GROUP NAME: GROUP 11

TOPIC:INVESTMENT TRUST COMPANY

LECTURER IN CHARGE: MR ADEBOLA

What is a 'Trust Company'

A trust company is a legal entity that acts as a fiduciary, agent or trustee on behalf of a
person or business entity for the purpose of administration, management and the eventual
transfer of assets to a beneficial party. The entity acts as a custodian for trusts, estates,
custodial arrangements, asset management, stock transfer, beneficial ownership
registration and other related arrangements.

BREAKING DOWN 'Trust Company'

A trust company does not own the assets its customers assign to its management,
but it may assume some legal obligation to take care of assets on behalf of other
parties
Investment companies are business entities, both privately and publicly owned, that
manage, sell, and market funds to the public. They typically offer investors a variety
of funds and investment services, which include portfolio management,
recordkeeping, custodial, legal, accounting and tax management services

What is an 'Investment Company'

A corporation or trust engaged in the business of investing the pooled capital of investors in
financial securities. This is most often done either through a closed-end fund or an open-
end fund (also referred to as a mutual fund). In the U.S., most investment companies are
registered with and regulated by the Securities & Exchange Commission under
the Investment Company Act of 1940.

Also known as "fund company" or "fund sponsor".

Trust Company Services

Trust companies offer a variety of services, with the most common being wealth
management in the mode of becoming a fiduciary or agent. Trust companies offer asset
management services such as bill pay, check writing and other features.
An investment trust is a form of collective investment found mostly in the united
kingdom Investment trusts are closed-end funds and are constituted as public limited companies. In
many respects, the investment trust was the progenitor of the investment company in the U.S
The name is somewhat misleading, given that (according to law) an investment "trust" is not in fact a
"trust in the legal sense at all, but a separate legal person or a company. This matters for
the fiduciary duties owed by the trustees and the equitable ownership of the fund's assets.
Generally, an "investment company" is a company (corporation, business trust, partnership, or limited
liability company) that issues securities and is primarily engaged in the business of investing in securities.
An investment company invests the money it receives from investors on a collective basis, and each
investor shares in the profits and losses in proportion to the investor's interest in the investment company.
The performance of the investment company will be based on (but it won't be identical to) the
performance of the securities and other assets that the investment

Each type has its own unique features. For example, mutual fund and UIT shares are "redeemable"
(meaning that when investors want to sell their shares, they sell them back to the fund or trust, or to a
broker acting for the fund or trust, at their approximate net asset value).

The federal securities laws categorize investment companies into three basic types:
Mutual funds (legally known as open-end companies);
Closed-end funds (legally known as closed-end companies);
UITs (legally known as unit investment trusts).

Investment companies are regulated primarily under the Investment Company Act of 1940 and the rules
and registration forms adopted under that Act. Investment companies are also subject to the Securities
Act of 1933 and the Securities Exchange Act of 1934. For the definition of "investment company," you
should refer to Section 3 of the Investment Company Act of 1940 and the rules under that section.

Who Should Use a Trust Company

A trust company is hired to act as a fiduciary for the client. Therefore, all the investment
decisions are made by the trust company, which is acting in the best interest of its client.

ORGANISATION
Investors' money is pooled together from the sale of a fixed number of shares which a trust issues
when it launches
Investment trust shares are traded on stock exchanges, like those of other public companies.
The share price does not always reflect the underlying value of the share portfolio held by the
investment trust. In such cases, the investment trust is referred to as trading at a discount (or
premium) to NAV (net asset value)
The investment trust often has no employees, only a board of directors comprising only non-
executive directors. However in recent years this has started to change, especially with the
emergence of both private equity groups and commercial property trusts both of which sometimes
use investment trusts as a holding vehicle.[2]
HISTORY
The first investment trust was the Foreign & Colonial Investment Trust, started in 1868 "to give the
investor of moderate means the same advantages as the large capitalists in diminishing the risk of
spreading the investment over a number of stocks".[7]
The investment trust often has no employees, only a board of directors comprising only non-
executive directors. However in recent years this has started to change, especially with the
emergence of both private equity groups and commercial property trusts both of which sometimes
use investment trusts as a holding vehicle.[2]

]
Classification of Investment Trusts
Investment trusts can hold a variety of assets (listed equities, government/corporate bonds, real
estate, private companieslisted /incorporated/domiciled in any region. Moreover the investment
objectives (growth, income, capital preservation risk profile (level of gearing, level of diversification
via assets and risk factors) varies. A trust domicile (UK, Channel Islands,...) and corporate structure
(use of warrants, loan stock, split caps, REITs, VCTs...) will vary. The grouping of trusts by above
characteristics or alternative self-consistent criteria is known as a classification. By grouping trusts
according to a given classification allows investors, marketers to compare similar trusts.

General Functions Of Trust Companies

A trust is something committed to another person's care for use or management and for which an account must be
rendered. The original and essential function of a trust company was to accept and handle trusts of a business nature.
To execute trusts efficiently, however, the trust company found it expedient to undertake many lines of collateral
business, thus adding function after function to its province until today it represents the most inclusive and complete
financial institution.
A representative trust company performs the following general functions:
1. Banking functions: savings and commercial banking operations.
2. Trust and agency functions:
(a) For individuals: private agreements, probate, investment, real estate, and insolvency operations.
(b) For corporations: trustee of mortgages and funds, transfer agent, registrar, corporate reorganization and financing
operations.
3. Insurance And Safe-Deposit Function
Split Capital Investment Trusts[edit]
Main article: Split capital investment trust
"Traditional" investment trusts normally issue only one type of share (ordinary shares) and have an
unlimited life. Split Capital Investment Trusts (Splits) have a more complicated
structure. Splits issue different classes of share to give the investor a choice of shares to match
their needs. Most Splits have a limited life determined at launch known as the wind-up date.
Typically the life of a Split Capital Trust is five to ten years.
Every Split Capital Trust will have at least two classes of share:
In order of (typical) priority and increasing risk

Zero Dividend Preference shares: no dividends, only capital growth at a pre-established

redemption price (assuming sufficient assets)
Income shares: entitled to most (or all) of the income generated from the assets of a trust until
the wind-up date, with some capital protection
Annuity Income shares: very high and rising yield, but virtually no capital protection
Ordinary Income shares (AKA Income & Residual Capital shares): a high income and a share of
the remaining assets of the trust after prior ranking shares
Capital shares: entitled most (or all) of the remaining assets after prior ranking share classes
have been paid; very high risk
The type of share invested in is ranked in a predetermined order of priority, which becomes
important when the trust reaches its wind-up date. If the Split has acquired any debt, debentures or
loan stock, then this is paid out first, before any shareholders. Next in line to be repaid are Zero
Dividend Preference shares, followed by any Income shares and then Capital. Although this order of
priority is the most common way shares are paid out at the wind-up date, it may alter slightly from
trust to trust.
Splits may also issue Packaged Units combining certain classes of share, usually reflecting the
share classes in the trust usually in the same ratio. This makes them essentially the same
investment as an ordinary share in a conventional Investment Trust.[8][9]

Real estate investment trusts

In the United Kingdom, REITs are constituted as investment trusts. They must be UK resident and
publicly listed on a stock exchange recognised by the Financial Conduct Authority. They must
distribute at least 90% of their income.