Weekly Closed-End Fund Roundup: NBB Tender Offer, Liberty Funds Dividend Adjustment

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Includes: APF, ASG, CCA, CGO, CIF, CXH, DDF, DEX, EOI, EOS, ETW, EXD, EXG, GGT, GIM, GLO, GLQ, GLU, GLV, GRF, GUT, HPS, HYB, IAF, IHD, JEQ, MCR, MFM, MFV, MGF, MMT, MSF, NBB, NDP, NIE, NTG, PAI, PDI, PFO, PML, RCG, SPPP, STK, TEI, USA
by: Stanford Chemist
Summary

Twenty-two CEF sectors out of 31 positive on price and 23 out of 31 sectors positive on NAV.

NBB begins tender offer for 20% of shares at 100% of NAV.

Liberty funds lower dividend to maintain their 8% NAV distribution policy.

This article was first released to subscribers 2 weeks ago.

The Weekly Closed-End Fund Roundup will be put out at the start of each week to summarize recent price movements in closed-end fund [CEF] sectors in the last week, as well as to highlight recently concluded or upcoming corporate actions on CEFs, such as tender offers. Most of the information has been sourced from CEFInsight or the Closed-End Fund Center. I will also link to some articles from Seeking Alpha that I have found for useful reading over the past week. The searchable tag for this feature is "cildoc". Data are taken from the close of Friday January 18, 2019.

Weekly performance roundup

Twenty-two out of 31 sectors were positive on price (down from 31 last week) and the average price return was 1.01% (down from 3.57% last week). Emerging market equity (+3.92%), Latin America equity (+3.20%) and global growth & income (+3.06%) led the way.

(Source: Stanford Chemist, CEFConnect)

Twenty-three out of 31 sectors were positive on NAV (down from 25 last week), while the average NAV return was 0.91% (down from 2.58% last week).

(Source: Stanford Chemist, CEFConnect)

The sector with the highest premium is multisector income (-0.44%), while the sector with the highest discount is New Jersey munis (-14.48%). The average sector discount is -7.73% (up from -7.78% last week).

(Source: Stanford Chemist, CEFConnect)

Emerging market equity showed the largest premium/discount increase (+1.72%), while investment grade income showed the largest premium/discount decline (-1.04%). The average change in premium/discount was +0.08% (down from +0.90% last week).

(Source: Stanford Chemist, CEFConnect)

The sector with the highest average 1-year z-score is emerging market equity (+1.38) while the sector with the lowest z-score is senior loan (-1.02). The average z-score is -0.09 (up from -0.10 last week).

(Source: Stanford Chemist, CEFConnect)

The sector with the highest MLPs (11.30%), global growth & income (10.35%), global equity dividend (10.11%), emerging market income (9.67%) and multisector income (9.18%). Discounts and z-scores for the sectors are included for comparison. The average sector yield is 7.39% (down from 7.44% last week).

(Source: Stanford Chemist, CEFConnect)

Individual CEFs that have undergone a significant decrease in premium/discount value over the past week, coupled optionally with an increasing NAV trend, a negative z-score, and/or are trading at a discount, are potential buy candidates.

Ticker

P/D decrease

Yield

P/D

z-score

Price change

NAV change

(PAI)

-4.04%

5.21%

-6.43%

-0.5

-4.20%

-0.07%

(PML)

-3.60%

5.89%

14.52%

1.3

-3.21%

-0.17%

(DDF)

-3.57%

9.05%

13.08%

1.4

-1.87%

1.23%

(IAF)

-3.52%

11.74%

-8.09%

-1.9

-2.11%

1.65%

(GRF)

-3.48%

7.26%

-11.74%

-1.3

-0.42%

3.50%

(RCG)

-3.30%

%

-28.18%

-2.4

-3.07%

1.38%

(HYB)

-3.19%

8.26%

-13.81%

-0.8

-1.11%

2.54%

(GUT)

-3.09%

9.65%

30.95%

0.6

-1.89%

0.42%

(NIE)

-2.82%

7.49%

-9.01%

-0.3

-0.83%

2.25%

(JEQ)

-2.60%

7.07%

-13.61%

-0.9

0.00%

3.01%

(Source: Stanford Chemist, CEFConnect)

Conversely, individual CEFs that have undergone a significant increase in premium/discount value in the past week, coupled optionally with a decreasing NAV trend, a positive z-score, and/or are trading at a premium, are potential sell candidates.

