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R02 Investment Principles & Risk > 7 Indirect investments > Flashcards

7 Indirect investments Flashcards

1
Q

Who classifies unit trusts & OEICs?

A

The Investment Association (IA)

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2
Q

Where are the rules for unit trusts & OEICs?

A

FCA sourcebook COLL (Collective Investment Schemes)

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3
Q

Trustees/directors must ensure markets are:

A
  1. Liquid
  2. Operating regularly
  3. Regulated
  4. Recognised (e.g. by statutory body or government agency)
  5. Open to the public
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4
Q

What size single holding may UCITS non-tracker funds have?

A

Up to 4 at 10%, and no others may exceed 5%

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5
Q

What size single holding may UCITS tracker funds have?

A

20%, or 35% in exceptional circumstances

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6
Q

What proportion of a company/group’s securities may a UCITS fund hold?

A

20%

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7
Q

A single gilt issue must not make up more than __ of a fund’s value.

A

30%

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8
Q

How much may UCITS funds invest in other collective schemes?

A

20%

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9
Q

How much may non-UCITS funds invest in other collective schemes?

A

35%

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10
Q

How much may UCITS funds invest in unapproved/unlisted securities?

A

10%

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11
Q

How much may non-UCITS funds invest in unapproved/unlisted securities?

A

20%

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12
Q

How much dividend income is tax-free?

A

£2,000

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13
Q

How much tax do basic-rate taxpayers pay on dividends?

A

8.75%

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14
Q

How much tax do higher-rate taxpayers pay on dividends?

A

33.75%

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15
Q

How much tax do additional-rate taxpayers pay on dividends?

A

39.35%

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16
Q

What is a personal savings allowance (PSA)?

A

Tax-free interest income

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17
Q

What is the personal savings allowance for a basic-rate taxpayer?

A

£1,000

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18
Q

What is the personal savings allowance for a higher-rate taxpayer?

A

£500

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19
Q

What is the personal savings allowance for an additional-rate taxpayer?

A

None

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20
Q

What is the annual exempt amount for capital gains tax?

A

£12,300

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21
Q

To qualify for an IA sector, how much must generally be invested in the relevant asset class?

A

80%

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22
Q

To qualify as an income fund, what yield must a fund achieve?

A

90% of the relevant index annually

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23
Q

What does UCITS stand for?

A

Undertakings for Collective Investment in Transferable Securities

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24
Q

What is the limit on funds holding warrants?

A

None

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25
Q

What is the regulatory limit on funds holding cash?

A

None

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26
Q

Why might a fund hold cash?

A

Liquidity and cash flow

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27
Q

In practice, how much of a fund is typically held in cash?

A

Around 5%

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28
Q

How much may a retail UCITS scheme borrow on a permanent basis for gearing purposes?

A

None; gearing is not allowed for retail UCITS schemes

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29
Q

How much may a UCITS scheme borrow temporarily against known future cash flow, such as dividends?

A

10% of its value

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30
Q

How much may a non-retail UCITS scheme borrow on a permanent basis for gearing purposes?

A

10% of its value

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31
Q

How much may a QIS borrow?

A

100% of its value

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32
Q

What does AIF stand for?

A

Alternative investment fund

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33
Q

What are examples of AIFs?

A

Hedge funds and private equity funds

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34
Q

If gilts make up more than __ of a fund’s value, these holdings must consist of at least __ different issues.

A

35% / 6

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35
Q

What does QIS stand for?

A

Qualified investor scheme

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36
Q

Where are the rules for AIFs?

A

FCA sourcebook FUND (investment funds)

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37
Q

What does UCIS stand for?

A

Unregulated collective investment scheme

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38
Q

May a NMPI be marketed to retail investors?

A

No

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39
Q

What does NMPI stand for?

A

Non-mainstream pooled investment

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40
Q

What are examples of NMPIs?

A
  1. UCIS
  2. QIS
  3. Traded life policy investments
  4. SPV securities with underlying investments other than shares/bonds
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41
Q

What does SPV stand for?

A

Special purpose vehicle

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42
Q

What does AIFMD stand for?

A

Alternative Investment Fund Managers Directive

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43
Q

Unit trust trustees are typically…

A

Large banks or insurance companies

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44
Q

Who arranges audits of a unit trust and issues financial statements to unitholders?

A

The trustee

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45
Q

Who arranges unitholder meetings?

A

The trustee

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46
Q

Who is responsible for registering unitholders and issuing certificates?

