Financial Terms Fund family

# Definition of Fund family

## Fund family

Set of funds with different investment objectives offered by one management company. In many
cases, investors may move their assets from one fund to another within the family at little or no cost.

# Related Terms:

## Annual fund operating expenses

For investment companies, the management fee and "other expenses,"
including the expenses for maintaining shareholder records, providing shareholders with financial statements,
and providing custodial and accounting services. For 12b-1 funds, selling and marketing costs are included.

## Balanced fund

An investment company that invests in stocks and bonds. The same as a balanced mutual fund.

## Balanced mutual fund

This is a fund that buys common stock, preferred stock and bonds. The same as a
balanced fund.

## Beta (Mutual Funds)

The measure of a fund's or stocks risk in relation to the market. A beta of 0.7 means
the fund's total return is likely to move up or down 70% of the market change; 1.3 means total return is likely
to move up or down 30% more than the market. Beta is referred to as an index of the systematic risk due to
general market conditions that cannot be diversified away.

## Beta equation (Mutual Funds)

The beta of a fund is determined as follows:
[(n) (sum of (xy)) ]-[ (sum of x) (sum of y)]
[(n) (sum of (xx)) ]-[ (sum of x) (sum of x)]
where: n = # of observations (36 months)
x = rate of return for the S&P 500 Index
y = rate of return for the fund

## Closed-end fund

An investment company that sells shares like any other corporation and usually does not
redeem its shares. A publicly traded fund sold on stock exchanges or over the counter that may trade above or
below its net asset value. Related: Open-end fund.

## Cost of funds

Interest rate associated with borrowing money.

## Dividend yield (Funds)

Indicated yield represents return on a share of a mutual fund held over the past 12
months. Assumes fund was purchased 1 year ago. Reflects effect of sales charges (at current rates), but not
redemption charges.

## Employee stock fund

A firm-sponsored program that enables employees to purchase shares of the firm's
common stock on a preferential basis.

## Endowment funds

Investment funds established for the support of institutions such as colleges, private
schools, museums, hospitals, and foundations. The investment income may be used for the operation of the
institution and for capital expenditures.

## Federal funds

Non-interest bearing deposits held in reserve for depository institutions at their district Federal
Reserve Bank. Also, excess reserves lent by banks to each other.

## Federal funds market

The market where banks can borrow or lend reserves, allowing banks temporarily
short of their required reserves to borrow reserves from banks that have excess reserves.

## Federal funds rate

This is the interest rate that banks with excess reserves at a Federal Reserve district bank
charge other banks that need overnight loans. The Fed funds rate, as it is called, often points to the direction
of U.S. interest rates.

## Forward Fed funds

Fed funds traded for future delivery.

## Fundamental analysis

Security analysis that seeks to detect misvalued securities by an analysis of the firm's
business prospects. Research analysis often focuses on earnings, dividend prospects, expectations for future
interest rates, and risk evaluation of the firm.

## Fundamental beta

The product of a statistical model to predict the fundamental risk of a security using not
only price data but other market-related and financial data.

## Fundamental descriptors

In the model for calculating fundamental beta, ratios in risk indexes other than
market variability, which rely on financial data other than price data.

## Funded debt

Debt maturing after more than one year.

## Funding ratio

The ratio of a pension plan's assets to its liabilities.

## Funding risk

Related: interest rate risk

## Funds From Operations (FFO)

Used by real estate and other investment trusts to define the cash flow from
trust operations. It is earnings with depreciation and amortization added back. A similar term increasingly
used is funds Available for Distribution (FAD), which is FFO less capital investments in trust property and
the amortization of mortgages.

## Global fund

A mutual fund that can invest anywhere in the world, including the U.S.

## Hedge fund

A fund that may employ a variety of techniques to enhance returns, such as both buying and
shorting stocks based on a valuation model.

## High-coupon bond refunding

Refunding of a high-coupon bond with a new, lower coupon bond.

## Income fund

A mutual fund providing for liberal current income from investments.

## Index fund

Investment fund designed to match the returns on a stockmarket index.

## International fund

A mutual fund that can invest only outside the United States.

