Unit 1 Equity Securities

(REIT) Real Estate Investment Trust

-A company that manages a portfolio of real estate investments in order to earn profits for shareholders. -Normally traded publicly and serve as a source of LONG-TERM financing for real estate projects. -NOT A LIMITED PARTNERSHIP -NOT AN INVESTMENT COMPANY -PASS THROUGH INCOME, NOT LOSSES -75% OF TOTAL INVESTMENT ASSETS IN REAL ESTATE -75% OF GROSS INCOME FROM RENTS OR MORTGAGE INTEREST -MUST DISTRIBUTE 90% OR MORE OF INCOME TO SHAREHOLDERS TO AVOID TAXATION AS A CORPORATION -TRADE ON EXCHANGES OR OTC -DIVIDENDS RECEIVED FROM REITS ARE TAXED AS ORDINARY INCOME

Issued Stock

-A form of common stock -Equity securities authorized by the issuer's registration statement distributed to the public.

Outstanding Stock

-A form of common stock -Equity securities issued by a corporation and in the hands of the public; issued stock that the issuer has no reacquired.

Treasury Stock

-A form of common stock -Equity securities that the issuing corporation has issued and repurchased from the public at the current market price.

Authorized Stock

-A form of common stock -the number of shares of stock that a corporation can issue. The number f shares is stipulated in the corporation's state-approved charter and may be changed by a vote of the corporations stockholders.

Book Value

-A measure of the net worth of each share of common stock. It is calculated by subtracting intangible assets and preferred stock from total net worth, then dividing the result by the number of shares of common outstanding. -Current liquidation value of a share

Common Stock

-A security that represents ownership in a corporation. -Holders of ______ _____ exercise control by electing a board of directors and voting on corporate policy. -Can also be classified as: authorized, issued, outstanding, and treasury

Par Value

-The dollar amount assigned to a security by the issuer. For an equity security, ___ _____ is usually a small dollar amount that bears no relationship to the security's market price. For a debt security, ___ _____ is the amount repaid to the investor when the bond matures, usually $1,000. Syn: face value; principal; stated value. -An arbitrary value

Market Value

-The price at which investors buy or sell a share of common stock or a bond at a given time. It is determined by buyers and sellers interaction. -Supply & Demand Value

Debt Investment

-a loan to a company in exchange for interest income and the promise to repay the loan at a future maturity date. -It does not confer ownership.

Debt Security

-a security representing an investors loan to an issuer such as a corporation, a municipality, the federal government, or a federal agency. In return for the loan, the issuer promises to repay the debt on a specified date and to pay interest. -It is commonly acquired by purchasing a companies bonds

Cumulative Voting

-a voting procedure that permits stockholders either to cast all of their votes for any one candidate or to cast their total number of votes in any proportion they choose. This results in greater representation for minority stockholders. -benefits the smaller investors

Statutory Voting

-a voting procedure that permits stockholders to cast one vote per share owned for each position. The procedure tends to benefit majority stockholders -benefits the larger shareholders

Bonds

-an issuing company's or legal obligation to repay the principal of a loan to investors at a specified future date. -are usually issued with par, or face, values of $1,000, representing the amount of money borrowed. -The issuer promises to pay a percentage of the par value as interest on the borrowed funds. -The interest payments are stated on the face of the ____ at issue.

Stock

-represents equity or ownership in a company -a companies primary means of raising business capital -each share entitles its owner to a portion of the company's profits and dividends -gives each shareholder an equal vote on the directors and other important matters

Callable/Redeemable

A company can buy back from investors at a stated price after a specified date. The right to ____ the stock allows the company to replace a relatively high fixed dividend obligation with a lower one. In return for this privilege, the corporation usually pays a premium exceeding the stock's par value at the ____, such as $103 for a $100 par value stock.

Fixed-Income Security

A type of preferred stock that is issued with a fixed dividend. Its price tends to fluctuate with changes in interest rates rather than with the issuing company's business prospects unless, of course, dramatic changes occur in the company's credit quality. It is also considered to be like preferred stock because it is NON-VOTING.

Fixed Dividend

An addition to preferred stock and is a key attraction for income oriented investors. Its usually stated as 6% meaning that it pays $6 from its fixed par value of $100.

Preferred Stock

An equity security that represents ownership in a corporation. It is issued with a stated dividend, which must be paid before dividends are paid to common stockholders. It generally carries no voting rights.

