DEFA14A: ASA Gold and Precious Metals Limited Announces Increased Distribution and Fee Waiver

ASA Gold and Precious Metals Limited declared a doubled distribution and Merk Investments LLC will waive a portion of its advisory fee due to proxy contest expenses.

Summary

• ASA Gold and Precious Metals Limited has announced a distribution of $0.02 per common share, payable on May 16, 2024, to shareholders of record as of May 6, 2024.
• This distribution doubles the semi-annual rate that has been paid since November 2018.
• The company has consistently paid distributions since 1959.
• Merk Investments LLC, the investment adviser, will voluntarily waive a portion of its advisory fee, equal to an annual rate of 0.05% of the company's managed net assets exceeding $100 million and less than $300 million, from April 1, 2024, through March 31, 2025.
• This waiver is in response to extraordinary expenses related to a proxy contest initiated by Saba Capital Management, L.P.
• This is in addition to Merk's ongoing waiver arrangement of 0.05% of managed net assets exceeding $300 million and an additional 0.10% of managed net assets exceeding $500 million, which has been in place since December 1, 2020.
• The company is a non-diversified, closed-end fund focused on long-term capital appreciation through investments in precious metals and minerals companies.
• At least 80% of its total assets must be invested in precious metals related investments.
• The company uses bottom-up fundamental analysis, including company meetings and site visits, for investment decisions.
• The company is a passive foreign investment company for United States federal income tax purposes.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive due to the increased distribution and fee waiver, but tempered by the ongoing proxy contest and associated expenses.

Positives

• The distribution to shareholders has doubled, increasing shareholder value.
• Merk Investments LLC is voluntarily waiving a portion of its advisory fee, reducing expenses for the company.
• The company has a long history of uninterrupted distributions since 1959.
• The company employs a fundamental investment strategy with detailed research.

Negatives

• The company is incurring extraordinary expenses due to a proxy contest initiated by Saba Capital Management, L.P.
• The company is classified as a passive foreign investment company, which may have tax implications for U.S. shareholders.

Risks

• The proxy contest initiated by Saba Capital Management, L.P. could lead to further expenses and uncertainty.
• The company's investment performance is subject to the fluctuations of the precious metals and minerals markets.
• As a non-diversified fund, the company's portfolio may be more volatile than a diversified fund.

Future Outlook

The company will continue to focus on long-term capital appreciation through investments in precious metals and minerals companies. The company will continue to pay distributions.

Management Comments

• Merk Investments LLC is making the voluntary waiver in recognition of the extraordinary expenses being borne by the Company as a result of a proxy contest initiated by Saba Capital Management, L.P.

Industry Context

The announcement reflects the ongoing dynamics within the investment management industry, where shareholder activism and cost management are key considerations. Closed-end funds are often targets for activist investors seeking to unlock value or influence corporate governance.

Comparison to Industry Standards

• The advisory fee waiver is a proactive measure to mitigate the financial impact of the proxy contest, which is a common concern for closed-end funds facing activist campaigns.
• Other companies in the precious metals sector, such as Franco-Nevada and Wheaton Precious Metals, do not typically face proxy contests of this nature, as they are not structured as closed-end funds.
• Compared to other closed-end funds, ASA's distribution yield may be more attractive due to the increased distribution, but this should be weighed against the expenses related to the proxy contest.

Stakeholder Impact

• Shareholders will benefit from the increased distribution.
• The company will benefit from the advisory fee waiver, reducing expenses.
• The proxy contest may create uncertainty for stakeholders.

Next Steps

• Shareholders will receive the distribution on May 16, 2024.
• The company will continue to manage the proxy contest initiated by Saba Capital Management, L.P.

Key Dates

Keywords

ASA Gold and Precious Metals Limited, distribution, fee waiver, Merk Investments LLC, precious metals, proxy contest, Saba Capital, investment adviser, closed-end fund