Edgar Filing: FORT DEARBORN INCOME SECURITIES INC

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )

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 Section240.14a-11(c) or
Section240.14a-12

FORT DEARBORN INCOME SECURITIES, INC.
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(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.
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and 0-11.
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FORT DEARBORN INCOME SECURITIES, INC.

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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

To The Shareholders of
Fort Dearborn Income Securities, Inc.:

The Annual Meeting of Shareholders of Fort Dearborn Income Securities, Inc.
(the "Company") will be held on Monday, December 16, 2002, at 2:00 P.M., Chicago
time, at UBS Global Asset Management, One N. Wacker Drive, Chicago, IL 60606,
for the purpose of electing five directors and for the transaction of such other
business as may properly come before the meeting.

Each shareholder is invited to attend the Annual Meeting of Shareholders in
person. Shareholders of record at the close of business on October 23, 2002,
have the right to vote at the meeting. WE URGE YOU TO COMPLETE, SIGN AND
PROMPTLY RETURN THE ENCLOSED PROXY IN ORDER THAT THE MEETING CAN BE HELD AND A
MAXIMUM NUMBER OF SHARES MAY BE VOTED.

JOSEPH A. ANDERSON
SECRETARY

Chicago, Illinois
November 8, 2002

FORT DEARBORN INCOME SECURITIES, INC.
ONE N. WACKER DRIVE
CHICAGO, ILLINOIS 60606

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PROXY STATEMENT

INTRODUCTION

This statement, which is being mailed to shareholders on or about
November 8, 2002, is furnished in connection with the solicitation of proxies by
the Board of Directors of Fort Dearborn Income Securities, Inc. (the "Company")
for use at the Annual Meeting of Shareholders (the "Annual Meeting") to be held
at UBS Global Asset Management, One N. Wacker Drive, Chicago, Illinois 60606, on
Monday, December 16, 2002, at 2:00 P.M., Chicago time. Proxies may be solicited
by mail, telephone and personal interview. The Company may also request brokers,
custodians, nominees and fiduciaries to forward proxy material to the beneficial
owners of stock of record. Any proxy given pursuant to such solicitation and
received in time for the Annual Meeting will be voted as specified in such
proxy. The enclosed proxy is revocable at any time. The proxy may be revoked in
writing, by giving a later-dated proxy, or orally at the Annual Meeting. Signing
and mailing the proxy will not affect your right to give a later proxy or to
attend the meeting and vote your shares in person. The cost of soliciting
proxies will be paid by the Company.

On October 23, 2002, the date for determination of shareholders entitled to
receive notice of and to vote at the Annual Meeting, or any adjournments
thereof, there were issued and outstanding 8,775,665 shares of Capital Stock of
the Company, each entitled to one vote, constituting all of the Company's then-
outstanding securities. For purposes of determining the outcome of the vote on a
matter, an instruction to "abstain" from voting on a proposal will be treated as
shares present and entitled to vote and will have the same effect as a vote
against the proposal. "Broker non-votes" are not counted for the purpose of
determining the number of shares present on a voting matter and have no effect
on the outcome of the vote. Any adjournment of the meeting would require the
affirmative vote of a majority of those present in person or by proxy at the
session of the meeting to be adjourned. The proxy solicited hereby confers
authority to vote for any such adjournment; however, a proxy voted against or
abstained from voting on any proposal herein would not be voted in favor of an
adjournment to permit further solicitation of proxies.

1. ELECTION OF DIRECTORS

Five directors are to be elected at the Annual Meeting as the entire Board
of Directors to hold office until the next annual meeting or until their
successors shall have been elected and shall have qualified. If authority is
granted on the accompanying proxy to vote in the election of directors, it is
the intention of the persons named in the proxy to vote at the Annual Meeting
for the election of the nominees named below. If any of the nominees are
unavailable to serve as directors, an event which the Board of Directors does
not now expect, the persons named in the proxy will vote for such other persons
as they, in their discretion, may choose. The affirmative vote of the holders of
a majority of the shares represented at the Annual Meeting is required for the
election of a director. All of the nominees are presently directors of the
Company and all have consented to serve if elected.

