Interest deemed to be earned on a security but not yet paid to the investor.
An intermediary, bank or other financial organisation that regularly performs services for another in a place or market to which the other does not have direct access. Intermediaries may have agents in foreign countries or on exchanges of which they are not members. Sometimes also referred to as correspondent.
The formal financial statement issued yearly by a public company. The report shows assets, liabilities, revenues, expenses and earnings. The report also shows the company's financial condition at the close of the business year and other basic information of interest to shareholders. The annual report is also the most widely-read shareholder communication. A semi-annual report is issued by a company for the first six months of its financial year.
If you die soon after you buy an annuity, it will not have paid out much. To guard against this you can choose an annuity with a guarantee period, say five or ten years. If you die within the guarantee period, the income may continue to be paid for the rest of the guarantee period, or it may be paid to your estate (and tax might be due on it).
An annuity is a regular income for the rest of your life. You buy an annuity with the fund you have built up in a money purchase pension fund. There are different types of annuity to suit your needs and circumstances.
The market price of a security: the ask price is the market price if you are buying and the bid is the price if you are selling.
The statement of the accounting firm's work and its opinion of the company's financial statements, especially if they conform to the normal and generally accepted practices of accountancy.
A pension top-up for an occupational pension. You pay contributions into a scheme run by your employer to boost your main pension.
Is a condensed financial statement showing the nature and amount of a company's assets, liabilities and capital on a given date. The balance sheet shows what the company owned, what it owed, and the ownership interest in the company of its shareholders.
A nickname investors give the stock market when security prices are generally declining over an extended period of time. Down markets got nicknamed bear markets because of the popular myth that bears attack with their paws pointing down. (See Bull Market)
The obligation of investment services firms to execute customer's orders at the best price available at the time the trade is entered.
The bid is the highest price anyone wants to pay for a security at a given time. (see Offer) . For collective investment schemes, the 'bid' price is the price at which you sell units of the fund. (See Spread).
A large holding or transaction of security - popularly considered to be 10,000 shares or more.
Securities of a big, well-known company that has a history of good earnings. Some examples of blue chip companies are Disney, Microsoft and British Telecom.
A long-term security in which the issuer agrees to pay the owner the amount of the face value on a future date and to pay interest at a specified rate at regular intervals.
These are new shares issued by a company to its existing shareholders, usually in a mathematical proportion to the number of shares already held. What the company is doing is turning part of its reserves it will have accumulated into issued capital. The shareholders do not pay for the new shares and appear to be no better off. However, in a 1 for 3 bonus issue, for example, the shareholders receive one new share for every three existing shares they own.
A nickname investors give the stock market when stock prices are generally rising over an extended period of time. The bull market got its name by the popular myth that bulls raise their heads up high when they charge. (See Bear Market).
The right of the issuer to redeem outstanding bonds before their scheduled maturity. Therefore a "callable bond" gives the option to the issuer to pay the face value of a bond before it matures.
Profit made on securities, either through dividends or by selling the securities for a higher price than they originally cost.
The loss on an investment when it is sold for less than it originally cost.
The value of a company obtained by multiplying the number of shares issued by their market price.
The actual piece of paper that is evidence of ownership of a share in a company or stock issued by a government.
The practice of persuading an investment holder to replace their existing investment (i.e. life policy endowment etc) with a similar product in order to benefit from the extra commission receivable. Sometimes also known as excessive trading.
The investment services firm's basic fee for purchasing or selling securities as an agent. Ask for a copy of the investment services firm's commission schedule which lists fees or charges you will be required to pay when buying or selling securities and when opening, operating and closing an account.
A tradable item that can generally be further processed and sold; includes industrial (metals), agricultural (wool, wheat, sugar, etc), and bulk (coal, iron ore) goods.
An official of an investment services firm whose role is to ensure that the entity complies with all the laws under which it operates and rules issued by the regulator.
The money value of a transaction (the number of shares multiplied by the price) before adding or deducting commission, stamp duty etc.
On the same day as a transaction takes place, an investment services firm sends to the investor a contract note detailing the transaction including full title of the security, price, stamp duty (if applicable), consideration, commission, time of deal etc.
