The simplified, user-friendly definitions in this glossary are provided only as a guide.

Accompanying notes

An integral part of financial statements that provide the explanations and tables required to interpret the content of financial statements

Accrued interest

Accumulated interest that is not yet due and payable. For example, a bond with a value of $100 pays a $2 coupon every 6 months. After 3 months, the accrued interest is $1. However, this will only be due in 3 months.

Actual cash value

For automobile or home insurance, the value of a property at the time of the loss, minus depreciation based on its use, life cycle and condition.

Actuary

Specialist in statistics and mathematics applied to finance and insurance.

Adverse selection

Situation in which an insured knowingly or unknowingly acts to his/her advantage, to the detriment of an insurer. For example, term insurance policyholders in very good health tend not to renew their contract on the renewal date, opting instead for a new policy that costs less than renewal. Conversely, insureds in poor health will draw on their renewal privilege.

All risks

All-risks insurance covers all losses, except for those described in the contract exclusions. For example, for home insurance, floods represent an excluded risk.

All-or-none order

Order that is carried out only when the complete quantity of the chosen security is available on the market at a given price.

Amortization

Reduction of the value of certain property to account for wear or obsolescence. Amortization reduces a company’s earnings but does not constitute a cash outflow and therefore does not reduce its cash assets.

Annual information form

Continuous disclosure document describing the company and its activities at a given time that highlights the company’s history and future development possibilities. The form describes the company and its activities, future outlooks, the risks to which the company is exposed and any external factors that impact the company.

Annuitant

Person who receives an annuity.

Annuity

Contract under which a series of periodic payments are made during a certain period of time in consideration of a certain amount. There are a number of types of annuities, including deferred, indexed, life, and guaranteed annuities.

Annuity certain

Annuity that guarantees payments for a specified period of time.

Arbitrage

Transaction that consists in buying an asset at a favourable price and simultaneously reselling it at a higher price for immediate profit. When carried out properly, this type of transaction generates a profit without incurring any major risks.

Not to be confused with arbitration (means of resolving a conflict without legal proceedings).

Ask price

Lowest price at which a seller would agree to sell a certain quantity of securities (shares, bonds, etc.).

Assets

Your assets are everything that belongs to you—all of your property. This may be the money you have in a chequing or savings account, personal belongings, investments, real estate, etc.

Assuris

A non-profit organization that protects Canadian policyholders in the event that their life insurance company becomes insolvent. Backed by insurance companies, it manages the industry’s solvency guarantee fund on behalf of consumers. For more information, visit the Assuris website at http://www.assuris.ca.

Auditor

Accountant who audits an entity in order to express an opinion as to the fair presentation of its financial statements.

Authorized capital

Number of shares that a company is legally authorized to issue.

Automobile Claims Database

A central repository of all automobile claims filed in Québec. It contains information on the claims filed by all insureds in the past six years. It provides insurers with background information on all their clients, enabling them to set fair and equitable premiums.

Automobile insurance

Insurance that covers the insured’s civil liability as the owner of the automobile. This insurance can also cover damage to the insured’s automobile following an accident or financial losses following a theft.

Autorité des marchés financiers

Body that regulates Québec’s financial industry and provides assistance to consumers of financial products and services. Its mission is to protect the public by enforcing the laws and regulations governing insurance, securities, deposit institutions (other than banks), and the distribution of financial products and services.

Balance sheet (statement of financial position)

Financial statement indicating the financial position of an individual, couple, family, company, etc. on a given date. This statement lists assets and liabilities and shows net worth (difference between assets and liabilities).

Basis point

One-hundredth of a percent. For example, if the mortgage rate posted by your financial institution rose from 4.25% to 4.30%, this would be an increase of 5 basis points.

Beneficiary

Individual designated on an insurance contract to receive insurance benefits.

Benefit

Amount of money the insurer pays the beneficiary of an insurance following a loss.

Bid

Highest price a buyer would pay for a security, subject to a quantity limit.

Bond

Securities issued by governments and companies and represent a loan granted by the investor to the issuer (state, public corporations, and private companies). In general, the issuer promises to pay a fixed interest rate to the buyer at certain intervals and pay back a predetermined amount at maturity, usually the face value, which is a multiple of $1,000. Bonds can be sold at a price above or below face value. Corporate bonds are generally backed by specific assets. The term is generally from 1 to 30 years.

Borrowing to invest

Borrowing money in order to invest. This increases the potential gains, as well as the potential losses, on any investment.

Also called margin buying.

Business corporation

Business established under law and that is a separate legal entity from its shareholders. Shareholders are therefore not responsible for the corporation’s debts; their risk is limited to the amount (capital) invested in the corporation. Shareholders control the corporation according to the number of voting shares they hold.

Callable bond

Bond that may be redeemed by the issuer prior to maturity at the price indicated in the issue contract. Buyers of callable bonds generally receive a higher return than with standard bonds in exchange for assuming the risk that the issuer might redeem the bond when economic conditions are less attractive for investors.

Canadian Life and Health Insurance Association

Non-profit organization that represents the collective interests of its members. Most life and health insurance companies with operations in Canada are members of CLHIA. Website: http://www.clhia.ca.

Canadian Payments Association (CPA)

Non-profit association created in 1980 by an Act of Parliament. Its mandate covers national clearing and settlement systems, as well as other activities involved in making or exchanging payments. For more information, visit the CPA website at http://www.cdnpay.ca/home/home.asp.

