PORTUGAL FUND INC DFAN 14A
Filing Date: 5/10/99
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TYPE: DFAN 14A
SEQUENCE: 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by Registrant [ ]
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[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the
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by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ X ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
PORTUGAL FUND, INC.
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(Name of Registrant as Specified in its Charter)
Deep Discount Advisors, Inc.
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(Name of Person(s) Filing Proxy Statement, if Other Than the
Registrant)
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DEEP DISCOUNT ADVISORS, INC.
Enhanced Performance through Closed-End Fund Investments
One West Pack Square, Suite 777, Asheville, NC 28801
(828) 274-1863 Fax: (828) 255-4834
May 10, 1999
Dear Fellow Portugal Fund Shareholder:
We believe that The Portugal Fund is misrepresenting facts about the real issues
in this proxy contest and we want you to be correctly informed. We know your
time is important and we hope that you will take just a few moments to review
the enclosed letter and consider returning the enclosed green proxy card for the
rescheduled meeting on May 20.
IMPORTANT THINGS EVERY PORTUGAL FUND SHAREHOLDER SHOULD KNOW!
1. OUR GOAL IS TO MAXIMIZE SHAREHOLDER VALUE
On April 1, 1999, the discount on your Portugal Fund shares was $2.74 per share,
equivalent to a +19.7% gain if eliminated. Federal securities laws require that
all shareholders be treated equally by the Fund so that any improvements will
accrue to all shareholders, not just our clients.
2. PORTUGAL FUND NEEDS STRONGER BOARD LEADERSHIP
Management contracts are very lucrative and steps to reduce the discount often
reduce management fees. The recently announced buy-back program has remained
almost unused. The board needs to press the manager to improve shareholder
value.
3. OUR INTERESTS ARE ALIGNED WITH OTHER SHAREHOLDERS
We are long-term shareholders of Portugal Fund. All shareholders benefit from a
reduced discount, especially if it comes from the Fund buying its own shares at
a discount.
4. WE DO NOT WANT TO DISMANTLE THE FUND
In spite of misleading claims to the contrary, we have never dismantled a fund.
In fact, a reading of our proposals shows that they have nothing to do with
dismantling this fund but only with improving shareholder returns.
5. OUR EFFORTS HAVE HELPED TO IMPROVE OTHER FUNDS
We have labored both in support of and in opposition to the managements of other
closed-end funds with demonstrated benefits for all shareholders. We are eager
to work toward making Portugal Fund a better investment.
Please read the enclosed letter for more information. Thank for your attention
and support.
Sincerely,
Ralph W. Bradshaw Ronald G. Olin
Candidate for Director Candidate for Director
PLEASE SEND IN THE GREEN PROXY BALLOT TO
CAST YOUR VOTE IN SUPPORT OF YOUR OWN BEST INTERESTS
Deep Discount Advisors, Inc.
One West Pack Square, Suite 777, Asheville, NC 28801
828-274-1863 Fax: 828-255-4834 E-mail: [email protected]
May 10, 1999
Dear Fellow Portugal Fund Shareholder:
I know your time is important to you, and probably the last thing you want to do
is to worry about some proxy fight at the Portugal Fund. Your may have already
received more mailings than you want to cope with containing various claims and
accusations. This is only our second communication with you and will be our
last. We believe the Fund is misrepresenting facts to you about us and the real
issues in the proxy fight. Please take a few moments to read this letter and
please consider signing and returning the enclosed green proxy card. It may
make a big difference in the value of your Portugal Fund shares. On April 1,
1999 the discount on your Portugal Fund shares was $2.74 per share, equivalent
to a +19.7% gain if eliminated.
I am a major shareholder of the Fund and, together with my investment management
clients, own 29% of the Fund's shares. The Fund would have you believe that
your interests and ours in maximizing shareholder value are different. However,
federal securities laws require that all shareholders be treated equally by the
Fund and that any actions taken that improve share value will accrue to all
shareholders. For example, at the conclusion of a proxy campaign we were
running at the Emerging Germany Fund on a platform of eliminating the redemption
fee associated with this fund's conversion to open-end, our clients voted their
discretionary shares with management and against our proxy after agreement was
reached to waive the redemption fee for all shares held longer than one year.
