BUSINESS AND ECONOMY,

STOCKS AND BONDS,

AGRICULTURE
Handouts

CURRENT BUSINESS AFFAIRS

 Table of Contents
Business................................................................................................................................................... 4
Forms of Business Ownership ............................................................................................................. 4
Sole proprietorship ......................................................................................................................... 4
Partnership...................................................................................................................................... 4
Corporation ..................................................................................................................................... 4
Types/Classifications of Business ........................................................................................................ 4
Intellectual Property ........................................................................................................................... 5
1) Patents .................................................................................................................................... 5
2) Copyrights ............................................................................................................................... 5
3) Trademarks ............................................................................................................................. 5
What is a Political Economy? .................................................................................................................. 6
Political System ....................................................................................................................................... 6
Democracy .......................................................................................................................................... 6
Totalitarianism .................................................................................................................................... 6
1. Communist totalitarianism ..................................................................................................... 6
2. Theocratic totalitarianism ....................................................................................................... 6
3. Tribal totalitarianism ............................................................................................................... 6
4. Right-wing totalitarianism....................................................................................................... 6
Economic System .................................................................................................................................... 6
1) Market economies ...................................................................................................................... 7
2) Command economies ................................................................................................................. 7
3) Mixed economies ........................................................................................................................ 7
Legal System ........................................................................................................................................... 7
1) Common law ............................................................................................................................... 7
2) Civic law ...................................................................................................................................... 7
3) Tribal law ..................................................................................................................................... 7
Economic Indicators ................................................................................................................................ 7
Gross Domestic Product (GDP) ........................................................................................................... 7
Per Capita Income ............................................................................................................................... 8
Balance of Trade or Balance of Payment ............................................................................................ 8
Interest Rate/Bank Rate...................................................................................................................... 8
Inflation Rate....................................................................................................................................... 8
Unemployment Rate ........................................................................................................................... 9
Exchange Rate ..................................................................................................................................... 9

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Introduction to Bonds ........................................................................................................................... 10
Characteristics of Bonds........................................................................................................................ 11
Face/Par Value .................................................................................................................................. 11
Coupon/Yield .................................................................................................................................... 11
Maturity ............................................................................................................................................ 12
Issuer ................................................................................................................................................. 12
Bond Rating ....................................................................................................................................... 12
Types of Bonds ...................................................................................................................................... 13
Government Bonds ........................................................................................................................... 13
Corporate Bonds ................................................................................................................................... 13
Asset-Backed Securities ........................................................................................................................ 14
How to Trade Bonds.............................................................................................................................. 15
Bond Brokers..................................................................................................................................... 15
Mutual Funds and ETFs ..................................................................................................................... 16
Government Bonds ........................................................................................................................... 16
Pakistani Bond Market .......................................................................................................................... 16
Pakistan Investment Bonds............................................................................................................... 16
US Special Dollar Bonds .................................................................................................................... 17
National Savings Bonds ..................................................................................................................... 17
Latest Bond Issues................................................................................................................................. 18
Conclusion ............................................................................................................................................. 19
Introduction .......................................................................................................................................... 20
Shareholder........................................................................................................................................... 20
Preference Shares ................................................................................................................................. 20
Types of Preferred Stocks ................................................................................................................. 20
Common Stock ...................................................................................................................................... 21
Control Stock ......................................................................................................................................... 21
Important Crops .................................................................................................................................... 23
1) Cotton ....................................................................................................................................... 23
2) Sugarcane .................................................................................................................................. 23
3) Rice ............................................................................................................................................ 23
4) Wheat........................................................................................................................................ 24
5) Maize ......................................................................................................................................... 24
6) Oilseeds ..................................................................................................................................... 24
7) Other Crops ............................................................................................................................... 24
Livestock and Poultry ............................................................................................................................ 24

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1) Livestock.................................................................................................................................... 24
2) Poultry ....................................................................................................................................... 25
3) Fishery ....................................................................................................................................... 25

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 Business & Economy
Business
A business is an organizational entity involved in the provision of goods and services to
consumers. It may also be explained as an organization or economic system where goods and
services are exchanged for one another or for money.
Every business requires some form of investment and enough customers to whom its output
can be sold on a consistent basis in order to make a profit. Businesses can be privately owned,
not-for-profit or state-owned. An example of a corporate business is PepsiCo, while a mom-
and-pop catering business is a private enterprise.

