APPENDIX III Glossary

Abandonment An application for trade-mark or other registration may be considered abandoned if the applicant does not take steps to complete the process.

Ability to Pay (Ability to Service) A borrower’s ability to meet principal and interest payments on long-term obligations out of earnings.

Abstract A written, condensed history of title to a parcel of real property, recorded in a land registry office.

Acceleration Clause A provision (normally present in a debenture agreement, mortgage or other contract) that the unpaid balance is to become due and payable if specified events of default should occur. Such events often include failure to meet interest, principal or sinking fund payments; insolvency; and nonpayment of taxes on mortgaged property.

Acceptance An obligation by a bank to pay on maturity the face amount of a bill of exchange, normally covering the sale of goods.

Acceptance Fee At issue of a banker’s acceptance, a deduction for fees at the quoted rate is made by the bank, calculated on a per annum basis for the term of the acceptance at face value.

Acceptance Paper A colloquial term for short-term promissory notes issued by sales finance companies to fund loans to consumers for cars, appliances and other hard consumer goods.

Accepting / Stamping The act of placing a bank’s “guarantee” on the form of a banker’s acceptance prior to its sale.

Accredited Investor An individual, financial institution or financial entity which has defined specialized invest- ment knowledge and financial strength and, therefore, meets established U.S. Securities and Exchange Commission guidelines for exempt purchase of securities.

Accrued Dividends Dividends which have accumulated on a stock since the last payment.

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Accrued Interest The amount of interest accumulated since the last interest payment date.

Acid Test Ratio A simple ratio of a company’s liquid assets to current liabilities. Such assets include cash, marketable securities and accounts receivable.

Acquisition The purchase by a company of part, or all, of another commercial operation.

Across the Board Movement in the stock market that affects almost all stocks in the same direction. When the market moves up across the board, almost every stock increases in price.

Acting in Concert Two or more investors working together to achieve the same goal. An example occurs when all buy shares in a company they want to take over.

Ad Valorem Term meaning “according to the value” and referring to a way of assessing duties or taxes on goods or property. As an example, ad valorem duty assessment is based on value of the imported item rather than on its weight or quantity.

Adjustable Rate Mortgage A mortgage agreement between a financial institution and a borrower stipulating pre- determined adjustments of the interest rate at specified intervals. Mortgage payments are tied to an index outside the control of the financial institution, such as the interest rates on treasury bills or the average national mortgage rate.

Administrators The term used to generally describe the securities regulatory authorities in Canada.

Advanced Internal Ratings Based Approach A measurement of credit risk under Basel II that uses risk weights determined from internal risk parameters, including probability of default, loss given default and exposure at default.

Advertisement Trade-Mark Publication of a trade-mark application in the Trade-marks Journal. Details are published to allow opportunity for challenges (opposition) to the application.

Advice Letter A letter required by a securities commission from the company’s auditors to advise them of the status of the auditors’ examination of the financial statements included in the pre- liminary prospectus.

Advisory Services Programs intended to help businesses solve management problems or improve their level of managerial expertise. Advisory programs take many forms, such as consulting services, management education courses and private-sector advice.

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After Acquired Clause A clause in a mortgage or loan agreement providing that any additional mortgageable property acquired by the borrower after the mortgage is signed will be additional security for the obligation.

After Sight Bill of exchange drawn after sight is payable when it has been accepted and the acceptor has written an acceptance date on the bill.

Aftermarket The market in which securities are traded after the initial allocation to subscribers is known.

Agent A market intermediary who assists in the structuring of private equity or other financing transactions.

Air Pocket Stock Stock that falls sharply, usually in the wake of such negative news as unexpected poor earnings. As shareholders rush to sell and few buyers can be found, the price plunges dramatically (like an airplane hitting an air pocket).

Alligator Spread Spread in the options market that “eats the investor alive” with substantial commission costs. The term is used when a broker arranges puts and calls that generate so much com- mission the client is unlikely to turn a profit, even if the markets move as contemplated.

Allowance for Credit Losses The amount deemed adequate by management to absorb anticipated credit-related losses in the portfolio of loans, acceptances, guarantees, letters of credit and deposits with other banks. The allowance is increased by specific provisions, the country risk provision and general provisions. It is reduced by write-offs (net of recoveries) and by losses realized on sales and exchanges of less developed country (LDC) loans.

Allowance of Trade-Mark Acknowledgement by the Trade-marks Office that an application is eligible for registration. The applicant receives a Notice of Allowance (not the same as Certificate of Registration).

American Depositary Receipt The original stock certificate of a foreign security may be registered and held in safekeep- ing in the name of an American trust company or other U.S. depository institution called a “depositary.” The depositary then issues receipts against this stock and these receipts are traded as American depositary receipts. The purpose of this process is to facilitate faster transfers of ownership of foreign securities than would otherwise be possible.

American Option An option which may be exercised at any time during the option period. Most foreign currency options are of this form.

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Amortization The allocation of amounts based on equal monthly, quarterly or annual payments in time. Can refer to the amortization of debt or depreciation of assets.

Amstel Club Grouping of finance houses from 15 European countries which make reciprocal arrange- ments to finance trade, especially for the smaller exporter. The official title is Amstel Finance International AG.

Angels Private individuals with capital to invest in business enterprises.

Annual Cleanup A provision normally included in a line of credit agreement. It requires a borrower to “clean-up” its loans (have a zero loan balance) for a specified time during one or more periods a year.

Annual Information Form (AIF) A public company disclosure document which contains information specified by law, and is supplemental to the annual financial statements. Investors do not have to be given a copy of the annual information form (AIF) but it is to be made available on request.

Annual Report A document which includes the annual financial statements and report on operations issued by a company to its shareholders.

Annuity Form of contract sold by life insurance companies that guarantees a fixed or variable payment to the annuitant at some future time, usually retirement.

Anticipated Holding Period Time during which a limited partnership expects to hold onto an asset. In the prospectus for a real estate limited partnership, for instance, a sponsor will typically say that the anticipated holding period for a particular property is five to seven years. At the end of that time the property is sold, and the capital accumulated is usually disbursed to the limited partners in one accounting.

Antitrust Laws U.S. federal legislation designed to prevent monopolies and restraint of trade.

Appraised Value An estimate of the current market value used in evaluating the assets pledged as security for a loan.

Arab Monetary Fund Based in Abu Dhabi and formed in 1977 by the Economic Council of Arab States, members are Jordan, United Arab Emirates, Bahrain, Tunisia, Algeria, Djibouti, Saudi Arabia, Sudan, Syria, Somalia, Iraq, Oman, Palestine, Qatar, Kuwait, Lebanon, Libya, Egypt, Morocco, Mauritania, Yemen, Comoros.

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Arbitrage The simultaneous purchase and sale of a security, commodity or foreign exchange on differ- ent exchanges to profit from price or interest rate differences. There will be a flow of funds between two different financial centres if the difference covers the cost of the currency exchange risk.

Archangel An individual who marshals informal capital by establishing syndicates of other informal angel investors.

Arithmetic Mean Simple average obtained by dividing the sum of two or more items by the number of items.

Arrearage Amount of any past due obligation.

Arrears Unpaid dividends that are due on cumulative preferred stock.

Asian Currency Unit (ACU) Separate accounting unit used in Singapore by selected banks licensed to deal in non- resident deposits.

Asian Dollar Bonds Similar to Eurobonds but centred in Singapore. The market emerged following the successful development of the Asian dollar market.

Asian Dollars U.S. Dollar bank deposits (similar to Eurordollars) that are normally held in Asia and traded outside the U.S. The market is based in Singapore.

Asked Price Price at which a security, commodity, etc. is offered for sale or the rate at which a loan is offered. The opposite is the bid price.

Assay The test of a metal for purity and the establishment of proportions of metals in ores or concentrates.

Asset-Backed Securities Bonds, notes or other securities backed by loan paper or accounts receivable originated by banks, credit card companies or other providers of credit and often “enhanced” by a bank letter of credit or by insurance coverage provided by an institution other than the issuer.

Asset Coverage Extent to which a company’s net assets cover a particular debt obligation, class of preferred stock or equity position.

Asset Mix The percentage of distribution of assets in a portfolio among the three major asset classes: cash, fixed income and equities.

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Asset Play Stock market term for a stock that is attractive because the current price does not reflect the value of the company’s assets.

Assets Under Administration Assets administered by a financial institution which are beneficially owned by clients. Services provided with respect to these assets are of an administrative nature, including safekeeping, collecting investment income, settling purchase and sale transactions, and record-keeping.

Assignment The sale of a commercial contract or security by one party to another, usually for a lump- sum payment.

At Call Money at call (i.e., immediately available).

At Par Nominal or face value of a share or security.

At Risk Exposed to the danger of loss. Investors in a limited partnership can claim tax deductions only if they can prove that there’s a chance of never realizing any profit and of losing their investment as well.

At Sight Describes a bill of exchange payable on presentation rather than on a specific date.

At-The-Money Option An option whose exercise rate equals the current market rate. Applying to both call and put options.

Attornment of Rent Taking of rents by mortgagee in possession to protect their rights in case of default by mortgagor.

Auction Market System by which securities are bought and sold through brokers on the securities exchanges, as distinguished from the over-the-counter market, where trades are negotiated.

Authorized Capital / Stock Maximum amount of all classes of shares (stocks) which a company is authorized to issue by its shareholders.

Automated Clearing House (ACH) A clearing house for settling of accounts between member banks accomplished through transfer of information via electronic equipment or magnetic tape. Through the ACH, banks can pass account debit activity without transferring paper instruments.

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Average Down Buying additional shares at a price lower than the original investment. The aim is to reduce unit cost.

Back-Door Listing A listing on a securities exchange resulting from a plan of acquisition, merger or consolidation in which an unlisted company acquires a listed one.

Back-To-Back Credit Credit opened by a finance house or bank on the strength of another credit for use in foreign trade. The foreign importer provides the finance house with the relevant documents, on the strength of which a credit is opened in favour of the exporter. These can then be used to back another credit for the exporter (i.e., the first credit backs the second).

Back-To-Back Loan Arrangement whereby a loan in the currency of one country is set against a loan in another country’s currency. It can be used to avoid or overcome exchange risks and controls.

Backwardation In futures terminology, the amount by which the quotation for the nearest delivery month exceeds that for a future delivery month. Also defined by COMEX as a market situation in which prices are progressively lower in the future delivery months. Opposite of “contango.”

Bail-Out Offering in which management and/or shareholders sell their shares of the company’s stock.

Balance of Payments The difference between a country’s international payments and receipts. It encompasses the current account and capital account transactions.

Balance of Trade Monetary record of a country’s net imports and exports of physical merchandise.

Balanced Fund A private equity fund strategy whereby a wide range of investment targets is pursued, as distinct from a specialized fund.

Balloon An extraordinarily large payment that comes due in some serial or sinking fund bond issues.

Bank Act The federal government legislation which governs the way banks operate in Canada.

Bank External System Support (BESS) A software system that handles electronic payment processing systems, including TELEX, CHIPS, SWIFT and FEDWIRE.

Bank for International Settlements (BIS) Profit making clearing agency based in Basle for central bank shareholder members in foreign exchange and Eurocurrency markets. The U.S. Federal Reserve Board (FRB) is not a member for technical reasons, and the U.S. shareholding is through Citibank. BIS acts as

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principal forum for routine meetings of central bank governors (always attended by an FRB member). Its financial accounts are denominated in Swiss gold francs. Dividends are paid annually in dollars at the day’s Zurich Swiss franc spot rate.

Bank of Canada Formed in 1934, the Bank of Canada is empowered by statute to regulate credit and currency in the best interests of the country.

Bank Rate The minimum rate at which the Bank of Canada makes advances of a short-term nature to the chartered banks, savings banks and investment dealers.

Banker’s Acceptances A bill of exchange, or draft, drawn by the borrower for payment on a specified date and accepted by a chartered bank. Upon acceptance, the bill becomes, in effect, a postdated certified cheque.

Banker’s Draft Draft payable on demand and drawn by or on behalf of the bank itself. It is regarded as cash and cannot be returned unpaid. Often used in international trade.

Banking Group The group of underwriters who assume the financial obligation of purchasing the under- written securities.

Bankruptcy A company becomes formally bankrupt following a court ruling that it is unable to meet its debts. The ruling may be sought either by the company concerned (voluntary liquidation) or by its creditors. In England and Canada, a receiver (trustee) is appointed by the court to manage and eventually realize the debtors’ assets on behalf of the creditors. Different rules and procedures are followed in other countries. A section of the U.S. 1978 Bankruptcy Reform Act known as Chapter 7 deals with liquidation. It provides for a court appointed interim trustee with broad powers and discretion to make management changes, arrange unsecured financing and generally operate the debtor business in such a way as to prevent loss. Only by filing an appropriate bond is the debtor able to regain possession from the trustee. Chapter 11 of the U.S. 1978 Bankruptcy Reform Act deals with reorganization. It provides that unless the court rules otherwise, the debtor remains in possession of the business and in control of its operation. Debtor and creditors are allowed considerable flexibility in working together to establish a solution to the insolvency.

Banque d’Affaires French investment bank similar to a British merchant bank. It has a much greater scope than a U.S. investment bank, providing a full range of international trading services.

Base Currency Currency against which exchange rates are normally quoted in a given centre or country (e.g., the U.S. dollar or U.K. sterling).

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Base Market Value Average market price of a group of securities at a given time. It is used as a basis of com- parison in plotting dollar or percentage changes for purposes of market indexing.

Base Period Particular time in the past used as the yardstick when measuring economic data.

Basis Point A measurement unit defined as one hundredth of a per cent. The basis point is expressed in dollars. For example, a return of 25 basis points means $25 were earned on each $10,000 of assets. Basis points are units in which interest / discount rates, fees, etc., are quoted: 1% equals 100 basis points.

Basket Clause A residual portion of an investment portfolio which may be invested in any form of securities at the sole discretion of the fund management.

Bear Market A market that experiences a period of falling prices, usually brought on by the anticipation of a declining economy. “Bearish” investors are pessimistic about the stock market.

Bearer Discount Form Banker’s acceptances and treasury bills are always issued at a discount from face value in bearer form. The difference between the price paid and the price received (par if held to maturity) is the interest income earned by the investor. The bid and offer yield is quoted as a percentage on a yield to maturity basis using a present value formula.

Bearer Person possessing a bill or note payable to bearer (i.e., ownership is presumed to be with the person bearing or holding the bill or note).

Bearer Form A security on which payments are made to the party that has physical possession of the security. There is no registered owner of the security.

Bell-Wether Security seen as an indicator of a market’s direction.

Beneficial Owner Person who enjoys the benefits of ownership even though title is in another name.

Berne Union Established in 1934 in Berne to study export credit insurance techniques, the full title is the International Union of Credit and Investment Insurers.

Best Efforts Agreement The agreement by the underwriter to sell, as agent for the company, as many of the securities offered as possible, subject to the number of securities qualified under a prospectus.

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Bid Undertaking to purchase at a specific price (e.g. the rate at which a dealer will buy or borrow a currency; the rate paid for a deposit or security; the price offered by a purchaser in the Eurobond secondary market).

Bid and Ask Quotation “Bid” represents the top price a prospective purchaser is willing to pay. “Ask” price is the lowest a seller will accept.

Bid Bond A bond in which an individual organization guarantees to pay a small percentage of the contract value (5%) in the event that the contract is not consummated.

Big Bang Deregulation of financial markets in London, England during 1986, including elimination of fixed brokerage charges on October 27, 1986.

Big Board New York Stock Exchange price display.

Bill of Exchange An unconditional order in writing addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay at a fixed future date a sum certain in money to the order of a specific person or to bearer.

Black-Scholes (also Black-Scholes Model) A widely used option pricing equation developed in 1973 by Fischer Black and Myron Scholes. Used to price OTC options, value option portfolios or evaluate option trading on exchanges.

Blind Pool Limited partnership or investment fund that does not specify the properties the general partner plans to acquire.

Block Trading Transaction of large stock lots, usually in excess of 10,000 shares among institutional buyers and sellers.

Blocked Accounts Bank accounts where payments cannot be freely made (e.g., accounts frozen for political reasons).

Blocked Currency Currency whose use is controlled by the government of issue. Such currency can only be used for purchases within the country.

Blowout Quick sale of all shares in a new offering of securities.

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Blue Chip Common stock of companies with proven management skill and expertise. Usually involves major companies with sound earnings and dividend records and above-average share per- formance. Extremely well-known and highly regarded corporations.

Blue Sky Laws Laws in various states and provinces enacted to protect the public against securities’ frauds. The term “blue skyed” is used to indicate that a new securities issue has been cleared by a Security Commission and may be distributed.

Board Lots Trading units which have been agreed upon by stock exchanges.

Boilerplate Standard legal language, often in fine print, used in most contracts, wills, indentures, prospectuses and other legal documents.

Bond Anticipatory Notes (BANs) Notes issued in the U.S. by states and municipalities to provide interim finance for projects to be funded by bond issues.

Bond Usually a fixed interest security under which the issuer contracts to pay the lender a fixed principal amount at a stated date in the future, and a series of interest payments, either semi-annually or annually. Interest payments may vary through the life of a bond. The issuer may be a government, municipal or corporate entity. Bonds maturing in less than five years are described as short term, between six and fifteen years as medium term and more than fifteen as long term. In the U.S., a bond is normally for more than 10 years.

Bond Indenture Legal document in the U.S. setting out the duties of the issuer and the rights of the holder.

Bond Market Primary or secondary market for government, municipal or corporate debt securities.

Bond Swap Simultaneous sale of one bond issue and purchase of another.

Bond Yield Rate of annual income return on a bond expressed as a percentage of its price. There are three types of yields — nominal, current and yield to maturity.

Book Value Total value of a corporation or of a corporate asset according to accounting records. Also known as net asset value. Book value per share is determined by dividing the number of issued shares into a company’s net assets.

Bootstrap Financing Small amounts of seed capital used in early stages of firm’s maturation.

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Bootstrapping Self-generated financing from current income or cash resources.

Bottom Fisher Investor who is on the lookout for stocks that have fallen to their bottom prices before turning up.

Bought Deal A new issue of securities, shares or bonds bought from the issuer by an investment dealer for resale to its clients.

Bourse French term for stock exchange, grain exchange or exchange dealing in other commodities. Also used to cover traders’ meetings.

Boutique Small, specialized brokerage firm that deals with a limited clientele and offers a limited product line.

Bracket Term used in the U.S. and Euromarkets to group the different categories of managers and underwriters of syndicated loans. The lead manager, co-managers, top underwriter, major underwriters, etc. are listed alphabetically within their respective brackets.

Brady Bonds Securities issued under the terms of the so-called “Brady Plan,” named after U.S. Treasury Secretary Nicholas Brady. Brady bonds, which may be secured in whole or in part by U.S. Treasury bonds, are issued by less-developed countries in exchange for loans payable to commercial banks.

Bretton Woods Site in New Hampshire, U.S., where an international conference was held in 1944 to work out rules for a post-war international monetary system. It resulted in the creation of the International Monetary Fund and the World Bank. The system was based on fixed exchange rates combined with temporary financing facilities to overcome crises. Devaluation was only allowed in the case of a fundamental disequilibrium in a country’s balance of payments.

Bridging / Bridge Loan A short term loan to cover the purchase or construction of an asset until permanent financing, frequently a previously arranged mortgage loan, can be drawn down against the completed asset.

Broadcast System of syndicating Eurocredits by offering widespread participation by telex / letter to potential lending institutions.

Broker An intermediary in the market who brings two parties together to make a deal, but who doesn’t take part in the deal and receives a commission for their efforts.

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Bucket Shop Unlawful or doubtful organization dealing unscrupulously in commodities or stocks.

Bull Market A market in which there is a prolonged rise in the price of stocks and bonds. Bull markets usually last a few months and are characterized by a high volume of trading. People who are “bullish” are optimistic about the future of the stock market.

Bulldog Bonds Sterling bonds issued by foreign borrowers.

Bullet Bond Bond, usually a Eurobond, which has no early redemption (i.e., is redeemed in full at maturity).

Bullion Precious metals in ingots, bars or wafers at least .995 pure.

Bullion Coins Term for contemporary coins minted in large numbers and marketed at a premium above the value of the gold content.

Business Cycle Recurrence of periods of expansion (recovery) and contraction (recession) in economic activity with effects on inflation, growth and employment.

Business Day A day on which a bank is open for business, excluding Saturday, Sunday and any other day that is declared a legal or statutory holiday or a day which Canadian chartered banks are not open for business in Canada.

Business Development Bank A Crown corporation that helps small and medium-sized businesses to get established and to expand and prosper. It offers financial lending and investment, and management services.

Business Plan A statement in words and numbers of the goals of a business and how and when the owner(s) propose to reach these goals. The business plan should also include a statement of the history of the business and of its owners.