Ticker

P/D increase

Yield

P/D

z-score

Price change

NAV change

(GLU)

4.97%

6.67%

-7.37%

0.4

6.39%

0.67%

(IHD)

4.91%

9.12%

-4.15%

1.1

7.63%

2.12%

(PFO)

4.58%

6.49%

8.15%

1.7

4.90%

0.47%

(STK)

4.38%

9.89%

3.54%

1.1

5.29%

0.84%

(EXD)

4.04%

7.05%

-7.72%

1.2

2.29%

-2.19%

(SPPP)

3.98%

%

-2.77%

0.7

8.54%

4.10%

(GGT)

3.97%

11.78%

4.76%

0.7

5.98%

1.97%

(CGO)

3.89%

10.51%

1.42%

-1.0

6.93%

2.83%

(NDP)

3.78%

19.21%

8.32%

1.9

6.92%

3.19%

(PDI)

3.74%

8.39%

14.62%

1.6

3.79%

0.40%

(Source: Stanford Chemist, CEFConnect)

Recent corporate actions

These are from the last month and are quoted from Closed-End Fund Center, Morningstar, or CEFInsight (email alerts); any new news in the past week has a bolded date:

None.

Upcoming corporate actions

These are from the last month and are quoted from Closed-End Fund Center, Morningstar, or CEFInsight (email alerts); any new news in the past week has a bolded date:

January 14, 2019 | Nuveen Taxable Municipal Income Fund Announces Commencement of Tender Offer. The Nuveen Taxable Municipal Income Fund (NYSE: NBB) today commenced a tender offer. As previously announced, the fund will purchase up to 20 percent of its outstanding common shares for cash at a price per share equal to 100 percent of the net asset value per share determined on the date the tender offer expires. The price that shareholders receive will be net of a repurchase fee which is estimated to be less than $0.03 per share, assuming the tender offer is fully subscribed. The tender offer will expire on February 12, 2019 at 5:00 p.m. Eastern time, or on such later date to which the offer is extended. If more than 20 percent of its outstanding common shares are tendered, and not withdrawn, the fund will purchase shares from tendering shareholders on a pro rata basis. Accordingly, shareholders cannot be assured that the fund will purchase all of its tendered common shares.

January 7, 2019 | Morgan Stanley Emerging Markets Fund, Inc. Announces Approval of Reorganization. Morgan Stanley Emerging Markets Fund, Inc. (NYSE: MSF) (the “Fund”) is pleased to announce that its stockholders, at the Fund’s Special Meeting of Stockholders held on January 7, 2019, approved the reorganization (the “Reorganization”) of the Fund into the Emerging Markets Portfolio (“MSIF Emerging Markets”). MSIF Emerging Markets is a diversified series of Morgan Stanley Institutional Fund, Inc., an open-end management investment company advised by the Fund’s investment adviser. In connection with the Reorganization, stockholders of the Fund will receive newly issued Class I shares of MSIF Emerging Markets with a value equal to the aggregate net asset value of their common shares of the Fund on the valuation date, which is expected to be the close of business on or about February 22, 2019. The transaction is currently expected to close on or about February 25, 2019, subject to the satisfaction of certain conditions. Stockholders of the Fund will continue to be able to trade their common shares of the Fund on the New York Stock Exchange until the close of business on or about February 22, 2019. Subsequently, the Fund will cease trading on the New York Stock Exchange and will be dissolved.

