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Accrued Interest


Annual General Meeting (AGM)

The AGM of a company gives its shareholders a yearly opportunity to question the board of directors and go over the company’s figures for the previous year. The purpose of the meeting is for the shareholders to approve the report and accounts, elect (or re-elect) the directors and appoint independent auditors. Holders of a mutual fund which is structured as a company are, in effect, the shareholders. They will be given the opportunity to attend the AGM and approve the annual report and accounts and the election of the directors.

Annual Management Fee

A charge or fee paid annually by a fund to its investment manager who oversees and manages the fund’s holdings. The management fee is usually between 0.5% and 1.5% of the fund’s net asset value. The size of the fee depends upon the skill involved in the management of the fund.

Balance Sheet

A condensed financial statement showing the nature and amount of a company’s assets, liabilities and capital on a given date. In € (or any other currency) amounts, the balance sheet shows what the company owned, what it owed, and the ownership interest in the company of its shareholders.

Base Rate

This is the rate at which banks would purchase money from each other; it is the ‘wholesale’ or ‘trade’ rate of interest. A retail product, e.g. credit cards or an overdraft, would be at a margin over the base rate.

Basis Point

One step on a 100-point scale representing one percent: used especially in expressing variations in the yields of bonds. Fixed income yields vary often and slightly within one percent and the basis point scale easily expresses these changes in hundreds of one percent.

For example, the difference between 12.83% and 12.88% is 5 basis point (or 0.05%).

Bear Market

A nickname investors give the stock market when security prices are generally declining over an extended period of time. Down markets got nicknamed bear markets because of the popular myth that bears attack with their paws pointing down. (See Bull Market).

Benchmark Index

Usually specified by an investment manager to help an investor compare the performance of the fund against an unmanaged index of stocks. The index concerned will depend on the investment strategy of the fund. For example a fund investing in the United States will have a benchmark index of US stocks, while a find investing in Europe would have a benchmark index made up of European stocks.

Best Execution

The obligation of intermediaries to execute customer’s orders at the best price available at the time the trade is entered.

Bid/Offer Price

From an investor’s point of view, the offer price is the price at which they buy the investment and the bid price is the price at which they can sell it. Not all funds have bid and offer prices, some deal at Net Asset Value (NAV). The difference between the bid and offer prices is known as the spread and the size of the spread should be considered when an investor is considering potential investments.


A large holding or transaction of security – popularly considered to be 10,000 shares or more.

Blue-Chip Stocks

The term blue-chip is borrowed from the game of poker where the blue chips are the most valuable. Blue-chip stocks or shares are those of well-established companies with exceptional standing. These companies are known for their excellent management, quality products and services. They have a proven track record, a history of earnings and dividend payments. However, some could be past their peak in terms of earnings expansion.

Some examples of blue chip companies are Disney, Microsoft and British Telecom.

Bond Funds

These are funds whose assets are invested in portfolios of bonds. These will generally have a lower risk/return level than an equity fund.


Bonds are loans that investors make to corporations and governments. The investor (the lender) earns a specified amount of interest per annum whilst the government or corporation (borrower) gets the money that they need.

The investor will also receive back their original investment amount – the principal amount or face value of the bond – due on a specific date but the bond may be sold anytime at the market price.

Bonds may be issued for periods up to 30 years and are rated by international agencies for their “quality” or likelihood of repayment.

Bonus Issue

You will see a bonus issue described as a free issue, a capitalisation issue and a stock dividend. These are new shares issued by a company to its existing shareholders, usually in a mathematical proportion to the number of shares already held. What the company is doing is turning part of its reserves it will have accumulated into *issued capital. The shareholders do not pay for the new shares and appear to be no better off. However, in a 1 for 3 bonus issue, for example, the shareholders receive one new share for every three existing shares they own. Hence, a shareholder owning 99 shares will receive 33 bonus shares in return.

This will reduce the price of the shares by 25% (assuming a price of € per share, the amount of the new shares, 33, divided by the total amount of shares owned, 132), catering to the preference of shareholders to hold lower priced shares whilst encouraging them to hope that the price will gradually climb to its former value, which will of course make them 25% better off.


An intermediary or third party, such as an independent financial adviser, who sells the financial products of several companies. A broker can offer independent advice to an investor. They are paid either by charging a fee to their client, or by receiving a commission from the financial company that their client chooses to invest with.

