A
Active Management
Investment strategy that seeks to achieve portfolio returns more than commensurate with risk, either by forecasting broad market trends or by identifying particularly mispriced sectors of a market or securities in a market.

Alpha
Value-added from active management over passive investing.

Annualized Rate of Return
The average return over a period of years, taking into account the effect of compounding. Also called the compound growth rate. For example, a 100% return over five years is equivalent to an annualized rate of return of 14.9% per year.

Asset Allocation
Apportioning of investment funds among asset classes, such as cash, equities, and fixed income.

B
Basis Point
1/100th of a percent.

Bear Market
A prolonged period of falling security prices.

Benchmark
A standard by which something can be measured or judged. Often used as a synonym for Index.

Beta
A measure of an asset´s sensitivity to an underlying index or factor. For example, an asset with beta of 1.2 would be expected to return 12 percent if the market returned 10 percent, and -12 percent if the market returned -10 percent. Beta is computed as an asset's correlation with the index times the ratio of the asset's standard deviation to the index's standard deviation.

Bull Market
A prolonged period of rising security prices. Buy and Hold A strategy whereby an asset mix is bought and left unchanged throughout the investment horizon.

C
Call Option
See Option

Common Stock
A security that represents ownership in a public corporation.

Custodian
The bank or trust company that holds a mutual fund´s assets (stocks, bonds, cash, and other securities) and handles payments and receipts for the fund´s securities transactions.

D
Derivative Security
A security, such as an option or a futures contract, whose value is derived from the value of the underlying asset.

Distribution
Payment of a dividend or capital gain. Shareholders may take their distributions in cash or may have them Financial Terms automatically reinvested in additional shares of the same fund.

Diversification
The practice of holding a large number of assets in a portfolio so as to reduce the portfolio´s sensitivity to an individual asset´s return.

Dow Jones Emerging Markets Sector Titans Indexes
The Dow Jones Emerging Markets Sector Titans Indexes measure the stock performance of leading emerging-market companies in each of the 10 Industries defined by the Industry Classification Benchmark (ICB). The family also currently includes one index-the Dow Jones Emerging Markets Metals & Mining Titans 30 Index-that covers two ICB Sectors. The Dow Jones Emerging Markets Sector Titans Composite 100 Index is a 100-stock index created by aggregating the ten Industry level indexes.

Duration
The weighted average of the remaining maturity of the cash flows (discounted to present value) scheduled to be received under the instrument. Duration is a calculation that seeks to measure the price sensitivity of a bond or a bond fund to changes in interest rates. It measures bond price sensitivity to interest rate changes more accurately than maturity because it takes into account the time value of cash flows generated over the bond's life.

E
EAFE
Abbreviation for the Morgan Stanley Capital International Europe, Australia, Far East Index, a well known, independently maintained and published large capitalization international stock index. See Table of Benchmark Definitions for additional information.

Emerging Markets
The financial markets of developing countries.

Equity Security
A type of security representing ownership in a corporation. Common stock, preferred stock, and convertible securities are all equity securities. Equity securities are distinguished from debt securities, which do not represent ownership in the issuer.

ERISA
Acronym for the Employee Retirement Income Security Act of 1974. ERISA governs qualified retirement savings plans.

Ex-Dividend Date
When used in reference to mutual funds, the date the fund declares a dividend. When this occurs, the fund share price drops by the amount of the dividend. Expressed otherwise, the fund's assets are reduced by the amount of the distribution before the NAV is calculated.

F
Floating Rate Market Cap
The full market cap minus the shares that are held by insiders.

Fundamental Analysis
The study of a company's business and financial status to help forecast future movements in its stock price. Analysts consider the company´s past record of earnings and sales as well as company assets, management, and markets to predict trends that could affect a company's stock.

Futures Contract
A contract that has uniform terms concerning price, quantity, and expiration and that obligates the seller to pay the value of the contract to the buyer on a pre-specified date.

H
Hedge
A strategy used to offset investment risk. In investing, hedging involves the purchase of an offsetting position, such as a put option or futures contract, to guard against the risk of a market decline. Often used as a defensive strategy in portfolios investing in non-U.S. securities to reduce the negative effects of unfavorable moves in currency exchange rates.

I
Illiquid Security
A security that may not be sold or disposed of in the ordinary course of business within seven days at approximately the value at which the fund has valued the investment.

Index
(a) A benchmark against which to measure performance, such as the Standard & Poor´s 500 Index. (b) A statistical composite that measures changes in the economy or financial markets, often expressed in percentage changes from a base year or from the previous month.

Indexing
A passive portfolio management strategy that seeks to match the composition, and therefore the performance, of a selected market index.

M
Management Fee
Fee paid to the fund manager for providing investment management.

Mean Reversion
The notion that an asset's value reverts to an average or equilibrium value. If an asset´s price is above its equilibrium value, the presumption of mean reversion is that the asset´s price will eventually decline to its equilibrium value. Similarly, if the price is below its equilibrium value, the presumption is that the asset´s price will eventually rise to its equilibrium value.

