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Glossary of Terms

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Accumulation Units
The term used to express ownership shares in a variable annuity's separate-account fund. The premiums paid by the purchaser of a variable annuity are credited to the purchaser's account in this form.

Aggressive Growth Style
Investment management style characterized by investment in smaller capitalization, and therefore higher risk, growth stocks.

American Stock Exchange (AMEX)
The second largest organized exchange, handling roughly 25 percent of total annual national share volume.

Annuitant
An individual who receives a stream of payments at stated intervals under an annuity contract.

Annuity
A series of periodic payments that are fixed in amount or variable in amount based on one or more variable investment options, that typically begin at retirement and continue for the lifetime of the annuitant or some other specified period of time. Click here for more information.

Asset Allocation
The process of dividing investments among different asset classes in accordance with an individual's tolerance for risk and personal investment objectives.

Asset-Backed Securities
Securities supported by other assets of the issuer.

Asset Class
A broad group of individual securities or investments that have similar characteristics, such as risk or market capitalization.

Back-end Load
Sales charge applied to an investment at the time of redemption.

Balanced Fund
A type of fund that widely diversifies its portfolio holdings among common stocks, bonds, and money market instruments. Also called a flexible fund.

Banker's Acceptance
A type of commercial money market instrument. A bank guarantees a draft drawn upon it based on a letter of credit and agrees to pay the check at some specified future date.

Bear Market
A market where prices decline sharply against a background of widespread pessimism, growing unemployment, and business recession. The opposite of Bull Market.

Beneficiary
An individual, company, trustee, or estate which receives, or may become eligible to receive payments or benefits from an insurance policy, retirement plan, annuity, trust, will, or other contract.

Beta
A coefficient measuring of a stocks relative volatility.

Blue Chip Stock
The stock of a large, well-established company that is known for consistent profitability and stability.

Bond
A bond is a certificate that represents a loan from the investor to the corporation or government issuing the bonds. The borrower or issuer promises to repay the loan at a specified date. Generally, the investor receives interest payments during the lifetime of the bond.

Bond Fund
A mutual fund with a portfolio consisting of bonds that is operated by an investment management company to typically provide fairly stable income with a minimum of capital risk.

Bull Market
A market with rising stock prices and optimistic investors. This is the opposite of a Bear Market.

Business Risk
The danger that a company will not be able to meet its financial obligations (principal, interest, or dividend payments) resulting in a decline in value.

Capital Appreciation
An increase in the market value of an investment.

Capital Gain (Loss)
The difference between the purchase price of an asset and its selling price.

Career Average Plan
A Defined Benefit pension plan that provides the member with a pension based on his salary throughout his membership in the plan. For example, the member receives a pension based on 2% for each year of employment, based on his average earnings throughout his career.

Certificate of Deposit
A savings instrument issued by a bank that usually pays a fixed amount of interest over a fixed period of time, usually from a few weeks to several years, and matures on a stated date.

Collateral
An asset (such as real property) that backs a financial security.

Commercial Mortgage
A loan on real estate such as industrial properties and office buildings. Not a residential mortgage.

Commercial Paper
Short-term obligations issued to investors by banks, corporations, or other borrowers. Maturities range from 2 to 270 days. A mutual fund with uninvested cash may include commercial paper in its investment portfolio.

Common Stock
Units of ownership in a public corporation represented by shares that constitute a claim on the corporation's earnings and assets. Shareholders of common stock can vote in the election of directors and other issues that arise at shareholder meetings, and may be entitled to receive dividends on their holdings. Common stock tends to have more potential for appreciation than some other classes of stock (i.e., preferred stock).

Common Shares
Represents ownership in a corporation.

Compound Interest
Interest that is calculated by applying the stated percentage rate both to the original capital amount and to the accumulated interest of previous periods.

Consumer Price Index (CPI)
A measure of the change in prices consumers pay for certain goods.

Contract Prospectus
A disclosure document required by the U.S. Securities and Exchange Commission that describes the features and risks of investing in a registered variable insurance product (for example, a variable insurance product (for example, a variable annuity). A contract prospectus describes such subjects as fees, investment options and contract benefits, including transfer rights, withdrawal rights, death benefits and the income phase. It also provides information statements, and how to purchase.