Bull Market

A nickname investors give the stock market when stock prices are generally rising over an extended period of time. The bull market got its name by the popular myth that bulls raise their heads up high when they charge. A person or company with a ‘bullish’ view of a particular market thinks that it is going to rise. (Also see Bear Market).


The right of the issuer to redeem outstanding bonds before their scheduled maturity. Therefore a “callable bond” gives the option to the issuer to pay the face value of a bond before it matures.

Capital Appeciation

As the value of the securities in a portfolio increase, a fund’s share price also increases, meaning that the value of the investment rises or appreciates. Selling shares at a higher price than the original purchase price results in a profit or capital gain. Selling shares at a lower price results in a capital loss.

Capital Gain

Profit made on securities, either through dividends or by selling the securities for a higher price than they originally cost.

Capital Loss

The loss on an investment when it is sold for less than it originally cost.


The value of a company obtained by multiplying the number of shares issued by their market price.


The actual piece of paper that is evidence of ownership of a share in a company or stock issued by a government.

Churning (sometimes also known as excessive trading)

An intermediary excessively trades securities of an investor for the purpose of increasing his or her commissions, rather than to further the investor’s investment objective.

Clients’ Account (Brokers)

Intermediaries are required to establish separate bank accounts into which investors’ money available for investment is maintained. It also requires intermediaries to segregate such money from that of his own.

Closed Ended Fund(s)

Shares in Closed Ended Funds are not readily transferable on the market especially if they may not be listed on a securities exchange. Shares issued by such funds are bought and sold similar to ordinary shares. The capitalisation of these companies remains the same unless action is taken to increase the issued capital. (See Open Ended Funds).

Collective Investment Scheme (CIS)

These are financial products where money from a number of different investors are pooled and then invested by a fund manager according to specific criteria. The scheme or fund is divided into segments called ‘units’, which are to some degree similar to shares. Investors take a stake in the fund by buying these units – they will therefore become unit holders. The price of a unit is based on the value of the investments the fund has invested in (Net asset value).


The intermediary’s basic fee for purchasing or selling securities as an agent. A copy of the intermediary’s commission schedule lists fees or charges a client will be required to pay when buying or selling securities and when opening, operating an account.

Common Stock

Stocks represent a share in the ownership of a particular company. If the company does well, the value of each share generally goes up. Although common stocks have a history of long term growth, their prices fluctuate based on changes in a company’s financial condition as well as overall market and economic conditions. There are no performance guarantees and investors could lose their entire investment if the company does not do well. See ‘stock’ and ‘preferred stock’.

Compliance Officer

An official of an intermediary whose role is to ensure that the entity complies with all the laws under which it operates and rules issued by the regulator.


This refers to the growth that takes place in a bank or shareholding account when any earnings and dividends are reinvested (along with the original investment amount). This adds to the account’s growth potential.


The money value of a transaction (the number of shares multiplied by the price) before adding or deducting commission, stamp duty etc.


This term describes the movements in the price of a share or the stock market in general. It applies when the price remains fixed around a specific trading level. For example, if a share of a company rises from $0.90 to $1.10 and then drops and remains static around the $1.00 level this would be termed a consolidation.

Contract Note

After a transaction takes place, an intermediary sends the investor a contract note detailing the transaction including full title of the security, price, stamp duty (if applicable), consideration, commission, time of deal etc.


The term is used to describe a short, but sustained, fall in the market following a period of rising prices.


see agent.


The rate of interest paid by a fixed-interest bond. The rate is normally an annual rate of interest expressed as a percentage of the principal amount. For example, a $1,000 bond with a 8.5% coupon rate pays, $85 a year. However, the yield can change if the bond is sold for an amount greater or lower than its par value or principal amount.

Credit Institutions

This is another term for banks.

Credit Ratings

These are given by independent organisations and are often used by potential investors to compare one fund, company or country against another.

Generally, for a fund they will indicate the performance against a benchmark and for a bond their investment rating or quality.

Two of the best-known companies which offer a ratings service are Standard and Poor’s and Moody’s. A key to the code which these two companies use is detailed below, these are for bonds only:

Credit ratings are a good way for an investor to assess a particular investment but they should not be used as the sole way of judging whether an investment is safe or not.

