Definition of Decile rank

Decile rank

Performance over time, rated on a scale of 1-10.1 indicates that a mutual fund's return was in the
top 10% of funds being compared, while 3 means the return was in the top 30%. Objective rank compares all
funds in the same investment strategy category. All rank compares all funds.

benefits-provided ranking

a listing of service departments in an order that begins with the one providing the most service
to all other corporate areas; the ranking ends with the
service department providing service primarily to revenueproducing
areas

Incremental costs and benefits

Costs and benefits that would occur if a particular course of action were
taken compared to those that would occur if that course of action were not taken.

Workers' Compensation Benefits

Employer-paid insurance that provides their employees with wage compensation if they are injured on the job.

Adjusted Cash Flow Provided by Continuing Operations

Cash flow provided by operating
activities adjusted to provide a more recurring, sustainable measure. Adjustments to reported cash
provided by operating activities are made to remove such nonrecurring cash items as: the operating
component of discontinued operations, income taxes on items classified as investing or financing activities, income tax benefits from nonqualified employee stock options, the cash effects of purchases and sales of trading securities for nonfinancial firms, capitalized expenditures, and other nonrecurring cash inflows and outflows.

Cash Flow Provided by Operating Activities

With some exceptions, the cash effects of transactions
that enter into the determination of net income, such as cash receipts from sales of goods
and services and cash payments to suppliers and employees for acquisitions of inventory and
expenses.

Cash Flow Provided or Used from Financing Activities

Cash receipts and payments involving
liability and stockholders' equity items, including obtaining cash from creditors and repaying
the amounts borrowed and obtaining capital from owners and providing them with a return on,
and a return of, their investments.

Cash Flow Provided or Used from Investing Activities

Cash receipts and payments involving
long-term assets, including making and collecting loans and acquiring and disposing of
investments and productive long-lived assets.

Automatic Benefits Payment

Automatic payment of moneys derived from a benefit.

CARs (cumulative abnormal returns)

a measure used in academic finance articles to measure the excess returns an investor would have received over a particular time period if he or she were invested in a particular stock.
This is typicAlly used in control and takeover studies, where stockholders are paid a premium for being taken over. Starting some time period before the takeover (often five days before the first announced bid, but sometimes a longer period), the researchers calculate the actual daily stock returns for the target firm and subtract out the expected market returns (usuAlly calculated using the firm’s beta and applying it to overAll market movements during the time period under observation).
The excess actual return over the capital asset pricing model-determined expected return market is cAlled an ‘‘abnormal return.’’ The cumulation of the daily abnormal returns over the time period under observation is the CAR. The term CAR(-5, 0) means the CAR calculated from five days before the
announcement to the day of announcement. The CAR(-1, 0) is a control premium, although Mergerstat generAlly uses the stock price five days before announcement rather than one day before announcement as the denominator in its control premium calculation. However, the CAR for any period other than (-1, 0) is not mathematicAlly equivalent to a control premium.

economic components model

Abrams’ model for calculating DLOM based on the interaction of discounts from four economic components.
This model consists of four components: the measure of the economic impact of the delay-to-sale, monopsony power to buyers, and incremental transactions costs to both buyers and sellers.

Abnormal returns

Part of the return that is not due to systematic influences (market wide influences). In
other words, abnormal returns are above those predicted by the market movement alone. Related: excess
returns.

Accelerated cost recovery system (ACRS)

Schedule of depreciation rates Allowed for tax purposes.

Accelerated depreciation

Any depreciation method that produces larger deductions for depreciation in the
early years of a project's life. Accelerated cost recovery system (ACRS), which is a depreciation schedule
Allowed for tax purposes, is one such example.

Accounts receivable turnover

The ratio of net credit sales to average accounts receivable, a measure of how
quickly customers pay their bills.

Active portfolio strategy

A strategy that uses available information and forecasting techniques to seek a
better Performance than a portfolio that is simply diversified broadly. Related: passive portfolio strategy

After-tax real rate of return

Money after-tax rate of return minus the inflation rate.

All equity rate

The discount rate that reflects only the business risks of a project and abstracts from the
effects of financing.