Capital Appreciation

An increase in the market price of shares. Historically owning common stock has provided investors with high real returns

Short the Stock

An investor may sell shares before he owns them, with the intent of buying them back at a lower price in the future-sell high buy low later. It involves borrowing shares to sell that the investor must eventually replace.

The Nasdaq Capital Market

As of September 2005, the EC approved the name change from Nasdaq SmallCap market to the Nasdaq _______ ______. The change was request by Nasdaq to better reflect the capitalization of the issuers included in the market tier.

Capital Gains

Buying low and selling high

Adjustable-Rate Preferred

Dividends that are tied to the rates of other interest benchmarks such as Treasury bills and money market rates, and can be adjusted as often as semiannually.

Straight Preferred (noncumulative)

Has no special features beyond the stated dividend payment. Missed dividends are not paid to the holder.

Senior Securities

If a company declares bankruptcy, the holders of its bonds and preferred stock have priority over common stockholders, making a company's debt and preferred shares to be ______ __________.

Forward Splits

Increases the number of shares and reduces the price without affecting the total market value of shares outstanding; an investor will receive more shares, but the value of each share is reduced.The total market value of the ownership interest is the same before and after the split.

PE Ratio (Price to Earnings Ratio)

It gives the ratio of the stocks current prices to its most recent 12 months earnings per share.

Registrar

It is a state entity that ensures that a corporation does not have more shares outstanding than have been authroized an is also responsible for certifying that a bond represents a legal debt of the issuer. To preform these functions, this individual, will audit the issuers transfer agent.

Participating Preferred

Offers its owners a share of corporate profits that remain after all dividends and interest due other securities are paid. the percentage to which participating preferred stock participates is noted on the stock certificate.

Convertible Preferred

Often issued with a lower stated dividend rate than nonconvertible preferred because the investor may have the opportunity to convert to common shares and enjoy capital gains. In addition, the conversion of preferred stock into shares of common increases the total number of common shares outstanding, which decreases earnings per common share and may decrease the common stock's market value.

Reverse Splits

Reduces the number of shares and increases the price per share without affecting the total market value of share outstanding; an investor will receive less shares, but the value of each share is increased. The total market value of the ownership interest is the same before and after the split.

Transfer Agent

Responsible for: -ensuring that its securities are issued in the correct owners name -canceling old and issuing new certificates -maintaining records of ownership -handling problems relating to lost, stolen, or destroyed certificates

Limited Liability

Stockholders cannot lose more than they have paid for a corporations stock and this protects them from having to pay a corporations debts in bankruptcy

Reset Date

The date of dividend adjustment

Dividend Record Date

The stockholders of record on the record date recieve the dividend distribution.

The Nasdaq Global Select Market

This market tier, the newest for Nasdaq effective July 2006, has initial listing standard, both financial and with regard to liquidity, that are among the highest of any other market. The creation of this market tier by Nasdaq with its stringent listing requirements is anticipated to compare directly with the NYSE.

Payable Date

Three of four weeks after the record date, the dividend disbursing agent sends dividend checks to all stockholders whose names appear on the books as of the record date

American Depository Receipts

U.S. securities that facilitate the trading of foreign stocks in the U.S. markets. It's a negotiable security that represents a receipt for shares of stock in a non-U.S. corporation usually from 1 to 10 shares. They are bough and sold in the U.S. securities markets like stock.

Cumulative Preferred Stockholders

When a company faces financial struggle and cannot pay out dividends, they are then forced to pay back dividends to theses stockholders first before it can pay its common stockholders dividends.

Proxy

When a stockholder cannot attend an annual stockholders meeting, they can still vote on company matter by means of a ballot.

Unrealized Gains

When an investor makes capital gains and does not sell the stock. He is not responsible for taxes until the investors sells the stock.

Realized Gains

When an investor sells stock at a higher price and makes profit, he will then become responsible for taxes on the gains

Inverse Relationship

When interest rates rise, the preferred price falls. Conversely, when interest rates fall, the preferred stock's price rises. The exact relationship occurs in bonds.

Long the Stock

When investors buy or owns shares of stock with the intent of selling them at a higher price in the future-buy low, sell high.

Stock Splits

When stock prices drastically increase, which investors really like, they tend to make the stock price more attractive to investor by a _____ _____.

