Glossary

A, B, C, D, E, F, G, H, I, J, K, L, M, N, O, P, Q, R, S, T, U, V, W, X, Y, Z.

AARF
Abbreviation forAustralian Accounting Research Foundation.

AAS
Abbreviation for Australian Accounting Standards. See Accounting Standards.

AAS25
Abbreviation for Australian Accounting Standard No. 25 entitled Financial Reporting by Superannuation Plans. Under this standard, accounts for certain superannuation funds are required to include valuations of assets at net market value rather than cost.

AASB
Abbreviation for Australian Accounting Standards Board.

ABS
Abbreviation for Australian Bureau of Statistics.

ACCC
Abbreviation for Australian Competition and Consumer Commission.

Acceptor
The party to whom a Bill of Exchange is addressed, and who accepts primary liability to pay on maturity the face value of the bill to its holder. See also Bank Bill.

Accord
Commonly-used shorthand for the Prices and Incomes Accord, a series of agreements between the Australian Government and the trade union movement since the early 1980s concerning salaries and benefits (including superannuation) to be provided to Australian workers under industrial awards.

Accounting Standards
Practice notes and policies issued by the Australian Accounting Research Foundation setting out acceptable practices and procedures for adoption by accountants and auditors. Australian Accounting Standards are usually abbreviated to AAS and numbered (eg. AAS25), and are adhered to by the professional accounting associations (ie. Australian Society of Certified Practising Accountants and Institute of Chartered Accountants in Australia).

Accrual Accounting
An accounting methodology which takes account of accrued as well as actual expenses and revenue during the relevant accounting period. For example, if interest payments on a bond owned by an investor are building up but have not yet been paid, the amount notionally built up at the time of accounting is included in accruals, even though it has not actually been received. (See also Cash Accounting).

Accrued Benefits
In relation to superannuation, the benefits which have already accumulated at a given point in time, as distinct from those which may or will build up in the future.

Accrued Interest
Interest earned on a security or bank deposit but not yet paid.

Accumulated Interest
Periodic interest payments which are past due and unpaid.

Accumulation Fund
Another term for Defined Contribution Fund.

Accumulation Index
A numerical index of movement in a financial market, which takes account of both price movement (capital) and income (dividends). Investment performance should generally be measured against an accumulation index rather than a price index, which measures movements in price only (not income). (See also All Ordinaries Accumulation Index).

Active Management
A style of investment management which seeks to attain returns above a set benchmark by asset allocation and stock selection. (Opposite of Passive Management).

Active Market
A market in which the volume of securities traded is heavy or above normal.

Active Position
The difference between the actual level of investment made in a particular asset class and the benchmark level of investment in that asset class.

ACTU
Abbreviation for Australian Council of Trade Unions.

Actual Price
The price at which a deal for the transfer of ownership of an asset is formally completed, eg. in a share transaction. (Not to be confused with Closing Price).

Actuarial Value
The present value of a defined benefit superannuation fund as determined by an actuary, taking account of current assets and expected future contributions, together with expected future benefits payments, discounted by appropriate interest factors.

Actuary
A professional person qualified to make calculations and valuations in respect of superannuation funds, insurance funds or other forms of investment. Actuaries apply mathematical, statistical, economic and financial analysis to a wide range of practical business problems, with particular emphasis on longer term financial contracts involving the need to incorporate assessment of risk or uncertain financial outcomes. Actuaries operating in Australia are normally qualified as Fellows of the Institute of Actuaries of Australia.

ADCAL
Abbreviation for Australian Development Capital Association Limited.

ADF
Abbreviation for Approved Deposit Fund.

Administrator
a) A person appointed by a court to administer the estate of a person who has died without leaving a will, or where the appointed executor is unable or unwilling to perform the task; b) a person appointed by a regulatory authority in certain circumstances to take charge of the affairs of a company or financial institution in place of the Board of Directors. (See also Liquidator, Receiver); or c) in relation to superannuation funds, the individual or company responsible for the day to day operation of the fund.

AFIC
Abbreviation for Australian Financial Institutions Commission.

AFMA
Abbreviation for Australian Financial Markets Association.

Age Dependency Ratio
A statistical measure of the ratio of persons above retirement age to those below retirement age. The ratio is commonly used as a leading indicator of the projected ageing rate of the general population.

Agent
A person employed to act on behalf of another (a principal).

Aggressive Portfolio
A portfolio which is significantly different from the index (or its benchmark) and which is designed to provide above-average returns by taking above-average risk. Typically, such portfolios have a relatively high exposure to equity investments.

AGM
Abbreviation for Annual General Meeting.

