Page 8 of 9 – SEC Filing
This letter shall serve as notice to the MFS Investment Grade Municipal Trust (“CXH” or the “Fund”), as to Karpus Management, Inc.’s (“Karpus”) timely submittal of a shareholder proposal pursuant to Rule 14a-8 of the Securities Exchange Act of 1934 for presentation to CXH shareholders at the Fund’s next annual shareholders’ meeting anticipated to be held in October 2017, or any postponement or adjournment thereof (the “Meeting”).
Karpus’ non-binding 14a-8 shareholder proposal (the “Proposal”) is as follows:
BE IT RESOLVED, the shareholders of the MFS Investment Grade Municipal Trust (“CXH” or the “Fund”) request that the Board of Trustees promptly consider authorizing a self-tender offer for all outstanding common shares of the Fund at or close to net asset value (“NAV”). If more than 50% of the Fund’s outstanding common shares are tendered, the tender offer should be cancelled and the Board should take the steps necessary to liquidate, merge, or convert the Fund to an open-end mutual fund or exchange traded fund.
Fortunately, closed-end fund boards have tools to address such issues. In fact, many funds, such as CXH, have language in their prospectus to address persistent discounts. The Fund’s prospectus states: “the trust may repurchase its shares from time to time in the open market or otherwise as and when it is deemed advisable by the trustees.” The prospectus further provides language where shareholder can ask the Trustees to put forth an open-ending proposal if certain conditions are met.
Despite having this language, to our knowledge we are not aware of any such actions being taken for the Fund’s common shares. As an investor, we cannot understand why the Trustees would not take more aggressive or committed measures to address the Fund’s persistent discount.
The Fund’s own prospectus anticipates that it may need to take action from time to time to reduce a persistent discount. Now is clearly that time. Our proposal, if approved and implemented, would take steps toward the type of action that it doesn’t appear the Trustees are willing to consider on behalf of shareholders. If put in place and a majority of outstanding shares are tendered, this would indicate that shareholders do not support the Fund continuing in its closed-end fund format.
Even though the Board is likely to come up with a wide range of excuses as to why they have not implemented actions like those we are proposing, MFS’ own proxy guidelines state they will: “support proposals to institute share repurchase plans in which all shareholders have the opportunity to participate on an equal basis. Such plans may include a company acquiring its own shares in the open market, or a company making a tender offer to its own shareholders.”
Why do they not hold themselves to the same standards that they hold for their portfolios’ investments?
Please vote FOR Karpus’ Proposal and tell our Fund’s Trustees that you want them to take action to narrow CXH’s discount and offer shareholders liquidity at or near net asset value for their shares.
Please advise us immediately if this notice is deficient in any way or if any additional information is required so that Karpus may promptly provide it in order to cure any deficiency.
U.S. Bank N.A. Letter
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