Shareholders in DEM to dissolve mutual fund It was started nearly three years ago by Chapman

share price has been low


July 02, 1998|By Bill Atkinson | Bill Atkinson,SUN STAFF

DEM Inc., a closed-end mutual fund started nearly three years ago by Baltimore-based Chapman Co., said yesterday that its shareholders will vote to liquidate its assets and dissolve the fund.

Stockholders are scheduled to vote at a special meeting in September, and they will receive the cash proceeds from the sale of DEM's portfolio once it is liquidated, said Nathan A. Chapman Jr., president of the brokerage and investment banking firm.

DEM is being liquidated because its stock is trading at a steep discount, about 20 percent, to the value of the assets in its portfolio, Chapman said.

DEM's stock is traded on Nasdaq, and yesterday it closed at $17 a share, up $1 on volume of 1,800 shares.

"The market value of the shares that have traded publicly haven't traded beyond $17," Chapman said. "Our goal is to enhance shareholder value."

Chapman said investors have put $22 million into the fund, which went public at $15 a share. But it has been tough generating broader interest despite the strength of the stock market.

"The issue is marketing," he said.

DEM is a closed-end mutual fund, which sells its shares to investors, then uses the money to buy stocks in minority-owned companies like BET Holdings Inc., watch maker Movado Group Inc., Granite Broadcasting Corp. and Jenny Craig Inc.

Investors benefit when DEM's stock appreciates and when it pays dividends.

Chapman said many of the investors in DEM plan to roll their money into a fund started about a month ago, called DEM Equity Fund.

Its shares are not traded on an exchange, but are bought and sold directly from the company.

He said $10 million has been invested in DEM Equity. Chapman said papers have also been filed with federal regulators to offer a fixed income fund and an index fund.

In February, Chapman Holdings went public, selling 1 million shares at $8 each. Chapman, a former Alex. Brown & Sons Inc. broker, owns about 60 percent of the company.

Chapman Holdings, the parent firm of Chapman Co., closed yesterday at $10.25 a share, unchanged.

Pub Date: 7/02/98

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