<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CMS ENERGY CORPORATION
- --------------------------------------------------------------------------------
(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):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] 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.:
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(3) Filing party:
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(4) Date filed:
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<PAGE> 2
[CMS ENERGY LOGO]
CMS ENERGY CORPORATION
CALL AND NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 28, 1999
To the Shareholders of CMS Energy Corporation:
The annual meeting of shareholders of CMS Energy Corporation will be held on
Friday, the 28th day of May 1999, at 10:30 A.M., Eastern Daylight Saving Time,
at the Dearborn Inn, 20301 Oakwood Boulevard, Dearborn, Michigan 48124 for the
following purposes:
(1) Electing a Board of Directors of 11 members;
(2) Ratifying the appointment of Arthur Andersen LLP, independent public
accountants, to audit the financial statements of CMS Energy Corporation for the
year ending December 31, 1999;
(3) Considering the approval of an amendment to the CMS Energy Corporation
Performance Incentive Stock Plan; and
(4) Transacting such other business as may properly come before the meeting.
The annual report to the shareholders for the year 1998, including financial
statements, has been furnished to you.
The Board of Directors has fixed March 31, 1999 as the record date for the
determination of shareholders entitled to notice of and to vote at the meeting.
All shareholders are cordially invited to attend the annual meeting and will be
entitled to vote on all matters that come before the meeting. The Board of
Directors requests that you vote by means of touch tone telephone, the Internet,
or by signing and returning the enclosed proxy. The enclosed envelope requires
no postage if mailed in the United States.
By order of the Board of Directors,
Thomas A. McNish, Secretary
CMS Energy Corporation
Fairlane Plaza South
Suite 1100
330 Town Center Drive
Dearborn, Michigan 48126
April 15, 1999
<PAGE> 3
PROXY STATEMENT
------------------------
INTRODUCTION
The Board of Directors solicits your proxy for use at this year's annual
meeting. The shares represented by your proxy will be voted as you direct if the
proxy is returned prior to the meeting. You may revoke your proxy at any time
before it is exercised.
As of December 31, 1998, CMS Energy Corporation's (the "Corporation")
outstanding Common Stock consisted of a total of 116,559,062 shares. This total
consisted of 108,106,516 shares of the Corporation's Common Stock, $.01 par
value, and 8,452,546 shares of the Corporation's Class G Common Stock, no par
value. Each outstanding share is entitled to one vote on all matters which may
come before the annual meeting. All shares represented by signed proxies will be
voted at the annual meeting.
The Corporation has received a copy of Schedule 13G filed with the
Securities and Exchange Commission ("SEC") by FMR Corp., 82 Devonshire Street,
Boston, Massachusetts 02109, which indicates holdings of 7,951,230 shares
representing 6.8% of the outstanding Common Stock of the Corporation. This
schedule indicates that the shares were purchased in a fiduciary capacity in the
ordinary course of business for investment purposes. The Corporation has also
received a copy of Schedule 13G filed with the SEC by Brinson Partners, Inc.,
209 South LaSalle, Chicago, Illinois 60604, which indicates holdings of
7,858,396 shares representing 6.7% of the outstanding Common Stock of the
Corporation. This schedule indicates that the shares were purchased in a
fiduciary capacity in the ordinary course of business for investment purposes.
The Corporation has also received a copy of Schedule 13G filed with the SEC by
American Express Company, American Express Tower, 200 Vesey Street, New York,
New York 10285 and by American Express Financial Corporation, IDS Tower 10,
Minneapolis, Minnesota 55440. This schedule indicates that holdings of 6,734,400
shares, representing 5.8% of the outstanding Common Stock of the Corporation,
were acquired in a fiduciary capacity in the ordinary course of business for
investment purposes. To the knowledge of management, no other person or entity
owns beneficially more that 5% of any class of the Corporation's outstanding
voting securities.
The determination of approval of corporate action by the shareholders is
based on votes "for" and "against". Abstentions and broker non-votes are not
counted as "against" votes but are counted in the determination of a quorum.
NOMINEES FOR ELECTION AS MEMBERS OF
THE BOARD OF DIRECTORS
The nominees for directors of the Corporation and Consumers Energy Company
("Consumers") will hold office until the next annual meeting or until their
successors are elected and qualified. Unless a shareholder withholds authority
to vote for the election of directors as provided in the proxy, the returned
proxy will be voted for the listed nominees. The Board of Directors has no
reason to believe that the persons named will not be available but in the event
any nominee is unable to serve, the proxy will be voted for a substitute nominee
designated by the Board of Directors. All of the nominees are presently serving
as directors.
1
<PAGE> 4
<TABLE>
<S> <C>
WILLIAM T. MCCORMICK, JR., 54, has served as Chairman of the
WILLIAM T. MCCORMICK, JR. Board and Chief Executive Officer of the Corporation since
[PHOTO] it was incorporated in February 1987 and as Chairman of the
Board of Consumers since November 1985. Until January 1992
he was also CEO of Consumers, and until December 1987, he
was also President of the Corporation and of Consumers. He
is a director of Bank One Corporation, Rockwell
International Corporation, and Schlumberger Ltd. He has been
a director of the Corporation since 1987 and of Consumers
since 1985.
JOHN M. DEUTCH, 60, has served since 1992 as Institute
JOHN M. DEUTCH Professor of Massachusetts Institute of Technology (MIT),
[PHOTO] Cambridge, Massachusetts. On leave from MIT, he served as
Director of the Central Intelligence Agency from 1995
through 1996, as U.S. Deputy Secretary of Defense from 1994
to 1995, and as Undersecretary of the U.S. Department of
Defense from 1993 to 1994. He is a director of ARIAD
Pharmaceuticals, Inc., Citigroup, Inc., Cummins Engine
Company, Inc., Raytheon Company, and Schlumberger Ltd. He
has been a director of the Corporation and of Consumers
since 1997. He had previously served as a director of the
Corporation and of Consumers from 1986 to 1993, when he
resigned following his confirmation as Undersecretary of the
U.S. Department of Defense.
JAMES J. DUDERSTADT, 56, has been President Emeritus and
JAMES J. DUDERSTADT University Professor of Science and Engineering at the
[PHOTO] University of Michigan, Ann Arbor, Michigan, since 1996. Dr.
