Whitten Capital Group - Whitten Investment Services

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Aim: AIM is the London Stock Exchange's market for small, young and growing companies. It gives investors the opportunity to invest and trade in the shares of these companies on a market regulated by the Exchange.

Annuitant: The beneficiary of an annuity who receives a stream of payments pursuant to the terms of the annuity contract.

Annuity: An Annuity is an income for life. Essentially, you hand over a lump sum, say $100,000 and somebody else, usually a life insurance company will guarantee you an income until your death. So, an annuity is like the reverse of a mortgage. Instead of getting a lump sum and then paying back monthly amounts to your home lender, you hand over a lump sum and receive monthly payments until you die. The rate of income you receive from the annuity will depend on how much capital you hand over and how old you are. A healthy 65 year old man will receive a smaller income than a 70 year old man, because the 70 year old is not expected to live as long. Because women tend to live longer than men, life insurance companies tend to offer them lower annuity rates.

There are other types of annuities, for example joint life annuities where the capital is handed over to the life insurance company which then pays an income for the life of both spouses. Annuity rates vary and are influenced by the prevailing level of interest rates in the economy.

AVCs: Additional voluntary contributions (AVCs) are extra amounts of money which you may choose to save in order to enhance the pension you will receive on retirement. If you are in a company pension scheme, it may be that the amount of money being saved for your retirement is less than you would like. By making extra contributions, you can effectively boost your pot of money and income in retirement.

Asset Manager: A person appointed by a written contract between the IBC (or the exempt company) or the APT and that person to direct the investment program. It can be a fully discretionary account or limitations can be imposed by the contract under the terms of the APT or by the officers of the IBC. Fees to the asset manager can be based on performance achieved, trading commissions or a percentage of the valuation of the estate under his or her management.

Base Rate: The base rate, sometimes referred to as the repo rate is the minimum rate at which banks are prepared to lend money - it acts as the benchmark for other interest rates, including personal loans and mortgages. The high street banks' base rate changes following the Bank of England's signals through its daily money market operations. The central bank moves base rates by changing the dealing rates at which it buys bills from the discount houses.

Bonds: A bond can be issued by anyone but is, generally, a certificate issued by a government or a public company to repay money borrowed. These loans normally repay a fixed rate of interest over a specified time and then also repay the original sum at par in full after an agreed period - when the bond matures. Interest in bonds among private investors increased after corporate bonds were permitted to be included in a personal equity plan (PEP) from mid 1995.

Building Society: A building society is a mutual organisation owned by its members - its savers and borrowers. It's traditional purpose was to lend money to individuals to purchase or remortgage their homes. This money used to come exclusively from individual saving members who are paid interest. These days an increasing proportion, but still a minority of the funds are raised on the commercial money markets.

Capital Appreciation: An increase in the market value of money or property.

Capital Gains Tax: A tax on gains made when you sell assets - things like shares, a holiday home or an oil painting. If you buy an asset or investment then later dispose of it for more than you paid for it, you are said to have made a capital gain. Make enough gains in one particular tax year and you will be liable for capital gains tax (CGT).

Closed End Funds: These are investment funds which have a limited number of shares.

Commodities: In City parlance, a commodity is any homogenous item which may be freely bought and sold. Commodities can be shares, furniture or houses, but the term typically refers to things like coffee, cocoa and Soya beans (soft commodities) or gold, aluminum, platinum (hard commodities). Commodities are typically bought and sold in the futures markets where producers combine with manufacturers and speculators to create a liquid market.

Common Stock: Shares of ownership in a corporation; normally referred to simply as "Stock"

Cooling Off Period: Also known as a Cancellation Period. This is a 14-day period, in the case of investments and insurances during which you may change your mind about an investment you have just made and have your money back instead. Cooling off periods apply only to some investments and are not available if you buy off-the-page in response to an advertisement or as an execution-only customer.