AIMA.
Abbreviation for Australian Investment Managers? Association

AIST
Abbreviation for Australian Institute of Superannuation Trustees.

All Industrials Index
See All Ordinaries Index.

Allocated Pension
A type of retirement income arrangement under which an individual invests a lump sum and then draws down an annual pension to a value he/she sees fit, taking account of his/her own expected cash flow needs and life expectancy. If the drawdown is greater than investment earnings, then part of the initial capital sum is used to make up the difference. Unlike a traditional pension or annuity, an allocated pension can therefore provide the retiree with continual access to the capital sum invested, and allows any balance to be passed on to beneficiaries upon the death of the individual concerned. Also called Cash Back Pension.

Allocation Price
The price at which a unit in a unit trust is issued. Also known as Purchase Price. (Opposite of Redemption Price).

All Ordinaries Accumulation Index
An accumulation index measuring movements in both the price (capital) and dividends (income) of the major shares listed on the Australian Stock Exchange. (See also All Ordinaries Index).

All Ordinaries Index
A share price index measuring the market prices of the major stocks listed on the Australian Stock Exchange. The index is calculated continuously, and expressed as a number which allows overall market fluctuations to be quickly gauged (eg. if the index was at 2000 at a given point in time and the overall value of the shares concerned rose by 10%, then the index would rise to 2200). Note that not all of the companies listed on the Australian Stock Exchange make up the All Ordinaries Index. Note also that the Index is broken into a series of sub-indices including the All Resources, All Industrials, the 50 Leaders and a series of sector indices such as mining, media, transport, etc.

All Resources Index
See All Ordinaries Index.

Alpha
The return a security or a portfolio would be expected to earn if the market rate of return were zero. A positive alpha indicates that an investment has earned on average a premium above that expected for the level of market variability. A negative alpha would indicate that the investment received on average a premium lower than that expected for the level of market variability. Sometimes alpha is used as a performance indicator. (See also Beta, Delta).

ALRC
Abbreviation for Australian Law Reform Commission.

AMBA
Abbreviation for Australian Merchant Bankers? Association.

American Option
An option which may be exercised any time between its initiation and expiration dates (inclusive). American options are among those traded on the floor of the Sydney Futures Exchange. (See also European Option).

Amortisation
Paying off an interest bearing liability by gradual reduction through a series of installments comprising both principal and interest components, as opposed to paying it off by a single lump-sum payment. A technique for gradually extinguishing a liability or capital expenditure over a period of time (eg. as in a typical home mortgage). (See also Credit Foncier Loan).

Amortised Yield
See Yield.

Analyst
A trained person who investigates all the facts concerning a security or industry under study and reaches a dependable conclusion about its merits that may help an investor to decide what action he or she should take.

Annual Accounts
A yearly summary of the financial position of a company or superannuation fund. Typically includes a balance sheet and profit and loss account.

Annual Benefit Statement
A report from the manager or trustees of a superannuation fund, advising members of details of their accrued and future benefits in a fund.

Annual General Meeting (AGM)
The yearly meeting between the directors and shareholders of a company, at which shareholders are asked to elect the directors, discuss any shareholder resolutions and approve the operating and financial results of the past year.

Annualising
The expression of a rate of return over periods other than a year converted to annual terms. For example, a compound return of 21% over two years would convert into an annualised return of 10% per annum, even though each annual return looked nothing like 10%. For example, if an investment earned minus 2% in year one and 23.5% in year two, the compound annual return would be 10%. (See also Compounding).

Annuity
An arrangement under which periodic payments are made to a person in return for the investment of a lump sum, usually for the purpose of providing retirement income. (See also Allocated Pension, Deferred Annuity).

Anticipatory Hedging
The taking of a futures position to hedge an anticipated position in the market for the underlying physical security.

APEC
Abbreviation for Asia-Pacific Economic Co-operation Group.

Appreciation
a) Generally, an increase in the value of an asset; b) In relation to foreign exchange transactions, the rise in the value of a currency in terms of another currency or currencies.

Approved Deposit Fund (ADF)
A type of fund into which Eligible Termination Payments can be `rolled over' upon a person's retirement, resignation or retrenchment. ADFs were introduced in 1984 following changes to the tax laws affecting lump-sum superannuation payouts, as a means of ensuring that payments intended for retirement purposes continue to attract favourable taxation treatment. (See also Annuity).

Approved securities
Listed shares and unlisted managed funds, which a Margin Lender will lend against.

