UBS
DIVISION CEO INDICTED BY FEDERAL GRAND JURY FOR CONSPIRING WITH OTHER SENIOR UBS
EXECUTIVES
Accused of helping UBS clients hide
as much as $20 billion in assets from IRS. The CEO of UBS’s
Global Wealth Management & Business Banking division was recently indicted
by a federal grand jury for conspiring with other senior UBS executives and
thousand of its US clients to hide as much as $20 billion in assets from the
IRS. UBS is the indirect parent of Investment Grade Municipal Fund’s
(PPM) investment adviser.
COMPLAINTS
FILED AGAINST UBS, SWITZERLAND’S BIGGEST BANK, BY THE ATTORNEY GENERAL OF THE
STATE OF NEW YORK
Results in the payment of $150
million in penalties and the redemption of $19 billion in Auction Rate
Securities. In
late July 2008, the Attorney General of the State of New York filed a complaint
against UBS that revealed that UBS’s apparent solution to the auction rate
liquidity crisis was to redouble its efforts to sell off its inventory of the
soon-to-be frozen securities to its own clients. A mere two weeks
after the complaint was filed, UBS agreed to pay a $150 million penalty and to
redeem $19 billion of its auction rate securities.
UBS
IS ALLEGED TO HAVE CHARGED INFLATED FEES AT AN $11.7 BILLION U.S. REAL-ESTATE
FUND BY OVERVALUING CERTAIN COMMERCIAL PROPERTIES
Managing Director and head of
valuations at a UBS real-estate fund affiliate filed a complaint under
Connecticut’s whistleblower law alleging that its real-estate valuations were
inflated by as much as $100 million. UBS clients were paying
for the management of up to $100 million in illusory assets. This
executive states in court papers that he repeatedly clashed with his bosses over
returning fees to the firm’s clients, which included public pension
funds.
ALLEGEDLY
PARTICIPATING IN TAX FRAUD, DUMPING BAD SECURITIES ON CLIENTS, CHARGING PUMPED
UP FEES ON BAD ASSET VALUATIONS - IT STRAINS CREDULITY THAT THE FUND’S
INVESTMENT ADVISER CAN ESCAPE THE TAINT OF ALLEGED CRIMINALITY AT ITS PARENT
COMPANY. IN THE CURRENT UNCERTAIN ECONOMIC CLIMATE, WITH MAJOR
INSTITUTIONS FALLING ON EVERY SIDE, ASK YOURSELF IF YOU REALLY WANT YOUR MONEY
IN THIS MANAGER’S HANDS.
PPM
STOCK PRICE OFF 39% WHILE NAV DISCOUNT HITS WORST LEVELS EVER
Dear
Fellow Stockholder:
PPM share
values have been hit hard by the current economic mess. So have most
securities. But PPM stockholders have been hit with a double whammy:
your shares have recently been trading at discounts of 20% or
more to their slumping underlying value. At these levels, past income you may
have earned on your investment in PPM is illusory – you will give it back and
more when you sell. Ask yourself if you want the current manager,
with all the allegations swirling around its parent, holding your money in this
environment. This
may be your last chance to directly address and fix this
problem. As a significant stockholder of Investment Grade
Municipal Income Fund Inc. (“PPM” or the “Fund”), Western Investment LLC,
together with the other participants in this solicitation is seeking your
support for the election of our slate of highly qualified nominees to the Board
at the Fund’s upcoming annual meeting. UBS AG (“UBS”), the ultimate
parent of the Fund’s investment adviser, has been indicted and still faces
further charges, the Fund’s performance is down and its discount to NAV is at
its worst levels ever. The current Board nevertheless staunchly
supports the current UBS affiliate manager and the risky status
quo.
We
believe it is imperative that stockholders act now to elect directors who will
promptly act to protect their investment and maximize value for all
stockholders.
We are
concerned that this Board endorses the continued employment of UBS Global Asset
Management (Americas) Inc. (“UBS Global”), the Fund’s investment advisor, even
as UBS remains the subject of a criminal indictment for allegedly helping its
American clients evade paying taxes on up to $20 billion in
assets. Just this past summer, UBS paid $150 million in fines in
settlement of a State of New York complaint regarding abusive sales practices in
connection with sales of auction rate securities. This is on top of
the numerous actions by UBS that have come to light over the course of
investigations into UBS’s activities, including allegations that UBS charged
inflated fees at an $11.7 billion U.S. real-estate fund by overvaluing certain
commercial properties. Do you want to support Switzerland’s largest
bank in its alleged efforts to cheat American taxpayers out of billions of
dollars? More importantly, do you want a manager overseeing your
money that claims that it has no connection at all to the improprieties and
alleged criminal activities UBS is charged with?
