ACCOUNT STATEMENT:
A document issued by the mutual fund, giving
details of transactions and holdings of an
investor.
ADJUSTED NAV (TOTAL RETURN) :
The net asset value of a unit assuming
reinvestment of distributions made to the
investors in any form.
ADVISOR:
Your financial consultant who gives
professional advice on the fund's
investments and who supervise the management
of its assets.
AGE OF FUND :
The time elapsed since the launch of the
fund.
ALPHA COEFFICIENT :
It is the excess return of the fund above
risk adjusted market return, given its level
of risk as measured by beta. An investment
with a positive alpha indicates that the
fund has performed better than expected,
given its beta. And a negative alpha
indicates that the fund has under performed.
AMORTIZATION :
A method of equated monthly payments over
the life of a loan.
Payments usually are paid monthly but can be
paid annually, quarterly, or on any other
schedule.
In the early part of a loan, repayment of
interest is higher than that of principal.
This relationship is reversed at the end of
the loan.
ANNUAL RETURN :
The percentage of change in net asset value
over a year's time, assuming reinvestment of
distribution such as dividend payment and
bonuses.
APPRECIATION :
When an investment increases in value, it
appreciates. For example, a equity share
whose price goes from Rs. 20/- to Rs. 25/-
has appreciated by Rs. 5/-.
APPLICATION FORM :
Form prescribed for investors to make
applications for subscribing to the units of
a fund.
ARBITRAGE :
The practice of buying and selling an
interlisted stock on different exchanges in
order to profit from minute differences in
price between the two markets.
ASSET :
Property and resources, such as cash and
investments, comprise a person's assets;
i.e., anything that has value and can be
traded. Examples include stocks, bonds, real
estate, bank accounts, and jewellery.
ASSET ALLOCATION :
When you divide your money among various
types of investments, such as stocks, bonds,
and short-term investments (also known as
"instruments"), you are allocating your
assets. The way in which your money is
divided is called your asset allocation.
ASSET MANAGEMENT COMPANY / AMC :
It is the investment manager for the mutual
fund. It is a company set up primarily for
managing the investment of mutual funds and
makes investment decisions in accordance
with the scheme objectives, deed of Trust
and other provisions of the Investment
Management Agreement.
ASKED OR OFFERING PRICE :
The price at which a mutual fund's shares
can be purchased. The asked or offering
price means the current net asset value
(NAV) per share plus sales charge, if any.
For a no-load fund, the asked price is the
same as the NAV.
ASSET ALLOCATION FUND :
A fund that spreads its portfolio among a
wide variety of investments, including
domestic and foreign stocks and bonds,
government securities, gold bullion and real
estate stocks. This gives small investors
far more diversification than they could get
allocating money on their own. Some of these
funds keep the proportions allocated between
different sectors relatively constant, while
others alter the mix as market conditions
change.
AUTOMATIC INVESTMENT PLAN :
Under these plans, the investor mandates the
mutual fund to allot fresh units at
specified intervals (monthly, quarterly,
etc.) against which the investor provides
post-dated cheques. On the specified dates,
the cheques are realized by
the mutual fund and on realization,
additional units are allotted to the
investor at the prevailing NAV.
AUTOMATIC REINVESTMENT :
A service offered by most mutual funds
whereby income, dividends and capital gain
distributions are automatically invested
into the fund by buying additional shares
and thus building up holdings through the
effects of compounding.
ANNUALISED RETURN :
This is the hypothetical rate of return, if
the fund achieved it over a year's time,
would produce the same cumulative total
return if the fund performed consistently
over the entire period. A total return is
expressed in a percentage and tells you how
much money you have earned or lost on an
investment over time, assuming that all
dividends and capital gains are reinvested.
AVERAGE COST METHOD :
A method of finding out the cost per unit by
adding up all the costs involved in
purchasing all the units of investment and
then dividing the sum by the total number of
units.
AVERAGE CREDIT QUALITY :
The composite indicator of the credit
quality of the Scheme's portfolios. It is an
average of each debt instrument's credit
rating, weighted by the instruments relative
weight in the portfolio. For these
calculations, Government of India
securities, cash and call money instruments
are taken as AAA credit quality and
non-rated debt instruments are taken as
having BBB credit quality.
BACK END LOAD :
The difference between the NAV of the units
of a scheme and the price at which they are
redeemed. The difference is charged by the
fund.
BALANCE SHEET :
A financial statement showing the nature and
amount of a company's assets, liabilities
and shareholders' equity.
BALANCED FUND :
A mutual fund that maintains a balanced
portfolio, generally 40% bonds and 60%
equity.
BALANCE MATURITY TENURE OF A SCHEME
:
In the case of close-ended schemes, the
balance period till the redemption of the
scheme.
BARTER :
The exchange of goods and services for other
goods and services without the use of money.
BASIS POINT :
A phrase used to describe differences in
bond yields, with one basis point
representing one-hundredth of a percentage
point. Thus if Bond X yields 8.5 per cent
and Bond Y 8.75 per cent, the difference is
25 basis points.
BEAR MARKET :
Period during which investors are on a
selling spree and the share prices are going
down.
BENCHMARK :
A parameter with which a scheme can be
compared. For example, the performance of a
scheme can be benchmarked against an
appropriate index.
BETA :
A measure of the relative sensitivity of a
stock or mutual fund to the market. The
higher the beta, the more volatile (or more
sensitive) the stock or fund is considered
to be relative to the market as a whole. The
BSE sensex is assigned a beta of 1.
