Investor Glossary
ACCOUNT VALUE
The total rupee value of mutual fund units in a unit holder's account. Account value is calculated by multiplying the number of fund units held in an account by the current net asset value per unit (NAV). If the account includes more than one fund, the results of this calculation for each fund are added together to obtain the value of the account.ACCOUNT STATEMENT
Means statement of transactions in Units in the folio of the Holder.ACCRUED INTEREST
Interest income owing on a bond or a debenture since the last payment was made, but not yet paid. The purchaser of the bond or debenture will pay the market price, plus the accrued interest.ACQUISITION COST
Cost of acquiring units of a mutual fund, including commissions and fees paid at the time of purchase.ANNUAL MEETING
Yearly shareholder's meeting at which the company's directors report on the preceding year and shareholders vote on matters of importance to the company. Annual meetings apply only to funds that are established as mutual fund company.ANNUALIZED RATE
The rate of return that would be earned if the security were invested for a one- year term.ANNUAL REPORT
An audited formal financial statement and report on its operations, distributed by a publicly held firm to its shareholders after its fiscal year-end.ANNUITY
A contract, usually between an insurance company and an individual, under which an amount is paid to the insurance company in exchange for the right to receive future regular payments, over a specified period of time.ASSET
(1) Everything a company owns or is due to the corporation. (2) All property (personal and real estate), financial investments (including mutual funds) and other financial resources owned by an individual.ASSET ALLOCATION
The process of selecting the optimal combination of securities from the different asset classes for an institutional or individual portfolio. Over time the portfolio will be re-balanced as markets change or the circumstances of an investor's personal and financial situation change in the case of an individual portfolio.ASSET CLASS
Three types of asset classes that can be held in a portfolio: cash or cash equivalents (treasury bills, commercial paper and other short-term promissory notes), fixed income investments (bonds, debentures and preferred shares) and equity securities (common shares).AUDIT
An intensive examination of the accounting and financial procedures and practices of a company or mutual fund, and is carried out by auditors. See Auditors.AUDITORS
Chartered accountant firm, responsible for conducting an independent audit. They are responsible for professionally examining and verifying a company's accounting documents and supporting data for the purpose of rendering an opinion as to their accuracy, consistency and fairness.AUTHORIZED SHARES
The total number of shares declared by a corporation at the time of its incorporation that can be issued, limited by its articles of incorporation. In the case of a mutual fund corporation, the charter permits an unlimited number of shares to be issued on a continuous basis.AVERAGE COST
Weighted average of the price paid per unit, based on the total units purchased in an account.AVERAGE MATURITY
Average time remaining to maturity of bonds in a portfolio. A longer average term to maturity will provide the investor with a higher yield, but also subjects the investor to potentially higher risk if interest rates were to rise.AVERAGING DOWN
Buying more of a security at a lower price than the original investment. The primary aim is for the investor to reduce the average cost of their security.ALLOCATION SCHEME
Means the allocation scheme(s) offered by the Pension Fund Manager in light of the Prescribed Allocation Policy issued by the Commission from time to time.ANNIVERSARY DATE
Means the Business Day following the completion of one full year from the opening of the Individual Pension Account with the Pension Fund Manager and thereafter the Business Day following completion of subsequent one full year.BACK-END LOAD
Means Sales Load deducted from the Net Asset Value in determining the Redemption Price.BALANCE SHEET
A financial statement showing a company's or fund's assets, liabilities and shareholder's equity.BALANCED FUND
A mutual fund comprised of a mix of various assets, including money market investments, fixed income securities and equities. The percentage holding of the type of asset class will depend on (1) market conditions and/ or (2) the fund's investment objective.BASIC POINT
One basis point equals one one-hundredth of a percentage point. Thus a 250 basis point increase is equal to a 2.5% increase.BANK RATE
The rate at which the State Bank makes short-term loans to chartered banks and other financial institutions. It is also the benchmark for prime rates set by financial institutions.BANKERS' ACCEPTANCES
A short-term debt instrument issued by a bank for a non-financial company backed by the bank's promise to repay if the borrowing corporation defaults.BEAR MARKET
A declining securities market, with prices decreasing in value over time. Opposite from a Bull Market.BEARER FORM
A security which does not have the owner's name registered on the books of the issuer. The name of the owner will not be found on the security. The coupons attached to the bond must be clipped and sent to the issuer in order to receive the coupon payment. Bonds in bearer form should be treated like cash.BENEFICIAL OWNER
