Annual Report

Itis a document issued by a company to its shareholders and the public containingthe chairman�s statement, and the financial performance including the assets andliabilities, profits and losses and other relevant information on the company.


AnAgent is normally a representative of a stockbroker and does the business ofbuying and selling of securities for a return commission.

Annual General Meeting

Itis a mandatory meeting held annually by law by all public companies to whichall shareholders are invited to attend, to discuss the affairs and performanceof their company.

Authorized ShareCapital

Thisis the company�s share capital, which is stated in the memorandum and articlesof association as required by law. To increase the authorized share capital, aresolution must be passed to that effect by the majority of the shareholdersand an application made to the registrar of companies for authority to increasethe shares.


Theterm “Assets” refers to all the properties and stock of investmentsincluding cash and bank deposits, which a company owns.


Aninvestor who has sold a security in the hope of buying it back at a lower priceSee Renounceable Documents

Bear Market

Amarket in which bears would prosper, that is, a falling market


  1. The price at which the market maker will buy shares
  2. An approach made by one company wishing to purchase the entire share capital of another.

Blue Chip

Termfor the most highly regarded shares. Originally an American Term, derived fromthe colour of the highest value poker chip. 

Bonus issue

Seecapitalization issue

Broker / dealer

Isan individual or firm that is licensed to buy or sell shares on behalf of thepublic, or on their own behalf. For a list of licensed broker/dealers and othermarket professionals


Aninvestor who has bought a security in the hope of selling it at a higher price.

Bull Market

Onein which bulls would prosper: a rising market


Abuy side of the quoted share, which is the highest price a buyer is willing topay to purchase a security.


Theseare shares given to existing shareholders at a specified ratio and paid fromthe company�s normal revenue reserve.


Theseare long term fixed interest securities issued by government and corporatebodies. In effect they are promissory notes in which the issuer makes anobligation to pay interest at specified times and intervals, and to pay backthe original amount at maturity of the Bond.


Aperson who buys and sells securities on behalf of clients at the stockexchange.


Theamount due to be paid to a company by the purchaser of new or partly paidshares

Call Option

Theright to buy stock or shares at an agreed price on a future date

Capitalization Issue

Theprocess whereby money from a company�s reserves is converted into issuedcapital, which is then distributed to shareholders. Also known as a bonus orscrip issue.


Thefee that a broker may charge clients for dealing on their behalf.


Themoney value of a transaction (number of shares multiplied by the price) beforeadding commission, stamp duty, time of deal etc.

Contract Note

Onthe same day as a bargain takes place a member firm sends to the client acontract note detailing the transaction, including full title of the stock,price, stamp duty (if applicable), consideration, commission etc.


  1. On bearer stocks, the detachable part of the certificate exchangeable for dividends.
  2. Denotes the rate 0f interest on a fixed interest security � a 10 per cent coupon pays interest of 10 percent a year on the nominal value of the stock.


Thetotal net profit a company has available for distribution as dividend, dividedby the amount actually paid gives the number of times that the dividend is covered.


Latinfor �with� used in the abbreviations cum cap, cum div, cum rights etc toindicate that the buyer of a security is entitled to participate in theforthcoming capitalization issue, dividend or rights issue.

Daily Official List

TheLondon Stock Exchange�s Daily Official List is the register of listedsecurities and the prices of transactions published each day.


Whenthe market price of a newly issued security is lower than the issue price


Thatpart of a company�s post-tax profits distributed to shareholders, usuallyexpressed in pence per share. See Final dividend and interim dividend.


Aperson or firm that buys and sells securities on their own behalf


Itis part of a company�s profits distributed to shareholders as cash after it hasbeen declared and approved in an Annual General Meeting (AGM). The amount of profitsnot distributed is retained as reserves of the company.


Therisk sharing part of a company�s capital, usually referred to as ordinaryshares.


Theopposite of cum, and used to indicate that the buyer is not entitled toparticipate in whatever forthcoming even is specified. Ex cap, ex dividend, exrights etc.

