The discount as of the close prior to the announcement was almost -27%, and I wouldn't be surprised if this narrowed some. I considered buying shares as a short term investment, but am holding off, at least for now, because I'm not sure if the distribution yield will be high enough to significantly lower the discount. However, for current shareholders of EQS who liked the fund before, the new distribution policy is definitely good news.

EQS 1-yr chart:

I consulted my magic 8 ball and it confirmed that the shareholder proposal will be approved and that SQF's days as a closed-end fund are numbered.

SQF 1-yr chart:

I can understand looking at a fund's market price in relation to its NAV to see if the discount is increasing or decreasing, but not looking at the market price in isolation. And as far as ACG, I'm not sure how big of a price movement a "surge" is equivalent to, but since this is a somewhat conservative bond fund, I wouldn't expect its market price or NAV to move too much over any short time period.

ACG 1-yr chart:

The interesting thing about this situation is that while Karpus appears to be the largest shareholder in AMF at nearly 14%, Phillip Goldstein's Bulldog Investors owned over 9.5% of the fund as of this filing in June. Both of these shareholders have shown in the past that they do not accept persistently large discounts, so if the board does not take any action and the discount does not decrease on its own, I wouldn't be surprised to see a proxy fight someday. Since these shareholders combined own such a high percentage of the fund, they could be formidable opponents to the board if a proxy fight does break out.

AMF-ACG 1-yr comparison chart:

I'm surprised that the board decided that the performance adjustment is not beneficial to shareholders. As I've written before, I like it when closed-end funds have performance fees, because it gives the adviser an extra incentive to provide shareholders with above average returns.

The way closed-end funds are structured, managers with traditional fee arrangements receive roughly the same dollar amount of fees every year regardless of whether the fund was an above average performer or below average. Because of this, some fund managers may view closed-end funds as a way to get a reliable stream of management fees without having to add value for the funds' investors. I'm not saying that this is how Kayne Anderson views their CEFs, but I would rather see a trend of funds adopting performance adjusted fees rather than dropping them.

I did recently do a search for other CEFs that have filed registration statements, and I came across two funds that looked really interesting to me.

For MAF shareholders, I don't see any downside to the fund being merged into another Allianz closed-end fund. As the letter mentioned, all of their other closed-end funds are trading at premiums, and they have had better performance. A merger could also be good for Allianz since the assets would be kept in a closed-end fund, instead of a redeemable open end fund.

Since Phillip Goldstein's proposal would keep MAF's assets in an Allianz CEF, it seems to me that the board will give it strong consideration. Because of this, I think MAF is an intriguing investment opportunity. If the board does go along with the merger suggestion, investors could benefit from the possibility that the -11.5% discount will be eliminated.

Many of the Putnam and MFS closed-end funds are trading at double-digit discounts, so they could be tempting targets for hedge funds. If the hedge funds can prevent new management agreements from being approved as closed-end funds, the fund families may compromise and agree to open-end some of them.

I don't fault myself too much for selling early, because at this point the shares seem to be trading at an irrational premium. It is difficult to know when to sell with this fund because obviously the premium can keep going higher, but there is no fundamental reason for BIF to trade at a premium at all.

These are valid points as long as it is a good fund to begin with. However, I really don't see a reason why SQF should remain in existence. It has a low yield relative to other closed-end muni bond funds, and its expense ratio certainly isn't low for its category. There also are a lot of other closed-end muni bond funds trading at a discount, so shareholders would have plenty of other options if SQF were open-ended or liquidated.

But the future of SQF is not for me to decide; it's up to the fund's shareholders. This brings me to a somewhat disturbing section of the proxy statement. Dissident shareholders attempted to nominate their own slate of director candidates, and also submit additional proposals for the meeting, but were denied because the submissions apparently did not comply with the requirements of SQF's bylaws.

Isn't it time for the typical TY buy-and-hold shareholder to get out?

I liked its strategy and the discount didn't bother me. But the ongoing controversy, charge vs. counter-charge atmosphere is too destabilizing. It has to distract and drain the energy of management and add to volatility.

It looks like each of the distributions over the last several years have consisted entirely of capital gains, and I wouldn't expect the fund to start distributing paid-in capital to shareholders in the near term. But it is not inconceivable that the fund may at some point in the future have to distribute some of the capital that will be raised in this rights offering back to shareholders. I'm not saying that this will happen, just that it is possible.

As long as a fund is distributing either dividend income or capital gains to shareholders, I don't think there is anything wrong with it raising new money at the same time that it has a high distribution policy. But if there is a return of capital included in the distributions, investors will wonder why they gave the fund additional money just to have it returned to them. It could happen in a situation where the fund manager wants to have more assets on which to collect management fees, but also wants to have a high distribution yield to keep the discount low and ward off activist investors. While this does not appear to be an issue with HQL, I could see it being a problem for other funds someday.

My first impression is that this proposal has little chance of being approved. The board will probably counter that if the management agreement with Seligman is terminated, there will be chaos until a new adviser can be hired, which could adversely affect the fund's investment performance.

