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Glossary of Terms

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ACCRUED INTEREST Bonds are securities that earn interest at fixed or variable interest rates. Interest accrues or accumulates daily. Accrued interest is the amount of interest accumulated from the last payment date to the current date.
ACTUARIAL PRICE A unit-linked fund price, used to buy and sell units. ILIM calculates offer and bid prices for these funds. Unlike most other unit-linked funds, where the Offer and Bid prices are published, Offer and Bid prices for these funds are for internal use only, the Actuarial price is published externally.
ADVISOR / ADVISER 1. Person or company responsible for making pooled fund investments. 2. Organisation employed by a pooled fund to give professional advice on the fund's investments and asset management practices. Also known as investment advisor.
AGGRESSIVE GROWTH FUNDS Pooled funds that strive for maximum growth as the primary objective.
AMERICAN DEPOSITORY RECEIPTS Certificates issued by a U.S. Depository Bank, representing foreign shares held by the bank, usually by a branch or correspondent in the country of issue.
AMERICAN-STYLE OPTION An option contract that can be exercised at any time between the date of purchase and the expiration date. Most exchange-traded options are American style.
ANALYST Employee of a brokerage or fund management house who studies companies and makes buy and sell recommendations on their stocks. Most specialise in a specific industry.
ANNUAL REPORT Yearly record of a publicly held company's financial condition. It includes a description of the firm's operations, its balance sheet and income statement.
ANNUAL RETURN The percentage of change in a pooled fund's net asset value over a year's time, factoring in income dividend payments, capital gains, and reinvestment of these distributions.
APPORTIONMENT ILIM deals in bulk in the markets on behalf of many funds. A bulk trade is apportioned, or divided up, in the appropriate amounts for each individual fund taking part in the trade.
ARBITRAGE Profiting from differences in the price of a single security that is traded on more than one market
ASSET ALLOCATION FUND Balanced fund in which changes are made in the stock and bond percentage mix, based on the outlook for each market.
ASSET PRICE This is a price of a unit linked fund, calculated by the pricing system, that includes the value of all assets and liabilities of the fund and any buying or selling costs appropriate to the assets. It excludes sales charges, management charges and rounding. In some circumstances, e.g. for DETE reporting, buying and selling costs are also excluded.
AT THE MONEY An option is at-the-money if the strike price of the option is equal to the market price of the underlying security. For example, if X stock is trading at 54, then the X 54 option is at-the-money.
AVERAGE An arithmetic mean of selected stocks intended to represent the behaviour of the market or some component of it. One good example is the widely quoted Dow Jones Industrial Average, which adds the current prices of the 30 DJIA's stocks, and divides the results by a predetermined number, the divisor.
AVERAGE MATURITY The average time to maturity of securities held by a pooled fund. Changes in interest rates have greater impact on funds with longer average life.
BACK OFFICE Brokerage house clerical operations that support, but do not include, the trading of stocks and other securities. Includes all written confirmation and settlement of trades, record keeping and regulatory compliance.
BALANCED FUNDS  Pooled funds that invest in both stocks and bonds, typically in relatively equal proportions
BANKER'S ACCEPTANCE A short-term credit investment created by a non-financial firm and guaranteed by a bank as to payment. Acceptances are traded at discounts from face value in the secondary market. These instruments have been a popular investment for money market funds.
BASIS The price an investor pays for a security plus any out-of-pocket expenses. It is used to determine capital gains or losses for tax purposes when the stock is sold.
BASIS POINTS Refers to yield on bonds. Each percentage point of yield in bonds equals 100 basis points. If a bond yield changes from 7.25 % to 7.39 %, that's a rise of 14 basis points.
BEAR An investor who believes a stock or the overall market will decline. A bear market is prolonged period of falling stock prices, usually by 20% or more.
BEAR MARKET Period during which the stock market loses more than 10 percent of its value.
BEAR RAID A situation in which large traders sell positions with the intention of driving prices down.
BETA (STOCKS) Measure of a stock's risk in relation to the market. 0.7 means a stock price is likely to move up or down 70 % of the market change; 1.3 means the stock is likely to move up or down 30 % more than the market.
BID PRICE The price at which a market participant is willing to buy securities from ILIM.
BID PRICING BASIS An approach to unit fund pricing that assumes more clients are leaving the fund than are entering it, and that the fund is in decline. This approach requires that bid prices of securities are used in fund valuations and that selling costs are deducted from security values.
BLUE CHIP STOCKS Stocks issued by well-established companies that pay dividends.
BOND  A debt instrument issued by a company, city, or state, or the U.S. government or its agencies, with a promise to pay regular interest and return the principal on a specified date.
BONUS ISSUE Issue of free shares from company to existing shareholders.
BULL An investor who thinks the market will rise.
BULL MARKET Period during which the stockmarket moves higher for a couple of years straight.
BUYING COSTS A calculation applied in fund pricing to provide for expenditure on brokerage and other costs arising from buying assets. This is used for funds on an offer-pricing basis and the value of these costs is added to the market value of securities in the pricing calculation.
BUYOUT Purchase of a controlling interest (or percent of shares) of a company's stock. A leveraged buyout is done with borrowed money.
CALL OPTION An option contract that gives the holder of the option the right (but not the obligation) to purchase, and obligates the writer to sell, a specified number of shares of the underlying stock at the given strike price, on or before the expiration date of the contract.
CALLABLE Debt that may be redeemed before it matures.
CAPITAL ASSET ANALYSIS An analysis of the current distribution of a funds assets over asset types (equities, bonds, property, cash) and countries.
CAPITAL EXPENDITURES Amount used during a particular period to acquire or improve long-term assets such as property, plant, or equipment.
