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About BDCs Now Grier Eliasek, Prospect Capital Corp. I n the 35 years since Congress created them, Business Development Companies (BDCs) have not attracted as much attention as newer assets like exchange- traded funds. Because of this lack of awareness, many investors are missing out on high dividend payouts and the potential to generate strong total returns. Here are five things investors should know about BDCs: 1. BDCs have low energy exposure. According to a report in September by KBW, BDCs have on average 5% energy exposure in their loan portfolio compared to mid-teens energy exposure in the high-yield bond market, thereby reducing potential downside risk within this volatile sector. BDCs primarily finance and invest in private, small- to mid-sized businesses across a wide range of industries and are required to meet strict diversification requirements. December, 2015 In this Issue: 1 Portfolio Perspectives: Five Things Investors Should Know 2 Swiss Equities offer local equity exposure, with world-class return potential 5 Why invest in China? 8 Activist Webinar 9 Past Webinars 11 The Miller/Howard High Income Equity Fund 13 BDC’s Providing High Yield, At A Discount 23 5th Annual CEF Conference A Hit With Closed-End Fund Community 25 A Buying Opportunity For High Yield Investors 27 Will Capitulation in MLPs Be Driven by CEF Selling? October 1, 2015. 32 BDC/REIT Activism Webinar 33 Pristine Advisers/ CEFNetwork – Recap of 5th Annual CEF/BDC/MLP/ ETF Investment Strategies Conference 33 Tuesday, October 27th New York Hilton Hotel 35 Award Winning Investor Relations, Public Relations, Media Relations, Social Media Strategists Pristine Advisers Quarterly Closed-End Fund News Offices in New York | Connecticut P: 631-756-2486 F: 646-478-9415 E: [email protected] 1 Portfolio Perspectives: Five Things Investors Should Know

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Page 1: Portfolio Perspectives: Things Investors Should Kno...buy or sell the stocks mentioned. Please do your own due diligence before making any investment decision. Offices in New York

About BDCs Now Grier Eliasek, Prospect Capital Corp.

In the 35 years since Congress created them, Business Development Companies (BDCs)

have not attracted as much attention as newer assets like exchange-traded funds. Because of this lack of awareness, many investors are missing

out on high dividend payouts and the potential to generate strong total returns. Here are five things investors should know about BDCs:

1. BDCs have low energy exposure. According to a report in September by KBW, BDCs have on average 5% energy exposure in their loan portfolio compared to mid-teens energy exposure in the high-yield bond market, thereby reducing potential downside risk within this volatile sector. BDCs primarily finance and invest in private, small- to mid-sized businesses across a wide range of industries and are required to meet strict diversification requirements.

December, 2015 In this Issue:

1 Portfolio Perspectives: Five Things Investors Should

Know

2 Swiss Equities offer local equity exposure, with

world-class return potential

5 Why invest in China?

8 Activist Webinar

9 Past Webinars

11 The Miller/Howard High Income Equity Fund

13 BDC’s Providing High Yield, At A Discount

23 5th Annual CEF Conference A Hit With

Closed-End Fund Community

25 A Buying Opportunity For High Yield Investors

27 Will Capitulation in MLPs Be Driven by CEF

Selling? October 1, 2015.

32 BDC/REIT Activism Webinar

33Pristine Advisers/CEFNetwork – Recap

of 5th Annual CEF/BDC/MLP/ETF Investment Strategies Conference

33Tuesday, October 27th New York Hilton Hotel

35Award Winning Investor Relations,

Public Relations, Media Relations, Social Media Strategists

Pristine Advisers Quarterly Closed-End Fund News

Disclaimer: The opinions in this article are for informational purposes only and should not be construed as a recommendation to buy or sell the stocks mentioned. Please do your own due diligence before making any investment decision.

Offices in New York | ConnecticutP: 631- 756- 2486 F: 646- 478- 9415 E: [email protected]

1

Portfolio Perspectives: Five Things Investors Should Know

Page 2: Portfolio Perspectives: Things Investors Should Kno...buy or sell the stocks mentioned. Please do your own due diligence before making any investment decision. Offices in New York

Swiss Equities offer local equity exposure, with world-class return potentialBy Stefan Frischknecht, Portfolio Manager

The Swiss Helvetia Fund (NYSE:SWZ)

invests primarily in equity and

equity-linked securities of Swiss companies.

Rationale for investing in Swiss stocks Switzerland is a politically and economically stable nation in the middle of Europe that boasts a skilled and innovative labor force1 that we believe is ideally suited for global firms. For example, Swiss equities top other major stock markets in terms of the proportion of global leaders in

their respective industries even though each has only a small domestic market for its goods and services.

Indeed, the relatively small domestic market has become an advantage because the average Swiss listed company’s geographical source of revenues is generally well diversified. On a historical basis, companies in the Swiss Performance Index (the ‘SPI’ or ‘Index’) have

outperformed global equities in the MSCI World All Countries Index since December 31, 1988 by 3.7% per annum as per September 30, 2015.

Stock market developments The most important event for Swiss companies in 2015 was the decision of the National Bank to abandon a floor of 1.20 for the exchange rate of the Swiss franc against the euro on January 15. The Swiss stock market reacted negatively to the corresponding appreciation in the Swiss franc and lost about 14% during the two days following the announcement (measured in US dollars, however, the value rose, as the currency gained

Disclaimer: The opinions in this article are for informational purposes only and should not be construed as a recommendation to buy or sell the stocks mentioned. Please do your own due diligence before making any investment decision.

Offices in New York | ConnecticutP: 631- 756- 2486 F: 646- 478- 9415 E: [email protected]

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2. BDCs are well positioned to benefit from a full-cycle increase in interest rates.Many BDCs have their liabilities in fixed-rate debt instruments and their assets are typically floating rate investments. Therefore, their earnings power stands to increase as interest rates rise, everything else being equal. In addition, a rate hike by the Federal Reserve would suggest a growing economy and the credit risk profile of BDC investments would likely be positively impacted as a result.

3. BDCs offer a compelling investment opportunity given the current market dislocation.Excluding micro-caps, companies tracked by the UBS ETRACS Wells Fargo Business Development Company

ETN (BDCS) are trading at approximately 17% below book value with a price-to-forward earnings ratio of 9x. By comparison, the S&P 500 is trading at 2.3x book value and 17x forward P/E. Over the trailing 10 years, BDCs, on average, have traded at a premium to book value.

4. Most BDCs pay attractive double-digit yields. BDCs are pass-through entities that avoid corporate taxation if, among other requirements, they pay at least 90% of their taxable income to shareholders as a dividend. As a result, BDCs have established a strong track record as a tax-efficient and income-oriented investment vehicle.

Prospect Capital (PSEC)

currently yields over 13% and the UBS ETRACS Wells Fargo Business Development Company ETN (BDCS) currently yields ~9.3% annually.

5. BDCs have conservative capital structures.

The maximum debt-to-equity ratio for BDCs is 1:1 so their total debt outstanding cannot be greater than total equity, reducing their risk profile. Banks, on the other hand, are typically leveraged 10:1. And unlike banks, no BDC has ever gone bankrupt or failed to make good on its debts.

Grier Eliasek is the president and chief operating officer at Prospect Capital Corp., a firm that provides private debt and equity capital, in New York.

Page 3: Portfolio Perspectives: Things Investors Should Kno...buy or sell the stocks mentioned. Please do your own due diligence before making any investment decision. Offices in New York

more than stock prices fell). And, as Swiss companies derive close to 90% of revenues from abroad, but produce less than that outside of Switzerland, earnings estimates fell. However, we believe they have left their low point behind, as companies announced measures to mitigate the impact of the strong Swiss franc and because the currency subsequently weakened. Current expectations are for a moderate, low single digit growth of Swiss earnings against the prior year. In brief, after the first shock absorption, Swiss listed companies have reacted well and remain competitive in a global economy, where they derive the bulk of revenues.

How the fund positioned to take advantage of opportunities in Swiss equitiesAs such, the Fund offers a good way for investors to participate in the performance of the entire Swiss equity universe.

The Zurich based portfolio management team conducts fundamental research to find the best ideas in terms of value and

quality in the Swiss equity market. The macroeconomic environment is reflected in each company’s fair value model. It is also taken into account in portfolio construction, where disciplined risk diversification is applied. As stock pickers, the team is more likely to find undervalued companies in

the area of small & mid caps, which we believe provides more attractive investment opportunities for the long term. As a result, this segment is likely to represent a higher weight than, say, an unmanaged Swiss Performance Index, which

www.globalinvestorspotlight.com

Disclaimer: The opinions in this article are for informational purposes only and should not be construed as a recommendation to buy or sell the stocks mentioned. Please do your own due diligence before making any investment decision.

Offices in New York | ConnecticutP: 631- 756- 2486 F: 646- 478- 9415 E: [email protected]

The Fund is a non-diversified (in terms of geographical exposure), closed-end investment company whose objective is to seek long-term capital appreciation primarily through investment in equity and equity-linked securities of Swiss companies

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Source: Bloomberg, performance in USD as of September 30, 2015. Past performance is no guarantee of future results.

Source: World Economic Forum, Global Competitiveness Report 2014-15, rank out of 144 economies.

Page 4: Portfolio Perspectives: Things Investors Should Kno...buy or sell the stocks mentioned. Please do your own due diligence before making any investment decision. Offices in New York

Disclaimer: The opinions in this article are for informational purposes only and should not be construed as a recommendation to buy or sell the stocks mentioned. Please do your own due diligence before making any investment decision.

Offices in New York | ConnecticutP: 631- 756- 2486 F: 646- 478- 9415 E: [email protected]

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the team aims to outperform. The Swiss portfolio management team has many years of investment experience and a strong track record in Swiss equities since 1999.

Outlook for Swiss Market We are encouraged by the resilience of Swiss earnings. Since the regime of fixed exchange rates ended in the 1970’s, companies listed in Switzerland have routinely been faced with a strengthening Swiss franc and have consistently performed well in the global markets. For example, the vast majority of quoted companies have announced cost programs

to keep competitiveness, thereby positioning themselves to turn the Swiss National Bank’s action from a short term pain into a long term gain. Being and staying competitive has always been a must for Swiss companies in order to maintain their global leadership. In a textbook manner, Swiss company leadership transforms into margins, which may lead to better stock performance. We also believe that these factors help explain the strong past performance of Swiss stocks, and thus bodes well for future returns.

The views and forecasts contained herein are those of the Schroders Swiss Equities team as

of September 30, 2015, and these opinions may change over time.

Switzerland had the highest patent per capita fi lings in Europe according to the Innovation Union Scoreboard 2011 (EU).

70% of members of the large cap Swiss Market Index (“SMI”) have ranked first or second within their markets on a global basis at one point since 2011, as have approximately 40% of members within the Swiss Mid Cap Index (“SMI Mid”).

Schroder Investment Management North America, Inc.

Page 5: Portfolio Perspectives: Things Investors Should Kno...buy or sell the stocks mentioned. Please do your own due diligence before making any investment decision. Offices in New York

Disclaimer: The opinions in this article are for informational purposes only and should not be construed as a recommendation to buy or sell the stocks mentioned. Please do your own due diligence before making any investment decision.

