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  •   Acc. (Accumulation)

    Refers to a fund which does not pay a dividend, but instead adds the returns to the assets of the fund, as added value. The opposite is 'Inc.' which refers to an income distributing fund.

  •   Acquisition

    When a company buys most, if not all, of the target company’s shares in order to assume control of it.

  •   Asset allocation

    This refers to the spread of an investment over different categories of financial assets and tangible assets. Asset allocation is generally driven by the desire to optimise the risk-return trade-off according to the investor’s time-frame and objectives.


  •   Bankruptcy

    This refers to the legal status of a company, which is unable to pay its creditors.

  •   Benchmark index

    A benchmark is a measure by which the performance of an investment can be measured. A benchmark is typically an index over a broad market or a market segment for shares or bonds that relate to the security or investment. If an investment fund is to be measured against a benchmark, it must be specified in the investment strategy.

  •   Bond

    A bond is a fixed income investment in which an investor loans money to an entity (typically to a company or government), which borrows the funds for a defined period of time at a variable or fixed interest rate. Bonds are used by companies, municipalities, states and sovereign governments to raise money and finance a variety of projects and activities. Owners of bonds are debtholders, or creditors, of the issuer. Upon maturity the bond is repaid, unless the issuer cannot pay off and subsequently goes bankrupt. Generally, bonds carry less risk than shares, because they must be repaid first before shareholders are paid, in case the issuer experiences payment problems.


  •   Capital gains tax

    Capital gains tax is applicable when a security is sold at a profit. Taxation on specific capital gains depends on the investor’s tax residence.

  •   Commodities

    A commodity is a basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are raw goods that are used in the production of other goods or services. The quality of a given commodity may differ slightly, but it is essentially uniform across producers. When they are traded on an exchange, commodities must also meet specified minimum standards, also known as a basis grade.

  •   Corporate action

    A corporate action is an event announced by a corporate entity that usually results in material changes to the security issued by the company, or involve a cash consideration. In practice a corporate action refers to a broad spectrum of activities undertaken by companies and which have a significant influence on its security holders. A corporate action will usually be decided upon by the company's board of directors and require regulatory or investment holder approval. Corporate actions include name changes, dividend or coupon distributions, mergers and spin-offs, liquidations and many others. Some corporate actions such as takeovers, bonus issues, rights issues and stock splits affect the number of shares in issue: these actions will generally change the number or percentage of a company's shares you hold. Some corporate actions are mandatory, as they are applicable to all holders of a certain security, while others are voluntary, as they give security holders the option to take or not to take part to the corporate action.


    Bonus issue

    When a company announces a bonus issue, security holders will receive additional securities free of payment from the issuer in proportion to their holding. Usually bonus issues are undertaken to convert profits which the company has retained into share capital.


    Capital gains distribution

    This refers to the distribution of profits resulting from the sale of company assets.


    Cash dividend

    Distribution of cash to shareholders, in proportion to their equity holding. Ordinary dividends are recurring and regular.


    Scrip Dividend option

    Distribution of a dividend to shareholders, where the shareholder can opt whether to receive this dividend in shares, cash or a combination of both.


    Ex-dividend date

    This is the date when an equity or bond starts trading without a recently announced dividend or coupon. Before the ex-date, the buyer of the equity or bond is entitled to the recently announced dividend or coupon, while after the ex-date the seller will be entitled to the dividend or coupon.


    Exchange offer

    An offer by the company to give securities and/or cash in exchange for another security.


    Forward stock split

    This refers to instances where a company’s number of outstanding equities increase (spilt), without any change in the shareholder's equity or the aggregate market value, at the time of the split.



    In a merger, two or more companies join to form a new company. Existing shareholders of merging companies typically receive shares of the new company in proportion to their current shareholding.


    Payment date

    The date on which a declared event is scheduled to be paid.


    Priority issue

    This refers to a form of open or public offer where, due to a limited amount of securities available, priority is given to existing shareholders.


    Record date

    The cut-off date established by a company in order to determine which shareholders are eligible to receive a dividend.


