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Columbia Wanger Offshore Funds

Effective 23 March 2012, the Wanger US Smaller Companies UCITS Fund and the Wanger European Smaller Companies UCITS Fund, managed by Columbia Wanger Asset Management, LLC, began trading as sub-funds on the MontLake UCITS Platform plc following the merger of the Wanger Investment Company into the MontLake structure.

For more information about the funds, please visit


The information provided is intended for mutual fund investors and is general in nature. Please refer to the prospectus for terms relative to a specific fund.

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12b-1 Fee An annual fee assessed by a fund to cover promotional expenses, such as marketing, advertising or public relations, in connection with the distribution of its shares to the public.

12b-1 Plan A plan that permits a mutual fund to pay some or all of the costs for related activities in connection with the distribution of its shares to the public. Both load and no-load funds may adopt 12b-1 plans, which are disclosed in the fund's prospectus as well as in its annual and semiannual reports. 12b-1 fees are included in the total expense ratio figures provided in a fund's literature.

80% Policy A rule that requires certain mutual funds, including certain Underlying Funds, to adopt an investment policy requiring that, under normal circumstances, at least 80% of its assets will be invested in the type of investment suggested by its name. The SAI identifies each Underlying Fund that has adopted an 80% Policy.

401(k) Plan A retirement plan that allows employees to save up to a specified amount on a tax-deferred basis. Created under section 401(k) of the Internal Revenue Code, a 401(k) plan can be offered by most businesses. The assets of these plans often are invested in some combination of mutual funds or stock.

403(b) Plan A retirement plan for employees of nonprofit organizations such as universities, churches or public schools. The employee can contribute a portion of salary into a mutual fund or an annuity, and the contributions and earnings grow tax-deferred until withdrawn.

52-Week High Price Highest price at which a security has traded within the last 52-week period.

52-Week Low Price Lowest price at which a security has traded within the last 52-week period.

529 Plan A tax-advantaged investment program designed to help finance education expenses. There are two types of 529 plans: prepaid tuition plans and college savings plans. Every state offers at least one of these. Tax advantages, investment options, restrictions, and fees can vary a great deal from one plan to another.

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Account The record of a shareholder's share balance and transactions in one fund. A customer may have accounts in more than one fund or different accounts in the same fund.

Account Number Unique number assigned to each account. Your account number is located on your quarterly statement and on all of your transaction confirmation statements.

Advisor The organization employed by a mutual fund to give professional advice on the fund's investments and asset management practices.

After-Tax Return The return from an investment after income taxes have been deducted. By comparing after-tax returns, an investor can determine which investment makes the most sense based on his or her tax bracket.

Age-Based Portfolios of Mutual Funds College savings plan portfolios in which the asset allocation changes automatically according to the beneficiary's age. Initially age-based portfolios invest primarily in stock funds. As the beneficiary grows older, the stock funds are replaced by more conservative investments such as bond funds.

Aggressive Growth Fund A mutual fund that seeks to increase its share price by holding stocks that the advisor believes will have powerful growth potential. These funds typically invest in smaller, less established companies that can be more vulnerable to changing market conditions than larger companies, resulting in greater investment risk. These funds do not seek current income.

Alpha Alpha is a risk (beta adjusted) measurement. Officially, alpha measures the difference between a portfolio's actual returns and what it might be expected to deliver based on its level of risk.

American Depository Receipt (ADR) Certificates issued by a US bank and traded in the US as domestic shares. The certificate represents the number of foreign securities the US bank holds in that security's country of origin. ADRs eliminate currency exchange, legal obstacles, foreign ownership transfers, and the need to trade on the foreign exchanges.

American Stock Exchange The American Stock Exchange (AMEX) was originated in 1842 as the New York Curb Exchange and became known as the American Stock Exchange in 1953. The more than 800 stocks listed on the AMEX generally represent smaller and younger companies than those on the NYSE. The requirements for a company to be listed on the AMEX include:

  • Pre-tax Income of $750,000 in the latest fiscal year of 2 of the most recent 3 years
  • Market value of public float of $3 million
  • Stockholders' Equity of $4 million
  • A minimum price of 3 dollars

Amortization An accounting method companies use to write-off intangible rights or assets over the period of their existence.

Annual Dividend Represents projected cash dividends for the upcoming year based upon fixed dividend distribution channels established by companies and mutual funds. When cash dividend rates for the entire year are not declared in advance, dividend payments during the most recent (rolling) four quarters are used as a basis for calculations.

Annual Maintenance Fee Total annual college savings plan upkeep expense.

Annual Report Financial statements issued by a corporation. Mutual funds are required to provide shareholders with annual reports and semiannual reports within 60 days after the end of the fund's fiscal year. The annual report includes the portfolio manager's review of investments, statements of assets and liabilities, statements of operations and other financial information.

Annuity An insurance contract, issued by an insurance company, that provides the potential to accumulate assets until retirement and then receive a steady stream of income at or during retirement. An annuity can be fixed or variable. A fixed annuity pays a fixed rate of interest. See variability annuity.

Application A form required for opening an account. We have several applications including, but not limited to, applications for general mutual fund accounts, 529 Plans, IRAs and Coverdell Education Savings Account (Coverdell ESA) formerly known as Educational IRAs.

Ask Price (Selling Price) The price at which a seller offers to sell an issue.

Asset Anything owned by a company or individual having commercial or exchange value.

Asset Allocation A strategy that can help you balance risk and return while in pursuit of your various investment goals. How an investor's portfolio is distributed among a wide variety of investments, such as domestic and international stocks and bonds, cash, real estate and government securities.

Automated Clearinghouse (ACH) The electronic funds transfer network that enables you to make a direct transfer of money from your bank account to your mutual fund, provided your bank participates in the ACH.

Automatic Investment Plan (AIP) An option whereby a shareholder instead of receiving cash payments, elects to have all income and capital gains distributions from an account used to purchase additional fund shares. Even though reinvested, the distributions may be tax-reportable events.

Average Annual Total Return How much an investment has grown over a specified period of time. It's calculated by measuring the sum of all dividends and capital gains and is expressed as a percentage of the fund's average net assets.

Average Daily Price Average daily closing stock prices within the last 52-week period.

Average Daily Volume Average total daily volume traded within the last 52-week period. Average volumes of zero may indicate a sparsely traded security and an average volume of N/A means that the volume is not applicable to the security.

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Back-End Load A sales charge levied at the time of redemption. It declines annually to zero over an extended holding period, as described in the prospectus.

Balanced Fund A mutual fund that invests in a combination of equity securities, preferred stock, and fixed income securities. These funds may seek both long-term growth and current income. Looks to provide a high total return with reasonable risk.

Bank of Record Bank designated by the shareholder to which redemptions from the account can be wired or mailed.

Basis Point A basis point equals one one-hundredth of a percentage point. Therefore, 100 basis points equal one percentage point. Basis points are used to clearly describe interest rate changes.

Bear Market A period during which securities prices in a particular market are generally falling.

Benchmark An unmanaged group of securities whose performance is used as a standard to measure investment performance. Some well-known benchmarks are the Dow Jones Industrial Average and the S&P 500 Index. You cannot invest directly in a benchmark.

Beneficiary An individual, institution, trustee, or estate which receives, or may become eligible to receive, benefits under a will, insurance policy, retirement plan, annuity, trust, or other contract.

Beta A statistical coefficient that gives an approximate measure of a stock's price volatility relative to the market (usually the S&P 500). A security's beta compares its price performance to fluctuations in the market in which the market is assigned a neutral beta of 1.0. Securities with betas below 1 are less volatile than the market as a whole. Securities with betas above 1 are considered more volatile. A security with a beta factor of 2.0 is about twice as volatile as the market and would have gone up or down twice as much as the market. Conversely, a security with a beta factor of 0.5 bears half of the risk of the market (S&P 500).

Bid Price (Offering Price) The highest price a buyer is willing to pay for shares of a publicly traded security.

Blue Chip Stocks Stocks of the most established companies in American industry. They are generally large, fairly stable companies that have demonstrated consistent earnings.

Bond A loan agreement that obligates the bond issuer (corporations, governments or government agencies), to pay back the bondholder a specified sum of money, with interest, at periodic intervals.

Bond Fund A mutual fund whose portfolio typically consists primarily of corporate, municipal or government bonds. Because a bond fund is usually actively managed, many of its bonds may not actually be held to maturity. These funds generally seek income rather than growth. Bond funds seek to provide a steady stream of income to the investor and are generally not intended to increase capital.

Bond Rating A system of evaluating the probability of whether a bond issuer will default. Standard and Poor's Corp. and Moody's Investors Services, among other firms, analyze the financial stability of both corporate and government bond issuers. Ratings range from AAA or Aaa (extremely unlikely to default) to D (currently in default). Bonds rated BBB or below by S&P or Baa or below by Moody's are considered to be junk bonds and not investment grade. Mutual funds generally restrict their bond purchases to issues of certain quality ratings, which are specified in their prospectuses.

Book Value Net value of a company's assets, calculated by using the following formula:

Total assets minus intangible assets (goodwill, patents, etc.) minus current liabilities minus any long-term liabilities and equity issues that have a prior claim (subtracting them here has the effect of treating them as paid) equals total net assets available for payment of the issue under consideration.