Cancellation

For the insured or the insurer, ending a contract during an insurance period without waiving past coverage or the premium earned for the expired term, as opposed to termination, which abolishes all coverage under a contract as though it never existed.

Capital gain (loss)

The difference between the selling price and the purchase price of an investment. For example, if you sell a share for $20 that you paid $12 for, your capital gain is equal to $8. If, however, you sell a share for $9 that you paid $12 for, you have a capital loss of $3.

Capital loss

Loss on the disposal of property, e.g., stock, a building, or land, at a price lower than its purchase price.

Cash surrender value

Amount available from the insurer when a policyholder voluntarily cancels a life insurance contract before maturity. Not all life insurance contracts offer cash surrender values.

Chambre de la sécurité financière (CSF)

Québec-based agency that protects the public by maintaining discipline and overseeing the training and professional conduct of its members. CSF members work in the following five areas: group savings plan brokerage (mutual funds), financial planning,* insurance of persons, group insurance of persons and scholarship plan brokerage.

*For financial planning, the CSF oversees professional conduct only.

For more information, contact CSF or visit its website at www.chambresf.com.

Chambre de l'assurance de dommages

The Chambre de l'assurance de dommages is a Québec-based agency that protects the public in the areas of damage insurance and claims adjustment. The ChAD oversees the mandatory continuing professional education of more than 14,000 damage insurance agents, brokers, and claims adjusters.

For more information, contact the ChAD or visit its website at www.chad.ca

Civil liability insurance

Insurance that can cover the cost of certain types of damage caused by the insured to another person.

Clearing house

Institution separate from an exchange that ensures payment and delivery of securities between dealers.

Coinsurance

Percentage of the cost of an insured’s claim that is assumed by the insurer once the deductible is paid.

Collateral

Assets such as bonds, shares, or other securities pledged against a loan, much like a guarantee. If the borrower fails to repay his/her debts as scheduled, the lender can sell the collateral assets to recover the loan amount, including interest.

Common share

Ownership interest issued by a company. As owners, common shareholders generally have the right to elect directors and to vote on certain decisions concerning the company’s operations. They are usually entitled to a portion of the company’s remaining assets if the company is dissolved. Common shareholders are also entitled to receive any dividends declared by the company. Common shares have no maturity date.

Concealment

The intention to withhold information that could influence an insurer’s risk assessment. This may void the contract or reduce the indemnity the insured is entitled to receive.

Consumer price index (CPI)

Measure of changes in the price of a “shopping basket” of items in order to estimate the inflation rate. The higher the CPI, the lower the purchasing power. The lower the CPI, the higher the purchasing power.

Conversion privilege

A provision in a term life insurance contract whereby the policyholder may convert the policy into a permanent (whole life) or endowment insurance policy without furnishing evidence of insurability.

Convertible bond

Bond which the holder may convert into common shares.

Counterparty risk

Risk that the party with whom you are dealing will not fulfill its obligations (delivery, payment, etc.) and that you will incur a loss as a result.

Cover note

Temporary document issued to the insured by a representative or insurer confirming that coverage is in effect. This document precedes the insurance policy.

Credit risk

Risk that a company will be unable to meet its obligations. As soon as a company or a state’s financial position deteriorates or if investors think this might happen, the value of the investment could decline.

Critical illness insurance

Insurance that provides a lump sum when the insured is diagnosed with a critical illness covered by the insurance.

Currency risk

Risk that the currency used to purchase your investment will fluctuate to your disadvantage. For example, if you hold bonds in U.S. dollars and the Canadian dollar appreciates against the U.S. dollar, your bonds will decline in Canadian dollars.

Current assets

Portion of assets that is convertible into cash in the current year.

Damage insurance

Property or liability insurance in the event of fire, accident, or miscellaneous risks.

Debenture

Fixed-income investment, similar to bonds, except that debentures are generally not backed by specific assets.

Also called unsecured bond.

Debt

Amount of money that a natural or legal person must pay back, generally with interest.

Debt security

Bonds and debentures, which are loans granted by investors to a company.

Deductible

The portion of risk assumed by the insured. If your home insurance has a $500 deductible and you claim a total of $20,000 in damage coverage, your insurer would pay $19,500.

Deferred annuity

Annuity that provides periodic payments that do not begin when the annuity is purchased, but at a later date.

Defined benefit pension plan

Pension plan that guarantees a certain level of retirement income in advance. Usually, the income you will receive under this plan is a percentage of your salary multiplied by the number of years of service you have completed.

Defined contribution pension plan

Pension plan in which employer and employee contributions are determined in advance. For example, the employer might agree to pay the same amount as the employee, who might invest 4% of his/her salary in the plan annually. However, employees do not know the amount of retirement income they will receive, as it will depend on the returns on investments made with these contributions and the cost of annuities at the time of retirement.

Deflation

Widespread drop in the price of consumer goods and services. Deflation is the opposite of inflation.

Demutualization

The process of converting from a mutual association to a business corporation. As part of demutualization, the former mutual members, who owned the mutual, generally receive shares in the business corporation, enabling them to retain ownership. In certain cases, they may receive other benefits, such as cash in the form of dividends.