    Repurchase offer

    This is an offer to existing shareholders by the issuing company to repurchase securities, with the aim of reducing the number of outstanding shares.


    Return of capital

    A return of capital occurs when a company makes a cash payment to all its shareholders, of a proportion of the value of their shares. Upon payment of this cash, the value of the share is reduced by the rate per share paid


    Reverse stock split

    This refers to the decrease in a company's number of outstanding shares without any change in the value of shareholder's equity or the aggregate market value at the time of the split.


    Rights issue

    This refers to the distribution of a security or privilege that gives the holder an entitlement (or right) to take part in a future event. A company may offer its current shareholders the right to buy new shares in the company, at a discount on the current market price.


    Share premium dividend

    A cash amount paid to shareholders from the shares premium reserve. This is similar to a dividend but with different tax implications. Upon payment of a share premium dividend, the value of the share may be decreased by the rate per share paid.



    A spin-off involves taking a part of a company, usually a contained business unit with its own management structure, and creating a new company that contains only that part. Shareholders of the parent company receive shares of the new subsidiary without having to surrender their shares in the parent company.


    Tender offer

    An offer made to shareholders, normally by a third party, to sell (tender) or exchange their shares. The term also refers to the process whereby shareholders submit their shares or securities to a takeover offer.


    Warrant exercise

    This is offered to shareholders where they are given the right to buy ordinary shares in the company, at a set price and at a future date. Warrants will have an exercise price, which is the price to be paid in order to convert a warrant into an ordinary share.

  •   Currency hedging

    Currency hedging is a transaction that enables funds to use different currencies to protect against currency fluctuations, as well as offering speculators the potential for capital gains.


  •   Distribution fee

    A distribution fee is the annual service fee paid by the fund company to the seller or distributor of the fund. This fee is paid to the distributor as long as the investor holds units in this fund. This fee generally ranges between 0.25% and 1%, and is paid from the ongoing costs of the fund. This means that the seller or distributor must provide services in return for this fee, to purchaser, such as answering any questions he might have about the performance of the fund, the free provision of mandatory documents and most recent valuation.


  •   Entry fee

    The fee payable to the financial advisor of an institution (the distributor) upon purchase of units in a mutual fund.

  •   Equity

    Also referred to as stock or share, an equity is the capital stock of a company (public or private). The value of the equity depends on the company’s current market valuation and future economic prospects.

  •   ETF

    An ETF (Exchange Traded Fund), also known as index fund or index tracker, is an investment fund with the objective of tracking an underlying index or commodity, as closely as possible.


  •   Funds categories

    Equity funds

    Equity funds invest primarily in company equities (which are also known as shares or stocks). These funds invest at least 75% of the total portfolio in equities.


    Bond funds

    Bonds funds invest primarily in different types of bonds, ranging from government bonds to corporate bonds.


    Real estate funds

    Real estate funds invest primarily in equity of real estate companies. These funds do not directly invest significantly in building projects, but in the real estate businesses, with some funds focusing on a particular segment of the sector, like companies or trusts that own office buildings and other properties.


    Monetary funds

    Monetary/cash funds invest in cash and different short term investment instruments. The portfolio contains fixed term deposits, debt securities and short-term treasury bills with a maximum term of one year.


    Mixed funds

    Mixed funds invest in different investment securities at the same time, including equities, bonds, cash, and sometimes real estate. Each unit represents a widely diversified portfolio.


  •   Inception date

    The Inception date refers to the date the mutual fund is formed.

  •   Investment grade

    Denotes a rating of at least BBB (Standard & Poor’s), Baa3 (Moody’s Investor Services) or BBB (Fitch). These ratings are considered equivalent by the Investment manager of a mutual fund.

