Guide to Analysing Companies

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PENSION
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Pension fund
A fund set up by a company or other organisation to manage
the savings of employees and to pay the pension benefits to
which these savings or contractual obligations entitle them.
Some pension funds, called defined contribution pen-
sions, guarantee a minimum amount to former employees ir-
respective of the investment climate and the movement of
stockmarkets; others, called defined benefit pensions,
place the investment risk squarely on the (former) employee.
So if there is not enough in the pot, the beneficiary suffers.
Pension funds are among the largest investors in the world’s
stockmarkets but have traditionally kept a low profile in the
affairs of the companies whose shares they own. Following
the spate of scandals and corporate excess at the turn of the 21st
century, pension funds are taking a closer interest in corporate
governance.
PEP
Short for Personal Equity Plan, a scheme introduced by the
UK government in 1987 to encourage individuals to accumu-
late savings and invest more in the stockmarket. In 1999,
peps were more or less replaced by isas (Individual Savings
Accounts).
P/E ratio
See price/earnings ratio.
Performance bond
A guarantee from a bank to an importer (often provided by
the exporter’s bank) that the exporter will fulfil a contract
according to its terms and conditions. Performance bonds are
often used in the construction industry when the buyer wants
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to ensure that a contractor completes a project on time and as
promised. Failure to comply with the terms of the contract gives
the buyer some degree of compensation for the delay and/or
the failure to meet the specifications.