A

The trustee, though they will often delegate to the manager

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47
Q

Who distributes income to unitholders?

A

The trustee

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48
Q

Who manages a unit trust’s assets?

A

The manager

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49
Q

What is a typical management fee for a unit trust?

A

0.5% - 1.5%

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50
Q

Who is responsible for promoting and advertising a unit trust?

A

The manager

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51
Q

Who is responsible for a unit trust’s administration?

A

The manager

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52
Q

A unit trust’s register must contain:

A
  1. Name & address of the unitholder
  2. Number & type of units they hold
  3. Date the holder was registered
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53
Q

Are unitholders allowed access to the register?

A

Yes, free of charge at all times during normal office hours (but trustee may close it for up to 30 days a year)

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54
Q

A unit trust certificate must contain:

A
  1. The date
  2. The name of the scheme
  3. The names & addresses of the manager & trustee
  4. The name of the unitholder
  5. Number & type of units they hold
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55
Q

May unit trust managers issue short form accounts?

A

Yes, provided full accounts are available to unitholders on request

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56
Q

May a unit trust manager materially alter the trust deed?

A

Only if approved by a unitholder meeting

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57
Q

May a unit trust manager raise charges?

A

Yes, with 60 days’ notice

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58
Q

Where are a unit trust’s management fees set out?

A

In the trust deed

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59
Q

May a trustee remove a unit trust manager?

A

Yes, with the FCA’s approval, if unitholders are at risk

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60
Q

How much capital gains tax do unit trusts pay?

A

None

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61
Q

What kind of tax, and how much, do unit trusts pay on income/gains from options & futures?

A

None

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62
Q

What tax regime applies to unit trusts?

A

It depends on the composition of investments

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63
Q

What tax, and how much, do unit trusts pay on interest & rental income?

A

Corporation tax at 20%

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64
Q

What is an equalisation payment?

A

A partial refund included with a unitholder’s first distribution

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65
Q

What tax applies to an equalisation payment?

A

None; it is a refund, not income

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66
Q

How much is an equalisation payment?

A

The income accrued between the last distribution and the date of purchase

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67
Q

How many times per year do unit trusts distribute income?

A

At least 1, usually 2, sometimes 4, and often 12 for income trusts

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68
Q

To pay dividends, a unit trust must hold…

A

Less than 60% of its value in interest-bearing investments

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69
Q

What type of tax applies to dividends?

A

Income tax

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70
Q

What is the tax-free dividend allowance for trustees?

A

None

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71
Q

To pay interest distributions, a unit trust must hold…

A

At least 60% of its value in interest-bearing investments

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72
Q

What is the PSA for trustees?

A

None

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73
Q

If unit trust dividends/interest are reinvested instead of distributed, does the investor pay the same tax?

A

Yes

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74
Q

For CGT purposes, units held on __ __ ____ have an acquisition cost = their value on that date

A

31st March 1982

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75
Q

When disposing of units, how do you calculate the acquisiton cost for CGT purposes?

A

Subtract the equalisation payment from the initial price paid

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76
Q

Does switching between an umbrella fund’s sub-funds count as disposal for CGT purposes?

A

Yes

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77
Q

What does TEF stand for?

A

Tax-elected fund

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78
Q

How do TEFs distribute to investors?

A

Interest & dividends separately, and gross of tax

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79
Q

Why become a TEF?

A

To shift point of taxation to investor

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80
Q

What happens if a unit trust deducts charges from capital instead of from distributions?

A

The quoted yield is higher but the capital performance suffers

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81
Q

If a unit trust deducts charges from the capital, it must…

A
  1. Include a prominent statement on all documentation
  2. State the resulting risk to capital growth
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82
Q

Which is more expensive to buy: income or accumulation units?

A

Accumulation units

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83
Q

What kind of units always reinvest income?

A

Accumulation units

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84
Q

Are accumulation units better for investors than buying more income units?

A

Yes, as you may have to pay all/part of the initial charge for new units

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85
Q

When are units most expensive?

A

Just before distribution

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86
Q

By how much does unit price typically fall after distribution?

A

The amount of income

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87
Q

How long does the xd period last?

A

Up to four months

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88
Q

What happens if you sell units during the xd period?

A

You still get the allocation attributable to the previous period

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89
Q

What proportion of UCITS funds qualify for stocks & shares ISAs?

A

100%

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90
Q

Do cash funds qualify for cash ISAs?

A

Yes

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91
Q

Do unit trusts have minimum holding requirements for investors?

