SCHEDULE 14A
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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 Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 'SS' 240.14a-12
FORT DEARBORN INCOME SECURITIES, INC.
(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated 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 paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ____________________________________________________
(2) Form, Schedule or Registration Statement No.: ______________________________
(3) Filing Party: ______________________________________________________________
(4) Date Filed: ________________________________________________________________
FORT DEARBORN INCOME SECURITIES, INC.
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NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
DECEMBER 5, 2008
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TO THE SHAREHOLDERS:
The annual meeting of shareholders of Fort Dearborn Income Securities,
Inc. (the "Fund") will be held on Friday, December 5, 2008 at 1:00 p.m., Central
Time, at One North Wacker Drive, 38th Floor, Chicago, Illinois 60606 for the
following purposes:
(1) To elect four (4) Directors to serve until the annual meeting of
shareholders in 2009, or until their successors are elected and
qualified or until they resign or are otherwise removed;
(2) To consider, if properly presented, a shareholder proposal; and
(3) To transact such other business as may properly come before the
meeting or any adjournment thereof.
You are entitled to vote at the meeting and any adjournments thereof if
you owned Fund shares at the close of business on October 6, 2008. If you attend
the meeting, you may vote your shares in person. IF YOU DO NOT EXPECT TO ATTEND
THE MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED WHITE PROXY
CARD IN THE ENCLOSED POSTAGE PAID ENVELOPE.
A dissident shareholder group has indicated its intention to file a proxy
statement to elect its own nominees to the Board of the Fund at the meeting.
Your vote is extremely important, especially in light of the dissident nominees
and the shareholder proposal, both of which are unanimously opposed by your
Fund's Board. Whether or not you plan to attend the meeting, and regardless of
the number of shares you own, we urge you to vote FOR your Board's nominees
(Proposal 1) and AGAINST the shareholder proposal (Proposal 2) by promptly
completing, signing, dating and returning the enclosed white proxy card.
By order of the Board of Directors,
MARK F. KEMPER
VICE PRESIDENT AND SECRETARY
October 16, 2008
One North Wacker Drive
Chicago, Illinois 60606
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YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWN
PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON THE ENCLOSED WHITE PROXY CARD,
DATE AND SIGN IT, AND RETURN IT IN THE POSTAGE PAID ENVELOPE PROVIDED. IF
YOU SIGN, DATE AND RETURN THE PROXY CARD BUT GIVE NO VOTING INSTRUCTIONS,
YOUR SHARES WILL BE VOTED "FOR" THE NOMINEES FOR DIRECTOR NAMED IN THE
ATTACHED PROXY STATEMENT, "AGAINST" THE SHAREHOLDER PROPOSAL, AND IN THE
PROXIES' DISCRETION, EITHER "FOR" OR "AGAINST" ANY OTHER BUSINESS THAT MAY
PROPERLY ARISE AT THE ANNUAL MEETING, INCLUDING ADJOURMENT. IN ORDER TO AVOID
THE ADDITIONAL EXPENSE TO THE FUND OF FURTHER SOLICITATION, WE ASK YOUR
COOPERATION IN MAILING YOUR PROXY CARD PROMPTLY.
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INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general guidelines for signing proxy cards may be of
assistance to you and avoid the time and expense to the Fund in validating your
vote if you fail to sign your proxy card properly.
1. INDIVIDUAL ACCOUNTS: Sign your name exactly as it appears in the
registration on the proxy card.
2. JOINT ACCOUNTS: Either party may sign, but the name of the party
signing should conform exactly to the name shown in the registration on the
proxy card.
3. ALL OTHER ACCOUNTS: The capacity of the individual signing the proxy
card should be indicated unless it is reflected in the form of registration. For
example:
REGISTRATION VALID SIGNATURE
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Corporate Accounts
(1) ABC Corp. ....................................... ABC Corp.
John Doe, Treasurer
(2) ABC Corp ........................................ John Doe, Treasurer
(3) ABC Corp. c/o John Doe, Treasurer ............... John Doe
(4) ABC Corp. Profit Sharing Plan ................... John Doe, Trustee
Partnership Accounts
(1) The XYZ Partnership ............................. Jane B. Smith, Partner
(2) Smith and Jones, Limited Partnership ............ Jane B. Smith, General Partner
Trust Accounts
(1) ABC Trust Account ............................... Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee u/t/d 12/18/78 ............. Jane B. Doe
Custodial or Estate Accounts
(1) John B. Smith, Cust. f/b/o
John B. Smith, Jr. UGMA/UTMA .................... John B. Smith
(2) Estate of John B. Smith ......................... John B. Smith, Jr., Executor
FORT DEARBORN INCOME SECURITIES, INC.
ONE NORTH WACKER DRIVE
CHICAGO, ILLINOIS 60606
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PROXY STATEMENT
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ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON DECEMBER 5, 2008
This proxy statement is furnished to the shareholders of Fort Dearborn
Income Securities, Inc. (the "Fund") in connection with the Board of Directors'
solicitation of proxies to be used at the annual meeting of shareholders of the
Fund to be held on December 5, 2008, at 1:00 p.m., Central Time, at the
principal executive offices of the Fund at One North Wacker Drive, 38th Floor,
Chicago, Illinois 60606, or any adjournment or adjournments thereof. This proxy
statement and the related proxy card will first be mailed to shareholders on or
about October 16, 2008.
A majority of the shares outstanding and entitled to vote on October 6,
2008 represented in person or by proxy, must be present to establish a quorum
for the transaction of business at the meeting. Abstentions and broker non-votes
will be counted as shares present for purposes of determining whether a quorum
is present. Broker non-votes are shares held in street name for which the broker
indicates that instructions have not been received from the beneficial owners or
other persons entitled to vote and for which the broker does not have
discretionary voting authority. It is expected that abstentions and broker
non-votes will have no effect on Proposal 1, but will have the equivalent effect
of a vote against Proposal 2. In the event that a quorum is not present at the
annual meeting, shareholders present in person or the persons named as proxies
may propose one or more adjournments of the annual meeting to permit further
solicitation of proxies. Any such adjournment will require the affirmative vote
of a majority of those shares represented at the annual meeting in person or by
proxy. If the meeting is adjourned, notice need not be given of the adjourned
meeting at which the adjournment is taken. At any adjourned meeting, the Fund
may transact any business which might have been transacted at the original
meeting.
The individuals named as proxies on the enclosed proxy card will vote in
accordance with your direction as indicated thereon if your proxy card is
received properly executed by you or by your duly appointed agent or
attorney-in-fact. If you give no voting instructions, your shares will be voted
FOR the four nominees for Director named herein, AGAINST the shareholder
proposal described herein, and, in the proxies' discretion, either FOR or
AGAINST any other business that may properly arise at the annual meeting,
including questions of adjournment. You may revoke any proxy card by attending
the annual meeting in person, giving another proxy or submitting a written
notice of revocation to the Fund's Secretary at UBS Global Asset Management
(Americas), Inc., One North Wacker Drive, Chicago, Illinois 60606. Unless you
are attending the annual meeting in person, to be effective, your revocation
must be received by the Fund prior to the meeting and must indicate your name
and account number. If you attend the annual meeting in person you may, if you
wish, vote by ballot at the meeting, thereby canceling any proxy previously
given. If your shares are held by your bank or broker, then in order to vote in
person at the annual meeting, you will need to obtain a "Legal Proxy" from your
bank or broker and present it to the Inspector of Election at the meeting. In
the event that the election of Directors is contested, the Fund expects that
broker-dealer firms holding shares of the Fund in "street name" for their
customers will not be permitted by New York Stock Exchange ("NYSE") rules to
vote on the election of Directors on behalf of their customers and beneficial
owners in the absence of voting instructions from their customers and beneficial
owners.
As of the record date, October 6, 2008, the Fund had 8,775,665 shares of
common stock outstanding. The solicitation of proxies, the cost of which will be
borne by the Fund, will be made primarily by mail but also may include telephone
and oral communications by regular employees of UBS Global Asset Management
(Americas), Inc. ("UBS Global AM" or the "Advisor"), who will not receive any
compensation therefor from the Fund. Each full share of the Fund outstanding is
entitled to one vote, and each fractional share of the Fund outstanding is
entitled to a proportionate share of one vote. The Fund has made arrangements
with Georgeson Inc. to assist with solicitation of proxies, as described in the
section entitled, "Solicitation of Proxies."
UBS Global AM serves as the Fund's investment advisor. UBS Global AM is an
indirect wholly owned asset management subsidiary of UBS AG. UBS AG is an
internationally diversified organization with headquarters in Zurich and Basel,
Switzerland. UBS AG operates in many areas of the financial services industry.