Offices in New York | ConnecticutP: 631- 756- 2486 F: 646- 478- 9415 E: [email protected]

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Why invest in China?We have long acknowledged

the presence of imbalances in China

and the transition away from an industrial- and manufacturing- based “Old China” to a services- and consumption- driven “New China.” As such, we expect a multi-year de-stocking process, working through the excess industrial capacities and housing inventories, evidenced in the collapse of the Old but also the resiliency of the New, reflected

in data points such as the retail sales volume, services as a growing component of GDP and strong household balance sheet with low debt levels.

While going through market corrections may not be a pleasant experience for investors, it’s important to keep a few things in perspective. Firstly,

given the sharp rally in the Chinese markets since the middle of last year, particularly that of the onshore A-shares, the sell-offs, though painful, helped temper the risk of a market

melt-up. Additionally, as we do not believe they stemmed from any fundamental deterioration,

Page 6: Portfolio Perspectives: Things Investors Should Kno...buy or sell the stocks mentioned. Please do your own due diligence before making any investment decision. Offices in New York

Disclaimer: The opinions in this article are for informational purposes only and should not be construed as a recommendation to buy or sell the stocks mentioned. Please do your own due diligence before making any investment decision.

Offices in New York | ConnecticutP: 631- 756- 2486 F: 646- 478- 9415 E: [email protected]

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moderated valuations afforded us, as a bottom-up stock picker, good buying opportunities for the stocks we like. Secondly, stock market setbacks have a fairly marginal impact on the Chinese consumer, and hence consumption driven activities, as only 10% of household assets are actually held in equities.

The property market, on the other hand, matters much more. We are seeing stabilization and improvement there, with rising sales volume and property prices, coupled with weak housing starts, indicative of inventory digestion. The more recent fiscal stimulus, lowering the down payment requirement for first time homebuyers without home purchase restriction from 30% to 25%, should also help support housing demand.

We believe the macro indicators should stabilise from very low levels and policy direction to be largely unchanged, though execution will be key. Any further RMB depreciation should be slow, as a stabilised RMB shows the PBoC’s determination to defend the currency from overshooting, potentially providing a cushion for further monetary easing.

Near term sentiment may remain volatile through this growth transition and further deleveraging, but we continue to believe there are plenty of secular growth opportunities in the Chinese markets. One just has to know where to look, and right now is a great time to take advantage as Chinese equities broadly are looking very cheap. On a forward 12-month price/earnings basis, MSCI China is trading at a +18% discount to historical average (9.4 times versus 11.5 times). On a price/book basis, it is trading at an

even steeper discount of +40% (1.3 times versus 2.2 times).1

Also important to keep in mind, China, despite recent episodes of volatility, remains the world’s second largest economy. As it continues to open up its capital markets to the rest of the world, the eventual inclusion of A-shares, which has been delayed for now, in global indices will make Chinese equities a very important part of

a client’s asset allocation (at full inclusion, Chinese equities would make up over 40% of MSCI EM). Though there have been hiccups and stumbles in implementation, the reform measures and supportive policies are ultimately aimed at delivering a better quality growth that is sustainable over the long term, one that reinforces China as a key investment universe.

In this environment and on the basis of this outlook, the China Region Fund Inc offers a great way to access the China markets, both onshore and offshore, as well as the Taiwan and Hong Kong markets. The expanded set of potential investment opportunities allows us to find the best ideas in an flexible, unconstrained approach, as many companies incorporated offshore still derive significant revenue streams from the Chinese economy and consumer. Acknowledging and comfortable with slower growth, we still have conviction in Chinese equities and believe the best long-term investment ideas exist in high-growth industries and stocks with potentially high and/or improving ROEs.

We find plenty of growth opportunities with strong multi-year prospects, primarily the structural growth names in China’s “new economies” such as healthcare, internet, consumption and environmental protection. Apple iPhone supply chain component companies also look attractive, leveraged to increasing penetration in their respective market and positioned to capture new market shares. We also like selective financials, such as insurers, mid-sized banks and property, which are liquidity beneficiaries and stand to gain from easy monetary policy.

Near term sentiment may remain volatile through this growth transition and further deleveraging, but we continue to believe there are plenty of secular growth opportunities in the Chinese markets.

Page 7: Portfolio Perspectives: Things Investors Should Kno...buy or sell the stocks mentioned. Please do your own due diligence before making any investment decision. Offices in New York

Disclaimer: The opinions in this article are for informational purposes only and should not be construed as a recommendation to buy or sell the stocks mentioned. Please do your own due diligence before making any investment decision.

Offices in New York | ConnecticutP: 631- 756- 2486 F: 646- 478- 9415 E: [email protected]

7

Watch our Webcast Replay: Latin America-An opportunity amid volatility?

T here are several misconceptions about investing in Latin America

today. While many investors perceive the region to be volatile, we believe it is home to compelling investment opportunities. Having invested in the region since the 1980s, our local “on-the-ground” presence allows us to see past the common misconceptions,

and uncover the realities. Watch the webcast replay

featuring Nick Robinson, Director-Head of Brazilian Equities, as he discusses the compelling realities of investing in Latin America.

Why Aberdeen believes Latin America is an important part of the global economy

How regional markets have become increasingly balanced

Developments in the corporate landscape

Current market conditionsWatch now

JPMorgan China Region Fund Shareholder Update - November 2015Date: November 17, 2015 Time: 10:00am (ET)Presented by: Jennifer Wu of J.P. Morgan China Region Fund Click Here for a replay of this WebcastClick Here to view the presentation This event was accepted for 1 CFP Continuing Education creditPristine Advisers and CEFNetwork proudly presented their Fifth Annual CEF/MLP/BDC Investor Conference

Page 8: Portfolio Perspectives: Things Investors Should Kno...buy or sell the stocks mentioned. Please do your own due diligence before making any investment decision. Offices in New York

Activist WebinarAlliance AdvisorsReminder: Activism webinar is next Tuesday 12/16. Only a few spots left, so register now if you’re interested: https://lnkd.in/d3HZ-Tm #corpgov

Alliance Advisors will host a webinar on Wednesday December 16th at 12:30 EST with several leading governance and activism experts on how to be proactive and get in front of an activist situation.

To register, please email [email protected] or simply reply to this email and I will personally take care of your registration. Space is limited to 500 registrants and we only have a few openings left.

Moderated by Waheed Hassan, CFA, Senior Managing Director of Alliance Advisors’ M&A Proxy Contest Group, panelists include Stephen L. Brown, President & CEO of

The Society of Corporate Secretaries and Governance Professionals, Robert B. Lamm, Of Counsel to Gunster, Yoakley & Stewart and Co-Chair of Gunster’s Securities and Corporate Governance Practice, and Tom Johnson, President of Abernathy MacGregor and head of its Mergers and Acquisitions practice.

Alliance is also proud to announce that Tonia Pankopf, Managing Partner of Pareto Advisors, LLC will also join the webinar as a special guest.

If you have any questions or would like further information, please do not hesitate to contact me directly.

Best regards,Scott Howanice | Senior Vice President - Global Head of Sales and MarketingP: 973-873-7707 | C: 973-768-4348 | F: 973-338-1430

Disclaimer: The opinions in this article are for informational purposes only and should not be construed as a recommendation to buy or sell the stocks mentioned. Please do your own due diligence before making any investment decision.

Offices in New York | ConnecticutP: 631- 756- 2486 F: 646- 478- 9415 E: [email protected]

8

BDC/REIT Activism WebinarDate and TimeWed, Dec 9, 2015 2:00 PM - 3:00 PM EST1 (631) 992-3221Access Code: 432-258-557 Registration URL: https://attendee.gotowebinar.com/register/6470675778165633794Are you an activist target?

Why has BDC/REIT activism accelerated recently?

What attracts an activist to BDC/REIT?

Who are the BDC/REIT activists?

What are the key issues raised by activists?

How can companies proactively prepare for likely activist engagement?

What is the role of proxy advisory firms in a proxy contest?

Strategies for winning a proxy contest.

Panelists: Thomas J. Friedmann Partner – Dechert LLP Phillip Goldstein Activist Hedge Fund Manager – Bulldog Investors Cynthia Krus Partner – Sutherland Asbill & Brennan LLP Moderated by: Waheed Hassan, CFA Senior Managing Director M&A/Proxy Contest Group, Alliance Advisors

Morris Retirement Advisors presents:Manage Your Taxes WebinarDate and TimeWed, Dec 2, 2015 11:00am - 12:00pm(415) 930-5321Access Code: 176-524-195Register: https://attendee.gotowebinar.com/register/376190577674214657

Use the opportunities in the current tax laws.

Agenda: Ease your tax burden with tax-savvy financial planningApply capital-gains rules effectivelyReduce taxable income with gifts and deductionsPrepare for a changing tax landscape

Panelists:Lou VegaVice President - Business DevelopmentAlliance Advisors, LLCSamantha Mackey CallaghanAlliance Advisors, LLC

Page 9: Portfolio Perspectives: Things Investors Should Kno...buy or sell the stocks mentioned. Please do your own due diligence before making any investment decision. Offices in New York

CEFN Webcast Series:Miller/Howard High Income Equity Fund Announces Conference CallPanelist included:Portfolio Manager John E. (Jack) Leslie III, CFA, of Miller/Howard Investments Click Here for a replay of this Webcast

Today’s Investment Landscape for FundsModerated by:Mariana Bush of Wells Fargo AdvisorsPanelist included:Ken Fincher of First TrustJonathan Diorio of Blackrock Robert Bush of Calamos Investments Click Here for a replay of this Webcast

JPMorgan China Region Fund Shareholder Update - June 2015Presented by:Jennifer Wu of J.P. Morgan China Region Fund Click Here for a replay of this WebcastClick Here to view the presentation

MLP RoundtableModerated by: Gabriel Moreen, Natural Gas Pipelines, Gas Utilities & MLP Senior Analyst at Bank of America Merrill LynchPanelist included:

Judd Cryer of Swank Capital John Cusick of Miller/Howard Ed Russell of Tortoise Advisors Chris Eades of ClearBridge Matthew Cooper of Goldman Sachs Asset Management Click Here for a replay of this WebcastClick Here to view the presentation

Rising Rate UIT’sModerated by: Patrici Baronowski-Schneider, President and CEO at Pristine AdvisersPanelist included:Kevin Mahn of Hennion & Walsh Asset Management (Smart Trust) John Cole Scott of Closed-End Fund AdvisorsClick Here for a replay of this WebcastClick Here to view the presentation

Floating Loan CEF’sModerated by: Ken Fincher, Senior Vice President and Portfolio Manager at First Trust Panelist include:Steve Baffico of Four Wood Capital Larry Holzenthaler of Symphony Asset Management Eliak Lanik of BofA Merrill Lynch Global Research Rob Shaker of Shaker Financial Click Here for a replay of this WebcastClick Here to view the presentation

Putting Shareholders FirstModerated by: Ken Fincher, Senior Vice President and Portfolio Manager at First Trust Panelist included: Jeremy Bannister of City of London Investment Management Daniel Lippincott of Karpus Investment Management Phil Goldstein of Bulldog Investors Click Here for a replay of this WebcastClick Here to view the presentationClick Here to view the transcription

Prospect Capital (PSEC) Webcast- Uncovering Deep Value in the BDC IndustryPresented by: Grier Eliasek, President & COOClick Here for a replay of this WebcastClick Here to view the presentationClick Here to view the transcription

The Asia Pacific Fund Performance Review, Portfolio Positioning and Asia Market Presented by: Philip Li, Fund ManagerClick Here for a replay of this WebcastClick Here to view the presentationClick Here to view the transcription

PAST WEBINARSPlease feel to view the replays and/or transcripts

Disclaimer: The opinions in this article are for informational purposes only and should not be construed as a recommendation to buy or sell the stocks mentioned. Please do your own due diligence before making any investment decision.