December 6, 2018 | Morgan Stanley Asia-Pacific Fund, Inc. Announces Reorganization into Morgan Stanley Institutional Fund, Inc. – Emerging Markets Portfolio. Morgan Stanley Asia-Pacific Fund, Inc. (NYSE: APF) (the “Fund”) announced that, after considering the recommendation of the Fund’s investment adviser, Morgan Stanley Investment Management Inc., the Board of Directors of the Fund determined that it would be in the best interest of stockholders of the Fund to approve an Agreement and Plan of Reorganization by and between the Fund and Morgan Stanley Institutional Fund, Inc., on behalf of its series Emerging Markets Portfolio (“MSIF Emerging Markets”), pursuant to which substantially all of the assets and liabilities of the Fund would be transferred to MSIF Emerging Markets and stockholders of the Fund would become stockholders of MSIF Emerging Markets, receiving shares of common stock of MSIF Emerging Markets equal to the value of their holdings in the Fund (the “Reorganization”). The Reorganization of the Fund will be submitted for stockholder approval at a special meeting of stockholders (the “Meeting”) scheduled to be held on March 8, 2019, and any adjournments or postponements thereof, to stockholders of record on January 14, 2019. Further information about the Reorganization will be included in a proxy statement/prospectus expected to be mailed to stockholders in the first quarter of 2019.

Recent activist or other CEF news

These are from the last month and are quoted from Closed-End Fund Center, Morningstar, or CEFInsight (email alerts); any new news in the past week has a bolded date:

January 7, 2019 | Tortoise Announces Completion of Fund Name and Investment Policy Changes for Tortoise Midstream Energy Fund, Inc. Tortoise today confirmed the completion of the previously announced name change for its closed-end fund Tortoise Midstream Energy Fund, Inc. (NYSE: NTG), formerly known as Tortoise MLP Fund, Inc. Ticker symbol and CUSIP remain unchanged. In addition, effective today is an amended investment policy for NTG. Under the amended policy, under normal market conditions, NTG will invest at least 80% of its total assets in equity securities of midstream energy entities in the energy infrastructure sector, including MLPs, with at least 50% of its total assets in equity securities of natural gas infrastructure entities. Previously, NTG’s investment policy stipulated that at least 80% of its total assets would be invested in equity securities of MLPs. Written notice was provided to stockholders of such changes on Nov. 7, 2018. “This amendment to the investment policy and name change allows greater flexibility for NTG to continue to invest in what we believe are the most attractive midstream energy entities, regardless of company structure,” said Tortoise Portfolio Manager Matt Sallee. “This change enables the fund to continue to seek to meet its objectives as the midstream energy landscape evolves.”

November 26, 2018 | Eaton Vance Tax-Advantaged Bond and Option Strategies Fund Announces Changes to Fund Name, Investment Objective, Fees and Distributions. The Board of Trustees of Eaton Vance Tax-Advantaged Bond and Option Strategies Fund (NYSE: EXD) (the "Fund") has approved changes to the Fund's name, investment objective and investment policies as described below. In connection with these changes, the portfolio managers of the Fund will change and the Fund's investment advisory fee rate will be reduced as discussed below. Each of the foregoing changes will be effective on or about February 8, 2019. Following implementation of the changes to the Fund's investment objective and policies, the Fund will increase the frequency of its shareholder distributions from quarterly to monthly and raise the distribution rate as described below.

Name. The Fund's name will change to "Eaton Vance Buy-Write Strategies Fund." It will continue to be listed on the New York Stock Exchange under the ticker symbol "EXD."

Investment Objectives. As revised, the Fund will have a primary objective to provide current income and gains, with a secondary objective of capital appreciation. In pursuing its investment objectives, the Fund will evaluate returns on an after-tax basis, seeking to minimize and defer shareholder federal income taxes. The Fund's current investment objective is tax-advantaged income and gains.

