Aberdeen   

Aberdeen Asset Management Plc and its subsidiary companies.

Alternative Investment Market (AIM)   

The Alternative Investment Market (AIM) is the London Stock Exchange's market for small, young and growing companies. It gives investors the opportunity to invest and trade in the shares of these companies on a market regulated by the London Stock Exchange.

Annual General Meeting (AGM)   

This is the annual shareholder meeting. All companies, except the very smallest, are required by law to hold such a meeting once a year. During the meeting shareholders are allowed to ask questions of the board. Additionally, the board of directors will explain the background to the company's trading record for that year.

Annual management fee   

A charge made every year for running your fund. It is usually a percentage of your investment.

Annual Percentage Rate (APR)   

The Annual Percentage Rate (APR) aims to estimate the real cost of borrowing so that you can compare different products on the market.

Asset cover   

Cover on a zero dividend preference share measures how well the price which has to be paid to the shareholders on redemption is covered by the current gross assets less the known costs and prior to charges. It is calculated by dividing current gross assets, less prior charges, wind-up costs and interest charges and management fees attributable to capital by the total zero charge.

Association of Investment Companies (AIC)   

The Association of Investment Companies (AIC) is the trade body for investment trust companies. The AIC provides a considerable amount of background reading and explanatory material on investment trusts including a series of free factsheets. Web site: http://www.theaic.co.uk Head Office Address: The Association of Investment Companies, 9th Floor, 24 Chiswell Street, London EC1Y 4YY. Telephone: 0207 282 5555 Facsimile: 0207 282 5556

Bank of England   

The United Kingdom's central bank. The Bank of England plays a key role in the fight to keep inflation under control having been given more independence by the Government. The Treasury sets the inflation target and the Bank of England has operational responsibility for setting interest rates to achieve this aim.

Bare Trust   

Parents or anyone else for that matter can set up a trust for a child known as a 'Bare Trust'. The aim is to transfer an asset to the child in a way that ensures the offspring actually gets the benefit and in a tax efficient way. With a 'Bare Trust', the asset is automatically transferred to the child when he/she reaches the age of 18.

Base Rate (or Interest Rate)   

The minimum rate at which banks are prepared to lend money - it acts as the benchmark for other interest rates, including mortgages and loans. The central bank announces every first Thursday of the month the base rate through its Monetary Policy Committee (MPC).

Basic Rate of Tax   

The tax system in the United Kingdom allows you to earn some money without incurring any tax liability. You then earn some money that is taxed at the lower rate, then earn some money which is taxed at the basic rate, finally some money which is taxed at the higher rate. The rates normally change annually and so you should refer to your local tax office for the current rates. Web site: www.inlandrevenue.gov.uk

Bid-Offer Spread (Securities)   

The Dealing System in the United Kingdom. These quotes, 'Bid' and ´Offer', are two-way prices, the lower of which is known as the Bid price (the price at which the holder can sell shares) and the higher is the Offer price (the price at which the holder can buy shares). The Bid/Offer spread will be determined by a number of factors - including, but not limited to, the underlying price of the equity, the sector it is in, the liquidity or the volatility.

Bid Price   

'Bid price' - This is the price at which a market-maker in the stockmarket is prepared to buy shares from existing holders. This term is also used to refer to the price at which a fund management company will sell units in a unit trust or similar pooled investment. The other price is referred to as the 'Offer price' or the price at which a fund management company will buy units in a unit trust or similar pooled investment.

Bid   

'Bid' - in the context of a takeover bid means making an offer for the shares of another company. 'Bid' - can simply mean offering to buy shares. It may also mean the highest price that you are prepared to pay for a given security at a particular time.

Blue Chip   

A term adopted to refer to the largest shares in a stockmarket. Those companies that are typically the largest and more prestigious. Companies such as British Telecom, British Petroleum and Vodafone are such companies.

Bonds   

A bond is simply an ´IOU'. It is an agreement under which a sum is repaid to an investor after an agreed period of time. A bond can be issued by anyone but is generally issued by a government or a public company to repay money borrowed. These loans normally repay a fixed rate of interest over a specified time and then repay the original sum in full after an agreed period.

Bonus Issue   

A bonus issue is when a company gives, free of charge, a number of new shares for each share existing shareholders already hold. After the issue, a company's share price is likely to fall, reflecting the new shares in issue.

C shares   

An Investment Trust being a corporate legal entity, may issue C shares (or ‘conversion’ shares) which are a method of raising new funds without penalising existing shareholders. The new money raised is maintained as a discrete pool which is kept separate from the existing fund for a specified period and all the costs of investment are borne by those subscribing for the new shares. The holders of the 'C' shares are then offered new ordinary shares at the combined net asset value of the enlarged Trust.

Capital Gains Tax (CGT)   

A tax on gains made when you sell assets - things like shares, a holiday home or an expensive painting. If you buy an asset or investment and then later dispose of it for more than you paid for it, you are said to have made a capital gain. Make enough gains in one particular tax year and you will be liable for capital gains tax (CGT). Everyone is allowed to make a certain level of gains each year before capital gains tax is charged. In reality very few people exceed their annual capital gains tax allowance.

Capital gearing   

When an Investment Trust borrows money to increase its exposure to a particular market - usually equity markets.

Capital Growth   

A rise in the value of an investment.

Capital Shares   

Some Investment Trusts issue more than one type of share. They are called Split Capital Investment Trusts. The simplest "Split" is divided between capital and income shares. The capital shares receive no dividends over the life of the trust, while the income shares receive all the income generated by the whole fund.

Capital structure   

The different amounts and types of stocks and shares (e.g. ordinary shares, preference shares and debentures etc. which are in issue) which go to make up an Investment Trust's capital.

Capital   

Money.

CAT standards   

CAT stands for low Charges, easy Access and fair Terms and relates to Individual Savings Accounts (ISAs). CAT standards are the minimum voluntary benchmark by which the Government hopes to encourage many new investors to save more. In common with many investment companies, Aberdeen has chosen not to offer a CAT standard ISA.

City ("The City")   

London's financial district is often referred to as "the City". It is in fact the square mile (more or less) of the old City of London. The City includes such institutions as the London Stock Market, the London International Financial Futures Exchange LIFFE) and Lloyd's of London.

Closed-end fund   

An investment vehicle, such as an Investment Trust, with a fixed capital structure. Variations in demand for the shares of the fund are reflected in movements in their share price and not by an expansion or contraction in their supply.

Collective investment   

Investments such as Unit Trusts and Investment Trust schemes.

Commission   

When you purchase an investment some companies pay a commission to the adviser or salesman who recommended the products to you.