Duderstadt also serves as director of the Millennium
Project, a research center at the University of Michigan
concerned with the impact of information technology on
society. He served as the President of the University of
Michigan from 1988 to 1996. He is a director of Unisys
Corporation and serves on the Executive Council of the
National Academy of Engineering. He has been a director of
the Corporation and of Consumers since 1993.
KATHLEEN R. FLAHERTY, 47, has served since December 1, 1998
KATHLEEN R. FLAHERTY as President and Chief Operating Officer of WinStar
[PHOTO] Communications, Europe, a provider of global
telecommunications services. Previously, she served from
1997 to 1998 as Senior Vice President, Product Architecture
for MCI Communications Corporation, and from 1995 to 1997 as
National Business Marketing Director for British Telecom.
Prior to that, she served from 1993 to 1995 as Corporate
Senior Vice President of MCI Communications Corporation, and
as Senior Vice President, Worldwide Sales and Marketing, of
Concert Management Services, Inc., a joint venture between
MCI and British Telecom. She has been a director of the
Corporation and of Consumers since 1995.
</TABLE>
2
<PAGE> 5
<TABLE>
<S> <C>
VICTOR J. FRYLING, 51, has served as Chief Operating Officer
VICTOR J. FRYLING of the Corporation since 1996 and as President of the
[PHOTO] Corporation since 1992. In addition, he was elected Vice
Chairman of Consumers in 1992. He is a charter member of the
U.S. -- Argentina Business Development Council. He has been
a director of the Corporation and of Consumers since 1990.
EARL D. HOLTON, 65, is Chairman of the Board of Steelcase,
EARL D. HOLTON Inc. and has served since January 1999 as Vice Chairman of
[PHOTO] Meijer, Inc., a Grand Rapids, Michigan based operator of
food and general merchandise centers. Previously, he served
from 1980 to January 1999 as President of Meijer, Inc. He is
a director of Meijer, Inc. and Steelcase, Inc. He has been a
director of the Corporation and of Consumers since 1989.
WILLIAM U. PARFET, 52, has served since 1995 as Co-Chairman
WILLIAM U. PARFET of MPI Research, Mattawan, Michigan, a research laboratory
[PHOTO] conducting risk assessment toxicology studies. Previously,
he served from 1993 to 1996 as President and Chief Executive
Officer of Richard-Allan Medical Industries. He is a
director of Pharmacia & Upjohn, Inc., Stryker Corporation,
ClinTrials Research, Inc., and Sybron International
Corporation. He is also a Commissioner of the Michigan
Department of Natural Resources. He has been a director of
the Corporation and of Consumers since 1991.
PERCY A. PIERRE, 60, has served since 1990 as Professor of
PERCY A. PIERRE Electrical Engineering, Michigan State University, East
[PHOTO] Lansing, Michigan. He also served as Vice President for
Research and Graduate Studies at Michigan State University
from 1990 to 1995. Dr. Pierre is a former Assistant
Secretary of the Army for Research, Development and
Acquisition. He is also a former President of Prairie View
A&M University. He is a director of Old Kent Financial
Corporation, the Whitman Education Group, and the Aerospace
Corporation. He also serves as a member of the Board of
Trustees for the University of Notre Dame. He has been a
director of the Corporation and of Consumers since 1990.
</TABLE>
3
<PAGE> 6
<TABLE>
<S> <C>
KENNETH L. WAY, 59, has served since 1988 as Chairman of the
KENNETH L. WAY Board and Chief Executive Officer of Lear Corporation, a
[PHOTO] Southfield, Michigan based supplier of automotive interior
systems to the automotive industry. He is a director of
Comerica, Inc. and WESCO International, Inc. He also serves
as a member of the Boards of Trustees for Kettering
University and the Henry Ford Health Systems. He has been a
director of the Corporation and of Consumers since 1998.
KENNETH WHIPPLE, 64, served from 1988 until his retirement
KENNETH WHIPPLE on January 1, 1999 as Executive Vice President of Ford Motor
[PHOTO] Company, Dearborn, Michigan, a world-wide automotive
manufacturer, and President of the Ford Financial Services
Group. In addition, he served from 1997 to 1998 as Chairman
and Chief Executive Officer of Ford Motor Credit Company. He
had previously served as Chairman and Chief Executive
Officer of Ford of Europe, Inc. from 1986 to 1988. He is a
director of Associates First Capital Corporation and Galileo
International, Inc. He has been a director of the
Corporation and of Consumers since 1993.
JOHN B. YASINSKY, 59, has served as Chairman and Chief
JOHN B. YASINSKY Executive Officer and President since 1995, President and
[PHOTO] Chief Executive Officer from 1994 to 1995, and President and
Chief Operating Officer from 1993 to 1994 of GenCorp,
Fairlawn, Ohio, a manufacturer of aerospace, automotive and
polymer products. He is a director of GenCorp. He has been a
director of the Corporation and of Consumers since 1994.
</TABLE>
4
<PAGE> 7
MANAGEMENT SECURITY OWNERSHIP
The following chart sets forth the ownership of the Corporation's Common
Stock by the directors and executive officers:
<TABLE>
<CAPTION>
Shares
Name Beneficially Owned*
---- -------------------
<S> <C>
William T. McCormick, Jr. .............. 237,769
John M. Deutch.......................... 3,000
James J. Duderstadt..................... 2,714
Kathleen R. Flaherty.................... 2,729
Victor J. Fryling....................... 124,577
Earl D. Holton.......................... 11,875
William U. Parfet....................... 11,600
Percy A. Pierre......................... 4,015
Kenneth L. Way.......................... 2,503
Kenneth Whipple......................... 3,600
John B. Yasinsky........................ 5,321
David W. Joos........................... 57,403
Paul A. Elbert.......................... 74,856
Alan M. Wright.......................... 38,855
All Directors and Executive Officers.... 885,606
</TABLE>
* In addition to the shares shown above, Messrs. McCormick, Fryling, Joos,
Elbert, Wright, and other executive officers own options to acquire 429,000;
237,500; 44,000; 55,100; 34,000; and 456,167 shares, respectively.