A

Yes, typically £500 or £1,000

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92
Q

Do unit trusts have maximum holding limits for investors?

A

No

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93
Q

Unit trust savings schemes (often linked to ISAs) typically start at __ to __ per month

A

£50 - £100

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94
Q

Why would you complete a renunciation form?

A

To sell unit trust units back to the manager

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95
Q

If you arrange to buy/sell units over the phone, is it legally binding?

A

Yes

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96
Q

Where & when would a unit trust management group send out a contract note?

A

To an investor after units are bought or sold

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97
Q

Before executing a purchase, unit trusts must supply investors with…

A

A KIID (Key Investor Information Document)

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98
Q

After receiving a renunciation form, how long does a unit trust manager have to make payment?

A

4 days

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99
Q

What is a unit trust share exchange scheme?

A

Swap shares in public companies for equivalent value of units

100
Q

Most unit trust share exchange schemes accept a minimum value of…

A

Around £1,000

101
Q

Does using a unit trust share exchange scheme count as disposal for CGT purposes?

A

Yes

102
Q

Unit trust managers may elect to operate under __ or __ pricing regulations

A

Single or dual

103
Q

Under dual pricing, which is higher: bid or offer price?

A

Offer (buying) price, the price at which investors buy units

104
Q

Under dual pricing, what is the bid price?

A

The lower (selling) price at which investors sell units back to the trust

105
Q

Under dual pricing, is the initial charge included in the bid-offer spread?

A

Yes, it’s added to the offer price

106
Q

Under single pricing, how is the unit price calculated?

A

Using mid-market prices for the underlying investments

107
Q

What would the bid-offer spread look like for a unit trust with highly liquid investments (e.g cash or gilts)?

A

Low: less than 1% or even 0% for some cash funds

108
Q

What would the bid-offer spread look like for a unit trust with less liquid investments (e.g. property)?

A

High: typically 5% - 7%

109
Q

What would the bid-offer spread look like for a unit trust with less liquid investments (e.g. property)?

A

High: typically 5% - 7%

110
Q

What does it mean if a unit trust is on an offer basis?

A

The manager has set the offer & bid prices towards the offer (higher) end of the range, as demand is high

111
Q

What does it mean if a unit trust is on a bid basis?

A

The manager has set the offer & bid prices towards the bid (lower) end of the range, as demand is low

112
Q

What is a ‘valuation point’ for a unit trust?

A

The time of day when the manager evaluates the trust’s property

113
Q

How often is a unit trust’s property evaluated?

A

Usually daily. The manager must state the frequency in the scheme particulars

114
Q

What does it mean if a unit trust uses forward pricing?

A

It deals at the price to be calculated at the next valuation point

115
Q

What does it mean if a unit trust uses historic pricing?

A

It deals at the price calculated at the last valuation point

116
Q

Which is more common for unit trusts: forward or historic pricing?

A

Forward pricing

117
Q

Under what circumstances can an investor force a unit trust manager to switch to forward pricing?

A

If the value of the trust is believed to have changed by 2% or more since the last valuation

118
Q

What charges may be associated with investing in a unit trust?

A
  1. Initial
  2. Annual (AMC)
  3. Performance
  4. Exit (within 5 years)
  5. Legal / audit fees
119
Q

For a unit trust, what is an OCF?

A

Ongoing charges figure - includes the AMC and any other costs

120
Q

For a unit trust, what is an AMC?

A

Annual management charge

121
Q

What is another name for an OEIC?

A

ICVC (investment company with variable capital)

122
Q

What are three ways to establish an OEIC?

A
  1. Retail UCITS
  2. Non-retail UCITS
  3. QIS
123
Q

Are OEICs governed by the Companies Acts?

A

No

124
Q

Who holds the assets of an OEIC?

A

An independent depository, authorised by the FCA

125
Q

For an OEIC, what is an ACD?

A

Authorised Corporate Director

126
Q

Where are the rules for selling & marketing OEICs?

A

FCA sourcebook COBS (Conduct of Business)

127
Q

True or false: some sub-funds within an umbrella OEIC may use forward pricing while others use historic pricing

A

False: all sub-funds must use the same pricing basis

128
Q

True or false: like unit trusts, OEICs may use single or dual pricing

A

True, though they usually use single pricing

129
Q

Who is responsible for an OEIC’s compliance with investor protection requirements?

A

The ACD

130
Q

Who is responsible for maintaining an OEIC’s register?

A

The ACD

131
Q

How often do OEICs report to shareholders?