CAPITAL GROWTH FUNDS Pooled funds that strive for maximum growth. Although these funds can earn the greatest gains, they also can rack up the heaviest losses. Also known as aggressive growth funds.
CAPITAL GAIN When a stock is sold for a profit, it's the difference between the net sales price of securities and their net cost, or original basis. If a stock is sold below cost, the difference is a capital loss.
CAPITAL LOSS The difference between the net cost of a security and the net sale price, if that security is sold at a loss.
CASH AND EQUIVALENTS The value of assets that can be converted into cash immediately, as reported by a company. Usually includes bank accounts and marketable securities, such as government bonds and Bankers' Acceptances. Cash equivalents on balance sheets include securities (e.g., notes) that mature within ninety days.
CASH DIVIDEND A dividend paid in cash to a company's shareholders. The amount is normally based on profitability and is taxable as income. A cash distribution may include capital gains and return of capital in addition to the dividend.
CASH FLOW In investments, it represents earnings before depreciation amortisation and non-cash charges. Sometimes called cash earnings. Cash Flow from operations (called Funds From Operations (FFO) by real estate and other investment trusts, is important because it indicates the ability to pay dividends.
CEDEL A European Clearing System and Depository.
CERTIFICATES OF DEPOSIT (CDs)  Debt instruments issued by banks and building societies.
CGT Abbreviation for Capital Gains Tax. For funds where tax is payable, this tax is charged on profits made on sales of securities.
CHANGES IN FINANCIAL POSITION Sources of funds internally provided from operations which alter a company's cash flow position: depreciation, deferred taxes, other sources, and capital expenditures.
CHARITABLE REMAINDER TRUST Legal document set up with a charity, in which the charity pays you income for life. When you die, the money goes to the charity, tax-free.
CLEARING SYSTEM An external system associated with a capital market that arranges security settlements eg CREST in ROI and UK.
CLOSED-END FUNDS Funds whose shares are traded on an exchange, similar to stocks. The price per share doesn't typically equal the net asset value of a share.
CLOSING PURCHASE A transaction in which the purchaser's intention is to reduce or eliminate a short position in a stock, or in a given series of options.
CLOSING SALE A transaction in which the seller's intention is to reduce or eliminate his long position in a stock, or a given series of options.
COMMERCIAL PAPER  Short-term loans to corporations.
COMMINGLED FUND A fund where the assets belong to more than one client. The term is more often used in the USA than in Europe.
COMMISSION Broker fee for trading on your behalf.
COMMON STOCK  Unit of ownership in a public corporation with voting rights, but with lower priority than either preferred stock or bonds if the company is ever liquidated.
COMMON STOCK/OTHER EQUITY Value of outstanding common shares at par, plus accumulated retained earnings. Also called shareholders' equity.
COMPLIANCE Adherence to the legislation, regulation and best practice approaches applicable to the fund management industry.
CONFIRMATION The written statement that follows any "trade" in the securities markets. Confirmation is issued immediately after a trade is executed. It spells out settlement date, terms, commission, etc.
CONSENSUS An investment mandate applied to some Life and Pension funds. ILIM seeks to set the asset allocation mix of such funds at the average of the mixes applied by our competitors, hence the term Consensus.

For each element of the mix ILIM tries to obtain an investment return equal to the index for that market. For an Active fund, ILIM would try to beat the index.

CONSTANT DOLLAR INVESTING  Investment strategy that preserves profits by periodic evaluation and adjustment of a portfolio. You maintain the same amount in your stock fund each year by channelling funds from and to a bond or money market fund.
CONVERGENCE The movement of the price of a futures contract toward the price of the underlying cash commodity. At the start, the contract price is higher because of the time value. But as the contract nears expiration, the futures price and the cash price converge.
CONVERTIBLE BOND FUNDS Pooled funds that invest in bonds that can be converted into stocks.
CORNER A MARKET To purchase enough of the available supply of a commodity or stock in order to manipulate its price.
CORPORATE BONDS Debt instruments issued by corporations.
COUNTERPARTY External company ILIM trades with, usually a stockbroker or a bank.
COUPON RATE In bonds, notes or other fixed income securities, the stated percentage rate of interest, usually paid twice a year.
COVERED CALL A short call option position in which the writer owns the number of shares of the underlying stock represented by the option contracts. Covered calls generally limit the risk the writer takes because the stock does not have to be bought at the market price, if the holder of that option decides to exercise it.
COVERED PUT A put option position in which the option writer also is short the corresponding stock or has deposited, in a cash account, cash or cash equivalents equal to the exercise of the option. This limits the option writer's risk because money or stock is already set aside. In the event that the holder of the put option decides to exercise the option, the writer's risk is more limited than it would be on an uncovered or naked put option.
CPMS Combined Performance Measurement Service. This is a service operated by the consultants, Mercers, to which many of ILIM’s clients subscribe. It provides an independent analysis of portfolio performance. ILIM supplies portfolio data to Mercers to support these analyses.
CREST Irish & UK central depository for equity trades.
CURRENT ASSETS Value of cash, accounts receivable, inventories, marketable securities and other assets that could be converted to cash in less than 1 year.
CURRENT LIABILITIES Amount owed for salaries, interest, accounts payable and other debts due within 1 year.
CURRENT YIELD For bonds or notes, the coupon rate divided by the market price of the bond.
CUSTODIAN Bank or other financial institution that safeguards pooled fund securities and may respond to transactions only by designated fund officers.
CUSTODY FEES Fees paid to custodian.
DAY ORDER An order to buy or sell stock that automatically expires if it can't be executed on the day it is entered.