BID OR SELL PRICE :
The price at which a mutual fund's shares
are redeemed (bought back) by the fund. The
bid or redemption price means the current
net asset value per share, less any
redemption fee or back-end load.
BLUE CHIP :
A share in a large, safe, prestigious
company, of the highest class among stock
market investments. A blue-chip company
would be called thus by being well-known,
having a large paid-up capital, a good track
record of dividend payments and skilled
management.
BOARD OF DIRECTORS :
A committee elected by the shareholders of a
company, empowered to act on their behalf in
the management of company affairs. Directors
are normally elected each year at the annual
meeting.
BOND :
An interest-bearing promise to pay a
specified sum of money -- the principal
amount -- due on a specific date.
BOND FUNDS :
Registered investment companies whose assets
are invested in diversified portfolios of
bonds primarily fixed income securities.
BOND RATING :
System of evaluating the probability of
whether a bond issuer will default. CRISIL,
ICRA, CARE and other rating agencies analyze
the financial stability of both corporate
and state government debt issuers. Ratings
range from AAA (extremely unlikely to
default) to D (likely to default). Mutual
funds generally restrict their bond
purchases to issues of certain quality
ratings, which are specified in their
prospectus.
BONUS :
Additional units allotted to investors on
the basis of their existing holdings.
Basically, there is a split of existing
units into more than one unit resulting in
the reduction of the NAV per unit.
BROKER :
One who guides the investors on one or more
investments and facilitates the process of
investment. A broker is a member of a
recognized stock exchange who buys and sells
or otherwise deals in securities.
BROKERAGE :
The fee payable to a broker for acting as an
intermediary
in a transaction. For example, brokerage is
payable by a fund for getting fresh
investments from investors.
BSE INDEX :
A index reflecting the stock prices of 30
companies listed on the Bombay Stock
Exchange (BSE) which is taken to be
representative of the stock market movement.
BULL MARKET :
Period during which the prices of stocks in
the stock market keep continuously rising
for a significant period of time on the back
of sustained demand for the stocks.
CAPITAL :
This is the amount of money you have
invested. When your investing objective is
capital preservation, your priority is
trying not to lose any money. When your
investing objective is capital growth, your
priority is trying to make your initial
investment grow in value.
CAPITAL APPRECIATION :
As the value of the securities in a
portfolio increases, a fund's Net Asset
Value (NAV) increases, meaning that the
value of your investment rises. If you sell
units at a higher price than you paid for
them, you make a profit, or capital gain. If
you sell units at a lower price than you
paid for them, you'll have a capital loss.
CAPITAL APPRECIATION FUND :
A mutual fund that seeks maximum capital
appreciation through the use of investment
techniques involving greater than ordinary
risk, such as borrowing money in order to
provide leverage and high portfolio
turnover.
CAPITAL GAINS :
The difference between an asset's purchased
price and selling price, when the difference
is positive. A capital loss would be when
the difference between an asset's purchase
price and selling price is negative.
CAPITAL GAINS DISTRIBUTERS :
Payments (usually annually) to mutual fund
shareholders of gains realized on the sale
of portfolio securities.
CAPITAL GROWTH :
A rise in market value of a mutual fund's
securities, reflected in its NAV per share.
This is a specific long-term objective of
many mutual funds. Capital Loss realized
when an instrument or asset is sold at a
price below its cost.
CAPITAL MARKET :
The market where capital funds, debt (bonds)
and equity ( stocks) are traded.
CASH & OTHER CATEGORY :
A mutual fund asset allocation theory that
includes net cash, short-term securities,
and any other securities (such as options)
not included in other asset allocation
categories.
CALLABLE BOND :
A bond which the issuer is permitted or
required to redeem before the stated
maturity date at a specified price, usually
at or above par, by giving notice of
redemption in a manner specified in the bond
contract.
CDSC :
Contingent Deferred Sales Charge (CDSC), a
charge imposed when the units are redeemed
within the first four years of unit
ownership. The SEBI (Mutual Funds)
Regulations, 1996, direct that a CDSC may be
charged only for the first four years after
purchase and mandates the maximum amount
that can be charged in each year.
CERTIFICATE OF DEPOSIT :
Interest-bearing, short-term debt instrument
mainly issued by Financial institutions
CLOSED-ENDED MUTUAL FUND :
A mutual fund that offers a limited number
of shares. They are traded in the securities
markets. Price is determined by supply and
demand. Unlike open-ended mutual funds,
closed-ended funds do not redeem their
shares.
COLLATERAL SECURITY :
This is extra security provided by a
borrower to back up his/her intention to
repay a loan.
COMMON STOCKS :
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 and on overall market and economic
conditions.
COMMERCIAL PAPER :
Short-term, unsecured promissory notes with
maturities shorter than 3 months. They are
issued by corporations to fund short-term
credit needs.
COMMISSION :
The broker's or agent's fee for buying or
selling securities for a client. The fee is
usually based on a percentage of the
transaction's market value.
COMPLIANCE OFFICER :
Officer appointed by the AMC to comply with
regulatory requirement and to redress
investor.
COMPOUNDING :
When you deposit money in a bank, it earns
interest. When that interest also begins to
earn interest, the result is compound
interest. Compounding occurs if bond income
or dividends from stocks or mutual funds are
reinvested. Because of compounding, money
has the potential to grow much faster.
CONSIDERATION :
The 'consideration' is the total purchase or
sale amount associated with a transaction.
The amount you 'pay' or 'receive'. It may
also be the basis for working out the
commission, taxes and any other charges you
are asked to pay.
CONTINUOUS OFFER :
Offer of the Units when the Scheme becomes
open ended, after closure of the initial
offer. The Scheme became open ended on
January 1, 1998.
