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CEF Weekly Update

Sumit Desai, CFA

AllianceBernstein Income Fund (ACG) announced that its board of directors approved a proposal to eliminate the fund's fundamental and nonfundamental investment policies, which will be submitted to shareholders at the annual meeting on March 27. The fund's primary fundamental policy requires it to invest at least 65% of total assets in obligations issued or guaranteed by the U.S. government, including agency securities and repurchase agreements pertaining to U.S. government securities. The fund's nonfundamental policy restricts it from investing more than 35% of assets in non-U.S. securities or 25% in the securities of any one foreign government. The board also approved a change to clarify that it may invest in any repurchase agreement pertaining to any fixed-income security. The nonfundamental policies do not require shareholder approval to change, but the board stated it intends to apply these nonfundamental changes only if shareholders approve the change to its 65% fundamental policy.

A couple of factors likely caused the fund's board to reassess its policies. Earlier this year, a large shareholder submitted a proposal to convert the fund from a closed-end vehicle to an open-end one, largely in order to narrow the persistent 10% discount between the fund's share price and net asset value. It is possible that this discount widened as investors sold shares in the fund over concerns of rising rates and declining Treasury bond prices. What's more, the fund's discount is historically wide, leaving it vulnerable to activist shareholder actions.

The fund's board suggests voting against the proposal to open-end the fund and believes that, by loosening the fund's investment policies, the portfolio may gain more flexibility to adjust its portfolio in response to higher rates, which in turn should help ease investor concerns and narrow the share's discount to NAV. For full details regarding the various shareholder proposals, click here and here.

In other board-level news, Helios High Yield Fund's (HHY) shareholders approved a plan to redomesticate the fund into a Maryland corporation as of Feb. 28, 2014. The fund also renewed its investment advisory agreement with Brookfield Investment Management.

Tender Offers
Asia Tigers Fund(GRR) announced it will hold a special meeting on March 12 for shareholders to vote on eliminating the fund's interval fund structure, which requires the fund to make nondiscretionary and costly semiannual repurchase offers. The fund's board believes that eliminating this policy would provide it with more flexibility in managing and reducing the fund's discount to NAV.

Another fund run by parent company Aberdeen Asset Management, India Fund(IFN), also announced the elimination of its interval fund structure as of Feb. 3. The fund also expects to authorize a cash tender offer to acquire up to 15% of its outstanding shares at a price of 98% of the fund's NAV.

Zweig Fund(ZF) and Zweig Total Return(ZTR) announced extended share repurchase programs to allow each fund to buy back an additional 10% of its shares outstanding. This announcement follows the completion of the funds' previous program, in which about 9% of total shares outstanding for each fund were repurchased between March 2012 and Feb. 10, 2014.

Virtus Total Return Fund
(DCA) will increase its quarterly distribution to $0.10 per share from $0.06. It will adopt a level distribution policy thereafter of $0.10 per share each quarter. It also plans to implement an options overlay strategy, including buying and selling calls and puts. The fund believes this strategy will enhance shareholder value over the long term.

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