Glossary
FINANCIAL TERMS FOR INVESTMENTS AND
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Investment Advisor See Advisor |
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Turnover Rate: See Portfolio Turnover Rate |
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Conversion Privilege: See Exchange Privilege |
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Advisor
The organization employed by a unit trust to give professional advice on The Funds’ investments and to supervise the management of its assets.
Asked or Offering Price
The price at which a unit trust’s shares can be purchased. The asked or offering price is based on the current net asset value (NAV) per share plus any sales charge.
Automatic Investment Plan
A plan offered by some funds where as little as BWP 100 a month is automatically deducted from an investor’s bank account and invested in The Fund of their choice.
Automatic Reinvestment
A service that some funds offer whereby a shareholder's income dividends and capital gains distributions are automatically reinvested in additional shares.
Benchmark
An unmanaged group of securities whose performance is used as a standard to measure investment performance. Commonly known as a market index. Some well-known benchmarks are the Domestic Companies Index ( Botswana Stock Exchange) and the S&P 500 (US markets).
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Bid or Sell Price
The price at which a unit trust shares are redeemed (bought back) by The Fund. The bid or redemption price is the current net asset value per share, less any redemption fee or back-end load.
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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 not considered to be of investment grade. Most funds generally restrict their bond purchases to issues of certain quality ratings, which are specified in their prospectuses.
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Capital Gain
Profit that results when the price of a security held by a fund rises above its purchase price. If the security is sold, then the capital gain is realized; if the security is still being held, the gain is unrealized. If the security has been held for more than a year, the gain is long-term; otherwise it is shorter-term. A capital loss occurs when the price of a security falls below its purchase price.
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Capital Gains Distributions
Payments made usually at the end of the year to unit trust shareholders of gains realized on the sale of securities in the mutual fund portfolio.
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Capital Growth
A rise in market value of a Funds’ securities, reflected in its net asset value per share. This is a specific long-term objective of many mutual funds
Certificate of Deposit
An interest-bearing, short-term debt instrument issued by banks.
Closed-End Investment Company
An investment company that offers a limited number of shares. They are traded in the securities markets, usually through brokers. Price is determined by supply and demand. Unlike open-end investment companies (mutual funds), closed-end funds do not redeem their shares.
Commercial Paper
Short-term, unsecured promissory notes with maturities no longer than 270 days. They are issued by corporations to fund short-term credit needs.
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Confirm Date
The date The Fund processed your transaction, typically the same day or the day after your Trade Date.
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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.
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Custodian
The bank or trust company that maintains a unit trust’s assets, including its portfolio of securities or some record of them. The custodian provides safekeeping of securities but has no role in portfolio management.
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Distributor (Distributions)
An individual or a corporation serving as principal underwriter of a unit trust’s shares, buying shares directly from The Fund, and reselling them to other investors.
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Distributions
The payments of dividends and/or capital gains by a unit trust.
Diversification
A basic risk management tool in which an investor maintains a mix of common stocks, bonds money markets and other investments to reduce potential risk.
(Dollar) Pula-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 security prices and fewer shares in periods of high prices. In this way, investment risk is spread over time.
Exchange Privilege (Or switching privilege)
The right to transfer investments from one fund into another, generally within the same fund group, at nominal cost.
Ex-Dividend Date
The date on which a Funds’ Net Asset Value (NAV) will fall by an amount equal to the dividend and/or capital gains distribution (although market movements may alter The Funds’ closing NAV somewhat). Most publications which list closing NAVs place an "X" after a Funds’ name on its Ex-Dividend Date
Expense Ratio
The ratio of total expenses to net assets of The Fund. Expenses include management fees, distribution charges, if any, the cost of shareholder mailings and other administrative expenses. The ratio is listed in a Funds’ prospectus. Expense ratios may be a function of a Funds’ size rather than of its success in controlling expenses.
Fiscal Year
An accounting period consisting of 12 consecutive months.
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Investment Company
A corporation, partnership or trust that invests the pooled monies of many investors. It provides greater professional management and diversification of investments than most investors can obtain independently. Unit trusts, mutual funds, and "open-end" investment companies, are the most popular forms of investment company.
Investment Objective
The financial goal (long-term growth, current income, etc.) that an investor or a fund pursues.
