Glossary of offshore Items

APCIMS: Association of Private Client Investment Managers and Stockbrokers.

Arbitrage: Buying securities in one country, currency or market and selling in another to take advantage of price differentials.

Articles of association: The regulations for governing the rights and duties of members of a company among themselves. Articles deal with internal matters such as general meetings, appointment of directors, issue and transfer of shares, dividends, accounts and audits.

Asset Protection Trust: A trust designed to accomplish a number of lifetime and deathtime estate planning goals of its settlor, including planning for the preservation of the settlor's estate from a variety of risks which would threaten to dissipate the estate if one or more of the risks materialised. An "APT" is typically established in a jurisdiction other than the settlor's home country.

Authorised Agent: A bank or trust company authorised by regulatory authorities to deal in foreign currency securities.

Authorised Dealer Bank: Banks permitted by their regulating authority to deal in precious metals and all foreign currencies.

Back to back loan: A loan transaction coupled with a separate but related loan transaction (e.g., "A" deposits a sum of money with a bank in country "X" on condition that a related branch, agency, Edge corporation or bank located in country "Y" will lead an equivalent sum to "A" or a designee in country "Y").

Bare Trusts: Also known as dry, formal, naked, passive or simple trusts. There are trusts where the trustees have no duties to perform other than to convey the trust property to the beneficiary(s) when called upon to do so.

Bargain: A deal made on or otherwise subject to the rules of the Exchange is an Exchange bargain. No "special price" is implied.

Bear: An investor who has sold a security in the hope of buying it back at a lower price.

Bear Market: A market in which Bears prosper, that is, a falling market.

Bearer Share Certificate: A negotiable share certificate filled out in the name of "bearer" and not to a particular person or organisation.

Bearer Stocks / Shares: Securities for which no register of ownership is kept by the company. A bearer certificate has an intrinsic value. Dividends are not received automatically from the company but must be claimed by removing and returning "coupons" attached to the certificate.

Bed and Breakfast Deal: Selling shares one day and buying them back the next for tax purposes at the end of the financial year.

Beneficial Owner: The actual or economic owner of an interest as distinct from the registered or nominal owner.

Besloten Vennootschap ("B.V."): A form of incorporation under Dutch company law which is broadly comparable to the private limited liability company in the United Kingdom.

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

Big Bang: 27th October 1986, when the new Exchange introduced new regulations and the Automated Price Quotation System (SEAQ)

Blind Trust: A trust in which the trustees are enjoined from providing any information to the beneficaries about the administration of assets of the trust.

Blue Chip: Term for the most prestigious industrial shares. Originally an American term derived from the colour of the highest value poker chip.

Bonus Issue: See Capitalisation Issue.

Broker/dealer: A London Stock Exchange member firm which provides advice and dealing services to the public and which can deal on its own account.

Bull: An investor who has bought a security in the hope of selling it at a higher price.

Bull Market: One in which Bulls prosper, that is a rising market.

Call: The amount due to be paid to a company by the purchase of new or partly-paid shares.

Call Account: A deposit account with a financial institution without a fixed maturity date. The deposit can be "called" (withdrawn) at any time. Call account deposits are usually one to seven day placements, however, two parties can agree on different maturities.

Call Option: The right to buy stock or shares at an agreed price at a future date.

Capital Controls: Government restrictions on the acquisition of foreign assets or foreign liabilities by domestic citizens, or the acquisition of domestic assets or domestic liabilities by foreigners.

Capitalisation Issue: The process whereby money from a company's reserves is converted into issued capital and then distributed to shareholders as new shares, in proportion to their original holdings, also known as bonus or scrip issue.

Caps: An option-like contract for which the buyer pays a fee or premium to obtain protection against a rise in a particular interest rate about a certain level. For example, an interest rate cap may cover a specified principle amount of a loan over a designated time period such as a calendar quarter. If the covered interest rate rises above the rate ceiling, the seller of the rate cap pays the purchaser an amount of money equal to the average rate differential times the principle amount times one quarter.

