Dictionary

RALLY	A rise in the price level of the market or in an individual security, usually describing a short term time period, and often after downward pressure.

RANDOM WALK THEORY	An investment theory which claims that market prices follow a random path up and down, making it impossible to predict with any accuracy which direction the market will move at any given point in time. This theory stands in contrast to the efficient market theory (now discredited) stating that all market participants receive and act on all of the relevant information available as soon as it becomes available. If the Random Walk Theory were true, no investment strategy would be better than a coin toss.

RATE OF RETURN	See also Yield

RATING SERVICE	An independent company that publishes financial ratings for securities such as preferred stock and debt issues, based on the likelihood of consistent and timely payments.

RATIONAL EXPECTATIONS	A school of economic theory which argues that companies and their workers are rational thinkers and are able to make intelligent economic decisions after evaluating all available information.

REAL ESTATE FUND	An investment fund that invests primarily in residential and/or commercial real estate properties in order to produce income and capital gains for its unitholders.

REAL ESTATE INVESTMENT TRUST (REIT)	A closed-end investment company that specializes in real estate or mortgage investments.

REAL INTEREST RATE	The nominal interest rate minus the inflation rate, i.e. the rate of interest not including the effects of inflation. All else being equal, the higher the current inflation rate, the higher nominal interest rates will be. With a nominal interest rate of 8% on a loan and inflation at 2%, the real interest rate is 6% (8 - 2 = 6).

REAL RETURN BOND (RRB)	Government of Canada RRBs pay semi-annual interest based on a real interest rate. Unlike standard fixed-coupon marketable bonds, interest payments on RRBs are adjusted for changes in the Consumer Price Index. Thus rates are adjusted higher for increases in the Consumer Price Index and vice versa.

RECORD DATE	A date set by the issuer of a security, on which an individual must hold their shares in order to be deemed eligible to receive a declared dividend or a capital gains distribution. Record date is also called the date of record.

REDEEMABLE BOND	A redeemable bond is the same as a callable bond. May be at the option of the issuer.

REDEEMABLE SHARES	Shares redeemable at the option of the issuer and/or the shareholder.

REDEMPTION	A purchase of shares by the issuer at a time and price predetermined in the terms of the securities.

RESEARCH REPORT	The process of gathering data for the purpose of initiating, modifying or terminating a particular recommendation for an investment or group of investments.

REGISTERED EDUCATION SAVINGS PLAN (RESP)	RESPs are registered education savings plans that permit savings to grow tax-free until the beneficiary is ready to go full-time to an eligible post-secondary educational institution. When the student begins to withdraw from the RESP for education, the income accumulated on the subscriber contributions and the grant, as well as the grant itself, become taxable to the student. However, because the student typically has little other income, he or she effectively pays little or no tax on RESP income.

REGISTERED PENSION PLAN (RPP)	RPPs are pension plans for employees sponsored by employers or unions, and usually funded through contributions by both employees and employers. RPPs must satisfy certain conditions and be registered for the purposes of the federal Income Tax Act. Contributions to RPPs are tax deductible, the investment income in them is taxdeferred and payments from them are taxable.

REGISTERED RETIREMENT INCOME FUND (RRIF)	RRIFs are funds for individuals, established at financial institutions and registered under the Income Tax Act, that provide income in retirement. RRIFs are established by directly transferring monies from Registered Retirement Savings Plans (RRSP) or from lump-sum payments from Registered Pension Plans (RPP). Amounts withdrawn from RRIFs are fully taxable. A minimum amount must be withdrawn from a RRIF each year; beginning in the first year after the RRIF is established.

REGISTERED RETIREMENT SAVINGS PLAN (RRSP)	RRSPs are savings plans for individuals, including the self-employed, that have been registered for the purposes of the federal Income Tax Act. RRSP contribution limits are based on earned income. RRSPs provide income at retirement, based on accumulated contributions and return on investment in the plan. Contributions to an RRSP are tax deductible, the investment income in it is taxdeferred and payments from it are taxable. Currently, annual contributions are limited to 18% of earnings up to a maximum of $13,500. Going forward the limits are $14,500 in 2003, $15,500 in 2004, $16,500 in 2005 and $18,000 in 2006.

REINVESTMENT RISK	The risk that market interest rates will fall, causing the cash flows on an investment, assuming that the cash flows are reinvested, to earn less than the original investment. For example, yield to maturity assumes that all interest payments received can be reinvested at the yield to maturity rate. This may not necessarily be true. If market interest rates fall the interest received would be reinvested at a lower rate. Reinvestment risk recognizes this risk.

REIT	See Real Estate Investment Trust.

RELATIVE STRENGTH INDEX (RSI)	A technical analysis indicator for a stock, developed by J. Welles Wilder, that quantifies the magnitude of gains over a period of time against the magnitude of losses over that same period. The equation is RSI = 100 - 100 / (1 + RS) where RS = (total gains / n) / (total losses / n) and n = number of RSI periods. Technical analysts usually recommend the use of around 15 time periods. The RSI value can range from 1 to 100. Some technical analysts believe a value of 30 or below indicates an oversold condition, and a value of 70 or above indicate an overbought condition.