  •   Investment policy

    A Mutual Fund must first establish a defined investment policy and must adhere to this when conducting investment decisions. The fund’s prospectus must clearly state the investment policy, so as to serve as a firm commitment. The investment policy should include critical information for investors, such as:

    • The asset classes in which the Mutual Fund is authorized to invest (e.g. equities, bonds, etc.), indicating in which asset classes it will mainly invest;

    • The type of actions that are allowed regarding derivative financial instruments (e.g. options, swaps, repurchase agreements, etc.);

    • The benchmark or index used to measure performance must be explained, if such is used;

    • Economically oriented informative elements, as well as social, ethical and environmental considerations are taken into account by the implementation of the Mutual Fund’s investment policy.


  •   Junk bonds

    These are also known as non-investment grade or high-yield bonds. These denote a maximum credit rating of BB+ (Standard & Poor’s), Ba1 (Moody’s Investor Services) or BB+ (Fitch).


  •   Legal documents


    The prospectus must contain all information necessary to enable the investor to make an informed assessment of the proposed investment. As a legally required document, the prospectus is offered free of charge to the investor before the conclusion of the investment agreement. This document provides the investor with a comprehensive description of all the undertakings in the Mutual Fund (such as administrator, custodian, etc.) and the specific product characteristics of the Mutual Fund, including:
    • Introduction of the Mutual Fund and sub-funds;
    • Bodies of the Mutual Fund;
    • Objective and policy (in which investment instruments will be invested and within the confines of the objective);
    • Costs (management fees, reimbursement for financial services, membership fees, etc.); and
    • Risk attached to a Mutual Fund or a sub-fund.

    A Mutual Fund (or sub-fund) will only be registered as a public Mutual Fund if the regulator (e.g. the Malta Financial Services Authority) has approved the prospectus.


    Annual report (periodic report)

    In order to monitor the activities and results of the Mutual Fund (or sub-fund), the investor can view the relevant annual and semi-annual reports, made available free of charge. The annual report includes the financial statements, a report on the activities during the previous year and a number of other figures - such as the number of units in circulation, the net asset value (total and per unit) and its evolution, the details of the securities portfolio, and the performance (return). The accounts of the Mutual Fund are audited. The half-yearly report includes a balance sheet, income statement and some of the data provided in the annual report.



    The Key Investor Information Document, also referred to as key investor information, is a document that informs the potential investor in a concise and structured way about the essential elements of a Mutual Fund.


  •   Market risk

    Market risk is the chance that an entire group of investments, like European stocks, will lose value simultaneously (as opposed to one particular stock falling in price).

  •   Morningstar

    Morningstar analyst rating for funds

    Morningstar analysts assign the ratings on a five-tier scale with three positive ratings of Gold, Silver, and Bronze, a Neutral rating, and a Negative rating. The Morningstar analyst rating is based on the analyst's conviction in the fund's ability to outperform its peer group and/or relevant benchmark on a risk-adjusted basis over the long term. If a fund receives a positive rating of Gold, Silver, or Bronze, it means Morningstar analysts expect the fund to outperform over a full market cycle of at least five years. This rating is intended to supplement investors' and advisors' own work on funds.

    • Gold: Best-of-breed fund in its category that distinguishes itself across the five pillars and has garnered the analysts' highest level of conviction.
    • Silver: A fund with more positive than negative ratings across the five pillars and with sufficient level of analyst conviction to warrant a positive rating.
    • Bronze: A fund with notable positive ratings across perhaps not all of the five pillars—strengths that give the analysts a high level of conviction.
    • Neutral: A fund that is unlikely to deliver standout returns but also isn't likely to significantly underperform, according to the analysts.
    • Negative: A fund that has at least one remark likely to significantly hamper future performance and that is considered by analysts an inferior alternative to its peers.


    Morningstar Research Methodology: The Five Pillars

    Morningstar evaluates funds based on the five key pillars of process, performance, people, parent, and price, to help indicate funds that are more likely to outperform over the long term on a risk-adjusted basis.

    • Process: This relates to the fund's strategy and its management’s competitive advantage.
    • Performance: The relationship between the fund's performance pattern and its process.
    • People: The fund manager's talent, tenure and available resources.
    • Parent: The prevalent priorities at the firm.
    • Price: The fund’s cost-benefit performance, in comparison with similar funds, sold through similar channels.