The principal business offices of UBS Global AM are located at One North Wacker
Drive, Chicago, Illinois 60606. The principal offices of UBS AG are
Bahnhofstrasse 45, Zurich, Switzerland and Aeschenvorstadt 1, 4051 Basel,
Switzerland.
THE FUND IS SENDING TO SHAREHOLDERS, IN A SEPARATE MAILING, THE FUND'S
ANNUAL REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2008. YOU MAY OBTAIN,
WITHOUT CHARGE, ADDITIONAL COPIES OF THE FUND'S ANNUAL REPORT AND SEMI-ANNUAL
REPORT BY: (1) WRITTEN REQUEST TO: UBS GLOBAL ASSET MANAGEMENT (AMERICAS), INC.,
ATTN: MARK F. KEMPER, ONE NORTH WACKER DRIVE, CHICAGO, ILLINOIS 60606; OR (2)
CALLING THE FUND'S TOLL-FREE NUMBER: 1-800-647 1568.
PROPOSAL 1. ELECTION OF DIRECTORS
Proposal 1 relates to the election of Directors of the Fund. Management
proposes the election of the four nominees named in the table on the following
page. Each nominee has indicated his or her willingness to serve if elected. If
elected, each nominee will hold office until the next annual meeting of
shareholders or until his or her successor is elected and qualified, or until he
or she resigns or is otherwise removed. Each of the nominees was last elected
Director at the Fund's December 2007 annual meeting of shareholders. As
described more fully below, these nominees have significant experience managing
investment vehicles. All of the Fund's nominees have been Fund Directors for
numerous years, and are also on the Boards of other funds managed by UBS Global
AM. They have had experience as senior officers and directors of major business
corporations and other investment advisors.
Directors are elected by a plurality vote of shareholders. Unless you give
contrary instructions on the enclosed proxy card, your shares will be voted FOR
the election of all four nominees. If any of the nominees should withdraw or
otherwise become unavailable for election, your shares will be voted FOR such
other nominee or nominees as management may recommend.
Directors, including those who are not "interested persons" of the Fund as
that term is defined by the Investment Company Act of 1940, as amended ("1940
Act") ("Independent Directors"), shall be elected by the affirmative vote of the
holders of a plurality of the shares of the Fund cast in person or by proxy and
entitled to vote thereon, provided a quorum is present. There is no cumulative
voting for the election of Directors. Proxies cannot be voted for a greater
number of persons than the number of nominees named. None of the Directors or
nominees beneficially owned 1% or more of the Fund's common stock and none of
the executive officers beneficially owned any shares of the Fund's common stock
as of October 6, 2008. In addition, the Directors and executive officers, as a
group, beneficially owned less than 1% of the outstanding common stock of the
Fund as of October 6, 2008.
Listed in the table on the following page, for each nominee, is a brief
description of the nominee's experience as a Director of the Fund and as a
director or trustee of other funds, as well as other recent professional
experience.
2
SHARES
BENEFICIALLY
OWNED
NUMBER OF DIRECTLY OR
POSITION(S) LENGTH OF PRINCIPAL PORTFOLIOS IN OTHER INDIRECTLY AT
HELD WITH TIME OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS OCTOBER 6,
NAME, AGE, AND ADDRESS FUND SERVED DURING PAST 5 YEARS OVERSEEN BY NOMINEE HELD BY NOMINEE 2008
---------------------- ---- ------ ------------------- ------------------- --------------- ----
INDEPENDENT DIRECTORS:
Adela Cepeda; 50 Director Since 2000 Ms. Cepeda is Ms. Cepeda is a Ms. Cepeda is a 1,000
A.C. Advisory, Inc. founder and director or trustee of director of the
161 No. Clark Street, president of A.C. four investment MGI Funds
Suite 4975 Advisory, Inc. companies (consisting (7 portfolios)
Chicago, IL 60601 (since 1995). of 56 portfolios) for (since 2005) and
which UBS Global a director of
AM or one of its Amalgamated
affiliates serves as Bank of Chicago.
investment advisor,
sub-advisor or
manager.
Frank K. Reilly; 72 Chair- Since 1992 Mr. Reilly is a Mr. Reilly is a Mr. Reilly is a 7,535
Mendoza College of person and Professor of Finance director or trustee director of
Business Director at the University of four investment Discover Bank, a
University of Notre Dame of Notre Dame companies (consisting subsidiary of
Notre Dame, IN (since 1982). of 56 portfolios), for Discover
46556-5646 which UBS Global Financial Services.
AM or one of its
affiliates serves
as investment
advisor,
sub-advisor or
manager.
Edward M. Roob; 74 Director Since 1993 Mr. Roob is retired Mr. Roob is a director None. 9,000
c/o UBS Global AM (since 1993). or trustee of four
One North Wacker Drive investment companies
Chicago, IL 60606 (consisting of 56
portfolios), for
which UBS Global AM
or one of its
affiliates serves
as investment
advisor,
sub-advisor or
manager.
J. Mikesell Thomas; 57 Director Since 2002 Mr. Thomas is a Mr. Thomas is a Mr. Thomas is a N/A
1353 Astor Place principal with the director or trustee of director and
Chicago, IL 60610 investment firm, four investment chair of the
Castle Creek companies Audit Committee
Capital (since July (consisting of 56 for Evanston
2008). He is the portfolios) for which Northwestern
former President UBS Global AM or Healthcare.
and CEO of one of its affiliates
Federal Home Loan serves as investment
Bank of Chicago advisor, sub-advisor
(2004 to March or manager.
2008). Mr. Thomas
was an independent
financial advisor
(2001-2004).
3
Each Independent Director receives, for his or her service to the UBS
Family of Funds Complex and two unregistered investment companies advised by the
Advisor and overseen by the Board, an annual retainer of $160,000 paid quarterly
for serving as a Board member (less a proportionate amount for a Director that
does not serve on the board of a particular fund in the UBS Family of Funds
Complex, if any). The chairperson of the Board also receives an annual retainer
of $20,000 from the UBS Family of Funds Complex for his or her service to the
Board. In addition, the chairs of the Audit Committee and the Nominating
Committee receive an annual retainer of $15,000 and $7,500, respectively, for
their service to the Board. The UBS Family of Funds Complex also reimburses each
Director and officer for out-of-pocket expenses in connection with travel and
attendance at Board meetings. No officer, director or employee of UBS Global AM
or any of its affiliates presently receives any compensation from the Fund for
acting as a Board member or officer.
4
COMPENSATION TABLE+
PENSION OR
RETIREMENT TOTAL
BENEFITS COMPENSATION
AGGREGATE ACCRUED AS FROM THE FUND
COMPENSATION PART OF FUND AND THE FUND
NAME OF PERSON, POSITION FROM THE FUND* EXPENSES COMPLEX**
------------------------ -------------- ------------ --------------
Adela Cepeda, Director ......................................... $6,624 N/A $123,500
Frank K. Reilly, Director and Chairperson ...................... 8,283 N/A 144,500
Edward M. Roob, Director ....................................... 6,624 N/A 127,500
J. Mikesell Thomas, Director*** ................................ 6,994 N/A 125,850
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+ Only Independent Directors are compensated by the Fund.
* Represents fees paid to each Director for service on the Board during the
fiscal year ended September 30, 2008.
** Represents fees paid for services during the fiscal year ended September
30, 2008 to each Board member by four investment companies for which UBS
Global AM or one of its affiliates served as investment advisor,
sub-advisor or manager. The Fund does not have a bonus, pension, profit
sharing or retirement plan.
*** These amounts include compensation paid to Mr. Thomas for his service as
the liaison for the Board of Directors for purposes of the UBS Global AM
(Americas) Profitability Working Group.
NOMINEE OWNERSHIP OF FUND SHARES
AGGREGATE DOLLAR RANGE OF EQUITY
SECURITIES IN ALL REGISTERED INVESTMENT
COMPANIES OVERSEEN BY NOMINEE FOR
DOLLAR RANGE WHICH UBS GLOBAL AM OR AN AFFILIATE
OF EQUITY SECURITIES SERVES AS INVESTMENT ADVISOR,
NOMINEE IN FUND+ SUB-ADVISOR OR MANAGER+
------- -------------------- ----------------------------------------
INDEPENDENT DIRECTORS:
Adela Cepeda ............................... $1-$10,000 $1-$10,000
Frank K. Reilly ............................ over $100,000 over $100,000
Edward M. Roob ............................. over $100,000 over $100,000
J. Mikesell Thomas ......................... $0 $0
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+ Information regarding ownership of shares of the Fund is as of October 6,
2008; information regarding ownership of shares in all registered
investment companies overseen by nominee for which UBS Global AM or an
affiliate serves as investment advisor, sub-advisor or manager is as of
September 30, 2008.
As of September 30, 2008, the Independent Directors and their immediate
family members did not own any securities issued by UBS Global AM or any company
controlling, controlled by or under common control with UBS Global AM.