Contract Note   

Your contract note is evidence that you have bought or sold shares or units. It’s an important document and it will get more important as the stockmarket carries out more and more electronic dealing and custody is dematerialised i.e. evidence to investments is held by an entry in an electronic register rather than producing paper share certificates. If your investments are being held by a stockbroker in a nominee account you won’t get the share certificates, hence the importance of retaining your contract note as evidence of investment.

Convertible loan stocks   

Fixed interest loans that may be converted into ordinary shares at a future date. The terms of conversion are fixed at the date of the issue of the loan.

Cooling-off period   

With some investments and under certain circumstances, you can cancel the agreement shortly after signing. If you have this right, it will to be shown on the agreement itself. Having signed this, you will receive a written copy through the post and you will usually have five days to cancel.

Corporate Bond   

Companies issue bonds to raise money and pay interest on the bonds. Usually bonds expire on a fixed date, when the company repays you. You can buy and sell bonds easily (like shares). Bond prices are heavily influenced by interest rate changes and bonds such as UK government bonds or gilts are not as risky as shares. Company or 'Corporate Bond' prices are also influenced by the prospects for the company issuing them and can sometimes be very risky, particularly if the issuing company becomes less likely to be able to pay off its debts. See Credit Rating for a full explanation regarding the bond classification: investment grade and non-investment grade.

Corporate Governance   

Corporate governance refers to the regulations and guidelines put in place to ensure the proper management of a company's affairs by its board of directors and management. Corporate Governance teams in companies such as Aberdeen monitor corporate management to make certain that they are operating their business in accordance with those regulations and guidelines and will engage with them and exercise proxy votes in support of this objective.

Corporation tax   

The tax chargeable on the profits of a UK company.

Correction   

A correction is a term to describe a downward movement in share prices - in other words, a mini-crash. Analysts may refer to there being a ´10% correction' to the stockmarket which means that the value of the stockmarket fell by 10% overall.

Coupon   

This term is often used interchangeably with interest but coupon is now mainly used to describe the name for the nominal interest a bond pays. Remember not to confuse the nominal interest being offered with the yield. The latter is the actual rate of return you are getting and it relates to the market price you paid for the investment.

Credit Rating   

Corporate bonds fall into two broad classifications: investment grade and non-investment grade, sometimes called high yield bonds. The latter constitute those bonds that a ratings agency, such as Standard & Poor's, deems to be less than BBB. The credit rating is designed to gauge the issuer's ability to meet its interest and principal (that is, the amount borrowed by the company through the bond) payments and can change over time, depending on the fortunes of the bond-issuing company.

The ratings agency will upgrade or downgrade its credit rating of a company, depending on its view of the company's prospects. For example, if the ratings agency believes the company was facing tougher markets for its products due to an economic downturn and that this would affect profitability and its ability to repay debt then it is likely that its credit rating would be downgraded. If, on the other hand, the ratings agency believe that its prospects were improving and that increased revenues were likely then the company's credit rating would be likely to be upgraded.

CREST   

CREST is the real-time settlement system for UK and Irish shares and other corporate securities. It enables participants to hold securities in uncertificated form and transfer them electronically with effective delivery versus payment.

Debenture   

A loan raised by a company, paying a fixed rate of interest and which is secured on the assets of the company. Debentures are fixed interest securities issued in return for long-term loans. They tend to be dated for redemption between ten and forty years ahead of the date of issue. They may be secured by a floating charge on the company's assets or they may be tied to specific, named assets.

Debt structure   

The amount and type of different classes of debt an Investment Trust may have. This includes loan capital and foreign currency loans.

Deferral   

(Of CGT liability) means putting it off, not becoming exempt.

Deflation   

Deflation is the opposite of inflation and means that the money you have today will be worth more tomorrow. It is very uncommon in developed markets.

Demutualisation   

This describes financial institutions such as building societies converting into Public Limited Companies - an example of this is Halifax Building Society which is now HBOS PLC.

Derivatives   

A collective name for futures, options and warrants.

Designating
(an account)   

Putting an account, for example a unit trust account, in another person's name. This might be used to invest on behalf of a child, where the account is designated with the name of the given child.

Disclosure   

An investment company is legally required to show you the total cost of taking out a product or policy with them, including details of any commission paid to an adviser.

Discount (Investment Trusts)   

If the share price of an investment trust is lower than the net asset value per share, the trust is said to be trading at a discount. The discount is shown as a percentage of the net asset value.

Disposal   

Usually refers to the sale of units/shares by the investor.

Diversification   

The opposite of 'putting all your eggs in one basket' - ensuring that the content of your investment portfolio is varied.

Dividend   

This is the income you receive as a shareholder from a company. When you buy an ordinary share in a company, you become a shareholder (an owner of the business) and to that extent you will have certain entitlements including the right to receive dividend payments as set by the board of directors and approved by the shareholders.

Emerging markets   

Relatively small stockmarkets in newly industrialised or developing countries that are likely to become players on the world economic stage e.g. Turkey, India, Latin America.

Equity   

Usually referred to as ordinary shares. The owners of the equity, the shareholders, are the owners of the company and have the right to elect directors and share in the company's profits through the payment of dividends.

Ethical Investment   

Ethical investments seek to invest in companies which make a positive contribution to the world and seek to avoid companies which harm the world, its people or its wildlife. It is difficult for an individual investor to judge whether a particular company is ethical or not. Therefore, most ethical investments are held through a managed investment fund such as a Unit Trust.

Ex Dividend   

Also abbreviated as 'xd', this is a share sold without the right to receive the declared dividend payment which is marked as due to those shareholders who are on the share register at a pre-announced date. The stock market authorities usually specify the date on which a share will begin trading 'xd'. The share price invariably drops when the share goes 'xd' taking the known income of the dividend out of the share price.

Execution only   

Where a customer buys a financial product without receiving advice on its suitability.

Final Dividend   

This is the dividend paid by a company to its shareholders out of profits at the end of the financial year. A motion to pay a final dividend must be approved at the shareholder's Annual General Meeting (AGM) - where they have the option of accepting the dividend recommended by the directors or of reducing it.

Financial Services Authority (FSA)   

The FSA is now the single statutory regulator responsible for regulating deposit taking, insurance and investment business. The FSA has new statutory objectives including consumer protection, tackling market abuse, promoting public understanding of the financial system and reducing financial crime. Head office address: The Financial Services Authority, 25 The North Colonnade, Canary Wharf, London E14 5HS Tel: 020 7676 1000 Fax: 020 7676 1099 Web site: www.fsa.gov.uk

Fixed Interest   

The term generally refers to bonds on which the holder receives a pre-determined rate of interest. What this offers the potential investor is a known return from holding the investment.

