Investing glossary

A

Active Investing

An investing approach that aims to identify and invest in securities that may be mispriced by the market with the view of generating enhanced returns. It’s a strategy that can involve amongst other things, in-depth analysis of companies’ financial statements and significant understanding of various markets and companies from around the world.

Active Share

The sum of the differences between the percentage weight of each security in a portfolio and the percentage weighting in a benchmark or comparator index.

ADRs

American Depository Receipts. ADRs are a type of negotiable financial security that is traded on a local stock exchange but represent a security that is issued by a foreign publicly-listed company.

Annualised return (%)

An annualised total return is the geometric average amount of money earned by an investment each year over a given time period.

Annualised volatility

Annualised volatility is a statistical measure of the dispersion of returns for a given security or market index for each year over a given time period.

Annualized Rate of Return

An annualized rate of return is a cumulative return expressed as an equivalent annual compounded rate. A compounded rate of return includes the effect of interest-on-interest.

Asset Class

A type of investment such as stocks, bonds, real estate or cash.

Assets

The amount of money invested in a fund. Also referred to as Net Asset Value (NAV).

B

Basket of Securities

In relation to a particular BMO ETF, a group of securities determined by the Manager from time to time representing the constituents of the applicable index in approximately the same weightings as such constituents are weighted in the applicable index.

Benchmark Index

A standard against which the performance of a security or mutual fund can be measured. Generally, broad market indexes are used for this purpose.

Bond

A debt instrument promising to pay its holders periodic interest (or coupon) payments on a fixed amount of principal and maturity.

Bond floor

As a form of restriction, a floor provides a limit for a particular activity or transaction to which it must adhere. The floor functions as a lower limit.

C

Cash and Cash equivalents

This asset class includes money market instruments and are short-term, highly liquid, low risk and relatively low return investment holdings.

Continuous Savings Plan (CSP) Amount

The amount you can automatically invest in your mutual funds on a weekly, bi-weekly, monthly, bi-monthly, quarterly, semi-monthly, monthly or annually basis.Once you set up a CSP, we’ll automatically transfer money from your bank account to buy units of the funds you choose.

Conversion price

The conversion price is the price per share at which a convertible security, such as convertible bonds or preferred shares, can be converted into common stock. The conversion price is set when the conversion ratio is decided for a convertible security.

Current Yield

Current yield is an investment’s annual income (interest or dividends) divided by the current price of the security. Current yield represents the return an investor would expect to earn, if the owner purchased the bond and held it for a year. However, current yield is not the actual return an investor receives if he holds a bond until maturity.

D

Date Started / Inception Date

The date that a fund became available for sale to investors.

Deferred Sales Charge (DSC)

If you purchase your funds under the deferred sales charge option, you may be required to pay a fee if you redeem your fund units within a specified number of years after your purchase. Some fund companies offer both a Standard Deferred Sales Charge option and a Low Load Deferred Sales Charge option (i.e. over a reduced number of years).

Delta

A delta is a ratio, sometimes referred to as a hedge ratio. It compares the change in price of an asset with the change in price of a derivative or option based on that same asset. A delta can be either positive or negative.

Derivative

Specialized investments like forward or future contracts, options contracts, and swap agreements whose value is based on the value of another investment called an underlying investment.

Designated Broker

A registered dealer, including BMO Nesbitt Burns Inc., an affiliate of the Manager, that has entered into a designated broker agreement with the Manager, on behalf of one or more BMO ETFs pursuant to which the Designated Broker agrees to perform certain duties in relation to the BMO ETFs.

Distribution Frequency

The amount of times during a year that a mutual fund pays distributions to unitholders. This is typically monthly, quarterly or annually.

Distribution Payment Date

: a day which is no later than the 10th business day following the applicable distribution record date, on which a BMO ETF pays a distribution to its Unitholders.

Distribution Record Date

A date determined by the Manager as a record date for the determination of Unitholders of a BMO ETF entitled to receive a distribution.

DPSPs

Deferred profit sharing plans as defined in the tax act

Duration

Measures the approximate sensitivity of a bond’s price to a change in interest rates. A duration of , for example, means that the price of the bond would decrease/increase by approximately 2% if the interest rate increased/decreased by 1%.

Duration to put

Is the duration of the bond to the next exercise date of an option – also known as the option adjusted duration.

E

Effective duration

Effective duration is a duration calculation for bonds that have embedded options. This measure of duration takes into account the fact that expected cash flows will fluctuate as interest rates change.

Effective maturity

The length of time it takes for a bond to reach maturity, taking into consideration that certain actions, such as a call or refunding, may cause some bonds to be repaid before they mature.

