Securities Exchange Act of 1934 - Rule 14a-8(i)(3) and 14a-9
The New Ireland Fund, Inc
March 15, 2004
Paul J. McElroy, Esquire
Sullivan & Cromwell LLP
1701 Pennsylvania Avenue
Washington, DC 20006-5805
Re: The New Ireland Fund, Inc. - Omission of Shareholder Proposal Pursuant to Rule 14a-8
Dear Mr. McElroy:
In a letter dated February 3, 2004, you notified the staff of the Securities and Exchange Commission of the intent of The New Ireland Fund, Inc. to omit from its proxy materials for its 2004 annual meeting the shareholder proposal and supporting statement submitted by Opportunity Partners, L.P. (the "Proponent").1 The Proposal states:
RESOLVED: The shareholders of The New Ireland Fund (the "Fund") request the Board of Directors to promptly take the steps necessary to open end the Fund or otherwise enable shareholders to realize net asset value ("NAV") for their shares.
You request our assurances that we would not recommend enforcement action if the fund omits the proposal and supporting statement in their entirety. If we disagree that the entire proposal and supporting statement may be excluded, you request that we permit the fund to exclude the entire supporting statement or require the revision of the statement to correct or delete certain false and misleading statements pursuant to Rule 14a-8(i)(3) under the Securities Exchange Act of 1934. This rule permits a company to exclude a proposal that violates any of the Commission's proxy rules, including Rule 14a-9 under that Act, which prohibits materially false and misleading statements in proxy soliciting materials. You assert that the supporting statement includes statements that are false and misleading both for the statements it contains and the information it omits.
We are unable to concur with your view that the fund may omit either the proposal or the supporting statement in their entirety under Rule 14a-8(i)(3) under the Exchange Act. Although there may be some basis for your belief that portions of the supporting statement may violate Rule 14a-9 under that Act, we believe that the Proponent may cure the potential violations by amending the supporting statement. In our view, the Proponent should:
- Modify the third sentence of the first paragraph to identify what the $12.43 price represents (e.g., clarify whether the $12.43 represents the closing price on September 30, 2003);
- Modify the last sentence of the first paragraph to reflect that only if the fund was operating as an open-end fund on September 30, 2003, would redeeming shareholders have received NAV of $15.28 per share;
- Modify the third sentence of the second paragraph: (1) to provide the information necessary to identify and locate the Dow Jones news article referenced; and (2) to clarify that shareholders will "get out at a profit" only if the proceeds (after deducting any applicable redemption fees) are greater than the amount they paid for those shares (including any sales charges or commissions).
Accordingly, unless the Proponent provides the fund with a supporting statement revised in this manner within seven calendar days after receiving this letter, we will not recommend enforcement action to the Commission if the fund omits only these portions of the Proponent's supporting statement from its proxy materials in reliance on Rule 14a-8(i)(3).
Attached is a description of the informal procedures the Division follows in responding to shareholder proposals. If you have any questions or comments concerning this matter, please call me at (202) 942-0653.
Christian T. Sandoe
Office of Disclosure and Review
cc: Opportunity Partners, L.P.
February 3, 2004
Division of Investment Management
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Attention: Office of the Chief Counsel
Re: The New Ireland Fund, Inc. -
Omission of Shareholder Proposal Pursuant to Rule 14a-8
Ladies and Gentlemen:
We are writing as counsel to The New Ireland Fund, Inc. (the "Fund"), a Maryland corporation registered as a closed-end management investment company under the Investment Company Act of 1940, as amended (the "Act"). The Fund received in the form of a letter, dated October 1, 2003, a shareholder proposal and related supporting statement (collectively, the "Proposal") from Opportunity Partners, L.P. (the "Proponent") for inclusion in the Fund's proxy materials for its 2004 Annual Meeting of Stockholders ("Proxy Statement"). We are writing to request that you concur in the Fund's opinion that the Proposal may be properly omitted from the Fund's Proxy Statement and request your confirmation that the Commission staff will not recommend the Commission take action by reason of the omission. By copy of this letter, the Fund hereby notifies the Proponent of the Fund's intention to omit the Proposal from the Fund's Proxy Statement.
Enclosed for filing with the Securities and Exchange Commission pursuant to Rule 14a-8(j) under the Securities Exchange Act of 1934, as amended, are six copies of each of (i) the Proponent's shareholder proposal and related supporting statement comprising the Proposal and (ii) this letter, stating the Fund's intention to omit the Proposal from its Proxy Statement.
