Securities and Exchange Commission
Washington, D.C. 20549
-------------------------------
SCHEDULE 13D
Under the Securities Exchange Act of 1934
Central European Value Fund, Inc.
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(Name of Issuer)
Common Stock
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(Title of Class of Securities)
153455100
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(CUSIP Number)
Ralph W. Bradshaw
c/o Deep Discount Advisors, Inc.
One West Pack Square, Suite 777
Asheville, NC 28801
(828) 255-4833
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
September 9, 1998
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(Date of Event which Requires
Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box. [ ]
<PAGE>
CUSIP No.: 153455100 13D Page 2
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. ID NO. OF ABOVE PERSON
Deep Discount Advisors, Inc.
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2 CHECK THE APPROPRIATE BOX IF A MEMBER (a) [ ]
OF A GROUP (b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS OO
===========================================================================
5 CHECK BOX IF DISCLOSURE OF LEGAL [ ]
PROCEEDINGS IS REQUIRED PURSUANT TO
ITEM 2(d) OR 2(e)
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
One West Pack Square, Suite 777 Asheville, NC 28801
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NUMBER OF | | SOLE VOTING POWER
SHARES | 7 | 496400
============================================================================
BENEFICIALLY | | SHARED VOTING POWER 0
OWNED | 8 |
============================================================================
BY EACH | | SOLE DISPOSITIVE POWER 496400
REPORTING | 9 |
============================================================================
PERSON | | SHARED DISPOSITIVE POWER 0
WITH | 10 |
============================================================================
11 AGGREGATE AMOUNT BENEFICIALLY OWNED
BY EACH REPORTING PERSON 496400
=======================================================================
12 CHECK IF THE AGGREGATE AMOUNT IN ROW [ ]
(11) EXCLUDES CERTAIN SHARES
=======================================================================
13 PERCENT OF CLASS REPRESENTED BY
AMOUNT IN ROW (11) 8.4%
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14 TYPE OF REPORTING PERSON IA
======================================================================
<PAGE>
CUSIP No.: 153455100 13D Page 3
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===============================================================================
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. ID NO. OF ABOVE PERSON
Ron Olin Investment Management Company
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2 CHECK THE APPROPRIATE BOX IF A MEMBER (a) [ ]
OF A GROUP (b) [ ]
========================================================================
3 SEC USE ONLY
======================================================================
4 SOURCE OF FUNDS OO
======================================================================
5 CHECK BOX IF DISCLOSURE OF LEGAL [ ]
PROCEEDINGS IS REQUIRED PURSUANT TO
ITEM 2(d) OR 2(e)
======================================================================
6 CITIZENSHIP OR PLACE OF ORGANIZATION
One West Pack Square, Suite 777 Asheville, NC 28801
=====================================================================
NUMBER OF | | SOLE VOTING POWER
SHARES | 7 | 311100
=====================================================================
BENEFICIALLY | | SHARED VOTING POWER 0
OWNED | 8 |
====================================================================
BY EACH | | SOLE DISPOSITIVE POWER 311100
REPORTING | 9 |
=====================================================================
PERSON | | SHARED DISPOSITIVE POWER 0
WITH | 10 |
======================================================================
11 AGGREGATE AMOUNT BENEFICIALLY OWNED
BY EACH REPORTING PERSON 311100
=====================================================================
12 CHECK IF THE AGGREGATE AMOUNT IN ROW [ ]
(11) EXCLUDES CERTAIN SHARES
=========================================================================
13 PERCENT OF CLASS REPRESENTED BY
AMOUNT IN ROW (11) 5.3%
=======================================================================
14 TYPE OF REPORTING PERSON IA
=========================================================================
<PAGE>
ITEM 1. SECURITY AND ISSUER
This Schedule 13D relates to the shares of Common Stock of
Central European Value Fund, Inc.(the "Issuer"). The principal executive
offices of the Fund are located at 200 Liberty Street, 38th Floor, World
Fin'l, Oppenheimer Tower, New York, NY 10281
Stephen Treadway, Chairman
ITEM 2. IDENTITY AND BACKGROUND
(a) - (c) This Schedule 13D is being filed by Deep Discount Advisors, Inc.
and Ron Olin Investment Management Company (the "Reporting Persons"),
who are Registered Investment Advisors, One West Pack Square, Suite 777,
Asheville, NC 28801.