Deposit institution

Bank, trust company, credit union, or other financial institution that accepts deposits from the public and provides a variety of financial services, such as savings accounts.

Director

Person elected to a company’s board of directors at the shareholders’ meeting. Among other matters, directors are responsible for putting in place corporate governance policies.

Disability insurance

Insurance that provides benefits to insureds who are unable to work following an illness or accident, generally based on their salary.

Discount rate

Interest rate that the Bank of Canada periodically sets for the short-term loans (current) extended to institutions that are members of the Canadian Payments Association.

Discounting

Method of calculating the current value of future financial flows.

Diversification

Strategy that consists in choosing different investments. Some investments may carry very high risk, while others carry very low risk. By combining various investments in your portfolio, you can reduce the overall level of risk for the level of return you hope to achieve.

Dividend

A portion of the earnings that a corporation distributes to shareholders in proportion to their holdings.

Dividend payments risk

The risk that the issuer may cancel or cut the scheduled dividend payout to investors. When this occurs, investors not only lose the dividend, but the value of their investment could fall as well.

Earnings per common share

A company’s net earnings for a fiscal year or a given year divided by the number of common shares outstanding.

Earnings per share

A company’s net earnings for a given period or fiscal year divided by the number of common shares outstanding.

Endorsement

Document appended to an insurance policy indicating changes to the contract.

Endowment life insurance

Insurance that pays a certain amount on the death of the insured or the insurance policy maturity date, whichever comes first.

Equity

The difference between a company’s assets and liabilities, in other words, what belongs to the company’s owners once all liabilities have been deducted.

Equity security (Participating security)

Refers to common shares or preferred shares representing an ownership interest in a company.

Estoppel

If an insurer acts in such a way that an insured believes he/she has the right to a claim even if this is not the case, the insurer creates an “estoppel,” meaning that the insurer implicitly waives its right to invoke exclusions or claim non-compliance by the insured with an obligation. To prevent this, insurers have the insured sign a non-waiver agreement.

Exchange

Published market where securities, for example shares and derivatives, are traded.

Exchange rate

Price of one currency compared with another. The exchange rate is affected by factors including currency supply and demand.

Exchange-traded fund (ETF)

Exchange-traded funds are traded like shares on stock exchanges. These funds generally track a benchmark index. Unlike mutual funds, the ETF manager is not mandated to maximize fund performance, but simply to track the benchmark index, thus explaining the lower management fees for ETFs.

Exclusion

Risk that is not covered by insurance. For example, in homeowner’s insurance, damage caused by war is generally not covered: This is an exclusion.

Expected return

The gain you expect to earn from your investment in the form of interest income, dividends, or capital gains. Generally, the higher the expected return on an investment, the higher the risk. The return you actually earn may differ significantly from the expected return.

Extended term insurance

When permitted under the insurance contract, the use of the cash surrender value of an insurance to stop paying premiums. The same insurance coverage is maintained but often for a limited period.

Face amount

Amount stipulated in an insurance contract that is paid to the insurance beneficiary if the risk covered occurs.

Also called the insured amount

Face value/par value

Price indicated on a bond or debenture certificate that usually corresponds to the amount of money the issuer will pay at maturity.

Financial planner (F. Pl.)

Natural person who assists clients in developing a financial plan by identifying strategies adapted to their needs and considering their constraints and objectives.

Firm underwriter

Natural or legal person that buys securities directly from the issuer for resale to the public.

First-to-die insurance

Life insurance that covers at least two persons and pays a certain amount on the death of the first insured.

Fixed-income investment

Investment that generates a fixed yield until maturity, e.g., a guaranteed investment certificate with a five-year term that generates a 3% return each year.

Flexible premium life insurance

Insurance for which the premium amount can be adjusted by the insurer according to the experience with a group of insurance policies.

Flow-through share

Share that can be issued by an oil, gas, or mining company. Since shareholders help fund exploration and development costs, holders of flow-through shares may be entitled to tax deductions and credits that are usually available only to companies.

Foreign currency

Currency issued by a foreign country.

Fundamental analysis

Method for assessing the future value of a company or the value of its shares based on its financial health (financial statements), its competitors, economic conditions, etc.

Futures

Futures are traded on an exchange, and their features are standardized based on the quantity, term, place of delivery, and quality of the underlying interest. This facilitates transfer of the asset from one investor to another. The price is thus the only element that fluctuates during the course of the contract. A clearing house acts as an intermediary between the buyer and the seller and ensures compliance with the contract terms, so there is no counterparty risk.

Futures and forward contracts

There are two types of contracts: futures and forward contracts. In both cases, the parties involved assume a legal obligation to buy or sell a specific quantity of an asset at a predetermined price and date. Futures and forward contracts are traded in a variety of commodities (grains, meats, etc.) and financial products (stock market indexes, bonds, common shares, etc.).

Grace period

A period granted by the insurer to make premium payments, other than the first payment. A grace period is not granted for all types of insurance.

Gross domestic product (GDP)

The total value of all goods and services produced within the geographic boundaries of a country, province, or other jurisdiction during a given period.

Group credit insurance

Insurance that repays the balance of a loan if the insured dies. Most insurers also offer disability insurance, which covers the periodic loan payment subject to certain criteria and limits.

Group insurance

Insurance for a group of persons provided under a basic contract, generally without a medical exam. Each participant receives an insurance certificate.

