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Aberdeen Asia-Pacific Income Fu Message Board

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  • axzl axzl Apr 22, 1999 6:56 AM Flag

    FAX is worth...

    at a large discount because it is generating poor
    earnings. Two other closed end funds selling at large
    discounts but with better earnings than KBA are MMT and
    KMM. If you look closely at the company that manages
    KBA you may find that their management fee is based
    on NAV and not market value which is true of KMM
    which is managed by Scudder. The companies managing
    these closed end funds are primarily concerned with
    generating income for themselves through the fees they
    charge to the fund for management. One way shareholders
    can take advantage of large discounts to NAV is to
    force the BOD of the managing company to convert the
    closed end fund to an open end fund which brings the
    market value up to the NAV immediately.

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    • A few year ago I became involved with a fund
      selling at a 18-19% discount and a battle with management
      on what they were doing about the discount(Salomon
      fund). I just happen to own it and was not for it
      opening the fund. BUt I found out some interesting things
      in the process. When a closed end fund buys it's own
      shares back at a discount and retires them the
      difference between the purchase price and the NAV is ADDED
      as a profit back to the fund.

      So certainly it
      makes a hell of a lot of sense for funds like KBA to
      buy some it's own shares back, praticually with boat
      load sof bonds maturing...but what will they do, buy
      more bonds instead 5% of make the shareholders 18% by
      buying in open market shares. Tsk, Tsk.

 
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