Forms of Business Ownership

Sole proprietorship
A sole proprietorship, also known as a sole trader, is owned by one person and operates for
their benefit. The owner operates the business alone and may hire employees. A sole
proprietor has unlimited liability for all obligations incurred by the business, whether from
operating costs or judgements against the business. All assets of the business belong to a sole
proprietor, including, for example, computer infrastructure, any inventory, manufacturing
equipment, or retail fixtures, as well as any real property owned by the sole proprietor.
Partnership
A partnership is a business owned by two or more people. In most forms of partnerships, each
partner has unlimited liability for the debts incurred by the business. The three most
prevalent types of for-profit partnerships are: general partnerships, limited partnerships, and
limited liability partnerships.
Corporation
The owners of a corporation have limited liability and the business has a separate legal
personality from its owners. Corporations can be either government-owned or privately
owned. They can organize either for profit or as nonprofit organizations. A privately owned,
for-profit corporation is owned by its shareholders, who elect a board of directors to direct
the corporation and hire its managerial staff. A privately owned, for-profit corporation can be
either privately held by a small group of individuals, or publicly held, with publicly traded
shares listed on a stock exchange.

Types/Classifications of Business
 Agriculture such as the domestication of fish, animals and livestock, as well
as lumber, oil and mining businesses that extract natural resources and raw materials,
such as wood, petroleum, natural gas, ores, plants or minerals.
 Financial services businesses include banks, brokerage firms, insurance
companies, asset and investment companies such as private equity firms, real estate

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 investment, pension funds, mutual funds, and hedge funds, stock exchanges, and
other companies that generate profits through investment and management
of capital.
 Entertainment and mass media companies generate profits primarily from the sale
of intellectual property – they include film studios and production houses, mass
media companies such as cable television networks, online digital
media agencies, mobile media outlets, newspapers, books and magazines
publishing houses.
 Industrial manufacturers produce products, either from raw materials or from
component parts, then export the finished products at a profit - they
include tangible goods such as cars, glass, cellphones, televisions, refrigerator
or aircraft.
 Real estate businesses sell, invest, construct and develop properties – including land,
residential homes, and other buildings.
 Retailers, wholesalers, and distributors act as middlemen and get goods produced by
manufacturers to the intended consumers; they make their profits by marking up their
prices. Most stores and catalog companies are distributors or retailers.
 Transportation businesses such as railways, airlines, shipping companies that deliver
goods and individuals to their destinations for a fee.
 Utilities produce public services such as electricity, waste management or sewage
treatment, usually under the charge of a government.
 Service businesses offer intangible goods or services and typically charge for labor or
other services provided to government, to consumers, or to other businesses. Interior
decorators, hairstylists, tanning salons, laundromats, and pest controllers are service
businesses.

Intellectual Property
Intellectual property refers to creations of the mind, such as inventions; literary and artistic
works; designs; and symbols, names and images used in commerce. Intellectual property
known as a property that is the product of intellectual activity.
Intellectual property can be protected using:
1) Patents – Exclusive rights for a defined period to the manufacture, use, or sale of that
invention.
2) Copyrights – The exclusive legal rights of authors, composers, playwrights, artists, and
publishers to publish and disperse their work as they see fit.
3) Trademarks – Design and names by which merchants or manufacturers designate and
differentiate their products.