A dissident shareholder group has indicated its intention to elect its own
nominees to the Fund's Board of Directors at the meeting. The dissident
shareholder group has also stated that it wants to terminate the Fund's
investment advisory agreement with UBS Global AM (as described in the
5
description of Proposal 2 below). If the dissident nominees are elected, the
Fund's current Board strongly believes that your Fund's investment advisory
agreement with UBS Global AM would be terminated - stripping the Fund of the
resources and expertise of UBS Global AM, which has been the Fund's investment
advisor for over 35 years, and potentially leaving the Fund without the capacity
to manage its portfolio, conduct research, or pursue trades.
As discussed in Proposal 2 below, the Fund's current Board believes that
it is in shareholders' best interests to continue the Fund's investment advisory
relationship with UBS Global AM. As a result, the Fund's current Board intends
to vigorously contest the election of the dissident nominees. We urge you to
vote FOR your Board's nominees by promptly completing, signing, dating and
returning the enclosed white proxy card.
PROPOSAL 2. A SHAREHOLDER PROPOSAL
A shareholder (the "Shareholder Proponent") has submitted the following
proposal (the "Shareholder Proposal") to be included in this proxy statement:
RESOLVED: The investment advisory agreement between UBS Global Asset
Management (Americas), Inc. and Fort Dearborn Income Securities, Inc.
shall be terminated.
Set forth below is the Board of Directors' opposition statement with
regard to the Shareholder Proposal, which is immediately followed by the
supporting statement of the Shareholder Proponent.
OPPOSITION STATEMENT OF FORT DEARBORN INCOME SECURITIES, INC.
YOUR FUND'S BOARD OPPOSES THE SHAREHOLDER PROPOSAL AND BELIEVES IT IS IN
YOUR BEST INTERESTS TO MAINTAIN YOUR FUND'S INVESTMENT ADVISORY AGREEMENT WITH
UBS GLOBAL AM. UBS Global AM has delivered consistently strong market returns to
Fund investors over time. The Board believes strongly that your Fund receives
significant benefits from its continued investment advisory relationship with
UBS Global AM, but would not be able to provide the same benefits to
shareholders if the investment advisory agreement with UBS Global AM is
terminated. THE BOARD THEREFORE RECOMMENDS THAT SHAREHOLDERS VOTE AGAINST THE
SHAREHOLDER PROPOSAL.
REASONS FOR THE BOARD'S RECOMMENDATION
Your Fund's Board has reviewed and considered the Shareholder Proposal but
believes that it is not in the best interests of the Fund and its shareholders.
For the reasons discussed below, the Board believes that the Fund's shareholders
are best served by voting AGAINST the Shareholder Proposal.
1. YOUR FUND'S COMPETITIVE PERFORMANCE
Your Fund's Board believes that the Fund's investment approach and
long-term market price performance has benefited shareholders. With UBS Global
AM as your Fund's investment advisor, your Fund's long-term performance at
market price has been consistently competitive, both in absolute terms and
relative to its Lipper peer group, and benchmark indices, as shown in the table
on the following page.
6
FORT DEARBORN INCOME SECURITIES, INC. AS OF SEPTEMBER 30, 2008
AVERAGE ANNUAL TOTAL RETURN(1) 1-YEAR 3-YEAR 5-YEAR 10-YEAR
------------------------------ ------ ------ ------ -------
Fund Return Based on Change
in Market Price(2) ............................. -0.62% 1.88% 3.55% 4.97%
Fund Return Based on Change
in Net Asset Value(3) .......................... -6.60% 0.29% 2.01% 4.43%
Investment Grade Bond Index(4) ................. -4.07% 0.81% 2.56% 4.84%
Lipper Corporate Debt Funds
BBB-Rated (NAV)(5) ............................. -7.48% 0.17% 2.42% 4.53%
Lipper Corporate Debt Funds
BBB-Rated (Market Price)(5) .................... -15.39% -3.18% 0.47% 3.71%
Rank in Lipper Category
Based on Change in NAV(5) ...................... 10 out of 21 9 out of 20 11 out of 18 6 out of 12
PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE
FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU
MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY
DIFFER FROM FIGURES SHOWN.
------------
(1) Total return calculations represent the average annual changes in value of
an investment over the periods indicated.
(2) Source: UBS Global AM. The Fund's market price returns assume that all
dividends and other distributions, if any, were reinvested at prices
obtained under the Fund's Dividend Reinvestment Plan.
(3) Source: UBS Global AM. The Fund's net asset value ("NAV") returns assume,
for illustration only, that dividends and other distributions, if any,
were reinvested at the NAV on the payable dates.
(4) Index composition, 12/31/81 - present: 5% Lehman Brothers US Agency Index
(7+ years); 75% Lehman Brothers US Credit Index (7+ years); 10% Lehman
Brothers US Mortgage Fixed Rate MBS Index (all maturities); 10% Lehman
Brothers US Treasury Index (7+ years).
(5) Source: Lipper Inc.
UBS Global AM has consistently provided your Fund with solid long-term
investment performance, which leads the Board to recommend that shareholders
continue the Fund's investment advisory relationship with UBS Global AM and vote
AGAINST the Shareholder Proposal.
2. YOUR FUND BENEFITS FROM THE CONSISTENT AND CONTINUOUS MANAGEMENT OF UBS
GLOBAL AM
UBS Global AM and its predecessors have managed your Fund consistently for
over 35 years, since its inception, with the goal of providing long-term
shareholders with a total return over time that is above what they could receive
by investing individually in the investment grade and long-term maturity sectors
of the bond market. UBS Global AM has continuously managed your Fund over the
years using a proven management style with an experienced management team. This
has benefited Fund shareholders year in and year out by providing steady,
uninterrupted management, which in turn, has reduced potential expenses
attributable to changes in fund management.
Fund shareholders also benefit from the experience and resources of the
Advisor. As of June 30, 2008, the Advisor had approximately $160 billion in
assets under management. Moreover, the Advisor is an
7
indirect, wholly owned asset management subsidiary of UBS AG and a member of the
UBS Global Asset Management division, which had approximately $741 billion in
assets under management worldwide as of June 30, 2008. The Advisor's expertise
and resources enable it to provide your Fund with first rate research, trading,
and investment management support. Michael G. Dow, your Fund's lead portfolio
manager, is Head of US Long Duration at UBS Global AM and has more than 18 years
of investment industry experience.
The extensive experience of the Advisor has contributed to the long-term
success of your Fund. Your Fund's Board therefore believes that it is in the
best interest of the Fund and its shareholders to retain UBS Global AM as the
Fund's investment advisor, and recommends voting AGAINST the Shareholder
Proposal.
3. THE SHAREHOLDER PROPOSAL IS INCOMPLETE
Your Fund's Board also opposes the Shareholder Proposal because it offers
no viable alternative if UBS Global AM is removed as your Fund's investment
advisor, raising the possibility that your Fund could eventually be orphaned
without any advisor at all. If the Shareholder Proposal is approved, your Fund's
Board would, of course, use its best efforts to search for a replacement
investment advisor that would be willing and able to manage the Fund. The 1940
Act provides a mechanism for the Fund's Board to retain UBS Global AM as the
Fund's investment advisor for an additional 150 days following the termination.
There is no guarantee, however, that the Fund's Board would be able to find and
retain a qualified investment advisor that would agree to assume the management
of your Fund for a reasonable cost and obtain shareholder approval of the new
advisor during this time period. If a new advisor is not approved within this
time period, your Fund will have no investment advisor, making it impossible for
your Fund to carry out any portfolio management, research or trading. In that
event, your Fund's investment program would be completely paralyzed.
The Shareholder Proposal also ignores the significant expenses that the
Fund and its shareholders could incur in replacing UBS Global AM. Not only could
the search process for a replacement investment advisor itself prove costly, but
your Fund may be further forced to pay higher advisory fees to attract a
replacement advisor that is qualified and willing to manage the Fund. Your
Fund's expenses could also increase if it must bear the replacement advisor's
costs of establishing portfolio management, research, and trading facilities
dedicated to the Fund - resources that UBS Global AM already provides. Your
Fund's costs could escalate even further depending on other integration expenses
that come with a replacement investment advisor, such as the expenses of
obtaining shareholder approval of a new investment advisory agreement with a
replacement investment advisor or brokerage costs due to increased portfolio
turnover from a replacement investment advisor implementing its new strategy.
Contrary to the Shareholder Proponent's assertion that terminating UBS
Global AM as the Fund's advisor would have a positive effect on your Fund's
market share price, the Board is concerned that the uncertainty surrounding a
dismissal of UBS Global AM could seriously undermine your Fund's market share
price. In light of these significant management continuity and expense issues,
the Board believes that the Shareholder Proposal is not in the best interest of
the Fund's shareholders. The Board therefore recommends that Fund shareholders
vote AGAINST the Shareholder Proposal.