CONVERTIBLE BOND :
A corporate bond, usually a junior
subordinated debenture, which can be
exchanged for shares of the issuer's common
stock.
CONVEXITY :
A mathematical concept that measures the
sensitivity of the market price of interest-
bearing bonds to changes in interest rate
levels. See also Duration.
CORPUS :
The total amount of money invested by all
the investors in a scheme
CORRELATION MEASURES :
Measures that show the validity of a
comparison to a benchmark index based on the
historical relationship between portfolio
returns and index returns. See R"2". See
also Volatility Measures.
COST OF CHURNING/TURNOVER COST :
The portfolio of a scheme changes from time
to time. The rate of change depends on the
style of the fund manager. Such portfolio
changes have associated costs of brokerage,
custody fees, transaction fees and
registration fees, which lower the returns.
These costs comprise the cost of churning.
COUPON :
The term is used colloquially to refer to a
security's interest rate.
COUPON RATE :
The annual rate of interest payable on a
debt security expressed as a percentage of
the principal amount.
CURRENCY FLUCTUATION :
Changes in the value of a currency in
relationship to other major currencies.
Currency fluctuations can have a significant
effect on the value of international mutual
funds.
CURRENCY RISK :
The risk that shifts in foreign exchange
rates may undermine the dollar or any other
foreign currency value of overseas
investments.
CURRENT INCOME :
Monies paid during the period an investment
is held. Examples include bond interest and
stock dividends.
CURRENT LOAD :
Load structure applicable currently. Funds
keep revising the load structures from time
to time.
CURRENT MARKET VALUE :
The amount a willing buyer will pay for a
bond today, which may be at a premium (above
face value) or a discount (below face
value).
CURRENT YIELD :
The ration of interest to the actual market
price of the bond stated as a percentage
CUSTODIAN :
The bank or trust company that maintains a
mutual fund's assets, including its
portfolio of securities or some record of
them. Provides safekeeping of securities but
has no role in portfolio management.
CUT OFF TIME :
In respect of all mutual funds regulated by
SEBI, fresh subscriptions and redemptions
are processed at a particular NAV. Every
fund specifies a cut-off time in respect of
fresh subscriptions and redemption of units.
All requests received before the cut-off
times are processed at that day's NAV and
thereafter at the next day's NAV.
DATE OF REDEMPTION :
The date specified for the redemption of a
scheme. No such date is specified for an
open-ended scheme.
DEBT /INCOME FUNDS :
Funds that invest in income bearing
instruments such as corporate debentures,
PSU bonds, gilts, treasury bills,
certificates of deposit and commercial
papers. Although these funds are less
volatile, the underlying investments carry a
credit risk. Comparatively, these funds are
the least risky and are preferred by
risk-averse investors.
DEFICIT :
The shortfall between government revenues
and budgetary spending in any given year. A
surplus occurs when annual revenues exceed
expenditures.
DERIVATIVE :
An investment contract based on an
underlying investment called an
"instrument." The most common type of
derivative is an option contract, which
involves the right to buy or sell the
underlying instrument at an agreed price.
Futures contracts are also derivatives.
DESIGNATED INVESTOR SERVICE CENTRES
:
Any location, as may be defined by the Asset
Management Company from time to time, where
investors can tender the request for
subscription, redemption, switching of
units, or any other request.
DEPOSITORY :
Depository as defined in the Depositories
Act, 1996 (22 of 1996).
DIVERSIFICATION :
Diversification is the concept of spreading
your money across different types of
investments and/or issuers to potentially
moderate your investment risk.
DIVIDEND :
Income distributed by the Scheme on the
Units.
DIVIDEND DISTRIBUTION TAX :
A tax payable by a debt oriented mutual fund
(a mutual fund that invests more than 50% of
its portfolio in the debt market) before
dividend is distributed to the unit holders.
The current Dividend Distribution Tax is 20%
plus the 10% surcharge .
DIVIDEND FREQUENCY :
The periodicity of dividend payout of a
scheme. This is especially valid in the case
of an income/debt scheme.
DIVIDEND HISTORY :
The track record of dividends declared by a
fund till date.
DIVIDEND PER UNIT :
Total amount of dividend declared by a fund
for a scheme divided by total number of
units issued to all the investors.
DIVIDEND PERIOD :
The period for which the dividend is
declared.
DIVIDEND PLAN :
In a dividend plan, the fund pays dividend
from time to time as and when the dividend
is declared.
DIVIDEND REINVESTMENT :
In a dividend reinvestment plan, the
dividend is reinvested in the scheme itself.
Hence instead of receiving dividend, the
unit holders receive units. Thus the number
of units allotted under the dividend
reinvestment plan would be the dividend
declared divided by the ex-dividend NAV.
DIVIDEND WARRANT :
An instrument issued by companies/ mutual
funds to an investor for the purpose of
payment of dividends.
DIVIDEND YIELD :
The dividend earned per unit of a scheme at
the prevailing per unit price.
DURATION :
Duration estimates how much a bond's price
fluctuates with changes in comparable
interest rates. If rates rise 1.00%, for
example, a fund with a 5-year duration is
likely to lose about 5.00% of its value.
Other factors also can influence a bond
fund's performance and share price. A bond
fund's actual performance may differ.
ENDORSEMENT :
Assigning or transferring a lien to another
person is accomplished through the use of an
endorsement. The words "PAY TO THE ORDER OF"
and then the name of the person to whom the
lien is being assigned to, is written. If
there is not enough space on the original
note to write an endorsement, it is written
on a separate piece of paper that is
permanently affixed to the original note.
