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 [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
[X] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
240.14a-11(c) or 240.14a-12
PACIFIC AMERICAN 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):
[X] No fee required.
[ ] 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 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] 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 previously paid. Identify the previous filing by egistration 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:
PACIFIC AMERICAN INCOME SHARES, INC.
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 4, 2004
------------------------
To the Stockholders of
PACIFIC AMERICAN INCOME SHARES, INC.
The Annual Meeting of Stockholders of Pacific American Income Shares, Inc.
(the "Company") will be held in the Board Room, Fifth Floor, 385 E. Colorado
Boulevard, Pasadena, California, on Tuesday, May 4, 2004 at 8:00 a.m.,
California time, for the following purposes:
(1) Electing six Directors to the Board of Directors of the Company;
and
(2) Transacting such other business as may properly come before the
Annual Meeting and any adjournment thereof.
The Board of Directors has fixed the close of business on March 10, 2004 as
the record date for the determination of stockholders entitled to receive notice
of and to vote at the Annual Meeting and any adjournment thereof.
By Order of the Board of Directors
Lisa G. Mrozek, Secretary
Pasadena, California
March 31, 2004
STOCKHOLDERS WHO DO NOT EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON ARE
URGED TO DATE, FILL IN, SIGN AND MAIL THE ENCLOSED PROXY IN THE ACCOMPANYING
ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
PACIFIC AMERICAN INCOME SHARES, INC.
385 EAST COLORADO BOULEVARD
PASADENA, CALIFORNIA 91101
------------------------
PROXY STATEMENT
The accompanying proxy is solicited by the Board of Directors of the
Company for use at the annual meeting of stockholders of the Company to be held
on May 4, 2004 at 8:00 a.m., California time (the "Annual Meeting"), and at any
adjournment thereof. At the Annual Meeting, stockholders will be asked to
consider the election of six Directors to the Board of Directors of the Company.
This Proxy Statement and the form of proxy were first mailed to stockholders on
or about April 2, 2004.
The Board of Directors has fixed the close of business on March 10, 2004 as
the record date for the determination of stockholders entitled to notice of and
to vote at the Annual Meeting and any adjournment thereof. As of the close of
business on March 10, 2004, there were 9,389,431 shares of the Company's common
stock (the "Common Stock") outstanding and entitled to one vote per share (and a
fractional vote with respect to fractional shares) with respect to each matter
to be voted on at the Annual Meeting. The outstanding shares of Common Stock
constitute the only outstanding voting securities of the Company entitled to be
voted at the Annual Meeting. As of the close of business on March 10, 2004, no
person owned of record, or to the Company's knowledge, owned beneficially more
than 5% of the Company's Common Stock, except that Cede & Co., as nominee for
participants in The Depository Trust Company, held of record 7,772,067 shares of
Common Stock, representing approximately 82% of the Company's Common Stock. Cede
& Co.'s address is 55 Water Street, 25th Floor, New York, New York 10041-0001.
A majority of the outstanding shares of Common Stock as of the close of
business on March 10, 2004 must be represented in person or by proxy to
constitute a quorum for the Annual Meeting. Each stockholder has the right to
revoke his or her proxy at any time before it is voted. A proxy may be revoked
by filing with the Secretary of the Company a written revocation or a properly
executed proxy bearing a later date or by voting in person at the Annual
Meeting. Any stockholder may attend the Annual Meeting, whether or not he or she
has previously given a proxy.
The solicitation of proxies for the Annual Meeting will be made primarily
by mail. However, if necessary to ensure satisfactory representation at the
Annual Meeting, additional solicitation may take place in writing or by
telephone or personal interview by officers of the Company, who will not receive
compensation from the Company for such services. As the date of the meeting
approaches, if we have not
1
received your proxies, you may receive a telephone call from our proxy
solicitor, Georgeson Shareholder Communications, Inc. ("GS"), which has been
retained to assist stockholders in the voting process. For these services, the
Company will pay GS a fee that is not expected to exceed $2,000. The Company
will reimburse brokers and other nominees, in accordance with New York Stock
Exchange approved reimbursement rates, for their expenses in forwarding
solicitation material to the beneficial owners of stock of the Company. All
expenses incurred in connection with the solicitation of proxies, including the
services of GS, will be borne by the Company.
Abstentions and "broker non-votes" (i.e., shares held by brokers or
nominees as to which (i) instructions have not been received from the beneficial
owners or the persons entitled to vote and (ii) the broker or nominee does not
have discretionary voting power on a particular matter) will be counted as
shares present for purposes of determining whether a quorum is present, but will
not be counted as having been voted on the matter in question. Assuming that a
quorum would otherwise be present, abstentions and broker non-votes will
accordingly have no effect for the purpose of determining whether a Director has
been elected.
James W. Hirschmann III, Lisa G. Mrozek and Ilene S. Harker, the persons
named as proxies on the proxy card accompanying this Proxy Statement, were
selected by the Board of Directors to serve in such capacity. Mr. Hirschmann and
Mesdames Mrozek and Harker are each officers of the Company. Each executed and
returned proxy will be voted in accordance with the directions indicated thereon
or, if no direction is indicated, such proxy will be voted for the election as
Directors of the Board of Directors' nominees listed in this Proxy Statement.
Discretionary authority is provided in the proxy as to any matters not
specifically referred to therein. The Board of Directors is not aware of any
other matters which are likely to be brought before the Annual Meeting. However,
if any such matters properly come before the Annual Meeting, the persons named
in the proxy are fully authorized to vote thereon in accordance with their
judgment and discretion. In all matters other than the election of Directors,
the affirmative vote of a majority of shares of the Company's Common Stock
present in person or represented by proxy at the Annual Meeting and entitled to
vote on the subject matter will be the act of the stockholders.
PROPOSAL
ELECTION OF DIRECTORS
Six Directors are to be elected at the Annual Meeting to serve until their
successors have been duly elected and qualified or until they shall resign or
shall have been removed, subject to applicable law and the rules of the New York
Stock Exchange. Information about each nominee is set forth in the table below.
2
Each of the nominees is presently a Director of the Company. No Director or
nominee serves as an officer of the Company.
The Company's Bylaws provide that the Board of Directors will consist of
seven directors. Due to the resignation of a Director of the Company in
September 2003, a vacancy currently exists on the Board. It is not proposed that
such vacancy be filled at the Annual Meeting, and a shareholder's proxy cannot
be voted for a greater number of persons than the six nominees named in this
Proxy Statement.
It is the intention of the persons designated as proxies in the proxy,
unless otherwise directed therein, to vote at the Annual Meeting for the
election of the nominees named below as Directors of the Company. Each of the
nominees has agreed to serve if elected at the Annual Meeting. If any nominee is
unable or unavailable to serve, the persons named in the proxies will vote the
proxies for such other person as the Board of Directors may recommend.
Information Regarding the Directors. Information about the Directors and
nominees is set forth below. The address of each Director and nominee is c/o the
Company at its principal business address listed above.