Shares shown as beneficially owned include (1) shares to which a person has
or shares voting power and/or investment power, and (2) the number of shares and
share equivalents represented by interests in the Employees' Savings and
Incentive Plan, the Deferred Salary Savings Plan, the Performance Incentive
Stock Plan, and the Directors' Deferred Compensation Plan as of December 31,
1998. Both CMS Energy Corporation Common Stock and CMS Energy Corporation Class
G Common Stock are included in the calculation of Shares Beneficially Owned. Mr.
McCormick, Dr. Duderstadt, Ms. Flaherty, Mr. Fryling, Mr. Holton, Mr. Whipple,
Mr. Joos, Mr. Elbert, Mr. Wright, and all other executive officers as a group
own 3,000; 100; 400; 1,500; 568; 1,000; 3,319; 26,300; 1,177; and 4,256 shares,
respectively, of Class G Common Stock. The directors each own 10 shares of
Preferred Stock of Consumers. No other executive officer owns shares of
Consumers Preferred Stock. The directors and executive officers together own
less than 1% of the outstanding shares of the Corporation.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Federal securities laws require the Corporation's directors and executive
officers, and persons who own more than 10% of the Corporation's Common Stock,
to file with the SEC reports of ownership and changes in ownership of any
securities or derivative securities of the Corporation. To the Corporation's
knowledge, during the year ended December 31,1998, the Corporation's officers
and directors made all required filings except Robert A Fenech, Senior Vice
President of Consumers Energy, who filed a Form 5 in February 1999 regarding a
withholding of 348 shares in February 1998 to cover taxes on vested stock.
5
<PAGE> 8
BOARDS OF DIRECTORS AND COMMITTEES OF THE CORPORATION AND CONSUMERS
The Board of Directors of the Corporation met 10 times and Consumers' Board
of Directors met 10 times during 1998. All incumbent directors attended more
than 75% of the board and assigned committee meetings during 1998.
AUDIT COMMITTEES
Members: William U. Parfet (Chair), John M. Deutch, James J. Duderstadt,
Percy A. Pierre, and John B. Yasinsky.
Meetings during 1998: Corporation 4 -- Consumers 4
These committees meet with representatives of the independent public
accountants from time to time during the year and after the completion of the
annual audit of the Corporation's and Consumers' financial statements to review
and discuss such audit, internal controls and other appropriate matters; review
the activities of the Internal Audit Department; review the relationship of the
Corporation's and Consumers' independent public accountants with the Corporation
and Consumers insofar as they perform nonaudit services; and review and
recommend to the Boards of Directors the appointment of independent public
accountants.
NOMINATING COMMITTEES
Members: John M. Deutch (Chair), James J. Duderstadt, Kathleen R. Flaherty,
Percy A. Pierre, Kenneth L. Way, and Kenneth Whipple.
Meetings during 1998: Corporation 2 -- Consumers 2
These committees conduct a continuing study of the size, structure,
composition and compensation of the Boards; seek out possible candidates to fill
Board positions; aid in attracting qualified candidates to the Boards; recommend
annually, prior to the solicitation of proxies, a slate of qualified candidates
for election to the Boards at the annual meeting and, in case of any vacancies
on the Boards, candidates to fill those vacancies; review periodically and
recommend to the Boards of Directors modifications, as appropriate, to the
director tenure policy; and determine from time to time criteria for selection
and retention of Board members. The committees consider shareholders'
recommendations of nominees for election to the Boards of Directors. The
recommendations must be accompanied by the consent of each of the recommended
nominees to act as a director. Shareholders should send their written
recommendations of nominees to: Mr. Thomas A. McNish, Vice President and
Secretary, CMS Energy Corporation, Fairlane Plaza South, Suite 1100, 330 Town
Center Drive, Dearborn, Michigan 48126.
ORGANIZATION AND COMPENSATION COMMITTEES
Members: Earl D. Holton (Chair), John M. Deutch, William U. Parfet, Kenneth
L. Way, Kenneth Whipple, and John B. Yasinsky.
Meetings during 1998: Corporation 3 -- Consumers 3
These committees review the executive organization of the Corporation and of
Consumers from time to time; review from time to time the salaries and other
compensation of all the officers of the Corporation and of Consumers; monitor
the development of personnel for availability to fill key management positions
as vacancies occur; establish goals annually for the Executive Incentive
Compensation Plan; review and approve the incentive compensation payment
schedule; administer the Corporation's Performance Incentive Stock Plan; and
report to the Boards of Directors with respect to the committees'
recommendations.
6
<PAGE> 9
ENVIRONMENTAL AND CORPORATE RESPONSIBILITY COMMITTEES
Members: Percy A. Pierre (Chair), James J. Duderstadt, Kathleen R. Flaherty,
Earl D. Holton, and John B. Yasinsky.
Meetings during 1998: Corporation 3 -- Consumers 3
These committees make recommendations to the Boards of Directors regarding
significant environmental matters affecting the Corporation's and Consumers'
operations; advise the Boards on the adoption and evaluation of policies
designed to maintain the Corporation's and Consumers' position of corporate
responsibility; review and monitor the Corporation's and Consumers' policies and
objectives related to equal employment opportunities, review the Corporation's
and Consumers' policies to comply with federal and state laws and regulations
affecting personnel matters; and review the Corporation's and Consumers'
policies related to contributions and support of charitable, educational and
community organizations.
EXECUTIVE COMMITTEES
Members: William T. McCormick, Jr. (Chair), John M. Deutch, Victor J.
Fryling, Earl D. Holton, William U. Parfet, Percy A. Pierre and
Kenneth Whipple.
Meetings during 1998: Corporation 0 -- Consumers 0
These committees exercise the power and authority of the Boards of Directors
as may be necessary during the intervals between meetings of the Boards of
Directors, subject to such limitations as are provided by law or by resolution
of the Boards.
FINANCE AND PENSION COMMITTEES
Members: Kenneth Whipple (Chair), Kathleen R. Flaherty, Victor J. Fryling,
Earl D. Holton, William U. Parfet, and Kenneth L. Way.