This is called an allonge.
ENTRY LOAD :
Load on purchases/ switch-out of units.
EQUITY SCHEMES :
Schemes where more than 50% of the
investments are done in equity shares of
various companies. The objective is to
provide capital appreciation over a period
of time.
EXCHANGE PRIVILEDGE :
The right to transfer investments from one
fund into another, generally within the same
fund group, at nominal cost.
EXCHANGE RATE :
The price at which one currency trades for
another.
EX-DIVIDEND RATE :
The day that a fund's Board of Directors
declares the amount of income or capital
gain to be distributed to shareholders and
deducts that amount from the fund's net
asset value.
EXPENSE RATIO :
Annual percentage of fund's assets that is
paid out in expenses. Expenses include
management fees and all the fees associated
with the fund's daily operations.
EXIT LOAD :
Load on redemptions Dividend switch-out of
units
FACE VALUE :
The face value is the term used to describe
the value of a bond in terms of what the
company which issued the bond will actually
repay when the loan matures. It's sometimes
described as nominal or par value.
FII :
Foreign Institutional Investors, registered
with SEBI under the Securities and Exchange
Board of India (Foreign Institutional
Investors) Regulations, 1995.
FISCAL YEAR :
An accounting period consisting of 12
consecutive months. FUND A mutual fund is a
trust under the Indian Trust Act. Each fund
manages one or more schemes.
FUND CATEGORY :
Classification of a scheme depending on the
type of assets in which the mutual fund
company invests the corpus. It could be a
growth, debt, balanced, gilt or liquid
scheme.
FUND FAMILY :
All the schemes, which are managed by one
mutual fund.
FUND MANAGEMENT COSTS :
The charge levied by an AMC on a mutual fund
for managing their funds.
FUND MANAGER :
The person who makes all the final decisions
regarding investments of a scheme
GILT FUNDS :
Funds, which invest only in government
securities of different maturities. With
virtually no default risk, they are very
secure. While returns are steady and secure,
they are lower than those from other debt
funds.
GROWTH :
Fund's Growth funds are designed to pursue
capital appreciation over the long-term.
Some growth funds are broad-based, meaning
that they have a wide range of stocks and
industries in which they can invest. Others
have a narrower focus - for example, they
may invest in a particular type of stock,
such as small-cap or cyclical stocks, or use
a specialized approach to stock selection,
such as investing only in stocks that are
currently underpriced. Growth funds are more
volatile than more conservative income or
money market funds and generally reflect
changes in market conditions and other
company, political, and economic news.
GROWTH FUND :
A mutual fund whose primary investment
objective is long-term growth of capital. It
invests principally in common stocks with
significant growth potential. Growth Stocks
of companies that have shown or are expected
to show rapid earnings and revenue growth.
Growth stocks have relatively more risk than
other conventional forms of investment.
Hybrid Funds :
One can avail ready-made diversified
products in mutual funds through hybrid
funds. Within hybrid funds, some invest
predominantly in equity or debt while there
are some which dynamically allocate between
equity and debt based on market conditions
or a mathematical model.
INCOME FUND :
A mutual fund that primarily seeks current
income rather than growth of capital. It
will tend to invest in stocks and bonds that
normally pay high dividends and interest.
INDEX FUND :
A passively managed, limited-expense
(advisor fee no higher than 0.50%) fund
designed to replicate the performance of an
unmanaged stock index on a reinvested basis.
INFLATION :
When the price of goods and services rises,
the result is called inflation. This means
that things you buy today at one price are
likely to cost more in the future.
INFLATION RISK :
The chance that the value of assets or
income will be diminished as inflation
shrinks the value of a currency.
INITIAL PUBLIC OFFERING (IPO)/ INITIAL
ISSUE :
The first sale of stock by a private company
to the public. IPO’s are often issued by
smaller, younger companies seeking capital
to expand, but can also be done by large
privately-owned companies looking to become
publicly traded.
In an IPO, the issuer obtains the assistance
of an underwriting firm, which helps it
determine what type of security to issue
(common or preferred), best offering price
and time to bring it to market. Also
referred to as a "public offering".
INITIAL OFFER PRICE :
The price at which units of a scheme are
offered in its Initial Public Offer (IPO).
INITIAL OFFER PERIOD :
The dates on or the period during which the
initial subscription to units of the Scheme
can be made.
INSTITUTUONAL INVESTOR :
An institutional investor is a professional
money manager whose job it is to put money
into shares and other assets on behalf of
private investors who entrust them with
money via their pension and life insurance
funds.
INTEREST :
The amount paid by a borrower as
compensation for the use of borrowed money.
This amount is generally expressed as an
annual percentage of the principal amount.
INTEREST RATE :
The annual rate, expressed as a percentage
of principal, payable for use of borrowed
money.
INTERNATIONAL FUNDS / EMERGING MARKET
FUNDS :
Funds investing in assets or bonds/shares of
companies from emerging economies. These are
not permissible in India due to regulations
against investing abroad. Most of the
schemes of Foreign Institutional Investors
(FII's) investing in India are funds of this
type.
IN THE MONEY SECURITIES :
An option contract on a stock whose current
market price is above the striking price of
a call option or below the striking price of
a put option. For example, a call option on
ABC fund at a striking price of 100 would be
"in the money" if ABC fund were selling at
10"2", and a put option with the same
striking price would be "in the money" if
ABC were selling at 98.
