Zeros

Zeros can be particularly attractive for investors who do not generally utilise their annual CGT allowances (£10,600 for 2011/12 tax year), since it will often be possible to obtain the return 'tax free'.

For a top rate tax payer who does not utilise his CGT allowances, a return of, say, 6% from a zero is the equivalent to a return of 10% from an interest bearing account.

The quality of Zeros varies considerably and this is usually reflected in the yields. The lowest yields are typically offered by Zeros which have a high level of 'cover' and no bank debt or other prior charges. In the case of Zeros which are not fully covered the notional yield may well be hypothetical. We use yields calculated by Fundamental Data Ltd on various assumptions as a useful way of comparing individual stocks.

We strongly advise investors to seek professional independent advice before buying individual Zeros.

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Manager of the Month

David Dudding

Threadneedle European Select C1

Career MRI 97.2%

The Threadneedle European Smaller companies fund and Threadneedle European Select fund are both run by David Dudding. Dudding joined Threadneedle in 1999 before taking over management of the smaller companies fund in 2002 and the larger cap fund in 2008. David manages both funds with a focus on medium to long term opportunities which have sustainably high returns.

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