Contributions
The amounts deposited into a member's pension plan. A plan can be "contributory" with the employee and Employer sharing in the cost 50/50, or "non-contributory" with the Employer paying 100% of cost of the plan.

Contribution Type
There are 3 main contribution types - Employer (E), Member (M) and Optional Member (O).

Convertible Securities
Corporate securities (usually shares of preferred stock or bonds) that can be exchanged for a set number of another type of security (usually shares of common stock) at a prestated price.

Corporate Bond
An instrument whereby a corporation acknowledges a stated sum is owed, which it will repay at a specified date with a stipulated amount of interest.

Coupon
The interest payment due on a bond. A bond with a 6% coupon pays 6% interest.

Current Yield
Annual bond interest divided by market price.

Credit Risk
The financial and moral risk that an obligation will not be paid and a loss will result.

Cyclical Stocks
Stocks whose value generally moves with the business cycle; generally they advance as business conditions improve and decline when business slackens. Steel, chemical, textile, and machinery stocks are included in this category.

Death Benefits
An amount payable to a beneficiary of a qualified plan and/or a variable annuity. Payment is generally made upon the death of the plan participant, in the case of a qualified plan, or the death of the participant, owner or annuitant of a variable annuity, depending upon the terms of the applicable contract. Methods of payment can vary, depending upon the terms of the plan/contract, and the applicable tax laws, and often include a lump sum payment or a stream of income.

Debt
An intangible investment that represents funds loaned in exchange for the receipt of interest income and the promised repayment of the funds at a given future date.

Default
The failure of the borrower (issuer) to make required payments on a bond or mortgage.

Deferred Annuity
An annuity where the stream of payments to the annuitant are due to commence at a future date.

Deferred Sales Charge
Sales charge levied by an investment company or an insurance company if a customer sells fund shares or withdraws money from an annuity or other insurance product within a specified number of years.

Defined Benefit Plan
A pension plan which defines the amount of the benefit a plan participant will receive at retirement. For example, the plan may provide a pension based on 2% of each year's salary. The annuity received at retirement would be the total of each year's 2%.

Defined Contribution Plan
A type of retirement plan that specifies the contributions made to the plan, either as a flat dollar amount or as a percent of compensation. The employee, the employer or both may make contributions to the plan. The final amount of income paid from this type of plan depends on results of investment experience.

Diversification
The practice of reducing investment risk by spreading assets:

Over several categories of investments (e.g., stocks, bonds, money market instruments);
Over several industries (e.g., pharmaceutical, consumer goods, high-technology); or
Through investment in a mutual fund or mutual funds where the portfolio typically includes a broad range of securities.

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Dividend Yield
The dividend divided by the market price of a stock.

Dividends
With common stock, this is the discretionary distribution of earnings to shareholders, usually a portion of profits. Mutual funds dividends are paid out of income from the fund's investments, usually on a quarterly basis.

Dollar Cost Averaging
The process of purchasing securities or shares at regular intervals with a set dollar amount. When share prices are lower, the investor buys more units or shares, and fewer when prices are higher. Over time, this typically nets the investor a better average price for all shares purchased over the life of the investment. Dollar cost averaging does not ensure a profit nor guarantee against loss. Investors should consider their financial ability to continue their purchases through periods of low price levels.

Dow Jones Industrial Average
A popular indicator of the stock market based on the average closing prices of 30 active industrial stocks representative of the overall economy. There are also Dow Jones averages for selected transportation and utility stocks.

Economic Risk
The risk that the economic environment will decrease the value of an investment.

Eligibility
The requirements to be met for a person to become a member of a pension plan.

Equities
Investments whereby a person purchases a "portion of ownership" with the expectation it will increase in value. (Stocks as opposed to bonds or mortgages.)

Equity
Stockholders or shareholders own a fractional portion of the company. This is called "equity".

Fiduciary
Any person who exercises discretionary authority or control over the management of a plan or the disposition of plan assets or who gives investment advice to the plan for a fee or other compensation.

Financial Planner
A person who helps individuals in the ongoing process of arranging and coordinating their personal financial affairs to enable them to seek their objectives. There are several designations for financial planners, each differing in experience and training requirements.

Fixed Income Securities
Investments that constitute an IOU to the investor from the saver - often a government or corporation, offering specific payments at predetermined times. The market value of these securities changes depending on the direction of market interest rates. Government securities and public and private bonds are examples of fixed-income securities.