Groupement des assureurs automobiles (GAA)

Organization in charge of distributing the joint report for an automobile accident, managing the Automobile Claims Database and drafting automobile insurance policies.

Guaranteed annuity

Life annuity that provides periodic payments while the annuitant is alive, but guarantees payment for a certain number of years. For example, a 5-year guaranteed annuity would provide payments for at least 5 years, even if the annuitant dies (in which case the amount is paid according to the contract terms).

Guaranteed income supplement

Monthly benefit paid to lower-income old age security (OAS) recipients living in Canada. This benefit is not taxable.

Guaranteed investment certificate (GIC)

Certificate of deposit issued by a financial institution that represents a loan granted by the investor to the issuer. Terms range from 30 days to ten years.

Health insurance

Insurance that covers all or part of the cost of medical care and drugs incurred by the insured.

Hedge fund

Fund issued in the form of units. The hedge fund manager has flexibility in terms of the investment strategies that can be used. These strategies are often called “alternative investment strategies.” Hedge funds are usually managed so that stock or bond market fluctuations have little or no impact on returns.

Hedge fund investments, such as shares of private companies, derivatives, and futures, are generally suitable only for sophisticated investors. The same holds true for the strategies used, which include short selling, borrowing to invest, narrow-based investing, and investing in distressed companies.

Hedging

Hedging consists of buying a financial instrument to offset possible losses on an investment. For example, an investor who owns shares could buy a put option on the shares he/she holds. This way, if the shares decline in value, the investor can exercise the option to offset the decline in value of the shares.

Home insurance

Insurance that covers your residence, its contents and your civil liability.

Illegal insider trading

Purchasing or selling securities using information that is not available to the public. The disclosure of privileged information can also be considered part of insider trading.

Income statement (statement of comprehensive income)

Financial statement indicating a company’s net income (profit or loss) for a given period.

Incontestable clause

Provision of a life insurance policy according to which the insurer waives its right, when the contract has been in effect for two years, to contest the validity of the contract if the insured made misrepresentations or concealed important facts that would have led to rejection by the insurer. This clause does not apply in the event of fraud.

Indemnity

Amount of money paid by an insurer to an insured following a claim to compensate for the loss or damage ate of return. For example, if you hold a guaranteed investment certificate (GIC) earning 3% when inflation is 2%, your real rate of return is approximately 1%.incurred.

Indexation

Adjustment of income (annuity, salary, etc.) in order to fully or partially offset cost of living increases.

Indexed annuity

Annuity whereby payments are periodically adjusted in order to fully or partially offset inflation.

Inflation

The average rate of increase in the prices of goods and services. It affects consumer purchasing power.

Inflation risk

Risk that cost of living increases will reduce the purchasing power of amounts invested.

Note: A simple method for measuring the rate of return on an investment after inflation is to subtract the inflation rate from the r

Information circular

Document sent to shareholders when a meeting is convened. The circular is sent along with the meeting notice and proxy form.

Insider

Person who holds privileged information, i.e. information not known to the public.

Insurability

A person’s ability to meet certain requirements stipulated by an insurer in order to receive insurance coverage. To determine a person’s insurability, insurers ask for information such as age, health status, employment, etc.

Insurability guarantee

A guarantee that allows you to take out additional insurance on certain occasions, without evidence of insurability, for an amount not exceeding the amounts specified in the contract.

Insurable interest

A person’s interest that the risk to be insured does not occur. For example, you have an insurable interest in your own home, since you would incur a loss if it burned down. However, you do not have an insurable interest in another person’s home, because even if it went up in flames, you would lose nothing.

Insurance Bureau of Canada

The Insurance Bureau of Canada (IBC) is a national industry association that represents most damage insurers, in other words those that offer property insurance (home and business), as well as automobile and civil liability insurance.

Insurance contract

Agreement whereby the insurer, in exchange for a premium, undertakes to pay the beneficiary the benefits set out in the contract if a covered risk occurs.

Insurance of persons

Insurance that covers natural persons against the cost implication of injury, disability, illness, or death.

Insurance policy

Written document that gives effect to the insurance contract signed between an insured and an insurer. It outlines the coverage provided, as well as exclusions and limitations.

Insured

Person for whom insurance is taken out. For example, for life insurance, the insured is the person who dies before any benefits under the contract are paid.

Interest

Compensation a borrower must pay an investor in addition to the amount of the loan.

Insured amount

Amount stipulated in an insurance contract that is paid to the beneficiary if the risk covered by the insurance occurs.

Also called face amount.

Interest rate risk

The risk that interest rates will fluctuate to your disadvantage. This is because some investments are sensitive to interest rate fluctuations: This is the case especially with bonds. For example, if you hold a bond and interest rates rise, the market value of bonds could fall. This is because bond values tend to move in the opposite direction of market interest rates. Interest rate risks are also higher if you invest using borrowed funds. In this case, if interest rates rise, you may end up paying more to borrow.

Interest rate/nominal interest rate

Percentage applied to an amount that was invested (or borrowed), that enables you to calculate the interest earned (or the cost incurred) on this amount for a given period. For example, a $1,000 loan bearing 6% interest will earn $60 in interest.

