'C' shares: 'C' shares (also known as conversion shares) are designed to enable trusts to raise new funds without penalising the interests of existing shareholders. Such new money is raised through subscription for 'C' shares, which are kept separate from the main assets of the trust for a specified period, with the costs of the issue borne by the 'C' share pool. The 'C' shares convert to the full ordinary shares when most of the new money raised has been invested. 'C' shareholders are offered new ordinary shares at the combined NAV of the enlarged trusts.

Cancellation price: For dual-priced unit trusts this is the lowest possible price at which an investor can sell units back to the manager under FSA regulations. It excludes exit charges. The cancellation price represents the proceeds the fund would receive if the fund's assets were sold.

Capital structure: The capital structure of an investment trust refers to the relationship between how much of their financing came common or preferred stock or retained earnings. Particularly important when considering split capital investment trusts.

Capital shares: In a split capital investment trust, capital shares are entitled to all of the surplus assets on the wind-up of the trust, after repayment of any prior charges. They are generally regarded as one of the highest risk types of investment trust shares.

Capital: The initial amount of money used to fund an investment before it receives any interest or growth. In a fund, "capital" can also refer to the assets held by the fund excluding any income the fund may receive.

Capital gains tax: Capital gains tax (CGT) is the tax which you may have to pay if you sell shares at a profit.

Capital growth: The increase in the value of your investment, excluding any income you have received from it.

Cash: In saving and investment terms, cash refers to a bank or building society deposit account in which your capital is secure.

Cash and Fixed Interest: The percentage of total assets held in cash and fixed interest stocks, excluding convertibles and unlisted fixed interest securities held for investment.

Cautious Managed Fund: A fund that restricts its equity holdings to a maximum of 60%,, in order to invest in other investments such as cash and bonds. This type of fund is considered to be more cautious than most equity funds , as the portfolios are diversified across less risky investments in cash and bonds.

Child Trust Fund (CTF): A savings and investment account for children from 1 September 2002 onwards. Each child receives a ?250 voucher to start their account, when they reach 18 the funds accumulated in the account can be withdrawn tax-free.

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. Opposite of an open-ended fund, such as a unit trust.

Collective investment schemes: A term used for funds/companies that pool investors' money and invest on their behalf, eg investment trust, unit trust and OEICs.

Compounding: The process by which your investment grows in value over time by reinvesting interest or dividends back into the fund.

Convertible unsecured loan stock: Unsecured debenture that entitles the holder to exchange the debenture for another security at some future date.

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 and are therefore very tax efficient.

Corporate bonds: A certificate issued by a company that promises to repay money lent to it at a fixed rate of interest and at a specific time.

Convertibles: Fixed interest loans or securities which may be converted into shares in the investment trust at a specified date, usually at an agreed price.

Conventional investment trust: Conventional investment trusts issue only one class of ordinary share. Depending on the trust's objectives, investors are entitled to their share of both income in the form of dividends paid by the company and any capital growth.

Creation price: For dual-priced unit trusts this is the highest possible price at which an investor can buy units from the manager under FSA regulations. The initial charge is not included. The creation price represents the cost of buying the fund's assets.

Credit default swaps ('CDS'): An agreement designed to switch economic exposure between two parties. It is often characterised as an insurance policy but as there is no requirement to hold any asset it is a derivative. It is possible to be either buyer or seller of 'insurance', the buyer pays a periodic fee (a premium) for protection against a specific event (eg a bond default) the seller would receive income but bear the cost of default.

Credit derivative: An over-the-counter derivate designed to transfer credit risk from one party to another. By synthetically creating or eliminating credit exposures they allow institutions to manage credit risks. Most credit derivatives entail two sources of credit exposure: one from the reference entity and the second from the possible default by the counterparty to the transaction. There are many forms of credit derivates of which credit default swaps are one of the more popular structures.

Credit ratings: Ratings provided by specialist credit agencies which assess the likelihood of companies being able to meet their financial obligations. Ratings range from AAA (the most secure) to D (the least secure); the greater the credit risk the lower the rating.

Credit Spread: The difference in yield between two bonds, measured in basis points. When one of the bonds is a top-rated governments bond, the spread represents the additional return investors demands to choose an asset with default risk over one with virtually none.

Credit Risk: Usually used when referring to investment in bonds, credit ratings agencies estimate the likelihood that the issuer of the bond will not be able to keep up your interest payments or repay your capital at the end of the holding period. 'Triple A' or 'investment grade rated' are considered to be the lowest credit risk while non-investment grade (also known as junk bonds) that are rated 'Triple B' down to D (when a bond defaults) are the highest credit risk.

CREST: CREST is an electronic system used for settling the sale and purchase of shares.

Currency risk: When the manager buys investments in currencies other than Sterling there is a risk that the value of those investments will change due to fluctuations in currency exchange rates.

Custodian: Usually a major banking group, the custodian is appointed by the fund's trustee or depositary to safeguard the fund's assets.

Cumulative: When referring to loan stock or shares, cumulative means that if the payment due for one period is missed, those securities must be given priority when the next payment is made. Arrears of the missed amounts must be paid before any dividend can be paid on the other shares in the trust structure.

Cyclicals: Sectors whose fortunes are subject to fluctuations in the economy - for example retailers and house buildings are likely to suffer in a recession.