<Table>
<Caption>
NUMBER OF SHARES OF
PORTFOLIOS COMMON
TERM OF IN FUND STOCK
OFFICE AND COMPLEX OTHER BENEFICIALLY
POSITION(S) LENGTH OF OVERSEEN DIRECTORSHIPS OWNED ON
HELD WITH TIME PRINCIPAL OCCUPATIONS BY HELD BY MARCH 1,
NAME AND AGE COMPANY SERVED+ DURING THE PAST 5 YEARS NOMINEE++ NOMINEE 2004
- ------------ ----------- ---------- ------------------------- ---------- ------------- ------------
Ronald J. Arnault Director Since 1997 Retired (1996) Executive 14 -- 1,000
Age 60 (1) Vice President, Chief
Financial Officer and
Director of Atlantic
Richfield Company.
John E. Bryson Director Since 1987 Chairman and CEO, Edison 14 Director of 1,000**
Age 60 (2)(3)(4) International (electric The Boeing
power generator, Company and
distributor and The Walt
structured finance Disney
provider) (since 1990); Company.
Chairman of Southern
California Edison Company
(1990-1999 and 2003-
present); Chief Executive
Officer of Southern
California Edison Company
(1990 to 1999).
</Table>
3
<Table>
<Caption>
NUMBER OF SHARES OF
PORTFOLIOS COMMON
TERM OF IN FUND STOCK
OFFICE AND COMPLEX OTHER BENEFICIALLY
POSITION(S) LENGTH OF OVERSEEN DIRECTORSHIPS OWNED ON
HELD WITH TIME PRINCIPAL OCCUPATIONS BY HELD BY MARCH 1,
NAME AND AGE COMPANY SERVED+ DURING THE PAST 5 YEARS NOMINEE++ NOMINEE 2004
- ------------ ----------- ---------- ------------------------- ---------- ------------- ------------
Anita L. DeFrantz Director Since 1998 President, since 1987, 14 Director of 520
Age 51 (1) and Director, since 1990, OBN Holdings
Amateur Athletic Inc.
Foundation of Los
Angeles; President and
Director, Kids in Sports,
since 1994; Vice
President and Director,
International Rowing
Federation, since 1997;
Member, International
Olympic Committee
("IOC"), since 1986;
Member, IOC Executive
Board, 1992-2001; Member,
U.S. Olympic Committee
("USOC"), since 1976;
Member, USOC Executive
Board, since 1977.
William G. McGagh Chairman Since 1984 Consultant, McGagh 14 -- 1,000
Age 74 and Associates (corporate
Director financial consulting),
(2)(4) since 1989; Chairman of
the Board of the John
Tracy Clinic; Chairman of
the Board of the Los
Angeles Orthopedic
Hospital. Formerly:
Senior Vice President,
Chief Financial Officer
and Director of Northrop
Grumman Corp. (defense,
aerospace and cyberspace
products).
</Table>
4
<Table>
<Caption>
NUMBER OF SHARES OF
PORTFOLIOS COMMON
TERM OF IN FUND STOCK
OFFICE AND COMPLEX OTHER BENEFICIALLY
POSITION(S) LENGTH OF OVERSEEN DIRECTORSHIPS OWNED ON
HELD WITH TIME PRINCIPAL OCCUPATIONS BY HELD BY MARCH 1,
NAME AND AGE COMPANY SERVED+ DURING THE PAST 5 YEARS NOMINEE++ NOMINEE 2004
- ------------ ----------- ---------- ------------------------- ---------- ------------- ------------
William E. B. Director Since 1997 Chairman, Walt Disney 14 Director of 4,000
Siart (1)(2)(3)(4) Concert Hall, Inc., since Sybron Dental
Age 57 1998; Chairman, since Specialties,
2000, President and Chief Inc.
Executive Officer (1998-
2000), Excellent
Education Development.
Formerly: Chairman and
Chief Executive Officer,
First Interstate Bancorp.
Louis A. Simpson Director Since 1994 President and Chief 14 Director of 10,000**
Age 67 (1)(3)(4) Executive Officer, ResMed Inc.
Capital Operations, GEICO
Corporation, since 1993.
Formerly: President and
Chief Executive Officer,
Western Asset Management
Company (1977-1979).
</Table>
- ---------------
(1) Member of the Audit Committee of the Board of Directors.
(2) Member of the Executive Committee of the Board of Directors.
(3) Member of the Governance and Nominating Committee of the Board of Directors.
(4) Member of the Compensation Committee of the Board of Directors.
+ Each of the Directors of the Company shall hold office until his or her
successor shall have been duly elected and shall qualify or until he or she
shall resign or shall have been removed, subject to applicable law and the
rules of the New York Stock Exchange.
++ Each Director also serves as a Trustee for Western Asset Premier Bond Fund
(closed-end investment company) and a Director of Western Asset Funds, Inc.
(open-end investment company), which are considered part of the same Fund
Complex as the Company. The Company's investment adviser, Western Asset
Management Company (the "Investment Adviser"), and subadviser, Western Asset
Management Company Limited (the "Subadviser"), also serve as adviser and
subadviser, respectively, to Western Asset Premier Bond Fund, and each
serves as subadviser to one or more series of Western Asset Funds, Inc.
** The nominee shares voting and investment power with respect to these shares.
5
The following table states the dollar range of equity securities
beneficially owned as of March 1, 2004 by each nominee in the Company and, on an
aggregate basis, in any registered investment companies overseen or to be
overseen by the nominee in the same "family of investment companies."
<Table>
<Caption>
AGGREGATE DOLLAR RANGE OF EQUITY
SECURITIES IN ALL FUNDS OVERSEEN
DOLLAR RANGE OF EQUITY OR TO BE OVERSEEN BY NOMINEE IN
NAME OF NOMINEE SECURITIES IN THE COMPANY FAMILY OF INVESTMENT COMPANIES
--------------- ------------------------- --------------------------------
Ronald J. Arnault.......................... $10,001 - $50,000 $10,001 - $50,000
John E. Bryson............................. $10,001 - $50,000 $10,001 - $50,000
Anita L. DeFrantz.......................... $1 - $10,000 $1 - $10,000
William G. McGagh.......................... $10,001 - $50,000 $10,001 - $50,000
William E. B. Siart........................ $50,001 - $100,000 $50,001 - $100,000
Louis A. Simpson........................... >$100,000 >$100,000
</Table>
As of March 1, 2004, all Directors and officers of the Company as a group
beneficially owned less than 1% of the outstanding shares on such date.
Audit Committee. The Board of Directors has established an Audit Committee
composed solely of Directors who are not "interested persons" (as defined in the
1940 Act) of the Company or the Investment Adviser or Subadviser, consisting of
Messrs. Arnault, Siart and Simpson and Ms. DeFrantz. Each member of the Audit
Committee is "independent," as independence for audit committee members is
defined in the currently applicable listing standards of the New York Stock
Exchange, on which the Common Stock of the Company is listed and traded. The
Audit Committee provides oversight with respect to the accounting and financial
reporting policies and procedures of the Company and, among other things,
considers the selection of independent public accountants for the Company and
the scope of the audit and approves services proposed to be performed by those
accountants on behalf of the Company and, under certain circumstances, the
Investment Adviser, Subadviser and certain affiliates. The Directors have
adopted a written charter for the Audit Committee, a copy of which is attached
as Appendix A to this Proxy Statement.