Also, Karpus only owns 3.28% of the outstanding shares, and it does not appear that there currently are any other large shareholders in the fund that will be able to offer enough support to get this proposal approved. But if SEL's discount stays around -14%, it could eventually attract some other hedge funds looking to liquidate it.

Mr. Lipson's willingness to attack me personally in his letters says a great deal more about his character than mine. But some of our stockholders may be concerned with what he wrote, so please permit me to set the record straight. The mutual fund investigation that Mr. Lipson referred to does not in any way relate to Tri-Continental, and was fully disclosed to you by letter nearly three years ago and in the 2003 Annual Report to Stockholders. Contrary to what Mr. Lipson's letters may insinuate, there are no regulatory lawsuits pending against Tri-Continental, Seligman, or me personally.

I'm not sure that Western Investment claimed that there were lawsuits pending against Seligman. Maybe they did, and I just missed it. However, it is definitely fair to bring up that Seligman is under investigation, and Eliot Spitzer did go to court to try to force Seligman to provide more information.

Also this week, Western Investment filed a definitive proxy statement, which shareholders should be receiving soon. The arguments in the letter center around TY's performance, its discount, and the ongoing investigation of Seligman's management. As I wrote before, to me, the biggest difference in this election versus the last election for Western is that they have now said "We have no intention of seeking to open-end or liquidate the fund." In the last election, while Western said that open-ending or liquidating was a last resort, I'm not sure that other shareholders believed them. By making the above statement this time, I think Western is trying to get the support of shareholders who are not exactly happy with the fund, but do not want to see any drastic changes.

Overall, while I agree with all of Western Investment's points, I'm doubtful that these newest letters to shareholders will convince many investors who voted for the incumbent board a few months ago to switch their vote to Western's nominees this time. We shall see though.

It's difficult to tell if this is a good idea before seeing the prospectus for the new fund, but it is in innovative way to launch a CEF. As far as I know, GAB is the only closed-end fund that has had spin-offs in the past. The proposed contribution to the new fund is fairly small at $60-$100 million, but I'm sure there will be future rights offerings to raise more money.

Overall, I don't know if this will be good for shareholders, but I don't think it will be bad for them. They should get shares in the new fund without having to pay any commissions or underwriting fees, but it's possible that the shares could trade at a discount shortly after they are distributed. If there are a lot of shareholders who do not want this type of focused fund, and therefore sell immediately after receiving their shares, this could cause the market price to drop below its NAV. On the other hand, since it appears that shares of the new fund will only be offered to current GAB shareholders, demand from outside shareholders could move the fund to a premium once it starts trading on the secondary market. Either way, I don't think anyone can complain too much about the spin-off since current GAB shareholders will be given the choice of whether or not to approve it.

I've been watching DCS since its inception because of its adviser, Dreman Value Management. David Dreman wrote the book on contrarian investing, and I like his philosophy of buying out of favor stocks. And most importantly, he has a really good long term track record (see KDHAX).

If I had to own an actively managed open end fund, his funds would be some of the few that I would consider. However, I think Dreman Value Management's strategy is better suited to closed-end funds. When they buy an unpopular stock, like they did with Altria (MO) a few years ago, and if it doesn't work out right away, his open end funds can be forced into selling undervalued stocks by redeeming shareholders. But with a CEF, Dreman can give his stock picks time to work out.

I've written before that I think it is appropriate that the board try to defend the fund from the Horejsi Group's tender offer. But if they are allowed to use the poison pill, it sets a bad precedent for closed-end funds, and continually raising the threshold is not doing anyone any good. My suggestion to the board would be to drop the poison pill idea, and think of another way to ensure that all shareholders would be treated fairly if the Horejsi tender offer were to be successful.

NRL 1-yr chart:

This price action seems to be a case of investors buying first and asking questions later. I can understand investors wanting to speculate on whether or not the embargo will be lifted. But the question I would ponder before investing in the fund is, even if the embargo is lifted, should CUBA trade at a 16% premium? One explanation for why a closed-end country fund would trade at a premium is that the CEF is the only way to access a market. However, there's no reason to believe that this fund will have exclusive access to companies that would benefit from the embargo being lifted. My guess is that many investment managers will quickly start offering Cuba focused funds if there is a chance to get management fees.

If the embargo is lifted, CUBA should theoretically do well based on its investment mandate. But if business with Cuba was more likely this week than last week, I would also assume that the prices of the fund's stocks should have increased this week, thus raising the fund's NAV by a percentage similar to the fund's market price increase. I could even accept that the market price should increase more and that the discount should decrease based on the recent news, but not by the roughly 20% that it has.

Part of the reason for the open-ending might be that this is AIM's only closed-end fund, and they decided that they weren't going to launch any more. If this were the case, it may be better for AIM to concentrate their resources on their open end funds and other investment products, and not bother with this single closed-end fund. Plus, when your only closed-end fund trades at a double-digit discount for over two and a half years, it doesn't reflect well on any of your investment products.

I bought shares in RRE a little over a year ago and will vote in favor of the proposal. This isn't because I see any major problems with the fund, but I do think there are plenty of other options right now as far as closed-end real estate funds go. So I will be happy to take the 13%+ return from the elimination of the discount, and invest it elsewhere.