Business Risk Sometimes referred to as an economic risk or operating risk, it is reflected in the variability of the firm’s earnings (earnings before interest and taxes).

Buyout The purchase of a business, often by current management, from the current owners.

Buyout Capital A specialized form of private equity characterized by risk investment in established private or public companies that are undergoing a fundamental change in operations or strategy.

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Buy-Sell A legal agreement between two or more shareholders setting out the conditions under which each may sell their shares. Such agreements may include “shot gun,” “piggy-back,” “right of first refusal” or similar clauses.

Buying Rate Rate at which a dealer or the principal market maker is willing to buy foreign currency.

Call Feature (Call Provision) Option on the part of the issuer in the U.S. to redeem a bond or other security issue prior to maturity at a pre-determined price.

Call Loan Commercial bank loan payable on demand by the lender and repayable at any time by the borrower.

Call Money Interest bearing deposits which are repayable at call (i.e., on demand). This covers both domestic money market and Euromarket funds. Also known as day-to-day money or demand money.

Call Option Option or contract giving the holder the right to buy a certain amount of stock or commodity futures at a specified price at a specific forward date or within a specified period. Calls are generally purchased by those who expect a price increase in the stock.

Call Price Price at which a bond issue can be called, usually at par or at a slight premium.

Call Rate Rate of interest payable on call money.

Canada Deposit Insurance Corporation A federal Crown corporation formed in 1967 to insure specified deposits in member financial institutions.

Canadian Bankers Association Professional industry association that provides information, research, advocacy, education and operational support services primarily to the banking industry.

Canadian Depository for Securities Limited (CDS) Agency responsible for the automatic processing and clearing of all securities transactions in Canada.

Canadian Payments Association This association, which is composed of several financial institutions and the Bank of Canada, operates a national clearing system for financial institution payments.

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Canadian Short-Term Money Market Broadly conceived, the market may be regarded as a reservoir of short-term funds which are efficiently mobilized and economically distributed to creditworthy financial and commercial institutions as well as to government bodies needing short-term accommodation. Borrowers and lenders of funds are brought together via telephone and telex through the trading rooms of banks and dealers all across Canada with each participant endeavouring to get the best deal consistent with their term and credit risk objectives.

Cap Table A popular name for a capitalization table.

Capacity An assessment of ability and willingness to repay a loan from anticipated future cash flow or other sources.

Capital Adequacy Ratio A ratio of total capital divided by risk-weighted assets and risk-weighted off-balance sheet items. A bank is expected to meet a minimum capital ratio of 8.0% unless a higher ratio has been specifically prescribed by the Superintendent of Financial Institutions.

Capital Commitment Resources flowing from individual, institutional and other external sources to private equity or venture capital funds.

Capital Flight Movement of large sums of money from one country to another to escape political or economic turmoil, or to seek higher rates of return.

Capital Investments Money used to purchase permanent fixed assets for a business, such as land, buildings or machinery. Also, money invested in a business on the understanding that it will be used to purchase permanent assets rather than to cover day-to-day operating expenses.

Capital Lease Lease that under Financial Accounting Standards must be reflected on a company’s balance sheet as an asset and corresponding liability. Generally, this applies to leases where the lessee acquires essentially all of the economic benefits and risks of the leased property.

Capital Ratios (Bank) The percentage of risk-adjusted assets and off-balance sheet financial instruments supported by capital of a bank. Tier I capital consists of common shareholders’ equity, non-cumulative preferred shares and non-controlling interest in subsidiaries, less goodwill. Tier II capital consists of other preferred shares and subordinated debentures at amortized values less investments in associated corporations. Total regulatory capital is the sum of Tier I and Tier II capital.

Capital Structure The mix of the various types of debt and equity capital maintained by a firm. The more debt capital a firm has in its capital structure, the more highly levered the firm is considered to be.

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Capital Turnover Annual sales divided by average stockholder equity (net worth).

Capital Under Management The total value of invested and uninvested capital resources in a private equity fund.

Capitalization The total amount of debt and equity issued by a company.

Capitalization Table Information in tabular form that shows the company’s capital structure and gives, for each class of securities (including short-term and long-term debt), the amount outstanding as of a specified date and the amount to be outstanding if all the securities being registered are sold. Though not required in a registration statement or prospectus, the table is commonly included in many offering documents.

Capped Floating Rate Notes A type of floating rate note which sets an upper limit on the borrower’s interest rate. The lender / investor forgoes the possibility of obtaining a return above the cap rate should market interest rates exceed the cap rate but, in return, receives higher-than-usual spreads over the base rate used.

Care and Maintenance Suspended mining operations because of a change of circumstances, such as lack of profitability.

Carry The cost of financing a position in a financial instrument. When the short-term interest rate is greater than the current return on the instrument, the carry is a negative one. If the financing cost is less than the return, it is a positive carry.

Cartel Group of businesses or nations that agree to influence prices by regulating production and marketing of a product.

Cash Cow Business that generates a continuing flow of cash. Such a business usually has well-established brand names whose familiarity stimulates repeated buying of the products.

Cash Cycle The period of time from the point a firm makes an outlay to purchase raw materials to the point cash is collected from the sale of the associated finished goods. The cash cycle repre- sents the amount of time the firm’s cash is tied up.

Cash Equivalents Instruments or investments of such high liquidity and safety that they are virtually as good as cash.

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Cash Flow Forecast An estimate of the timing and amount of money which will be coming in and going out of a business, usually on a month-by-month basis for the period of one or two years.

Cash Management The management of liquid securities so as to maximize the return and, at the same time, meet the payment of obligations that come due.

Cash Management Bill Very short-term U.S. treasury bills with one to twenty days maturity, designed to maintain balances until taxes are received.

Cash Ratio Ratio of cash and related assets to liabilities. In the case of a bank, the ratio of cash to total deposit liabilities.

Cash Reserves The ratio of bank cash to chartered bank reservable deposits.

Cash Turnover The number of times each year a firm’s cash is turned over. It can be calculated by dividing the firm’s cash cycle in days into the number of days in the year.

Central Bank Major regulatory bank in a nation’s monetary system, generally government controlled. Its role normally includes control of the credit system, note-issuance, supervision of commercial banks, management of exchange reserves and the national currency’s value as well as acting as the government’s banker. In Canada, it is the Bank of Canada; in the U.S., it is the Federal Reserve Board; in the U.K., it is the Bank of England.

Central Bank Intervention A pre-calculated action undertaken by a central bank to change the money supply so as to stabilize financial markets or move them in a desired direction.

Centrale de Livraison de Valeurs Mobiliers, Luxembourg (CEDEL) A computerized clearing system for Eurobonds.

Certificates of Deposit (CDs) CDs are instruments issued by banks, evidencing a time deposit made with the bank. The certificates are issued on an interest bearing or discounted basis, in registered or bearer form. In Canada, maturities of the deposit range from one day to five years for amounts of $5,000 and over. The certificates are generally non-transferable. In the U.S., the U.S. Dollar CDs range from one month to five years in term for amounts of $100,000 and over. The certificates are transferable resulting in an active secondary market. In the London Domestic Market, Sterling CDs range from 30 days to 5 years in term for amounts of 50,000 pounds and higher. Being negotiable, they trade in an active secondary market on a discount basis. In the Euromarket, Eurodollar CDs are issued for terms of 30 days to 5 years for amounts of $25,000 and over.

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Certification Marks Marks identifying goods or services meeting a defined standard (e.g., Woolmark on clothing or Watermark on paper).

Character An assessment of a business person’s dependability as a person.

Chattel Mortgage A charge over goods or equipment of a movable nature, as opposed to real estate.

Chicago Board of Trade A major commodities futures exchange specializing in grains, soybeans and soybean products. It also trades in plywood, silver, gold, treasury bond, 10 year treasury note and Government National Mortgage Association Certificate futures.

Churning Excessive trading in a client’s account with the sole purpose of earning commission income for a broker.

Class A and B Stock Class A stock is similar to a participating preferred share with a prior claim over Class B for a stated amount of dividends or assets or both but without voting rights. The Class B usually has voting rights but no priority as to dividends or assets.

Clearing Procedure through which a clearing house or association becomes buyer to each seller of a futures contract and seller to each buyer, and assumes responsibility for protecting buyers and sellers from financial loss by assuring performance on each contract. National system for clearing cheques.

Clearing Bank Member bank of a national cheque-clearing system.

Clearing House Adjunct to commodity / stock exchanges through which transactions executed on the floor are settled. Also charged with assuring the proper conduct of delivery procedures and the adequate financing of the trading.

Clearing House Interbank Payment System (CHIPS) CHIPS is a computerized clearing system used for international payments, located in New York.

Clearly Descriptive A word that clearly describes a feature of a product or service and, therefore, is not registrable as a trade-mark.

Close End of a trading session when last orders are executed.

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Closed End (Investment) Company Investment company with a fixed capital structure with a number of fixed shares outstanding which are traded in the secondary market and cannot be redeemed or increased.

Closed Mortgage A mortgage agreement which does not provide for prepayment prior to maturity. A lender may permit prepayment under certain circumstances but will levy a prepayment charge or indemnity for doing so.

Closely Held Corporation Corporation, most of whose voting stock is held by a few shareholders.

Code of Conduct — Banking Initiated by the Canadian Bankers Association, it is an agreement among the principal lending banks in Canada to communicate with their clients should they intend to change the client’s credit relationship in any significant way.

Co-Financing Finance jointly provided for a country by commercial banks and international financing institutions, such as the International Monetary Fund, World Bank or regional development banks. It is one way of effectively increasing the amount lent by international institutions. The banks are, thus, more willing to lend through the reassurances provided by the syndicate partners.

Co-Investment Two or more investors in a given transaction. Also known as syndication.

Co-Manager In securities issues, usually an invitee on an ad hoc basis, either by the lead manager or at the request of the issuer of the securities or guarantor. As a rule, co-managers make larger underwriting commitments than do syndicate participants.

Collateral An asset / security which is pledged to support / secure a loan, (e.g., a collateral mortgage on a house or a pledge of a bond taken as security by a bank to support a term or operating loan).

Collateral Mortgage A loan backed by a promissory note and the security of a mortgage on a property. The money borrowed may be used for the purchase of the property itself or for another purpose.

Collateral Trust Bond A bond secured by other securities, stocks or bonds, of companies controlled by the issuing company, or other securities, and which are deposited with a trustee.

Collateralized Debt Obligation Securities with multiple tranches that are issued by special purpose entities and collateral- ized by debt obligations, including bonds and loans. Each tranche offers a varying degree of risk and return so as to meet an investor’s demand and requirement.

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Comfort Letter A letter required by the securities commission from the company’s auditors which provides the commission with limited assurance on the unaudited financial statements included in a prospectus, based on the auditors’ review of those statements. The same term is used for the auditors’ letter to the underwriters reporting the results of performing specified procedures on financial information in the prospectus.

Comment (or Deficiency) Letter A letter from a securities commission listing the comments noted in its review of the preliminary prospectus. These comments must be cleared to the satisfaction of the com- mission’s staff before the final prospectus may be filed.

Commercial Bank Bank concentrating principally on short-term industrial and commercial lending. Typically, such an institution will offer a broad range of services to business and consumers, including current (chequing) accounts, commercial, consumer and mortgage loans.

Commercial Letter of Credit The U.S. term for a documentary letter of credit.

Commercial Mortgage-Backed Securities Securities created through the securitization of commercial mortgages.

Commercial Paper A money market instrument defined to be a short-term security maturing within nine months and used to raise funds for current transactions.

Commercial Pledge In Quebec, a form of security whereby machinery and equipment pertaining to a business are given as security for a loan to a business.

Commitment Fee Fee charged by lenders on the committed loan facility.

Commitments to Extend Credit Credit facilities available to clients either in the form of loans, banker’s acceptances and other on-balance sheet financing, or through off-balance sheet products, such as guarantees and letters of credit.

Committee on Uniform Security Identification Procedures (CUSIP) The trade-mark for a standard system of securities identification (i.e., CUSIP numbering system) and securities description (i.e., CUSIP descriptive system) that is being used in processing and recording securities transactions in North America.

Commodity A product used for commerce that is traded on an organized exchange.

Commodity Exchange (COMEX) A New York exchange trading futures contracts on gold and silver and option contracts on gold futures.

III-20 APPENDIX III | Glossary

Commodity-Indexed Warrants A warrant which offers the holder the right to purchase the underlying security at a ratio in relation to the price of a specified commodity.

Common Stock Securities which represent ownership in a corporation and carry voting privileges.

Company Buyback The redemption of private stock by the management of a portfolio company. This is a common exit mechanism for private equity and venture capital funds.

Compensation Balance Portion of a commercial loan, usually expressed as a percentage of the loan which the borrower is required to keep on deposit with the bank in lieu of other fees or charges.

Compensatory Financing International Monetary Fund facility providing short-term finance to compensate for fluctuations in a country’s export levels caused by circumstances largely outside a country’s control.

Competitive Devaluation Devaluation designed to gain a competitive advantage in export markets.

Concentrate Material that has been processed to increase the content of the contained metal or mineral relative to the contained waste.

Conditional Sales Contract Credit instrument which allows the vendor of the asset or product to retain legal title until the purchaser has made full payment.

Conditions The limits written into an agreement between a borrower and a lender. The limits specify exactly what each party is expected to do in exchange for the benefits each will receive.

Conformed Copy A copy of any legal instrument which is a copy of an original document, with all essential legal features except that it contains typed or printed signatures rather than manual signatures.

Conglomerate Corporation composed of companies in a variety of businesses. Conglomerates were popular in the 1960s when they were thought to provide better management and sounder financial backing and, therefore, generate more profit than small independent companies.

Consent A written statement signed by an accountant or other expert and filed with a registration statement, indicating that the accountant or other expert consents to the use of its report and/or name in the registration statement.

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Consent Letter A letter required under securities legislation when a solicitor, auditor, accountant, engineer, appraiser or other such expert is named as having prepared or certified part of a prospectus (or a report used in connection with the prospectus).

Consolidation Loan Loan that combines and refinances other loans or debt. It is normally an installment loan designed to reduce the dollar amount of monthly payments.

Consortium Group of companies formed to promote a common objective or engage in a project of benefit to all the members. The relationship normally entails co-operation and a sharing of resources, sometimes even common ownership.

Consortium Bank Specialized bank with a group of other banks as shareholders but where no single bank holds a majority of the equity. Usually involved in large scale international financing opera- tions via the Euromarkets.

Constrained Share Companies Companies such as Canadian banks, trust, insurance or communication firms having constraints on the transfer of shares or a portion of shares to persons who are non-Canadian residents or citizens.

Construction Loan Short-term real estate loan to finance building costs. The funds are disbursed as needed or in accordance with a prearranged plan, and the money is repaid on completion of the project, usually from the proceeds of a mortgage loan.

Consumer Price Index (CPI) Monthly index measuring the changes in the cost of a basket of consumer essentials, including food, rent, mortgages, heating, fuel, travel, etc. A major indicator of a nation’s inflation rate.

Contango In futures terminology, the amount by which the quotation for a future delivery month exceeds that for the nearest delivery month; also defined by COMEX as a market situation in which prices are progressively higher in the future delivery months. Opposite of “backwardation.”

Contingency Plan An alternate plan of action to use if circumstances change.

Continuous Disclosure The requirement under securities laws and regulations to issue disclosure documents such as press releases and financial reports as soon as a material change occurs in its affairs.

Contrarian Investor who does the opposite of what most investors are doing at any particular time.

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Convertible A bond or other financial instrument which can be exchanged by the holder for a stated number of common shares at a pre-determined price.

Convertible Debt Debt or preferred stock that is convertible, based on certain conditions, into a company’s common stock.

Copyright Legal protection for literary, artistic, dramatic or musical works, or computer software.

Corporate Angel Large firm that invests in spin-off, related businesses. They provide both financial and managerial support, and investments are usually complementary to existing activities.

Corporate Finance Financial or monetary activity which deals with a company’s money.

Corporate Fund A private equity fund that is a division or subsidiary of a financial or industrial corporation.

Corporate Governance A generic term which describes the ways in which rights and responsibilities are shared between the various corporate participants, particularly the management and the share- holders. Usually specified in the corporate by-laws.

Corporate Raider An individual who tries to take control of a company by buying a major portion of its stock and installing new management without consent of current management.

Correspondent Bank or financial organization which acts on behalf of a similar organization in a centre where the latter is not physically represented.

Correspondent Banking The network of large financial institutions that engage in international business transactions and currency trading.

Cost of Carry Out-of-pocket costs incurred while an investor has an investment position, among them interest on long positions in margin accounts, dividends lost on short margin positions and incidental expenses.

Cost of Funds The interest paid on deposits.

Countervailing Duty Import duty imposed over and above normal levels when an importing country considers the export price to contain a subsidy.

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Country Bank A colloquial term for a non-bank lender who provides short-term sources of credit for investment dealers.

Country Risk Risk of lending funds to, or making an investment in, a particular country.

Coupon Interest rate payable on bonds, whether bearer or registered. It also refers to the detachable certificate entitling the bearer to payment of the interest.

Coupon Rate The rate of interest that appears on the certificate or other document of a bond or other debt instrument.

Coupon-Stripping The process of producing single-payment (zero coupon) instruments from existing conven- tional bonds by separating principal and interest payment streams.

Covenant Promise in a trust indenture or other formal debt agreement that certain acts will be performed and others refrained from.

Cover A purchase or sell transaction which is entered into for the purpose of offsetting another position. Cover usually refers to buying a financial instrument previously sold short.

Coverage Interest Arbitrage Borrowing a currency followed by conversion into a second currency for investment, then selling the second currency for future delivery against the first currency.

Coverage Ratios Ratios (such as times interest earned, total debt coverage and overall coverage ratio) that measure the ability of a firm to meet its fixed financial obligations.

Covered Bonds Full recourse on-balance sheet obligations issued by banks and credit institutions that are also fully collateralized by assets over which investors enjoy a priority claim in the event of an issuer’s insolvency.

Credit Default Swaps A derivative contract that provides the purchaser with a one-time payment should the referenced entity / entities default (or a similar triggering event occur).

Credit History A review of a firm’s credit relationships. For new business owners who have not held mortgages or credit cards in their own name, the lack of credit history is particularly problematic for securing debt financing.

III-24 APPENDIX III | Glossary

Credit Lines An uncommitted, unadvised (or a committed, advised) facility opened up by one bank in favour of a customer or another bank.

Credit Rating Overall creditworthiness of a borrower. In the U.S., the two rating agencies are Moody’s and Standard & Poor’s. In Canada, a top agency is Dominion Bond Rating Service. A top rating is described as triple A or AAA.

Credit Risk Risk that a borrower may default on their obligations; a danger that repayment will not take place.

Credit Scoring A rating mechanism that assesses an applicant’s risk based on several standardized factors, such as the firm’s debt to equity and working capital ratios, and longevity.

Credit Unions Financial co-operation organizations comprising individuals with a common affiliation (e.g., employer, neighbourhood and nationality). They accept members’ deposits in the form of share purchases, pay interest out of earnings while providing consumer instalment credit for their members.

Creditworthiness The generalized assessment of a firm’s ability to cover (service) debt or interest expenses and maintain a reasonable level of current assets, such as accounts receivable and inventory.

Cross Currency Exposure Where a corporation’s debt service needs in a given currency are not covered by revenue or potential revenue in that currency.

Crosscut A mine working, which is driven horizontally and at right angles to an adit, a drift or a level.

Cross Default Clause in a loan agreement stipulating that default by borrower on any other loans will be regarded as a default on the loan governed by that clause.

Cross on the Board When a broker has both an order to sell and an order to buy the same stock at the same price, a cross is allowed on the exchange without interfering with the limits of the prevail- ing market.

Cross-Reference Sheet This is a sheet bound in a registration statement following the cover page (but preceding the prospectus) indicating the location within the prospectus of the various information required by the items of the form being filed. It is also called a “tie sheet.”

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Crown Jewels The most desirable entities within a diversified corporation as measured by asset value, earning power and business prospects.

Cum Dividend Latin term meaning “with dividend.” Said of a stock whose buyer is eligible to receive a declared dividend. Including the right to the current dividend on a share. Opposite is ex dividend.

Cum Rights Latin term meaning “with rights.” Said of stocks that entitle the purchaser to buy a specified amount of stock that is yet to be issued.

Cumulative Stock Stock or share, generally preference or preferred, the ownership of which carries an entitle- ment to receive dividend arrears before payment out of current profits is made on stock and ordinary shares not carrying this entitlement.

Currency Exchange Arrangement whereby two companies in different countries agree to cover specific foreign exchange needs by matching loans in their national currencies. It does not require an exchange of currency between the two countries.

Currency Futures Exchange traded contracts for the delivery of a standardized amount of foreign currency at some future date at a specified exchange rate. Gains or losses are incurred as a result of subsequent currency fluctuations.