The Proposal's supporting statement is contrary to Rule 14a-9, which prohibits false and misleading statements in proxy soliciting materials. (Rule 14a-8(i)(3))
Rule 14a-8(i)(3) provides that a company may exclude a proposal from its proxy statement and form of proxy if the proposal or supporting statement is contrary to any of the Commission's proxy rules, including Rule 14a-9. Rule 14a-9 prohibits proxy materials from containing statements that are false or misleading with respect to any material fact or from omitting to state a material fact necessary in order to make the statements therein not false or misleading. As discussed below, the Fund believes the Proposal is false and misleading, both for the statements it contains and the information it omits.
Misleading use of specific dollar amounts. In the opening paragraph of the supporting statement of the Proposal, Proponent reports that on September 30, 2003 the discount of the Fund's share price to its NAV was 18.7%. That is the last mention of a date of reference within the Proposal. The Proponent next states: "That means that a shareholder wishing to sell shares would only receive $12.43 per share." The Proponent's statement as to what a shareholder "would . . . receive" misleads the reader by failing to tie the assertion to a reference date, and by equating a closing price per share of the Fund with the (unknown) price that a willing buyer would pay for some (unknown) quantity of a seller's shares. The last sentence of the first paragraph of the supporting statement reads: "If the Fund were open-ended, he [i.e., a shareholder wishing to sell shares] would receive the NAV or $15.28 per share." The Proponent fails to tie the stated price to a reference date.
The Proponent dispenses with time references in order to use the dollar amounts of "$12.43" and "$15.28" throughout the supporting statement in an effort to bolster artificially his arguments for open-ending ("Since $15.28 is so much more that [sic] $12.43, open-ending the Fund means a higher stock price for every shareholder"; and "...they need to convince you that you are better off owning a stock worth $12.43 than one worth $15.28"). To serve his rhetoric, the Proponent has transformed the stated dollar amounts from an example of a discount level on a particular date into an immutable measure of the purported advantage of open-ending the Fund. The specific dollar amounts are referred to so often in the Proposal - unfettered by ties to any specific timeframe - that a reader could infer that they constitute predictions as to specific future market values, in violation of Rule 14a-9. (See Note (a) thereto.)
"Dow Jones news story" quotation is misleading and omits material information. In the second paragraph of the supporting statement of the Proposal, the Proponent speculates on why "management" may oppose open-ending the Fund:
"Why? A Dow Jones news story a few years back revealed what we think is the reason: 'It gives shareholders a way to get out at a profit, and so threatens the company's management fees.'"
Because this citation lacks critical information - viz., the author's name, the name of the periodical, the date of publication - the Fund and the readers of the Proposal have no opportunity to confirm the quoted statement or to examine the circumstances under which it was made. The Proposal thus omits to state material information. The Fund strongly believes that the Proponent should be prohibited from being able to hide behind this quotation of unknown provenance. The Proponent should not be allowed to assert that shareholders may "get out at a profit" through open-ending and should not be relieved of the burden of having to substantiate, or qualify, that assertion with facts. To allow the Proponent's use of the quotation would be tantamount to permitting the Proponent to do indirectly what it is prohibited from doing directly.
After quoting the assertion from this 'news story', the Proponent asks: "But what manager is going to admit that?" An admission relates to matters of fact. But the quoted statement is not factual; it is opinion tendered, but not substantively supported, by the Proponent. The Proponent misleads the reader in suggesting that an investment adviser should "admit" an unsubstantiated opinion. An investment adviser or anyone else may agree with an opinion in whole, in part or not at all. For example, an adviser may well agree that if shareholders "get out" of an open-end fund such that share redemptions exceed share purchases, then that fund's net assets will be reduced, as will be the amount of the adviser's fees paid as a percentage of net assets. If the Proponent's quotation is stripped to its essence in this fashion, however, nothing remains of the sizzle and innuendo on which the Proponent so heavily bases its argument.
Cynical and provocative rhetoric impugns character, integrity and reputation of the Board and the investment adviser. The Proponent asserts, in the voice of the 'new story' quotation, that open-ending "threatens the company's management fees". This assertion is misleading on at least two counts. First, the use of the word "threatens" suggests that an investment adviser's resistance to the proposal to open-ending is inevitable, in utter disregard of the fiduciary duties owed by the adviser to the Fund and its shareholders. The Fund strongly believes that this insidious suggestion impugns the character and integrity of the Fund's investment adviser, as well as that the Fund's Board of Directors, which hires the adviser and has ongoing responsibility to review the adviser's performance and decide whether to continue the adviser's employment.
