WASATCH FUNDS - Curian Clearing

WASATCH FUNDS MANAGEMENT DISCUSSIONS — Definitions of Financial Terms
MARCH 31, 2015 (UNAUDITED)
The Arab Spring was a series of antigovernment protests
and demonstrations across the Middle East and North Africa
that commenced in 2010.
An asset-backed security is backed by a loan, lease or
receivables against assets other than real estate and
mortgage-backed securities. For investors, asset-backed
securities are an alternative to investing in corporate debt.
The “cloud” is the Internet. Cloud-computing is a model
for delivering information technology services in which
resources are retrieved from the Internet through web-based
tools and applications, rather than from a direct connection
to a server.
A corporate bond is a debt security issued by a corporation
for the purpose of raising money to expand its business.
Earnings growth is a measure of growth in a company’s
net income over a specific period, often one year.
Earnings-per-share or EPS is the portion of a company’s
profit allocated to each outstanding share of common stock.
EPS growth rates help investors identify companies that are
increasing or decreasing in profitability.
Effective duration is a measure of the responsiveness of a
bond’s price to market interest rate changes. For example, if
the interest rate increased 1%, a bond with an effective duration
of five years would experience a decline in price of 5%.
The federal funds rate is the interest rate at which private
depository institutions (mostly banks) lend balances (federal
funds) at the Federal Reserve to other depository institutions,
usually overnight. It is the interest rate banks charge each
other for loans.
A forward currency contract is a binding contract in the
foreign exchange market that locks in the exchange rate for
the purchase or sale of a currency on a future date. A currency
forward is essentially a hedging tool that does not
involve any upfront payment.
The Great Recession was the steep decline in economic
activity during the late 2000s, which is generally considered
the largest downturn since the Great Depression. The term
“Great Recession” applies to the U.S. recession, which officially
lasted from December 2007 to June 2009, and the
ensuing global recession in 2009. The economic slump
began when the bubble in the U.S. housing market burst and
large amounts of mortgage-backed securities and derivatives
lost significant value.
Gross domestic product (GDP) is a basic measure of a
country’s economic performance and is the market value of
all final goods and services made within the borders of a
country in a year.
An initial public offering (IPO) is a company’s first sale of
stock to the public.
The price-to-earnings (P/E) multiple, also known as the
P/E ratio, is the price of a stock divided by its earnings
per share.
A private investment in public equity, often called a PIPE
deal, involves the selling of publicly traded common shares
or some form of preferred stock or convertible security to
private investors. It is an allocation of shares in a public
company not through a public offering in a stock exchange.
Quantitative easing is a government monetary policy used
to increase the money supply by buying government
securities or other securities from the market. Quantitative
easing increases the money supply by flooding financial
institutions with capital in an effort to promote increased
lending and liquidity.
Return on assets (ROA) measures a company’s profitability
by showing how many dollars of earnings a company
derives from each dollar of assets it controls.
Return on equity (ROE) measures a company’s efficiency
at generating profits from shareholders’ equity.
The S&P 500 Index includes 500 of the United States’
largest stocks from a broad variety of industries. The Index is
unmanaged but is a commonly used measure of common
stock total return performance.
Valuation is the process of determining the current worth
of an asset or company.
A warrant is a certificate, usually issued along with a bond
or preferred stock, entitling the holder to buy a specific
amount of a security at a specific price, usually above the
current market price at the time of issuance, for an extended
period, which can be anywhere from a few years to forever.
If the price of the security rises above the warrant’s exercise
price, the investor can buy the security at the warrant’s
exercise price and resell it for a profit. Otherwise, the warrant
will simply expire or remain unused. A warrant is listed
on an options exchange and trades independently of the
security with which it was issued.
The World Bank is a collection of international organizations
that aid countries in their process of economic
development with loans, advice and research. It was founded
in the 1940s to aid Western European countries after World
War II with capital.
The World Bank’s Ease of Doing Business Index ranks
economies from 1 to 189, with first place being the best. A
high ranking (a low numerical rank) means the regulatory
environment in a country is conducive to business operation.
The index averages the country’s percentile rankings
on 10 topics covered in the World Bank’s Doing Business.
The ranking on each topic is the simple average of the percentile
rankings on its component indicators.
The yield curve is a line on a graph that plots the interest
rates, at a set point in time, of bonds having equal credit
quality, but differing maturity dates. The most frequently
reported yield curve compares three-month, two-year, fiveyear
and 30-year U.S. Treasury securities. This yield curve is
used as a benchmark for other interest rates, such as mortgage
rates or bank lending rates. The curve is also used to
predict changes in economic output and growth.
Pertaining to the use of MSCI information. Source: MSCI.
MSCI makes no express or implied warranties or representations
and shall have no liability whatsoever with respect to
any MSCI data contained herein. The MSCI data may not be
further redistributed or used to create indices or financial
products. This report is not approved or produced by MSCI.
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