Flotation   

When a company first offers its shares for sale, usually with a big publicity fanfare.

FTSE 100 index   

The most widely-quoted and 'popular' index for tracking the London stockmarket. The FTSE 100 contains the shares of the top 100 UK listed companies ranked by market capitalisation.

FTSE All-Share index   

The Financial Times Stock Exchange All Share Index is the most comprehensive stockmarket index for securities listed in the UK.

Fund Manager   

A fund manager is employed to invest money for (among other things) unit trusts and investment trusts. Fund managers aim to outperform their chosen index by buying shares which they think will do particularly well. They can also choose to keep a percentage of their fund in cash.

Fund of funds   

A Fund or trust that invests in the shares of other investment trusts or other Funds.

Futures   

A contract where you agree to buy or sell assets at a set price on a fixed date in the future.

Gearing   

'Gearing' refers to the exaggerated effect on an investment of borrowed funds. Investment Trusts can 'Gear' or borrow money to invest but unit trusts are limited in this respect. A geared investment is riskier because of the borrowed money.

Gift   

A transfer of money from one person to another that is recognised by the Inland Revenue.

Gilts   

Gilts, sometimes referred to as British Government bonds are a way for the Government to raise money from large financial institutions like pension funds and from private investors. Gilts are sometimes referred to as 'gilt edged securities' or 'bonds' or 'fixed interest securities'.

Gross Redemption Yield   

The total yield in a security, including both the income expected and the capital growth for the whole of the period up to the date of maturity and eventual repayment. Gross redemption yield is calculated without making any allowance for tax liability. This is a forward-looking calculation (in contrast to past performance) and is therefore not guaranteed.

Gross   

A gross interest rate or dividend is one that doesn't take into account the tax you'll have to pay on that income.

High Yield Bond (also know as Non-Investment Grade Bond)   

These are corporate bonds with a credit rating of BB or below. This means that the agency which has rated the bond believes there is a higher possiblity that the company which issued the bond may default on interest payments and possibly the repayment of the loan altogether. In order to make the bond attractive to investors the bond issuing company will pay a higher yield in comparison to an investment grade bond.

Hurdle rate   

The rate at which an Investment Trust's assets have to grow to repay the redemption price.

Income Shares   

Some Investment Trusts issue more than one type of share. They are called Split Capital Investment Trusts. The simplest 'Split' is divided between capital and income shares. The capital shares receive no dividends over the life of the trust, while the income shares receive all the income generated by the whole fund.

Income tax   

This is tax you pay on the income you earn each year above a certain amount. The amount of tax you pay will depend on the amount of your salary and allowances.

Independent Financial Adviser (IFA)   

Independent financial advisers or IFAs offer you a full range of products from all the financial services companies on the market. IFAs must observe some key principles in carrying out their business. They must carry out a comprehensive review of the client's needs. This 'fact find' as it is sometimes called seeks to put the adviser in a position of knowledge so that he will be able to offer 'best advice'. An independent financial adviser has to make clear to clients how he/she is being remunerated - the two main ways are either by receiving commission, or, alternatively, charging an hourly rate.

Individual Savings Account (ISA)   

Individual Savings Account or ISAs are savings accounts that let you save in cash or equities (bonds, gilts and shares) , or a combination of the three. Their attraction is that you do not have to pay income or capital gains tax on any gain you make when you sell them. There are limits on how much you can invest in an ISA each year.

Inflation (or Retail Price Index -RPI)   

Inflation, the tendency of prices to rise and keep on rising is measured in the UK by the 'Retail Price Index (RPI). This official measure is calculated each month by taking a sample of goods and services that the typical household might buy. These figures for retail prices will reveal the trend for prices over the previous month. An annual rate is also published.

Inheritance Tax (IHT)   

In the event of your death, this tax is payable by your heirs.

Interest rate   

The price you pay for borrowing money. The rate of interest you are charged on a loan, for example, will vary according to the level of base rates.

Investment Advice   

Only people qualified to do so can give investment advice. FSA sets minimum competence standards for IFAs who should have the minimum of the Financial Planning Certificate (FPC).

Investment Grade Bonds   

Companies whose bonds are rated as 'investment grade' have a lower chance of defaulting on their debt than those rated as 'non-investment grade'. Generally, these bonds are issued by long-established companies with strong balance sheets. Bonds rated BBB or above are known as Investment Grade Bonds.

Investment Management Association (IMA)   

The Investment Management Association (IMA) was formed on 1 February 2002, when the Association of Unit Trusts and Investment Funds (AUTIF) merged with the Fund Managers’ Association (FMA). Investment Management Association, 65 Kingsway, London WC2B 6TD Tel: 020 7831 0898 Fax: 020 7831 9975 Website: www.investmentfunds.org.uk.

Investment Manager   

(Also Fund Manager) The individual who takes the day to day investment decisions for a specific Investment Fund or Trust.

Investment Objective   

States the aims of a given fund and the type of assets in which it invests to look to achieve those aims.

Investment Trusts (ITs)   

Investment Trusts are companies that invest in the shares of other companies. Like Unit Trusts, they are collective investments that pool together the money of many investors. This money is then invested in a portfolio (or wide range) of companies which will be more varied than the small investor could achieve on his own. Two key differences between Investment Trusts & Unit Trusts are: Unit Trusts are open-ended and can keep receiving funds for putting into the market from investors. Investment Trusts are closed-ended, that is they have a fixed amount of capital that is divided into shares. The investors then purchase these shares. Investment Trusts can borrow money to invest - this makes them more volatile. As public limited companies themselves Investment Trusts are subject to company law, the FSA’s Listing Rules and the rules of the London Stock Exchange.

Investment Universe   

The scope of investment possibilities afforded by a Fund's stated Investment Objective.

ISA Wrapper   

The product structure through which an ISA holding achieves its tax benefits.

Liquidity   

The amount within a portfolio which is held in cash rather than being invested.

Management company   

A company employed by one or more Investment Trusts to provide investment management and services such as administration and secretarial services, registration, accountancy and research.

Mid price   

The 'mid price' is the price you see against a share when you look in the newspapers. It is effectively the average between the buying and selling price in the market. More formally, the mid price is the half-way price between the two prices shown in the London Stock Exchange's Daily Official List under 'Quotation', or the average of both buying and selling prices.

Money Market Instruments   

Money market instruments are forms of debt that generally mature in less than one year. Treasury bills make up the bulk of the money market instruments globally.

Mutual Fund   

The name used in the USA market for unit trusts. They are pooled investments that are also open-ended.

Net asset value (NAV)   

The net worth of an Investment Trust company's equity capital usually expressed in pence per share. It is arrived at by totalling the value of the Trust's listed investments at mid-market prices, unlisted investments at directors' valuation, cash and other net current assets, and deducting all of its liabilities, including any issued preference capital.