Please note: Both companies make further differentiation’s on the quality of bonds within each category. Moody’s uses a numerical system (1,2,3) and Standard & Poor’s use a + or -. For example, a rating of Aa1 from Moody’s would be a better rating than Aa3, and an A+ from Standard & Poor’s a better rating than A.

Credit Risk Moody’s Standard & Poor’s
Prime Aaa AAA
Excellent Aa AA
Upper Medium A A
Lower Medium Baa >BBB
Speculative Ba BB
Very Speculative B, Caa B, CC, CCC
Default Ca, C , D C

Currency Risk

Whenever investing in a currency that is not your own, your investments will be exposed to an additional element of risk that there will be a shift in the relevant foreign exchange rates.

For Example, if you have Euro to invest and buy a Japanese Yen holding , then your investment will not only be effected by the movement of your holding but also any change in the exchange rates between Japanese Yen and Euro.

Current Price

The market price at any given time.

Current Yield

The Yield is what you actually earn from your bond holdings. The Current yield is the ratio of interest which you are earning to the actual market price of the bond and is stated as a percentage:

Annual interest ÷ current market value = current yield

The current yield can change depending upon the market value of the bond.


Someone who maintains assets on behalf of their owner. In the case of a minor, a custodian protects, manages and maintains assets until the individual reaches majority age, when the assets are turned over to him or her.

Custody Fees

This is the fee paid for the services rendered by the custodian. Not all intermediaries charge this fee.


The word used to describe buying and selling in funds, shares and bonds.

Dealing Days

Generally Bonds and Shares deal on all working days. Many funds can only be dealt in on specify days known as ‘dealing days’. These may differ from standard working days so investors should always check the dealing days in advance if they wish to procure funds by a certain date.


A sum owned by one person to another.


Person elected by shareholders, usually during an annual meeting, to serve on the Board of Directors of a company. Directors decide, among other matters, if and when dividends shall be paid.


This word is often used to describe the situation when a share, bond or closed-end fund is trading at level which does not fully reflect its value. For a company this would mean it trading at a value below that detailed in its reports, for a fund it would be below the value of its underlying holdings and for a bond at a level below its face or redemption value.

The term is also used when an investment company is promoting or launching one of their funds and would like to offer potential investors an added incentive to invest in that fund by means of a discount on this initial charge. The discount will be taken off the standard initial charge & benefit the client in the form of extra shares or units purchased. For example, if an investor had $5,000 to invest in a fund and the standard initial charge of 5% was discounted to only 3% then the client would benefit by 2% being deducted from the initial charge, leaving more money to be invested in the fund.

Discretionary Portfolio Management

An account in which the customer gives the intermediary discretion to buy and sell securities, including selection, timing, amount and price to be paid or received.


The practice of spreading money into a number of different investments. Investors diversify so they can reduce the risk of their investments losing money. If you put your money into five shares and five bonds, for example, you’re practising diversification. In effect, you’re hoping that if one investment is not doing well, it will be offset by most of the other investments, which presumably are making money. Buying a collective investment scheme is one of the best ways to diversify. Collective investment schemes, because they are a collection of shares, bonds or other securities, are typically diversified investments.


Dividends are the portion of a company’s profits paid out to shareholders. Usually only large, mature companies pay dividends. Smaller ones need to reinvest their profits to continue growing.

This payment determined by the Board of Directors is distributed pro rata among the shareholders of a company. Sometimes a company will pay a dividend out of past profits even if it is not currently operating at a profit.

Dow Jones Average

There are four Dow Jones Averages. The Dow Jones Industrial Average (DJIA) is the best known and most widely reported, generally referred to as the Dow. The DJIA is an unmanaged index of common stocks comprised of 30 major US industrial companies, and assumes reinvestment of dividends. It is a good indication of the performance of the US economy as a whole but it should be remembered that it only represents a proportion of the total value of all stocks traded on the New York Stock Exchange.

Earnings Per Share (EPS)

EPS is the total profit that a company has made, divided up among the number of shares that rank for dividend. EPS is reported quarterly and is calculated by dividing the net profit after tax for the quarter by the number of shares in issue during that quarter.

Emerging Market(s)

An emerging market is a securities market that is either small, or has a short operating history when compared with the major stock markets. For example, those of Brazil, China and Russia can be described as emerging markets.