(d) None
(e) None
(f) USA
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
Investment funds
ITEM 4. PURPOSE OF TRANSACTION
The acquisition of the securities of the issuer was made for the purpose of
investment. The reporting persons may acquire additional securities, or dispose
of the securities of the issuer from time to time.
The reporting persons are in favor of actions by the issuer which would have the
effect of increasing the investment value of the issuer's shares, and will
support or may initiate actions which, in the sole discretion of the reporting
persons, may result in increase in the market value of the issuer's shares.
On September 9, 1998, Ronald G. Olin, a control person associated with the
reporting persons and also an individual shareholder of the issuer, sent the
secretary of the Central European Value Fund Inc. (the issuer) a shareholder
proposal intended for inclusion in the issuer's next shareholder meeting. This
proposal requested that the shareholders vote on the mandatory termination of
the investment advisory contract and further recommended that the Board of the
issuer solicit competitive proposals for a new investment advisor. The letter
also requested a meeting with the Board of Directors and suggested actions which
might be taken to reduce or eliminate the discount at which the shares of the
Fund have traded. A copy of the letter sent by Mr. Olin is attached as an
exhibit to this filing.
It is possible that the reporting persons may directly solicit support for
Olin's proposal with shareholders of the Fund to the degree permitted under
applicable law. It is also possible that the reporting persons may solicit
proxies in support of various other proposals and Director nominees in
opposition to the existing Board. To the extent that Olin is influencing how
the reporting persons' shares are voted, at present it is anticipated that such
shares would be voted in support of Olin's proposal, although no final
determination will be made until the Fund's final proxy is available. This
Schedule D filing, in lieu of the reporting persons' normal filing of Schedule
G, is occasioned by Mr. Olin's position as a control person of the reporting
persons and by the possible solicitation of proxies by the reporting persons
which may take place as a result. The securities of the issuer acquired and
held by the reporting persons were acquired in the ordinary course of business
and were not acquired for the purpose of and, except as described herein, do not
have the effect of changing or influencing the control of the issuer of such
securities and were not acquired in connection with or as a participant in any
transaction having such purposes or effect.
<PAGE>
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
(a) The Fund's semiannual report, dated April 16,1998,
states that, as of the close of business on February 28, 1998, there were
5,878,047 shares of Common Stock outstanding. The percentage set forth in
this Item 5(a) was derived using such number.
The Reporting Persons are the beneficial owners of 807,500
shares of Common Stock, which constitute approximately 13.7% of the outstanding
shares of Common Stock.
(b) Power to vote and to dispose of the securities resides
with the Reporting Persons.
(c) During the last sixty days, the following shares
of Common Stock were traded:
Date Number of Shares Price Per Share
- - ------- -------------------------- ---------------
7/17/98 5000 bought 12.5625
7/29/98 1200 bought 11.6875
7/30/98 1200 bought 11.75
7/31/98 1000 bought 11.875
8/5/98 -800 sold 11.75
8/5/98 4300 bought 11.8009
8/12/98 600 bought 11.4583
9/1/98 -24400 sold 8.269
9/2/98 8900 bought 8.5625
9/3/98 -11900 sold 8.625
9/4/98 5000 bought 8.5625
9/4/98 -22200 sold 8.625
9/8/98 -17100 sold 8.6477
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER
None
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
The letter from Mr. Olin to the Fund, which precipitates this filing, is
attached as Exhibit 1.
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
Date: September 9, 1998 Deep Discount Advisors, Inc.
By: /s/ Ralph W. Bradshaw
----------------------------
Name: Ralph W. Bradshaw
Title: Secretary
<PAGE>
EXHIBIT A
The business address for all individuals listed
in this Exhibit A is One West Pack Square, Suite 777,
Asheville, NC 28801.
DIRECTORS AND/OR GENERAL PARTNERS
Name and Address Principal Occupation
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Ronald G. Olin Investment Advisor
Sandra D. Olin Director
Gary A. Bentz Investment Advisor
Ralph W. Bradshaw Investment Advisor
William A. Clark Investment Advisor
Ralph D. McBride Attorney
<PAGE>
EXECUTIVE OFFICERS
Name and Address Principal Occupation
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Ronald G. Olin Investment Advisor
Gary A. Bentz Investment Advisor
Ralph W. Bradshaw Investment Advisor
William A. Clark Investment Advisor
SHAREHOLDERS WHO MAY BE DEEMED TO CONTROL THE ADVISORS.
