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Accrued Interest

The amount of interest which has accumulated in respect of an interest-bearing security since the last payment date.

Annual Management Fee

A charge paid by a fund to its investment manager who overseas and manages the fund’s holdings. The management fee is usually between 0.5% and 1.5% of the fund’s net asset value.

Annual Report(s)

The formal financial statement issued yearly by a public company. The report shows assets, liabilities, revenues, expenses and earnings. The report also shows the company’s financial condition at the close of the business year and other basic information of interest to shareholders. The annual report is also the most widely-read shareholder communication. A semi-annual report is issued by a company for the first six months of its *financial year.

Asset Allocation

When investors divide their money amongst various types of investments, such as shares, bonds and other short-term investments they are allocating their assets. The way in which their money is divided is called the ‘asset allocation’

At Best

Expression meaning “at the lowest possible price” in the case of a purchase order and “at the highest possible price” in the case of a selling order. The buyer or seller does not prescribe any maximum or minimum price for the execution of the order. In the case of securities with a limited market, the order is carried out at the earliest opportunity.

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Balance Sheet

A condensed financial statement showing the nature and amount of a company’s assets, liabilities and capital on a given date. In Lm (or any other currency) amounts, the balance sheet shows what the company owned, what it owed, and the ownership interest in the company of its shareholders.

Basis Point

One one-hundredth (1/100 or 0.01) of one percent. For example, if the annual management fee for a fund is 1.5% this would be 150 basis points.


A person or company with a negative view of the market or a particular share. A person or company with a ‘bearish’ view of the market thinks that it is going to fall.

Bid/Offer Price

From an investor’s point of view, the offer price is the price at which they buy the investment and the bid price is the price at which they can sell it. Not all funds have bid and offer prices, some deal at Net Asset Value (NAV). The difference between the bid and offer price is known as the spread and the size of the spread should be considered when an investor is considering potential investments.


Securities earning a fixed rate of interest

Bonus issue

A process whereby existing shareholders are allocated further shares in a company in proportion to their current holding.

Bond Fund

Investment fund which under its by-laws invests its assets in straight and convertible bonds.


A person or company with a positive view of the market or a particular share. A person or company with a ‘bullish’ view of a particular market thinks that it is going to rise.

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Capital Appreciation

As the value of the securities in a portfolio increase, a fund’s share price also increases, meaning that the value of the investment rises or appreciates. Selling shares at a higher price than the original purchase price results in a profit or capital gain. Selling shares at a lower price results in a capital loss. Please also see Capital Gain and Capital Loss.

Capital Gain

Occurs if you sell an asset for more than you bought it.

Capital Loss

The opposite of a capital gain, it occurs when you sell an asset for less than you bought it.


The value of a company obtained by multiplying the number of shares issued by their *market price.

Collective Investment Schemes

CIS’s are schemes established for the purpose of collecting funds from the public. The funds collected are pooled and invested by the Manager of the scheme in accordance with the investment criteria published in the prospectus or scheme particulars.


The fee charged by a stockbroker for carrying out a customer’s instruction to buy or sell shares.

Contract Note

A record of the details of the trade, its total value and all charges.


The money value of an Exchange transaction (number of securities multiplied by the price) before adding commission.


The term is used to describe a short, but sustained, fall in the market following a period of rising prices.

Coupon Rate

The rate is normally an annual rate of interest expressed as a percentage of the principal amount. For example, a Lm1,000 bond with a 6.6% coupon rate pays Lm66 a year. However, the yield can change if the bond is sold for an amount greater or lower than its par value or principal amount.


Entitlement to the next dividend that the issuer declares on those shares. Thus, the market’s estimate of the value of the dividend is included in the share price.

Currency Risk

Whenever investing in a currency that is not your own, your investments will be exposed to an additional element of risk that there will be a shift in the relevant foreign exchange rates. For example, if you have Euro to invest and buy a US Dollar holding, then your investment will not only be effected by the movement of your holding but also any change in the exchange rates between US Dollar and Euro.

Current Price

The market price at any given time.

Current Yield

The current yield is what you actually earn from your bond holdings. The current yield is the ratio of interest which you are earning to the actual market price of the bond and is stated as a percentage.

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Debt to Equity Ratio

A company’s debt divided by its equity. In other words a determination of how much a company has borrowed versus what the company is worth.

Discretionary Portfolio Management

An account in which the customer gives the intermediary discretion to buy and sell securities, including selection, timing, amount and price to be paid or received.


This is the concept of spreading money across different types of investments and/or issuers to try to moderate investment risk.


The periodic cash sum paid on a company security out of profits.

Dividend Cover

The number of times that a company’s earnings per share cover its dividend per share. Investors generally regard a ratio of two or more as comfortable and anything below 1.5 times as potentially risky.