Intrinsic value

The intrinsic value of a call option, a share right, or a subscription warrant is the difference between the market value of the security and the strike price. If the difference is negative, the intrinsic value is zero. The intrinsic value of a put option is the difference between the strike price and the market value of the security. Once again, if the difference is negative, the intrinsic value is zero.

Investment Industry Regulatory Organization of Canada (IIROC)

IIROC is the national self-regulatory organization that oversees all investment dealers and trading activity on debt and equity marketplaces in Canada. It was created in 2008 through the consolidation of the Investment Dealers Association of Canada and Market Regulation Services Inc.

Irrevocable beneficiary

Individual designated on an insurance contract to receive insurance benefits who cannot be removed from the contract without his/her consent.

Issuer

Person who is issuing or plans to issue a security in exchange for capital solicited from the investors. This person is normally a legal person, such as a company or mutual fund.

An issuer solicits funds from investors to improve its financial position, carry out projects, or develop new markets. In exchange for the money invested, investors receive securities such as shares traded on a stock exchange or bonds.

Joint insurance

Life insurance that covers more than one insured in case of death.

Joint report of automobile accident

Report completed by the parties involved in an automobile accident where no injuries were sustained. This speeds up claims processing. A copy of this joint report can be obtained from the Groupement des assureurs automobiles (GAA).

Key person insurance

Life insurance that covers the life of a critical company employee.

Labour-sponsored funds

Investment funds issued by a labour organization. A portion of these funds are invested in startups or small and medium-sized enterprises (SMEs) in order to create or maintain jobs. These funds usually generate tax benefits for investors.

Last survivor insurance

Life insurance that covers at least two persons and pays a certain amount on the death of the last surviving insured.

Liability

An amount owed, e.g., a mortgage balance, bank loans, a credit card balance, etc.

Life annuity

Annuity that provides periodic payments until the death of the annuitant.

Life income fund (LIF)

Tax shelter that allows taxes on the investment income it generates to be deferred. Funds invested in a LIF are often derived from a supplemental pension plan. Unlike an RRSP, the holder of a LIF is required to withdraw a minimum amount each year. In addition, holders cannot withdraw more than a certain amount from a LIF each year, to ensure that income can be provided for life. Amounts withdrawn are taxable.

Life insurance

Contract under which the insurer enters into an agreement with the insured in exchange for a premium, to pay the beneficiary the benefit provided for in the contract in the event of the insured’s death or until a specified period during his/her lifetime.

Limited partnership

Limited partnership units are issued by a partnership. A general partner manages the partnership and limited partners supply the capital. The liability of limited partners is limited to their investment outlay. These partnerships usually invest in a particular sector such as real estate or the oil and gas industry. They often provide tax benefits that may be transferable from the partnership to the limited partners.

Liquidation value

Amount that could be obtained on the dissolution of a company.

Liquidity

The ability to easily convert an investment into cash without significant cost.

Listed share

Company share that is traded on a stock exchange. For a company to be registered, it must meet certain criteria, rules, and regulations, and pay listing fees.

Locked-in retirement account (LIRA)

Tax shelter that allows holders to defer payment of income taxes on investment income until amounts are withdrawn from the LIRA. The funds usually stem from amounts accumulated in a supplemental pension plan (SPP). Since the amounts in a LIRA are locked in, these funds can only be used to draw a lifetime income in retirement. To do so, you must transfer amounts held in a LIRA into a life income fund (LIF) or purchase a life annuity from an insurance company.

Long-term debt (not current debt)

Amount of money that a natural person or legal person must pay back, generally with interest. However, the amount is not due within one year.

Loss

Damage sustained following an unfavourable event, for example death, illness, fire, accident, etc.

Loss of employment insurance

Insurance that repays a debt or portion thereof when the borrower loses his/her job. A number of restrictions may apply.

Managed account

Account for which a client has given a third party formal written authorization to make all required investment transactions in consideration of a fee.

Margin account

Account opened with a dealer that a client may use for margin buying, i.e., using money borrowed through the dealer.

Margin buying

Borrowing money in order to invest. This increases the potential gains, as well as the potential losses, on any investment (leverage effect). Margin buying thus increases risk and requires caution on the part of investors.

Also called borrowing to invest.

Marginal tax rate

Tax rate applicable to the highest taxable income bracket.

Market capitalization

The value of a company determined by multiplying the number of common shares by its market price.

Market price

Most recent price at which a security (e.g., share, bond, etc.) was traded.

MD&A (Management’s Discussion & Analysis)

Document that explains, through the eyes of management, the company’s results for the period covered by the financial statements as well as the company’s financial condition and future prospects. This report completes the financial statements but does not form part of these statements.

Medical history

All diseases and other health problems experienced by a person and his/her ascendants and descendants.

Money market

That part of the financial market in which short-term securities (current assets) are bought and sold, such as Treasury bills, short-term bonds, guaranteed investment certificates, etc.

Mutual benefit association

An association without share capital that provides benefits to members and their families in the event of a loss. Benefits may be available in the event of death, illness, or accident.

Mutual fund

Fund made up of money pooled by investors and managed on their behalf by a manager. The manager uses the money to purchase stocks, bonds, or other securities according to the fund’s objectives. Ownership is in the form of shares if the mutual fund is set up as a business corporation, and in the form of units if the fund is set up as a trust (the most common form). Holders have voting rights. These securities have no maturity.