DEAL TICKET Initial record of deal.
DEBT/EQUITY RATIO Indicator of financial leverage (gearing). Compares assets provided by creditors to assets provided by shareholders. Determined by dividing long term debt by common stockholders' equity.
DECILE RANK Performance over time, rated on a scale of 1-10. 1 indicates that a pooled fund's return was in the top 10 % of funds being compared, while 3 means the return was in the top 30 %.
DEPRECIATION A non-cash expense that provides a source of free cash flow. Amount allocated during the period to amortise the cost of acquiring long term assets over the useful life of the assets.
DERIVATIVE SECURITY A financial security, such as an option, or future, whose value is derived in part from the value and characteristics of another security, the underlying security.
DISINVESTMENT Sale of a security by a portfolio
DIVIDEND DISTRIBUTION Some unit-linked funds (Property Modules, MIIEUT) accumulate income over six month periods, then distribute the income to unitholders at the end of the period. The distribution causes the price of the unit fund to drop. The distribution may be done by way of a cash payment to the unitholder or by way of an additional allocation of units in the fund. Most funds do not distribute income, but accumulate it within the fund.
EARNINGS Net income (profit) for the company during the period.
EARNINGS PER SHARE (EPS) Net income for the past 12 months divided by the number of common shares outstanding, as reported by a company. The company often uses a weighted average of shares outstanding over reporting term.
EARNINGS YIELD The ratio of Earnings Per Share after allowing for tax and interest payments on fixed interest debt, to the current share price. It is the inverse of the Price/Earnings ratio. Calculate it as Total Twelve Months Earnings divided by number of outstanding shares, divided by the recent price, multiplied by 100. The end result is shown in percentage.
ENDORSEMENTS An agreed alteration to the terms of an insurance policy. Eg increasing the amount insured.
ENTITLEMENTS Amounts of income due to a fund when a fund holds certain assets e.g. dividends on equities or interest on cash deposits.
EQUITY The value of the common stockholders' equity in a company as listed on the balance sheet.
EQUITY INCOME FUNDS Pooled funds that favour investments in stocks that generate income over growth. As a result, they can be less risky than other types of stock funds.
EQUITY OPTIONS Securities that give the holder the right to buy or sell a specified number of shares of stock, at a specified price for a certain (limited) time period. Typically one option equals 100 shares of stock.
EUROPEAN-STYLE OPTION An option contract that can only be exercised on the expiration date.
EXCESS MARGIN An amount of money on deposit with a counterparty, usually for futures trades, that exceeds the amount of margin or safety deposit actually required by the counterparty.
EXCHANGE The marketplace in which shares, options and futures on stocks, bonds, commodities and indices are traded. Major stock exchanges include the New York Stock Exchange (NYSE), the National Association of Securities Dealers (NASDAQ) and the London Stock Exchange (LSE).
EX-DIVIDEND DATE Date on which the value of the income or capital gains distribution is deducted from the price of a fund's shares.
EXECUTION The process of completing an order to buy or sell securities.
EXERCISE To implement the right of the holder of an option to buy (in the case of a call) or sell (in the case of a put) the underlying security.
EXPENSE RATIO The percentage of the assets that were spent to run a pooled fund.
FACE VALUE Value of a bond or note as given on the certificate. In the US corporate bonds are usually issued with £1,000 face values, municipal bonds with £5,000 face values, and government bonds, £1,000 to £10,000 face values. Also known as the principal.
FINANCIAL PLANNER  Individual who helps an individual to establish a financial game plan. Although a financial planner may have certain licenses or designations indicating the extent of his or her training, there is no requirement that a financial planner have a license.
FIRST IN-FIRST OUT (FIFO) Basis for calculating the tax impact of pooled fund profits and losses that assumes shares sold are the oldest shares owned.
FIXED-INCOME FUND  Another term for a mutual bond fund.
FORWARD RATES Usually used in the context of foreign currency trading. It is a means of reflecting interest rate differentials between different currencies over a period of time.
FRONT-END LOADS  Sales commission paid to purchase shares of pooled funds.
FUND FAMILY The management company that runs and/or sells shares of the fund. Fund families often offer several funds with different investment objectives.
FUND FLOW A statement of the sources of money flows into a portfolio (eg contributions, income, security sales) and what the money was spent on (eg payments to client, expenses, security purchases).
FUTURES CONTRACT Agreement to buy or sell a set number of shares of a specific stock in a designated future month at a price agreed upon by the buyer and seller. The contracts themselves are often traded on the futures market. A futures contract differs from an option because an option is the right to buy or sell, whereas a futures contract is the promise to actually make a transaction.
GENERAL PURPOSE MONEY FUNDS Pooled funds that invest largely in bank CDs and short-term corporation IOUs called commercial paper.
GILTS Fixed Interest securities issued by the government in either Ireland or the UK.
GLOBAL FUNDS Pooled funds that invest in both Ireland and foreign countries.
GOOD 'TIL CANCELED Sometimes simply called "GTC", it means an order to buy or sell stock that is good until you cancel it. Stockbrokers usually set a limit of 30-60 days, at which the GTC expires if not restated.
GROWTH AND INCOME FUNDS Pooled funds that own primarily blue-chip stocks of well-established companies that pay out a lot of dividends to their shareholders. These funds generally develop stock portfolios that balance the potential for appreciation with the potential for dividend income.
GROWTH FUNDS Pooled funds that invest in the stocks of well-established firms that are expected to be profitable and to grow for years to come.
GROWTH RATES Compound annual growth rate for the number of full fiscal years shown. If there is a negative or zero value for the first or last year, the growth is NM (not meaningful).