Book Value per Share The assets of a company available to common shareholders. Book value per share indicates what each common share is worth according to the historical stockholders' equity costs maintained in a company's accounting books. By comparing book value per share with market price per share, analysts get an indication of how the stock market views a company. Since market price per share is based on current stock prices, it is usually higher than book value per share, which is based on historical prices.
Book Value per Share = Total Common Equity / Common Shares Outstanding

Bottom-Up Approach An investment strategy that emphasizes finding outstanding individual companies before considering broad economic trends.

Breakpoint The level of dollar investment in a mutual fund at which an investor becomes eligible for a discounted sales fee. This level may be achieved through a single purchase or a series of smaller purchases.

Broker/Dealer Any individual or firm in the business of buying and selling securities for itself and others. Broker/dealers must register with the SEC. When acting as a broker, a broker/dealer executes orders on behalf of his/her client. When acting as a dealer, a broker/dealer executes trades for his/her firm's own account. Securities bought for the firm's own account may be sold to clients or other firms, or become a part of the firm's holdings. The terms broker, broker/dealer, and dealer are sometimes used interchangeably.

Bull Market A period during which securities prices in a particular market are generally rising.

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Capital Appreciation An increase in the value of an asset, such as mutual fund shares. Capital appreciation is the investment objective of mutual funds that purchase securities whose value is expected to rise.

Capital Appreciation Fund A mutual fund that seeks capital appreciation by investing in companies that do not pay dividends. These funds may use techniques involving greater than ordinary risk, such as borrowing money in order to provide leverage, short selling and high portfolio turnover.

Capital Gain The profit on an investment when it is sold for more than it originally cost.

Capital Gains Distribution A taxable distribution paid to shareholders when any investments in their mutual fund's portfolio are sold at a profit. Realized Capital Gains are when stock or bond holdings are sold at a profit. Unrealized Capital Gains represent an increase in the mark.

Capital Growth A rise in market value of a mutual fund's securities, reflected in its net asset value per share. This is a specific long-term objective of many mutual funds.

Capitalization The market value of a company's outstanding securities, excluding current liabilities. Under $250 million is generally considered small cap; $250 million to $1 billion is mid cap; and over $1 billion is large cap.

Capital Loss The loss on an investment when it is sold for less than it originally cost.

Capital Stock True representation of the shareholder's collective interest after creditors are paid.

Capital Surplus Amount paid in excess of the common stock legal or par value.

Cash equivalents Short-term, interest-bearing instruments which can easily be converted into cash, including U.S. government obligations, bank obligations, and certain asset-backed securities, foreign government securities and commercial paper issued by U.S. and foreign issuers which, at the time of investment, is rated at least Prime-2 by Moody’s Investors Service, Inc. (Moody’s), A-2 by S&P, or F-1 by Fitch IBCA (Fitch).

Certificate of Deposit (CD) A short-term investment with a stated rate of return, for a stated term, issued by banks and guaranteed and insured by the US government.

Change A fluctuation in the price of an investment from the previous trading day. Negative values denote a decrease in price; positive values mean an increase in price.

Chief Executive Officer (CEO) The highest ranking executive officer that manages the day-to-day operations of a business.

Closed End Fund A regulated investment company that offers a fixed number of shares, which are traded on a stock exchange just like stocks.

Closed-End Investment Company An investment company that offers a limited number of shares. They are traded in the securities markets, usually through brokers. Share price is determined by supply and demand. Unlike open-end investment companies (mutual funds), closed-end funds do not redeem their shares on a daily basis.

Closing Price The price of the last transaction for a given security at the end of a given trading session. Also can be referred to as the close.

College Savings Plan College Savings Plans are state sponsored programs sometimes known as Section 529 Plans for the IRS Section that permits earnings on investments of savings earmarked for higher education to grow federally income tax free. Established by individual states, the programs are generally administered by mutual fund companies. In many states, earnings are exempt from state tax as well, although residency restrictions often apply. Some of the benefits include high contribution limits, no income restrictions and withdrawals that can be used for any qualified higher education expense.

Commercial Paper Short-term, unsecured promissory notes with maturities no longer than 270 days. They are issued by corporations, in denominations starting at $10,000, to fund short-term credit needs.

Common Stock A unit of ownership in a public company for which the holder can vote on matters and receive dividends from the company's growth, but is last to receive assets if the company liquidates.

Common Stock Fund An open-end investment company whose holdings consist primarily of common stocks, usually emphasizing growth-potential.

Compound Interest Interest earned on principal plus interest that was earned earlier. If $100 is deposited in a bank account at 10%, the depositor will be credited with $110 at the end of the first year and $121 at the end of the second year. That extra $1, which was earned on the $10 interest from the first year, is the compound interest. This example involves interest compounded annually: interest can also be compounded on a daily, quarterly, half-yearly, or other basis.

Confirmation Date The date a transaction is processed, typically the same day or the day after your trade date.

Confirmation Number Identification Number for a pending transaction.

Contingent Deferred Sales Charge (CDSC) A fee (or back-end load) imposed by certain funds on shares redeemed within a specific period following their purchase. These charges are usually assessed on a sliding scale, such as four percent to one percent of the amounts redeemed, with the fee reduced each year the shares are held.

Convertible Preferred Stock Securities that can be exchanged easily for common stock within the same company at a preset price upon demand by the stockholder

Corporate Bond Debt instrument issued by a private corporation, as distinct from one issued by a government agency or a municipality. Corporates typically have four distinguishing features: (1) they are taxable; (2) they have a par value of $1000; (3) they have a term maturity-which means they come due all at once-and are paid for out of a sinking fund accumulated for that purpose; (4) they are traded on major exchanges, with prices published in newspapers.

Correlation A statistical measure of how two securities move in relation to each other, computed into a “correlation coefficient” which ranges between -1 and +1. A correlation co-efficient of +1 implies that as one security moves, either up or down, the other security will move in lockstep in the same direction. Alternatively, a correlation co-efficient of -1 means that if one security moves in either direction the security that is perfectly negatively correlated will move by an equal amount in the opposite direction. If the correlation is 0, the movements of the securities is said to have no correlation; it is completely random.

Cost Basis The cost of an investment, used as the basis for calculating and reporting capital gains or losses. It is adjusted for stock splits, distributions, and return of capital.

Cost of Goods Sold Includes all expenses directly associated with the production of goods or services the company sells (such as material, labor and overhead) excluding depreciation, depletion, amortization, and selling, general, and administration expenses (SG&A).

Coupon Bond Bond issued with detachable coupons that must be presented to a paying agent or the issuer for semiannual interest payment. These are bearer bonds, so whoever presents the coupon is entitled to the interest. Once universal, the coupon bond has been gradually giving way to the registered bond, some of which pay interest through electronic transfers.

Coupon Rate The rate at which a bond pays interest periodically--usually twice a year--until it matures, based on par, or face value.

Coverdell Education Savings Account Accounts established with after-tax contributions for higher education. Parents, grandparents, other family members, friends, or a child themselves may contribute to the child's Coverdell ESA provided that the total contributions for the child during the taxable year do not exceed $2,000. Amounts deposited in the Coverdell ESA have the potential to grow tax-free until distributed. The child will not owe tax on any withdrawal from the account if the child's qualified higher education expenses at an eligible educational institution for the year equal or exceed the amount of the withdrawal.

Credit Risk The threat that a bond issuer may not be creditworthy. Rating agencies such as Standard & Poor's and Moody's constantly monitor an issuer's financial statements in an effort to determine the issuer's ability to continue making interest payments, as well as to pay the full face value of a bond. If the credit rating is lowered, the market value of the bond will probably fall. Therefore, an investor is usually paid a higher coupon rate with a lower rating than on one with a higher rating.

Current Assets Current assets are a balance sheet classification, which includes cash, marketable securities, accounts receivable, inventories and prepaid expenses. These items are typically characterized as assets that can be converted into liquid cash within a year or less.

Current Liabilities Current liabilities are general obligations owed to the company's creditors within one year. These balance sheet items include accounts payable, notes payable, accrued expenses payable and federal income taxes.

Current Ratio The current ratio is a liquidity measure that is typically used to gauge a firm's solvency and its ability to cover short-term debt. Usually this ratio exceeds but should be looked at in comparison to the industry ratio. The larger the ratio, the more solvent the company is and the larger the cushion it has to pay its current liabilities. An excessively large ratio for a long period of time also means that management is unable to use its resources effectively.
Current Ratio = Current Assets / Current Liabilities

CUSIP Numbers Identification numbers and codes assigned to securities for trading purposes. CUSIP stands for the Committee on Uniform Securities Identification Procedures.

Custodian Someone who maintains assets for the benefit of another person. In the case of a minor, a custodian protects, manages and maintains assets until the individual reaches majority age, at which time the assets are turned over to him or her. Also a financial institution that maintains custody of assets of a fund.

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Daily Dividend Fund This term applies to funds that declare their income dividends on a daily basis and reinvest or distribute monthly.