Meetings during 1998: Corporation 2 -- Consumers 2
These committees give advice and counsel to the officers of the Corporation
and Consumers with respect to the means for providing the funds required to
carry out the Corporation's and Consumers' programs; review the financial
policies including capitalization objectives, use of short-term financing and
issuance of long-term securities; and recommend to the Boards of Directors
financial policies for the Corporation and Consumers. In addition, the committee
of Consumers reviews the investment policies for all employee benefit funds with
respect to assets being managed, including adequacy of funding; reviews
quarterly the investment performance of each of the investment managers for all
employee benefit funds of Consumers; reports to the Board of Directors on
findings regarding selection and retention of managers; and reviews the
administration of the employee benefit plans.
7
<PAGE> 10
COMPENSATION OF DIRECTORS
Directors who are not officers of the Corporation or Consumers received in
1998 an annual retainer fee of $30,000, and $1,250 for attendance at each Board
meeting and $750 for attendance at each committee meeting. Committee chairs
receive $1,000 for attendance at each committee meeting. Retainer and attendance
fees are set by the Boards of Directors. In 1998, Mr. Way was granted 500 shares
of Common Stock of the Corporation with a fair market value at time of grant of
$21,656.25. All other Directors were granted 100 restricted shares of Common
Stock of the Corporation with a fair market value at time of grant of $4,137.50.
All Directors, except Mr. Way, were vested in 500 restricted shares of Common
Stock of the Corporation with a fair market value at the time of vesting of
$20,687.50. Directors are reimbursed for expenses incurred in attending Board or
committee meetings. Directors who are officers of the Corporation or Consumers
do not receive retainers or meeting fees for service on the Board or as a member
of any Board committee. Pursuant to the Directors' Deferred Compensation Plan, a
Director of the Corporation or Consumers who is not an officer may, at any time
prior to a calendar year in which a retainer and fees are to be earned, or at
any time during the year prior to the month in which a retainer and fees are
earned, irrevocably elect to defer payment for that year, or a portion thereof,
through written notice to the Corporation or Consumers, of all or half of any of
the retainer and fees which would otherwise be paid to the Director, to a time
following the Director's retirement from the Board of Directors. Any amount
deferred will either (a) accrue interest at either the prime rate or the rate
for 10-year Treasury Notes (whichever is greater), (b) be treated as if it were
invested as an optional cash payment in the Corporation's Stock Purchase Plan,
or (c) be treated as if it were invested in a Standard & Poor's 500 stock index
fund. Accrued amounts will be distributed in a lump sum or in five or ten annual
installments in cash. Outside Directors who retire with five years of service on
the Board will receive monthly retirement payments equal to the retainer. These
payments will continue for a period of time equal to their years of service on
the Board. All benefits will cease at the death of the retired Director. Outside
Directors are offered optional life insurance coverage, business-related travel
accident insurance, and optional health care insurance, and the Corporation and
Consumers pay the premiums associated with participation by Directors. The
imputed income for the life insurance coverage in 1998 was: Messrs. Deutch,
$870.60; Duderstadt, $691.20; Holton, $1,341.20; Parfet, $576.80; Pierre,
$870.60; Whipple, $1,221.60; and Yasinsky, $810.60.
8
<PAGE> 11
EXECUTIVE COMPENSATION
The following charts contain information concerning annual and long-term
compensation and awards of stock options and restricted stock under the
Corporation's Performance Incentive Stock Plan. The charts include the Chairman
of the Board and the next four most highly compensated executive officers in
1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation(1)
------------------------
Awards Payouts
Annual ---------- ----------
Compensation Securities Long-Term
-------------------- Underlying Incentive All Other
Name and Principal Position Year Salary Bonus Options Payouts(2) Compensation(3)
--------------------------- ---- ------ ----- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
William T. McCormick, Jr. 1998 $900,000 $665,000 62,000 $1,093,554 $27,000
Chairman and CEO, 1997 840,000 725,000 67,000 776,358 25,200
Corporation and Chairman, 1996 780,000 700,000 50,000 493,291 23,400
Consumers
Victor J. Fryling 1998 625,000 382,440 36,000 663,158 18,750
President and COO, 1997 595,000 438,250 40,000 450,297 17,850
Corporation and Vice 1996 550,000 429,000 30,000 246,165 16,500
Chairman, Consumers
David W. Joos 1998 430,000 269,520 16,000 301,802 12,900
President and CEO -- Electric, 1997 343,750 252,260 20,000 175,914 10,312
Consumers 1996 287,500 205,130 16,000 84,393 8,625
Paul A. Elbert 1998 360,000 171,740 35,200(4) 267,399 10,800
President and CEO -- Gas, 1997 288,125 236,600 14,000(5) 188,850 8,640
Consumers 1996 254,000 171,730 12,000(5) 105,560 7,620
Alan M. Wright 1998 335,000 189,220 16,000 332,770 10,050
Senior Vice President 1997 318,000 216,210 18,000 228,275 9,540
and CFO, Corporation 1996 289,583 184,820 16,000 124,897 8,687
and Consumers
</TABLE>
(1) Aggregate non-performance based restricted stock granted prior to 1998 held
as of December 31, 1998 by named officers was: Victor J. Fryling, 10,000
shares, with value based on market price on December 31, 1998 of $484,375;
David W. Joos, 15,000 shares, with value based on market price on December
31, 1998 of $726,562.50; and Paul A. Elbert, 15,000 shares, with value based
on market price on December 31, 1998 of $726,562.50. Regular dividends were
paid on such restricted stock.
(2) Market value of Common Stock paid under the Corporation's Performance
Incentive Stock Plan for three-year performance periods.
(3) Employer matching contribution to defined contribution plans.
(4) 23% of the securities underlying options awarded to Mr. Elbert in 1998 are
the Corporation's Common Stock, $0.01 par value. The remaining 77% are the
Corporation's Class G Common Stock.
(5) 50% of the securities underlying options awarded to Mr. Elbert in 1996 and
1997 are the Corporation's Common Stock, $0.01 par value. The remaining 50%
are the Corporation's Class G Common Stock.
9
<PAGE> 12
EMPLOYMENT ARRANGEMENTS
Agreements with the executive officers named above and nine other executive
officers provide for payments of two times annual cash compensation if there is
a change of control and adverse change of responsibilities. The Corporation and
Consumers also provide long-term disability insurance policies for all executive
officers which would provide payment of up to 60% of compensation in the event
of disability.
