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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 registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
PACIFIC AMERICAN INCOME SHARES, INC.
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 10, 2005
------------------------
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 10, 2005 at 8:00 a.m., Pacific
time, for the following purposes:
(1) Electing seven Directors to the Board of Directors of the Company;
(2) Approving an amendment to the Company's Certificate of
Incorporation in order to change the name of the Company to "Western Asset
Income Fund"; and
(3) 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 15, 2005 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, 2005
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 10, 2005 at 8:00 a.m., Pacific time (the "Annual Meeting"), and at any
adjournment thereof. At the Annual Meeting, stockholders will be asked to
consider (1) the election of seven Directors to the Board of Directors of the
Company and (2) an amendment to the Company's Certificate of Incorporation in
order to change the name of the Company to "Western Asset Income Fund". This
Proxy Statement and the form of proxy were first mailed to stockholders on or
about April 4, 2005.
The Board of Directors has fixed the close of business on March 15, 2005 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 15, 2005, 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 15, 2005, 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 7,821,147 shares of
Common Stock, representing approximately 83% 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 15, 2005 must be represented in person or by proxy to
constitute a quorum for the Annual Meeting. Directors will be elected by a
plurality of the votes of the shares of the Company's Common Stock present in
person or represented by proxy and entitled to vote on the election of
Directors. In all matters other than the election of Directors, including the
proposed amendment to the Company's Certificate of Incorporation, the
affirmative vote of the 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. 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
1
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 (or their designees),
who will not receive compensation from the Company for such services. As the
date of the meeting approaches, if we have not received your proxies, you may
receive a telephone call from our proxy solicitor, Computershare Fund Services
(formerly, Georgeson Shareholder Communications, Inc.) ("CFS"), which has been
retained to assist stockholders in the voting process. For these services, the
Company will pay CFS 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 CFS, 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, but will have the effect of a negative vote on Proposal 2 below.
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
Mses. 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 and
the approval of an amendment to the Company's Certificate of Incorporation.
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,
except where a different vote is required by any provision of law or the
Certificate of Incorporation or Bylaws, 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.
2
PROPOSAL 1
ELECTION OF DIRECTORS
Seven 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. Except with respect to Mr. Olson, 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 expected retirement of Mr. William G. McGagh, the
current Chairman of the Board, immediately following the Annual Meeting, a
vacancy will exist on the Board. It is proposed that such vacancy be filled at
the Annual Meeting. The Board has designated Mr. William E.B. Siart as Mr.
McGagh's successor as Chairman of the Board.
It is the intention of the persons designated as proxies in the proxy card,
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 Nominees. Information about the nominees is set
forth below. No Director of the Company serves as an officer of the Company. The
address of each Director and nominee is c/o the Company at its principal
business address (385 East Colorado Boulevard, Pasadena, California 91101).
<Table>
<Caption>
SHARES OF
COMMON
NUMBER OF STOCK
PORTFOLIOS OF THE
TERM OF IN FUND COMPANY
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 2005
- ------------ ----------- ----------------- ------------------------ ---------- ------------- ------------
Ronald J. Arnault Director Served since 1997 Retired (1996) Executive 14 1,000
Born in 1943 (1)(4) Vice President, Chief
Financial Officer and
Director of Atlantic
Richfield Company.
</Table>
3
<Table>
<Caption>
SHARES OF
COMMON
NUMBER OF STOCK
PORTFOLIOS OF THE
TERM OF IN FUND COMPANY
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 2005
- ------------ ----------- ----------------- ------------------------ ---------- ------------- ------------
John E. Bryson Director Served since 1987 Chairman and CEO, Edison 14 The Boeing 1,000+++
Born in 1943 (2)(3) International (electric Company and
power generator, The Walt
distributor and Disney
structured finance Company
provider)(1990-
present); Chairman of
Southern California
Edison Company
(1990-1999 and
2003-present); Chief
Executive Officer of
Southern California
Edison Company.
(1990-1999).
Anita L. DeFrantz Director Served since 1998 President (1987-present) 14 OBN Holdings 630
Born in 1952 (2)(3) and Director (1990- Inc.
present) of Amateur
Athletic Foundation of
Los Angeles; President
and Director of Kids in
Sports (1994-present);
Vice President and
Director of the
International Rowing
Federation
(1997-present); Member
of the International
Olympic Committee
("IOC") (1986-present);
Member, of the IOC
Executive Board
(1992-2001); Member of
the U.S. Olympic
Committee ("USOC")
(1976-present); Member
of the USOC Executive
Board (1977-present).