Dealer An individual or firm in the securities business who buys and sells stocks and bonds as a principal rather than as an agent, charging a mark-up rather than a commission.

Debenture A promissory note backed by the general credit of a company and usually not secured by a mortgage or lien on any specific property.

Debt to Asset Ratio A coverage ratio that measures the amount of debt a company has in relation to its assets. The amount of debt to asset may vary from industry to industry and should be compared as such.
Debt to Asset = Total Debt / Total Assets

Debt to Equity Ratio A coverage ratio that measures the amount of debt a company has in relation to its stockholders' equity. The amount of debt to equity may vary from industry to industry and should be compared as such.
Debt to Equity = Total Debt / Total Stockholders' Equity

Debt Security A security issued by a governmental body or company (the issuer) to help fund their operations or major projects. The issuer pays interest at a specified rate on a specified date or dates, and repays the principal when the security matures. Short-term debt securities include money market instruments such as U.S. Treasury obligations and commercial paper. Long-term debt securities include fixed income securities such as government and corporate bonds, and mortgage-related and asset-backed securities.

Deferred Compensation Plan A tax-sheltered investment plan to which employees of state and local governments can defer a percentage of their salary. Also known as a 457 plan or a non-qualified deferred compensation plan.

Deferred Taxes Postponement of tax payments from a current year to a later year. For instance, a Traditional individual retirement account (IRA) defers taxes until the money is withdrawn.

Defined Contribution Pension Plan Pension plan in which the level of contributions is fixed at a certain level, while benefits vary depending on the return from the investments. In some cases, such as 401(k), 403(b), and 457 plans, employees make voluntary contributions into a tax-deferred account, which may or may not be matched by employers.

Deflation The opposite of inflation-a decline in the prices of goods and services.

Depositary Receipts Evidence of the deposit of a security with a custodian bank. American Depositary Receipts (ADRs), for example, are certificates traded in U.S. markets representing an interest of a foreign company. They were created to make it possible for foreign issuers to meet U.S. security registration requirements. Other examples include ADSs, GDRs and EDRs.

Depreciation Amortization of fixed assets, such as plant and equipment, so as to allocate the cost over their depreciable life. Depreciation reduces taxable income but does not reduce cash. The three typical depreciation methods used in the US are straight line, sum of the years' digits and declining balance.

Derivatives A derivative is a financial contract whose value is based upon, or ‘‘derived’’ from, an underlying financial asset (such as a stock or a bond), a commodity (such as gold), a market index (such as the S&P 500) or a reference rate (such as the prime lending interest rate). Examples of derivative instruments include futures, options, index-, equity-, commodity- and currency linked securities, warrants and swap contracts. For a detailed description of the derivatives described here, see the SAI.

Disclosure Information pertaining to account services, fees, and regulatory requirements.

Distribution Options Choices available to the investor for handling payouts of capital gains, interest, dividends, etc. Shareholders can choose to receive their distributions as cash, reinvest them into more shares or add them to another account.

Distributions Capital gains (short-term or long-term), interest, a return of principal or dividends paid to shareholders.

Distributor An individual or a corporation serving as principal underwriter of a mutual fund's shares, buying shares directly from a fund, and reselling them to other investors.

Diversification The policy of spreading investments among a range of different securities to help reduce the risks inherent in investing. Mutual funds, because they are pools of securities, tend to offer investors the benefits of diversification. Diversification does not ensure a profit or guarantee against a loss.

Diversified A diversified fund, as defined by the 1940 Act, must have at least 75% of its total assets in cash and cash equivalents, government securities, securities of other investment companies, or other securities. For purposes of this calculation, the fund may not count securities of a single issuer that comprise more than 5% of the fund’s assets.

Dividend The payment a corporation makes when it distributes earnings to shareholders. Usually paid quarterly, the amount of a dividend is decided by the board of directors. Mutual fund dividends are paid out of income on the fund's basis. The most common dividends are cash dividends paid to holders of common stock.

Dividend Reinvestment Plan Automatic reinvestment of shareholder dividends in more shares of the company's stock. Some companies absorb most or all of the applicable brokerage fees, and some also discount the stock price. Dividend reinvestment plans allow shareholders to accumulate capital over the long term using dollar cost averaging. For corporations, dividend reinvestment plans are a means of raising capital funds without the flotation costs of a new issue.

Dividend Yield The latest indicated annual dividend rate divided by the latest closing price.

Dividend per Share The cash payment, per share, made by the company to its shareholders. Payment is usually made quarterly.

Dollar-Cost Averaging The technique of investing a fixed sum at regular intervals, regardless of stock market movements. This reduces average share costs to the investor, who acquires more shares in periods of lower securities prices, and fewer shares in periods of higher prices. This technique tends to spread investment risk over time, although it does not ensure a profit or guarantee against a loss in declining markets.

Dow Jones Industrial Average One of the most important and oldest stock market indicator representing an average of the stock prices of thirty top US industrial corporations traded on the New York Stock Exchange. Often it is referred to as "the Dow."

Drawdown The peak to trough decline during a specific record period of an investment or fund. It is usually quoted as the percentage between the peak to the trough.

Duration (Also known as adjusted duration.)
A measure of a bond fund's price sensitivity to interest rates. The longer the duration, the more sensitive a bond's price will be to changes in interest rates. A bond fund's portfolio manager uses a weighted average adjusted duration to reflect the durations of the fund's holdings, and adjusts the fund's duration according to how he or she expects interest rates might move.

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ERISA The Employee Retirement Income Security Act of 1974 is a federal law that provides rules for investment practices and administration of qualified retirement savings plans.

Earnings Per Share (EPS) The latest reported portion of a company's earnings allocated to each outstanding share of common stock within a 12-month period. It is calculated by taking a company's net income minus preferred stock obligations and dividing that by the number of shares outstanding of common stock. EPS calculations can become complex, due to the fact that dilutive securities, accounting changes, discontinued operations, extraordinary items etc. can all impact EPS. A rising EPS on a year to year basis is indicative of improving earnings.

Education IRA See Coverdell Education Savings Account

Equity A type of security representing ownership in a corporation. Common stock, preferred stock and convertible securities are all equity securities. (Debt securities do not represent ownership.)

Equity Funds (Growth Funds) A mutual fund that tends to be made up of stocks of companies that present potential for growth. These funds tend to offer greater return potential than Growth and Income funds, but are typically more risky.

Equity Income Fund A mutual fund that invests in a portfolio of bonds and dividend-paying stocks. While similar to Growth and Income funds, they are more likely to hold bonds and focus on stocks that pay higher-than-average dividends.

Ex-Dividend Means "without the dividend." Used to refer to a security that no longer carries the right to the next dividend. An "x" will appear next to the name of the stock or fund to indicate that the share price has dropped by the amount of that dividend.

Ex-Dividend Date The day dividends and/or capital gains are distributed to shareholders of record. The NAV of the fund is reduced by the amount of the dividend on the ex-dividend date.

Exchange Privilege (Or switching privilege) The right of a shareholder to transfer investments in one fund into another, generally within the same fund group, at nominal or no cost.

Expense Ratio The percentage of total investment that mutual fund shareholders pay for fund operating expenses. Expenses include management fees, 12b-1 charges, if any, the cost of shareholder mailings and other administrative expenses. The ratio is listed in a fund's prospectus. Expense ratios may be a function of a fund's size, rather than its success in controlling expenses.

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FINRA An industry organization charged by Congress with standardizing investment practices and establishing high ethical standards in the financial community.

Fact Sheet A one-page document that provides portfolio and performance information on a particular fund for a given quarter.

Federal Deposit Insurance Corporation (FDIC) The government agency that provides deposit insurance for member banks and insures certificates of deposit (CDs) and passbook deposits for up to $250,000.

Federal Home Loan Mortgage Corporation (Freddie Mac) A publicly chartered agency that buys qualifying residential mortgages from lenders, and then resells the securities on the open market. The corporation is owned by savings institutions across the United States and is held in trust by the Federal Home Loan Bank System.

Federal National Mortgage Association (Fannie Mae) A publicly owned, government-sponsored corporation that purchases mortgages from lenders, primarily the Federal Housing Administration, packages them into new securities backed by these mortgages, and resells them to investors. Shares of Fannie Mae itself are sold on the New York Stock Exchange.

Federal Reserve System The central bank of the United States, which has regulated credit in the economy since its inception in 1913. Includes the Federal Reserve Bank, 14 district banks, and the member banks of the Federal Reserve.

Fiduciary Generally, the person or legal entity that manages or has discretionary control over assets for the benefit of others. Legally obligated to invest the assets in the best interest of the beneficiaries.

Financial Advisor A licensed professional who can help with a variety of issues such as retirement planning, investing and, if qualified to do so, insurance.

Financial Aid Money given to students to help pay for college. Financial aid can be one of four types: loans, grants, scholarships, or work-study jobs.

Financial Statement Written account of a firm's operations including an income statement and balance sheet.

Fiscal Year An accounting period of 365 days (366 in leap years) for which a mutual fund prepares financial statements and performance data. Not necessarily the same as the calendar year (January 1 through December 31).

Fiscal Year-End The time when a corporation closes its books and determines a profit or loss.