Captive Insurance Company: A wholly owned or controlled subsidiary company established by a non-insurance parent for the purpose of participation in the insurance risks of the parent and its other affiliates or associates.

Clearing System: A mechanism for calculation of mutual positions within a group of participants with a view to facilitating the settlement of their mutual obligations on a net basis.

Collar: The simultaneous purchase of a cap and the sale of a floor with the aim of maintaining interest rates within a defined range. The premium income from the sale of the floor reduces or offsets the cost of buying the cap.

Commission: The fee that a broker may charge clients for dealing on their behalf

Commodity Options: A contract providing the purchaser the right but not the obligation to buy or sell a given quantity of a commodity at a strike price, on or before a given date.

Commodity Swaps: A transaction that allows an investor to exchange payment streams which are based on commodity prices. Commodity swaps involve swaps of payment streams only and are usually settled in cash. However, physical delivery may also occur. Commodity swaps enable producers and consumers to hedge commodity price risk. Usually the consumer pays fixed, the producer floating.

Company Limited by Guarantee: An incorporated entity without share capital

Consideration: The money value of a transaction (number of shares multiplied by the price) before adding commission, stamp duty, etc.

Contract Note: On the same day as a bargain takes place, a member of the firm must send the client a contract note detailing the transaction, including full title of the stock, price, consideration and stamp duty (if applicable).

Coupon: (1) On bearer stocks, the detachable part of the certificate exchangeable for dividends. (2) Denotes the rate of interest on a fixed interest security - 10 per cent coupon pays interest of 10 per cent a year.

Cover: The total net profit a company has available for distribution as dividend, divided by the amount paid, gives the number of times that the dividend is covered.

Credit Risk: The risk that a counter-party to a transaction will fail to perform according to the terms and conditions of the contract, thus causing the holder of the claim to suffer a loss.

Credit Equivalent Value: Amount representing the credit risk exposure in off-balance sheet transactions. In the case of derivatives, credit equivalent value represents the potential cost at current market prices of replacing the contract's cash flows in the case of default by the counter-party.

Cross-Currency Settlement Risk (or Herstatt risk): Risk relating to the settlement of foreign exchange contracts that arises when one of the counter-parties to a contract pays out one currency prior to receiving a payment of the other. Herstatt risk arises because the hours of operation of domestic inter-bank fund transfer systems often do not overlap due to time zone differences. In the interval between final settlements of each leg, counter-parties are exposed to credit risk and market risk.

Cross-Currency Interest Rate Swaps: A transaction involving the exchange of streams of interest rate payments (but not necessarily principal payments) in different currencies and often on different interest bases e.g. fixed Deutsche Mark against floating dollar, but also fixed Deutsche Mark against fixed dollar.

Cum: Latin for "with", used in the abbreviations Cum Cap, Cum Div, Cum Rights and so on, to indicate that the buyer of a security is entitled to participate in the forthcoming capitalisation issue, dividend or rights issue.

Currency Swaps: A transaction involving the exchange of cash flows and principle in one currency for those in another with an agreement to reverse the principle swap at a future date.

Current Exposure Method: Term used in the Basle Capital Accord to denote a method of assessing credit risk in off-balance sheet transactions, consisting of adding the marked-to-market replacement cost of all contracts with positive value and an add-on amount for potential credit exposure arising from future price or volatility changes.

Debenture: A loan raised by a company paying a fixed rate of interest and secured on the assets of the company.

Discount: When the market price of a newly issued security is lower than the issue price. If it is higher, the difference is called the premium.

Discount Swaps: Also called off-market swaps, in which the fixed payments are low market rates. At the end of the swap, the shortfall is made up by one large payment. The credit risk taken on by the fixed rate recipient (usually the bank) increases with the discount applied to interest rates.

Discretionary Trust: The form of trust usually established offshore. The "discretions" are vested in the trustee who can usually decide which of the beneficiaries is to benefit, when and to what extent. Discretions are exercised under advice of, or suggestions from the settlor or protector.