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What is a Political Economy?
Political economy of a nation describes how the political, economic, and legal systems of a
country are interdependent.
 They interact and influence each other
 They affect the level of economic well-being in the nation

Political System
Political system refers to the system of government in a nation. It is assessed according to
 The degree to which the country emphasizes collectivism as opposed to individualism
 The degree to which the country is democratic or totalitarian

Democracy
A political system in which government is by the people, exercised either directly or through
elected representatives.
 Usually associated with individualism
 Pure democracy is based on the belief that citizens should be directly involved in
decision making
 Most modern democratic states practice representative democracy where citizens
periodically elect individuals to represent them

Totalitarianism
Form of government in which one person or political party exercises absolute control over all
spheres of human life and prohibits opposing political parties.
Four major forms of totalitarianism exist today
1. Communist totalitarianism – found in states where the communist party monopolizes
power. For example North Korea.
2. Theocratic totalitarianism – found in states where political power is monopolized by a
party, group, or individual that governs according to religious principles. For example
Kingdom of Saudi Arabia and Iran
3. Tribal totalitarianism – found in states where a political party that represents the
interests of a particular tribe monopolizes power. For example Federally
Administrated Tribal Area (FATA) of Pakistan.
4. Right-wing totalitarianism – permits some individual economic freedom, but restricts
individual political freedom. For example Nazi Germany under Hitler.

Economic System
Political ideology and economic systems are connected. Countries that stress individual goals
are likely to have market based economies. In countries where state-ownership is common,

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collective goals are dominant. Economic systems are the means by which countries and
governments distribute resources and trade goods and services. They are used to control the
five factors of production, including: labor, capital, entrepreneurs, physical resources and
information resources.
There are three types of economic systems

1) Market economies - All productive activities are privately owned and production is
determined by the interaction of supply and demand. Government encourages free and
fair competition between private producers.
2) Command economies - Government plans the goods and services that a country
produces, the quantity that is produced, and the prices as which they are sold. All
businesses are state-owned, and governments allocate resources for “the good of
society”. Because there is little incentive to control costs and be efficient, command
economies tend to stagnate
3) Mixed economies - Certain sectors of the economy are left to private ownership and
free market mechanisms while other sectors have significant state ownership and
government planning. Governments tend to own firms that are considered important to
national security

Legal System
The rules that regulate behavior along with the processes by which the laws are enforced and
through which redress for grievances is obtained. The legal system in a country is influenced
by the prevailing political system. Legal systems are important for business because they:
 Define how business transactions are executed
 Identify the rights and obligations of parties involved in business transactions
There are three types of legal systems:

1) Common law - based on tradition, precedent, and custom

2) Civic law - based on detailed set of laws organized into codes
3) Tribal law - based on tribal culture and rituals

Economic Indicators
An economic indicator is a statistic about an economic activity. Economic indicators allow
analysis of economic performance and predictions of future performance. Various
macroeconomic indicators are:

Gross Domestic Product (GDP)

The gross domestic product (GDP) is one of the primary indicators used to gauge the health
of a country's economy. It represents the total dollar value of all goods and services produced
over a specific time period; we can think of it as the size of the economy. In Pakistan GDP

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growth rate as per government claims is 4.71% for year 2016 and the highest was 10.22% in
year 1952 whereas the lowest was 1.8% in year 1954.

Per Capita Income

Per capita income or average income measures the average income earned per person in a
given area (city, region, country, etc.) in a specified year. It is calculated by dividing the area's
total income by its total population. GDP per capita income in Pakistan is $1468.

Balance of Trade or Balance of Payment

The balance of trade, commercial balance, or net exports, is the difference between the
monetary value of a nation's exports and imports over a certain period. Sometimes a
distinction is made between a balance of trade for goods versus one for services. If a country
exports a greater value than it imports, it is called a trade surplus, positive balance, or a
"favorable balance", and conversely, if a country imports a greater value than it exports, it is
called a trade deficit, negative balance, "unfavorable balance", or, informally, a "trade gap".
Pakistan recorded a trade deficit of 274757 PKR Million in June of 2017. Balance of Trade in
Pakistan averaged -31573.87 PKR Million from 1957 until 2017, reaching an all time high of
6457 PKR Million in June of 2003 and a record low of -362902 PKR Million in May of 2017.

