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Split Capital Investment Trusts are very useful, but complex, investments,that allow people with different needs to work together to their mutual satisfaction.
If considering investing either directly or indirectly via a unit trust, you must ensure that you understand your position.
There are several classes of share in a Split Capital Investment Trust, but the example simply looks are a three class split into income , capital and zeros.
This a glossary of some of the terms
The annual rate of growth needed to meet the obligations of the class of share.. A negative rate means that the fund could lose money and still be OK, a positive one means the fund has to grow.
The rate of return needed to maintain the current value of the class of share. 0% is break even, negative implies that the fund could fall and still be OK , positive implies that growth is needed to redeem the share at its current price.
The ability of the current assets to meet the redemption rights of the class of share. 0.9 for zeros means that a present day wind up would only return 90% of redemption rights, 1.2 for income means that income people get all their entitlement, and 20% is carried over for those entitled to capital shares.
May or may not have any capital value at the end of the day. May be medium to high risk. Depends upon structure.
Gets the surplus at the end of the day after all other classes have been paid off in full. High risk.
Fixed rights to capital and usually get first call. Lowest risk in most funds. Price influenced by interest rates.
Rights to capital growth plus an increasing income. Normally low risk.
Income plus capital surplus. These can be high risk.