Offices in New York | ConnecticutP: 631- 756- 2486 F: 646- 478- 9415 E: [email protected]

9

Page 10: Portfolio Perspectives: Things Investors Should Kno...buy or sell the stocks mentioned. Please do your own due diligence before making any investment decision. Offices in New York

BDC’s compared to traditional closed-end fundsModerated by: John Cole Scott of Closed-End Fund AdvisorsPanelist included: Gregg Felton of Full Circle Aaron Peck of Monroe Capital Grier Eliasek of Prospect Capital Click Here for a replay of this WebcastClick Here to view the presentationClick Here to view the transcription

Passive vs. Active Investing Moderated by: Ken Fincher of First TrustPanelist included: Rick Ferri of Portfolio Solutions, LLC Daniel Spears of Swank Capital Click Here for a replay of this WebcastClick Here to view the transcription

Investing in a low interest rate environment Moderated by: Mike Patton of Integrity Wealth Management/Think AdvisorPanelist included: Peter Vanderlee of ClearBridge Investments Steve Baffico of Four Wood Capital Adam Anderson of Morris Retirement Advisors Click Here for a replay of this Webcast Click Here to view the

presentationClick Here to view the transcription

Impact if Fed raises rates (as projected) Moderated by: John Cole Scott of Closed-End Fund Advisors

Panelist included: Mike Patton of Integrity Wealth Management/Think Advisor Rob Shaker of Shaker Financial Click Here for a replay of this WebcastClick Here to view the presentationClick Here to view the transcription

Pristine Advisers and CEFNetwork presented: MLP Roundtable DiscussionModerated by: Michael Jabara, Executive Director, Head of ETF and CEF Research at Morgan Stanley Wealth Management Presented by: Chris Eades, Managing Director & Portfolio Manager, ClearBridge Investments Ed Russell, Managing Director, Tortoise Capital Advisors Roger Young, Portfolio Manager & Research Analyst, Miller Howard Investments Click Here for a replay of this Webcast

The Asia Pacific Fund Update and OutlookPresented by: Philip Li, Fund ManagerClick Here for a replay of this WebcastClick Here to view the presentation

Join our LinkedIn Groups to learn more about relevant topics

Join us on our LinkedIn Groups

BDC Funds - www.linkedin.com/groups/6599442CEFNetwork - www.linkedin.com/groups/4119220Closed-End Fund Corporate Governance - www.linkedin.com/groups/6599435Closed-End Fund Events - www.linkedin.com/groups/8206191Closed-End Fund Specialist www.linkedin.com/groups/2080875Equity Income Investors & Professionals Group www.linkedin.com/groups/5109576ETF – Exchange Traded Fund News, Commentary, Events and Discussions www.linkedin.com/groups/6600634Morris Retirement Advisors www.linkedin.com/groups/8440323REIT - Real Estate Investment Trust/Funds - REIT - www.linkedin.com/groups/6600660

Disclaimer: The opinions in this article are for informational purposes only and should not be construed as a recommendation to buy or sell the stocks mentioned. Please do your own due diligence before making any investment decision.

Offices in New York | ConnecticutP: 631- 756- 2486 F: 646- 478- 9415 E: [email protected]

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Page 11: Portfolio Perspectives: Things Investors Should Kno...buy or sell the stocks mentioned. Please do your own due diligence before making any investment decision. Offices in New York

Disclaimer: The opinions in this article are for informational purposes only and should not be construed as a recommendation to buy or sell the stocks mentioned. Please do your own due diligence before making any investment decision.

Offices in New York | ConnecticutP: 631- 756- 2486 F: 646- 478- 9415 E: [email protected]

11

The Miller/Howard High Income Equity Fund

By Stephanie Sese Senior Editor of Global Investor Spotlight

The High Income Equity Fund comes from the stables

Miller/Howard, an independent research

driven investment boutique with over 20 years’ experience in managing portfolios for major institutions, mutual funds and individuals in dividend-focused investment strategies. Miller/Howard is an SEC registered and employee owned investment management firm, with more than $9.1 billion under management as of June, 2015.

The Miller/Howard High Income Equity Fund is a closed end fund, meaning that it has a fixed number of shares which are not redeemable from the fund. It seeks high current income and long term capital appreciation through investing in high income equities strategically allocated across multiple sectors and industries focusing on high current income, growth on income and lower volatility.

The fund has a 10 year tenure which will expire by November 24, 2024, unless recommended otherwise by the board of trustees. The board of trustees determines if it is in the best interests of shareholders to extend the term limit for one year or the shareholders vote to extend or shorten the life of the fund. Upon termination of the fund, shareholders will receive a Net Asset Value (NAV) per share. The aim of the fund is to guarantee that

investors have an asset that doesn’t always trade at a discount to Net Asset Value.Source: Motley fool

Healthcare REITs are a long term winner and HIE fund has seen just that, thus acquiring significant holdings in healthcare. Healthcare REITs are expected to show an increase in yields due to this expected massive demographic shift. This demographic shift will see an increase in the demand for hospitals and senior citizen care. For instance, HCP Inc, which is one of the REITs in the HIE’s portfolio is well positioned to gain from this expected shift, HCP derives 36 percent of its portfolio from senior housing, 28 percent from skilled nursing facilities, 17 percent from life science buildings and 16 percent from medical office buildings.

Among the HIE’s fund holdings are data centre REITs which according to analysts are growing at an exponential rate with the demand for big data, cloud computing and live streaming far outweighing the supply. These Data centre REITs provide the infrastructure and connectivity required for these

operations. The data centre REIT rents yields for 2015 are in the range of 11 to 17 percent, which will drive high earnings for investors in the HIE fund.

The energy sector is another critical sector to look at with the HIE fund, seeing as two of the fund’s top five beneficiaries for September belong in this sector. However, investors should exercise caution when dealing in the Oil and Gas sector, because of the unstable oil prices. The falling oil prices are as a result of growth in Shale crude oil production.

However, seeing as one of the biggest beneficiaries of the Shale oil revolution in America is Kinder Morgan, which is also one of the largest beneficiaries of the energy sector allocation for the HIE fund. The growth of US energy market through the revolutionary shale oil will only lead to significant growth for Kinder Morgan. The same story goes for Williams Inc, which is also one of the major beneficiaries of the energy sector allocation for the HIE fund. The growth of Shale crude oil in North America would only bring about higher yields for the Miller/

The energy sector is another critical sector to look at with the HIE fund, seeing as two of the fund’s top five beneficiaries for September belong in this sector. However, investors should exercise caution when dealing in the Oil and Gas sector, because of the unstable oil prices. The falling oil prices are as a result of growth in Shale crude oil production.

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Disclaimer: The opinions in this article are for informational purposes only and should not be construed as a recommendation to buy or sell the stocks mentioned. Please do your own due diligence before making any investment decision.

Offices in New York | ConnecticutP: 631- 756- 2486 F: 646- 478- 9415 E: [email protected]

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Howard High Income Equity fund investors.

According to Analysts, the Kinder Morgan stock price is under- valued, selling at $31.33 when it could easily be sold at $40. A recent drop in prices would suggest that investors are waiting out the 2014 pause distribution growth. However, when this has been waited out, investors will quickly see an appreciation in their share price.

The Miller/Howard High Income Equity fund prioritizes sectors such as MLPs, REITs, Energy and Financials, which have been projected to experience significant growth by analysts over the next 10 years. The HIE’s top holdings some of which are undervalued and expected to quickly appreciate (Kinder Morgan and Williams Inc.). While Seagate technologies and Blackstone Group have been projected to experience rapid growth as a result of the fast evolving technology growth and financial boom in the US.

The researchers at Miller/Howard have a knack for picking the right companies and industries to invest in. The HIE is an excellent option for investors looking for high yields with capital appreciation especially with its 10 year tenure.

The fund highlights as of September 30, 2015 are listed in the table below.

Fund highlights as of September 30, 2015.Total Net Assets $186,227,319Number of Holdings 46Expense ratio 1.79%Leverage on total assets 16.7%NAV at September 30,2015 $13.88NYSE closing price at September 30,2015 $12.07Limited term 10 yearsInception date November 24,2014Shares Outstanding 13,417,927

The above table shows a summary of the Miller Howard High Income Equity Fund

The Sector allocations of the fund are listed in the table below.

Consumer discretionary 3.8%Consumer staples 2.1%Energy 11.9%Financials 11.9%Health Care 3.9%Industrials 9.6%MLPs 13.8%REITs 20.8%Technology 6.0%Telecom 7.7%Utilities 8.0%Cash 0.5%

Top 5 holdings as of September 2015

Sector

Seagate Technology PLC Information TechnologyWilliams Cos Inc./The EnergyAT&T Inc. TelecomsKinder Morgan Inc./DE EnergyBlackstone Group LP Financials

The sector allocation table shows that REITs has the highest allocation with 20.8 percent of the funds.The Miller/Howard HIE Fund holdings in REITs are mainly in speciality item areas such as Healthcare, Data Centres and Outdoor Advertising. According to the US Census Bureau of Statistics, Canada, the 75 and older population is expected to grow by at least 98 percent by 2035.

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BDC’s Providing High Yield, At A Discount

By Thomas Hughes Senior Editor of Global Investor Spotlight

BDC’s provide investors high recurring income and are trading at significantly deeper

discounts than average, providing opportunity for growth and yield.

Prospect Capital And The Rising Rate Environment Don’t be surprised when closed end funds and BDC’s in particular come back into vogue. The asset class still offers some of the highest yield and total-return in the market and is now trading at significantly larger discounts to NAV than is typical for the industry. This was caused in

part by the uncertain interest rate environment in which the FOMC has put us but has set the industry up for gains into the coming years. Why? Because most of the lending done by BDC’s is at a floating rate while the credit facilities used to finance those loans are usually set at a fixed rate.

Prospect Capital for one is well positioned to benefit from a rising rate environment. At current mix, 89% of interest bearing assets are pegged to a floating rate while 87% of liabilities are pegged to a fixed rate, well above BDC average. Fund managers have estimated a rise in rates on the forward end of the LIBOR curve of 5% would increase net investment earnings by $0.28 per share in 2016, and $0.34 per share in

2017, all due to portfolio positioning. The caveat is that it will take at least a 1% move to affect income due to the terms of PSEC’s credit terms.

Dividend History Is Good, Outlook GoodIn the end, when it comes to CEF’s and BDC’s, it is all about dividends and dividend health. Prospect Capital Corporation has paid a regulat dividend since it’s IPO in 2004 with no expectations for that to stop, as you know BDC’s are required to pay out 90% of their taxable earnings to shareholders. PSEC’s rate has steadily risen since inception, minus two cuts, and has paid in excess of 10% for over 5 years, as it now. At today’s share prices the fund yields

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14

over 15% and is the highest in the class. Fund managers receive some criticism due to the fact that NII is barely covering distributions, and that is a concern, but considering the fact that taxable income covers payments it’s not as big of one as some would lead you to believe.