Equity represents shareholders interest in a company. This is owned equally by all ordinary shareholders in direct proportion to their ‘share’ in the company. (See Ordinary Shares)


A long-term loan issued in a currency other than that of a country or market in which it is issued. Interest is paid without the deduction of tax.

Ex-Dividend (‘XD’)

A synonym for ‘without dividend’. A share is described ex-dividend (xd or ex-div) when a potential purchaser will no longer be entitled to receive the company’s current dividend, the right to which remains with the vendor.

Exchange Rate

The exchange rate is the price, or rate, at which one currency can be traded with another.

Execution Only

A service in which the intermediary has no responsibility for advising the investor on whether a particular transaction is suitable or not (for the investor). The intermediary’s responsibility is limited to executing the transaction on the investor’s instructions.

Face Value (or Par Value)

The value that appears on the face of the bond, unless the value is otherwise specified by the issuing company. Face value is not an indication of market value. (See Principal).

Fact Find

A document compiled by an intermediary that details vital facts about an investor’s financial circumstances and investment objectives. The intermediary will rely on the information contained in a fact find to make appropriate investment recommendations to the investor.

Fair Market Price

A reasonable price for securities based on supply and demand.

Financial Times Stock Exchange 100 (FTSE 100)

This is an unmanaged index of the top 100 stock prices in the UK and includes the reinvestment of dividends. As with all indices, the FTSE 100 is an important tool in measuring the overall health of the UK stockmarket. It’s limitations should be kept in mind though since it only covers the top 100 stocks.

Financial Year

A company’s accounting year. Due to the nature of their particular business, some companies do not use the calendar year for their bookkeeping. A typical example is the department store that finds 31 December too early a date to close its books after the Christmas rush. For that reason many stores wind up their accounting year on 31 January. Their financial year, therefore, runs from 1 February of one year through 31 January of the next. The financial year of other companies may run from 1 July through the following 30 June. Most companies though, operate on a calendar year basis.

Fixed Offer Price (Fund) 

When a new fund is launched the manager can offer potential investors a ‘fixed offer price’, normally for up to three weeks. The NAV at which the fund is offered will remain the same during this period. To the manager this means that they will have up to three weeks to gather the first batch of money to invest and to the investor it means that they know the price at which they are investing. After the end of the fixed offer period the price of the fund will vary depending on the value of its underlying holdings and market trends.


When a company’s shares are first sold on the stock market it is called a flotation, initial public offering (I.P.O.) or a new issue.


An investment vehicle where investor’s money is pooled together and invested by a manager in accordance with a defined investment strategy. Each fund will have its own investment strategy and objective, so an investor can choose a fund to match his or her own objective. Instead of owning the underlying investments (shares, bonds etc.) directly each investor in the fund owns shares in the fund itself. The value of each share will reflect the performance of the investment portfolio that the fund holds.

One of the advantages of a fund is that an investor can have their investment spread across a higher number of shares than if they had invested directly in bonds or shares. However funds generally carry higher fees than direct investments and the reduced risk can also mean a reduced return particularly in the case of bond funds. Most funds fall into three main categories: stock or equity funds, bond funds and money market funds.

Fund Manager (or Fund Management Company)

A Fund Manager is usually a company whose line of business is investing in other companies and entities on behalf of a collective investment scheme. The Scheme appoints the Fund Manager to buy and sell securities in accordance with the investment objectives.


Global Depository Receipts allow companies in Europe, Asia, the United States of America and Latin America to offer shares in many markets around the world.


A company’s debts expressed as a percentage of its equity capital. High gearing means debts are high in relation to equity capital.

Gilts or Gilt Edged

These are fixed rate stocks issued and guaranteed by the UK government.

Going Public

When a company sells shares of itself to the public to raise capital for the first time. (See Initial Public Offering)

Going-concern Value

The value of a company as an operating business to another company or individual. (See Goodwill)


The going-concern value of a company in excess of its asset value. Generally, it is the value of the business’ good name, its customer relations, high employee morale, and other factors that might translate into earning power.

Growth Funds

Growth funds are designed to pursue capital appreciation over the long-term by investing in stocks.


The term is usually used in reference to the practice of protecting a company or fund from changes in currency exchange rates or interest rates which might adversely affect the company or share.