Shares in Closed Ended Funds are not readily transferable on the market especially if they may not be listed on a securities exchange. Shares issued by such funds are bought and sold similar to ordinary shares. The capitalisation of these companies remains the same unless action is taken to increase the issued capital. (See Open Ended Funds)
These are financial products where money from a number of different investors are pooled and then invested by a fund manager according to specific criteria. The scheme or fund is divided into segments called 'units', which are to some degree similar to shares. Investors take a stake in the fund by buying these units - they will therefore become unit-holders. The price of a unit is based on the value of the investments the fund has invested in (Net asset value).
This period starts from the day on which you buy the investment. The investor is given a few days' time (such as 14 days) during which he/she can consider his investment again. Before the lapse of this period, the investor can, if he so wishes, withdraw from the transaction without normally incurring any extra charges.
The rate of interest paid by a fixed-interest bond. A 5% coupon implies that the bond pays 5% interest.
This is another term for banks.
The market price at any given time.
Someone who maintains assets on behalf of their owner. In the case of a minor, a custodian protects, manages and maintains assets until the individual reaches majority age, when the assets are turned over to him or her.
A sum owned by one person to another.
Person elected by shareholders, usually during an annual meeting, to serve on the Board of Directors of a company. Directors decide, among other matters, if and when dividends shall be paid.
The amount by which a security may sell below its par value. (See Premium).
An account in which the customer gives the investment services firm discretion to buy and sell securities, including selection, timing, amount and price to be paid or received.
The practice of putting money into a number of different investments. Investors diversify so they can reduce ex-dividend (xd or ex-div) when a potential purchaser will no longer be entitled to receive the company's current dividend, the right to which remains with the vendor.
The payment determined by the Board of Directors to be distributed pro rata among the shareholders of a company. The dividend varies with the profits of the company and may not be distributed if business is poor or if the directors determine to withhold earnings to invest in plants and equipment. Sometimes a company will pay a dividend out of past profits even if it is not currently operating at a profit.
A service in which the investment services firm has no responsibility for advising the investor on whether a particular transaction is suitable or not (for the investor). The investment services firm's responsibility is limited to executing the transaction on the investor's instructions.
EPS is the total profit that a company has made, divided up among the number of shares that rank for dividend. EPS is reported quarterly and is calculated by dividing the net profit after tax for the quarter by the number of shares in issue during that quarter.
Financial markets in Latin America (e.g. Brazil, Argentina), Africa, former communist countries in Eastern Europe and parts of Asia (e.g. Thailand).
See Ordinary Shares
A long-term loan issued in a currency other than that of a country or market in which it is issued. Interest is paid without the deduction of tax.
A synonym for 'without dividend'. A share is described the value is otherwise specified by the issuing company.
The value that appears on the face of the bond, unless the risk of their investments losing money. If you put your money into five shares and five bonds, for example, you're practising diversification. In effect, you're hoping that if one investment is not doing well, it will be offset by most of the other investments, which presumably are making money. Buying a collective investment scheme is one of the best ways to diversify. Collective investment schemes, because they are a collection of shares, bonds or other securities, are typically diversified investments. Face value is not an indication of market value (See Principal).
A document compiled by an investment services firm that details vital facts about an investor's financial circumstances and investment objectives. The investment services firm will rely on the information contained in a fact find to make appropriate investment recommendations to the investor.
A reasonable price for securities based on supply and demand.
A company's accounting year. Due to the nature of their particular business, some companies do not use the calendar year for their bookkeeping. Most companies though, operate on a calendar year basis.
A Fund Manager is usually a company whose line of business is investing in other companies and entities on behalf of a collective investment scheme. The scheme appoints the Fund Manager to buy and sell securities in accordance with the investment objectives.
A company's debts expressed as a percentage of its equity capital. High gearing means debts are high in relation to equity capital.
When a company sells shares of itself to the public to raise capital for the first time. The benefits are wholly or partly the value of a company as an operating business to determined by reference to the value of the units in the another company or individual. (See Goodwill) collective investment scheme.