Currency Option Clause Allows payment of principal and interest on a Eurobond issued in one currency to be made in a different currency at the option of the purchaser.

Currency Swap A transaction in which two counterparties exchange specific amounts of two different currencies at the outset and repay over time according to market practices, which reflect interest payments and possibly amortization of principal. The payment flows in currency swaps (in which payments are based on fixed interest rates in each currency) are generally like those of spot and forward currency transactions.

Current Account Record which reflects all payments between two countries for goods, services, interest and dividends.

Cushion Theory Theory that a stock’s price must rise if many investors are taking short positions in it, because those positions must be covered by purchases of the stock.

Customer Exposure The total amount a particular customer has unmatched, either in terms of currency or maturity date.

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Cut-Off Grade The lowest grade of mineralized material that qualifies as ore in a given deposit.

Daisy Chain Trading between market manipulators to create the appearance of active volume as a lure for legitimate investors. When these traders drive the price up, the manipulators unload their holdings.

Day Order Commodity order given for one day at a specific price. If it cannot be executed, it is auto- matically cancelled.

Day-to-Day Loans Loans made by the chartered banks to money market participants within the purchase and resale agreement of the Bank of Canada.

Day Traders Traders who acquire and liquidate the same futures position during one trading day. In the U.S., they are also known as “scalpers.”

Daylight Exposure During the course of business, it is the unmatched position that exists during business hours.

Daylight Exposure Limit Limits on a bank’s foreign exchange business during a working day, either overall or by currency.

Daylight Loan A loan that exists for less than one working day. Such loans are often used to complete a series of legal transactions which must take place consecutively (e.g., sale of an asset from Company A to Company B before Company B is purchased by Company C).

Days Sales Outstanding This measures the speed and efficiency with which management is collecting on accounts receivable.

Dealer An individual or financial institution who often acts as a principal for the ultimate purpose of bringing together a buyer and a seller to consummate a transaction. Unlike a broker, the dealer most often acts as a principal by being a party to the transaction.

Dealer Loan Overnight loan to a dealer, backed by collateral.

Debenture A written acknowledgement of a debt. In the U.S., a debenture, whether straight or convertible, is secured by a general guarantee (but not a lien on specific assets) while bonds are unsecured. In the U.K. and Canada, a debenture is usually secured by a charge on corporate assets, while bonds are unsecured.

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Debt A financial obligation to a lender. The amount of debt and interest payable is agreed upon over a designated period of time.

Debt / Equity Ratio A measure of the extent to which the firm uses debt for capital.

Debt Management Manipulation of three aspects of debt: the level of interest rates, the pattern of ownership and the maturity schedule.

Debt Service Ratio (Requirement) The cash flow available to pay debt principal and interest requirements.

Deceptively Misdescriptive Used to describe a word that may not be registered as a trade-mark or part of a trade-mark because it is misleading.

Decision Trees An analytical technique for making sequential decisions among alternatives in an objective and consistent manner. Decision trees are diagrams that permit various alternatives and payoffs, as well as their probabilities of occurrence, to be mapped out in a clear and easy-to- analyze fashion.

Deemed Realization A transfer of assets which, for tax purposes, is considered “a sale” by the Canada Revenue Agency, though no cash or other consideration may be involved.

Deep Discount Bond Bond selling for a discount of more than approximately 20% from its face value.

Default The failure of a borrower to repay either the interest or the principal according to the condi- tions governing the loan. In certain cases, the creditors may consent to a rescheduling of the payments to avoid default.

Defeasance Provision found in some debt agreements whereby the contract is nullified if specified acts are performed.

Defensive Stock A stock of a company with a record of stable earnings and continuous dividend payments and which has demonstrated relative stability in poor economic conditions.

Deferred Annuity A contract, usually sold by life insurance companies, which pays a regular stream of income to the beneficiary or annuitant, starting at some agreed-upon future date.

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Deferred Disbursement In leasing, a portion of the cost of the asset not paid to the supplier of the equipment until a specified date in the future; sometimes negotiated with the supplier as a way of reducing the rental factor to be quoted in a lease transaction.

Deficiency Letter See “Comment (or Deficiency) Letter”

Deficit Financing Budgetary policy which produces a deficit and, hence, a growing government borrowing requirement. It can be the direct result of positive governmental action or of a failure to control spending.

Deflation Usually a depressive slowdown in the rise or fall of prices associated with a contraction in the supply of money and credit. It accompanies a decline in output and a rise in unemployment.

Delist Removal of a security’s listing on a stock exchange, usually as a consequence of breach of certain rules or regulations.

Delta The “factor” by which an option price varies in relation to the value of the instrument into which it is convertible. The nearer and more certain the conversion, the higher the delta factor — up to 1. The commonest delta factor is approximately 0.5, meaning that if a contract price rises or falls 100 points, the option moves to 50.

Demand For Payment A term which describes an action which may be taken by a lender when a borrower is in default. The demand is usually a formal request for repayment of the outstanding balance in full within a certain period of time.

Demand Loan A loan which must be repaid in full on demand.

Demographics Characteristics of the population that influence consumption of products and services. They include age, sex, race, family size, level of education, occupation, income and location of residence.

Depletion Accounting treatment available to companies that extract oil and gas, coal or other miner- als, usually in the form of an allowance that reduces taxable income. Oil and gas limited partnerships pass the allowance on to their limited partners, who can use it to reduce other tax liabilities.

Depletion Curve A plot of production versus time which indicates how the daily rate of production declines over time.

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Deregulation Greatly reducing government regulation in order to allow freer markets to create a more efficient marketplace.

Derivatives Financial contracts whose value is derived from the value of some underlying asset, rate or index. Derivatives are used as risk-management tools by governments and corporations to reduce exposure to risk, mainly related to fluctuations in foreign-exchange and interest rates. Derivative instruments include swaps, options, futures and forward contracts. Typi- cally, they are used by banks in two principal activities: sales / trading and asset / liability management.

Designated Money Market Dealers Those investment dealers who may borrow day loans from the chartered banks secured by eligible collateral (e.g., treasury bills, short-term Government of Canada Bonds).

Devaluation A downward movement in the value of a particular currency so as to make the foreign imported goods relatively more expensive and domestic exported goods more competitive.

Development Corporation A Crown corporation which operates with the intention of maximizing economic opportu- nities in a particular region or province.

Development Play A low-risk oil or gas project in which wells are drilled in an existing area of production, either between or adjacent to producing wells.

Developmental Drilling Program Drilling for oil and gas in an area with proven reserves to a depth known to have been productive in the past.

Dilution Reduction in per share participation in net earnings through an increase in issued stock.

Direct Assistance Programs which allow for a direct transfer of funds or services between government and business.

Director’s Questionnaire Tool used by the company’s securities solicitor and the underwriter’s solicitor to gather information about the members of the company’s board of directors prior to registration. The questionnaires verify information to be disclosed in the registration statement.

Disaster Out Clause A clause in an underwriting agreement allowing the underwriter to rescind the agreement should a law, event or major financial occurrence transpire that adversely affects financial markets in general or the issuer in particular.

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Disbursement The dollar amount flowing from an investor or lender to a company in a specific transaction.

Disclaimer Clause A clause mandated by securities commissions which states on the front page of a prospectus that the commission itself has in no way approved the merits of the securities being offered for sale.

Disclaimer of Trade-Mark A statement that a certain word or portion of a trade-mark is not protected.

Discount Bond A bond which consistently sells below par in the secondary market.

Discount House Financial institution dealing in the purchase and discount of trade and banker’s accep- tances, bills of exchange and other forms of commercial paper. Its function is to supplement the regular banking facilities for discounting trade and banker’s acceptances, especially those arising out of export and import transactions.

Discount Market The open market for acceptances and commercial paper. As part of the money market, the discount market consists of the Federal Reserve banks, discount houses, commercial paper houses and note dealers that make up supply and demand for such paper.

Discount Rate Interest rate at which a central bank will discount government paper or lend money against government paper collateral.

Discount Securities Money market instruments issued at less than face value and redeemed at maturity for the full face value (e.g., treasury bills). The difference is the interest earned on the security.

Discounted Cash Flow Techniques for establishing the relative worth of a future investment by discounting (at a required rate of return) the expected net cash flows from the project against its net outlays.

Discretionary Administration The principle by which government officials are empowered to approve requests for assistance as they see fit. Thus, no business is entitled to a particular incentive by law, and all businesses must compete for assistance. Most direct incentives are administered on a discretionary basis.

Disinflation A reduction in the rate of inflation, either as a result of government policy or of declining economic activity.

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Disintermediation Placing of funds directly in securities by investors in a switch away from banks or other financial intermediaries, which then place the funds in the credit market.

Distinguishing Guise The unique shape of a product or package which can be registered as a trade-mark.

Distribution The sale of treasury securities of a company, or the sale of securities by a shareholder holding more than 20% of the outstanding voting securities of the company. A distribution must be made by prospectus unless it satisfies one of the various prospectus exemptions provided in the applicable securities legislation.

Distribution Spread The difference between the price of securities offered to the public and the cost of the securities to the underwriter (i.e., the underwriter’s fee).

Divestiture Financing Capital provided to a company to facilitate the sale or disposal of its interest in a product, division or subsidiary to another business entity.

Dividend Cash or stock payment to shareholders, variable in the case of ordinary or common shares, fixed in the case of preferred shares. Even if a company is doing badly, it may make a pay- ment of past earnings. Typically, the payment cannot be greater than the retained earnings account.

Dividend Coverage Number of times a company’s dividend is covered by earnings.

Dividend Discount Model The relationship between a stock’s current price and the present value of all future dividend payments.

Dividend Payout Ratio Dividends on common shares as a percentage of net income after preferred share dividends.

Dividend Reinvestment Plan (DRIP) A company-operated plan whereby dividends may be reinvested into the acquisition of additional company shares without commissions and often at a discount from market.

Dividend Yield Current dividend as percentage of a share’s market price.

Documentary Letters of Credit A letter of credit guaranteeing payment by the issuing or opening bank in favour of an exporter against presentation of shipping and other documents. These instruments are known as commercial letters of credit in the U.S.

Dollar Averaging Investing fixed sums at intervals in a given stock, regardless of price changes.

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Doré A bar of intermixed gold and silver metals containing impurities, prior to refining into pure gold and silver bullion.

Double Indemnity A type of insurance that pays double the principal amount if loss occurs due to certain specified causes (e.g., accidental death).

Dow Short for Dow Jones Industrial Average, this measures the price movement of 30 high- quality stocks of financially sound corporations and is the most popular means of judging the performance of the stock market.

Draft A written unconditional order to an importer to pay on presentation (sight draft) or at a specified future time (time draft).

Draw The amount of income or other capital that an owner takes from a firm to cover personal living expenses. This can also be thought of as an owner’s salary.

Dual-Currency Bonds Long-term securities denominated in two currencies. The most common types have been bonds with initial payment and interim coupon payments in a non-dollar currency, say francs or yen, and a fixed final principal payment in U.S. dollars.

Due Diligence The conducting of reasonable investigative procedures by the underwriter and other persons to provide a defensible basis for believing that there are no misrepresentations contained in a prospectus.

Dutch Auction Auction system in which the price of an item is gradually lowered until it meets a respon- sive bid and is sold.

Dutch Auction Preferred Stock Type of adjustable-rate preferred stock whose dividend is determined every seven weeks in a Dutch auction process by corporate bidders.

Early Stage Financing Capital provided to a young or emerging company to facilitate its growth and development.

Earnings per Share (EPS) The earnings of a company divided by the number of common shares outstanding. In public companies, EPS is usually expressed “after tax.” In smaller private companies, it is usually “pre-tax.”

Earnings per Share, Basic Calculated as net income less preferred share dividends divided by the average number of shares outstanding.

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Earnings per Share, Diluted Calculated as net income less preferred share dividends divided by the average number of shares outstanding adjusted for the dilutive effects of stock options, warrants and other convertible securities.

Earnings Yield Hypothetical rate of return which an investor would obtain if all the company’s latest annual earnings per share were distributed, divided by the current price for the shares.

Easement A right acquired to use another’s land or buildings, generally for access to some other adjoining property.

Econometrics Use of computer analysis and modelling techniques to describe in mathematical terms the relationship between key economic forces (such as labour, capital, interest rates and govern- ment policies) and then test the effects of changes in economic scenarios. For instance, an econometric model might show the relationship of housing starts and interest rates.

Economic Capital An estimate of the amount of equity capital required to underpin risks.

Economic Indicators Key statistics showing the direction of the economy. Among them are the unemployment rate, inflation rate, factory utilization rate and balance of trade.

Efficient Market Hypothesis The theory that a stock’s price reflects all available information and reflects its true value.

Electronic Funds Transfer System (EFTS) A system using electronic equipment to consolidate information currently recorded on paper cheques, thus reducing the amount of paper handled by banks.

Embedded Option A term used to describe the convertible, retractable or extendible features of some securi- ties. These features can often be valued using the same techniques used to value options.

Employee Buyout Financing Capital provided to facilitate the takeover of all or part of a business entity by employees or a labour organization.

Employee Stock Ownership Plan (ESOP) The ESOP is an organized plan for a company’s employees to acquire stock in the company.

Entrepreneur A person who starts, organizes and manages a business, who invests money in it, and who thus accepts the risk of either profit or loss.

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Equipment Lease A contract in which one party (the lessor) grants to another party (the lessee) the use of one or more items of equipment for a certain period of time in exchange for consideration known as the rental.

Equipment Trust Certificate A security issued to pay for new moveable equipment, secured by a first lien on the equipment.

Equity The value of a business after all debts and other claims are settled. In addition, the amount of cash a business owner invests in the business. Also, the difference between the price for which a property could be sold and the total debts registered against it.

Equity Cycle The cyclical pattern of stock prices over time.

Equity Kicker An ownership position added to a deal that involves loans.

Equivalent Rate The rate at which the stream of rental payments, together with the option price, can be discounted to equal the purchase price.

Escheat Return of property (e.g., land, bank balances and insurance policies) to the state if abandoned or left by a person who died without making a will.

Escrow Money, securities or other property or instruments held by a third party until the condi- tions of a contract are met.

Escrowed Shares The outstanding shares that continue to have voting rights but need special approval to be sold.

Eurobond International straight or convertible bond issued by state or corporate entities, denominated in a Eurocurrency and issued outside the currency’s domicile. Normally sold on several international markets by groups or syndicates of banks or brokers in the units equivalent to $1,000 U.S.

Euroclear Computerized clearing system for Eurobonds operated and managed under contract by the Brussels branch of Morgan Guaranty Trust Co. of New York.

Eurocredit Medium-term international credits in a Eurocurrency usually provided by a syndicate of banks. Such credits are normally for a fixed term with an agreed margin and base rate (e.g., the London interbank offered rate (LIBOR)) for six month deposits in the Eurocurrency being used.

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Eurocurrency Bank deposits made and held outside the country of the currency’s domestic origin (e.g., Euromarks, Euro French francs, Euro Swiss francs, Eurosterling, Euroguilder, Euroyen).

Eurozone A group of European Union member states that have adopted the euro currency as their sole legal tender.

European Currency Unit (ECU) A weighted average of 12 European Community currencies based on the relative strength of the underlying economies. It was the obvious choice for a single currency to replace the 12 national ones. Britain had proposed that the ECU become a hard currency issued by a new European Monetary Fund. The ECU was largely an accounting and issuing device. The ECU was replaced by the euro on January 1, 1999.

European Economic Community (EEC) European Common Market made up of 12 member states. Originally established by Belgium, France, Italy, Luxembourg, Netherlands and West Germany in 1957 under the treaty of Rome. Denmark, Ireland, and the U.K. joined in 1970, followed by Greece in 1981. Portugal and Spain were accepted as members in 1985. In 1993, the EEC was renamed European Community (EC).

European Option An option which may be exercised only at expiry of the option period.

Eurosyndicated Loans Large bank credits, usually with maturities of three to ten years, granted by international bank syndicates put together on an ad hoc basis. Lenders are almost exclusively banks and finance companies, thus, these credits are not placed with private investors. Interest rates are calculated by adding a margin to interbank offered rates and usually adjusted every three or six months. Funds for the loans are drawn from the Euromarket.

Event Transaction A generic term for a range of activity of interest to buyout and mezzanine funds. “Event” refers to the nature of the specific business objective that is the basis for financing , such as divestiture, management buyout, merger / acquisition, recapitalization, restructuring / turnaround, or succession plan.

Evergreen Credit Revolving credit with no fixed maturity date, which a bank has the option once annually to convert into a term loan.

Ex Dividend Excluding the right to the current dividend on a share. Opposite is cum dividend.

Examination The process through which the Patent or Trade-marks Office determines whether an appli- cation for registration warrants granting registration.

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Exchange An organized association providing a marketplace for bringing together purchasers and sellers of securities.

Exchange Act A common name for the U.S. Securities Exchange Act of 1934.

Exchange Offering Prospectus (EOP) A prospectus meeting the requirements of both a stock exchange and applicable securities legislation which qualifies securities for distribution through the facilities of the exchange.

Exchange Rate Mechanism (ERM) A group of eight European currencies, led by the German mark and French franc. It is part of the European monetary system under which member states coordinate policy and promote monetary stability. Currencies are allowed to fluctuate within narrow, pre-determined ranges and the mechanism is subject to realignment. When the limits are in danger of being breached, central banks must step in to buy or sell currency. The ERM has been credited with reducing exchange-rate fluctuations and reducing inflation in member countries. ERM was discontinued with the introduction of the euro in 1999.

Exchange Rate Rate at which a currency is exchanged for another currency, gold, or special drawing rights.

Exchange Risk The risk associated with an asset or liability that is valued in a foreign currency and is vulnerable to the movement of exchange rates.

Executed Copy An executed copy of a registration statement or other document is a copy that contains manual signatures.

Exempt Purchaser A category of sophisticated investors (individual or institutional) to which the sale of a new issue of securities does not require the issuer to file a prospectus with the applicable securities commission.

Exempt Security A security that does not have to be registered with securities regulators.

Exempt Transaction A transaction that does not have to be registered with the securities regulators.

Exercise Rate or Strike Price The exchange rate at which an option may be exercised.

Exit The sale of ownership in a business.

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Exit Mechanism The strategic means by which a private equity or venture capital fund liquidates its stake in a business and achieves optimal returns. There are multiple exit routes, including acquisi- tion, company buyback, initial public offering, secondary purchase and write-off.

Exit Strategy The plan or method in place for the disposal or liquidation of the investment or ownership of a business’s equity.

Expansion Financing Capital provided to a company to facilitate its growth and development.

Experts Accountants, appraisers, engineers and others whose profession gives authority to a state- ment made by them.

Exploratory Drilling Program Search for an undiscovered reservoir of oil or gas — a very risky undertaking. Exploratory wells are called wildcat.

Export Incentives An important aim of macroeconomic policy in general is the expansion of exports, and governments offer many programs aimed at involving companies in export trade.

Exposure Foreign Exchange On foreign exchange markets, exposure can arise through the existence of an uncovered position, whether overall or for a single currency. The extent of exposure can reflect the different maturity periods for the currencies being used.

Exposure Lending When a bank provides funds to a country or corporation, it becomes exposed to the borrower. Most banks have internal rules designed to prevent involvement in overexposure to any single borrower.

Extendible Bond A bond which at the option of the issuer may have its maturity date extended for a specific number of years.

Face Value The nominal value which appears on the face of a document recording an entitlement, generally a certificate or bond. For indebtedness, the amount to be repaid at maturity.

Factoring Financial service whereby a firm sells or transfers title to its accounts receivable to a factoring company, which then acts as principal not as agent. The receivables are sold without recourse, meaning that the factor cannot turn to the seller in the event accounts prove uncollectible.

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Federal Deposit Insurance Corp (FDIC) Established in the U.S. in 1933 to insure accounts at commercial and mutual savings banks and, thus, protect depositors. All Federal Reserve members are required to be members. It has federal supervisory authority over insured state banks, not members of the Federal Reserve.

Federal Reserve System Known as the Fed, this is the central banking system of the U.S., comprising 12 Federal Reserve Banks controlling 12 districts under the Federal Reserve Board in Washington. Membership of the Fed is obligatory for banks chartered by the U.S. Comptroller of currency and voluntary for banks operating under state charters. All member banks subscribe to its capital and around 70% of U.S. banks deposits are held by member banks. Approximately 38% of all banks are members. The 12 Fed banks are based in Boston, New York, Philadel- phia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Dallas, Minneapolis, Kansas City and San Francisco. A similar role is carried out in Canada by the Bank of Canada.

Fedwire The U.S. Federal Reserve’s electronic communications system linking Federal Reserve Offices, the Board, depository institutions, the Treasury and other government agencies. Used for transferring the reserve account balances of depository institutions and government securities.