High-Yield Bond

A high-yield bond is one which is rated lower than Baa by Moody’s or BBB by Standard & Poor’s, of average quality.

Index Fund Inflation

These funds are designed to produce the same performance that investors would have got if they owned all of the stocks in a particular index.

Inflation Risk

The chance that inflation, or the rise in the cost of living, will diminish the value of an investment.

Initial Public Offering (IPO)

A company’s first offering of shares to the public. (See Going Public)

Interest Rate Risk

The risk that a change in general interest rates will adversely affect the price of a bond investment. Usually, a fixed-rate bond will decline in value when there is a rise in interest rates.

Investment Objective

The goal – such as growth, capital appreciation, or income – that an investor pursues. *Collective investment schemes also have investment objectives which are stated in the *prospectus. The investment objective often determines the type of *securities in which the fund invests, the result expected and the level of risk with which it is associated.

Investment Portfolio

A variety of securities owned by an individual or an entity.

Investment Risk

The possibility of losing money or not gaining value in an investment.

Investment-Grade Bonds

These are corporate and government bonds given one of the top four ratings by independent agencies. Issues rated by Moody’s from Baa to Aaa or by S&P from BBB to AAA are considered investment-grade.

Investor Compensation Scheme

This is the technical term which is used to describe a scheme which provides compensation to retail investors who stand to lose money as a result of the default or bankruptcy of an authorised intermediary.

Issued Capital

The number of shares on offer to the public at a particular time. Sometimes referred to as Issued Share Capital.

Large Capitalisation Stocks (Large Cap)

The stock of a company whose market value is more than $ 5 billion. Also known as large-cap stocks.


Jargon for passing money through one or more bank accounts or investments in an attempt to disguise its origins. The money may have been obtained illegally. Also called Money Laundering.

Linked Long Term Contracts of Insurance (or LLTCIs)

An LLTCI is a life assurance policy linked to property of any description – such as units in a *collective investment scheme. The benefits are wholly or partly determined by reference to the value of the units in the collective investment scheme.

  1. How easily one’s assets can be converted back into cash. For example, money in an account that cannot be withdrawn for five years is not very liquid;
Listed Security (ies)

The security of a company that is traded on a *stock exchange.


A one-time sales charge that some *collective investment schemes charge unit holders. The load is usually incurred only on purchase, there being, in most cases, no charge when the shares are sold (redeemed).

Funds which do not have any initial sales charges are called no-load funds.

Lump Sum

A ‘lump sum investment’ is an amount of money which is to be invested at one time.


An illegal operation. Buying or selling a security for the purpose of creating false or misleading appearance of active trading or for the purpose of raising or depressing the price to induce purchase or sale by others.

Market Maker

Intermediaries, banks or stockbrokers who create a market by buying and selling securities on their own behalf.

Market Price

The last reported price at which the security sold.

Market Risk

The risk that the price of a security will rise or fall due to changing economic, political or market conditions, or due to a company’s individual situation.

Maturity Date


Money Laundering

Money Laundering may be described as the process through the financial system of the monies received from crime in order to disguise their illegal origin. Criminals mix ‘dirty’ money with ‘clean’ money, ultimately providing a legitimate cover for the source of their income. (See Prevention of Money Laundering).

Money Supply

This term generally refers to the volume of notes and coins in public circulation, including bank deposits in the private sector. As a guideline, increases in the supply are usually bad news for future inflation figures.

NASDAQ Composite Index

An unmanaged index of the National Market System in the US that includes more than 5,000 stocks. These shares are traded by a fully remote trading platform connecting dealers. Generally Technology, Telecom and Biotechnology securities are included.

Negotiable Instrument

A document of title that can be freely negotiated. For example, cheques, in which the stated payee of the instrument can negotiate the instrument by either inserting the name of a different payee or by making the document ‘open’ by endorsing it (signing one’s name), usually on the reverse.

Net Asset Value (NAV) 

The monetary value of one share of a fund. This is determined by taking the total assets of the fund, subtracting the total liabilities (the net assets) and dividing by the total number of shares outstanding.

Net Assets

The total assets of a fund or company, minus the total liabilities of that fund or company.

No Load 

A term used to describe *collective investment schemes that have no sales charges.