## International Monetary Fund

An organization founded in 1944 to oversee exchange arrangements of
member countries and to lend foreign currency reserves to members with short-term balance of payment
problems.

## Liability funding strategies

Investment strategies that select assets so that cash flows will equal or exceed
the client's obligations.

A mutual fund with shares sold at a price including a large sales charge -- typically 4% to 8% of
the net amount indicated. Some "no-load" funds have distribution fees permitted by article 12b-1 of the
Investment Company Act; these are typically 0. 25%. A "true no-load" fund has neither a sales charge nor
Freddie Mac program, the aggregation that the fund purchaser receives some investment advice or other
service worthy of the charge.

## Low-coupon bond refunding

Refunding of a low coupon bond with a new, higher coupon bond.

## Match fund

A bank is said to match fund a loan or other asset when it does so by buying (taking) a deposit of
the same maturity. The term is commonly used in the Euromarket.

## Money market fund

A mutual fund that invests only in short term securities, such as bankers' acceptances,
commercial paper, repurchase agreements and government bills. The net asset value per share is maintained at
\$1. 00. Such funds are not federally insured, although the portfolio may consist of guaranteed securities
and/or the fund may have private insurance protection.

## Multifamily loans

Loans usually represented by conventional mortgages on multi-family rental apartments.

## Mutual fund

Mutual funds are pools of money that are managed by an investment company. They offer
investors a variety of goals, depending on the fund and its investment charter. Some funds, for example, seek
to generate income on a regular basis. Others seek to preserve an investor's money. Still others seek to invest
in companies that are growing at a rapid pace. funds can impose a sales charge, or load, on investors when
they buy or sell shares. Many funds these days are no load and impose no sales charge. Mutual funds are
investment companies regulated by the Investment Company Act of 1940.
Related: open-end fund, closed-end fund.

## Mutual fund theorem

A result associated with the CAPM, asserting that investors will choose to invest their
entire risky portfolio in a market-index or mutual fund.

The net present value of the savings from a refunding.

An open-end investment company, shares of which are sold without a sales charge.
There can be other distribution charges, however, such as Article 12B-1 fees. A true "no load" fund will have
neither a sales charge nor a distribution fee.

A mutual fund that does not impose a sales commission. Related: load fund

## Nonrefundable

Not permitted, under the terms of indenture, to be refundable.

## Objective (mutual fund)

The fund's investment strategy category as stated in the prospectus. There are
more than 20 standardized categories.

## Open-end fund

Also called a mutual fund, an investment company that stands ready to sell new shares to the
public and to redeem its outstanding shares on demand at a price equal to an appropriate share of the value of
its portfolio, which is computed daily at the close of the market.

## Overfunded pension plan

A pension plan that has a positive surplus (i.e., assets exceed liabilities).

Refunded bond.

## Private Export Funding Corporation (PEFCO)

Company that mobilizes private capital for financing the
export of big-ticket items by U.S. firms by purchasing at fixed interest rates the medium- to long-term debt
obligations of importers of U.S. products.

## Purchase fund

Resembles a sinking fund except that money is used only to purchase bonds if they are selling
below their par value.

## Pure index fund

A portfolio that is managed so as to perfectly replicate the performance of the market portfolio.

## Refundable

Eligible for refunding under the terms of indenture.

## Refunded bond

Also called a prerefunded bond, one that originally may have been issued as a general
obligation or revenue bond but that is now secured by an "escrow fund" consisting entirely of direct U.S.
government obligations that are sufficient for paying the bondholders.

## Refunding

The redemption of a bond with proceeds received from issuing lower-cost debt obligations
ranking equal to or superior to the debt to be redeemed.

## Regional fund

A mutual fund that invests in a specific geographical area overseas, such as Asia or Europe.

## Revenue fund

A fund accounting for all revenues from an enterprise financed by a municipal revenue bond.

## Single country fund

A mutual fund that invests in individual countries outside the United States.

## Sinking fund requirement

A condition included in some corporate bond indentures that requires the issuer to
retire a specified portion of debt each year. Any principal due at maturity is called the balloon maturity.

## Stopping curve refunding rate

A refunding rate that falls on the stopping curve.

## Surplus funds

Cash flow available after payment of taxes in the project.

