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Approved investment trust |
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Approved investment trustAn investment trust which satisfies certain conditions set by the tax authorities and accordingly is exempt from tax on capital gains made on profits from sales of investments within its portfolio.This ability of investment trusts to trade in and out of shares gives them an advantage over private investors who, in considering whether to sell shares, are bound to have one eye on the capital gains tax liability that they might incur.Similar MatchesInvestment managerInvestment managerThe individual who manages a portfolio of investments. Also called a portfolio manager or a money manager. Investment letterInvestment letterA letter of intent between the issuer of new securities and the buyer, in the private placement of these new securities. The letter of intent establishes that the securities are being bought for a minimum time period and are treated as an investment, not for resale. If no such letter exists, the securities must be registered with Securities and Exchange Commission. Foreign Direct InvestmentForeign Direct InvestmentAcquisition or construction of physical capital by a firm from one (source) country in another (host) country. Split capital investment trustSplit capital investment trustAn investment trust with a limited life, in which the equity capital is divided into two classes - income shares and capital shares.Holders of income shares receive the majority of the trust's income throughout its life and a specified capital amount on liquidationHolders of capital shares receive virtually no income during the trust's life but on liquidation receive all the assets after repayment of capital to holders of income shares. In other words they get the benefit of most of the capital growth.The raison d'etre of split capital investment trusts is that a single trust can accommodate the requirements of two types of investor in one fund, and provide better performance for both than they would be able to achieve if they invested in separate funds.It works like this:Ian Illingworth has £10,000 to invest and wants to get maximum income from it. He buys 'Income Shares' in the Split.Colin Casey has £10,000 to invest and wants to get maximum capital growth from it. He buys 'Capital Growth Shares' in the Split.The Split invests their pooled money and during the lifetime of the trust pays out all the income to Ian. At the end of the Split's life, when the capital value of the fund has risen to, say, £60,000, it pays Ian back his £10,000, and pays £50,000 to Colin.How have Ian and Colin benefited?Ian has benefited because for 7 years he has received the income on £20,000 even though he only invested £10,000.Colin has benefited because he has received the capital growth on £20,000 even though he only invested £10,000 and, being a higher-rate taxpayer, it has suited him very well not to have received any income on his £10,000 in that time.Basically, it is as if Ian said to Colin 'You have the capital growth on my £10,000' and Colin said to Ian 'Fine, I'll give you the income on my £10,000 in return.'There are many other classes of share within splits, and the thinking behind them gets progressively more complex. It is also important to note that Splits are geared investments (they can borrow money) which, depending on performance, can either be beneficial or detrimental to investors. If you are interested in what they have to offer it is essential to get specialist advice. Green field investmentGreen field investmentFDI that involves construction of a new plant, rather then the purchase of an existing plant or firm. Contrasts with brown field investment. Further SuggestionsValue Line investment surveyInvestment history Passive investment strategy Direct Foreign Investment Systematic investment plan Reinvestment Real Estate Mortgage Investment Conduit (REMIC) Income investment company protected investment products Investment value real estate investment trust Alternative investments Overinvestment Temporary investment Direct investment Reinvestment rate Future investment opportunities Personal Investment Authority Association of Private Client Investment Managers and Stockbrokers Legal investments Unit investment trust Regulated investment company Real Estate Investment Trust (REIT) Investment advisory service Investment agreement |
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