An individual who benefits from the assets owned in an account. This individual may be different from the registered owner, as in the case of a nominee.BENIFICIARY
An individual named as the recipient of a gift which can be made through a trust or who will receive an inheritance upon the death of another individual.BETA
Represented by the symbol ß. A statistical tool used to measure the volatility (risk) of a stock. The volatility of a stock is measured relative to a stock market (represented by an index), which always has a beta of 1. A stock that is more volatile than an index has a beta greater than 1; while a stock which is less volatile than a market has a beta less than 1. For example should a stock market increase by 10%, the price of a stock with a beta of 2 should increase by 20%, indicating that it is twice as volatile as that particular market.BID PRICE
The highest price a buyer is willing to pay for a security.BLUE CHIP
A high grade investment. Usually an active well known common share with a record of continuous payment of dividends.BOARD OF DIRECTORS
A group of individuals elected by the shareholders of a company, who are empowered and given the responsibility to manage the affairs of the company in a diligent and prudent manner. The directors are usually elected at the annual general meeting of the company.BOND
An IOU of the federal government, a provincial government or a corporation (if secured by specific assets). It is a fixed income security, issued with a maturity of one year or more to raise funds in the long-term. It is an evidence of debt, in which the issuer guarantees to pay the investor a specific amount of money, interest, for a period of time, and the eventual repayment of the principal on the maturity date.BOND FUND
A mutual fund whose primary investment objective is to invest in high quality fixed-income investments in order to offer its investors regular income streams.BOOK VALUE OR BREAK-UP VALUE
(1) The book value of a stock of a company is calculated from a company's balance sheet, by adding all the assets and deducting them from the total liabilities. (2) The original cost of all the investments held within a mutual fund plan, less any withdrawals, plus any reinvested dividends and income.BROKER
Securities firm or duly registered individual employed by such a firm. A broker does not usually own the securities that are bought or sold, but rather acts as agent for the buyer or seller and charges a commission for its services.BULL MARKET
An advancing securities market, with prices increasing in value over time. Opposite from Bear Market.BUSINESS CYCLE
A several year period in which the economy generally grows and then contracts (recession) and then resumes an up-trend.BUSINESS DAY
Days when corporations and governments are open for business. It excludes Sundays and certain statutory holidays.BUY-AND-HOLD STRATEGY
A long-term investment strategy where investments are purchased for their future potential and are held by the investor regardless of their short-term.CALL OPTION
An option contract in which the buyer has the right, but not the obligation, to purchase an underlying security at a fixed price, prior to an agreed-upon expiry date. Call options are usually purchased by investors who believe that the underlying security will go up in value.CALL PREMIUM
The difference between the call price and the par value of a callable bond or callable preferred share.CALL PROTECTION
Shares that cannot be called for a specific period of time after they have been issued.CALLABLE
A bond or preferred share that can be called by the issuer, at a specific price, usually when interest rates have declined since the bond or preferred share was originally issued.CAPITAL
(1) From an economic perspective, it represents the inputs into production, such as machinery, factories and buildings. (2) From a company perspective, it represents the equity interest in a business or net worth (the difference between the total assets and total liabilities), consisting primarily of common and preferred shares. (3) From an investor's perspective, it represents all that is owned by an individual, including home, securities, cash and any other investments. (4) In an investment sense, it is the total money available through savings for investment.CAPITAL ASSETS
(1) For accounting purposes, fixed assets of a business including land, buildings, machinery or furniture, not intended for sale. (2) For tax purposes a capital asset is a stock, bond, mutual fund, option, real estate and other property, primarily purchased as a long-term investment, with income producing capabilities.CAPITAL COST ALLOWANCE
Allowing for the depreciation in value of a fixed asset for tax purposes.CAPITAL GAIN (or Capital Appreciation or Capital Growth)
Results when a profit is realized from the difference between the purchase price of a capital asset (stocks, bonds, options, mutual funds, real estate and other property) and the selling price of that asset.CAPITAL LOSS
Results when a loss is realized from the difference between the purchase price of a capital asset (stocks, bonds, options, mutual funds, real estate and other property) and the selling price of that asset.CAPITAL STOCK
All the outstanding shares in a corporation, including preferred and common shares.CASH EQUIVALENTS
