The past week saw significant activity in the closed-end fund world. Many funds remain busy on the issuing and repurchasing front, while Templeton is looking to expand its investment options in China.
Nuveen Dividend Advantage(NZF) and Nuveen NY AMT-Free Muni (NRK) both announced the filing of notice for the redemption of all their outstanding Variable Rate MuniFund Term Preferred and MuniFund Term Term Preferred shares shares. The funds expect to finance the redemptions with proceeds of newly issued preferred shares. The anticipated redemption date is April 11, 2014.
H&Q Healthcare Investors(HQH) and H&Q Life Sciences Investors(HQL) announced preliminary registrations for a proposed rights offering for shareholders to acquire additional shares of the fund. While important details of the offering, including timing and pricing, have yet to be determined, the fund did indicate it would use the proceeds of the offering to invest in new opportunities without having to sell existing holdings. The fund indicated that a higher asset base may also lead to economies of scale that help lower fixed expenses as a percentage of net assets. Under the terms of the proposed offering, existing shareholders will receive one nontransferable right for each share already held, and at least three rights will be required to acquire one additional share of the fund.
Tender Offers and Repurchases
India Fund (IFN) announced the commencement of a tender offer to acquire up to 15% of the fund’s outstanding shares for cash at a price equal to 98% of the fund’s net asset value. India Fund's shares currently trade near 90.6% of NAV. If more than 15% of shares are tendered, the fund will purchase shares on a pro rata basis from tendering shareholders. This tender offer is made in conjunction with the fund’s recent announcement that it is eliminating its interval fund structure. Asia Tigers Fund(GRR) also announced a special meeting to similarly eliminate its own interval fund structure.
Investment Policy Changes
Templeton Dragon Fund(TDF) approved an amendment to the fund’s nonfundamental policy limiting investments in a single issuer to up to 15% of the fund’s total assets. This new policy was implemented to enable the fund to invest a greater portion of its assets in the Templeton China Opportunities Fund, Ltd, a vehicle for U.S.-based Templeton funds to invest directly in the China A Share market, which is usually only available to domestic Chinese investors and other qualified investors. Under the new policy, the 15% limit will apply to the fund’s proportionate interest in the individual holdings held by the affiliated investment vehicles. While the fund previously invested in Chinese companies through H and B shares, adding A shares to the fund’s investment universe should expand the fund’s options for gaining exposure to China.
AllianzGI Convertible & Income (NCV), AllianzGI Equity & Convertible(NIE), and AllianzGI Convertible & Income II (NCZ) all rescinded nonfundamental investment policies that required the funds to maintain a portfolio with an average maturity ranging from five to 10 years.
Sumit Desai, CFA does not own shares in any of the securities mentioned above.