GIPS Global Investment Performance Standards. The standards seek to remove subjective elements of performance measurement so that it is possible to make fair comparisons between the results obtained by different fund mangers. The standards have widespread industry acceptance globally. In time, they may replace CPMS, or CPMS may adopt these standards.
GROSS ROLL UP A tax arrangement introduced on 1/1/2001 for ROI Life funds. Before this date, funds provided for income tax and capital gains tax daily and produced fund prices net of tax. Funds launched after this date no longer provide for tax in fund pricing. Tax is paid only when a client sells units in the fund. The tax is calculated on the growth in unit price between the purchase and sale dates.
HEDGING A strategy designed to reduce investment risk using "call" options, "put" options, "short" selling, or futures contracts. A hedge can help lock in existing profits. Its purpose is to reduce the potential volatility of a portfolio, by reducing the risk of loss.
HEDGING Strategy of investing in one or more securities to protect yourself from potential losses in other investments.
HIGH PRICE The highest (intraday) price of a stock over the past 52 weeks, adjusted for any stock splits.
HIGH-QUALITY CORPORATE BOND FUNDS Pooled funds that buy bonds issued by the nation's financially strongest companies.
HIGH-YIELD BOND FUNDS Risky bond pooled funds that invest in high-yield bonds of companies with poor credit ratings. The bonds are rated below triple B by Standard & Poors and Moodys. Also known as junk bond funds.
HOLDING COMPANY A corporation that owns enough voting stock in another firm to control management and operations by influencing or electing its board of directors.
INCOME Periodic interest or dividend distributions obtained from a fund.
INCOME FUNDS Pooled funds that invest in higher-yielding stocks, but may own some bonds. You get income first along with some growth. These funds usually invest in utility, telephone, and blue-chip stocks.
INDEX A) Measure updated regularly that give a representation of the movement in value of a particular market.

B) List of prices or other characteristics representing a particular group of goods or services which gives an indication of movements over time, for example, the consumer price index, the average earnings index and the retail sales index.

INDEXATION A) Adjustment of payments or values in line with movements in a particular index of prices or earnings.

B) The use of index funds.

INDEX FUND Investment fund which is designed to match the returns on a particular stock market index. The fund may hold all the shares in the particular index or, more commonly, use a mathematical model to select a sample which will perform as closely as possible to the index.
INDICATED DIVIDEND Total amount of dividends that would be paid on a share of stock over the next 12 months if each dividend were the same amount as the most recent dividend. Usually represent by the letter e in stock tables.
INDICATED YIELD The yield, based on the most recent quarterly rate times four. To determine the yield, divide the annual dividend by the price of the stock. The resulting number is represented as a percentage.
INDUSTRY The category describing a company's primary business activity. This usually is determined by the largest portion of revenue.
INFLATION Rise in prices of goods and services.
INFLATION HEDGE Term describing an investment that performs well when inflation heats up.
INITIAL MARGIN Minimum deposit required to trade futures.
INITIAL PUBLIC OFFERING (IPO) A company's first sale of stock to the public. Securities offered in an IPO are often, but not always, those of young, small companies seeking outside equity capital and a public market for their stock. Investors purchasing stock in IPOs generally must be prepared to accept very large risks for the possibility of large gains. IPOs by investment companies (closed end funds) usually contain underwriting fees which represent a load to buyers.
INSIDER INFORMATION Relevant information about a company that has not yet been made public. It is illegal for holders of this information to make trades based on it, however received.
INSTALMENT INVESTMENT STRATEGY Investment strategy in which you divide your investment among several pooled funds and make any new investments into the fund that performs the worst.
INSURANCE AGENT Individual licensed to sell insurance.
INTEREST INCOME Earnings received, often from bonds.
INTERMEDIATE-TERM BOND FUNDS Pooled funds that invest in bonds that mature in about 5 to 10 years. International bonds Debt instruments issued by foreign governments or corporations.
INTERNATIONAL FUNDS Pooled funds that invest in stocks or bonds of world-wide companies.
IN-THE-MONEY A "call" option is in-the-money if the strike price is less than the market price of the underlying security. A "put" option is in-the-money if the strike price is greater than the market price of the underlying security. For example, an xyz "call" option with a 52 strike price is in-the-money when xyz trades at 52 1/8 or higher. An xyz "put" option with a 52 strike price is in-the-money when xyz is trading at 51 7/8 or lower.
INVENTORY For companies: Raw materials, items available for sale or in the process of being made ready for sale. They can be individually valued by several different means, including cost or current market value, and collectively by FIFO, LIFO or other techniques. The lower value of alternatives is usually used to preclude overstating earnings and assets. For security firms: securities bought and held by a broker or dealer for resale.
INVESTMENT BANKER Firm that sells stocks or bonds to brokerages which, in turn, sell them to investors on a securities exchange.
INVESTMENT COMPANY  Firm that, for a management fee, invests pooled funds of small investors in securities appropriate for its stated investment objectives.
INVESTMENT OBJECTIVE Description, included in a fund document, of what a pooled fund hopes to accomplish.
INVESTMENT TRUST A closed-end fund. These funds have a fixed number of shares which are traded on the secondary markets similarly to corporate stocks. The market price may exceed the net asset value per share, in which case it is considered at a "premium." When the market price falls below the NAV/share, it is at a "discount." Many closed end funds are of a specialised nature, with the portfolio representing a particular industry, country, etc. These funds are usually listed on stock exchanges.
IRREVOCABLE TRUST Legal document that allows you to avoid probate and reduce the tax bite. You give up ownership of any asset you placed in this type of trust, and it can't be changed.