Interest Rate/Bank Rate

An interest rate, is the amount of interest due per period, as a proportion of the amount lent,
deposited or borrowed (called the principal sum). The total interest on an amount lent or
borrowed depends on the principal sum, the interest rate, the compounding frequency, and
the length of time over which it is lent, deposited or borrowed.
It is defined as the proportion of an amount loaned which a lender charges as interest to the
borrower, normally expressed as an annual percentage. It is the rate a bank or other lender
charges to borrow its money, or the rate a bank pays its savers for keeping money in an
account. In Pakistan interest rate announced by State Bank of Pakistan (SBP) under Monetary
Policy which is announced every two months. Currently the interest announced in last
monetary policy is 5.75%.

Inflation Rate
Inflation is a sustained increase in the general price level of goods and services in an economy
over a period of time. When the price level rises, each unit of currency buys fewer goods and
services; consequently, inflation reflects a reduction in the purchasing power per unit of
money – a loss of real value in the medium of exchange and unit of account within the
economy. A chief measure of price inflation is the inflation rate, the annualized percentage
change in a general price index, usually the consumer price index, over time.
In Pakistan according to government resources inflation rate currently. Consumer prices in
Pakistan rose 2.91 percent year-on-year in July of 2017, easing from a 3.93 percent increase
in the previous month. It is the lowest inflation rate since November of 2015. Inflation Rate

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in Pakistan averaged 7.82 percent from 1957 until 2017, reaching an all time high of 37.81
percent in December of 1973 and a record low of -10.32 percent in February of 1959.

Unemployment Rate
The unemployment rate is a measure of the prevalence of unemployment and it is calculated
as a percentage by dividing the number of unemployed individuals by all individuals currently
in the labor force. During periods of recession, an economy usually experiences a relatively
high unemployment rate.
Unemployment Rate in Pakistan decreased to 5.90 percent in 2015 from 6 percent in 2014.
Unemployment Rate in Pakistan averaged 5.46 percent from 1985 until 2015, reaching an all
time high of 7.80 percent in 2002 and a record low of 3.10 percent in 1987.

Exchange Rate
An exchange rate of two currencies is the rate at which one currency will be exchanged for
another. It is also regarded as the value of one country’s currency in relation to another
currency. For example, an interbank exchange rate of Pakistani Rs. 108 to the United States
dollar means that Rs. 108 will be exchanged for each US$1 or that US$1 will be exchanged for
each Rs.108. In this case it is said that the price of a dollar in relation to rupee is Rs.104, or
equivalently that the price of a Pakistani rupee in relation to dollars is $1/108.
Exchange rates are determined in the foreign exchange market, which is open to a wide range
of different types of buyers and sellers, and where currency trading is continuous 24 hours a
day except weekends. The spot exchange rate refers to the current exchange rate. The
forward exchange rate refers to an exchange rate that is quoted and traded today but for
delivery and payment on a specific future date.

