Unit trusts and OEICs

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3. The trust deed and scheme particulars

The trust deed is the legal document for setting up a unit trust. It defines the operational parameters of the trust, and has to conform to regulations laid down by the Financial Services Authority (FSA).

The key elements of a trust deed are:

• the name of the trust which must be consistent with its investment objectives - so you couldn't have a trust called The Play Safe UK Income Trust which invested in Russian oil exploration companies.
• the law that applies to the trust - in nearly all cases, the law of England and Wales.
• a statement that the trust may invest in the eligible markets as defined by the FSA.
• a statement that the trust deed is binding on the unitholders, trustees and managers and that the trust property is held by the trustees for the unitholders.

It can also include restrictions on the powers of the investment managers, the charges, the unit pricing formulas, the creation of a unitholders' register and the remuneration of managers and trustees.

Another important document - the 'scheme particulars' - expands on the information in the trust deed, and covers:

• details of the managers and trustees
• the trust objectives
• types of units issued (i.e. distribution or accumulation)
• dealing days and the valuation point (i.e. the time of valuation)
• charges
• minimum investment levels

A trust cannot be marketed to the public until its deed and scheme particulars have been authorised by the FSA.

1. What is a unit trust? 2. What is a unit? 3. The trust deed and scheme particulars 4. The people behind a unit trust 5. Charging structure of unit trusts 6. Pricing of units - FSA rules on maximum offer price 7. Pricing of units - FSA rules on minimum bid price 8. Pricing of units - in practice 9. Pricing of units - historic and forward pricing 10. OEICs - Open Ended Investment Companies 11. Shares in OEICs 12. OEICs - pricing 13. OEICs - charges 14. Taxation of unit trusts and OEICs - Introduction 15. Tax treatment of dividends from equity funds 16. Tax treatment of coupons from non-equity funds 17. Capital Gains Tax 18. Tax shelters 19. Investment powers of fund managers: 'eligible investments' 20. Diversification 21. Fund classification: risk gradings 22. Selecting a fund: Defining your objectives 23. Selecting a fund: Active vs passive 24. Selecting a fund: lump sum vs regular savings 25. Selecting a fund: Past performance 26. Where to buy unit trusts and OEICs 27. Buy with or without advice? 28. The mechanics of buying 29. The mechanics of selling 30. Share exchanges and fund switches 31. Investor protection 32. Conclusion

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