4. YOUR FUND'S DISCOUNT IS CONSISTENT WITH OTHER CLOSED-END FUNDS
As with most other closed-end funds within the Fund's Lipper peer group,
the market price of the Fund's shares often trades at a lower price than the
Fund's net asset value ("NAV") per share. That is, the Fund's shares often trade
at a discount. As of September 30, 2008, the median discount for the Lipper
Corporate Debt BBB-
8
Rated closed-end funds peer group was -14.7% and the average discount for that
group was -14.8%, compared to the Fund's discount of -6.4%. (Source: Lipper
Inc.). The Fund's discount is thus in line with that currently experienced by
similar corporate bond closed-end funds generally. Accordingly, the Board
believes that the presence of a discount should not, by itself, necessitate the
drastic step of terminating your Fund's investment advisory agreement with UBS
Global AM. Given your Fund's consistently solid returns at market price and NAV,
your Fund's Board believes it would be unwise to terminate the investment
advisory agreement with UBS Global AM based on factors wholly unrelated to the
Advisor's long-term investment performance. The Board therefore recommends that
the Fund's shareholders vote AGAINST the Shareholder Proposal.
CONCLUSION
For the reasons stated above, the Board recommends that Shareholders vote
AGAINST the Shareholder Proposal.
SUPPORTING STATEMENT OF THE SHAREHOLDER PROPONENT
Many closed-end funds are trading at a premium to their net asset value
("NAV"). However, neither the Board of Directors of Fort Dearborn Income
Securities, Inc. (the "Fund") nor the advisor, UBS Global Asset Management
(Americas), Inc., has taken effective steps to help provide shareholders of this
Fund with such an opportunity for increased value. To the contrary, for many
years this Fund has instead continued to sell at a persistent discount to its
NAV.This shareholder proposal to terminate the investment advisory agreement
with UBS Global Asset Management (Americas), Inc. may be the only type of
shareholder proposal that the Board cannot legally ignore. If the existing
advisory agreement is terminated by this shareholder proposal, the Board could
be forced to take action that may lead to a significant increase in the market
value of shares of the Fund, to the direct benefit of its shareholders.
The Shareholder Proponent is Ralph W. Bradshaw, One West Pack Square,
Suite 1650, Asheville, North Carolina 28801. Neither the Fund, its Board of
Directors nor management is responsible for the contents of the Shareholder
Proposal or the Supporting Statement of the Shareholder Proponent.
VOTE REQUIRED
Section 15(a)(3) of the 1940 Act provides that a shareholder proposal to
terminate the advisory agreement requires the "vote of a majority of the
outstanding voting securities" of the Fund, which is defined in the 1940 Act to
be "the vote, at the annual or a special meeting of the security holders of such
company duly called, (A) of 67 per centum or more of the voting securities
present at such meeting, if the holders of more than 50 per centum of the
outstanding voting securities of such company are present or represented by
proxy; or (B) of more than 50 per centum of the outstanding voting securities of
such company, whichever is the less."
9
ADDITIONAL INFORMATION
INFORMATION CONCERNING INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The Fund's financial statements for the fiscal year ended September 30,
2007, were audited by Ernst & Young LLP ("Ernst & Young"), independent
registered public accounting firm. In addition, Ernst & Young prepares the
Fund's federal and state annual income tax returns and provides certain
non-audit services. The Audit Committee has considered whether the provision of
those non-audit services is compatible with maintaining Ernst & Young's
independence. In the past two fiscal years, the Audit Committee did not approve
any services provided by Ernst & Young pursuant to Rule 2-01(c)(7)(i)(C) of
Regulation S-X. The Board of Directors of the Fund has selected Ernst & Young as
the independent registered public accounting firm for the Fund for the fiscal
year ending September 30, 2008. Ernst & Young has been the Fund's independent
registered public accounting firm since the fiscal year ended September 30,
2001. Ernst & Young has informed the Fund that it has no material direct or
indirect financial interest in the Fund.
Representatives of Ernst & Young will be present at the meeting via
telephone.
AUDIT FEES
For the fiscal years ended September 30, 2008 and September 30, 2007, the
aggregate Ernst & Young audit fees for professional services rendered to the
Fund were approximately $35,000 and $34,350, respectively.
Fees included in the audit fees category are those associated with the
annual audits of financial statements and services that are normally provided in
connection with statutory and regulatory filings.
AUDIT-RELATED FEES
In each of the fiscal years ended September 30, 2008 and September 30,
2007, the aggregate audit-related fees billed by Ernst & Young for services
rendered to the Fund that are reasonably related to the performance of the
audits of the financial statements, but not reported as audit fees, were
approximately $2,500 and $2,500, respectively.
Fees included in the audit-related fees category are those associated with
the reading and providing comments on the semi-annual statements.
There were no audit-related fees required to be approved pursuant to
paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X during the fiscal years
indicated above.
TAX FEES
In each of the fiscal years ended September 30, 2008 and September 30,
2007, the aggregate tax fees billed by Ernst & Young for professional services
rendered to the Fund were approximately $4,440 and $4,150, respectively.
Fees included in the tax fees category comprise all services performed by
professional staff in the independent accountant's tax division except those
services related to the audits. This category comprises fees for tax return
preparation and review of excise tax calculations.
10
There were no tax fees required to be approved pursuant to paragraph
(c)(7)(ii) of Rule 201 of Regulation S-X during the fiscal years indicated
above.
ALL OTHER FEES
In each of the fiscal years ended September 30, 2008 and September 30,
2007, there were no fees billed by Ernst & Young for products and services,
other than the services reported above, rendered to the Fund.
Fees included in the all other fees category would consist of services
related to internal control reviews, strategy and other consulting, financial
information systems design and implementation, consulting on other information
systems, and other tax services unrelated to the Fund.
There were no "all other fees" required to be approved pursuant to
paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X during the fiscal years
indicated above.
PRE-APPROVAL POLICIES AND PROCEDURES
The Audit Committee Charter contains the Audit Committee's pre-approval
policies and procedures. Reproduced below is an excerpt from the Audit Committee
Charter regarding pre-approval policies and procedures:
To carry out its purposes, the Audit Committee shall have the following
duties and powers:
(a) To pre-approve the engagement of, and to recommend to the Board the
engagement, retention or termination of, the independent auditors to
provide audit, review or attest services to the Fund, and, in
connection therewith, to review and evaluate the capabilities and
independence of the auditors, and receive the auditors' specific
representations as to their independence. In evaluating the auditor's
qualifications, performance and independence, the Committee must,
among other things, obtain and review a report by the auditors, at
least annually, describing the following items: (i) all relationships
between the independent auditors and the Fund, as well as with the
Fund's investment advisor or any control affiliate of the investment
advisor that provides ongoing services to the Fund; (ii) any material
issues raised by the most recent internal quality control review, or
peer review, of the audit firm, or by any inquiry or investigation by
governmental or professional authorities, within the preceding five
years, with respect to one or more independent audits carried out by
the firm, and any steps taken to deal with any such issues; and (iii)
the audit firm's internal quality control procedures.
(b) To pre-approve all non-audit services to be provided to the Fund by
the independent auditors when, without such pre-approval, the auditors
would not be independent of the Fund under applicable federal
securities laws, rules or auditing standards.
(c) To pre-approve all non-audit services to be provided by the Fund's
independent auditors to the Fund's investment advisor or to any entity
that controls, is controlled by or is under common control with the
Fund's investment advisor ("advisor affiliate") and that provides
ongoing services to the Fund, when, without such pre-approval by the
Committee, the auditors would not be independent of the Fund under
applicable federal securities laws, rules or auditing standards.
(d) To establish, if deemed necessary or appropriate as an alternative to
Committee pre-approval of services to be provided by the independent
auditors as required by paragraphs (b) and (c) above, policies and
procedures to permit such services to be pre-approved by other means,
such as by
11
action of a designated member or members of the Committee, subject to
subsequent Committee review or oversight.
(e) To consider whether the non-audit services provided by the Fund's
independent auditor to the Fund's investment advisor or any advisor
affiliate that provides on-going services to the Fund, which services
were not pre-approved by the Committee, are compatible with
maintaining the auditors' independence.
AGGREGATE NON-AUDIT FEES
For the fiscal years ended September 30, 2008 and September 30, 2007, the
aggregate non-audit fees billed by Ernst & Young of $211,849 and $6,650,
respectively, included non-audit services rendered on behalf of the Fund of
$6,940 and $6,650, respectively, and non-audit services rendered on behalf of
the Fund's investment advisor (not including any sub-advisor whose role is
primarily portfolio management and is subcontracted with or overseen by another
investment advisor) and any entity controlling, controlled by, or under common
control with the investment advisor that provides ongoing services to the Fund
of $204,909 and $0, respectively.
