Boulder Growth & Income Reckoning with Questionable Shareholders

The Boulder Growth & Income Fund (BIF) recently received two unsolicited shareholder proposals to elect alternative directors to the Fund's Board of Directors, terminate its investment co-advisory contracts and continue an "aggressive" level-rate distribution policy. Ralph W. Bradshaw and Ronald G. Olin, the aforementioned shareholders, suspiciously have a history of simultaneously submitting such requests, an issue Boulder plans to bring to the attention of the SEC.

These similar proposals submitted by Ralph W. Bradshaw and Ronald G. Olin to other closed-end funds were conducted in concert with the affiliated Doliver Capital Adviser institutional manager, whose hold currently stands at approximately 17% of the Fund's shares. This association Boulder also finds questionable considering the affiliated group has neglected to meet federal securities laws in filing their status as such.

Moreover, the group proposed the termination of the investment co-advisory contract between the Fund and Boulder Investment Advisers and Stewart Investment Advisers (the "Boulder Advisers"). With this, it is anticipated the group would have proposed Cornerstone Advisors as the replacement adviser based on past behavior. To this, Fund president Steve Miller commented:

It's hard to imagine that someone with Cornerstone's track record would have the audacity to suggest that the Boulder Advisers with their track record be replaced. Maybe they should take care of the cooking in their own kitchen before they recommend a new chef in ours.

Reiterating his position, Miller disclosed:

…. the trailing one-year period ending 10/31/08 CRF's total return on NAV was -40.35% and CLM's was -38.5%. This compares to BIF's return on NAV for the same period of -17.3%. CRF's market price has suffered even more, falling from a lofty 105% premium in July 2008 to about a 10% premium as of last Friday. And CLM was at a 64% premium in May 2008 and as of Friday was at a discount of -1.2%.

As far as the group’s proposal for an "aggressive level-rate distribution policy," the Board perceived this as overlooking the many factors not taken into consideration. These factors include implementing and maintaining a level-rate distribution policy, Including the Fund's previously stated goal of tying its distribution rate to its long-term performance, compliance with certain federal securities laws on maintaining the level-rate distribution policy, the impact of an aggressive policy on the Fund's leverage coverage ratio, the policy's current and long-term efficacy in narrowing the Fund's discount from net asset value, the tax consequences of level-rate distributions and the long-term investment interests of all of the Fund's shareholders.

Miller continued:

The Fund intends to pursue very aggressively its claims that this group and their investors are acting in violation of federal securities laws, including referring this matter to the SEC. We are concerned that, given their past tactics and their poor stewardship of the Cornerstone Funds, their proposals would destroy value and not serve the long-term interests of our shareholders. Any proposal such as theirs to destroy the long-term value of one of the better-performing closed-end equity funds must be viewed with great skepticism.

We believe that the shareholder group led by Messrs. Olin and Bradshaw, including Doliver, is known in the closed-end fund industry as a group who acts in concert to gain control over closed-end funds with little regard for federal securities laws. This group tries to take action with respect to its own interests to profit at the expense of the interests of long-term shareholders. This group may posture itself to be an advocate for shareholder rights, but we believe that it acts only for its investors' personal profit, irrespective of whether their proposed actions are detrimental to long-term shareholders who have invested in the Fund. They have targeted the wrong Fund.

Additionally, Boulder plans to refer the group’s excess holdings to the SEC for review and other independent remedies against the group for possible violations of federal securities laws. The Fund is a closed-end management investment company co-managed by Stewart Investment Advisers and Boulder Investment Advisers, LLC.

Disclosure: no positions

Comments

[Gwailo:]

Given the history of Stewart Horejsi's takeover of BIF (formerly the US Life Income Fund) by a proxy fight back in January, 2002, all one can say is:
"Pot....Kettle....Blac...

2008 Nov 19 09:19 PM

[Clifford:]

BIF "Yields" 32% which is of course not yield, it is a return of capital. When will these closed end funds get real on yield. with the discount, a real yield would be closer to 5-10% which would be enough to attract real investors. With the current yield, why not put my money in a money market and ask my brokerage to "Pay" me 32% out of interest and principal annually. It is insane, but because many do not understand the difference between yield and return of capital we are doomed to watch a sad and steady decline in NAVs and an ever increasing "dividend" in these funds. I would not invest in BIF with the current payout strategy even though the discount is attractive.

2008 Dec 20 12:24 AM

[Dan Plettner:]

I control well over 200,000 shares of BIF and I certainly own this investment because it is a tremendous value. I am an MBA, who was also a closed end fund product specialist at Morgan Stanley prior to leaving the investment industry in 2000. BIF is the most attractive closed end fund to buy right now, but that is no thanks to Boulder.

I was one of 2 shareholders not affiliated with Boulder who attended their shareholder meeting in Phoenix on Friday and I would like to share my understandings as to what is happening at BIF.

Do NOT take Boulder's advice on Proposal 1. Vote AGAINST Proposal 1. The proposal opposes us (shareholders) getting fair value for our shares. Currently, shareholders have the right to propose a new board who is willing to open-end the fund to improve shareholder value -- and we could have that done within 1 year, making our shares worth much more.

Boulder is in the business of making money by managing money. I was at the meeting, I spoke to the manager, and to the board. Their actions clearly indicate that they care most about keeping the money there so that they can earn high management fees. Yes, having talked to them I believe this is more important to them than shareholder value. My experience suggests that is exactly why their shares trade for about 78% of the Net Asset Value of the Fund, while the average closed end fund trades for more than 90% of Net Asset Value.

Now, here is the good news...

Proposal 1 has failed thus far, and Boulder is likely to have to take an action that improves shareholder value in order to change that. Doliver Capital owns about 18% of the fund and they are likely to negotiate with Boulder such that Boulder takes such an action in exchange for their votes. As shareholders, tender offers, etc are very very good for us even if you do not wish to sell your shares.

Apr 27 04:47 PM