Fee A charge for services.

Fiduciary Responsibility The obligation to act with prudence and reason in regard to the management of depositors’ or investors’ money.

Filing Date The date a completed application is officially received at the Patent or Trade-marks Office and filed (not to be confused with registration).

Filing Solicitor The lawyer designated to coordinate the filing of the prospectus and supporting documents and to speak for the issuer in communications and negotiations with the securities commis- sion. The lawyer is usually with the underwriter’s or the issuer’s law firm.

Final Receipt The receipt issued by a securities commission upon filing a prospectus which satisfies the jurisdiction’s requirements. This receipt qualifies the securities described in the prospectus for sale in this jurisdiction.

Financial Accounting Standards (FAS) The Financial Accounting Standards which govern accounting rules in the U.S. Also see “Financial Accounting Standards Board (FASB)”. In Canada, see “Generally Accepted Accounting Principles (GAAP)”.

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Financial Accounting Standards Board (FASB) Independent board responsible for establishing and interpreting generally accepted accounting principles in the U.S.

Financial Assistance Most government programs involve financial assistance, which may take the form of loans, loan guarantees, subsidies, tax allowances, contributions or cost-sharing arrangements. Assistance is granted where there is demonstrated financial need.

Financial Breakeven Point The level of earnings before interest and taxes (EBIT) necessary for a firm to be just able to meet its fixed financial obligations. In other words, the level of earnings before interest and taxes at which the earnings per share just equals zero. The higher the financial breakeven point, the more financially risky the firm is considered.

Financial Incentive A government program not providing assistance where there is demonstrated financial need but rather an incentive to share the risk with the private sector, improve the private sector internal rate of return and, therefore, encourage a company to take an action it might other- wise avoid.

Financial Lease A lease which substantially transfers all the benefits and risks of ownership to the lessee. Usually the contractual rental payments return the lessor’s entire investment during the basic term of the lease together with the desired yield or profit return on that investment.

Financial Printer Printer specialized in the printing of prospectuses and registration statements.

Financial Structure Makeup of the right-hand side of a company’s balance sheet, which includes all the ways its assets are financed, such as trades accounts payable and short-term borrowings as well as long-term debt and ownership equity.

Financings and Investments Each transaction involving a private equity or venture capital fund in a given portfolio company represents one round of financing. Each financing is made up of one or more investments, depending on the presence of co-investors. Financings are also known as deals.

Fine Weight The pure gold content of a gold bar or coin, determined by multiplying the gross weight by the fineness.

Fineness Fineness is expressed in thousandths and indicates the number of thousandth parts of pure metal (e.g., gold) contained in an alloy.

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First Refusal The right of a second party to buy shares or property on the same terms and conditions as have been offered to a first party. The right usually has a short-time period attached to it, say 10 to 30 days.

Fiscal Agent An investment dealer appointed by a company to advise it in financial matters and to manage the underwriting of its securities.

Fiscal Policy The overall management of the government’s revenues and expenses which regulates the pace of business activity.

Fitch Sheets Reports indicating the successive trade prices of securities listed on the major exchanges. They are published by Francis Emory Fitch, Inc. in New York City.

Fix On some foreign exchange markets or bourses, a daily meeting (fixing) at which rates for different currencies are officially fixed by adjusting the buying and selling level to reflect market conditions. Participants include commercial banks and, directly or indirectly, the central bank. The latter may intervene to maintain a rate at a specific level. On the gold market, the twice daily meeting at 10:30 a.m. and 15:00 p.m. of the five London bullion houses at which they fix the gold price by matching bids and offers. For floating rate securi- ties or loans, a meeting shortly before the start of each new interest period to fix the interest rate level.

Fixed Assets Land, buildings, plant, equipment and other assets acquired for carrying on the business of a company with a life exceeding one year. Normally expressed in financial accounts at cost, less accumulated depreciation.

Fixed Charge Coverage This measures the firm’s ability to pay (cover) the obligations that arise out of interest payments, lease obligations or from other debt-related requirements.

Fixed Expenses Costs of doing business which do not change with the volume of business. Examples might be rent for business premises, insurance payments, heat and light.

Fixed Rate Loan Loan for a fixed period of time with a fixed interest rate for the life of the loan.

Fixed Rate of Exchange A specified exchange rate for a particular currency relative to another which is infrequently changed by the government when the prevailing rate no longer reflects an accurate value.

Fixings Precious metals prices are fixed daily in London by the fixing members of the London Bullion Market who agree on a price at which they can settle transactions.

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Flat Income Bond The price at which a bond is currently quoted with no interest accumulated. Bonds in default normally trade in this manner.

Float Condition under which a currency is allowed to fluctuate outside internationally prescribed limits without discretionary intervention (i.e., free float). In the U.S., this term is used to describe the time lag which often occurs in the Federal Reserve’s cheque collection process. The Federal Reserve credits the reserve accounts of depository institutions within two business days of the cheques being deposited but more time may be needed to process some cheques and receive funds in payment. Thus, some institutions may receive credit before the Federal Reserve has obtained payment from others. To launch an issue, company or business.

Floating Charge Charge or assignment on a company’s total assets as collateral for a loan without specifying a fixed charge on specific assets.

Floating Rate A situation where the interest rate or rate of exchange is determined solely by market forces.

Floating Rate Bond Bond with a variable interest rate.

Floating Rate Lease A lease agreement in which the rental payments are adjusted upward or downward during the lease term based upon the movement of an agreed-upon index. If the index (often 90 day banker’s acceptances) changes during the term of the lease, the subsequent rentals will be adjusted accordingly.

Floor Price Minimum price which normally cannot be reduced further due to political, economic or trade considerations.

Flow Rate The rate at which an oil or gas well produces, typically expressed as barrels of oil per day (BOPD) or thousands of cubic feet per day (MCFPD).

Flow-Through Shares Shares of Canadian exploration or mining companies where specified tax deductions and credits, normally available only to the corporation, may flow through to the owners of the shares, who may claim said deductions or credits.

Flower Bonds Low coupon U.S. treasury bonds acceptable at par in payment of federal estates tax when a person dies.

Follow-On Financing A supplementary round of financing in an existing company that builds on its original financing.

III-42 APPENDIX III | Glossary

Foreign Currency and Interest Rate Futures Contractual obligations to buy or sell a foreign currency or a financial instrument on a future date at a specific price established on a commodity exchange.

Foreign Currency and Interest Rate Options Contractual agreements in which the writer grants the purchaser the right, but not the obli- gation, either to buy (call option) or sell (put option) at or by a prescribed date, a set amount of foreign currency or financial instruments at a fixed price.

Foreign Exchange Claims in a foreign currency payable abroad, including bank deposits, bills and cheques. Foreign exchange rates refer to the number of units of one currency needed to buy another.

Foreign Exchange Forward Contract An agreement between two parties to exchange one type of currency for another at a fixed rate of exchange for value and settlement on a specified future date. The size is normally $100,000 and over.

Foreign Exchange Spot Contract An agreement between two parties to exchange one type of currency for another at a fixed rate of exchange for value and settlement one or two business days hence. The size is usually $100,000 and over.

Forgivable Loans A government loan which, upon fulfillment of certain conditions, need not be repaid.

Form 6-K Form required by the U.S. Exchange Act for foreign private issuers and multi-jurisdictional disclosure system filers to disclose information that has been disclosed publicly in its home country.

Form 8-K Those companies that use Form 10-K for annual reporting must use this form for reporting certain specified events under the U.S. Exchange Act. This form is available to all issuers.

Form 10 Those companies that do not qualify as foreign private issuers or multi-jurisdictional dis- closure system filers must use (and other filers may use) this form for the initial filing under the U.S. Exchange Act.

Form 10-K Those companies that do not qualify as foreign private issuers or multi-jurisdictional disclo- sure system filers must use (and other filers may use) this form for their annual reporting requirements under the U.S. Exchange Act.

Form 10-Q Those companies that use Form 10-K for annual reporting must use this form for their quarterly reporting requirements under the U.S. Exchange Act.

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Form 20-F The form used by most foreign private issuers (other than those Canadian companies that qualify under the multi-jurisdictional disclosure system) to satisfy the requirements of the U.S. Exchange Act. This may be used as an initial filing and for periodic annual reporting.

Form 40-F The form used by most multi-jurisdictional disclosure system filers to satisfy the annual reporting requirements of the U.S. Exchange Act. This may also be used as an initial registration.

Form F-1 The most comprehensive registration form used by a foreign private issuer to register securities in the U.S. under the U.S. Securities Act.

Forward Contract A foreign currency exchange contract which is entered into at present for delivery at some time in the future (more than the spot settlement date of two business days following).

Forward Cover Arrangement by a purchaser or seller to cover themself against unforeseen interest or exchange rate movements through a future or forward foreign exchange contract.

Forward Exchange Rate Rate at which a currency can be purchased or sold for delivery in the future.

Forward Rate Agreement (FRA) An agreement which involves a cash settlement at a future date for the difference between a contracted rate of interest and the current market rate based on a notional principal amount. Forward rate agreements can be used as hedge instruments to protect against future movements in interest rates.

Forward Sales The sale of a commodity for delivery at a specified future date and price.

Forward Triangular Merger A type of merger that occurs when the subsidiary of the acquiring corporation merges with the target firm.

Four Nines Gold with a fineness of .9999 — the finest gold available. Gold professionals call it “four nines fine gold.”

Four Pillars A term used to describe the main types of financial institutions: banking, trust, insurance and securities.

Franchise The right to sell products or services under a corporate name or trade-mark which has been established by someone else. This right is usually purchased for cash in addition to a royalty fee as a percentage of all subsequent sales.

III-44 APPENDIX III | Glossary

Franchisee The person who purchases a franchise.

Franchisor The owner of the franchise, including the corporate name, who sells licences to others who wish to operate under the corporate name.

Free on Board (FOB) A term frequently used to indicate the point at which goods are available at a specified price, and from which point all transportation, insurance and other charges will be to the customer’s account.

Front End Fees Fees paid when a loan is arranged, such as management fees.

Front End Loading Charges or fees which are greater at the start of a loan or investment contract than in its later stages.

Frozen Assets Assets, balances or credits temporarily blocked or frozen due to political circumstances (e.g., war or legal action).

Full Payout Lease This is an alternative expression that is often used for a financial lease.

Fully Diluted Earnings per Share A calculation of the earnings per share assuming that all convertible securities are con- verted into common shares.

Fund The pool of capital established for the purposes of private equity or venture capital activity. A management company will be responsible for several funds that may vary according to mandate or investment period.

Fund of Funds A professionally managed intermediary vehicle wherein individual and institutional investors allocate or pool assets for subsequent commitment to private equity or venture capital funds.

Fund Raising The activity whereby a venture capital or private equity firm seeks to raise new capital from external sources.

Funded Debt Debt that is due after one year and is formalized by the issuing of bonds or long-term notes.

Funding Costs The price of obtaining capital, either borrowed or equity, with intent to carry on business operations.

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Future Rate Agreement (FRA) A contract between two parties calling for a cash settlement at a future date for the differ- ence between a contracted rate of interest and the current market rate, based on a notional principal amount. When used as a hedge, an FRA protects against future movements in market interest rates.

Futures Contracts to deliver or take delivery of a large amount of a commodity on a specific date for a specific price. Futures contracts are available on everything from pork bellies to treasury bills.

Futures Contract An exchange-traded contract generally calling for delivery of a specified amount of a par- ticular grade of commodity or financial instrument at a fixed date in the future. Contracts are highly standardized and traders need only agree on the price and number of contracts traded.

Futures Market Term for the market on which commodity, currency and interest futures contracts are traded.

Gamma The sensitivity of an options delta to small unit changes in the price of the underlying instrument. Some option traders attempt to construct “gamma-neutral” positions in options (long and short) such that the delta of the overall position remains unchanged for small changes in the price of the underlying instrument.

Gatekeeper A professional advisor or intermediary operating in the private equity or venture capital market on behalf of clients, such as institutional investors.

Gearing Ratio The ratio of net borrowings to net borrowings plus shareholder’s equity.

General Agreement on Tariffs and Trade (GATT) Established in Geneva in 1948 as a legislative and negotiating framework for international trade relations.

General Partner The operating and managing partner in a limited partnership.

Generally Accepted Accounting Principles (GAAP) GAAP is the term used to describe the basis on which financial statements are normally prepared. This is codified in the CPA Canada Handbook.

Glass Steagall U.S. law of 1933 prohibiting commercial banks from underwriting or dealing in securities except for general obligation bonds and in selected special purpose municipal revenue bonds and U.S. government debts.

III-46 APPENDIX III | Glossary

Gold Fixing Daily determination of the price of gold by selected gold specialists and bank officials in London, Paris and Zurich.

Good Delivery Good delivery bars are those meeting the internationally recognized specifications established by The London Bullion Market.

Government Fund A government-owned private equity or venture capital fund, usually organized through a federal or provincial agency or Crown corporation.

Grace Period Length of time during which repayments of loan principal are excused. Usually occurs at the start of the loan period, often in connection with soft loans to developing countries where the terms and conditions are mild.

Grade The relative quality or percentage of metal content.

Green Shoe An option given to the underwriter to acquire securities from the issuer in addition to those being underwritten on a firm commitment basis. Such options are given when the underwriter feels that market conditions may allow the sale of additional securities but the underwriter does not want to assume further risk by increasing the number of underwritten securities.

Greenmail Payment by a takeover target to potential acquirer, usually to buy back shares at a premium. In exchange, the acquirer agrees not to pursue the takeover bid further.

Grey Market A colloquial term used to describe the unlisted over-the-counter market for newly issued but unlisted securities.

Gross Domestic Product (GDP) Measures output in Canada from foreign and domestic producers.

Gross National Product (GNP) Measures output by Canadian producers in Canada or abroad. It excludes foreign producers in Canada.

Gross Spread Difference between the price received by an issuer for its securities and the price paid by investors for the same securities. The spread equals the selling concession, together with the management and underwriting fees.

Growth Stock An issue of a company that seems likely to produce above average gains in earnings and net worth over a long period.

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Guarantee An undertaking by a bank or other party (the guarantor) to stand behind the current obligations of a third party and to carry out these obligations should the third party fail to do so (e.g., a loan guarantee under which A makes a loan to B against a guarantee of repay- ment provided by bank C).

Guaranteed Investment Certificates Certificates issued by financial institutions evidencing a deposit made with them with maturities ranging from one to five years for amounts of $1,000 and up. Issued in registered form on an interest-bearing basis.

Guaranteed Residual A contractual agreement under which a third party agrees to purchase leased equipment at a fixed price at a future point in time. The purpose is to protect the lessor’s exposure on the value of the leased equipment at the end of the lease term.

Hard Currency A currency of one of the major industrialized nations which is, therefore, tradeable in virtually all markets.

Head Grade The total mineral content of the ore being fed into the processing plant.

Hedge A risk management technique to insulate financial results from market, interest rate or foreign currency exchange risk (exposure) arising from normal banking operations. The elimination or reduction of such exposures is accomplished by establishing offsetting posi- tions. For example, assets denominated in foreign currencies can be offset with liabilities in the same currencies through the use of foreign exchange hedging instruments, such as futures, options or foreign exchange contracts.

Hedge Funds Investment funds that use derivatives to attempt to profit when financial markets go up or down.

Hedging Technique of minimizing loss due to future price fluctuations by taking equal and opposite positions in the commodity for delivery at some future date (i.e., futures contract or foreign exchange forward contract).

Hemline Theory Whimsical idea that stock prices move in the same general direction as the hemlines of women’s dresses. Short skirts in the 1920s and 1960s were considered bullish signs that stock prices would rise, whereas longer dresses in the 1930s and 1940s were considered bearish (falling) indicators.

Highly Leveraged Transaction (HLT) Purchase of a company financed mainly by bank loans, secured by the assets of the com- pany being purchased rather than by funds of the purchasers.

III-48 APPENDIX III | Glossary

Hive Off The distribution or spin off of assets by a corporation to its shareholders.

Holding Company Corporation or company controlling one or several companies through ownership of their stock, in most cases with voting control. Often used to bring together and supervise the interest of large corporations or to facilitate diversification.

Holding Period The length of time an investor holds all or part of their interest in a portfolio company.

Home Run Substantial gain by an investor in a short time frame.

Hostile Takeover The attempt to buy control of a publicly traded company against the wishes of existing management. Often the buyer will appeal to shareholders in the battle to win the company.

Hot Buttons Key operational information which can give an early indication of the health of a company. These frequently include receivables and payables expressed in days, inventory level and turnover, warranty claims and level of returned goods, order book and back order levels.

Hurdle Rate The required rate of return in a discounted cash flow in the budgeting of capital expenditures.

Hybrid Venture Capital Funds that are government supported but privately administered. Managed at arm’s length transaction to government, these funds may include both federal and provincial investment.

Hypothec Lien on real estate (Quebec).

Hypothecation The pledge of property and assets to secure a loan. Hypothecation does not transfer title but it does provide the right to sell the hypothecated property in the event of default.

Immoveable Property In Quebec, property which is fixed and cannot be removed (e.g., land or buildings).

Impaired Loans Loans are classified as impaired when there has been a deterioration of credit quality to the extent that management no longer has reasonable assurance of timely collection of the full amount of principal and interest in accordance with the contractual terms of the loan agreement.

Implicit Rate The rate at which the stream of rental payments, together with the option price, can be discounted to equal the purchase price.

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Informal Investor An individual who invests personal capital directly in a business owned by others. Also referred to as a business angel.

In-the-Money Option An option whose exercise rate is below the current market rate for a call option and is above the current market rate for a put option.

Income Bonds Bonds whose principal is assured but on which interest payments are made only if earned and approved by the corporation’s directors.

Incorporation by Reference This is a method by which, under certain circumstances, certain materials previously filed with the securities regulators or issued to security holders may be referred to rather than repeated verbatim.

Indemnitor A third party who agrees to guarantee to the lessor the due payments and full performance of all obligations of the lessee as specified in the lease agreement.

Indenture Legal contract spelling out the obligations of a security issuer and the rights of the holder of the security.

Index Options Options contracts based on the level of stock market indices, such as the Toronto Stock Exchange 35 index.

Indirect Incentives Programs which do not involve a direct transfer of additional funds or services from gov- ernment to business. Indirect programs include taxation incentives, such as tax credits and procurement policies.

Industrial Design The shape, pattern or ornamentation (or combination of these) of an industrial-produced object and the legal protection against imitation of these elements.

Industry-Specific Incentives Some assistance programs are targeted toward particular industries, such as shipbuilding, defence, machinery and equipment, and film. Industry-specific programs often concentrate on developing high-risk technical projects, or helping obsolescent firms to modernize, or on promoting business expansion.

Information Circular A document sent to shareholders, along with a voting proxy, providing details and disclosure of matters to come before a shareholders’ meeting.

Infringement (of a Patent or Trade-Mark) Violation of patent or trade-mark rights through unauthorized use of a patent or trade-mark.

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Initial Public Offering The first time that a company makes an offering that is required to be registered with the securities regulators.

Insider Trader A person who trades on the market with access to inside information (i.e., information unavailable to the investing public which can considerably change the value of a company’s shares in the market). Insider trading is a violation of the law.

Insider Trading Trading in a security by an individual who, because of their employment position, may have special information before that information is released to the public or shareholders. Exploi- tation of inside or privileged information for profit in market transactions. More precisely in the U.S., trading on the basis of material non-public information gained through an insider or a privileged position.

Insider Transactions Transactions in shares of a corporation by persons considered to be insiders of the company. For purposes of disclosure and reporting of such transactions, insiders include all directors and senior officers of a company as well as beneficial holders of more than 10% of any class of equity securities. This is commonly referred to as “insider trading.”

Insiders Generally, the directors, senior officers, and principal shareholders of a reporting issuer. Insiders are required to file publicly available reports on their holdings in the company.

Insolvent Being unable to pay debts as they become due; not strictly the same as Bankruptcy.

Institutional Investor Pension funds, insurance companies, endowments, charitable foundations, mutual funds and other non-bank financial institutions that are often key suppliers of capital to venture capital and private equity firms.

Institutional Venture Capital The organized market for venture activity, established from the early 1980s, based on an industry of associated management firms and funds as distinct from the informal invest- ment market.

Instrument Any type of financial debt paper.

Integrated Circuit Topography The three-dimensional configuration of the electronic circuits embodied in integrated circuit products or layout designs and the legal protection against imitation of this configuration.

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Intellectual Property A form of creative endeavour (copyright, invention, know-how, logo, service mark, trade- mark, trade name or trade secret) that can be protected through a trade-mark, patent, copyright, industrial design or integrated circuit topography.

Inter-American Development Bank (IADB) Set up in 1959 to provide development funds for Central and Latin American countries. As well as these countries, Japan and a large number of European countries are members.