</Table>
4
<Table>
<Caption>
SHARES OF
COMMON
NUMBER OF STOCK
PORTFOLIOS OF THE
TERM OF IN FUND COMPANY
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 2005
- ------------ ----------- ----------------- ------------------------ ---------- ------------- ------------
William E. B. Siart Director Served since 1997 Chairman of Walt Disney 14 4,000
Born in 1946 (1)(2) Concert Hall, Inc.
(1998-present); Chairman
(2000-present) and
President and Chief
Executive Officer
(1998-2000) of Excellent
Education Development.
Formerly: Chairman and
Chief Executive Officer
of First Interstate
Bancorp.
Louis A. Simpson Director Served since 1994 President and Chief 14 10,000
Born in 1936 (1)(4) Executive Officer,
Capital Operations of
GEICO Corporation (1993-
present). Formerly:
President and Chief
Executive Officer of
Western Asset Management
Company (1977-1979).
Jaynie Miller Studenmund Director Served since 2004 Formerly, Chief 14 aQuantive 0
Born in 1954 (1) Operating Officer of Inc.,
Overture Services, Inc. Treasury Bank
(2001-2004); President and Forest
and Chief Operating Lawn Memorial
Officer of Park
Paymybills.com (2000- Association
2001); Executive Vice
President of Home
Savings of America
(1997-1998).
</Table>
5
<Table>
<Caption>
SHARES OF
COMMON
NUMBER OF STOCK
PORTFOLIOS OF THE
TERM OF IN FUND COMPANY
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 2005
- ------------ ----------- ----------------- ------------------------ ---------- ------------- ------------
Interested Nominee
Ronald L. Olson N/A N/A(5) Senior Partner of -- Edison --
Born in 1941 (Nominee) Munger, Tolles & Olson International,
International (a law City National
partnership). Corporation
(financial
services
company), The
Washington
Post Company,
RAND
Corporation
(nonprofit
institution)
and Berkshire
Hathaway,
Inc.
</Table>
- ---------------
(1) Member of the Audit Committee of the Board of Directors.
(2) Member of the Executive and Contracts 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.
(5) Mr. Olson does not currently serve on the Board of Directors. If elected,
Mr. Olson would be an "interested person" (as defined in section 2(a)(19) of
the Investment Company Act of 1940, as amended (the "1940 Act) of the
Company because his law firm has provided legal services to the Company's
investment adviser, Western Asset Management Company (the "Investment
Adviser").
+ Each of the Directors of the Company holds 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 except Mr. Olson 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 Boards of
6
Trustees/Directors of these companies have nominated Mr. Olson to be elected as
a Trustee of Western Asset Premier Bond Fund and a Director of Western Asset
Funds, Inc. on May 10, 2005. The Investment Adviser and the Company's
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.
The following table states the dollar range of equity securities
beneficially owned as of March 1, 2005 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 E. B. Siart........................ $50,001 - $100,000 $50,001 - $100,000
Louis A. Simpson........................... over $100,000 over $100,000
Jaynie Miller Studenmund................... None None
Interested Nominee
Ronald L. Olson............................ $10,001 - $50,000 $10,001 - $50,000
</Table>
As of March 1, 2005, all Directors and officers of the Company as a group
beneficially owned less than 1% of the outstanding shares of the Company 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. Studenmund. 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
7
adopted a written charter for the Audit Committee, a copy of which was attached
as Appendix A to the Company's proxy statement dated March 31, 2004.
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
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)
William E. B. Siart
Louis A. Simpson
Jaynie Miller Studenmund
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 and McGagh
and Ms. DeFrantz. 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 was included as Appendix B to the
Company's proxy statement dated March 31, 2004. 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
8
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,
shareholders or any other source deemed to be appropriate by the Governance and
Nominating Committee. Mr. Olson was recommended to the Governance and Nominating
Committee of the Board of Directors for consideration as a nominee by the full
Board of Directors. Candidates properly submitted by stockholders (as described
below) will be considered and evaluated on the same basis as candidates
recommended by other sources.
The policy of the Governance and Nominating Committee is 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. 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 and Contracts Committee. The Board of Directors has established
an Executive and Contracts Committee consisting of Messrs. Bryson, McGagh and
Siart and Ms. DeFrantz. The Executive and Contracts Committee may meet from time
to time between Board meetings in order to consider appropriate matters between
meetings of the full Board of Directors and to review the various contractual
arrangements between the Company and its affiliated persons.
