Appendix III. Glossary

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. III-1 Canadian Corporate Finance Manual 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. III-2 APPENDIX III | Glossary 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 commission 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. III-3 Canadian Corporate Finance Manual 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. III-4 APPENDIX III | Glossary Arbitrage The simultaneous purchase and sale of a security, commodity or foreign exchange on different 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

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