Dictionary

MACAULAY DURATION	The weighted-average term to maturity of a bond's cash flows. The weighting is based on the present value of each cash flow divided by the price. This is one of two ways to calculate duration, the other being modified duration.

MAJOR TREND	The underlying price trend prevailing in a market despite temporary counter trend declines or rallies.

MAJORITY SHAREHOLDER	An individual shareholder or entity that controls more than half of a corporation's outstanding shares, or in some instances, one of a small group of shareholders who collectively control more than half of a corporation's outstanding shares.

MANAGED ACCOUNT	An account for which the holder/owner gives his/her broker or another individual the ability and authority to buy and sell securities, either on a discretionary or non- discretionary basis. May also be called a controlled, discretionary or WRAP account.

MANAGEMENT COMPANY	The group within an investment fund organization that is responsible for the investment decisions of the fund's portfolio and/or the administrative functions of the fund. It is compensated on a percentage of the fund's total assets.

MANAGEMENT’S DISCUSSION	The section in a quarterly or annual report in which the company's senior executives describe the prior period (usually the previous quarter) and the current outlook going forward.

MANAGEMENT EXPENSE RATIO (MER)	A measure of the total costs of operating an investment fund as a percentage of average total assets. It includes the management fee as well as other expenses that are charged directly to the fund such as administrative, audit and legal fees, but excludes brokerage fees. Published rates of return are normally calculated after the management expense ratio has been deducted.

MANAGEMENT FEE	The sum paid to an investment company's adviser or manager for overseeing its portfolio and managing its operations. The fee is usually set as a fixed percentage of the fund's net asset value.

MARGIN	The amount that is paid by a client when the individual uses credit to purchase a security, the balance of the purchase price is loaned by a broker against acceptable collateral.

MARGIN CALL	When an investor purchases a security on margin with the expectation that the share value will rise, or shorts a security with the expectation that the share price will decline, and share prices move against the investor, the brokerage firm administering the account will send out a margin call requiring that the investor add additional funds or marketable securities to the account in order to protect the broker's loan.

MARGINAL TAX RATE	The rate of tax on the last dollar of taxable income.

MARKETABLE	A security that is easily purchased or sold.

MARKET CAPITALIZATION	See Capitalization.

MARKET CORRECTION	A price reversal that typically occurs when a security or market has been overbought or oversold.

MARKET MAKER	A trader employed by an investment/securities firm who has the authority and who is required, by the self-regulatory organizations (SROs), to ensure reasonable liquidity in securities markets by making firm bids or offers for one or more designated securities.

MARKET ORDER	An order that is placed to purchase or sell a security immediately at the best current price.

MARKET PRICE	The most recent price at which a security transaction took place.

MARKET RISK	The uncontrollable or systemic risk that is associated with equities.

MARKET SEGMENTATION THEORY	A theory on the composition of the yield curve. It is thought that large institutions dictate the shape of the yield curve. The banks prefer to borrow in the short term while the insurance industry, with a longer time horizon, prefer long-term money. Therefore it is held that supply and demand from the larger institutions predominantly shape the yield curve.

MARKET TIMING	Decisions on when to purchase or sell securities based on a variety of economic factors such as the strength or weakness of the economy and the direction of interest rates. It can also be based simply on stock price movements or on trading volume through the use of technical analysis.

MARKET TRANSPARENCY	Within the context of fixed income management, characterizations of a bond market where debt management strategies and operations are clear and well understood by market participants.

MARKET VALUE WEIGHTED INDEX	A Stock Index where each stock equally affects the Index relative to its market value. Examples include the S&P/TSX, NASDAQ Composite Index, S&P 500, Wilshire 5000 Equity Index, Hang Seng Index and EAFE Index. It may also be called a capitalizationweighted index.

MARKET INDEX	A vehicle used to denote trends in securities markets. The most popular in Canada is the S&P / TSX Composite (replaced the TSX 300 Index in 2002).

MARKET PRICE	In the case of a security, the market price is usually considered the last reported price at which the stock or bond is sold.

MARKETABLE DEBT	Debt instruments that have a secondary market where they can be purchased and sold by investors after they are first issued. Government of Canada marketable fixed income securities can be issued in a number of forms including fixed-coupon marketable bonds, Medium Term Notes, Treasury bills, real return bonds and Canada bills. All Canadian dollar denominated marketable debt is initially sold through auction to primary dealers such as chartered banks and investment dealers, who in turn resell the bonds to individual and institutional investors.

MARKETABLE SECURITY	Security that probably could be converted into cash quickly and with ease.

MATERIAL INFORMATION	Information that would likely affect a stock's price, either positive or negative, once it was made public. Examples may include a takeover, a divestiture, significant management changes and new product introductions. May also be called material news.

MATURITY DATE	The date at which a loan, bond or debenture comes due and must be redeemed or paid off.

MBS	See Mortgage-Backed Security.

MEDIUM TERM	Usually referring to 2-10 years, and normally used in reference to fixed income. When used in technical analysis, medium term usually refers to a few weeks to a few months. May also be referred to as intermediate-term.

MEMBER FIRM	An investment brokerage firm or investment dealer that is a member of a stock exchange or the Investment Dealers Association of Canada.