Compensation Committee. The Board of Directors has established a
Compensation Committee consisting of Messrs. Arnault, McGagh 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 2004, the Board of Directors held five meetings, the
Audit Committee held seven meetings, the Governance and Nominating Committee
held four meetings, the Compensation Committee held two meetings and the
Executive and Contracts Committee held two meetings. Each Director attended
9
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 regularly scheduled
meetings of the Board of Directors. Each current Director attended the Company's
last annual stockholder meeting in May 2004.
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, at 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.
Director Compensation. Effective February 2005, 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
$50,000 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 $20,000 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 annual net assets.
10
For the fiscal year ended December 31, 2004, 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........... $2,411 $0 $0 $90,000
John E. Bryson.............. $1,975 $0 $0 $73,750
Anita L. DeFrantz........... $2,163 $0 $0 $80,625
William E. B. Siart......... $2,210 $0 $0 $82,500
Louis A. Simpson............ $2,077 $0 $0 $77,500
Jaynie M. Studenmund........ $ 565 $0 $0 $21,250
</Table>
- ---------------
(1) Includes amounts received in 2004 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 2005, the
Directors earn compensation for their service as described above.
During 2004, 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 Directors. The
Directors unanimously recommend that stockholders vote to elect each of the
nominees listed above to the Board of Directors.
PROPOSAL 2
PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION
The Directors of the Company are proposing to amend the Company's
Certificate of Incorporation in order to change the name of the Company from
"Pacific American Income Shares, Inc." to "Western Asset Income Fund". The
Directors believe that the name change will enable investors to better identify
the Company with the Investment Adviser. If Proposal 2 is approved at the Annual
Meeting, it is expected that Company's name change would be effective June 30,
2005.
11
Required Vote. Approval of Proposal 2 will require the affirmative vote of
a majority of the Company's Common Stock entitled to vote on the matter. If the
vote required to approve Proposal 2 is not obtained, the Company's name will not
be changed and Directors will consider what other actions to take in the best
interests of the Company. The Directors unanimously recommend that stockholders
vote for Proposal 2.
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.
12
Information regarding the executive officers of the Company and their
ownership of Common Stock is set forth below. Unless otherwise noted, the
address of each officer is c/o the Company at the address listed above.
<Table>
<Caption>
SHARES OF
COMMON STOCK
OF THE COMPANY
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, 2005
- ------------ ---------------- ----------------- ------------------------ --------------
James W. Hirschmann III President Served since 1999 Director, President and 10,000
Born in 1960 Chief Executive Officer
of the Investment
Adviser (1999-present);
Director of the
Subadviser (1999-
present); Member of the
Board of Directors of
Medical Simulation
Corporation (2003-
present); Member of the
Board of Trustees of
Widener College (1995-
present); Member of the
Investment Committee of
Burroughs Wellcome Fund
(2005-present);
President of Western
Asset Funds, Inc.
(1999-present) and
Western Asset Premier
Bond Fund (2001-
present). Formerly:
Managing Director of the
Subadviser (1996-1999);
Director of Marketing of
the Investment Adviser,
(1989-1998); Vice
President and Director
of Marketing of
Financial Trust
Corporation (bank
holding company) (1988-
1989); Vice President of
Marketing of
Atalanta/Sosnoff Capital
(investment management
company) (1986-1988).
</Table>
13
<Table>
<Caption>
SHARES OF
COMMON STOCK
OF THE COMPANY
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, 2005
- ------------ ---------------- ----------------- ------------------------ --------------
Ilene S. Harker Vice President Served since 1996 Head of Enterprise Risk 4,719
Born in 1955 of the Investment
Adviser (2003-present);
Vice President of
Western Asset Funds,
Inc. (1990-present) and
Western Asset Premier
Bond Fund
(2001-present).
Formerly: Secretary and
Director of Compliance
and Controls of the
Investment Adviser
(1978-2003); Secretary
of Western Asset Funds,
Inc. and the Company
(1993-1996).
Scott F. Grannis Vice President Served since 1990 Chief Economist of the 4,000
Born in 1949 Investment Adviser
(1989-present); Vice
President of Western
Asset Funds, Inc.
(1990-present).
Formerly: Vice-President
of Leland O'Brien
Rubinstein (investment
advisory firm)
(1986-1989); Senior
Economist of the
Claremont Economics
Institute (1980-1986).
