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A certificate issued by a U.S. bank representing one or more shares of a foreign stock traded on a U.S. exchange. ADRs are denominated in U.S. dollars.

The Securities and Exchange Commission (SEC) requires each fund to provide its shareholders with an annual report within 60 days following the end of the fund's fiscal year. The report contains an audited financial statement, as well as detailed information regarding the fund’s holdings and performance during the previous 12 months.

A fund’s average return per year compounded over a specific period of time.

Shares of preferred stock issued by leveraged closed-end funds. The shares are purchased or sold at weekly auctions, at which time the dividends or interest payments are determined.

A fund’s average return per year over a specific number of years. The calculation of the average annual total return includes the change in net asset value or market price, and reinvestment of any dividends and capital gains distributions.

The average maturity dates of a fixed income fund’s holdings. This is an indicator of a fund’s performance in periods of rising or falling interest rates. The longer the average maturity, the more a fund’s value will fluctuate in response to changes in interest rates.

A company’s market capitalization is the total value of its stock. A mutual fund’s average and median market capitalization provides an indication of the size of the companies in which it invests.

A basis point is equivalent to one one-hundredth of a percentage point (0.01%). For example, 50 basis points equals 0.50%.

A market index which is used for comparison purposes in evaluating the performance of a fund.

A debt security issued by corporations, governments or government agencies. The issuing entities usually agree to make periodic interest payments to bondholders and to repay (or redeem) the face value of the bonds at a specified future date.

A closed-end or open-end mutual fund that invests in bonds. Taxable bond funds invest in U.S. government securities and/or corporate bonds. Some funds also invest in foreign corporate bonds or government debt. Municipal bond funds generally pay interest that may be exempt from state and/or federal taxes.

This investment strategy focuses on individual companies’ businesses and places less emphasis on sectors and current economic conditions.

Capital appreciation is an increase in the total value of the securities held by a fund, resulting in a rise in the fund’s net asset value per share.

Mutual funds distribute to shareholders any net capital gains generated by the sales of securities. Capital gains payments typically are distributed to shareholders on an annual basis in December. The amount of the capital gains distribution is deducted from the fund’s net asset value.

The difference between the cost basis of an investment and its value at the time of sale. There is a capital gain if the sale price is higher than the cost basis. Conversely, a lower sale price generates a capital loss. A short-term capital gain is a gain on securities that an investor holds for less than one year. Long-term capital gains apply to assets that are held for more than one year.

Similar to an open-end fund, a professional manager invests a closed-end fund’s assets in a portfolio of securities. However, unlike open-end funds, a closed-end fund issues a fixed number of shares through an initial public offering, and investors subsequently buy and sell shares on a securities exchange.

The calculation of an investment’s cost basis, or total cost, includes stock splits, dividend or interest payments, and capital gains distributions. The cost basis is used in determining capital gains and losses.

A rating agency (Moody's, Fitch, or Standard & Poor's) assigns a credit rating to a fixed income security based on its evaluation of the issuer’s creditworthiness.

Credit risk represents the potential that the issuer of a debt security will not be able to meet its obligation to make periodic interest payments or repay principal to investors. Securities issued by the U.S. government or its agencies generally have little or no credit risk.

A closed-end fund’s market distribution rate, expressed as a annualized percentage, is calculated by dividing the amount of its most recent distribution by its market price. This percentage is then multiplied by the number of distribution payments made in a 12-month period.

A bond’s annualized rate of return, expressed as the ratio of a bond’s interest payment to its market value. The percentage assumes that the security will be held to maturity and the interest payments can be reinvested at the current yield.

A bank or trust company that is responsible for holding and safeguarding the assets of an open- or closed-end fund. The custodian also may process payments and maintain records of a fund’s securities transactions.

The date on which a closed-end fund’s board of directors announces the amount of a dividend and/or capital gains distribution that will be paid to shareholders.

The values of these financial instruments, which include swaps, warrants, options and futures, are tied to those of other securities, assets or market indices. Derivatives can be used as risk management tools and to gain indirect exposure to securities such as stocks, bonds, commodities and currencies.

A closed-end fund trades at a discount if its market price is lower than its net asset value.

A discount bond trades below its par or face value, and may provide a capital gain if it is redeemed by the issuer at face value upon maturity.

The interest rate that member banks pay directly to the Federal Reserve for short-term loans.

A periodic payment of dividends, capital gains and/or returns of capital that a fund makes to its shareholders.

The amount of a closed-end fund’s most recent distribution divided by the fund’s current market price, then multiplied by the number of distribution payments made in a 12-month period.

The scheduled dates on which a fund makes income, principal, dividend, capital gains and/or other distributions to shareholders.

A risk-management investment strategy that allocates assets across diverse securities and/or sectors.