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 Bonds & Stocks
Introduction to Bonds
Most simply, bonds represent debt obligations and therefore are a form of borrowing. If a
company issues a bond, the money they receive in return is a loan, and must be repaid over
time. Just like the mortgage on a home or a credit card payment, the repayment of the loan
also entails periodic interest to be paid to the lenders. The buyers of bonds, then, are
essentially lenders. For example, if you have ever bought a government savings bond, you
became a lender to the federal government.
Governments (at all levels) and corporations commonly use bonds in order to borrow money.
Governments need to fund roads, schools, dams or other infrastructure. The sudden expense
of a war may also demand the need to raise funds. Similarly, corporations will often borrow
to grow their business, to buy property and equipment, to undertake profitable projects, for
research and development or to hire employees. The problem that large organizations run
into is that they typically need far more money than the average bank can provide. Bonds
provide a solution by allowing many individual investors to assume the role of lender. Indeed,
public debt markets let thousands of investors each lend a portion of the capital needed.
Moreover, markets allow lenders to sell their bonds to other investors or to buy bonds from
other individuals – long after the original issuing organization raised capital.
Of course, people wouldn’t lend their hard-earned money for no compensation
 There is an opportunity cost involved with any investment, which is the lost
opportunity of using those same funds for another purpose.
 The issuer of a bond must pay the investor something extra for the privilege of using
his or her money. This "extra" comes in the form of the interest payments, which are
made at a predetermined rate and schedule.
 The date on which the issuer must repay the amount borrowed (an amount known as
the face value) is called the maturity date. The interest rate associated with a bond is
often referred to as the bond’s yield or coupon. In the past, when bonds were issued
as paper documents, there would be actual coupons that investors would clip and
redeem for their interest payments.
Bonds are often referred to as fixed-income securities because the lender can anticipate the
exact amount of cash they will have received if a bond is held until maturity. For example, say
you buy a corporate bond with a face value of $1,000, a coupon of 5% paid annually, and a
maturity of 10 years. This tells you that you will receive a total of $50 ($1,000 x 0.05) of
interest per year for the next 10 years (because most corporate bonds pay interest semi-
annually by convention. You'd then receive two payments of $25 a year for 10 years. When
the bond matures in a decade, you'd then get your $1,000 back.
In our example, the bond was issued with a fixed interest rate, but often a bond carries a
variable rate. Variable interest is typically calculated as some predetermined spread above

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some benchmark rate, such as the Fed Funds Rate or LIBOR, and which are reevaluated after
each successive coupon payment.

Characteristics of Bonds
Bonds come in many varieties, however, some characteristics are unique to all of them, and
should be understood by any potential bond investor.

Face/Par Value

The first characteristic of a bond is its face, or par value. This represents the amount of
principal that a bondholder will receive at maturity, and is also the value that that a bond is
issued for at the time that a company or government first sells them. The majority of
corporate bonds today carry a face value of $1,000, but may vary by issuer. Government
bonds are often sold with higher face values, some of which can be as high as a hundred
thousand or even a million dollars. The face value of a bond should not be confused with the
price of a bond observed in the market – the face value is always a given amount, while the
price of a bond will fluctuate over time. When the observed market price of a bond is lower
than the stated face value, it is said to be trading at a discount, and when the market price is
higher than par it trades at a premium.

Coupon/Yield

The coupon or yield of a bond is the interest rate the issuer agrees to pay its bondholders.
Interest payments on corporate bonds are typically paid semi-annually but may also be paid
annually or quarterly. Some bonds do not pay a coupon at all (zero-coupon bonds), but are
instead sold at an initial discount to be repaid at the full face value at maturity, which has the
same net effect as paying interest on a bond sold at face value. The yield is expressed at a
percentage of the face value, so a yield of 10% on a $1,000 bond would imply an annual
payment of $100 in interest. If the interest rate paid on a bond remains the same for the life
of the security it is a fixed rate, while if it floats and changes over time it is referred to as
adjustable or variable rate. Variable rates are typically pegged as a spread above some other
benchmark rate such as that paid on 10-year government bonds or the LIBOR.
The yield of a bond is determined by a number of factors:
 First, the prevailing interest rate environment
 Second inflation expectations
 And third the chances of being repaid or not.
The greater the risk of not being repaid, the higher the yield on the bond. A bond with a
shorter maturity is more predictable, therefore than a bond with a long maturity – and
therefore a bond with a longer maturity will carry a higher interest rate. A company on an
insecure financial footing will also carry a higher interest rate on its bonds since it may be
more likely to default than a solid, blue chip company.

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Maturity

The maturity is the date at which the bond’s principal comes due and must be repaid to
lenders in full. Maturities for corporate bonds are typically in the range of one to five years,
with some bonds maturing in 10 or even 30 years. Occasionally, a company will issue a so-
called century bond that matures in 100 years. Government bonds can be short term (a few
months) to many years (10 or 30 years). The bond maturity is decided by the issuer, and
influences the bond’s yield – the longer the time to maturity, the more chances that a
company has to fail to repay, and therefore the higher the yield that it must carry.