Named peril

Named peril insurance covers losses only for causes that are specifically described in your contract.

Net worth

Assets less debt.

Non-waiver agreement

Document signed by the insured after a claim has been filed. This document states that the insurer is currently investigating the circumstances of the loss and reserves the right to apply possible policy restrictions or exclusions that might result in denial of coverage.

Notice of meeting

Notice sent to shareholders announcing the date, time and location of the shareholders’ meeting. The notice of meeting is usually included with the information circular.

Odd lot

Number of shares traded other than a round lot. For example, if a round lot is 100 shares and an investor wants to trade 135, the trade will involve one round lot of 100 shares and one odd lot of 35 shares.

Old age security pension (OASP)

Monthly benefit paid by the Government of Canada to eligible citizens age 65 and older, subject to certain conditions.

Opening price

Price paid to purchase a security in the first transaction of a trading session.

Option

Financial instrument that entitles the holder to buy (call option) or sell (put option) an asset at a fixed price for a specified period. The underlying interest may be a common share, a commodity, a currency, or an index (such as a stock market index).

Over-the-counter market

Market where securities not listed on an exchange are traded. Refers to an interdealer market.

P&C (property and casualty)

Insurance other than life and health insurance, e.g., fire, accident, or miscellaneous risks. Also called damage insurance.

Participating insurance

Insurance for which policyholders may receive benefits based on company performance. Benefits may include lower fees for insurance policies, increased coverage, etc.

Participating security (Equity security)

Refers to common shares or preferred shares representing an ownership interest in a company.

Pension adjustment (PA)

An amount determined by the Canada Revenue Agency used to calculate the maximum allowable RRSP contribution amount.

For a defined contribution pension plan, the PA is the sum of employer and employee contributions for the year.

Pension fund

Fund made up of contributions and investment income that is used to cover retirement plan benefits.

Periodic fixed amount purchase

Investment made at regular intervals based on a fixed amount. For example, a $300 investment made every month.

Policyholder dividend

Benefit of insurance with participation. Insureds often have a choice between receiving cash or paying lower insurance costs. A number of other options may also be available. Dividends are not guaranteed, and the company may pay a higher or lower amount, subject to certain criteria, particularly the experience with a group of insurance contracts.

Political risk

Risk that a government will not be able to honour its commitments. The risk that a government will alter the rules in place must also be considered. For example, a government may amend tax laws, sometimes even retroactively. Political instability and war are also risk factors.

Preferred share

Share issued by a company. Preferred shareholders have an ownership interest in the issuer. Holders of preferred shares are generally entitled to receive a fixed dividend before any dividends are paid to holders of common shares.

Preferred share with cumulative dividends

Share that provides dividends that must be fully paid before dividends can be offered to holders of common shares.

Premium

Amount an insured must pay an insurer for an insurance to come into and remain in force.

Present value

The value today of one or more streams of future income.

Price/earnings ratio

The price of a common share of a company divided by the net earnings (net income) per share over the past fiscal year. For example, a share that sells for $40 with a net income of $4 over the past 12 months has a price/earnings ratio of 10.

Pricing

Calculating the cost of an insurance premium based on different factors, such as age and location of residence, for example.

Primary market

Financial market where newly issued securities are traded, as opposed to the secondary market, where securities are bought and sold subsequent to a previous issue.

Principal-protected note

A security whereby the issuer recognizes a debt. Principal-protected notes do not necessarily carry a fixed interest rate—it can fluctuate according to a benchmark portfolio that may be tied to one or more indexes, commodities, foreign currencies or hedge funds. Notes are generally issued for a limited period and reach maturity in five to ten years. In certain cases, the issuer may limit the return earned on a note or redeem the note before maturity.

Privatization

Transfer of a government activity (government corporation or other assets) to the private sector.

Professional liability insurance

Insurance that covers the financial consequences of errors or omissions committed by insureds in carrying out their professional activities when they are personally liable for the consequences of their acts.

Property and Casualty Insurance Compensation Corporation (PACICC)

An industry-funded non-profit corporation that, in the event of the failure of a member insurer, responds to claims of policyholders (subject to a number of restrictions and limitations). For more information, visit the PACICC website at http://www.pacicc.com.

Prospectus

Detailed information document that must be prepared whenever an issuer plans to sell securities to the public.

The prospectus must provide full, true, and plain disclosure of all material facts relating to the securities to be distributed. It must also disclose all material facts likely to affect the value or the market price of the securities to be distributed.

Some issuers may be exempted from the requirement to prepare a prospectus in order to sell securities, but only under certain conditions.

Proxy form

Document used by a shareholder to authorize another person to act on his/her behalf at an assembly.

Québec Pension Plan

A contributory, mandatory plan for Québec workers. It provides current and former Québec workers and their family members with basic financial protection at retirement and in the event of death or disability. For more information, visit the Régie des rentes du Québec website at http://www.rrq.gouv.qc.ca.

Quorum

Minimum number of members required to attend a shareholders’ meeting to validly deliberate and make decisions.

Quote

Offer of insurance coverage detailing both the premium and the available coverage.

Real interest rate

The interest rate less the inflation rate. For example, if your investment earns a 3% interest annually and the inflation rate is 2%, your real interest rate will be approximately 1% (3% - 2%).

Real return bond

Bond that pays interest at a rate that is adjusted for changes in the consumer price index.