</Table>
14
<Table>
<Caption>
SHARES OF
COMMON STOCK
OF THE COMPANY
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, 2005
- ------------ ---------------- ----------------- ------------------------ --------------
S. Kenneth Leech Vice President Served since 1998 Chief Investment Officer 26,500
Born in 1954 of the Investment
Adviser (1998-present);
Vice President of
Western Asset Funds,
Inc. (1990-present) and
Western Asset Premier
Bond Fund
(2001-present).
Formerly: Director of
Portfolio Management of
the Investment Adviser
(1990-1998); Senior
Trader at Greenwich
Capital (1988-1990);
Fixed Income Manager of
The First Boston
Corporation (holding
company; stock and bond
dealers) (1980-1987);
Portfolio Manager of
National Bank of Detroit
(1977-1980).
</Table>
15
<Table>
<Caption>
SHARES OF
COMMON STOCK
OF THE COMPANY
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, 2005
- ------------ ---------------- ----------------- ------------------------ --------------
Stephen A. Walsh Vice President Served since 1999 Deputy Chief Investment 0
Born in 1958 Officer of the
Investment Adviser
(2000-present); Vice
President of Western
Asset Funds, Inc. (1994-
present). Formerly:
Director of Portfolio
Management of the
Investment Adviser
(1998-2000); Senior
Portfolio Manager of the
Investment Adviser
(1991-2000); Portfolio
Manager and Trader at
Security Pacific
Investment Managers,
Inc. (investment
management company)
(1989-1991); Portfolio
Manager at Atlantic
Richfield Company
(1981-1988).
</Table>
16
<Table>
<Caption>
SHARES OF
COMMON STOCK
OF THE COMPANY
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, 2005
- ------------ ---------------- ----------------- ------------------------ --------------
Marie K. Karpinski Treasurer and Served since 2001 Vice President of Legg 500
Born in 1949 Principal Mason Wood Walker,
100 Light Street Financial and Incorporated (1992-
Baltimore, MD 21202 Accounting present); Vice President
Officer and Treasurer of all
Legg Mason retail funds
(open-end investment
companies) (1986-
present); Vice President
and Treasurer of Legg
Mason Charles Street
Trust, Inc. (open-end
investment company)
(1998-present); Vice
President, Treasurer and
Principal Financial and
Accounting Officer of
Western Asset Funds,
Inc. (1990-present);
Treasurer and Principal
Financial and Accounting
Officer of Western Asset
Premier Bond Fund (2001-
present), Western Asset/
Claymore U.S. Treasury
Inflation Protected
Securities Fund (2003-
present), and Western
Asset/Claymore U.S.
Treasury Inflation
Protected Securities
Fund 2 (2004-present).
Formerly: Assistant
Treasurer of the Company
(1988-2001).
</Table>
17
<Table>
<Caption>
SHARES OF
COMMON STOCK
OF THE COMPANY
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, 2005
- ------------ ---------------- ----------------- ------------------------ --------------
Erin K. Morris Assistant Served since 2001 Assistant Vice President 0
Born in 1966 Treasurer of Legg Mason Wood
100 Light Street Walker, Incorporated
Baltimore, MD 21202 (2002-present);
Assistant Treasurer
(2001-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-present) and
Western Asset/Claymore
U.S. Treasury Inflation
Protected Securities
Fund 2 (2004-present);
Manager, Fund Accounting
of Legg Mason Wood
Walker, Incorporated
(2000-present).
Formerly: Assistant
Manager, Fund Accounting
of Legg Mason Wood
Walker, Incorporated
(1993-2000).
</Table>
18
<Table>
<Caption>
SHARES OF
COMMON STOCK
OF THE COMPANY
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, 2005
- ------------ ---------------- ----------------- ------------------------ --------------
Amy M. Olmert Chief Compliance Served since 2004 Senior Vice President of 0
Born in 1963 Officer Legg Mason, Inc. (2004-
100 Light Street present); Vice President
Baltimore, MD 21202 and Chief Compliance
Officer of all Legg
Mason retail open-end
investment companies
(2004-present); Vice
President and Chief
Compliance Officer of
Legg Mason Charles
Street Trust, Inc., an
open-end investment
company (2004-present);
Chief Compliance Officer
of Western Asset Funds,
Inc., Western Asset
Premier Bond Fund,
Western Asset/Claymore
U.S. Treasury Inflation
Protected Securities
Fund and Western
Asset/Claymore U.S.
Treasury Inflation
Protected Securities
Fund 2 (2004-present).
Formerly, Director
(2000-2003) and Managing
Director (2003-2004) of
Deutsche Asset
Management.