The Audit Committee of the Company has submitted the following report:
The Audit Committee has reviewed and discussed with management of the
Company the audited financial statements for the last fiscal year. The Audit
Committee has discussed with the Company's independent accountants the matters
required to be discussed by Statements on Auditing Standards No. 61 (SAS 61).
SAS 61 requires independent accountants to communicate to the Audit Committee
matters including, if applicable: (1) methods used to account for significant
unusual transactions; (2) the effect of significant accounting policies in
controversial or emerging areas for which there is a lack of authoritative
6
guidance or consensus; (3) the process used by management in formulating
particularly sensitive accounting estimates and the basis for the accountant's
conclusions regarding the reasonableness of those estimates; and (4)
disagreements with management over the application of accounting principles and
certain other matters. The Audit Committee has received the written disclosures
and the letter from the Company's independent accountants required by
Independence Standards Board Standard No. 1 (requiring accountants to make
written disclosures to and discuss with the Audit Committee various matters
relating to the accountants' independence), and has discussed with such
accountants the independence of such accountants. Based on the foregoing review
and discussions, the Audit Committee recommended to the Directors the inclusion
of the audited financial statements for the last fiscal year in the Company's
annual report to stockholders.
Ronald J. Arnault (Chairman)
Anita L. DeFrantz
William E. B. Siart
Louis A. Simpson
Governance and Nominating Committee. The Board of Directors has
established a Governance and Nominating Committee composed solely of Directors
who are not "interested persons" (as defined in the 1940 Act) of the Company or
the Investment Adviser or Subadviser, consisting of Messrs. Bryson, Siart and
Simpson. The Governance and Nominating Committee meets to select nominees for
election as Directors of the Company and consider other matters of Board policy.
The Directors have adopted a written charter for the Governance and Nominating
Committee, a copy of which is included as Appendix B to this Proxy Statement.
The Company does not currently maintain a website on which the charter is
available.
The Governance and Nominating Committee requires that Director candidates
have a college degree or equivalent business experience, but has not otherwise
established specific, minimum qualifications that must be met by an individual
to be considered by the Committee for nomination as a Director. The Governance
and Nominating Committee may take into account a wide variety of factors in
considering Director candidates, including, but not limited to: (i) availability
and commitment of a candidate to attend meetings and perform his or her
responsibilities to the Board of Directors, (ii) relevant industry and related
experience, (iii) educational background, (iv) financial expertise, (v) an
assessment of the candidate's ability, judgment and expertise and (vi) overall
diversity of the Board's composition. The Governance and Nominating Committee
may consider candidates for Director recommended by the Company's current
Directors, officers, Investment Adviser or Subadviser, stockholders or any other
source deemed to be appropriate by the Governance and Nominating Committee.
Candidates properly submitted by shareholders (as described below) will be
considered and evaluated on the same basis as candidates recommended by other
sources.
7
It is the policy of the Governance and Nominating Committee to consider
nominees recommended by stockholders to serve as Director, provided that any
such recommendation is submitted in writing to the Company, to the attention of
the Secretary, at the address of the principal executive offices of the Company,
not less than one hundred and twenty calendar days nor more than one hundred and
thirty-five calendar days prior to the date of the meeting at which the nominee
would be elected and that such shareholder recommendation contains the
information about such nominee required by the Company's procedures for
stockholders to submit nominee candidates, which are a part of the Governance
and Nominating Committee's Charter (see Appendix B to this Proxy Statement). The
Governance and Nominating Committee has full discretion to reject nominees
recommended by stockholders, and there is no assurance that any such person so
recommended and considered by the Governance and Nominating Committee will be
nominated for election to the Company's Board of Directors.
Executive Committee. The Board of Directors has established an Executive
Committee consisting of Messrs. Bryson, McGagh and Siart. The Executive
Committee may meet from time to time between Board meetings in order to consider
relevant items requiring its consideration.
Compensation Committee. The Board of Directors has established a
Compensation Committee consisting of Messrs. Bryson, McGagh, Siart and Simpson.
The Compensation Committee meets to review and make recommendations to the Board
with respect to Director compensation for services to the Company.
Meetings. During 2003, the Board of Directors held five meetings, the
Audit Committee held five meetings, the Governance and Nominating Committee held
four meetings, the Compensation Committee held one meeting and the Executive
Committee did not meet. Each Director attended each of the meetings of the Board
of Directors and the Committees of the Board of Directors on which he or she
served. Although the Company's policies do not require the Directors to attend
the Company's annual stockholder meetings, annual meetings are generally held in
connection with a regularly scheduled meeting of the Board of Directors in order
to facilitate attendance. Each current Director attended the Company's last
annual stockholder meeting in May 2003.
Stockholder Communications. The Board of Directors provides a process for
stockholders to send communications to the Board of Directors. Stockholders may
mail written communications to the attention of the Board of Directors, care of
the Company's Secretary, to the principal executive offices of the Company. The
written communication must include the stockholder's name, be signed by the
stockholder, refer to the Company, and include the class and number of shares
held by the stockholder as of a recent date.
8
Director Compensation. Effective February 2004, each Director of the
Company who is not an "interested person" (as defined in the 1940 Act) of the
Company, the Investment Adviser or the Subadviser receives an aggregate fee of
$40,000 annually for serving on the combined Board of Directors/ Trustees of the
Company, Western Asset Funds, Inc. and Western Asset Premier Bond Fund. Each
Director also receives a fee of $5,000 and related expenses for each meeting of
the Board attended in-person and a fee of $2,500 for participating in each
telephonic meeting. The Chairman of the Board and the Chairman of the Audit
Committee each receive an additional $10,000 per year for serving in such
capacities. Each member of the Audit Committee receives a fee of $5,000 for
serving as a member of the Audit Committee. Other committee members receive
$2,500 for serving as a member of each committee upon which they serve.
Committee members also receive a fee of $2,500 for participating in each
telephonic committee meeting. All such fees are allocated among the Company,
Western Asset Funds, Inc. and Western Asset Premier Bond Fund according to each
such investment company's average net assets.
For the fiscal year ended December 31, 2003, the Directors received the
compensation set forth in the following table for serving as Directors of the
Company and as Directors or Trustees of other funds in the same "Fund Complex."