Fixed Assets Tangible assets used in the operation of a business, but not expected to be consumed or converted into cash in the ordinary course of events within one year. Plant, machinery and equipment, furniture and fixtures and leasehold improvements comprise the fixed / Long-Term Assets of most companies. They are normally represented on the balance sheet at their net depreciated value.

Fixed Income Investment Security that pays a fixed rate of return. This usually refers to government, corporate, or municipal bonds, which pay a fixed rate of interest until the bonds mature, and to preferred stock, paying a fixed dividend. Such investments may generally be advantageous in a time of low inflation, but do not protect holders against erosion of buying power in a time of rising inflation, since the bondholder or preferred shareholder gets the same amount of interest or dividends, even though consumer goods cost more.

Floor Trading area where stocks, bonds and options are bought and sold on securities exchanges.

Foreign Stock A security issued by a company incorporated outside the US that does most of its business outside the US

Front-End Load A sales charge paid when shares of a mutual fund are purchased.

Fund of Funds Investors with a common objective pool their capital into a fund, which is then invested by a portfolio manager in individual hedge funds as opposed to buying stocks or bonds. These funds can have a single strategy orientation, or one that combines multiple strategies seeking to represent a more diversified program.

Fund Family A group of mutual funds managed by the same investment company.

Futures Contract A contract to buy or sell underlying instruments at a specified price on a specified future date. The price is typically set through a futures exchange.

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Glide Path How the strategic allocations to asset classes (stocks, bonds or cash) and sub-asset classes (i.e., large-capitalization, mid-capitalization, small capitalization, international, core bond, short-term bond or high yield) are expected to change as each Portfolio ages.

Global Fund A mutual fund investing in securities around the world including US companies.

Government National Mortgage Association (Ginnie Mae) A government-owned agency that buys mortgages from lending institutions and pools them to form securities, which it then sells to investors. The agency guarantees the timely payment of both interest and principal, but the rate of repayment is uncertain. Ginnie Mae benefits the home mortgage market because it makes more capital available for lending.

Government Security Any debt obligation issued by the US government or its agencies. Certain securities, such as Treasury bonds and Ginnie Maes, are backed by the government for both principal and interest payments. Other securities, such as those issued by the Federal Home Loan Mortgage Corporation, or Freddie Mac, are backed by the issuing agency.

Gross Domestic Product (GDP) Gross Domestic Product measures the market value of all goods ands services produced within the United States during a given period.

Growth Funds (Equity Funds) A mutual fund that tends to be made up of stocks of companies that present potential for growth. These funds tend to offer greater return potential than Growth and Income funds, but are typically more risky.

Growth Stock The stock of a company that has exhibited faster-than-average gains in earnings over the last few years, and has the potential to continue to show high levels of profit growth. Over the long run, growth stocks have tended to outperform slower-growing or stagnant stocks. At the same time, growth stocks are considered riskier investments than average stocks since they usually sport higher price/earnings ratios and make little or no dividend payments to shareholders.

Growth and Income Fund A mutual fund that seeks to provide long-term growth as well as current income. Growth comes when the prices of the securities in the fund's portfolio increase. Income comes from dividends or interest the securities pay. The income can help to cushion short-term changes in stock prices when the market is down, which could help provide more stable returns through all market cycles. Growth and Income funds have historically been the least risky of equity funds.

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Hedge/Hedging A strategy used to help offset investment risk. A perfect hedge is one eliminating the possibility of future gain or loss.

High Yield Fund A mutual find that consists of lower-quality, lower-rated income securities that have the potential to offer higher than average income or yield. These funds tend to experience greater price volatility and risk to principal than funds which invest in higher rated, higher quality bonds.

Holding Period The length of time an investment must be in an account before it can be exchanged.

Holdings The assets held within a mutual fund or the shares you own in an account.

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Income Interest and dividends earned on securities held by a mutual fund and paid out to shareholders. Reinvested income could enhance returns, through compounding. Taxes are payable on dividend income including those that are reinvested.

Income Fund A mutual fund that primarily seeks current income rather than capital appreciation.

Income Statement A summary of a company's profits and losses during a specified period of time.

Index Statistical benchmarks used to measure changes in the stock and bond markets and as standards against which fund managers and investors can measure the performance of their investment portfolios. Indices are unmanaged and unavailable for investment.

Index Fund A mutual fund that seeks to construct a portfolio to mirror the performance of a specific index.

Indicated Annual Dividend Projected cash dividends for the upcoming year based upon fixed dividend distribution channels established by companies and mutual funds. When cash dividend rates for the entire year are not declared in advance, dividend payments during the most recent (rolling) four quarters are used as a basis for calculations.

Indicated Annual Dividend Yield Dividend amount paid by a company expressed as a percentage of the current share price.

Individual Retirement Account (IRA) A personal, tax-deferred retirement account available to wage earners. Only those who do not participate in a pension plan at work or who do participate and meet certain income guidelines can make deductible contributions to an IRA. All others can make contributions to an IRA on a non-deductible basis. Such contributions qualify as a deduction against income earned in that year and interest accumulates tax-deferred until the funds are withdrawn.

Individual Retirement Account (IRA) Rollover A tax-free reinvestment of assets distributed from a qualified retirement plan or another IRA into an IRA

Inflation A rise in the prices of goods and services, often equated with loss of purchasing power.

Inflation Rate Rate of change in prices. Two primary US indicators of the inflation rate are the consumer price index and producer price index, which track changes in prices paid by consumers and by producers. The rate can be calculated on an annual, monthly, or other basis.

Inflation Risk The threat that an investment will not keep up with the pace of inflation.

Information Ratio In separate accounts, the information ratio is a measure of the consistency of excess return. This value is determined by taking the annualized excess return over a benchmark (style benchmark by default) and dividing it by the standard deviation of excess return.

Institutional Holdings Institutions are banks, firms or funds with equity assets over $100 million. Shares held by institutions represent the number of common and preferred stocks held by those institutions.

Instrumentality An instrumentality of the U.S. government is a government agency organized under federal charter with government supervision.

Interest Cost of borrowing money or return on invested capital.

Interest Rate Risk The threat that changes in market interest rates pose to an investment. Daily changes in rates cause the prices of bonds to fluctuate--when interest rates rise, bond prices fall, and vice versa. In general, although longer-term issues historically have had higher yield potential than those with shorter maturities, their market values have tended to fluctuate more in response to interest rate changes.

Intermediate Bond Fund A mutual fund that generally invests in bonds with maturities within the 5 to 10-year range.

International Fund A mutual fund that focuses on either directly or indirectly investing in foreign markets. These funds invest in companies throughout the world and are intended for the long-term investor who can tolerate the greater share price volatility that accompanies international investing.

Inventory Turnover Inventory turnover measures a firm's efficiency in managing inventory through sales. It measures the number of times the average amount of inventory on hand is sold within a given period. A high inventory turnover may indicate that a company has low inventory levels, which could result in a business loss. A low inventory turnover might indicate that a company is overstocking its merchandise. This ratio should be compared within the industry because what may be high for one industry may be low for another. Inventory Turnover = Cost of Goods Sold / Inventory

Investment An item of value that seeks to produce income or appreciate in value.

Investment Advisor A company or individual providing investment advice, often including portfolio management, for a fee. Mutual funds hire investment advisors to manage the fund's assets.

Investment Company A firm that, for a fee, invests the pooled funds of small investors in securities appropriate for its stated investment objective. An open-end investment company, better known as a mutual fund, has a floating number of outstanding shares and is prepared to sell or redeem shares at their current net asset value. A closed-end investment company, or an investment trust, has a fixed number of shares that are traded like stock, often on the major exchanges.

Investment Grade or Investment Grade Bond A corporate or municipal bond that has 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 financial goals pursued by an investor or a mutual fund. Examples of investment objectives include long-term growth, capital preservation, or current income.

Investment Risk The possibility of losing money or not gaining value in an investment.

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Joint Account An account owned by two or more people. The owners may be joint-tenants with rights of survivorship where, upon the death of one party, complete ownership passes to the remaining party. The owners may also be tenants in common where, upon death of one party, that party's ownership goes to his/her estate and not to the other owner.

Joint Tenants in Common (JTIC) A form of joint ownership of an account whereby a deceased tenant's fractional interest in the account is retained by his estate.

Joint Tenants with Right of Survivorship (JTWROS) A form of joint ownership that stipulates that a deceased tenant's interest in the account passes to the surviving tenant(s).

Junk Bond A speculative bond rated below investment grade (BB or below for Standard & Poor's, and Ba or below for Moody's). Also called below investment-grade bonds, these bonds are generally issued by a corporation of questionable financial strength or without a proven track record. Below investment-grade bonds tend to be more volatile but have historically provided high potential yields than have bonds with investment grade ratings.

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Keogh Plan A tax-deferred retirement savings plan for employees of unincorporated businesses or for persons who are self-employed (either full-time or part-time).

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Large CapCompanies having a market capitalization between $10 billion and $200 billion.

Large-Cap Stock A stock with a large market capitalization, usually over $10 billion. The stock prices of the large, established companies may be less volatile than those of smaller companies.

Latest Dividend The latest dividend amount, paid per share.