This benefit applied to all shareholders, not just our clients, and benefited
all long-term shareholders of the fund. So rather than argue the merits of our
case, the Portugal Fund directors and advisor have instead tried to confuse you
and vilify us.
Our goal in closed-end funds is simple: MAXIMIZE SHARE VALUE. Our interests are
the same as yours. We know how to reduce or eliminate the discount at which
your shares are selling in the market, we know how to lower fund expenses, and
we know how to deal with poor performance by the Fund's advisor. Our candidates
for director and our proposals are all designed to accomplish this goal of
maximizing your, and our, share value.
The Fund advisor, Credit Suisse, and their hand-picked directors are trying to
distract you from our message by attacking us. They claim that they are already
dealing with the discount problem, that we misled you about how bad the Fund's
performance really is, that our interests are different from yours, and that our
efforts will result in dismantling the Fund. To support these claims, the Fund
has misrepresented facts and omitted material relevant information. They have
unfairly characterized our activities in other closed-end funds and joined an
industry wide attack on our motives and actions.
PLEASE UNDERSTAND WHAT IS BEHIND THIS CONFRONTATION
Closed-end fund management contracts are very lucrative. Unlike regular mutual
funds, shareholders can not cash in their shares at their full value, but must
instead find some other investor to buy their shares in the market. The manager
collects his management fee based on the full asset value of the fund and not
the market value. He does not need to satisfy redemption requests if the
performance is bad. The advisor keeps on collecting his fees regardless of how
big the discount grows between the market value and the asset value of the
shares. This same manager picks the initial directors of the fund who in turn
perpetuate themselves and their replacements, usually with no opposition. The
interests of the people running the funds are different from the shareholders.
We are challenging that system and trying to give shareholders control of their
own investments in these funds.
CLAIMS CONCERNING EXISTING DISCOUNT REDUCTION STEPS
With great fanfare, the Fund announced a repurchase program last October and
authorized the advisor, Credit Suisse, to repurchase up to 15% of the Fund's
shares in open market transactions with the intent to "provide additional
liquidity to those shareholders that elect to sell their shares and to enhance
the net asset value of the shares held by those shareholders that maintain their
investment." Through the end of December, the Fund had not repurchased any
shares. By February 22, 1999, four months after the announcement, a total of
only 23,700 shares had been repurchased of the 803,312 shares authorized. The
enhancement to NAV was less than $0.01 per share and the discount understandably
began to widen again. At this rate, it will take over 11 years to buy back the
number of shares authorized. Perhaps this slow pace is understandable when one
realizes that every share repurchased by Credit Suisse will have the effect of
reducing their management fees.
CLAIMS THAT WE MISLED YOU ABOUT POOR FUND PERFORMANCE
Our proxy statement correctly claimed that, after commencing operations in
Novermber 1989, the Fund reported "total investment returns" for the following
nine calendar years (1990-1998) corresponding to a total gain of +62.2% or a
compound annual return of only +5.5% a year. In reports, the Fund compares
itself to the unmanaged MSCI Index of Portugal equity securities. The MSCI
Portugal index had total returns of +118% during this same period, almost twice
the results of the Fund's shareholders. The Fund complained that we did not
include the initial two month inception period of the Fund from November 9, 1989
to December 31, 1989 and that this increased the cumulative return to +99% while
only increasing the index to +122%.
We did not include this initial two months because, after the Fund raised its
initial offering cash, it reported 0% turnover for this period, its asset value
was unchanged at $13.79 per share, and its calculation of "total investment
return" during that period did not include the effect of the initial
underwriting expenses paid by the shareholders to buy the shares. The Fund
reported total investment return of +22.49% for this "two month" period even
though, apparently, no Portugal investments were made. Therefore, we thought it
best to exclude this brief, initial two month period from the Fund's nine year
performance history.
Nevertheless, the Fund's own updated numbers still demonstrate that shareholder
total return lagged the index by significant margins over the last three years
as well as since inception, and correspond to a compound annual return since
inception of only +7.8% through the end of 1998. In our opinion, this is
terrible performance for all the risks taken by the shareholders.