Net   

Interest received from a bank or building society account after basic rate tax has been deducted.

Offer Price   

The price at which a fund management company will buy units in a unit trust or similar pooled investment.

Offshore Funds   

These are collective investment funds that are based in overseas countries, from a UK investor's perspective.

Open-ended funds   

These are investment funds where the number of units in issue varies from day to day. In the UK unit trusts are an example of open-ended funds. An 'open-ended' fund varies from investment trusts which are closed-end funds, and have a fixed number of shares in issue.

Open Ended Investment Companies (OEICs)   

Open Ended Investment Companies or OEICs are pooled investment vehicles, in company form. They are similar to unit trusts. OEICs are the preferred method of establishing pooled collective investment schemes in Europe. The UK is coming into line with these structures in an effort to open UK schemes to international foreign investment.

Options   

A contract where you get the option to buy or sell a fixed number of shares at a fixed price within a certain period, typically three months.

Par value   

The par value of a loan stock is its face value.

Personal Equity Plans (PEPs)   

As of 6 April 2008, PEPs are now known and treated the same as ISAs.

Pooling   

Assets from a range of investors are 'pooled' in the same fund, for example a pension fund, which has a certain Investment Objective.

Premium   

If the share price of an investment trust is higher than the net asset value per share, the trust is said to be trading at a premium. The premium is shown as a percentage of the net asset value.

Private Equity   

Holdings in unquoted companies which can include financing management buy-outs, management buy-ins and start-ups.

Purchasing Power   

The amount of goods a given amount of money can buy at any given time. This can be eroded by inflation.

Redemption yield   

An estimate of the total long term returns including income and capital on fixed income investments like corporate bonds and gilts.

Rights Issue   

These are the relatively rare occasions in a company's life when it will create new shares, the proceeds of which will go directly into its bank account, instead of giving a profit (or a loss) to an existing shareholder.

Running yield   

An estimate of the annual rate of interest paid out by fixed income investments like corporate bonds and gilts. It does not take into account any increases or decreases in the capital value of the investment.

Share exchange   

A share exchange service whereby equities can be converted into Investment Trust shares.

Shares   

Shares are issued by a company to raise money. Unlike bonds, which are a straightforward loan, shares give you ownership of part of the company. Most shares are listed on a stock exchange, which makes them easy to buy and sell. Dealing costs, however, may be expensive, investing in a unit or investment trust is attractive as the costs are shared with lots of other investors.

Splits   

What are Split Capital Investments?

A split capital trust is an investment trust company with more than one class of share (hence "split capital"), each class having different rights to participate in income or capital returns. Split capital investment trusts were originally devised over 100 years ago and operate on the basis that shareholders look for either income or capital growth and are able to meet such requirements through choice of the different share classes. Split capital investment trusts have a fixed life span at the end of which they are wound up or rolled over into a new fund.

A zero dividend preference share or "zero" is a particular class of share within a split capital investment trust. Its principal characteristics are:

- No dividend is payable at any stage to the zeroholder. In effect, therefore, the interests of the zeroholder are principally in capital return rather than income from the trust.

- At the redemption date (the date specified on the establishment of the split for its winding-up), the zeroholder is entitled to receive a pre-established redemption price provided that there are sufficient assets in the trust.

- In determining whether there are sufficient assets to meet the payments due to zeroholders, the only prior call on the assets of the trust is in favour of any bank which has lent money to the trust.

Zeros can be contrasted with the other two main share classes, income and capital shares. As the name suggests, income shareholders are entitled to a regular dividend payable from the assets of the trust during its lifetime. Capital shares do not pay dividends and do not have a predetermined value. Instead, capital shareholders are entitled to share in the remainder of the assets of the trust on winding-up once the prior interests of any lenders, zeroholders and income shareholders have been met. Consequently, the entitlements on winding-up to the assets of the trust are in the following order:

(i)  Bank lending;
(ii)  Zero holders;
(iii)  Income shareholders; and
(iv)  Capital shareholders.

Individual trusts can have two or more classes of share in different combinations.

Stamp duty   

A tax payable on purchase of ordinary shares, preference shares and convertible loan stocks. Other loan stocks, such as debentures, are exempt.

Stock Exchange   

The Stock Exchange is the main forum for the trading of stocks and shares and other securities. In the United Kingdom, the London Stock Exchange (LSE) is the main exchange.

Tax credit   

The amount which an ISA manager can reclaim from the Inland Revenue in respect of share dividends received. This 10% tax credit was abolished in April 2004.

Tessa   

Tax-Exempt Special Savings Accounts or TESSAs are five-year savings accounts that enable you to receive interest gross - without the deduction of any tax. Since 5 April 1999, it has not been possible to start a new TESSA. However, TESSAs in existence at that date can continue to run to maturity under the normal TESSA rules.

Trustee   

A person who you nominate to carry out your financial instructions.

Umbrella Fund   

Umbrella funds are collective investments that are divided into a number of subfunds or share classes, each investing in different assets and markets. Investors can change their investment strategy by shifting money among the different subfunds, sometimes at minimal cost. All umbrella funds are based offshore in financial centres such as Jersey, Luxembourg and Dublin. It's not possible to operate an umbrella fund in the United Kingdom.

Unit trust   

A fund which pools investors' money, making it easier for them to buy into a wider range of investments and reduce the costs of investing.

Value Added Tax (VAT)   

An indirect tax payable by adding it on to the value of most goods and services.

Variable rate   

An interest rate that can move up or down at any time. Usually linked to changes in the Bank of England Base Rate.

Venture Capital Trusts (VCTs)   

A collective investment portfolio made up of holdings in the shares of unlisted companies or AIM stocks. Tax benefits include initial income tax relief of up to 40% on subscriptions.

Volatility   

If the price of a fund moves up and down rapidly over a short period of time it is 'volatile' or has 'high volatility'. If the price remains relatively stable it is said to have 'low stability'.

Warrants   

Warrants gives the holder the right to buy a given number of shares in a company at a fixed price called the 'subscription price' at some future date. Usually this date is several years ahead. Like share options, a warrant gives you the right to buy shares at some predetermined date but the warrant holder is under no obligation to do so. Like options, warrants pay no interest or dividends.

Winding up   

The process of terminating a company by realising its assets, paying off creditors and distributing the remaining assets among shareholders, according to the correct order of priority.

Wrapper   

The product structure through which an ISA holding achieves its tax-free benefits.

Yield   

Yield is the annual return you receive from holding a stock, share or unit trust - it is expressed as a percentage of its price.

