CSA soliciting proxies in fight against Equity board

A proposed plan to merge two closed-end flow-through investment funds into an operating mining finance house, is being opposed by CSA Management Ltd. Officers of Equity Preservation Corp. and Equity Reserve Corp., two closed-end funds which received the assets of the First Exploration flow-through funds completed in 1986 and 1987, have tabled several major changes for consideration by its shareholders.

These include the combining of the assets of both companies under the banner of Equity Preservation, which trades on the Toronto Stock Exchange. Shareholders are also being asked to approve a proposed change to have the company`s fundamental business philosophy altered.

The changes, according to Peter Bradshaw, president of Equity’s general partner, Capital Preservation II Corp., are needed to convert the company from a closed-end investment company into an operating mining company. If approved, Equity will be able to acquire more than 20% of a mining company, to invest directly in mining projects and to perform exploration and development functions in essence a mining finance house. As a cost- saving measure, Equity also wants to dismiss csa from its duties as the funds investment manager. Lack of experience

Robert McEwen, president of csa, argues that Bradshaw and other officers of the general partner lack the mining expertise needed to run an operating mining company. In a strongly worded letter to a broker, McEwen takes a jab at Bradshaw’s claim, spelled out in an information circular to shareholders, that “the existing management of Equity Preservation and Equity Reserve have worked with juniors over the past two years and are the best people to perform this function (of running the company).”

“One look at the experience of current management,” McEwen counters, “tells the reader that these gentlemen must be very quick learners. For example, the president (Bradshaw) prior to his involvement with First Exploration Funds was the managing director of an aluminum fabrication and sales company.” Also, he notes that the president of Equity does not hold one share in the company.

Bradshaw defends by noting that all exploration investments are first screened by an exploration advisory board comprised of well- known geologists and engineers. He also adds that csa will be retained as an exploration advisor. The real fracas is over Bradshaw’s move to remove csa as the investment manager. “We have not used them for 18 months,” he explained to The Northern Miner.

Csa charges a fee based on the net asset value of the funds for managing and trading issues in the fund. Bradshaw argues that the First Exploration funds focused exclusively on junior companies. As a result, the funds are heavily weighted in large share positions of junior companies big blocks of stock which are largely ill-liquid. “The need for a fund manager is redundent. We could not sell those shares and would not,” Bradshaw says. Concerns over proposals

McEwen is also concerned that Equity has not spelled out just how it plans to obtain the large amounts of capital required to take advanced projects to the production stage.

To Bradshaw’s claim that the dismissal of csa will save more than $500,000 per year in fees, McEwen asks, just what will the new fees be for the management services required to run an operating company?

The largest contention is over Equity’s belief that the large discount to which the shares trade to net asset value, will be partially alleviated by transforming the funds into an operating mining company. McEwen feels otherwise. He believes that by concentrating on just a few small companies “the safeguards inherent in a broadly-based portfolio,” will be reduced. “This may well result in a greater discount in the trading price of Preservation shares.” These concerns will be addressed at a meeting of limited fund partners scheduled for Feb 29 in Vancouver. csa has issued an information circular to shareholders, soliciting proxies which will be used to fight the proposals of Equity management.