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Page One

PROVISIONAL ALLOTMENT LETTER Holding of Ordinary Shares of £1 each in the name of Mark Johnson 1000 Number of New Shares of £1 each provisionally allotted 200 Amount payable at £1.50 per share £300 Dear Mr Johnson, The Directors have provisionally allotted to you the number of new Ordinary Shares of £1 each set out above. The Shares have been allotted to the holders of existing Ordinary Shares on the basis of one New Ordinary Share for every five Ordinary Shares previously held. If you wish to take up the Ordinary Shares provisionally allotted to you, you must send an appropriate remittance for the amount shown above to this address. If payment is not made by 15 January 200- this provisional allotment will be deemed to have been declined and will lapse. By Order of the Board of Directors R G Blakeney

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FORM OF RENUNCIATION

To the Directors of Delta plc: I/We hereby renounce my/our right to the Shares comprised in the Allotment Letter in favour of the person named in the Registration Application Form ……………………YES/NO Signature of person(s) named on Page One: ……………………... All Joint Holders must sign: ……………………...

In the case of a company its Common Seal must be affixed: ……………………...

Page Three

REGISTRATION APPLICATION FORM

This form is only to be completed where there has been a renunciation. It is used to identify the purchasers) so that Delta plc can record the change of ownership of the shares. First Name(s) ………………………. Title (Mr, Mrs, Ms, Miss) ……………………... Surname ……………………... Address …………………...………………………………… Postcode……………

Section I. Sight translation

A Maxim to Follow

A maxim which should be followed by all investors is 'buy at the bottom and sell at the top'. Prices of all stocks fluctuate from time to time, and the art of speculation is to buy securities at the best time. It is not as easy as it sounds for two reasons. First, it is as difficult to know when share prices have finished falling as it is to know when they have reached their peak. Second, the maxim assumes that the speculator is in a position to take the necessary action. For example, funds may not be available for a purchase at the vital moment.

The Stock Exchange is a highly sensitive market and stock prices fluctuate in response to a wide variety of pressures. Speculators should always be looking to the future and attempting to anticipate events. For example, businesses are interdependent to a large extent and will be affected by the general economic climate. Orders for ships lead to orders for steel which in turn leads to money in the pocket of shipbuilders and steel-workers to buy television sets and carpets. Conversely, the closing of a motor assembly plant causes a fall in the sale of beer which increases the number of redundancies, this time in the breweries.

Speculators pay attention when the Chancellor of the Exchequer introduces his Budget. This is the time when tax rates are changed, future government spending patterns are declared and the effect of the changes on their securities can be gauged.

The government also promotes its policies through the Bank of England, perhaps using the government broker to conduct open market operations. Government stocks are sold when the government wants to reduce the supply of money. This will pressurise the banking system to raise interest rates with the effect of reducing inflation. The government broker buying government stocks will have the opposite effect, lowering interest rates and reducing unemployment.

All these things will affect the price of shares on the Stock Exchange, as will the fact that some political parties are seen as more sympathetic to business interests. Prices will be particularly sensitive at the time of parliamentary elections.

Section K. Multiple choice

Tick the phrase which best completes each sentence.

1. If you own shares in a pharmaceutical company selling a wide variety of medicines, you will be pleased to hear

   1. that the government is reducing its expenditure on the National Health Service;

   2. that the birth rate is falling;

   3. rumours that the company is to be taken over by an even larger German competitor.

2. If you decide to sell shares it is best to sell them when

   1. prices have reached a record low;

   2. prices look as if they will not be going any higher;

   3. other people are also rushing to sell.

3. If you own shares in a life assurance company with subsidiaries in the USA, it will be bad news to hear that

   1. the value of the dollar is falling in the foreign exchanges;

   2. that a new drug has been found to cure cancer;

   3. that the government is planning to spend more on the National Health Service.