Investment Policies. Pursuant to its revised investment policies, the Fund's strategy will consist of owning a diversified portfolio of common stocks and selling covered index call options (a "buy-write strategy"). Under normal market conditions, the Fund's investment program will consist primarily of (1) owning a diversified portfolio of common stocks, a segment of which ("Segment One") seeks to exceed the total return performance of the S&P 500 Composite Stock Price Index® (the "S&P 500") and a segment of which ("Segment Two") seeks to exceed the total return performance of the NASDAQ 100 Index® (the "NASDAQ 100") and (2) selling on a continuous basis S&P 500 call options on at least 80% of the value of Segment One and NASDAQ 100 call options on at least 80% of the value of Segment Two. Initially, approximately 50% to 75% of the Fund's net assets will be invested in Segment One and the balance will be invested in Segment Two. Although the Fund will designate separate S&P 500 and NASDAQ 100 segments, the Fund's stock portfolio will be managed on an integrated basis. Over time, the percentages of the Fund's stock portfolio invested in each Segment may vary based on the investment adviser's evaluation of equity market conditions and other factors. Due to tax considerations, the Fund intends to limit the overlap between its stock portfolio holdings (and any subset thereof) and each of the S&P 500 and the NASDAQ 100 to less than 70% on an ongoing basis. The Fund's stock holdings may include stocks not included in either index.

The Fund will seek to generate current earnings in part by employing an options strategy of writing (selling) index call options on the S&P 500 and the NASDAQ 100. Under normal market conditions, the Fund expects to sell on a continuous basis S&P 500 call options on at least 80% of the value of Segment One and NASDAQ 100 call options on at least 80% of the value of Segment Two. Under normal market conditions, at least 80% of the value of the Fund's total assets will be subject to written index call options. Writing index call options involves a tradeoff between the option premiums received and reduced participation in potential future stock price appreciation of the Fund's portfolio of common stocks.

The Fund currently employs a tax-advantaged short-term bond strategy ("Bond Strategy") and a rules-based option overlay strategy that consists of writing put and call spreads on the S&P 500 ("Option Overlay Strategy"). The Bond Strategy consists of investing in a diversified portfolio of short-term, high quality municipal securities and other debt obligations. The Options Overlay Strategy involves the selling of S&P 500 put spreads and call spreads following a systematic, rules-based strategy. The Options Overlay Strategy is designed to monetize the difference between the implied volatility of the S&P 500 as reflected in options prices and the realized volatility of the index.

Distribution changes announced this month

These are sorted in ascending order of distribution change percentage. Funds with distribution changes announced this month are included. Any distribution declarations made this week are in bold. I've also added monthly/quarterly information as well as yield, coverage (after the boost/cut), discount and 1-year z-score information. I've separated the funds into two sub-categories, cutters and boosters.

(Note: due to the large amount of special distributions this month some of these funds may accidentally appear as cutters and boosters due to how my screening algorithm calculates distribution changes. Apologies in advance for any mistakes).

Cutters

Name Ticker Change Previous Current Discount Yield z-score Coverage Announced Ex-date
EV Tax-Managed Glb B-W Opps (ETW) -20.1% 0.091 0.0727 -1.09% 8.77% -1.7 24% 1/2/2019 1/23/2019
EV Tax-Managed Global Fund (EXG) -18.9% 0.076 0.0616 -1.83% 9.18% -1.1 9% 1/2/2019 1/23/2019
Liberty All-Star Growth (ASG) -9.1% 0.11 0.1 -7.45% 8.05% -1.3 -2% 1/14/2019 1/24/2019
Clough Global Equity (GLQ) -6.5% 0.1115 0.1043 -7.35% 10.45% -0.5 0% 1/10/2019 1/18/2019
Liberty All-Star Equity (USA) -6.3% 0.16 0.15 -7.24% 10.19% -0.4 3% 1/14/2019 1/24/2019
Clough Global Opportunities (GLO) -5.6% 0.0878 0.0829 -10.99% 10.97% -0.9 2% 1/10/2019 1/18/2019
Clough Global Div and Inc Fund (GLV) -4.3% 0.1048 0.1003 -10.37% 11.14% -0.9 19% 1/10/2019 1/18/2019
Delaware Enhanced Gbl Div&Inc (DEX) -4.0% 0.0945 0.0907 -12.99% 11.65% -1.6 43% 1/2/2019 1/14/2019
Delaware Inv Div & Inc (DDF) -4.0% 0.0951 0.0913 13.08% 9.05% 1.4 28% 1/2/2019 1/14/2019
MFS Special Value Trust (MFV) -3.6% 0.04524 0.04362 -2.26% 10.11% -0.9 31% 1/2/2019 1/15/2019
MFS California Municipal Fund (CCA) -2.9% 0.035 0.034 -12.58% 3.89% 1.3 128% 1/2/2019 1/15/2019
MFS Intermediate High Income (CIF) -2.3% 0.01965 0.01919 -9.27% 10.23% -1.7 64% 1/2/2019 1/15/2019
Templeton Global Income (GIM) -1.9% 0.0378 0.0371 -13.13% 5.94% -0.2 81% 1/2/2019 1/14/2019
JH Preferred Income III (HPS) -1.8% 0.1222 0.12 -1.95% 8.42% 0.1 81% 1/2/2019 1/11/2019
MFS Municipal Income (MFM) -1.7% 0.0295 0.029 -9.87% 5.45% -0.4 107% 1/2/2019 1/15/2019
MFS Investment Grade Muni (CXH) -1.3% 0.0385 0.038 -9.95% 4.95% 0.6 103% 1/2/2019 1/15/2019
MFS Multi-Market Income (MMT) -0.9% 0.04014 0.03976 -12.07% 8.97% -1.1 53% 1/2/2019 1/15/2019
MFS Charter Income (MCR) -0.5% 0.0565 0.0562 -11.33% 8.89% -0.5 51% 1/2/2019 1/15/2019