The
Board would have you believe that UBS is some remote affiliate of the Fund’s
investment adviser with little or no effect on the Fund. In fact, UBS
controls your Fund’s investment adviser. The uncertainty and risk
this connection generates concerns us since they hold the future of your
investment in their hands. If elected, we can do something about
that.
Your vote
at the upcoming Annual Meeting is extremely important. As you are
aware, the Fund recently traded (on October 10, 2008) at a 28.8% discount to net
asset value, or NAV. At this level, stockholders would see an
immediate gain of nearly 40% if shares traded at NAV, their true
value. We believe such a discount is unacceptable. Where
is the Board that the Fund’s prospectus says will “consider taking action to attempt to
reduce or eliminate any discount” and will annually consider “action either to repurchase shares
of common stock in the open market or to make a tender offer for shares of
common stock at their net asset value.” To our knowledge,
directors have not ordered the repurchase of a single share of common stock
despite the fact that repurchases would have been strongly accretive to NAV and
earnings per share.
We
believe this Board, by asking stockholders to approve a new management contract
with UBS Global while simultaneously failing to address the Fund’s discount to
NAV, is putting UBS’s interests above those of the stockholders, and seems more
interested in taking actions that maximize the fees for the Fund’s adviser than
in taking actions that maximize value and minimize risk for
stockholders. Accordingly, we have proposed an alternative slate of
qualified individuals with the dedication, skills and expertise the Fund
needs. We need your support to elect them and urge you to vote the
enclosed GOLD proxy
today, by phone, internet or mail. Do your part to see independent
and experienced governance brought to the Fund. Stockholders deserve
better leadership than this Board has provided.
The
Fund’s performance has been mediocre for many years and particularly horrible in
2008. As you are aware, the Fund’s stock price is off 39% from last
summer’s highs, its discount to NAV has soared, and the Fund’s preferred
stockholders have seen their investment locked up since last
February. Any benefit common stockholders may have received in
dividends over the years has effectively been wiped out. The fact is,
the depth and impact of the current credit crisis has been magnified by the very
same leverage that has been condoned by the Fund’s board. Common
stockholders until recently paid higher fees for a leveraged asset base that
included the outstanding preferred stock. However, this very leverage
has magnified the Fund’s recent stock price collapse. UBS Global
collects hefty fees to do more than just trade portfolio
securities. They are paid to manage, and managing risk is part of
their job. The chart below depicts the total return on an investment
in the Fund and in an unleveraged, open-end
municipal bond fund. The Board could have directed the adviser to
reduce or eliminate leverage, although this decision would have lowered
management fees received by the fund adviser. We wonder if director
fees of up to $235,000 a year influenced this decision.
Western
Investment has a long history of acting to benefit all shareholders, and most
recently was instrumental in permitting shareholders of Pioneer Municipal and
Equity Income Trust to obtain full NAV for their shares. Our
interests are aligned with yours. Western Investment believes that
there are other well qualified advisers readily available who would provide
superior service for a lower fee. Unlike members of the current
Board, who stand to collect $235,000/year from UBS for their service on other
boards in the UBS fund complex and own no shares of stock of the Fund, we
benefit only if all stockholders benefit. We have no affiliation with
UBS and hold no directorships in any other UBS fund. Our nominees
bring a commitment to good governance and provide an ownership representation in
the boardroom that assures an engaged advocacy for stockholders and effective
oversight of the manager. They have the talent, expertise and
experience needed to make the hard choices required. Our goal is
simple: to deliver to PPM stockholders the full value of their
investment.
You have
a choice. We urge you to vote your shares today by phone or internet,
or by signing, dating and returning the enclosed GOLD proxy in the envelope
provided.
Thank you
for your support.
Regards,
Arthur D.
Lipson
Western
Investment LLC
January
5, 2009
IF
YOU HAVE ALREADY RETURNED A WHITE PROXY TO THE FUND’S MANAGEMENT, EITHER
DIRECTLY OR OVER THE PHONE OR INTERNET,
YOU HAVE
EVERY RIGHT TO CHANGE YOUR VOTE.
WE
URGE YOU TO VOTE YOUR GOLD PROXY TODAY.
IF
YOU HAVE ANY QUESTIONS ABOUT
HOW
TO VOTE YOUR GOLD WESTERN INVESTMENT PROXY, PLEASE CONTACT THE FIRM
ASSISTING US IN THIS SOLICITATION:
INNISFREE
M&A INCORPORATED
TOLL-FREE
AT: (877) 687-1873
BANKS
AND BROKERS PLEASE CALL COLLECT:
212-750-5833
YOU
MAY ALSO CONTACT WESTERN INVESTMENT LLC VIA EMAIL AT
info@fixmyfund.com
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