OPTION GRANTS IN 1998
<TABLE>
<CAPTION>
Number of
Securities
Underlying Percentage of Total Exercise Grant Date
Options Options Granted to Price Per Expiration Present
Name Granted Employees in 1998 Share Date Value(1)
---- ---------- ------------------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
William T. McCormick, Jr. ... 62,000 14.7 $43.3125 08/22/08 $398,660
Victor J. Fryling............ 36,000 8.5 43.3125 08/22/08 231,480
David W. Joos................ 16,000 3.8 43.3125 08/22/08 102,880
Paul A. Elbert............... 8,000 Common 1.9 43.3125 08/22/08 51,440
Paul A. Elbert............... 27,220 Class G 6.4 24.625 08/22/08 82,416
Alan M. Wright............... 16,000 3.8 43.3125 08/22/08 102,880
</TABLE>
(1) The present value is based on the Black-Scholes Model, a mathematical
formula used to value options traded on securities exchanges. The model
utilizes a number of assumptions, including the exercise price, the
underlying stock's volatility of 15.93% (20.02% for Class G Common Stock)
using weekly closing prices for a four-year period prior to grant date (a
five-year period for Class G Common Stock), the dividend rate of $0.33 per
quarter ($0.325 for Class G Common Stock) with 5% annual dividend growth,
the term of the option, and the level of interest rates at 5.45%, equivalent
to the rate of four-year Treasury Notes (5.44% for Class G Common Stock,
equivalent to the rate of five-year Treasury Notes). However, the Model does
not take into account a significant feature of options granted to employees
under the Corporation's Plan, i.e., the non-transferability of options
awarded.
AGGREGATED OPTIONS EXERCISES IN 1998 AND YEAR-END OPTIONS VALUES
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Securities Underlying In-the-Money
Shares Acquired Value Unexercised Options Options at
Name On Exercise Realized at Year End Year End(1)(2)
---- --------------- -------- --------------------- --------------
<S> <C> <C> <C> <C>
William T. McCormick, Jr. ............. 50,000 $1,187,937 429,000 $7,716,375
Victor J. Fryling...................... 20,000 469,719 237,500 4,244,969
David W. Joos.......................... 16,000 313,750 44,000 448,000
Paul A. Elbert......................... 18,100 Common 208,681 8,900 51,750
Paul A. Elbert......................... 0 Class G 0 46,200 149,587
Alan M. Wright......................... 16,000 234,000 34,000 306,000
</TABLE>
(1) All options listed in this table are exercisable. The named officers have no
unexercisable options.
(2) Based on the December 31, 1998 closing price of the Corporation's Common
Stock as shown in the report of the NYSE Composite Transactions ($48.4375).
Mr. Elbert's Class G Common Stock is valued based on the December 31, 1998
closing price of $25.25.
10
<PAGE> 13
LONG-TERM INCENTIVE PLANS -- AWARDS IN 1998
<TABLE>
<CAPTION>
Estimated Future Payouts
Under Non-Stock Price-Based
Plans (Shares)(1)
Number Period ----------------------------------
Name of Shares Until Payout Threshold Target Maximum
---- --------- ------------ --------- ------ -------
<S> <C> <C> <C> <C> <C>
William T. McCormick, Jr. ........... 31,000 2-5 years 7,750 31,000 46,500
Victor J. Fryling.................... 18,000 2-5 years 4,500 18,000 27,000
David W. Joos........................ 9,000 2-5 years 2,250 9,000 13,500
Paul A. Elbert....................... 4,000 Common 2-5 years 1,000 4,000 6,000
Paul A. Elbert....................... 7,082 ClassG 2-5 years 1,770 7,082 10,623
Alan M. Wright....................... 8,000 2-5 years 2,000 8,000 12,000
</TABLE>
(1) Under the Corporation's Performance Incentive Stock Plan, awards of
restricted stock for the above officers vest at the rate of 25% per year
after two years and are subject to achievement of specified levels of total
shareholder return over a three-year period. The target number of shares as
shown above will be earned if 100% of the targeted average 15% annual total
shareholder return is achieved. The threshold number of shares will be
earned on achievement of 40% of the target, and the maximum number of shares
will be earned on achieving 140% of the target.
PENSION PLAN TABLE
The following table shows the aggregate annual pension benefits at normal
retirement date presented on a straight life annuity basis under the
Corporation's qualified Pension Plan and non-qualified Supplemental Executive
Retirement Plan (offset by a portion of Social Security benefits).
<TABLE>
<CAPTION>
Years of Service
--------------------------------------------------------
Compensation 15 20 25 30 35
- ------------ -------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$ 500,000 $157,500 $210,000 $247,500 $ 285,000 $ 322,500
800,000 252,000 336,000 396,000 456,000 516,000
1,100,000 346,500 462,000 544,500 627,000 709,500
1,400,000 441,000 588,000 693,000 798,000 903,000
1,700,000 535,500 714,000 891,500 969,000 1,096,500
2,000,000 630,000 840,000 990,000 1,140,000 1,290,000
</TABLE>
Regular, straight-time salary, as shown in the Summary Compensation Table
during the five years of highest earnings, is used in computing benefits under
the Pension Plan. In addition, awards under the Executive Incentive Compensation
Plan, as shown in the Summary Compensation Table during the five years of
highest earnings, are used in computing benefits under the Supplemental
Executive Retirement Plan. The estimated years of service for each named
executive is: William T. McCormick, Jr., 23.22 years; Victor J. Fryling, 23.00
years; David W. Joos, 27.15 years; Paul A. Elbert, 32.76 years; and Alan M.
Wright, 15.45 years.
11
<PAGE> 14
ORGANIZATION AND COMPENSATION COMMITTEE REPORT
Compensation Philosophy
The Corporation's executive compensation program is directed by a committee
composed entirely of independent outside directors. The Committee is responsible
for determining and administering executive compensation policies and plans as
well as reviewing and recommending officer appointments to the Board of
Directors. The Committee also has the responsibility for approving both annual
compensation and awards under long-term stock ownership programs. Such programs
seek to enhance the profitability of the Corporation and, hence, shareholder
value by aligning the financial interests of the Corporation's officers with
those of its shareholders. In doing so, the Committee relies to a large degree
on incentive compensation including stock-related awards to attract and retain
outstanding officers.
