On July 16, 2010, Western Investment LLC issued an open letter
to shareholders of DWS Enhanced Commodity Fund, Inc. (NYSE: GCS).
GCS is controlled by Deutsche Bank AG (NYSE: DB) through its
subsidiary Deutsche Investment Management Americas Inc. (together
with its affiliates, “Deutsche”). The full text of the letter
follows.
Western Investment LLC
7050 South Union Park
Center
Midvale, Utah 84047
July 15, 2010
Dear Fellow Shareholder:
By now you probably received the
latest “fight” letter, dated July 6, 2010, from the fund’s
chairman, telling you he adjourned the June 28, 2010 annual meeting
of shareholders to July 22, 2010, and blaming Western. Don’t be
fooled by this dishonest letter.
This long-overdue GCS annual
shareholders meeting (the last one was held in 2008) was convened
as scheduled on June 28, 2010. A quorum was present, and all
business on the agenda could have been conducted, including voting
on the resolutions to terminate Deutsche Asset Manager as the
fund’s investment adviser and to approve the merger of GCS into an
open-end Deutsche fund. Vote tabulations available to both sides in
the proxy contest, as reported by Broadridge Financial Solutions,
Inc. showed that a majority of the fund’s shares outstanding had
voted “FOR” approval of the merger and that approximately 2/3 of
the shares present at the meeting had voted “FOR” termination of
Deutsche.
But the board adjourned the
meeting to July 22, 2010 without allowing any of those votes to be
counted officially. Why?
Here’s why. In order to
approve the merger, the board would have had to count 347,000
shares voted by Western which were bought after the board of
directors’ adoption in 2009 of a “control share” resolution
freezing our voting rights. Without Western’s votes, the merger was
short of the number of votes needed for approval.
The board could repeal this
anti-democratic “control share” vote sterilization resolution at
any time. They could have done this on June 28 if they had bothered
to show up for your meeting (they didn’t), or they could even have
done it by telephone! So why didn’t they do so and thereby permit
the merger to be approved on June 28? The reason is Deutsche
doesn’t want them to, and this board of directors does only what
Deutsche wants it to do. Every one of our so-called “independent”
board members is paid more than $200,000 per year to sit on more
than 100 other Deutsche-advised fund boards. So they rejected GCS’
shareholders’ vote to approve the merger (a merger which
they recommended to
shareholders) in favor of their personal interests and the
interests of their benefactors at Deutsche!
Our fund gets no benefit from the
board’s refusal to count Western’s votes. Other shareholders get no
benefit from the board’s refusal to count Western’s votes. But
Deutsche is the adviser to other
funds whose identical boards of directors have adopted the
same illegal “control share” vote sterilization rule, and Deutsche
wants them to present a united front in defense of this “control
share” rule and other similarly repugnant anti-democratic rules
they have adopted at many of the other 100-plus funds from which
Deutsche rakes in advisory fees and the board receives directors’
fees.
Unless the board gives in, repeals
the vote sterilization resolution, and agrees to count all of
Western’s votes, the merger probably will not occur, unless and
until Western wins its pending lawsuit to force the fund to count
our votes. Broadridge’s report as of the close of business
yesterday continues to indicate that the merger can be approved
only if all of Western’s votes are counted.
Western makes this public
appeal to the board of directors: Stop acting so stubbornly
disloyal to the shareholders. Repeal your “control share”
vote sterilization resolution, count all shareholders’ votes and
allow the merger – a merger which you recommended – to proceed.
Something else shareholders should
know.
The chairman’s letter reported the
fact that on June 25, 2010, Western announced we were withdrawing
our recommendation to vote against the merger, and would vote in
favor of it. What the letter didn’t tell you was why. As the June
25, 2010 press release (copy attached) announced, Western chose not
to stand in the way of the merger, considering it to be the “least
worst option” for fund shareholders, as it would effectively
open-end our fund and allow all shareholders to liquidate their
assets, without the high discount to net asset value that the stock
market has priced into our stock for as long as Deutsche has been
the adviser. Western’s objection to the merger had been Deutsche’s
and the board’s imposition of a 1% transfer fee on shareholders who
redeemed their shares within one year of the merger. Western fought
against this arbitrary penalty (which was designed to enable
Deutsche to continue to rake in unearned fees from you even after
the merger), and Western is pleased to report that our efforts now
appear to have resulted in Deutsche’s reduction of the penalty to
0.5% and a reduction of the penalty period to 6 months. The board
and Deutsche can malign us all they want, but the facts are
irrefutable - Western’s efforts have benefited all fund
shareholders.
