| Objective |
A fund's investment objective states the financial
goals it is aiming for, such as "growth," or "income." |
| Options Clearing Corporation (OCC) |
A clearing corporation owned jointly by the exchanges
dealing in listed options. OCC is the central or main clearing corporation
for listed options. Options traded on any SEC-regulated exchange can
be settled through OCC. |
| OCC Prospectus |
A prospectus published by the OCC and available to
option traders upon request. It contains information on trading options
and the risks involved. |
| Odd Lot |
A quantity of securities that is smaller than the
standard unit of trading, which is usually 100 shares. |
| Offer for Sale |
A method of bringing a company to the market. The
public can apply for shares directly at a fixed price. A prospectus
containing details of the sale must be printed in a national newspaper. |
| Offer Price |
The price at which the market maker will sell shares
to investors. |
| Open-End Fund |
An investment company that pools money from shareholders
and invests in a variety of securities, including stocks, bonds, and
money market instruments. They offer growth, income, or both, and
the opportunity to invest in everything from a country or industry
to the movements of the markets themselves. A mutual fund continually
sells new shares to investors and redeems those that are tendered
by shareholders. (Also known as "mutual fund.") |
| Open-End Management Company |
A management company that is constantly issuing new
shares. |
| Opening Transaction |
Refers to a customer either buying or selling an option
contract to open a new position. |
| Operating Expenses |
The normal costs a mutual fund incurs in conducting
business, such as the expenses associated with maintaining offices,
staff, and equipment. There are also expenses related to maintaining
the fund's portfolio of securities. These expenses are paid from the
fund's assets before any earnings are distributed. |
| Option |
A contract that entitles the buyer to buy (call) or
sell (put) a predetermined quantity of an underlying securities for
a specific period of time at a pre-established price. |
| Option Adjustments |
Changes made in the terms of an option contract on
ex-dividend date when the underlying stock pays a cash or stock dividend
or when there is a stock split, etc. |
| Option Agreement |
The agreement the customer must sign to trade options
in which the customer agrees to abide by the rules of the listed option
exchanges. |
| Option Class |
The group of options, put or call, with the same underlying
security. |
| Option Fund |
A fund which trades options to increase the value
of its shares. The fund may either be conservative or aggressive.
A conservative fund, commonly called an "option income fund,"
may buy stocks and increase shareholders' income through the premium
earned by writing options on the stocks within the portfolio. An aggressive
fund, commonly called an "option growth fund," may buy options
in securities that the fund manager thinks will fall or rise sharply
in the near term. |
| Option Series |
The group of options having the same strike price,
expiration date, and unit of trading on the same underlying stock. |
| Order Book Official (OBO) |
An employee of certain exchanges who executes limit
orders on behalf of the membership. |
| Order Department |
The department within a brokerage firm that is responsible
for sending the customers' orders to the proper market for execution. |
| Ordinary Shares |
The most common form of share. Holders receive dividends
which vary in amount in accordance with the profitability of the company
and recommendations of the directors. The holders are the owners of
the company. Also known as Common Stock. |
| Original Issue Zeros |
Zero-coupon securities originally issued by a corporation,
government, or governmental subdivision as zeros. A zero-coupon security
not created by severing interest and principal payments from a preexisting
bond. |
| OTC Bulletin Board |
An electronic service that provides selected quotes
on over-the-counter stocks. |
| Out-of-the-Money |
Options with no intrinsic value such as a call when
the market price is below the strike price of the call or a put when
the market price is above the strike price of the put. |
| Over-The-Counter Market (OTC) |
Comprised of a network of telephone and telecommunication
systems over which unlisted securities and other issues trade. |
| Pacific Basin Fund |
A fund that invests primarily in the stocks of companies
located in the Pacific Basin, which includes Australia, Hong Kong,
Japan, Malaysia, New Zealand, Singapore, and Taiwan. |
| Pacific Clearing Corporation (PCC) |
The clearing corporation of the Pacific Stock Exchange. |
| Pacific Ex Japan Funds |
A fund that invests primarily in the stocks of companies
whose primary trading markets or operations are concentrated in the
Pacific region (including Asian countries), and which specifically
does not invest in Japan. |
| Pacific Stock Exchange (PSE) |
This exchange operates in San Francisco and Los Angeles. |
| Par Value |
A value that a corporation assigns to its security
for bookkeeping purposes. |
| Participating Preferred |
Preferred stock whose holders may "participate"
with the common shareholders in any dividends paid over and above
those normally paid to common and preferred stockholders. |
| Pass-Through Security |
Instrument representing an interest in a pool of mortgages.