Junk Bond
A speculative bond rated BB or below by Standard & Poor's Corp. and Ba or below by Moody's Investor Service. "Junk bonds" are generally issued by corporations of questionable financial strength or without proven track records. They tend to be more volatile and higher yielding than bonds with superior quality ratings. "Junk bond funds" emphasize diversified investments in these low-rated, high-yielding debt issues.
Load
A sales charge added to the purchase of a unit trust shares ("load fund") to cover their selling costs. The commission is generally stated as a portion of The Funds’ offering price, and can range up to 8.5%.
Long-Term Capital Gain
A profit on the sale of a unit trust share that has been held for more than one year.
Management Fee
The amount a fund pays to its investment advisor for services rendered, including management of The Funds’ portfolio. In general, this fee ranges from .5% to 2% of The Funds’ asset value.
Money Market Fund
A fund that aims to pay money market interest rates. This is accomplished by investing in safe, highly liquid securities, including bank certificates of deposit, commercial paper, Botswana government securities and repurchase agreements. Money Market funds make these high interest securities available to the average investor seeking immediate income and high investment safety.
Mutual Fund
An open-end investment company that buys back or redeems its shares at current net asset value. Most funds continuously offer new shares to investors. See also Investment Company.
Net Asset Value Per Share
The current market worth of a unit trust share. Calculated daily by taking The Funds total assets: securities, cash and any accrued earnings, deducting liabilities, and dividing the remainder by the number of shares outstanding.
No-Load Fund
A commission-free unit trust 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.
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.
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Payroll Deduction Plan
An arrangement between an employer and a unit trust, authorized by the employee, through which a specified sum is deducted from an employee's salary to buy shares in The Fund.
Portfolio Manager
A professional hired by the unit trust advisor to make investment decisions concerning the purchase and sale of securities for the unit trust portfolio in accordance with The Funds’ objectives.
Portfolio Turnover Rate
The rate at which The Funds’ portfolio securities are changed each year. Aggressively managed funds generally have higher portfolio turnover rates than do conservative funds that invest for the long term. High portfolio turnover rates generally add to the expenses of a fund.
Prospectus
An official document that each investment company must publish, describing the unit trust and offering its shares for sale. It contains information required by the Regulatory Authority, including fees and expenses of The Fund, past performance and how to buy and redeem shares.
Record Date
The date The Fund determines who its shareholders are; "shareholders of record" who will receive The Funds’ income dividend and/or net capital gains distribution. Frequently the business day immediately prior to the Ex-Dividend Date.
Redemption Fee
A fee charged by a limited number of funds for redeeming, or buying back, fund shares.
Redemption Price
The price at which a unit trust’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.
Reinvestment Date (Payable Date)
The date on which a share's dividend and/or capital gains will be reinvested (if requested) in additional fund shares.
Reinvestment Privilege
A service that some unit trust’s offer whereby a shareholder's income dividends and capital gains distributions are automatically reinvested in additional shares. See Automatic Reinvestment.
Risk
The measure of an investor's ability to withstand volatility in the markets. Investors with a near-term focus are likely to be more conservative than those with a long-term viewpoint who can benefit from the market's fluctuations by taking advantage of compounding and historical growth of the markets.
Share
Unit of ownership
Systematic Withdrawal Plans
Some unit trust’s offer withdrawal programs whereby shareholders receive payments from their investments. These payments are usually drawn from The Funds’ dividend income and capital gain distributions, if any, and from principal only when necessary.
Total Return
The performance of an investment, including yield (dividends, interest, capital gains) as well as changes in per share price, calculated over a designated period of time. Assuming reinvestment of capital gains and income distributions, multiply the number of shares owned by the net asset value per share. Subtract the original investment from the result. Then divide that figure by the original investment and multiply by 100. (Assuming your shares are now worth BWP 8,000 and the investment was BWP 5,000, divide BWP 3,000 by BWP 5,000 getting 0.6. Multiplied by 100 percentage increase the total return was 60%.) See Yield.
Trade Date
The actual date on which your shares were purchased or sold. The transaction price is determined by the closing Net Asset Value on that date.
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Transfer Agent
The organization, usually a bank, that unit trust’s employ to prepare and maintain records relating to shareholder accounts. Some unit trust groups operate in-house transfer agencies.
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 unit trust shares. All monies held in the annuity accumulate tax-deferred.
Yield
Income or return received from an investment, usually expressed as a percentage of market price, over a designated period. For a unit trust, yield is interest or dividend before any gain or loss in the price per share. See Total Return.
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