United Corporations: quality stocks at a discount. The fund holds several Canadian blue chip stocks such as BCE and TD Bank

United Corporations is one of the closed-end funds tracked by Money Digest (see page 9). Currently, the fund trades at a whopping discount of about 30% to its net asset value. It holds both Canadian and non-Canadian stocks in its portfolio

Among United Corporation's holdings are such well-known names as BCE, Canadian Pacific, IBM, Northern Telecom, Power Financial, Royal Bank, Scotiabank, Seagram, and TD Bank. When you buy United Corporations, you are in effect buying these stocks at a huge discount.

However, because it is a closed-end fund, when you sell, you may have to sell at a discount. So the best way to profit from it is to buy it for the long term. Generally, from time to time the discount narrows. If this happens when the stocks appreciate, you stand to gain in two ways: increased stock prices and lower discounts. Since it is already trading at a huge discount, the downside risk is not very high.

Another possibility is that the fund may be converted into an open-end mutual fund. In general, when a quality closed-end fund continues to trade at a huge discount, there is some pressure from investors to convert the fund into a open-end fund, so they can realize the full value of the investments held by the fund.

United Corporations has a low management fee (MER) of just 1.3%. From time to time, the company distributes capital gains. Its current annual dividend yield is about 1.7%.

Because United Corporations holds high quality stocks and is trading at a huge discount, it is highly suited for conservative investors who want to hold high quality stocks in their portfolio for the long haul.

United Corporations trades on the Toronto Stock Exchange under the symbol UNC. You need to contact a stock broker to buy or sell the fund or you may contact the closed-end fund directly at (416) 947-2583.