All or none

Requirement that none of an order be executed unless All of it can be executed at the specified price.

All-in cost

Total costs, explicit and implicit.

All-or-none underwriting

An arrangement whereby a security issue is canceled if the underwriter is unable
to re-sell the entire issue.

Annual fund operating expenses

For investment companies, the management fee and "other expenses,"
including the expenses for maintaining shareholder records, providing shareholders with financial statements,
and providing custodial and accounting services. For 12b-1 funds, selling and marketing costs are included.

Annualized holding period return

The annual rate of return that when compounded t times, would have
given the same t-period holding return as actuAlly occurred from period 1 to period t.

Arithmetic average (mean) rate of return

Arithmetic mean return.

Arithmetic mean return

An average of the subperiod returns, calculated by summing the subperiod returns
and dividing by he number of subperiods.

Asset allocation decision

The decision regarding how an institution's funds should be distributed among the
major classes of assets in which it may invest.

Asset-coverage test

A bond indenture restriction that permits additional borrowing on if the ratio of assets to
debt does not fAll below a specified minimum.

Asset turnover

The ratio of net sales to total assets.

At-the-money

An option is at-the-money if the strike price of the option is equal to the market price of the
underlying security. For example, if xyz stock is trading at 54, then the xyz 54 option is at-the-money.

Average accounting return

The average project earnings after taxes and depreciation divided by the average
book value of the investment during its life.

Average rate of return (ARR)

The ratio of the average cash inflow to the amount invested.

Balanced fund

An investment company that invests in stocks and bonds. The same as a balanced mutual fund.

Balanced mutual fund

This is a fund that buys common stock, preferred stock and bonds. The same as a
balanced fund.

Balloon maturity

Any large principal payment due at maturity for a bond or loan with or without a a sinking
fund requirement.

Barbell strategy

A strategy in which the maturities of the securities included in the portfolio are concentrated
at two extremes.

BARRA's performance analysis (PERFAN)

A method developed by BARRA, a consulting firm in
Berkeley, Calif. It is commonly used by institutional investors applying Performance attribution analysis to
evaluate their money managers' Performances.

Beta (Mutual Funds)

The measure of a fund's or stocks risk in relation to the market. A beta of 0.7 means
the fund's total return is likely to move up or down 70% of the market change; 1.3 means total return is likely
to move up or down 30% more than the market. Beta is referred to as an index of the systematic risk due to
general market conditions that cannot be diversified away.

Beta equation (Mutual Funds)

The beta of a fund is determined as follows:
[(n) (sum of (xy)) ]-[ (sum of x) (sum of y)]
[(n) (sum of (xx)) ]-[ (sum of x) (sum of x)]
where: n = # of observations (36 months)
x = rate of return for the S&P 500 Index
y = rate of return for the fund

Blow-off top

A steep and rapid increase in price followed by a steep and rapid drop. This is an indicator seen
in charts and used in technical analysis of stock price and market trends.

Borrower fallout

In the mortgage pipeline, the risk that prospective borrowers of loans committed to be
closed will elect to withdraw from the contract.

Break-even time

Related: Premium payback period.

Bullet strategy

A strategy in which a portfolio is constructed so that the maturities of its securities are highly
concentrated at one point on the yield curve.

Buy limit order

A conditional trading order that indicates a security may be purchased only at the designated
price or lower.
Related: Sell limit order.

Buy-and-hold strategy

A passive investment strategy with no active buying and selling of stocks from the
time the portfolio is created until the end of the investment horizon.

Call

An option that gives the right to buy the underlying futures contract.

Call an option

To exercise a cAll option.

Call date

A date before maturity, specified at issuance, when the issuer of a bond may retire part of the bond
for a specified cAll price.

Call money rate

Also cAlled the broker loan rate , the interest rate that banks charge brokers to finance
margin loans to investors. The broker charges the investor the cAll money rate plus a service charge.

Call option

An option contract that gives its holder the right (but not the obligation) to purchase a specified
number of shares of the underlying stock at the given strike price, on or before the expiration date of the
contract.
CAll premium
Premium in price above the par value of a bond or share of preferred stock that must be paid to
holders to redeem the bond or share of preferred stock before its scheduled maturity date.