RESOURCE ALLOWANCE	The resource allowance provides an annual deduction to mining and oil and gas producers. It is calculated as 25% of a taxpayer's annual resource profits, calculated after operating costs and capital cost allowances, but before the deduction of exploration expenses, development expenses, earned depletion and interest expenses.

RESP	See Registered Education Savings Plan.

RETRACTABLE	A feature which may be included in a new debt or preferred share offering, granting the holder the option, under particular conditions, to redeem the security on a specific date and prior to maturity, in the case of a fixed income instrument.

RETURN ON ASSETS (ROA)	A measure of a company's profitability, which is equal to a company�s fiscal year's earnings divided by its total assets, and expressed as a percentage.

RETURN ON CAPITAL (ROC)	A measure of how effectively a company uses the money (either borrowed or owned) invested in its operations. This is calculated by taking the company net income after taxes and dividing it by the total assets, less excess cash and non-interestbearing liabilities.

RETURN ON EQUITY (ROE)	A measure of how effectively a company used its retained earnings to generate additional earnings. ROE is equal to a fiscal year's after-tax income (after preferred stock dividends but before common stock dividends), divided by its book value of retained earnings, and expressed as a percentage.

RETURN ON INVESTMENT (ROI)	A measure of a corporation's profitability. ROI is equal to a company�s fiscal year's income divided by its common stock and preferred stock equity, plus long-term debt.

RETURN ON SALES (ROS)	A measure of a company's profitability. ROS is equal to a company�s fiscal year's pre-tax income divided by its total sales.

REVERSE MORTGAGE	This type of mortgage allows homeowners to generate income from the equity in their homes. No payments are required on the mortgage, and when the homeowner dies, the mortgage, loan and interest are paid out, and any remaining proceeds become part of the deceased�s estate.

REVERSE SPLIT	A stock split that effectively reduces the number of shares outstanding, as well as increasing the per-share price proportionately. Usually this action constitutes an attempt by a company to meet and maintain the minimum requirements for continued listing on an exchange, or to disguise a falling stock price.

REVERSE TAKE-OVER (RTO)	When a smaller sized company buys out a larger sized company.

RIGHT	A short-term opportunity granted to a company's shareholders to purchase additional common shares from the company, usually at a discount and within a specified time period. The rights of listed companies trade on stock exchanges from the ex-rights date up until their expiry date.

RIGHTS OFFERING	An offering of common stock to current holders of shares which entitles them to purchase further issues at a discount from the offering price.

RIGHT OF RECISSION	The right of a purchaser of a new issue to decline the purchase contract within the applicable time limits, if the prospectus contained a false statement or omitted a specific material fact.

RISK	The possibility of loss and/or the uncertainty of future returns.

RISK-AVERSE	A descriptive term used for an investor unable or unwilling to accept the probability or chance of losing original capital invested.

RISK/RETURN TRADE-OFF	The relationship between risk and return that usually exists for an individual willing to accept greater risk in order to pursue greater returns. It is also called a Risk/Reward Trade-off.

RISK ADJUSTED RETURN	A measure of how much an investment has returned in relation to the degree of risk undertaken. Often used to compare a higher-risk, higher-return investment with a lower-risk, lower-return investment.

RISK-FREE ASSET	An asset whose future return is known with certainty.

RISK-FREE RETURN	A theoretical interest rate that would be returned on an investment completely free of risk. The 3-month Treasury Bill is a close approximation, since it is virtually risk-free.

RISK MANAGEMENT	The process of analyzing exposure to risk and determining how to best handle such exposure.

RISK TOLERANCE	An individual�s ability to handle declines in the value of his or her portfolio.

ROA	See Return on Assets.

ROC	See Return on Capital.

ROE	See Return on Equity.

ROI	See Return on Investment.

ROS	See Return on Sales.

ROYALTY TRUSTS	This type of trust normally flow most of their income to their unitholders. The pools of these funds primarily invest in the natural resource (oil and gas) sectors.

RPP	See Registered Pension Plan.

RRB	See Real Return Bond.

RRIF	See Registered Retirement Income Fund.

RRSP	See Registered Retirement Savings Plan.

RRSP-ELIGIBLE	Investment that is allowed to be held within an investor�s RRSP. The foreign content limit within an RRSP is currently 30% and any foreign content above that level is subject to certain tax penalties.

RSI	See Relative Strength Index.

R-SQUARED	The r-squared is a measure of a manager�s return and the return of the chosen index. It measures the percentage of the manager�s return that can be explained by the return of the chosen index.

RTO	See Reverse Take-Over.

RULE OF 72	The rule of 72 is a method to calculate how much money you can make from the interest of an investment. Divide 72 by the interest rate of your account and the result is the number of years it will take to double your investment. If you earn 6% interest on your money, it will take 12 years (72/6) for your original investment to double in value.

RUSSELL 2000 GROWTH INDEX	Measures the total return (with dividends reinvested) of the smallest 2000 growth companies in the Russell 3000 Index and represents approximately 8% of the total market capitalization of the Russell 3000 Index.