SHARES
BENEFICIALLY
OWNED
WHEN DIRECTLY OR
FIRST INDIRECTLY
NAMES AND AGES PRINCIPAL OCCUPATIONS BECAME SEPTEMBER 30,
OF NOMINEES AND OTHER DIRECTORSHIPS DIRECTOR 2002
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Adela Cepeda, 44..................... Founder and President of A.C. Advisory, 2000 1,000
Inc.; Director of Lincoln National
Income Fund, Inc. and Lincoln National
Convertible Securities Fund. Former
Managing Director and co-founder of
Abacus Financial Group, Inc.,
(1991-1995); Vice President, Smith
Barney, Harris Upham & Co. Inc.,
(1980-1991).

C. Roderick O'Neil, CFA, 71.......... Chairman, O'Neil Associates (formerly 1992 3,398
Greenspan O'Neil Associates), an
investment and financial consulting
firm; Director, Beckman Coulter, Inc.
(Since January, 1994) Director, Cadre
Institutional Investors Trust (Since
1995); Trustee, Optimum Q-TM- Fund
(Since 2002).

Frank K. Reilly, CFA, 66............. Bernard J. Hank Professor of Finance, 1993 4,706
University of Notre Dame (since 1981);
Chairman, The UBS Funds (since 1992);
Chairman, The UBS Relationship Funds
(since 1995); Director, Discover Bank
(since 1993); Director, Morgan Stanley
Trust, FSB (since 1996); Director,
NIBCO (1993-2001); Director, Battery
Park High Yield Fund (1996-2001);
Board of Governors, Association for
Investment Management and Research
(1993-2000) Chairman, 1998-1999; Board
of Trustees, Institute of Chartered
Financial Analysts (1993-2000)
Chairman, 1996-1997; Board of Regents,
Financial Analysts Seminar
(1992-2001); Board of Trustees,
Research Foundation of the Association
of Investment Management and Research
(since 1996).

Edward M. Roob, 68................... Senior Vice President, Daiwa Securities 1993 7,000
America, Inc. (1986-1993); Senior Vice
President, First National Bank of
Chicago (1975-1985); Director, The UBS
Funds; Director, The UBS Relationship
Funds; Trustee, UBS Global Asset
Management Trust Company; Trustee, CCM
Advisors Funds; Trustee, CCMA Select
Investment Trust; Trustee A.H.A.
Investment Funds; Member, Board of
Governors Chicago Stock Exchange,
(1988-1991); Member U.S. Treasury and
Federal Agency Advisory Committee,
(1972-1985). Member, Committee for
Specialist Assignment and Evaluation,
Chicago Stock Exchange, (1993-1999).

J. Mikesell Thomas, 51............... Independent Financial Advisor, (April, 2002 --
2001-Present); Managing Director,
Lazard Freres & Co. (1995-2001); First
Chicago Corporation, (1973-1994)
Executive Vice President and Co-Head
Corporate and Institutional Banking,
(1992-1995), Executive Vice President
and Co-Head, Merchant Banking,
(1989-1992), Executive Vice President
and Chief Financial Officer,
(1986-1989), Senior Vice President and
Treasurer, (1980-1986), Assistant
Treasurer, (1976-1980), First Scholar
Management Development Program,
(1973-1976). Director and Chairman of
Finance Committee, Evanston
Northwestern Healthcare; Vice
President of Board of Trustees,
Mid-Day Club; Leadership Greater
Chicago Association.

The Board of Directors has an Audit Committee. The Board of Directors does
not have a nominating or compensation committee.

During the fiscal year ended September 30, 2002, five meetings of the Board
of Directors and one meeting of the Audit Committee were held. All directors
attended at least 80% of the total number of such meetings.

The Company pays each of its directors (except the Chairman) at the rate of
$9,000 annually to serve as directors and $750 for each Board of Directors
meeting attended. The Company pays the Chairman at the rate of $13,000 annually
to serve in such capacity and $750 for each Board of Directors meeting attended.

The following table sets forth as to each Director the compensation paid to
such Director in the fiscal year ended September 30, 2002 for service on the
Board of the Company and, in the case of Messrs. Reilly

and Roob, on the boards of three other investment companies for which the
Advisor performed investment advisory services.