MER	See Management Expense Ratio.

MICRO CAP	Describes a publicly traded company with a market capitalization under $250 million.

MID CAP	Describes a publicly traded company with a market capitalization between $1 billion to $5 billion in Canada, and $2 billion to $20 billion in the U.S.

MINI TENDER OFFER	This is a bid for a small block of shares at less than the market price. Often small and unsophisticated investors are the targets for these types of bids as shareholders who do not pay attention to the price of their shares.

MODIFIED DURATION	A measure of the sensitivity in the price of a fixed income instrument to interest rate changes. It is equal to the Macaulay Duration divided by (1+ (bond yield/k)) where k represents the number of compounding periods per annum. Thus, it is inversely related to the approximate percentage change in price for a given change in yield. This is one of two ways in which duration can be calculated, the other method being Macaulay Duration.

MOMENTUM	The perceived strength behind a price movement.

MOMENTUM INVESTING	A type of investing that requires buying the strongest performing stocks (winners) and selling the worst performing stocks (losers) within a portfolio. In essence this investing style tries to ride out the trends of a stock or market.

MONETARISM	The school of economic theory that specifies that the level of prices as well as the economic output of an economy is directly influenced by its money supply. This school of thought believes that control of the money supply is more important to the functioning of the economy than is the amount of government spending.

MONETARY POLICY	The process of managing the supply of money as well as credit in order to influence the performance of the economy. The Bank of Canada manages Canadian monetary policy mainly through its management of short-term interest rates. The Bank is ultimately responsible to the federal government for its actions or inactions. The Bank alters shortterm interest rates through the adjustment of its own bank rate. A rise in the bank rate is an act of "tightening" or decreasing the supply of money as well as credit, immediately decreasing elements in the economy that add to inflation and economic performance. The reverse can also be true. The bank rate and the money supply influence interest rates as well as the Canadian dollar exchange rate and determines the monetary conditions in which the Canadian economy functions.

MONEY LAUNDERING	Methods by which the proceeds of crime are processed through the financial system and converted into "clean money”. These methods seek to hide the person originating the transaction or to the illegal origins of the funds.

MONEY MANAGER	An individual who is responsible for the entire financial portfolio of another individual or other entity. A money manager receives payment, usually as a fixed percentage fee on assets managed, in exchange for assuming responsibility for the selection and monitoring of appropriate investments for the client on an ongoing basis.

MONEY MARKET FUND	A type of investment fund that invests primarily in treasury bills and other low-risk, short-term investments that provide the fund with a guaranteed stable net asset value.

MONEY PURCHASE OR DEFINED CONTRIBUTION PENSION PLAN	A type of pension plan that will provide whatever pension income the accumulated contributions and the return on investment in the plan will purchase at the time of retirement. Total annual contributions for a member of these plans are currently limited to the lesser of 18 per cent of a members’ annual earnings or $13,500.

MONEY SUPPLY	The total supply of money in circulation within a given country's economy at a given point in time. There are several measures for the money supply, such as M1, M2 and M3.

M1	One measure of the money supply that includes all coins, currency held by the public, traveler's cheques, chequing account balances, automatic transfer service accounts and balances in credit unions.

M2	One measure of the money supply that includes M1, plus savings and small time deposits, overnight repos at commercial banks and non-institutional money market accounts. Also a key economic indicator used in the forecast of inflation.

M3	One measure of the money supply that includes M2, plus large time deposits, repos of maturity greater than one day at commercial banks and institutional money market accounts.

MORTGAGE-BACKED SECURITY (MBS)	A security backed by a pool of mortgages. May also be called mortgage-backed certificate.

MORTGAGE FUND	An investment fund that invests in mortgages. Portfolios of mortgage funds normally consist of first mortgages on Canadian residential property, although some funds may also invest in first mortgages on commercial properties.

MORTGAGE PASS THROUGH SECURITY	A security consisting of a pool of residential mortgage loans. All payments of principal and interest are consequently passed through to investors each and every month. May also be called a passthrough.

MOST FAVOURED NATION (MFN) TREATMENT	Article I of the General Agreement on Tariffs and Trade 1994 (GATT 1994) that requires countries not to discriminate between goods on the basis of country of origin or destination. The MFN principle has established the foundation of the world trading system since the end of World War II.

MSCI WORLD INDEX	This is the Morgan Stanley Capital International Index, which measures the total return (with dividends reinvested) of equity securities available in developed markets around the globe. As of June 2001, the Index represented 23 different countries indices.

MUNICIPAL BOND	Bonds issued by a city or local government in order to finance operations and/or special projects.

MUTUAL FUND	An investment entity that pools shareholder or unitholder funds and invests in various securities. The units or shares are redeemable upon demand by the investor. The value of the underlying assets of the fund influences the current price of units on a daily basis.

MUTUAL FUND COMPANY	A firm that uses its capital and/or the capital of its clients to invest in other companies. Its capital is a pool of funds gathered from a number of investors and is used to purchase securities that are selected to meet specific requirements and goals. In Canada, investment fund companies fall under the jurisdiction of the provincial securities commissions.