CLAIMS THAT OUR INTERESTS ARE DIFFERENT FROM YOURS
The Fund has claimed that we "stand to benefit from the very market discounts of
which we complain." Well, so does every other shareholder. Everyone benefits
from any discount reduction that may result from share repurchases except for
the investment advisor, who loses fee income.
The Fund then attacked us with the most blatant misrepresentation of facts we
have yet observed. In referring to our campaign to bring shareholder value to
the Austria Fund, they said "Olin sold out virtually his entire position in the
fund only a few months after his representatives - who were advocating
"shareholder rights" - joined the Board. They were unable to close the
discount. In fact, the discount has widened to as much as 19%. Is that the
action of someone interested in the rights of all shareholders?"
The real truth about the Austria Fund should be instructive to every Portugal
Fund shareholder considering how to cast his vote. We initiated a proxy contest
to elect directors and pass shareholder value proposals at the Austria Fund late
last year. During the campaign, the Austria Fund repurchased almost one third
of their shares from shareholders who wanted out at progressively smaller and
smaller discounts. We did not sell our 10% stake which then became an 18% stake
by virtue of the buy-back. While seven directors were not standing for
election, we won the remaining four available director positions by a wide
margin in spite of losing the support of many who cashed out in the buy-back.
The day of the annual meeting, the buy-back abruptly stopped. Then someone else
began to buy massive amounts of shares in the market. Other large holders who
had supported us began to sell their positions at progressively smaller and
smaller discounts. We did not sell.
In our first Board meeting, the Austria Fund incumbent directors, over our
objections, expanded the Board size, appointed three of the four defeated
directors back to the board, and passed a series of by-law changes which had the
effect of further limiting shareholder rights and giving more authority to the
Board and its Chairman. In addition, the chairman of the Advisor, who had been
defeated for reelection to the Austria Fund Board in January, was elected
Chairman of the Fund. The Board reduced the compensation paid to each Director
and adopted a new policy that will require any U.S. director (like the four of
us) to pay our own way to Austria if we wished to personally attend the annual
meeting of the Board scheduled this June. Proposals overwhelmingly passed by
the shareholders in the annual meeting to eliminate staggered Board terms and to
reimburse us for limited proxy communication expenses in our successful election
were rejected by the newly expanded board. Because the vote to open-end the
Austria Fund was 4,891,919 in favor vs. 1,493,883 against, we submitted a
proposal to allow those shareholders who wished to leave the Fund to receive
full net asset value for their shares. After the Chairman expressed his
negative opinion, our proposal was defeated by the same party line vote.
Some days after the meeting, we had an opportunity, along with others, to sell
most of our client positions in the open market on the stock exchange at a 3%
discount, to an unidentified buyer. We sold out most all of our positions, with
the exception that the four of us elected as directors continued to hold
personally significant stakes in the Fund. Subsequent federal filings indicate
that Bank of Austria, who is affiliated with the sub-advisor, and which
represents the largest portfolio position in the Austria Fund, had been the
buyer of ours and the other positions. After our sale, their buying apparently
stopped and the discount widened to as much as 19%. We remain committed to
implement the mandate of the shareholders as expressed in the annual meeting of
the Austria Fund. We do not accept "greenmail" which we continue to believe is
both illegal and immoral in closed-end funds. We have rejected offers to sell
our entire stakes at prices well above market in two other closed-end funds in
exchange for backing off from proxy contests. In one such case, the parties
trying to buy our shares, who are affiliated with the advisor, subsequently
purchased large stakes under similar conditions in private transactions with
other large shareholders on condition that they obtain voting rights. They also
allocated $750,000 of shareholder money to fight us. We lost these proxy
fights.
CLAIMS THAT OUR EFFORTS WILL RESULT IN DISMANTLING THE FUND
The Portugal Fund has also attacked us for forcing the liquidation of the
Scudder Spain and Portugal Fund. In that case we and other shareholders
supported the idea of allowing those shareholders who wished to cash out to
receive full asset value for their shares. The Fund did a 70% tender offer for
its shares and honored all 72% tendered, including our shares. The remaining
$40 million fund was still larger than many existing closed-end funds. The
advisor then decided to seek shareholder approval to liquidate, which happened
some months later. We initiated no proxy contest and did nothing in that
situation other than express our opinion publicly.
