Glossary

Adjustment made to bond prices to allow for the fact that interest is paid at set intervals but earned on a daily basis.

This describes any investment other than equities and fixed income. Property, private equity and hedge funds are all examples of alternative investments.

The annual fee, usually calculated on a daily basis which covers the cost of running the fund.

An annualised return provides a geometric average annual return over a given period. For example, if a fund has produced a return of 75% over 5 years this means that on average the fund would have produced an annualised return of 11.8% each year.

The proportion of investment or assets placed in various geographic regions, industry sectors or types of security.

Any possession that has a value. The investments within a fund are assets, these may include shares, bonds and/or cash.

A statistic relating to bond funds which provides the weighted-average maturity of all the bonds within a fund. The maturity of a bond is the time at which the principal of a bond is repayable and it ceases to exist.

Funds investing in shares and bonds.

This is one target against which investment fund performance can be measured. A benchmark, usually stipulated at the outset of an investment process, can be a stockmarket index or a peer group. Many fund managers aim to beat their benchmark by one or two percentage points every year. To do so, they tend to construct a portfolio that is generally in line with their benchmark, i.e. stock or country weightings will reflect those of the chosen benchmark. To add value, fund managers will then over or underweight assets relative to the benchmark.

A statistic that indicates a fund's historic volatility relative to its benchmark index:

A fund with a beta of 1 will be expected to move in line with its benchmark index

A fund with a beta of over 1 will be expected to be more volatile than any move in its benchmark index

A fund with a beta of less than 1 will be expected to be less volatile that its benchmark index

The difference between the buying and selling price of shares and units, largely attributable to the initial charge.

With the exception of shares in the Reserve Funds, an initial charge, payable to The Manager, may be added to the price of Class A Shares and they are issued in registered and bearer form. Unless otherwise requested, Class A Shares will be issued in r3

Class B Shares are only available through BlackRock. Class B Shares have a contingent deferred sales charge deducted from their redemption proceeds and are only issued in registered form.

Class E Shares will be available in certain countries, through specific distributors selected by The Manager. Class E Shares have a sales charge added to their purchase price and are only issued in registered form.

A common stock of an established company that has a long record of stable growth and very substantial assets. Named after a high denomination gambling chip.

A bond is a loan agreement with a company or a Government (ie. the company or government issues bonds) whereby there is an arranged repayment to the investor when the loan matures and the investor receives interest throughout the life of the loan. See Gilt edged security.

Also known as a scrip issue. This is when a company issues free shares to a company's existing shareholders. No money changes hands and the share price falls pro rata. This is usually used as an exercise to make the shares more marketable (ie. cheaper per share and therefore more attractive to small investors).

A method of portfolio construction determined primarily by stock selection. Fund managers will assess the quality and future prospects of a stock, analysing factors such as the strength of management, market share, pricing power, which will all determine future earnings growth. Sector and country weightings will reflect the manager's individual stock selections and will not be driven by macroeconomic factors.

A term relating to performance that provides the return of a fund from 1st January to 31st December each year.

Option providing its holder with the right to buy an investment at a future date at a price agreed now.

A fund seeking capital growth aims to maximise the value of the capital sum invested rather than producing any income.

Firms conducting investment business are required to have sufficient funds of their own. The European Union's Capital Adequacy Directive, which sets minimum levels of capital for UK's financial services companies, came into effect on 1st January 1996.

Arises when an investment is sold at a higher price than originally paid.

Also known as Bonus Issue or scrip issue. This is when a company issues free shares to a company's existing shareholders. No money changes hands and the share price falls pro rata. This is usually used as an exercise to make the shares more marketable (ie. cheaper per share and therefore more attractive to small investors).

A closed end fund, usually known as an Investment Trust, has a fixed number of shares or units in issue, although a C-share issue can be undertaken to expand the participation in the fund. This compares with an open-ended fund, such as a unit trust, which3

Are funds which take money from a number of private investors and pool it together in one fund. This enables investors to invest in a larger number of individual investments than would otherwise be the case and therefore to avoid the risk of investing only in a few companies' shares. See Unit trust and Open ended.

Charge made by a firm for their services.

Written confirmation of a purchase, a switch between funds or redemption (sale) of shares.

This is sent out to an investor by firms such as fund managers and stockbrokers when a transaction has been completed. It is a legal document which provides the client with all the details of the deal that was made on his behalf.

Debt obligations issued by corporations as an alternative to offering equity ownership by issuing stock. Like most municipal bonds and Treasuries, most corporate bonds pay semi-annual interest and promise to return their principal when they mature. Maturities range from 1 to 30 years.

