Equities Flashcards
What stamp duty is payable on Equities?
Paper-based = stamp duty = 0.5% rounded up to next multiple of £5
No stamp duty on transactions under £1,000
Min is £10
What stamp duty reserve tax is payable on equities?
No certificate and done electronically (CREST)
0.5% of purchase price rounded to nearest penny
Applies to any size of transaction
What is the PTM levy
The Panel of Takeovers and Mergers Levy
Flat charge of £1 on all trades over £10,000
What is the admission criteria for AIM listing?
Appoint (and retain) a nominated adviser
Issue necessary documentation prior to listing
If an investing company raise at least £3m
Produce annual accounts
Comply with AIM rules and pay AIM fees
What are the features of preference shares?
No voting rights
If redeemed usually at par value
Generally pay fixed dividends
Rank ahead of ordinary shares in payment of dividends and on liquidation
What is the order of priority of investors in the event of liquidation?
Debentures - fixed charge
Debentures - floating charge
Unsecured corporate bonds (loan stock)
Preference shares
Ordinary shares
What are the types of preference share?
Cumulative - any shortfall in dividends must be paid at a later date before any future dividends for ordinary shareholders - always this unless otherwise stated
Non-cumulative - any shortfall in dividends will not be carried forward
Convertible - can convert in ordinary shares at a pre-set date and term
Participating - additional dividend payable if profits go above an agreed level
Redeemable - redemption date set
What is Private Equity?
Ownership or part ownership of trading companies not traded on major stock exchange
What are the limitations of investment ratios?
Comparison in same sector
Snapshot at a certain date - will change
Historic data - no reflection on future performance
Some data will be based on assumptions that may be subjective - eg expected future growth
Need to look at real figures to take inflation into account as some increase in earnings can be in part down to inflation
How is capitalisation of companies calculated for leading equity indices?
Multiple number of shares in issue by the current share price
Will fluctuate with share price as number of shares usually fixed
What is the FTSE 100 and how often is it reviewed?
100 largest companies by capitalisation
Reviewed quarterly
What is the FTSE 250?
Next 250 after FTSE 100 by capitalisation
What is the FTSE 350?
The FTSE 100 and 250 together
What’s the FTSE All-Share Index?
630 companies representative of overall market
What’s the FTSE Small Cap?
FTSE All-share companies that are too small for the FTSE 350
What are the limitations of Indices?
Don’t include reinvested dividends
Small number of large companies can have a major effect - due to weighting’s
Don’t include CGT
Don’t include dealing and management costs
Assume fully invested and no cash
Why would a company do a rights issue?
To fund expansion
Strengthen the balance sheet
Refinance
What factors affect share prices?
Economic and political - inflation, productivity, growth and gov fiscal and monetary policy
Investor sentiment
Business specific factors - profit/div expectations, takeover activity, mgmt. track record
What rights to ordinary share holders have?
Entitlement to all of profit after tax and preference shares - some profit r etained in business to increase value
Vote entitlement - except A shares
Entitled to residual value of company assets after debts
What options do shareholders have under a rights issue?
Subscribe for new shares and pay full amount
Sell rights in the market
Sell enough to generate cash to take up remainder
Lapse - company sells and distributes proceeds after costs
Why use a Bonus share issue and what is it?
Used to bring share capital in line with real worth
reduces share price to make it more attractive
Shares issued fully paid to shareholders
also called Scrip Issue
What are indices and how used?
Means to measure performance of share portfolio over time
Compare particular share to overall market
compare fund managers performance to overall mkt performance
Interim and final dividends?
Interim declared during financial year, by board, can be revoked and only if Articles expressly permit
Final declared after financial year, by shareholders, can’t be revoked, not subject to articles its right of shareholders
