Annuity Contract where an annuitant invests in a fund managed by an insurance company, then receives periodic payments. See Fixed Annuity, also Variable Annuity. .

Asset Anything of value owned by a business or individual. .

Asset Allocation Investment category seeking both income and capital appreciation by shifting assets between stocks, bonds and cash to achieve the optimal return. Where a balanced fund (fixed allocation) maintains a fixed percentage of stocks to bonds, asset allocation funds are not tied to a specific asset ratio. Also called Flexible Allocation. .

Assumed Investment Rate Rate which must be assumed for the purpose of setting premiums and statutory reserves for a guaranteed minimum death benefit. The premiums are those which flow into a Separate Account. .

Balanced Fund Mutual fund that strives for stability by maintaining a constant ratio of equity to debt securities, usually 60%:40%. Also called Fixed Allocation. .

Blue Chip Common stock of a large company with a record of stable growth and earnings over an extended period. .

Bond Security where the issuer borrows money (assumes a loan from an investor) and promises repayment with interest or extra principal at a specified date. .

Bond Anticipation Note (BAN) Short-term debt security issued by a municipality or state that is to be paid off with the proceeds of a future bond offering. .

Breakpoint Dollar-value where the sales charge percentage changes in a schedule of load-fees. Typically, a sales charge schedule contains five or six breakpoints with the commission declining as the dollars invested rise. .

Broker Person who buys and sells securities on behalf of others, receiving a commission for each exchange. See also Dealer. .

Call Tradable security derived from a prediction of a stock's price movement. A specialist on an options exchange can create a "call," or an option buy a stock within a limited time frame and sell at a set, higher price (the "Call Price"). The call option can now can be traded and its value will fluctuate as the underlying stock moves. The opposite of a Call option is a Put. Option contracts and other derivatives may be used either for speculative or "hedging" purposes. .

Capital Material assets of a business, including plant and equipment, inventories, cash, receivables, etc. .

Capital Gains Profits realized from the sale of securities which have appreciated while being held. Long Term Capital Gains are from securities held for more than one year, Short-Term Capital Gains are from securities held one year or less. .

Capital Gains Distribution Payment to investment company shareholders from capital gains realized on shares held. .

Capital Gains Tax Rates Under present law, all short-term capital gains are taxed as ordinary income. Although the maximum tax rate for individuals, estates and trusts can be as high as 39.6%, the tax on long-term capital gains is guaranteed by law not to exceed 28 percent. See Capital Gains. .

Capital Growth Increase in market value of securities. .

Cash Position State of a company's fiscal situation comparing cash to total net assets. .

Certificates of Deposit Bank or thrift note guaranteeing that a sum of money will be held by the bank for a fixed period of time and will earn a pre-arranged interest rate. Euro CDs Issued by foreign branches of U.S. banks or U.S. branches of foreign banks. .

Check-Writing Privilege Ability to write a check and have the money drawn from an investment account, such as a money market. The holdings will continue to earn dividends until checks are cleared. .

Closed-End Investment Company Investment company which trades on the open market and holds a fixed number of shares in the form of investments as stated in its objective. The market value of the closed-end fund will usually differ from value of its holdings. .

Closed-Up Fund Open-end investment company which trades actively but does not accept deposits from new investors. .

Cash Position State of a company's fiscal situation comparing cash to total net assets. .

Certificates of Deposit Bank or thrift note guaranteeing that a sum of money will be held by the bank for a fixed period of time and will earn a pre-arranged interest rate. Euro CDs Issued by foreign branches of U.S. banks or U.S. branches of foreign banks. .

Check-Writing Privilege Ability to write a check and have the money drawn from an investment account, such as a money market. The holdings will continue to earn dividends until checks are cleared. .

Closed-End Investment Company Investment company which trades on the open market and holds a fixed number of shares in the form of investments as stated in its objective. The market value of the closed-end fund will usually differ from value of its holdings. .

Closed-Up Fund Open-end investment company which trades actively but does not accept deposits from new investors. .

Common Stock Security representing partial ownership of a corporation and therefore normally carries voting rights. Should a company liquidate, the claims of a common stock holder rank below those of bond, debt and preferred stock holders because the company's creditors receive recompensation before the owners. .

Common Stock Fund Investment company whose portfolio consists primarily of common stocks. .

Contingent Deferred Sales Charge (CDSC) A fee payable when shares are redeemed. See Load Fee, Back-End Load. Also called trailers or redemption fee. .

Contractual Plan Type of accumulation plan under which the total intended investment amount and periodic payments to reach that amount are specified at the time of purchase. The sales charge corresponds to the total amount to be invested, and usually is deducted from the initial payments. .

Contrarian Investor who attempts to move against major market trends at any given time, searching for undiscovered opportunities. .

Controlled Affiliate Company in which 25 percent or more of the outstanding voting securities are controlled by one source, as stipulated in the Investment Company Act of 1933. .

Conversion Privilege See Exchange Privilege. .

Convertible Securities Preferred stocks or bonds carrying the right to exchange for given amounts of common stock before a pre-arranged date. .

Conversion Ratio Specified rate of exchange from preferred stocks or bonds into common stocks, as determined when the convertible security is issued. .

Corporate (Master or Prototype) Retirement Plan Corporate or trust agreement which qualifies for special tax treatment because the company is investing for the benefit of its employees. Prototype plans typically take the form of pension or profit sharing plans. 401(k) plans are also offered. .

Current Liabilities Obligations due within one year or less. .

Custodian Bank or trust company that holds all securities and cash owned by an investment company. In some cases, the custodian act as transfer agent and dividend disbursing agent, although it has no supervisory function in regard to portfolio policies. .

Cyclical Stock Stock whose performance is closely tied to the strength of the economy. Examples are heating oil, air travel and housing.

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