Compensation for Mr. McCormick and the other executive officers consists of
a base salary, which is intended to be at the competitive median of the amounts
paid to senior executives with equivalent positions at other energy companies of
comparable size, and substantial annual and long-term incentive compensation
closely tied to the Corporation's success in achieving earnings, stock
appreciation and other performance goals. The incentive program is also designed
to be competitive with plans of other comparable energy companies and variable
"at risk" compensation is intended to be above median in years when the
corporation meets or exceeds its performance goals, which in recent years have
exceeded industry norms in terms of earnings and dividend growth.
Annual Compensation
Just prior to the beginning of each fiscal year, the Committee reviews the
base salary of Mr. McCormick and the other officers and approves annual salaries
for them based on industry, peer group, and national surveys and judgment as to
the past and expected future contributions of each individual. In the case of
Mr. McCormick, such judgment also involves the Committee's assessment of his
past performance and its expectation as to his future contribution in leading
the Corporation.
The annual incentive compensation (bonus) payment, if any, is based on the
Corporation's success in meeting challenging earnings per share goals set by the
Committee at the beginning of each year. In addition, individual performance
goals are established for each executive officer for specific financial,
operating and management achievements. Following the end of each year, the
results on a corporate and individual basis are reviewed by the Committee to
determine the appropriate awards. Under the Corporation's Executive Incentive
Compensation Plan for 1998, because the Corporation achieved 91.4% of its
earnings per share goal, the Committee granted annual incentive bonuses to
officers, including those shown in the Summary Compensation Table. The Plan has
a threshold payout at 80% of the earnings per share goal and a maximum payout at
120% of goal. Mr. McCormick's award was based on a standard award under the Plan
of 75% of his salary, adjusted to reflect the Corporation's earnings relative to
goal and the Committee's judgement as to his leadership performance for the year
and his achievement of specific, predetermined goals.
Long-Term Compensation
The last element of executive compensation considered by the Committee
during each year is long-term incentive awards in the form of stock options and
restricted stock awards under the Corporation's Performance Incentive Stock
Plan. The Committee believes such awards are desirable in encouraging Common
Stock ownership
12
<PAGE> 15
by executives, thus linking their interests directly to that of other
shareholders. Therefore, in 1998, the Committee decided to grant stock options
with an exercise price equal to the market price on the date of the grant to the
officers, including those shown in the above charts. Options have been granted
annually, usually for approximately the same number of shares. The Committee
believes grants should be made annually on a generally consistent basis. In
determining grants, the Committee weighed a number of factors including prior
grants and corporate performance. The Committee also awarded performance-based
restricted stock which will vest at the rate of 25% per year after two years,
with 100% vested after five years. However, the nominal restricted stock award
will be paid only if the average annual shareholder return target of 15% is
achieved for each three-year performance period. If the average annual
shareholder return is less than the target, then the award will be smaller, and
if the return is more than the target, then the award will be greater.
Compensation Deductibility
The Committee has reviewed the Corporation's compensation plans and the
applicability of Section 162(m) of the Internal Revenue Code and regulations
thereunder dealing with federal income tax deductibility for compensation in
excess of $1 million. The Committee believes that awards of stock options and
vesting of performance based restricted stock under the Corporation's
Performance Incentive Stock Plan are not considered compensation under the
regulations of Section 162(m), because both have been approved by shareholders
and are based on pre-established performance goals. However, bonus awards under
the Executive Incentive Compensation Plan are considered compensation because
the Committee believes that it is in the best interests of the Corporation to
retain maximum flexibility in rewarding superior performance.
Compensation Consultant
In connection with its ongoing independent review of executive compensation,
the Committee has retained Hewitt Associates, a recognized compensation and
benefit consultant, to assist the Committee in evaluating the appropriateness
and competitiveness of its compensation policies and programs.
Submitted by the Organization and Compensation Committee: Earl D. Holton
(Chair), John M. Deutch, William U. Parfet, Kenneth L. Way, Kenneth Whipple, and
John B. Yasinsky.
13
<PAGE> 16
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG CMS ENERGY CORPORATION, S&P 500 INDEX & DOW JONES UTILITY INDEX
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN GRAPH
<TABLE>
<CAPTION>
CMS ENERGY S&P 500 DOW JONES UTILITY
---------- ------- -----------------
<S> <C> <C> <C>
'1993' 100.00 100.00 100.00
'1994' 94.00 101.00 85.00
'1995' 128.00 139.00 112.00
'1996' 149.00 171.00 121.00
'1997' 201.00 229.00 149.00
'1998' 228.00 294.00 177.00
</TABLE>
Total return assumes reinvestment of dividends.
Fiscal years ending December 31.
Assumes the value of the investment in the Corporation's Common Stock and each
index was $100 on December 31, 1993.
14
<PAGE> 17
RATIFICATION OF THE APPOINTMENT OF AUDITORS
Subject to the approval of the shareholders, the Board of Directors has
appointed Arthur Andersen LLP, independent public accountants, to audit the
financial statements of the Corporation for the year 1999. Arthur Andersen LLP
also served as the Corporation's auditors for the year 1998. A representative of
Arthur Andersen LLP will be present at the annual meeting of shareholders and
will have an opportunity to make a statement and respond to appropriate
questions.
Approval of the proposal to ratify the appointment of auditors requires the
affirmative vote of a majority of the shares of Common Stock voting on the
proposal.
THE BOARD OF DIRECTORS RECOMMENDS RATIFICATION OF THE APPOINTMENT OF AUDITORS
PROPOSAL FOR APPROVAL OF AMENDMENT TO CMS ENERGY
PERFORMANCE INCENTIVE STOCK PLAN
DESCRIPTION OF THE PLAN
The following is a description of the Corporation's Performance Incentive
Stock Plan (the "Plan") without giving effect to the proposed amendment
described below, except where specifically noted.