Latest Dividend Payment Date The date on which the dividend was paid to shareholders.

Lipper Lipper, Inc. is an independent mutual fund performance monitor. Lipper ranks mutual funds' total performance (assuming reinvestments of distributions) against other funds having similar investment objectives and strategies. Lipper makes no adjustment for the effect of sales loads.

Liquidity The ease with which an investment may be sold. Mutual funds offer investors liquidity because they can redeem shares on any business day (except stock market holidays) prior to the market close at the fund's net asset value (which is calculated at the end of the business day and may be more or less than the original purchase price).

Load A sales charge or commission assessed by certain mutual funds to cover their selling costs. The commission is generally expressed as a portion of the fund's offering price, usually on a sliding scale from one to 8.5 percent.

Load Fund A mutual fund, sold by a broker or a salesman that levies a sales charge up to 8.5 percent. The load is included in the price of the fund's shares.

Long-Term Assets Tangible assets used in the operation of a business, but not expected to be consumed or converted into cash in the ordinary course of events within one year. Plant, machinery and equipment, furniture and fixtures and leasehold improvements comprise the fixed/long-term assets of most companies. They are normally represented on the balance sheet at their net depreciated value.

Long-Term Bond Fund A mutual fund that generally invests in bonds that mature in more than 10 years.

Long-Term Capital Gain A profit on the sale of an investment that has been held for more than one year.

Long-Term Debt (LTD) Debt due in a year or more. Normally, interest is paid periodically over the term of the loan, and the principal amount is payable as notes or bonds mature.

Low Price (Lo, Low) The lowest price at which an issue traded during a given time period.

Low-Load Fund A mutual fund that charges a small sales commission, of 3.5% or less, for the purchase of its shares.

Lump-Sum Distribution The payout of the entire balance of an individual's account in an employer-sponsored retirement plan within one tax year due to termination of employment, retirement or disability.

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Management Company The firm that organizes, manages, and administers a mutual fund.

Management Fee The fee a mutual fund pays to its investment advisor for services rendered, including management of the fund's portfolio and investment activities.

Margin Amount a customer deposits with a broker when borrowing from the broker to buy securities.

Market Capitalization The total value of a company's outstanding stock. Market capitalization is used to measure corporate size and is calculated by multiplying the number of outstanding shares by the current market price of the stock.

Market Price The last reported price at which a stock or bond is sold.

Market Risk The possibility that the value of an investment will fall because of a general decline in the financial markets.

Market Timing An often perilous investment practice based on predicting market cycles. The aim is to anticipate the market trend by buying before share prices go up and selling before prices go down.

Market Value The price of a security at any given point in time. Market value, whether for a bond, stock, or mutual fund, changes over time. The number of shares of common stock that can be publicly traded multiplied by the latest closing price.

Maturity or Maturity Date The date at which an investor is paid the full face value, or par, of a bond by the issuer.

Mid-Cap Stock Stock of companies with a market capitalization of $2 billion to $10 billion. The stock prices of these companies tend to be less volatile than those of smaller companies but greater than those of larger companies.

Minimum Investment Minimum initial deposit requirement to open an account.

Money Market Fund A mutual fund that aims to pay money market interest rates. This is accomplished by investing in lower risk, highly liquid securities, including bank certificates of deposit, commercial paper, US government securities and repurchase agreements. Money Market funds make these high interest securities available to the average investor seeking some current income potential, but primarily investment-preservation. An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although money market mutual funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in money market mutual funds.

Morningstar Company provides investment information, data, and analysis of stocks, mutual funds, exchange-traded funds, closed-end funds, separate accounts, and variable annuity/life sub-accounts.

Morningstar Rating For each fund with at least a three-year history, Morningstar calculates a Morningstar Rating based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a fund's monthly performance (including the effects of sales charges, loads and redemption fees), placing more emphasis on downward variations and rewarding consistent performance. The top 10% of funds in each category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars and the bottom 10% receive 1 star. (Each share class is counted as a fraction of one fund within this scale and rated separately, which may cause slight variations in the distribution percentages.) The overall Morningstar Rating for a fund is derived from a weighted-average of the risk-adjusted performance figures associated with its three-, five- and ten-year (if applicable) Morningstar Rating metrics.

Mortgage-Backed Securities Certificates backed by pooled mortgages (such as those issued by Fannie Mae or Ginnie Mae). Issuing agencies buy mortgages from lending institutions and repackage them as securities, which are then sold to investors. These securities are generally issued in denominations of $25,000 or above, and carry a yield that is generally higher than that of Treasury bonds of comparable liquidity and risk.

Municipal Bond Fund A mutual fund that invests in the fixed-income securities of state, city and other local governments, with the objective of providing tax-free income. The interest obtained from these bonds is exempt from most federal taxes, but may be subject to state and local taxes. Capital gains from municipal bonds are subject to federal, state and local taxes.

Municipal Securities Debt securities issued to raise money for a variety of public purposes, including financing for state and local governments as well as financing for specific projects and public facilities.

Mutual Fund An open-end investment company that buys back or redeems its shares at the net asset value (NAV) calculated at the end of the business day on which you executed your trade. Most mutual funds continuously offer new shares to investors. Mutual funds can provide diversification, liquidity and professional management.

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NASDAQ Composite Index A computerized market system that provides brokers and dealers with price quotations for securities traded "Over the Counter" (OTC). The NASDAQ Exchange is split into two sections: The NASDAQ National Market and the NASDAQ Small-Cap Market. The requirements for the National Market include:

  • Net tangible assets of $4 million
  • Net income of $400,000 in two fiscal years of the last three fiscal years
  • Pre-tax income of $750,000
  • Public float shares of 500,000
  • Market value of float of $3 million
  • Minimum bid of $5.00
  • The requirements for the small-cap market include:
    - Total assets of $4 million
    - Total stockholders' equity of $2 million
    - Public float of 100,000
    - Market value of public float of $1 million
    - Minimum bid of $3.00

Net Asset Value (NAV) The current market value of one share of a mutual fund. The fund's NAV is calculated daily, after the close of the market, by taking the fund's total assets (securities, cash, and accrued earnings), subtracting the fund's liabilities, and dividing by the number of shares outstanding. The NAV does not include the sales charge.

Net Income Sum remaining after all expenses have been met or deducted; synonymous with net earnings and net profit or net loss (depending on whether the amount is positive or negative).

Net Income Before Extras Net income before any extraordinary gains or losses.

Net Sales Gross sales less returns and allowances, freight out, and cash discounts allowed.

New York Stock Exchange The New York Stock Exchange (NYSE) was founded in 1792 and is the oldest and largest stock exchange in the United States. NYSE is also known as The Big Board and The Exchange. More than 1,600 companies are listed on the NYSE, representing large firms meeting the exchange's uniquely stringent listing requirements. The requirements include:

  • Pre-tax earnings of $2.5 million
  • 1.1 million shares publicly held with $18 million market value
  • Net tangible assets of $18 million

No-Load Fund A mutual fund that sells its shares at net asset value, either directly to the public or through an affiliated distributor without the addition of a sales charge.

Non-Diversified A fund that holds securities of fewer issuers than other kinds of funds. Non-diversified funds tend to have greater price swings than more diversified funds because events affecting one or more of its securities may have a disproportionately large effect on the fund.

NRSRO A nationally recognized statistical rating organization, such as S&P or Moody’s.

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Odd Lot An amount of stock that is less than the round 100-share unit.

Offering Price Price to purchase one share of a given mutual fund.
Offering Price = NAV + Sales Charge

Open-End Funds A mutual fund that sells shares in the fund to the public and buys them back on demand at the NAV (which may be higher or lower than the original purchase price).

Open-End Investment Company An investment company that continuously offers new shares in an actively managed portfolio of securities.

Operating Income The difference between the revenues of a business and the related costs and expenses.

Options An option is the right to buy or sell a security based on an agreed upon price at a specified time. For example, an option may give the holder of a stock the right to sell the stock to another party, allowing the seller to profit if the price has fallen below the agreed price. Options may also be based on the movement of an index such as the S&P 500.

Option Income Fund A fund that invests primarily in dividend-paying common stocks on which call options are traded on national securities exchanges. These funds seek high current return consisting of dividends, premiums from selling options, net short-term gains (including those from the exercising of options) and any profits from closing purchase transactions.

Over-The-Counter (OTC) Market A market in which securities transactions are conducted through an intricate telephone and computer network rather than on the floor of an exchange. OTC securities are not listed and traded on an organized floor, and tend to carry high risks.

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Par Value The fixed face value of a bond.

Payable Date The date on which distributions are paid to shareholders who do not want to reinvest them. This date can be anywhere from one week to one month after the record date.

Payout Ratio The dividend payout ratio is the percentage of earnings per share returned to share owners in the form of cash dividends. It is calculated by dividing the annual dividend by the latest reported earnings per share. If a company reported negative earnings per share the payout ratio will appear as N/C (not calculable).

Payroll Deduction Plan An arrangement between an employer and a mutual fund, authorized by the employee, through which a specified sum is deducted from the employee's salary to buy shares in the fund. For investors who agree to purchase shares through a payroll deduction plan, mutual funds may lower the minimum investment requirements.

