Annual Management Charge
This is a charge levied by Unit Trusts, OEICs, Investment Trusts, Life and Pension funds to cover the operating costs and renewal commissions.  It is generally deducted from the value of the fund before the unit price is calculated.

Bid Price
This is the selling price of units in Unit Trusts, Life and Pensions Funds.

Dilution Levy
This is a discretionary charge applied by an OEIC which is displayed as a separate, explicit charge.  This allows the fund manager to apply the levy to those investors who have caused the fund to incur dealing costs, ie. buyers  may be required to pay a dilution levy on top of the price of the share, whilst sellers may have to deduct a dilution levy from the amount they receive per share.  This would be in addition to the initial charge for a buyer and possibly an exit charge for the seller.

Dividend Yield
See also Yield. This shows income as a percentage of the value of the investment. This is a well known stock market ratio. To calculate - use the dividend per share and divide by the market price of the share. The dividend can be either net or gross. Normally the gross figure is used. The Yield  represents the income only.  An investor trying to evaluate the Total Return should take into account how the Capital Value has performed.

Equity
See Share

Eurotop 100 Index
This index measures the movements in share prices (excluding dividends) of the 100 most highly capitalised blue chip companies in Europe.

Ex-Dividend
This is represented by the symbol “xd”.  This refers to a share which is sold without the right to receive the most recent dividend, which is marked as payable to the shareholder who is on the register at ex-Dividend date..

FTSE Financial Times Share Indices. These are the indices used to record information and performance of companies quoted in the UK and in other countries in certain indices.

The main UK Indices are:

FTSE 100 – This index represents the top 100 capitalised companies in the UK and accounts for around 80% of the UK market in value..

FTSE Actuaries All Share - The main benchmark index. It covers almost all of the UK shares quoted on the London Stock Exchange.  It is an accumulation of the FTSE 100, FTSE 250 and the FTSE Small Cap indices.

Fund Manager
This is an individual employed by an institution to manage assets within an investment fund to meet its predetermined objectives. The assets could be various types of shares and/or government stock, commercial property amongst others. Usually a Fund manager will run a particular fund which will invest in a certain sector of the economy or country e.g. UK larger companies or US smaller companies.

Gilt
The usual name given to British government securities. These are issued by the government to fund fiscal borrowing.

IMA Sector Classification
The Investment Management Association (IMA) was founded in February 2002 when the Association of Unit Trust Investment Funds (AUTIF) and the Fund Managers Association (FMA) merged.

The IMA has categorised funds into sectors which have strict definitions e.g. UK All Companies which is defined as those funds which “invest at least 80% of their assets in UK equities which have a primary objective of achieving capital growth.”

Life Fund
This usually refers to Unit linked Investment Funds. These are funds run by Life Assurance or Pension Companies. Such funds are used for individuals holding life assurance policies to invest in. The assets held within the fund are divided into a number of units. When an investor contributes to a Life Fund, units are allocated to investors in proportion to their investment.

Market Capitalisation
This is what a company is worth, represented by its Market Value. The market value can be ascertained by multiplying the number of issued shares by their current market price.

Mid Price
This is the average of bid (selling) and offer (buying) price usually relating to a particular share. This is used in calculating share price movements over a set period of time. It is the middle price which is quoted in the non-specialist financial press.

Net Asset Value (NAV)
This usually represents  the value of one unit of a fund. It is the fund's assets minus its liabilities divided by the number of shares issued.  It is generally calculated on a daily basis.

For an open ended fund, such as an OEIC or Unit Trust, it represents the market price, although for a close ended fund, such as an Investment Trust, the market price may vary significantly from the Net Asset Value resulting in a market price which is at a premium or discount to the Net Asset Value.

OEIC - Open Ended Investment Company
This is the investment vehicle which almost all  Unit Trusts have converted to. It is a Company open to investment run by its directors. These havebecome prevalent in the UK as the UK Investment industry has adopted theEuropean investment structure for its Investment vehicles.

Investors buy shares in the company and unlike Investment Trusts it can issue an unlimited number of shares. OEICs do not carry a bid/offer spread as the shares are traded on a single price, based on the Net Asset Value, see above, of the fund. However, initial charges are deducted to cover expenses and commissions and shown separately.  A Dilution Levy, see above, may also be applicable.

Offshore Funds
These funds operate from one of the many offshore centres outside the UK to obtain a tax advantage. These funds are similar to Unit Trusts but normally fall outside UK regulation. Some funds in certain countries can still receive a form of UK authorisation.

Offer Price
This is the buying price at which a share is offered for sale on the stockmarket. It is also the buying price of Unit Trusts, Life and Pension Funds.

Pension Fund
This usually refers to Unit Linked Pension Funds. These are funds run by Life Assurance and Pension Companies. Such funds are used for individuals contributing toward Pension Plans to invest in. The assets held within the fund are divided into a number of units.

Price Earnings Ratio P/E
When analysing shares this term is often encountered. This is the relationship between the profit for the year and the market value of the share capital. Net profit is divided by the number of ordinary shares, giving earnings per share. When then divided into the market price, this gives the price/earnings ratio. On a very general basis; lower price/earnings ratios are perceived to be better value in the shorter term. Higher price/ earnings ratios suggest that the share may be better value in the future.  This is just one of the factors taken into account when looking at whether a share is good value.

Share
A share is a unit of ownership of a limited company. A shareholder is someone who has subscribed a sum of money to the company's capital. The shareholder receives a return in the form of dividends (proportion of profits) and in any increase in the share price.

Stock
UK term for fixed interest securities, US term for ordinary share.

Unit or Unitisation
This is applicable to Unit Trusts, OEICs, Investment Trusts or Life and Pension Funds. All of these investments divide their assets into a number of units. When an investor contributes to one of these funds units are allocated to investors in proportion to their investment at the prevailing value of the fund. Therefore investors will be able to follow the progress of their investment by multiplying the number of units held by their bid (selling) price.

Unit Trust
This is a method of pooling investor's funds and managing the assets purchased by those investors. The assets are held within a trust and usually held by a recognised bank or other financial institution who acts as custodian. Unit Trusts are managed by a Fund Manager and there are a large number covering different sectors throughout the world and the UK. Prices are quoted daily in the financial press.

Yield
This is a general term used for the rate of income from an investment expressed as an annualised percentage and based on the current capital value. e.g. An investment of £100 paying an income of £7 would have a yield of 7%.