Interbank Rate The interest rate at which banks will lend to one another. In general, it is a narrower margin than commercial transactions.

Interest A charge for the use of money supplied by a lender.

Interest Arbitrage Switching funds between different interest-bearing instruments or countries to profit from higher interest rates.

Interest Cover Ability of borrower to pay the interest payments due on a borrowing from currently available financial resources.

Interest Parity Occurs between two currencies when the differential in interest rates is directly reflected by the discount or premium in the forward exchange margins.

Interest Rate Charge, often annual, paid by a borrower to a lender over a period of time. It is intended to compensate a lender for the sacrifice of losing intermediate use of money and for the inflationary erosion of its buying power over the life of a loan and for the risk involved in lending the money. Interest rates are sensitively responsive to the supply and demand factors of credit and to inflationary expectations.

Interest Rate Cap An option-like feature for which the buyer pays a fee or premium to obtain protection against a rise in a particular interest rate above a certain level.

Interest Rate Futures Similar to currency futures, except that the contracts are for delivery of a standardized amount of a specified security, normally treasury bills, government bonds or bank certificates of deposit. Gains or losses are incurred as a result of subsequent changes in interest rates.

Interest Rate Options The buyer of the option has the right (but not the obligation) to lock into a pre-determined interest rate during some period in the future (typically London Interbank Offered Rate (LIBOR) or the price of a U.S. treasury security). The instrument may either be traded “over the counter” or exchange traded.

III-52 APPENDIX III | Glossary

Interest Rate Risk The risk taken by an investor that interest rates will rise and the market price of competitive securities such as bonds will fall.

Interest Rate Swap A transaction in which two counterparts exchange interest payment streams of differing character based on an underlying notional principal amount. The three main types are coupon swaps (fixed rate to floating rate in the same currency), basis swaps (one floating- rate index to another floating-rate index in the same currency), and cross-currency interest rate swaps (fixed rate in one currency to a floating rate in another).

Internal Rate of Return (IRR) A sophisticated way of evaluating capital expenditure proposals. The discount rate that causes the net present value of a project to equal just zero. If a project’s IRR is greater than the cost of capital, the project is acceptable; otherwise, it should be rejected. The IRR is often referred to as the yield on a project.

International Debt Issue Debt issue underwritten and sold outside the country of the borrower / guarantor. It may be a foreign bond issue or a Eurobond issue.

International Financial Reporting Standards (IFRS) IFRS are principles-based standards, interpretations and the framework adopted by the International Accounting Standards Board.

International Monetary Fund (IMF) A specialized agency of the U.N. that provides funds to member countries under certain conditions of need and commitments of policy. The fund was established by the Bretton Woods Agreement on a system of differential quota subscriptions representing drawing rights and voting power.

International Organization for Standardization (ISO) An international organization created to promote standardization around the world.

Intra Day Limit Limits allowed on a foreign exchange dealer’s position in each and all currencies during the course of the trading day. Such limits may well be substantially larger than those allowed at the close of business when books are squared as far as possible.

Intrinsic Value The net benefit to be derived from exercising an option contract immediately. It is the difference between the price of the underlying and the option’s exercise price. An option generally sells for at least its intrinsic value.

Inventory Stock on hand in the form of goods ready for sale, or raw material to be made into goods for sale, or material in the process of being manufactured or completed for sale.

Inverted Yield Curve Uncommon condition where short-term interest rates are higher than long-term rates.

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Investment Bank A bank acting as an underwriter for new issues of bonds or stock and as part of a syndicate redistributes the issue to investors. Also carries out other functions similar to a British merchant bank.

Investment Banker A financial organization that is engaged in the business of underwriting securities (i.e., buying bond or stock issues in their entirety from the issuing corporation or selling share- holders) or that participates with others in such a purchase for the purpose of resale. If it distributes the issues to dealers, it is referred to as a “wholesaler.” If it sells the issues directly to investors, it is known as a “retailer.” It also is known as an underwriting house.

Investment Capital Funds, either debt or equity, required to operate a business.

Investment Letter Securities that may not be offered by the purchaser for resale to the public without first being registered under the U.S. Securities Act. The purchaser of this type of security is generally required to furnish the issuer with a letter stating that they are acquiring the securities for investment and not for resale.

Investment Trust (Company) A company engaged in buying securities of various kinds with a view to distributing the income to its shareholders.

Irrevocable Revolving Credit Agreement A binding commitment by a bank to lend to a customer.

Issue Offering of shares, stock or bonds.

Issue Price Price at which securities are sold on issue. This is at face value or par, at a discount or a premium. Occasionally, an issue may be partly paid, meaning that the price at launch is met by instalments.

Issued Capital Portion of authorized capital actually issued in the form of common, ordinary or preferred stock.

Issuer Bid An offer by an issuer to security holders to buy back any of its own shares or other securities convertible into its shares.

J Curve Graphic description of the initially perverse and then benign reaction of the balance of trade following devaluation. The trade balance deteriorates as import costs rise, then recovers to surplus as exports expand in volume due to cheaper exchange costs.

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Jitney The execution and clearing of orders by one member of a stock exchange for the account of another member, usually without disclosure to the public.

Jobbers Specific dealers delegated by the Bank of Canada who perform buying and selling functions of short-term government securities and who also have borrowing privileges from the Bank of Canada.

Jointly and Severally Legal terminology in relation to a liability. The obligation may be enforced against all obligators jointly or against any one of them separately.

Junior Issue Debt or equity that is subordinate in claim to another issue in terms of dividends, interest, principal or security in the event of liquidation.

Junior Security Debt with lower priority claim on assets and income than a senior security.

Junk Bond A bond with a speculative credit rating. The bonds are called junk because they are issued by companies without long and consistent track records of sales and earnings, or with ques- tionable credit strength. Because junk bonds are risky investments, returns can be high.

Kennedy Round Round of industrial tariff cuts in General Agreement on Tariffs and Trade between 1964 and 1967, so called because the initiative came from President Kennedy’s Trade Expansion Act.

Keynesian Economics Body of economic thought developed by John Maynard Keynes and his followers based on a cause and effect analysis of the variations in aggregate spending and income. It stands in opposition to the view that the free market is the ultimate regulator and believes that economic performance could be improved by government intervention.

Kicker Equity participation added to a debt obligation, usually designed to enhance marketability.

Killer Bees Usually investment bankers who devise strategies to aid a company in fending off a take- over bid by making the target less attractive or more difficult to acquire.

Killer Warrants Exercising these warrants forces the redemption of the bonds they were once attached to.

Lead Manager Manager who leads a securities issue, and who is normally responsible for the contact with the borrower, organization of the issue and preparation of the contracts and prospectus. The lead manager is also primarily responsible for putting together the issue syndicate (e.g.,

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co-managers and underwriters) and the selling group, and for the placement of the issue. As a rule, the lead manager makes the largest commitment to take up and place bonds or securities in the event of undersubscription.

Leading Indicators Statistical data that tends to precede the economy’s highs and lows of the business cycle.

Lease An agreement to rent for a period of time at an agreed price.

Leasehold Mortgage A mortgage loan for the purchase of a building or improvements to a building where the building is on land which is leased (rented).

Legal-for-Life The term used to describe securities which are eligible for investment by insurance, pension, loan and trust institutions under their governing statutes, without using the “basket clause.” Very few new issues are able to satisfy the statutory requirements, since an important crite- rion is a steady record of dividend payments.

Legal Tender The coin or currency which the supreme monetary authority of a country declares to be universally acceptable therein as medium of exchange.

Legend Opinion An auditor’s opinion with a preamble to take into effect transactions that have not yet been consummated. This type of report is not acceptable for a registration statement to be declared effective by the Securities and Exchange Commission or a Canadian securities commission.

Less-Developed Countries A country whose economy is generally less developed than an industrialized country. The Superintendent of Financial Institutions Canada requires that a minimum 35% provisions for loan loss be maintained in respect of the aggregate exposures to 46 such countries that have restricted or experienced difficulties in servicing all or part of their external debt to commercial banks.

Lessee The individual or firm that acquires use of an asset by leasing it from the owner, the lessor.

Lessor The individual or firm that owns an asset leased by another firm or individual.

Letter of Credit Financial instrument issued by a bank guaranteeing the payment of a customer’s drafts up to a stated amount for a specified period.

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Letter of Intent Any letter expressing an intention in respect of an action, sometimes subject to other action being taken. For example, a bank might issue a letter of intent stating it will make a loan to a customer subject to another lender’s agreement to participate. The letter of intent facili- tates the second loan.

Letter Security Stock or bond that is restricted. It is not registered with the Securities Commission and therefore cannot be sold in the public market.

Leverage Effect of the use of senior capital (common / ordinary stock) in capitalizations. High leverage can enable common / ordinary stockholders to benefit from an above-average level of profit- ability from employed loan stock, but it works to the company’s detriment in a downturn since fixed charges must be met.

Leveraged Buyout (LBO) The method of buying a company with borrowed funds secured by assets of the business. LBOs have caused a mini-revolution in the investment business because they allow smaller companies or groups of individuals to acquire very large businesses.

Leveraged Lease Provision by lender of only a small share of the cost of equipment being leased, the rest being provided by another lender.

Lien A charge placed over an asset by such parties as (1) the seller of that asset, or (2) in the case of construction or repairs, by the person (contractor) who carries out the work. The lien holder may take possession until the asset / work is paid for in full. Liens must be registered under the various provincial laws in order to be protected and enforceable.

Limit Order An order in which the customer stipulates the highest or lowest price at which they are prepared to buy or sell (i.e., the maximum or minimum price at which the order can be carried out).

Limited Partnership Partnership form of organization consisting of a general partner who manages a project and limited partners who invest money but have limited liability, are not involved in day-to-day management and usually cannot lose more than their capital contribution.

Linchpin Technology A technology for which commercialization increases the market potential for other support- ing or ancillary technologies.

Line of Credit An agreement negotiated between a borrower and a lender which establishes the maximum amount against which a borrower may draw. The agreement also sets out other conditions, such as how and when money borrowed against the line of credit is to be repaid.

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Liquid Assets Also quick assets. Cash and readily disposable current assets.

Liquid Market Market where selling and buying can be accomplished with ease.

Liquidate To close out a long position in government securities and other assets, including commodity futures. Closing a short position is usually called covering.

Liquidating Dividend Distribution of assets in the form of a dividend from a corporation that is going out of business.

Liquidation Dissolution or winding up a company, either voluntary or compulsory. Disposal of assets for cash.

Liquidity Characteristic of a security with a float (number of units outstanding) to allow large trans- actions without a substantial drop in price.

Liquidity Crisis A situation in which a firm is unable to meet due bills. A period of “technical insolvency.”

Liquidity Ratios Ratios which indicate a borrower’s ability to meet short-term obligations incurred. The ratio of liquid assets to current liabilities is described as the quick or acid test ratio on a com- pany’s balance sheet.

Liquidity Sensitive Funds Highly mobile blocks of funds which seek risk-free, short-term investments which can quickly be converted into cash.

Lis Pendens Notice of commencement of court action recorded against title of property.

Listed Security A security listed on a national securities exchange, as opposed to one traded “over the counter.”

Listing When a securities issue is listed on a stock exchange, it is approved for trading.

Listing Requirements Prerequisites before a stock is listed for trading on an exchange. See Part B, Chapter 11, Public Markets, for more information.

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Listing Statement A stock exchange document published when a company’s shares are accepted for listing, which provides basic information on the company, its business, management, assets, capitalization and financial status.

Loan Agreement Contract between the bank and the borrower in which the terms and conditions of a credit commitment are recorded.

Loan Sale The sale, transfer or assignment of a loan or a loan participation to a third party with or without the knowledge of the borrower.

Lock-Box System An arrangement whereby a firm has its customers mail their payments to geographically dispersed post office boxes which are opened by its bank. The receipts are deposited in the firm’s account and the other enclosures are forwarded to the firm. This system speeds the collection process by reducing the time needed to mail, deposit and clear cheques.

Loco Cost of goods at the place where they lie or including delivery at the place named in the price quotation.

London Delivery Bar A bar of approximately 400 ounces troy, minimum fineness of .995 and carrying the mark- ings of an approved melter or assayer. The trading unit used in the London gold market.

London Interbank Bid Rate (LIBID) The rate which a bank is willing to pay for funds in the international interbank market. It is 125 basis points below LIBOR.

London Interbank Mean Rate (LIMEAN) The mean of LIBID and LIBOR.

London Interbank Offered Rate (LIBOR) London Interbank Offered Rate for Eurodollar funds, usually three or six months, although it can range from overnight to five years. Different banks may quote differing LIBOR rates simply because they use different source banks. Information as to this rate is usually gathered in London at 11:00 a.m. daily.

London Rule A term in a financing syndication agreement whereby all lending banks participate in new loans to help restructure a faltering debtor.

Long “Going long” means to purchase a commodity. (The opposite of “short.”)

Long Position A situation in which a commodity, currency or security has been bought on a net basis and not offset by a corresponding sale.

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Long-Term Bond A bond or debenture maturing in more than 10 years.

Long-Term Capital Account Balance of payments term to distinguish investment and government expenditure and receipts abroad from short-term capital or hot money flows. Together with the current account, it forms the basic balance of payments.

Long-Term Equity Anticipation Securities These are longer-term stock options.

Long the Basis A person or firm buying a spot commodity and hedging with a sale of futures is “long the basis.”

Loss Settlement Value The agreed value of equipment at various times during the term of the lease. It represents the liability of the lessee to the lessor in the event the equipment is lost or destroyed or rendered unusable for any reason during the lease term.

Love Money Financing extended by close friends and family. Lending is usually based on the relationship between individuals rather than on a formalized risk assessment.

Macroeconomics Analysis of a nation’s economy as a whole, using such aggregate data as price levels, unem- ployment, inflation and industrial production.

Make Whole To reimburse a lender for any loss of interest occasioned by prepayment of a debt obligation.

Making a Market Efforts by an underwriter to maintain trading activity in a particular stock by offering firm bid and asked prices in that stock on the public market.

Management Buyout Capital provided to facilitate the takeover of a business by a team of managers.

Management Capacity The general knowledge, skills and abilities resident in the management team of a firm. Skills include financial, domestic, network, human resource, and technological management, among others.

Management Company The professional manager of a private equity or venture capital fund.

Management Fee A charge by banks for managing a securities issue or credit, especially on Euromarkets. A fee paid to the operators of an investment company.

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Management Group A group of financial institutions which coordinate closely with the lead manager in the distribution and pricing of an issue.

Managing Underwriter Underwriter who leads the offering effort and who forms a syndicate of underwriters.

Mandate Formal authority to an agent (broker, banker or lender) setting out a customer’s instructions (e.g., a lead manager is given a mandate to raise funds for a client).

Manpower Incentives Programs that are implemented with the objective of creating jobs.

Margin Incremental percentage referring to deposits or collateral held to permissible exchange rate functions. In commodities, it is the amount of money or collateral deposited with a broker, or with the clearing house, to insure against loss on open futures contracts. It is not a part payment or a purchase. Maintenance margin is the amount which must be maintained on deposit with the broker at all times. In the stock market, shares may be bought “on mar- gin,” the buyer having to pay only part of the purchase price in cash immediately (i.e., the customer uses their broker’s credit).

Margin Call If a commodity, futures or securities market moves against a trader or speculator, they may receive a margin call to provide extra finance or security to maintain their margin.

Margin Requirements Refers to any of several different requirements for margin stipulated by a regulatory authority over its clientele.

Mark-to-Market Valuation at market rates, as of the balance sheet date, of securities purchased for trading purposes and off-balance sheet transactions such as foreign exchange and interest rate contracts.

Market Barrier Those obstacles, other than the needs for technical development, market analysis and business planning that must be overcome in commercializing a technology.

Market Capitalization Aggregate value of a corporation as determined by the market price of its total issued and outstanding stock.

Market Maker Recognized financial institution or individual making consistent buy and sell quotations in a selection of issues in the secondary market. A principal requisite is that the market maker must hold, or have ready access to, the issues quoted (i.e., carry an inventory).

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Market-Making A process where a bank, subject to market conditions, stands ready to buy or sell negotiable instruments at prevailing market rates during normal trading hours. The purpose of these activities is to clearly identify the market and to provide bank customers with orderly and efficient markets. Trading is on a net yield basis, free of commissions or fees, so that the difference between the bid yield and the offer yield is the profit.

Market Order Order to buy or sell a security or a futures contract at the best price obtainable at the time it is entered in the market.

Market Out Clause A clause incorporated in an underwritten agreement which enables the underwriter to rescind the agreement without penalty.

Marketing Plan A statement in words and numbers of how a business proposes to sell its product and/or services and to whom. It is an integral part of the business plan.

Marks Each good delivery bar is stamped with identifying “marks” by producers or assayers.

Master Lease Agreement The legal document signed by the lessor and the lessee which stipulates all the terms and conditions for any future lease. Each additional asset being leased requires only the comple- tion of a leasing schedule. The leasing schedule incorporates, by reference, all the terms and conditions of the master lease agreement.

Master Netting Agreement An agreement between one financial institution and a counterparty designed to reduce the credit risk of multiple derivative transactions through the creation of a legal right of offset of exposure in the event of default.

Matched The situation where a forward purchase is offset against a forward sale for the same date and the same amount.

Matchmaking Services Strategic alliances between capitalists and informal investors. These services function to screen investees on behalf of investors and act as a conduit to a deal.

Material Change Report A report providing a full description of any change in the business, operations or capital of the issuer that may be expected to significantly affect the market price or value of the issuer’s securities.

Maturity Date Delivery or settlement date for a futures contract. Final redemption date for a bond / loan. The expiry date of a deposit.

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Measured Resource A mineral resource intersected and tested by drill holes, underground openings or other sampling procedures at locations which are spaced closely enough to confirm continuity and where geo-scientific data are reliably known.

Medium-Term Bond A bond or debenture maturing over three and within ten years.

Medium-Term Notes (MTNs) Promissory notes issued by financial institutions to raise medium-term funds. Maturities range from one year to ten years for amounts of $100,000 and over. MTNs are issued in registered form on an interest-bearing basis.

Merchant Bank Originally a bank which specialized in financing international trade and, as such, developed specialist knowledge of the countries with which it dealt. Now it plays a much broader role by acting as an issuing house for stocks, bonds, by raising loans, equity, capital, dealing in bills and foreign exchange. Merchant banks also act for and advise companies (e.g., in merger situations and some deal in bullion).

Merger The joining of two firms through share exchanges or share purchases.

Mezzanine Financing A type of venture capital that can take several forms — debt, equity, warrants or options. The subordinated debt financing usually bridges working capital and expansion funding prior to a public offering or a buyout. Often includes long-term debt that is subordinated to the claims of existing debt.

Mezzanine Level Stage of a company’s development just prior to its going public.

Micro Business A business with annual sales of less than $200,000 and fewer than three employees.

Micro Loans Micro loans refer to small loans, generally in the range of $500 to $5,000, based on the character and reference group support rather than collateral. These are typically provided by developing nation’s banks and may be made as independent transactions or through informal lending circles.

Microeconomics Study and analysis of the behaviour of basic economic units, such as companies, industries or households.

Middle Market A generic term used to describe the universe of well-established and mostly private companies in traditional sectors.

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Mineralizaton A deposit of rock containing one or more minerals for which the economics of recovery have not been established.

Mini Business A firm with sales of $200,000 to $500,000 and three or more employees.

Minimum Offering The minimum number of shares to be sold by the underwriter under a “best efforts” agreement before the appointed trustee may release the proceeds to the issuer.

Minority Shareholders Stockholders who do not have control of a corporation by virtue of having less than 50% of the cumulative voting shares.

Mismatches A mismatch arises when the average remaining maturity of assets in a portfolio differs from that of liabilities. Interest rate exposure results, since a change in interest rates affects asset yields and liability costs at different times. Also referred to as gap positions or interest rate sensitivity gaps.

Monetarism School of economic thought which advocates strict control of the money supply as the major weapon of monetary policy, especially against inflation. Usually involves cuts in public spending and temporarily high interest rates.

Monetary Policy Techniques used by the central bank to influence the demand for goods and changing credit conditions.

Monetary Reform Catch-all phrase for any modification to “freely” floating currencies.

Money Laundering Popular term used to describe the process whereby criminals conceal illicitly acquired funds by converting them into seemingly legitimate income. While the term refers to the proceeds of organized crime generally, it is now most often associated with financial activities of drug dealers who seek to launder the large amounts of cash generated from the sale of narcotics.

Money Market A segment of the capital market where short-term (usually one month to three years maturities) financial obligations are bought and sold.

Money Market Instrument A financial instrument that is sold in the money market segment of the capital markets.

