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12(b)1

A method of charging distribution-related expenses directly against fund assets. "12(b)1" refers to the 1980 U.S. Securities & Exchange Commission rule that permits the use of these plans. A fund is required to include a 12(b)1 charge in its stated expense ratio.

Adviser

An organization that is hired by a mutual fund to oversee the investment of the mutual fund’s assets.

Advisory Fee

The fee (sometimes called a Management Fee) that the investment adviser charges the mutual fund in return for management services.

Aggressive Growth Fund

A mutual fund that seeks to provide maximum long-term capital growth from stocks, usually the stocks of smaller companies or narrow market segments.

Annual and Semiannual Reports

The formal financial statement issued yearly (or twice yearly) by a mutual fund (or by any corporation). This report contains a list of the mutual fund’s assets, liabilities and earnings, and identifies the securities currently in the fund’s portfolio of investments. The Annual Report is mailed to each shareholder at the end of the fund’s fiscal year.

Asked or Offer Price

More commonly called the public offering price, this is the price at which mutual fund shares can be purchased. The asked price is also referred to as the fund's net asset value (NAV) per share, and includes front-end sales charges, if any. For a no-load fund, the asked price is the same as the NAV.

Assets

The current dollar value of all the money that a mutual fund’s shareholders have invested in the fund.

Asset Allocation

An investing strategy that distributes an investor’s dollars among multiple investment products or asset classes. Asset Allocation affects both risk and return and is a key point in planning personal financial planning and investment management.

Asset Class

Asset classes are simply different broad types of investments. The three primary asset classes are stocks, bonds, and money markets.

Automatic Reinvestment

Also known as a dividend reinvestment plan. It is an arrangement whereby mutual fund investors can use their fund dividends and capital gains to automatically purchase additional fund shares, rather than taking them in the form of a distribution.

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Back-end Load

A fee assessed when certain mutual fund shares are sold. Also called a redemption fee or a contingent deferred sales charge (CDSC). Some funds gradually phase out back-end loads over several years, so that if a shareholder stays invested in the fund long enough, they pay a reduced fee or none at all.

Balanced Fund

Funds which blend investments in stocks and bonds are commonly known as balanced funds. A balanced fund typically has the flexibility to change the investment mix based on then-current economic conditions. The returns for balanced funds have typically been greater than those of bond and money market funds, but lower than those of pure stock funds. Investing in both types of securities means the value of principal should fluctuate less than it would in a stock or bond fund alone.

Basis Point

One hundredth of one percent in the yield of an investment. 100 basis points equals 1%.

Beta

The beta coefficient is a means of measuring the volatility of a stock or stock portfolio in comparison with the market as a whole. A beta of 1.0 indicates that the portfolio's price will move with the market. A beta higher than 1.0 indicates that the portfolio's price will be more volatile than the market. A beta of less than 1.0 indicates that the portfolio's price will be less volatile than the market.

Bid or Sell Price

The price at which a mutual fund’s shares are redeemed, or bought back, by the fund. The bid price is the current NAV per share, less any redemption fee or back-end load.

Bond

Also known as a fixed-income security, a bond is an agreement to repay the investor the amount loaned (the principal) on a specific date and to make periodic fixed payments (interest) to the investor until the loan is repaid.

Bond Fund

A mutual fund that invests in bonds; generally, corporate, municipal, or U.S. Government debt obligations. Bond funds typically emphasize income as an investment objective rather than growth.

Broker-Dealer

A firm that sells mutual funds or other securities to investors.

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An increase in the market value of an investment.

Capital Appreciation Fund

A mutual fund that seeks maximum capital appreciation by investing primarily in stocks.

Capital Gain

The profit made from the sale of securities due to an increase in share value.

Capital Gains Distribution

Payments of capital gains, which are the positive differences between the asset’s adjusted purchase price and selling price to shareholders of a mutual fund. For tax purposes, long-term capital gains distributions are separate from interest income or dividends.

Capital Growth

An increase in the market value of a fund's securities which is reflected in the value of the fund's shares. Capital growth is a specific long-term objective of many stock mutual funds.

Cash Equivalents

Investments that are of such high liquidity and safety that they are considered virtually as good as cash, such as U.S. Treasury Bills or money market instruments.

Cash Position

The percentage of a mutual fund's assets that are invested in short-term cash equivalents.

Certificate of Deposit (CD)

An instrument issued by a bank or savings and loan, which promises to repay your money at a specified date and with a specified amount of interest. CDs are often federally insured.

Commission

A fee paid to a broker for executing a trade.

Compounding

The growth of an investment that comes from earnings on both the original principal amount invested and the reinvested income and capital gains.

Contingent Deferred Sales Charge

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, with the fee reduced each year the shares are held.

Current Yield

The income paid annually on bonds or bond mutual fund shares, expressed as a percentage of the current price per share.

Custodian

An organization, usually a bank, which holds in custody and safekeeping the securities and other assets of a mutual fund.

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Distribution

Regular payments from mutual funds to their shareholders, made up of dividends, interest and short-term capital gains earned from the fund’s portfolio of securities. Income may be distributed annually, bi-annually, quarterly, or monthly, with operating expenses deducted.

Distribution Schedule

The frequency (monthly, quarterly, semi-annually, or annually) of a mutual fund's scheduled distributions of dividends or capital gains.

Distribution Yield

Latest net income distributed (annualized), divided by month-end net asset value.

Diversification

An investing strategy that spreads risk, and thus increases stability and safety, by investing assets over many different individual securities and/or asset classes.

Dividend

A payment to shareholders of moneys earned by a fund. Dividends must be declared as income in the year in which they are received.

Dollar-Cost Averaging

Also known as a constant dollar plan. Investing a fixed dollar amount at regular intervals over a long period of time to insure purchases at a variety of prices.

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Earnings per Share

The figure which represents the portion of a company’s profit allocated to each outstanding share of common stock.

Emerging Markets Fund

A mutual fund that invests primarily in the stocks of companies located in countries that are becoming industrialized. Emerging markets funds tend to be volatile, so values can fluctuate dramatically.

Equity (Stock) Fund

A stock mutual fund invests in selected securities traded on the stock market. The fund changes in value as the prices of the stocks in the fund change. Although these funds tend to rise or fall in price more than other types of mutual funds, they have traditionally rewarded investors with higher returns over the long run.

Expense Ratio

The expense ratio is taken out of the fund's current income and is disclosed in the prospectus. The amount, expressed as a percentage of total investment, that shareholders pay annually for mutual fund operating expenses and management fees.

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Financial Modernization Act of 1999

The Legislation repealing Glass-Steagall prohibitions on affiliations among financial institutions, insurance companies, and securities dealers. The Act implements a system of integrated financial services.

Financial Planner

A professional who advises individuals and corporations on their financial status and goals. Their compensation may be fee only, commissions, or a combination.

Fixed-income (Bond) Fund

A fixed income fund is a mutual fund which invests in a pool of bonds. While bonds generally pay a fixed rate of interest, the income paid by a bond fund will fluctuate as individual securities are added to or subtracted from the pool. In addition, fixed income funds are subject to changes in net asset value due to the changing market conditions. Like individual bonds, fixed income funds will tend to increase in value during times of declining interest rates and will generally decrease in value when interest rates rise. There are a wide range of fixed-income funds to choose from, each with its own investment objectives. These objectives range from stability of principal, to maximum yield, to tax-free income.

Front-end Load

A sales commission, or load, paid when shares of certain mutual funds are purchased.

Fund Assets

The total value of a mutual fund portfolio's securities, cash, and other holdings, minus any outstanding debts.

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