CLOSED-ENDED FUNDS

· closed-end funds may be compared with conventional companies - they raise capital from investors at launch in exchange for shares in the company

· to raise further capital it is necessary for the fund company to observe certain formalities as laid down by law and its constitutive documents of the company - it cannot issue shares to or redeem shares from prospective investors on demand - in practical day to day terms therefore the number of shares in issue is fixed

· the fund shares will be quoted on a stock exchange · fund shares may be bought and sold through a broker just like shares in other companies quoted on a stock exchange · alternatively they may be dealt in through the management company and all purchases through FundAccount introductions are effected this way - the management companies brokerage charges are very competitive

· the value of the fund shares will ultimately depend on demand for the fixed supply of shares (just like any other quoted company shares)

· as already stated all funds whether open-end or closed-end invest mainly into securities of various descriptions - hence it is possible to calculate a value for a closed-end fund by reference to the value of the underlying securities (the Net Asset Value - "NAV") - and then to derive the Net Asset Value per fund share simply by dividing the total NAV by the fixed number of shares in issue

· it would be reasonable to suppose that the value of the fund shares as quoted in the stock market (and as determined by demand) should be very close to the NAV per share (being the actual value of the investments into which the fund is invested per fund share) - in other words that investors would not be prepared to pay more and would jump at the opportunity to pay less than NAV per fund share!

· in fact it is often the case that fund shares trade in the stock market at less than the NAV per share (at a discount to NAV), and occasionally at a price greater than the NAV per share (at a premium to NAV)

·