The following shareholders and/or partners may be deemed to
control the Reporting Persons:
Ronald G. Olin
EXHIBIT 1
RONALD G. OLIN
One West Pack Square, Suite 777, Asheville, NC 28801
704-274-1863 Fax: 704-255-4834 E-mail: [email protected]
Deborah Kaback, Secretary Ph: 212-374-1601 Fax: 212-349-4759
The Board of Directors, The Central European Value Fund, Inc.
Oppenheimer Capital
World Financial Center
225 Liberty Street, 16th Floor
New York, NY 10281
(via both Fax and Federal Express) September 9, 1998
To the Board of Directors of The Central European Value Fund, Inc.:
My clients and I currently own about 14% of the Central European Value Fund
(the Fund). We have been disappointed by the performance of the Fund and the
persistent and growing discount at which the Fund's shares have traded.
We feel that there is no need to tolerate such a discount, as adequate remedies
exist that are beneficial to all shareholders. The purpose of this letter is to
suggest two specific remedies, to request a meeting with the Board of Directors
to discuss these matters, and to submit a shareholder proposal for the next
meeting of the Fund's shareholders.
The shareholder proposal to terminate the management contract with Value
Advisors LLC may seem to be an extreme measure, but it represents one of the few
effective means the shareholders have to indicate their displeasure if the Board
and Manager fail to respond to their wishes.
A POOR INVESTMENT
All of the shareholder reports since the inception of the Fund are the basis of
the following synopsis of the "out of pocket" investment results of the Fund's
owners:
CENTRAL EUROPEAN VALUE FUND SHAREHOLDER RESULTS
(Values in Thousands - Source: Data from Regular Shareholder Reports)
All Total Mgmt. Total Distr.
Period Shares Offer Share Cust. Director Oper. Paid
Ending Issued Fees Cost Fees Fees Expense Out
-------------------------------------------------------------------------------
9/30/94 4,407 5,407 66,100
8/31/95 679 30 1,265 441
2/15/96 1,471 604 16,548
8/31/96 895 32 1,575 1,183
8/31/97 712 31 1,909 2,939
8/28/98 (Estimated based on 2/28/98 report) 1,068 31 1,998 804
TOTALS 5,878 6,011 82,648 3,354 123 6,748 5,366
2/28/98 Per Total Results Fund
Values Share Value Since Inception Shares
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Market
Price: 8.00 47,024 Market Value 47,024
Net Asset + Payouts 5,366
Value: 12.05 70,830 - Share Cost 82,648
Discount
Loss: 4.05 -23,806 Net Loss: -30,257
WHO GOT WHAT IN THE CENTRAL EUROPEAN VALUE FUND?
(September 1994 - August 1998)
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Net Loss to Shareholders $ 30 Mil. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
Total Fees & Expenses $ 12 Mil. xxxxxxxxxxxxxxxxx
Shareholder Loss to Discount $ 24 Mil. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
SYNOPSIS OF SHAREHOLDER INVESTMENT RESULTS
This has been a poor investment. Since inception on 9/30/94, the Fund's
shareholders have paid $83 million to buy new shares, received $5 million in
distributions, and had an investment with a market value of $47 million as of
8/28/98.
The shareholders paid out over $12 million in management fees, director fees,
underwriting fees, and other expenses while losing over $30 million on their
investment. As of 8/28/98, the discount was costing each and every shareholder
$4.05 a share or a +50% extra return over market value. The recovery of the $24
million lost to the discount would go a long way in restoring the $30 million
collectively lost by the shareholders since inception of the Fund.
REMEDIES TO REDUCE THE DISCOUNT & ENHANCE SHAREHOLDER RETURNS
The discount represents an opportunity to markedly improve shareholder
investment results with this Fund. All that is required is that the Board take
the actions necessary to enhance shareholder wealth through the reduction and
eventual elimination of the discount. Remedies are available which would
enhance the Net Asset Value (NAV) of the Fund's shares, reduce/eliminate the
discount, and allow shareholders a choice between a closed-end structure and
receiving NAV for all their shares. The only significant impact of such actions
would be a reduction in the advisory fee income paid to Value Advisors LLC due
to those shareholders who choose to cash out entirely. Transactions could be
structured so that there would not be an significant impact on those
shareholders choosing to remain in the closed-end structure.
