OEIC Specifics

Question 1

What is another name for an OEIC?

Answer 1

1. Investment companies with variable capital (ICVCs)

Question 2

What is the regulatory structure of an OEIC

Answer 2

1. Must be authorised by FCA to be marketed
2. operated by Board of Directors - may be a single ACD (Authorised corporate director)
3. Assets held by independent depository
4. ACD and Depository must be authorised persons

Question 3

How does the product structure differ to Unit Trust

Answer 3

1. Company not Trust - own constitutional docs. and AGMs
2. can be stand alone or part of umbrella
3. issues shares not units
4. appoints directors
5. independent depository needed
6. annual audited accounts
7. single pricing used
8. Limit on borrowing - temporary only - 10% of fund

Question 4

What is the ACD (Authorised Corporate Director) responsible for?

Answer 4

1. Compliance with investor protection requirements
2. maintaining register of shareholders
3. day-to-day mgmt - valuation,pricing etc.
4. preparation of accounts
5. Overseeing manager

Question 5

What is the role of the Depository

Answer 5

1. safe keeping of asset
2. collection of income and auth distributions
3. Valuation, pricing and dealing the shares.

Question 6

Reporting requirements of OEIC

Answer 6

1. report to holders twice a year - once unaudited and once audited
2. produce reports that comply with OEICCs statement of recommended practice
3. issue short form account
4. make available full accounts on request

Question 7

How are Share prices valued

Answer 7

1. NAV per share
2. Assets in OEIC calc’d at mid market price - or only price available

Question 8

Explain the Dilution Levy

Answer 8

1. For Single Priced Shares
2. added to sale price or deducted from price of redemptions
3. to cover dealing costs and spread between buying and selling prices

Question 9

Advantages of OEICs

Answer 9

1. Most widely recognised type of collective investment in Europe - marketed internationally
2. Permit multiple share classes - flexible charging and currency structures
3. Allows umbrella funds - larger range of objectives covered
4. Umbrella also makes it easier for manager to make new funds via new share class

Question 10

How are OEICS taxed

Answer 10

1. Corporation tax on income received less expenses
2. OEICS exempt from CGT

Question 11

How are investors in OEICS taxed

Answer 11

1. Dividends paid without deduction of tax
2. Interest paid gross
3. CGT on growth on sale or switch of share class

Question 12

What are offshore funds

Answer 12

1. Funds established outside the UK
2. Structured like an OEIC

Question 13

What is a recognised Offshore Fund

Answer 13

1. Recognised by FCA
   
   • under section 272 of FSMA 2000 or
   • placed under Temporary Marketing Permissions Regime (TMPR)
2. Can then be promoted to UK retail investors

Question 14

What are the two types of Offshore funds - for tax treatment

Answer 14

1. Reporting Funds
2. Non-Reporting Funds

Question 15

How are Reporting Funds Taxed on Investors

Answer 15

1. Fund reports all income to HMRC
2. Investors are taxed on their share of the income even if it is not distributed
3. Types of income taxed as normal:
   
   • Foreign dividends = Income tax
   • Interest - as normal
4. If >60% held in FI - all distributions classed as interest

Question 16

How are Non-Reporting Funds Taxed on Investors

Answer 16

1. Usually roll-up funds
2. Gain on disposal subject to income tax

Question 17

Explain Tax on Offshore Funds

Answer 17

1. May be subject to witholding tax on dividends received

Question 18

Explain Automatic Exchange of Information

Answer 18

1. Allow exchange of info between different tax authorities
2. To stop tax avoidance/evasion