Zero dividend preference share   

A class of share making up a Split Capital Investment Trust, it is a share with no right to receive a dividend. It is, however, entitled to a fixed sum on repayment. This figure is usually expressed as an annual percentage and accrues annually.

Aberdeen

Aberdeen Asset Management Plc and its subsidiary companies.

Alternative Investment Market (AIM)

The Alternative Investment Market (AIM) is the London Stock Exchange's market for small, young and growing companies. It gives investors the opportunity to invest and trade in the shares of these companies on a market regulated by the London Stock Exchange.

Annual General Meeting (AGM)

This is the annual shareholder meeting. All companies, except the very smallest, are required by law to hold such a meeting once a year. During the meeting shareholders are allowed to ask questions of the board. Additionally, the board of directors will explain the background to the company's trading record for that year.

Annual management fee

A charge made every year for running your fund. It is usually a percentage of your investment.

Annual Percentage Rate (APR)

The Annual Percentage Rate (APR) aims to estimate the real cost of borrowing so that you can compare different products on the market.

Asset cover

Cover on a zero dividend preference share measures how well the price which has to be paid to the shareholders on redemption is covered by the current gross assets less the known costs and prior to charges. It is calculated by dividing current gross assets, less prior charges, wind-up costs and interest charges and management fees attributable to capital by the total zero charge.

Association of Investment Companies (AIC)

The Association of Investment Companies (AIC) is the trade body for investment trust companies. The AIC provides a considerable amount of background reading and explanatory material on investment trusts including a series of free factsheets. Web site: http://www.theaic.co.uk Head Office Address: The Association of Investment Companies, 9th Floor, 24 Chiswell Street, London EC1Y 4YY. Telephone: 0207 282 5555 Facsimile: 0207 282 5556

Bank of England

The United Kingdom's central bank. The Bank of England plays a key role in the fight to keep inflation under control having been given more independence by the Government. The Treasury sets the inflation target and the Bank of England has operational responsibility for setting interest rates to achieve this aim.

Bare Trust

Parents or anyone else for that matter can set up a trust for a child known as a 'Bare Trust'. The aim is to transfer an asset to the child in a way that ensures the offspring actually gets the benefit and in a tax efficient way. With a 'Bare Trust', the asset is automatically transferred to the child when he/she reaches the age of 18.

Base Rate (or Interest Rate)

The minimum rate at which banks are prepared to lend money - it acts as the benchmark for other interest rates, including mortgages and loans. The central bank announces every first Thursday of the month the base rate through its Monetary Policy Committee (MPC).

Basic Rate of Tax

The tax system in the United Kingdom allows you to earn some money without incurring any tax liability. You then earn some money that is taxed at the lower rate, then earn some money which is taxed at the basic rate, finally some money which is taxed at the higher rate. The rates normally change annually and so you should refer to your local tax office for the current rates. Web site: www.inlandrevenue.gov.uk

Bid

'Bid' - in the context of a takeover bid means making an offer for the shares of another company. 'Bid' - can simply mean offering to buy shares. It may also mean the highest price that you are prepared to pay for a given security at a particular time.

Bid-Offer Spread (Securities)

The Dealing System in the United Kingdom. These quotes, 'Bid' and ´Offer', are two-way prices, the lower of which is known as the Bid price (the price at which the holder can sell shares) and the higher is the Offer price (the price at which the holder can buy shares). The Bid/Offer spread will be determined by a number of factors - including, but not limited to, the underlying price of the equity, the sector it is in, the liquidity or the volatility.

Bid Price

'Bid price' - This is the price at which a market-maker in the stockmarket is prepared to buy shares from existing holders. This term is also used to refer to the price at which a fund management company will sell units in a unit trust or similar pooled investment. The other price is referred to as the 'Offer price' or the price at which a fund management company will buy units in a unit trust or similar pooled investment.

Blue Chip

A term adopted to refer to the largest shares in a stockmarket. Those companies that are typically the largest and more prestigious. Companies such as British Telecom, British Petroleum and Vodafone are such companies.

Bonds

A bond is simply an ´IOU'. It is an agreement under which a sum is repaid to an investor after an agreed period of time. A bond can be issued by anyone but is generally issued by a government or a public company to repay money borrowed. These loans normally repay a fixed rate of interest over a specified time and then repay the original sum in full after an agreed period.

Bonus Issue

A bonus issue is when a company gives, free of charge, a number of new shares for each share existing shareholders already hold. After the issue, a company's share price is likely to fall, reflecting the new shares in issue.

C shares

An Investment Trust being a corporate legal entity, may issue C shares (or ‘conversion’ shares) which are a method of raising new funds without penalising existing shareholders. The new money raised is maintained as a discrete pool which is kept separate from the existing fund for a specified period and all the costs of investment are borne by those subscribing for the new shares. The holders of the 'C' shares are then offered new ordinary shares at the combined net asset value of the enlarged Trust.

Capital

Money.

Capital Gains Tax (CGT)

A tax on gains made when you sell assets - things like shares, a holiday home or an expensive painting. If you buy an asset or investment and then later dispose of it for more than you paid for it, you are said to have made a capital gain. Make enough gains in one particular tax year and you will be liable for capital gains tax (CGT). Everyone is allowed to make a certain level of gains each year before capital gains tax is charged. In reality very few people exceed their annual capital gains tax allowance.

Capital gearing

When an Investment Trust borrows money to increase its exposure to a particular market - usually equity markets.

Capital Growth

A rise in the value of an investment.

Capital Shares

Some Investment Trusts issue more than one type of share. They are called Split Capital Investment Trusts. The simplest "Split" is divided between capital and income shares. The capital shares receive no dividends over the life of the trust, while the income shares receive all the income generated by the whole fund.

Capital structure

The different amounts and types of stocks and shares (e.g. ordinary shares, preference shares and debentures etc. which are in issue) which go to make up an Investment Trust's capital.

CAT standards

CAT stands for low Charges, easy Access and fair Terms and relates to Individual Savings Accounts (ISAs). CAT standards are the minimum voluntary benchmark by which the Government hopes to encourage many new investors to save more. In common with many investment companies, Aberdeen has chosen not to offer a CAT standard ISA.

City ("The City")

London's financial district is often referred to as "the City". It is in fact the square mile (more or less) of the old City of London. The City includes such institutions as the London Stock Market, the London International Financial Futures Exchange LIFFE) and Lloyd's of London.

Closed-end fund

An investment vehicle, such as an Investment Trust, with a fixed capital structure. Variations in demand for the shares of the fund are reflected in movements in their share price and not by an expansion or contraction in their supply.

Collective investment

Investments such as Unit Trusts and Investment Trust schemes.

Commission

When you purchase an investment some companies pay a commission to the adviser or salesman who recommended the products to you.

