CEF Weekly Update

Morningstar

Fund Mergers
Nuveen announced the restructuring and combination of several of its equity-option closed-end funds in order to streamline its offerings. The funds affected include Nuveen Equity Premium Income (JPZ), Nuveen Equity Premium & Growth (JPG), Nuveen Equity Premium Opportunity (JSN), Nuveen Equity Premium Advantage (JLA), Dow 30 Premium & Dividend Income (DPD), Dow 30 Enhanced Premium & Income (DPO), and NASDAQ Premium Income & Growth (QQQX).

If approved, these funds would merge via various combinations to form four newly named funds: Nuveen S&P500 Buy-Write Income Fund (proposed ticker BXMX), Nuveen S&P500 Dynamic Overwrite Fund (proposed ticker SPXX), Nuveen Nasdaq 100 Dynamic Overwrite Fund (proposed ticker QQQX), and Nuveen Dow 30 Dynamic Overwrite Fund (proposed ticker DIAX). The new fund lineup would provide investors with a more-straightforward suite of buy-write strategies centered around the S&P 500, Dow Jones Industrial Average, and Nasdaq indexes. For more information regarding the proposed restructuring, click here.

Advisor Change
American Income Fund (MRF) announced that it plans to change its advisor from U.S. Bancorp to Nuveen Fund Advisors. Nuveen is already the subadvisor on the fund, and Jason O'Brien, Chris Neuharth, and John Fruit of Nuveen will remain responsible for day-to-day management. The proposal will be submitted to shareholders of the fund for a vote at a special meeting of shareholders during the third quarter of 2014.

Similarly, American Strategic Income I (ASP), American Strategic Income II (BSP), American Strategic Income III (CSP), and American Select Portfolio (SLA) are combining to form a newly organized CEF, also to be advised by Nuveen Fund Advisors. Nuveen Asset Management will remain as a subadvisor to the fund as well. The combined fund will enjoy a broader mandate, focus on real estate and infrastructure securities across the capital structure, and will be managed by John Wenker, Jay Rosenberg, Jeffrey Schmitz, David Yale, and Jason O'Brien.

Private Placements
Three funds announced the completion of private placements. Kayne Anderson MidstreamEnergy (KMF) issued $30 million in unsecured notes at a rate of 3.46% and another $40 million in Mandatory Redeemable Preferred Shares MRPS at 4.06%. Kayne Anderson MLP (KYN) issued $140 million of unsecured notes at rates ranging between 2.88% and 3.93%, along with $50 million in MRPS at 4.06%. Of the $190 million total raised, Kayne Anderson MLP received $130 million immediately and will receive the remaining $60 million by the end of July.

Another MLP-oriented fund, ClearBridge Energy MLP (CEM), announced the completion of a private placement of $75 million in fixed-rated senior secured notes. All three of these funds plan to use the new proceeds to refinance existing debt and make new portfolio investments.

Rights Issue
Cornerstone Progressive Return (CFP) announced that its rights offering will begin May 6, 2014. The fund indicated last week that it would issue its existing shareholders one right for each share owned on the record date of May 1, 2014. Shareholders can purchase one new share for every three rights held.

We mentioned last week that this corporate action may increase net asset value and benefit investors in the short run, but also warned that this fund is notorious for returning capital to shareholders. In fiscal 2013, a majority of the fund's distributions were composed of return of capital, as were its distributions in 2012, 2011, and 2009. Considering that the fund's NAV has depreciated substantially over this time--about 72% from its $14.96 IPO NAV in September 2007--it is safe to classify this return of capital as destructive.

Click here for data and commentary on individual closed-end funds.

Sumit Desai, CFA does not own shares in any of the securities mentioned above.

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