unit 14

Question 1

3 categories of investment companies

Answer 1

face-amount certificate
unit investment trust
management companies(open and closed)

Question 2

requirements for investment company registration with sec

Answer 2

must have 100k private capitalisation
the clearly defined investment objective
annual financial reports to sec
semiannual to shareholders

Question 3

shareholder rights to vote

Answer 3

1. changing nature of business(from open to closed)
2. changing investment objective
3. changing investment advisor

Question 4

structure of investment companies

Answer 4

board of directors
BOD can’t have felonies or securities midimneanors
min 40% noninterested

Question 5

Investment advisor to manage portfolio for fee

Answer 5

2 year contract, renew annually
max 60 day termination
must be in writing

Question 6

inlawful for registered investment company to

Answer 6

1. margin trading
2. short selling
3. joint trading
4. acquire more than 3% of the voting shares of another investment company

Question 7

open end

Answer 7

continuos primary offering
prespectus required
only common stock
redeemable shares
no secondary trading

Question 8

closed end

Answer 8

fixed shares
no prospectus after ipo
issues common, preferred, or bonds
supply and demand
secondary(exchange/otc)

Question 9

pricing of closed end funds

Answer 9

supply and demand

can be at discount or premium of nav

Question 10

pricing for open end funds

Answer 10

priced is based on NAV

assets-liabilities/ number of shares

based on FOWARD PRICING

Question 11

12-b1

Answer 11

used for marketing and promotion
annual expense paid out of funds nav
paid on quarterly basis
not cdsc
subject to annual approval

testable
maxmium 12b1 fee is .75%
no load funds limited to .25%

Question 12

class a

Answer 12

investors pay sales charge on each purchase

no front end load on no load funds

Question 13

class b

Answer 13

back end
investors pay decling charge at redemption
based on nav(not POP) at redemption
higher 12b then class a

good for long time

Question 14

class c shares

Answer 14

level load
purchase at nav with 1% cdsc for 1 year
higher 12b than A

good for short term

Question 15

breakpoint ok for

not for

Answer 15

individiauls and spouses
parents and dependent children
entity formed as business partner

not for investment clubs

Question 16

private funds

Answer 16

not registered with sec or states
fund manager registered if not exempt
high risk-low liquidity
high comp to managers

look for going concerns and to turn it into something better

Question 17

venture capital

Answer 17

come in at very early stages

Question 18

hedge funds registration

Answer 18

not required to be registered with SEC

have limited transparency 
limited liquidity
high expenses
managers usually have interest 
only for accredited or qualified investors

Question 19

reits and flow through

Answer 19

not flow through vehichles like DPP

Question 20

Taxation on a reit

Answer 20

in the majority of cases, dividends are taxed as ordinary income

capital gains distributions are treated as long-term capital gains

Question 21

The Investment Company Act of 1940 requires certain types of investment companies to compute their net asset value on a regular basis. Excluded from that requirement are

Answer 21

face amount certificates

Question 22

Can reits loan money for commercial construction projects.

Answer 22

yes

Question 23

what not to consider when dealing with mutual funds

Answer 23

liquidity

Question 24

The most common form of organizational structure for venture capital investment is the

Answer 24

limited partnership