The Audit Committee has considered whether the provision of non-audit
services that were rendered to the Fund's investment advisor (not including any
sub-advisor whose role is primarily portfolio management and is subcontracted
with or overseen by another investment advisor), and any entity controlling,
controlled by, or under common control with the investment advisor that provides
ongoing services to the Fund that were not pre-approved pursuant to paragraph
(c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining Ernst &
Young's independence.
ADDTIONAL INFORMATION ABOUT THE BOARD OF DIRECTORS
The Board of Directors (the "Board") of the Fund met seven times during
the fiscal year ended September 30, 2008. Each Director attended 75% or more of
the Board meetings during the last fiscal year. In addition, no Directors
attended less than 75% of the aggregate of the total number of meetings held by
the Board and the total number of meetings held by all committees on which such
Director served during the fiscal year ended September 30, 2008.
The Fund's Directors are not required to attend the Fund's annual
meetings. All four of the Directors attended the annual meeting of shareholders
in 2007.
The Fund's Audit Committee is responsible for, among other things: (i)
selecting, overseeing and setting the compensation of the Fund's independent
registered public accounting firm; (ii) overseeing the Fund's accounting and
financial reporting policies and practices, its internal controls and, as
appropriate, the internal controls of certain service providers; (iii)
overseeing the quality and objectivity of the Fund's financial statements and
the independent audits thereof; and (iv) acting as a liaison between the Fund's
independent registered public accounting firm and the full Board of Directors. A
copy of the Audit Committee Charter is available on the Fund's website at
www.ubs.com. In fulfilling its duties, the Audit Committee has: (a) reviewed and
discussed the Fund's audited financial statements with management; (b) discussed
with the independent auditors the matters required to be discussed by Statement
on Auditing Standards No. 61; (c) received certain written disclosures and the
letter from the independent auditors required by Independence Standards Board
Standard No. 1 and discussed the independent auditors' independence with them;
and (d) based upon its review of the above, recommended to the Board that the
Fund's audited financial statements be included in the Fund's annual report to
shareholders for the fiscal
12
year ended September 30, 2007. It is anticipated the Audit Committee will
conduct similar discussions and review for the fiscal year ended September 30,
2008. The Audit Committee currently consists of Ms. Cepeda and Messrs. Reilly,
Roob and Thomas, none of whom have any relationship to the Fund that may
interfere with the exercise of their independence from management or the Fund
and each of whom is independent as defined under listing standards of the NYSE
applicable to closed-end funds. Each member of the Fund's Audit Committee is
also a member of a similar committee established by the boards of certain other
investment companies for which UBS Global AM or an affiliate serves as
investment advisor, sub-advisor or manager. The Audit Committee met five times
during the fiscal year ended September 30, 2008.
The Board has also established a Nominating, Compensation and Governance
Committee that acts pursuant to a written charter ("Nominating, Compensation and
Governance Committee Charter"). The Nominating, Compensation and Governance
Committee is responsible for, among other things, selecting, evaluating and
recommending to the Board candidates to be nominated as additional Independent
Directors of the Board, periodically reviewing the composition of the Board,
periodically reviewing Board governance procedures and recommending any
appropriate changes thereto and periodically reviewing the compensation
structure for Independent Directors. A copy of the Nominating, Compensation and
Governance Committee Charter is attached as Appendix A. The Nominating,
Compensation and Governance Committee currently consists of Ms. Cepeda and
Messrs. Reilly, Roob and Thomas, none of whom is an "interested person" for
purposes of the 1940 Act, and all of whom are independent as defined under
listing standards of the NYSE applicable to closed-end funds. The Nominating,
Compensation and Governance Committee met four times during the fiscal year
ended September 30, 2008.
In nominating candidates, the Nominating, Compensation and Governance
Committee believes that no specific qualifications or disqualifications are
controlling or paramount, or that specific qualities or skills are necessary for
each candidate to possess. In identifying and evaluating nominees for Director,
the Nominating, Compensation and Governance Committee takes into consideration
such factors as it deems appropriate. These factors may include: (i) whether or
not the person is an "interested person" as defined in the 1940 Act, meets the
applicable independence and experience requirements of the NYSE and is otherwise
qualified under applicable laws and regulations to serve as a member of the
Board; (ii) whether or not the person has any relationships that might impair
his or her independence, such as any business, financial or family relationships
with Fund management, the investment advisor of the Fund, other Fund service
providers or their affiliates; (iii) whether or not the person is willing to
serve, and willing and able to commit the time necessary for the performance of
the duties of a Board member; (iv) the person's judgment, skill, diversity and
experience with investment companies and other organizations of comparable
purpose, complexity and size and subject to similar legal restrictions and
oversight; (v) the interplay of the candidate's experience with the experience
of other Board members; and (vi) the extent to which the candidate would be a
desirable addition to the Board and any committees thereof.
While the Nominating, Compensation and Governance Committee is solely
responsible for the selection and recommendation to the Board of Board
candidates, the Nominating, Compensation and Governance Committee will consider
nominees recommended by Qualifying Fund Shareholders if a vacancy occurs among
those board members who are independent board members. A Qualifying Fund
Shareholder is a shareholder that: (i) owns of record, or beneficially through a
financial intermediary, 1/2 of 1% or more of the Fund's outstanding shares and
(ii) has been a shareholder of at least 1/2 of 1% of the Fund's total
outstanding shares for 12 months or more prior to submitting the recommendation
to the Nominating, Compensation and Governance Committee. In order to recommend
a nominee, a Qualifying Fund Shareholder should send a letter to the chairperson
of the Nominating, Compensation and
13
Governance Committee, care of the Secretary of the Fund at UBS Global Asset
Management (Americas), Inc., One North Wacker Drive, Chicago, Illinois 60606.
The Qualifying Fund Shareholder's letter should include: (i) the name and
address of the Qualifying Fund Shareholder making the recommendation; (ii) the
number of shares of the Fund which are owned of record and beneficially by such
Qualifying Fund Shareholder and the length of time that such shares have been so
owned by the Qualifying Fund Shareholder; (iii) a description of all
arrangements and understandings between such Qualifying Fund Shareholder and any
other person or persons (naming such person or persons) pursuant to which the
recommendation is being made; (iv) the name and address of the nominee; and (v)
the nominee's resume or curriculum vitae.
The Qualifying Fund Shareholder's letter must be accompanied by a written
consent of the individual to stand for election if nominated for the Board and
to serve if elected by shareholders. The Nominating, Compensation and Governance
Committee may also seek such additional information about the nominee as it
considers appropriate, including information relating to such nominee that is
required to be disclosed in solicitations or proxies for the election of board
members.
Shareholders may send other communications to the Board by sending a
letter to the chairperson of the Board of Directors, Mr. Frank K. Reilly, care
of the Secretary of the Fund at UBS Global Asset Management (Americas), Inc.,
One North Wacker Drive, Chicago, Illinois 60606. The chairperson of the Board of
Directors will relay shareholder communications to the other Board members.
14
EXECUTIVE OFFICERS
Officers of the Fund are appointed by the Directors and serve at the
pleasure of the Board. None of the Fund's officers currently receives any
compensation from the Fund. The executive officers of the Fund are:
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS;
POSITION(S) HELD LENGTH OF NUMBER OF PORTFOLIOS IN FUND COMPLEX
NAME, ADDRESS, AND AGE WITH THE FUND TIME SERVED FOR WHICH PERSON SERVES AS OFFICER
---------------------- --------------- ----------- ----------------------------------
Joseph J. Allessie*; 43 Vice President Since 2005 Mr. Allessie is an executive director (since
and Assistant 2007) (prior to which he was a director)
Secretary and deputy general counsel (since 2005) at UBS
Global Asset Management (US) Inc. and UBS Global
AM (collectively, "UBS Global AM--Americas
region"). Prior to joining UBS Global
AM--Americas region, he was senior vice
president and general counsel of Kenmar Advisory
Corp. (from 2004 to 2005). Prior to that, Mr.
Allessie was general counsel and secretary of
GAM USA Inc., GAM Investments, GAM Services, GAM
Funds, Inc. and the GAM Avalon Funds (from 1999
to 2004). Mr. Allessie is a vice president and
assistant secretary of 21 investment companies
(consisting of 105 portfolios) for which UBS
Global AM--Americas region or one of its
affiliates serves as investment advisor,
sub-advisor or manager.
Thomas Disbrow*; 42 Vice President, Since 2000 Mr. Disbrow is an executive director (since
Treasurer, and (Vice 2007) (prior to which he was a director)
Principal President) and head of US mutual fund treasury
Accounting and administration department (since 2006) of
Officer since 2006 UBS Global AM--Americas region. Mr.