Corporate Bond: is an IOU issued by a public company, such as British Telecom, ICI or Marks & Spencer. When you invest in a corporate bond, you are lending money to the company. In return you will receive interest at a fixed rate and the promise that your capital will be repaid at a certain date in the future. The guarantee that our capital will be returned is only as good as the company you are lending money to. While BT, ICI or Marks & Spencer are considered 'good risks' by investment pundits because they are blue chip companies, other smaller companies are likely to be a less good risk. Following the Chancellor's decision to permit corporate bonds to be included in a Personal Equity Plan (PEP), leading financial service providers have launched schemes encouraging investment in Corporate Bond Peps. Preference shares , convertibles and Euro sterling bonds are also permitted to be included in Peps as of July 1995.

Covenant: This is an agreement or promise in the form of a deed binding the person or persons signing the covenant to do certain things or not to do them, including make specified payments of money.

Custodian: A bank, financial institution or other entity that has the responsibility to manage or administer the custody or other safekeeping of assets for other persons or institutions.

Debenture: A loan raised by a company, paying a fixed rate of interest and which is secured on the assets of the company.

Diversification: Spreading of risk by putting assets in several categories of investments.

Equities: Ownership interests possessed by shareholders in a corporation - stock as opposed to bonds.

Equity Bonds: Equity Bonds (or Insurance bonds investing exclusively in company shares) are comparable with unit trusts, except for the taxation differences. Equity Bonds can be just as specialist as unit trusts, putting cash into sectors such as 'Emerging Markets' or investing for 'UK Income' or 'UK Growth'. Since insurance bonds pay Capital Gains Tax (CGT) internally (within the fund), they will be less tax efficient than unit trusts for most investors.

Eurobond: A Eurobond is a medium or long-term interest-bearing bond created in the international capital markets. A Eurobond is denominated in a currency other than that of the place where it is being issued. This means, among other things, that interest on such bonds is usually paid gross - without tax being deducted. Eurobonds are only issued by major borrowers, such as governments, other public bodies or large multinational companies.

Face Value: The face value is the term used to describe the value of a bond in terms of what the company which issued the bond will actually repay when the loan matures. It's sometimes described as nominal or par value.

Fund performance: Reflects a fund's investment results.

Futures: A contract for the purchase and sale of a commodity, financial instrument or index at a fixed price at a fixed date in the future. Futures contracts were originally invented to allow those who regularly buy and sell goods to protect themselves against future changes in the price of those goods. In other word, the futures markets evolved to allow producers or consumers to hedge their risk.

Gilts: Gilts, sometimes referred to as British Government bonds are a way for the Government to raise money from large financial institutions like pension funds and from private investors. The money is needed by the Government because the Treasury so often finds that its outgoings (to pay for things such as road building and unemployment benefit) exceed its income (from things such as taxation).

To make matters a little more potentially confusing gilts are sometimes referred to as 'gilt edged securities' or 'bonds' or 'fixed interest securities'. In any event, gilts are issued by the Treasury and in nearly all cases, the investor hands over his cash and then receives a fixed rate of interest for the life of the gilt. When the gilt matures, its capital value is repaid at par value.

Global fund: Invest in both U.S. and foreign securities.

Grey Market: Trading in shares outside a recognized market. This has come to mean trading in shares ahead of their issue on the stock market. Unofficial trading has become commonplace particularly in privatization stocks ahead of their actual listing and commencement of official trading.

Growth Fund: A fund that focuses on capital appreciation rather than income as its investment goal.

Historical yield: Refers to an investment's actual return from income over a given period measured from the beginning of the period.

Income: Earnings, generally from interest or dividends, that are credited or paid to an investor.

Income dividend: Payments of dividends, interest, or short-term capital gains earned by a fund's portfolio of securities after deducting operating expenses. The prospectus describes how often a fund pays dividends.

Income Fund: A fund that specializes in investments that can produce current income and dividends.

Income Tax: Income tax is payable on any income, whether it's derived from working or investment. Every person however can earn a certain amount of money each year before tax kicks in. This is the Personal Allowance.

Index: A benchmark, such as the Standard & Poor's 500 Composite Index, against which to measure performance. It is not possible to invest directly in an index.

Index Funds or Tracker Funds: Tracker funds, sometimes referred to as 'index funds' aim to replicate or copy the performance of a given share index. To do this, the fund managers could buy every share in a given index e.g. - they could buy all the shares in the Footsie 100 index. However, it is possible to construct a fund which tracks the index without buying every share.

Index Linking: Index-linking usually means 'linking something to the rate of inflation'.