REMEDY #1 - PERPETUAL SHARE BUYBACKS TO ENHANCE NAV & REDUCE DISCOUNTS
Share buybacks have been viewed by the industry as a failure because, even
though they have always enhanced NAV, they have never permanently fixed the
discount. This is not surprising because all repurchase plans have been limited
in size and duration. You don't get a permanent fix with a temporary band-aid.
Instead, if a fund unequivocally committed to perpetual, sizable buybacks
whenever a discount existed, there would always be a buyer for the Fund's
shares. Potential sellers would learn to be patient and would lower the
discount at which they were willing to sell. Every share that the Fund bought
at a discount would enhance NAV and the performance of the Fund. This would
attract other buyers and serve to rebalance the demand/supply equation at a
lower discount level. Logic says that eventually the price would stabilize in a
range somewhere near NAV.
The value of such a program to existing shareholders is significant. For
example, suppose repurchases began at a 33% discount (similar to that of The
Central European Value Fund), suppose it took one half of the Fund's assets and
one year to reduce the discount to 0%, suppose the average purchase price were
at a 17% discount, and further suppose that the Fund's portfolio securities
appreciated 10% during the same year net of expenses. In this case, those
shareholders sticking with the Fund would see their investment increase by about
+60% (+33% from discount elimination, +17% from NAV enhancement, +10% from the
portfolio increase).
Repurchasing shares at a discount is equivalent to buying the fund's own
carefully chosen portfolio at prices cheaper than those available in the market.
The turnover of the Central European Value Fund has ranged from 20% to 56% in
recent years. What could be a better investment for the Fund?
Fifty per cent of the Fund's yearly expenses are management and custodial fees
which are proportional to the size of the Fund. A reduction in Fund size by one
half might increase the Fund's expense ratio from about 2.2% to about 3.3%.
Most shareholders would gladly make this tradeoff to eliminate the discount and
enhance their wealth.
REMEDY #2 - SPLITTING UP THE FUND TO SATISFY ALL SHAREHOLDERS
Many shareholders feel that they should be entitled to receive full NAV for
their shares right away and should not have to wait for perpetual share buybacks
or other techniques to slowly eliminate the discount. They desire that the Fund
be open-ended or liquidated. Fund Managers and Boards often object that this is
not fair to shareholders who like the closed-end structure. They argue that
such actions will create tax consequences, difficulties of operation, and costs
due to massive redemptions when other shareholders cash out.
There is a solution which should satisfy all shareholders. The Fund could do a
self-tender offer for its shares in exchange of an in-kind distribution of its
portfolio. Those wishing to remain in the closed-end fund would not have any
immediate consequences as a result.
The tendering shareholders could be given a further option to exchange their
portfolio proceeds for shares of a newly formed open-end fund created for that
purpose or alternatively a liquidating trust which would sell them out. The
entire series of transactions could be structured so that all expenses and tax
impacts would be borne only by the those shareholders who chose to tender.
Scudder Spain and Portugal Fund has already researched and is currently planning
such an action to allow their shareholders the option of receiving NAV or
staying in the closed-end fund. The Central European Value Fund shareholders
should be entitled to similar consideration.
A further advantage of this approach is that it would remove from the market the
large number of the Fund's shareholders who are currently willing to sell their
shares at less than NAV, and leave only those shareholders who truly desire the
closed-end format in the remaining closed-end fund.
The optimal solution for the Central European Value Fund might be a combination
of the two remedies: First, allowing those who wished NAV to exit to an open-
end counterpart, and then instituting a perpetual buyback program in the
remaining closed-end fund to keep the discount from reappearing.
A REQUESTED MEETING WITH THE BOARD
I would like to request a meeting with the Fund's Board to discuss these
potential remedies and other issues relating to performance of the Fund and the
discount. I believe there is a growing intolerance of the status quo among the
shareholders and a level of impatience that will not be satisfied by less
effective actions than those mentioned above.
THE SHAREHOLDER PROPOSAL TO TERMINATE VALUE ADVISORS LLC
On May 8, 1998 the SEC overruled the objections of eight fund management
companies and their Boards of Directors and determined that the shareholders of
closed-end funds could fire their investment advisor without Board approval.