A

Twice a year: interim (unaudited) and annual (audited)

132
Q

True or false: OEIC shares can be held in ISAs

A

True

133
Q

What is a dilution levy?

A

A charge sometimes applied by single-price basis OEICs to cover dealing costs and the price spread of underlying investments

134
Q

Is a dilution levy applied when buying or redeeming shares in an OEIC?

A

It can be applied to both

135
Q

Are contract notes issued by unit trusts or OEICs?

A

Both

136
Q

True or false: OEICs can be marketed internationally more easily than unit trusts

A

True, as the structure is widely recognised in Europe

137
Q

True or false: OEICs may have multiple share classes

A

True

138
Q

True or false: unit trusts and OEICs can offset management charges against dividend income for tax purposes

A

False. Unit trusts and OEICs can offset management charges against interest income for tax purposes

139
Q

What does a “fund of funds” do?

A

Invests directly in other managers’ funds

140
Q

What does a “manager of managers” fund do?

A

Appoints specialist managers to look after different parts of the portfolio

141
Q

What does it mean if a “fund of funds” is “fettered”?

A

It can only invest in funds run by the same management group

142
Q

How can a “fund of funds” mitigate the underlying funds’ charges?

A

Negotiating a rebate or buying an institutional class of unit/share with lower charges

143
Q

What is a tax advantage of a “fund of funds”?

A

Managers can switch their investment between other funds without paying CGT

144
Q

True or false: a “manager of managers” fund charges a separate AMC for each manager

A

False. Their fees all come out of a single AMC

145
Q

Where are offshore funds typically based?

A

The Channel Islands or the Isle of Man

146
Q

True or false: offshore funds may be marketed to UK retail investors without FCA recognition

A

False

147
Q

While waiting for FCA recognition post-Brexit, EEA funds may market in the UK under the…

A

Temporary Marketing Permissions Regime (TMPR), until the end of 2023

148
Q

What is the European equivalent of unit trusts?

A

“Fonds commun de placement” (FCP)

149
Q

What is the European equivalent of OEICs / ICVCs?

A

“Société de investissement à capital variable” (SICAV)

150
Q

True or false: due to fewer restrictions, offshore funds may be more specialised than UK funds

A

True, although highly specialist or speculative funds are not usually FCA recognised

151
Q

Offshore funds with FCA approval can generally be marketed normally, but not following…

A

Cold-calling

152
Q

If an offshore fund’s manager is not part of a UK regulatory body, what extra rule applies to its advertising?

A

All adverts must be approved by a member of a suitable regulator

153
Q

For tax purposes, what are the two types of offshore funds?

A

Reporting and non-reporting

154
Q

Do most UK-resident/domiciled investors prefer reporting or non-reporting funds?

A

Reporting funds

155
Q

What is the main advantage of reporting funds?

A

The usual UK tax rules apply to dividends, interest, and CGT on disposal

156
Q

What might disqualify a reporting fund from the usual CGT rules?

A

If it did not retain reporting status throughout the investor’s period of ownership

157
Q

What is the tax treatment of dividends from offshore funds constituted as companies?

A

They are treated as foreign dividends, subject to income tax, like dividends from equities

158
Q

Under what circumstances would distributions from an offshore fund be treated as interest for tax purposes?

A

If more than 60% of its assets are interest-bearing investments

159
Q

May interest from an offshore fund be offset against the investor’s PSA?

A

Yes

160
Q

True or false: a reporting fund is required to distribute all its income

A

False. However, investors are taxed for their share of the income, even if the distribution is not received

161
Q

What does a reporting fund report, and to whom?

A

Its income, to HMRC

162
Q

Non-reporting funds are usually…

A

Roll-up funds, i.e. all income is accumulated and no dividends are paid

163
Q

What is the tax treatment of gains from non-reporting funds?

A

That gain is calculated using CGT rules but then taxed as income, so the CGT exempt amount does not apply

164
Q

Why might a UK resident use an offshore roll-up fund?

A

To shelter accumulated income & realise it later, when their tax band has dropped or they are no longer a UK resident

165
Q

What benefit do non-domiciled investors gain from offshore investments?

A

Their IHT liability is only based on their UK assets

166
Q

What does AEOI stand for?

A

Automatic Exchange of Information

167
Q

What is an example of AEOI in practice?

A

Foreign banks share information with HMRC about their UK resident customers, to help detect tax avoidance & evasion

168
Q

Do offshore equity funds tend to focus on income or growth? Why?

A

Growth, as withholding taxes erode income

169
Q

What is an offshore fund sector with no UK equivalent?