Dividend: That part of a company's post-tax profits distributed to shareholders, usually expressed in pence per share.

Domicile: Under English common law, domicile is the place of your permanent home and the means by which you are connected with a certain system of law for certain legal purposes such as marriage, divorce, succession of estate and taxation.

Double Exit: Use of two passports for the purpose of confusion or convenience.

Dutch Sandwich: A tax structure using companies from two Dutch jurisdictions to reduce the US tax obligation on royalty and patent income flowing from the United States.

ECU: European Currency Unit

EMS: European Monetary Unit

End-User (swap-market): In contrast to a swap-trading institution, a counter-party which engages in a swap to change its interest rate or currency exposure. End-users may be non-financial corporations, financial institutions or governments.

Equity: The risk-sharing part of a company's capital, usually referred to as ordinary shares.

Equity Options: Encompass a class of options giving the purchaser the right but not the obligation to buy or sell an individual share, a basket of shares, or an equity index at a predetermined price on or before a fixed date.

Equity Swaps: A transaction that allows an investor to exchange the rate of return (or a component thereof) on an equity investment (an individual share, a basket or index) for the rate of return on another non-equity or equity investment.

Eurobond: A bond issued in a currency other than that of the country or market in which it is issued. Interest is paid without the deduction of tax.

Ex: Latin for "without", the opposite of Cum. Used to indicate that the buyer is not entitled to participate in whatever forthcoming event is specified, for example Ex Cap, Ex Dividend, Ex Rights.

Exchange Control or Restrictions: Limits on free dealings in foreign exchange or on free transfers of funds into other currencies and other countries.

Exercise Price: The fixed price at which an option holder has the right to buy, in the case of a call option, or to sell, in the case of a put option, the financial instrument covered by the option.

Expatriation: The removal of ones legal residence or citizenship from one country to another in anticipation of future restrictions on capital movements or to avoid estate taxes.

FIBV: World Federation of Stock Exchanges

Fiduciary Account: An amount typically deposited with a Swiss Bank which will redeposit the sum with a third party bank outside Switzerland in its own name (to overcome Swiss withholding tax on interest).

Final Dividend: The dividend paid by a company at the end of its financial year, recommended by the directors not authorised by the shareholders at the Company's Annual General Meeting.

Fixed Interest: Loans issued by a company, the government (gilts or gilt-edged) or local authority, where the amount of interest to be paid each year is set on issue. Usually the date of repayment is also included in the title.

Flight Capital: The movement of large sums of money from one country to another to escape political or economic turmoil, aggressive taxation or to seek higher rates of interest.

Floor: A contract whereby the seller agrees to pay to the purchaser in return for the payment of a premium, the difference between current interest rates and an agreed (strike) rate times the notional amount should interest rates fall below the agreed rate. A floor contract is effectively a string of interest rate guarantees.

Flotation: The occasion on which a company's shares are offered on the market for the first time.

Foreign Currency Account: An account maintained in a foreign bank in the currency of the country in which the bank is located. Foreign currency accounts are also maintained for depositors by banks in the United States. Such accounts usually represent that portion of the carrying bank's foreign currency account that exceeds its contractual requirements.

FSC (Foreign Sales Corporations): A corporation that provides US businesses which export with tax benefit. Exporters can establish a Foreign Sales Corporation ("FSC") in a specially designated foreign country), or one of several designated US possessions. The statute providing for the establishment of FSCs was part of the Deficit Reduction Act of 1984.

FT 30: Index Owned and calculated by the Financial Times, this index is based on the prices of 30 leading industrial and commercial shares and is calculated hourly during the day with a closing index at 4.30 p.m.

FT-SE 100: Share Index Popularly known as the "Footsie", this is an index of 100 leading shares listed on the London Stock Exchange. It provides a minute by minute picture of how share prices are moving and is the basis of futures and traded options listed on the London International Financial Futures and Options Exchange (LIFFE).

