INFLUENCES

AND

FACTORS AFFECTING SHARE PRICES

MAIN INFLUENCES:

SUPPLY & DEMAND

MAIN FACTORS:

1.EXTERNAL ECONOMIC AND POLITICAL 2.INVESTOR SENTIMENT

3.PROFIT EXPECTATIONS

4.DIVIDEND EXPECTATIONS

5.TAKEOVER ACTIVITY

6.QUALITY & TRACK RECORD OF MANAGEMENT

REGULATED BY THE UK LISTING AUTHORITY(UKLA- PART OF FSA)

PRIMARY: OFFICIAL LIST OR MAIN MARKET

ALTERNATIVE INVESTMENT MARKET(AIM)- aim companies DO NOT fall within the definition of companies listed on a recognized stock exchange, and their shares not described as 'listed'.

BUYING AND SELLING:

COMMISSION: flat fee or %age of purchase price(typically 1.25% on the first £10k,...

STAMP DUTY: rounded off to the next multiple of £5

STAMP DUTY RESERVE TAX( SDRT): 0.5% ot purchase price; typically rounded off to the nearest penny

PANEL ON TAKEOVERS AND MERGERS(PTM) LEVY - £1 for every £10k and more worth trades.

TYPES

AND

3 MAIN AREAS OF DIFFERENCE

ORDINARY SHARES AND PREFERENCE SHARES: 1. receipts of dividends

2. control of company

3.return of capital on liquidation of company

PREFERENCE SHARES: CHARACTERISTICS

( dividend, co ownership, treatment on liquidation, yield compared to bonds)

DIVIDEND:

1.paid at fixed rate,

2.half yearly (similar to loan stock),

3.only paid if sufficient after-tax profits (unlike loan stocks);

4.has priority over dividends on ord shares

5.but lower than interest on loan stock

VOTING RIGHTS: NONE UNLESS PAYMENT FALLING INTO ARREARS

TREATMENT ON LIQUIDATION: Rank ahead of ord share capital, but after loan capital and all other creditors

YIELD: higher than bonds as risk is higher UNDATED: MOSTLY

PREFERENCE SHARES: TYPES

(RANKED ACCORDING TO THEIR PRIORITY FOR PAYMENT OF DIVIDENDS * ENTITLEMENT TO CAPITAL ON LIQUIDATION)

CUMULATIVE: arrears can be added

NON-CUMULATIVE: cannot be added PARTICIPATING: participate in profit sharing unlike others

REDEEMABLE: can be redeemed at at pre-determined date

CONVERTIBLE: convertible to ord shares

>Entitled to profit after tax and preference shares have been paid

>Able to attend GMs and right to elect directors

>Upon liquidation, the last to be paid after preference shares and debts discharged

>Bear the greatest risks and, therefore, higher return

A ORD SHARES: participate in profit but are non-voting

B SHARES: usually redeemable shares, issued as part of return of capital to shareholders

C DEFERRED : often issued to the founders of the company, and only pay dividend after a certain no. of years or all other dividends have been paid

>paid out of profits that have paid corpn tax

>UK dividends are paid net,

with 10% inc tax credit attaching for basic rate tax payers

>for HRT payers, total tax charge - 32.5% ( so pay 22.5% on self assessment)

>for additional rate tax payers(50% in 2012 and going to 45% in 2013/14), addl rate is 42.5%, to be reduced to 37.5% in 2103/14

CLERCS

a>Equity capital risks

b>Share dividend volatility

c>Currency risk

d>Liquidity risk

e>Counterparty risk

f>Regulatory risk

a> from individual shares

b> across sectors

c> across international markets