Final Dividend

Thedividend paid by a company at the end of its financial year, recommended by thedirectors, but authorized by the shareholders at the company�s Annual GeneralMeeting.

Fixed Interest

Loansissued by a company, the government (gifts or gilt-edged) or local authority,where the amount of interest to be paid each year is set on issue. Usually thedata of repayment is also included in the title.


Refersto when a company�s shares are offered on the market for the first time. It isalso known as an Initial Public Offer.


Securitiesor goods bought or sold for future delivery. There may be no intention to takethem up but to rely upon price changes in order to sell at a profit beforedelivery.

Fund Manager

Isa person licensed by the Authority to undertake, on behalf of the client themanagement of a portfolio of funds


Acompany�s debts expressed as a percentage of its equity capital. High gearingmeans debts are high in relation to equity capital.

Gilt or Gilt EdgedSecurities

Loansissued on behalf of the government to fund its spending. �Longs�: those with aredemption date greater than 15 years. �Mediums�: those with a redemption datebetween 5-15 years. �Shorts�: those with a redemption date within five years.

Insider Dealing

Thepurchase or sale of shares by someone who possesses �inside� information aboutthe company; that is information on the company�s performance and prospectswhich has not yet been made available to the market as a whole, and which, ifavailable, might affect the share price. In the UK such deals are a criminaloffence.

Interim Dividend

Adividend declared part way through a company�s financial year, authorizedsolely by the directors.

Investment Trust

Companywhose sole business consists of buying, selling and holding shares.

Initial PublicOffering (IPO)

AnIPO is the first time the company invites the public to subscribe forsecurities. This is sometimes referred to as a public offer. 

Investment Advisor

Licensedperson(s), who engage in the business of advising their clients aboutsecurities on issues of whether it is advisable to invest, purchase or sellsecurities. Advisers also carry out analysis or reports concerning securities.They can also manage a range of investments under a contract or on agreementwith investors.


Theterm “Issuer” refers to any company or other legal entities whosesecurities are the subject of an application for listing.

Listed Company

Acompany whose shares are available for trade on the stock exchange.

Listing Particulars

Thedetails a company must publish about itself and any securities it issues beforethese can be listed on the Daily official List. Often called a prospectus.

Loan Stock

Stockbearing a fixed rate of interest. Unlike a debenture, loan stocks may beunsecured.

Listed Company

Alisted company is one which has offered securities for the public to buy andhence makes part of its shareholding available for trading at a stock exchange.

Net Asset Value

Thevalue of a company after all debts have been paid expressed in pence per share.

New Issue

Acompany coming to the market for the first time or issuing additional shares.

Nil Share

Sharesnewly issued by a company. These shares can usually be transferred onrenounceable documents.


Theprice at which the market maker will sell shares to investors

Offer for Sale

Amethod of bringing a company to the market. The public can apply for sharesdirectly at a fixed price. A prospectus containing details of the sale must beprinted in a national newspaper.


Theright (but not the obligation) to buy or sell securities at a fixed pricewithin a specified period.

Ordinary Shares

Themost common form of share. Holders receive dividends which vary in amount inaccordance with the profitability of the company and recommendation ofdirectors. The holders are the owners of the company


Thisis the opposite of a bid, it is the price at which a seller is willing to sella security.


Thenominal value of a security

P/E Ratio

SeePrice/Earnings Ratio

Preference Shares

Theseare normally fixed-income shares whose holders have the right to receivedividends before ordinary shareholders but after debenture and loan stockholders have received their interest.


Ifthe market price of anew security is higher than the issue price, thedifference is the premium. If it is lower, the difference is called thediscount. The cost of purchasing a traded option

Price / Earnings

RatioThe current share price divided by the last published earnings per share, whereearnings per share is net profit divided by the number of ordinary shares. TheP/E ratio is a measure of the level of confidence investors have in a company(rightly or wrongly). Generally, the higher figure, the higher the confidence.


Conversionof a state run company to public limited company status often accompanied by asale of its share to the public.