Inheritance Tax: In the event of your death, this tax is payable by your heirs

International fund: Invest only in foreign securities, none from the United States.

Investment Objective: The stated goal of a mutual fund. It helps determine the types of securities in which a portfolio invests, the expected returns, and the level of risk.

Investment Position: An investor's stake in a particular security or market.

Investment Trusts: Investment Trusts are companies which invest in the shares of other companies. Like unit trusts, they are collective investments which pool together the money of many investors. This money is then invested in a portfolio (or wide range) of companies which will be more varied than the small investor could achieve on his own.

ISA: The Individual Savings Account (ISA) was launched on 6 April 1999 and is guaranteed to run for at least 10 years, offering some certainty to people who want to use the plan for long term savings. The main features of the ISA are that you are able to put £7,000 per annum into the plan (at least until tax year 2006-2007) of which no more than £3,000 can go into cash and £1,000 into life insurance. Alternatively you can put your whole £7,000 annual ISA allowance into shares only, unit trusts or investment trusts.

Large-cap (capitalization) stocks: Companies with outstanding shares valued at $6 billion or more.

Leasehold: Holding a 'leasehold' gives you the right of possession, but not ownership, of a property for an agreed period of time. Ultimately, ownership remains with the freeholder. The duration of the right of ownership is usually a fixed term granted by the lease.

LIBOR: LIBOR stands for London Inter Bank Offer Rate. It's the rate of interest at which banks offer to lend money to one another in the so-called wholesale money markets in the City of London. Money can be borrowed overnight or for a period of in excess of five years.

LIFFE: The London International Financial Futures and Options Exchange (LIFFE) was first established in September 1982 to trade in financial futures. Ten years later it took over the London Traded Options Market. LIFFE is now the world's largest financial futures market outside Chicago and is the largest market, for example, in Bund (German government bond) futures - more than twice the size of domestic German Bund future trading. LIFFE trades futures contracts in several government bonds, including Gilts. It also trades FTSE index futures and has some currency futures contracts.

Limited Liability: Shareholders are not liable for the debts of the company over and above the money they have subscribed through the purchase of the company's shares. This is known as limited liability.

Limited-maturity fund: Generally invest in bonds that come due in five years or less. Usually, the objective of such funds is to produce current income

Liquidity: The ease with which an asset can be turned into cash. It is a central objective of money market funds.

Listed Company: A company whose shares have been listed by a stock exchange.

Lloyds Names: Names are wealthy individuals with at least £250,000 of liquid assets who have traditionally supported the Lloyds of London insurance market. They underwrite risks, pledging their entire wealth should it be necessary to meet claims. Names do not put money into the pot upfront but their assets are at risk.

Market Maker: Market makers are players in the stock market who trade as principals and may actively try to encourage/discourage trading by changing the prices they quote to tempt buyers and sellers into the market.

Market Value: The current price of an asset, as indicated by the most recent price at which the asset was traded on the open market.

Money Market Fund: Seek to provide current income and maintain a stable net asset value of $1 per share by investing in short-term, high-grade securities. Investments in the fund are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund.

Mutual Fund: An investment company that invests the money of its shareholders in a (usually) diversified group of securities to achieve a specific objective over time. These are often described as the American equivalent of unit trusts. They are pooled investments which are also open ended funds. Click here for more information about Mutual Funds.

Mutual Society: An organisation set up and owned by its members and run for their benefit. Building societies, friendly societies and some life insurers are examples of mutual societies.

NASDAQ-OTC Index: An unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotations System. NASDAQ quotes are published in the financial pages of newspapers. It is not possible to invest directly in an index.

NASDAQ acquired EASDAQ in March to create NASDAQ Europe. This Brussels-based Pan-European stock market was set up in November 1996 along similar lines to NASDAQ in the USA.

National Association of Securities Dealers (NASD): An industry organization in the U.S. charged by Congress with standardizing investment practices as well as establishing and enforcing high ethical standards in the financial community.

National Insurance: A back door tax by the Treasury. The money collected from income earners is used to pay for most social security benefits.

