Why is this happening now?

An activist hedge fund named Ocean Capital recently acquired a position in the Fund and at the last minute launched a proxy fight.  They never contacted the Fund’s Board before launching their campaign.

 

Who is Ocean Capital?

Ocean Capital is an investment vehicle controlled by executives of First Southern, LLC, a Georgia- and Puerto Rico-based financial services company that specializes in strategies such as “distressed bond investing.” First Southern and its affiliates have been involved in the liquidation of multiple Puerto Rico bond funds[1], including those of Santander.  Notably, key executives associated with both Ocean Capital and First Southern appear to have moved to Puerto Rico in order avoid capital gains taxes pursuant to Puerto Rico’s Act 22, including Ben Eiler, as reported by the Associated Press[2] and multiple outlets.

 

Is Ocean Capital’s election contest lawful?

No.  The Board has determined, upon the advice of outside counsel, that Ocean Capital failed to comply with the advance notice provisions set forth in the Fund's organizational documents for director nominations and shareholder proposals.  As a result, the only director candidates eligible for election at the Fund's meeting are the Board’s director nominees.

 

How could Ocean Capital and their nominees harm me and the Fund's other shareholders?

Ocean Capital’s proxy contest is unlawful because its director nominations failed to comply with the Fund's organizational documents.  Moreover, Ocean Capital has provided no concrete plan but, based on their prior statements and actions and First Southern’s business, they and their nominees may intend to liquidate the Fund to generate short-term gains and/or take over management of the Fund to generate higher fees.  While good for Ocean Capital, both potential scenarios could be highly detrimental to the Fund's other shareholders.

 

How is the Fund performing under the current Board?

Since inception, Fund IV has distributed $8.92 per share in cumulative dividends to its shareholders, in line with its investment objectives, despite the crash of the Puerto Rico municipal market that sent bond prices on the island tumbling.  Fund IV delivers very compelling, tax-advantaged yields of 5.3%, that shareholders are unlikely to find elsewhere at a similar risk profile.[3]

Fund IV performed strongly from inception until the Puerto Rico municipal bond market crash in 2013 and has performed positively since the end of 2015, as it has continued to provide its shareholders with consistent monthly income.  While the crash of Puerto Rico’s municipal bond market affected all investors in these markets, under the Board's leadership, the Fund continued to deliver monthly tax-advantaged income; something direct investors in Puerto Rico bonds have not seen in years.

 

What is the Fund's Board doing to protect my investment and generate monthly income?

The Board believes the outlook for the Fund is positive.  As the Puerto Rico bond market emerges from the PROMESA process, both the income and liquidity of the Fund are expected to improve.  The Board is keenly aware of the need for liquidity in the Fund's shares and will continue to make achieving this a strategic priority.

At the current Board's direction, the Fund continues to work tirelessly to maximize shareholder returns.  This includes registering the Fund with the U.S. Securities and Exchange Commission under the Investment Company Act of 1940, which may contribute to increased liquidity and reduced market discount to NAV, paving the way for further positive returns.

 

Why should I support the Board's nominees by voting on the WHITE proxy card?

The Board's director nominees are highly qualified and respected financial professionals with deep roots in Puerto Rico and a long-standing commitment to the Fund and its shareholders.  All nominees have strong corporate management credentials, experience overseeing Puerto Rico bond funds and a deep understanding of Puerto Rico’s financial markets.

Due to Ocean Capital’s failure to comply with the Fund's organizational documents, any votes cast for Ocean Capital’s director nominees will be disregarded.

 

How do I vote my shares on the WHITE proxy card?

You have three options to vote your shares in the Fund, but given that the meeting is a short time away, you are encouraged to use the Internet so that your voice is heard at the meeting.

 

By Internet:

1. Find the 16-digit control number on your WHITE proxy card sent to you in the mail. If you cannot find your WHITE proxy card, please contact your financial advisor or custodian for assistance.
2. Go to www.proxyvote.com, enter your control number and follow the simple on-screen instructions.
3. If you have multiple investments, be sure to scroll down after you submit your initial voting instructions, for other ballots that may be outstanding for this and other meetings which would be listed below.

 

By Mail:

1. Sign and date the WHITE proxy card you receive.
2. Mail back with the enclosed business reply envelope. As the meeting is a short time away, it is more likely your vote will be received if you vote via the internet or at the meeting.
3. Please note that there may be multiple mailings, so once you have voted the WHITE proxy card, you may discard any future mailings you may receive.

At the Virtual Meeting:

1. Register at https://viewproxy.com/UBSPuertoRico/broadridgevsm/ by 5:00 p.m. Atlantic Standard Time (5:00 p.m. E.D.T.) on August 1, 2023.

 

Who can I call if I have questions?

Please call Okapi Partners toll-free number for more information at 877-566-1922.  Agents are available to answer questions Monday through Friday from 9:00 a.m. to 7:00 p.m. Eastern Time. You will have the option for a Spanish-speaking representative by pressing 1, or an English representative by pressing 2.