MSCI Emerging Markets Index
The MSCI Emerging Markets Index is a float-adjusted market capitalization index. As of May 2005, it consisted of indices in 26 emerging economies: Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Israel, Jordan, Korea, Malaysia, Mexico, Morocco, Pakistan, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand, Turkey and Venezuela.

Mutual Fund
A diversified, professionally managed portfolio of securities that pools the assets of individuals and organizations to invest toward a common objective such as current income or long-term growth. Mutual funds are open-ended investment companies and are generally registered with the SEC under the Investment Company Act of 1940. Mutual funds issue redeemable shares, and are distinguishable from closed-end funds, whose shares are traded on the secondary market.

N
NAV
An acronym for Net Asset Value. The NAV of a share is determined for each fund by dividing the total market value of the fund's portfolio investments and other assets, less any liabilities, by the total outstanding shares of the fund.

O
Option
An option is the right either to buy or to sell a specified amount or value of a particular underlying interest at a fixed exercise price by exercising the option before its specified expiration date. An option that gives a right to buy is a Call Option, and an option that gives a right to sell is a Put Option.

P
Passive Management
A portfolio management strategy that seeks to match the composition, and therefore the performance, of a selected market index. Also referred to as Indexing.

Portfolio Turnover
A measure of the trading activity in a fund's portfolio of investments -- that is, how often securities are bought and sold by the fund.

Price to Earnings Ratio (P/E Ratio)
A method of valuing stocks, calculated by dividing the closing price of a company´s stock by its annual earnings per share. Growth stocks tend to have high P/E ratios compared with income stocks.

Price to Earnings (P/E)
A valuation ratio of a company´s current share price compared to its per-share earnings.

Price to Book (P/B)
A ratio used to compare a stock´s market value to its book value. It is calculated by dividing the current closing price of the stock by the latest quarter´s book value per share.

Price to Sales (P/S)
A ratio used for valuing a stock relative to its own past performance, other companies, or the market itself.

Price to Cash Flow (P/Cash Flow)
A measure of the market´s expectations of a firm´s future financial health. This is not a projection of the ETF´s future performance or earnings.

Projected P/E
A measure of the price-to-earnings ratio (P/E) using forecasted earnings for the P/E calculation. This is not a projection of future earnings or returns of the fund.

Prospectus
The official offering document that describes a fund and offers its shares for sale. By law, a prospectus must be given to all investors before they invest or with confirmation of their purchase.

Purchase Premium
Fee paid to and retained by a mutual fund that is designed to allocate transaction costs caused by shareholder purchases to the shareholder generating the activity, rather than to the fund as a whole.

Put Option
See Option

Q
Quantitative Investing
Investment strategy that combines strategic quantitative analyses of countries, industries, and sectors with sophisticated computer models to select particular stocks.

R
Redemption
The process of converting a shareholder´s shares into cash. A registered open-end mutual fund must redeem shares at the price next determined after receipt of the shareholder´s request.

Redemption Fee
Fee paid to and retained by a mutual fund that is designed to allocate transaction costs caused by shareholder redemptions to the shareholder generating the activity, rather than to the fund as a whole.

REIT
Real Estate Investment Trusts (REITs) are managed vehicles that invest in real estate or real estate-related assets.

Return of Capital
A fund distribution that exceeds earned income -- that is, a distribution that includes a portion of the investor´s original principal. Return of capital is sometimes distributed to maintain the level of the distribution when income is not adequate to do so. It is generally not subject to taxes.

ROE
Abbreviation for Return on Equity. ROE is an accounting ratio of net profits divided by equity.

S
SENSEX
The Bombay Exchange Sensitive Index (Sensex) - the benchmark index of the Bombay Stock Exchange (BSE). It is composed of 30 of the largest and most actively-traded stocks on the BSE. Initially compiled in 1986, the Sensex is the oldest stock index in India.

Share
A unit of ownership in an equity security, such as a mutual fund or common stock.

Share Class T
The class of shares held by an investor in a mutual fund. Although a share class may have different distribution or shareholder servicing fees, all share classes of a fund pay the same management fees, and represent an interest in the total investment portfolio of the fund.

Shareholder
An owner of shares in a mutual fund.

Shareholder Service Fee
Fee paid to an investment management company for providing client services and reporting services.

Statement of Additional Information (SAI)
An addendum to a mutual fund's prospectus that includes further disclosure about the fund´s operations.

T
Top-Down Approach
An approach to investing in which the investor first looks at general trends in the economy and then chooses specific industries and particular companies that will benefit from these broad trends.

Total Return
The return on investment that takes into account the change in price plus dividends or interest received. The total return for a fund reflects changes in net asset value and reinvestment of all distributions in additional shares of the fund.

Trailing P/E
The sum of a company´s price-to-earnings, calculated by taking the current stock price and dividing it by the trailing earnings per share for the past 12 months.