<Table>
<Caption>
AGGREGATE PENSION OR RETIREMENT ESTIMATED TOTAL COMPENSATION
COMPENSATION BENEFITS ACCRUED AS ANNUAL FROM THE COMPANY
FROM THE PART OF COMPANY'S BENEFITS UPON AND ITS FUND COMPLEX
NAME OF PERSON COMPANY EXPENSES RETIREMENT PAID TO DIRECTORS(1)
-------------- ------------ --------------------- ------------- --------------------
Ronald J. Arnault........... $15,000 $0 $0 $56,500
John E. Bryson.............. $12,000 $0 $0 $49,000
Anita L. DeFrantz........... $12,000 $0 $0 $50,500
William G. McGagh........... $13,000 $0 $0 $54,500
William E. B. Siart......... $14,000 $0 $0 $55,000
Louis A. Simpson............ $14,000 $0 $0 $55,000
</Table>
- ---------------
(1) Includes amounts received from the Company and from Western Asset Funds,
Inc. and Western Asset Premier Bond Fund, which are considered part of the
same Fund Complex as the Company. Effective February 2004, the Directors
will earn compensation for their service as described in the preceding
paragraph.
During 2003, the Company paid no remuneration to its officers, all of whom
were also officers or employees of the Investment Adviser or one of its
affiliates.
Required Vote. The Directors of the Company will be elected by a plurality
vote of the shares of the Company's Common Stock present in person or
represented by proxy and entitled to vote on the election of
9
Directors. The Directors unanimously recommend that stockholders vote to elect
each of the nominees listed above to the Board of Directors.
INFORMATION CONCERNING THE INVESTMENT
ADVISER AND SUBADVISER AND THE COMPANY'S OFFICERS
The Investment Adviser and the Subadviser are subsidiaries of Legg Mason,
Inc., a holding company which, through its subsidiaries, is engaged in providing
securities brokerage, investment advisory, corporate and public finance, and
mortgage banking services to individuals, institutions, corporations and
municipalities, and the provision of other financial services. The address of
Legg Mason, Inc. is 100 Light Street, Baltimore, Maryland 21202. The Investment
Adviser's address is 385 East Colorado Boulevard, Pasadena, California 91101.
The Subadviser's address is 155 Bishopsgate, London, England EC2N3TY. An
affiliate of the Investment Adviser, Legg Mason Fund Adviser, Inc., 100 Light
Street, Baltimore, Maryland 21202, provides administrative services to the
Company.
10
Information regarding the executive officers of the Company and their
ownership of Common Stock is set forth below. The address of each officer is c/o
the Company at the address listed above.
<Table>
<Caption>
SHARES OF
COMMON STOCK
TERM OF OFFICE BENEFICIALLY
POSITION(S) HELD AND LENGTH PRINCIPAL OCCUPATION(S) OWNED ON
NAME AND AGE WITH FUND OF TIME SERVED(1) DURING THE PAST 5 YEARS MARCH 1, 2004
- ------------ ---------------- ----------------- ------------------------ -------------
James W. Hirschmann III President Served since Director, President and 10,000
Age 43 1999. Chief Executive Officer
of the Investment
Adviser, March 1999 to
present; Director of the
Subadviser, 1999 to
present; Member, Board
of Directors of Medical
Simulation Corporation;
Member, Board of
Trustees of Widener
College; President,
Western Asset Funds,
Inc. and Western Asset
Premier Bond Fund.
Formerly: Managing
Director of the
Subadviser, 1996-1999;
Director of Marketing of
the Investment Adviser,
April 1989 to 1998; Vice
President and Director
of Marketing, Financial
Trust Corporation (bank
holding company), 1988
to 1989; Vice President
of Marketing Atalanta/
Sosnoff Capital
(investment management
company), 1986 to 1988.
</Table>
11
<Table>
<Caption>
SHARES OF
COMMON STOCK
TERM OF OFFICE BENEFICIALLY
POSITION(S) HELD AND LENGTH PRINCIPAL OCCUPATION(S) OWNED ON
NAME AND AGE WITH FUND OF TIME SERVED(1) DURING THE PAST 5 YEARS MARCH 1, 2004
- ------------ ---------------- ----------------- ------------------------ -------------
Ilene S. Harker Vice President Served since Head of Enterprise Risk 4,383
Age 49 1996. of the Investment
Adviser, 2003 to
present; Vice President,
Western Asset Funds,
Inc., 1990 to present,
and Western Asset
Premier Bond Fund, 2001
to present. Formerly:
Secretary and Director
of Compliance and
Controls of the
Investment Adviser, 1978
to 2003; Secretary of
Western Asset Funds,
Inc. and the Company,
1993 to 1996.
Scott F. Grannis Vice President Served since Chief Economist, the 4,000
Age 54 1990. Investment Adviser, 1989
to present; Vice
President of Western
Asset Funds, Inc., 1990
to present. Formerly:
Vice-President, Leland
O'Brien Rubinstein
(investment advisory
firm), 1986 to 1989;
Senior Economist,
Claremont Economics
Institute, 1980 to 1986.
</Table>
12
<Table>
<Caption>
SHARES OF
COMMON STOCK
TERM OF OFFICE BENEFICIALLY
POSITION(S) HELD AND LENGTH PRINCIPAL OCCUPATION(S) OWNED ON
NAME AND AGE WITH FUND OF TIME SERVED(1) DURING THE PAST 5 YEARS MARCH 1, 2004
- ------------ ---------------- ----------------- ------------------------ -------------
S. Kenneth Leech Vice President Served since Chief Investment Officer 26,500
Age 49 1998. of the Investment
Adviser, 1998 to
present; Vice President,
Western Asset Funds,
Inc. and Western Asset
Premier Bond Fund.
Formerly: Director of
Portfolio Management of
the Investment Adviser,
1990 to 1998; Senior
Trader, Greenwich
Capital, 1988 to 1990;
Fixed Income Manager of
The First Boston
Corporation (holding
company; stock and bond
dealers), 1980 to 1987;
Portfolio Manager of
National Bank of
Detroit, 1977 to 1980.
Stephen A. Walsh Vice President Served since Deputy Chief Investment --
Age 44 1999. Officer of the
Investment Adviser, 2000
to present; Vice
President, Western Asset
Funds, Inc. Formerly:
Director of Portfolio
Management of the
Investment Adviser,
1998-2000; Senior
Portfolio Manager of the
Investment Adviser,
1991-2000; Portfolio
Manager and Trader,
Security Pacific
Investment Managers,
Inc. (investment
management company),
1989 to 1991; Portfolio
Manager, Atlantic
Richfield Company, 1981
to 1988.
</Table>
13
<Table>
<Caption>
SHARES OF
COMMON STOCK
TERM OF OFFICE BENEFICIALLY
POSITION(S) HELD AND LENGTH PRINCIPAL OCCUPATION(S) OWNED ON
NAME AND AGE WITH FUND OF TIME SERVED(1) DURING THE PAST 5 YEARS MARCH 1, 2004
- ------------ ---------------- ----------------- ------------------------ -------------
Marie K. Karpinski Treasurer and Served since 2001 Vice President, Legg 500
Age 55 Principal Mason Wood Walker,
Financial and Incorporated, 1992 to
Accounting present; Vice President
Officer and Treasurer of all
Legg Mason retail funds
(open-end investment
companies), 1986 to
present; Vice President
and Treasurer of Legg
Mason Charles Street
Trust, Inc. (open-end
investment company),
1998 to present; Vice
President, Treasurer and
Principal Financial and
Accounting Officer,
Western Asset Funds,
Inc., 1990 to present;
Treasurer and Principal
Financial and Accounting
Officer of Western Asset
Premier Bond Fund, 2001
to present; Western
Asset/ Claymore U.S.