Dividend Yield

The dividend paid out on a share as a percentage of its market price.

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Earnings per share

The net income of a company divided by the number of shares in issue.

Earnings Yield

This is the earnings per share expressed as a percentage of the market price. It is the reciprocal of the P/E Ratio. It describes the return on ordinary shares in a similar way to which yield to maturity describes the return on a bond.


Equity represents shareholders’ interest in a company. This is owned equally by all ordinary shareholders in direct proportion to their ‘share’ in the company.
Equity risk premium – the extra return that investors expect from putting their capital into equities rather than a risk-free asset.

Ex dividend

A share is quoted ex dividend when the amount of the dividend just paid has been deducted from the price. When a stock is dealt ex dividend, the seller retains the dividend.

Execution Only

A service in which the intermediary has no responsibility for advising the investor on whether a particular transaction is suitable or not (for the investor). The intermediary’s responsibility is limited to executing the transaction on the investor’s instructions.

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Financial Year

A company’s accounting year. Most companies operate ona calendar year basis ending on 31st December.
Fixed interest securities (Bonds) – a security on which the borrower agrees to pay regular fixed amounts of income (usually half-yearly) and repay principal at a specific date.
Flotation – the offering of a company’s shares on the market for the first time.


An investment vehicle where investors money is pooled together and invested by a manager in accordance with a defined investment strategy. Each fund will have its own investment strategy and objective, so an investor can choose a fund to match his or her own objective. Instead of owning shares directly, each investor in the fund owns shares in the fund itself. The value of the shares will reflect the performance of the investment portfolio that the fund holds. One of the advantages of a fund is that the investor can have their investment spread across a higher number of shares than if he/she had invested directly.

Fund Manager (or Fund Management Company)

A Fund Manager is usually a company whose line of business is investing in other companies and entities on behalf of a *collective investment scheme. The Scheme appoints the Fund Manager to buy and sell securities in accordance with the *investment objectives.

Fungible Issues

Fungible issues are amalgamated with existing securities of identical terms that had been issued by the same company after a stipulated period of time. Normally sovereign issuers (Government’s) and corporate issuers resort to similar offerings. In this case investors can purchase units in the second tranche of an identical security and this will then be merged with the same security which would have already been listed on the Stock Exchange

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The proportion of debt held by a company in relation to the funds held by shareholders.

Going Public

When a company sells shares of itself to the public to raise capital for the first time (See Initial Public Offering).


Growth funds are designed to pursue capital appreciation over the long-term by investing in shares.

Gross yield

The income produced by investments (such as securities, real estate property, etc) before any deductions, charges or taxes.

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The chance that inflation, or the rise in the cost of living, will diminish the value of an investment


The risk that a change in general interest rates will adversely affect the value of a bond investment. Usually, a fixed-rate bond will decline in value when there is a rise in interest rates and rise in value when there is a fall in interest rates.
Interim Dividend – a dividend declared half way through a company’s financial year, authorised solely by the directors.

Initial public offering (IPO)

Securities industry term used when a private company first offers its shares to the public. A step towards becoming a public company and towards widening the capital base.

Investment Portfolio

A variety of securities owned by an individual or an entity.

Investor Compensation Scheme

This is the technical term which is used to describe a scheme which provides compensation to retail investors who stand to lose money as a result of the default or bankruptcy of an authorised intermediary. Payment of claims are limited to a specified amount – that is, investors may receive only a part of the monies invested through an intermediary who has defaulted or gone bankrupt.

Issue at par

Securities issued at the nominal or face value.

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1. How easily one’s assets can be converted back into cash. For example, money in an account that cannot be withdrawn for five years is not very liquid;
2. The ability of the market in a particular security to absorb a reasonable amount of buying or selling at reasonable price changes. Liquidity is one of the most important characteristics of a good market.

Listed Company

A company whose shares are quoted and traded on a Stock Exchange


A one-time sales charge that some *collective investment schemes charge unitholders to compensate the intermediary who sells the funds. The load is usually incurred only on purchase, there being, in most cases, no charge when the shares are sold (redeemed).
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Management Fee

An annual charge to administer a fund. The fee is usually deducted from the fund’s income rather than capital.

Market Maker

An annual charge to administer a fund. The fee is usually deducted from the fund’s income rather than capital.
Broker or dealer who makes a market to buy and sell a stock for his own account. Market makers can have a major influence on trading.

Market Official

An Exchange official who overseas the trading operations of the Exchange in accordance with the Bye – Laws

Market Price

The last reported price at which the security sold.

Market Risk

The risk that the price of a security will rise or fall due to changing economic, political or market conditions, or due to a company’s individual situation.