A portion of a company’s earnings that its board of directors authorizes to be distributed to shareholders. A dividend is usually calculated as an amount paid on each share.

A DRIP provides shareholders of a company or fund with the opportunity to reinvest their cash dividends and capital gains distributions in additional stock or fund shares on the dividend payment date.

The total dividends paid by a company per share over the previous 12 months divided by the stock’s current market price.

An investment plan in which a fixed amount is invested in a fund at predetermined time periods. Consequently, more shares are purchased when a fund’s price drops, and fewer are bought at higher prices, so the average cost of the shares generally will be lower than their average price during the time that the periodic investments are made. Nonetheless, dollar-cost averaging does not guarantee a profit or protect against a loss in declining markets.

Duration is a measure (expressed in years) of the sensitivity of an individual bond or fixed income portfolio to interest rate fluctuations. For example, the price of a bond with a duration of seven years will move roughly 7% for each percentage point that interest rates rise or fall. A fixed income security’s price volatility is directly related to its duration.

A fund is assigned ex-dividend status during the interval between the date of announcement of a dividend or capital gains distribution and the date on which they are paid to shareholders. An investor cannot receive the distribution if shares are purchased when the fund is trading ex-dividend.

This is the date that an investor purchasing a security is ineligible to receive the company’s most recently declared dividend. A fund’s net asset value is reduced by the amount of a declared dividend or capital gains distribution on the ex-dividend date.

The percentage of average net assets used by a fund to pay expenses such as management and administrative fees and 12b-1 charges.

A fund’s 12-month accounting period for which it is required by the SEC to provide shareholders with financial statements and performance data. A fund’s fiscal year may differ from a calendar year.

A debt security, such as a bond, CD and preferred stock, which pays a stated interest rate or dividend.

A forward contract delays the delivery of a commodity until after the contract is made. The price is specified on the initial trade date, although the commodity is delivered at a future date. The majority of forward contract trades are not conducted on securities exchanges.

A fund’s total assets (the value of its securities, cash and any other holdings) minus its liabilities.

A strategy of evaluating a security which involves an examination of a company’s business operations and financial status, including sales, earnings, growth potential and management. Fundamental analysis places less emphasis on sectors and current economic conditions. Also known as “bottom-up” analysis.

An investment strategy in which futures contracts or put options are used in an effort to offset the risk that the value of a security held in a portfolio will decline.

Also known as “junk bonds,” these fixed income securities have been assigned a credit rating of BB or below by an independent rating service such as Standard & Poor's or Moody's Investors Service. The bonds typically provide high yields because they have a higher risk of default.

A payment made by a fund to its shareholders of dividends and interest generated by its holdings (after deducting expenses).

A market benchmark, such as the S&P 500 Index and the Barclays Capital Aggregate Bond Index, used in comparing the performance of a stock of fund.

The first public offering of sale for a company’s common stock or a closed-end fund.

The potential for a decline in the price of a security if there is a change in interest rates.

Fixed income securities issued by entities that an independent rating service such as Standard & Poor's or Moody's Investors Service has judged as creditworthy (rated AAA,AA, A or BBB by Standard & Poor’s, and Aaa, Aa, A and Baa by Moody’s).

An individual or corporate portfolio manager which is responsible for making decisions concerning the purchase or sales of securities on a daily basis.

A company which is engaged mainly in investing in securities such as mutual funds and closed-end funds. Most investment companies are registered with the SEC, which regulates them under the Investment Company Act of 1940.

The financial target of a fund or investor. For example, a growth fund seeks long-term growth of capital, with little or no emphasis on current income.

The overall strategy that a fund uses to determine asset allocation and the securities to purchase The investment style usually is an indicator of an equity fund’s focus on large-, medium- or small-capitalization companies, and whether it emphasizes value or growth stocks, or a blend of the two categories.

A fund’s use of borrowed capital to invest in securities or other assets.

The average return of all of the funds within a Lipper fund classification for a specific time period.

The ability to convert an asset to cash quickly with minimal effect on its value.

A profit on an individual security or open- or closed-end fund that has been held for a period exceeding one year. Long-term gains are usually subject to a lower federal tax rate than short-term capital gains.

Under a managed distribution policy, a closed-end fund makes periodic distributions (usually monthly or quarterly) to shareholders based on a percentage of a fund’s assets. This enables the fund to provide a predictable– though not guaranteed–level of cash flow; a consistent, periodic distribution, generally derived from dividend and interest income; and net realized capital gains (both long- and short-term).

The manager and administrator of an open- or closed-end fund, or an exchange-traded fund.

The amount a fund pays to its investment adviser for the investment management associated with overseeing the fund's portfolio.

The possibility that stock or bond prices will fluctuate.

An investment's current annualized dividend total divided by its current market price.

