Closed-End Fund Must Include Shareholder’s Self-Tender Resolution
The staff of the Division of Investment Management refused to allow a closed-end fund to omit a shareholder proposal requiring the fund to repurchase its shares if the discount to net asset value exceeds 10%. The proposal requested a change to the Declaration of Trust which would require the closed-end fund to conduct a self-tender to repurchase 20% of its outstanding shares at a price equal to 98% of net asset value. The fund attempted to exclude the proposal on various procedural grounds.
OUR TAKE: This type of proposal, if adopted, could have a profound impact on closed-end funds. The tender would essentially provide an immediate windfall to investors by guaranteeing them a price significantly above the market price. It would also require closed-end funds to engage in a self-defeating cycle of redemptions in order to pay for the tender.