Fund Central

C

CALL RISK The possibility that bonds will be re-paid (or "called") prior to maturity. This possibility increases during periods of falling interest rates. CAPITAL APPRECIATION The profit made on an investment, measured by the increase in a fund share's value from the time of purchase to the time of sale. CAPITAL APPRECIATION FUNDS A fund that invests primarily in common stocks the manager believes will provide maximum capital appreciation. Capital appreciation funds often resort to aggressive investment techniques, such as rapid portfolio turnover, leveraging, and investing in unregistered securities in order to achieve their objectives. CAPITAL GAIN DISTRIBUTIONS A distribution to shareholders of profits realized from the sale of securities in a fund's portfolio. Capital gain distributions are usually paid yearly, and are currently taxable at a rate up to 28%. CAPITAL GROWTH Also called capital appreciation, capital growth is an investment objective of many stock funds. Capital growth is achieved when the market values of a fund's holdings increase, causing the fund's net asset value per share to increase. CDSC (Contingent deferred sales charge) A type of back end load sales charge, a contingent deferred sales charge is a fee charged when shares are redeemed within a specific period following their purchase. These charges are usually assessed on a sliding scale, with the fee reduced each year the shares are held. CERTIFICATE A physical document representing the mutual fund shares owned. Certificates are rarely issued, in the interest of economy and convenience. Shares are now recorded by the Transfer Agent, or in a brokerage account (known as "street name.") CLASSES OF SHARES Various classes of a single portfolio are distinguished by the type of sales charge they levy. In general: -- Class A shares carry a front-end load. -- Class B shares carry a back-end load (also known as a contingent deferred sales charge). -- Class C shares carry an ongoing charge (usually in the form of an annual 12b-1 charge). CLONE FUND A fund launched to mirror a closed fund. For example, fund managers may decide to close a fund that has grown so large it is no longer able to establish positions in smaller securities. They could then launch a new fund in the closed fund's image. While both funds would have the same investment objective, they would generally be run by different managers and would invest in different securities. CLOSED-END FUND A fund that offers a limited number of shares. The shares of closed-end funds, which are typically listed on one of the major stock exchanges, are bought and sold through brokers. The price of the shares is determined by the pressures of supply and demand rather than by the value of underlying assets. CLOSED TO NEW INVESTORS Occasionally a manager may declare a fund "closed to new investors" which means that no new investments will be accepted. This is often a temporary designation, prompted by a tremendous amount of money invested in the fund in a short period of time. The portfolio manager may be concerned about finding enough appropriate securities to add to the fund's portfolio. COLLATERALIZED MORTGAGE OBLIGATION (CMO) A security collateralized with mortgages or mortgage-backed securities. Many CMOs backed by a U.S. government agency are rated AAA. Non-agency CMOs may be lower rated. COMMERCIAL PAPER Debt instruments that are issued by established corporations to meet short term financing needs. Such instruments are unsecured and have maturities ranging from 2 to 270 days. Commercial paper is rated by Standard & Poor's and Moody's Investor Service. COMMISSION A fee imposed when funds are bought or sold to compensate the broker for his or her role in the transaction. COMMON STOCK FUND A fund that invests primarily in common stocks. The investment objectives of common stock funds may vary greatly. COMPOUNDING Interest earned on interest previously earned and reinvested. For example, if a security paid a fixed interest rate of 10% annually and an investor invested $500, by the end of the first year the investor would have earned $50 in interest. If that interest was reinvested, the investor would enter the second year with $550 invested. At the end of the second year, the investor would have earned $55 in interest -- earning an extra $5 in interest thanks to the reinvestment of the first year's interest. CONTINGENT DEFERRED SALES CHARGE (CDSC) A type of back end load sales charge, a contingent deferred sales charge is a fee charged when shares are redeemed within a specific period following their purchase. These charges are usually assessed on a sliding scale, with the fee reduced each year the shares are held. CONTRACTUAL PLAN A program in which a legal vehicle (plan company or participating unit investment trust) agrees to invest a fixed amount in a fund at regular intervals for 10 or 15 years. In exchange, investors in these plans commonly receive other benefits, such as decreasing term life insurance. CONVERTIBLE SECURITY Corporate securities (usually preferred shares or stock or bonds) that are exchangeable for a set number of another form of security (usually common stock) at a prestated price. CONVERTIBLE SECURITIES FUNDS A fund that invests primarily in convertible bonds and/or convertible preferred stocks. CORPORATE BOND FUNDS A fund that invests primarily in corporate bonds. In general, corporate bond funds seek income over capital growth. COUNTRY FUNDS A fund that invests primarily in the securities of a single country. In some cases, country funds also invest in securities outside the single country if those securities are expected to benefit by growth in that country. COUNTRY RISK The potential for price fluctuations in stocks sold in foreign countries due to events (political, financial, etc.) in these countries. CREDIT RATING A measure of a bond issuer's creditworthiness as rated by an independent agency, such as Standard & Poor's or Moody's Investor Services. Ratings are set as a reflection of the perceived financial stability of the issuer, from AAA to D. Bonds rated Baa or higher by Moody's, or BBB or higher by S&P, are considered "investment grade." Conservative investors tend to select funds composed of all AAA rated bonds, or "investment grade" bonds. More aggressive investors, looking for high yields, are more interested in funds that invest in lower rated bonds. Moody's Standard & Poor's Aaa AAA Aa AA A A Baa BBB Ba BB B B Caa CCC Ca CC C C DDD DD D CREDIT RISK The possibility that a bond issuer will default, failing to repay principal or interest as promised. "Credit risk" is also known as "default risk." CURRENCY RISK The potential for price fluctuations in the dollar value of international stocks due to changing currency exchange rates. CURRENT YIELD Annual interest or dividend payments expressed as a percentage of a bond's current price. CUSIP (Committee on Uniform Securities Identification Procedures) A standard nine-digit code used to identify securities. CUSTODIAN The organization (usually a bank) that keeps custody of securities and other assets of a fund.

Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted.