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Schroders gets into gear for tax-free income

Schroders&#39 income Isa aims to provide a tax-free income of 5.8 per cent a year and the potential for capital growth by investing in the ordinary shares of the recently introduced Schroder split investment fund.

This investment trust invests 75 per cent in stocks listed on the FTSE 350 index. The remainder goes into a portfolio of fixed-interest securities via the Schroder monthly high income and Schroder corporate bond unit trusts. Gearing is limited to 15 per cent so it is not as risky as highly-geared trusts such as BFS geared income.

Investing in the UK may be attractive to some investors as it has held up quite well over the last few weeks but stocks with good growth potential may still be picked up cheaply. This Isa is likely to appeal to more adventurous income seekers as cautious investors may prefer with-profits bonds. But some investors may be looking for a higher level of income than this Isa offers.

According to Standard & Poor&#39s, the Schroder corporate bond fund is ranked 17th out of 74 funds and the Schroder monthly high income fund 15th out of 30 funds based on £1,000 invested on a bid-to-bid basis with net income reinvested over three years to December 10, 2001.

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