JUNK BOND FUNDS  Pooled funds that invest in bonds issued by companies or governments that are rated below BBB by Standard and Poor's or Moody's. Also know as high-yield bond funds.
LIMIT ORDER An order to buy a stock at or below a specified price or to sell a stock at or above a specified price. For instance, you could tell a broker "Buy me 100 shares of xyz Corp at £8 or less" or to "sell 100 shares of xyz at £10 or better."
LONG POSITION Occurs when an individual owns securities. An owner of 1000 shares of stock is said to be "Long the Stock."
LONG POSITION (OPTIONS) An options position where a person has executed one or more options trades where the net result is that they are an "owner" or holder of options (i.e. the number of contracts bought exceeds the number of contracts sold).
LONG TERM ASSETS Value of property, equipment and other capital assets minus the depreciation. This is an entry in the bookkeeping records of a company, usually on a "cost" basis and thus does not necessarily reflect the market value of the assets.
LONG TERM DEBT Value of obligations of over 1 year that require that interest be paid.
LONG-TERM BOND FUNDS Pooled funds that invest in bonds that mature in more than 10 years.
MANAGEMENT CHARGE REBATES Management charges within a unit-linked fund are applied equally to all unit holders. Rebates are an arrangement whereby ILA reduces the level of charge for a client by allocating additional Level 2 units to the client.

This occurs within ILA for certain large pension schemes and allows marketing personnel customise the level of charges for certain clients.

It also occurs within certain Level 1 funds that own units in funds managed by external managers

MANAGEMENT FEE Charge for running the fund.
MANAGEMENT/CLOSELY HELD SHARES Percentage of shares held by persons closely related to a company.
MARGIN ACCOUNT (STOCKS) An account in which stocks can be purchased for a combination of cash and a loan. The loan in the margin account is collateralised by the stock and, if the value of the stock drops sufficiently, the owner will be asked to either put in more cash, or sell a portion of the stock.
MARGIN CALL Requirement to place extra funds on deposit with futures counterparty.
MARGIN REQUIREMENT (OPTIONS) The amount of cash an uncovered (naked) option writer is required to deposit and maintain to cover his daily position valuation and reasonably foreseeable intrude price changes.
MARKET CAPITALISATION The total dollar value of all outstanding shares. Computed as shares times current market price. It is a measure of corporate size.
MARKET CYCLE The period between the 2 latest highs or lows of the S&P 500, showing net performance of a fund through both an up and a down market. A market cycle is complete when the S&P is 15 % below the highest point or 15 % above the lowest point (ending a down market). The dates of the last market cycle are: 12/04/87 to 10/11/90 (low to low).
MARKET ORDER An order to buy or sell a stock at the going price.
MARKET TIMING Strategy by which investors attempt to buy low and sell high by buying when the market is turning bearish and selling at the end of a bull market.
MARKET VALUE The value of an investment in the capital markets at a point in time.
MATURITY DATE Date that a bond is due for payoff.
MONEY MARKET FUND A pooled fund that invests only in short term securities, such as bankers' acceptances, commercial paper, repurchase agreements and government bills. The net asset value per share is maintained at £1.00. Such funds are not federally insured, although the portfolio may consist of guaranteed securities and/or the fund may have private insurance protection.
MONEY MARKET POOLED FUND  Pooled fund that invests typically in short-term government and company loans and CDs. These tend to be lower-yielding, but less risky than most other types of funds. Also known as money market funds or money funds.
MOVING AVERAGE Used in charts and technical analysis, the average of security or commodity prices constructed in a period as short as a few days or as long as several years and showing trends for the latest interval. As each new variable is included in calculating the average, the last variable of the series is deleted.
MUNICIPAL BOND FUNDS Pooled funds that invest in tax-exempt bonds issued by states and local governments in the US, Germany and elsewhere.
NET ASSET VALUE (NAV) The value of a fund's investments. For a pooled fund, the net asset value per share usually represents the fund's market price, subject to a possible sales or redemption charge. For a closed end fund, the market price may vary significantly from the net asset value.
NET INCOME The company's total earnings, reflecting revenues adjusted for costs of doing business, depreciation, interest, taxes and other expenses.
NOISE Price and volume fluctuations that can confuse interpretation of market direction.
NO-LOAD POOLED FUND  Pooled fund that is sold without sales commission.
NOTE Another word for a short-term bond.
NO-TRANSACTION FEE ACCOUNT Brokerage firm account that allows customers to purchase a selection of pooled funds with no charge or a limited charge.
OBJECTIVE (POOLED FUNDS) The fund's investment strategy category as stated in the prospectus. There are more than 20 standardised categories.
OFFER PRICING BASIS An approach to unit fund pricing that assumes more clients are entering the fund than are leaving it, and that the fund is growing. This approach requires that offer prices of securities are used in fund valuations and that buying costs are added to security values.

The price at which a market participant is willing to buy securities

OPALS An OTC instrument sold by investment banks to institutional investors that is designed (but not guaranteed) to track a stock index.
OPEN INTEREST The number of outstanding option contracts in the exchange market or in a particular class or series.
OPEN-END FUNDS Funds that permit ongoing purchase and redemption of fund shares (pooled funds are open-end funds).
OPTION Gives the buyer the right, but not the obligation, to buy or sell stock at a set price on or before a given date. Investors, not companies, issue options. Investors who purchase call options bet the stock will be worth more than the price set by the option (the strike price), plus the price they paid for the option itself. Buyers of put options bet the stock's price will go down below the price set by the option.