Contract Note

Your contract note is evidence that you have bought or sold shares or units. It’s an important document and it will get more important as the stockmarket carries out more and more electronic dealing and custody is dematerialised i.e. evidence to investments is held by an entry in an electronic register rather than producing paper share certificates. If your investments are being held by a stockbroker in a nominee account you won’t get the share certificates, hence the importance of retaining your contract note as evidence of investment.

Convertible loan stocks

Fixed interest loans that may be converted into ordinary shares at a future date. The terms of conversion are fixed at the date of the issue of the loan.

Cooling-off period

With some investments and under certain circumstances, you can cancel the agreement shortly after signing. If you have this right, it will to be shown on the agreement itself. Having signed this, you will receive a written copy through the post and you will usually have five days to cancel.

Corporate Bond

Companies issue bonds to raise money and pay interest on the bonds. Usually bonds expire on a fixed date, when the company repays you. You can buy and sell bonds easily (like shares). Bond prices are heavily influenced by interest rate changes and bonds such as UK government bonds or gilts are not as risky as shares. Company or 'Corporate Bond' prices are also influenced by the prospects for the company issuing them and can sometimes be very risky, particularly if the issuing company becomes less likely to be able to pay off its debts. See Credit Rating for a full explanation regarding the bond classification: investment grade and non-investment grade.

Corporate Governance

Corporate governance refers to the regulations and guidelines put in place to ensure the proper management of a company's affairs by its board of directors and management. Corporate Governance teams in companies such as Aberdeen monitor corporate management to make certain that they are operating their business in accordance with those regulations and guidelines and will engage with them and exercise proxy votes in support of this objective.

Corporation tax

The tax chargeable on the profits of a UK company.

Correction

A correction is a term to describe a downward movement in share prices - in other words, a mini-crash. Analysts may refer to there being a ´10% correction' to the stockmarket which means that the value of the stockmarket fell by 10% overall.

Coupon

This term is often used interchangeably with interest but coupon is now mainly used to describe the name for the nominal interest a bond pays. Remember not to confuse the nominal interest being offered with the yield. The latter is the actual rate of return you are getting and it relates to the market price you paid for the investment.

Credit Rating

Corporate bonds fall into two broad classifications: investment grade and non-investment grade, sometimes called high yield bonds. The latter constitute those bonds that a ratings agency, such as Standard & Poor's, deems to be less than BBB. The credit rating is designed to gauge the issuer's ability to meet its interest and principal (that is, the amount borrowed by the company through the bond) payments and can change over time, depending on the fortunes of the bond-issuing company.

The ratings agency will upgrade or downgrade its credit rating of a company, depending on its view of the company's prospects. For example, if the ratings agency believes the company was facing tougher markets for its products due to an economic downturn and that this would affect profitability and its ability to repay debt then it is likely that its credit rating would be downgraded. If, on the other hand, the ratings agency believe that its prospects were improving and that increased revenues were likely then the company's credit rating would be likely to be upgraded.

CREST

CREST is the real-time settlement system for UK and Irish shares and other corporate securities. It enables participants to hold securities in uncertificated form and transfer them electronically with effective delivery versus payment.

Debenture

A loan raised by a company, paying a fixed rate of interest and which is secured on the assets of the company. Debentures are fixed interest securities issued in return for long-term loans. They tend to be dated for redemption between ten and forty years ahead of the date of issue. They may be secured by a floating charge on the company's assets or they may be tied to specific, named assets.

Debt structure

The amount and type of different classes of debt an Investment Trust may have. This includes loan capital and foreign currency loans.

Deferral

(Of CGT liability) means putting it off, not becoming exempt.

Deflation

Deflation is the opposite of inflation and means that the money you have today will be worth more tomorrow. It is very uncommon in developed markets.

Demutualisation

This describes financial institutions such as building societies converting into Public Limited Companies - an example of this is Halifax Building Society which is now HBOS PLC.

Derivatives

A collective name for futures, options and warrants.

Designating
(an account)

Putting an account, for example a unit trust account, in another person's name. This might be used to invest on behalf of a child, where the account is designated with the name of the given child.

Disclosure

An investment company is legally required to show you the total cost of taking out a product or policy with them, including details of any commission paid to an adviser.

Discount (Investment Trusts)

If the share price of an investment trust is lower than the net asset value per share, the trust is said to be trading at a discount. The discount is shown as a percentage of the net asset value.

Disposal

Usually refers to the sale of units/shares by the investor.

Diversification

The opposite of 'putting all your eggs in one basket' - ensuring that the content of your investment portfolio is varied.

Dividend

This is the income you receive as a shareholder from a company. When you buy an ordinary share in a company, you become a shareholder (an owner of the business) and to that extent you will have certain entitlements including the right to receive dividend payments as set by the board of directors and approved by the shareholders.

Emerging markets

Relatively small stockmarkets in newly industrialised or developing countries that are likely to become players on the world economic stage e.g. Turkey, India, Latin America.

Equity

Usually referred to as ordinary shares. The owners of the equity, the shareholders, are the owners of the company and have the right to elect directors and share in the company's profits through the payment of dividends.

Ethical Investment

Ethical investments seek to invest in companies which make a positive contribution to the world and seek to avoid companies which harm the world, its people or its wildlife. It is difficult for an individual investor to judge whether a particular company is ethical or not. Therefore, most ethical investments are held through a managed investment fund such as a Unit Trust.

Ex Dividend

Also abbreviated as 'xd', this is a share sold without the right to receive the declared dividend payment which is marked as due to those shareholders who are on the share register at a pre-announced date. The stock market authorities usually specify the date on which a share will begin trading 'xd'. The share price invariably drops when the share goes 'xd' taking the known income of the dividend out of the share price.

Execution only

Where a customer buys a financial product without receiving advice on its suitability.

Final Dividend

This is the dividend paid by a company to its shareholders out of profits at the end of the financial year. A motion to pay a final dividend must be approved at the shareholder's Annual General Meeting (AGM) - where they have the option of accepting the dividend recommended by the directors or of reducing it.

Financial Services Authority (FSA)

The FSA is now the single statutory regulator responsible for regulating deposit taking, insurance and investment business. The FSA has new statutory objectives including consumer protection, tackling market abuse, promoting public understanding of the financial system and reducing financial crime. Head office address: The Financial Services Authority, 25 The North Colonnade, Canary Wharf, London E14 5HS Tel: 020 7676 1000 Fax: 020 7676 1099 Web site: www.fsa.gov.uk

Fixed Interest

The term generally refers to bonds on which the holder receives a pre-determined rate of interest. What this offers the potential investor is a known return from holding the investment.

