Harvard will liquidate investments in two close-end funds run by Templeton, a unit of Franklin Resources, after both sides agreed to drop law suits against each other, Templeton announced Thursday.
Harvard Management, which runs the university's $18 billion endowment, is the largest shareholder of the Templeton Dragon Fund and the Templeton China World Fund. Unsatisfied with the funds performance, Harvard wanted to stop Templeton as investment advisor last year (see MFMN 2/10/03). Templeton sued Harvard this January for alleged violation of security laws. Harvard countersued Templeton for what it claimed was breach of fiduciary duty.
Harvard now agrees with the boards proposal to convert the China World Fund into an open-end fund. If the proposal is endorsed by shareholders, Harvard will redeem all shares in the fund within 30 days after the conversion. Instead of cash, Harvard will get its redemption proceeds through a pro rata, in-kind distribution of portfolio investments. The Dragon Fund will in April start cash tender offer for 15% of its outstanding shares at 92.5% of net asset value per share as of the date the offer expires. The fund will also apply to the Securities and Exchange Commission exemption allowing it to make occasional tender offers in kind through a pro rata distribution of marketable portfolio securities. If the application is not granted, the fund may, but is not obligated to, conduct an additional cash tender offer.