OUT OF THE MONEY A call option is out-of-the-money if the strike price is greater than the market price of the underlying security. A put option is out-of-the-money if the strike price is less than the market price of the underlying security.
OVER-THE-COUNTER MARKET An investment tailor-made by an investment bank for the purchaser rather than a standard instrument, like an equity or a gilt, traded in the capital markets
OVERWEIGHT Exposure to a specific asset (or asset class) which is higher than the proportion it represents in the market index or benchmark against which the portfolio is measured. Investment managers may take overweight positions in shares or sectors they expect to outperform in order to add value to the portfolio.
PENALTIES In the context of deal settlement, charges levied by stock exchanges or clearing systems for late settlement.
PERFORMANCE A mathematical measurement of the rate of increase or decrease in the value of a portfolio over a period of time.
PERFORMANCE ATTRIBUTION An analysis of the factors that contributed to a fund’s performance over a period of time, including market, asset type and currency.
PASSIVE MANAGEMENT Where an investment manager establishes a portfolio which aims to replicate a particular market index or benchmark fund and does not attempt to actively manage the portfolio.
P/E RATIO EQUATION Assume XYZ Co sells for £25.50 per share and has earned £2.55 per share this year. £25.50 = 10 times £2.55 so the XYZ stock sells for 10 times earnings.
PHONE SWITCHING In pooled funds, the ability to transfer shares between funds in the same family by telephone request. There may be a charge associated with these transfers. Phone switching is also possible among different fund families if the funds are held in street name by a participating broker/dealer.
POINT AND FIGURE CHART A price-only chart that takes into account only whole integer changes in price, i.e., a 2-point change. Point and figure charting disregards the element of time and is solely used to record changes in price.
PORTFOLIO A collection of assets owned by one or more clients.
PORTFOLIO CONSTRUCTION An area in Fund Management responsible for managing funds according to clients’ mandates.
PORTFOLIO MANAGER Person responsible for making pooled fund investments.
POSITIONS In a Treasury context, the Long or Short currency positions held by individual funds or Treasury pools.
PRECIOUS METALS POOLED FUND Pooled funds that invest in precious metals and mining stocks.
PREFERRED STOCK A security that shows ownership in a corporation and gives the holder a claim, prior to the claim of common stockholders, on earnings and also generally on assets in the event of liquidation. Most preferred stock pays a fixed dividend, stated in a dollar amount or as a percentage of par value. This stock does not usually carry voting rights.
PREMIUM A one-off or regular payment by a client for an insurance contract.
PRICE/BOOK RATIO Compares a stock's market value to the value of total assets less total liabilities (book). Determined by dividing current price by common stockholders' equity per share (book value), adjusted for stock splits. Also called Market-to-Book.
PRICE/EARNINGS RATIO Shows the "multiple" of earnings at which a stock sells. Determined by dividing current price by current earnings per share (adjusted for stock splits). Earnings per share for the P/E ratio is determined by dividing earnings for past 12 months by the number of common shares outstanding. Higher "multiple" means investors have higher expectations for future growth, and have bid up the stock's price.
PRICE/SALES RATIO Determined by dividing stock's current price by revenue per share (adjusted for stock splits). Revenue per share for the P/S ratio is determined by dividing revenue for past 12 months by number of shares outstanding.
PRICES Price of a share of common stock on the date shown. Highs and lows are based on the highest and lowest intraday trading price.
PRIMARY MARKET The first buyer of a newly issued security buys that security in the primary market. All subsequent trading of those securities is done in the secondary market.
PRINCIPAL  Original investment.
PROFIT MARGIN Indicator of profitability. Determined by dividing net income by revenue for the same 12-month period. Result is shown as a percentage.
PROGRAMME TRADING A large number of trades by the same broker based on signals from computer programs, usually entered directly from the trader's computer to the market's computer system and executed automatically.
PROSPECTUS  Legal disclosure document that spells out information you need to know to make an investment decision on a pooled fund or other security.
PROXY Document intended to provide shareholders with information necessary to vote in an informed manner on matters to be brought up at a stockholders' meeting. Includes information on closely held shares. Shareholders can and often do give management their proxy, representing the right and responsibility to vote their shares as specified in the proxy statement.
PUT OPTION An option contract that gives the holder the right to sell (or "put"), and places upon the writer the obligation to purchase, a specified number of shares of the underlying stock at the given strike price on or before the expiration date of the contract.
QUARTILE Relative ranking (in quarters) of a particular portfolio (or a manager) in a league table of returns. So, for example, a quartile ranking of 2 indicates that 25% of portfolios performed better and 50% acheived a lower return.
QUICK RATIO Indicator of a company's financial strength (or weakness). Calculated by taking current assets less inventories, divided by current liabilities. Also called Acid Test.
RANGE The difference between the high and low price during a given period.
REALISED PROFIT OR LOSS If the sale value of an investment (security, currency position) is greater than the value for which it was bought, the portfolio makes a realised profit, if it is less the portfolio makes a realised loss.
REBALANCING  Investment strategy in which you adjust your mix of investments periodically to keep the proper percentages of money in each fund, based on your tolerance for risk.
RECORD DATE Date by which a shareholder must officially own shares in order to be entitled to a dividend.
REDEMPTION CHARGE The commission charged by a pooled fund when redeeming shares. For example, a 2 % redemption charge (also called a "back end load") on the sale of shares valued at £1000 will result in payment of £980 (or 98 % of the value) to the investor. This charge may decrease or be eliminated as shares are held for longer time periods.
REDENOMINATION Reclassification of company share capital.
REGIONAL FUNDS Pooled funds that invest in one specific region of the globe.
