Glossary of terms
This glossary of terms has been composed by FIRST STRATA to provide you with an easily accessible and comprehensive description of the many terms frequently used in all aspects of land sales.
We trust you will find it both useful and informative.
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A public corporate body registered under the Companies Acts and having for its main purpose the investment of shareholders' funds in the shares of other companies, to that extent being unique. Thus investors with small cash resources can spread their risks over a considerable range of shares, knowing the entire portfolio is under specialist management. Before such a trust company can be established, the Inland Revenue must be satisfied that:
a. it is resident in the United Kingdom and must not be a "close" company;
b. its income is derived wholly or mainly from shares and securities;
c. it does not invest more than 15% of its assets in the shares and securities of any one company, but investment in other approved investment trusts is not restricted;
d. all its ordinary share capital is quoted on the UK Stock Exchange;
e. its articles prohibit the distribution by way of dividend of any surplus realised on the sale of assets; and
f. it does not retain more than 15% of the income received each year from its investment in shares and securities.
The practical application of these requirements is affected by a number of important qualifications and interpretations. Unlike a unit trust, which is open-ended, an investment trust company is a closed-end fund, ie the ordinary capital is fixed to the same extent as any other public limited company. The investment trust company is exempt from paying tax on the capital gains made within its funds. The shares of such trusts offer those who invest small amounts a chance to benefit from the lower risks associated with larger investment portfolios.
The annual percentage return which is considered to be appropriate for a specific valuation or an investment, being expressed as the ratio of annual net income (actual or estimated) to the capital value. It is therefore a measure of an investor's opinion about the prospects and risks attached to that investment. The better the prospects and the lower the risks, the lower the expected yield and thus the greater the capital value. The required yield from an investment is estimated in the light of such factors as:
a. the security in real terms of the capital invested;
b. the security in real terms and regularity of the income;
c. the ability to adjust the income to reflect market conditions;
d. the complexity and cost of management;
e. the ease and likely cost of realising the capital; and
f. the tax position.
Cf RETURN (ON CAPITAL).
