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Introducing the LemonFools Personal Finance Calculators

Fund selection criteria

Closed-end funds and OEICs
colin
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Re: Fund selection criteria

#166508

Postby colin » September 15th, 2018, 8:13 am

???! Perhaps you should do some more research

I did, I Iooked at this board!

colin
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Re: Fund selection criteria

#166510

Postby colin » September 15th, 2018, 8:20 am

“Gearing” is a misnomer. No or little Gearing. It’s mainly invested in index linkers, gold and some equity. It’s for capital preservation. TJH doesn’t worry about a 30% cut in capital and dividends because he knows things will recover, happily slicing his winners to top up his losers.

so toofast2live do you know why they do not pay out 85% of their income?

richfool
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Re: Fund selection criteria

#166519

Postby richfool » September 15th, 2018, 9:22 am

They are obliged to pay out (at least) 85% of their income, which means they can retain the up to 15% to distribute when times are leaner.

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Re: Fund selection criteria

#166556

Postby StOmer » September 15th, 2018, 12:31 pm

In their latest annual report -
In a normal year, the Board would be recommending a modest increase in the annual dividend from 20p to 21p per Ordinary share, in part reflecting the further fall in the ongoing charges ratio to 0.77%. However, under the retention test to qualify for investment trust status the Company can only retain 15% of revenue. To preserve this status, the Board is therefore recommending an additional special dividend of 6p per share, making a total payout of 27p per share (20p last year).Investors should note that,as when in the past a special dividend has been similarly declared, this does not imply a repeat of any such extra payment in succeeding years.

Hariseldon58
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Re: Fund selection criteria

#166622

Postby Hariseldon58 » September 15th, 2018, 10:24 pm

@colin

The reserving of income by investment trusts is an accounting issue not an actual treasure chest of cash tucked away for hard times.

The retained income is reinvested in the portfolio and allows Trust to maintain or increase a dividend if the received income in a given year is insufficient, dividends paid from capital profits is also now allowed and a few trusts with low actual income are using gains to pay a healthy dividend.

colin
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Re: Fund selection criteria

#166680

Postby colin » September 16th, 2018, 11:35 am

Thanks for that clarification Hariseldon.
so the retained income is re-invested which as you say allows the trust to maintain the dividend in bad years, so what happens to the extra income generated in good years? is that re-invested?
Thanks for your comments

tjh290633
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Re: Fund selection criteria

#166717

Postby tjh290633 » September 16th, 2018, 1:39 pm

I think that Hariseldon is wrong. ITs run two accounts, the income account and the capital account. Surpluses from dividends stay in the income account as cash. Those from the capital account trading activities stay in that account. Looking at the published accounts should reveal any transfers of cash between them.

TJH

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Re: Fund selection criteria

#166733

Postby Alaric » September 16th, 2018, 4:38 pm

tjh290633 wrote: Surpluses from dividends stay in the income account as cash.


I don't believe there are any constraints on investment policy such that a declared surplus in the Income account must stay as cash. It would my belief that the Capital Account and Income Account are managed as a single pool. Distinctions between them are for internal reporting only and satisfying the taxation conditions that 85% of the income be distributed and also that apart from the recent changes, capital isn't distributed as dividend.

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Re: Fund selection criteria

#166738

Postby tjh290633 » September 16th, 2018, 5:00 pm

Alaric wrote:
tjh290633 wrote: Surpluses from dividends stay in the income account as cash.


I don't believe there are any constraints on investment policy such that a declared surplus in the Income account must stay as cash. It would my belief that the Capital Account and Income Account are managed as a single pool. Distinctions between them are for internal reporting only and satisfying the taxation conditions that 85% of the income be distributed and also that apart from the recent changes, capital isn't distributed as dividend.

I would be more convinced if you could find an IT whose accounts show that the cash held is less than the income reserve.

TJH

Alaric
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Re: Fund selection criteria

#166753

Postby Alaric » September 16th, 2018, 6:21 pm

tjh290633 wrote:I would be more convinced if you could find an IT whose accounts show that the cash held is less than the income reserve.


Try one of the biggest Foreign & Colonial.

At the end of 2017 Income Reserve 91,320, cash at bank 31,136.

OZYU
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Re: Fund selection criteria

#166758

Postby OZYU » September 16th, 2018, 6:34 pm

IIRC IT income reserves are not cash, they are a mathematical accounting instrument, no more. Surplus income to divi requirements, if any, is booked to the reserve, and released as required in the reverse process.

If you think about it, some of these income reserves are way too large to hold as unproductive cash.

Ozyu

Sorry Alaric, did not see your post which confirms my understanding of IT accounts.


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