COMPENSATION TABLE

PENSION OR
RETIREMENT
BENEFITS
ACCRUED AS
AGGREGATE PART OF ESTIMATED TOTAL COMPENSATION
COMPENSATION COMPANY ANNUAL BENEFITS FROM COMPANY AND
NAME OF DIRECTOR FROM COMPANY EXPENSES UPON RETIREMENT FUND COMPLEX
---------------- ------------ ------------ --------------- ------------------

Adela Cepeda............................ $12,750 0 0 $12,750
C. Roderick O'Neil...................... $15,750 0 0 $15,750
Frank K. Reilly......................... $12,750 0 0 $64,350
Edward M. Roob.......................... $12,750 0 0 $64,350
J. Mikesell Thomas...................... $ 7,000 0 0 $ 7,000

INDEPENDENT AUDITOR

The Board of Directors has selected Ernst & Young LLP as auditors of the
Company for the fiscal year ending September 30, 2003. To the best knowledge of
the Board of Directors, the firm of Ernst & Young LLP has no direct or material
indirect financial interest in the Company. Representatives of Ernst & Young LLP
will attend the Annual Meeting, have an opportunity to make a statement and be
available to respond to appropriate questions from shareholders. Ernst & Young
LLP first became the independent auditors for the Company for the fiscal year
ending September 30, 2001.

KPMG LLP, which had been the independent auditors for the Company since its
organization, ceased its client-auditor relationship with the Company on
September 5, 2001. KPMG LLP informed the Company that such cessation was based
solely on the fact that it would not be independent if any of its partners,
principals, shareholders and employees had any financial interest in any
affiliate of the Advisor and that it could not make a determination prior to
commencing its audit of the Company's financial statements for the fiscal year
ending September 30, 2001.

KPMG's reports on the financial statements for each of the Company's two
fiscal years ending September 30, 2000 did not contain an adverse opinion or a
disclaimer of opinion, nor was either such report qualified or modified as to
uncertainty, audit scope or accounting principles. During the Company's two
fiscal years ending September 30, 2000 and any subsequent interim period
preceding such cessation, there were no disagreements with KPMG on any matter or
accounting principles or practices, financial statement disclosure or auditing
scope or procedure, which disagreement(s), if not resolved to the satisfaction
of KPMG, would have caused it to make reference to the subject matter of the
disagreement(s) in connection with its report.

For the fiscal year ended September 30, 2002, fees for services provided by
Ernst & Young LLP were as follows:

Audit................................... $ 27,000

Financial Information Systems Design and
Implementation......................... $ 0

All Other Services rendered to the
Advisor and to any entity controlling,
controlled by or under common control
with the Advisor that provides services
to the Company......................... $100,000

The Audit committee has considered whether the provision of the above
services, other than audit services, is compatible with maintaining Ernst &
Young LLP's independence and has concluded that it is.

REPORT OF THE AUDIT COMMITTEE

All of the directors are members of the Audit Committee. Each member of the
Committee is independent as defined under the New York Stock Exchange listing
standards. The Committee operates under a written charter, adopted by the Board
of Directors.

The Audit Committee makes recommendations concerning the retention of the
Company's independent auditors, their fees and duties, including any non-audit
related services performed by them; confers with such auditors; reviews the
Company's financial reporting activities; and confers with and makes appropriate
recommendations to personnel of the Company's investment advisor who perform
services of a financial nature for the Company. The Committee has met with
management of the Company to discuss, among other things, the Company's audited
financial statements for the year ended September 30, 2002. The Committee also
has met with the Company's independent auditors and discussed with them certain
matters required under SAS 61 (an accounting standard) including, but not
limited to, the scope of the Company's audit, the Company's financial statements
for the year ended September 30, 2002 and the Company's accounting controls. The
Committee has received the written disclosures and the letter from the Company's
independent auditors required by Independence Standards Board Standard No. 1, as
may be modified or supplemented from time to time, and has discussed with the
independent auditors, their independence.

Based upon these reviews and discussions, the Committee has recommended to
the Board of Directors that the Company's audited financial statements be
included in the Company's Annual Report to Shareholders for the year ended
September 30, 2002.

INVESTMENT ADVISOR

UBS Global Asset Management (Americas) Inc. ("Advisor"), One North Wacker
Drive, Chicago, Illinois 60606, is the investment advisor to the Company. The
Advisor is a wholly-owned subsidiary of UBS (USA) Inc. UBS AG (Zurich,
Switzerland) owns 100% of the common stock of UBS (USA) Inc.

