September 1 2014

Canoe EIT Income Fund (EIT.UN)

Hello,

The security discussed below is one of the most attractive investments that I have seen in many years. It is unique in that it presents an opportunity for continued financial gains while appealing to a risk averse investor.

Canoe EIT Income Fund (EIT.UN), is a “closed-end fund” trading on the Toronto Stock Exchange under the symbol EIT.UN. Its assets are securities such as stocks and bonds, each of which can be bought or sold on securities or stock exchanges. On any given day one can find the total Net Asset Value (NAV) of the fund by adding up the market values of all the securities owned by the fund at prices that they trade on the financial markets, plus any other assets, less any liabilities of the fund.

This NAV on a given day can be found at  http://www.canoefinancial.com/products/  which is the website of the fund. For example, at the end of the trading day on August 29 2014 the NAV was $15.05. However the market price of the units (shares) was $12.61. That is, the units were trading at a discount of 16.2% to the NAV. In general, units of a closed-end fund can trade at a discount, premium or equal to the NAV. Recent trading prices are shown below.

Top 8 Holdings (as of June 30, 2014)

The Fund also distributes $1.20 per unit, i.e. a “dividend” of approximately 9.52% per annum, paid monthly which is equivalent to an effective yearly rate of 9.94%. This return is projected to be paid atleast well into 2016.

Another feature of the fund is the dividend reinvestment plan (DRIP). That is, instead of receiving distributions, as is usual, a unitholder can choose to receive, instead, an equivalent number of units based on the market price less a 5% discount.

Another feature is the Optional Cash Purchase Plan (OCP). Under this plan unitholders can make additional purchases of up to $10,000 per month at a 5% discount to the market price. Details and other option plans are described on the EUT.UN website. There is also an annual redemption feature. Up to 10% of the outstanding units are at the discretion of the unit holder to be redeemed by the fund at 95% of NAV.

Further, there are warrants traded on the Toronto Exchange under the symbol EIT.WT.E. At any time prior to the expiry date of 5:00 p.m. (Calgary time) on November 14, 2014, four Warrants will entitle the holder to subscribe for one unit upon payment of the subscription price of $12.40. The warrants have recently traded in the range of $0.05-$0.08.

EIT.UN is one of the largest, most liquid closed-end funds in Canada with a low management fee of 1.1% per annum. The fund represents a quality and low risk investment. Using the various features of the fund one should be able to devise an investment strategy providing a very high reward to risk ratio.

-M