Assets that can be converted quickly into cash without a loss and include T-bills, commercial paper, short-term bonds and short-term paper.CASH FLOW
A company's reported net income generated from its operations, plus amounts charged for depreciation, depletion, amortization, deferred income taxes and minority interest.CERTIFICATE
A document representing ownership of a certain number of shares or fixed income investments such as bonds.CLOSED-END FUND
An investment fund that issues a specific number of shares; its capitalization is fixed. The shares are not redeemable, but are readily transferable and trade on either a stock exchange or the over-the-counter market.COLLATERAL
Securities or other property pledged by a borrower as a guarantee for repayment of a loan.COMMERCIAL PAPER
Short-term promissory note, issued by well-established corporations to raise funds to meet short-term needs, traded in the money market.COMMISSION
A fee charged by a stock broker or financial advisor or mutual funds sales representative for buying or selling securities as agent on behalf of an investor.COMMON SHARES
A class of stock that represents ownership in a company. They usually carry a voting privilege and entitle owners to share in the company's profits.COMPANY
See Corporation.COMPOUNDING
Indicates that the return earned on an investment will increase, if the returns are reinvested, whether it be interest and/ or dividend income and/ or capital gains. The rate that is used to calculate the returns is based not only on the original investment, but also on the accumulated returns of prior terms.CONFIRMATION
A printed document identifying details of an investor's purchase and/ or sale of a security. The confirmation is usually sent out by the broker, investment dealer or fund company.CONSTITUTIVE DOCUMENT
means the Trust Deed that is the principal document governing the formation, management or operation of the Trust.CONTINUOUS DISCLOSURE
Securities regulators require organizations and individuals report information that is material to them within a certain period of time. This may include changes in the affairs of the company to an advisor's business or personal address change.CONVERSION
A bond, debenture or preferred share which can be converted into the common stock of the same company.CONVERSION PRICE
The price at which investors can convert their bonds or preferred shares into common shares.CONVERTIBLE
A bond, debenture or preferred share which is convertible by the investor into the common shares of the issuing company.CORPORATE RESOLUTION
Document signed by the Board of Directors of a corporation that identifies the people with signing authority on behalf of a corporation for a mutual fund account.CORPORATION
A legal, taxable organization chartered under either provincial or federal law. Ownership of a corporation is held by its stockholders. The corporation can be private (limitations on the number of shareholders as well as restrictions on rights of shareholders to transfer shares) or public (shares trade in an open market with no restrictions). Also referred to as a company.CORRECTION
A short-term drop in stock prices bringing the market back into line as determined by investment professionals.COUPON RATE
The annual rate of interest paid on a bond.CREDIT RISK
See Risk.CURRENT ASSETS
An asset that can be converted into cash within a year. Examples include cash, cash equivalents, and marketable securities, accounts receivable and inventories.CURRENT LIABILITY
Money that has to be paid by a business within a year. Examples include accounts payable and short-term loans.CURRENT YIELD
The yearly income from an investment, expressed as a percentage of its current market price. On a bond, it is the annual interest divided by the current market price of the bond; for a stock, it is the annual dividend divided by the current market price of the stock.CUSTODIAN
A bank or a depository company that according to securities law holds the assets (cash and securities) of a mutual fund on behalf of the fund. This safekeeping of the assets serves to protect investors and helps facilitate easier transactions for the fund when securities are bought or sold.CONTRIBUTION
Means an amount as may be voluntarily paid by a Participant at any frequency to the Trustee for credit to the Individual Pension Account of a Participant, subject to any minimum limit as specified in the Offering Document.DEALER
A firm or individual that specializes in the buying and selling of securities from or to another firm or the public.DEBENTURE
An IOU of a municipal government or a corporation backed only by the general credit of the issuer and not secured by specific assets. It is a fixed income security, issued with a maturity of one year or more to raise funds in the long-term. It is an evidence of debt, in which the issuer promises to pay the investor a specific amount of interest for a period of time, and the eventual repayment of the principal on the maturity date.DEBT
Reference to amounts that are owing to be repaid in the future. Examples include bonds, debentures, mortgages and short-term notes.DEBT TO EQUITY RATIO
financial ratio, identifying the amount of debt incurred by a corporation to fund its growth, relative to its equity.DEFAULT
The failure of a debtor (issuer) to make the coupon payments and/ or repayment of principal on the due date.DEFAULT RISK
See Risk.DEPRECIATION