To date, Prospect has been able to earn in excess of it’s distributions on a quarter to quarter basis and is expected to continue covering payments into the future. Dividend coverage ran near 107% in the last fiscal year and current year earnings estimates more than cover distributions at their present level of $1.00 annually, or 0.0833 monthly. Low estimates for full year earnings is $1.00, high estimate is $1.09 with average estimate just over $1.03. At the same time recurring income is on the rise, reaching 96.1% in the last quarter.

Regardless of criticisms, NII has been growing on an annual basis since the funds IPO. Growth has slowed in 2015 but still expected into 2016 and beyond as the fund

originates and manages new loans.

Historic Discounts Offer Huge Returns It is not unusual for CEF’s and BDC’s in particular to trade a discount to NAV. It is also not unusual for PSEC to trade at a deeper discount to NAV than many of its peers.. The thing to take note of is that, at current share prices, the fund is trading at a much deeper discount to NAV than is typical, nearly double the industry average and PSEC’s own average.

Some analysts have suggested the discount represents a mis-pricing of portfolio value but not according to management. Prospect Capital Corporation president Grier Eliasek had this to say in an interview with Tom Sizemore . . . “We actually consider our book value accounting to be a major source of strength. We don’t value the portfolio ourselves. Our third-party valuation firms start with a blank piece of paper every quarter and value our portfolio from scratch. And our auditors approve.”

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

400

350

300

250

200

150

100

50

0

Net Investment Income has grown each year over the past 10 years(FY as of 6/30)

Net

Inve

stm

ent I

ncom

e ($

M fo

r Fisc

al Y

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Reinforcing that opinion are some notable insider purchases and a company stock buy back plan. Over the past 6 months alone insiders have bought more than 529,000 shares. That number more than doubles if you look back over the past 18 months and that is on top of a buy back plan that has so far flown largely under the radar. While so far purchases have been small, with the company trading at such a deep discount more are expected by the analyst community.

At $7.50 PSEC is trading at less than half the value of its peers on a forward P/E basis, on a price-to-book basis and on a discount to NAV basis. At last reporting NAV had increase to $10.31 leaving shares trading at a +30% discount. Looking back at the historical data, as provided in a company presentation, strategic investors can expect to receive some big gains over the next 12 months. The average gain in share price alone is over 55% for each of the four previous times PSEC has traded at such a deep discount. Including dividends average returns in the forward 12 month period are over 80% and when you consider only the two times the discount was 30% or greater average return jumps to over 100%.

Some Things To Consider There are some things to consider when looking at an investment in Prospect Capital Corporation. One of which is taxes. Prospect Capital Corporation, as a registered BDC, is in actuality a pass-thu company. This means that they are exempt from any of the taxes normally incurred by a business of this type. It is an advantage for the company as it frees up cash flow for investments, among other things, and to investors as it allows for above average dividend distributions and yield. The downside is that it can also be a burden; shareholders become liable for taxes upon receipt of those distributions. Depening on the type of account in which you are holding the stock there are a number of ways in which you can be affected.

First, Ordinary Income. This results from the regular, day to day business of the company and comes in the forms of interest income from debt securities. This is listed in box 1a of the 1099 DIV form. After that comes dividend income. Prospect Capital invests in equity positions in companies per its secondary objective; capital gains. As a shareholder in these companies Prospect recieves

dividends but the tax liability falls to shareholders of PSEC, not Prospect Capital Corporation. This income is qualified for the 15% tax rate on dividends and listed on line 1b. If fund managers decide to sell equity positions there is a chance of short and/or long term capital gains. These pass through as well and are reported on lines 1A for short term, and 2A for long term. From time to time there may also be a distribution not sourced from income ad would be considered a “return of capital” and not subject to tax.

The Bottom Line The bottom line is that if you are looking to add yield to your portfolio, and gain exposure to anticipated benefits rising from higher interest rates, then Prospect Capital Corporation is a good place to find it. The fund has a solid porttfolio of income producing assets, is paying over 15% in annuallized distributions and is trading at a discount to NAV that has provided some incredible 1-year returns in the past. The only negative that I can see at this time is potential tax impact on investor accounts, but paying taxes is a good thing if it means your making money.

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Swapping out of similar ETNs and into ETFs can produce approximately 127 bps in additional income plus realization of a valuable tax loss.

We are lowering our rating on AMLP to Neutral from Constructive.

Pricing and Fund Data

Name Ticker Rec. Price ($) Div. Yield (%)

NAV (S/share)

Premium/ Discount (%)

Index Ticker

Avg. Trading Vol. (000) (a)

Managed Assets ($mm)

Total Return (%) (b)

ETFs

Alerian MLP (AMLP) AMLP N 13.96 8.56 14.11 -0.64 AMZI 7,671 7.890 -17.41

Global X MLP ETF MLPA C 12.03 7.97 12.22 +0.25 SOLMLPA 86 161 -21.89

ETNs

Credit Suisse X-Links Cush. MLP Infra ETN MLPN UC 22.84 6.71 22.76 +0.22 MLPX 315 522 -28.25

JP Morgan Alerian MLP ETN AMJ UC 34.45 6.64 34.72 +0.32 AMZ 2,237 4.310 -25.85

UBS ETRACS Alerian MLP ETN MLPI UC 29.99 6.64 NA +0.13 AMZI 699 1,940 -25.16

UBS ETRACS Alerian Nat. Gas MLP ETN MLPG UC 25.50 6.81 NA -0.23 ANGI 2 22 -27.79

Source: Bloomberg, pricing as of November 4, 2015. a: 15-day moving average. b. 1-year trailing total return.

GATES Capital CorpYear-End Tax Swaps in MLP ETFs & ETNs – Part 2 November 5 2015.

In preparing this tax-swap report, we examined the structure and methodology of each MLP ETF/ETN index, the structure of each MLP ETF & MLP ETN,

as well as their distribution policies before proposing our swaps. Our conclusions and recommendations are summarized below.

MLP ETN to MLP ETF Swap: We recommend investors sell their MLP ETN positions in MLPN, AMJ, MLPI & MLPG and replace them with positions in the Global X MLPA MLP ETF (MLPA). Investors will realize a valuable tax benefit, increase their current yield by anywhere between 75 bp and 150 bp and in our view will be moving into an ETF that has excellent distribution coverage and a well-constructed underlying index. These and other factors supporting this recommendation are:

• Because of the differences in how MLP ETNs and ETFs structure their distributions, ETFs have a built-in yield advantage vs. their ETN counterparts that ranges anywhere between 75 bp and 150 bp. • Approximately 35% to 100% of the distributions from MLP ETFs are typically considered a return of capital, vs. MLP ETN distributions that are considered 100% ordinary income. • The underlying indices for the ETNs (MLPN, AMJ, MLPI & MLPG) are very similar to the index used by the Global X MLP ETF, with the notable exception that the Global X MLP ETF index modified its methodology in March 2015 to exclude natural gas processing companies and the commodity exposure these companies bring to the index. On a year-to-date basis, the Global X MLP ETF index outperformed the AMZI index by 605 bp based on market price.

AMLP to MLPA Swap: Within the MLP ETF universe we recommend investors sell their positions in the Alerian AMLP ETF in favor of the Global X

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MLP ETF (MLPA) for the following reasons:• MLPA has a much higher distribution coverage ratio of 103.4% and 97.2% for 2013 & 2014, respectively. This is also far higher and more consistent than AMLP’s distribution coverage, which has recently slipped from 90.9% to 86.4% for 2013 and 2014.• This lower distribution coverage is also likely lead to increased tracking error for AMLP vs. AMZI.• Management fees on the Global X MLP ETF are only 45 bp, far lower than AMLP’s 85 bp.

We are also lowering our rating on the Alerian MLP ETF (AMLP) from Constructive to Neutral until the inconsistencies in its distribution coverage are resolved. We also feel that investors seeking exposure to energy midstream assets will have both a lower risk profile and superior returns in the Global X MLP ETF.

Additionally, we are initiating coverage of the Credit Suisse X-Links Cush. MLP Infra ETN (MLPN) and the UBS ETRACS Alerian Nat. Gas MLP ETN (MLPG) with Unconstructive ratings (UC).

ETF Index ReviewBefore we can recommend swapping out of one ETF and into another, a careful examination of the underlying ETF Index is required. Every ETF is managed against one particular index, with the ETF manager’s performance measured by comparing the total return of their ETF against that index. This measure of performance is called tracking error, and is commonly used to measure an ETF fund manager’s performance. Because of the desire of ETF fund managers to attract assets and to differentiate themselves against their peers, it is very common to have ETFs within the same market sector utilize different indices. Some indices can be weighted by using the market capitalization of the underlying securities, while others can be equal-weighted and still others can utilize a combination of rules or factors in determining the index composition. Therefore, it is critical to understand the types of indices being tracked by the ETF to make sure the tax-swap being contemplated will not also change the character of the

investor’s initial investment. Within the MLP ETF universe, the Alerian, Cushing

and Solactive family of indices dominate the sector, with the Alerian family dominating the space in terms of ETF AUM. The Alerian indices used by the MLP ETFs we cover are variations on market capitalization-based indices composed of midstream MLPs, while the Solactive index excludes upstream and natural gas processing assets. However, the Cushing indices cover a slightly broader base of energy MLPs and utilize several factors in determining index composition.

After examining all of the underlying indices used in our family of MLP ETFs, we have a much more favorable view of the Alerian and Solactive family of market capitalization-weighted midstream indices in the current low-commodity price environment. We especially like the exclusion of upstream and natural gas processing MLPs from the Solactive index used by the Global X MLP ETF (MLPA) and feel the Cushing family of indices are better suited to a stronger commodity price environment.

MLP ETFs: Within this universe the Alerian MLP ETF (AMLP) dominates in terms of assets under management (AUM), which currently stands at $7,374 bn. The fund is indexed to the Alerian MLP Infrastructure Index (AMZI), which is largely a capped (22 issuers) market capitalization-weighted index whose constituents earn the majority of their cash flow from midstream MLP energy companies. The Global X MLP ETF (MLPA) fund is indexed to the Solactive MLP Infrastructure Index and is also a caped (40 issuers), free float market capitalization-weighted index that is composed of MLPs engaged in the transportation, storage and refining of marketing of natural resources. While this index has a similar composition when compared against the AMZI Index, it has outperformed the AMZI Index on a market-price basis by 605 bp and 568 bp, respectively over the YTD and 1-year periods. In our view, the index’s more diverse exposure to the sector, 40 issuers vs. AMZI’s 22 issues, plus the recent exclusion of natural gas processing business from the index contributed to this outperformance.

MLP ETNs: Based on AUM, the majority of MLP ETN assets are based on indices produced by Alerian, with a much smaller group based on indices produced by Cushing Asset Management. The Alerian-based ETNs, the largest being the JP Morgan Alerian MLP ETN (AMJ), is based on the Alerian MLP Index (AMZ). Like its sister Alerian Index, AMZI (discussed above), AMZ is a capped market capitalization-

Every ETF is managed against one particular index, with the ETF manager’s performance measured by comparing the total return of their ETF against that index.

