What Are The Different Types Of Stock Trust

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Register to read the introduction… Identify and discuss three classes of assets in which public unit trusts may invest funds. Extend your discussion by distinguishing between listed and unlisted trusts.
• types of trust include property trusts, equity trusts and mortgage trusts
• property trusts invest the majority of funds in different forms of property. For example, one property trust may invest in resorts while another may invest mostly in central business district properties
• equity trusts invest the majority of funds in shares listed on stock exchanges. For example, one equity trust may invest in domestic industrial shares listed on the ASX while another may invest in shares included in the Dow Jones Index in the USA
• a mortgage trust will invest in mortgages taken as security over property, usually first mortgages
• unit may be listed on a stock exchange or be an unlisted trust. With a listed trust the unit holder will buy or sell units through the stock exchange; with an unlisted trust the unit holder will buy units from or sell units back to the trustee
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Within the share portfolio the investor can hold shares in a number of companies, a range of industry sectors, and across different countries
• therefore, as investors are able to hold diversified investment portfolios, prices will not incorporate a significant risk component for unsystematic risk

6. Assume the existence of a taxation regime that allows for dividend imputation. The company tax rate is 30 per cent. An investor’s marginal tax rate is 40 per cent. The investor receives a 70 per cent partly franked dividend of $500.00.
(a) Explain the dividend imputation process.
• with the Australian dividend imputation system, dividends on which the company has already paid company tax are referred to as franked dividends
• a company is able to pass the benefit of the tax paid on profits to its shareholders
• for personal taxation purposes, the franked dividend received by the shareholder is grossed-up by the franking credit and the total amount is included in assessable income

• the individual shareholder is entitled to receive a franking rebate up to the amount of the franking

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