Treasury Inflation
Protected Securities
Fund, 2003 to present,
and Western
Asset/Claymore U.S.
Treasury Inflation
Protected Securities
Fund 2, 2004-present.
Formerly: Assistant
Treasurer of the
Company, 1988 to 2001.
</Table>
14
<Table>
<Caption>
SHARES OF
COMMON STOCK
TERM OF OFFICE BENEFICIALLY
POSITION(S) HELD AND LENGTH PRINCIPAL OCCUPATION(S) OWNED ON
NAME AND AGE WITH FUND OF TIME SERVED(1) DURING THE PAST 5 YEARS MARCH 1, 2004
- ------------ ---------------- ----------------- ------------------------ -------------
Erin K. Morris Assistant Served since Assistant Vice President --
Age 37 Treasurer 2001. of Legg Mason Wood
Walker, Incorporated,
2002 to present;
Assistant Treasurer,
2001 to present, of:
Legg Mason Income Trust,
Inc., Legg Mason Cash
Reserve Trust, Legg
Mason Tax Exempt Trust,
Inc., Legg Mason
Tax-Free Income Fund,
Western Asset Funds,
Inc. and Western Asset
Premier Bond Fund;
Assistant Treasurer of
Western Asset/Claymore
U.S. Treasury Inflation
Protected Securities
Fund, 2003 to present,
and Western
Asset/Claymore U.S.
Treasury Inflation
Protected Securities
Fund 2, 2004 to present.
Manager, Fund
Accounting, Legg Mason
Wood Walker,
Incorporated (2000 to
present). Formerly:
Assistant Manager, Funds
Accounting, Legg Mason
Wood Walker,
Incorporated (1993 to
2000).
</Table>
15
<Table>
<Caption>
SHARES OF
COMMON STOCK
TERM OF OFFICE BENEFICIALLY
POSITION(S) HELD AND LENGTH PRINCIPAL OCCUPATION(S) OWNED ON
NAME AND AGE WITH FUND OF TIME SERVED(1) DURING THE PAST 5 YEARS MARCH 1, 2004
- ------------ ---------------- ----------------- ------------------------ -------------
Lisa G. Mrozek Secretary Served since Senior Compliance --
Age 41 1999. Officer of the
Investment Adviser;
President of the Board
of Directors of
California Dollars for
Scholars; Member of the
Board of Trustees of
Scholarship America;
Secretary, Western Asset
Funds, Inc. and Western
Asset Premier Bond Fund.
Formerly: Assistant Vice
President, Fund Business
Management, Capital
Research and Management
Company (an investment
management firm), 1990
to 1999.
</Table>
- ---------------
(1) Each officer shall hold office until his or her successor shall have been
duly chosen and shall qualify or until his or her resignation or removal.
STOCKHOLDER PROPOSALS FOR 2005 ANNUAL MEETING
Proposals that stockholders wish to present to the 2005 Annual Meeting and
to be included in the Company's proxy materials relating to such meeting must be
delivered to the Secretary of the Company not less than 120 days prior to April
2, 2005.
Stockholders who wish to make a proposal at the 2005 Annual
Meeting -- other than one that will be included in the Company's proxy
materials -- should notify the Company not less than 45 days prior to April 2,
2005.
The proper submission of a stockholder proposal does not guarantee that it
will be included in the Company's proxy materials or presented at a stockholder
meeting. Stockholder proposals are subject to the requirements of applicable law
and the Company's Certificate of Incorporation and Bylaws.
16
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 30(h) of the 1940 Act and Section 16(a) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), require the Company's officers and
Directors, the Investment Adviser, the Subadviser, certain affiliates of the
Investment Adviser or Subadviser, and persons who beneficially own more than ten
percent of a registered class of the Company's equity securities, among others,
to file reports of ownership and changes in ownership with the Securities and
Exchange Commission ("SEC") and the New York Stock Exchange. These persons are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons, the Company believes
that, during 2003, all such filing requirements were met.
ANNUAL REPORT TO STOCKHOLDERS
The Company's Annual Report to Stockholders for the fiscal year ended
December 31, 2003 contains financial and other information pertaining to the
Company. The Company will furnish without charge to each person whose proxy is
being solicited, upon request of such person, a copy of the Annual Report to
Stockholders. Requests for copies of the Annual Report to Stockholders should be
directed to Pacific American Income Shares, Inc., Attention: Investor Relations,
385 E. Colorado Boulevard, Pasadena, California 91101 or you may call
800-426-5523.
INDEPENDENT ACCOUNTANTS
The Audit Committee of the Board of Directors has selected
PricewaterhouseCoopers LLP as the independent public accountants of the Company
for the fiscal year ending December 31, 2004, and the Board of Directors,
including a majority of the Directors who are not "interested persons" (as
defined in the 1940 Act) of the Company, has unanimously ratified such
selection. PricewaterhouseCoopers LLP's service is subject to removal by a
majority of the outstanding shares of the Company. Representatives of
PricewaterhouseCoopers LLP are currently expected to attend the meeting, and
may, as they see fit, make a statement and/or respond to appropriate questions.
17
The following table presents fees billed in each of the last two fiscal
years for services rendered to the Company by PricewaterhouseCoopers LLP:
<Table>
<Caption>
FISCAL YEAR ENDED AUDIT FEES AUDIT-RELATED FEES TAX FEES ALL OTHER FEES
- ----------------- ---------- ------------------ -------- --------------
December 31, 2002 $29,500 $2,485 $800 N/A
December 31, 2003 $33,900 $2,700 $870 N/A
</Table>
"Audit Fees" represents fees billed for each of the last two fiscal years
for professional services rendered for the audit of the Company's annual
financial statements for those fiscal years or services that are normally
provided by the accountant in connection with statutory or regulatory filings or
engagements for these fiscal years.
"Audit-Related Fees" represents fees billed for each of the last two fiscal
years for assurance and related services reasonably related to the performance
of the audit of the Company's annual financial statements for those years,
including audit test pricing of the Company's holdings at an interim date.
"Tax Fees" represents fees billed for each of the last two fiscal years for
professional services related to tax compliance, tax advice and tax planning,
including preparation of federal and state income tax returns, review of excise
tax distribution requirements and preparation of excise tax returns.
"All Other Fees" represents fees, if any, billed for other products and
services rendered by PricewaterhouseCoopers LLP to the Company for the last two
fiscal years.
For the fiscal years ended December 31, 2002 and December 31, 2003,
PricewaterhouseCoopers LLP billed aggregate non-audit fees in the amounts of
$545,938 and $886,920, respectively, to the Company, the Investment Adviser and
any entity controlling, controlled by or under common control with the
Investment Adviser.