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weighted index, but has a much lower market capitalization threshold of $500 mm vs AMZI’s market capitalization threshold of $2.0 bn. The UBS ETRACS Alerian MLP ETN (MLPI), like the AMLP ETF, is based on the Alerian MLP Infrastructure Index (AMZI). The UBS ETRACS Alerian Nat. Gas MLP ETN (MLPG) is also based on an Alerian Index, but this index, the Alerian Natural Gas MLP Index (ANGI), is based on similar underlying index rules, but focuses only on natural gas-based pipeline transportation, storage and processing companies as an additional filter. Like the AMZ index, this index also has a lower market capitalization threshold of $500 mm.

However, the Credit Suisse X-Links Cush. MLP Infra ETN (MLPN) uses an index developed by Cushing Asset Management. The Credit Suisse MLPN ETN, based on the Cushing 30 MLP Index (MLPX), is designed to track widely held energy infrastructure MLPs, but is an equal-weight index that is also based on a proprietary valuation methodology. The index has 30 MLP constituents that hold midstream energy infrastructure assets. We believe the equal weight component of this index tracks the Alerian AMZI index fairly closely. On a total return basis the Cushing MLPX index outperformed the Alerian AMZI index by approximately 314 bp and 332 bp over the YTD and 1-year basis, but underperformed the Alerian AMZI index by 335 bp over a 5-year period.

Passive ETF Structure ReviewIn reviewing the broad structural characteristics of passive ETFs, we will focus particular attention on how their structural elements will lead to different tax treatments of their distributions. As both MLP ETFs in our universe are C-corps and use an in-kind creation/redemption process to minimize tax liabilities, the largest factor that will influence the tax efficiency of distributions is portfolio turnover. As a general rule, higher levels of portfolio turnover can generate higher levels of realized portfolio gains, which will reduce the ability of the ETF to pass through return-of-capital losses received from investments to shareholders.

While ETFs are passive strategies from a portfolio management perspective, changes in the underlying index will require the ETF to do a cash sale/purchase in order to rebalance the index. As both of the indices used by our two MLP ETFs are market capitalization-weighted, periods of higher than average market volatility can also lead to changes

in index composition and higher portfolio turnover. Both indices rebalance quarterly, but can do so more frequently due to mergers, acquisitions and spinoffs. Lastly, changes in index methodology can also have a significant impact on index composition and by extension ETF portfolio turnover.

Both the Alerian MLP (AMLP) and Global X MLP (MLPA) ETFs’ experienced portfolio turnover for fiscal 2014 that was twice that of prior periods. The factors behind this increase in turnover are largely associated with those previously mentioned. However, during March 2015 the Solactive MLP Infrastructure Index implemented a methodology change which excluded natural gas-processing MLPs from the index. This was the only major structural change since index inception approximately 3 years ago, but will undoubtedly increase portfolio turnover in the MLPA for fiscal 2015. By comparison, the AMZI index has not had significant methodology changes since inception, which should promote lower portfolio turnover.Conclusion: While passive ETF structures can give investors a cost-effective exposure to a particular market sector, index turnover can significantly reduce the tax efficiency of their distributions. In comparing these two indices, we would have to say that the index supporting the AMLP ETF has had fewer methodology changes to its index than MLPA. This should promote less portfolio turnover for AMLP.

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ETN Structure ReviewAn Exchange-Traded Note (ETN) is nothing more than a structured unsecured debt security of the issuing broker-dealer. While the interest payments on the ETN are linked to one of several MLP Indices, interest payments are considered ordinary income. The obligation to pay interest and principal upon maturity is that of the issuing broker-dealer. Both market price and distribution levels are linked to the underlying index, and can vary among the several MLP ETNs in our universe. Moreover, it is important to remember that all MLP ETNs have a final maturity. Typically these maturities average 20 years from issuance date.Conclusion: These structures offer investors a much better tool to track index performance without a management fee drag on NAV. However, distributions are universally lower than ETFs and are 100% taxable.

DistributionsAt the most basic level ETNs distribute all dividends received from their underlying investment to shareholders after deducting management fees, while ETFs distribute all of their dividends received before management fees. This disparity is the principal reason distribution rates from ETFs exceed those from ETNs by approximately 75 bp to 1750 bp depending on fees (See Figure 1).

In Figure 1 above we compared distribution yields between one ETF (MLPA) with one ETN (AMJ), which also used similar indices. As can be seen in Figure 1, while this differential did vary over time, it did average 97 bp over this period. This differential is largely driven by the different distribution strategies discussed above, which will at most equal the sum of the management fees from the two funds. In our example above, MLPA charges a management fee of 0.45 bp, while AMJ charges 0.85 bp, which will equal 130 bp.

In addition, there are some disparities between the distribution policies among MLP ETFs. Specifically, while many largely distribute their gross proceeds to shareholders every quarter, which can result in some quarters producing small periodic reductions in distributions rates, the Alerian AMLP ETF is guided by several principles. The principles they consider include (1) the rate of growth in underlying MLP distributions, (2) the actual yield from these MLPs, (3) the desire to minimize distribution volatility and (4) the income of the fund. Over the past 18 months the Alerian AMLP ETF has been paying out a distribution rate than has been higher than the level of gross distributions it received. This has been a departure from the fund’s pre-2013 history, where distribution rates matched distributions received very closely. The fund has attributed this disparity to the rapid growth of the ETF and to index changes that have occurred over the past year and has suggested that its distribution growth rate would be lower going forward until this disparity is eliminated. While we think these are good reasons behind why this disparity currently exists, we place a significant amount of weight behind distribution coverage.

Because the tax character of MLP ETN’s are 100% taxable, we will only show tables for AMLP and

Figure 1: Source: Bloomberg

AMLP Distribution History (%)6-months

11/30/12 11/30/13 11/30/14 5/31/15

Return of Capital 99.68 100.0 64.25 35.0

Ordinary Income 0.32 0.0 35.75 65.0

Distribution Coverage (a) 93.0 90.9 86.4 80.3

Source: Alerian a. net investment income plus return of capital distributions/distributions paid.

MLPA Distribution History (%) 6-months

11/30/12 (b) 11/30/13 11/30/14 5/31/15

Return of Capital 96.9 71.4 35.5 86.0

Ordinary Income 3.1 28.6 64.5 14.0

Distribution Coverage (a) 86.0 103.4 97.2 88.1Source: Global X a. net investment income plus return of capital distributions/distributions paid. b. from the funds commencement of operations 4/18/12.

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MLPA. As we have discussed and as can be seen in the table below, distribution coverage is much stronger for MLPA than AMLP. While the tax character of AMLP is a bit better than that of MLPA, the issues already discussed about AMLP’s weak distribution coverage will also have the effect of boosting the return of capital percentage for distributions. While we do give significant weight to the tax character of distributions, we give a much higher weighting to their coverage ratio.

AMLP Distribution History (%) While the distribution of the gross amount of dividends from MLP ETFs potentially builds in a NAV drag over time, we have a favorable view of the asset class and consider even a planned NAV distribution of up to 1% to be manageable. While we acknowledge AMLPs’ distributions are more tax efficient than MLPA, MLPA has a superior history of distribution coverage.

Disclosure Appendix – A1 Analyst Certification: I, N. Charles Earle, hereby certify that all of the views expressed in this report accurately reflect my personal opinions about any and all of the subject securities or issuers, and that no part of my compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by me in this research report.

Conflicts of InterestThis research contains the views, opinions and recommendations of GATES Capital Corporation research analysts. GATES Capital has adopted research conflict-of-interest policies, including prohibitions on non-research personnel influencing the content of research. Research analysts still may speak to GATES Capital trading desk personnel in formulating views, opinions and recommendations. The trading desk may trade or may have traded as principal on the basis of the research analyst’s views and research. Therefore, this research may not be independent from any proprietary interest of the GATES Capital trading desk which may conflict with your interests. As a general matter, GATES Capital and/or its affiliates trade as principal in connection with making markets in fixed income securities discussed in research reports.

semi-annual11/30/12 11/30/13 11/30/14 5/31/15

I ncome Statement ($000)

Net Investment Income (a) -15 -151 -301 -213

R eturn of Capital A dj 432 3375 6,110 4,672

Net R ealized Gains/Losses 14 -50 1,792 -5,712

Net Unrealized Gains/Losses 279 6435 4,736 -53

Other 0 0 0 0

Net Income (b) 710 9,609 12,337 -1,306

Distribution CoverageNet Investment Income + R OC A dj. 417 3,224 5,809 4,459

Net Call Option Premiums 0 0 0 0

Cash Distributions (f) 485 3,118 5,978 5,062

Distr ibution Cover age 86.0% 103.4% 97.2% 88.1%

Net Assets ($000)B alance B eginning of Y ear 0 16330 66,852 142,278

Net Investment Income 710 9,609 12,337 -1,306

R eturn of Capital A dj. -432 -3,375 -6,110 -4,672

Distributions -485 -3,118 -5,978 -5,062

Share Distributions 0 0 0

Share T ransactions (c) 16,537 47,407 75,177 31,274

B alance End of Y ear 16,330 66,853 142,278 162,512

Deferred T axes (000)Net Operating loss Carryforwards 0 0 0 228

Capital Loss Carryforwards 0 0 6 0

Other 8 3 0 0

Net Unrealized Gains -163 -3492 -6,072 -2,972

Income from M LP Investments -149

Other 0 0 -361 -10

B alance End of Y ear -155 -3,489 -6,427 -2,903

K ey L everage DataB ank Debt Facility (mm) 0 0 0 0

Senior Notes (mm) 0 0 0 0

Preferred Stock (mm) 0 0 0 - L ever age R atio (d) (%) 0.0% 0.0% 0.0% 0.0%

Common Shares Oust (mm) 1.1 4.15 4.50 2.0

Per Share Fees & E xpenses e

M anagement Fees 0.45 0.45 0.44 0.46

Other Expenses 0.00 0.02 0.03 0.00

S ubtotal 0.45 0.47 0.47 0.46

Leverage Expenses 0.00 0.00 0.00 0.00

T otal 0.45 0.47 0.47 0.46

Portfolio T urnover 6% 14% 31% 33%

M L PA - Financial H ighlights (000)

a: I nv estment income adds back return of capital adjustments. b: Reported as net increases/decreases in net assets f rom operations, net inv estment income plus realized and unrealized gains/losses f rom operations less

pref erred stock div idends. c: Reinv estments and/or tenders. d: L ev erage Ratio = total debt& pref erred stock / ( net assets + total debt & pref erred stock ) . e: F ees and ex penses are ex pressed as a percentage of av erage

net assets, semi-annual results are annualized. f : E x cluding shares issued f or div idend re- inv estment. g: lev erage adjustments f or def erred tax liabilities adds back 100% of current def erred tax liabilities. T he f unds

inceptino date was 4/18/12.

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Analyst OwnershipAs of November 22, 2015, N. Charles Earle and household owns 415 shares of CEM, 1020.432 shares of NRK, 1,088 shares of BTO, 5,967.203 shares of BDJ, 364.3576 shares of CII, 54 shares of HYT, 1085.656 shares of CBA and 2,950.0 shares of NDP.