Money Market Present Value Formula The present value formula for calculating proceeds on a “yield to maturity” basis is as follows:

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Par value of note Proceeds = 1 + dealing rate times number of days to maturity to issuer

Money Supply The most narrowly defined M1 consists of all currency in circulation plus demand deposits held with the chartered banks. Broader definitions M2, M3, M4, and M5 begin to include various categories of time and saving deposits.

Moody’s U.S. firm which, along with Standard and Poor’s, supplies statistical information and a rating service from AAA to C for both corporate and municipal credits.

Moratorium A situation where a borrower makes a formal statement that they are unable to meet all or part of their debts. It is usually a holding action designed to lead to re-negotiation of outstanding debt repayments. Not to be confused with default.

Mortgage Debt instrument by which the borrower (mortgagor) gives the lender (mortgagee) a lien on property as security for the repayment of a loan.

Moveable Property In Quebec, assets that can be moved (e.g., machinery and equipment).

Multi-Component Facility Facility under which several different pricing options for drawing funds are available to the borrower. These may include issuing notes, drawing on short-term or medium-term credits or other special purpose credits.

Multi-Jurisdictional Disclosure System A filing system used by certain Canadian issuers.

Multicurrency A loan or bond issue involving several currencies. A bond issue may be made in a specific currency but repayable in several. A rollover credit may be available in different currencies that suit the borrower.

Multiples Analytical equity ratios such as price / earnings ratio. A corporation stock price expressed as a multiple of reported earnings per share.

Multiple-Unit Residential Building (MURB) Units or interests in MURB projects were popular tax shelter investments because of the immediate deductibility of certain “soft costs” and an exemption from a capital cost allow- ance limitation applicable to other non-qualifying residential buildings.

Multiplier Conceptual tool referring to the magnified impact that investment and spending have on total income, or that reserve requirements have on bank positions.

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Municipal Bond A bond issued by a state, or local government authority, especially in the U.S. The interest is exempt from U.S. federal taxation. The two major categories are general obligation bonds and reserve bonds.

Mutual Fund An investment product in which your money is pooled with the money of many other investors. A professional manager uses the pooled money to buy a portfolio of investments or securities and monitors each of the investments on an ongoing basis. There are many varieties of mutual funds, each with specific objectives. By investing in a mutual fund, you purchase units of that fund. The value of your units can go up or down depending on the type and performance of the mutual fund.

Naked Position Securities position that is not hedged from market risk.

Naked Warrant Warrants that are issued by themselves rather than with a bond.

National Association of Securities Dealers Automated Quotations (NASDAQ) System A computerized quotation system for issues quoted on the U.S. Over the Counter (OTC) market, sponsored by NASD.

National Association of Securities Deals (NASD) A self-regulatory U.S. association of brokers and dealers in the over-the-counter market. Reviews underwriters’ compensation for fairness and reasonableness.

National Association of Securities Dealers Automated Quotations A computerized quotation system containing information on all National Association of Securities Dealers-listed securities. This system functions similar to a securities exchange like the New York Stock Exchange or the American Stock Exchange.

National Policy Policy statements issued jointly by the provincial securities commissions in Canada.

Negative Carry When the cost of money borrowed to finance securities is higher than the yield on the securities.

Negative Cash Flow When a business spends more cash than it receives through earnings or other transaction in a period.

Negative Covenant An undertaking not to do certain things. It is frequently argued that negative covenants are preferable to positive covenants because it is easier to establish if something which was not to have been done has in fact been done rather than vice versa. The breaking of a covenant, say in a debenture, usually constitutes a default which, in turn, gives rise to certain specified remedies which can be taken by the debenture or other security holder.

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Negative Pledge An understanding by a borrower not to raise new loans giving new creditors preferential terms over existing creditors. Can also apply to the re-negotiation of existing loans.

Negotiable A security which is transferable by presentation of the security.

Negotiable Instrument Unconditional order or promise to pay an amount of money readily transferable from one person to another.

Negotiable Sale Issue of securities in which the price and other terms of sale are set by the securities under- writers and issuer through negotiations. The opposite is a competitive sale where sealed bids are submitted.

Net Borrowings Total long-term debt, less cash on hand.

Net Interest Income The difference between what a bank earns on loans and securities and what it pays on deposits and subordinated debentures. Called Net Interest Margin when expressed as a percentage of average total assets. Sometimes referred to as the spread.

Net Lease A capital or financial lease in which the client, or lessee, pays all the costs in connection with the use of the equipment in addition to the rental payable under the lease agreement (e.g., under a net lease , the lessee pays all taxes, insurance and maintenance).

Netting The offsetting with a counterparty or counterparties of financial obligations or payments one is owed with those one is entitled to receive. Netting is also used as a risk management tool to help counterparties, thus reducing the costs arising out of payment settlements.

New Investment The original round of financing in a company. Venture-backed companies typically receive further follow-on financing as they grow and develop.

New Issue Stock or bond being offered to the public for the first time.

New Money In a refunding operation, the amount by which the nominal value of the securities is greater than that of the maturing securities. Thus, the borrower takes in additional cash beyond the amount being repaid.

New York Commodity Exchange Inc. Commodity futures market trading principally in gold, silver and copper.

New York Futures Clearing Corporation (NYFCC) Set up by the New York Futures Exchange to handle clearing operations.

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New York Futures Exchange (NYFE) New York Futures Exchange was established in August 1979 and is a wholly owned subsid- iary of the New York Stock Exchange.

Niche Particular specialty or market segment in which a firm has garnered a large share.

No Par Value Common stock without a stated face value.

Non-Callable Preferred stock or bond that cannot be redeemed at the option of the issuer. Also non-redeemable.

Non-Full Payout Lease A lease which does not return the lessor’s entire investment during the full term of the lease. The exposure remaining to the lessor is commonly described as “residual risk.”

Non-Performing Loans Non-performing loans consist of non-accrual and renegotiated reduced-rate loans. Non- accrual loans are those placed on a cash basis (i.e., interest income is only recognized when cash is received) because, in the opinion of management, there is reasonable doubt regard- ing the collectability of principal or interest. Loans other than credit card balances are automatically placed on a cash basis when a payment is 90 days past due, unless the loan is well secured and in the process of collection. All loans are classified as non-accrual when a payment is 180 days in arrears. Renegotiated reduced-rate loans are loans where, due to the weakened financial condition of the borrower, the terms have been modified to provide for a reduction in the interest rate below the prevailing market rate charged on similar loans to new borrowers.

Non-Residential Mortgages Mortgages on land and buildings that are used for commercial purposes.

Normal Course Issuer Bid A program for the repurchase of a company’s own shares for cancellation through a stock exchange that is subject to the various rules of the relevant stock exchange and securities exchange.

Nostro Account The depositing description of an account held with another bank (e.g., our account in Germany with a German bank). See “Vostro Account.”

Note Insurance Facilities (NIFs) and Revolving Underwriting Facilities (RUFs) A medium-term arrangement enabling borrowers to issue short-term paper, typically of three or six months maturity, in their own names. Usually a group of underwriting banks guarantees the availability of funds to the borrower by purchasing any unsold notes at each rollover date, or by providing a standby credit. Facilities produced by competing banks are called, variously, revolving underwriting facilities (RUFs), note purchase facilities and Euronote facilities.

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Notice Day Day on which notices of intent to deliver on futures contracts may be issued.

Notional Principal A hypothetical amount on which swap payments are based. The notional principal in an interest rate swap is never paid or received.

New York Stock Exchange (NYSE) The NYSE, sometimes known as the “Big Board,” is a stock exchange located at Wall Street, New York City, United States. It is by far the world’s largest stock exchange by market capi- talization of its listed companies at US$16.613 trillion as of May 2013.

New York Stock Exchange (NYSE) Common Stock Index Composite index covering all stock listed on the Big Board, based on the market close at end December 1965 as 50.00 and weighted according to the number of shares listed for each issue. There are four supplementary indices for industrials, transportation, utilities, and finance and real estate.

Off-Balance Sheet Activities Bank’s business, often fee-based, that does not generally involve booking assets and taking deposits. Examples are trading of swaps, options, foreign exchange forwards, standby commitments and letters of credit.

Off-Balance Sheet Financial Instruments A variety of products offered to customers to meet their needs for liquidity, foreign exchange and interest rate protection. A bank uses certain of their products to manage its interest rate and foreign exchange rate risk.

Offering Circular A document, similar to a prospectus, that is distributed by offerors of securities exempt from registration. Also referred to as “Offering Memorandum.”

Offering Memorandum A “prospectus-like” document providing detailed descriptions of a company’s past, pres- ent and prospective business operations. It is normally prepared for the use of potential purchasers of securities offered under the seed capital or private placement prospectus exemptions.

Offshore Banking Unit (OBU) A foreign bank usually handling foreign exchange, Eurocurrency and domestic money market transactions in a centre where the capital market is free and enjoys advantages in terms of tax and/or reserve requirements.

Offshore Centre (Market) Conglomeration of OBU’s drawn together by the tax advantages of operating in that centre. Examples: Bahrain, Cayman Islands and Philippines.

Ombudsperson A liaison person of a bank or other institution who works at arm’s length to service the concerns of small business owners.

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Open Contract A position which has not been covered by an offsetting transaction.

Open Mortgage A mortgage agreement which allows the borrower to repay the debt more quickly than specified and usually without prepayment charges.

Open Outcry Method of public auction required for making bids and offers in some commodity markets and stock markets.

Open Position (Open Interest) Total of futures contracts open at any one time which have not yet been matched and closed by a corresponding opposite transaction (i.e., there has been no subsequent sale or purchase, nor has delivery been made or taken of the financial instrument or physical commodity). Also called open contracts or open commitments.

Operating Cycle The process and time required to convert the inputs of raw materials and labour to cash from sales.

Operating Lease A lease in which the lessor does not recover its entire investment plus profit during the basic lease term or transfer substantially all the benefits and risks incident to ownership of the property to the lessee. The unrecovered portion is an exposure remaining to the lessor and is commonly described as “residual risk.”

Operating Leverage The difference between a financial institution’s revenue growth rate and non-interest expense growth rate.

Operating Loan A loan intended for short-term financing to supply cash flow support or cover day-to-day operating expenses. Loans of this type are part of the line of credit.

Opportunity Cost The return a firm can earn on the best alternative similar-risk investment opportunity available at a given time. In some cases, the cost of borrowing or the savings that would result from repayment of an existing debt.

Opposition The process whereby members of the public may object to the granting of a trade-mark registration if they have valid grounds for doing so.

Option Right, acquired for a price, to buy certain specified property (e.g. a security or an instrument), or to sell at an agreed price within a specified period of time.

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Option Contract A transaction where one party has the right to settle all or part between two specified dates at a price outlined in the contract.

Ore Material that contains one or more minerals, at least one of which has commercial value and which can be recovered at a profit.

Ore Body A continuous well-defined mass of material of sufficient ore content to make extraction economically feasible.

Original Equipment Manufacturer (OEM) A major equipment manufacturer which typically purchases various parts, supplies or sub-assemblies from other manufacturers.

Out-of-the-Money Option An option whose exercise rate is above the current market rate for a call option and is below the current market rate for a put option.

Overburden Waste sitting above the ore body.

Over-the-Counter This is a market for securities made up of brokerage concerns that may or may not be mem- bers of a securities exchange. Thousands of companies have insufficient shares outstanding, stockholders or earnings to warrant application for listing on a stock exchange. Securities of these companies are traded in the over-the-counter market between brokerage concerns that act either as principals for their own account or as agents for customers.

Over-the-Counter Option Customized options with characteristics individually negotiated between the bank and the customer.

Overnight Deal from the current trading day to the next. At weekends, this means Friday to Monday.

Overtrading Practice of a firm that expands sales beyond levels that can be financed with normal working capital.

Pac-Man Strategy This technique is used by a corporation that is the target of a takeover bid to defeat the acquirer’s goal. The target company defends itself by threatening to take over the acquirer and begins buying its common shares.

Paid up Shares Shares for which the company has received the full nominal value in payment.

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Paired Shares Common stocks of two companies under the same management that are sold as a unit, usually appearing as a single certificate printed front and back.

Par Price of a security when this is equal to its nominal or face value. Has more significance with bonds indicating maturity risk than it has with common stock.

Par Value The principal or face value of a security.

Pari Passu To rank equally or in a stated ratio with another portion of the company’s capital structure or debts.

Participating Preferred Stock Preferred stock that, in addition to paying a deferred dividend, gives the holder the right to participate with the common stockholder in additional distributions of earnings under specified circumstances.

Participation Fee Fee charged by a bank for taking part in providing a loan (e.g., in the Euromarket).

Partly Paid Shares for which the full nominal value has not been paid and on which a liability to pay the balance exists. Often used in connection with new issues when the terms of the issue require only part of the issue price to be paid on application.

Pass-Through Securities Securities, usually mortgage-backed, where part capital is repaid to the lender together with interest payments.

Patent A government grant giving the right to exclude others from making, using or selling an invention.

Patient Capital A loan in which the terms of repayment are delayed in order that the borrower can earn revenue to pay back the capital and interest outstanding.

Payback Period The number of years required for a firm to recover the initial investment required by a project from the cash inflows it generates.

Paying Agents Bank of a bond issuer where principal and interest are payable.

Payment Cycle The interval between the time at which the firm purchases raw materials and labour, and the time at which it makes the cash payment for them.

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Pay Zone An interval of rock intersected by a well which contains economic accumulations of hydrocarbons.

Pension Funds Funds invested by the state, trade union or corporate sector for their members’ pensions. An important source of finance for the capital market and investment. Pension funds can have a considerable impact on stock markets as well as on economic activity.

Performance Bond Instrument aimed at ensuring a service or contract is completed correctly. If this is not the case, then the bank issuing or guaranteeing the bond will be required to make a compensa- tory payment.

Personal Guarantee A personal promise made by an individual on behalf of the borrower to repay the debt if the borrower fails to repay as agreed.

Physical Market American term for the traditional metals market, where precious metals are bought and sold for immediate delivery in the form of actual bars, as opposed to the U.S. futures market, where delivery is only taken on a fraction of the contracts when they fall due.

Piggy-Back A clause which allows a party the same rights as another if certain actions are taken by the other. A piggy-back buy-sell would mean that if A sold their shares, B would have the right either to force sale of their own shares at the same price (piggy-back) or buy A’s shares at the same price (right of first refusal) as well as the alternative of doing nothing.

Piggy-Back Warrants A second series of warrants acquired by holders on exercise of warrants sold as parts of a unit.

Pink Sheets A U.S. over-the-counter market primarily for trading American depositary receipts (ADRs) that are not subject to registration and periodic reporting with the U.S. Securities and Exchange Commission.

Place of Origin A word that designates the origin of a product or service and, therefore, may not be regis- tered as a trade-mark.

Plus Accrued Interest Applied to the price of bonds with interest accruing from the date of the last payment. A seller is, therefore, entitled to receive the interest, as calculated from the last interest date to the business day following the day on which the sale is made, from the buyer.

Point Used in describing changes in stock / bond prices or exchange and interest rates (e.g., in the U.S. stock market one point equals one dollar, while in the bond market it is equal to one dollar per $100 of value). See “Basis Point.”

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Poison Pill Strategic move by a takeover-target company to make its shares less attractive to an acquirer, usually by an action that causes dilution.

Poison Put Provision in an indenture giving bondholders the privilege of redemption at par if certain designated events occur, such as a hostile takeover, the purchase of a big block of shares or an excessively large dividend payout. These are popular antitakeover devices because they create an onerous cash obligation for the acquirer.

Portable Mortgage This option allows the transfer of the loan balance, interest rate and remaining term of the old mortgage to a new property. If additional money is lent, the result will be a new mortgage with a blended interest rate.

Portfolio Company A business entity that has secured at least one round of financing from one or more venture capital or private equity firms.

Positive Carry When the cost of money borrowed to finance securities is lower than the yield on the securities.

Positive Yield Curve When interest rates are higher on long-term debt securities of the same quality.

Post-Effective Amendment An amendment to a registration statement filed after the effective date of that registration statement.

Power of Attorney A legal document authorizing one person to act for another, either for a specific time and/or purpose in general.

Pre-Emptive Right Right of shareholders and others to maintain their proportional control of, and equity in, a corporation when additional shares are issued.

Pre-Publication Verification A second search of Trade-marks Office records to ensure no confusing trade-marks exist before a given application is published in the Trade-marks Journal.

Preferred Investment Range A private equity fund’s preferred scope for making investments. This varies by market segment, with many venture funds preferring ranges below $10 million and many buyout / mezzanine funds preferring ranges between $10 million and $50 million.

Preferred Stock A class of share capital that entitles the owner to a fixed dividend and a stated dollar value per share in an event of liquidation.

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Preliminary Prospectus A securities disclosure document filed with a securities commission, which complies with the requirements for the form and content of prospectuses, but which has not been reviewed by the commission’s staff and which omits the terms of issue. The receipt issued promptly upon filing permits the distribution of the document to potential investors to solicit their interest in the proposed offering.

Preliminary Search The search of Patent or Trade-marks Office records one should undertake before submitting an application for registration. The search may turn up conflicting patent or trade-marks and show that the application process would be in vain.

Premium The difference between the par value and the value of a security at maturity when the price is greater than the par value.

Price-Earnings Ratio (P/E Ratio) The current market price of a company’s stock expressed as a multiple of its total per share earnings for the previous 12 months.

Pricing Amendment Generally, the last amendment to a registration statement before it becomes effective, indicating the offering price and other data dependent on the offering price.

Primary Distribution Primary distribution is the sale of a new issue of stocks or bonds as contrasted to an offer- ing of securities by existing shareholders (a secondary distribution or secondary offering).

Primary Market The new issuance of money market instruments such as banker’s acceptances, bearer deposit notes and commercial paper. The Government of Canada weekly auctioned treasury bills are primary market issues.

Primary Offering The treasury securities of the company offered for sale under a prospectus.

Prime Rate The interest rate that is charged by the banks to their most creditworthy customers.

Principal Face amount of a bond, exclusive of accrued interest. Person employing another to act as agent. A person acting for their own account in a transaction.

Principal Jurisdiction The jurisdiction selected by the issuer to assume primary responsibility for the review of a preliminary prospectus filed in more than one jurisdiction.

Principal Shareholder A person or company who owns more than 10% of any class of the company’s securities (whether of record or beneficially, directly or indirectly).

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Prior Charges Charges on debentures, loan stock or notes, which rank ahead of share capital. The service of interest on such charges is a cost of running the company which must be met before any dividend is paid and in the event of default on the conditions of the issue, the repayment of such indebtedness is a charge ranking before share capital.

Private Company A company whose ownership is private and, thus, does not need to meet the regulatory filing requirements of local securities commissions.

Private Equity The generic term for the private market reflecting all forms of equity or quasi-equity invest- ments. Often consists of buyout capital, mezzanine capital and venture capital.

Private-Independent Fund A professionally managed private equity fund that raises capital from external sources, such as institutional investors.

Private Placement The sale of stock or debt to a limited group of investors that, therefore, doesn’t have to comply with all the rules and regulations of disclosure that restrict the normal placement procedure.

Probable Reserves Those measured and/or indicated reserves which are not yet “proved” but of which detailed technical and economic studies have demonstrated that extraction can be justified at the time of determination and under specific conditions.

Pro Forma A type of financial statement or other financial data (e.g., ratios and statistics) prepared “as if” a transaction or event had taken place on a retroactive basis.

Procurement Policy Government policy that controls where government funds are spent. A “Buy Canadian” procurement policy can shift millions of dollars of government spending to Canadian firms.

Prohibited Marks Marks which are specifically prohibited from use through subsection 9(1) of the Trade- marks Act.

Project Financing Debt finance, usually non-recourse, provided by financial institutions for the development and construction of a new project.

Promissory Note A written promise to pay. Used as an instrument of commodity futures trading and of direct company borrowing in the form of commercial paper.

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Promotional Incentives Programs intended to improve the awareness of Canadian products and services. Federal and provincial governments implement trade missions and sponsor exhibits at trade shows as well as offer assistance in the development of promotional material.

Prompt Offering Qualification System (POP) A system which allows reporting issuers to issue a short form prospectus that contains only information not previously disclosed to regulators.

Proposed Use A statement indicating intention to use a certain trade-mark and how that use will occur.

Prospectus A securities disclosure document which provides full, true and plain disclosure of all facts that may materially affect the market price or value of a company’s securities (whether issued or proposed to be issued), and is prepared in accordance with the requirements of the governing securities legislation.

Proved Reserves Those measured mineral resources of which detailed technical and economic studies have demonstrated that extraction can be justified at the time of determination and under specific conditions.

Provision for Loan Losses A charge to income which is added to the allowances for credit losses. Specific provisions are established to reduce the book value of specific retail and commercial loans to estimated realizable values. A country risk provision is established for possible losses on aggregate loans to a group of 46 less-developed countries designated by the Superintendent of Financial Institutions Canada. General provisions are established for anticipated losses on aggregate exposure in a particular industry or geographic region (excluding less developed countries (LDCs)) where credit losses cannot yet be determined on an individual facility basis.