Pre-Approval Policies of the Audit Committee. The Audit Committee has
determined that all work performed for the Company by PricewaterhouseCoopers LLP
will be pre-approved by the full Audit Committee and, therefore, has not adopted
pre-approval procedures. Since May 6, 2003, all audit and non-audit services
performed by PricewaterhouseCoopers LLP for the Company, and all non-audit
services performed by PricewaterhouseCoopers LLP for the Investment Adviser and
any entity controlling, controlled by or under common control with the
Investment Adviser that provides ongoing services to the Company (a "Service
Affiliate"), to the extent that such services related directly to the operations
and financial reporting of the Company, have been pre-approved by the Audit
Committee. The percentage of "Audit-Related Fees," "Tax Fees" and "Other Fees"
set forth in the table above that were waived pursuant to 17 CFR
210.2-01(c)(7)(i)(c) was zero.
18
PricewaterhouseCoopers LLP did not bill any fees for non-audit services
that required pre-approval by the Audit Committee pursuant to paragraph
(c)(7)(ii) of Rule 2-01 of Regulation S-X during the Company's last two fiscal
years.
The Audit Committee has considered whether the provision of the non-audit
services rendered by PricewaterhouseCoopers LLP since May 6, 2003 to the
Investment Adviser and any Service Affiliate that were not required to be
pre-approved by the Audit Committee pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X is compatible with maintaining the independence of
PricewaterhouseCoopers LLP.
ADJOURNMENT
In the absence of a quorum at the Annual Meeting or any adjournment
thereof, a majority in voting interest of the stockholders present in person or
by proxy and entitled to vote thereat or, in the absence therefrom of all the
stockholders, any officer entitled to preside at, or to act as secretary of, the
Annual Meeting, may adjourn such meeting from time to time. At any such
adjourned meeting at which a quorum is present, any business may be transacted
which might have been transacted at the meeting as originally called.
OTHER BUSINESS
The Company is not aware of any other matters to be presented for action at
the Annual Meeting. However, if any such other matters are properly presented,
it is the intention of the persons designated in the enclosed proxy to vote in
accordance with their best judgment.
By Order of the Board of Directors
Lisa G. Mrozek, Secretary
March 31, 2004
19
APPENDIX A
PACIFIC AMERICAN INCOME SHARES, INC.
WESTERN ASSET FUNDS, INC.
WESTERN ASSET PREMIER BOND FUND (THE "FUNDS")
AUDIT COMMITTEE CHARTER
REVISED AS OF FEBRUARY 10, 2004
The respective Boards of Directors/Trustees (each a "Board") of Pacific
American Income Shares, Inc., Western Asset Funds, Inc. and Western Asset
Premier Bond Fund have adopted this Charter to govern the activities of the
Audit Committee of the Boards with respect to their oversight of the Funds. This
Charter applies separately to each Fund and its Board and Audit Committee, and
shall be interpreted accordingly.
The Audit Committee of the Board shall be comprised entirely of
"independent" Directors/Trustees, as such term is interpreted for purposes of
Section 10A(m)(3) of the Securities Exchange Act of 1934, as amended, and the
listing standards of the New York Stock Exchange (the "Exchange"). The Audit
Committee shall have at least three members, who shall collectively satisfy the
independence and expertise requirements of the Exchange.
The purposes of the Audit Committee shall be:
(a) to assist with the Board's oversight of the integrity of the
Fund's financial statements, the Fund's compliance with legal and
regulatory requirements, the qualifications and independence of the Fund's
independent auditors, and the performance of the Fund's internal control
systems and independent auditors;
(b) to oversee generally the Fund's accounting and financial reporting
policies and practices, the Fund's internal controls and, as appropriate,
the internal controls of certain service providers;
(c) to oversee generally the quality and objectivity of the Fund's
financial statements and the independent audit thereof;
(d) to act as a liaison between the Fund's independent auditors and
the full Board; and
(e) to prepare the report required by applicable rules of the
Securities and Exchange Commission to be included in the annual proxy
statements of Pacific American Income Shares, Inc. and Western Asset
Premier Bond Fund.
A-1
To carry out its purposes and responsibilities, the Audit Committee shall
have the duty and power to:
(a) be directly responsible for the appointment, termination,
compensation, and oversight of the work of the independent auditors engaged
by the Fund for the purpose of preparing or issuing an audit report or
performing other audit, review or attest services for the Fund, including
resolution of disagreements between management and the independent auditors
regarding financial reporting. The independent auditors shall report
directly to the Audit Committee, and the Audit Committee shall have
ultimate authority for all audit engagement fees and terms. The Board and
the Fund's stockholders shall have such rights to approve, ratify and
replace the Fund's independent auditors as are provided by applicable law.
(b) consider the independence of the Fund's independent auditors, and
in connection therewith to obtain at least annually formal written reports
from the auditors regarding the auditors' independence, including a
delineation of all relationships between the auditors and the Fund, discuss
with the auditors any disclosed relationships or services that may impact
the objectivity and independence of the auditors, and if so determined by
the Audit Committee, recommend that the Board take appropriate action to
satisfy itself of the independence of the auditors.
(c) meet with the Fund's independent auditors, including private
meetings, as necessary (i) to review the arrangements for and scope of the
annual audit and any special audits; (ii) to discuss any matters of concern
relating to the Fund's financial statements, including any adjustments to
such statements recommended by the independent auditors, or other results
of said audit; (iii) to consider the independent auditors' comments with
respect to the Fund's financial policies, procedures and internal
accounting controls and the responses of LM Fund Adviser, Inc. ("LMFA"),
Western Asset Management Company ("Western Asset"), and Western Asset
Management Company Limited ("WAML," and together with LMFA and Western
Asset, the "Managers"), as applicable, thereto; and (iv) to review the form
of opinion the auditors propose to render to the Board and the Fund's
stockholders.
(d) discuss with management and the independent auditors the Fund's
annual financial statements, including any narrative discussion by
management concerning the Fund's financial condition and investment
performance.
(e) discuss with management the Fund's semi-annual financial
statements, including any narrative discussion by management concerning the
Fund's financial condition and investment performance.
(f) review major issues regarding accounting principles and financial
statement presentations, including, to the extent applicable: (A) any
significant changes in management's selection or
A-2
application of accounting principles for the Fund, and major issues as to
the adequacy of the Fund's internal controls and any special audit steps
adopted in light of material control deficiencies; (B) analyses prepared by
management and/or the independent auditors setting forth significant
reporting issues and judgments made in connection with the preparation of
the Fund's financial statements, including analyses of the effects of
alternative GAAP methods on the financial statements; and (C) the effect of
regulatory and accounting initiatives, as well as off-balance sheet
structures, on the Fund's financial statements.
(g) consider the effect upon the Fund of any changes in accounting
principles or practices proposed by the Managers or the auditors.
(h) pre-approve, to the extent contemplated by applicable regulations,
audit and non-audit services rendered to the Fund by the auditors and
non-audit services rendered to the Managers and certain of their affiliates
by the auditors, and review the fees charged by the auditors for such
services; provided, however, that the Audit Committee may implement
policies and procedures pursuant to which services are pre-approved other
than by the full Audit Committee, subject to the requirement that the full
Audit Committee be notified in a timely manner of each such service.
