M-P

The Investment Research Partnership

M-P

M N O P

Macroeconomics	The study of how the aggregation of decisions taken in individual markets determine variables such as national income, employment and inflation. Macroeconomics is also concerned with explaining he relationship between these variables, their rates of change over time and the impact of monetary and fiscal policy on the general level of economic activity.

Mandatory Offer	A provision of the City Code that requires a formal bid to be made for a company's ordinary share capital once 30% of that company's voting capital is held by the highest bidder. A mandatory bid must be made at a price at least equal to the highest price paid by the bidder for the target company's shares over the last 12 months.

Market capitalisation	The total value of a company's issued shares represented by the number of issued shares multiplied by the share price.

Market maker	A securities dealing firm which “makes a book” (I.E. quotes two-way prices) in a security.

Market Timing	An investment approach employed to exploit pricing anomalies in those securities markets that are believed to be subject to mispricing by utilising fundamental and/or technical analysis to assist in the forecasting of future events and the timing of purchases and sales of securities. Also known as Active Management .

Maximum Loss (Maximum Drawdown)	The Maximum Loss or Drawdown represents the highest amount of loss during the investment period being analysed. This includes temporary up periods.

MD	*Modified Duration* - a measure of the sensitivity of a bond's price to changes in its yield. Modified duration approximates a bond's convexity.

Median	A measure of central tendency established by the middle value within an ordered distribution containing an odd number of observed values of the arithmetic mean of the middle two values in an ordered distribution containing an even number of values.

Member Firm	A firm that is a member of a UK Stock Exchange or UK Cleaning House.

Memorandum of Association	The legal document that principally defines a company's powers or objects and its relationship with the outside world. The Memorandum also details the number and nominal value of shares the company is authorized to issue and has issued.

Microeconomics	Microeconomics is principally concerned with analyisng the allocation of scarce resources within an economic system. That is, microeconomics is the study of the decisions made by individuals and firms in particular markets and how these interactions determine the relative prices and quantities of factors of production, goods and services demanded and supplied.

Mid price	The price half-way between bid and offer price. Usually the prices quoted in the press are these average or mid prices.

Mode	A measure of central tendency established by the value or values that occur most frequently within a data distribution.

Monetary Policy	The setting of short term interest rates by a central bank in order to manage domestic demand and achieve price stability in the economy. Monetary policy is also known as Stabilisation Policy.

MPC	*Monetary Policy Committee* - a body of nine individuals who set UK interest rates, independently of HM Treasury. Their objective is to deliver price stability (as defined by the government's inflation target).

MPT	*Modern Portfolio Theory* - the proposition that investors will only choose to hold those diversified, or efficient, portfolios that lie on the efficient frontier.

MWR	Money Weighted Rate of Return - the internal rate of return that equates the value of a portfolio at the start of an investment period plus the net new capital invested during the investment period with the value of the portfolio at the end of this period. The MWR, therefore, measures the fund growth resulting from both the underlying performance of the portfolio and the size and timing of cash flows to and from the fund over this period.

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NAPF	*National Association of Pension Funds* - the trade body that represents the interests of occupational pensions scheme providers.

NASDAQ	National Association of Securities Dealers Automated Quotation System - The second major US stock market, NASDAQ specialises in technology shares. The NASDAQ composite index is weighted by market capitalisation unlike the Dow Jones index.

National Debt	A government's total outstanding borrowing result from financing successive budget deficits, mainly through the issue of government backed securities.

NAV	Net Asset Value - The total value of the constituents of a unit trust, investment trust, mutual fund or any company after all the liabilities have been accounted for.

Negotiable Security	A security whose ownership can pass freely from one party to another. Negotiable securities are therefore tradable

New Issue	A new issue of ordinary shares whether made by a offer for sale, an offer for subscription or a placing. Also known as an Initial Public Offering (IPO).

Nominal Value	The face of par value of a security. the nominal value

NPV	*Net Present Value* - the result of subtracting the discounted, or present, value of a project's expected cash outflows from the present value of its expected cash inflows.

NRY	*Net Redemption Yield* - the annual compound return from holding a bond to maturity taking account of both the coupon payments net of income tax and the capital gain or loss to maturity.

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OEIC	*Open-Ended Investment Company* – a structural hybrid between UK unit trust and investment trust. Similar in structure and requirement of a UCITS.

OFEX	A market for unquoted companies in the early stages of development. OFEX is short for off exchange.

Offshore fund	An investment scheme in which the fund is legally based outside the home country of the individual investors. A fund might be established offshore for tax reasons or to avoid legal or regulatory restrictions.

Option	The right (but not the obligation) to buy or sell securities at a fixed price within a specified period.

Ordinary shares	The most common form of share. Shareholders are owners of the company and enjoy dividends and other benefits as a result of the company's progress.

Over The Counter Derivatives	Derivatives that are not traded on a derivatives exchange owing to their non-standardised contract specifications.

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Par	The nominal value of a security. In bonds, usually 100.

Pari Passu	Of equal ranking. New Ordinary Shares issued under a rights issue, for instance, rank pari passu with the company's existing Ordinary Shares.

Partly paid	A listed share where there is still a call due as part of the flotation procedure. Particularly common with large new issues such as privatisations.

Passive Management	A investment approach employed in those securities markets that are believed to be price efficient. The term also extends to passive bond management techniques collectively known as Immunisation.

PIBS	*Permanent Interest Bearing Securities* - irredeemable Fixed Interest Securities issued by mutual building societies. Known as Perpetual Subordinated Bonds (PSBs) if the building society demutualises.

Portfolio Theory	Portfolio Theory The proposition that investors will only choose to hold those diversified, or efficient, portfolios that lie on the efficient frontier. Also known as Modern Portfolio Theory.

POTAM	*Panel on Takeovers and Mergers* - the non-statutory body that overseas corporate takeovers and mergers by applying a non-statatory takeover code to the entire process, known as the City Code.

PPP	Purchasing Power Parity - the nominal exchange rate between two countries that reflects the difference in their respective rates of inflation.

Pre-Emption Rights	The rights accorded to ordinary shareholders under company law to subscribe for new ordinary shares issued by the company, in which they have the shareholding, for cash before the shares are offered to outside investors.

Preference shares	Shares which rank after interest claims of debenture and loan stock, and before dividend rights of ordinary shares.

Premium	The amount of cash paid by the holder of an option to the writer in exchange for conferring a right. Also the difference in the spot and forward exchange rate that arises when interest rates in the base currency are higher than those in the quoted currency.

Price/earnings ratio	A share's price divided by its earnings. A prospective p/e ratio is based on the forecast of the next annual earnings to be published.

Primary Market	The market for New Issues or Initial Public Offerings (IPOs).

Prospectus	Document giving details that a company is required to make public at the time of a new issue of shares.

Provisional Allotment Letter	That which is sent to those shareholders who are entitled to participate in a rights issue. The letter details the shareholder's existing shareholding, their rights over the new shares allotted and the date(s) by which they must act.

Proxy	A person empowered by a shareholder to vote on his behalf at a company meeting.

PSNCR	Public Sector Net Requirement - the extent to which the Uk government needs to borrow, mainly through the issue of government backed securities, to finance a budget deficit as a result of its spending exceeding tax revenue for the fiscal year.

Put option	The right, but not the obligation, to sell a security at a predetermined price and date.

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