    Morningstar category for equity funds

    Morningstar groups funds into categories according to their actual investment style, not merely their stated investment objectives or their ability to generate a certain level of income. To ensure homogeneous groupings, Morningstar normally allocates funds to categories on the basis of their portfolio holdings.


    Morningstar style box

    The Morningstar style box is a nine square grid that provides a graphical representation of the various investment styles. Morningstar offers a style box for equities as well as one for bonds.

    For direct equities and equity funds, it classifies securities according to their size or market capitalization (the vertical axis of the style box) and the investment style of the equity in terms of growth equity or value equity (the horizontal axis of the style box).

    Morningstar classifies direct bonds and bonds funds, in terms of their solvency (the vertical axis of the style box) and sensitivity to changes in rates (the horizontal axis of the style box).

  •   Mutual fund

    When you invest in a mutual fund, your money is pooled with that of other investors, and is managed by a group of professionals who seek to earn a return by selecting particular securities, which meet the overall objectives of the fund. One key advantage of funds is that they are less volatile than the individual components of the portfolio. On the other hand, fund returns can be muted relative to individual stocks. In investing, risk and return are intimately correlated—reduce one, and odds are you will reduce the other. Mutual fund investors must also consider expenses, since the professionals running mutual funds charge fees.


  •   NAV

    A fund's net asset value (NAV) represents the value of the fund per unit. NAV is calculated by dividing a fund's total net assets by its number of outstanding units. Units in regular open-end mutual funds are bought and sold at NAV, but units in ETFs are bought and sold at the market price, which can differ from NAV.


  •   Ongoing charge

    All charges paid out from the fund over a year are expressed as a percentage of net assets. These ongoing charges include the fund’s management fee, administrative costs and expenses relating to legislation, auditing and registration. Entry and exit fees or performance fees are not included. Ongoing charges are processed on a daily basis in the fund’s life cycle and are therefore not charged separately.


  •   Returns

    Annual Return

    Annual total returns are calculated on a calendar-year basis. Total return includes both capital appreciation of the fund and any paid-out dividends. This includes both income in the form of dividends or interest payments as well as capital gains or losses (the increase or decrease in the value of a security). Total returns account for management, administrative and other costs, which are automatically deducted from fund assets.


    Annualised return and year-to-date return

    For objective comparison, returns should be compared over the same period of time. The standard method used is one calendar year, which refers to the conversion of the return on an investment into a yearly rate.


    Cumulative total return

    The return or yield on an investment or portfolio over a given period of time, expressed in non-annualized terms.


    Total return

    The calculation of total return, expressed in percentage terms, is determined by taking the change in price (if applicable), together with the reinvestment of all dividends and capital gains of the period, and dividing these by the starting price. Unless otherwise noted, total returns are not adjusted for sales charges (such as stock exchange fees, withholding tax and possible in and exit costs), to give a clearer picture of performance. Total returns account for ongoing costs, (such as management, administrative and other costs that are taken out of the mutual fund) and are settled daily according to the fund's NAV.


  •   Synthetic Risk and Reward Indicator (SRRI)

    The Synthetic Risk and Reward Indicator (SRRI) of a fund is indicated in the fund’s KIID and measures the potential risks and rewards of the fund. The higher the SRRI, the greater the potential expected rewards, but the greater the risk of losing money. The SRRI is based on historical data, which may change over time and which may not be a reliable indication of the future risk profile of the fund. You should be aware that even funds with the lowest SRRI can lose value and that under extreme market circumstances, you can suffer losses.


  •   UCITS

    UCITS stands for Undertakings for Collective Investment in Transferable Securities. It refers to the UCITS IV Directive 2009/65 / EC of the European Parliament and of the Council of 13 July 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS). The Directive defines the criteria which an investment or mutual fund based in the EU must satisfy, in order to be sold in all EU countries. It aims to simplify investment guidelines in Europe and to provide investors with more protection.