FT-SE Mid 250: The real time benchmark for medium-sized companies consisting of the 250 next largest companies after those on the FT-SE 100. The FT-SE Actuaries 350 is a combination of the FT-SE 100 and the Mid 250 indices - this is an index of the more actively traded shares in large and medium sized UK companies. The FT-SE SmallCap, launched in January 1993 provides investors with a daily measure of the performance of around 500 smaller companies.

FT-SE Actuaries All-Share Index: The principle index for UK portfolio performance - covering large, medium and smaller companies.

FT-SE Eurotrack 200: Index Denominated in ECUs this comprises the stocks on the FT-SE 100 Share Index plus the constituents of the FT-SE Eurotrack 100 Index. The UK component is weighted to ensure that the 200 index closely tracks the major benchmark indices.

Fully Paid: Applied to new issues when the total amount payable in relation to the new shares has been paid to the company.

Futures: Securities or goods bought or sold for future delivery. There may be no intention to take them up but to rely upon price changes in order to sell at a profit before delivery.

Gearing: A company's debts expressed as a percentage of its equity capital. High gearing means that debts are high in relation to assets.

GEMMs: Gilt-Edged Markets Makers

Gilts or Gilt Edged Securities: Loans issued on behalf of the government to fund its spending. "Longs" have a redemption date greater than 15 years, "mediums" between 7 - 15 years and "shorts" within 7 years.

GMBH (Ger. Gesellschaft mit Beschrankter Haftung): In Germany, Switzerland and Austria, a limited liability company in which the liability of the members is limited to amounts of agreed contributions or as stipulated in the Articles of Association.

Grantor Trust: Under US tax law, income of the trust is taxed as the income of the grantor.

Gross: Before deduction of tax.

Grossing Up: Calculating the amount that would be required in the case of an investment subject to tax, to equal the income from that investment as if it were not subject to tax.

Hard Currency: The term "hard currency" is a carry-over from the days when sound currency was freely convertible into "hard" metal i.e. gold. It is used today to describe a currency which is sufficiently sound so that it is generally accepted internationally at face value.

Hedge Funds: Speculative funds managing investments for private investors (in the US, such funds are unregulated if the number of investors does not exceed one hundred).

Hot Money: (1) Large quantities of money that move quickly in international currency exchanges due to speculative activity. (2) Foreign funds temporarily transferred to a financial centre and subject to withdrawal at any moment.

Insider Dealing: A criminal offence involving the purchase or sale of shares by someone who possesses "inside" information about a company's performance and prospects which is not yet available to the market as a whole, and which if available might affect the share price.

Institutional Net Settlement (INS) Service: A central service for institutional investors which enables them to make or receive one net payment each day to the London Stock Exchange for settled transactions and other cash distributions.

Interim Dividend: A dividend declared part way through a company's financial year, authorised solely by the directors.

International Business Company ("IBC"): A term used to define a variety of offshore corporate structures. Common to all IBC's are its dedication to business use outside the incorporating jurisdiction, rapid formation, secrecy, broad powers, low cost, low to zero taxation and minimal filing and reporting requirements. An increasing number of offshore jurisdictions are permitting the use of bearer shares, nominee shareholders, directors and officers.

Interbank Rate of Exchange: The rate at which banks deal with each other in the market.

Interest Rate Swap: A transaction in which two counter-parties exchange interest payment streams of differing character based on an underlying notional principle amount. The three main types are coupon swaps (fixed rate to floating rate in the same currency), basis swaps (one floating rate index to another floating rate index in the same currency) and cross-currency interest rate swaps (fixed rate in one currency to floating rate in another).

Intermediary (Swap Market): A counter-party who enters into a swap in order to earn fees or trading profits. Most intermediaries or swap dealers are major US money-centre banks, major US and UK investment and merchant banks and major Japanese securities companies.

Investment Trust: A company whose sole business consists of buying, selling and holding shares.

IOSCO: International Organisation of Securities Commissions.