Percent Price Change Percent price change is the percent change between the latest available selling price of a stock and the previous price. For example: One-year percent price change is the percent change between the latest available selling price of a stock and its closing price a year earlier.

Portfolio A group of stocks, bonds or other investments owned by a mutual fund or individual investor.

Portfolio Management Team Responsible for investing a mutual fund's assets, implementing its investment strategy and managing the day-to-day portfolio trading.

Portfolio Manager The person or group responsible for managing a pool of investments.

Portfolio Turnover Rate The rate at which a mutual fund's portfolio securities are changed each year. Aggressively managed funds may have a higher portfolio turnover rate than do more conservative funds.

Preferred Stock Stock shares that represent a portion of ownership in a company. The shares normally carry fixed dividends, but shareholders do not have voting rights. Preferred stock shareholders also hold priority for distributions over those holding common stock.

Prepaid Tuition Plans Prepaid tuition plans are a college savings vehicle that may be sponsored by states (on behalf of public colleges) or by private colleges. A prepaid tuition plan lets you prepay tuition expenses now for use in the future. The plan's money manager pools your contributions with those from other investors into one general fund. The fund assets are then invested to meet the plan's future obligations (some plans may guarantee you a minimum rate of return). At a minimum, the plan hopes to earn an annual return at least equal to the annual rate of college inflation for the most expensive college in the plan.

Prepayment Risk In a mortgage-backed security, the threat of uncertainty concerning the timing of cash flow. An individual who has invested in a mortgage has granted the borrower an option to prepay all or part of a mortgage during a given time period.

Price-Book Ratio (P/B) Compares a company's market value to the value of total assets less total liabilities (book). The P/B ratio is determined by dividing current price by common stockholders' equity per share (book value), adjusted for stock splits. Also called Market-to-Book.

Price-Cash Flow Ratio A measure of the market’s expectations of a company’s future financial health, calculating the price of a stock divided by its cash flow per share.

Price-Earnings Ratio (P/E) The price of a share of stock divided by its reported earnings for a 12-month period. It is an indicator of how much investors are willing to pay for an opportunity to share in a firm's future earnings potential.

Primary Market Market for new issues of securities as distinguished from the secondary market, where previously issued securities are bought and sold. A market is primary if the proceeds of sales go to the issuer of the securities sold.

Principal The original amount of an investment.

Private Placement A private placement is the sale of stocks, bonds or other investments directly to a qualified investor without having to register the offering with the SEC or other comparable foreign regulatory authorities. Qualified investors are typically large institutional investors or high net worth individuals. Securities acquired through private placements generally may not be resold.

Prospectus An official document that each investment company must publish, describing the security and offering its shares for sale. It contains information required by the Securities and Exchange Commission. Prospectuses are provided at no charge to the investor and should be read prior to making an investment.

Proxy Written authorization given by shareholders to represent them and vote their shares at a shareholder meeting.

Proxy Statement Information given to shareholders in conjunction with the solicitation of proxies.

Public offering price (POP) The purchase price of one share of an open-end mutual fund, including the sales charge. The POP is equal to the NAV plus the sales charge.

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Qualified Retirement Plan A private retirement plan that meets the rules and regulations of the Internal Revenue Code Section 401(a) and ERISA. These plans offer several tax benefits: they allow employers to deduct annual allowable contributions for each participant; contributions and earnings on those contributions are tax-deferred until withdrawn for each participant; and some of the taxes can be deferred even further through a transfer into a different type of IRA.

Quantitative Analysis The process of determining the value of a security by examining it numerical, measurable characteristics such as value of assets, cost of capital, and the historical and projected patterns of sales, costs and profitability.

Quick Ratio Quick ratio measures short-term liquidity to short-term liabilities excluding inventory, which is the least liquid of all assets. When the quick ratio exceeds 1 it means that the firm could pay off its short-term obligations without having to sell inventories at hand. A figure less than 1 would mean a company would have to depend on inventory sales to pay off short-term debts.

Quick Ratio or Acid Test = (Current Assets - Inventory) / Current Liabilities

Quote The highest bid to buy and the lowest offer to sell a security in a given market at a given time.

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R-Squared A statistical of volatility. It indicates the ‘risk’ associated with a return series. Standard deviation also measures a fund’s performance correlated to a standard index. By definition, the market beta and R squared are 1.00. A beta above 1 is more volatile than the overall market, while a beta below 1 is less volatile.

Real Estate Investment Trust (REIT) A portfolio of real estate investments which may include office buildings, apartment complexes, hotels and shopping malls, and real-estate-related loans or interests. A REIT is a tax-advantaged entity whose assets are composed primarily of such investments.

Realized Profit or Loss Profit or Loss resulting from the sale of a security. Capital gains taxes may be due when profits are realized. Realized losses can be used to offset realized gains for tax purposes.

Record Date The date on which you must be registered as a shareholder (shareholder of record) to receive a declared dividend and/or net capital gains distribution, and to vote at a shareholder's meeting. It is frequently the business day prior to the ex-dividend date.

Redemption How a shareholder sells his or her mutual fund shares back to the fund.

Redemption Fee A fee charged by some funds for redeeming, or buying back, shares.

Redemption Price The price at which a mutual fund's shares are redeemed (bought back) by the fund. The redemption price is usually equal to the current net asset value per share. Also called the bid, call or sell price.

Regional Fund A mutual fund that focuses on a specific geographic area. The objective is to take advantage of a region's growth potential. There may be additional risks associated with these funds due to the concentration of investments in the same region.

Reinvest Distributions Feature where a shareholder requests the mutual fund dividends and/or capital gains to be reinvested in more shares.

Reinvestment Date Date on which a mutual fund's dividends and/or capital gains will be reinvested in additional fund shares.

Repurchase Agreement (REPO; RP) Agreement between a seller and a buyer, usually of US government securities, whereby the seller agrees to repurchase the securities at an agreed upon price and, usually, at a stated time. Repos, also called RPs or buybacks, are widely used both as a money market investment vehicle and as an instrument of Federal Reserve monetary policy

Retained Earnings Retained Earnings are net profits kept and usually reinvested into a business after dividends are paid. Retained Earnings can also be referred to as undistributed profits or earned surplus.

Retirement Plans-Nonqualified A corporate retirement plan, funded by the employer, that does not meet the IRS or the Employee Retirement Income Security Act of 1974 requirements for favorable tax treatment.

Retirement Plans-Qualified A private retirement plan that meets the rules and regulations of the Internal Revenue Code Section 401(a) and ERISA. These plans offer several tax benefits: they allow employers to deduct annual allowable contributions for each participant; contributions and earnings on those contributions are tax-deferred until withdrawn for each participant; and some of the taxes can be deferred even further through a transfer into a different type of IRA.

Return Total return represents the price performance of a security during a given period with dividend distributions taken into consideration.

Return of Capital (ROC) A nontaxable distribution to shareholders that reduces their cost basis. In general, a return of capital results when a fund distributes more income and gains during a year than it has actually earned.

Return on Assets (ROA) Return on Assets measures the rate of return on the assets of a company. ROA is a key indicator of profitability. The higher the ratio, the more profitable the company is. It summarizes the results of the firm's activities in the marketplace and shows how efficiently it runs its finances.
Return on Assets = Net Profits after Taxes / Total Assets

Return on Equity (ROE) The annual earnings from total operations divided by common stockholders equity. Return on Equity (ROE) measures the return on each dollar invested by the common stockholders in a company. This is one indicator of how effectively a firm's management is using investor funds.
Return on Equity = Net Income/Net Worth

Return on Sales Measures profitability after all operating expenses and indicates a firm's productivity as compared to other firms in the same industry.
Operating Profit Margin = Earnings before Income & Taxes (EBIT) / Net Sales

Return to Index A measure in value changes among a group of similar securities as a gauge used to predict possible future movements.

Reverse Repurchase Agreement A repurchase agreement in which an investor sells a security to another party, like a bank or dealer, in return for cash, and agrees to buy the security back at a specified date and price. Reverse repurchase agreements are, in effect, loans to a fund.

Right of Accumulation Allows shareholders to qualify for reduced sales charges on additional mutual fund purchases of front-end load mutual fund shares.

Rights The option the company gives to shareholders in which the shareholders can buy a pro rata share of a new common stock issue at a specific price prior to the stock being made widely available for purchase.

Risk Possibility that a given investment will decrease in value or will provide a lower than expected return. Types of risk include investment risk, inflation risk, principal risk, market risk and interest rate risk. Risks of mutual funds are disclosed in the prospectus.

Risk Tolerance An investor's personal capacity to tolerate declines in his/her investments.

Rollover The transfer of funds to and from IRAs and other plans, particularly post-Economic Growth & Tax Relief Reconciliation Act of 2002. This transfer must occur within a specified period of time, normally 60 days-otherwise the funds are taxed as ordinary income.