Dividend Disbursing Agent (DDA)

When stockholders are sent cash, property, or stock dividends, or new shares after a split. if the broker/dealer holds the securities in street name, the ___ makes the appropriate distributions or transfers directly to the broker/dealer. Then the broker/dealers dividend department then distributes the dividends or additional shares to the appropriate accounts.

Mortgage REIT

When the trust owns mortgages on property

Hybrid REIT

When the trusts own both morgages on property and the property

Equity REIT

When the trusts own property

Warrant

a certificate granting its owner the right to purchase securities from the issuer at a specified prices (normally higher than the current market price) as of the date of issue of the _______.

Subscription Rights

a certificate representing a short-term (typically 30 to 45 days) privelege to buy additional shares of a corporation. One right is issued for each common stock share outstanding.

Stock Power

a form that duplicates that back of a stock certificate for transfer purposes

Due Bill

a printed statement showing a buyer's right to a dividend

Points

a stock markets price is qouted in whole dollars, also know as ______.

Voting Right

a stockholders right to vote for members of the board of directors and on matters of corporate policy-particularly the issuance of senior securities, stock splits and substantial changes in the corporation's business. A variation of the right is extended to variable annuity contract holders and mutual fund shareholders, who may vote on material policy issues.

Committee of Uniform Securities Identification Procedures (CUSIP)

a universal security identification number that helps common stock, preferred stock, corporate bonds and municipal bonds become tracked in the case that its lost, stolen, or destroyed.

Non-voting Common Stock

allows a company to raise additional capital while maintaining management control and continuity without diluting voting power.

Rights Offering

allows stockholders to purchase common stock below the current market price. These rights are valued separately from the stock and trade in the secondary market during the subscription period.

Security

an investment that represents either an ownership stake or a debt stake in a company. An investor becomes part owner in a company by buying shares of the company stock.

Dividend Department

collects and distributes cash dividends for stocks held in street name. In addition to processing cash dividends, the department handles interest payments, stock dividends, stock splits, rights offerings, warrants, and any special distributions to stock holders and bond holders.

Net Worth

computed by subtracting all liabilities from the value of total assets

Terms

describe how many new shares a stockholder may buy, the price, the date the new stock will be issued, and the final date for exercising the rights.

Dividends

distributions of a company's profits to its stockholders.

Stock Certificate

indicates the shares of a corporation a person owns.

Current Yield/Dividend Yield

is the annual dividend normally four times the quarterly dividend by the current market value of the stock

Ex-dividend

means that the buyer will not receive the next dividend check

Cum Rights

refers to a shareholder of record that qualifies for a rights offering declared by a company. They allow existing shareholders to buy new shares, typically at a price lower than the current market price of the shares in question.

Ex-rights

shares of stock that are trading but no longer have rights attached because they have either expired, been transferred to another investor or been exercised. The rights originally assigned to the stockholder are, for whatever reason, no longer valid or no longer applicable to the stock.

Preemptive Rights

stockholders then have the right to purchase enough newly issued shares to maintain their proportionate ownership in the corporation.

Net Change in Price

the difference between the closing price on the trading day reported and the previous days closing price.

Equity

the excess of the value of assets over the value of liabilities

The Nasdaq Global Market

the largest of the three Nasdaq market tiers was renamed to better reflect the global nature of the securities included. These OTC stocks have high interest and appeal. Though many may be eligible for listing on an exchange like those in the Global Select Market, the companies have chosen to trade OTC instead.

Currency Risk

the possibility that an investment denominated in one currency could decline if the value of the currency declines in its exchange rate with the U.S. dollar. They are an important consideration because they represent stock in companies located in foreign companies.

Over the Counter Market

the security exchange system in which broker/dealers negotiate directly with one another rather than through an auction on a exchange floor. The trading takes place over computer and telephone networks that link brokers and dealers around the world. Both listed and ___ securities, as well as municipal and U.S. government securities, trade in the ___ ______.

Cash Trades

these trades settle the same day so they go ex-dividend on the day after the record date because no lag occurs between the trade date and the transaction settlement.

Liabilities

what the company owes: accounts payable, short/long term debt, and other obligations

Assets

what the company owns: cash in the bank, accounts receivable, investments, property, inventory....

Proxy Solicitation

when a company sends proxies to shareholders for a specific meeting

Antidilution Provision

when a corporation raises capital through the sale of additional common stock, it may be required by law or its corporate charter to offer the securities to its common stockholders before the general public.