??? received "corporate action" money in my HL Vintage for Vanguard LifeStrategy

royal23

I have a S&S ISA with Hargreaves Lansdown (HL).
I'm holing only one fund: Vanguard LifeStrategy 80% (Acc).

I noticed today that the current value of my total portfolio was a bit higher than expected, so I checked out "stock movements" in my account.

then i saw that on 31/5/2013, type "corporate action" (normally just see "bought" in that section), unit cost 0, unit price 0:
cost: -232.67

what is that about?

HL has an info box below which says:
What does 'Corporate Action' refer to?
If a stock you hold has undergone a rights issue, merger, takeover, consolidation or other material change this will be listed here as a 'Corporate action'. It is also common to see 'Corporate action' listed alongside an adjustment to your cost figure, in most cases this will be an 'equalisation payment'.

so i clicked on the link "equalisation payment" and it tells me:
Equalisation payment
When you buy a fund between income payment dates the price you pay includes an amount of income already rolled up in the price. Where appropriate the fund manager will reimburse you for this by returning a part of your initial investment on the first income payment date. This will reduce your cost figure as it is considered a return of your capital (and so isn't taxable as income). If you hold accumulation units your equalisation payment is never physically made to you, it is instead reinvested within the fund, so the adjustment to your cost figure is made solely for tax purposes. Taxable income will be included on your annual tax schedule.



can someone explain this to me?
i just got handed free money. but why?!

Lokolo

It's not free money. You basically paid more for the funds at a certain point in time and this is the "refund" of the difference.

royal23

and why did this happen only once?
i bought this fund three times
1) 30 july 2012
2) 14 aug 2012
3) 08 may 2013

so this refund happend on 30 may 2013.

why never before. why this time?

Carpi09

royal23 wrote: »

and why did this happen only once?
i bought this fund three times
1) 30 july 2012
2) 14 aug 2012
3) 08 may 2013

so this refund happend on 30 may 2013.

why never before. why this time?

Maybe because only on certain occasions you overpaid?

It would be easier to message HL.

They respond promptly, I also put this question to them and here was the response.

Dear Mr XXXXXXXXX

Thank you for your email.

The 'Corporate action' which is showing on your account is a reduction in your cost price for your holding of the Vanguard Life Strategy 80% Equity fund. This is due to an equalisation payment of £57.86.

An equalisation payment occurs when you purchase a fund between the previous and next dividend payment date. When this occurs, part of the next dividend has already accrued in the price you paid for the units. As a result, when you bought the units you had in fact paid for part of the dividend. This portion is identified within the next dividend as equalisation and is regarded as a return of capital. This amount is taken off the original total investment cost to show the true cost you paid for the units; i.e. the original unit price less the dividend portion of that price. As a result the investment cost shown for your fund has now reduced by the amount of the equalisation. As you are holding this fund in accumulation units this amount has been reinvested back into the fund by the fund manager and as such, you have not received a cash payment.

The same will apply to any other funds as and when they pay the first dividend from when you invested in the fund. Equalisation only applies to the first distribution made when you make a new investment into a fund. The first distribution for this fund following your initial and subsequent investments was the 31st May 2013, and accordingly this is the date the cost price was reduced.

I hope this has been of assistance to you. If you have any further queries please contact us on 0117 900 9000.

Kind regards,

Hope this helps.

royal23

thanks, that's very helpful. cheers

Lokolo

http://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/v/vanguard-lifestrategy-80-equity-accumulation

And you can see the next dividend date here, And as its yearly you can see that when you bought on 8th May, this was between the ex-div and div-payment dates.