National Savings: The Department of National Savings is a government department which has the role of bringing in extra cash to help the government pay its bills. Put another way, the department is another way for the Treasury to raise money to help meet the shortfall in the government's income. It's been described as the government's little piggy bank, but the serious role of National Savings is to borrow money from citizens by selling them competitive investment products. The first National Savings Certificates - then called War Savings Certificates - were issued in 1916. It was basically another way for the government to raise money for the Great War. Since then successive U.K. governments have issued fresh certificates.

Net asset value (NAV): The market price of a mutual fund's total assets (after deducting liabilities) per share. It is the price at which a shareholder would sell a fund's shares.

OFEX: OFEX is an unregulated trading facility established by the stock broking firm JP Jenkins in which shares of smaller companies may be bought and sold.

Offshore: Offshore is an international term meaning not only out of your country (jurisdiction) but out of the tax reach of your country of residence or citizenship; synonymous with foreign, transnational, global, international, transworld and multi-national, though foreign is used more in reference to the IRS. Click here for more information about Offshore Mutual Funds.

Options: An option is a contract giving the right to sell or buy a commodity, financial instrument or index, at a specified price for a certain period. In other words, like futures, options are derivatives which allow you to put down a small stake and give yourself exposure to a much larger investment. Like futures, they can be used to minimise or maximise risk. There is one key difference between options and futures. If you buy a futures contract, you have agreed to take delivery of a commodity (say 10 kilos of Sugar) at a given date in the future. You have no alternative (unless of course you sell the contract on to somebody else). With an option, you are not bound to take delivery. If you choose, you may decided against taking delivery and let the option 'lapse'.

Ownership: Ownership constitutes the holding or possession of limited liability company legal claim or title to an offshore asset.

PEP: now closed, they were created in 1987. By the time of their abolition, the Inland Revenue had permitted each taxpayer to put £6000 into a General PEP and an additional £3000 per annum in a single company PEP. Apart from investing directly in shares, many people used PEPs to invest in unit trusts and investment trusts. PEPs were also able to invest in corporate bonds, convertibles and preference shares in UK and EU companies.

PLC: A 'plc' is now the standard form for a public company in the UK. It was introduced in the Companies Act 1980. A public limited company is defined as one limited by shares or by guarantee, whose memorandum states that it is a public company and which has registered as such. It is a legal requirement that the words public limited company or plc must follow the company's name. Only plc's may qualify for listing or trading on the Alternative Investments Market (AIM) or the London Stock Exchange.

Portfolio: The stocks, bonds and other assets owned by a mutual fund or other investor.

Portfolio manager: Handles the assets of a securities portfolio of a mutual fund, an individual, or an institutional investor. Usually, this individual is responsible for deciding which securities to buy, hold, or sell.

Preference Shares: Preference shares are shares issued by companies but are a little different to ordinary shares. They are considered less risky than ordinary shares because they pay a fixed dividend which is decided at the time of the issue of the shares - dividends from ordinary shares can rise and fall from year to year. Holders of preference shares have an entitlement as their name suggests, to receive their dividends before ordinary shareholders are paid out. So, if there's a limited amount of cash in the kitty, preference holders may be OK while ordinary shareholders get nothing. If a company were to go out of business, preference shareholders stand higher up the pecking order than ordinary shareholders. Preference shareholders will be repaid at par value, the price at which the shares were issued, before ordinary shareholders get a look in !

Price-to-earnings (P/E) ratio: The amount investors pay for a stock in relation to the company's earnings per share of outstanding stock.

Principal value: Represents an investment's original invested amount.

Prospectus: Describes its history, the background of its managers, its objectives, its financial statement, its eligible investments, its charges, and other essential facts an investor would need to make an informed decision concerning the fund's prospects.

Redemption: The process of converting shares into cash, or selling shares. Any open-end mutual fund must redeem shares at the current price from a registered shareholder upon his or her request. Also referred to as a liquidation.

Regional Bond: Regional Bond Fund seeks current income. Generally invest in corporate and/or governments debt securities focusing on a single region, but not limited to one country.

Reinvestment: Using dividend or capital gain payments to purchase more shares instead of taking payments in cash.

RPI: Inflation, the tendency of prices to rise and keep on rising is measured in the U.K. by the so called 'Retail Price Index (RPI). This official measure is calculated each month by taking a sample of goods and services which the typical household might buy. Included are such items as food, heating, housing, household goods, bus fares and petrol.

