Glossary

A

Account Type

Account type identifies investments registration. Common account types include: Non-Registered (a regular investment account), RRSP, Self- Directed RRSP and RESP.

Adjusted Cost Base

This is the average cost of units/shares.

Administrator

This is the Investment Dealer or Intermediary who administers accounts on behalf of their investor clients.

Annual Maximum Payment Amount

This is the maximum amount that may be withdrawn from an account – usually a RRIF account.

Annual Minimum Payment.

This is the minimum amount that must be withdrawn from an account – usually a RRIF account.

Average Cost per Unit/Share

Calculated by taking the net amount invested through purchases and reinvested distributions and dividing it by the number of units/shares bought.

B

Balanced Fund.

A mutual fund that invests in a combination of stocks and bonds:

Bear Market.

A prolonged period of falling securities prices.

Bond

A long-term debt instrument that promises to pay a specified amount of interest and return the principal amount on a specified maturity date. See Fixed Income Funds.

Bond Funds

A mutual fund with a portfolio consisting primarily of bonds.

C

Capital Distribution

This is the portion of a distribution that is comprised of capital gains realized in the Fund.

Capital Gains Distribution

Derived from profits earned by the sale of stocks and bonds in a portfolio, capital gains distributions are passed from the Fund to its unitholders.

Cash Equivalent

A type of asset that can be quickly converted to cash, including Treasury bills and short-term commercial paper.

Closed-End Fund

A mutual fund that issues a fixed number of units. These units are usually bought and sold on stock exchanges and market supply and demand forces determine their value.

Common Stock

A type of security that represents an ownership share in a corporation. Owners of common shares are typically entitled to receive voting rights and dividends. These securities generally have the greatest potential for capital appreciation, but their rights are subordinated in the event of a liquidation or bankruptcy.

Compounding

An important investment principle, this is the process of earning income on income already earned.

Contingent Beneficiaries

Beneficiaries are entitled to receive death benefits in the event there are no eligible primary beneficiaries for the contract.

Current Yield

  1. The current yield of a bond is the income received by an investor over the course of one year (also called annual coupon), divided by the current market price of the bond. It is a reasonable estimate of the income generated by a security at a specific point in time.
  2. The current yield of a bond fund is the market-weighted average of the current yields of all the bonds in the portfolio. This measure is gross of fees and excludes yield on cash.
  3. The current yield of a money market fund spans 10 business days, annualized, and is net of all applicable fees.

D

Deep Value Style Investing (Mutual Advisers)

This investment style seeks opportunities to 'unlock' shareholder value by identifying special situations such as distressed bonds at substantial discounts or takeovers and by accumulating majority positions and force restructuring through shareholder activism.

Deferred Sales Charge

A mutual fund purchase option that requires an investor to pay a commission if and when the investment is redeemed. The amount of the commission is typically reduced the longer the investment is held. For Templeton, Franklin, Franklin Bissett, and Franklin Franklin Mutual Series Funds, the commission declines to nil if the investment is held for more than 6 years.

Distribution (or Dividend)

A payout to the unitholders (or shareholders) of the net income or realized capital gains earned by a mutual fund.

Distribution rate

  1. A fund's monthly distribution rate is the sum of all the income plus any return of capital paid to investors per unit during one month, divided by the fund's month-end unit price. This calculation may exclude capital gain distributions to reflect the normal monthly income stream.
  2. The trailing 12-month distribution rate is the sum of the monthly distribution rates of the previous 12 months. Both distribution rates are net of all applicable fees.

Diversification

An investment strategy that spreads investments across a variety of areas, which may include some or all of the following: securities, asset classes, geographic regions, and investment instruments. This strategy seeks to reduce risk in a investment, particularly during times of market volatility.

Dividend Yield

  1. The dividend yield of a stock is the total amount of dividend per share paid over the previous 12 months, divided by its current price.
  2. The dividend yield of a mutual fund is the market-weighted average of the dividend yields of all the stocks in the portfolio. This measure is gross of fees.