Forward Averaging
Calculating the tax on a lump sum distribution as if the lump sum had been paid in equal payments over a certain period of years and was your only income in those years.

Front-end Load
Sales charge applied to an investment at the time of initial purchase and taken directly from the purchase price.

Fund Performance
A record of a fund's investment results.

Fund Prospectus
Required by federal securities laws, a document issued by a registered investment company that describes such subjects as investment objectives and policies, services, investment restrictions, officers and directors, how shares are bought and redeemed, fund fees and other charges and the fund's financial statements.

Fund Surplus
Money in a pension plan which is not allocated to any member. The money results from nonvested Employer contributions left in the Plan when a member terminates. The Employeer can instruct the insurer to use the surplus to pay off future Employer Contributions.

Global Fund
A mutual fund investing in both U.S. and foreign securities.

Growth Fund
A mutual fund focusing on capital appreciation ratter than income.

Growth Stocks
Stocks believed to have a strong potential for better-than-average capital appreciation. Due to expected higher earnings and faster expansion of the underlying company. Growth stocks are riskier investments than average stocks.

Growth Style
Investment management style that emphasizes shares of companies that have experienced and are expected to continue to experience consistently high growth in operations and earnings and normally pay little or no dividends.

Guaranteed Interest Account (GIA)
A no-risk investment which guarantees a set interest rate for a period of 5 years. Suitable for investors approaching retirement or extremely risk adverse.

H

Historical Yield
A record of an investment's return over a period of time.

Income Fund
A mutual fund focusing on income.

Income Stock
The stock of a company that has a consistent record for paying relatively high dividends.

Income Style
Investment management style that emphasizes current dividend return associated with income stocks.

Index Fund
A portfolio of stocks or bonds designed to replicate the composition and return of a particular market index (e.g., the S&P 500).

Inflation
The persistent and appreciable rise in the general level of prices of goods and services (as measured by the CPI) and the resulting loss in the purchasing power of money.

Inflationary Risk
The danger of rising costs. If an investment's return is lower than the rate of inflation, its earnings may actually reflect a net negative return or a "real" loss measured in "today's dollars." This applies especially to the less aggressived income-type investment options.

Interest Rate Risk
The inverse relationship between market interest rates and bond prices. As interest rates rises, bond prices decline because an investor seeking to sell an 8% bond in a 9% market will have to sell the bond at a discount to provide a competitive return to the purchaser of the bond.

Interfund Transfer
An Interfund Transfer occurs when a member changes his investment option from investment profile to another. Interfund Transfers can be done at any time by completing and forwarding the appropriate form.

Investment Company
Firm that, for a management fee, invests the pooled funds of small investors in securities appropriate for its stated investment objective.

Investment Objective
The stated goal of a mutual fund as indicated in the Prospectus.

Investment Risk
The risk that the value of an investment will fall.

Irrevocable Trust
A trust which cannot be changed or canceled after it has been established, without the consent of the beneficiary.

Junk Bond
Bond with a credit rating of BBB or lower by rating agencies. Although commonly used, the term has a pejorative connotation, and issuer and holders prefer the securities to be called high-yield bonds. These bonds carry the potential for higher returns and higher risks.

Lehman Brother Aggregate Bond Index
An index of corporate and government bonds, and mortgage-backed and asset-backed securities. The index return comprises gains and losses in the price of these securities and income distributions as a percentage of the original investment.

Lipper Balanced Fund Index
An equally weighted performance index adjusted for capital gains distributions and income dividends of the largest qualifying funds in the investment objective. The index represents funds whose primary objective is to conserve principal by maintaining at all times a balanced portfolio of both stocks and bonds. Typically, the stock/bond ratio ranges around 60%/40%.

Liquidity
The ability of a company or individual to convert assets into cash or cash equivalents without undue loss in the value of those assets. For instance, investments in money market funds and listed stocks offer greater liquidity than real estate.

Locked-in
Pension funds which are restricted by the "Pensions Act" from being paid out of the plan in cash.

Market Risk
The change that investors might lose some of their principal due to downturns in a volatile market. Stocks tend to be more volatile than bonds, and their prices can rise or fall sharply due to changes in investor demand.

Market Value
The current price of an asset based on the most recent trade price on the open market.

Maturity Date
The date on which the principal amount of a note, draft, acceptance bond or other debt instrument becomes due and payable bond or other financial.