RELATIVE STRENGTH A stock's price movement over the past year as compared to a market index such as the S&P 500. Value below 1.0 means the stock shows relative weakness in price movement (under-performed the market); a value above 1.0 means the stock shows relative strength over the 1-year period.
REPO An agreement to loan a security, usually a bond, for a day. The loan attracts a rate of interest better than the rate obtainable in the cash markets. The loan can be renewed daily.
REPURCHASE AGREEMENTS Generally, overnight loans secured by U.S. Treasury or similar securities
RETURN The percentage gain or loss for a pooled fund in a specific time period. This number assumes that all distributions are reinvested.
RETURN ON ASSETS (ROA) Indicator of profitability. Determined by dividing net income for the past 12 months by total assets. Result is shown as a percentage.
RETURN ON EQUITY (ROE) Indicator of profitability. Determined by dividing net income for the past 12 months by common stockholders' equity (adjusted for stock splits). Result is shown as a percentage.
REVERSE STOCK SPLIT A proportionate decrease in the number of shares, but not the value of shares of stock held by shareholders. Shareholders maintain the same percentage of equity as before the split. For example, a 1-for-3 split would result in stockholders owning 1 share for every 3 shares owned before the split. A firm generally institutes a reverse split to boost its stock's market price and attract investors.
RIGHTS OFFERING Issuance of "rights" to current shareholders allowing them to purchase additional shares, usually at a discount to market price. Shareholders who do not exercise these rights are usually diluted by the offering. Rights are often transferable, allowing the holder to sell them on the open market to others who may wish to exercise them. Rights offerings are particularly common to closed end funds, which cannot otherwise issue additional common stock.
RISK In relation to a pooled fund, chances of losing money.
RISK TOLERANCE Amount of money you can stomach losing in a given year.
S&P 500 INDEX Measure of the performance of a large group of blue-chip stocks in the U.S.
SALES CHARGE The fee charged by a pooled fund when purchasing shares, usually payable as a commission to a marketing agent, such as a financial advisor, who is thus compensated for his assistance to a purchaser. It represents the difference, if any, between the share purchase price and the share net asset value.
SEC The Securities and Exchange Commission, the primary federal regulatory agency of the securities industry in the US.
SECONDARY MARKET A market that provides for the purchase or sale of previously owned securities. Most trading is done in the secondary market.
SECURITIES Stocks, bonds, or rights to ownership, such as options, typically sold by a broker.
SECURITIES EXCHANGE Tightly regulated marketplace where stocks, bonds, and cash are traded.
SEGREGATED FUND A non-unitised fund managed by ILIM on behalf of the trustees of a pension scheme under an investment management agreement. The assets of these funds belong to the scheme members acting through the trustees.
SELLING COSTS A calculation applied in fund pricing to provide for expenditure on brokerage and other costs arising from selling assets. This is used for funds on a Bid pricing basis and the value of these costs is subtracted from the market value of securities in the pricing calculation.
SELLING SHORT If an investor thinks the price of a stock is going down, the investor could borrow the stock from a broker and sell it. Eventually, s/he must buy the stock back on the open market. For instance, you borrow 1000 shares of XYZ on July 1 and sell it for £8 per share. Then, on Aug 1, you purchase 1000 shares of XYZ at £7 per share. You've made £1000 (less commissions and other fees) by selling short.
SETTLEMENT DATE The date on which payment is made to settle a trade. For stocks traded on US exchanges, settlement is currently 5 business days after the trade, but this will be reduced to 3 days in 1995. For pooled funds, settlement usually occurs in the U.S. the day following the trade. In some regional markets, foreign shares may require months to settle.
SHARE  Unit of ownership.
SHARE REPURCHASE Program by which a corporation buys back its own shares in the open market. It is usually done when shares are undervalued. Since it reduces the number of shares outstanding and thus increases earnings per share, it tends to elevate the market value of the remaining shares held by stockholders.
SHAREHOLDER One who owns shares.
SHORT POSITION (OPTIONS) A position wherein a person's interest in a particular series of options is as a net writer (i.e., the number of contracts sold exceeds the number of contracts bought).
SHORT POSITION (STOCKS) Occurs when a person sells stocks s/he does not yet own. Shares must be borrowed, before the sale, to make "good delivery" to the buyer. Eventually, the shares must be bought to close out the transaction. Technique is used when an investor believes the stock price is going down.
SHORT SALE Selling a security that the seller does not own but is committed to repurchasing eventually. It is used to capitalise on an expected decline in the security's price.
SHORT-TERM BOND FUNDS Pooled funds that generally invest in bonds that mature in less than three years.
SINGLE-COUNTRY FUNDS Pooled funds or closed-end funds that invest in one country.
SLIPPAGE The difference between estimated transaction costs and actual transaction costs. The difference is usually composed of revisions to price difference or spread and commission costs.
SMALL COMPANY STOCK FUNDS Volatile pooled funds that invest in younger companies whose stocks are frequently traded on the over-the-counter stock market.
SOCIALLY RESPONSIBLE FUNDS Pooled funds that invest in companies that don't pollute the environment or sell arms. They will not own tobacco or alcohol stocks, nor invest in companies with poor employee relations.
SPECIALIST FUNDS  Funds that invest in one specific industry or industry sector.
SPECULATION Gambling on a risky investment in hopes of a high payoff down the road.
SPOT RATES Exchange rates for settlement in 2 days time.
STAMP DUTY Tax levied for purchase of IR & UK Equities and Properties.
STOCK Investment that buys ownership in a corporation, in exchange for a portion of that company's earnings and assets.
STOCKBROKER  Person licensed to sell stocks and other types of securities. Also known as a registered representative.