The Plan is administered by the Organization and Compensation Committee of
the Board of Directors (the "Committee"), which is entirely composed of outside
(non-employee) independent members of the Board of Directors. Each officer or
other key executive employee of the Corporation or its subsidiaries is eligible
to participate. As of December 31, 1998 approximately 120 people were eligible
to participate in the Plan. The Committee selects the participants, determines
the amount of grants and prescribes the other terms and conditions of each
award.
The Board of Directors may amend, suspend or terminate the Plan, but no
amendment to the Plan may be made without shareholder approval which increases
the total number of shares available under the Plan, changes the Plan's
eligibility requirements or materially increases benefits to eligible employees
under the Plan.
Under the Plan, the Committee may grant to eligible employees share awards
representing a contingent right to receive shares of the Corporation's Common
Stock ("Restricted Stock") and/or Incentive Stock Options ("ISOs") intended to
qualify as such under federal tax law and/or Nonqualified Stock Options
("NQOs"). (ISO's and NQO's are collectively referred to herein as "Options.")
Stock Appreciation Rights ("SARs") may also be granted in conjunction with ISOs
or NQOs.
Under the current Plan, shares awarded or subject to Options may not be more
than 3% of the outstanding shares of each class of Common Stock of the
Corporation on January 1 of any year less the number of shares awarded or
subject to Options granted under the Plan during the previous four years. Any
shares or Options which are forfeited become available to be granted under the
Plan. In effect, the current Plan allows the granting each year, on average, of
0.6% of the total outstanding shares.
Under the proposed amendment, the Board recommends an increase in the shares
that could be awarded from 3% over five years to 5% or an average of 1.0% per
year of outstanding shares versus the current 0.6% allowed in the Plan. The
amendment will also limit the percentage of restricted stock grants to no more
than 20% of all awards
15
<PAGE> 18
for an average of 0.2% per year of outstanding shares. Since the Plan was first
adopted in 1988 and amended in 1995, the Corporation has grown and diversified,
resulting in a substantial increase in employees eligible for the Plan. The
encouragement of Common Stock ownership by executives to link their financial
interests with other shareholders continues to be an important corporate goal
which will be furthered by the proposed increase. The proposal would enable the
Corporation to be competitive by increasing the number of shares available to a
level commensurate with the number of shares covered by plans of comparable
energy companies.
Under the Plan, the exercise price for all Options and SARs is at least 100%
of the fair market value of the related shares on the date of the grant.
Options and SARs may not be transferred other than by will or by the laws of
descent and distribution and, during the lifetime of the optionee may be
exercised only by the optionee. Options and SARs terminate no later than 10
years and one month after the date of the grant.
Except as set forth below, Options and SARs terminate upon the termination
of employment of the optionee with the Corporation. In the case of a termination
of optionee's employment due to a reason other than the death of the optionee,
the Committee may permit the exercise of Options and SARs for a period of up to
one year after termination or up to three years upon retirement under a Pension
Plan of the Corporation or one of its subsidiaries (ISOs and related SARs must
generally be exercised within three months of termination of employment unless
such termination was by reason of disability). In the case of a termination of
the optionee's employment by reason of the optionee's death, any Option and
related SAR may be exercised for up to one year following the optionee's death.
In no event may an Option or SAR be exercisable subsequent to its expiration
date. Options and SARs may only be exercised after the termination of the
optionee's employment to the extent exercisable on the date of such termination.
Upon the exercise of an Option, a participant may purchase all or a portion
of the optioned shares by paying cash or, with the consent of the Committee,
surrendering Common Stock of the Corporation already owned by the participant.
Upon the exercise of an SAR, the participant will receive an amount equal to the
difference between the exercise price and the fair market value on the exercise
date. Such amount may be paid in cash, common stock or partly in each. If an SAR
is granted in conjunction with an Option, exercise of the Option reduces the
number of shares as to which the SAR may be exercised and exercise of the SAR
cancels the Option as to such number of shares.
During the period of restriction relating to a grant of Restricted Stock,
the participant has the right to vote the shares, to receive dividends, when
declared for all shareholders, and to exercise other shareholder rights with
respect to the Restricted Stock, except that the Corporation retains custody of
the stock certificate and, in general, the participant may not transfer the
shares. If a participant's employment is terminated during the restriction
period other than by retirement on or after age 62, or death, all rights to any
shares of Restricted Stock will be forfeited to the Corporation. However, the
Committee may, if circumstances warrant, approve the distribution of such
otherwise forfeitable shares. Upon the occurrence of a Change in Control (as
defined in the Plan) each award of Restricted Stock becomes fully vested for all
award periods that have not then ended.
The Corporation believes that under present federal tax laws the grant of
Options or SARs will create no tax consequences for a participant or the
Corporation. An optionee will have no taxable income upon exercising an ISO
(except that the alternative minimum tax may apply), and the Corporation will
receive no deduction when an ISO is exercised. After exercise of an NQO or SAR,
the participant must generally recognize ordinary income equal to the difference
between the exercise price and the fair market value of the shares on the date
of exercise and the
16
<PAGE> 19
Corporation will be entitled to a deduction of the same amount. If the
participant does not dispose of shares acquired pursuant to an ISO within two
years from the date of grant or within one year of the transfer of the shares to
such participant, any gain or loss realized on their subsequent disposition will
be capital gain or loss. If these holding period requirements are not satisfied,
the participant will generally realize ordinary income at the time of
disposition in an amount equal to the lesser of (i) the excess of the fair
market value of the shares on the date of exercise over the option price or (ii)
the excess of the amount realized upon disposition, if any, over the option
price and the Corporation will be entitled to a corresponding deduction.
Generally, there will be no tax consequence to the Corporation from dispositions
of shares acquired pursuant to NQOs or SARs.
The grant of awards under the Plan is based on future performance as
determined in the discretion of the Committee and accordingly, it is not
possible to determine amounts that will be received thereunder in the future.
Awards under the Plan during 1998 for Messrs. McCormick, Fryling, Joos, Elbert,
and Wright are shown in the tables presented earlier in this statement. The
restricted stock shown had a market value at December 31, 1998 of $1,501,562,
$871,875, $435,937, $372,570, and $387,500, respectively. The executive officers
as a group and the non-executive officer group were awarded stock options for
256,200 and 165,700 shares respectively and restricted stock of 122,582 shares
with a market value at December 31, 1998, of $5,773,350 and 128,368 shares with
a market value of $6,104,948, respectively.