This is one of the few effective actions the shareholders can take if their
Board and their Manager are not responsive to shareholder wishes. The decision
to submit this shareholder proposal is occasioned by the filing deadline and the
possibility that Value Advisors LLC and the Board will not take steps which
result in eliminating the discount. It would be preferable if the Board would
take actions prior to the next meeting of shareholders which would eliminate the
need for shareholders to vote in support of this proposal.
I personally own 200 shares of The Central European Value Fund Inc. in my IRA
and intend to continue to own these shares until the Fund's next annual meeting.
(I am enclosing independent certification from my broker demonstrating
continuous beneficial ownership of Fund shares in the required amounts for the
required period of time). Pursuant to Rule 14a-8 of the Securities Exchange Act
of 1934, I am hereby submitting the following proposal and supporting statement
for inclusion in the Fund's proxy material for its next annual meeting of
stockholders or any earlier special meeting. The notice of annual meeting held
on February 20, 1998 specified September 10, 1998 as the deadline for such
submissions. It should be noted for the record that I am not interested in
participating in the competition for the Fund's advisory contract.
SUBMITTED SHAREHOLDER PROPOSAL:
RESOLVED: The Fund's investment advisory agreement with its investment manager,
Value Advisors LLC, shall be terminated and the shareholders recommend that the
board solicit competitive proposals for a new investment advisor.
SUPPORTING STATEMENT:
I believe Value Advisors LLC's advisory contract should be terminated because
shareholder results with the Fund have been poor, and because management fees
are apparently so lucrative to the manager that effective steps to enhance
shareholder value are not taken.
Since inception on 9/24/94, the Fund's shareholders have paid $83 million to buy
new shares, received $5 million in distributions, and had an investment with a
market value of $47 million as of 8/28/98. The resulting loss of over $30
million dollars in just 4 years brings into question the value of this entire
economic endeavor. The Net Asset Value (NAV) return of the Fund is somewhat
better, but it fails to reflect the devastating impact of the discount on
shareholder investment results.
The shareholders paid out over $12 million in advisory fees, director fees,
underwriting fees, and other expenses while losing more than $30 million on
their investment. As of 8/28/98, the discount was costing each and every
shareholder $4.05 a share or a +50% extra return. The recovery of the $24
million lost to the discount would go a long way in restoring the $30 million
collectively lost by the shareholders since inception of the Fund.
After 25 years as a private investor and 10 additional years as an investment
professional managing up to $240 million in closed-end fund shares, I am
convinced that the biggest problem in fixing discounts and adding market value
is the investment advisor. Fees are so lucrative that the fund manager will
rarely recommend more than token steps to enhance shareholder value. I believe
the Directors owe their positions to the manager and the manager's predecessors
and therefore will not take effective actions such as committing to perpetual
share buy-backs, tender offers, open-endings, or other means to deliver Net
Asset Value to shareholders. Such steps would reduce the Fund size and the
advisory fees paid to the manager. Instead, this Fund conducted a rights
offering and sold new shares at a discount, which diluted the asset value, added
to the supply of shares, and increased the advisory fees paid.
It is very expensive and time consuming for shareholders to organize and wage
successful proxy fights to replace staggered Boards of Directors. Fortunately,
the law gives shareholders one practical tool to fix this problem. A majority
can vote to "fire" the investment manager. Qualified advisors are available
that will work with a motivated Board to enhance shareholder value.
We have a chance to send a loud and clear message to the Board that we want the
Fund run exclusively for the benefit of the Fund's owners. Vote for this
shareholder sponsored resolution.
***End of supporting statement***
CONCLUSION
I am sure the Board would agree that the discount represents both a wasteful
loss of shareholder wealth, and an issue of contention between the Fund's owners
and its fiduciaries. The shareholders and the Board should work together to
resolve this problem expeditiously. Getting rid of the discount would eliminate
the need for disruptive activities such as proxy fights, opposing director
candidates, and shareholder proposals like the one above.
I remain available at any time for discussions with Value Advisors LLC or
members of the Board concerning any issues related to the Central European Value
Fund, suggestions to remedy the discount, the submitted shareholder proposal,
and other ideas to enhance shareholder value. I am looking forward to your
response.
Very truly yours,
Ronald G. Olin