The date on which the face value of a bond must be repaid by the issuer.

An open-end investment vehicle that pools the assets of individuals and organizations to invest in a professionally managed portfolio of securities.

Created by the National Association of Securities Dealers (NASD) in 1971, Nasdaq is a computerized stock trading system that provides price quotes for more than 5,000 listed and over-the-counter (OTC) stocks in the U.S.

The total net market value of a portfolio’s holdings.

The market value for each share of a mutual fund or closed-end fund. The NAV is calculated by dividing the total fund assets minus liabilities by the number of shares outstanding.

Founded in 1792, the NYSE is the world’s largest stock trading exchange, based on the total market capitalization of its listed securities.

An investment vehicle that continuously issues new shares without restriction regardless of the number of investors, and will redeem shares at any time.

A contract providing the purchaser with the right–but not the obligation–to buy (call) or sell (put) a security at a specified price within a certain period of time or on a specific date.

The date on which a fund issues a dividend or capital gains distribution to its shareholders.

A measure of how frequently fund managers buy and sell assets within a portfolio, usually reported for a 12-month time period. A higher portfolio turnover rate may result in an increase in fund expenses.

A type of ownership of a company under which a fixed dividend is paid before any dividend payments are issued to holders of common stock. Additionally, in the event of a company’s liquidation, holders of preferred stock are paid after bondholders but have priority over owners of common stock.

A bond trades at a premium if its current market price is higher than its par (face) value. The premium on a closed-end fund is the difference between its net asset value and its higher market price.

A legal document, required by and filed with the Securities and Exchange Commission, which contains a description of a fund and an offer of sale of its shares or units to the public.

A legal document in which a shareholder authorizes a company’s management to vote on behalf of the shareholder at an annual meeting.

The date established by a fund for the purpose of determining which shareholders are eligible to receive a dividend or capital gains distribution.

Provides fund shareholders with the option of using interest income, dividends or capital gains distributions to purchase additional fund shares without a sales charge.

A fund distribution that is made from a portion of a shareholder’s original investment rather than income or realized capital gains. A return of capital distribution does not result in a taxable gain if the amount is less than a shareholder’s original investment.

Provides a company’s shareholders with the opportunity to purchase a specified number of additional shares at a designated price (usually at a discount to the current market price) within a fixed period of time.

Following the initial public offering of a stock or closed-end fund, shares of the security can be purchased only from other investors in the secondary market rather than the issuer of the security.

The federal agency, established under the Securities and Exchange Act of 1934, which is the primary regulator of the U.S. securities industry, including mutual funds and closed-end funds.

The date by which the payment for an executed securities transaction must be made. The settlement date for most securities is three business days after the execution of the trade, and one business day for options and U.S. government securities.

A profit on the sale of a security or fund shares held for one year or less. Short-term capital gains usually are subject to a higher tax rate than long-term gains.

Government-issued debt which is frequently denominated in foreign currencies.

A statistical measure of the historical volatility of a mutual fund. Standard deviation is a gauge of how a fund’s returns diverged from its average return over a certain time period, typically three years. A smaller variation from the average return will result in a lower standard deviation.

A supplement to a mutual fund's prospectus containing more information about the fund’s policies and operations.

An investor’s account in which securities are held in the name of a brokerage firm, usually for the purpose of facilitating account transactions.

An agreement between two parties to exchange payments over a specific period of time. The most common of these transactions is an interest rate swap, in which one party agrees to provide a fixed-rate payment to another party in return for an adjustable-rate payment.

A plan in which an investor makes regular periodic purchases of mutual fund shares through electronic transfers from a bank account, payroll deduction, or exchanges from another mutual fund.

The 12-month period (usually a calendar year) for which an individual files an income tax return.

A series of letters representing a particular security or fund listed on an exchange or otherwise traded publicly. Mutual funds and closed-end fund letters are usually followed by an “X” to differentiate them from stocks.

A fund’s total outstanding debt.

The rate of return on an investment over a specified time period. For a mutual fund, the calculation of total return includes the change in share price plus the reinvestment of dividends, interest income and capital gains distributions in additional fund shares.

The date on which shares of a security or fund are purchased or sold.

A financial institution with which a fund company contracts to maintain records of investors, account balances and transactions.

The total amount of a fund’s earned dividend and interest income which has not yet been distributed to shareholders.

The dividend and interest income return generated by a mutual fund or closed-end fund, usually expressed on an annualized basis as a percentage of net asset value or market price.

A graph which plots the yields of bonds of differing maturities, illustrating the relationship between short- and long-term interest rates. The most commonly cited yield curve tracks three-month and two-, five- 10- and 30-year U.S. Treasury securities, and is used as a benchmark for mortgage rates and bank lending rates. An inverted yield curve occurs when short-term rates exceed long-term rates.