SIE 6/7 - Investment Returns and Packaged Products

CY = annual div (dollar amount)/current market price

• Dividend/declaration date: the date the dividend is announced
• Payment Date: date on which the dividend is distributed
• Record Date: date on which you must own the stock to receive a dividend (trade must settle on/before record date)
• Ex-Div Date: one business day before the record date
• Stock begins to sell w/o its dividend

• No economic gain/loss or capitalization for share holders, and no change to equity ownership
• Stated in % terms

Shares not taxed as income, total basis is unchanged (basis per share is decreased). S1P1 = S2P2

Annual interest/current market price

Yield to maturity of a bond. This includes 1) interest payments 2) interest from reinvesting the interest (compound interest) 3) gain/loss on the difference between current value and par value.

Price goes down, CY and YTM go up

Price goes up and CY/YTM go down

• Short term is due to assets held for <=1 yr [taxed at ordinary rate]
• Long-term is due to assets held for >1 yr [maximum of 20% tax]

• FACs: Face Amount Certificate Companies - guaranteed growth rates
• UITs: Unit Investment Trusts - fixed portfolios with passive management

• Professional management
• Diversification
• Liquidity (required by law to be liquid)
• Convenience and cost
• Exchanges at NAV

• Underwriter: Fidelity
• Board: Both Fidelity/non Fidelity
• Investment Advisor: Fidelity employee
• Custodian Bank: Prevents stealing, hold's cash and securities
• Transfer Agent: Issues, redeems, and cancels shares--distributes securities

• NAV = (Assets - Liabilities)/#Shares Outstanding
• 4:00 PM each day

• NAV + any sales charges
• NAV = bid POP = ask [fund company's perspective]

• (POP-NAV)/POP
• Maximum 8.5%

• Front end load--sales fee charged right away upon buying
• Back-end load--Assessed at redemption, percentage decreases as its been held for longer (called CDSC)

Fees that a fund levies against the fund's assets.

• Management fee: paid to investment advisor, not tied to PnL
• Admin Fee: Bank payments and transfer agent costs
• Redemption Fee: Remains in the fund and benefits owners

Sales charges. It includes opex and management fees (including 12b-1 and admin). Just no sales charges.

• A: front-end load, low 12b-1 fees, breakpoints available for large purchases
• B: sales charge at time of sale, higher 12b-1, can convert to class A after 6-8 years
• C: may have both front-end and deferred charge, higher 12-b1 fees (same as B), no conversion to class A
• Never recommend b shares

A mutual fund with no sales charges that may only charge annual 12b-1 fees up to 0.25%.

• A non-binding provision that lets investors have extra time to qualify for breakpoint sales charges.
• 13 month duration, may be backdated 90 days

• Rights of Accumulation--right to add up all purchases made from the same family of funds
• When a breakpoint is crossed, current and future purchases may be able to get the better sales charge
• Available to: purchaser, immediate family, fiduciary for account, trustee for trust, pension plans, investment clubs

• This allows investors to receive regular, periodic paymetns from their accounts.
• NEVER advise a client to engage in a purchase and withdrawal plan at the same time.
• Fixed dollar amount, fixed percentage, fixed time, fixed number of shares
• Payments not guaranteed

• Breakpoint sales: soliciting sales of amounts just below breakpoints
• Recommending different fund families to get higher sallles charges
• Switching between fund families to get funds (must justify why it's ok)
• Excessive class b share purchases (since they don't qualify for breakpoints)

• Closed: one time issuance, may trade +/- NAV, sponsor doesn't have to redeem, secondary market, may be sold short
• Open: Continually issue new shares (with prospectus), shares sold at POP, shares must be bought at the NAV, shares remain in the primary market, cannot be sold short