Market Size

The number of shares in which a market maker is prepared to deal either as a buyer or as a seller, at the current displayed prices

Maturity or Maturity Date

he date upon which the principal or face value of a security becomes due or payable to the security holder

MSE Account Number

An account number generated by he Malta Stock Exchange to serve as a point of reference for administrative purposes.

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The total assets of a fund or company, minus the total liabilities of that fund or company

Net Asset Value

The value of a company to its shareholders as recorded in its balance sheet. The residual amount left over from a schedule of the company’s assets after deducting all the claims on the business which rank ahead of those of the ordinary shareholders.

Nominal Value

The nominal value of a security is taken as €100 in fixed interest stocks. Also referred to as par value.

Nominee Services

Investors’ money and investments are held in the name of the intermediary on their behalf.

No Load

A term used to describe *collective investment schemes that have no sales charges.

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The price at which an investor can purchase a share or fund. In the case of a mutual fund with a sales charge, this price is the net asset value (NAV) plus the sales charge. In the case of no-load funds, it is the NAV.

Open-Ended Fund(s)

Open-ended funds sell their own new units to investors, stand ready to buy back their old units, and are sometimes listed on a stock exchange. Open-ended funds are so called because their capitalisation is not fixed, they issue more shares depending on how much investors want to invest (in the fund). In Malta, the words SICAV p.l.c. (a French acronym that stands for collective investment scheme with variable capital) which follows a name of a *collective investment scheme denote that the fund is open ended.

Ordinary Shares

Shares in a company which do not have any special rights attached.

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The Nominal or face value of a security as given on the certificate or instrument. Generally, bonds have a par value of 100. See also ‘nominal value’.

Price Earnings Ratio (P/E Ratio)

The P/E ratio shows the relationship between a company’s share price and a company’s earnings for the past four quarters. It is calculated by dividing the current price per share by the earnings per share. The ratio is very useful to compare two companies in the same sector. Normally, the higher the P/E ratio the more highly rated the company is.


This term refers to the placement of one’s assets or investments as security/collateral against loan facilities.


The term used to describe a collection or ‘parcel’ of securities.

Preference Shares

These are normally fixed interest shares, whose holders have the right to receive dividends before ordinary shareholders.

Primary Market

The process by which a company’s share or stock is issued for the first time. It is then sold to the public on the secondary market.


The amount by which a bond sells above its par (face) value.


A printed brochure that provides a thorough description of a mutual fund or company. With regards to a fund, it explains the fund’s objective, how it invests its money, and the fees and expenses associated with the fund.

Preference Shares

A share with preference rights, i.e. which is preferred over other stocks of the same company in terms of dividend payments and any distribution of assets on liquidation. The full dividend must be paid on preferred shares before any dividend can be paid on other shares.


In stock exchange trading, the difference between the par value and the higher market value of a security expressed as a percentage of the par value.

Professional Investor(s)

Professional investors would be experienced in financial matters and therefore capable of investing with minimum or without assistance of intermediaries.

Profit and Loss Account

A report on a company’s financial status of its earnings or losses over a given period. The profit and loss account lists the income earned, expenses paid and the net profit available for reinvestment.


It is an arrangement between two parties who agree to buy or sell a determined quantity of shares or bonds at a determined price.

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

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Record Date

The deadline determined by a company’s board of directors, by when an investor must be recorded as an owner of shares in order to qualify for a forthcoming dividend or share distribution.


When a redemption is placed in a fund, the investor sells his/her holding. It is also the term used to describe the date at which a security will be repaid at face value.

Redemption Yield/Yield to Maturity

The yield an investor would receive if he/she held a bond to its maturity date. This can be different to the current yield. For example if the bond was bought at below par and held to maturity then the redemption yield will also include some portion of capital repayment. See also ‘Current Yield’.


An organization or an individual that takes the responsibility for maintaining a company’s share register.

Regular Savings Plan

Most investment managers offer a regular, or monthly, savings plan into their funds. The fees are normally the same as a lump sum investment would be. Savings plans provide an easy way for an investor to start holding funds, without the need for a large cash lump sum to make the first investment.


A body set up by law entrusted with overseeing the financial services sector. Sometimes it is also referred to as the Competent Authority. In Malta the regulator or competent authority for investment services is the Malta Financial Services Authority.


Where a mutual fund pays out a distribution a shareholder can choose to have the distribution reinvested into the fund to buy more shares.

Rights Issue

A means by which a company raises new capital, most often equity, to existing shareholders in proportion to the number of shares already held. The price at which the new shares are issued is below the current market price of the shares to encourage the shareholders to take up the issue. The purpose for a rights issue differ from company to company but the main reasons are to finance expansion and to strengthen balance sheet in order to reduce debt to equity ratio (gearing).