Proxy Person or legal entity authorized to represent and, if necessary, act and vote on behalf of another.

Public Offering The sale of securities to the general investing community that requires registration with the securities regulators.

Purchase Fund A fund set up by a company to retire a stated number of preferred shares in the market at a pre-stipulated price on a best efforts basis that doesn’t carry over from year to year.

Push Out The process during a stock split where the transfer agent forwards new shares directly to the registered holders of old share certificates without the holders having to surrender these old shares. Both old and new certificates have equal value.

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Put Option An option or contract giving the holder the right to sell a certain amount of stock or com- modity futures at a special price at a specific forward date, or within a defined period. Puts are usually purchased by those who think a stock option may go down.

Qualified Institutional Investor In the U.S., to qualify as a qualified institutional investor under Rule 144A, the investor must, in the aggregate, own and invest on a discretionary basis $100 million or more in securities of unaffiliated issuers. Banks and savings and loan associations must, in addition to owning and investing on a discretionary basis at least $100 million of securities of unaffiliated issuers, have an audited net worth of at least $25 million. Registered broker-dealers must in the aggregate own and invest on a discretionary basis $10 million or more in securities of unaffiliated issuers to meet the qualified institutional investor test under Rule 144A. Also referred to as a qualified institutional buyer.

Quasi Business Single ventures formed for the exploitation of temporary opportunity, often with no employees. They are short-lived, lack conventional business organization and may incubate start-up operations.

Quick Ratio The ratio of cash and short-term accounts receivable compared to short-term current liabilities that provides a measure of the ability of a firm to pay its financial obligations as they come due.

Quiet Filing The practice by which the U.S. Securities and Exchange Commission reviews a draft of the registration statement and provides a comment letter without an official filing being made. This type of filing is normally only available to foreign registrants.

Quit Claim Deed A full release of one’s interest in property to another, usually executed between mortgagees and mortgagors.

Quotation Current price or rate of a commodity, security or currency on the market place or exchange, but not necessarily the price at which a trade will be made.

Rally Short, spirited price rise.

Ratchet A term in a shareholder agreement wherein shareholding positions are adjusted based on specified financial performance.

Rating Creditworthiness of a specific security issue or a particular borrower as evaluated by a ratings agency (e.g., typically graded from AAA downwards).

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Ratio Comparison of two figures used to evaluate performance. One measure of the health of a business is how well it is doing in these activities compared with similar businesses. Exam- ples of key ratios are the debt / equity ratio and return on investment.

Real Property Real estate, including land and buildings.

Reallowance In underwriting, a fixed percentage of the selling concession representing discounts between NASD members.

Recapitalize To refinance the capital structure of the firm, which often involves retirement of debt through issuance of equity.

Receivables Accounts receivable, being payments due from customers.

Recession When the gross domestic product declines for at least two consecutive three-month periods.

Recourse In the event of default, recourse gives the right to take possession of the asset.

Recourse Loan Loan for which a guarantor is liable for payment in the event the borrower defaults.

Red Herring A preliminary prospectus where certain information is printed in red ink on the cover. Its sole purpose is to ascertain the investors’ interest while it is being reviewed by the regulatory authorities.

Red-Lined Prospectus A prospectus filed with final material which highlights in red underlining and sidelining all modifications made to the preliminary prospectus in order to facilitate the securities commission’s review.

Redemption The purchase of a security by the initial issuer at a predetermined time and price.

Rediscount Purchase before maturity by a central bank of a government obligation or other financial instrument already discounted in the money market.

Refunding Rollover of government debt by replacing one issue with another, the maturity of which is deferred to a later date, typically by offering a straight exchange. Also the replacement of an issue by another bearing a lesser interest charge, thereby reducing the cost of servicing the debt. The latter is sometimes called refinancing.

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Regional Incentives Programs directed at promoting balanced regional economic development (e.g., designated regions, such as the Maritimes, Manitoba, and Northern Ontario, receive high priority in many aid programs, such as job creation).

Registered Bond A bond which bears the name of the owner that can be registered as to the principal and/or interest.

Registered Security Security registered on the books of the issuing company in the name of the owner. Such ownership can only be transferred when endorsed by the owner.

Registered Trade-Mark A trade-mark entered on the federal government’s Trade-mark Register which formally recognizes the owner’s rights to the mark.

Registered Trade-Mark Agent A person who is qualified to be registered under federal legislation as a trade-mark agent. The person is either a lawyer or notary (in Quebec) who has paid a registration fee, or someone who has worked, under supervision, in the trade-marks’ field for a prescribed period and has passed qualifying examinations.

Registered User A party that has been authorized to use a registered trade-mark by the mark’s owner.

Registrar Agency issuing certificates to new shareholders, checking transfers of stocks and reconciling new stocks issued with number of stocks cancelled.

Registrar of Trade-Marks The official responsible for the Canadian Trade-marks Office.

Registration Requirement for a corporation to be listed in a particular country before it can be admitted for dealings on a national or local security exchange. Public offerings of new securities by a corporation or outstanding securities by controlling shareholders must also be registered. The exact amount of information which must be disclosed at the different legal requirements can vary between countries.

Regular Delivery Unless otherwise stipulated, sellers of stocks must deliver such shares by the third full business day after sale.

Regulation D Provisions of the U.S. Securities Act containing rules that govern certain private placements.

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Regulation M Since April 1981, this gives the U.S. Federal Reserve Board the power to regulate consumer leasing. Previously Regulation M covered the foreign activities of member banks. These are now covered by the International Banking Act of 1979 and the Monetary Control Act of 1980.

Regulation Q U.S. Federal Reserve power to impose interest rate ceilings on certificates of deposit and all time deposits. It was phased out in 1986.

Regulation S Provisions of the U.S. Securities Act containing rules that govern registration exemptions related to offshore public offerings.

Regulation S-K Instructions for preparing non-financial statement information for inclusion in the U.S. registration statement. Issuers should be aware that some of the information required by Regulation S-K are financial in nature (for example, selected financial information, quar- terly information).

Regulation S-X Instructions for preparing financial statements for inclusion in the registration statement.

Regulation T U.S. Federal Reserve regulation limiting the amount of credit which can be advanced by brokers and dealers to customers to buy securities or for margin requirements.

Regulation U U.S. Federal Reserve regulation governing the quantity of credit a bank can provide to its clients seeking to buy securities.

Reinsurer Insurance concern operating in the reinsurance market whereby the initial insurer reinsures part of the original risk.

Rental Factor A factor expressed as a percentage which, when multiplied by the asset cost, gives the rental payment. All lease rate charts use rental factors.

Repo Agreement A repurchase agreement.

Reporting Issuer A company that has obtained a receipt for a final prospectus filed with a securities commis- sion or whose securities are listed and posted for trading on a stock exchange.

Repurchase Agreement Usually involves U.S. Treasury or Federal agency securities. Generally transacted in denominations of $5 million or more, these instruments are basically loan arrange- ments by which a holder sells the securities at a specified price under commitment to repurchase the same or similar securities at a later date. They are considered collateral

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for the transaction. Dealers in the New York money market use these arrangements to finance their positions. The Federal Reserve utilizes such agreements to temporarily bank reserves.

Research and Development Incentives Programs intended to encourage basic research by industry. Many firms can recover much of their research and development costs through government assistance.

Reserve Requirement Legislated percentage of deposits that depository institutions (e.g., banks) must set aside in their vaults or with the central bank.

Reservoir A geologic structure capable of trapping and holding economic accumulations of hydrocarbons.

Residual Value The net value, if any, of the equipment at the end of the lease term. Residual value may be estimated by the lessor before the lease commences and taken into account in establishing the rental. (The actual residual value may, of course, turn out to be higher or lower than the lessor’s original estimate.)

Restricted Shares Shares that participate in a company’s earnings and assets as common shares but generally have no or restrictions on voting rights.

Restrictive Loan Provisions Provisions that place constraints on the operations of term borrowers, such as restrictions on working capital, fixed asset, future borrowing, combinations, salaries, security invest- ments, the use of loan proceeds and the payment of dividends. Sometimes called “restrictive covenants.”

Restructuring / Turnaround Financing Capital provided to an established firm, usually in a traditional sector, that is experiencing financial distress.

Retractable A clause in the issuance of a bond or a preferred share which allows the holder to redeem the security on a specified date or time in the future providing that certain conditions are met.

Return on Assets (ROA) Net income expressed as a percentage of average total assets. Used, along with return on equity as a measure of profitability and as a basis for intra-industry performance comparison.

Return on Equity (ROE) Net income, less preferred share dividends, expressed as a percentage of average common shareholders’ equity.

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Return on Investment (ROI) The amount of money earned by an investment. This key number is usually expressed as a percentage which compares net profit or dividend received with the original amount invested.

Revenue Bond A municipal bond that is secured by revenues from tolls, or rent from the facility being used.

Reverse Mortgage Program whereby a homeowner borrows against home equity and receives regular pay- ments (tax-free) from the lender until the accumulated principal and interest reach the credit limit of equity.

Reverse Split The exchange of a greater number of company shares for a fewer number, on a pro rata basis, thus resulting in a higher nominal share price and a lesser number of outstanding shares.

Reverse Swap One form of activity in the secondary swap market. A reverse swap can offset the interest rate or currency exposure on an existing swap.

Reverse Takeover A private company strategy for gaining access to public markets through the takeover of a listed business, usually referred to as a “shell” firm.

Reverse Triangular Merger The merger of the subsidiary of an acquiring company with a target company.

Revocable Credit Credit given under a bill of exchange revocable at any time without notice.

Revolving Credit Line of credit against which funds may be borrowed at any time, with regular scheduled repayments of a predetermined minimum amount.

Revolving Underwriting Facilities (RUFS) See “Note Insurance Facilities.”

Right (Rights Offering) A privilege given to existing common shareholders that allows them to purchase additional shares from the company at a predetermined price.

Risk Used interchangeably with the term “uncertainty” to refer to the variability of returns associated with a project or forecast values of the firm. In a statistical sense, risk exists when a decision maker can estimate the probabilities associated with various outcomes.

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Risk-Adjusted Assets and Off-Balance Sheet Financial Instruments Used in the calculation of risk-based capital ratios. The face amount of lower risk assets is discounted using risk weighting factors in order to reflect a comparable risk per dollar among all types of assets. The risk inherent in off-balance sheet transactions is also recognized, first by adjusting notional values to balance sheet (or credit) equivalents, and then by applying appropriate risk weighting factors.

Risk Premium That part of interest rate or yield that represents a premium over the rate on a risk-free investment.

Road Show Presentations by chief executive officer, management and underwriters on tour of the financial communities to promote and enhance the sale of the company’s securities.

Roly-Poly CD This facility involves the issue of certificates of deposit on a similar basis to note insurance facilities.

Round Lot A security transaction for the number of shares that constitute a normal unit of trading or any multiple of that unit on a stock exchange.

Round Tripping In the U.K., a situation where a company may decide to borrow from its bank using an existing line of short-term credit (overdraft) and then deposit those funds in the short-term money market for short-term gain. The situation arises when short-term money market rates are higher than those charged on an overdraft facility and a profit can be made from the interest rate differential.

Rule 144A Exemption established in the U.S. Exchange Act that allows, under certain conditions, the sale of restricted and control stock in the public market without registration of that stock.

Rule of 78s Mathematical methodology for computing rebates of interest on installment loans. It uses the sum-of-the-year’s-digits basis in determining the interest earned by the finance company for each month of a year, assuming equal monthly payments, and gets its name from the fact that the sum of the digits 1 through 12 is 78. Accordingly, interest is equal to 12/78ths of the total annual interest in the first month, 11/78ths in the second month, and thus.

Safe-Keeping of Securities A bank, for a fee, undertakes to hold and to service stocks, bonds or money market instru- ments. The bank will be liable for negligence, for example, if it fails to collect due dividend or interest payments and to present the instrument at maturity.

Sale and Leaseback A transaction in which a lessor purchases assets and then leases them back to the party from whom they were purchased.

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Sampling Taking small pieces of rock at intervals along exposed mineralization to determine mineral content.

Samurai Bond Bond issued in Japan by a foreign borrower, denominated in yen, which can be bought by non-residents of Japan. No withholding tax is payable.

Save Harmless A contract clause whereby one party to a transaction tries to protect themself from a past or subsequent liability caused, usually unwittingly, by the other party.

Savings and Loan Association U.S. national or state chartered institution holding savings deposits and primarily making funds available to the housing industry through home mortgages.

Savings Ratio Percentage of disposable personal income that is saved or used to repay debt.

Schedule 1 Banks Schedule 1 Banks are domestic banks and are authorized under the Bank Act to accept deposits, which may be eligible for deposit insurance provided by the Canadian Deposit Insurance Corporation.

Schedule 2 Banks Schedule 2 banks are foreign bank subsidiaries authorized under the Bank Act to accept deposits, which may be eligible for deposit insurance provided by the Canada Deposit and Insurance Corporation. Foreign bank subsidiaries are controlled by eligible foreign institutions.

Schedule 3 Banks Schedule 3 banks are foreign bank branches of foreign institutions that have been autho- rized under the Bank Act to do banking business in Canada. These branches have certain restrictions.

Schuldscheindarlehen Financial instrument in West Germany involving a loan against a borrower’s note.

Scorched-Earth Policy Technique used by a company that has become the target of a takeover attempt to make itself unattractive to the acquirer. To illustrate, it may agree to sell off the most attractive parts of its business, or it may schedule all debt to become due immediately after a merger.

Scrip A temporary document that entitles the holder to receive stock or some other asset at some specified future date. A form letter of undertaking.

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Secondary Distribution The sale of securities by other than the issuer of the securities. It is usually the holdings of an individual stockholder or an estate that is being liquidated. In secondary distribution, the selling shareholders, rather than the issuing corporation, receive the proceeds of the offering.

Secondary Market The market where securities are traded either in an exchange or over the counter after they have been issued. Telephone / telex and over the counter market for the sale and purchase of international and foreign bonds or domestic securities after initial issue on primary markets. The proceeds of the sale are received by an investor and not by the corporation or government unit underlying the transaction. In commodities, sale or resale by an intermediary rather than a first-party transactor. Money market instruments, such as Government of Canada treasury bills and banker’s acceptances already issued and outstanding, may change hands many times prior to maturity.

Secondary Offering Also known as a secondary distribution. The redistribution of a block of stock, normally of an established corporation, some time after it has been brought to market by a firm or group of securities firms.

Securities and Exchange Commission (SEC) Official U.S. body established by the Securities Exchange Act of 1934. Charged with regulatory oversight and administering rules associated with all parts of the securities industry.

Securities Act of 1933 U.S. federal act regulating the offering and selling of securities in interstate trade and through the mail. Commonly called the “the ‘33 Act,” “the Securities Act” or “the 1933 Act.”

Securities Exchange Act of 1934 U.S. federal act regulating securities markets and practices. Commonly called the “the ’34 Act,” “the Exchange Act” or “the 1934 Act.”

Securities Negotiable instruments, such as stocks and bonds.

Securitization The term is most often used narrowly to mean the process by which traditional bank assets, mainly loans or mortgages, are converted into negotiable securities which may be purchased either by depository institutions or by non-bank investors.

Security Assets pledged to support a loan. In the case of term loans, the property (e.g., land, buildings or equipment) being purchased with the loan usually forms the security for the loan.

Seed Capital The proceeds raised by a one-time sale of securities to a restricted number of purchasers, usually to finance the initial development of the company’s business. This initial sale is exempt from prospectus requirements.

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Selected Financial Data A summary included in a registration statement or other filing that shows selected data in a convenient, readable format, thus highlighting trends in the registrant’s financial condition and results of operations.

Sellers’ Option Option for a seller to decide, provided the standard contract terms are observed, the time and place of delivery and/or the quality of commodity or security supplied in execution of an order.

Selling Concession The portion of the spread paid to managers, underwriters and the selling group for the securities purchased by them.

Selling Group Members Those invited by a lead manager to place an issue. The group consists of all syndicate mem- bers plus other banks and securities dealers. Members report their subscription results to the lead manager and thereupon receive an allotment depending on their results and on their position and reputation as placers. They are allocated at a set time called the selling period. Unlike syndicate members, they assume none of the risk of underwriting the securities.

Senior Debt Debt securities whose claim is prior to junior obligations and equity on a corporation’s assets in the event of liquidation.

Sensitivity Analysis Study using modelling techniques for measuring the effect of a change in a variable on the risk, or profitability of an investment, often referred to as “what if” analysis.

Serial Bond A bond where a predetermined amount of the principal matures in each year over the life of the bond.

Settlement Points Regional collection points in the clearing and settlement system operated by the Canadian Payments Association. Settlement points forward each bank’s regional balance to the Bank of Canada in Ottawa at the end of each day to allow the central bank to adjust the banks’ balances with the central bank.

Settlement Value The minimum payout value, expressed as a percentage of the original cost of the asset, at various times during the term of the lease.

Shakeout Change in market conditions that results in the elimination of marginally financed partici- pants in an industry.

Share Capital Total of shares authorized to be issued, or actually issued, by a company.

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Share Register Register kept by a limited company giving details of shareholdings, including addresses of shareholders.

Shelf Prospectus A prospectus filed with and received by a securities commission where no distribution of shares is contemplated. The purpose of the filing is the attainment of “reporting issuer” status to facilitate future distributions of shares and/or trading of outstanding shares.

Shelf Registration A U.S. term used for Securities and Exchange Commission Rule 415 adopted in the 1980s, which allows a corporation to comply with registration requirements up to two years prior to a public offering of securities. With the registration “on the shelf,” the corporation, by simply updating regularly filed annual, quarterly and related reports to the Securities and Exchange Commission, can go to the market as conditions become favourable with a minimum of administrative preparation. The flexibility corporate issuers enjoy as the result of shelf registration translates into substantial savings of time and expense.

Shogun Bond A foreign currency bond sold to domestic investors in Japan.

Short Anchor Very short term component of a U.S. Treasury refunding package.

Short Position A situation where a commodity, currency or security has been sold and has yet to be cancelled out or covered by a corresponding purchase.

Short Sale Sale of stocks, bonds, foreign exchange or commodities that the seller does not own made in anticipation of a fall in prices.

Short-Term Debt All debt obligations coming due within one year.

Short-Term Notes (STN) Promissory notes issued by financial institutions to raise short-term funds. Maturities range from one day to 365 days for amounts of $50,000 and up. STNs are issued in bearer or registered form on a discounted or interest-bearing basis.

Shot-Gun A clause in a buy-sell agreement whereby if one party offers to buy out the other at a certain price, the other party has, within a limited period, either to accept the price or buy the offeror out at the same price.

Securities and Investment Board (SIB) The key regulatory body of the British financial community.

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Singapore Interbank Offered Rate (SIBOR) SIBOR is a daily reference rate based on the interest rates at which banks offer to lend unse- cured funds to other banks in the Singapore wholesale money market (or interbank market). It is similar to the widely used LIBOR (London Interbank Offered Rate). Using SIBOR is more common in the Asian region and is set by the Association of Banks in Singapore.

Sinking Fund A fund used to accumulate the cash required to redeem a certain amount of an issue within a given period through payments to a special account.

Skip-Payment Privilege Clause in some mortgage contracts and installment loan agreements that allows the borrower to miss a payment if payments are ahead of schedule.

Slag The waste substance formed in any one of several ways by chemical action and fusion at furnace operating temperatures.

Small Business There are many definitions for this term. Most banks use a version of this: a business owned and operated by one or more persons, which has up to 20 employees, which has annual sales of up to $2 million and which requires loans of up to $500,000.

Small Business Lending Act (SBLA) The SBLA is U.S. federal legislation which makes guaranteed or secured provision for loans to small businesses. The act specifies that even if the borrower defaults on a loan, the lender (an approved financial institution) will be able to recover a high proportion of the loan.

Small-Cap Stocks Small Capitalization, or “Small-Cap” stocks are shares of junior sized companies such as new ventures, emerging growth companies, etc. Their stock market capitalization, i.e., number of shares outstanding multiplied by stock price is modest (usually below $50 million) compared to their more mature “blue chip” counterparts, whose capitalizations number in the billions. Small-Cap companies have been in strong favour in recent years owing to their superior growth and capital gains potential.

Smithsonian Agreement Agreement of December 18, 1971, among the Group of Ten on major parity adjustments which included a devaluation of the U.S. dollar against gold, a widening of parity bands from 1% to 2 1/4%, either side of par, and the suspension of a 10% U.S. import surcharge.

Snake Coordinated floating exchange rates of a group of European currencies which can only move within prescribed limits against each other, but which can float without prescribed limits against non-member currencies.

