Glossary Terms

Annual Report: A financial report sent yearly to a publicly held firm's shareholders. This report must be audited by independent auditors.
Back-end load: A sales charge levied when mutual fund units are redeemed.

Balanced fund: A mutual fund which has an investment policy of "balancing" its portfolio generally by including bonds and shares in varying proportions influenced by the fund's investment outlook. 

Bond fund: A mutual fund whose portfolio consists primarily of bonds. 

Book value: The value of net assets that belong to a company's shareholders, as stated on the balance sheet.

Distributions: Payments to investors by a mutual fund from income or from profit realized from sales of securities. 

Diversification: The investment in a number of different securities. This reduces the risks inherent in investing. Diversification may be among types of securities, companies, industries or geographic locations. 

Dividend: A per-share payment designated by a company's board of directors to be distributed among shareholders. For preferred shares, it is generally a fixed amount. For common shares, the dividend varies with the fortunes of the company and the amount of cash on hand. It may be omitted if business is poor or the directors withhold earnings to invest in plant and equipment. 

Dividend fund: A mutual fund that invests in common shares of senior Canadian corporations with a history of regular dividend payments at above average rates, as well as preferred shares. 

Dollar cost averaging: A principle of investing which entails the use of equal amounts for investment at regular intervals in the hope of reducing average share cost by acquiring more shares in periods of lower securities prices and fewer shares in periods of higher securities prices.

Equity fund: A mutual fund whose portfolio consists primarily of common stocks

Front-end load: A sales charge levied on the purchase o mutual fund units.

Income fund: A Mutual Fund that invest primarily in fixed-income securities such as bonds, mortgages and preferred shares. Their primary objective is to produce income for investors, while preserving capital.
Index fund: A mutual fund that matches its portfolio to that of a specific financial market index, with the objective of duplicating the general performance of the market in which it invests. 

Interest: Payments made by a borrower to a lender for the use of the lender's money. A corporation pays interest on bonds to its bondholders.

International fund: A mutual fund that invests in securities of a number of countries. 

Investment fund: A term generally interchangeable with "mutual fund." 

Investment Funds Institute of Canada (IFIC): The mutual fund industry trade association set up to serve its members, co-operate with regulatory bodies, and protect the interests of the investing public that use mutual funds as a medium for their investments.

Leverage: The financial advantage of an investment that controls property of greater value than the cash invested. Leverage is usually achieved through the use of borrowed money.

Liquidity: Refers to the ease with which an investment may be converted to cash at a reasonable price. 

Load: Commissions charged to holders of mutual fund units. (See sales charge.)

Management expense ratio: A measure of the total costs of operating a fund as a percentage of average total assets. 

Management fee: The sum paid to the investment company's adviser or manager for supervising its portfolio and administering its operations. 

Market price: In the case of a security, market price is usually considered the last reported price at which the stock or bond is sold.

Money market fund: A type of mutual fund that invests primarily in treasury bills and other low-risk, short-term investments. 

Mortgage fund: A mutual fund that invests in mortgages. Portfolios of mortgage funds usually consist of first mortgages on Canadian residential property, although some funds also invest in commercial mortgages. 

Mutual fund: An investment entity that pools shareholder or unit holder funds and invests in various securities. The units or shares are redeemable by the fund on demand by the investor. The value of the underlying assets of the fund influences the current price of units.

Net asset value: The value of all the holdings of a mutual fund, less the fund's liabilities. 

Net asset value per share: Net asset value of a mutual fund divided by the number of shares or units outstanding. This represents the base value of a share of unit of a fund and is commonly abbreviated to NAVPS. 

No-load fund: A mutual fund that does not charge a fee for buying or selling its shares.

Open-end fund: An open-end mutual fund continuously issues and redeems units, so the number of units outstanding varies from day to day. Most mutual funds are open-ended.

Prospectus: The document by which a corporation or other legal entity offers a new issue of securities to the public.

Real estate fund: A mutual fund that invests primarily in residential and/or commercial real estate to produce income and capital gains for its unit holders. 

Real estate investment trust: A closed-end investment company that specializes in real estate or mortgage investments.
Registered Education Savings Plan (RESP): A plan that enables a contributor, on a tax deferral basis, to accumulate assets on behalf of a beneficiary to pay for a post-secondary education. 

Registered Retirement Income Fund (RRIF): A maturity option available for RRSP assets to provide a stream of income at retirement. 

Registered Retirement Savings Plan (RRSP): A retirement savings plan to hold amounts deducted from taxable income, within certain limits, in a tax deferred state. There are various investment options and a tax deferral on investment income and gains available to individuals to and including 71 years of age, but must be collapsed by the end of the year in which the holder turns 71 years of age.

Sales charge: In the case of mutual funds, these are commissions charged to holder of fund units, usually based on the purchase or redemption price. Sales charges are also known as "loads." 

Simplified prospectus: An abbreviated and simplified prospectus distributed by mutual funds to purchasers and potential purchasers of units or shares. 

Specialty fund: A mutual fund that concentrates its investments on a specific industrial or economic sector or a defined geographical area.

Systematic withdrawal plan (SWP): Plans offered by mutual fund companies that allow unit holders to receive payment from their investment at regular intervals.

Unit trust: An unincorporated fund whose organizational structure permits the conduit treatment of income realized by the fund.

Voluntary accumulation plan (Also known as Pre-authorized chequing plan, or PAC): A plan offered by mutual fund companies whereby an investor agrees to invest a predetermined amount on a regular basis.


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