Eligibility

Indicates types of registered plans a mutual fund may be held in.Environmental, Social and Governance (ESG)ESG is the framework that breaks the broad concept of sustainability down into three key issues – Environmental issues, Social issues, and Governance issues.

Equity (Stock)

Shares of ownership in a company.

Equity Growth Funds

A category of BMO Mutual Funds, these funds maximize return potential through investing in specific market sectors or emerging economies with greater growth potential. These may entail greater risk than conventional growth funds.

ETF

Exchange-traded fund

ETF Summary Document

summarizes certain features of the ETF such as performance and total cost. All purchasers of an ETF will receive this publicly available document.

Ethical Investing

Ethical investing refers to screened funds with the strictest investment criteria that avoid investing in any company that may have a poor record on environmental, human rights or other ethical grounds. An investment philosophy that tends to be guided by moral values, ethical codes or religious beliefs.

F

Financial Statements

Annual and semi-annual fund specific reports that provide the financial position of the mutual fund.

Front-end Load (Sales Charge Option)

Under a front-end (FE) load option, you pay a commission to your dealer when you buy units of a fund. The commission is usually negotiable between you and your dealer.

Fund Facts

The Fund Facts documents highlight key information about each available series of a fund, including the performance history, risk ranking, investor suitability and the cost of buying and owning a fund.

Fund Total Assets

The amount of money invested in a fund, also referred to as Net Asset Value (NAV). NAV is calculated by adding the total value of the Fund’s assets and subtracting the liabilities.

G

Growth Funds

A category of BMO Mutual Funds, these funds provide potential for higher long-term returns, often by investing in stocks. They range from relatively conservative equity funds that specialize in high quality Canadian “blue chip” stocks to funds that invest in major global stock markets. It’s important to remember that higher growth potential may entail greater risk.

I

Impact Investing

Impact investing goes beyond a passive approach to ESG and involves funds with a clearly expressed intention to generate positive, measurable, social or environmental impact, alongside a financial return.

Inception Date

The date that a fund became available for sale to investors.

Income Funds

A category of BMO Mutual Funds, these funds typically invest in bonds, mortgages and other fixed income securities. The level of income and risk depend on the characteristics of investments in the fund’s portfolio.

Information ratio

The information ratio (IR) is a measurement of portfolio returns beyond the returns of a benchmark, usually an index, compared to the volatility of those returns. The benchmark used is typically an index that represents the market or a particular sector or industry.

Interest rate duration

A measure of the sensitivity of the price of a bond or other debt instrument to a change in interest rates.

Investment Objectives

Included in the prospectus and fund facts, the fund’s objective outlines the goals of the fund.

L

Last Distribution

The last date that a payout was made to unitholders of the net income or realized capital gains earned by a mutual fund.

Low Load Deferred Sales Charge (Low Load)

If you purchased your funds under the low load sales charge option (LL), you may be required to pay a fee if you redeem your fund units within a specified number of years after your purchase. Some fund companies offer both a Standard Deferred SalesCharge option and a Low Load Deferred Sales Charge option (i.e. over a reduced number of years).

M

Managed Solutions

An investment solution that wraps a mix of underlying mutual funds and/or ETFs into a single portfolio.

Management Expense Ratio (MER)

The management expense ratio is the total annual fee charged by the fund to pay for the costs associated with running the fund. It includes the management fee, operating expenses and applicable taxes. It does not include the TER. It is expressed as an annualized percentage of the average net asset value of the funds.

Management Fee

Each fund pays the manager a fee for management services and this fee is included in the fund’s MER. The management fee is a percentage of your total investment and varies by fund and by series. It does not include a fund’s operating expenses related to the operation of the fund.

Management Report of Financial Performance (MRFP)

Annual and semi-annual fund-specific reports that includes a management discussion of fund performance; financial highlights; past performance, and a summary of portfolio holdings as at the end of the relevant period.
ManagerBMO Asset Management, a Canadian investment manager responsible for providing managerial, administrative and compliance services to the BMO ETFs.

N

NAV per Unit

In relation to a particular BMO ETF, the net asset value per unit, calculated by dividing the NAV of the BMO ETF by the total number of units outstanding.
No-loadA no-load mutual fund does not require you to pay a sales charge or redemptions fee when you buy, switch or redeem units of the fund.

O

Operating Expenses

Each fund pays operating expenses that include administration fees related to the day to day operation of the fund such as audit, legal, recordkeeping system and custodian fees. Operating expenses are included in the management expense ratio (MER) of a fund.