Approved Trustee
An organisation eligible to be the trustee of a Public Offer Fund under the SIS Legislation. An Approved Trustee must be a corporation, fulfil certain capital/net asset or custodial requirements, and have been approved by the Insurance and Superannuation Commission as being capable of properly performing the trustee's duties. Approved Trustee status only applies to trusteeships of Public Offer Funds; it should be distinguished from the requirements of a corporate trustee for a regular employer sponsored superannuation fund.

Arbitrage
Taking advantage of countervailing prices in different markets <196> eg. the purchase of an asset for a low price in one market and its sale for a higher price in another.

Arbitrageur
A person who engages in arbitrage.

Arithmetic Average
In the context of investment performance surveys, a <169>simple<170> average of the sum of all values measured, divided by the number of those values. As opposed to the asset-weighted average.

Arm's Length
A description of a transaction conducted on a strictly commercial basis. The term is used particularly in cases where the parties to the transaction are associated with each other (ie. to ensure that the transaction proceeds as if the parties were completely independent of each other).

Arrears
a) In the case of superannuation, contributions which are overdue; b) More generally, the term refers to money which is now due, but has not yet been paid

Articles of Association
A document which spells out the internal rules of operation of a company. (See also Memorandum of Association).

ASA
Abbreviation for Australian Shareholders' Association.

ASAC
Abbreviation for Asian Securities Analysts Council.

ASC
Abbreviation for Australian Securities Commission.

ASCT
Abbreviation for Australian Society of Corporate Treasurers.

ASFA
Abbreviation for Association of Superannuation Funds of Australia. A national industry association established in 1961 to promote the interests of superannuation funds and their trustees and members.

Asian Securities Analysts Council (ASAC)
An international co-operative organisation for securities analysts in the Asian and Oceania regions. The purpose of ASAC is to promote the interchange of securities analysis and fund management expertise on matters of common interest to member associations (including the Securities Institute of Australia).

Asia-Pacific Economic Co-Operation Group (APEC)
An international grouping of nations in the Pacific, East Asia and North America established to advance regional interests and promote free trade policies around the world. APEC commenced as the Asia Pacific Economic Forum in 1989, but rose to greater prominence in November 1993 when leaders of most member nations met in Seattle, United States to formalise their combined regional policies and trade principles. The founding membership of APEC comprises Australia, Brunei, Canada, China, Hong Kong, Indonesia, Japan, Malaysia, New Zealand, the Philippines, Singapore, South Korea, Taiwan, Thailand and the United States <196> a grouping of nations representing approximately 40% of the world's population, 40% of the world's trade, and 50% of global gross domestic product.

Ask Price
The price at which the holder of a security is prepared to sell that security. (See also Offer).

Asset Allocation
The apportionment of an investment portfolio among different asset classes (shares, bonds, property, cash and overseas investments) from time to time in accordance with the investment outlook of the investor or investment manager. Also known as Investment Mix. (See also Strategic Asset Allocation and Tactical Asset Allocation).

Asset Allocation Model
A computer model which, given information and forecasts for the various asset classes (return, risk, covariances), will give asset allocations which will be most efficient in terms of the trade-off between risk and return. (See also Optimisation).

Asset Backing
The value of a company's assets standing behind its issued shares. Some companies may have a strong asset backing even if the dividends they pay on shares are relatively low. (See also Net Asset Backing).

Asset Class
A broadly defined category of financial assets (eg. domestic shares, overseas bonds, cash, etc).

Asset Consultant
A professional person engaged by investors such as superannuation fund trustees to advise on appropriate investment strategies, asset allocation and selection of investment managers.

Assets
The resources owned by a company, fund or individual. Cash, investments, money due, materials and inventories are called current assets; buildings and machinery are known as fixed assets; and patents and goodwill are known as intangible assets. Opposite of liabilities.

Asset Value
The value of the assets underpinning a security. These may not be fully reflected in the price of a security. (See also Net Asset Value).

Asset-Weighted Average
In the context of investment performance surveys, an average derived by comparing returns earned by fund managers where those returns are weighted according to the managers' respective size of assets under management. An alternative to the use of arithmetic averages.

Assignment
The transfer of property (eg. an assignment of interest under a will, an assignment of rights in a patent or an assignment of a lease or mortgage). An assignment of contract is an act by which one person substitutes another as a party to a contract, either for some or all of the purposes of the contract. The assignment of rights and liabilities under contracts is limited by law.

Assurance
Traditionally used to describe insurance based on human life (hence 'life assurance').

ASX
Abbreviation for Australian Stock Exchange.

Asymmetric Hedge
An option-based hedge. 'Asymmetric' refers to the fact that the protection afforded by an option-based hedge will not be symmetrical, because the return from a call option is not as great as the return would have been from investing in the underlying security directly.