## Term Fed Funds

Fed funds sold for a period of time longer than overnight.

## 12b-1 funds

Mutual funds that do not charge an upfront or back-end commission, but instead take out up to
1.25% of average daily fund assets each year to cover the costs of selling and marketing shares, an
arrangement allowed by the SEC's Rule 12b-I (passed in 1980).

## Two-fund separation theorem

The theoretical result that all investors will hold a combination of the riskfree
asset and the market portfolio.

## Underfunded pension plan

A pension plan that has a negative surplus (i.e., liabilities exceed assets).

## Unfunded debt

Debt maturing within one year (short-term debt). See: funded debt.

## Shareholdersâ€™ funds

The capital invested in a business by the shareholders, including retained profits.

## fundamental analysts

Analysts who attempt to find under- or overvalued securities by analyzing fundamental information, such as earnings, asset values, and business prospects.

## funded debt

Debt with more than 1 year remaining to maturity.

## internally generated funds

Cash reinvested in the firm; depreciation plus earnings not paid out as dividends.

## sinking fund

fund established to retire debt before maturity.

## Federal Funds Rate

The interest rate at which banks lend deposits at the Federal Reserve to one another overnight.

## International Monetary Fund (IMF)

Organization originally established to manage the postwar fixed exchange rate system.

## Family and Medical Leave Act

A federal Act containing the rules for offering
health insurance to employees who are on leave.

## Uniform Interstate Family Support Act

A federal Act specifying which jurisdiction
shall issue family support-related garnishment orders.

## Life Income Fund

Commonly known as a LIF, this is one of the options available to locked in Registered Pension Plan (RPP) holders for income payout as opposed to Registered Retirement Savings Plan (RRSP) holders choice of payout through Registered Retirement Income funds (RRIF). A LIF must be converted to a unisex annuity by the time the holder reaches age 80.

## Registered Retirement Income Fund (Canada)

Commonly referred to as a RRIF, this is one of the options available to RRSP holders to convert their tax sheltered savings into taxable income.

## Segregated Fund

Sometimes called seg funds, segregated funds are the life insurance industry equivalent to a mutual fund with some differences.The term "Mutual fund" is often used generically, to cover a wide variety of funds where the investment capital from a large number of investors is "pooled" together and invested into specific stocks, bonds, mortgages, etc.
Since Segregated funds are actually deferred annuity contracts issued by life insurance companies, they offer probate and creditor protection if a preferred beneficiary such as a spouse is named. Mutual funds don't have this protection.
Unlike mutual funds, segregated funds offer guarantees at maturity (usually 10 years from date of issue) or death on the limit of potential losses - at times up to 100% of original deposits are guaranteed which makes them an attractive alternative for the cautious and/or long term investor. On the other hand, with regular mutual funds, it is possible to have little or nothing left at death or plan maturity.

## Funding Costs

The price of obtaining capital, either borrowed or equity, with intent to carry on business operations.

Venture capital corporations established by labour unions. They function as other venture capital corporations but are subject to government regulation.

## EFT (electronic funds transfer)

funds which are electronically credited to your account (e.g. direct deposit), or electronically debited from your account on an ongoing basis (e.g. a pre-authorized monthly bill payment, or a monthly loan or mortgage payment). A wire transfer is a form of EFT.

## growth funds

Mutual funds that seek long-term capital growth. This type of fund invests primarily in equity securities.

## income funds

Mutual funds that seek regular income. This type of fund invests primarily in government, corporate and other types of bonds, debt securities, and other income producing securities and in certain circumstances can also hold common and preferred shares.

## index funds

Mutual funds that aim to track the performance of a specific stock or bond index. This process is also referred to as indexing and passive management.

## international fund

A mutual fund that can invest in securities issued anywhere outside of Canada.

## money market fund

A type of mutual fund that invests primarily in short-term debt securities maturing in one year or less. These include treasury bills, bankersâ€™ acceptances, commercial paper, discount notes and guaranteed investment certficates.

## mutual fund

When you buy a mutual fund, you are pooling your money with that of other investors. An investment professional called a portfolio advisor takes that money and invests it for all the investors in a variety of different securities as determined by the investment objectives of the mutual fund. This gives you the benefit of diversification that is, being invested in many different investments at once.