Important DisclosuresAnalyst’s Compensation: The research analyst responsible for the preparation of this report receives compensation based upon various factors, including the quality and accuracy of research, client feedback, competitive factors and overall firm revenues.

Risk Associated With Exchange- Traded & Closed-End FundsAll investments are subject to risk and the potential for principal loss, with the following risks more specific to Exchange-Traded & Closed-End Funds:• Investments in equity securities can expose investors to a greater risk of “loss of principal” vs. investment-grade debt. • The use of leverage, options and derivatives may also increase the volatility of NAV and the market price of common shares, which may increase the risk of loss of principal.• Exposure to foreign-based equity securities may also expose investors to currency risks, where positions are not fully hedged.• Exposure to smaller capitalized issuers may also increase volatility in NAV and the market prices of common shares.• At times, liquidity in certain ETFs & CEFs may be limited, which can produce both upward and downward volatility in market prices.

Closed-End Fund Rating SystemGates Capital Corporation rates Closed-End Funds (CEF) Buy, Hold and Sell. Investors should carefully

read Gates Capital Corporations’ research in its entirety and not infer the contents from the ratings alone. In any case, ratings (or research) should not be used or relied upon as investment advice. An investor’s decision to buy or sell a security or fund should depend on individual circumstances, such as the investor’s existing holdings, tax status or risk tolerance, and other individual circumstances.

Closed-End Fund Rating DefinitionsBUY (B): The CEF’s total return is expected to exceed the average total return of the analyst’s coverage universe, over the next twelve to eighteen months.HOLD (H): The CEF’s total return is expected to be in line with the average total return of the analyst’s coverage universe over the next twelve to eighteen month sSELL ( S): The CEF’s total return is expected to be below the average total return of the analyst’s coverage universe over the next twelve to eighteen months.

Closed-End Fund Ratings DistributionAs of November 22, 2015, the distribution of CEF ratings can be seen in the following table.

Price Chart and Rating HistoryGates Capital Corporation initiated its first equity research report on Closed-End Funds on May 19, 2014. For a current list of our price chart and rating history for closed-end funds please click on the following link. http://gatescapital.com/wp-content/uploads/2015/06/BaseDisclosure-Pricechartsratinghistoryv10152015.pdf However, feel free to contact Gates Capital Corporation at 1-800-752-1018 for additional information.

Exchange-Traded Fund Rating SystemGates Capital Corporation rates Exchange-Traded Funds (ETF) Constructive, Neutral and Unconstructive. Investors should carefully read Gates Capital Corporations’ research in its entirety and not infer the contents from the ratings alone. In any case, ratings (or research) should not be used or relied upon as investment advice. An investor’s decision to buy or sell a security or fund should depend on individual

Closed-End Fund Rating Category

Count % of Total

Buy 26 46%Hold 20 36%Sell 10 18%

The research analyst responsible for the preparation of this report receives compensation based upon various factors, including the quality and accuracy of research, client feedback, competitive factors and overall firm revenues.

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circumstances, such as the investor’s existing holdings, tax status or risk tolerance, and other individual circumstances.

Exchange-Traded Fund Rating DefinitionsConstructive (C): The ETF’s management, performance, structure and sponsor are judged to be substantially stronger than its peers in the same market sector. Neutral (N): The ETF’s management, performance, structure and sponsor are judged to be no stronger or weaker than its peers in the same market sector. Unconstructive ( UC): The ETF’s management, performance, structure and sponsor are judged to be substantially weaker than its peers in the same market sector.

Exchange-Traded Fund Ratings DistributionAs of November 22, 2015, the distribution of ETF ratings can be seen in the following table. Additionally and as of 11/22/2015, Gates Capital provided no investment banking services to any of the subject issuers for which this rating distribution applies

Exchange-Traded Funds - Price Chart and Rating History Gates Capital Corporation initiated its first equity research report on Exchange-Traded Funds on January 23, 2015. As such, there will be no rating history as of November 22, 2015. However, feel free to contact Gates Capital Corporation at 1-800-752-1018 for additional price chart and rating history information.

Other DisclosuresGATES Capital Corporation (the Firm) is a registered broker dealer. The Firm may make a market in the securities referenced herein and/or may actively trade these securities for its customers and for its own account. Accordingly, the Firm may have a long or short position in any such security at any time. The securities noted herein may not have been registered under the Securities Act of 1933 (Securities Act) and may not be offered or sold except in a transaction pursuant to SEC Rule 144A or otherwise exempt from or not subject to the registration requirements of the Securities Act. Any information contained herein, that is associated with securities offered or sold under SEC Rule 144A, is not intended for distribution in the United States or to any US person other than a “Qualified Institutional Buyer,” as defined in Rule 144A.

Any price indications contained herein are not firm bids or offers either as to price or size, and are provided solely for your information. Such indications (if any) are not intended as a solicitation with respect to the purchase or sale of any security and are subject to change at any time without notice. Nothing herein shall form the basis of or be relied on in connection with any contract or commitment whatsoever. Neither the Firm nor any other person accepts any liability whatsoever for any loss (however arising and whether direct or consequential) from any use of the information contained herein or otherwise arising in connection herein.

Although the information contained herein has been obtained from sources that the Firm believes to be reliable, the Firm does not guarantee its accuracy, and such information may be incomplete or condensed. Although this material is not a research report, to the extent it contains a recommendation, this report does not take into account the investment objectives or financial situation of any particular person. Investors should obtain advice based on their own individual circumstances before making an investment decision on the basis of a recommendation contained in this report. This communication is made by the Firm and any investment service or products herein are offered solely to market counterparties, and intermediate customers. No other person may rely on the contents of this communication.

This material is furnished on the understanding that the Firm is not undertaking to manage money or act as a fiduciary with respect to your account(s) or any of your managed fiduciary account(s) and that our services do not serve as a primary basis for any investment decision made with respect to such accounts. This material provided informative and/or alternatives we believe to be appropriate for consideration. The decision whether or not to adopt any strategy or engage in any transaction is your responsibility.

@ GATES Capital Corporation, 2015. All rights reserved. “The Bond Desk” is a trademark of GATES Capital Corporation.

N. Charles EarleGates Capital Corp.Director of Research & [email protected](212) 682-6810www.gatescefresearch.com

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5th Annual CEF Conference A Hit With Closed-End Fund Community

By Jason Van Steenwyk Senior Editor of Global Investor Spotlight

With interest rates stubbornly low, investors are

getting increasingly hungry for yield. And

that’s good news for closed-end mutual fund managers, who, thanks to the closed-end capital structure and some currently deep discounts from NAV, have the inside track on delivering ROI to investors looking for increasingly hard-to-come-by yield.

The Fifth Annual Closed-

End Fund conference – the only industry forum of its size currently devoted entirely to discussing issues specific to closed-end funds, BDCs and MLPs, is the brainchild of Patricia Baronowski, the President of Pristine Advisors, an investor relations and IR/PR company with a unique focus on serving closed-end funds and other companies supporting the industry, such as BDC’s, MLP’s and ETF’s.

“We started this conference because we found there was a real need for an event specifically focused on issues that have particular resonance for the closed-end fund community,” explained

Baronowski. “There are other fantastic conferences that look at the fund industry more generally, of course, but this is the only event that really lets us dig deep into the unique attributes and advantages of the closed-end fund structure, as well as the challenges we face in this industry in getting the word out about those structural investment vehicles.

This year’s conference, held October 27th at the New York Hilton Hotel – Midtown - was the biggest yet, with over 18 sponsors and 250 attendees from a variety of disciplines. Attendees included fund managers, analysts and researchers,

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financial advisors and brokers, institutional investors and their representatives, investment bankers, shareholders, attorneys and accountants, financial journalists, shareholders and shareholder activists and retail investors. The result was a frank exchange of views and perspectives on many of the important issues facing closed end fund, MLP, BDC and ETF professionals and investors today.

Among the topics of discussion: Master limited partnerships (MLPs) and energy value chain investments

Business development companies (BDCs)

Corporate actions from wide discounts (including open-endings, tenders, liquidations, etc.)

International investing and the closed-end fund advantage

Income investing in a rising-interest rate environment

Closed-end fund discounts What’s important in picking a

closed-end fund?Equity income ideas for the

clients’ portfolio …to name a fewThe conference also included

open Q & A forums with a panel of expert CEF, BDC MLP and ETF speakers, including for the CEF forum:• Renee Baker, manager of Closed-End Funds, Aberdeen Asset Management• John Cole Scott, Chief Investment Officer, Closed End Fund Advisors• Ken Fincher, Senior Vice President, First Trust Advisors• Chris Earle, Director of Research and Strategy, Gates Capital Corporation• Jay Hatfield, Co-founder and President, Infrastructure Capital Advisors, LLC• Alberto Osorio, President and

CEO, Mexico Fund, Inc. • Mike Taggart, Head of Closed-End Fund Research, Nuveen Investments• Robert Shaker, Portfolio Manager, Shaker Financial Services• Stefan Frischknecht, Head of Investments, Fund Manager, The Swiss Helvetia Fund, Inc. • Mariana Bush, Head of CEF and Exchange-traded Tracking Products Research, Wells Fargo Advisors

Certified Financial Planner (CFP®) practitioners and candidates also received professional education credit for attending.

The CEF Conference also attracted sponsorship and participation from CEFNetwork.com,

TheStreet.com, Daily Fund News and Global Investor Spotlight.

Response from participants was overwhelmingly positive. “The CEF conference brings together the advisor, the institutional investor, the analyst, hedge funds, the activists – it brings the whole community together for an environment with the closed-ended fund structure as its main focus,” says John Cole Scott of Closed-End Fund Advisors and the author of the well-respected Scott Letter, focusing on closed-end funds analysis and industry events. “It’s a well-spent day in our marketing efforts to stay in touch with our investors and with the community.”

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A Buying Opportunity For High Yield Investors

By Thomas Hughes Senior Editor of Global Investor Spotlight

The HIE, or High Income Equity Fund, is a high yield

closed end fund managed by Miller Howard

Investments with value for investors.

Dividends Come At A Price The most recent quarter was not a good one for HIE share prices and fund managers will be the first to say it. In their most recent conference call manager John “Jack” E Leslie III said it straight out, our “pursuit of dividends hurt us in the quarter”. This is because dividend stocks fell out of vogue, at least in the first half of the year, as investors turned away from yield in favor of other opportunities in the equities market. Dividend producers of all form underperformed, not just the HIE. This is easy to see when you compare a dividend tracking index such as the Spyder S&P Dividend tracker SDY with the broader market but nonetheless troubling for investors, especially with the specter of higher interest on the horizon.

Higher interest rates are a concern as they could lead investors away from cash producing assets as yields begin to rise on other asset classes. However, from what I took away from the HIE conference call, fund manger Jack Leslie see’s more risk of a rate hike hurting the overall economy than there is of it significantly impacting longer term yields. The FOMC has

long said that once lift off began it would be a slow process and that we would be in a low rate environment for a long time. Any rate hike we get will most likely be 25 basis points, not much considering the amount of time the market has had to prepare for it and the amount of time we can expect it to take for rates to be raised again. What does this mean for dividends and dividend paying assets? That they will remain a prime place for investors seeking cash flow and return on investment. In fact, in Leslie’s view a rate hike would be beneficial to dividend producing assets.