At a Discount
Below par value. A security is said to be selling at a discount when the market value is below the par value of the security. Shares can also be said to be trading at a discount (or premium) to net tangible assets.

At a Premium
Above par Value. A security is said to be selling at a premium when its market price is above its par value.

ATO
Abbreviation for Australian Taxation Office.

At Par
The price which equals the face value (par value) of a security.

At the Close
Describing an order calling for execution of an order at the price obtainable 'at the close' of the market on the day it is entered.

At the Market
Describing an order which the broker will execute at the best price obtainable at the moment he or she receives it on the trading floor. Synonymous with market order. (See also Limit Order).

At the Money
Referring to a call option or a put option whose exercise price is equal (or virtually equal) to the current price of the commodity or asset on which the option is written.

At the Opening
Describing an order to be executed at the best price obtainable as soon as the market opens: no actual price limit is set.

Attribution Analysis
The process by which the return on an investment portfolio is attributed to its manager's investment decisions. Typically the decisions in respect of which performance is attributed are stock selection, asset allocation and market timing.

Audit
An independent examination of the records and operations of a company, superannuation fund or other legal entity to check on compliance with accounting requirements and/or regulatory standards. A conventional financial audit is conducted to scrutinise the annual accounts of an organisation to ascertain whether (in the opinion of the auditor) they represent a true and fair view of the organisation's financial status. Other types of audits might be conducted at the initiation of management or regulatory authorities; for example, audits of an organisation's information technology systems. Under the SIS Legislation, audit requirements include examination of a fund's compliance with prescribed operating standards, such as the requirement that funds do not lend money to their members. (See also External Audit and Internal Audit).

Ausmaq
Derived from Australian Market Automated Quotation System, Ausmaq is an on-line transaction network designed primarily for financial advisers but also investors and fund managers. It facilitates automated transaction processes for the issue and redemption of units in public unit trusts.

AUSSIE MAC
A mortgage-backed certificate issued by the National Mortgage Market Corporation, first issued in 1985. (See also Securitisation).

Austraclear
A computerised settlement and safe custody system for bills of exchange and, more recently, cash transactions. Austraclear records trades and changes of ownership and removes the need for bills of exchange or cash to physically change hands.

Australian Accounting Research Foundation (AARF)
The organisation which researches and issues accounting standards for Australian practitioners. Founded in 1966, the AARF is jointly sponsored by the Australian Society of Certified Practising Accountants and the Institute of Chartered Accountants in Australia.

Australian Accounting Standard No. 25
See AAS25.

Australian Accounting Standards Board (AASB)
A Board established under the Corporations Law to develop a conceptual framework for evaluating proposed accounting standards, and to review, sponsor, consult upon or change proposed standards.

Australian Bureau of Statistics (ABS)
The Commonwealth Government body responsible for the collection and publication of statistical data on a wide range of matters, including economics, demographic trends and census figures.

Australian Competition and Consumer Commission
(ACCC) The Commonwealth Government agency responsible for administering legislation concerning fair trade practices, prices surveillance, competition and consumer protection. It was formed in 1995 by merging of the former Trade Practices Commission and Prices Surveillance Authority.

Australian Council of Trade Unions (ACTU)
The national organisation for Australia's trade union movement. The ACTU was established in 1927 and has its headquarters in Melbourne.

Australian Development Capital Association Limited (ADCAL)
An industry association formed in April 1992 for specialist managers, investors and other participants in Australia's development capital industry.

Australian Financial Institutions Commission (AFIC)
The body established by uniform legislation among the states and territories to regulate the affairs of Australia's non-bank financial institutions. AFIC commenced its operations on 1 July 1992.

Australian Financial Markets Association (AFMA)
A national industry body for organisations in over-the-counter (OTC) financial markets. As an industry association, AFMA membership represents almost 200 organisations, large and small, comprising the full range of participants in wholesale financial markets. The AFMA mandate includes facilitation, consultation and dissemination on issues including benchmarking, self-regulation, market risk, dispute resolution, market conventions, codes of conduct, education, documentation and access to better quality information through AFMAdata.

Australian Institute of Superannuation Trustees (AIST)
An institute founded in June 1992 by the Conference of Major Superannuation Funds to represent the interests of superannuation fund trustees. The AIST is an independent, non-profit incorporated association, whose objectives include the promotion of ethical and effective performance standards by trustees, improvement of the knowledge and skills of trustees, representations to government and relevant authorities on matters of concern to trustees, and enhancement of sound management and security of superannuation funds by trustees on behalf of their members. The Institute's information and educational activities include provision of a reference manual to members as well as access to an ongoing seminar series.