Issuing House: An organisation, usually a merchant bank, which arranges the details of an issue of stocks and shares and the necessary compliance with the London Stock Exchange regulations in connection with the listing of that issue.

LCAC Listed Companies Advisory Committee: An independent consultative committee which advises the Exchange as the Competent Authority for Listing on general issues concerning listed companies.

Letter of Renunciation: This applies to a rights issue and is the form attached to an allotment letter which is completed should the original holder wish to pass his entitlement to someone else, or to renounce his rights absolutely.

Letter of Wishes / Memorandum of Wishes: A document prepared by the settlor or grantor of a trust providing guidance on how trustees should exercise their discretions.

LIFFE: London International Financial Futures and Options Exchange.

Limit: In relation to dealing instructions, a restriction set on an order to buy or sell, specifying the minimum selling or maximum buying price.

Listed Company: A company that has obtained permission for its shares to be admitted to the London Stock Exchange's Official List.

Listing Particulars: The details a company must publish about itself and any securities it issues before these can be listed on the Official List. Often called a prospectus.

Loan Stock: Stock bearing a fixed interest rate. Unlike a debenture, loan stocks may be unsecured.

London Market Information Link: A new digital information feed which went live in 1995. It provides the replacement for the Exchange's CRS services and is intended to be the primary source of UK financial data for market professionals and information vendors.

Managed Bank: An offshore bank also known as a Class "B" or Cubicle Bank. The Managed Bank is not required to maintain a physical presence in the licensing jurisdiction. Its presence in the licensing jurisdiction is passive with nominee directors and officers provided by a managing trust company with a physical presence. The Managed Bank is not permitted to transact business within the licensing jurisdiction but may maintain its books, records etc. to assure secrecy of operations.

Mandatory Quote Period: Time of the day during which market makers in equities are obliged to quote prices under London Stock Exchange rules: SEAQ 8.30 a.m.-4.30 p.m., SEAQ International 9.30 a.m. - 4.00 p.m.

Man of Straw: Effectively a nominee settlor or grantor who creates an offshore trust but often has no further connection with the trust once it is created.

Market Maker: An Exchange member firm which is obliged to make a continuous two-way price, that is to offer to buy and sell securities in which it is registered throughout the Mandatory Quote Period.

Member Firm: A trading firm of the London Stock Exchange may act as an agency broker on behalf of clients or on behalf of the firm itself.

Memorandum of Association: The charter of a company which indicates nationality, the nature of it's business and the share capital it is authorised to issue. It is a statutory document which effectively governs the company's relations with the outside world.

Merchant Bank: A European form of an investment bank.

Mid Price: The price half-way between the two prices shown in the London Stock Exchange's Official List under "Quotation" or the average of both buying and selling prices offered by the market makers. The prices found in newspapers are normally estimates of the mid-price.

Minimum Quote Size: The minimum number of shares in which market makers are obliged to display prices on SEAQ for securities in which they are registered.

Mini Trust: A short (usually pre-printed) form of trust, often used as a confidentiality enhancer, to bridge the ownership and management of an International Business Company. The Mini-Trust is intended only to pass assets on the death of the settlor, i.e. a will substitute.

Mutual Legal Assistance Treaty: A treaty which provides for mutual legal assistance, including the exchange of information, etc., in cases where criminal offences have been committed.

Net Asset Value: The value of a company after all debts have been paid, expressed in pence per share.

New Issue: A company coming to the market for the first time or issuing additional shares.

New Shares: Shares newly issued by a company; these shares can usually be transferred on renounceable documents.

Nil Paid: A new issue of shares, usually as the result of a rights issue on which no payment to the company has yet been made.

Nominee Company: A company formed for the express purpose of holding securities and other assets in its name or to provide nominee directors and / or officers on behalf of clients of its parent bank or trust company.

Nominee Director: A director whose function is passive in nature. The director receives a fee for lending his or her name to the organisation. Nominee directors are subject to director responsibilities.