The going-concern value of a company in excess of its asset value.
A contract with an insurance company where you take an income direct from your pension fund, while leaving most of it invested in the stock market or other asset-backed investments. Usually, the hope is that the returns on your invested fund will make up for all or most of the charges and any income withdrawn, and be enough to sustain your income. However, the fund value could fall as well as rise and any income you take, plus the charges, will reduce the value of your fund if they are more than the investment growth.
The amount of a company's authorized share capital that has actually been taken up (i.e. sold to investors).
A company whose shares are traded on the stock exchange and are able to be bought and sold by members of the public.
A market principal who assesses second by second the weight of buy and sell pressures and adjusts prices accordingly, thus encouraging dealing.
The last reported price at which the security sold.
Some occupational pensions and all retirement annuity contracts and personal pensions are money purchase pensions. Your contributions are invested in, for example, the stock market and the size of your fund depends on your contributions and how well your investments do. You buy an annuity with your pension fund to provide you with retirement income.
A document of title that can be freely negotiated. For example, cheques, in which the stated payee of the instrument can negotiate the instrument by either inserting the name of a different payee or by making the document 'open' by endorsing it (signing one's name), usually on the reverse.
Usually used in connection with collective investment schemes to mean net asset value per share. A collective investment scheme computes its assets daily, or even twice daily, by totalling the market value of all securities owned. All expenses are deducted, and the balance divided by the number of units held by the fund's investors. The resulting figure is the net asset value per unit.
A term used to describe collective investment schemes that have no sales charges.
Investors' money and investments are held in the name of the investment services firm on the client's behalf.
See Retail Investor
Only available through employers and run by pension scheme trustees. There are two types – salary-related (defined benefit) and money purchase (defined contribution).
The price at which a person is ready to sell. For collective investment schemes, the 'offer' price is the price at which you purchase units in the fund. (See Spread)
The Department of Social Services will pay your Old Age Pension based on your Social Insurance record.
Open-ended funds sell their own new units to investors, stand ready to buy back their old units, and are sometimes listed on a stock exchange. Open-ended funds are so called because their capitalisation is not fixed, they issue more shares depending on how much investors want to invest (in the fund).
You do not have to buy an annuity from your pension provider. You can shop around to compare rates and arrangements offered by other insurance companies and buy an annuity from another provider if you find a better deal – this is called the 'open-market option'.
Specific instructions for handling transactions.
The most common form of share. The holders are the owners of the company and receive dividends which vary in amount in line with the profitability of the company and recommendation of directors. Also referred to as equity".
See Face Value.
A business relationship in which two or more people agree to share the risks and profits of running a business.
A pension policy, available in the UK, that you take out yourself from an insurance company or financial institution and into which you pay contributions.
A group of shares, bonds or other investments owned by a collective investment scheme or individual investor.
These are normally fixed-income shares whose holders have the right to receive dividends before ordinary shareholders but after debt holders have received their interest.
The amount by which a bond may sell above its par value. May also refer, also, to redemption price of bond if it is higher than face value. (See Discount)
This is the term used to describe the world-wide efforts to combat money laundering. All investment services firms are obliged to follow strict rules to ensure that the local financial system is not used by criminals to launder their illegal monies. As part of this process, investment services firms must establish the identity of the investor with whom they are dealing - a process usually referred to as "knowing your customer" or "KYC" - by requesting the person to provide proof of identity and address and asking a number of questions.
The P/E ratio is a measure of the valuation of a company, based on the level of confidence investors have in the company. Generally, the higher the figure, the higher the confidence. It is a measure of the expected future earnings and is worked out by dividing the current share price by the last published Earnings Per Share.
The process by which a company's share or stock is issued for the first time. It is then sold to the public on the secondary market. (See Initial Public Offering)
A person on whose behalf an agent or broker acts. The term "principal" may also refer to a person's capital or to the face amount of a bond. (See Face Value)
A term used to describe an insurance company or other type of company responsible for putting a particular product together.
