Glossary

AiM

Alternative Investment Market (AiM) is the London Stock Exchange's global market for smaller, growing companies.

AIC

Association of Investment Companies. This is a collective association for UK investment companies.

Annual General Meeting (AGM)

An annual meeting called by directors of a company that allow shareholders to stay informed and involved with company decisions and workings.

Assets

Anything owned or controlled that has value, but usually, for an investment company, it refers to equities, bonds and cash. The underlying assets of an investment company will vary depending on the company's objective.

Benchmark

A measure against which the performance of an investment company is compared or against which it sets its objective. For example, a UK invested investment company might have the FTSE All-Share Index as a benchmark and a stated objective to outperform this. See index

Bid price

This is the price at which the market is prepared to buy your investment trust shares. This price is determined by supply and demand.

Blue-chips

The shares with the highest status as equity investments.

Buy-backs

Investment trusts have the ability to buy-back their shares to improve shareholder value and help moderate volatility in the discount. Shareholders will be asked to vote each year so that the Company can exercise this right as and when it is deemed suitable.

Capital Gains Tax

A tax charged on gains arising from the sale of assets. There is a CGT exemption limit set each tax year and any gains up to that will not be taxable.

Capital structure

The different amounts and types of stocks and shares which make up a trust's capital - the amount of ordinary and preference shares, debentures and unsecured loan stock etc, which are in issue.

Child Trust Fund (CTF)

The CTF is a savings and investment account for children who were born between 1 September 2002 and 2nd January 2011. Each child born within that period qualified for a contribution of between £50 and £250 from the Government which had to be invested in a CTF product. Although CTFs are no longer available to new born children, existing accounts can continue to be held or transferred into a Junior ISA (JISA). For both CTF and JISA accounts, limits apply to the amount that can be saved each year on behalf of the child by parents, family or friends. The CTF is a tax efficient savings product; there is potentially no income or capital gains tax paid either on dividend income or by the capital growth of the investment. More information about the Jump CTF and JISA is available here.

Closed-ended

A company with a fixed capital structure. Variations in demand for the shares of the company are reflected in movements in their market prices and not by an increase or decrease in the number of shares in issue – the opposite of an open-ended fund, such as a unit trust.

Company objective

This is a brief description of what the trust aims to achieve in terms of growth/income or both and what type of company/industry sector the trust can invest in.

Conventional investment company

Investment companies which issue only one class of ordinary share are commonly known as conventional investment companies.

Corporation tax

The tax a company may have to pay on its profits for a year. Investment trust companies are exempt from corporation tax on their capital gains and also do not pay tax on any UK dividends. As they can also offset expenses against any taxable income, most investment trusts do not pay corporation tax, helping their tax efficiency.

Crest

The computerised system introduced in July 1996 by the securities industry through which transactions in securities are 'settled' (i.e. concluded) by the payment of cash or by the delivery of securities against payment.

Dealing

Buying and selling of shares.

Diluted Net Asset Value

A method of calculating the net asset value of a company after taking into consideration any outstanding convertible loan stock, warrants or options which are assumed to be exercised by the holders, so increasing the number of shares among which the assets are divided.

Discount

When the share price is lower than the Net Asset Value (NAV), it is referred to as trading at a discount. The discount is expressed as a percentage of the Net Asset Value.

Dividend

Income paid to shareholders by the company they invest in.

Dividend yield

The annual dividend income per share received from a company divided by its current share price. Put simply - how much income you're getting out of the company for the capital you've got locked up in it.

Emerging markets

The stock markets of countries which have less developed economies compared with the developed world but which nevertheless have functioning stock exchanges.

Equities

Shares in a company.

Ex

When a stock or dividend is issued by a company it is based upon an "on register" or "record date". However, to create a level playing field when shares are traded on the London Stock Exchange during this benefit period an "ex" date is set. Before this "ex" date if shares are sold the selling party will need to pass on the benefit or dividend to the buying party.

Exchange

An exchange provides access to capital and facilitates securities dealing through speedy and innovative trading platforms and services. An exchange is also responsible for delivering an orderly market.