Weakness Is Opportunity This recent sell-off in the market is an opportunity for investors of all variety, but most importantly high yield investors. Not only are stocks being sold at a discount, they are being sold with higher yields and a high degree of dividend growth potential, an opportunity to good to pass up. HIE is no different. It too has undergone a sell-off that has left it undervalued, with a higher yield and significant potential for capital appreciation over the next year. In fact, the HIE is better positioned to produce growth than most stocks in the broader market. The average yield on the S&P is only about 2.20% with average growth near 12%. The HIE is yielding over 10% with average growth among portfolio stocks greater than 20%.

On a quarterly basis REITs and Utilities were the worst performing sectors in 2nd quarter of this year and had the biggest impact on HIE share

prices. These sectors are closely tied to the bond markets, often referred to as bond proxies, and were negatively impacted by rising bond rates during the period. Looking forward we can expect these sectors to continue paying and raising their distributions as the economy continues to expand. The three top performing assets this quarter; Golar LNG, Williams Companies and Blackstone Group all performed better than expected, increased their dividends and/or raised guidance resulting in significant upside for each.

Another concern with the HIE, as with all high yielders, is dividend health. HIE has been able to earn more than enough cash to cover its dividends through its strategies and, as Mr. Leslie put it, not just been paying shareholders with their own money. This is done through earned dividends as well as special dividends that have been paid by its portfolio companies and through cash flow producing options strategies. The fund prospectus allows as much as 20% of portfolio value to be tied up in option strategies including short puts and calls. Over the course of the past quarter 12 put positions were sold with 9 expiring worthless and 3 being put back to the company, resulting in discounted purchases of stocks fund managers already wanted to own.

Forward Outlook Is Strong Economic outlook for the US is strong regardless of risks abroad. Despite weak growth in the EU and Japan, and despite the ongoing slow

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down in China, the US is poised for growth in the range of 2-3% over the next 2-3 years at least with signs pointing to robust growth in earnings into the next 12 months. On an economic basis we are in the throes of ongoing improvement in labor, housing and auto sales. Labor trends show a healthy, stable market with unemployment within the FOMC’s range of “full employment. At the same time there are signs of wage inflation that, while still tame, have led to a 2.2% annualized increase in wages that is expected to spill over into consumer spending. Consumer spending is also on the rise, as evidenced by the 2.5% year to date increase announced just last month.

In terms of earnings outlook the 3rd quarter of this year is not going to be a good one. At best we can expect to see earnings growth among S&P 500 companies to be flat on last year. However, looking past the 3rd quarter earnings growth is expected to return in the 4th quarter with revenue growth returning in the 1st quarter of next year. Expectations for 2016 earnings growth are robust, trending in a range between 10% and 11%.

In terms of dividends Leslie and Miller Howard expect them to continue to increase although good

yield will be hard to find and come at a premium. This is because the net effect of higher rates on dividend paying assets will be either better coverage ratios on distributions, dividend growth, or both. In effect, a continuation of positive dividend trends we have seen over the past few years.

According to data from S&P Dow Jones the 2nd quarter of 2015 saw net dividend increases of $12.5 billion. This is slightly slower than $12.6 billion pace set last year in the 2nd quarter but nonetheless a significant amount of growth. Not only are S&P index companies increasing their distributions so to are the non-S&P companies, and all expected to continue into the 3rd quarter and beyond.

Howard Silverblatt, Senior Index Analyst at S&P Dow Jones Indices, had this to say in the quarterly report on dividends. . . “Given the current

declared policies, it would take a catastrophic event (or government action) for 2015 not to be a record year. The question at this point is will we extend the four-year run of double-digit growth in actual payments. The answer appears to be that we will be very close to that mark, and while the actual rate is relevant to the official record, it is a nice neighborhood to be in.”

What This Means For The HIE Based on trends and evidence economic expansion, revenue growth, earnings growth and dividends are on the rise with no end in sight. What this all means for the HIE is that it is set up to take advantage of market trends and expectations. At current valuation the fund is undervalued compared to NAV and its ability to earn income providing a chance not only for significant cash flow, but also for capital appreciation.

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27

Will Capitulation in MLPs Be Driven by CEF Selling? October 1, 2015.

Lower asset prices prompt many MLP CEFs to sell assets and reduce leverage in order to meet mandated asset coverage tests.

Summary: It is our belief that this past month’s 13.37% sell-off in the Alerian MLP Index was at least partially exacerbated by leverage reduction-related asset sales of several MLP CEFs. As further detailed below, continued weakness in the price of energy assets has finally started to push leverage levels near or in excess of statutory maximums. While funds can operate with excess leverage levels, they are prohibited from making any distributions. While PIMCO did suspend their distribution on several CEFs during the 2008/2009 period and made-up skipped distributions at a later date, we do not think any MLP CEF sponsors will seek to utilize this option in the current environment. Also adding to the overall selling pressure in this sector have been the following factors:1. Much lower levels of dealer inventory in many CEFs and lower levels of market liquidity.2. Uncertainty on what longer-term oil & gas throughput volumes will be in a lower crude-oil environment.3. Anticipation as to the strength of third quarter earnings from

underlying MLP companies.While we are confident the

third quarter will show reasonable earnings from MLP companies and are encouraged by signs U.S. crude oil production has started to fall, low levels of market liquidity and volatility could still produce additional periods of leverage reduction-related selling pressure for the remainder of 2015. Therefore, we encourage investors to add to their MLP CEF positions during these periods as we retain our positive view on the sector over the longer term.

Specifically, we encourage

investors to add to existing position in those funds shown not to have significant leverage issues, specifically the Tortoise NDP, ClearBridge CEM and Nuveen JMF funds. Conversely, we would avoid those funds we believe are in the process of doing significant delevering, which include GER, GMZ, KYN and NML.

Energy and MLP Price Indices: As can be seen in Figure 1, prices of energy companies in the Energy Select SPDR (XLE) have tracked the MLP Index (AMZ) fairly closely. This relationship remained fairly

Figure 1 Source: Bloomberg

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28

tight up until September, when it significantly diverged, as we can see in Figure 1. Although this divergence has been in place for only a few weeks, we think it is evidence of leverage-induced selling on the part of closed-end fund managers. Conversely, XLE has seen some strength during this period as crude oil prices have stabilized on lower U.S. production data.

Will Capitulation in MLPs be Driven by CEF Selling? October 1, 2015Leverage Covenants for Closed-End Funds: All closed-end funds are regulated by the Investment Company Act of 1940 (40 Act), which is administered by the SEC. Among the many rules outlined in this Act are limitations on the levels of debt and preferred stock leverage.

These limitations restrict any closed-end fund from either issuing new stock or making any distributions if these absolute levels of leverage are exceeded.

With respect to debt leverage, closed-end funds must maintain an asset coverage ratio of 300% against total debt. This is also more commonalty referenced as a debt limitation of 33.33% of the fund’s total net assets plus outstanding debt levels. This can also be seen in the formula represented below:Debt Leverage Ratio = Debt

Net Assets + DebtWith respect to preferred stock

leverage, closed-end funds have a much less stringent coverage test, as the funds need only maintain a 200% asset coverage against total preferred stock and debt balances. This is also more commonalty referenced as a preferred stock limitation of 50.0% of the fund’s total net assets plus outstanding debt and preferred stock levels. This can also be seen in the formula represented below:Preferred Stock = Preferred Stock + Debt Leverage Ratio Net Assets + Preferred

Stock + DebtCurrent Estimated Leverage Levels:

As can be seen in Figure 2 below, most MLP CEF funds appear to be very close to the statutory maximum, with those estimated to be significantly in excess of this limit highlighted in red. However, it is important to note that although we do have good daily date for each fund’s net asset values, the reporting of debt and preferred leverage levels is done on either a monthly or semi-annual basis. Therefore, we view this table as more of an indication that a particular fund either already has or is in the process of reducing leverage.

Still, we do have additional evidence that several funds already reduced leverage earlier this year. This would include the Goldman Sachs funds GER & GMZ, which on a combined basis reduced leverage by $40 mm during the six-month period ending May 31, 2015.

In most cases, leverage reduction is funded by the sale of managed assets unless excess cash balances are available.

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In other notable cases, Legg Mason recently completed the private placement of preferred stock leverage for the benefit of all of its MLP CEFs, which we believe will be used to replace a portion of each fund’s debt leverage. Although two Legg Mason funds shown in Table 2 have excess leverage, these funds will require only modest amounts of leverage reductions by our estimates. Also helping the Legg Mason complex of MLP funds is the fact that this sponsor had historically maintained below-average leverage levels vs industry averages. Historically, these leverage levels ranged between 20% and 25%, while the rest of the MLP industry averaged 28% and higher.

Additionally, none of the MLP CEF funds we cover or monitor appeared to be close to exceeding preferred stock leverage limits, as can also be seen if Figure 2.

Analyst Certification:I, N. Charles Earle, hereby certify that all of the views expressed in this report accurately reflect my personal opinions about any and all of the subject securities or issuers, and that no part of my compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by me in this research report.

Conflicts of InterestThis research contains the views, opinions and recommendations of GATES Capital Corporation research analysts. GATES Capital has adopted research conflict-of-interest policies, including prohibitions on non-research personnel influencing the content of research. Research analysts still may speak to GATES Capital trading desk personnel in

formulating views, opinions and recommendations. The trading desk may trade or may have traded as principal on the basis of the research analyst’s views and research. Therefore, this research may not be independent from any proprietary interest of the GATES Capital trading desk which may conflict with your interests. As a general matter, GATES Capital and/or its affiliates trade as principal in connection with making markets in fixed income securities discussed in research reports.

Analyst OwnershipAs of October 1, 2015, N. Charles Earle and household owns 415 shares of CEM, 1015.796 shares of NRK, 5,929.297 shares of BDJ, 361.836 shares of CII, 54 shares of HYT, 1085.656 shares of CBA and 2,950 shares of NDP.

Important DisclosuresAnalyst’s Compensation: The research analyst responsible for the preparation of this report receives compensation based upon various factors, including the quality and accuracy of research, client

feedback, competitive factors and overall firm revenues.

Risk Associated With Exchange-Traded & Closed-End FundsAll investments are subject to risk and the potential for principal loss, with the following risks more specific to Exchange-Traded & Closed-End Funds:• Investments in equity securities can expose investors to a greater risk of “loss of principal” vs. investment-grade debt.• The use of leverage, options and derivatives may also increase the volatility of NAV and the market price of common shares, which may increase the risk of loss of principal.• Exposure to foreign-based equity securities may also expose investors to currency risks, where positions are not fully hedged.• Exposure to smaller capitalized issuers may also increase volatility in NAV and the market prices of common shares.• At times, liquidity in certain ETFs & CEFs may be limited, which can produce both upward and downward volatility in market prices.

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30

Closed-End Fund Rating SystemGates Capital Corporation rates Closed-End Funds (CEF) Buy, Hold and Sell. Investors should carefully read Gates Capital Corporations’ research in its entirety and not infer the contents from the ratings alone. In any case, ratings (or research) should not be used or relied upon as investment advice. An investor’s decision to buy or sell a security or fund should depend on individual circumstances, such as the investor’s existing holdings, tax status or risk tolerance, and other individual circumstances.