STOCK DIVIDEND Payment of a corporate dividend in the form of stock rather than cash. The stock dividend may be additional shares in the company, or it may be shares in a subsidiary being spun off to shareholders. Stock dividends are often used to conserve cash needed to operate the business. Unlike a cash dividend, stock dividends are not taxed until sold.
STOCK FUND BUILDER Investment strategy in which you invest your bond fund's interest income into a stock fund to build your wealth.
STOCKLENDING Short term loan of securities for a fee.
STRIKE PRICE The stated price per share for which underlying stock may be purchased (in the case of a call) or sold (in the case of a put) by the option holder upon exercise of the option contract.
SWAP A derivative financial instrument. A swap is a financial transaction in which two parties agree to exchange streams of payment over time. Trades may be across interest rates, currencies or combinations of both.
TAX-DEFERRED INVESTMENT An investment that is not taxed until money is withdrawn, usually at retirement.
TESTAMENTARY TRUST  Legal document set up by a will when a person dies that is used for special situations, such as to establish a fund to pay for a child's education.
TICK INDICATOR A market indicator based on the number of stocks whose last trade was an uptick or a downtick. Used as an indicator of market sentiment or psychology to try to predict the market's trend.
TIME VALUE The portion of the premium that is based on the amount of time remaining until the expiration date of the option contract, and that the underlying components that determine the value of the option may change during that time. Time value is generally equal to the difference between the premium and the intrinsic value.
TOTAL RETURN The rate of return on an investment, including reinvestment of distributions.
TOTAL REVENUE Total sales and other revenue for the period shown. Known as "turnover" in the UK.
TRADE A verbal (or electronic) transaction involving one party buying a security from another party. Once a trade is consummated, it is considered "done" or final. Settlement occurs 1-5 business days later.
TRADE DATE The date on which a trade occurs. Trades generally settle (are paid for) 1-5 business days after a trade date. With stocks, settlement is generally 5 business days after the trade.
TRADING RANGE The difference between the high and low prices traded during a period of time; with commodities, the high/low price limit established by the exchange for a specific commodity for any one day's trading.
TRANSFER AGENT Entity that maintains shareholder records, including purchases, sales, and account balances.
TREASURY BILLS Short-term IOUs to the U.S. Treasury.
TRUST  Legal document that does not have to be approved by probate court before your loved ones can inherit your wealth.
TRUST DEED A legal document that establishes a unit trust and that sets out the way in which the trust will be managed and administered.
TURNOVER For pooled funds turnover is a measure of trading activity during the previous year, expressed as a percentage of the average total assets of the fund. A turnover ratio of 25 % means that the value of trades represented one-fourth of the assets of the fund.
UNCOVERED CALL A short call option position in which the writer does not own shares of underlying stock represented by his option contracts. Also called a "naked" call, it is much riskier for the writer than a covered call, where the writer owns the underlying stock. If the buyer of a call exercises the option to call, the writer would be forced to buy the stock at market price.
UNCOVERED PUT A short put option position in which the writer does not have a corresponding short stock position or has not deposited, in a cash account, cash or cash equivalents equal to the exercise value of the put. Also called "naked" puts, the writer has pledged to buy the stock at a certain price if the buyer of the options chooses to exercise it. The nature of uncovered options means the writer's risk is unlimited.
UNDERLYING SECURITY For options: the security subject to being purchased or sold upon exercise of an option contract. For example, IBM stock is the underlying security to IBM options. For depository receipts: the class, series and number of the foreign shares represented by the depository receipt.
UNIT A share in a Unit-Linked Life Assurance fund or a Unit Trust. Each unit is equal in value to all other units.
UNIT CERTIFICATE Some Unit Trusts issue unit certificates to clients as evidence of ownership of units in the trust.
UNIT LINKED A unitised portfolio. ILIM operates two types of these portfolios, Unit Trusts and Unit-Linked Life Assurance funds. Each has its own legal construct. These portfolios are divided into a number of units of equal value. Units may be created or deleted, but only if a corresponding amount of assets is added to or subtracted from the portfolio so that the value of a unit is unchanged.
VALUE AVERAGING INVESTING  Investment strategy in which you always make sure that the value of your fund increases by a specific amount over a specific time period.
VALUE INVESTING Style of investing characterised by search for shares that can be bought cheaply and therefore offer good value.
VENTURE CAPITAL Capital invested in start-up companies. Such companies are not traded in the capital markets, hence their need to raise capital by other means.
VOLATILITY A measure of risk based on standard deviation in fund performance, usually measured over 3 years or 5 years.
WALLFLOWER Stock that has fallen out of favour with investors; tends to have a low P/E.
WARRANT A security entitling the holder to buy a proportionate amount of stock at some specified future date at a specified price, usually one higher than current market. This "warrant" is then traded as a security, the price of which reflects the value of the underlying stock. Warrants are usually issued as a "sweetener" bundled with another class of security to enhance the marketability of the latter.
WASTING ASSET An asset that has a limited life and thus, decreases in value (depreciates) over time. Also applied to consumed assets, such as gas, and termed "depletion."
WATCH LIST A list of securities selected for special surveillance by a brokerage, exchange or regulatory organisation; firms on the list are often take-over targets, companies planning to issue new securities or stocks showing unusual activity.
WITHDRAWAL PLAN The ability to establish automatic periodic pooled fund redemptions and have proceeds mailed directly to the investor.
WORLD FUNDS Pooled funds that invest in both the U.S. and foreign countries. Also known as global funds.
YIELD A measure of return on a security. It is a financial calculation based on the settlement date, maturity, coupon rate, price, redemption value, and number of annual coupon payments and interest basis of a security.