Tag Archives: Closed End Fund

finance, investments, Picks

Split Shares of TD Bank

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TDb Split Corp. is closed-end mutual fund consisting of units invested in the common shares of TD Bank. These units are divided or split into two classes of shares, one kind is the Class A Shares while the other is the Priority Equity or Preferred Shares. The various shares trade separately on the TSX under the symbol XTD for the Class A shares and XTD.PR.A for the preferred shares.

As stated by the company, its investment objectives with respect to the Priority Equity Shares are:

(a) to provide holders of the Priority Equity Shares with fixed cumulative preferential monthly cash dividends in the amount of $0.04375 per Priority Equity Share to yield 5.25% per annum on the original issue price of $10; ]

and

(b) on or about December 1, 2019, to pay the holders of the Priority Equity Shares the original issue price of $10 for equity shares.

With respect to the Class A Shares, the objectives are:

(a) to provide holders of Class A Shares with regular monthly cash dividends targeted to be $0.05 per Class A Share to yield 6.0% per annum on the original issue price of $10;

and

(b) on or about the December 1, 2019, to pay the holders of Class A Shares at least the original issue price of the Class A Shares.

Under certain conditions, the termination date of December 1, 2019 may be changed to a later date. Only after the holders of the Priority Equity Shares receive the distribution of $0.5250 on their shares will the class A shareholders receive distributions, if available, from the total fund and subject to other restrictions.

The net asset value of a class A share is the net asset value of a unit minus the fixed net asset value of a Priority Equity Share which stays fixed at $10. This means that the class A shares reflect the increasing or decreasing market value of the underlying TD Bank shares. For example, if the net asset value of a unit is $15 at then the net asset value of a class A share would be $5.

The closing prices on the TSE today, October 1 2014 were:

Class A shares (XTD),   $5.22 with a distribution of $0.60 for a yearly yield of 11.49%;

Priority Equity Share (XTD.PR.A),   $10.17 with a distribution of $0.525 for a yearly yield of 5.16% .

The Net Asset Value of a unit on September 15 2014 was $15.60

The fund is managed by Quadravest Capital Management . For more information please go to its website at http://www.quadravest.com . For those people interested in TD Bank you may also want to follow XTD and XTD.PR.A.

-M

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Picks

Citadel Income Fund (CTF), A Closer Look.

The following was written originally written on June 1, 2014 and updated September 26, 2014.

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Citadel Income Fund (CTF.UN) is an example of a “closed – fund“ managed by Artemis Investment Management. Think of it as a company whose main assets are securities such as stocks and bonds each of which can be bought or sold on securities or stock markets. 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 shares at the prices that they trade at plus any other assets less any liabilities. On December 31 2013 the total NAV of CTF.UN was $113,494,197. The actual ownership of CTF.UN was represented by the 25,041,625 shares (units) into which the company is divided.

Accordingly, each unit had a NAV of $113,494,197 divided by 25,041,625 equaling $4.53 NAV per unit. You would expect that if CTF.UN was terminated on December 31 2013 a person owning some units of CTF.UN would receive a total of $4.53x(the number of units owned)

One would imagine that on a given date, December 31 2013 for example, the units could be bought or sold at approximately $4.53 per unit, as would be the case of an “open-ended” fund. In an open-ended fund, the managers can issue or cancel units to assure within a degree of approximation that the units can be bought or sold (redeemed) at the NAV. However CTF.UN is a closed-end fund which means units are bought and sold between investors at prices already agreed upon. There are no new units issued or cancelled ensuring the NAV per unit is the market price.

This means that the market price of the units can be equal to the NAV per unit, or they can be below the NAV per unit (we say the units are trading at a discount) or in another instance, they could trade at a price above the NAV (we say the units are trading at a premium).