(Treasurer Disbrow is a vice president and treasurer
and Principal and/or principal accounting officer of 21
Accounting investment companies (consisting of 105
Officer) portfolios) for which UBS Global AM--Americas
region or one of its affiliates serves as
investment advisor, sub-advisor or manager.
15
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS;
POSITION(S) HELD LENGTH OF NUMBER OF PORTFOLIOS IN FUND COMPLEX
NAME, ADDRESS, AND AGE WITH THE FUND TIME SERVED FOR WHICH PERSON SERVES AS OFFICER
---------------------- --------------- ----------- ----------------------------------
Michael J. Flook*; 43 Vice President Since 2006 Mr. Flook is an associate director and a
and Assistant senior manager of the US mutual fund
Treasurer treasury administration department of UBS
Global AM--Americas region (since 2006). Prior
to joining UBS Global AM--Americas region, he
was a senior manager with The Reserve (asset
management firm) from May 2005 to May 2006.
Prior to that he was a senior manager with PFPC
Worldwide since October 2000. Mr. Flook is a
vice president and assistant treasurer 21
investment companies (consisting of 105
portfolios) for which UBS Global AM--Americas
region or one of its affiliates serve as
investment advisor, sub-advisor or manager.
Mark F. Kemper**; 50 Vice President Since 1999 Mr. Kemper is general counsel of UBS
and Secretary and 2004, Global AM--Americas region (since 2004).
respectively Mr. Kemper also is a managing director of UBS
Global AM--Americas region (since 2006). He was
deputy general counsel of UBS Global AM from
July 2001 to July 2004. He has been secretary of
UBS Global AM--Americas region since 1999 and
assistant secretary of UBS Global Asset
Management Trust Company since 1993. Mr. Kemper
is secretary of UBS Global AM--Americas region
(since 2004). Mr. Kemper is vice president and
secretary of 21 investment companies (consisting
of 105 portfolios) for which UBS Global
AM--Americas region or one of its affiliates
serves as investment advisor, sub-advisor or
manager.
16
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS;
POSITION(S) HELD LENGTH OF NUMBER OF PORTFOLIOS IN FUND COMPLEX
NAME, ADDRESS, AND AGE WITH THE FUND TIME SERVED FOR WHICH PERSON SERVES AS OFFICER
---------------------- --------------- ----------- ----------------------------------
Joanne M. Kilkeary*; 40 Vice President Since 2006 Ms. Kilkeary is a director (since 2005) and a
and Assistant senior manager (since 2004) of the US
Treasurer mutual fund treasury administration department
of UBS Global AM--Americas region. Ms. Kilkeary
is a vice president and assistant treasurer of
21 investment companies (consisting of 105
portfolios) for which UBS Global AM--Americas
region or one of its affiliates serves as
investment advisor, sub-advisor or manager.
Tammie Lee*; 37 Vice President Since 2005 Ms. Lee is a director and associate general
and Assistant counsel of UBS Global AM--Americas
Secretary region (since 2005). Prior to joining UBS
Global AM--Americas region, she was vice
president and counsel at Deutsche Asset
Management/Scudder Investments from 2003 to
2005. Prior to that she was assistant vice
president and counsel at Deutsche Asset
Management/Scudder Investments from 2000 to
2003. Ms. Lee is a vice president and assistant
secretary of 21 investment companies (consisting
of 105 portfolios) for which UBS Global
AM--Americas region or one of its affiliates
serves as investment advisor, sub-advisor or
manager.
Steven LeMire*; 39 Vice President Since 2007 Mr. LeMire is a director and senior
and Assistant manager of the US mutual fund treasury
Treasurer administration department of UBS
Global AM--Americas region (since October 2007).
Prior to joining UBS Global AM--Americas region,
he was an independent consultant with Third
River Capital, LLC (formerly Two Rivers Capital,
LLC) (from 2005 to 2007). Prior to that, he was
vice president of operations and fund
administration with Oberweis Asset Management,
Inc. (from 1997 to 2005). Mr. LeMire is a vice
president and assistant treasurer of 21
investment companies (consisting of 105
portfolios) for which UBS Global AM--Americas
region or one of its affiliates serves as
investment advisor, sub-advisor or manager.
17
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS;
POSITION(S) HELD LENGTH OF NUMBER OF PORTFOLIOS IN FUND COMPLEX
NAME, ADDRESS, AND AGE WITH THE FUND TIME SERVED FOR WHICH PERSON SERVES AS OFFICER
---------------------- --------------- ----------- ----------------------------------
Joseph McGill*; 46 Vice President Since 2004 Mr. McGill is a managing director
and Chief (since 2006) and chief compliance
Compliance officer (since 2003) at UBS Global
Officer AM--Americas region. Prior to joining UBS
Global AM--Americas region, he was assistant
general counsel at J.P. Morgan Investment
Management (from 1999 to 2003). Mr. McGill is a
vice president and chief compliance officer of
21 investment companies (consisting of 105
portfolios) for which UBS Global AM--Americas
region or one of its affiliates serves as
investment advisor, sub-advisor or manager.
Nancy D. Osborn*; 42 Vice President Since 2007 Ms. Osborn is an associate director and a
and Assistant senior manager of the US mutual fund
Treasurer treasury administration department of UBS
Global AM--Americas region (since 2006). Prior
to joining UBS Global AM--Americas region, she
was an Assistant Vice President with Brown
Brothers Harriman since April 1996. Ms. Osborn
is a vice president and assistant treasurer of
21 investment companies (consisting of 105
portfolios) for which UBS Global AM--Americas
region or one of its affiliates serves as
investment advisor, sub-advisor or manager.
Eric Sanders*; 43 Vice President Since 2005 Mr. Sanders is a director and associate
and Assistant general counsel of UBS Global AM--
Secretary Americas region (since 2005). From 1996 until
June 2005, he held various positions at Fred
Alger & Company, Incorporated, the most recent
being assistant vice president and associate
general counsel. Mr. Sanders is a vice president
and assistant secretary of 21 investment
companies (consisting of 105 portfolios) for
which UBS Global AM--Americas region or one of
its affiliates serves as investment advisor,
sub-advisor or manager.
18
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS;
POSITION(S) HELD LENGTH OF NUMBER OF PORTFOLIOS IN FUND COMPLEX
NAME, ADDRESS, AND AGE WITH THE FUND TIME SERVED FOR WHICH PERSON SERVES AS OFFICER
---------------------- --------------- ----------- ----------------------------------
Andrew Shoup*; 52 Vice President Since 2006 Mr. Shoup is a managing director and
and Chief the Global Head of the Fund Treasury
Operating Administration department of UBS Global
Officer AM--Americas region (since July 2006). Prior to
joining UBS Global AM--Americas region, he was
Chief Administrative Officer for the Legg Mason
Partner Funds (formerly Smith Barney, Salomon
Brothers and CitiFunds mutual funds) from
November 2003 to July 2006. Prior to that, he
held various positions with Citigroup Asset
Management and related Companies with their
domestic and offshore mutual funds since 1993.
Additionally, he has worked for another mutual
fund complex as well as spending eleven years in
public accounting. Mr. Shoup is a vice president
and chief operating officer of 21 investment
companies (consisting of 105 portfolios) for
which UBS Global AM--Americas region or one of
its affiliates serves as investment advisor,
sub-advisor or manager.
Kai R. Sotorp**; 49 President Since 2006 Mr. Sotorp is Head--Americas for UBS
Global Asset Management (since 2004); a member
of the UBS Group Managing Board (since 2003) and
a member of the UBS Global Asset Management
Executive Committee (since 2001). Prior to his
current role, Mr. Sotorp was head of UBS Global
Asset Management--Asia Pacific (2002-2004),
covering Australia, Japan, Hong Kong, Singapore
and Taiwan; head of UBS Global Asset Management
(Japan) Ltd. (2001-2004); representative
director and president of UBS Global Asset
Management (Japan) Ltd. (2000-2004); and a
member of the board of Mitsubishi Corp.--UBS
Realty Inc. (2000-2004). Mr. Sotorp is president
of 21 investment companies (consisting of 105
portfolios) for which UBS Global AM--Americas
region or one of its affiliates serves as
investment advisor, sub-advisor or manager.
19
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS;
POSITION(S) HELD LENGTH OF NUMBER OF PORTFOLIOS IN FUND COMPLEX
NAME, ADDRESS, AND AGE WITH THE FUND TIME SERVED FOR WHICH PERSON SERVES AS OFFICER
---------------------- --------------- ----------- ----------------------------------
Keith A. Weller*; 47 Vice President Since 2004 Mr. Weller is an executive director and
and Assistant senior associate general counsel of UBS
Secretary Global AM--Americas region (since 2005) and
has been an attorney with affiliated entities
since 1995. Mr. Weller is a vice president and
assistant secretary of 21 investment companies
(consisting of 105 portfolios) for which UBS
Global AM--Americas region or one of its
affiliates serves as investment advisor,
sub-advisor or manager.