(i) establish procedures for (A) the receipt, retention, and treatment
of complaints received by the Fund regarding accounting, internal
accounting controls, or auditing matters, and (B) the confidential,
anonymous submission by employees of the Fund, the Fund's investment
adviser(s), administrator, principal underwriter (if any) or any other
provider of accounting-related services for the Fund of concerns regarding
questionable accounting or auditing matters.
(j) if and to the extent that the Fund intends to have employees, set
clear policies for the hiring by the Fund of employees or former employees
of the Fund's independent auditors.
(k) obtain and review at least annually a report from the independent
auditors describing (i) the independent auditors' internal quality-control
procedures and (ii) any material issues raised by the independent auditors'
most recent internal quality-control review or peer review or by any
governmental or other professional inquiry or investigation performed
within the preceding five years respecting one or more independent audits
carried out by the independent auditors, and any steps taken to address any
such issues.
(l) review with the independent auditors any audit problems or
difficulties encountered in the course of their audit work and management's
responses thereto.
(m) discuss with management any press releases discussing the Fund's
investment performance and other financial information about the Fund, as
well as any financial information and earnings
A-3
guidance provided by management to analysts or rating agencies. The Audit
Committee may discharge this responsibility by discussing the general types
of information to be disclosed by the Fund and the form of presentation
(i.e., a case-by-case review is not required) and need not discuss in
advance each such release of information.
(n) discuss with management its guidelines and policies with respect
to risk assessment and risk management.
(o) review such other matters or information that it believes may be
relevant to the auditors, the audit engagement or the Fund's financial
policies and procedures or internal accounting controls.
(p) report its activities to the full Board on a regular basis.
The Audit Committee shall also have the power to make such recommendations
with respect to the above and other matters as it may deem necessary or
appropriate.
The Audit Committee shall meet on a regular basis and be empowered to hold
special meetings, as circumstances require. Any action of the Audit Committee
with respect to Pacific American Income Shares, Inc. or Western Asset Funds,
Inc. may be taken without a meeting if all members of the Committee consent
thereto in writing. Any action of the Audit Committee with respect to Western
Asset Premier Bond Fund may be taken without a meeting if at least a majority of
the members of the Audit Committee consent thereto in writing.
At least annually, the Audit Committee shall meet separately with the
independent auditors and separately with the representatives of Fund management
responsible for the financial and accounting operations of the Fund. The Audit
Committee shall regularly meet with the Treasurer of the Fund and may seek to
meet with internal auditors, if any, for the Managers as circumstances warrant.
The Audit Committee shall have the resources and authority appropriate to
discharge its responsibilities, including the authority to retain special
counsel and other experts or consultants. The Fund shall provide the necessary
funding, as determined by the Audit Committee, to compensate the Fund's
independent auditors and any advisers employed by the Audit Committee, as well
as for the payment of ordinary administrative expenses of the Audit Committee
that are necessary or appropriate in carrying out its duties. The Audit
Committee may request any officer or employee of the Fund or of any of the
Fund's service providers or the Fund's outside counsel or independent auditors
to attend a meeting of the Audit Committee or to meet with any member of, or
consultants to, the Audit Committee.
Nothing in this Charter shall be construed to reduce the responsibilities
or liabilities of the Managers or the Fund's independent auditors. The function
of the Audit Committee shall be oversight; it shall be the responsibility of the
Managers to maintain appropriate systems for accounting and internal control;
the
A-4
independent auditors' responsibility to plan and carry out a proper audit and
report thereon to the Board and stockholders, as required by law; and
management's and the independent auditors' responsibility to determine that the
Fund's financial statements are accurate and complete and in accordance with
generally accepted accounting principles. Members of the Audit Committee are not
employees of a Fund and, in serving on this Audit Committee, are not, and do not
hold themselves out to be, acting as auditors. As such, it is not the duty or
responsibility of the Audit Committee or its members to conduct "field work" or
other types of auditing or accounting reviews or procedures. Each member of the
Audit Committee shall be entitled to rely on (i) the integrity of those persons
and organizations from which the Audit Committee receives information and (ii)
the accuracy of financial and other information provided to the Audit Committee
by such persons or organizations absent actual knowledge to the contrary.
The performance of the Audit Committee shall be reviewed at least annually
by the Board.
A-5
APPENDIX B
PACIFIC AMERICAN INCOME SHARES, INC.
WESTERN ASSET FUNDS, INC.
WESTERN ASSET PREMIER BOND FUND
GOVERNANCE AND NOMINATING COMMITTEE CHARTER
AS OF FEBRUARY 10, 2004
PURPOSES AND ORGANIZATION
The purpose of the Governance and Nominating Committee of the respective
Boards of Directors/ Trustees (each a "Board") of Pacific American Income
Shares, Inc., Western Asset Funds, Inc., and Western Asset Premier Bond Fund
(each a "Fund") is to review matters pertaining to the composition, committees,
and operations of the Boards. Members of the Committee may not be "interested
persons" of a Fund, as such term is defined in the Investment Company Act of
1940, as amended ("Interested Persons").(1) This Charter applies separately to
each Fund and its Governance and Nominating Committee, and shall be interpreted
accordingly. The Committee shall have the following duties and powers:
(1) To evaluate and recommend all candidates for election or
appointment as members of the Board and recommend the appointment of
members and chairs of each Board Committee.
(2) To review policy matters affecting the operation of the Board and
Board committees and make such recommendations to the Board as deemed
appropriate by the Committee.
(3) To evaluate periodically the effectiveness of the Board and Board
Committees and make such recommendations to the Board as deemed appropriate
by the Committee.
The Committee shall have the resources and authority appropriate to
discharge its responsibilities.
The Committee shall meet on a regular basis and be empowered to hold
special meetings, as circumstances require. Any action of the Committee shall be
taken by the affirmative vote of a majority of the members. Any action of the
Committee with respect to Pacific American Income Shares, Inc. or
- ---------------
(1) As contemplated by certain rules under the Investment Company Act of 1940,
as amended, the selection and nomination of candidates for election as
members of the Board who are not Interested Persons shall be made by the
incumbent members of the Board who are not Interested Persons.
B-1
Western Asset Funds, Inc. may be taken without a meeting if all members of the
Committee consent thereto in writing. Any action of the Committee with respect
to Western Asset Premier Bond Fund may be taken without a meeting if at least a
majority of the members of the Committee consent thereto in writing.
QUALIFICATIONS FOR DIRECTOR/TRUSTEE NOMINEES
The Committee requires that Director/Trustee candidates have a college
degree or equivalent business experience. The Committee may take into account a
wide variety of factors in considering Director/Trustee candidates, including
(but not limited to): (i) availability and commitment of a candidate to attend
meetings and perform his or her responsibilities on the Board, (ii) relevant
industry and related experience, (iii) educational background, (iv) financial
expertise, (v) an assessment of the candidate's ability, judgment and expertise
and (v) overall diversity of the Board's composition.
