GLOSSARY
I | J | L

I

IFC Global Emerging Markets Index

Index of the most liquid stocks in emerging markets according to the World Bank. Market capitalization must total more than US$50 million. The index is now owned by Standard & Poors.

Immediate payment annuity

Contract generally sold by a life insurance company with a payout plan that begins immediately for the beneficiary or annuitant. The contract is bought with a single lump-sum payment.

Income fund

Mutual fund that invests primarily in fixed-income securities, such as bonds, mortgage-backed securities and preferred shares. The fund's main objective is to generate income while preserving capital.

Income statement

Financial statement showing a corporation's revenues and expenses that result in a profit or loss for a given period.

Index

Statistical measurement of a securities exchange (market index) or of the economy based on the return on shares or other components. Examples include the S&P/TSX index (formerly the TSE 300), the S&P 500 index and the consumer price index.

Index fund

Mutual fund whose portfolio matches that of a particular market index. The fund's objective is to mirror the general movement of the market where the fund invests its assets.

Inflation

General and sustained increase in the average price level of goods and services in the economy. In Canada, the consumer price index is generally used to measure inflation.

Initial public offering (IPO)

A corporation's first offering of stock on the market when it goes public.

Insider

A director, manager or any other person who has access to confidential information about the corporation as well as any natural or legal person that holds more than 10% of the voting shares in a corporation.

Insurance policy - universal life

Temporary life insurance policy that can be renewed each year and that includes both an insurance and an investment component. The investment component consists of investing excess premiums to generate a return for the insured.

Interest-rate spread

Difference between the interest rate a financial institution pays on deposits and the higher rate it charges on loans.

International equity fund

Mutual fund that invests in one or several stock markets outside North America and seeks capital appreciation while protecting investments against a lower Canadian dollar.

Interest

Payment made to the lender by the borrower for the use of money. A business corporation pays interest to its bondholders.

Intrinsic value

Difference between the strike price or exercise price of an option or a subscription warrant and the market value of the underlying security.

Investment horizon

The duration of your investments.

Investment adviser (manager)

Financial adviser in respect of a mutual fund; may also be a mutual fund manager.

Investment objective

A mutual fund's investment objective is always presented in its simplified prospectus. The investment objective states whether the fund is focusing on growth, protection of capital, interest income, etc.

Investment company

Organization that uses its capital to buy securities in other companies. There are two principal types: closed-end investment companies and mutual fund companies, which in turn are divided into two categories based on whether they are incorporated or a trust, namely open-end investment companies and mutual funds. Shares in closed-end investment companies can easily be traded on the open market like any other stock. Mutual fund companies sell their own shares to investors and are not listed on an exchange. They issue more units as demand increases.

Investment Funds Institute of Canada (IFIC)

Professional association set up to serve the members of the investment funds industry, cooperate with regulatory agencies and protect the interests of mutual fund investors.

Investment policy (management mandate)

Agreement between a client and the portfolio investment adviser (manager), which includes guidelines for the adviser.

Investment strategy

The strategy provided by mutual fund companies that outlines how a manager will reach the fund's objectives.

Investor (individual investor)

Person who seeks to minimize risk, in contrast to a speculator, who is willing to take a calculated risk in the hope of making above-average returns, and a gambler, who accepts even greater risks. The term "investor" is generally used to refer to persons who have a significant amount of money to invest or large corporations, while "individual investor" refers to small investors.

Issued capital

Outstanding capital stock of a corporation sold in the form of shares. The number of shares can be equal to or less than the number which the corporation is authorized to issue.

J

J.P. Morgan Global Bond Index

Index that measures the performance of the largest government bond markets in industrialized countries.

L

Lehman Brothers 3-month T-Bill Index

This index represents the average Treasury bill rates for each previous quarter, adjusted based on the equivalent bond return (money market and short-term instruments). The index generally plots the short-term risk-free rate.

Lehman Brothers Aggregate Bond Index

Market value-weighted U.S. index of fixed-rate senior debt instruments such as government and corporate bonds and asset-backed and mortgage-backed securities with maturities of at least one year.

Letter of intent

Agreement by which an individual investor undertakes to carry out a series of mutual fund purchases in exchange for lower acquisition fees.

Leverage

Enhancing return on an investment with borrowed funds, margin accounts or securities that require payment of only a portion of their value (for example, options, subscription rights or subscription warrants).

Liability

A corporation's overall debts and expenses in the form of credit balances, loans, mortgages and long-term debts.

Life annuity

Annuity that makes a guaranteed payment for the rest of the life of the annuitant.

Life expectancy adjusted withdrawal plan

Plan offered by mutual fund companies whereby an investor's assets are returned in total by the end of the plan in the form of maximum periodic payments during the planholder's expected lifetime.

Liquidity

1.   The capacity of a market for a particular security to absorb normal levels of buying and selling without wide fluctuations in price.
2.   A corporation's cash flow position.
3.   Cash or securities that can be converted to cash that make up a company's cash flow position.

Long-term bond

Bond with a maturity of over 10 years.

Long-term debt (consolidated)

All of a corporation's debt obligations due in a year or more.

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