---------------
* This person's business address is 51 West 52nd Street, New York, NY
10019-6114.
** This person's business address is One North Wacker Drive, Chicago, IL 60606.
20
OWNERSHIP OF SHARES
As of October 6, 2008, the following persons or entities were known by the
Fund to be owners of more than 5% of the Fund's common stock. Other than with
respect to Doliver Capital Advisors, Inc., as set forth in their Schedule 13G/A
filing, the Fund has no knowledge whether the record holdings reported below are
also held beneficially.
NAME AND ADDRESS OF AMOUNT AND NATURE OF
BENEFICIAL OWNER OWNERSHIP PERCENT OF FUND
---------------------- ---------------------- ---------------
Raymond James & 1,543,753 shares of common 17.6%
Associates, Inc. stock of the Fund
880 Carilion Parkway
P.O. Box 12749
St. Petersburg, FL 33716
Doliver Capital Advisors, Inc.* 1,352,800 shares of common 15.4%
6363 Woodway, Suite 963 stock of the Fund
Houston, TX 77057
Merrill Lynch 793,579 shares of common 9.0%
101 Hudson St. stock of the Fund
8th Floor
Jersey City, NJ 07302
Wachovia Securities, LLC 783,908 shares of common 8.9%
One North Jefferson Avenue stock of the Fund
St. Louis, MO 63103
Charles Schwab & Co., Inc. 635,470 shares of common 7.2%
Attn: Proxy Department stock of the Fund
211 Main Street
San Francisco, CA 94105
First Clearing, LLC 616,512 shares of common 7.0%
10700 Wheat First Drive stock of the Fund
WS 1023
Glen Allen, VA 23060
----------
* Based on Schedule 13G/A filed on February 14, 2008. According to an amended
Form 13F-HR/A filed with the SEC on October 2, 2008 for the calendar year or
quarter ended June 30, 2008, Doliver Capital Advisors, Inc. reported owning
1,483,700 shares of common stock of the Fund.
Other than as set forth above, as of October 6, 2008, Management of UBS
Global AM did not know of any other person who owned of record or beneficially
5% or more of the common stock of the Fund.
21
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Fund is not aware of any outstanding report required to be filed
pursuant to Section 16(a) of the Securities Exchange Act of 1934 by any Board
member or officer.
SHAREHOLDER PROPOSALS
The Fund anticipates mailing this proxy statement on or about October 16,
2008. In addition, the Fund anticipates that its next annual meeting of
shareholders will be held on or around the same date next year. Any shareholder
who wishes to submit proposals for inclusion in the Fund's proxy statement and
proxy card to be considered at the Fund's 2009 annual meeting of shareholders
should send such proposals to the Secretary of the Fund at UBS Global Asset
Management (Americas), Inc., One North Wacker Drive, Chicago, Illinois 60606. In
order for such proposals to be included in the Fund's proxy statement and proxy
card relating to the 2009 annual meeting of shareholders, shareholder proposals
must be received by the Fund no later than June 18, 2009 and must satisfy other
requirements of the federal securities laws. Submission of a proposal by a
shareholder does not guarantee that the proposal will be included in the proxy
statement. A shareholder who wishes to make a proposal at the Fund's 2009 annual
shareholders' meeting without including the proposal in the Fund's proxy
statement and proxy card must notify the Fund of such proposal by directing such
notice to the Secretary of the Fund at the address set forth above by no later
than September 1, 2009. If a shareholder fails to give notice to the Fund by
this date, then the persons named as proxies in the proxies solicited by the
Board for the 2009 annual meeting of shareholders may exercise discretionary
voting power with respect to any such proposal.
SOLICITATION OF PROXIES
Your vote is being solicited by the Directors of the Fund. The cost of
soliciting these proxies will be borne by the Fund. The Fund reimburses
brokerage firms and others for their expenses in forwarding proxy material to
the beneficial owners and soliciting them to execute proxies.
In addition, the Fund has made arrangements with a professional proxy
solicitation firm, Georgeson Inc., to assist with the solicitation of proxies.
The Fund anticipates that the cost of retaining Georgeson Inc. will be
approximately $50,000, plus expenses. The Fund has agreed to indemnify Georgeson
Inc. against certain liabilities, including liabilities arising under the
federal securities laws. Georgeson Inc. has informed the Fund that it intends to
employ approximately 40 persons to solicit proxies.
The Fund expects that the solicitation will be primarily by mail, but also
may include telephone, telecopy, electronic, oral, or other means of
communication. If the Fund does not receive your proxy by a certain time you may
receive a telephone call from a proxy soliciting agent asking you to vote.
It is currently estimated that the total amount estimated to be spent on
the solicitation (in excess of that normally spent for an annual meeting where
only the reelection of the existing board members is at issue, and excluding
salaries and wages of Fund officers and employees of UBS Global AM) will be
approximately $115,300 to $208,600. As of September 30, 2008, approximately
$39,681 has been spent on the solicitation. These amounts exclude costs normally
expended for the election of Directors in the absence of a contest. The
Directors and officers of the Fund, or regular employees and agents of UBS
Global AM, may be involved in the solicitation of proxies. The Fund does not
reimburse such persons for the solicitation of proxies. The Fund intends to pay
all costs associated with the solicitation and the annual meeting.
22
PARTICIPANTS
A dissident shareholder group has stated that it intends to file a proxy
statement nominating its own slate of nominees for the Fund's Board of
Directors. In the event that the dissident does commence a proxy contest, the
SEC requires the Fund to provide shareholders with certain additional
information relating to "participants" as defined in the SEC's proxy rules.
Pursuant to those rules, the Fund's Directors are, and certain employees and
agents of the Fund may be, deemed to be "participants."
For information about the Directors, please refer to Proposal 1 of this
Proxy Statement. In addition, the following persons may also act as
participants:
o Mark Carver is Head of Product Development and Management-Americas for
UBS Global AM. Mr. Carver's business address is 51 West 52nd Street,
New York, New York 10019-6114.
o Igor Lasun is Product Manager--Fixed Income for UBS Global AM. Mr.
Lasun's business address is 51 West 52nd Street, New York, New York
10019-6114.
o Michael G. Dow is Head of US Long Duration for UBS Global AM and lead
portfolio manager for the Fund. Mr. Dow's business address is One
North Wacker Drive, Chicago, Illinois 60606.
Except as noted in Proposal 1, the participants and their associates are
not beneficial or record owners of any securities of the Fund or any securities
of a parent or subsidiary of the Fund. The participants are not, and have not
been within the past year, party to any contract, arrangements or understandings
with any person with respect to any securities of the Fund, including, but not
limited to joint ventures, loan or option arrangements, puts or calls,
guarantees against loss or guarantees of profit, division of losses or profits,
or the giving or withholding of proxies. The participants and any associates of
the participants do not have any arrangement or understanding with any person
with respect to any future employment by the Fund or its affiliates or with
respect to any future transactions to which the Fund or any of its affiliates
will or may be a party.
OTHER BUSINESS
Management knows of no business to be presented at the meeting other than
the matters set forth in this proxy statement, but should any other matter
requiring a vote of shareholders arise, the proxies will vote thereon according
to their best judgment in the interest of the Fund.
By order of the Board of Directors,
MARK F. KEMPER
VICE PRESIDENT AND SECRETARY
October 16, 2008
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IT IS IMPORTANT THAT YOU EXECUTE AND RETURN YOUR PROXY PROMPTLY.
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23
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Appendix A
NOMINATING, COMPENSATION AND GOVERNANCE COMMITTEE CHARTER
I. THE COMMITTEE.
The Nominating, Compensation and Governance Committee (the "Committee") is
a committee of, and established by, the Board of Trustees/Directors (the
"Board") of each of the entities listed on Schedule A hereto (each a
"Fund"). The Committee consists of such number of members as set by the
Board from time to time and its members shall be selected by the Board.
The Committee shall be comprised entirely of "independent members." For
purposes of this Charter, independent members shall mean members who are
not interested persons of the Fund ("Disinterested Board members") as
defined in Section 2(a)(19) of the Investment Company Act of 1940, as
amended (the "1940 Act").
II. BOARD NOMINATIONS AND FUNCTIONS.
1. The Committee shall make recommendations for nominations for
Disinterested Board members on the Board to the incumbent
Disinterested Board members and to the full Board. The Committee
shall evaluate candidates' qualifications for Board membership and
the independence of such candidates from the Fund's investment
advisors and other principal service providers. Persons selected must
be independent in terms of both the letter and the spirit of the 1940
Act. The Committee shall also consider the effect of any
relationships beyond those delineated in the 1940 Act that might
impair independence, E.G., business, financial or family
relationships with investment advisors or service providers.
2. The Committee also shall evaluate candidates' qualifications and make
recommendations for "interested" members on the Board to the full
Board.
