Investment trusts

Investment trusts have a similar name to unit trusts, and they also pool in­vestments managed by specialists. However, the similarities end there. Investment trusts are much older - starting in 1868 compared to 1935; they are subject to lower charges and they are 'closed ended' funds. This means that, if people want to buy more of them, and because their quantity is limited then their share prices can rise above the value of the assets they own.

In brief, investment trusts are limited companies which invest in other limited companies. Most of them are quoted on the stock exchange: there are over 300 investment trusts. Investors buy and sell them through stockbrokers (they buy and sell unit trusts through the managers). In the financial pages, their share prices are shown along with a column showing the percentage premium or discount of the share price to the net average value of a share (NAV).

Investment trusts can borrow long term so as to invest in more assets, rather than asking the shareholders for more money. However, because the number of shares is fixed (hence their name of 'closed funds'), the share price can vary more sharply than the price of the underlying assets. The price can fall to a discount below the NAV. In fact, this is common with investment trusts.

X. Find the terms which match the following definitions:

merchant banks; financial intermediary; unit trust; retail banking; financial institution; building society; wholesale banking; discount house; clearing bank; overseas banks

1. An investment organization that invests funds subscribed by the public in securities and in return issues units that it will repurchase at any time.	___________
2. A person or firm, other institutions that hold money balances, or borrow from individuals and other institutions in order to make loans or other investments.	___________
3. The activities of the commercial banks carried out with the general public and business enterprises.	___________
4. Institutes that carry out a variety of financial services including acceptance of exchange? the issue and placing of loans and securities, portfolio and unit trust management, foreign exchange dealing and some banking services.	___________
5. A financial institution in the city of London founded originally (early 19 century) to act as broker for the acceptance by banks of bills of exchange.	___________
6. The group of major commercial and public organizations engaged in exchanging, lending, borrowing and investing money. The term is often used as an alternative for financial intermediaries.	___________
7. A UK financial institution engaged in the provision of mortgages driving its funds from deposits by the general public.	___________
8. The making of loans or acceptance of deposits between banks and other financial institutions especially in the interbank market.	___________
9. The banks which deal with the offsetting of liabilities and sales between two parties. Member of the London Banker’s Clearing House now used synonymously with commercial banks.	___________
10. Banks operating in the UK but foreign controlled; UK owned banks that conduct their business mainly abroad.	___________

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