Ex-dividend

See ex

Fair value pricing

This is the Company’s best estimate of the value of one or more securities at the valuation point of the fund. Fair value pricing has the intention of producing a "fairer" dealing price where there is doubt over the validity of prices.

FCA

The FinancialConduct Authority (FCA) is an independent non-governmental body, given statutory powers by the Financial Services and Markets Act 2000.

Fund Manager

The person responsible for the day-to-day management of the investment funds.

Fixed interest securities

Securities like debenture stocks, loan stock and convertibles which carry a fixed rate of interest called a coupon.

FTSE 100 index

An index of the 100 of the largest UK companies trading on the London Stock Exchange. Its constituents are reviewed quarterly.

FTSE All-Share index

A broadly based index covering hundreds of the largest UK industrial, commercial and financial companies, including some investment companies. Commonly used as a benchmark against which performance of some investment companies or sectors are measured.

Gearing

Gearing is an investment term for borrowing. Borrowing is permitted to buy further investments. If assets rise in value, gearing magnifies the return to ordinary shareholders. Correspondingly, if the share price falls, gearing magnifies the fall.

Geographical sector

This refers to the geographical area that the trust assets are invested in.

Hedging

A strategy employed (e.g. in a futures market) to reduce risk. Hedging is used to reduce the risk of loss through adverse movements in interest rates, equity markets, share prices or currency rates. It has become an accepted risk management tool.

IFA

This term stands for Independent Financial Adviser and is a person who can provide financial advice on the most suitable investment for you.

Index

This is a device that measures changes in the prices of a basket of shares. The purpose is to give investors an easy way to see the general direction of shares in the index.

Inheritance Tax

Inheritance Tax (IHT) is the tax your estate pays when you die although it can also be charged on certain lifetime gifts.

Investment trust

A public limited company that is listed on the London Stock Exchange. It exists to invest in the equity of other companies with the aim of producing a return for its shareholders.

Investment company

A closed-ended fund which invests primarily in a diversified portfolio of the shares and securities of other companies. See Investment trust

Investment scheme

A facility to enable purchases of investment company shares to be made easily and cheaply by the investment of regular (usually monthly) sums of money or by occasional lump sum contributions. See wrapper products and pound-cost averaging.

ISA

Individual Savings Account (ISA) offers tax advantages for UK based investors. Any returns earned are free from capital gains tax and no further income tax is paid. The Witan ISA is a stocks and shares ISA. There is an annual limit to the amount that can be invested each year. You can split the amount you pay into an ISA between a Cash ISA, Stocks and Shares ISA and an innovative finance ISA as you choose, as long as the overall amount does not exceed the maximum ISA allowance. Witan does not currently offer a Cash ISA or Innovative Finance ISA. However, you have the option of transferring the value of any of your existing stocks and shares ISAs or cash ISAs to us without losing their tax-efficient status. However your existing ISA manager may charge you for the transfer. More information about the Witan Wisdom ISA is available here.

ISIN

International Securities Identification Number (ISIN). International code for a listed security.

Issued capital

Issued share capital is the total number of shares subscribed to by the shareholders.

Junior ISA

The Junior ISA is a tax efficient savings vehicle for children who did not qualify for the Child Trust Fund. (see above ‘Child Trust Fund’). Like adult ISAs, Junior ISAs are subject to an annual limit on the amount that can be invested each year, on behalf of the child. More information about the Jump Junior ISA is available here.

Large-cap

These are companies who typically have market capitalization exceeding around £2 billion. Their financial strength and size attracts institutional investors who want long-term steady growth prospects. They are generally viewed as being less risky than smaller companies.

Main market

The London Stock Exchange's principal market for listed companies from the UK and overseas. The securities need to be admitted to the Official List by the UK Listing Authority (UKLA), a division of the Financial Services Authority, if they are to trade on the main market.

Management charge

The charge levied by an external investment manager for the management of a company. It is usually charged annually, and may consist of a fixed fee and/or a performance related fee.

Market capitalisation

The stock market value of a company as determined by multiplying the number of shares in issue by the price of the shares.

Market price

See Share price.

Mid-market price

A price calculated as the mid point between the bid and offer prices. See share price. The mid-market price is used to calculate the discount, yield and share price performance data on this website.