DESCRIPTION OF PROPOSED AMENDMENT
The Board of Directors has approved an amendment to the Plan which would
provide that shares awarded or subject to options may not be more than 5% of the
outstanding shares of each class of Common Stock of the Corporation on January 1
of any year less the number of shares awarded or subject to Options granted
under the Plan during the previous four years. This would permit an average
annual grant of 1.0% of the total shares outstanding versus 0.6% under the
current Plan. The amendment will also limit the percentage of restricted stock
grants to no more than 20% of all awards for an average 0.2% per year of
outstanding shares.
The Board believes that the proposed increase in shares available under the
Plan would give the Organization and Compensation Committee the flexibility to
continue to meet the objective of the Plan, ie., to link financial interests of
the Corporation's executives with those of other shareholders, consistent with
the substantial increase in participants in the Plan since the Plan was first
implemented in 1988 and amended in 1995 due to the growth of the Corporation and
to provide for projected future participation resulting from expanding business
opportunities. Also, the proposal would enable the Corporation to be competitive
by increasing the number of shares available to a level commensurate with the
number of shares covered by plans of comparable energy companies.
If the proposal is not approved by the shareholders, the Plan will remain in
effect in its current form.
Approval of this proposal requires the affirmative vote of the holders of a
majority of the shares of Common Stock voting on the proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE PROPOSAL.
17
<PAGE> 20
2000 PROXY STATEMENT INFORMATION
A shareholder who intends to submit a proposal for consideration at the 2000
annual meeting pursuant to the applicable rules of the Securities and Exchange
Commission must send the proposal to reach the Corporation's Corporate Secretary
on or before December 21, 1999; and in any event if the Corporation has not
received written notice of any matter to be proposed at that meeting by March 6,
2000, the Proxy Holders may use their discretionary voting authority on any such
matter. The proposals should be addressed to: Mr. Thomas A. McNish, Vice
President and Secretary, Fairlane Plaza South, Suite 1100, 330 Town Center
Drive, Dearborn, Michigan 48126.
OTHER MATTERS
The Board of Directors does not know of any other matters that might be
presented to the meeting except matters incident to the conduct of the meeting.
However, if any other matters (including matters incident to the conduct of the
meeting) do come before the meeting, it is intended that the holders of the
proxies will vote thereon in their discretion.
The cost of solicitation of proxies will be borne by the Corporation.
Proxies may be solicited by officers and other employees of the Corporation or
its subsidiaries or affiliates, personally or by telephone, facsimile, Internet,
or mail. The Corporation has arranged for Morrow & Co., Inc. 445 Park Avenue,
New York, New York 10022, to solicit proxies in such manner, and it is
anticipated that the cost of such solicitations will not exceed $20,000, plus
incidental expenses. The Corporation may also reimburse brokers, dealers, banks,
voting trustees or other record holders for postage and other reasonable
expenses of forwarding the proxy material to the beneficial owners of shares of
stock held of record by such brokers, dealers, banks, voting trustees or other
record holders.
18
<PAGE> 21
[CMS ENERGY LOGO] COMMON STOCK PROXY
SOLICITED BY THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS
The undersigned appoints W. T. MC CORMICK, JR. and T. A. MC NISH, and each of
them, proxies with full power of substitution, to vote on behalf of the
undersigned at the annual meeting of shareholders of CMS Energy Corporation to
be held at the Dearborn Inn, 20301 Oakwood Boulevard, Dearborn, Michigan on May
28, 1999 and at any adjournment or adjournments thereof. Said proxies, and each
of them present and acting at the meeting, may vote upon the matters set forth
on the reverse side hereof and with discretionary authority on all other matters
that come before the meeting; all as more fully set forth in the Proxy Statement
received by the undersigned. The shares represented hereby will be voted on the
proposals as specified. IF THIS PROXY IS RETURNED SIGNED BUT NOT COMPLETED, IT
WILL BE VOTED IN FAVOR OF THE ELECTION OF DIRECTORS, THE RATIFICATION OF
APPOINTMENT OF AUDITORS, AND THE PROPOSAL TO AMEND THE PERFORMANCE INCENTIVE
STOCK PLAN.
IF YOU CANNOT VOTE BY TOUCH TONE PHONE
OR INTERNET, PLEASE VOTE, SIGN AND DATE
THIS PROXY ON THE REVERSE SIDE AND
RETURN IT IN THE ENCLOSED ENVELOPE.
THANK YOU FOR YOUR PROMPT RESPONSE.
<PAGE> 22
PLEASE VOTE, SIGN AND DATE BELOW
<TABLE>
<S><C>
[ ] TO VOTE AS RECOMMENDED by the Board of Directors on all items, PLEASE MARK THIS BOX, SIGN, DATE AND RETURN THIS PROXY.
(No additional boxes need be marked. If additional boxes are marked, this box will take precedence.)
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2 AND 3.
(1) ELECTION OF [ ] FOR all nominees listed below (except as indicated below)
DIRECTORS [ ] WITHHOLD AUTHORITY to vote for all nominees listed below
(01) William T. McCormick, Jr., (02) John M. Deutch, (03) James J. Duderstadt, (04) Kathleen R. Flaherty,
(05) Victor J. Fryling, (06) Earl D. Holton, (07) William U. Parfet, (08) Percy A. Pierre, (09) Kenneth L. Way,
(10) Kenneth Whipple, and (11) John B. Yasinsky.
(INSTRUCTION: To withhold authority to vote for any individual nominee, write that nominee's name on the space provided below.)
- --------------------------------------------------------------------------------------------------------------------------------
(2) Ratification of appointment of auditors PLEASE SIGN, DATE AND RETURN THIS PROXY
[ ] FOR [ ] AGAINST [ ] ABSTAIN IN THE ENCLOSED ENVELOPE. NO POSTAGE IS NEEDED
IF MAILED IN THE UNITED STATES.
(3) Proposal to amend the CMS Energy Performance Incentive Signed ___________________________________________________
Stock Plan
[ ] FOR [ ] AGAINST [ ] ABSTAIN Dated ______________________________________________, 1999
</TABLE>