IDENTIFICATION OF NOMINEES
In identifying potential nominees for the Board, the Committee may consider
candidates recommended by one or more of the following sources: (i) a Fund's
current Directors/Trustees, (ii) a Fund's officers, (iii) a Fund's investment
adviser(s), (iv) a Fund's stockholders (see below) and (v) any other source the
Committee deems to be appropriate. The Committee may, but is not required to,
retain a third party search firm at the expense of the Funds to identify
potential candidates.
CONSIDERATION OF CANDIDATES RECOMMENDED BY STOCKHOLDERS
The Committee will consider and evaluate nominee candidates properly
submitted by stockholders on the same basis as it considers and evaluates
candidates recommended by other sources. Appendix A to this Charter, as it may
be amended from time to time by the Committee, sets forth procedures that must
be followed by stockholders to properly submit a nominee candidate to the
Committee (recommendations not properly submitted in accordance with Appendix A
will not be considered by the Committee).
B-2
PROCEDURES FOR STOCKHOLDER TO SUBMIT NOMINEE CANDIDATES
(AS OF FEBRUARY 10, 2004)
A Fund stockholder must follow the following procedures in order to
properly submit a nominee recommendation for the Committee's consideration.
1. The stockholder must submit any such recommendation (a "Stockholder
Recommendation") in writing to the Fund, to the attention of the Secretary,
at the address of the principal executive offices of the Fund.
2. The Stockholder Recommendation must be delivered to or mailed and
received at the principal executive offices of the Fund not less than one
hundred and twenty (120) calendar days nor more than one hundred and
thirty-five (135) calendar days prior to the date of the Board or
shareholder meeting at which the nominee would be elected.
3. The Stockholder Recommendation must include: (i) a statement in
writing setting forth (A) the name, age, date of birth, business address,
residence address and nationality of the person recommended by the
shareholder (the "candidate"); (B) the class or series and number of all
shares of the Fund owned of record or beneficially by the candidate, as
reported to such shareholder by the candidate; (C) any other information
regarding the candidate called for with respect to director/trustee
nominees by paragraphs (a), (d), (e) and (f) of Item 401 of Regulation S-K
or paragraph (b) of Item 22 of Rule 14a-101 (Schedule 14A) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), adopted
by the Securities and Exchange Commission (or the corresponding provisions
of any regulation or rule subsequently adopted by the Securities and
Exchange Commission or any successor agency applicable to the Fund); (D)
any other information regarding the candidate that would be required to be
disclosed if the candidate were a nominee in a proxy statement or other
filing required to be made in connection with solicitation of proxies for
election of trustees or directors pursuant to Section 14 of the Exchange
Act and the rules and regulations promulgated thereunder; and (E) whether
the recommending shareholder believes that the candidate is or will be an
"interested person" of the Fund (as defined in the Investment Company Act
of 1940, as amended) and, if not an "interested person," information
regarding the candidate that will be sufficient for the Fund to make such
determination; (ii) the written and signed consent of the candidate to be
named as a nominee and to serve as a director/trustee if elected; (iii) the
recommending shareholder's name as it appears on the Fund's books; (iv) the
class or series and number of all shares of the Fund owned beneficially and
of record by the recommending shareholder; and (v) a description of all
arrangements or understandings between the recommending shareholder and the
candidate and any other person or persons (including their names) pursuant
to which the
B-3
recommendation is being made by the recommending shareholder. In addition,
the Committee may require the candidate to furnish such other information
as it may reasonably require or deem necessary to determine the eligibility
of such candidate to serve on the Board.
B-4
3551-PS-04
PACIFIC AMERICAN INCOME SHARES, INC.
Dear Stockholder,
Please take note of the important information enclosed with this Proxy Ballot.
There is an issue related to the management and operation of your Company that
requires your immediate attention and approval. This is discussed in detail in
the enclosed proxy materials.
Your vote counts, and you are strongly encouraged to exercise your right to vote
your shares.
Please mark the boxes on this proxy card to indicate how your shares will be
voted. Then sign the card, detach it and return your proxy vote in the enclosed
postage paid envelope. Your vote must be received prior to the Annual Meeting of
Stockholders, May 4, 2004.
Thank you in advance for your prompt consideration of this matter.
Sincerely,
Pacific American Income Shares, Inc.
DETACH HERE
- --------------------------------------------------------------------------------
PACIFIC AMERICAN INCOME SHARES, INC.
ANNUAL MEETING OF STOCKHOLDERS - MAY 4, 2004
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
PACIFIC AMERICAN INCOME SHARES, INC.
The undersigned, revoking all prior proxies, hereby appoints James W. Hirschmann
III, Lisa G. Mrozek and Ilene S. Harker, and each of them, attorneys and proxies
of the undersigned, each with full power of substitution, to attend the Annual
Meeting of the Stockholders of Pacific American Income Shares, Inc., a Delaware
corporation (the "Company"), to be held in the Board Room, Fifth Floor, 385 E.
Colorado Blvd., Pasadena, California, on May 4, 2004, at 8:00 a.m., California
time, and at any adjournments thereof, and thereat to vote as indicated all
shares of the Common Stock of the Company which the undersigned would be
entitled to vote if personally present with respect to the matters listed on the
reverse, which are more fully described in the Notice of Meeting and Proxy
Statement of the Company, receipt of which is acknowledged by the undersigned.
PLEASE VOTE, DATE, SIGN ON REVERSE AND RETURN PROMPTLY
USING THE ENCLOSED ENVELOPE.
Please sign this Proxy exactly as your name(s) appear(s) on the reverse side.
Joint owners should each sign personally. Trustees and other fiduciaries should
indicate the capacity in which they sign. If a corporation, this signature
should be that of an authorized officer who should state his or her title.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PACIFIC AMERICAN INCOME SHARES, INC.
C/O EQUISERVE TRUST COMPANY, N.A.
P.O. BOX 8694
EDISON, NJ 08818-8694
DETACH HERE IF YOU ARE RETURNING YOUR PROXY CARD BY MAIL
[X] Please mark
vote as in
this example
PACIFIC AMERICAN INCOME SHARES, INC.
1. Election of Directors.
(01) RONALD J. ARNAULT, (02) JOHN E. BRYSON, (03) ANITA L. DEFRANTZ,
(04) WILLIAM G. MCGAGH, (05) WILLIAM E.B. SIART,
(06) LOUIS A. SIMPSON
With discretionary power upon such other matters as may properly come before
the meeting or any adjournment thereof.
FOR [ ] [ ] WITHHELD
ALL FROM ALL
NOMINEES NOMINEES
[ ] For all nominees except as noted above
Mark box at right if an address change or comment has been noted on the reverse
side of this card. [ ]
THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE, THIS PROXY
WILL BE VOTED FOR THE ELECTION AS DIRECTORS OF THE NOMINEES OF THE BOARD OF
DIRECTORS.
Please be sure to sign and date this Proxy.
Signature: _________________________________ Date: ___________
Signature: _________________________________ Date: ___________