Pass-throughs pay interest and principal on a monthly basis. |
| Passive Income |
Income from an investment in a trade or business in
which the investor does not "materially participate." Material
participation requires regular, continuous and substantial involvement
in the operations of the activity. |
| Payment Date |
The day on which a mutual fund pays income dividend
or capital gains distributions to its shareholders. |
| Penalty Plan |
A mutual fund accumulation plan in which sales fees
for the entire obligation are deducted from shares purchased in the
first few years that the plan is in effect. In the event that the
investors redeem the shares after a short time, only a small portion
of the purchase price will be refunded. Sales charges and penalty
plans are regulated by the Investment Company Amendments Act of 1970. |
| Penny Stocks |
Extremely low-priced securities that trade over the
counter. |
| PEPS (Personal Equity Plans) |
These allow investment in a number of shares and carry
various tax benefits, including the receipt of dividends without paying
income tax on the income and sales free from capital gains tax on
the profit. |
| Per capita |
A method of dividing an estate that gives one equal
share to each person in a class of people who are all related in the
same degree of relationship to the deceased person. For example, all
grandchildren take equal shares regardless of how many children the
deceased person had. |
| Per stirpes |
A method of dividing an estate among a class of people
based on representation at a closer degree of relationship to the
deceased person than the degree of the class itself. For example,
grandchildren take only the shares that their respective parents would
have taken. |
| Performance |
A measure of how well a fund is doing. Two commonly
used mutual fund performance measures are yield (which measures dividends)
and total return (which measures dividends plus changes in net asset
value). |
| Periodic Payment Plan |
A plan in which an investor agrees to make monthly
or quarterly investments in a mutual fund as a method of accumulating
shares over a period of years. Fixed periodic contributions result
in dollar cost averaging. |
| Personal Assets |
Assets acquired for your use and enjoyment, including
your home, automobiles, furnishings and similar possessions. |
| Phantom Interest |
The yearly accreted interest that a zero-coupon security
is presumed to pay each year you hold it even though payment of interest
isn't made until the zero matures. |
| Pink Sheets |
Daily publication providing dealer names and quotes
on penny stocks. It is actually printed on pink paper. |
| Plus-Tick Rule |
SEC rule that states that no short sale may be made
when the last trade on the security was a minus tick. |
| Point |
A price movement of one full increment. For example,
a stock rises one point when its price goes from 23 to 24. |
| Pooling |
Pooling is the basic concept behind mutual funds.
A fund pools the money of thousands of individual and institutional
investors who share common financial goals. The fund uses this pool
to buy a diversified portfolio of investments |
| Portfolio |
A collection of securities owned by an individual
or an institution (like a mutual fund). A fund's portfolio may include
a combination of stocks, bonds, and money market securities. |
| Portfolio Manager |
The individual who is responsible for managing a mutual
fund's assets. |
| Portfolio Theory |
The management of a portfolio based on quantitative
analysis, where the selection of securities in a portfolio is made
as a result of a mathematical assessment of the risk and return against
the market as a whole and/or by reference to the risks or returns
determined by the client for the portfolio. Portfolio theory will
assess risk-free returns and the likelihood of returns made by market
timing, determining the benefits of investments by their volatility
(beta coefficient) or dispersion (risk) and the capital asset pricing
model. |
| Portfolio Turnover |
A measure of the trading activity in the fund's portfolio
of investments. In other words, how often securities are bought and
sold. |
| Position Limits |
The maximum number of option contracts that may be
held on the same side of the market for a particular security. The
number may vary depending on the security. |
| Pre-Existing Conditions |
Medical conditions that existed, were diagnosed or
were under treatment before you took out a policy. Medical, disability
and long-term care insurance policies may limit or exclude benefits
payable for such conditions. |
| Pre-Tax Rate of Return |
The rate of return before income taxes (and any applicable
tax credits) are taken into account. See After-tax rate of return. |
| Precious Metals Fund |
A fund that seeks an increase in the value of its
holdings by investing at least two-thirds of its portfolio in securities
associated with gold, silver, and other precious metals. Also known
as "gold funds." |
| Preemptive Right |
A right, sometimes required by the issuer's corporate
charter, by which current owners must be given the opportunity to
maintain their percentage ownership if additional shares of the same
class are issued. Additional shares of the soon-to-be issued security
are offered to current owners in proportion to their holders before
the issue can be offered to others. Usually one right is issued for
each outstanding share. The rights are used to subscribe to the additional
shares at a predetermined cash amount. |
| Preference Shares |
These are normally fixed-income shares whose holders
have the right to receive dividends before ordinary shareholders but
after debenture and loan stockholders have received their interest. |
| Preferred Stock |
Stock that represents ownership in the issuing corporation
and that has prior claim on dividends. In the case of bankruptcy,
preferred stock has a claim on assets ahead of common stockholders.
