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U.S. Securities and Exchange Commission

No-Action Letter under:
Securities Exchange Act of 1934 --
Rule 14a-8(i)(10)

Current Income Shares, Inc.

July 10, 2001

Roy W. Adams, Jr., Esq.
1024 Country Club Drive
Moraga, California 94556

Re: Current Income Shares, Inc.

Dear Mr. Adams:

In a letter dated May 14, 2001, you requested our assurance that we would not recommend enforcement action to the Commission if Current Income Shares ("the Fund") omits from its proxy materials a shareholder proposal ("the proposal") submitted by Walter S. Baer. The proposal states:

RESOLVED: The shareholders recommend to the Board of Directors that the Fund be merged into the HighMark Bond Fund, an open-end fund, so that shareholders can buy and sell shares at net asset value ("NAV").

The proposal was accompanied by a supporting statement, which, among other things, indicates that HighMark Capital Management ("HCM") is the investment adviser to both the Fund and the suggested merger partner, HighMark Bond Fund ("the HighMark Fund"); and that the funds have similar investment objectives and the same team leader overseeing their bond portfolios.

In your May 14, 2001 letter, you state that the Fund intends to omit the proposal from its proxy statement and form of proxy in reliance upon paragraph (i)(10) of Rule 14a-8 under the Securities Exchange Act of 1934. Paragraph (i)(10) provides that a registrant may exclude a proposal "[i]f the company has already substantially implemented the proposal...."

You state that the Fund's board ("the Board") has considered a possible merger of the Fund into the HighMark Fund several times in the last two years. In February 2001, the Board requested that HCM consider and submit to the Board a definitive proposal of terms and conditions for the merger. HCM informed the Board that it "declined to pursue the merger at this time." HCM argued that the merger would be "very labor intensive from an operations standpoint, which would be difficult for [HCM] to handle given a number of initiatives that take greater precedence at this time." HCM also reviewed "a number of factors," including "The expenses to be incurred in effecting the merger," "The potential `run off' of the Fund's assets [subsequent to the merger]" and the "final revenue potential of such a combination...for [HCM]." You further state, "Given HCM's decision, neither the Board nor the Fund realistically can do anything further." As a result, you claim that the proposal has been "substantially implemented."

We do not agree with your view that the proposal may be excluded under Rule 14a-8(i)(10). In our view, the proposal has not been "substantially implemented." 1 In order for a proposal to be substantially implemented, the Board must have actually taken steps to implement the proposal. It appears from your letter that the Board's activity has been limited to considering the merger and requesting HCM to "coordinate with the HighMark Family to consider and submit to the Board a definitive proposal of terms and conditions for the merger." You do not state, however, that the Board actually pursued the merger by submitting a proposal to, or otherwise had discussions with, the directors of the HighMark Fund that have the authority to effectuate a merger. Rather, the formal action that the Board has taken involves discussion with a service provider to the HighMark Fund, its adviser, HCM. Thus, we cannot assure you that we would not recommend that the Commission take any enforcement action if the Fund omits the proposal from its proxy statement and form of proxy in reliance on Rule 14a-8(i)(10).

In connection with the foregoing, please see the enclosure, which sets forth a brief discussion of the Division's procedures regarding shareholder proposals. If you have any questions concerning this matter, please telephone me at 202.942.0686.


Vincent J. Di Stefano, Jr.
Senior Counsel
Office of Disclosure and Review


cc: Walter S. Baer (w/encl.)



1 The Commission clarified the meaning of "substantially implemented" in its 1997 proposing release addressing the shareholder proposal rule:
It is insufficient for the company to have merely considered the proposal, unless the proposal clearly seeks only consideration by the company, and not necessarily implementation.

Securities Exchange Act Release No. 39093 (September 18, 1997) at footnote 49. See also Securities Exchange Act Release No. 40018 (May 21, 1998)(adopting rule changes); Securities Exchange Act Release No. 20091 (August 16, 1983).


Incoming Letter

(Only available in PDF format.)




Modified: 10/30/2001