The face value of a stock or share. It’s of academic interest and has no relation to the underlying value of the share. The term ‘nominal’ and ‘par’ can be used interchangeably in this context.

For example: When dealing in Bonds (which usually pay back par (100) on maturity) Euro 10,000 nominal means that Euro 10,000 will be paid back at maturity date irrespective of what the cost of purchasing the bond was.

The cost of purchasing Euro 10,000 nominal will depend upon the market price.

For eg: 10,000 Nominal @ 98.00 = Euro 9,800

10,000 Nominal @ 101.00 = Euro 10,100

Nominee Services

Investors’ money and investments are held in the name of the intermediary on their behalf. A nominee can be used to hold shares on a third party’s behalf with the third party not needing to reveal their identity. Most often nominee accounts are used when administering a large number of client accounts.

Non-professional Investor

A person who buys or sells securities for his or her own account. A retail investor is dependent on the intermediary for information and assistance. Therefore the level of protection of a retail investor is higher than that given to a professional investor.

Offer Price

In equities the offer price is the price at which a person is ready to sell. For *collective investment schemes, the ‘offer’ price is the price at which you purchase units in the fund. In the case of a mutual fund with a sales charge, this price is the net asset value (NAV) plus the sales charge. In the case of no-load funds, it is the NAV.

Open-Ended Fund(s)

Open-ended funds sell their own new units to investors, stand ready to buy back their old units, and are sometimes listed on a stock exchange. Open-ended funds are so called because their capitalisation is not fixed, they issue more shares depending on how much investors want to invest (in the fund).

The words SICAV p.l.c. (a French acronym that stands for collective investment scheme with variable capital) follows a name of a collective investment scheme to denote that the fund is open ended.

Orders (market)

Specific instructions for handling transactions.

Ordinary Share (s)

The most common form of share. The holders are the owners of the company and receive dividends which vary in amount in line with the profitability of the company and recommendation of directors.

These shares also entitle their holder to a proportion of the company’s assets after all prior claims have been settled. The shares will fluctuate with the fortunes of the company. Also referred to as “equity”.

Par Value

The Nominal or face value of a security as given on the certificate or instrument. Generally, bonds have a par value of 100. Please see ‘nominal’. Also see Face Value


A business relationship in which two or more people agree to share the risks and profits of running a business.


This term refers to the placement of one’s assets or investments as security/collateral against loan facilities.

Portfolio (s)

The term used to describe a collection or ‘parcel’ of shares and securities.

Preference Shares

These shares offer their holders ownership in a corporation, but differ from common stock in several ways. Generally, preferred stock has a lower risk than common stock, but also has a lower reward potential.

The amount of dividend is predetermined either as a fixed amount or by way of a formula. If the company is wound up then the holders of preference shares will be repaid in advance of ordinary shareholders. However, the dividend is not usually increased if the company profits go up and the price of preferred stock normally does not increase as quickly as that of common stock.


The amount by which a bond may sell above its par value. May also refer, also, to redemption price of bond if it is higher than face value. (See Discount)

Prevention of Money Laundering

This is the term used to describe the world-wide efforts to combat money laundering. In the EU, all intermediaries are obliged to follow strict rules to ensure that the financial system is not used by criminals to launder their illegal monies. As part of this process, intermediaries must establish the identity of the investor with whom they are dealing – a process usually referred to as “knowing your customer” – by requesting the person to provide his identity card and asking a number of questions.

Price Earnings Ratio (P/E Ratio)

The P/E ratio is a measure of the valuation of a company, based on the level of confidence investors have in the company (rightly or wrongly). Generally, the higher the figure, the higher the confidence.

The Price/earnings ratio shows the relationship between a stock’s price and the company’s earnings for the last four quarters. It’s calculated by dividing the current price per share by the earnings per share. (See EPS) This ratio can be very useful in comparing two companies in the same sector.

Primary Market

The process by which a company’s share or stock is issued for the first time. It is then sold to the public on the secondary market. (See Initial Public Offering)


A person on whose behalf an *agent or broker acts. The term “principal” may also refer to a person’s capital or to the face amount of a bond. (See Face Value)


Involves the sale of state owned assets to the public.

