REPORTS Details of director s transactions in a listed UK company appear in : -Regulatory Information Service -Directors register Disclosure of directors interest

in shares: -all dealings must be disclosed -disclosure to the company must be within 5 business days. Companies submit annual report to: Registrar of companies Public company required to hold General Meeting: Every 12 months Must be provided by member in a six-monthly portfolio valuation: -Name of firm -designated investment held and its market value, or fair value -total fees and charges -cash balance at beginning and end of reporting period. Client money: look after by firm but not owned AGM: -Approve accounts -Remove directors -Can t change the dividends FINE Max insider dealing: 5000 Market abuse: -Person regularly deals in investment -Hypothetical person Maximum award per claim for loses in authorised firm defaulting is: 100% of the first 30,000 And 90% of the rest. Investigation by FSA: -require authorised firm and employee to provide all documents to investigation teem deemed relevant -require authorised firm and employee to attend questioning by investigator and answers -appoint accountants, actuaries to do investigations -extend investigation beyond regulated activities. Basic written Agreement only required for : Retail Client (not to professional client and eligible counterparty)

Normally firm provide terms of agreement to retail client: Before the client bou nd by any agreement.

Protection required by particular client: Proportionate

Eligible complainant to Financial Ombudsman Service: Private individual and Small Business (NOT director of insolvent firm or large company) FSA INDIVIDUAL Individual should be aware of personal dealing restrictions and should inform fi rms promptly on personal transactions Person ceases to perform a controlled function must be informed within 7 days Threshold competence for individual: -passing appropriate examination -passing an internal assessment High net worth individual according to Financial Promotions Order: Net income of GBP 100,000. Insider dealing legislation exclude: Foreign exchange transactions FIRM FSA responsible for : Board of Banking supervision Conditions for qualify merger for referral to the competition commission is market share of more than 25% In case of rejection to part IV permission for regulated activity, firm can take complain to Financial Services and Markets Tribunal (in other word, FSMT reviews decision of FSA) Attribute to eligible market: - Regulated by statutory body - Operates regularly - Has price transparency - Open to public Correct procedure in offering custodial service for UK company that is authorise d to advise on investment: Reapply to FSA for part IV permission To issue CD, institution must be a bank with UK banking license Authorisation is exempted from: Appointed representative The following does not require authorisation: -News paper investment advice -introducers -trustee The following requires authorisation: -Tip sheets

FINANCIAL SERVICES AND MARKETS ACT 2000 (replaced Financial Services Act 1986 an d effective 1 December 2001) Records: - Management responsibilities for non-Mifid: 6 years from any change in senior management Non Mifid (third countries business) large undertaking : Called up share capital of GBP 10million or more Specified investments: - Shares in US company - Exchange traded futures - Euro option - Not included is: Premium Bonds (unlike: Government bonds, corporate bonds and Eurobonds) Packaged products: -Regulated collective investment scheme -investment trust savings scheme European -Require -must be -seek to Directive: member state to amend law through implementation of primary legislation implemented by member state by specified date harmonise regulations, create fair market place

UCITS status allows fund to pasported across EEA for collective investment schem es STATEMENTS of PRINCIPLES of Business 7. communication with client (report) 6. customer s interest (churning) (churning: dealing too frequently and relates to investment generally) PENSION FUND Occupational Pension Scheme receives statements of principles (SIPs) every year Statement of investment principle is being written by Trustee of pension fund Requirements of Trustee under TRUSTEE ACT 2000: -must obtain and consider proper advice -must have regard to suitability of the investment to trust -general duty to exercise reasonable care in investments -must review the investments of trust regularly UK private pension will generally have lower fixed income exposure than EU priva te pension Yield of defined benefit pension scheme need to take into account: -mortality rates -job transfers -inflation

TAX Capital Gain Tax (CGT) tax payable: (Net Profit /Loss CGT allowance) * marginal rate of tax on gains 10% tax credit (net dividend ) is not reclaimable from HMRC Total UK payable tax for UK parent company is (foreign + UK tax on profits) Overseas tax relief under corporate tax: Lower of UK corporation tax and oversea s tax UK corp tax is charged on: -UK profits on UK resident company -Overseas profits of UK resident companies -UK profits of companies resident overseas BONDS Government Bonds: -Italian: BTP - UK. Normal issuance is by variable price auction/competitive auction -Japanese bonds trade in Over the Counter -French: OAT, settles T+3 pay annual coupon, BTAN medium term, settles T+1 Domestic German equity exchange: Clearstream Bonds traded at discount under par will risen the price near maturity There are no central bank with responsibility of managing govt debt For higher coupon, the interest rate risk is usually lower Long dated and low coupon is the most sensitive to risk to yield changes Floating Rate Notes: interest rate is reset to market level. If interest rate fa lls, yield and coupon will fall but price remain constant JGB (Japanese) pays semi annual coupon, US TBond, UK Gilt, Italian BTP, French O AT, German Bunds, Eurobonds pay annual coupon.

