Consolidated Investment Corporation of Canada was incorporated in February 1929, and its bonds and preferred shares were offered for sale to the public. The Company was capitalized with $15,000,000 4½% First Collateral Trust Gold Bonds due 1959, and $10,000,000 ($100 par) of 5% Cumulative Preferred shares. 1,375,000 common shares (no par value) were issued of which 375,000 were deposited in trust or reserved for sale to the Company’s senior security holders. The Company’s securities were sold for $32,000,000 plus accrued interest and organizational expenses.
The trust deed securing the First Collateral Trust Gold Bonds covenanted that assets pledged with the trustee should at all times be equal to 125% of the principal amount of bonds outstanding. With the decline in security values beginning in late 1929, the Company attempted to satisfy this covenant by purchasing the Company’s bonds for cancellation at discount prices. The continued deterioration of security markets into 1932 made the continuation of this policy impracticable. The Company therefore defaulted under its covenants and the Company was reorganized.
Under the February 13, 1933 arrangement, the Company’s remaining $6,427,000 4½% Gold Bonds ($8,573,000 out of the original $15,000,000 had been purchased for cancellation) received 70% of their face value in a new issue of 5% “income” bonds due 1953, and 30% of their face value in Class “A” 5% “preferred” shares. The bondholders were also given 53.61% of the common equity (Class “B” shares) with the old preferred shareholders and common shareholders receiving 41.70% and 4.69% of the new equity respectively.
Under the February 13, 1933 reorganization, the Company’s name was changed to United Corporations Limited (“United” or the “Company”).
On December 23, 1959, the Company acquired all of the assets of London Canadian Investment Corporation for $7,925,483. Consideration was satisfied by issuing $2,408,700 par value of 5% preferred shares (1959 series) and common (Class B) shares equal to 15.7% of the total common shares to be outstanding after the completion of this transaction.
United is a closed-end investment corporation, the shares of which trade on the Toronto Stock Exchange. United is an investment vehicle for long-term growth through investments in common equities, as management believes that over long periods of time, common equities, as an asset class, will outperform fixed income instruments or balanced funds. From time to time, however, assets of the Company may be invested in interest-bearing short-term securities pending the selection of suitable equity investments.
The Company has been a closed-end investment corporation since 1929 and has never bought back its Common Shares. The Common Shares have historically traded at a discount to their net asset value, generally ranging from a 45% discount to a 20% discount. Management believes that shareholders who have invested in the Common Shares of the Company recognize that the Common Shares of the Company usually trade at a discount to their net asset value.
Closed-end funds have the following benefits: they often allow investors the opportunity to purchase assets at a discounted price; they have management expense ratios which are generally much lower than those for open-ended funds; and the management of a closed-end fund’s portfolio is not impacted by shareholder subscription or redemption activities.
United has no plans to become an open-ended investment fund.
The objective of the Company is to earn an above-average rate of return, primarily through long-term capital appreciation and dividend income. Short-term volatility is expected and tolerated. Management remains confident that the Company’s investment strategy will reward shareholders over the long term.
The investment portfolio of the Company comprises a mix of predominantly foreign equities. Net equity value and net investment income may vary significantly from period to period depending on the economic environment and market conditions. United’s exposure to non-Canadian equities is approximately 97% of United’s investments.