We were further attacked for not eliminating entirely the discount at the
Clemente Global Growth Fund, at which three of us are directors and I am
Chairman. We bought most of our shares over a period of years at 25% to 30%
discounts. We were appointed to the Board in a compromise situation which grew
out of a proxy contest in which we were not involved directly except as
shareholders whose votes were solicited. Clemente Global is currently in the
market every day buying back shares whenever they are selling at a discount. We
have adopted a budget representing a 30% reduction in fund expenses. We have
eliminated staggered Board terms. The discount has recently gotten as low as 4%
and been in the range of 4% to 14% since we became involved as part of the
board. The shareholders rejected open-ending this fund in the last election,
and we have come to believe that more value can be provided to long-term
shareholders through buy-backs, portfolio performance improvement, and expense
reduction than immediate open-ending. As the buy-back continues to reduce the
supply of shares available for sale at a discount, we think it is inevitable
that the discount will eventually be reduced to nominal levels.
Even when we have not won with our opposing proposals and candidates, we have
been successful in improving shareholder value. In response to our challenges,
Funds have done massive buy-backs, made tender offers, initiated payout
policies, and occasionally decided to change their structure in response to
shareholder wishes. We like closed-end funds, it is our business. But we want
them run for the benefit of the shareholders, not their investment advisors.
VOTE YOUR BEST INTERESTS
I want to thank you for reading through all of this, however you decide to vote.
If you have any questions, I encourage you to call me personally at
828-255-4832. Please consider signing and returning the green proxy card which
is enclosed. We are committed to serving your best interests and those of all
Portugal Fund Shareholders. Thank you for your time.
Sincerely yours,
Ronald G. Olin
PROXY CARD
PROXY SOLICITED IN OPPOSITION
TO THE BOARD OF DIRECTORS OF THE PORTUGAL FUND, INC.
BY DEEP DISCOUNT ADVISORS, INC. AND RON OLIN INVESTMENT MANAGEMENT COMPANY
ANNUAL MEETING OF STOCKHOLDERS RESCHEDULED TO BE HELD ON MAY 20, 1999
The undersigned hereby appoints Ronald G. Olin, Ralph W. Bradshaw, Gary A.
Bentz, and William A. Clark, and each of them, as the undersigned's proxies,
with full power of substitution, to attend the Annual Meeting of Stockholders of
The Portugal Fund, Inc. (the "Fund") to be held on May 20, 1999, at the offices
of Credit Suisse Asset Management, One Citicorp Center, 153 East 53rd Street,
57th Floor, New York, New York 10022, at 2:00 p.m., New York time, (the
"Meeting"), and any adjournment(s) or postponement(s) thereof, and to vote on
all matters that may come before the Meeting and any such adjournment or
postponement the number of shares that the undersigned would be entitled to
vote, with all the power the undersigned would possess if present in person, as
specified below. The proxies may vote in their discretion with respect to such
other matter or matters, including adjournment or postponement issues, as may
come before the Meeting and with respect to all matters incident to the conduct
of the Meeting.
(INSTRUCTIONS: Mark votes by placing an "x" in the appropriate [ ].)
1. ELECTION OF DIRECTORS.
Directors (whose terms expire in 2002)
RONALD G. OLIN
RALPH W. BRADSHAW
FOR ALL NOMINEES [ ] WITHHOLD [ ] FOR ALL EXCEPT [ ]
NOTE: IF YOU DO NOT WISH YOUR SHARES VOTED "FOR" ANY PARTICULAR NOMINEE, MARK
THE "FOR ALL EXCEPT" BOX AND STRIKE A LINE THROUGH THE NAME(S) OF THE
NOMINEE(S). YOUR SHARES WILL BE VOTED FOR THE REMAINING NOMINEE(S).
THE SOLICITING SHAREHOLDER URGES YOU TO VOTE "FOR" THE ELECTION OF ALL NOMINEES
2. To ratify the selection by the Board of Directors of PricewaterhouseCoopers
LLP as the Fund's independent auditors for the year ending December 31, 1999:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
THE SOLICITING SHAREHOLDER HAS NO RECOMMENDATION FOR PROPOSAL TWO (2), IF
PROPOSAL TWO (2) IS LEFT BLANK, THE SOLICITING SHAREHOLDER WILL VOTE TO ABSTAIN.
