Glossary

Some of the commonly used terms in the industry are explained here.

Advisor (same as Investment Advisor)
Your financial consultant who gives professional advice on the fund's investments and to supervise the management of its assets.

Appreciation
When an investment increases in value, it appreciates. For example, an equity share whose price goes from Rs. 20/- to Rs. 25/- has appreciated by Rs. 5/-.

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.

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.

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 using extra units earned through dividends.

Annualized Return
A term used to show the return by a fund over the year.

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.

Barter
The exchange of goods and services for other goods and services without the use of money.

Bid or Sell Price
The price at which a mutual fund’s units are redeemed (bought back) by the fund. The bid or redemption price means the current net asset value per unit, less any redemption fee or sales load.

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.

Capital
This is the amount of money you have invested.

Capital Gain
Profit from a sale of an investment constitutes a capital gain. For example, if you bought a share of stock for Rs. 10/- and later sold it for Rs. 17/-, you would have a capital gain of Rs. 7/-.

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.

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 units.

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.

Custodian/Trustee
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.

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.

Diversification
The policy of spreading investments among a range of different securities to reduce the risks inherent in investing.

Dividend
When companies pay part of their profits to shareholders, those profits are called dividends. A mutual fund's dividend is money paid to shareholders from investment income the fund has earned. The amount of each share's dividend depends on how well the company does.

Exchange of Units
The right to transfer investments from one fund into another managed by the same Asset Management Company

Expense Ratio
The ratio of total expenses to net assets of the fund. Expenses include management fees, the cost of shareholder mailings and other administrative expenses.

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.

Fiscal Year
An accounting period consisting of 12 consecutive months.

Fixed Income Fund
A mutual fund whose portfolio consists primarily of corporate and government securities (money market). These funds generally emphasize on income rather than growth.

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.

Institutional Investor
An institutional investor is a professional money manager whose job is to invest in units and other assets on behalf of their respective concerns.

International Fund
A fund that invests in securities traded in markets outside Pakistan.

Investment Objective
The financial goal (long-term growth, current income, etc.) that an investor or a mutual fund pursues.

Investment Officer
Your financial consultant who gives professional advice on the fund's investments and to supervise the management of its assets.

Issued Share Capital
This is the total number of shares a company has made publicly available.

Lessee
The entity that makes lease payments. Has the right of possession and use of property under the terms of the lease.

Lessor
The entity that receives lease payments. Leases property / assets.

KIBOR
KIBOR stands for Karachi Inter Bank Open-market 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 Karachi. Money can be borrowed overnight or for a period of in excess of five years. The most often quoted rate is for six month KIBOR. ‘6 month KIBOR’ tends to be used as a yardstick for lenders involved in high value transactions.

Lien
A type of security instrument (i.e., a tax lien), placed against property, marking it as collateral 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
If you can generally buy or sell an asset readily, or convert it to cash readily, then that asset is considered “liquid.”

Load
A sales charge or commission assessed by certain mutual funds (“Sales Load”) to cover their selling costs.

Load Fund
A mutual fund that levies a sales charge, which is included in the offering price of its shares, and is sold by a broker or salesman. A front-end load is the fee charged when buying into a fund; a back-end load is the fee charged when getting out of a fund.

Low-Load Fund
A mutual funds that charges small commission, usually 1.5% or less, for the purchase of its shares.

Management Fee
The amount that an Asset Management Company (AMC) charges for management of the fund’s portfolio. In general, this fee ranges from 0.5% to 3.00% of the fund’s 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 such a market.

Maturity
This is the length of time (term) before a debt instrument, such as a bond, is due to be repaid in full.

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.

Net Asset Value (NAV)
Also known as NAV, this is the unit price (or rupee value) of one unit of a mutual fund. NAV is calculated at the end of every business day. It is calculated by adding up the value of all the securities and cash in the mutual fund's portfolio (its assets), subtracting the fund's liabilities, and dividing that number by the number of units that the fund has issued. It does not include a sales charge. The NAV increases (or decreases) when the value of the mutual fund's holdings increase (or decrease).

Net Worth
A person’s net worth is equal to the total value of all possessions, such as residential properties, stocks, bonds, and other securities, minus all outstanding debts, such as mortgage and revolving credit lines.

No-Load Fund
A commission-free mutual fund that sells its units at NAV, either directly to the public or through an affiliated distributor, without the addition of a sales charge.

Offer Document
An official document that an asset management company publishes, describing the intricate details of the mutual fund in the offering.

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.

Premium
A bond premium is the amount by which a bond sells above its par (face) value. For insurance, the premium is the amount you pay for your insurance policy.

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

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.

Rate of Return
The total proceeds derived from the investment per rupee initially invested. The rate of return is expressed as a percentage.

Record Date
The date the fund determines who its unit holders are; "unit holders of record" who will receive the fund's income dividend and/or net capital gains distribution.

Redeemable
Preferred shares or bonds that give the issuing corporation an option to repurchase securities at a stated price. These are also known as callable securities.

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.

Regional Fund
A mutual fund that concentrates its investments within a specific geographic area, usually the fund's local region. The objective is to take advantage of regional growth potential before the national investment community does.

Registrar (also Transfer Agent)
The organization that mutual funds employ to prepare and maintain records relating to unit holder accounts. Like ABL AMC some mutual fund groups operate in-house transfer agencies.

Reinvestment Date
The date on which a share's dividend and/or capital gains will be reinvested (if requested) in additional fund shares units.

Securities
This is another word for stocks, bonds, and short-term investments.

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.

Systematic Investment Plan
Many mutual funds offer investment programs whereby unit holders can invest on a regular interval.

Systematic Withdrawal Plans
Many mutual funds offer withdrawal programs whereby unit holders receive payments from their investments on a regular interval. These payments are usually drawn from the fund's dividend income and capital gain distributions, if any, and from principal only when necessary.

Total Return
The performance of an investment, including yield (dividends, interest, capital gains) as well as changes in per unit price, calculated over a designated period of time. Assuming reinvestment of capital gains and income distributions, multiply the number of units owned by the net asset value per unit.

Trade Date
The actual date on which your units shares were purchased or sold. The transaction price is determined by the closing Net Asset Value on that date.

Transfer Agent (also Registrar)
The organization that mutual funds employ to prepare and maintain records relating to unit holder accounts. Like ABL AMC some mutual fund groups operate in-house transfer agencies.

Trustee
One designated to hold property for another, pending the performance of an obligation..

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.

Yield
Income or return received from an investment, usually expressed as a percentage of market prices, over a designated period. For a mutual fund, yield is interest or dividend before any gain or loss in the price per share. See Total Return.