Systematic charges against earnings to write off the cost of an asset over its estimated useful life representing the loss in value due to 'wear and tear' through use. It is a bookkeeping entry and does not involve the expenditure of cash.DERIVATIVES
These are securities whose value and returns are determined by or "derived from" the value of an underlying instrument such as a stock, bond, commodity, currency, market index or some other investment. Examples include rights, warrants, options and futures.DIRECTOR
An individual elected by shareholders to the Board of Directors to oversee the operation of the business. The directors appoint the President, senior executives and officers of the company. They also decide when dividends are to be paid.DISCLAIMER CLAUSE
Regulators require that all prospectuses have a disclaimer clearly indicating that the regulators/ securities authorities have in no way passed upon the merits of the securities being offered for sale.DISTRIBUTIONS
Payments made by a fund to its investors representing dividends, capital gains and interest income.DISTRIBUTIONS FUNCTION
means with regard to:a) Receiving applications for issue of Units together with the aggregate
Offer
Price for Units applied for by the applicants;
b) Issuing of receipts in respect of (a) above;
c) Interfacing with and providing services to the Holders including receiving redemption applications, transfer applications, conversion notices and applications for change of address or issue of duplicate Certificates for immediate transmission, in accordance with the instructions given by the Management Company or the Trustee, to the Management Company or the Transfer Agent as appropriate; and
d) Accounting to the Trustee for all
(1) moneys received from the applicants for issuance of Units;(2) payments made to the Holders on redemption of Units; and
(3) expenses incurred in relation to the Distribution Function.
DISTRIBUTOR
Financial organizations that have both the authority and infrastructure to buy and sell mutual funds to the investing public. This includes investment dealers, brokers, banks, mutual fund dealers, insurance companies and mutual fund management companies, registered as dealers.DIVERSIFICATION
Spreading investments among different asset classes; purchasing different securities in different companies, in different businesses, in various locations at different times. A method used to reduce and/ or eliminate unsystematic risk.DIVIDENED
Generally paid out of retained earnings and determined by the company's board of directors and paid out to its preferred and/or common shareholders. The dividend may be paid in cash or in additional shares. Common share dividends fluctuate with the profitability of a company, while its preferred share dividends are fixed. Dividend payments are not legal obligations.DISTRIBUTION COMPANY/COMPANIES
Means individual(s), company(ies), firm(s), Bank(s) or other entity(ies) appointed by the Pension Fund Manager for performing any or all of the Distribution Functions and shall include the Pension Fund Manager itself, if it performs the Distribution Function.ELECTRONIC FUNDS TRANSFER (EFT)
A method of transferring payments electronically between the bank accounts of the payer and payee.EQUITY FUND
A mutual fund whose primary investment objective is growth. The fund would invest in growth oriented securities such as common shares, with growth potential.EQUITY INVESTMENT RISK
See Risk.FACE VALUE
The stated value of a common share/ unit used for accounting purposes only. The face value is no indication of the current market price of a security. Face value is also referred to as the par value, par, principal amount or denomination.FAMILY OF FUND
A group of mutual funds managed by the same mutual fund management company.FIDUCIARY
An individual or organization placed in a position of trust, acting on behalf of another individual, responsible for holding and/or administrating the assets owned by another individual. Examples of a fiduciary include salespersons, trustees, administrators and guardians.FINANCIAL ADVISOR
A registered representative in a jurisdiction, who is licensed to provide investors advice on their choice of investments. See Salesperson.FINANCIAL PLANNER
A professional advisor who assesses an individual's current financial situation, helps the individual identify short and long-term financial goals, and develops strategies to help the individual achieve his or her goals.FISCAL POLICY
The federal government's use of expenditures and taxes to influence the growth of the economy. Broadly determined by the size of the annual budgetary deficit or surplus.FIXED ASSETS
Assets of a long term nature such as land or buildings.FLOATING RATE
Securities (usually bonds or debentures or preferred shares) which have rates that change with changes in the interest rate. The floating rate is generally based on the prime lending rate or the average treasury bill yield over a specific period.FOREIGN INVESTMENT RISK
See Risk.FORWARD
An instrument, which allows the holder to make or take delivery of an asset or security at some future date and at an agreed-upon price. Also known as a forward contract. See Futures Contract.FORWARD PRICING
The use of the next valuation date for purposes of pricing purchases and redemptions of a mutual fund.FRONT-END LOAD OR FREE
See Sales ChargeFUND OF FUNDS
The fund invests primarily in other closed end funds with the objective of capitalizing on the discount that the stated closed end funds are traded at.FUTURES CONTRACT