Mid-cap

These are UK companies that generally have a market value in the £250 million to £2 billion range and make up indices in the FTSE 250 range.

Net asset value (per share)

Net Asset Value or NAV is the value of the total assets less liabilities of the trust divided by the number of ordinary shares in issue.

NAV per share

See Net asset value.

Offer price

The price at which the market is prepared to sell your shares. This price is determined by supply and demand. See share price.

Ongoing Charges

The ongoing charges represents the total of the recurring operating and investment management costs expressed as a percentage of net assets.

Ordinary shares

Companies can have different types of shares, but the vast majority are 'ordinary' shares. As a holder of ordinary shares, you have bought a stake in the ownership of the company. Registered holders are invited to attend shareholders' general meetings, including the Annual General Meeting and have the right to vote on certain major affairs of the company.

Par Value

The par value of a loan stock is its face value (also known as its nominal value).

Portfolio

A group of investments. Investments can be made up of various asset classes (stocks, bonds, real estate, commodities) or the same asset class (exposure to stocks across companies and industries).

Pound-cost averaging

An investment strategy by which the investor invests fixed sums over time, without specific regard to the share price at the time of purchase. The idea is that, by setting aside a fixed amount, rather than focusing on share price, you end up buying more shares when the price is low and fewer when the price is high. It can be a useful way to invest in the stock market if you are concerned about short-term volatility, as issues of timing are not as critical.

Premium

When the share price is higher than the NAV (Net Asset Value) it is referred to as trading at a premium. The premium is expressed as a percentage of the NAV.

Public offer

This is a method of flotation in which a company issues shares to the public at large, including private and institutional investors.

PLC

A Public Limited Company in the UK is a company limited by shares and having an authorised share capital of not less than £50,000.

Redemption value

The amount at which a prior charge or preference share is due to be repaid on the expiry of the loan period or on liquidation.

Registrar

An organisation responsible for maintaining a company's share register.

Return

The realised profit/loss on an investment as a percentage of capital.

Share

The authorised share capital of a company is divided into a number of equal parts. Each part is called a share. See ordinary share

Share price

The share price is the value of the share at a given moment. It is determined by the balance between demand and supply on the stock markets. There are different share prices quoted in the market. Bid/Sell is the price offered in the market to buy shares from an investor, also referred to as the selling price. Offer/Buy is the price offered in the market at which shares are offered to investors also referred to as the buying price. The mid-market price is calculated as the mid point between the bid and offer prices and is used to calculate the price related data.

Small-cap

These companies tend to exhibit higher volatility than large or medium cap companies, but can offer higher growth potential.

Spread

The spread is the term used to describe the difference between the offer price and the bid price.

Stamp duty

A Government tax imposed on the buying of shares and property. Currently, stamp duty on share purchases applies at the rate of 0.5% but is currently not applied to sales.

Tender offer

An offer made by a company to all shareholders to buy all or part of their holding in that security.

Total assets

The total value of all assets held, less current liabilities (short term loans used for investment purposes are not deducted), before deducting prior charges, including listed investments at their fair value price and unlisted investments at directors’ valuation. Income for the current financial year has been excluded. Revenue taken to reserves for the prior financial year is included in the total assets.

Total return performance

Performance data can be calculated with income reinvested. This is defined as total return meaning that any income received through dividends is reinvested into the shares of the company on the day the shares were quoted ex dividend i.e. the day the dividends were declared and not the day they are paid. The total return will then be the difference between the value of the enlarged holding at the end of the period and the starting value, expressed as a percentage of the starting value.

Volatility

A measure of the tendency of a market/share price to vary over time. There are several ways to measure volatility, but the most common method used is the standard deviation. Standard deviation measures the extent to which a value, such as the share price, has varied around its average level during a past period. The higher the volatility of the values, the higher the standard deviation will be. Standard deviation is often used as a measure of investment risk.

Wrapper products

ISAs, savings and investment schemes, children's saving schemes and pensions are all 'wrapper products'. They are not investments in their own right, but simply different ways of holding investments; some of the wrappers have tax advantages.