Call price

The price, specified at issuance, at which the issuer of a bond may retire part of the bond at a
specified cAll date.

Call price

The price for which a bond can be repaid before maturity under a cAll provision.

Call protection

A feature of some cAllable bonds that establishes an initial period when the bonds may not be
cAlled.

Call provision

An embedded option granting a bond issuer the right to buy back All or part of the issue prior
to maturity.

Call risk

The combination of cash flow uncertainty and reinvestment risk introduced by a cAll provision.

Call swaption

A swaption in which the buyer has the right to enter into a swap as a fixed-rate payer. The
writer therefore becomes the fixed-rate receiver/floating rate payer.

Callable

A financial security such as a bond with a cAll option attached to it, i.e., the issuer has the right to
cAll the security.

Capital allocation

decision Allocation of invested funds between risk-free assets versus the risky portfolio.

Cash flow coverage ratio

The number of times that financial obligations (for interest, principal payments,
preferred stock dividends, and rental payments) are covered by earnings before interest, taxes, rental
payments, and depreciation.

Cash flow time-line

Line depicting the operating activities and cash flows for a firm over a particular period.

Chinese wall

Communication barrier between financiers (investment bankers) and traders. This barrier is
erected to prevent the sharing of inside information that bankers are likely to have.

Closed-end fund

An investment company that sells shares like any other corporation and usuAlly does not
redeem its shares. A publicly traded fund sold on stock exchanges or over the counter that may trade above or
below its net asset value. Related: Open-end fund.

Combination strategy

A strategy in which a put and with the same strike price and expiration are either both
bought or both sold. Related: Straddle

Committee, AIMR Performance Presentation Standards Implementation Committee

The Association for investment Management and Research (AIMR)'s Performance Presentation Standards Implementation
Committee is charged with the responsibility to interpret, revise and update the AIMR Performance
Presentation Standards (AIMR-PPS(TM)) for portfolio Performance presentations.

Common stock/other equity

Value of outstanding common shares at par, plus accumulated retained
earnings. Also cAlled shareholders' equity.

Concentration services

Movement of cash from different lockbox locations into a single concentration
account from which disbursements and investments are made.

Corporate acquisition

The acquisition of one firm by anther firm.

Corporate bonds

Debt obligations issued by corporations.

Corporate charter

A legal document creating a corporation.

Corporate finance

one of the three areas of the discipline of finance. It deals with the operation of the firm
(both the investment decision and the financing decision) from that firm's point of view.

Corporate financial management

The application of financial principals within a corporation to create and
maintain value through decision making and proper resource management.

Corporate financial planning

Financial planning conducted by a firm that encompasses preparation of both
long- and short-term financial plans.

Corporate processing float

The time that elapses between receipt of payment from a customer and the
depositing of the customer's check in the firm's bank account; the time required to process customer
payments.

Corporate tax view

The argument that double (corporate and individual) taxation of equity returns makes
debt a cheaper financing method.

Corporate taxable equivalent

Rate of return required on a par bond to produce the same after-tax yield to
maturity that the premium or discount bond quoted would.

Cost of funds

Interest rate associated with borrowing money.

Cover

The purchase of a contract to offset a previously established short position.

Coverage ratios

Ratios used to test the adequacy of cash flows generated through earnings for purposes of
meeting debt and lease obligations, including the interest coverage ratio and the fixed charge coverage ratio.

Covered call

A short cAll option position in which the writer owns the number of shares of the underlying
stock represented by the option contracts. Covered cAlls generAlly limit the risk the writer takes because the
stock does not have to be bought at the market price, if the holder of that option decides to exercise it.

Covered call writing strategy

A strategy that involves writing a cAll option on securities that the investor
owns in his or her portfolio. See covered or hedge option strategies.

Covered interest arbitrage

A portfolio manager invests dollars in an instrument denominated in a foreign
currency and hedges his resulting foreign exchange risk by selling the proceeds of the investment forward for
dollars.