Roth IRA Unlike the Traditional IRA, the Roth IRA won't let you deduct your contribution (because it has already been "taxed"), but it does have an important benefit: your investment earnings may be withdrawn without federal tax implications. This means that, provided you keep your contributions in the account for at least five years and are at least age 59 1/2 when you begin withdrawals, you'll keep everything you earn because you'll pay no federal tax on your withdrawals. Like the Traditional IRA, your maximum contribution to a Roth IRA is limited to $3,000 ($4000 or $4500 if you are age 50 or older) and income limits apply. See IRS Publication 590, Individual Retirement Arrangement(s), available at for more information on contributions and deductions.

Round Lot 100 shares of stock.

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S&P (Standard & Poor's) Ranking An investment service that rates securities according to their risk.

  • Common Stock: S&P rankings for common stock are based on the growth and stability of earnings and dividends. S&P calculates a rank based on the per-share earnings and dividend records of the most recent 10 years. The final score for each stock is measured against a scoring matrix determined by analysis of a large and representative sample of stocks. The range of scores includes:

A+ = Highest
A = High
A- = Above Average
B+ = Average
B = Below Average
B- = Lower
C = Lowest
D = In Reorganization
N/R = Not Rated (insufficient data/not amenable)


  • Preferred Stock: An S&P ranking for preferred stock is an assessment of the capacity and willingness of an issuer to pay preferred stock dividends. Preferred stock rankings are based on the likelihood of payment of dividends, the nature of the issue, and the relative position of the issue in the event of bankruptcy, reorganization, or other arrangements affecting creditors' rights.

    AAA = Extremely strong capacity to pay preferred stock obligations
    AA = High quality fixed income security
    A = Sound capacity to pay obligations
    BBB = Adequate capacity to pay obligations
    BB = On balance or speculative with respect to the payment of obligations
    B = On balance or speculative with respect to the payment of obligations
    CCC = On balance or speculative with respect to the payment of obligations
    CC = Currently pays dividends but is speculative in the future
    C = Non-paying issue
    D = Non-paying issue in default
    N/R = Not Ranked (insufficient data/not amenable)

Sales Charge or Sales Load A fee charged when shares are purchased (front-end) or redeemed (CDSC).

Sales/Revenues Includes all net sales of a corporation plus any other revenues associated with the main operations of a business (or those labeled as operating revenues).

Sector Particular group of stocks, usually found in one industry. Securities analysts often follow a particular sector of the stock market, such as airline or chemical stocks.

Sector Fund A mutual fund that focuses on a designated market segment (technology, healthcare, etc.). There are additional risks associated with this type of fund due to the concentration on a single industry.

Securities Exchange Commission (SEC) Government agency created by Congress in 1934 to regulate the securities industry and to help protect investors. The SEC is responsible for ensuring that the securities markets operate fairly and honestly.

Security A general term for stocks, bonds, mutual funds and other investments.

Security Type Security type illustrates the broad-based security category. Security types include: Common stocks, warrants & rights, convertible preferred stocks, American Depository Receipts (ADR), foreign stocks, indices, mutual funds and money market funds.

Sell A transaction for the selling of a security.

Series Fund A mutual fund whose prospectus allows for more than one portfolio. Portfolios may be specialized (Sector Fund) or broad (growth stock, along with a money market portfolio). Management can create additional portfolios as it sees fit.

Settlement Date Date by which the buyer must pay and seller must provide the goods purchased. Normally the settlement date is three business days after the trade date.

Share Proportional ownership in a mutual fund or a "pool" of investors' money.

Share Class A A shares have a front-end sales charge, which is deducted when you buy your shares. This means that a smaller amount is invested in the funds, unless you qualify for a waiver or reduction of the sales charge.

Share Class B B shares do not have a front-end sales charge, but you may have to pay a CDSC when you sell them. The CDSC you may pay depends on when you bought your shares, how much you bought in some cases and how long you held them.

Share Class C C shares do not have a front-end sales charge, but you may pay a CDSC when you sell them. Your selling agent receives compensation when you buy C Shares.

Share Class R R shares do not have a front-end sales charge when you buy shares or a contingent deferred sales charge (CDSC) when you sell them. However, R shares are only available for purchase through certain eligible retirement plans and health savings accounts. Your selling agent receives compensation when you buy R Shares.

Share Class T T shares have a front-end sales charge, which is deducted when you buy your shares. This means that a smaller amount is invested in the funds, unless you qualify for a waiver or reduction of the sales charge. In some cases you may pay a contingent deferred sales charge (CDSC) if your sell T shares that were purchased without an initial sales charge. Class T shares are available for purchase only to investors who received (and who have continuously held) Class T shares in connection with the merger of certain Galaxy Funds into various Columbia Funds (formerly named Liberty Funds).

Share Class Z Z shares do not have a front-end sales charge when you buy shares or a contingent deferred sales charge (CDSC) when you sell them. However, Class Z shares are available only to certain eligible investors, which are subject to different minimum initial investment requirements.

Shareholder An owner of shares of stock in a corporation or mutual fund.

Share Price The market value of a share of stock. For mutual funds the share price is the Net Asset Value (NAV).

Shareholder Report Annual and semiannual written financial statements issued for each fund which includes the portfolio manager's review of investments, statements of assets and liabilities, statements of operations and other financial information.

Shares Outstanding Stock held by shareholders, shown on corporate balance sheets under the heading of capital stock issued and outstanding. The largest reported shares outstanding as indicated on the latest quarterly report, adjusted for stock splits, dividends and buy backs.

Sharpe Ratio A measure of reward per unit of risk-the higher the Sharpe Ratio, the better. It is a portfolio's excess return over the risk-free rate divided by the portfolio's standard deviation. The portfolio's excess return is its geometric mean return minus the geometric mean return of the risk-free instrument (by default, T-bills).

Short Selling The sale of a security which is not owned by the seller. The "short seller" borrows stock for delivery to the buyer, and must eventually purchase the security for return to the lender.

Short-Term Municipal Bond Fund A fund that generally invests in municipal bonds with maturities not exceeding two years. See Municipal Bond Fund.

Short-term Debt All debt obligations coming due within one year.

Signature Guarantee A stamped or typed assurance by a financial institution that a particular signature is valid. A notary cannot provide a signature guarantee. Acceptable guarantors include commercial banks that are members of the FDIC, trust companies, savings and loan associations.

Simplified Employee Pension (SEP) Plan An alternative to a Keogh plan that allows employers to sponsor and establish a retirement plan to contribute to their employee's and their own Individual Retirement Accounts. Contribution amounts are generally greater than those permitted in personal IRA's.

Small-Cap Stock Stocks with a relatively small market capitalization. The definition can vary but generally it is a company with a market capitalization of between $300 million and $2 billion. These stocks may be characterized by greater return potential but generally experience greater price volatility than stocks of larger, more established companies.

Specialty Fund A mutual fund specializing in the securities of a particular industry or group of industries or special types of securities. Sometimes known as a sector fund. These funds carry more risk than funds that invest across different sectors or industries.

Spousal IRA An IRA in which non-wage earning spouses can contribute up to a $4000 ($4500 if age 50 or older) to their own Roth IRA or Traditional IRA, if the couple files a joint federal income tax return. The deductibility of spousal IRA contributions depends on your income limits and whether you are covered by an employer-sponsored retirement plan.

Standard Industrial Classification (SIC) Description SIC was developed for use in classifying of businesses by type of activity in which they are engaged. It's a system invented by the Executive Office of the President, Office Management and Budget, for the purpose of facilitating the collection, tabulation, presentation, and analysis of data relating to establishments and for promoting uniformity and comparability in the presentation of statistical data.

Standard Deviation (R Squared) A statistical measure of volatility. It indicates the 'risk' associated with a return series. Standard deviation also measures a fund's performance correlated to a standard index. By definition, the market beta and R squared are 1.00. A beta above 1 is more volatile than the overall market, while a beta below 1 is less volatile.

Statement of Additional Information (SAI) A supplement to the information contained in a mutual fund's prospectus.

State Savings Plan State savings plans let you save money for college in an individual investment account. These plans are run by the states, which typically designate an experienced financial institution to manage their plan. To open an account, you fill out an application, choose a beneficiary, and start contributing money. However, you can't hand pick your own investments as you would with a Coverdell ESA, custodial account, or trust. Instead, you typically choose one or more portfolios offered by the plan-the underlying investments of which are exclusively chosen and managed by the plan's professional money manager. After this, you simply decide when, and how much, to contribute.

Stock Security that represents part ownership or equity in a company.

Stock Dividend A dividend paid in securities rather than cash.

Stock Exchange The marketplace in which shares of stock are traded, for example the New York Stock Exchange (NYSE), American Stock Exchange (AMEX), Over-The- Counter (NASDAQ) as well as the Boston, Midwest, Philadelphia and Pacific exchanges.

Stock Fund A mutual fund focused on growth or capital appreciation through portfolio holdings in stocks.

Stockholder's Equity Paid-in capital, donated capital, and retained earnings less the liabilities of a corporation.

Stock Split Increase in a corporation's number of outstanding shares of stock without any change in the shareholders' equity or the aggregate market value at the time of the split. In a split, also called a split up, the share price declines.

Symbol The official trading abbreviation by which a security trades and appears on stock quotation machines. Ticker symbols are useful as company identifiers and they also make trading easier on exchanges.