Nominee Name: Name in which security is registered and held in trust on behalf of the beneficial owner.

Non-Active Company: A company which is either in voluntary liquidation or wishes to protect a name which includes the word bank or trust company in it even though the company is not carrying on any banking or trust business.

Normal Market Size: The SEAQ classification system that replaced the old alpha, beta, gamma system. NMS is a value expressed as a number of shares used to calculate that minimum quote size for each security.

Offer: The price at which the market maker will sell shares to investors.

Offer for Sale: A method of bringing a company to the market. The public can apply for shares directly at a fixed price. A prospectus containing details of the sale must be printed in a national newspaper.

Official List: The London Stock Exchange's Official List features listed securities and the prices of transactions published each specified period.

Offshore Banking: By popular usage, the establishment and operation of US or foreign banks in such offshore "tax havens" as the Bahamas and the Cayman Islands.

Offshore Banking Unit ("OBU"): A bank in Cyprus, or any other financial centre with similar organisations; not allowed to conduct business in the domestic market, only with other OBU's or with foreign persons.

Offshore Booking Centres: An offshore financial centre used by international banks as a location for "shell branches" to book certain deposits and loans. Such offshore bookings are often utilised to avoid regulatory restrictions and taxes.

Offshore Company: See International Business Company.

Offshore Dollars: Same as Eurodollars, but encompassing such deposits held in banks and branches anywhere outside the United States, including Europe.

Offshore Financial Centers: A country or jurisdiction where an intentional attempt has been made to attract foreign business by deliberate government policy such as the enactment of secrecy laws and tax incentives.

Offshore Group of Banking Supervisors ("OGBS"): Established in 1980 at the instigation of the Basel Committee on Banking Supervision with which the OGBS maintains close contact. The primary objective of the OGBS is to promote the effective supervision of banks in their jurisdiction and to further international cooperation in the supervision among the OGBS and Basel Committee member nations and other banking supervisors. Current OGBS members include Aruba, Bahamas, Bahrain, Barbados, Bermuda, Cayman, Cyprus, Gibraltar, Guernsey, Hong Kong, Isle of Man, Jersey, Liechtenstein, Lebanon, Malta, Mauritius, Netherland Antilles, Panama, Singapore and Vanuatu.

Offshore Institute: An Isle of Man based organisation engaged in the promotion of education and training for accountants, bankers and lawyers whose professional activities include the use of offshore financial centres.

Offshore Limited Partnership: A partnership, the general partner of which is an offshore company, but the limited partners may be onshore entities.

Offshore Profit Centers: Branches of major international banks and multinational corporations located in a low or no tax financial center which are established for the purpose of lowering taxes.

Offshore Trust: A trust the governing or applicable law of which is different from that of the settlor's home country, and which is the law of one of the world's many offshore financial centers which recognizes the concept of the trust.

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 share. Holders receive dividends which vary in amount in accordance with the profitability of the company and recommendations of the directors. The holders of the ordinary shares are the owners of the company.

Par: The nominal value of a security

Payable Through Account: A correspondent banking account relationship established by a foreign bank with a US bank, for the purpose of clearing US dollar denominated cheques drawn on the foreign bank by its demand deposit customers.

Personal Equity Plan: A tax incentive scheme for individual shareholders introduced in 1987. It allows investment in a number of shares and carries various tax benefits - all income from the shares re-invested in the PEP is free from income tax and profit from a sale is free from capital gains tax.

Portfolio: A collection of securities held by an investor.

Preference Shares: Normally fixed-interest shares whose holders have the right to receive dividends before ordinary shareholders but not in advance of debenture and loan stock holders have received their interest.

Preferential Form: The London Stock Exchange allows companies offering shares to the public to set aside up to 10 per cent of the issues for application from employees and where a parent company is floating off a subsidiary, from shareholders of the parent company, Separate application forms, usually pink in colour, (hence the name pink forms) are used for this.