EQUITY Permissable activity of registered equity market maker: -Access to inter dealer broker (during SEAQ mandatory quote period/settlement de cided on T+3) Seller on equity pays: -Broker commission -Fees to PTM (Panel on Takeover and Merger) Panel Rules on takeovers and mergers apply to acquisitions of: -public companies -fully listed companies -companies on AIM -private companies

NMS: Normal Market Size Eurobonds settlements: T+3 FX settlement: Spot (two business days) Confirmation of transaction should be send by T+1 Physically delivered (based on notional coupon) VS contract for difference (cash settled, based on index or interest rate) Risk in buying in secondary market: credit risk/issuer default Tracker fund manager issues: -Method of index replication -Frequency of portfolio rebalancing Benchmark of funds should reflect client s preference Suitable for singles: Index linked gilts, ordinary shares, unit trust INDEX Function: -comparing investment performance of manager -monitoring level of market -comparing return on asset classes Standard and Poor composite index: Arithmetically weighted (against market capit alisation) Highest S&P rating: A1+ A1 Moody s: P1 P2 P3 A2

Unweighted: DJIA (arithmetic aggregate, equal share towards index value), FTSE o rdinary, Nikkei 225 FTSE 100 futures: -Leverage of portfolio -Lower transaction cost -dedicated portfolio FTSE Actuaries fixed interest indices comprises : -bond price changes -coupon payments -accrued income Variation Margin: calculated by LCH Clearnet for Euronext life trades refers to market gain/loss on the position on previous day. OPTIONS Call options will be influenced by: -Strike price -share price -interest rate

European options can only exercised at expiry and amercan style can be exercised at any time. CORP ACTIONS Bonus issue: script/capitalisation issues (double the number of shares in conver sion), scrip protected double the conversion rate. -would not raise cash for company -would reduce premium reserve by a corresponding increase in share capital -market value of shares would fall as more shares -no change in net assets Ex bonus price will decrease (but the total value of holding remains the same be cause investor will have more shares) Coupon becoming Ex Dividend: 7 days prior to coupon payment date Coupon shares becoming ex dividend: 2 business days prior books closed date (reg ister date) Share can be traded special ex dividend 10 business days prior ex dividend date Bond trading at par will have coupon equal to (redemption) yield All reserves in shareholders funds may be used to make a bonus issue: 1. p/l account reserve 2. share premium acct reserve 3. capital redemption reserve 4. revaluation reserve

Proxy voting: -In person or appointed in writing -Only able to vote in poll -Proxy could have general or special vote -proxy granted is valid to that meeting and subsequent adjournment Proxy form should be submitted 48 hours before AGM According to city code, successful offer can open for minimum period of 35 calen dar days (21 days first closing days plus 14) PROPERTY Characteristics: -decentralised -management cost -heavily regulated Inelastic supply of property because: -Planning constraints -Geographical immobility Undervalued bonds: positive alpha No correlation of portfolio return to market : zero beta Market neutral funds: not exposed to general gyration in market : take long posi

tions on stocks that are expected to outperform and short position in stocks exp ected to under perform. Generate positive return. Indifference with changes in u nderlying market. SHARPE ratio Excess return on portfolio divided by portfolio standard deviation No profit = Marginal cost BIGGER than average variable cost Profit maximising company will expand out put marginal revenue is bigger than mar ginal cost Shareholders funds = Net assets Return on capital = profit/capital employed (fixed assets+working capital or in other words shareholder funds+long term loans) Net assets = Total assets Total Liabilities Total assets= Fixed assets+stocks+debtors+cash Liabilities= bank overdraft+creditors+long term liabilities Goodwill = Price paid Net assets

Current ratio = Current assets (Short term assets)/ current liabilities (credito r less than 1 year)

Sample variance =

is sum/number of variable Full year(s) yield: weighted yield Total return with basic geometric (compounded): (1+ra) (1+r2)= (1+R) Total value after n years: Value at beginning * (1+r) + (1+r) Present value Future value

Forward /spot calculation:

If the value of the currency in exchange rate is decreased, that mean the curren cy has depreciated and the goods of the other currency will be more expensive. An increase rate of domestic inflation will cause the nation s currency to depreci ate An increase in interest rate will increase premium in

Corporate Bond Modified duration

Gross redemption yield = flat yield (of bond) if Interest rate yield = coupon r ate Earnings per share is calculated after these have been deducted: --tax -minority interest -interest -preference dividend Cash statements: -capital expenditure and investment income -taxation paid -dividends paid Capital expenditure: Overseas statement Immunisation is possible if all promised cash flow is realised (no callable bond s) Accruals are liabilities for cost incurred during period, found in Creditor fall ing due. Stocks are not fixed assets Method of calculation: Highest inventory when price and inventory level are rising: First in First Out (Cheapest good being sold first) Monopoly: barrier of entry to industry Monopolistic firm is price maker, competitive firm is price taker Capital Asset Pricing model =Portfolio returns best explained by systematic risk . Alpha= Actual return required return Required return = risk free rate + beta (expected return risk free rate)