Second, the reference to the "company's management fees" (emphasis added) is but one example in a long list of ways in which the Proponent attempts to blur the distinction between the Fund and its Board of Directors, on the one hand, and the Fund's investment adviser, on the other hand. The Proposal alternately and confusingly refers to "management", "our manager" and "our managers". These references obfuscate the important distinctions between the authority and duties of the Fund's Board of Directors and those of the investment adviser. The actions requested by the Proposal are a subject for consideration only by the Board of Directors of the Fund, who must respond to the Proposal solely in the light of the best interests of the Fund. The actions are not a subject over which the investment adviser has any authority or responsibility, and the preservation of the investment adviser's asset-based management fees is in no way relevant to the deliberations of the Fund's Board. The directors of the Fund take their statutory duties very seriously, and are not controlled or influenced by the investment adviser in the exercise of those duties. The Proposal is deliberately or carelessly drafted to give the false and misleading impression that the Fund is managed by and for the benefit of the investment adviser and thereby obscure the critical differences in the responsibilities and powers of the Board and the investment adviser over the management of the Fund.
The imagery throughout the third paragraph of the Proposal is further evidence of the Proponent's provocative and inflammatory intent, ever implying the deceptive tactics used, or to be used, by the Fund: in the space of a few lines, the reader sees "trick", "tricked", "whitewash", "confuse" and "gullible". We are told that "[i]nstead" of "admit[ting]" the 'news story' quotation, "our manager may have to borrow a trick from Tom Sawyer." Comparing a Tom Sawyer tale to a closed-end fund offering counter-arguments to an open-ending proposal is a feeble analogy at best. However, the Proponent uses it to stick "our manager" with the Hobson's Choice of either endorsing a flawed quotation or tricking the Fund's shareholders. 'Tom Sawyer' affords the Proponent the opportunity to imply that the Fund, its Board and/or its investment adviser would resort to "trick[ing]" and "whitewash[ing]" Fund shareholders believed to be "gullible", if the Fund does not to agree unqualifiedly with the Proposal. The Proponent's unfounded accusations are summed up in perhaps the single most inflammatory and provocative sentence in the Proposal: "Our managers and our Board may try to use a similar strategy to confuse shareholders."
The Fund believes that the statements made in the second and third paragraphs of the Proposal, as discussed above, constitute clear violations of Rule 14a-9, which prohibits material in proxy solicitations which directly or indirectly impugns character, integrity or personal reputation, or directly or indirectly makes charges concerning improper, illegal or immoral conduct or associations, without factual foundation. (See Note (b) to Rule 14a-9.)
The Fund believes that several no-action letters support the views stated herein. See The Swiss Helvetia Fund, Inc. (avail. Mar. 6, 2001) (Commission staff concurred with the fund that the proponent's statement that fund directors should try not to breach their fiduciary duties was in violation of Rule 14a-9 and the fund could exclude the entire proposal under Rule 14a-8(i)(3)); Phoenix Gold International, Inc. (avail. Nov. 21, 2000) (misleading to assert that a proposal will give an opportunity to elect a truly independent director, because proposal implied current directors were not independent); and CCBT Bancorp, Inc. (avail. Apr. 20, 1999) (supporting statement that board of directors violated their fiduciary duty may be deleted under Rule 14a-8(i)(3) because it violates Rule 14a-9).
* * *
For the reasons set forth above, we respectfully request that you concur that the Proposal may be properly omitted from the Fund's Proxy Statement and request confirmation that the Commission staff will not recommend that the Commission take action by reason of the omission of the Proposal from the Proxy Statement. If the staff does not agree that the Proposal may be omitted in its entirety, we request that the Fund be permitted to exclude the supporting statement or require the supporting statement to be revised to correct or delete the false and misleading statements identified above.
If the staff has any questions or would like to discuss this letter, please contact John E. Baumgardner, Jr. of this firm at 212-558-3866 or the undersigned at 202-956-7550.
Paul J. McElroy(attachment)
cc: Opportunity Partners L.P. , c/o Phillip Goldstein