Premium: (1) If the market price of a new security is higher than the issue price, the difference is the premium. If it is lower, the difference is called the discount. (2) The cost of purchasing a traded option.

Price Earnings Ratio: The current share price divided by the last published earnings per share where earnings per share is net profit divided by the number of ordinary shares. The P/E ratio is a measure of the level of confidence investors have in a company. Generally the higher the figure the higher the confidence.

Private Company: A company which does not have a listing on the Exchange and is debarred from offering its shares to the general public.

Private Placement: An issue this is offered to a single or a few investors as opposed to being publicly offered.

Private Trustee Company: A company incorporated in certain offshore jurisdictions, such as Bermuda, to act as a trustee for a limited class or group of trusts. Private trustee companies are not permitted to offer trustee services to the public generally.

Privatisation: Conversion of a state run company into a public company, often accompanied by a sale of its shares to the general public.

Probate Price: The price used to assess the value of shares for inheritance tax purposes. Calculated on the "quarter up" principle. That is instead of taking the mid price in the Official List, the difference between the two prices (bid and offer) given under "quotation" is divided by four and the result added to the lower of the two prices.

Proper Law: The body of law which governs the validity and interpretation of a contract or trust deed.

ProShare: An independent organisation set up to promote share ownership among individual investors including employees.

Prospectus: A document containing information a company is required to make public when it wishes to issue shares.

Protector: A person appointed by the settlor / grantor of a trust, who has limited powers to control the trustee, and usually has the right to change trustees.

Proxy: A person empowered by a shareholder to vote on his behalf at company meetings.

Public Bank License: The bank is permitted to carry on banking business with members of the general public.

Public File: The file available at the Company Registry for inspection on request.

Public Limited Company: A public company limited by shares or by guarantee and having share capital and which may offer shares for purchase by the general public. Only plcs may qualify for listing on the London Stock Exchange.

Purpose Trust: A trust created for an express purpose without any individually ascertained or ascertainable beneficiaries. A purpose trust is typically used in circumstances where the trust would not be exclusively charitable, but, wholly philanthropic.

Put Option: The right to sell stock at an agreed price at or within a stated future time.

QUOTED : Securities admitted to the official List of the London Stock Exchange.

Redemtion shares: The date on which a security (usually fixed interest stock) is due to be repaid by the issuer at its full face value. The year is included in the title of the security, the actual redemption date being that on which the last interest is due to be paid.

Re-domiciliation Corporations: Some offshore jurisdictions allow corporations incorporated in other jurisdictions to re-incorporate in their own at will.

Renounceable Documents: Temporary evidence of ownership of which there are four main types. When a company offered shares to the public, it sends an Allotment Letter to its shareholders, or in the case of a capitalisation issue, a renounceable certificate. All of these are in effect bearer securities and are valuable.

Resident Company: A bank, trust company or holding company permitted to deal only in local currency. Foreign currency transactions must be approved by the appropriate regulatory authority.

Restricted Bank and / or Trust Licence: Is one which permits the holder to carry on business with certain specified persons whose names are usually listed in the licence.

RIE: Recognised Investment Exchange. The status required by Securities and Investment Board for exchanges in the UK.

Rights Issue: An invitation to existing shareholders to acquire additional shares in the company in proportion to the number of shares they already own - usually at a preferential price.

RNS: Regulatory New Service. A service operated by the Exchange in its role as Competent Authority for Listing, which ensures that information required from listed companies in line with their continuing obligations is collected and distributed to all RNS subscribers at the same time.

Rolling Settlement: A modification to the Talisman system which brought to an end the two-week account cycle. Instead, settlement takes place on any business day 10 days after the trade date

SAEF: The SEAQ Automated Execution Facility. This enables trade in UK shares to be executed automatically at a computer terminal instead of being executed over the telephone.

SEAQ: The Stock Exchange Automated Quotation system for UK securities. A continuously updating computer database containing price quotations and trade reports in UK securities, SEAQ carries the market makers bids and offers for UK securities.