Don’t be fooled again by the
fund’s board or Deutsche! Western is the largest investor in
GCS. Western has invested many millions of dollars in GCS
and we – not the board and certainly not Deutsche – share
your interests. We urge
shareholders to vote the GOLD proxy card FOR the election of
Western’s eight INDEPENDENT nominees to the Fund’s Board of
Directors, FOR the Fund’s proposed merger and FOR our proposal to
terminate the Fund’s investment management agreement with
Deutsche.
Please feel free to contact
me.
Art Lipson
Western Investment LLC
Contact: Info@fixmyfund.com
PRESS RELEASE DATED JUNE 25, 2010 ISSUED BY
WESTERN INVESTMENT LLC
Western Investment Withdraws its
Recommendation that Shareholders of DWS Enhanced Commodity Fund,
Inc. Vote Against the Proposed Merger of the Fund into an Open End
Deutsche-run Fund
New York, NY – June 25, 2010 – Western Investment LLC has
WITHDRAWN its recommendation that shareholders of DWS Enhanced
Commodity Fund, Inc. (NYSE: GCS) vote AGAINST the proposed merger
of the fund into an open ended Deutsche-run fund. GCS is controlled
by Deutsche Bank AG (NYSE: DB) through its subsidiary Deutsche
Investment Management Americas Inc. (together with its affiliates,
"Deutsche").
Western is gratified that its relentless efforts to reform the
abysmal Deutsche model of corporate governance forced upon
shareholders of the Fund for the past 3 years will lead to the
open-ending of the Fund providing liquidity for its long-suffering
shareholders at net asset value. In 2008, Western nominated
directors who received 64% of the votes cast. However, DWS hid
behind a repugnantly undemocratic rule to cling to control, and its
unpopular and unelected directors have continued in office despite
its lack of any shareholder mandate. Recognizing its shareholders
were fed up, Deutsche canceled elections in 2009 to avoid a
complete loss of control. Only after Western sued management in
2010, did Deutsche take the long-overdue step of open-ending the
Fund, taking it out of business and enabling shareholders to obtain
liquidity at net asset value - almost. Its parting insults to
shareholders were (1) a one-year redemption fee, charging
shareholders 1% to get out, and hoping vainly that that might cause
shareholders to delay redemptions and thereby enable Deutsche to
claim an extra year's worth of management fees; and (2)
accomplishing open-ending via an unnecessarily expensive merger,
rather than simply closing the discount via self-tenders or
open-ending of the Fund itself.
Western opposed the merger on those grounds alone, fighting to
the bitter end for the Fund's shareholders against a management
which has no regard for the shareholders. We ran a proxy contest
which we would have "won," but unlike the Fund's managers, we
consider winning to be less important than the ultimate financial
outcome for shareholders. Tallies reported today by Broadridge show
Western is well ahead of management in the vote for all directors,
Western is well ahead of management on the vote to terminate
Deutsche's management contract, and Western is well ahead of
management in votes against the merger. If Western were like
Deutsche, we would proceed with our proxy campaign in order to
claim a "win." But that is not Western's method of operation. The
best outcome for shareholders is what Western stands for.
Accordingly, Western does not wish to stand in the way of the
open-ending of the fund via the merger, which will accomplish what
Western has fought for since the beginning of its battle with
Deutsche in 2008, liquidity for shareholders at nearly net asset
value. This could have been accomplished much sooner and at much
less expense, but Deutsche stubbornly clung to power for an extra
two years in order to wring out more fees for itself at the expense
of shareholders. Nevertheless, sometimes the best option is the
least worst option, and Deutsche has given shareholders only this
one option. As unscrupulous as that is, it is time to end this
battle and accept Deutsche’s least worst option, which is the
merger with its open end fund.
So Western recommends that shareholders vote its GOLD proxy card
FOR the merger, while continuing to vote the GOLD proxy card FOR
Western's director nominees and FOR Western's proposal to terminate
the management contract of Deutsche Investment Management.
Western will continue its campaign for shareholders and against
this same unscrupulous, unelected and self-serving board of
directors and investment manager at their other under-performing,
deeply discounted closed end funds, including DWS RREEF World Real
Estate & Tactical Strategies Fund, Inc. (NYSE: DRP), DWS Global
High Income Fund, Inc. (NYSE: LBF) and DWS Dreman Value Income Edge
Fund (NYSE: DHG), whose corporate governance is as bad as that at
GCS.
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