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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

  • Capital Reserves : 

    Capital Reserves comprise of a company’s profits that are not normally distributed as cash dividends to shareholders. They can however be distributed as permanent share capital by way of bonus issues.

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  • Bonus Issue : 

    These are additional shares issued to existing shareholders in proportion to their holdings. They are issued free of cost.

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  • Liquidity : 

    This is the ability of an asset e.g. shares, to be bought or sold without affecting its price. Liquid assets are those that can be easily bought or sold without any significant change in price. Such assets are normally characterized by a high level of trading activity. A company which has issued a large number of shares is said to have liquid stock in the market. Investors find it safer to buy such stock because it is easier to get their money out of the investment if they need to do so.

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  • Undervalued Shares : 

    These are shares that are trading below their true value. There are many reasons for this; the industry could be out of favour, or the company is not well known, or it has not yet caught the fancy of investors.

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  • Mixed Market : 

    This is when the stock market does not have a clear trend, with about the same number of advancing and declining stocks.

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