Covered or hedge option strategies

Strategies that involve a position in an option as well as a position in the
underlying stock, designed so that one position will help offset any unfavorable price movement in the other,
including covered cAll writing and protective put buying. Related: naked strategies

Covered Put

A put option position in which the option writer also is short the corresponding stock or has
deposited, in a cash account, cash or cash equivalents equal to the exercise of the option. This limits the
option writer's risk because money or stock is already set aside. In the event that the holder of the put option
decides to exercise the option, the writer's risk is more limited than it would be on an uncovered or naked put
option.

Cross-border risk

Refers to the volatility of returns on international investments caused by events associated
with a particular country as opposed to events associated solely with a particular economic or financial agent.

Crossover rate

The return at which two alternative projects have the same net present value.

Cumulative abnormal return (CAR)

Sum of the differences between the expected return on a stock and the
actual return that comes from the release of news to the market.

Day order

An order to buy or sell stock that automaticAlly expires if it can't be executed on the day it is entered.

Debt service

Interest payment plus repayments of principal to creditors, that is, retirement of debt.

Debt service parity approach

An analysis wherein the alternatives under consideration will provide the firm
with the exact same schedule of after-tax debt payments (including both interest and principal).

Debt-service coverage ratio

Earnings before interest and income taxes plus one-third rental charges, divided
by interest expense plus one-third rental charges plus the quantity of principal repayments divided by one
minus the tax rate.

Dedication strategy

Refers to multi-period cash flow matching.

Deferred call

A provision that prohibits the company from cAlling the bond before a certain date. During this
period the bond is said to be cAll protected.

Dividends per share

Amount of cash paid to shareholders expressed as dollars per share.

Dividend reinvestment plan (DRP)

Automatic reinvestment of shareholder dividends in more shares of a
company's stock, often without commissions. Some plans provide for the purchase of additional shares at a
discount to market price. Dividend reinvestment plans Allow shareholders to accumulate stock over the Long
term using dollar cost averaging. The DRP is usuAlly administered by the company without charges to the
holder.

Dividend yield (Funds)

Indicated yield represents return on a share of a mutual fund held over the past 12
months. Assumes fund was purchased 1 year ago. Reflects effect of sales charges (at current rates), but not
redemption charges.

Dividends per share

Dividends paid for the past 12 months divided by the number of common shares
outstanding, as reported by a company. The number of shares often is determined by a weighted average of
shares outstanding over the reporting term.

Doctrine of sovereign immunity

Doctrine that says a nation may not be tried in the courts of another country
without its consent.

Dollar return

The return realized on a portfolio for any evaluation period, including (1) the change in market
value of the portfolio and (2) any distributions made from the portfolio during that period.

Dollar-weighted rate of return

Also cAlled the internal rate of return, the interest rate that will make the
present value of the cash flows from All the subperiods in the evaluation period plus the terminal market value
of the portfolio equal to the initial market value of the portfolio.

Dow Jones industrial average

This is the best known U.S.index of stocks. It contains 30 stocks that trade on
the New York Stock Exchange. The Dow, as it is cAlled, is a barometer of how shares of the largest
U.S.companies are performing. There are thousands of investment indexes around the world for stocks,
bonds, currencies and commodities.

Dynamic asset allocation

An asset Allocation strategy in which the asset mix is mechanisticAlly shifted in
response to -changing market conditions, as in a portfolio insurance strategy, for example.

Economic order quantity (EOQ)

The order quantity that minimizes total inventory costs.

Economies of scale

The decrease in the marginal cost of production as a plant's scale of operations increases.

Effective call price

The strike price in an optional redemption provision plus the accrued interest to the
redemption date.

Employee stock fund

A firm-sponsored program that enables employees to purchase shares of the firm's
common stock on a preferential basis.

Endowment funds

investment funds established for the support of institutions such as colleges, private
schools, museums, hospitals, and foundations. The investment income may be used for the operation of the
institution and for capital expenditures.

European Monetary System (EMS)

An exchange arrangement formed in 1979 that involves the currencies
of European Union member countries.

Ex post return

Related: Holding period return

Exante return

The expected return of a portfolio based on the expected returns of its component assets and
their weights.

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