Money Market Fund
A fund that invests in short-term securities such as negotiable certificates of deposit, commercial paper and US Treasury Bills. Money market funds generally expose the investor to the least amount of market risk and tend to provide the smallest returns. Shares of the fund are not insured or guaranteed by the US Government.

Morgan Stanley Capital International-Europe, Australia, Far East (EAFE) Index
A market value-weighted average of the performance of more than 900 securities listed on the stock exchanges of countries in Europe, Australia, and the Far East. The index return includes reinvestment of dividends before foreign tax withholding.

Mortgage
Contract between a lender and a property owner typically with monthly payments of principal and interest and the property as collateral.

Mortgage-Backed Securities
Securities whose payments to the investor are based on payments of principal and interest of an underlying pool of mortgages.

Municipal Bond
Issues of states, counties, cities, and other political subdivisions and distinguished by interest income that is exempt from federal taxation.

Mutual Fund
A collection of stocks, bonds or other securities owned by a group of investors and managed by a professional investment company.

New York Stock Exchange (NYSE)
The key exchange for stock and bond transactions, accounting for about 65 percent of the total annual volume of shares traded.

Net Asset Value (NAV)
The dollar value of one share of stock in the fund. Calculated by dividing the value of all fund holdings by the total number of shares.

No-Load Mutual Fund
A mutual fund that does not have a sales charge or load assessed in connection with the purchase or redemption of shares of the fund.

Non Locked-in Funds
Pension funds which can be paid out in cash.

Option
An agreement, or privilege, that conveys the right to buy (receive) or sell (deliver) a specific security or property at a strike price and within a stated period of time. If not exercised during that time, the money paid for the option (but no more than that amount) is forfeited.

Over-the-Counter
A market for securities, not listed on an exchange, made up of securities dealers who may or may not be members of a securities exchange. Over-the-counter is mainly a market made over the telephone.

Pensions Act
The National Pension Scheme (Occupational Pensions) Act, 1999, as amended.

Pension
An agreement between you and your employer under which your employer contributes a certain amount of money to a retirement plan during the years you work. Pension plans fall under two main categories: A defined benefit plan, which guarantees you will receive a fixed, pre-defined contribution plan, which does not guarantee a fixed pension amount.

Pension Plan
An investment for the purpose of accumulating funds to provide for a retirement benefit.

Portability
The movement of pension funds from one Employer's pension plan to another's to continue to build a "nest egg" for retirement throughout an individual's employment years.

Portfolio
The stocks, bonds and other assets held by an investor.

Preferred Stock
Securities or shares representing an ownership interest in the business, but which have "preference" over the other shares (i.e., common stock), as regards dividends, or in distribution of assets up to a certain fixed amount in the event of liquidation, or both. Preferred dividends are normally fixed, whereas common stock dividends may fluctuate depending upon company earnings.

Present Value
The current worth of an amount or series of amounts payable or receivable in the future after discounting each such amount at a specified rate of interest (the discount rate).

Price-Earnings Ratio
A stock's market price divided by its current or estimated future earnings. It is a measure of the attractiveness of a particular security versus all other securities as determined by the investing public. The P/E ratio gives investors an idea of how much they are paying for earning power.

Principal
The amount invested. It does not include earnings.

Prospectus
A formal written offer to sell securities that sets forth the plan for a proposed business enterprise or the facts concerning an existing one that an investor needs to make an informed decision.

Qualified investment
An investment you may purchase on a pre-tax basis through an employee-sponsored program.

Rate of Return
The percentage change in an investment over a period of time. This is an indication of an investors return on his investment and can be positive or negative.

Real Estate
Raw land and other forms of real property, such as apartments, office buildings, retail stores, and warehouses.

Real Estate Portfolio
A mutual fund that invests in companies the own or manage real estate.

Real Return
The gain or loss of an investment after inflation has been accounted for. If an investment returns 8% and inflation is 4%, your real return would be 4%.

Rebalancing
The periodic adjustment of a member's account to realign the account with the original risk profile chosen by the member.

Return
The expected level of profit from an investment; the reward for investing.

Risk
Uncertainty regarding loss.

Risk Profile
A pension plan offers a selection of risk profiles for members to choose from. These profiles range from a no-risk investment to an aggressive risk profile. An investment quiz is available to assist in choosing the best profile for a particular individual.