Professional Investor

Professional investors would be experienced in financial matters and therefore capable of investing with minimum or without assistance of intermediaries. (See Retail Investor)

Profit and Loss Account 

A report on a company’s financial status of its earnings or losses over a given period. The profit and loss account lists the income earned, expenses paid and the net profit available for reinvestment.

  1. A document that provides details about a new offering of securities for sale to the public. It gives a detailed financial background of the issuing company, how the proceeds of the securities will be used, and other pertinent information investors will need to make an informed decision.
  2. A legal document that describes an investment objective and policies, investment restrictions, officers, directors and expenses of a collective investment scheme or other investment.

It is an arrangement between two parties who agree to buy or sell a determined quantity of shares or bonds at a determined price.

Quartile Rankings

A fund’s performance can be measured against a benchmark index, or in relation to other funds. All funds with the same investment strategy and region (for example growth funds investing in UK large-cap stocks) will be grouped together. The performance of each fund can then be gauged against the others, if it is in the top 25% of funds then the fund will be in the top quartile. If the fund’s performance is better than only 10% of the other funds in its group then it is in the 4th quartile.


The highest bid to buy and the lowest offer to sell any security at a given time.


An old term for a company listed on a stock market.


A period of no or negative economic growth and high unemployment.


Redemption is the term used to describe the date at which a Bond will be repaid at face value. A redemption is also placed when a mutual fund the investor sells the holding.

Redemption price

The price at which a bond may be redeemed before maturity, at the option of the issuing entity.

Redemption Yield / Yield to Maturity

The yield an investor would receive if they held a bond to its maturity date. This can be different to the current yield. For example if the bond was bought at below par and held to maturity then the redemption yield will also include some portion of capital repayment. Please see ‘Current Yield’.

Regular Savings Plan

Most investment managers offer a regular, or monthly, savings plan into their funds. The fees are normally the same as a lump sum investment would be. Savings plans provide an easy way for an investor to start holding funds, without the need for a large cash lump sum to make the first investment.


A body set up by law entrusted with overseeing the financial services sector. Sometimes it is also referred to as the Competent Authority. In Malta, the regulator or competent authority for investment services is the Malta Financial Services Authority.


Funnelling of profits back into a company to enhance its operations. An individual stockowner can also reinvest by choosing that dividends paid on stock will be used to purchase additional shares of that stock.

Retail Investor (also referred to as Non-Professional Investor)


Retained Profits

Profits a company keeps for its operations, after paying taxes and dividends.

Return (or Total Return or Net Return)

Total return measures increases and decreases in the value of your investment over time, after subtracting costs (you will usually find it written as “Net Return”). When expressed as a percentage, net return for an indicated period is calculated by dividing the change in a investments value, assuming reinvestment of all income and capital gains distributions, by the initial price.

Rights issue

An opportunity to existing shareholders of a company to buy more shares in the company at a discounted rate, without the need to buy through intermediaries


See Investment Risk – The possibility of losing money or not gaining value in an investment.

Secondary market

When stocks or bonds are traded or resold, they are said to be sold on the secondary market. The majority of all securities transactions take place on the secondary market.

Security / Securities

The general term for stocks and shares and bonds.


Conclusion of a securities transaction when a customer pays a broker/dealer for securities purchased or delivers securities sold and receives from the broker the proceeds of a sale.


-See Ordinary Shares- The most common form of share. The holders are the owners of the company and receive dividends which vary in amount in line with the profitability of the company and recommendation of directors. These shares also entitle their holder to a proportion of the company’s assets after all prior claims have been settled. The shares will fluctuate with the fortunes of the company. Also referred to as “equity”.


SICAV stands for ‘Societe d’investissement a` Capital Variable’. A SICAV is a type of collective investment vehicle which is an open-ended investment company. It can have a legal structure of an umbrella fund with several sub-funds, each of which relates to a separate portfolio of securities with specific investment objectives.


The buying and/or selling of securities, currencies etc with a view to making relatively quick profits as opposed to long term investment.

Spread (Bid-Offer Spread)

The difference between the bid and offer price is the ‘spread’

Standard & Poor’s 500 Index (S&P 500)

The S&P 500 is a widely recognised, unmanaged index of common stocks in the US. It is a broad based measurement of changes in stock market conditions based on the average performances of these 500 US stocks.

