Ralph W. Bradshaw
One West Pack Square, Suite 750, Asheville, NC 28801
828-255-4833 Fax: 828-210-8183
April 27, 2001
Dear Fellow Stockholders of Excelsior Income Shares, Inc.:
The Officers and Directors of our Fund continue to spend an inordinate amount of
our Fund's money on compensation to officers and to inundate us shareholders
with phone calls and mailings that confuse and distort the issues. All this
effort and shareholder expense just to keep the shareholders from having the
opportunity for positive change and improvement in their investment. Why should
Fund management allow change to a comfortable status quo when it can just spend
more and more shareholder money to stop it? LET ME ASSURE YOU AGAIN THAT MY
MOTIVATION FOR THIS PROXY CONTEST IS SIMPLE AND STRAIGHTFORWARD - TO MAXIMIZE
THE VALUE OF YOUR INVESTMENT IN THE FUND.
WHAT'S WRONG WITH THIS PICTURE? (WHY AN APPLE IS NOT AN ORANGE)
I have previously expressed my concern that our Fund has usually languished at a
persistent double-digit discount to Net Asset Value per share ("NAV"), and
typically has a yield at or near the bottom of its peer group of closed-end
funds. I am sorry to report that the Wall Street Journal's closed-end fund
recap continues to confirm this sad but true fact. Their most recent
information available shows our Fund with not only the highest discount to NAV,
but also the lowest yield in its category.
In their mailings to you, the Fund has made what they know to be misleading
comparisons between this bond fund (i.e. apple) and several equity funds (i.e.
oranges) that my nominees and I have been involved with. Here is some of what
they failed to tell you. Unlike Excelsior Income Shares, Inc. ("EIS"), most
bond funds typically trade at a discount to NAV in the low single digits. Most
equity funds, on the other hand, have usually traded at a double-digit discount
- in part a reflection of the very different nature of their underlying
investment portfolios. I have in fact been involved on the Boards of several
equity closed-end funds, and attention to fund discounts and shareholder value
have been on-going priorities of mine and my fellow Directors. Allow me to use
as an example the Clemente Strategic Value Fund, Inc. ("CLM"), for which I have
been a Director since 1998. The mailing sent to you by EIS Fund management
chose only to depict a period of historically poor performance for equities and
good performance for bonds, a misleading distortion of the worst kind. What if
one takes a more appropriate longer-term view? CLM delivered an average annual
total investment return to its shareholders for years 1998 through 2000 of over
16%, even though this period includes one of the worst years ever for equities,
while reducing the ending discount during this period to only 6.4%. What about
your investment in EIS? Total return to EIS shareholders for 1998 through 2000
averaged a woeful 5.4%, with an ending discount level of 13.2% for these three
years, unusually high for a bond fund. Quite a different picture indeed!
HELP MAKE YOUR INVESTMENT WORK HARDER FOR YOU
My fellow nominees and I would very much appreciate your vote to elect us as
directors in this year's annual meeting, WHICH HAS BEEN ADJOURNED. We are
committed to enhancing the value of your investment in this Fund.
Specifically, we see two primary ways to materially improve the value of our
common investment in the Fund:
1) The distributions from the Fund need to be increased; and,
2) The discount at which the Fund's shares trade in the market needs to be
reduced.
If we are elected as directors, we will propose the following, subject to
shareholder approval:
First, we will increase the yearly distribution to $1.85 per share. This
represents an approximate yield of 11% based on the current market price of the
shares. To the extent that this distribution exceeds the income earned by the
portfolio, the balance will be either long-term capital gain, which is taxed at
a reduced rate, or a tax-free return of capital. Shareholders will have the
option to have all or part of their distribution reinvested in additional
shares of the Fund. In this way, shareholders will have more choice and
flexibility in balancing the size of their distributions and the amount of
their remaining investment in the Fund.
Second, we will have the Fund buy-back shares in the open market when those
shares are selling at more than a nominal discount. The gains to the Fund
realized by retiring shares at a discount will be returned to the shareholders
in the form of an increase in the NAV of the remaining shares.
While we expect to take other additional steps to increase the value of the
Fund's shares, we believe the above actions will enhance the attractiveness of
the shares to investors and are also likely to materially reduce or eliminate
the Fund's discount in the marketplace.
TIME IS SHORT AND YOUR VOTE IS IMPORTANT!
To enable us to vote your shares on these issues, PLEASE MARK, SIGN, and DATE
AND RETURN THE ENCLOSED [GREEN] PROXY CARD IN THE POSTAGE PAID
ENVELOPE THAT HAS BEEN PROVIDED.
You may vote on all proposals contained in the Fund's [WHITE]
proxy card by using the enclosed [GREEN] proxy card. Instructions for
executing the [GREEN] proxy card follow below.
If you have already returned the [WHITE] proxy card sent to you by the Fund, you
may revoke that proxy and vote for our nominees and proposals by marking,
signing, dating and mailing a later dated [GREEN] proxy card.
AFTER SUBMITTING A [GREEN] PROXY CARD, PLEASE DO NOT RETURN A [WHITE] PROXY CARD
(EVEN IF YOU ARE VOTING AGAINST THE NOMINEES NAMED IN THE FUND'S PROXY
STATEMENT). DOING SO WILL REVOKE YOUR [GREEN] PROXY CARD.
Thank you for taking an active role in improving your investment in the Fund.
If you have any questions, please call me at (828) 255-4833.
Sincerely yours,
Ralph W. Bradshaw