Online Proxies Could Spur More Fights

The decision by the Securities and Exchange Commission to allow investment firms to provide annual reports and proxy-voting materials online might encourage closed-end-fund activists to wage more proxy-voting wars to open funds and to contest board elections or new advisory contracts, The Wall Street Journal reports. This is a possible scenario, since proxy fights by closed-end funds are becoming more commonplace.

"There are potential savings and costs that may make a proxy fight a little more appealing," said Bruce Goldfarb, senior managing director and general counselor for Georgeson Shareholder Communications Inc.

The SEC voted unanimously last week to allow the online option. The decision will be open for public commentary for 60 days, and if accepted will go into effect in 2007. The plan provides that the company can make the leap to digital annual reports if it notifies shareholders of the Internet address at least 30 days before the annual meeting. Under the new rules, paper annual reports can still be ordered, and will be free of charge.

Phillip Goldstein, a seasoned closed-end-fund activist, said that mailings can cost up to $2 per shareholder. "I'm very cost-conscious. I try to do just one mailing. This could lead to more proxy fights and activism," Goldstein said.

To illustrate just how much Internet proxy fights can save, take the case of the proxy fight that Karpus Investment Management led against Citigroup Inc. over transferring five closed-end-funds to Legg Mason. Cody Barlett, an investment strategist at Karpus, said that it took $3,000 per fund to print and $15,000 per fund to mail. Only the significant shareholders receive the materials.

The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.