INVESTMENT GRADE OR INVESTMENT GRADE BOND
:
The broad credit designation given to
corporate and municipal bonds which have a
high probability of being paid and minor, if
any, speculative features. Bonds rated Baa
and higher by Moody's Investors Service or
BBB and higher by Standard & Poor's are
deemed by those agencies to be "investment
grade."
INVESTMENT OBJECTIVE :
The identification of attributes associated
with an investment or investment strategy,
designed to isolate and compare risks,
define acceptable levels of risk, and match
investments with personal goals.
ISSUE DATE :
The date on which a security is deemed to be
issued or originated.
ISSUER :
A state, political subdivision, agency or
authority that borrows money through the
sale of bonds or notes.
ISSUED SHARE CAPITAL :
This is the total number of shares a company
has made publicly available multiplied by
the total nominal value of the shares. A
company may have 10 million shares in issue,
each with a nominal value of Re. 1. So the
issued share capital is Rs. 10 million.
JUNK BOND :
A speculative bond with higher credit risk.
KYC :
Know your Customer or KYC details are a must
to start any financial transaction with a
mutual fund, bank account, broker account,
etc. SEBI has mandated a common KYC for all
capital market entities so that investors do
not have multiple procedures across
entities.
LAUNCH DATE :
The date on which a scheme is first made
open to the public for subscription.
LESSEE :
The person who makes lease payments. He has
right of possession and use of a property
under the terms of a lease.
LESSOR :
The person who receives lease payments. He
leases property.
LIBOR :
LIBOR stands for London Inter Bank Offer
Rate. It's the rate of interest at which
banks offer to lend money to one another in
the so-called wholesale money markets in the
City of London. Money can be borrowed
overnight or for a period of in excess of
five years. The most often quoted rate is
for three month money. '3 month LIBOR' tends
to be used as a yardstick for lenders
involved in high value transactions. They
tend to quote rates as 'points above LIBOR'.
So if 3 month LIBOR were (say) six per cent,
a bank may choose to lend to another bank at
(say) 6 and a quarter per cent. e.g. a
quarter per cent above 3 month LIBOR.
LIEN :
A type of security instrument (i.e., a tax
lien), placed against property, making it
security for the payment of a debt,
judgment, mortgage, or taxes. If the lien is
not paid, the lien holder has the right to
confiscate the property in order to recover
the money that was loaned.
LIQUIDITY :
The ability to buy or sell an asset quickly
or the ability to convert to cash quickly.
LIQUID FUNDS /MONEY MARKET FUNDS
:
Funds investing only in short-term money
market instruments including treasury bills,
commercial paper and certificates of
deposit. The objective is to provide
liquidity and preserve the capital.
LOAD :
A charge that may be levied as a percentage
of NAV at the time of entry into the
Scheme/Plans or at the time of exiting from
the Scheme/Plans.
LOCAL CHEQUE :
A Cheque handled locally and drawn on any
bank, which is a member of the banker's
clearing house located at the place where
the application form is submitted.
LOCK IN PERIOD :
The period after investment in fresh units
during which the investor cannot redeem the
units.
MANAGEMENT FEE :
Money paid by a mutual fund to its
investment manager or advisor for overseeing
the portfolio. A management fee is usually
between one-half and one percent of the
fund's net asset value.
MARKET :
A public place where the buying and selling
of all types of bonds, stocks and other
securities takes place. A stock exchange is
a market.
MARKET PRICE :
The price at which the units of a scheme are
quoted on a stock exchange.
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.
MARKETABLITY :
The ease or difficulty with which securities
can be sold in the market.
MATURITY OR MATURITY DATE :
The date upon which the principal of a
security becomes due and payable to the
security holder.
MATURITY VALUE :
The amount (other than periodic interest
payment) that will be received at the time a
security is redeemed at its maturity. On
most securities the maturity value equals
the par value.
MINIMUM ADDITIONAL INVESTMENT :
The minimum amount, which an existing
investor should invest for purchasing fresh
units.
MINIMUM BALANCE :
Minimum amount specified by a fund that
should remain invested in a scheme after any
redemption.
MINIMUM SUBSCRIPTION :
The minimum amount required to be invested
to purchase units of a scheme of a mutual
fund.
MINIMUM WITHDRAWAL :
The smallest sum that an investor can
withdraw (get redeemed) from the fund at one
time.
MONEY MARKET FUND :
A mutual fund that aims to pay money market
interest rates. This is accomplished by
investing in safe, highly liquid securities,
including certificates of deposit,
commercial paper, and Government securities.
Money funds make these high interest
securities available to the average investor
seeking immediate income and high investment
safety.
MONEY MARKET INSTRUMENTS :
Commercial paper, treasury bills, GOI
securities with an unexpired maturity up to
one year, call money, certificates of
deposit and any other instrument specified
by the Reserve Bank of India.
MORTGAGE :
A legal instrument given by a borrower to
the lender entitling the lender to take over
pledged property if conditions of the loan
are not met.
MOVING AVERAGES :
The average price of a mutual fund
calculated periodically over some designated
period of time and plotted on a chart
against actual price. The effect of a moving
average is to minimize short-term price
fluctuations and highlight long-term price
fluctuations.
MUTUAL FUND :
An investment that pools shareholders money
and invests it toward a specified goal. The
funds are invested by a professional
investment manager usually called the AMC (
Asset Management Company).
MUTUAL FUND REGULATIONS :
Securities and Exchange Board of India
(Mutual Funds) Regulations, 1996 as amended
up to date and such other Regulations, as
may be in force from time to time, to
regulate the activities of the Mutual Fund.
NO-LOAD SCHEME :
A Scheme where there is no initial Entry or
Exit Load.