Issuer

The type and quality of the bond issuer is also an important characteristic of a bond, as the
issuer's stability is your main assurance of getting paid back in full. For example, the U.S.
government is far more secure than any one corporation. Its default risk (the chance of the
debt not being paid back) is extremely small - so small that U.S. government securities are
often referred to as risk-free assets. The reason behind this is that a government will always
be able to bring in future revenue to pay its debts through taxation. A company, on the other
hand, must continue to make profits, which are far from guaranteed. This added risk means
corporate bonds must offer a higher yield in order to entice investors - this is the risk/return
tradeoff in action, sometimes known as the “yield spread” between corporate and
government bonds.

For corporate bonds, there is a fairly standardized bond rating system, based on the analysis
of credit rating agencies, to help investors determine a company's credit or default risk. Think
of a bond rating as the report card for a company's credit rating. Blue-chip firms, which are
large, financially secure companies issue bonds that are safer investments, and have a high
rating, while risky companies have a low rat5ing. The chart in next column illustrates the
different bond rating scales from the major rating agencies in the U.S.: Moody's, Standard and
Poor's and Fitch Ratings.

Bond Rating
Moody’s S&P/Fitch Grade Risk
Aaa AAA Investment Highest Quality
Aa AA Investment High Quality
A A Investment Strong
Baa BBB Investment Medium Grade
Ba, B BB,B Junk Speculative
Caa/Ca/C CCC/CC/C Junk Highly Speculative
C D Junk In Default

Notice that if the company falls below a certain credit rating, its grade changes from
investment quality to junk status. Junk bonds, or high yield bonds are below investment
grade, and are aptly named: they are often the debt issued by companies in some sort of
financial difficulty or instability. Because they are so risky, they have to offer much higher
yields than any other debt. This brings up an important point: not all bonds are inherently
safer than stocks. Certain types of bonds can be just as risky, if not riskier, than stocks.

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Types of Bonds
Government Bonds

Government bonds can be issued by national governments as well as lower levels of

government. At the national or federal level, these government bonds are known as
“sovereign” debt, and are backed by the ability of a nation to tax its citizens and to print
currency. In the U.S. federal debt is classified according to its maturity. “Bills” are bonds
maturing in less than one year, “Notes” between one and ten years, and “Bonds” maturing in
more than ten years. Marketable securities from the U.S. government - known collectively as
“Treasuries” - follow this guideline and are issued as Treasury bonds, Treasury notes and
Treasury bills (T-bills). All debt issued by the U.S. government is regarded as extremely safe,
often referred to as “risk-free” securities, as is the debt of many stable countries. The debt of
developing countries, on the other hand, does usually carry substantial risk. Like companies,
countries can therefore default on payments. Credit ratings agencies also rate a country’s risk
to repay debt in a similar way that they issue ratings on corporate bond issuers. Countries
with greater default risk must issue bonds at higher interest rates – which essentially
increases their cost of borrowing. Governments also issue bonds that are linked to inflation,
known in the U.S. as Treasury Inflation Protected Securities, or TIPS.

The government also issues what are known as zero-coupon or z-bonds, which pay no coupon,
but instead are offered at a discount at sale. For example, let's say a zero-coupon bond with
a $1,000 par value and 10 years to maturity is trading at $600; you'd be paying $600 today for
a bond that will be worth $1,000 in 10 years. These bonds are known as Treasury STRIPS in
the U.S. Government savings bonds are also zero-coupon bonds that gain value as they
mature.

Municipal bonds, also known as "munis" are bonds issued by state or local governments or
by government agencies. These bonds are typically riskier than national government bonds;
cities don't go bankrupt that often, but it can happen (for example in Detroit and and
Stockton, CA). The major advantage to munis for investors is that the returns are free from
federal tax, and furthermore, state and local governments will often consider their debt non-
taxable for residents, thus making some municipal bonds completely tax free, sometimes
called triple-tax free. Because of these tax savings, the yield on a muni is usually lower than
that of an equivalent taxable bond. Depending on your personal situation, a muni can be a
great investment on an after-tax basis.