Redeemable share

Share that the issuer can buy back whenever it wishes, at a predetermined price. However, the issuer may have to fulfill conditions in order to buy back its shares. For example, shares may be bought back only after a given period of time, for example after 5 years.

Reduced paid-up life insurance

Insurance for which the insured no longer pays premiums but remains insured for a lower face amount.

Registered education savings plan (RESP)

Plan that allows the participant to accumulate tax-sheltered amounts in order to partially or fully fund the beneficiary’s postsecondary education costs. It should be noted that plan participants cannot deduct contributions from their taxable income. However, RESP contributions entitle participants to a Canada Education Savings Grant (CESG), subject to certain conditions. Quebeckers can also benefit from the Québec Education Savings Incentive (QESI), also subject to certain conditions. In addition, some families may benefit from the Canada Learning Bond (CLB).

Registered retirement income fund (RRIF)

Tax shelter that allows investment income to accumulate tax free. Amounts invested in an RRIF are generally derived from an RRSP. Unlike an RRSP, participants in an RRIF must withdraw a minimum amount each year (as with the LIRA). Amounts withdrawn are taxable.

Registered retirement savings plan (RRSP)

Plan that lets participants’ assets grow tax free. It is used mainly to accumulate savings for retirement. One benefit of RRSPs is that individuals can deduct RRSP contributions from their earned income. This usually generates tax savings.

Registered shareholder

Shareholder whose name is recorded in the books or registers of a company on a given date. Whether or not a shareholder is registered is important, particularly for the distribution of dividends. For example, if a company declares a dividend for registered shareholders, only those shareholders who are recorded in the books on the given date will receive the dividend

Replacement cost

For automobile or home insurance, the amount it takes to replace an insured’s property that has been damaged or is deemed to be irreparable.

Reporting issuer

Issuer that is subject to the continuous disclosure requirements provided for in the Securities Act. Reporting issuers are required to file prospectuses, financial statements, and other public information documents.

Resolution

Proposal submitted to a vote during a shareholders’ meeting.

Restricted share

Share with limited or no voting rights except under special circumstances.

Retractable bond

Bond that may be redeemed prior to the maturity date at the option of the holder.

Retractable share

Share that the holder can redeem at a predetermined date under certain conditions.

Revocable beneficiary

Individual designated on an insurance contract to receive insurance benefits who can be removed from the contract without his/her consent.

Risk

The possibility of earning a lower return than anticipated or losing all or a portion of the amounts invested. There are several types of risk that can affect the value of an investment, including credit risk, counterparty risk, currency risk, and political risk.

For more information, see the brochure Short Investment Glossary.

For damage insurance, the likelihood that a future event will take place, causing a loss to the property insured. The risk must be uncertain and cannot depend solely on the willingness of the parties involved.

Risk of a credit rating downgrade

The possibility that the credit rating on your investment will be downgraded by a rating agency. A rating agency is an organization that assesses the quality of a security. For example, if you hold what is considered a good quality bond that becomes a “junk” bond, its value could fall considerably.

Round lot

Standard number of shares determined by stock exchanges for the purpose of trading. A round lot generally corresponds to 100 shares.

Rule of 72

Method for estimating the number of years it will take your investment to double based on the expected return. To apply the rule, simply divide 72 by the rate of return you will receive. For example, if you expect to receive a 6% annual return, it will take 12 years for the value of your investment to double.

Savings

Amount of money you are able to set aside. Your savings is the difference between your income and your expenses.

Savings bond

Bond issued in several forms by the federal government and by the governments of certain provinces. It represents a loan granted by the investor to the government issuer. Terms are for one year or more.

Secondary market

Financial market where previously issued securities are traded. The secondary market includes exchanges and over-the-counter markets.

Secured loan

Loan for which the borrower provides property as guarantee.

Securitization

Financial transaction that commonly consists of converting receivables into marketable securities for subsequent sale to investors.

Security

A type of financial instrument. A few examples of securities: a Treasury bill, a guaranteed investment certificate, a savings bond, etc.

Segregated fund

Fund issued by insurers that is similar to a mutual fund, but with additional guarantees. For example, capital may be reimbursed in the event of death, even if the value of your investments has declined. You may also be guaranteed reimbursement at maturity. The invested assets are held by an insurer separately from its other assets, hence the term “segregated fund.”

Share

Ownership interest in a company issued by that company. Shares issued by companies represent an ownership interest in that company.

Share capital

Portion of the equity of a business corporation that represents the contribution of shareholders.

Share right

A privilege a company gives its common shareholders to buy additional shares at a specified price, usually below market price. Investors must exercise their rights within a short period, generally within six to eight weeks.

Shareholder

A natural person or legal person that holds common shares or preferred shares in one or more companies.

Shareholders’ ledger

Document indicating the names and addresses of all shareholders in addition to the number of shares held.

Short form prospectus

An abbreviated prospectus that meets all the legal requirements and provides the information to which investors are entitled.

Short selling

Selling a security without owning it. An investor expects a security to decline in value and to be able to buy it back at a lower price. The transaction consists of borrowing the security from a financial intermediary and selling it immediately on the market. The investor promises to buy back the security and deliver it back to the intermediary. This investment strategy is extremely risky, because the investor can lose more than the value of the security traded if it rises in price. Theoretically, the loss could be unlimited. For sophisticated investors only.

