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Winmill Feels The Heat From Activist Shareholder

 January 04, 2010 05:16 PM


Winmill & Co. Incorporated (OTC:WNMLA), which provides investment management and distribution services to sponsored mutual funds and from its own securities trading, is facing some opposition from its own shareholders after failing to maintain regular quarterly reports.

Investment Partners Asset Management, which owns 86,845 Class A shares sent a letter to the company's board of directors criticizing the company for not contacting shareholders over the past two years, since their third quarter 2007 results some 25 months ago. However, the firm believes that WNMLA may be trading at only a fraction of its tangible book value.

Here are some highlights from the letter:

"Unfortunately, as 2009 draws to a close, outside, minority shareholders of Winmill have not heard from you this year… or last year for that matter.  In fact, you have not updated your outside Class A shareholders with consolidated information since November of 2007 (25 months ago) when you released Winmill's Third-Quarter 2007 financial results.  Given the financial crisis of the past 2 years and the increased scrutiny and skepticism of financial institutions during that same period, it is uncertain as to why you have not been more communicative.  One expects that a responsible board in this environment would proactively assure investors that measures are being taken to improve operations, grow revenues and enhance shareholder value.  To date, though, there has not yet been any message from your management directly to its outside minority shareholders during this tumultuous period.  With the stock, according to the last-sale price on the pink sheets from December 16, 2009 at $2.25 (down from more than $6.00 roughly two years ago), the current market capitalization of the Company is only about $3.71 million – representing only a fraction of my estimate of Winmill's tangible book value.

"Your company still has a publicly-traded stock, and you have a fiduciary obligation to enhance shareholder value. Due diligence for shareholders is a continual process, and to that end, I request that you immediately release Winmill's consolidated annual reports for 2007 and 2008, as well as resume quarterly updates.  Furthermore, you should hold an annual meeting where shareholders can have a productive dialogue to voice their concerns, better understand your company's approach, and hear about your strategy for creation of shareholder value.  Also, your affiliated companies and funds should consider abandoning the protection provisions of Maryland Law (specifically the Maryland Control Share Acquisition Act) and any other poison pill provisions, as I suspect that these limitations on shareholders' rights may be contributing to the discounts to book value of these companies' share prices.  For similar reasons, I also think you should consider re-listing the shares of your holding company, closed-end funds, and affiliates on national exchanges - or at least move them up to a higher tier on the bulletin board, such as the OTCQX. Finally, in order to represent the interests of the outside minority shareholders, you should consider appointing an independent outside individual to Winmill's board of directors.  To ensure independence, that new board member should be someone who is unaffiliated with your firm, its affiliates, its employees, or employees' family members.

I am interested in seeing Winmill's share price more accurately reflect the value of the company's enterprise, and would expect that you also share this goal. Therefore, as 2009 closes, I would like to see Winmill's board take this opportunity to improve communication and enact strategies to create value for the company's outside minority shareholders."

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