Corporate Bonds
The other major issuer of bonds are corporations, and corporate bonds make up a large
portion of the overall bond market. Large corporations have a great deal of flexibility as to
how much debt they can issue: the limit is generally whatever the market will bear.

 A corporate bond is considered short-term corporate when the maturity is less than
five years
 Intermediate is five to 12 years
 And long-term is over 12 years.

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Corporate bonds are characterized by higher yields than government securities because there
is a higher risk of a company defaulting than a government. The upside is that they can also
be the most rewarding fixed-income investments because of the risk the investor must take
on, where higher credit companies that are more likely to pay back their obligations will carry
a relatively lower interest rate than riskier borrowers. Companies can issue bonds with fixed
or variable interest rates and of varying maturity. Bonds issued by highly rated companies are
referred to as investment grade while those below investment grade are junk or high-yield.

Convertible bonds are debt issued by corporations that give the bondholder the option to
convert the bonds into shares of common stock at a later date. The rate at which investors
can convert bonds into stocks, that is, the number of shares an investor gets for each bond, is
determined by a metric called the conversion rate. The conversion rate may be fixed or change
over time depending on the terms of the offering. A conversion rate of 30 means that for
every $1,000 of par value the convertible bondholder converts, she receives 30 shares of
stock. It is not always profitable to convert bonds into equity. Investors can determine the
breakeven price by dividing the selling price of the bond by the conversation rate. Typically,
investors will exercise this option if the share price of the company exceeds the breakeven
price. Convertible bonds typically carry lower yields due to this right given to investors.

Callable bonds are bonds that can be redeemed by the issuer at some point prior to its
maturity. If interest rates have declined since the company first issued the bond, the company
is likely to want to refinance this debt at a lower rate of interest. In this case, the company
calls its current bonds and reissues them at a lower rate of interest. Callable bonds typically
have a higher interest rate to account for this added risk to investors. When homeowners
refinance a mortgage, they are calling in their older debt for a new loan at better rates.
Putable bonds allow the bondholder to force the issuer to repurchase the security at specified
dates before maturity. The repurchase price is set at the time of issue, and is usually par value,
and generally works to the favor of investors. Therefore, yields on these bonds tend to be
lower.

Asset-Backed Securities
A third category of bonds is issued by banks or other financial sector participants and are
referred to as asset-backed securities or ABS. These bonds are created by packaging up the
cash flows generated by a number of similar assets and offering them to investors. If such a
bond is backed by a number of mortgages, they are known as mortgage-backed securities or
MBS. These bonds are typically reserved for sophisticated or institutional investors and not
individuals.

How to Read a Bond Table

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Column 1: Issuer - This is the company, state (or province) or country that is issuing the
bond.

Column 2: Coupon - The coupon refers to the fixed interest rate that the issuer pays to the
lender.

Column 3: Maturity Date - This is the date on which the borrower will repay the investors
their principal. Typically, only the last two digits of the year are quoted: 25 means 2025, 04
is 2004, etc.

Column 4: Bid Price - This is the price someone is willing to pay for the bond. It is quoted in
relation to 100, no matter what the par value is. Think of the bid price as a percentage: a
bond with a bid of 93 is trading at 93% of its par value.

Column 5: Yield - The yield indicates annual return until the bond matures. Usually, this is
the yield to maturity, not current yield. If the bond is callable it will have a "c--" where the "-
-" is the year the bond can be called. For example, c10 means the bond can be called as
early as 2010.

How to Trade Bonds

Most bond transactions can be completed through a full-service or discount brokerage, and
increasingly online brokerage services allow for easy and inexpensive bond trading.

Bond Brokers

You can also open an account with a specialized bond broker, but be warned that most bond
brokers require a minimum initial deposit. Another option for adding bonds to a portfolio is
by looking at mutual funds that specializes in bonds (known as a bond fund).