Correlation shows the strength of a linear relationship between two instruments, be they stocks, indices or funds. A perfect positive correlation, when the investments behave in exactly the same manner, is represented by 1, a perfect negative correlation; i.e. the investments move in exactly opposite ways. 0 represents no linear correlation; i.e. the investments behave independently of one another.

The percentage rate of interest payable on a bond. The figure shown is always the pre-tax (gross) rate.

A way of assessing the relative risk of default on repayment by an issuer of bonds as defined by credit rating.

The risk that there may be default on payment of interest or capital by a borrower.

The annual interest on a bond divided by the current market price.

Similar to a forward currency contract. The difference is that futures contracts are standardised for the convenience of market participants and quoted on an exchange. To reduce the risk of one party to the contract defaulting, the accrued profit or loss

The use of currency futures and options transactions to protect the value of investments and cash against fluctuations in exchange rates relative to the currency in which the fund is denominated.

Buying and selling bonds, shares or units or switching shares or units between funds.

The currency in which shares or units are brought or sold (usually the currency of denomination of the shares or units).

Derivative products is the collective term applied to certain types of financial instruments such as futures and options. Their value derives from other commodities, indices or individual shares.

Effect on earnings per share and book value per share if all convertible securities were converted or all warrants or stock options were exercised.

The income or capital gain made by a mutual fund that is paid to the fund's investors.

The allocation of assets among various types of investments.

This is the income you receive as a shareholder from a company. It is a share of the profits made by a company that it has chosen to distribute to its shareholders. Returns vary from year to year depending on the company's profits or operational strategy.!

Dividends that are reinvested in the security that generated them.

This ratio represents the amount of income a company pays in dividends compared with its current share price. It is calculated by dividing the annual dividend per share of a company by its current share price. The ratio does not take into account capital gains or losses associated with the stock.

The location of a fund for legal purposes.

A term applying to bonds or portfolios showing the length of time to maturity. This will give an indication of the relative sensitivity of the value of the bonds to short, medium or long-term interest rates (for example, a short duration indicates that th3

Four times the last quarter's earning divided by the number of shares outstanding.

Another name given to shares. Shareholders are the owners of a company who can vote on important matters such as the appointment of directors. They also participate in the increased value of the company, and therefore its shares, if the company is successful.

"Ethical investment" is the term given to investment in companies which make a positive contribution to the world rather than to companies which harm the world, its people and wildlife. For example, someone may avoid investing in a company because it produces alcohol or is thought to exploit labour from poor countries.

Date a split or dividend is reflected in the price of the security (if you buy a stock on the ex-dividend date, you are not entitled to the dividend); for splits, this is the trading day after the distribution is made.

Customers who do not want the firm's advice but wish to be able to execute transactions by instructing the firm.

Any return over the return produced by cash.

The displayed value on a debt security/bond also called principal or par value.

System whereby the rate of a country's currency is established at a particular level and is not allowed to move from that level.

Debt securities or IOUs for borrowed money such as bonds. They obligate the borrower to pay the owner interest during the term of the loan and to return the principal or face value, when the loan matures. A variety of institutions issue debt obligations including the Government, publicly held companies, banks, and savings and loans.

The most commonly used yield calculation, and divides the annual income paid by the market price.

The term used to describe how a currency's exchange rate is determined by market forces it is free to 'float' up or down as the market dictates.

An agreement to buy or sell a currency at a future date at a previously agreed price.

System for pricing units where the manager buys or sells the assets underlying the units at the next price fix for units, after an instruction from an investor who pays that price.

The main financial services regulatory body in the United Kingdom, formerly known as the Securities and Investment Board (SIB). FSA is the designated agency under the Financial Services and Markets Act 2000 and the regulator of exchanges, clearing houses, recognised professional bodies, banks, wholesale money markets and certain investment businesses.

Previously known as the Financial Services Act and became operational in April 1988.The legislation that introduced a new regime of investor protection.

A fund that simultaneously invests in several funds, thereby reducing the performance risk inherent in any one fund. The manager of the fund selects which funds to invest in, but not the individual stocks.

These are investment funds which issue a fixed number of shares.

The total value of assets under management in a fund.

These are collective investment schemes, in which the number of units in the fund varies from day to day according to the number of people wishing to buy or sell their holding in the fund.

This is a contract where you are obligated to buy or sell a commodity at a future date, at a fixed price which is agreed now. Whilst wealthy private individuals trade them, futures are normally traded by institutions as a substantial amount of risk can be3