3. Stockholder proposal recommending that the Board of Directors commit
unequivocally to aggressive, continuous, perpetual repurchases of the Fund's
shares in the market whenever they trade at a discount to Net Asset Value:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
THE SOLICITING SHAREHOLDER URGES YOU TO VOTE "FOR" PROPOSAL THREE
4. Stockholder proposal recommending that it would be in the best interests of
the Fund to receive the resignation of all Directors not standing for election
at the 1999 Annual Meeting who oppose the shareholder resolution that they
commit unequivocally to aggressive, continuous, perpetual repurchases of Fund
shares whenever they trade at a discount, and that the stockholders hereby
recommend that such Directors resign their positions as Directors of the Fund:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
THE SOLICITING SHAREHOLDER URGES YOU TO VOTE "FOR" PROPOSAL FOUR
5. Stockholder proposal providing that the advisory contract between the Fund
and Credit Suisse Asset Management (Credit Suisse) be terminated within sixty
(60) days as provided for in the Investment Company Act of 1940:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
IF PROPOSAL FIVE (5) IS LEFT BLANK FOR ALL BOXES, THE SOLICITING SHAREHOLDER
WILL VOTE ON THIS PROPOSAL IN THE BEST INTERESTS OF THE STOCKHOLDERS AT THE TIME
OF THE ANNUAL MEETING, BASED ON THE SOLE JUDGEMENT OF THE SOLICITING SHAREHOLDER
6. Stockholder proposal recommending that the Board of Directors authorize and
direct the officers of the Fund to reimburse the Soliciting Shareholder for such
reasonable fees and expenses associated with its proxy communication to
shareholders, including only printing, normal mailing, distribution, and
tabulating costs, but not including attorneys fees, solicitor fees, overnight
mailing costs, telephone communication, or other extraordinary expenses:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
THE SOLICITING SHAREHOLDER URGES YOU TO VOTE "FOR" PROPOSAL SIX
IMPORTANT - - PLEASE SIGN AND DATE BELOW
SHARES WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED IN FAVOR OF THE ELECTION OF ALL NOMINEES NAMED ABOVE IN ITEM 1 AND "FOR"
PROPOSALS 3, 4, AND 6 AND WILL ABSTAIN FROM VOTING ON PROPOSAL 2. ALL OTHER
PROPOSALS, INCLUDING PROPOSAL 5, WILL BE VOTED BY THE SOLICITING SHAREHOLDER IN
THE BEST INTERESTS OF STOCKHOLDERS AS DETERMINED BY THE SOLE JUDGEMENT OF THE
SOLICITING SHAREHOLDER AT THE TIME OF THE MEETING. THE UNDERSIGNED HEREBY
ACKNOWLEDGES RECEIPT OF THE PROXY STATEMENT DATED APRIL 19, 1999 OF DEEP
DISCOUNT ADVISORS, INC. THE UNDERSIGNED HEREBY REVOKES ANY PROXY HERETOFORE
EXECUTED BY THE UNDERSIGNED RELATING TO THE SUBJECT MATTER HEREOF AND CONFIRMS
ALL THAT THE PROXIES MAY LAWFULLY DO BY VIRTUE HEREOF.
(IMPORTANT - PLEASE FILL IN DATE)
This proxy card is provided by Deep Discount Advisors, Inc. and Ron Olin
Investment Management Company, both beneficial shareholders of the Fund. Please
sign exactly as your name appears hereon or on proxy cards previously sent to
you. When shares are held by joint tenants, both should sign. When signing as
an attorney, executor, administrator, trustee or guardian, please give full
title as such. If a corporation, please sign in full corporate name by the
President or other duly authorized officer.
If a partnership, please sign in partnership name by authorized person.
SIGNATURE(S)_____________________________________________Dated:_______________
Please sign as registered and return promptly in the enclosed envelope.
Executors, trustees and other signing in a representative capacity should
include their names and the capacity in which they sign.