Flotation

When a company first offers its shares for sale, usually with a big publicity fanfare.

FTSE 100 index

The most widely-quoted and 'popular' index for tracking the London stockmarket. The FTSE 100 contains the shares of the top 100 UK listed companies ranked by market capitalisation.

FTSE All-Share index

The Financial Times Stock Exchange All Share Index is the most comprehensive stockmarket index for securities listed in the UK.

Fund Manager

A fund manager is employed to invest money for (among other things) unit trusts and investment trusts. Fund managers aim to outperform their chosen index by buying shares which they think will do particularly well. They can also choose to keep a percentage of their fund in cash.

Fund of funds

A Fund or trust that invests in the shares of other investment trusts or other Funds.

Futures

A contract where you agree to buy or sell assets at a set price on a fixed date in the future.

Gearing

'Gearing' refers to the exaggerated effect on an investment of borrowed funds. Investment Trusts can 'Gear' or borrow money to invest but unit trusts are limited in this respect. A geared investment is riskier because of the borrowed money.

Gift

A transfer of money from one person to another that is recognised by the Inland Revenue.

Gilts

Gilts, sometimes referred to as British Government bonds are a way for the Government to raise money from large financial institutions like pension funds and from private investors. Gilts are sometimes referred to as 'gilt edged securities' or 'bonds' or 'fixed interest securities'.

Gross

A gross interest rate or dividend is one that doesn't take into account the tax you'll have to pay on that income.

Gross Redemption Yield

The total yield in a security, including both the income expected and the capital growth for the whole of the period up to the date of maturity and eventual repayment. Gross redemption yield is calculated without making any allowance for tax liability. This is a forward-looking calculation (in contrast to past performance) and is therefore not guaranteed.

High Yield Bond (also know as Non-Investment Grade Bond)

These are corporate bonds with a credit rating of BB or below. This means that the agency which has rated the bond believes there is a higher possiblity that the company which issued the bond may default on interest payments and possibly the repayment of the loan altogether. In order to make the bond attractive to investors the bond issuing company will pay a higher yield in comparison to an investment grade bond.

Hurdle rate

The rate at which an Investment Trust's assets have to grow to repay the redemption price.

Income Shares

Some Investment Trusts issue more than one type of share. They are called Split Capital Investment Trusts. The simplest 'Split' is divided between capital and income shares. The capital shares receive no dividends over the life of the trust, while the income shares receive all the income generated by the whole fund.

Income tax

This is tax you pay on the income you earn each year above a certain amount. The amount of tax you pay will depend on the amount of your salary and allowances.

Independent Financial Adviser (IFA)

Independent financial advisers or IFAs offer you a full range of products from all the financial services companies on the market. IFAs must observe some key principles in carrying out their business. They must carry out a comprehensive review of the client's needs. This 'fact find' as it is sometimes called seeks to put the adviser in a position of knowledge so that he will be able to offer 'best advice'. An independent financial adviser has to make clear to clients how he/she is being remunerated - the two main ways are either by receiving commission, or, alternatively, charging an hourly rate.

Individual Savings Account (ISA)

Individual Savings Account or ISAs are savings accounts that let you save in cash or equities (bonds, gilts and shares) , or a combination of the three. Their attraction is that you do not have to pay income or capital gains tax on any gain you make when you sell them. There are limits on how much you can invest in an ISA each year.

Inflation (or Retail Price Index -RPI)

Inflation, the tendency of prices to rise and keep on rising is measured in the UK by the 'Retail Price Index (RPI). This official measure is calculated each month by taking a sample of goods and services that the typical household might buy. These figures for retail prices will reveal the trend for prices over the previous month. An annual rate is also published.

Inheritance Tax (IHT)

In the event of your death, this tax is payable by your heirs.

Interest rate

The price you pay for borrowing money. The rate of interest you are charged on a loan, for example, will vary according to the level of base rates.

Investment Advice

Only people qualified to do so can give investment advice. FSA sets minimum competence standards for IFAs who should have the minimum of the Financial Planning Certificate (FPC).

Investment Grade Bonds

Companies whose bonds are rated as 'investment grade' have a lower chance of defaulting on their debt than those rated as 'non-investment grade'. Generally, these bonds are issued by long-established companies with strong balance sheets. Bonds rated BBB or above are known as Investment Grade Bonds.

Investment Management Association (IMA)

The Investment Management Association (IMA) was formed on 1 February 2002, when the Association of Unit Trusts and Investment Funds (AUTIF) merged with the Fund Managers’ Association (FMA). Investment Management Association, 65 Kingsway, London WC2B 6TD Tel: 020 7831 0898 Fax: 020 7831 9975 Website: www.investmentfunds.org.uk.

Investment Manager

(Also Fund Manager) The individual who takes the day to day investment decisions for a specific Investment Fund or Trust.

Investment Objective

States the aims of a given fund and the type of assets in which it invests to look to achieve those aims.

Investment Trusts (ITs)

Investment Trusts are companies that invest in the shares of other companies. Like Unit Trusts, they are collective investments that pool together the money of many investors. This money is then invested in a portfolio (or wide range) of companies which will be more varied than the small investor could achieve on his own. Two key differences between Investment Trusts & Unit Trusts are: Unit Trusts are open-ended and can keep receiving funds for putting into the market from investors. Investment Trusts are closed-ended, that is they have a fixed amount of capital that is divided into shares. The investors then purchase these shares. Investment Trusts can borrow money to invest - this makes them more volatile. As public limited companies themselves Investment Trusts are subject to company law, the FSA’s Listing Rules and the rules of the London Stock Exchange.

Investment Universe

The scope of investment possibilities afforded by a Fund's stated Investment Objective.

ISA Wrapper

The product structure through which an ISA holding achieves its tax benefits.

Liquidity

The amount within a portfolio which is held in cash rather than being invested.

Management company

A company employed by one or more Investment Trusts to provide investment management and services such as administration and secretarial services, registration, accountancy and research.

Mid price

The 'mid price' is the price you see against a share when you look in the newspapers. It is effectively the average between the buying and selling price in the market. More formally, the mid price is the half-way price between the two prices shown in the London Stock Exchange's Daily Official List under 'Quotation', or the average of both buying and selling prices.

Money Market Instruments

Money market instruments are forms of debt that generally mature in less than one year. Treasury bills make up the bulk of the money market instruments globally.

Mutual Fund

The name used in the USA market for unit trusts. They are pooled investments that are also open-ended.

Net

Interest received from a bank or building society account after basic rate tax has been deducted.

Net asset value (NAV)

The net worth of an Investment Trust company's equity capital usually expressed in pence per share. It is arrived at by totalling the value of the Trust's listed investments at mid-market prices, unlisted investments at directors' valuation, cash and other net current assets, and deducting all of its liabilities, including any issued preference capital.

