Glossary of Terms

Bear : An investor who anticipates a falling market and, therefore, sells the security in the hope of buying it back at a lower price.

Blue Chip : A largely well-established company with a history of profitable operations.

Bonds : Fixed-income securities which entitle the holder to a pre-determined return during their life and repayment of principal at maturity.

Bull : An investor who anticipates a rising market and, therefore, buys the security in the hope of selling it later at a higher price.

Capital gains tax : Tax payable on profit arising form appreciation in value of Investment, realized at the time of selling or maturity of investment.

Carry-Over Trades : Equity repurchase transactions, better known in Pakistan as �Badla�, are an established form of transactions used in the stock market for temporary financing of trades by speculators and jobbers.

Dividends : That par0 of a company�s profit which is distributed among shareholders, usually expressed in rupee per share or percentage to paid-up capital. It could be in form of cash or stock (bonus shares).

Earning per share (EPS) : A profitability indicator calculated by dividing the net after-tax earnings (earnings available to common shareholders) during a period by the average number of shares outstanding at the end of that period.

Equity : The owners� interest in a company�s capital, usually referred to as ordinary shares.

Floatation : The occasion when a company�s shares are offered on the stock market for the first time.

Funds Managers : A company which invests and manages investors� stock market for the first time.

Initial Public Offering (IPO) : The offering of equity shares of a company to the general public for the first time.

Inside trading : The purchase or sale of shares by someone who possessed �inside� information on a company�s performance i.e. information that is not available tot eh market and which might affect the share price. In Pakistan, such details are a criminal offence.

Investment companies : A company which issues shares and uses its capital to buy securities and shares in other companies.

Listed Companies : A company whose securities are admitted for listing on a stock exchange.

Long Position : When an individual purchases securities of a company, he is said to have a long position in the company�s shares. For example, an owner of shares in PTCL is said to be �long PTCL� or �has long position in PTCL�. If you are long, you would like the share price to go up.

Market capitalization : The total value of a company�s equity capital at the current market price.

Nominee : A person or company which holds securities on behalf of others, but is not the owner of such securities.

Option : The right (but not the obligation) to buy or sell securities at a fixed price within a specified period.

Ordinary shares : The most common form of shares which entitle the owner to jointly own the company. Holders may receive dividends depending on profitability of the company and recommendation of directors.

Portfolio : A collection of investments.

Price/earning Ratio (P/E ratio) : The P/E ratio is a measure of the level of confidence (rightly or wrongly) investors have in a company. It is calculated by dividing the current share price by the last published earning per share.

Primary market : Where a company issues new shares, either for the first time. Or at the time of issuing additional securities.

Privatization : Conversion of a state-owned company to a public limited company (plc) status.

Private Limited Company : A company that is not a public company and which is not allowed to offer its shares to the general public.

Public Limited Company (plc) : A company whose shares are offered to the general public and traded freely on the open market and whose share capital is not less than a statutory minimum.

Right Issue : The issue of additional shares to existing shareholders when companies want to raise more capital.

Securities : A broad term for shares, corporate bonds or any other instrument of investment in the capital market.

Settlement : Once a deal has been made, the settlement process transfers stock from seller to buyer and arranges the corresponding exchange of money between buyer and seller.

Short selling : The act of borrowing stock to sell, expecting the price to go down and with the intention of buying it back at a cheaper price.

Stock Broker : A member of the stock exchange who deals in shares for clients and advises on investment decisions.

Stock Market : The market place where shares of publicly listed companies are bought and sold.

Unit trust : An open-ended mutual fund that invests funds in securities and issues units for sale to the public. It can repurchase these units at any time.

Yield : The aggregate return earned on an investment, taking into account the dividend/interest income and its present market value.