Investment Trusts

The oldest form of pooled investment, these are companies with shares quoted on the London Stock Exchange, whose business is to invest in the shares of other companies. 

Investors buy and sell shares in the investment trust company itself, which shares are fixed in number (thus the phrase closed-end fund). As such, investors are shareholders in the investment trust company, with normal shareholder rights. The value of those shares is established by demand and supply in the market, as well as by the underlying value of the company's holdings.  

Where the share price is greater than the net book value of the underlying assets, the share is sold at a premium. Where the share price is lower, it is sold at a discount. 

Because they have corporate powers, investment trust companies may borrow, and hence gear-up their investments. 

Split Capital Trust

This is a hybrid Investment trust, in which two types of share are issued: the income (ordinary) share which has entitlement to dividends on the trading income of the trust and the preference share (usually with zero coupon), which offers capital appreciation on the whole of the fund upon a winding up. Thought to be a low-medium / medium risk investment by many consumers in the past, they have since endured a bad press as prices crashed amid allegations of excessive counter-holdings of other split-cap investment trusts by some fund managers supporting one another's prices within the industry.

Taxation on shareholdings in the hands of the investor is the same as for any other directly-held shares.   

What you will get back depends on how your investment grows. The value of the investment is determined by the value of the units, the price of which can fall as well as rise. You should remember that past performance is not necessarily a guide to future returns.