SEAQ International: The Exchange's electronic price quotation system for non-UK equities

SEATS: The Stock Exchange Alternative Trading Service. A service which supports the trading of listed UK equities in which turnover is insufficient for the market making system. The service shows current orders, company information and historical trading activity for each stock, plus the sole market maker where only one is registered.

Secret Trust: A UK trust where no evidence of the existence of the trust appears in any public document. They invariably arise in connection with wills, where the will is a public document.

Securities: General name for all stocks and shares of all types. In common usage, stocks are fixed interest, securities and shares are the rest, though strictly speaking the distinction is that stock is denominated in money terms.

SEPON: (The Stock Exchange Pool Nominee) An account into which stock is registered during the course of settlement.

Sequal: The London Stock Exchange's on-line trade confirmation and transaction reporting system.

S equence Programme: A programme being undertaken by the Exchange to replace the central systems supporting trading and information in the equity markets. Launched in October 1993, it is being implemented in stages until Spring 1996.

Service Company: A company located in an offshore financial centre to provide management, invoicing and other services for client companies located in other countries. Initially used to advantage double taxation treaties. Service Companies are now frequently used to facilitate flight capital outflow and are often involved in money laundering schemes.

Settlement: The process of exchanging money and shares for shares.

SFA: The Securities and Futures Authority - the Self Regulating Organisation responsible for regulating the conduct of brokers and dealers in securities options and futures, including most member firms of the Exchange.

SIB: The Securities and Investments Board. The agency appointed by the government under the Financial Services Act to oversee the regulation of the investment industry, including the SROs, RIEs and clearing houses.

SRO: Self Regulating Organisation - an organisation recognised by the SIB and responsible for monitoring the conduct of business and capital adequacy of investment firms.

Stag: One who applied for a new issue in the hope of being able to sell the shares allotted to him at a profit as soon as dealing starts.

Stamp Duty: A UK tax currently levied on the purchase of shares

Talisman: The Exchange's computerised settlement system that acts as a central clearing house for transaction in equities.

Tap Stocks: Government stocks which the Government Broker (an official of the Bank of England) supply at a given price. The price chosen provides a means of influencing interest rates in general.

Tender Offer: In an offer by tender, buyers of shares specify the price at which they are willing to buy.

TOPIC3 and TOPIC PLUS: Price Information and market data distributed by the Exchange in alliance with the information specialists, ICV and TELEKURS.

Touch: The best buying and selling prices available for a stock from market makers as quoted in SEAQ and SEAQ International.

Traded Options: Transferable options with the right to buy and sell a standardised amount of a security at a fixed price within a specified period.

Trading Trust: A trustee vehicle which carries on a trade via its trustee. Often used to circumvent accounting disclosure requirements as offshore trusts do not generally file accounts.

Transfer: The form signed by the seller of a security authorising the company to remove his name from the register and substitute that of the buyer.

Transnational: A term used to describe any transactions which may encounter laws of more than one country.

Treaty Shopping: Where a national or resident of a third country seeks to obtain the benefit of a double tax agreement between two other countries by interposing a company or other entity in one or the other of them.

Trustee Status: Used with reference to ordinary shares of those companies which meet the requirements of "wider range" investments as defined by the Trustee Investment Act 1961.

Underwriting: An arrangement by which a company is guaranteed that an issue of shares will raise a given amount of cash because the underwriters for a commission agree to subscribe for any of the issue not taken up by the public.

Unit Trust: Are a form of collective investment vehicles. The beneficial rights to the trust assets are divided into a number of units and these units are offered for sale to the public. The unit trust vehicle can either be a trust or corporate entity.

Warrant: A special kind of option given by the company to holders of a particular security giving them the right to subscribe for future issues either of the same kind or some other security.

White Knight: A company which rescues another which is in financial difficulty, especially one which saves a company from an unwelcome take-over bid.

Yield: The return earned on an investment taking into account the annual income and its present capital value. There are a number of different types of yield and in some cases different methods of calculating each type.

<< go back