A person who is experienced in financial matters and therefore capable of investing with minimum or without the assistance of an investment services firm. (See Retail Investor)
A report on a company's financial status of its earnings or losses over a given period. The profit and loss account lists the income earned, expenses paid and the net profit available for reinvestment.
A document setting out an investment recommendation and advice and the reasons for this. Sometimes referred to as a suitability report.
A period of no or negative economic growth and high unemployment.
The price at which a bond may be redeemed before maturity, at the option of the issuing entity.
A body set up by law entrusted with overseeing the financial services sector. Sometimes it is also referred to as the Competent Authority. In Gibraltar, the regulator or competent authority for investment services is the Gibraltar Financial Services Commissioner.
Funnelling of profits back into a company to enhance its operations. An individual stockowner can also reinvest by choosing that dividends paid on stock will be used to purchase additional shares of that stock.
A type of money purchase pension, available in Gibraltar, that you take out yourself from an insurance company or financial institution and into which you, or your employer, pay contributions.
A person who buys or sells securities for his or her own account. A retail investor is dependant on the investment services firm for information and assistance. Therefore the level of protection of a retail investor is higher than that given to a professional investor.
Profits a company keeps for its operations, after paying taxes and dividends.
Total return measures increases and decreases in the value of your investment over time, after subtracting costs (you will usually find it written as "Net Return"). When expressed as a percentage, net return for an indicated period is calculated by dividing the change in a fund's net asset value, assuming reinvestment of all income and capital gains distributions, by the initial price.
An opportunity to existing shareholders of a company to buy more shares in the company at a discounted rate, without the need to buy through investment services firms.
See Investment Risk
A type of occupational pension. The amount of pension you get is worked out on your salary at or near retirement, or when you left employment, and your pensionable service.
Structured Capital at Risk Products.
The highest bid to buy and the lowest offer to sell any security at a given time.
A general term for stocks, bonds, collective investment schemes and other products.
Conclusion of a securities transaction when a customer pays a broker/dealer for securities purchased or delivers securities sold and receives from the broker the proceeds of a sale.
See Ordinary Shares
The buying and/or selling of securities, currencies etc with a view to making relatively quick profits as opposed to long term investment.
The difference between the bid and offer price is the 'spread'. In a collective investment scheme this would usually represent the commission or fee, whereby, if you had to buy units (offer price) in a collective investment scheme and sell them on that same day (at the bid price), the difference in the price will be the commission or fee you paid (the spread).
Money or property risked in a wager or gambling game.
A market for the sale and purchase of securities, in which prices are controlled by the laws of supply and demand.
A person or entity who buys and sells securities on a stock exchange on behalf of an investor and receives remuneration for this service in the form of a commission.
A rate or price, which if reached, will trigger the closing of a position in order to limit loss.
An order that goes into effect where there is a trade at a specified price.
This is the amount from your pension fund that you can take as a tax-free lump sum. The amount is limited by the income Tax Office
This is a document which sets out in detail the investment services agreement between the investment services firm and the investor. It should specify, amongst other things, whether the investment services firm will provide investment advice or not, and the type of fees and commissions which the investment services firm will charge. In the case of portfolio managers or investment dealer and brokers will normally form part of the customer agreement.
An arrangement by which a company is guaranteed that an issue of shares will raise a given amount of cash. The underwriters undertake to subscribe for any of the issue not taken up by the public. They charge commission for this service.
A report showing the extent to which investments have increased or decreased from all the various gains and losses registered in a specific period.
The return earned on an investment taking into account the annual income. There are a number of different types of yields, and in some cases different methods of calculating each type.
A yield on a security calculated by assuming that interest payments will be paid until the call date, when the security will be redeemed at the call price. The Yield to Call is calculated in the same way as yield to maturity but assumes that a bond purchased at a premium will be called and that the investor will receive the amount of the face value at the call date.
The rate of return earned on an investment (such as a bond) bought at a specified price and held until maturity. The Yield to Maturity equals all the interest you receive from the time you purchase the bond until maturity (including interest on interest at the original purchasing yield) plus any gain (if you purchased the bond below its face, or par, value) or loss (if you purchased it above its face value). The tax payable on the interest and the capital repayments is ignored.
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