On December 31 2013 units of CTF.UN were trading at the discount price of $3.74, i.e. a discount of 17.44%. On the manager’s Website (see below) we find the following brief history of the NAVs and market prices of CTF.UN:

 

Citadel Income Fund – NAV and Market Price History

 
Date Net Asset Value Market Price Premium (Discount)
30-May-2014 $4.65  $3.34  (28.17)% 
23-May-2014 $4.70  $3.32  (29.36)% 
16-May-2014 $4.67  $3.33  (28.69)% 
09-May-2014 $4.67  $3.30  (29.34)% 
02-May-2014 $4.72  $3.34  (29.24)% 
25-Apr-2014 $4.68  $3.32  (29.06)% 
17-Apr-2014 $4.69  $3.29  (29.85)% 
11-Apr-2014 $4.61  $3.28  (28.85)% 
04-Apr-2014 $4.66  $3.26  (30.04)% 
28-Mar-2014 $4.63  $3.23  (30.24)% 
21-Mar-2014 $4.62  $3.24  (29.87)% 
14-Mar-2014 $4.55  $3.20  (29.67)% 
07-Mar-2014 $4.59  $3.25  (29.19)% 
28-Feb-2014 $4.58  $3.31  (27.73)% 
21-Feb-2014 $4.59  $3.35  (27.02)% 
14-Feb-2014 $4.56  $3.35  (26.54)% 
07-Feb-2014 $4.50  $3.30  (27.00)% 
31-Jan-2014 $4.47  $3.24  (27.52)% 
24-Jan-2014 $4.51  $3.45  (23.50)% 
17-Jan-2014 $4.58  $3.69  (19.43)% 
10-Jan-2014 $4.55  $3.68  (19.12)% 
03-Jan-2014 $4.49  $3.67  (18.26)% 
27-Dec-2013 $4.56  $3.68  (19.30)% 
20-Dec-2013 $4.48  $3.68  (17.86)% 
13-Dec-2013 $4.38  $3.55  (18.95)% 
06-Dec-2013 $4.45  $3.58  (19.55)% 

Currently CTF.UN pays out a dividend or distribution of $0.01 per month and trades at a discount of approximately 28%

Citadel Income Fund

Top 25 Securities As of March 31, 2014 By % of Total Assets

 

  1. TORONTO DOMINION BANK 5.27
  2. ROYAL BANK OF CANADA 4.85
  3. BANK NOVA SCOTIA 4.03
  4. CANADIAN IMPERIAL BANK OF COMMERCE 3.26
  5. POTASH CORP OF SASKATCHEWAN INC 2.52
  6. CDN NATURAL RESOURCES LIMITED 2.42
  7. THOMSON REUTERS CORPORATION 2.40
  8. CANADIAN NATIONAL RAILWAY COMPANY 2.31
  9. CASH 2.29
  10. MANULIFE FINANCIAL CORP 2.23
  11. MAJOR DRILLING GROUP INTERNATIONAL INC 2.22
  12. CANADIAN IMPERIAL BANK OF COMMERCE CORP 2.14
  13. ROYAL DUTCH SHELL PLC 2.14
  14. CATERPILLAR INC 2.10
  15. ENCANA CORPORATION 2.08
  16. JOHNSON & JOHNSON 2.06
  17. TECK RESOURCES LTD 2.04
  18. CLIFFS NATURAL RESOURCES INC 1.93
  19. PFIZER INC 1.91
  20. INTER PIPELINE LIMITED 1.87
  21. BCE INC 1.85
  22. HSBC HOLDINGS PLC 1.77
  23. PEPSICO INC 1.76
  24. TOTAL SA 1.68
  25. TRANSCANADA CORPORATION 1.66

For more details on CTF.UN please go to the web page of the managers, Artemis Investment Managers at; http://artemis.mobilelinkage.com/nav_info.php?id=30

Units of CTF.UN are currently trading at approximately 28% below the net asset value with a 3.6% distribution. Purchase of the units should be considered as a conservative investment as there is anticipation that the discount to NAV would gradually lessen. Further, in such situations where the market price is substantially below the NAV, a large number of very dissatisfied investors holding units of CTF.UN may force the management of CTF to actually terminate the fund, resulting in unit holders obtaining the NAV of the units and realizing a large premium above the current market price. The declaration of Trust does provide legal recourse in how this can be pursued. This however, is a discussion for another instance.

-M

 

 

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