Exchange-traded contracts that obligates the buyer to buy and receive, or obligates the seller to sell and deliver, a specified amount of a commodity or asset at an agreed-upon price at a future date. Profits and losses are settled daily (mark-to-market) between the two parties rather than being settled when the contract is exercised. Also known as a future.HEDGING
Strategy designed to reduce a portfolio's exposure to adverse price movements in securities, interest rates and foreign currency. It is designed to offset investment risk.HARAM
Means anything prohibited by the Shariah.INCOME
Earnings made from an investment in the form of interest or dividend income.INCOME FUND
A mutual fund whose primary investment objective is regular income. Examples include money market funds, mortgage funds, bond funds and dividend funds.INCOME STATEMENT
A financial statement issued by a company showing its revenues and expenses over a given period of time, usually a year, resulting in either a profit or a loss.INDEPENDENT DIRECTOR
A director of an investment fund who is not a partner, officer, director, employee or shareholder of its underwriter or investment advisor.INFLATION
The general rise in the price of goods and services in the economy.INITIAL INVESTMENT
The minimum initial investment for all the Atlas Funds is Rs. 5,000.INITIAL PRICE
Means the price per Unit during the initial offering period determined by the Management Company.INITIAL PUBLIC OFFERING (IOP)
The first public issues of shares by a corporation that has not previously traded publicly in the financial markets.INSTITUTIONAL INVESTOR
An organization, often a collection of professional investors, whose primary objective is to invest its own capital (assets) or that of those whose interest it represents. It generally buys and sells in large volumes. Examples include pension funds, investment companies, banks and life insurance companies.INSTRUMENT
A term used to describe securities or investments.INTEREST
Payments made by a borrower to lenders for the use of their money for a period of time.INTEREST INCOME
Income earned on fixed-income investments treated as ordinary earned income and taxed fully at an individual's marginal tax rate.INTEREST RATE RISK
See Risk.INVESTMENT OBJECTIVE
The investment goal of an investor. The three primary investment objectives of an investor are safety, income and growth. Two secondary investment objectives are tax minimization and liquidity.INVESTORS
An individual whose principal concern is to invest in an asset or security or set of securities with minimal risk.INDIVIDUAL PENSION ACCOUNT
Means a distinct account being maintained in the name of each Participant with the Pension Fund Manager to record his investments and the Units of Sub-Funds as issued there against including appreciations thereof.JOINT ACCOUNT
An account owned by two or more persons.KNOWN PRICING
The use of previous valuation date for purpose of pricing, purchases and redemptions of mutual funds.LEVERAGING
Refers to borrowing funds to purchase a security in order to magnify returns.LIABILITIES
Claims made by creditors against a corporation. Liabilities include those due and payable within the year, known as current liabilities (including accounts payable, taxes payable) and those payable after one year, referred to as long-term liabilities (including bonds, bank loans and mortgages).LIMITED LIABILITY
The owners of a corporation are responsible only for the amount they paid for their shares in a corporation. They are not personally responsible for any unpaid debts accumulated by the corporation.LIQUIDATING VALUE
The sale value of an asset.LIQUIDITY
(1) The ease with which an investment can be sold or pledged for cash. (2) The ability of a given market to absorb a reasonable amount of buying and selling of securities at reasonable price changes. (3) A company's cash position: the amount of current assets in relation to its current liabilities.LOAD
The commission or cost of acquiring a mutual fund. See Sales Charge.LONG-TERM BOND
A bond maturing in ten years or more.LONG-TERM DEBT
Liabilities that are due in more than one year.LOSS
The sale of an asset at a price lower than the original price or the deficit recorded when expenditures exceed the revenue of a company.MANAGEMENT FEE
The amount paid by the fund directly to the management company for providing portfolio management, day-to-day and administrative services to a fund. The fee is calculated as a percentage of the average assets being managed annually.MARKET INDEX
Tool used to identify trends in the securities market.MARKET PRICE
The last reported price at which a security was sold on an exchange.MARKET RISK
See Risk.MARKET VALUE
The current value of an asset if it were sold on the marketplace.MARKETABLE
A security that can be easily bought or sold.MATURITY (or Maturity Date)
Date on which the principal amount of a note, acceptance paper, bond, debenture or other debt instrument becomes due and payable.MONEY MARKET
The market that brings together buyers and sellers of debt instruments that have a term-to-maturity of less than one year. These include treasury bills, commercial paper, finance paper, bankers' acceptances, as well as government debt obligations maturing in three years or less.NEGOTIABLE