</Table>
19
<Table>
<Caption>
SHARES OF
COMMON STOCK
OF THE COMPANY
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, 2005
- ------------ ---------------- ----------------- ------------------------ --------------
Lisa G. Mrozek Secretary Served since 1999 Senior Compliance 0
Born in 1962 Officer of the
Investment Adviser
(1999-present); Member
of the Board of
Directors of California
Dollars for Scholars
(1998-present); Member
of the Board of Trustees
of Scholarship America
(2002-present);
Secretary of Western
Asset Funds, Inc. (1999-
present) and Western
Asset Premier Bond Fund
(2001-present).
Formerly: Assistant Vice
President, Fund Business
Management of Capital
Research and Management
Company (an investment
management firm)(1990-
1999).
</Table>
- ---------------
(1) Each officer holds office until his or her respective successor shall have
been duly chosen and shall qualify or until his or her resignation or
removal.
STOCKHOLDER PROPOSALS FOR 2006 ANNUAL MEETING
Proposals that stockholders wish to present to the 2006 Annual Meeting and
to have 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 4, 2006.
Stockholders who wish to make a proposal at the 2006 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 4,
2006.
20
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.
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, 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 2004, all such filing requirements were met.
ANNUAL REPORT TO STOCKHOLDERS
The Company's Annual Report to Stockholders for the fiscal year ended
December 31, 2004 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, 2005, 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 termination 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.
21
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, 2003........... $33,900 $2,700 $870 $0
December 31, 2004........... $36,000 $2,500 $950 $0
</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 those 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 interim audit security pricing.
"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 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, 2003 and December 31, 2004,
PricewaterhouseCoopers LLP billed aggregate non-audit fees in the amounts of
$883,350 and $372,631, respectively, to the Company, the Investment Adviser and
any entity controlling, controlled by or under common control with the
Investment Adviser that provides ongoing services to the Company.
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. No "Audit-Related Fees," "Tax Fees" and "Other Fees" set forth in the
table above were waived pursuant to 17 CFR 210.2-01(c)(7)(i)(c).
22
PricewaterhouseCoopers LLP did not bill 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 (even if a quorum is
so present) if sufficient votes in favor of a proposal set forth in the Notice
of Annual Meeting are not received by the time scheduled for the Annual Meeting,
the persons named as proxies may propose one or more adjournments of the Annual
Meeting after the date set for the original Annual Meeting, with no other notice
than announcement at the Annual Meeting, to permit further solicitation of
proxies with respect to such proposal. In addition, if, in the judgment of the
persons named as proxies, it is advisable to defer action on a proposal, the
persons named as proxies may propose one or more adjournments of the Annual
Meeting with respect to such proposal for a reasonable time. Any adjournments
with respect to a proposal will require a majority in voting interest of the
stockholders present in person or represented by proxy and entitled to vote at
the Annual Meeting 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. The persons named as proxies will
vote in favor of such adjournment those proxies which they are entitled to vote
in favor of the proposal in question. They will vote against any such
adjournment those proxies required to be voted against such proposal. The costs
of any additional solicitation and of any adjourned session will be borne by the
Company. Any proposals for which sufficient favorable votes have been received
by the time of the Annual Meeting may be acted upon and, if so, such action will
be final regardless of whether the Annual Meeting is adjourned to permit
additional solicitation with respect to any other proposal. 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.
23
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, 2005
24
PACIFIC AMERICAN INCOME SHARES, INC.
Dear Stockholder,
Please take note of the important information enclosed with this Proxy Ballot.
There are several issues related to the management and operation of your Company
that require your immediate attention and approval. These matters are 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 10, 2005.
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 10, 2005
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 10, 2005, at 8:00 a.m., Pacific
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
[X] Please mark
votes 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) RONALD L. OLSON, (05) WILLIAM E.B. SIART, (06) LOUIS A. SIMPSON,
(07) JAYNIE MILLER STUDENMUND
FOR [ ] [ ] WITHHELD
ALL FROM ALL
NOMINEES NOMINEES
[ ] For all nominees except as noted above
2. Amendment to the Company's Certificate of Incorporation in order to change
the name of the Company to "Western Asset Income Fund".
FOR [ ] [ ] AGAINST [ ] ABSTAIN
With discretionary power upon such other matters as may properly come before the
meeting or any adjournment thereof.
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 AND FOR THE AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION.
Please be sure to sign and date this Proxy.
Signature: Date:
--------------------------------- -----------
Signature: Date:
--------------------------------- -----------