There are several types of risk: Interest Rate Risk, Principal Risk, Purchasing Power Risk, and others. Each risk level is a measure of the volatility and likelihood of loss in an investment.


This term is normally used when a fixed-rate security is being redeemed and the same  issuer is offering exisitng holders of the matured stock the possibility of renewing the investment with the same issuer. However the terms may change from the original investment depending on market circumstances.

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The day when an investment company pays an investor the proceeds from their fund holding following a redemption. It can also be the day that an investor pays for the purchase of their fund or shares. Settlement for dealing on the Malta Stock Exchange is currently T+3.

Secondary market

A market for securities following their initial distribution; may be order driven (automatic matching of offers with bids) or comprise market makers (the dealers who quote simultaneous bid and offer prices for securities) Security(ies)
A general term for stocks, *bonds, *collectives investment schemes and other products.


SICAV stands for ‘Societe d’investissement a` Capital Variable’. A SICAV is a type of collective investment vehicle which is an open-ended investment company. It can have a legal structure of an umbrella fund with several sub-funds, each of which relates to a separate portfolio of securities with specific investment objectives.

Subordinated Bonds

Subordinated bonds offer a lower protection to investors and the main issuers of such bonds are usually banks. The concept of subordination implies that in the event of the winding up of the issuer, bondholders will rank after depositors (in the case of banks) and other unsubordinated creditors.

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Tax at source

Tax collected at source by withholding the amount of the tax from payments due to the taxpayer withholding tax

Terms of Business Letter

This is a document which sets out in detail the investment services agreement between the intermediary an the investor. It should specify, amongst other things, whether the intermediary will provide investment advice or not, and the type of fees and commissions which the intermediary will charge.

Thin Market

Arises when there are few buyers or sellers for a security. Typically gives rise to increased price volatility. This is also known as an illiquid market.

Trade Range

The percentage increase/decrease from the trade weighted average price dealt in during the last trading session in which that particular security was trading.

Treasury bills

Short- and medium-term debt certificates issued in bill form by a government.

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Umbrella Fund

A fund which offers a range of shares in various sub-funds under a single umbrella. Each sub-fund will have its own portfolio of securities and be managed with specific investment objectives. There can be advantages to an investor, if their investment objective changed and they wanted to change funds they may be able to do so at a lower cost within the umbrella fund than a normal switch between separate funds would incur.

Underlying Holdings

These are the shares held by a mutual fund or unit trust on behalf of investors. The price or NAV of the shares in the fund is calculated in direct relation to the market value of these underlying holdings plus any charges.

Unit Trust

A collective investment scheme. Called a ‘unit trust’ because investors’ contributions are divided into units and the scheme is governed by a trust deed. Please see definitions of ‘Fund’.


In investment banking, a member of a new issue syndicate who contracts to purchase primary debt or equity securities on a given date at a specific price, thus guaranteeing the borrower the full proceeds

Unsubordinated Bonds

A senior or unsubordinated bond has priority on interest payments by the company over other unsecured debt. If such a company defaults, holders of seniorbonds have a prior claim in receiving whatever money is available before other creditors receive payment. Senior bonds normally offer slightly lower interest rates compared to junior or subordinated bonds since they are considered less risky.

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This term refers to the ups and downs of the price of an investment in general. The greater and more frequent the ups and downs, the more volatile the investment.

Venture Capital

Corporate financing, in particular for new or small and medium-sized private companies with advanced technology and high growth potential. To raise the capital for such companies, many banks and specialized financial institutions offer venture (or risk) capital at special terms, often involving some form of participation.

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Withholding tax

The system provides for a final tax of 15% deducted at source on certain categories of investment income paid to Maltese individuals and companies. Interest paid by Maltese banks (in whatever currency), the government and Maltese public corporations are examples of investment income to which the final tax provisions apply. An individual in receipt of investment income on which the 15% tax has been withheld is not required to disclose the existence of such income in the annual tax return. Interest received from overseas deposit accounts is taxable at the normal rates of tax. Interest paid to non-residents is exempt from tax in Malta.



Ex dividend. Shares which are classed as ‘XD’ are those bought on or after the ex-dividend date. They will not qualify for the next dividend.

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The percentage return an investor receives, based on the amount invested or on the current market value of holdings.

Yield Curve

The relationship between the interest rates paid on short-term and long-term bonds.

Yield to Maturity

The rate of return earned on an investment (such as a *bond) bought at a specified price and held until maturity. The yield to Maturity equals all the interest you receive from the time you purchase the bond until maturity (including interest on interest at the original purchasing yield) plus any gain (if you purchased the bond below its face, or par, value). The tax payable on the interest and the capital repayments is ignored.

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