A

Currency funds, including single and managed currency funds

170
Q

What is an investment trust company?

A

A closed-ended investment fund and a type of public limited company

171
Q

Subject to any restrictions in their articles of association, investment trusts may invest in:

A
  1. Public or private companies
  2. Venture capital
  3. Any country
172
Q

Who classifies investment trusts?

A

The Association of Investment Companies (AIC)

173
Q

Why are investment trusts described as “closed-ended”?

A

They issue a fixed number of shares, which are traded on the London Stock Exchange

174
Q

Are investment trusts allowed to gear?

A

Yes

175
Q

What is a self-managed trust?

A

An investment trust which directly employs its own salaried fund manager(s)

176
Q

What is a more common way of running an investment trust than self-managed?

A

Hiring an external management group which also provides admin, registration and accountancy

177
Q

Who is responsible for looking after shareholders’ interests in an investment trust?

A

The independent board of directors

178
Q

What are terms for the difference between the bid & offer price of investment trust shares?

A

The market makers’ spread or turn

179
Q

Which have narrower spreads: large, generalist trusts or small, specialist trusts? Why?

A

Large trusts, as there is generally more demand & more stock availability

180
Q

How would you calculate the shareholders’ funds for NAV purposes?

A
  1. Mid-market prices for listed investments
  2. Plus unlisted investments as valued by directors
  3. Plus cash & any other assets
  4. Less nominal value of loans, debentures & preference shares
181
Q

How would you calculate diluted NAV per share for an investment trust?

A

Assume all outstanding warrants & convertible loan stocks will be exercised

182
Q

If an investment trust has 100 outstanding warrants at £1 per share, what effect would this have on the diluted NAV per share?

A

The shareholders’ funds would increase by £100, but the number of ordinary shares would increase by 100

183
Q

What does it mean when an investment trust is trading at a discount?

A

The share price is lower than the NAV per share

184
Q

Which is less common: trading at a discount or trading at a premium?

A

Trading at a premium

185
Q

How are discounts/premiums expressed?

A

As a percentage of NAV per share

186
Q

What does a narrowing discount mean for an investor?

A

The trust is delivering a better ROI than its underlying investments

187
Q

How might an investment trust manager combat a wide discount?

A

Buying back shares to reduce supply

188
Q

True or false: an investment trust may be actively involved in the management of companies in which it invests

A

False

189
Q

Does the FCA require investment trusts to seek HMRC approval?

A

Yes, under the Income & Corporation Taxes Act 1988, but they may operate without approval

190
Q

How does HMRC approval benefit an investment trust?

A

It will not pay CGT on sales of shares

191
Q

What are the requirements for HMRC approval of an investment trust?

A
  1. Resident in UK & not “close” (controlled by 5 people)
  2. Ordinary shares listed on London Stock Exchange
  3. Does not retain more than 15% gross income
192
Q

What are the types of capital structure for investment trusts?

A
  1. Conventional trusts
  2. Split capital trusts
193
Q

What characterises a conventional trust?

A

Issues one main share class (ordinary shares) which entitles the holder to all income & gains

194
Q

True or false: conventional trusts are usually set up for an indefinite term

A

True. Some are over 100 years old

195
Q

What is a limited life conventional trust?

A

When the term expires shareholders vote to continue for 3 years at a time

196
Q

What is the benefit of a limited life conventional trust?

A

As the winding-up date nears, discount should narrow, as investors might obtain full value of assets

197
Q

True or false: shareholders may vote to wind up even indefinite conventional trusts at any time

A

True, as with all public limited companies

198
Q

What characterises a split capital investment trust?

A

2 - 4 share classes entitled to different returns, with different priority on winding-up

199
Q

What does it mean if a split capital investment trust offers units?

A

Packages of all its share classes, equivalent to an ordinary share in a conventional trust

200
Q

Do split capital investment trusts have an indefinite lifespan?

A

No. Their initial lifespan is typically 5 - 10 years

201
Q

What does redemption yield measure?

A

Capital & income return on a particular share until wind-up

202
Q

What does it mean if a share has a redemption yield of 7%?

A

If you buy it now and hold it until wind-up, it will grow in value by 7% per year

203
Q

What is a hurdle rate?

A

The rate investments must grow per year for the fund to repay share classes at wind-up

204
Q

What is a wipe-out rate?

A

The rate investments must shrink per year for the fund to repay no capital at wind-up

205
Q

What does a hurdle rate of -2% mean?