OFFICERS

The Company does not pay direct compensation to officers for their services
to the Company. The Company's officers are as follows:

Jeffrey J. Diermeier, CFA, B.B.A., M.B.A. (age 50), serves as the
President of the Company. Investment Committee member, UBS Global Asset
Management (Americas) Inc. (1998-Present); Director, Chief Investment
Officer and Managing Director and Investment Committee member, UBS Global
Asset Management (Americas) Inc. (2000-Present); Managing Director, First
Chicago Investment Advisors, N.A. (1975-1989).

Craig G. Ellinger, CFA (age 32), serves as Vice President and Portfolio
Manager of the Company and is a Portfolio Manager in the Fixed Income Group
at UBS Global Asset Management (Americas) Inc. (since 2000). He previously
served in a similar position at PPM America, Inc (1997-2000) and was a
Commissioned Bank Examiner at the Federal Deposit Insurance Corporation
(1992-1997).

Joseph A. Anderson (age 40), who serves as Secretary-Treasurer of the
Company is an Executive Director of UBS Global Asset Management (Americas)
Inc. (since 1991) and is currently the Vice President of UBS Global Asset
Management Trust Company (since 1995).

Robert M. Fascia (age 29) serves as Assistant Secretary and Assistant
Treasurer of the Company and is an Associate Director of UBS Global Asset
Management (Americas) Inc., (since 1999). He was previously employed by
Stein Roe & Farnham.

PRINCIPAL SHAREHOLDERS

Generally, under the Securities and Exchange Commission rules, a person is
deemed to be the beneficial owner of a security with respect to which such
person, through any contract, arrangement, understanding, relationship or
otherwise, has or shares voting power (which includes power to vote, or direct
the voting of, such security) or investment power (which includes power to
dispose of, or direct the disposition of, such security). On September 30, 2002,
the directors and officers of the Company as a group owned or were deemed to own
beneficially, directly or indirectly, less than 1% of the outstanding shares of
Capital Stock of the Company.

SHAREHOLDER PROPOSALS

Any shareholder proposal to be presented for action at the Company's 2003
annual meeting of shareholders must be received at the Company's office not less
than 120 days prior to November 8, 2003 in order to be considered for inclusion
in that meeting's proxy materials.

OTHER MATTERS

Shareholders are urged to review the Company's Annual Report which
accompanies this Proxy Statement.

The Board of Directors does not know of any matters to be presented at the
Annual Meeting other than those mentioned in this Proxy Statement. If any other
business should come before the meeting, the persons named in the proxy will
vote thereon in accordance with their best judgment.

Please complete and sign the enclosed proxy and return it in the envelope
provided so that the meeting may be held and action taken on the matters
described herein with the greatest possible participating shares.

JOSEPH A. ANDERSON
SECRETARY/TREASURER

PROXY

Fort Dearborn Income Securities, Inc.

Proxy Solicited by the Board of Directors for the annual meeting of
shareholders, December 16, 2002

The undersigned, having received the Notice of Annual Meeting and Proxy
Statement dated November 8, 2002, appoints M. Finley Maxson and Robert M. Fascia
and each or any of them as proxies, with full power of substitution and
revocation, to represent the undersigned and to vote all shares (including those
owned beneficially by the undersigned through the Automatic Dividend Investment
Plan) which the undersigned is entitled to vote at the Annual Meeting of
Shareholders of Fort Dearborn Income Securities, Inc. to be held on December 16,
2002, 2:00 P.M., at UBS Global Asset management, One N. Wacker Drive, 38th
floor, Chicago, Illinois, and any adjournments thereof.

Election of Directors, Nominees:

A. Cepeda, C.R. O'neil,
F.K. Reilly, E.M. Roob,
J.M. Thomas

COMMENTS: (change of address)

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(If you have written in the above space, please mark the corresponding box on
the reverse side of this card.)

You are encouraged to specify your choice by marking the appropriate boxes ON
THE REVERSE SIDE. If you do not mark any boxes, your proxy will be voted in
accordance with the Board of Directors' recommendations. The proxies cannot vote
your shares unless you sign and return this card.

SEE REVERSE SIDE

6210

Please mark your votes as in this example.

This proxy when properly executed will be voted in the manner directed herein.
If no direction is made, this proxy will be voted FOR election of directors.

The Board of Directors recommends a vote FOR election of directors.

1. Election of Directors. (see reverse) FOR WITHHELD

2. In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the Meeting or any adjournment thereof.

For, except vote withheld from the following nominee(s):

Change of Address/
Comments on Reverse Side.

Please date and sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.

2002
SIGNATURE(S) DATE