Australian Investment Managers' Association (AIMA)
An industry association formed in December 1990 to promote the interests of institutional fund managers and to propose measures to improve the efficiency and integrity of Australian capital markets. Among the activities of the AIMA are the issue of practice notes recommending appropriate actions for institutional investors on corporate governance issues, the preparation of submissions to government on fund management regulatory issues, liaison with overseas institutional shareholder and funds management associations, and advice to companies in understanding the requirements of institutional investors. As at December 1995 the AIMA had 62 members, representing combined funds under management of approximately $320 billion.

Australian Law Reform Commission (ALRC)
A Commonwealth Government body responsible for reforms on legal issues referred to it by the Attorney-General. Together with the Companies and Securities Advisory Committee, the ALRC was responsible for a major review of Australia's collective investments industry in 1992<196>94, leading to a number of expected legislative changes during 1996.

Australian Market Automated Quotation System
See Ausmaq.

Australian Merchant Bankers' Association (AMBA)
An industry association representing participants in Australia's wholesale banking, securities and financial markets. AMBA's membership comprises both Australian and foreign-owned institutions including the operations of major international and investment banks which operate in Australia.

Australian Ratings
Australia's only home-grown credit rating agency, based in Melbourne. Now owned by Standard & Poors. (See also Moody?s, Standard & Poors).

Australian Securities Commission (ASC)
The Commonwealth Government body responsible for regulation of companies and the securities and futures industries under the Corporations Law. The ASC commenced its operations on 1 January 1991, replacing the National Companies and Securities Commission and State Corporate Affairs Commissions which existed under the previous co-operative scheme of companies and securities regulation. (See also Australian Accounting Standards Board, Companies Auditors and Liquidation Disciplinary Board).

Australian Society of Certified Practising Accountants
Formerly known as the Australian Society of Accountants.

(ASCPA)
One of the two main professional associations for the accounting profession in Australia. (See also Institute of Chartered Accountants in Australia).

Australian Society of Corporate Treasurers (ASCT)
A national professional organisation established in 1986, representing 1130 corporate and public sector treasury professionals. The ASCT aims to provide forums for the discussion of treasury issues, provide education to members and keep members involved and informed on submissions to Government. The head office is in Melbourne.

Australian Stock Exchange (ASX)
The national organisation for dealing in shares, bonds and certain other securities. The Australian Stock Exchange Limited commenced operations in 1987, replacing the previous State-based exchanges.

Authorised Capital
The maximum number of shares, valued at their par value, which a company is permitted to issue under its rules. (See also Issued Capital).

Authorised Dealers
A select group of companies which make up the 'official' short term money market in Australia. Authorised dealers are utilised by the Reserve Bank of Australia for investment of short term cash surpluses and to stimulate trade in government securities.

Authorised Foreign Exchange Dealers
Organisations granted a general authority by the Government to buy and sell foreign currency in Australia under the Banking (Foreign Exchange) Regulations.

Authorised Investments
The investments which a pooled investment fund is permitted to make, eg. under the fund's Trust Deed.

Automatic Exercise
The exercise by the clearing house of an in-the-money option at expiration, unless the holder of the option has submitted specific instructions to the contrary.

Average Price
The mean, or average, price obtained in the purchase or sale of a block of securities.

Average Rate Option
An option structured in such a way as to allow traders to hedge their daily exposures using a single contract which covers the entire period of that exposure.

Average Weekly Earnings (AWE)
A measure of wage and salary levels of employees in Australia, published monthly by the Australian Bureau of Statistics. AWE is one of the key measures used by economists to assess the state of the economy, particularly to gauge the overall level of activity and potential inflationary influences. (See also Average Weekly Ordinary Time Earnings).

Average Weekly Ordinary Time Earnings (AWOTE)
Similar to Average Weekly Earnings except that overtime earnings are excluded, making it a less volatile measure in the short term but a less accurate measure in the long term.

Averaging Up or Down
The practice of purchasing the same security at various price levels, thereby arriving at a higher or lower average cost.

Award
An industrial agreement between employers and employees, ratified by a State or Commonwealth Industrial Tribunal, setting out salary levels and terms and conditions of employment.

Award Superannuation
Superannuation entitlements which are paid to an employee pursuant to an industrial award. (See also Industry Funds).

AWE
Abbreviation for Average Weekly Earnings.

AWOTE
Abbreviation for Average Weekly Ordinary Time Earnings.

A, B, C, D, E, F, G, H, I, J, K, L, M, N, O, P, Q, R, S, T, U, V, W, X, Y, Z.