Simplified pension plan

Defined contribution pension plan administered by a financial institution. Funds accumulated in this plan can be used to purchase an annuity with an insurer or transferred to a locked-in retirement account (LIRA).

Statement of cash flows

Financial statement that analyzes changes in a company’s liquidities during the reporting period.

Statement of changes in equity (statement of retained earnings)

Financial statement summarizing changes in a company’s equity during the reporting period.

Statement of comprehensive income (income statement)

Financial statement indicating a company’s revenue and expenses for a given period.

Statement of financial position (balance sheet)

Financial statement indicating the financial position of an individual, couple, family, company, etc. on a specific date. This statement lists assets and liabilities and shows net worth (difference between assets and liabilities).

Statement of retained earnings (statement of changes in equity)

Financial statement summarizing changes in a company’s equity during the reporting period.

Stock market index

Statistic that measures stock market developments and is frequently used as an indicator of economic conditions.

Stock split

The attribution of two or more shares to every share outstanding. For example, a two-for-one stock split would double the number of shares outstanding. However, as the value of each share would decline by half, shareholders’ financial position does not change following a stock split.

Strike price

Price at which an underlying interest may be purchased (in the case of a call option) or sold (in the case of a put option).

Stripped bond

Bond on which no interest is paid. The investor earns a return by purchasing the bond at a lower price than the price paid at maturity. For example, the investor can pay $950 for a bond with a value of $1,000 at maturity.

Subscription warrant

Subscription warrants give the holder the right to purchase a number of securities from the issuer at a certain price within a specified period—usually three to five years. Warrants are generally offered to investors when they acquire certain types of securities, such as fixed-income securities or preferred shares.

Subsidiary

A company controlled by a parent company, which may derive economic benefits from the controlled company and assumes the related risks.

Substandard risk

Risk that the insurer cannot assume under the normal conditions of an insurance contract due to the high probability that the insured will make a claim under the contract. As a result, more restrictive clauses are included in the contract or the insured is required to pay an additional premium.

Supplemental pension plan (SPP)

Pension plan that is generally set up by an employer. There are several different categories of SPP, including:

Traditional private pension plans;

Simplified pension plans.

Swap

Financial contract for the exchange of cash flows between investors, e.g., exchanging the floating interest rate of one security for the fixed interest rate of another financial instrument.

Takeover bid

Public notification by a natural or legal person to company shareholders of its intent to purchase a certain number of shares within a certain period of time at a given price.

Tax base

The amount to which a tax rate is applied, such as taxable income.

Tax credit

Amount a taxpayer can deduct from taxes due.

Tax deduction

Amount a taxpayer can deduct from his/her total income for the purpose of calculating the tax due.

Tax rate

Percentage applied to income used to calculate the income tax to be paid.

Tax shelter

Investment vehicle (e.g., RRSP) or investment (e.g., labour-sponsored fund) that provides tax credits, tax deferrals, or other tax benefits for investors.

Technical analysis

Method for assessing the future value of a company’s shares based on the analysis of graphs and charts illustrating share prices and trading volume.

Term life insurance

Life insurance that provides the beneficiary with coverage for a limited period. Term policies are generally renewable at prices set in advance that increase periodically.

Termination of an insurance contract

Terminating an insurance contract by cancelling all coverage as though it never existed. Not to be confused with cancellation.

Traditional supplemental pension plan

Contract that must be registered with the Régie des rentes du Québec (RRQ, or Québec Pension Plan) in which the employer—either alone or with plan participants—undertakes to periodically pay into a pension fund to accumulate a retirement pension.

Travel insurance

Coverage for illness or accidents occurring outside Québec during a vacation or business trip. Travel insurance protects against unforeseen expenses for medical care, hospitalization, trip cancellation/interruption, or stolen luggage, as well as in the event of death.

Treasury bill

Security issued by the federal and provincial governments. Treasury bills represent a loan by the investor to the issuing government. They are sold in large denominations, starting at $1,000, and reach maturity in no more than a year.

Trust

Arrangement under which an individual or company entrusts securities (bonds, shares, etc.) to another party (trustee), who undertakes to hold and administer these securities on behalf of other individuals or companies.

Trustee

Natural person or legal person (generally a trust company) that is responsible for securities (for example, bonds or shares) placed in trust and must ensure compliance with all provisions of the trust deed.

Underlying interest

Assets used to determine the value of derivatives (call or put options, futures, etc.).

Universal life insurance

Life insurance that also includes a savings component. By paying a premium that is higher than the cost of insurance, the insured can save money tax free. However, a number of restrictions apply, and the insured may pay tax on withdrawal of the amounts saved.

Variable annuity

Annuity whereby payments vary according to the return earned on the underlying investments.

Waiting period

Period during which an insured is not eligible for insurance benefits, even though the covered risk may have occurred. For example, in the event of disability insurance, an insured may not be eligible for benefits during the first two weeks of a disability.

Waiting period

Period during which an insured is not eligible for insurance benefits, even though the covered risk may have occurred. For example, in the event of disability insurance, an insured may not be eligible for benefits during the first two weeks of a disability.

Whole life insurance

Life insurance that provides coverage until the death of the insured. Premiums are usually fixed for this type of insurance. This type of policy usually has a cash surrender value.