(1) An asset that can be sold or transferred to another party for money or as settlement of an obligation. (2) A certificate that is transferable by delivery and in the case of a registered certificate has been endorsed and guaranteed.NET ASSET VALUE (NAV)
The value of a mutual fund's holding less any liabilities. The NAV is calculated for most funds after the close of the exchanges and markets each day. It is calculated by taking the closing market value of all securities owned plus other assets such as cash, subtracting all liabilities and, then dividing by the total number of shares outstanding.NOMINEE
One designated to act for another in his or her place. For example a person (e.g.. bank official) or company (e.g.. investment dealer) into whose name securities or other properties are transferred by agreement of the beneficial owner.NOTARY PUBLIC
A public officer whose function it is to administer oaths, to attest, certify and validate and give credit, by his/her hand as well as an official seal, that certain documents are authentic. Documents may include wills and contracts.OFFERING DOCUMENT
The prospectus, advertisement or other document, which contains the investment and distribution policy and all other information in respect of the Unit Trust, as, required by the Rules and is calculated to invite offers by the public to invest in the Unit Trust.OPEN-ENDED FUND
Commonly referred to as a mutual fund. These funds are in a continuous process of issuing shares/ units on demand and redeeming shares/ units on demand. Hence the term: open-end fund. The shares/ units do not trade on a market. The number of shares/ units outstanding varies each time the net asset valuation calculation is carried out, which is daily for most open-ended funds.PAR VALUE
See Face Value.PORTFOLIO
The combined holdings of more than one cash equivalent security, bond, stock, commodity, or any other assets by an individual investor or institutional investorPOWER OF ATTORNEY
Authority given (usually in a legal document) to an individual to act on another individual's behalf in matters concerning his/ her affairs in general or under certain circumstances.PRICE
For a mutual fund - the net asset value per share/ unit calculated on a specific day.PRICE EARNING RATIO
Current price per share / Earning per share. This formula shows a company’s earnings versus its share price.Principal The face value that has been borrowed (amount of a debt security) or invested (amount of deposit), on which interest is earned, that has to be repaid to the investor.
PROFIT
The amount remaining after all costs (direct and indirect) are deducted from the income of a business or from the amount realized on sale.PROSPECTUS
A legal document in which a corporation or other legal entity offers a new issue of securities to the investing public. The prospectus, which is compiled in accordance with the regulators' requirements, describes in detail the issuer, its business, the securities being offered, the use of the proceeds, management, a set of financial statements etc.PROXY
(1) Generally, a person authorized to act or speak or substitute for another. (2) Written permission (or power of attorney) granted by a shareholder to someone else, to represent him/ her at a shareholders' meeting, and vote on his/ her behalf. (3) An alternate term for an attorney.PURCHASE
The act of buying mutual fund units or securities.PUT OPTION
An option contract which gives the buyer the right to sell the underlying security to the writer at a fixed price prior to an agreed-upon expiry date. Put options are usually purchased by investors who believe the underlying security may go down.PARTICIPANT
Means any person who makes Contributions or on whose behalf Contributions are made into the Pension Fund, and held in an identifiable Individual Pension Account managed by the Pension Fund Manager.RATE OF RETURN
The coupon rate (as in bond or debenture) or annual dividend (as in preferred or common share) divided by the purchase price.REAL INTEREST RATE
The after-inflation interest rate generally approximated by taking the difference between the interest rate and the year over-year percent change in the Consumer Price Index.RECESSION
Defined as two consecutive quarters of decline in real Gross Domestic Product. It may also be defined by several quarters of virtually zero net growth.REDEMPTION
(1) Repayment of a debt security or preferred share prior to or at maturity by an issuer, at a specified price (usually at a premium). (2) Mutual fund units are redeemed at the net asset value, when a unit holder's holdings are sold.REGISTRAR
They are responsible for keeping track of investors who own the units of the mutual funds. They may process purchase, switch and redemption orders, issue investor account statements and issue annual tax reporting information.REGISTRAR FUNCTION
means the functions with regard to:a) Maintaining the Register;
b) Receiving application for redemption and transfer/ transmission of Units directly from Holder or legal representatives or through Distributor;
c) Processing requests for issue, redemption, transfer and transmission of Units and requests for recording of pledge or for recording of changes in information/ particulars/ data with regard to the Holders;
d) Issuing Account Statement to Holders;
e) Issuing Certificates including Certificates in lieu of undistributed income to Holders;
f) Dispatching income distribution warrants and allocating Units to Holders on re-investment of dividends.