NAV :
Net Asset Value of the Units in each plan of
the Scheme is calculated in the manner
provided in this Offer Document or as may be
prescribed by Regulations from time to time.
The NAV will be computed upto four decimal
places. NAV Formula :
NAV CHANGE :
The difference between today's closing net
asset value (NAV) and the previous day's
closing net asset value (NAV).
NAV CHANGE % :
The percentage change between today's
closing net asset value (NAV) and the
previous day's closing net asset value (NAV)
NET WORTH :
A person's net worth is equal to the total
value of all possessions, such as a house,
stocks, bonds, and other securities, minus
all outstanding debts, such as mortgage and
revolving credit lines.
NET YIELD :
Rate of return on a security net of
out-of-pocket costs associated with its
purchase, such as commissions or markups.
NON PERFORMING INVESTMENTS :
Part of the portfolio investment of a debt
fund which is not making interest payment or
principal amount repayments in time.
NIFTY :
An index of prices of a group of fifty
stocks listed on the NSE.
NRI :
Non-Resident Indian.
OCB :
extent of at least 60% by NRls and trusts in
which at least 60% of the beneficial
interest is held irrevocably by NRls.
OFFER DOCUMENT OR PROSPECTUS :
The official document issued by mutual funds
prior to the launch of a fund describing the
characteristics of the proposed fund to all
its prospective investors. It contains
information required by the Securities and
Exchange Board of India, such as investment
objective and policies, services, and fees.
Individual investors are encouraged to read
and understand the fund's prospectus.
OFFERING PERIOD :
The period during which the initial offer to
subscribe for the units of a scheme is open.
OFFER PRICE :
The lowest price that a seller is willing to
accept from a prospective buyer. 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.
OFFERING DATE :
The date on which a distribution of stocks
or bonds will first be available to the
public.
OPEN-ENDED SCHEMES/ FUNDS :
A fund whose units are redeemable at any
time at asset value, Except for funds that
no longer accept new unitholder, new units
are offered continuously.
OPENING NAV :
The NAV disclosed by the fund for the first
time after the closure of an IPO.
OPTION :
A device used to speculate or hedge in
securities markets. Buying a "call" option
gives an investor the right to buy 100
shares of a stock at a certain price within
a specified time; buying a "put" option
allows an investor to sell a stock under the
same conditions.
OPPORTUNITY RISK :
The risk that a better opportunity may
present itself after you have already
committed your money elsewhere.
PLANS :
The Scheme offers five Plans, Growth Plan
and four Dividend Plans viz. Monthly,
quarterly, Half Yearly and Annual Dividend
Plans.
PIO :
Person of Indian Origin
PORTFOLIO :
The list of securities owned by the mutual
fund. This list may be long, for example,
Fidelity Magellan, with over 2000 stocks, or
relatively short, for example, Sequoia, with
only 16 stocks.
PORTFOLIO CHURNING :
Switches between different stocks in the
market, keeping in view the market
conditions, in order to give unit holders a
better yield.
PREMIUM :
The amount by which a bond/ or a stock (in
case of a IPO) sells above its par (face)
value.
PRICE OF UNITS :
Price offered by a mutual fund for
repurchase or sale of a unit on a daily
basis. Price/Earnings Ratio This is the
price of a stock divided by its earnings per
share. This ratio gives an investor an idea
of how much they are paying for a particular
company's earning power. A trailing P/E
refers to a ratio that is based on earnings
from the latest year, while a forward P/E
uses an analyst's forecast of next year's
earnings. For instance, a stock selling for
Rs. 20 a share that earned Re. 1 last year
has a trailing P/E of 20. If the same stock
has projected earnings of Rs. 2 next year,
then it has a forward P/E of 10.
PRICE STABILITY :
Price stability protects the original amount
you put into an investment. A mutual fund's
price stability is seen in changes in its
net asset value over time.
PRIMARY MARKET(NEW ISSUE MARKET)
:
The market on which newly issued securities
are sold, including government security
auctions and underwriting purchases of
blocks of new issues, which are then resold.
PROSPECTUS :
An official document that each investment
company must publish, describing the mutual
fund and offering its shares for sale. It
contains information that has been
mandatorily required by SEBI.
PURCHASE PRICE :
Purchase Price to the investor of Units of
any of the plans computed in the manner
indicated
in this Offer Document.
RATE OF RETURN :
The total proceeds derived from the
investment per rupee initially invested.
Proceeds must be defined broadly to include
both cash distributions and capital gains.
The rate of return is expressed as a
percentage.
RATINGS :
Designations given by credit rating agencies
indicating relative credit quality as
compared to other funds
RECORD DATE :
The date the fund determines who its
unitholders are; "unitholders of record" who
will receive the fund's income dividend
and/or net capital gains distribution.
REDEMPTION :
The paying off or buying back of units of a
mutual fund / bond by the issuer.
REDEMPTION FEE :
A fee charged by a limited number of funds
for redeeming, or buying back, fund units.
REDEMPTION PRICE :
The price at which a mutual fund's units are
redeemed (bought back) by the fund. The
redemption price is usually equal to the
current NAV per unit.
REFUND :
The act of returning money to an investor by
the fund. This could be on account of
rejection of an application to subscribe
units or in response to an application made
by the investor to the fund to redeem units
held by him.
REGISTRAR / KARVY :
Karvy Consultants Ltd., who have been
appointed as the Registrar.
REINVESTMENT DATE :
The date on which a share's dividend and/or
capital gains will be reinvested (if
requested) in additional fund shares.