Save As You Earn option schemes: This are a way for employees of a company to save gradually over three, five or seven years and with the proceeds purchase shares in 'their company' at a discount.

Securities: This is the generic term for any financial instrument traded on the Stock Exchange. In common usage in the U.K., stocks are fixed rate bonds. But, the American definition has gained currency and today people understand 'securities' to refer to shares or bonds.

Security: An investment interest that can be bought and sold. Examples include stocks, bonds, and money market obligations.

Securities and Exchange Commission (SEC): The federal agency responsible for regulating securities markets and mutual funds as well as protecting investors.

SFA: The Securities & Futures Authority (SFA) is the self-regulatory organization (SRO) for firms dealing or arranging deals in stocks and shares, financial and commodity futures, options on securities and on foreign exchange.

Share: A unit of ownership in a fund or a stock.

Shareholder: Owns shares of a mutual fund or a stock.

SIPC: The Securities Industry Protection Corporation. Provides up to $500,000 insurance protection for your U.S. stock brokerage account.

Small-cap (capitalization) stocks: Issues with outstanding shares valued at $2 billion or less.

Specialized Fund: Specialized Equity Funds invest in securities of a specific industry or economic sector. Sectors include technology, real estate, gold, precious metals utilities, etc. The fund could be limited to one or more regions and/or countries.

Standard & Poor's 500 Composite Index (S&P 500): A popular, unmanaged index of common stock total return performance. It is not possible to invest directly in an index.

Stock fund: Generally seek to produce an increase in the value of their shares. Their objectives can range from moderate growth and moderate current income to long-term growth with income incidental.

Stock and bond fund: Invest in a mix of bonds, preferred stocks, and common stocks and seek to conserve principal, pay current income, and seek long-term growth of both principal and income.

Total Return: The rate of return on an investment, including all dividends and interest, plus or minus any change in the value of the asset. Also, an investment strategy that seeks a combination of growth and income.

Tracker Funds: See Index Funds

Unit Trust: A unit trust is an open ended collective investment. It is open ended because the number of 'units' in each trust will vary according to supply and demand. It is collective because it puts together the money from many different investors for a professional investment manager to look after. It is the job of the unit trust fund manager to make sure the money is invested properly and to deliver the investors the very best returns. Most unit trusts use the money given to them by unit holders to buy ordinary shares, or equities, but with more than 1,700 unit trusts managed by 170 management companies, there are a great many different types from which to choose.

Unquoted / Unlisted shares: Shares in some companies, often smaller ones, are not traded on any stock exchange. For people interested in investing in unquoted shares, there are investment trusts which specialise in this area.

U.S. Government Securities: Securities issued by the U.S. government. Examples include; Treasury notes, Treasury bills and Treasury bonds.

US Bond Fund: US bond funds seek current income. Generally invest in debt securities of US companies and/or government agencies.

US Equity Fund: US Equity funds seek growth by normally investing in US equities.

World Developed Markets Bond Fund: World Developed Markets Equity Funds seek growth y normally investing in equity securities located in developed markets throughout the world, across multiple regions and/or countries.

World Emerging Markets Equity Fund: World Emerging Markets Equity Funds seek growth by normally investing in equity securities from emerging markets (multiple countries). Funds normally can include all countries, with these exceptions: US, Canada, Japan, Hong Kong, Singapore, Australia, New Zealand, and Western European countries.

Venture Capital Trusts: Venture Capital Trusts (VCT's) were devised in the 1993 budget as a way for new and unquoted companies to obtain money from investors. VCT's are essentially investment trusts. Like other investment trusts their shares are often traded in the stock market. Since these small and growing companies are a higher risk than investing in bigger, more mature businesses, VCT's offer more attractive tax breaks.

World Markets Bond Fund: World Markets Balanced Funds generally invest in a combination of equities, money markets and bonds across various countries. The allocation to each asset category may vary according to market conditions.

World Market Equity Fund: World Markets Equity Funds seek growth by normally investing in equity securities from developed and emerging markets.

Yield: The percentage rate of return of the annual dividends paid on a stock, a bond, or a mutual fund.