4. You have bought shares in a commercial bank in the expectation that the price of its shares will rise soon and you will be able to sell the shares at a profit. When the accounts for the year are produced you will be pleased to hear that it has

   1. increased its dividend;

   2. increased its provision for bad debts;

   3. reduced its costs.

5. Prices of shares on the International Stock Exchange in London would be most likely to rise if

a) the rate of tax on profits (corporation tax*) was to increase by 2p in the £;

b) interest rates fell by 1%;

c) there was political unrest in the Middle East.

6. The price of equities in a UK group which owns a number of hotels in Eastern Europe would increase if there was

   1. an enlargement of the European Community;

   2. a break-up of the European Community;

   3. a substantial increase in the price of oil.

7. A speculator on the Stock Exchange buys some British Petroleum ordinaries. Which of the following items of news would be most welcome to him?

   1. the government increases the petrol tax;

   2. the government places restrictions on the import of foreign cars;

   3. income tax is reduced by 2p in the £.

8. One of the companies represented in your portfolio of securities has sent you notice of a general meeting at which it is proposed to elect three new directors to the board, none of whom is known to you. Which of the following is the most logical reason for staying away from the meeting?

   1. the company has sent you a proxy which will allow you to vote without attending the meeting;

   2. your stake in the shares is too small to justify the expense of the journey;

   3. the new directors would have no effect on your stake in the company.

Section J. Unit trusts*

Even if you think a particular company has a bright future, it is unwise to invest the whole of your surplus funds in one venture. The proverb tells us not to put all our eggs in one basket, and the investment experts advise us to diversify, which means the same thing. It may be easy for a wealthy investor to diversify, but what about someone who only has, say, £3,000 to invest? One way in which the smaller investor can diversify is by buying units in a unit trust.

A unit trust buys large blocks of specified stocks which are then broken down into sub-units and offered to the public. The sub-units can be bought and sold through the company which manages the fund. Bid and offered prices will be quoted. The bid price is the price at which the company will buy back the securities from the sub-unit holders. The offered price is the price at which the managers are offering the securities to the public. The bid price will obviously be below the offered price on any particular day.

There are a great variety of unit trusts (or «funds» as they are also called) offered to investors in the United Kingdom, from those specialising in Japanese industrial shares to those concentrating on gold-mining equities. It may help to convey an impression of the various types of unit trusts available to the investor if we study a selection of those on offer by one of the Big Four, National Westminster. They include the following funds on their list:

Title	Aim	Special features
Capital Trust	to produce a high level of capital	Income earned by the trust is not distributed but held and applied to the purchase of further securities.
Growth Investment Unit Trust	to provide overall growth of both capital and income through in vestment in a wide range of high-class equities both in the UK and overseas.	Invested in over 132 high-class securities with over one-fifth in North America.
Income Trust	to provide an increasing income together with a measure of capital growth.	Portfolio weighted towards income rather than capital growth but about one-tenth of the portfolio is in banks and insurance.
Financial Trust	to produce long-term capital growth by investing in an international spread of financial shares.	Nearly half the portfolio is taken up in UK banking and insurance equities. Approximately one-quarter of the securities are overseas mainly in North America.
Universal Fund	to provide capital growth from world-wide investment.	The bulk of the portfolio is in USA securities.

Your task

During the course of the morning Gordon Davis, the Deputy Manager of the Hightown branch, discusses the possibility of investment in unit trusts with four different customers:

Ms Elizabeth Hart is 68 years old. She inherited her flat from her parents, but is finding it difficult to live on her old age pension. She has been left a legacy of £5,000 in the will of a friend who has recently died, and is considering investing part of the legacy in a unit trust.

Sarah Parry is a 52 year-old architect who is financially self-sufficient, but wants to boost her income on retirement in eight years' time. She has £20,000 to invest, but has no knowledge of the stock markets.

Peter Webb is the proprietor of a small engineering works producing specialised farming equipment. He already has a portfolio of UK securities, mainly in banks and insurance, with a current market value of £50,000.

Andrew Carter wishes to make a gift of £3,000 to his ten-year-old grandson. He is thinking of investing the money in a unit trust for him.