The expected dividend is part of the issue's description. |
| Premium |
(1) If the market price of a new security is higher
than the issue price, the difference is the premium. If it is lower,
the difference is called the Discount. (2) The cost of purchasing
or selling a traded option. |
| Premium Bond |
A note or bond selling at a price above par. |
| Prenuptial Agreement |
An agreement entered into by prospective spouses before
marriage, in which the property rights of one or both are determined. |
| Prepayment Risk |
The possibility that, as interest rates fall, homeowners
will refinance their home mortgages, resulting in the prepayment of
GNMA securities, and possible decline in net asset values of GNMA
Funds. |
| Price Spread |
A spread in which the two options have the same expiration
date but have different exercise or strike price. |
| Price/Earnings Ratio |
The current share price divided by the last published
earnings per share, where earnings per share is net profit divided
by the number of ordinary shares. |
| Primary Dealer |
Any of 40 firms recognized by the Treasury Department
as eligible to bid on Treasury and agency securities when they are
initially issued and to make a market for secondary buyers. |
| Primary Market |
(1) The initial offering of certain debt issues. (2)
The main exchanges for equity trading. |
| Principal |
a.) The amount of money that is financed, borrowed
or invested, generally to distinguish this amount from the interest
or other earnings derived from the principal. Earnings; b) A brokerage
firm when it acts as a dealer and marks up a purchase price or marks
down a sale price when reporting the execution. |
| Private Company |
A company which is not a public company and does not
offer its shares to the general public. |
| Private Placement |
An issue that is offered to a single or a few investors
as opposed to being publicly offered. |
| Privatization |
Conversion of a state run company to public limited
company status often accompanied by a sale of its shares to the public. |
| Probate |
Proceedings involving a court of law that pertain
to the administration and distribution of an estate. This includes
determination of the validity of a will, appointment of an executor
or administrator, and settlement of the estate. |
| Probate Price |
The price used to assess the value of shares for inheritance
tax purposes. Calculated on the "quarter up" principle.
That is, instead of taking the Mid Price in the Official List, the
difference between the two prices (bid and offer) given under "quotation"
is divided by four, and the result added to the lower of the two prices. |
| Professional Management |
The pool of shareholder dollars invested in a fund
is managed by full-time, experienced professionals who decide which
securities to hold, when to buy, and when to sell. |
| Program Trading |
Professional investors and institutions often use
computer-generated buying and selling programs as part of their trading
activities. These normally buy or sell shares, options or futures,
on the basis of market movements and operate automatically. Can cause
considerable market volatility. |
| Property Ownership |
How legal title to property is held (for example,
sole ownership, joint tenancy, tenancy by the entirety, tenancy in
common, or in trust). |
| Prospectus |
The official document that describes a mutual fund.
It contains information required by the Securities and Exchange Commission
on such subjects as the fund's investment objectives, policies, services
and fees. A prospectus must be given to every investor. In the US,
a more detailed document, known as "Part B" of the registration
statement, (or "Statement of Additional Information,") is
available at no charge upon request. |
| Proxy |
A form and a process for voting via the mail, permitting
stockholders to vote on key corporate issues without having to attend
the actual meeting. |
| Proxy Fight |
An attempt by a dissident group to take over the management
of a corporation. The group sends proxies electing them to the board;
the current management sends proxies favoring them. The shareholders
cast their votes by selecting one proxy or the other. |
| Public Limited Company (PLC) |
A public company limited by shares and having a share
capital, and which may offer shares for purchase by the general public.
Only PLC's may qualify for listing or trading on the USM on the London
Stock Exchange. |
| Public Market |
The listed exchanges through which zero-coupon investments
can be purchased and sold. |
| Public Offering Date |
The first day the new issue is offered to the public,
on or shortly after the effective date. |
| Purchase Price |
The amount paid to purchase a Treasury or agency obligation. |
| Purchasing Power Parity |
Purchasing power parity between two currencies exists
when their exchange rates are in equilibrium with each other, i.e.
their domestic purchasing powers at that exchange rate are equivalent
('at parity'). For instance, the exchange rate of £1 = $1.60
would be in equilibrium if £1 could buy the same amount of goods
and services in the UK as $1.60 would buy in the US. If indeed they
are equivalent in terms of purchasing power at that exchange rate,
one says that PPP holds. Otherwise one currency is overvalued with
respect to the other. PPP theory is important in international economics
and finance. The basic underlying idea is that arbitrage forces will
come into play if one currency is overvalued relative to the other,
and these will eventually lead to the equalisation of goods and services
prices internationally (taking into account the exchange rate). As
such, PPP theory is a 'law of one price'. In reality, PPP theory seems
to hold relatively well in the long-run, but is quite unreliable in
the short-run. It is especially deficient as a theory in that it cannot
explain the high volatility in exchange rates and prolonged divergences
from PPP. Other theories that build on PPP have been introduced which
are slightly more satisfactory - overshooting for example. Probably
a major reason for the unsatisfactory performance of PPP theory is
that international comparisons and estimates of the price of equivalent
baskets of goods and services are extremely difficult to make accurately. |
| Put |
An option that permits the owner to sell a standard
amount of an underlying security at a set price for a predetermined
period. |
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