A

The fund has surplus assets & can afford to shrink by 2% per year until wind-up

206
Q

What is asset cover?

A

An investment trust’s ability to meet its liability to share classes with pre-determined redemption price

207
Q

How is asset cover expressed?

A

Decimal fraction or percentage (e.g. 0.5 or 50%)

208
Q

What typically happens when a split capital investment trust reaches its redemption date?

A

Instead of winding up, managers offer investors roll-over investment vehicle with no CGT, or cash alternative

209
Q

What are zeros?

A

Zero dividend preferential shares in a split capital investment trust

210
Q

What’s one reason to buy zeros?

A

You’re not already using your CGT exemption

211
Q

What are three types of income shares in a split capital investment trust?

A
  1. Traditional (redemption value = initial value)
  2. “Annuity-style” (nominal redemption value)
  3. Ordinary (no redemption value, surplus capital only)
212
Q

In a split capital investment trust, what are capital shares entitled to?

A

Surplus capital only

213
Q

What are three main types of shares in a split capital investment trust?

A
  1. Zeros
  2. Income
  3. Capital
214
Q

What is a warrant?

A

Right to buy shares at set “exercise price,” on set date/within set period

215
Q

Are warrants high or low risk?

A

High

216
Q

True or false: warrants can be traded on the London Stock Exchange until their final exercise date

A

True

217
Q

How do investment trusts typically use warrants?

A

As “sweeteners” for investors (buy 5 shares, get 1 warrant free)

218
Q

Why might an investment trust repurchase its own warrants?

A

To prevent NAV dilution

219
Q

What are the two “rates” for an investment trust?

A

Hurdle rate and wipe-out rate

220
Q

What is a share buyback?

A

An investment trust buying back its own shares, typically to narrow the discount

221
Q

What must an investment trust do before a share buyback?

A

Get shareholders’ permission

222
Q

Are investment trusts allowed to gear?

A

Yes

223
Q

How is financial gearing expressed?

A

(total gross assets / net assets) x 100

A result of 120 means the fund is 20% geared i.e. 20% of the assets are borrowed

224
Q

Besides optional financial gearing, split capital investment trusts inherently involve…

A

Structural gearing

225
Q

What is structural gearing?

A

Low priority share classes = higher risk

226
Q

What is a COBS rule on gearing?

A

Advisors must provide enhanced risk warning to clients if they recommend significantly geared trusts

227
Q

What could typically be considered “significant” financial gearing?

A

30% +

228
Q

What are typical AMCs for older / general investment trusts?

A

Low: typically under 0.5%

229
Q

What are typical AMCs for newer / specialist investment trusts?

A

High: typically 0.5% - 2% or more

230
Q

What kind of document must UCITS funds provide to investors?

A

Key information document (KID)

231
Q

What does TER stand for?

A

Total expenses ratio

232
Q

What is the main difference between AMC and TER?

A

TER includes any performance fees

233
Q

What are typical charges for a savings & investment scheme?

A
  • Initial charge (often 0.2% - 1%)
  • Stamp duty/SDRT (0.5%)
234
Q

What is an advice note?

A

Sent by savings & investment schemes to investors in place of a certificate, if their shares are held in nominee account to keep costs down

235
Q

What is franked income?

A

Tax-free dividends paid by one UK company to another

236
Q

What tax do investment trusts pay?

A

Corporation tax on interest income, but offsetting expenses means they often pay little or no tax

237
Q

True or false: CGT is only chargeable if TOTAL gains, AFTER deduction of losses, exceeds the exempt amount

A

True

238
Q

Compared to OEICs/unit trusts, investment trusts typically…

A
  1. Have lower initial & annual charges
  2. Come with greater risk/reward
239
Q

Why do unit trusts have greater risk/reward than OEICs/unit trusts?

A
  1. As there are limited shares, their price will rise/fall more dramatically
  2. Investment trusts are allowed to gear
240
Q

What is the basic rate income tax band?*

A

£12,571 - £50,270

241
Q

What is the higher rate income tax band?*

A

£50,271 - £125,140

242
Q

What is the additional rate tax band?*

A

£125,141 +

243
Q

How much is income tax?

A
  1. Basic 20%
  2. Higher 40%
  3. Additional 45%
244
Q

What is the income tax personal allowance?*

A

Up to £12,570

245
Q

How much is regular CGT?

A
  1. 10% for basic rate taxpayers
  2. 20% for higher & additional rate taxpayers

R02 Investment Principles & Risk (11 decks)

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