Risk Tolerance
The willingness and ability of an investor to accept the uncertainty regarding possible loss from an investment.

Russell 2000 Index
A market value-weighted index consisting of the stock of the smallest 2,000 companies of the largest 3,000 US companies by market capitalization. The index return includes the reinvestment of dividends and is considered to be representative of the performance of small companies.

Security
Under securities law, an invest made in a common enterprise with the reasonable expectation of deriving profits solely from the actions of others. Stocks, mutual funds, bonds, and variable annuities are all securities.

Segregated Pension Plan
A pension plan which is not a "Trustee" plan. Assets are segregated and not in the insurer's general assets.

Share
One of the equal parts into which the capital stock of a corporation is divided. It represents the owner'' proportion of interest in the corporation and is issued in the form of a stock certificate.

Stability of Principal
In a stability of principal account, the account value does not typically fluctuate with market prices and is expressed as the sum of deposits plus interest minus withdrawals.

Standard & Poor's (S&P) 500 Index
A market value-weighted index covering the stock of 500 utility, industrial, transportation and financial companies. The index return includes the reinvestment of dividends and is considered to be representative of the performance of large capitalization companies of the US markets.

Strike Price
Price at which the stock or commodity underlying a call or put option can be purchased or sold over a specific period.

Stock
A share of stock represents ownership in a corporation. When you own stock, you usually have a right to vote on certain corporate matters, such as members of the Board of Directors. Stocks are also referred to as equities.

Stock Dividend
A dividend payable in shares of stock and generally disbursed in lieu of cash by corporations wishing to conserve capital for expansion or other purposes.

Stock Fund
A fund that invests primarily in common stocks of publicly traded companies. Earnings come from a combination of dividend payments (investment income) and the increase in value of the underlying stocks that make up the portfolio (capital appreciation).

Systematic Risk
Tendency of the asset price to move along with the market. The measure of systematic risk is widely known as beta.

Tax-deductible
An item or expense subtracted from adjusted gross income to reduce the amount of income subject to tax.

Transfer Values
Pension money transferred into a pension plan from a previous pension plan. Transfers may be "locked-in" or "non locked-in" transfers.

Treasury Bill (T-Bill)
Treasury bills are short-term US government debt securities with maturities of one year or less.

Treasury Bond
A marketable security issued by the US Treasury with a term-to-maturity over seven years. Interest is paid semiannually and principal is returned at maturity.

Treasury Note
A marketable security issued by the US Treasury with a term-to-maturity between one and seven years. Interest is paid semiannually and principal is returned at maturity.

Trustee Plan
A pension plan administered by BF&M, but the investments are held in trust by Butterfield Trust Company under a trustee agreement.

Units
The number of shares held in a mutual fund.

Unit Value
The value of one unit or share held in a mutual fund. (See NAV)

US Government Bonds
Direct debt obligations of the US government. Government bonds include: Treasury bonds, notes, bills and savings bonds. They carry the highest safety ratings (the least amount of risk) of all bonds.

Value Style
An investment management style emphasizing stocks that appear to be undervalued currently, typically selling at a low price-to-earnings ratio.

Variable Annuity
Life insurance company annuity contract whose value fluctuates with that of an underlying securities portfolio or other index of performance. Distributions from a variable annuity may be taken periodically, beginning immediately or any time in the future. The annuity may be single-premium or multiple-premium contract. The return to investors may be in the form of a periodic payment that varies with the market value of the portfolio or a fixed minimum payment with add-ons based on the rate of portfolio appreciation.

Vested/Vesting
Vesting refers to the right of ownership. A member's contributions are 100% vested from the date of enrolment, however the Employer contributions become vested after the member satisfies a period of membership in the plan. The Pensions Act requires a member to become 100% vested after satisfying two years membership in the pension plan.

Vesting Schedule
The number of years a member is required to be enrolled in the pension plan before the members becomes 100% vested. The Vesting Schedule is set out in the Rules of the Plan as well as the Pension Booklet.

Volatility
A measure of the potential for change in value of a security over time.

Wholesale Price Index
A measure of the change in the price of goods sold between businesses.

Withdrawal Plan
Program available through most open-end mutual fund companies in which shareholders can receive fixed payments of income or capital gains (or both) on a regular basis.

Yield
The return of an investment expressed as a percentage of cost or market value.