g) Canceling old Certificates on redemption or replacement.
h) Maintaining record of lien/ pledge/ charge.
i) Keeping record of change of addresses/ other particulars of the Holders.
REINVESTMENT
Mutual funds provide a service that allows unit holders to purchase more units of the fund with the proceeds from interest and dividend income, usually at no additional cost (no sales charge).RETAINED EARNINGS
A company's profit not paid out in the form of dividends. They are retained by the company to help finance future expansion and form part of shareholder's equity.RETURN
The profit earned from an investment.RISK
The potential of loss on an investment due to a number of factors, listed below:a) Credit Risk - Potential that an investment (specifically fixed-income securities) will go down when assigned a negative rating (downgraded) by a reputable credit rating service.
b) Default Risk - Risk associated with an issuer of a debt instrument that may not have the financial ability to meet regular interest payments or is incapable of repaying the debt at maturity.
c) Equity Investment Risk - Risk resulting from changes in a specific company or industry developments and prospects, as well as changes in interest rates, economic conditions and stock market news.
d) Interest Rate Risk - Risk resulting from increased interest rates in the market place, that the income earned from an original investment will not be worth as much as the going market rates.
e) Liquidity Risk - Inability to sell a security reasonably quickly at the prevailing market price or convert an asset into cash as quickly as possible.
f) Political Risk - Potential for changes in government to impact the value of an investment. It may also include policy changes made by governments.
RULES
Means the NBFC Rules 2003, which governs the operation of the mutual funds.RETIREMENT AGE
Means any age between sixty and seventy years or such age as may be prescribed in the Rules from time to time, which the Participant selects for retirement, in accordance with the provisions of the Rules.RETIREMENT DATE
Means the date on which the retirement of a Participant from the Pension Fund becomes effective.SALES AGENT
An individual, firm, corporate or other entity appointed by the Management Company to identify, solicit and assist investors in investing in the scheme.SALES LOAD
The sales charge or commission not exceeding 5% of the net asset value, which may be included in the Offer Price of certain classes of Units or deducted from the Net Asset Value in order to determine the Redemption Price of certain classes of UnitsSECP/COMMISSION
The Securities and Exchange Commission of Pakistan, established under section 3 of the Securities and Exchange commission of Pakistan Act, 1997.SETTLEMENT
Completing a trade between brokers acting as agents or between a salesperson and the client. A trade is settled when the required payment is made for securities purchased or the correct documentation has been delivered and the client receives the proceeds from the sale.SHARE
Part of equity ownership in a corporation.SHAREHOLDERS' EQUITY
Ownership interest of common and preferred stockholders in a company. That is, it represents the difference between the assets and liabilities of a company.SHARIAH COMPLIANT FUND
These funds invest in securities which are shariah compliant.SHORT SELLING
Sale by an investor of borrowed shares, obtained through a broker. The investor's expectation is that the market price of the security will decline in value and that the shares will be repurchased at a lower price (cover his/ her short position), and thus make a profit.SPREAD
(1) The difference between the bid and ask price of a security. (2) The difference in yields between two bonds or debentures. (3) The buying and selling of puts or calls on the same underlying security, but with different strike prices and/ or expiration dates.STOCK BROKER
A securities firm or an employee of such a firm who is licensed to trade securities. The broker does not own the securities that are bought or sold, but acts as an agent for the buyer or seller and charges a commission for the service.STOCK EXCHANGE
Means Karachi Stock Exchange, Lahore Stock Exchange, Islamabad Stock Exchange or any other stock exchange registered under section 5 of the Securities and Exchange Ordinance.SUBSCRIPTION DAY
Means every Business Day provided that the Management Company may with the prior written consent of the Trustee and upon giving not less than seven days notice in at least one newspaper, either English or Urdu, declare any particular Business Day not to be a Subscription Day.SUB-FUND
Means a collective investment sub-scheme of a specified investment class and/or investment policy set up within the overall Pension Fund. The Deposited Property shall be accounted for and segregated with respect to each Sub-Fund.Shariah or Islamic Shariah
Means divine guidance as given by the Holy Quran and the Sunnah of Prophet Muhammad (Peace Be Upon Him) and embodies all aspects of the Islamic faith.