Primary Market

Thisrefers to the purchase of shares in an Initial Public Offering (IPO), whereby acompany offers its shares to members of the public for the first time and thosewishing to acquire securities apply to that company or institution.


Aprospectus is a document, notice, circular or advertisement inviting the publicto purchase any shares or securities of a company.

Private Company

Aprivate company is a limited company with a minimum of two shareholders and amaximum of fifty. Private companies have restrictions on the transfer ofshares.


Thisis the act of transferring government owned assets (i.e. state ownedenterprises) into private hands or the general public, either through publicoffering, tender or private contract. The act is also referred to asdivestiture since it entails divestment by the government.

Public Company

Apublic company is a limited liability company with a minimum of sevenshareholders and no maximum. A public company does not have restriction on thetransfer of shares. Public companies are required by law to disclose allmaterial and relevant information about their performance, activities,operations and accounts.


Fundsmanaged on behalf of clients at the discretion of a fund manager

Redemption Date

Thedate on which a security (usually a fixed interest stock) is due to be repaidby the issue at its full face value. The year is included in the title of thesecurity; the actual redemption date being that on which the last interest isdue to be paid.


DocumentsTemporary evidence of ownership, of which there are three main types. When acompany offers shares to the public, it sends an allotment letter to thesuccessful applicants; if it makes a rights issue, it sends a provisionalallotment letter to its shareholders or in the case of a capitalization issue,a renounceable certificate. All of these are in effect bearer securities, andare valuable. Each includes full instructions on what should happen if theholder wishes to have the newly shares registered in their own name, or if theywish to renounce them in favour of somebody else.

Rights Issue

Aninvitation to existing shareholders to purchase additional shares in thecompany.


Generalname for all stocks and shares of all types. In common usage, stocks are fixedinterest securities and shares are the rest, though strictly speaking, thedistinction is that stocks are denominated in money terms.


Onewho applies for anew issue in the hope of being able to sell the sharesallotted to him/her at a profit as soon as dealing starts.

Secondary Market

Asecondary market is a facility (called an exchange or over the counter market)where securities initially acquired from the primary market are traded. At thesecondary market, shares can only be bought through a licensed broker/dealerwho buys and sells securities on behalf of investors for a commission or abrokerage fee.

Stock Market Index

Theindex is a measure of stock market trends and performance. The index may beused as an indicator of the movement (up and down) of the stock market prices.An upward movement in the index shows that on the average, the shares areappreciating. The index is therefore a weighted average of the marketperformance.


Sharesrepresent part ownership of the company and are classified into the followingcategories

  • Ordinary-shares

 Give the shareholder part ownership of thecompany in proportion to the number of shares held and entitle him/her to dividends.

  • Preference-shares

Beara fixed annual rate of dividend and have a right over all ordinary shares inthe distribution of dividends. They also have a prior claim to repayment ofcapital in case a company winds up.

  • Redeemable-shares

Canbe redeemed by the company either at fixed dates and prices, or on certain,specified terms at the discretion of the board.

Trading Floor

Aspecific area at a stock exchange where brokers/dealers competitively bid oroffer securities of listed companies on behalf of their clients or on theirbehalf.


Individualor company who holds the assets of a collective investment fund on behalf ofits investors, who are the beneficiaries of the trust.

Trust Deed

Agreementbetween a Fund Manager and an Authorised Corporate Director (ACD)


Anarrangement by which a company is guaranteed that an issue of shares will raisea given amount of cash because, the underwriters, for a commission, undertaketo subscribe for any of the issue not taken up by the public.

Unit Trust

Aportfolio of holdings in various companies divided into units and managed byprofessionals.

Unit Trusts

Aunit trust is an investment scheme that pools savings of the public who sharethe same financial interests. The pooled savings are then invested insecurities such as shares, bonds and other authorised securities


Thereturn earned on an investment taking into account the annual income and itspresent capital value. There are a number of different types of yield, and insome cases different methods of calculating each type.