Dollar Cost Averaging

An investment strategy in which regular purchases are made with the goal to reduce the average cost per share by acquiring more shares when prices are lower and fewer shares when prices rise.

E

Effective Yield

  • A bond's effective yield is the total yield on a bond when interest payments are reinvested. The effective yield is always higher than the basic yield because interest from the investment is itself earning interest, an effect known as compounding.
  • A mutual fund's effective yield is the market-weighted average of the effective yields of all the bonds in the portfolio

Emerging Market

Any country with stock market capitalization of less than 3% of the Morgan Stanley Capital International World Index; low to middle income economy, as determined by the International Bank of Reconstruction and Development. Examples: Indonesia, Colombia, Peru, Philippines, South Africa, Thailand.

Equity Funds

A mutual fund with a portfolio consisting primarily of common stocks.

Excess Payment Amount.

An amount withdrawn subject to withholding tax.

F

Fixed Income Fund

A mutual fund that invests primarily in fixed income securities (bonds).

Front-End Load

A mutual fund purchase option that requires the investor to pay an up-front commission to an investment advisor. Typically, the commission is deducted from the initial investment.

G

GARP or Growth at a Reasonable Price Style Investing

The GARP objective is to produce above average returns at lower than average risk levels; capital preservation and stability are of primary importance by employing a bottom-up approach in which companies demonstrate a gaining momentum and sustainable, replicable growth.

Global Fund

A mutual fund that invests anywhere in the world.

Growth Investing

An investment approach that focuses on companies whose earnings are expected to rise at an above-average rate. A version of this investment style is employed by the managers of the Franklin Bissett and Franklin Funds.

Growth Style Investing

Bottom-up company research looking for secular investment opportunities; companies with proprietary/intellectual property, a sustainable competitive advantage or a unique marketing niche; leaders of major secular trends.

I

Income Distribution

Comprised of interest and income earned in a mutual fund.

Income Mutual Funds

These Funds invest primarily in fixed-income securities such as bonds, mortgages and preferred shares. Their primary objective is to produce income for investors, while preserving capital.

Index

A statistical model used to measure changes in a specific financial market.

Internal Yield

  1. A blended measure used for balanced funds, the internal yield is the market-weighted average of the Yield to Maturity of the fund's fixed income component and the Dividend Yield of the fund's equity component. This measure is gross of fees.

L

Large Cap Canadian Fund

Two-thirds of the fund must be invested in S&P/TSE60 Index companies, and remainder in the 120 largest Canadian-listed companies.

Large Cap U.S Equity Fund

Market cap greater than U.S. $8.5 billion Load: A commission charged to mutual fund investors.

M

Management Expense Ratio

A measure of the total costs of operating a mutual fund, expressed as a percentage of the fund's average net assets.

Market Value

This is the value of a fund on the day listed. It is calculated by multiplying the Units/Shares owned by the Unit/Share Price.

Micro Cap

Market capitalization under C$100 million.

Money Market Fund

A mutual fund that invests primarily in Treasury bills and other low risk short-term securities.

Mutual Fund

An entity that pools the money of many individuals and is invested by professional investment managers in a wide range of securities on their behalf.

N

Net Asset Value Per Unit (NAVPU) or Net Asset Value Per Share (NAVPS)

The market value of one unit of a mutual fund on a given day. Net Asset Value is calculated by adding the total value of the Fund's assets and subtracting the liabilities. To find the NAVPU, the Fund's Net Asset Value is divided by the total number of units outstanding. A listing of the daily NAVPU, is available.

O

Open-End Fund

A mutual fund that continually issues and redeems units. Unlike a Closed-End Fund, the number of units outstanding will vary on a daily basis. The value of each unit is based on the Fund's net asset value per unit. Most mutual funds are open-ended.

P

Preferred Shares

A class of shares that typically pays dividends at a specified rate. Preferred shares have preference over common shares in the payment of dividends and the liquidation of assets, but they do not ordinarily carry voting rights.