P

Passive Investing

An investing approach that provides access to a broad market, for example, through an index fund or exchange traded fund (ETF) that typically tracks the performance of a market index.

Portfolio Manager

Registered individual who manages the assets and expenses of a mutual fund according to the fund’s objectives.

Price (NAVPS)

The market value of one unit of a mutual fund on a given day. Net Asset Value (NAV) is calculated by adding the total value of the Fund’s assets and subtracting the liabilities. To find the net asset value per security (NAVPS), the Fund’s Net Asset Value is divided by the total number of securities outstanding.

Prospectus

The simplified prospectus is a legal document that contains important information about each BMO Mutual Fund to help investors make investment decisions and understand their rights as investors. The prospectus includes the fund objectives and strategies, associated fees and risks as well as distribution policy.

R

RDSP (Registered Disability Savings Plan)

A plan that provides people with disabilities an easy and effective way to save and invest for their long-term financial security.

Real rates duration

A measure of the sensitivity of the price of a bond or other debt instrument to a change in real interest rates.

Registrar and Transfer Agent

In relation to a particular BMO ETF, CIBC Mellon Trust Company.

Reinvestment Price

The price at which unitholders, who have opted to reinvest their distributions, buy additional units of a mutual fund with the distribution proceeds.

RESP (Registered Education Savings Plan)

A plan that allows investors to save for post-secondary education on a tax-sheltered basis.

Responsible Investing

Responsible investing is an umbrella term that incorporates a range of practices and approaches in the consideration of key environmental, social and governance (ESG) risks, opportunities and impacts of the investments we make.

RIF (Retirement Income Fund)

A plan that holds your retirement savings and provides income after you retire. There are rules about how much you may take out each year.

ROC (Return of Capital)

A mutual fund trust may distribute a ROC if it distributes more than its net income and net realized capital gains. A ROC distribution is not included in your income, but instead reduces the adjusted cost base (“ACB”) of the securities on which it was paid.

S

Sales Commissions (Load)

You may be required to pay a commission when you buy the (front-end load) version of a mutual fund.

Security Funds

A category of BMO Mutual Funds that help you preserve wealth, while providing a modest level of income. They offer safety of principal, regular income payments and easy access to money should you need it. Money market funds are typical security funds.

Short-term Trading Fee

A fund may charge a short-term trading penalty (e.g. up to 2% of the amount that you redeem or switch) if you buy or switch and then redeem or switch securities of a fund within a specified number of days (e.g. 30 days) of purchasing or switching them. This penalty is meant to discourage short-term trading by investors because it may adversely affect all investors in a fund.

Socially Responsible Investing (SRI)

Socially responsible investing is the practice of investing money in companies and funds that have positive social impacts.

Strategic Asset Allocation

An investing approach that maintains a predetermined mix of asset weightings within a portfolio. For example, a simple strategic allocation model might target a weighting of 60% in equities and 40% in bonds. Because the value of investments can change over time, the portfolio would be rebalanced regularly to maintain the preset asset weightings.

Sustainable Development Goals (SDGs)

The Sustainable Development Goals are 17 goals set by the United Nations in 2015 that act as a global framework for achieving a better and more sustainable future. They address the global challenges we face, including those related to poverty, inequality, climate, environmental degradation, prosperity and peace and justice. The UN is targeting completion of all 17 interconnecting goals by 2030.

Sustainable Investing

Sustainable investing is a method of investing which proactively seeks companies to invest in that makes positive contributions in addressing social and environmental challenges.

T

Tactical Asset Allocation

An investing approach that aims to take advantage of perceived market opportunities by increasing a portfolio’s weightings in some assets and reducing other assets correspondingly. This approach may also include placing upper and lower bounds around asset class allocations. For example, for equities in a portfolio, a lower bound might be 40%, an upper bound 80% and a neutral weighting 60%.

TFSA

A plan that provides tax-free growth on savings in which investors can make tax-free withdrawals at any time. There is an annual contribution limit, with the ability to carry forward unused contribution room.

Trading Day

For each BMO ETF, a day on which: (i) a session of the TSX is held; (ii) the primary market or exchange for the majority of the securities held by the BMO ETF is open for trading.

Trading expense ratio (TER)

The TER represents the costs each fund spends on brokerage commissions for buying and selling the underlying investments. The TER is not part of the MER. Typically, new funds, funds with high portfolio turnover or foreign securities will have a higher TER.

Trailing Commission (Service Fees)

This is an ongoing type of service commission paid by fund companies to dealers and brokers for the continued advice and service they provide to investors. They are usually based on the value of the units of the funds that their clients hold.

TSX

The Toronto Stock Exchange.