Systematic Investment Plan (SIP) Investment plan in which a shareholder authorizes the fund to periodically take money out of the shareholder's bank account and use it to buy shares. This purchasing plan is a form of dollar-cost averaging. (See dollar-cost averaging.)

Systematic Withdrawal Plans (SWP) Feature offered by many mutual funds to allow shareholders to receive automatic payments from their investments on a regular basis. Often these payments are drawn from the fund's dividend income and capital gain distributions.

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Tax-Deferred Earnings or income which have the potential to accumulate, and are not taxed until withdrawn.

Tax-Exempt Investments whose earnings are exempt from federal-and sometimes state and local-income taxes. Earnings may be subject to the federal Alternative Minimum Tax. Capital gains on such investments are subject to taxation.

Tax Exempt Bond Fund A mutual fund that focuses on helping investors maximize their income and reduce their tax burden by investing in fixed income securities free from federal income tax.

Thematic Funds A mutual fund that applies a thematic approach to investing which combines top-down stock picking based on an analysis of global structural change with bottom-up stock picking based on traditional considerations such as company strategy, competitive market industry situation, etc. This philosophy is based on the belief that cash flow is driven by structural changes and growth in cash flow is what drives stock prices.

Ticker Symbol The abbreviation by which a security appears on stock quotation machines. Ticker symbols are useful as company identifiers and also make trading easier on exchanges.

Total Asset Turnover Measures the management's effectiveness in utilizing the total resources available to generate sales. A high ratio indicates a conscientious management, prudently managing the firm's assets to enhance shareholder's equity.

Total Assets Total assets owned by a given mutual fund including cash and equivalents. Total Assets = Current Assets + Fixed Assets

Total Liabilities Total Liabilities = Current Liabilities + Long Term Debt

Total Return The performance of an investment over a designated period of time, including any income from the investment (dividends, interest and capital gains) as well as any changes in share price. Mutual funds are required to provide total return information monthly and for the 1-year, 5-year and 10-year periods (or life of the fund, if shorter), current as of at least the end of the most recent calendar quarter.

Total Stockholders' Equity Stockholder's Equity = Capital Stock + Capital Surplus + Retained Earnings

Trade The process of buying or selling securities.

Trade Date The date on which shares were purchased or sold.

Traditional IRA A Traditional IRA allows individuals to make an annual tax-deductible contribution of $4000 (or $4500 if you are age 50 or older) or 100% of their compensation, whichever is less. Any earnings in the IRA have the potential to grow tax-deferred until withdrawn. Distributions from Traditional IRAs are included in income at the time of withdrawal and may be subject to a 10% early withdrawal penalty if you are under age 59 1/2. See IRS Publication 590, Individual Retirement Arrangement(s), available at for more information on contributions and deductions.

Transfer Agent The organization, usually a bank, which mutual funds employ to prepare and maintain records relating to shareholder accounts. Some mutual fund groups operate in-house transfer agencies.

Treasuries Negotiable debt obligations of the US government, secured by its full faith and credit and issued at various schedules and maturities. The income from Treasury securities is exempt from state and local, but not federal, income taxes.

US Treasury Bill (T-Bill) Commonly called bill or T-bill by money market people, a Treasury bill is a short-term (maturities up to a year), discounted government security sold through competitive bidding at weekly and monthly auctions in denominations from $10,000 to $1 million.

Treasury Bonds Long-term debt instruments with maturities of 10 years or longer issued in minimum denominations of $1000.

Treasury Notes Intermediate securities with maturities of 1 to 10 years. Denominations range from $1000 to $1 million or more. The notes are sold by cash subscription, in exchange for outstanding or maturing government issues, or at auction

Triple Tax-Exempt Fund A municipal bond fund, whose dividends and interest are exempt from federal, state and local income taxes within a particular state.

Turnover Rate The rate at which a mutual fund's portfolio securities are changed each year. Aggressively managed funds may have a higher portfolio turnover rate than do more conservative funds.

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U.S. Government Obligations A wide range of debt securities that include U.S. Treasury obligations, securities issued or guaranteed by various agencies of the U.S. government, or by various instrumentalities which have been established or sponsored by the U.S. government. Securities issued or guaranteed by federal agencies and U.S. government sponsored instrumentalities may or may not be backed by the full faith and credit of the U.S. government.

US Government Short-Term Fund A mutual fund that invests only in U.S. Treasury and government-agency issues (of a short term nature) such as Treasury bills with an original maturity of up to one year. These funds are not backed by the US government or any federal agency.

US Treasury Bill Commonly called bill or T-bill by money market people, a Treasury bill is a short-term (maturities up to a year), discounted government security sold through competitive bidding at weekly and monthly auctions in denominations from $10,000 to $1 million.

U.S. Treasury Obligation A debt security issued or guaranteed by the U.S. Treasury. U.S. Treasury obligations are backed by the ‘‘full faith and credit’’ of the U.S. government.

US Series EE and I Savings Bonds Backed by the full faith and credit of the United States government, US government savings bonds offer a tax-advantaged way to save for college. The interest from these bonds is usually exempt from state and local taxes and is tax free if used for qualified higher education expenses.

Underwriter The organization that acts as the distributor of a mutual fund's shares to broker/dealers and the public.

Uniform Gifts to Minors Act (UGMA) Laws adopted by most states allowing an adult to contribute to a custodial account in a minor's name without having to establish a trust or name a legal guardian. Thus, minors can have securities bought and money invested in their names, but the custodian is responsible for managing the funds in the account. The custodian has a fiduciary duty to manage the account prudently, but once the minor reaches the age of majority, he/she has complete rights to the funds in the account.

Uniform Transfers to Minors Act (UTMA) Law which extends the Uniform Gift to Minors Act's definition of a gift to include real estate, fine art, patents and royalties.

Unpaid Dividend A dividend that has been declared but not yet paid.

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Value Investing Investing in companies whose stocks appear to be undervalued by the market at large.

Value Stocks Stocks that are purchased because they are relatively inexpensive. These stocks are typically characterized by low price/earnings ratios

Variable Annuity A type of insurance contract that guarantees future payments to the holder, or annuitant, usually at retirement. The annuity's value varies with that of the underlying portfolio securities, which may include mutual fund shares. Assets held in the annuity accumulate on a tax-deferred basis. Guarantees are subject to the claims-paying ability of the issuing insurance company.

Vested Benefits Entitled to anywhere from a portion of to full retirement plan benefits. Depending on your plan's provisions, after you have been with your employer for a certain amount of time, you can take ownership of employer-contributed money in a pension fund or profit sharing plan when you leave the company.

Volatility A type of risk associated with investing, particularly in stocks or the stock market in general. Volatility refers to the fact that security prices will rise or fall over short periods of time.

Volume/Traded Volume This figure is the number of shares traded for a security on a specific exchange on the previous trading day.

Voting Rights A common stockholder's right to vote their stock in the affairs of a company. An individual may vote in person or by proxy on corporate elections and other related business matters.

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Wall Street Nickname for the financial district in New York and the location of the New York Stock Exchange.

Warrants A company issued certificate that represents an option to buy a certain number of shares at a specific price before a predetermined date.

Weighted Average Maturity The average amount of time that will pass until a bond fund's portfolio matures, weighted by the market value of the securities in the portfolio.

Withdrawal Plan Feature offered by many mutual funds to allow shareholders to receive regular, automatic payments from their investments on a regular basis. Often these payments are drawn from the fund's dividend income and capital gain distributions.

Working Capital Working capital finances the cash conversion cycle of a business (the time required to convert raw materials into finished goods, finished goods into sales and accounts receivable into cash). These factors vary with the type of industry and the scale of production, which varies in turn with seasonality and with sales expansion and contraction. Internal sources of working capital include retained earnings, savings achieved through operating efficiencies and the allocation of cash flow from sources like depreciation or deferred taxes to working capital. External sources include bank and other short-term borrowings, trade credit and term debt and equity financing not channeled into long-term assets. Working Capital = Current Assets - Current Liabilities

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X/XD Symbol used in newspapers to signify that a stock is trading ex-dividend, that is, without dividend. The symbol X is also used in bond tables to signify without interest.

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Yield Calculated by dividing the annual dividend by the latest available selling price of the security. For a bond, the yield is the relationship of a bond's coupon rate to its market value. If the bond increases in price, yield will decrease, and vice versa. For a money market fund, yield, usually expressed as seven-day yield, illustrates the investment return earned by a money market fund during a specific seven-day period.

Yield Curve A yield curve will show the relationship between the returns on fixed income investments of the same quality and their maturities. The Treasury yield curve, published regularly in the Wall Street Journal, shows in graph form the yields on US Treasury securities with maturities ranging from three months to 30 years. The Treasury yield curve is the benchmark fixed income investors use to determine whether they are being rewarded enough for the risks they are taking.

Yield to Maturity The measure of a bond's yield, which takes into account both the market price of the bond as well as any capital gains or losses on the bond when held to maturity. It is greater than the current yield when the bond is selling at a discount and less than the current yield when the bond is selling at a premium.

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Zero Coupon Security Security that makes no periodic interest payments but instead is sold at a deep discount from its face value.

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