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| The definitions herein have been collated and compiled from various sources. This may differ from fund to fund and should there be any contradiction between definitions provided herein and concerned Offer Document of any fund, it is clarified that definition as provided in Offer Document shall prevail. |
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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.
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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.
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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 Grievances
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
Annual interest
---------------------------- = Current yield
Current market value
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.
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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.
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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
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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
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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.
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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.
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JUNK BOND
A speculative bond with higher credit risk.
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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.
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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.
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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 :
Market/Fair Value of Scheme's investments (+) Receivables (+)
Accrued Income (+) Other Assets (-)
AccruedExpenses (-) Payables (-) Other Liabilities
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Number of Units Outstanding
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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
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OCB
Overseas Corporate Bodies, firms and societies which are held directly or
indirectly, but ultimately, to the 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.
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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.
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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.
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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.
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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.
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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
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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
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