Stock Exchange

A market for the sale and purchase of securities, in which prices are controlled by the laws of supply and demand. Their basic functions is to allow public entities and governments to raise capital by selling securities to investors. They perform valuable secondary functions by allowing those investors to buy and sell these securities, providing liquidity and reducing the risks attached to investment. Sometimes referred to as Stock Market.

Stock Index

A way of using a select group of stocks for long term evaluation. The performance of a group of stocks that the sponsor of the index regard as important is averaged and over time that average serves as an indicator of the market’s general movement. For example, the FTSE 100 is an index of the share prices of the 100 largest companies (by market capitalisation) in the UK which is updated throughout the trading day. Stock indices are designed to give investors an idea of the general movement of the stock markets and its overall value.

By comparing the performance of their own portfolios with the performance of one of the stock indices, investors can see how well they have done from a comparative point of view. In particular they can see whether they would have been better off putting their money in an index tracker fund.


Issued by a company, stocks are pieces of the corporate pie. When an investor buys a stock, or share, they buy a slice of the company. Companies issue two basic types of stock: common (or ordinary) and preferred (or preference). The term stock can be used interchangeably with share or security. In Malta the term stock may also be used when speaking about Government Bonds.


A person or entity who buys and sells securities on a stock exchange on behalf of an investor.

Terms of Business Letter

This is a document which sets out in detail the investment services agreement between the intermediary and the investor. It should specify, amongst other things, whether the intermediary will provide investment advice or not, and the type of fees and commissions which the intermediary will charge.

Treasury Bill (T-Bill)

A government security with a maturity of a year or less.

Umbrella Fund

A fund which offers a range of shares in various sub-funds under a single umbrella. Each sub-fund will have its own portfolio of securities and be managed with specific investment objectives.

There can be advantages to an investor, if their investment objective changed and they wanted to change funds they may be able to do so at a lower cost within the umbrella fund than a normal switch between separate funds would incur.

Underlying Holdings

These are the shares held by a mutual fund or unit trust on behalf of investors. The price or NAV of the shares in the fund is calculated in direct relation to the market value of these underlying holdings plus any charges.


An arrangement by which a company is guaranteed that an issue of shares will raise a given amount of cash. The underwriters undertake to subscribe for any of the issue not taken up by the public. They charge commission for this service.

Unit Trust

A collective investment scheme. Called a ‘unit trust’ because investors’ contributions are divided into units and the scheme is governed by a trust deed. Please see definitions of ‘Fund’ and ‘Mutual Fund’.

Valuation Statement

A report showing the extent to which investments have increased or decreased from all the various gains and losses registered in a specific period.


This term refers to the ups and downs of the price of an investment in general. The greater and more frequent the ups and downs, the more volatile the investment.


These give their holder the right, but not the obligation, to purchase shares at a specified price (the ‘exercise price’) before a certain date.


Ex dividend. Shares which are classed as ‘XD’ are those bought on or after the ex-dividend date. They will not qualify for the next dividend.


The return earned on an investment taking into account the annual income. There are a number of different types of yields, and in some cases different methods of calculating each type.

Annual interest / price paid = yield %. Also see ‘Current Yield’ or ‘Redemption Yield’

Yield Curve

The relationship between the interest rates paid on short-term and long-term bonds is called the yield curve. Short-term bonds usually have a life of a year or less, intermediate-term a life of between two and ten years and long-term bonds have up to, and over, 30 years.

Yield to Call

A yield on a security calculated by assuming that interest payments will be paid until the call date, when the security will be redeemed at the call price. The Yield to Call is calculated in the same way as *yield to maturity but assumes that a bond purchased at a premium will be called and that the investor will receive the amount of the face value at the call date.

Yield to Maturity

The rate of return earned on an investment (such as a bond) bought at a specified price and held until maturity.

The Yield to Maturity equals all the interest you receive from the time you purchase the bond until maturity (including interest on interest at the original purchasing yield) plus any gain (if you purchased the bond below its face, or par, value) or loss (if you purchased it above its face value). The tax payable on the interest and the capital repayments is ignored.

Zero-Coupon Bond

A bond where no periodic interest payments are made. Instead, the interest element is discounted from the issue price, so investors normally buy zero-coupon bonds at prices far lower than par value. The maturity value an investor receives is equal to the principal invested plus interest earned at the original rate to maturity.