## NSF (non-sufficient funds)

This appears on your statement if there are insufficient funds in your account to cover a cheque that you have written or a pre-authorized payment that you have already arranged. You will be charged a service fee for non-sufficient funds.

## savings funds

Mutual funds that seek to preserve capital. This type of fund invests primarily in short-term securities with an average term to maturity of one year or less, or in the case of money market funds, 90 days or less.

## Pension Fund

Assets used to pay the pensions of retirees. An investment institution established to manage the assets used to pay the pensions of retirees.

## Segregated Fund

A pool of assets held by the insurer, to back a specific liability to a policyholder. Segregated funds flucuate in value depending on the market value of a specific group of assets the company must maintain separately.

## Lock-out

With PAC bond CMO classes, the period before the PAC sinking fund becomes effective. With
multifamily loans, the period of time during which prepayment is prohibited.

## Phone switching

In mutual funds, the ability to transfer shares between funds in the same family by
telephone request. There may be a charge associated with these transfers. Phone switching is also possible
among different fund families if the funds are held in street name by a participating broker/dealer.

## Tandem programs

Under Ginnie Mae, mortgage funds provided at below-market rates to residential
mortgage buyers with FHA Section 203 and 235 loans and to developers of multifamily projects with Section
236 loans initially and later with Section 221(d)(4) loans.

## Back To Back Annuity

This term refers to the simultaneous issue of a life annuity with a non-guaranteed period and a guaranteed life insurance policy [usually whole life or term to 100]. The face value of the life insurance would be the same amount that was used to purchase the annuity. This combination of life annuity providing the highest payout of all types of annuities, along with a guaranteed life insurance policy allowed an uninsurable person to convert his/her RRSP into the best choice of annuity and guarantee that upon his/her death, the full value of the annuity would be paid tax free through the life insurance policy to his family members. However, in the early 1990's, the Federal tax authorities put a stop to the issuing of standard life rates to rated or uninsurable applicants. Insuring a life annuity in this manner is still an excellent way to provide guaranteed tax free funds to family members but the application for the annuity and the application for the life insurance are separate transactions and today, most likely conducted through two different insurance companies so that there is no suspicion of preferential treatment given to the life insurance application.

## Creditor Proof Protection

The creditor proof status of such things as life insurance, non-registered life insurance investments, life insurance RRSPs and life insurance RRIFs make these attractive products for high net worth individuals, professionals and business owners who may have creditor concerns. Under most circumstances the creditor proof rules of the different provincial insurance acts take priority over the federal bankruptcy rules.
The provincial insurance acts protect life insurance products which have a family class beneficiary. family class beneficiaries include the spouse, parent, child or grandchild of the life insured, except in Quebec, where creditor protection rules apply to spouse, ascendants and descendants of the insured. Investments sold by other financial institutions do not offer the same security should the holder go bankrupt. There are also circumstances under which the creditor proof protections do not hold for life insurance products. Federal bankruptcy law disallows the protection for any transfers made within one year of bankruptcy. In addition, should it be found that a person shifted money to an insurance company fund in bad faith for the specific purpose of avoiding creditors, these funds will not be creditor proof.

## Structured Settlement

Historically, damages paid out during settlement of personal physical injury cases were distributed in the form of a lump-sum cash payment to the plaintiff. This windfall was intended to provide for a lifetime of medical and income needs. The claimant or his/her family was then forced into the position of becoming the manager of a large sum of money.
In an effort to create a more financially stable arrangement for the claimant, the Structured Settlement was developed. A Structured Settlement is an alternative to a lump sum cash payment in the resolution of personal physical injury, wrongful death, or workersâ€™ compensation cases. The settlement usually consists of two components: an up-front cash payment to provide for immediate needs and a series of future periodic payments which are funded by the defendantâ€™s purchase of one or more annuity policies. Those payors make payments directly to the claimant. In the unfortunate event of the claimantâ€™s death, a guaranteed portion of the settlement may be directed to a beneficiary or his/her estate.
A Structured Settlement is a guaranteed source of funds paid to the claimant or his/her family on a tax-free basis.