R

Rear-Load

See Deferred Sales Charge

Registered Education Savings Plan (RESP)

A plan that allows a contributor's investments to grow tax free until a beneficiary is able to use the proceeds to pay the costs of post-secondary education. More information is available on Franklin Templeton Investments RESPs.

Registered Retirement Income Fund (RRIF)

A RRIF enables investors to roll-over their RRSP assets into a plan that provides a regular investment income stream at retirement.

Registered Retirement Savings Plan (RRSP)

A tax-deferral plan that allows individuals to invest for their retirement. Invested amounts, subject to certain limits, are deductible from taxable income and can compound within the plan tax-free. Franklin Templeton Investments offers a wide variety of RRSP-eligible funds.

S

Sector Fund

A mutual fund that concentrates on a particular industry such as health care, energy or telecommunications.

Simplified Prospectus

A document that must be distributed to each new mutual fund investor. The simplified prospectus contains pertinent information such as the stated investment objective of the fund, the fees and commissions payable, and purchase/redemption options.

Small Cap Canadian Fund

Market capitalization between C$100 million and C$1 billion.

Small Cap U.S. Equity Fund

Companies with market caps not exceeding (i) U.S. $1.5 billion, and (ii) highest market cap value in the Russell 2000 Index.

Systematic Withdrawal Plan (SWP)

A withdrawal plan option that allows an investor to receive regular payments through the automatic redemption of units from his/her mutual fund account. To participate in this plan, Franklin Templeton Investments investors must have a minimum account balance of $5,000.

T

Treasury Bills

Short term government debt securities with maturities of less than one year. Treasury bills can quickly be converted into cash.

V

Value Style Investing

Stocks selling at prices lower than analysts' assessment of their true worth; long-term perspective with average holding time of 5 years; bottom-up style of selecting funds.

Volatility

The tendency of a mutual fund or security to rise or fall sharply. There are many statistical measures of volatility.

Y

Yield

  1. In general terms, yield is the annual income paid by a security expressed as a percentage of its market price.
  2. With bonds, yield is the rate of interest, calculated by dividing the coupon by the bond's market price. Bonds are typically issued with fixed coupon payments (regular cash payments of a set amount), and their yield is expressed as the dollar amount received from coupon payments relative to the bond's current market price.

Yield to Maturity (YTM)

  1. The yield to maturity (YTM), also known as gross redemption yield or redemption yield, is a long-term yield expressed as an annual rate.
  2. A bond's YTM is the rate of return anticipated if one assumes the bond is held until its maturity date and all the coupons paid by the bond are reinvested at the same rate of return as the coupons. The calculation takes into account the current market price, par value, coupon interest rate and time to maturity and assumes that all coupons are reinvested at the same rate.
  3. The YTM of a bond fund is the market-weighted average of the YTMs of all the bonds in the portfolio.
  4. Franklin Strategic Income Fund and Franklin High Income Fund YTMs use:
    • The yield to the average effective maturity date for mortgage-backed securities and asset-backed securities
    • The current yield on certain convertible preferred stock and floating rate bonds
    • The yields calculated to the first call and/or fixed to floating coupon date for certain hybrid securities.

Yield to Worst

  1. The yield to worst (YTW) of a bond is the yield to maturity if the worst possible bond repayment takes place. If market yields are higher than the coupon, the YTW would assume no prepayment. If market yields are below the coupon, the YTW would assume prepayment.
  2. The YTW of a bond fund is the market-weighted average of the YTWs of all the bonds in the portfolio. This measure is gross of fees and excludes yield on cash.
  3. Franklin Strategic Income Fund and Franklin High Income Fund YTMs use:
    • The yield to the average effective maturity date for mortgage-backed securities and asset-backed securities
    • The current yield on certain convertible preferred stock and floating rate bonds
    • The yields calculated to the first call and/or fixed to floating coupon date for certain hybrid securities.