Closed-End Fund Rating DefinitionsBUY (B): The CEF’s total return is expected to exceed the average total return of the analyst’s coverage universe, over the next twelve to eighteen months.HOLD (H): The CEF’s total return is expected to be in line with the average total return of the analyst’s coverage universe over the next twelve to eighteen month sSELL ( S): The CEF’s total return is expected to be below the average total return of the analyst’s coverage universe over the next twelve to eighteen months.

Closed-End Fund Ratings DistributionAs of October 1, 2015, the distribution of CEF ratings can be seen in the following table.

Closed-End Fund Rating Category Count % of TotalBuy

Buy 26 47%

Hold 20 36%

Sell 9 16%

Price Chart and Rating HistoryGates Capital Corporation initiated its first equity research report on Closed-End Funds on May 19, 2014. For a current list of our price chart

and rating history for closed-end funds please click on the following link. http://gatescapital.com/wp-content/uploads/2015/06/BaseDisclosure-Pricechartsratinghistoryv9102015.pdf. However, feel free to contact Gates Capital Corporation at 1-800-752-1018 for additional information.

Other DisclosuresGATES Capital Corporation (the Firm) is a registered broker dealer. The Firm may make a market in the securities referenced herein and/or may actively trade these securities for its customers and for its own account. Accordingly, the Firm may have a long or short position in any such security at any time. The securities noted herein may not have been registered under the Securities Act of 1933 (Securities Act) and may not be offered or sold except in a transaction pursuant to SEC Rule 144A or otherwise exempt from or not subject to the registration requirements of the Securities Act. Any information contained herein, that is associated with securities offered or sold under SEC Rule 144A, is not intended for distribution in the United States or to any US person other than a “Qualified Institutional Buyer,” as defined in Rule 144A.

Any price indications contained herein are not firm bids or offers either as to price or size, and are provided solely for your information. Such indications (if any) are not intended as a solicitation with respect to the purchase or sale of any security and are subject to change at any time without notice. Nothing herein shall form the basis of or be relied on in connection with any contract or commitment whatsoever. Neither the Firm nor any other person accepts any liability whatsoever

for any loss (however arising and whether direct or consequential) from any use of the information contained herein or otherwise arising in connection herein.

Although the information contained herein has been obtained from sources that the Firm believes to be reliable, the Firm does not guarantee its accuracy, and such information may be incomplete or condensed. Although this material is not a research report, to the extent it contains a recommendation, this report does not take into account the investment objectives or financial situation of any particular person. Investors should obtain advice based on their own individual circumstances before making an investment decision on the basis of a recommendation contained in this report. This communication is made by the Firm and any investment service or products herein are offered solely to market counterparties, and intermediate customers. No other person may rely on the contents of this communication.

This material is furnished on the understanding that the Firm is not undertaking to manage money or act as a fiduciary with respect to your account(s) or any of your managed fiduciary account(s) and that our services do not serve as a primary basis for any investment decision made with respect to such accounts. This material provided informative and/or alternatives we believe to be appropriate for consideration. The decision whether or not to adopt any strategy or engage in any transaction is your responsibility.

@ GATES Capital Corporation, 2015. All rights reserved. “The Bond Desk” is a trademark of GATES Capital Corporation.

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Video - https://vimeo.com/144152239

This video will give you a full insight into what people have to say about Pristine Advisers and CEFNetwork: 5th Annual Closed-End Fund Investment Strategies Conference

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Disclaimer: The opinions in this article are for informational purposes only and should not be construed as a recommendation to buy or sell the stocks mentioned. Please do your own due diligence before making any investment decision.

Offices in New York | ConnecticutP: 631- 756- 2486 F: 646- 478- 9415 E: [email protected]

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Save the DateBDC/REIT Activism WebinarAre you an activist target?

December 9, 2015 | 2 PM EST

Discussion topics include:Why has BDC/REIT activism accelerated recently?What attracts an activist to BDC/REIT?Who are the BDC/REIT activists?What are the key issues raised by activists?How can companies proactively

prepare for likely activist engagement? What is the role of proxy advisory firms in a proxy contest? Strategies for winning a proxy contest.

Panelists:Thomas J. FriedmannPartner – Dechert LLPPhillip GoldsteinActivist Hedge Fund Manager – Bulldog InvestorsCynthia Krus

Partner – Sutherland Asbill & Brennan LLPModerated by:Waheed Hassan, CFASenior Managing Director ‐ M&A/Proxy Contest Group, Alliance Advisors

For questions, please contact Lou Vega at: [email protected]

To Register: https://attendee.gotowebinar.com/register/6470675778165633794

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Disclaimer: The opinions in this article are for informational purposes only and should not be construed as a recommendation to buy or sell the stocks mentioned. Please do your own due diligence before making any investment decision.

Offices in New York | ConnecticutP: 631- 756- 2486 F: 646- 478- 9415 E: [email protected]

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Pristine Advisers/CEFNetwork – Recap of 5th Annual CEF/BDC/MLP/ETF Investment Strategies Conference

Tuesday, October 27th New York Hilton Hotel

AGENDA 8:00 a.m. – 6:30 p.m.8:00 a.m. REGISTRATION & CONTINENTAL BREAKFAST – GRAMERCY EAST & WEST8:05-8:15 OPENING REMARKS Patricia Baronowski-Schneider, President, Pristine Advisers & CEFNetwork.com8:15-9:15 MLP & Energy Value Chain InvestmentsModerator: Alex Reiss Director, Closed-End Fund Research, Stifel, NicolausPresenter: (20 min presentation on Opportunities in the energy value chain and 10 min Q&A) Ed Russell, Director, Tortoise Capital AdvisorsPresenter: (20 minute presentation on the fund and 10 min Q&A) Jay Hatfield, Co-Founder and President, Infrastructure Capital Advisors, LLCInfraCap MLP ETF (NYSE:AMZA)9:15-9:55 Business Development CompaniesAnnouncer/Presenter: John Cole Scott, Chief Investment Officer, Closed-End Fund Advisors Overview on the Current BDC Sector (Discounts and Income

Trends - 10 Min)Presenter: (20 minute presentation and 10 min Q&A) Grier Eliasek, President and Chief Operating Officer, Prospect Capital CorporationProspect Capital Corporation (NASDAQ:PSEC)

9:55-10:10 AM BREAK10:10-11:00 Corporate Actions From Wide Discounts (i.e. open-endings, tenders, liquidations, etc.)Moderator: Mariana Bush, CEF & ETP Research, Wells Fargo AdvisorsPresenters: Kenneth S. Fincher ‐ Senior Vice President, Portfolio Manager, First Trust Advisors Michael Jabara, Executive Director,Head of ETF/CEF Research, Morgan Stanley Wealth Mgmt Alexander Reiss – Director, Closed-End Fund Research, Stifel, Nicolaus11:00-12:00 International Closed-End Funds Moderator: John Cole Scott, Chief Investment Officer., Closed-End Fund AdvisorsPresenters: (20 minute presentation each on the fund and 10 min Q&A)

Stefan Frischknecht, Swiss Helvetia/ SchrodersThe Swiss Helvetia Fund, Inc. (NYSE:SWZ)Alberto Osorio, President & CEO, The Mexico FundThe Mexico Fund (NYSE:MXF)

12:00-1:00 NETWORKING LUNCHEON – MURRAY HILL EAST & WEST1:00-2:20 Income Opportunity for Rising Interest RatesAnnouncer: Rob Shaker, Portfolio Manager, Shaker FinancialPresenters: Tracy Maitland, President, Advent Capital ManagementDaniel Spinner, Portfolio Manager, Eagle Point Credit CompanyMike Taggart, CEF Research, Nuveen Investments2:20-3:00 Discussions on CEF DiscountsModerator: Renee Baker, Closed-End Funds, Manager, Aberdeen Asset ManagementPresenters: Mike Taggart, Vice President. Head of Closed-End Fund Research, Nuveen Investments

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Disclaimer: The opinions in this article are for informational purposes only and should not be construed as a recommendation to buy or sell the stocks mentioned. Please do your own due diligence before making any investment decision.

Offices in New York | ConnecticutP: 631- 756- 2486 F: 646- 478- 9415 E: [email protected]

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John Cole Scott, Chief Investment Officer, Closed-End Fund AdvisorsRob Shaker, Portfolio Manager, Shaker Financial

3:00-3:10 PM BREAK3:10 - 4:10 What’s Important when Picking a Closed-End FundModerator: Charles Earle, Director of Research & Strategy, Gates CEF ResearchPresenters: William T. Korver, Director, Guggenheim InvestmentsJohn Cole Scott, Chief Investment Officer., Closed-End Fund Advisors

Daniel Spinner, Portfolio Manager, Eagle Point Credit Company4:10-4:40 Equity Income Ideas for Your PortfolioAnnouncer: Charles Earle, Director of Research & Strategy, Gates CEF ResearchPresenter: (20 minute presentation 10 min Q&A)Mike Taggart, Vice President. Head of Closed-End Fund Research, Nuveen Investments4:40 - 5:20 CEF Specialist PanelModerator: Mike Taggart, Vice President. Head of Closed-End

Fund Research, Nuveen InvestmentsPresenter: John Cole Scott, Chief Investment Officer., Closed-End Fund AdvisorsCharles Earle, Director of Research & Strategy, Gates CEF ResearchRob Shaker, Portfolio Manager, Shaker Financial

5:20-6:30 COCKTAIL RECEPTION – NASSAU EASTHosted by CLOSED-END FUND ADVISORS

Contact us to learn how Pristine Advisers can help you and your Fund compete in this growing investment market.

Phone: 631-756-2486 | Fax: 646-478-9415

Gold sponsor Silver sponsors Supporting Sponsors Media Partners

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Pristine Advisers Receives 2015 Best of Farmingdale Award

Each year the Farmingdale Award Program chooses only the best local businesses. We focus on companies that have demonstrated their ability to use various marketing methods to grow their business in spite of difficult economic times. The companies chosen exemplify the best of small business; often leading through customer service and community involvement and raising awareness for their customers and clients across various methods, being innovative, resourceful and paving the way as a leader in their selective industry.

Pristine Advisers wins again!

On behalf of the US Institute for Advancement of Trade & Commerce, I wanted to let you know that Pristine Advisers has been recognized as a 2014 New York Excellence Award recipient Our panel of industry executives and consultants oversees an annual survey commissioned by the USIATC on various industries and determines which companies meet and exceed the industry benchmarks that have been set forth. Pristine Advisers was one of those selected this year.”

We are also featured in “Insiders Know-How to Running Your Own Business”, “CEO Women – Taking the Reigns” and We are regular speakers in “Public Relations – Helping Clients Succeed” podcasts

World Class Magazine “The Right Connections & Relationships”

WE Magazine for Women “2014 Who’s Who Among Women in Ecommerce”

Award Winning Investor Relations, Public Relations, Media Relations, Social Media Strategists

Disclaimer: The opinions in this article are for informational purposes only and should not be construed as a recommendation to buy or sell the stocks mentioned. Please do your own due diligence before making any investment decision.

Offices in New York | ConnecticutP: 631- 756- 2486 F: 646- 478- 9415 E: [email protected]

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