Offer Price

The price at which a fund management company will buy units in a unit trust or similar pooled investment.

Offshore Funds

These are collective investment funds that are based in overseas countries, from a UK investor's perspective.

Open-ended funds

These are investment funds where the number of units in issue varies from day to day. In the UK unit trusts are an example of open-ended funds. An 'open-ended' fund varies from investment trusts which are closed-end funds, and have a fixed number of shares in issue.

Open Ended Investment Companies (OEICs)

Open Ended Investment Companies or OEICs are pooled investment vehicles, in company form. They are similar to unit trusts. OEICs are the preferred method of establishing pooled collective investment schemes in Europe. The UK is coming into line with these structures in an effort to open UK schemes to international foreign investment.

Options

A contract where you get the option to buy or sell a fixed number of shares at a fixed price within a certain period, typically three months.

Par value

The par value of a loan stock is its face value.

Personal Equity Plans (PEPs)

As of 6 April 2008, PEPs are now known and treated the same as ISAs.

Pooling

Assets from a range of investors are 'pooled' in the same fund, for example a pension fund, which has a certain Investment Objective.

Premium

If the share price of an investment trust is higher than the net asset value per share, the trust is said to be trading at a premium. The premium is shown as a percentage of the net asset value.

Private Equity

Holdings in unquoted companies which can include financing management buy-outs, management buy-ins and start-ups.

Purchasing Power

The amount of goods a given amount of money can buy at any given time. This can be eroded by inflation.

Redemption yield

An estimate of the total long term returns including income and capital on fixed income investments like corporate bonds and gilts.

Rights Issue

These are the relatively rare occasions in a company's life when it will create new shares, the proceeds of which will go directly into its bank account, instead of giving a profit (or a loss) to an existing shareholder.

Running yield

An estimate of the annual rate of interest paid out by fixed income investments like corporate bonds and gilts. It does not take into account any increases or decreases in the capital value of the investment.

Share exchange

A share exchange service whereby equities can be converted into Investment Trust shares.

Shares

Shares are issued by a company to raise money. Unlike bonds, which are a straightforward loan, shares give you ownership of part of the company. Most shares are listed on a stock exchange, which makes them easy to buy and sell. Dealing costs, however, may be expensive, investing in a unit or investment trust is attractive as the costs are shared with lots of other investors.

Splits

What are Split Capital Investments?

A split capital trust is an investment trust company with more than one class of share (hence "split capital"), each class having different rights to participate in income or capital returns. Split capital investment trusts were originally devised over 100 years ago and operate on the basis that shareholders look for either income or capital growth and are able to meet such requirements through choice of the different share classes. Split capital investment trusts have a fixed life span at the end of which they are wound up or rolled over into a new fund.

A zero dividend preference share or "zero" is a particular class of share within a split capital investment trust. Its principal characteristics are:

- No dividend is payable at any stage to the zeroholder. In effect, therefore, the interests of the zeroholder are principally in capital return rather than income from the trust.

- At the redemption date (the date specified on the establishment of the split for its winding-up), the zeroholder is entitled to receive a pre-established redemption price provided that there are sufficient assets in the trust.

- In determining whether there are sufficient assets to meet the payments due to zeroholders, the only prior call on the assets of the trust is in favour of any bank which has lent money to the trust.

Zeros can be contrasted with the other two main share classes, income and capital shares. As the name suggests, income shareholders are entitled to a regular dividend payable from the assets of the trust during its lifetime. Capital shares do not pay dividends and do not have a predetermined value. Instead, capital shareholders are entitled to share in the remainder of the assets of the trust on winding-up once the prior interests of any lenders, zeroholders and income shareholders have been met. Consequently, the entitlements on winding-up to the assets of the trust are in the following order:

(i)  Bank lending;
(ii)  Zero holders;
(iii)  Income shareholders; and
(iv)  Capital shareholders.

Individual trusts can have two or more classes of share in different combinations.

Stamp duty

A tax payable on purchase of ordinary shares, preference shares and convertible loan stocks. Other loan stocks, such as debentures, are exempt.

Stock Exchange

The Stock Exchange is the main forum for the trading of stocks and shares and other securities. In the United Kingdom, the London Stock Exchange (LSE) is the main exchange.

Tax credit

The amount which an ISA manager can reclaim from the Inland Revenue in respect of share dividends received. This 10% tax credit was abolished in April 2004.

Tessa

Tax-Exempt Special Savings Accounts or TESSAs are five-year savings accounts that enable you to receive interest gross - without the deduction of any tax. Since 5 April 1999, it has not been possible to start a new TESSA. However, TESSAs in existence at that date can continue to run to maturity under the normal TESSA rules.

Trustee

A person who you nominate to carry out your financial instructions.

Umbrella Fund

Umbrella funds are collective investments that are divided into a number of subfunds or share classes, each investing in different assets and markets. Investors can change their investment strategy by shifting money among the different subfunds, sometimes at minimal cost. All umbrella funds are based offshore in financial centres such as Jersey, Luxembourg and Dublin. It's not possible to operate an umbrella fund in the United Kingdom.

Unit trust

A fund which pools investors' money, making it easier for them to buy into a wider range of investments and reduce the costs of investing.

Value Added Tax (VAT)

An indirect tax payable by adding it on to the value of most goods and services.

Variable rate

An interest rate that can move up or down at any time. Usually linked to changes in the Bank of England Base Rate.

Venture Capital Trusts (VCTs)

A collective investment portfolio made up of holdings in the shares of unlisted companies or AIM stocks. Tax benefits include initial income tax relief of up to 40% on subscriptions.

Volatility

If the price of a fund moves up and down rapidly over a short period of time it is 'volatile' or has 'high volatility'. If the price remains relatively stable it is said to have 'low stability'.

Warrants

Warrants gives the holder the right to buy a given number of shares in a company at a fixed price called the 'subscription price' at some future date. Usually this date is several years ahead. Like share options, a warrant gives you the right to buy shares at some predetermined date but the warrant holder is under no obligation to do so. Like options, warrants pay no interest or dividends.

Winding up

The process of terminating a company by realising its assets, paying off creditors and distributing the remaining assets among shareholders, according to the correct order of priority.

Wrapper

The product structure through which an ISA holding achieves its tax-free benefits.

Yield

Yield is the annual return you receive from holding a stock, share or unit trust - it is expressed as a percentage of its price.

Zero dividend preference share

A class of share making up a Split Capital Investment Trust, it is a share with no right to receive a dividend. It is, however, entitled to a fixed sum on repayment. This figure is usually expressed as an annual percentage and accrues annually.