Shariah Advisor
Means an Islamic Financial Institution, an Islamic scholar or a body of Islamic scholars, appointed in its place by the Pension Fund Manager with the approval of the Commission, having knowledge of Islamic finance, to supervise and monitor the activities of the Pension Fund to ensure that all its activities comply with Shariah.Shariah Compliant
Shall mean any activity that is in accordance with the Islamic Shariah, as may be advised to the Pension Fund Manager by Shariah Advisor.TAX CREDIT
An amount subtracted from the federal tax payable, which will directly reduce the amount of tax payable.TECHNICAL ANAYLSIS
A method of evaluating future security prices and market directions, based on statistical analysis of variables such as trading volumes (historic) and price changes, in order to identify patterns.TOTAL RETURN
The annual return on an investment including interest income, dividend income and capital gains.TOTAL RETURN CALCULATION
To calculate the return from open-ended mutual funds Investors can apply the following equation and guidelines:Symbols stand for:
a = Date of investment
b = Date of calculation of return or date of redemption
x = (b-a) means period of investment holding
PP = Purchase Price or NAV at the beginning of relevant year
RP = Redemption Price or NAV at the end of relevant year
D = Dividends received during the investment holding period or relevant year
Profit from investment can be calculated as follows:
(RP+D-PP)
The return can be worked out by dividing the profit from investment by the PP and then be annualized. Investors can work out the return for the entire holding period (i.e. x), or separately for each year.
Open-ended funds recover a sales charge (called sales load) from unit/ share holders. Sales load is a certain fixed percentage of NAV. Some mutual funds recover the sales load when investors purchase the units, whereas others do when investors redeem the units. Mutual funds generally do not charge sales load on reinvestment of dividend. The shorter the period of investment, the greater will be the impact of the sales load. Maximum benefit can be derived from mutual fund investment by regularly investing, reinvesting the dividend and holding the investment for a longer period.
TRANSFER
The redemption of units in one account to purchase units in another account within the same family of funds. The transaction usually takes place at the same time.TRANSFER AGENT
Means a company including a Bank that the Management Company shall appoint for performing the Registrar Function.TREASURY BILLS
Short-term debt instruments issued by governments for a year or less. They are issued at a discount and mature at face value. The difference between the purchase price and the maturity value is considered interest income.TRUST
A legal entity created by a grantor for the benefit of designated beneficiaries, under the laws of the jurisdiction and the valid trust instrument.TRUSTEE
In the case of a mutual fund established as a trust, an individual or person responsible for representing the interests of the unit holders.TRUST DEED
Legal document that includes the conditions under which a fund is issued. It includes the face value, maturity date, coupon rate and any other terms and/ or features.UNDERWRITER
An investment dealer that assists corporations or governments to issue new securities to the public. The investment dealer may purchase the security directly from the issuer for resale to the public or may sell the securities to the public on its behalf.UNIT
Part of ownership in a mutual fund, when it is established as a trust.UNIT HOLDER
Owner of one or more units in a mutual fund.UNLISTED SECURITY
A security not listed on a stock exchangeVOLATILITY
Measures the amount of change in the price and the returns of a security over a period of time. A measure of the relative volatility of a stock to the overall market is its beta.WITHHOLDING TAX
(1) Deductions by an employer from employees' salaries for the payment of federal and provincial income taxes. (2) Withholding by corporations and financial institutions of interest and dividend payments due to investors.YIELD
Also known as return. It is the amount of interest paid on a bond or dividend paid on the current market price of the security, expressed as a percentage.YIELD CURVE
A curve formed when plotting yield against maturity over a given period.a) Negative Yield Curve. Shorter-term interest rates are higher than longer-term interest rates. It occurs in periods of a "tight" credit environment. Also called inverted yield curve.
b) Normal Yield Curve. Shorter-term interest rates are lower than longer-term interest rates. It occurs in periods of a "loose" credit environment. Also called positive yield curve.
Center for International Private Enterprise (CIPE)
International Investment Fund Managers Association (IIFA)
Jama Punji