REINVESTMENT PRIVILEGE :
A service that most mutual funds offer
whereby a shareholder's income dividends and
capital gains distributions are
automatically reinvested in additional
shares. See Automatic Reinvestment.
RELATIVE VOLATILITY :
A ratio of a portfolio's standard deviation
to the standard deviation of a benchmark
index. See Volatility Measures.
REPATRIATION CONVERSION OF FOREIGN
CURRENCY TO AN INVESTOR'S BASE CURRENCY
:
Rupee-Cost-Averaging With
rupee-cost-averaging, you invest a fixed
amount on a regular basis - regardless of
the current market trends. The investor buys
more shares when the price is low and fewer
shares when the price is high; the overall
cost is lower than it would be if a constant
number of shares were bought at set
intervals. Rupee-cost-averaging does not
assure a profit or protect against a loss in
a declining market. You must continue to
purchase shares both in market ups and
downs. The goal of rupee-cost-averaging is
to attain a lower average cost per share.
REPO :
Sale of Securities with simultaneous
agreement to repurchase them at a later
date.
REPURCHASE :
Buying back/ cancellation of the units by a
fund on an ongoing basis or for a specified
period or on maturity of a scheme. The
investor is paid a consideration linked to
the NAV of the scheme.
REPURCHASE DATE /PERIOD :
In the case of close-ended schemes, the
specified date on which or period during
which the investor can redeem units held by
him in the scheme before the maturity of the
scheme.
REPURCHASE PRICE :
The price of a unit (net of exit load) that
the fund offers the investor to redeem his
investment.
RETURNS :
The dividend and capital appreciation
accruing to the investor on the investment
held by him.
REVERSE REPO :
Purchase of securities with simultaneous
agreement to sell them at a later date.
RISK ADJUSTED RETURNS :
Generally, the expected returns from an
investment are dependent on the risk
involved in the investment. For the purpose
of comparing returns from investments
involving varying levels of risk, the
returns are adjusted for the level of risk
before comparison. Such returns (reduced for
the level of risk involved) are called
risk-adjusted returns.
SAPs :
Special Purpose Vehicles approved by the
appropriate authority or the Government of
India.
SALE PRICE :
The price at which a fund offers to sell one
unit of its scheme to investors. This NAV is
grossed up with the entry load applicable,
if any.
SALES CHARGE :
Fee on the purchase of new shares of a
mutual fund. A sales charge is similar to
paying a premium for a security in that the
customer must pay a higher offering price.
Sometimes called a load.
SCHEME :
A mutual fund can launch more than one
scheme. With different schemes, in spite of
there being a common trust, the assets
contributed by the unit holders of a
particular scheme are maintained and managed
separately from other schemes and any
profit/loss from the assets accrue only to
the unit holders of that scheme.
SEBI :
The Securities and Exchange Board of India.
SEBI REGULATIONS :
Securities and Exchange Board of India
(Mutual Funds) Regulations, 1996 or such
other SEBI (MF) Regulations as may be in
force from time to time and would include
Circulars, Guidelines etc., unless
specifically mentioned to the contrary.
SECONDARY MARKET :
The market where the securities are traded
i.e purchased or sold after they have been
initially offered to the public through a
public offer in the primary market.
SECTOR ALLOCATION :
That portion of a fund which invests in
narrowly defined segments of the economy,
i.e. utilities, healthcare services,
telecommunications, etc.
SECTOR FUNDS :
Sector funds invest in the stocks of one
specific sector of the economy, such as
health care, chemicals, or information
technology.
SECURITY :
Generally, an instrument evidencing debt of
or equity in a common enterprise in which a
person invests on the expectation of
financial gain. The term includes notes,
stocks, bonds, debentures or other forms of
negotiable and non-negotiable evidences of
indebtedness or ownership.
SHARE PRICE :
The value of one share in a listed company
fund. With most funds, the NAV is calculated
every day, because the value of a fund's
securities changes every day in response to
the movements of the stock, bond and money
markets. For some funds, share price is
calculated on an hourly basis.
SHARE HOLDER :
The owner of one or more shares of stock in
a corporation. Shareholder rights can vary
according to the articles of incorporation
of the by-laws of a particular company.
SHARPE RATIO :
The Sharpe ratio measures the risk-adjusted
return of a fund. Simply put, the ratio
measures the variability of ' excess
returns' (defined by returns of the fund
over the 'risk less' 91 day T-bill).
Mathematically, the formula takes a fund's
return in excess of a risk-free investment
and divides this by the standard deviation
of the returns. The higher the Sharpe ratio,
the better the fund.
SPREAD :
The difference between the rates at which
money is deposited in a financial
institution and the higher rates at which
the money is lent out. Also, the difference
between the bid and ask price for a
security.
SUBSIDY :
A financial contribution by government
(including any form of income or price
support) that also confers a benefit to the
recipient (i.e., producers of goods or
services or buyers of goods). Many types of
government practices constitute a financial
contribution, including traditional forms of
subsidies such as grants and loans, as well
as foregone revenues such as tax credits.
SYSTEMATIC INVESTMENT PLAN :
Many mutual funds offer investment programs
whereby unitholders can invest. The
Unitholders of the scheme can benefit by
investing specific Rupee amounts
periodically, for a continuous period. The
SIP allows the investors to invest a fixed
amount of Rupees every month or quarter for
purchasing additional units of the scheme at
NAV based prices.
SYSTEMATIC WITHDRAWAL PLANS :
Many mutual funds offer withdrawal programs
whereby unitholders receive payments from
their investments. These payments are
usually drawn from the fund's dividend
income and capital gain distributions, if
any, and from principal only when necessary.
