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Investor Handbook

Acquisition

An acquisition is when one company makes a bid to acquire control of another (called the target). It can either be hostile or friendly.

Active Shares

These are shares which are most frequently traded (bought and sold) at the NSE, as distinguished from partly active shares in which trading is not as frequent. The shares of most leading companies are active.

Agent

An agent is an appointed representative (of a stockbroker or investment bank) who is authorized to transact the business of buying and selling shares for a commission through and on behalf of the stockbroker or investment bank.

All or None (AON)

This is a restriction placed on a buy or sell order that instructs the broker to fill the order completely by the close of the market or the order should not take place.

Allotment Letter

This is the document issued by a company to its investors showing the number and value of shares allotted to the applicant after successful subscription.

Amalgamation

This is when two companies, previously independent of one another, combine to form a new company.

Annual Report

A publication issued by a company to its shareholders at the company’s fiscal year-end. The document typically includes financial statements, reports on operations, the auditor’s report and other relevant information on the company. It is mandatory for all public companies.

Annual General Meeting

This is a mandatory meeting held once a year by all public companies. The directors of the company report to the shareholders on the year’s performance and future of the company. All shareholders are invited and allowed to ask questions. Notice of such a meeting is mandatory.

Articles of Association

This is a document describing the purpose, place of business and details of a company. Every incorporated company in Kenya by law must have and submit this document to the registrar of companies and work by what it stipulates. The articles of association together with the memorandum of association form the constitution of a company.

Ask

It is also known as the offer price. It is the lowest price which a seller is willing to accept for a security. It also typically stipulates the amount of the security the seller is willing to sell.

Assets

This is anything owned by a company that has a market value. This includes land, buildings, equipment, furniture, cash, bank deposits, manufactured goods ready to be sold, goodwill, trademarks etc.

At Best Order

This is an instruction from a client to a broker authorizing the broker to use his discretion and try to execute an order at the best possible prize.

Authorized Shares (Stock)

This is the total number of shares that a company is permitted to issue according to its memorandum and articles of association. This number can only be increased if a resolution is passed to that effect by the majority of the shareholders and an application made to the registrar of companies.

Authorized Share Capital

The authorized share capital is calculated by multiplying the nominal share value with the total number of authorized shares. This is stated in the memorandum and articles of association as required by law.

Automated Trading System (ATS)

This is the online trading system software used at the Nairobi Securities Exchange to effect all trading transactions. It can be accessed through the NSE trading floor (through the Local Area Network) or from the stockbrokers’ offices (through the Wide Area Network). It is completely controlled and managed by the NSE.

Averaging Down

Buying more shares in a company at a price that is lower than the price paid for the initial investment. The aim of averaging down is to reduce the average cost per share bought.

Advocacy

Lobbying

Union

Market Growth

Investor Education

Code of Ethics

Investor Protection

Investor Education

  • Issued Shares : 

    This is the total number of a company’s shares that have been sold and are held by shareholders regardless of whether they are individuals, institutions or insiders. It is not mandatory for a company to issue the total number of its authorized shares.

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  • Joint Bond : 

    This is a bond guaranteed by two or more guarantors, one of them being the issuer. The assets of all the guarantors can be called upon to pay the bond holders in the event that a default occurs. This commonly happens when a parent company is required to guarantee the bonds of a subsidiary company.

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  • Bell : 

    Refers to the bell which is sounded to open and close trading at the Nairobi Securities Exchange Trading Floor, thus the Opening Bell and Closing Bell respectively. Since the NSE went fully electronic by automating trading on September 22 2006, the Bell is rang on special occasions such as during the listing and commencement in the trading of a new security.

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  • Redeemable Preference Shares : 

    These are preference shares that come with an agreement that the company can buy them back at a future fixed date and price, or on certain specific terms at the discretion of the board.

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  • Delisting : 

    This is the removal of a company’s name from the official list at the Nairobi Securities Exchange so that it can no longer be traded. This happens when the company for which the stock is issued is not in compliance of the listing requirements at the exchange.

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