Boosters

Name Ticker Change Previous Current Yield Discount z-score Coverage Announced Ex-date
Templeton Emerging Mkts Income (TEI) 0.6% 0.0651 0.0655 7.96% -11.47% -0.5 108% 1/2/2019 1/14/2019
MFS Government Markets Income (NYSE:MGF) 1.0% 0.02802 0.0283 7.53% -4.25% 2.9 37% 1/2/2019 1/15/2019
EV Enhanced Equity Income (EOI) 3.9% 0.0864 0.0898 8.07% -3.89% -0.6 9% 1/2/2019 1/23/2019
EV Enhanced Equity Income II (EOS) 12.9% 0.0875 0.0988 7.27% 5.57% 2.2 -3% 1/2/2019 1/23/2019

Commentary and actionable takeaway

Liberty All-Star Growth Fund (ASG) and Liberty All-Star Equity Fund (USA) reduced their distributions by -9.1% and -6.3% respectively last week. However, this is simply due to their stated policy of distributing 8% and 10% of NAV each year respectively. With both of their NAVs falling over -12% in 2018, a distribution cut was inevitable.

Chart

ASG Net Asset Value data by YCharts

Anyone owning ASG or USA should also take note of the funds' DRIP policy:

The distribution will be paid in newly issued shares to all shareholders except those who are not participating in Liberty All-Star Growth Fund’s Dividend Reinvestment Plan and who elect to receive the distribution in cash. Shares will be issued at the lower of the February 22, 2019 net asset value per share or market value per share (but not less than 95% of market value). The market value of the Fund’s shares for this purpose will be the last sales price on the New York Stock Exchange.

With both funds currently trading at a discount of around -7%, I suggesting turning the DRIP off because whenever new shares are issued below NAV, the funds will suffer a slight hit to their NAV/share. Take the distribution in cash instead, and buy back new shares of ASG/USA on the open market.

Nuveen Taxable Municipal Income Fund's (NYSE: NBB) tender offer commenced last week, and is due to expire on February 12, 2019. The offer is for 20% of shares at 100% of NAV. With a discount of -4.50%, there's between 0.90% and 4.50% of alpha to be gained on the tendered shares depending on how many shareholders tender (since the actual amount accepted will be determined on a pro rata basis). However, as with all tender offers, the risk is that the share price will tank upon expiry of the offer, leading to capital losses on the non-accepted portion. Complicating this issue is the fact that NBB has recently abolished its term provision, which all other things being equal, should make NBB's discount wider. Performance-wise, NBB has lagged the peer group in the taxable muni category per CEFConnect numbers. Overall, I'd be inclined to sit this one out.

Disclosure: I am/we are long THE PORTFOLIOS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.