SYSTEMATIC TRANSFER PROGRAM (STP)
:
A plan that allows the investor to give a
mandate to the fund to periodically and
systematically transfer a certain amount
from one scheme to another.
STANDARD DEVIATION :
A statistical measurement of the dispersion
of a fund's return over a specified time
period. Investors may examine historical
standard deviation in conjunction with
historical returns to decide whether a
fund's volatility would have been acceptable
given the returns it would have produced. A
higher standard deviation indicates a wider
dispersion of past returns and thus greater
historical volatility. Standard deviation
does not indicate the absolute performance,
but merely indicates the volatility of its
returns over time.
TAKEOVER :
A change in the controlling interest of a
corporation. A takeover may be a friendly
acquisition or a hostile bid. A hostile
takeover is usually attempted through a
public tender offer.
TAXABLE EQUIVALENT YIELD :
The interest rate return which must be
received on a taxable security to provide
the holder the same after-tax return as that
earned on a tax-exempt security.
TERM :
The time during which interest payments will
be made on a bond or certificate of deposit.
TOTAL RETURN :
Return on an investment, taking into account
capital appreciation, dividends or interest,
and individual tax considerations adjusted
for present value and expressed on an annual
basis.
TRADE DATE :
The actual date on which your shares were
purchased or sold. The transaction price is
determined by the closing Net Asset Value on
that date.
TRANSACTION CUTOFF TIMINGS :
Currently 2 P·m· on all working days.
TRANSACTION DAY :
A Transaction day ( Day 'T' commences after
the previous working day's cut off time to
the following working day's cut off time.
Presently 'T' day commences after 2 p.m. of
the previous working day and ends at Z p.m.
of the following working day.
TRANSACTION SLIP :
A brief form to be filled at the time of
additional purchases or redemption.
TRUSTEE :
A person or a group of persons having an
overall supervisory authority over the fund
managers. They ensure that the managers keep
to the trust deed, that the unit prices are
calculated correctly and the assets of the
funds are held safely.
TRUST DEED :
The Trust Deed entered into on April 24,
1995 between the Sponsor and the Trustee,
and any amendment thereof.
TRUST FUND :
The corpus of the Trust, unit capital and
all property belonging to and i or vested in
the Trustee.
TURNOVER :
The extent to which the fund's portfolio is
turned over during the course of a year.
High turnover results in greater investment
expenses and therefore in an erosion of the
value of share assets.
TURNOVER RATE :
A measure of the fund's trading activity
calculated by dividing total purchases or
sales of portfolio securities (whichever is
lower) by the fund's net assets over a
period of time.
UNDERWRITER :
The organisation that acts as the
distributor of an initial offer share to
broker/dealers and investors and undertakes
to subscribe to any under-subscription of
the offer.
UNIT :
The interest of the investors in any of the
plans of the Scheme which consists of each
Unit representing a share in the assets of
the corresponding plan of the Scheme.
UNIT HOLDER :
A person who holds Unit(s) under any plan of
the Scheme.
UNIT HOLDER OF RECORD :
Unitholders whose names appear on the
unitholders register of the concerned plan/
(s) on the date of determination of
dividend, subject to realisation of the
proceeds towards subscription.
VALUATION :
Calculation of the market value of the
assets of a mutual fund scheme at any point
of time
VALUE DATE :
The date on which a foreign exchange
transaction or a cash movement takes place.
Can be used interchangeably with settlement
date.
VALUE STOCKS :
Stocks that are considered to be undervalued
based upon such ratios as price-to-book or
price-to-earnings (P/E). These stocks
generally have lower price-to-book and
price-earnings ratios, higher dividend
yields and lower forecasted growth rates
than growth stocks.
VERTICAL INTEGRATION :
This is where a company merges or takes over
other companies in the same supply chain. If
a shoe manufacturer, takes over his supplier
it would be vertical integration.
VOLATILITY :
In investing, volatility refers to the ups
and downs of the price of an investment. The
greater the ups and downs, the more volatile
the investment.
VOLUNTARY PLAN :
A flexible plan for capital accumulation,
involving no specified time frame or total
sum to be invested.
VOLATILITY MEASURES :
Volatility measures the variability of
historical returns. Relative Volatility,
Beta, and R"2" compare a portfolio's total
return to those of a relevant market,
represented by the benchmark index. Standard
Deviation is calculated independent of an
index.
WORKING DAY :
Any day, provided such day is not a Saturday
or a Sunday or a Principal Pnb Asset
Management Company Private Limited Head
Office holiday or any day on which Banks in
Mumbai and / or The Stock Exchange, Mumbai
and National Stock Exchange are closed for
transactions or a day on which sale and
repurchase of units is suspended by the AMC
or a day on which normal business could not
be transacted due to storms, floods, bandhs,
strikes etc., subject to modifications by
Principal Pnb Asset Management Company
Private Limited from time to time.
Yield Curve :
The relationship between time and yield on
securities is called the Yield Curve. The
relationship represents the time value of
money - showing that people would demand a
positive rate of return on the money they
are willing to part today for a payback into
the future.
Year to Date (YTD) :
A time period in a calendar year starting
from the first of January and ending on the
current date.
Yield to Maturity (YTM) :
Rate of return anticipated on a bond if held
until maturity. YTM is expressed as an
annual rate. The YTM factors in the bond's
current market price, par value, coupon
interest rate and time to maturity.
Portfolio yield is weighted average YTM of
the securities.
Zero Coupon Bond :
A bond that is sold at a fraction of its
face value. It does not, however, provide
periodic interest payments but pays
principal upon maturity.