Society For Worldwide Interbank Financial Telecommunication (SWIFT) A co-operative owned by the international banking community that operates a global data processing system for the transmission of financial messages and funds.

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Sovereign Risk Risk of lending too much, results in banks normally observing limits on the amount of lending they will make to any single government or organization whose borrowing is guaranteed by that government. Such a sovereign risk is, however, more acceptable than one incurred on a loan not subject to a government guarantee.

Special Bid Method of filling an order to buy a large block of stock on the floor of the New York Stock Exchange. The bidder pays a special commission to their representing broker, but the seller does not pay a commission. The special bid is made on the floor of the exchange at a fixed price which may not be below the last sale of the security or the current regular market, whichever is higher.

Special Drawing Right (SDR) The amount by which each country is permitted to tap an intangible reserve asset created by the Interbank Monetary Fund. Its value is a composite of the U.S. dollar, West German mark, French franc, British pound and Japanese yen.

Specialist A person on the trading floor of the American Stock Exchange who holds an inventory of particular stocks.

Specialized Fund A private equity fund strategy focusing on specific investment targets (e.g., sectors, stages of development) as distinct from a balanced fund.

Special Purpose Entities Special purpose entities, which may take the form of a corporation, trust, partnership or unincorporated entity, typically are created to accomplish a narrow and well-defined objective with legal arrangements that impose strict limits on the decision-making powers of their governing board, trustee or management over its operations. Frequently these provi- sions specify that the policy guiding the ongoing activities of the SPEs cannot be modified, other than perhaps by the creator or sponsor.

Spin Off Method used by a company to split its operations and assets by proportionately distributing to its own shareholders, shares which it owns in another company. Sometimes called hive off.

Split Division of the outstanding shares of a corporation into a larger number of shares, although the proportional ownership of the shares is maintained.

Split Financing The joint financing of a firm’s short-term financing needs by a chartered bank and a- com mercial finance company.

Splits To facilitate trading, large commercial paper issues may be split into a number of notes in smaller amounts during the term of the issue. These notes are called splits.

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Spot Currency A currency which is purchased in a foreign exchange market for delivery in one business day in Canada or two business days in the rest of the world.

Spot Price The current price of a metal or commodity for immediate delivery.

Spread Gap in a quotation between buying and selling prices (e.g. the difference between the pur- chase of one futures delivery month against the sale of another delivery month of the same commodity). For new issues, the floatation cost or the amount by which the offering price exceeds the proceeds received by the issuer.

Stages of Development Critical points on the growth continuum for companies financed by venture capital and other private equity. Early stages may include seed stage or start-up; late stages may include expansion, acquisition / buyout and turnaround.

Stagflation A period of time in which both the unemployment rate and the rate of inflation are rela- tively high.

Standard & Poor’s U.S. security rating company that appraises the creditworthiness of corporations and municipalities.

Standby Credit Arrangement with a lender (either a bank or banks, or the International Monetary Fund in the case of a member country) that a fixed amount of credit will be available for drawing during a given period, if required.

Standby Fee A fee charged on the unused portion of the credit under a revolving credit or line-of-credit arrangement.

Standby Letters of Credit An obligation on the part of the bank to a designated beneficiary to perform or provide compensation under the terms of the underlying contracts to which they refer, should the bank’s customers fail to do so. The underlying contracts may involve either financial or non-financial undertakings (e.g., the customer’s payment of a commercial paper, delivery of merchandise, or completion of a construction contract).

Standstill Agreement Agreement between a company and its lenders, whereby the lenders agree to hold their current position without any unilateral action for a given period of time, in order to allow the company to develop a restructuring proposal.

Start-Up Financing Capital provided to facilitate the first-time establishment of a legal company structure around a marketable product concept.

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Stock Dividend A portion of the net earnings of the corporation in shares or fractional shares paid to share- holders. It is paid in securities rather than cash.

Stock Exchange Organized trading floor for stock and share transactions.

Stock Index Futures Similar to currency and interest rate futures except that the basis for the contract is a stock index.

Stock Option Contract conferring the right to all or certain employees to buy or sell a specified number of shares at a certain price during a stipulated period.

Stock Split Division of the outstanding shares of a company into a greater number of shares without affecting the total capital amount. An individual’s proportional equity in the company would remain unchanged.

Stock Spread The difference between the bid and ask of a stock.

Stock Symbol A unique alphabetical symbol, usually three or four letters, assigned to a security.

Stope The underground excavation from which ore is extracted.

Stop Limit Stop order which becomes a limit order after the specified price has been reached.

Stop Order (Stop Loss Order) Order to a stock or commodity broker to buy or sell at the market when a given price threshold is reached.

Straddle In commodities, the simultaneous matching purchase of one delivery with the sale of another. In stock markets, a contract giving the holder the right to buy or sell at a certain price. In options trading, a simultaneously held ‘put and call’ giving the holder the right to buy and sell at a certain price.

Street Certificate A stock certificate registered in the name of an investment dealer or stock broker rather than of the individual owner in order to increase its negotiability.

Stretch Term The number of months from the date the purchase option is exercisable until the end of the lease term.

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Strike Price The price specified in an option contract at which the underlying security will be purchased in the case of a call or sold in the case of a put.

Strip Bonds Bonds where the principal and interest payment streams have been separated, thus creating a single-payment financial instrument.

Stripping The process of removing overburden or waste to expose ore.

Stripping Ratio The ratio of overburden and waste to ore in an open pit operation.

Structured Investment Vehicle Managed investment vehicle that holds mainly highly rated asset-backed securities and funds itself using the short-term commercial paper market as well as the medium-term note market.

Subordinated Debentures Direct unsecured obligations which are subordinated in right of payment to the claims of depositors and certain other creditors. Convertible debentures can be exchanges for shares at the option of the holder, the issuer or both.

Subordinated Debt Where one lender has agreed in writing to rank behind another in claiming against an asset, the lender will only receive their capital back after the other has been fully paid out. A bank will often insist that shareholder loans be subordinated to the obligations of the bank. This is also known as “subrogation.”

Subprime Loans Subprime lending is the practice of making loans to borrowers who do not qualify for the best market interest rates because of their deficient credit history and inherent risk.

Subrogation See “Subordinated Debt.”

Substantial Shareholder A person or group of persons holding sufficient securities to materially affect control of a company. (A holding of more than 20% of the outstanding voting securities is deemed to have such influence, in the absence of evidence to the contrary.)

Succession Plan The basis for transfer of business ownership from one generation of family or managers to the next, often with the assistance of private equity.

Support Point Point at which a central bank may intervene in a currency, usually its own. Level at which market forces may combine to prevent further price declines for a currency or security.

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Sushi Bonds Non-Yen denominated bonds issued by Japanese corporations.

Swap Temporary purchase with guaranteed resale, or line of reserve credits between central banks. It can also cover the simultaneous exchange of securities. Foreign exchange price denoting the interest differential between two currencies for the same term.

Sweat Equity The time and energy exerted by the business owner during the incubation, gestation, and early start-up phases of operations. While not a monetary form of equity, owners should document their time and other in-kind contributions to demonstrate to potential investors the type and level of management activity.

Sweetener A condition incorporated in a new issue so as to make the issue more attractive to the investment community.

Swing Up and down price movements of the market.

Swingline Facility for short-term funds which can be drawn at short notice to cover the period between the offer of notes under a note issuance facility and the receipt of funds.

Syndicate Group of investment banks or financial institutions which guarantee to buy (underwrite) on a wholesale basis a new securities issue from the issuer and offer it for resale to investors. A group of banks which join together to raise medium-term finance for governments, financial institutions or other entities via the Euromarkets.

Syndicated Lease An arrangement whereby a number of investors (financial institutions or other parties) share the ownership of the leased assets as well as the benefits and risks in the lease.

Syndicated Loans Loans to a company backed by a group of banks in order to share the risk in a large transaction among several financial institutions. There is usually a lead bank and several participating banks.

Tailings The waste material from ore after the economically recoverable metals and minerals have been extracted.

Takedown The price at which underwriters obtain securities to be offered to the public.

Takeover A corporate action where one company makes a bid to acquire another company.

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Take-Over Bid An offer made to security holders of a company to purchase voting securities of the company which, with the offeror’s already owned securities, will in total exceed 20% of the outstanding voting securities of the company.

Talon A coupon or a certificate, similar to a warrant, attached to another security and carrying some right or privilege.

Tap To seek financing through the issue of shares, stock or bonds on stock markets or capital markets.

Taxable Equivalent Adjustment An addition to interest income in order to gross up the tax-exempt income earned on certain securities (primarily loan substitute securities) to an amount which, had it been taxable at the statutory rate, would result in the same after-tax net income as appears in the financial statements. The gross-up of such income to a taxable equivalent basis permits a uniform measurement and comparison of net interest income.

Taxation Incentives Federal and provincial governments offer a wide variety of tax breaks to qualifying businesses. These include incentives under both income and sales tax legislation. Tax incentives work to stimulate employment, investment, scientific research and other areas of the economy. They are administered on a statutory rather than a discretionary basis (i.e., all qualifying firms are eligible for them).

Technical Analysis The analysis of a particular security as to its potential value by understanding as well as predicting investor behaviour.

Ten (10) K Detailed corporate annual reporting form required by the U.S. Securities and Exchange Commission. Basically similar, but supplementary, to the annual report.

Tender Credit A line of credit relating to certified cheques which accompany tenders submitted by a contractor.

Tender Offer A public offer to buy shares for cash or other securities from existing shareholders of one corporation by another company or organization, under specified terms in force for a limited period.

Tender Panel In distributing notes issued under note issuance facilities, a group of financial institutions has the right to bid, auction-like, for the short-term notes issued under the facility on each issue date. These financial institutions make up the tender panel.

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Term Bond Issue in which all bonds mature on the same date.

Term Deposit Receipts Receipts given to depositors, evidencing a time deposit for amounts normally $5,000 and up. Non-transferable and can usually be redeemed prior to maturity with penalty. Terms from 1 to 30 days.

Term The length of time which a loan agreement covers. The maximum time during which a loan is to be repaid.

Term Loan Loan for a fixed period, usually more than a year.

Term to Option The period of time from the lease commencement date to the purchase option date.

Terms of Purchase The agreed-upon cost and repayment provisions between a buyer and seller.

Thin Market Market as a whole, or for a single commodity or security, in which there is a little buying or selling interest, little volume or activity.

Tied Loan Country-to-country loan requiring the recipient state to purchase goods or services from the donor.

Tier 1 Capital Tier 1 capital comprises the more permanent components of capital and consists primarily of common shareholders’ equity, non-cumulative preferred shares, the majority of which do not have conversion features into common shares, and the eligible amount of innovative capital instruments.

Tier 2 Capital Tier 2 capital consists mainly of subordinated debentures, trust subordinated notes, the eli- gible amount of innovative capital instruments that could not be included in tier 1 capital, and an eligible portion of the total general allowance for credit losses, less other prescribed OSFI deductions.

Tight Money Monetary restraint policy restricting the availability of credit and usually forcing interest rates higher.

Tilting Yield Curve The yield curve that results from a decline in long-term bond yields while short-term rates are rising.

Time Deposit Bank deposit of a fixed maturity.

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Time Value The imputed monetary value of an option reflecting the possibility that the price of the underlying will move so that the option will become more valuable. The total value of an option, or its price, is comprised of its intrinsic value and its time value.

Times Covered Number of times the amount available for distribution (i.e., earnings) can be divided by the amount of the distribution (i.e., dividend).

Tombstone Advertisement of a stock, bond or syndicated credit issue, appearing in newspapers and financial magazines as a matter of record. It usually describes the price, size and type of issue, and the composition of the syndicate.

Toronto Index Participation Units (TIPs) A financial instrument that allows investors to buy part of a basket of stocks mirroring the Toronto 35 index. The price of TIPs moves up and down with the index.

Trade Credit Credit obtained through open-account purchases, represented by an account payable by the recipient.

Trade-Mark A word, symbol or design, or combination of these, used to distinguish the goods or services of one party from those of another.

Trade-Mark Register The official listing of registered trade-marks.

Trade-Marks Act Federal legislation governing trade-mark registration in Canada.

Trade-Marks Journal A publication of the Trade-marks Office issued weekly and containing all approved applications and Office rulings.

Trade-Marks Records The inventory of registered trade-marks and pending applications maintained by the Trade- marks Office at its premises in Hull, Quebec.

Trade Name The name under which a company chooses to operate. Trade names may or may not also be considered trade-marks, depending on the circumstances.

Trade-Off Approach A financial strategy in which the firm finances a portion of its forecast seasonal funds need with long-term funds. This strategy represents a trade-off between the high-profit high risk aggressive approach and the low-profit low risk conservative approach. The exact trade-off used depends largely on the decision-maker’s attitude toward risk.

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Traded Options The style of option prevalent in the U.S. Traded options can be bought or sold at any time until a day or two before their expiry date. By contrast, the “European” option is exercisable only on maturity.

Trading Paper Certificates of deposit expected to be traded by purchasers on Euromarkets.

Tranche An agreed instalment of a credit or loan which may be drawn down as required. Also refers to a country’s drawings from the IMF which are made into tranches.

Transaction Risk The risk that results from the effect of changes in currency rates on balance sheet assets.

Transfer Agent Agency that maintains official records of the transfer of stocks from one individual to another.

Treasury Bills Short-term government debt, issued in denominations of $10,000 to $1 million, available in maturities up to a year. Treasury bills do not pay interest but are sold at a discount and mature at par (100). The difference between the issue price and par at maturity represents the lender’s income in lieu of interest.

Treasury Investment Growth Receipt (TIGR) Securities representing U.S. treasury bonds, stripped of coupons, to provide capital growth.

Treasury Shares Authorized stock which has not been issued and is held on the balance sheet.

Troy Ounce A measurement of weight based on a pound equalling 12 ounces, most often used to mea- sure gold.

True Lease A transaction that for tax purposes is recognized as providing the lessor with the tax benefits of ownership and the lessee with the ability to expense the rentals.

Trust Indenture Act of 1939 This act requires and issuer of debt securities to enter into a written contract with a U.S. domestic corporation (typically a bank) to act as trustee for the debt securities issued.

Turnover Ratios A measure of the efficiency with which a firm uses particular assets (e.g., inventory, fixed assets and total assets).

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Two-Tier Market Dual exchange rate system under which one tier is openly responsive to market pressure and the other is insulated by government intervention or control (e.g., Belgian financial and convertible francs).

Ultra Vires Activities Actions of a corporation that are not authorized by its charter and that may, therefore, lead to shareholder or third-party suits.

Unbundling Trend in banking toward costing and pricing separately for services provided.

Undercapitalization Situation in which a business does not have enough capital to carry out its normal business functions.

Underwrite To agree to purchase stock at a fixed date at a fixed price.

Underwriter The investment banker (or syndicate) who buys an issue of securities from the issuer and sells them to individuals and institutions.

Underwriting Underwriting assumes the risk of buying a new issue of securities from the issuing cor- poration or government entity and reselling them to the public, either directly or through dealers. 1. All or nothing underwriting: An underwriting in which interim proceeds of sales are generally placed in escrow pending the final results. If the sales do not meet a specified volume, they are cancelled and the funds returned to the buyers. 2. Best efforts underwriting: An underwriting in which the underwriter is committed only to using its best efforts to sell and issue for the issuing corporation (or others, if the offering is a secondary offering). 3. Standby commitment: An underwriting in which the underwriter serves the client issuing new securities by agreeing to purchase for resale any securities not taken by existing holders or rights.

Underwriting Agreement Agreement between the underwriters and the company stating the terms of the offering, the method of underwriting, the offering price and the commission.

Underwriting Spread This refers to the profit the underwriter makes on the difference between the public offering price and the price paid to the issuer.

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Undrawn Overdraft Facilities Reviewable borrowing facilities under which funds borrowed are technically repayable on demand.

Unencumbered Property free and clear of all liens (creditors’ secured claims).

Unit Two or more corporate securities (such as preferred shares and warrants) offered for sale to the public at a single, combined price.

Unit Trust British equivalent of a mutual fund.

Valuation The value of an asset, as assessed by a qualified appraiser, usually expressed as the resale value given current market conditions.

Value Date The date on which transactions are settled; normal settlement is same day value for transac- tions completed before noon and the next working day for transactions executed after 12:00 noon. In the Eurocurrency and foreign exchange markets, value date refers to the delivery date of funds to settle the transaction. In the Eurobond market the value date falls seven calendar days after the deal is struck, regardless of holidays.

Value Spot Spot deal for settlement in two trading days.

Variable Expenses Costs of doing business which vary with the volume of business. Examples are advertising costs, manufacturing costs, and bad debts.

Variable Rate (Floating Rate) Financial instrument or security bearing a variable interest rate. Can be applied to certificates of deposit issued for a normal minimum period of 360 days with the interest rate set a specified spread over the current rate of 90-day certificates of deposit (CDs). Such CDs are adjusted every 90 days.

Variable Rate Mortgage Domestic housing mortgage with an interest rate which fluctuates during the life of the mortgage, normally in line with a chosen market rate or index.

Venture Capital An individual or institution that provides “high risk” debt or equity capital unavailable from traditional sources, for the growth (or in some instances, seed funding) of small businesses at any stage before they go public.

Vertical Merger A merger between two companies producing different goods or services for one specific finished product.

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Vintage Year The year in which a venture capital or private equity fund is first established.

Vostro Account The receiving bank’s description of the account of another bank. The bank holding the account would refer to it as a vostro account while the bank depositing the funds would refer to it as a nostro account.

Voting Trust An arrangement to place the control of a company into the hands of certain managers for a given period of time, or until certain results have been achieved.

Wafer Bullion manufactured in a flat, generally rectangular shape (“gold wafer”).

Waiting Period The period between the date on which a receipt is issued for a preliminary prospectus and the date on which a receipt is issued for a final prospectus.

Wallflower Stock that has fallen out of favour with investors.

Warehouse Receipt Negotiable instrument listing goods or commodities kept for safekeeping in a warehouse.

Warrant A financial instrument which authorizes the holder to purchase securities at a predeter- mined price until a specified time in the future.

Wealth Maximization The strategy of maximizing the value of the owners’ or shareholders’ investment in a firm, which is generally measured by the market value of the firm’s shares. This strategy is not necessarily consistent with a strategy of profit maximization.

Weighted Average Cost of Capital A measure of the cost of capital calculated by weighing the marginal cost of each type of capital (i.e., debt, preferred shares and common equity) by the proportion of that type of capital in the firm’s capital structure.

When Issued Short for “when, as, and if issued.” Hypothetical price of a security not yet issued, often in a stock split. Conditional deals in the security may take place on this basis.

Widow-and-Orphan Stock A high-grade equity stressing safety of principal and regularity of income. Bell Canada is an example.

Wildcat Drilling Exploring for oil or gas in an unproven area.

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Withholding Tax Tax on interest or dividend payments remitted to persons residing outside the country levying the tax; also tax deducted at source.

Working Capital The difference between a firm’s current assets and current liabilities.

Working Control Number of shares in a block needed to control the activities of a corporation. In theory, this is 51% of all voting shares. In practice, it can be less, sometimes considerably less, due to the distribution of stock ownership and blocks.

Working Interest Direct participation with unlimited liability.

Workout In the case of a bad loan or troubled firm, remedial measures being taken.

World Bank Main international agency for channelling aid funds for capital and human resource projects to developing countries. Set up under the Bretton Woods Agreement of 1944, which also established the International Monetary Fund. The bank may channel private funds and make loans from its own resources. It also raises money by selling bonds on the world market. The official title is International Bank for Reconstruction and Development.

Wrap Account An account at a brokerage firm of a specified minimum size, on which a fixed annual fee is charged rather than individual transaction commissions.

Write-Off The write-down of a portfolio asset to the value of zero, with the result that the private equity investor goes without proceeds on disposition.

Yankee Bond Bond issued in the U.S. by a foreign borrower in U.S. currency and registered with the Securities and Exchange Commission. No withholding tax is payable.

Yard Slang for a billion, derived from the continental European “milliard.”

Yield Percentage return on an investment, usually an annual rate.

Yield Curve Reflects the “shape” of interest yields at different time points along the maturity scale (which may run from 1 day to 30 years). Most often upward sloping (positive) but can be downward sloping (inverted / negative). Can be flat rather than curved.

Yield of Minerals The actual grade of ore realized after the mining and treatment process.

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Yield to Maturity For a bond, the price discount or the premium over the face value. It is larger than the current yield when the bond sells at a discount and smaller than the current yield when the bond sells at a premium.

Zero Coupon Discount basis corporate credit instruments issued with imputed interest calculated on the price paid by the buyer and the par value at which the bond will be redeemed. Typically, such a bond would be issued in the amount of 200 million U.S. dollars, the price paid at redemption. It would provide the borrower with an immediate cash amount of less than half the value.

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