3. The Committee may consider the factors listed in Schedule B to
evaluate candidates for membership on the Board. The Committee also
may from time to time establish specific requirements and/or
additional factors to be considered for Board candidates as it deems
necessary or appropriate.
4. The Committee shall periodically review Board governance procedures
and shall recommend any appropriate changes to the full Board.
5. The Committee shall periodically review the composition of the Board
to determine whether it may be appropriate to add individuals with
backgrounds or skill sets that differ from those of the members
currently on the Board.
6. The Committee shall periodically review Disinterested Board member
compensation and shall recommend any appropriate changes to the
Disinterested Board members as a group.
7. The Committee shall review recommendations from Qualifying Fund
Shareholders (as defined in Schedule B) for nominations to fill
vacancies on the Board if such recommendations are submitted in
accordance with the procedures described in Schedule B.
III. COMMITTEE NOMINATIONS AND FUNCTIONS.
1. The Committee shall make recommendations to the full Board for
nomination for membership on all committees of the Board and shall
review committee assignments at least annually.
2. The Committee shall review as necessary the responsibilities of any
committees of the Board, whether there is a continuing need for each
committee, whether there is a need for additional
A-1
committees of the Board, and whether committees should be combined or
reorganized. The Committee shall make recommendations for any such
action to the full Board.
IV. OTHER POWERS AND RESPONSIBILITIES.
1. The Committee shall meet as often as it deems appropriate.
2. The Committee shall have the resources and authority appropriate to
discharge its responsibilities, including authority to retain special
counsel and other experts or consultants at the expense of the Fund.
3. The Committee shall report its activities to the Board and make such
recommendations as the Committee may deem necessary or appropriate.
4. A majority of the members of the Committee shall constitute a quorum
for the transaction of business at any meeting of the Committee. The
action of a majority of the members of the Committee present at a
meeting at which a quorum is present shall be the action of the
Committee. The Committee may meet in person or by telephone, and a
majority of the members of the Committee may act by written consent
to the extent not inconsistent with the Fund's by-laws. In the event
of any inconsistency between this Charter and the Fund's
organizational documents, the provisions of the Fund's organizational
documents shall be given precedence.
5. The Committee shall review this Charter at least annually and
recommend any changes to the full Board.
A-2
SCHEDULE A
The UBS Funds
UBS Relationship Funds
SMA Relationship Trust
Fort Dearborn Income Securities, Inc.
A-1-1
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SCHEDULE B
NOMINATION AND APPOINTMENT POLICY
1. The Committee believes that it is in the best interests of the Fund and
its shareholders to obtain highly-qualified candidates to serve as members
of the Board.
2. In nominating candidates, the Committee believes that no specific
qualifications or disqualifications are controlling or paramount, or that
specific qualities or skills are necessary for each candidate to possess.
The Committee shall take into consideration such factors as it deems
appropriate. These factors may include:
o whether or not the person is an "interested person" as defined in the
1940 Act, meets the independence and experience requirements
applicable to closed-end funds as they may be adopted and modified
from time to time by the New York Stock Exchange and is otherwise
qualified under applicable laws and regulations to serve as a member
of the Board;
o whether or not the person has any relationships that might impair his
or her independence, such as any business, financial or family
relationships with Fund management, the investment advisor and/or
sub-advisors of the Fund, Fund service providers or their affiliates;
o whether or not the person is willing to serve, and willing and able
to commit the time necessary for the performance of the duties of a
Board member;
o the person's judgment, skill, diversity and experience with
investment companies and other organizations of comparable purpose,
complexity and size and subject to similar legal restrictions and
oversight;
o the interplay of the candidate's experience with the experience of
other Board members; and
o the extent to which the candidate would be a desirable addition to
the Board and any committees thereof.
3. While the Committee is solely responsible for the selection and
recommendation to the Board of Board candidates, the Committee will
consider nominees recommended by Qualifying Fund Shareholders if a vacancy
occurs among those Board members who are Independent Board Members. A
Qualifying Fund Shareholder is a shareholder that: (i) owns of record, or
beneficially through a financial intermediary, (1)/2 or 1% or more of the
Fund's outstanding shares and (ii) has been a shareholder of (1)/2 of 1%
of the Fund's total outstanding shares for 12 months or more prior to
submitting the recommendation to the Committee. Such recommendations shall
be directed to the Secretary of the Fund at such address as is set forth
in the Fund's disclosure documents. The Qualifying Fund Shareholder's
letter should include: (i) the name and address of the Qualifying Fund
Shareholder making the recommendation; (ii) the number of shares of each
class and series of shares of the Fund which are owned of record and
beneficially by such Qualifying Fund Shareholder and the length of time
that such shares have been so owned by the Qualifying Fund Shareholder;
(iii) a description of all arrangements and understandings between such
Qualifying Fund Shareholder and any other person or persons (naming such
person or persons) pursuant to which the recommendation is being made;
(iv) the name and address of the nominee; and (v) the nominee's resume or
curriculum vitae. The Qualifying Fund Shareholder's letter must be
accompanied by a written consent of the individual to stand for election
if nominated for the Board and to serve if elected by shareholders. The
Committee may also seek such additional information about the nominee as
it considers appropriate, including information relating to such nominee
that is required to be disclosed in solicitations or proxies for the
election of Board members.
B-1
-----------------------
FORT
DEARBORN INCOME
SECURITIES, INC.
=======================
PROXY STATEMENT --------------------------
FORT
DEARBORN INCOME
SECURITIES, INC.
==========================
-----------------
NOTICE OF
ANNUAL MEETING
TO BE HELD ON
DECEMBER 5, 2008
AND
PROXY STATEMENT
=================
TO VOTE BY MAIL, PLEASE DETACH PROXY CARD HERE
--------------------------------------------------------------------------------
FORT DEARBORN INCOME SECURITIES, INC.
ANNUAL MEETING OF SHAREHOLDERS -- DECEMBER 5, 2008
The undersigned hereby appoints as proxies, Joseph J. Allessie and Tammie
Lee, and each of them (with full power of substitution) to represent the
undersigned and to vote for the undersigned all shares of common stock of
P the undersigned at the aforesaid meeting and any adjournment or
R postponement thereof with all the power the undersigned would have if
O personally present. The shares represented by this proxy will be voted as
X instructed. IF NO INSTRUCTIONS ARE RECEIVED, THIS PROXY SHALL BE DEEMED TO
Y GRANT AUTHORITY TO VOTE "FOR" PROPOSAL 1 AND "AGAINST" PROPOSAL 2.
ADDITIONALLY, THE VOTES ENTITLED TO BE CAST BY THE UNDERSIGNED WILL BE
CAST IN THE DISCRETION OF THE PROXYHOLDER ON ANY OTHER MATTER THAT MAY
PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT OR POSTPONEMENT
THEREOF. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
FORT DEARBORN INCOME SECURITIES, INC.
YOUR VOTE IS IMPORTANT. Please date and sign this proxy on the reverse
side and return it in the enclosed envelope.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
SEE REVERSE SIDE SEE REVERSE SIDE
AUTHORIZED SIGNATURES -- THIS CARD MUST BE SIGNED AND DATED FOR YOUR
VOTE TO BE COUNTED. -- DATE AND SIGN BELOW
This proxy will not be voted unless it is
dated and signed exactly as instructed below.
TO VOTE BY MAIL, PLEASE DETACH PROXY CARD HERE
--------------------------------------------------------------------------------
[X] PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
--------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE LISTED NOMINEES
AND AGAINST PROPOSAL 2.
--------------------------------------------------------------------------------
1. Election of Directors.
01 -- Adela Cepeda WITHHOLD
02 -- Frank K. Reilly FOR ALL VOTE FROM ALL
03 -- Edward M. Roob NOMINEES NOMINEES
04 -- J. Mikesell Thomas [ ] [ ]
FOR ALL EXCEPT - TO WITHHOLD A VOTE FOR ONE OR MORE NOMINEES, MARK THE "FOR
ALL NOMINEES" BOX ABOVE AND WRITE THE NAME OF THE NOMINEE(S) ON THE LINE
BELOW
--------------------------------------------------------
2. Shareholder Proposal to terminate the investment advisory agreement between
UBS Global Asset Management (Americas), Inc. and Fort Dearborn Income
Securities, Inc.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
--------------------------------------------------------------------------------
Date ___________________________________
________________________________________
Signature
________________________________________
Signature, if held jointly
________________________________________
Title or Authority
If shares are held by an individual,
sign your name exactly as it appears on
this card. If shares are held jointly,
either party may sign, but the name of
the party signing should conform exactly
to the name shown on this proxy card. If
shares are held by a corporation,
partnership or other entity, the name
and capacity of the individual signing
the proxy card should be indicated
unless it is reflected in the form of
registration.
Sign exactly as name appears hereon.