Consider which of the unit trusts listed here Gordon Davis would be most likely to recommend to each of these customers on the evidence available.

Section K. Vocabulary

tax	capital	auditor	replaced	securities*
voting	broker	majority	asset-stripping	risk
premium*	equities	dividend	supplies	quotation
inflation	report	Guinness	annually	satisfactory

Match the words listed above with the definitions which follow:

1. You can expect to receive these annually providing your company is making good profits.

2. Another name for ordinary shares.

3. One of the factors which will determine the price of the shares is the degree of …….. .

4. The member of the Stock Exchange who will arrange purchases or sales of stocks on your behalf.

5. This happens when a company is taken over and sold off in parts.

6. This is the difference between the value of the new shares and their cost in a rights issue, assuming the difference is positive.

7. Only these shares are likely to be purchased by a take-over bidder.

8. In order to take over the control of a company you need to acquire a ………….. of the voting shares.

9. A take-over bid may have as its objective the securing of these.

10. One way of hedging against this is to buy growth equities.

11. If a company is taken over its directors may be ………….. .

12. Appointed by the shareholders at an Annual General Meeting (AGM) to verify its accounts during the coming year.

13. This affair was the result of directors artificially raising the price of shares on the Stock Exchange go avoid a take-over.

14. Long-term investors are usually looking for ……………. growth in their portfolios.

15. The chairperson of a company will produce this for the shareholders at the AGM.

16. Deducted from the dividend before being paid over to the shareholder.

17. The company's accounts have to be produced ……………… for the shareholders.

18. The board of directors can expect to stay in power, so long as the company's results are …….

19. Another name for stocks and shares.

20. When shares have a …………. on the Stock Exchange they can be sold more easily and at a higher price.

Section L. Text for home translation

Your task: Give full written translation of the text with analysis of translation techniques. Pay special attention to the highlighted words and phrases. While translating, complete your glossary on the topic.

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Stocks and Shares The strengths and weaknesses of a company in the market, or the qualitative factors governing the performance of an industry, are best learnt by constant interaction with industrial experts. Abroad, it is common to have investor relations managers, who help to disseminate such information. And don't forget a company's worth is not merely a function of its earnings. It's also a function of the management's vision, which can be best understood by talking to the entrepreneurs themselves. One also needs to evolve new concepts. For instance, the earnings per share ratio is commonly misunderstood today as the master key to unlocking all the secrets of investment. While the utility of the ratio as a guiding factor should not be underestimated, it cannot yield good results by itself. While cash earnings per share have now become popular, gross earnings per share are still ignored. In fact, anomalies can be found where a company with high gross earnings per share is quoted cheaper, merely because it's net earnings per share is low. Another useful ratio, not in vogue today, is gross profit to market capitalization. One should also continuously search for qualitative factors to gain an edge in the market. Here again, the assessment is based on one's understanding. It will be wrong to assess, for instance, cement units on a replacement cost basis, because most old units were producing cement using the wet process, which was hardly cost-effective. On the other hand, most sugar units can be evaluated using the replacement cost technique as there has not been much change in the sugar industry. Moreover, the technology is indigenously available, and even marginal investments in modernization allow sugar units to maintain their efficiency. Time has now come when brand values, technology, globalization import competitiveness, and franchise values command a premium on the stock markets. For instance, Infosys and Wipro are always highly-priced shares because of their high intellectual capital. HDFC is valued for its franchise value. There's one more tip you might like to remember. When it rains, everybody gets wet. In some phases of the market, good stocks and good industries are available at cheaper prices than usual. You can take advantage of this profitably. Similarly, favouring a stock when there is mass aversion to it can yield good results. But you can't be a contrarian just to be contrary. For example, you can't be a contrarian in an industry whose life cycle is over. This approach is applicable where something is ignored currently but its long-term potential could be excellent. In the coming months, the cement industry may throw up such an opportunity. But never forget; being contrary is an art.