. About half of the portfolio is invested in Canadian income trusts. On Oct. 31, the Canadian government announced plans to change the tax treatment of the trusts, and the fund's share price collapsed. The proposed tax changes won't happen for four years, and current outlook for the companies in the portfolio is very good.Why do investors often dump new funds at the end of the year?Those who buy new issues are often the uninitiated and uninformed. Their broker told them to buy it. But when a new fund trades below the offering price, they want to sell to take a tax loss. We've only had 17 new issues in 2006, and more than half of them have losses since their inceptions. In 2005 we had 47 new issues.Why do municipal closed-end funds get hit at the end of the year?Municipal funds always have some tax selling, and investors tend to dump the ones with dividend cuts, which create short-term trading opportunities. The one we are buying most is Alliance California Municipal Income FundAKP
, a California municipal bond fund. It cut its dividend on Oct. 24, and its share price has dropped 9%.What's ahead for closed-end funds in 2007?New Securities & Exchange Commission rules make it easier to launch a closed-end fund of funds. The first of them slated to come to market will be the Cohen & Steers Closed-End Opportunity Fund, which will be looking to buy large-company funds that deliver high income. If these funds of funds are successful, there will be more demand for closed-end funds. That could result in fewer yearend bargains.