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Mutual Funds and ETFs

In addition to numerous mutual funds, there are also exchange traded funds (ETFs) that invest
in bonds, and which trade like shares of stock for investors. When buying and selling bonds
on the open market, keep in mind that these are “secondary market” transactions, meaning
that you are buying from another investor and not directly from the issuer. One drawback of
mutual funds and ETFs is that investors do not know the maturity of all the bonds in the fund
portfolio since they are changing quite often, and therefore these investment vehicles are not
appropriate for an investor who wishes to hold a bond until maturity. Another drawback is
that you will have to pay additional fees to the portfolio managers.

If you do decide to purchase a bond through your broker, he or she may tell you that the trade
is commission free, but be wary! What typically happens is that the broker will mark up the
price slightly; this markup is really the same as a commission. To make sure that you are not
being charged too much, simply look up the latest quote for the bond and determine whether
the markup is acceptable.

Government Bonds

Many financial institutions today will provide their clients with the service of transacting
government securities. However, if your bank or broker doesn't provide this service, you can
purchase government bonds directly through a government agency. (This is true in most
countries). In the U.S. you can buy bonds directly from the federal government through its
service, Treasury Direct. The Bureau of the Public Debt started Treasury Direct so that
individuals could buy bonds directly from the Treasury, thereby bypassing a broker and
greatly reducing transaction costs. All transactions and interest payments are done
electronically.

Pakistani Bond Market

The various types of Government bonds issued by the Govt. of Pakistan are as follows:

 Pakistan Investment Bonds

 US Special Dollar Bonds
 Wapda Bonds
 National Saving Bonds
 and Sukuk

Pakistan Investment Bonds

It is a conventional Fixed Coupon bond, bearing bond classification of Par + Coupon. The
Pricing is based on market determined yields.

Salient Features are:

Issuer : Government of Pakistan
Coupon : 7.00, 7.75, 8.75 (Paid-Semi Annually)

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 Tenor : 3, 5, 10, Years
Denominations : Multiple of 100,000 PKR
Withholding Tax : Deducted at Source (currently 10%)
Sale of Bills : Through Designated Primary Dealers
Redemption : Shall not be redeemable before maturity
Tradable : Traded freely in the Secondary Market and
are transferable.

US Special Dollar Bonds

Government of Pakistan issues international bonds in international market with a foreign
currency and in this case specifically in USD.

Salient Features are:

Issuer : Third Pakistan International Sukuk
Company Limited
Borrower/Country of Risk Pakistan
Coupon : 5.5 (Paid-Semi Annually)
Tenor : 5 Years
Denominations : Multiple of 1000 USD
Minimum Settlement 200,000 USD
Amount
Listing : Luxembourg S.E.

National Savings Bonds

National Savings time to time issues National Savings Bonds in different denominations like
100, 200, 500, 7500, 1500, 7500, 1500, 25000, and 40000 all in PKR. Apart from coupon the
issuing authority preferably on quarterly basis announce prize money on the said bonds. The
latest issue is 40000 PKR Premium Bond with highest prize money of 80,000,0000 PKR.

Issuer : Government of Pakistan

Coupon : 3% (Paid-Semi Annually)
Tenor : Unlimited
Denominations : Multiple of 100,000 PKR
Withholding Tax : Deducted at Source (currently 10%)
Zakat : Exempted from Zakat
Prize Money : 80,000,000 PKR
Tradable : Traded freely in the Secondary Market,
transferable and Pledge-able.
Sale of Bill : Can be purchased from offices of State
Bank of Pakistan Banking Services
Corporations.

SUKUK Bonds

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Sukuk (Islamic bonds), structured in such a way as to generate returns to investors without
infringing Islamic law (that prohibits riba or interest). Sukuk represents undivided shares in
the ownership of tangible assets relating to particular projects or special investment activity.

The latest Pakistan has issued in October, 2016 the $1 billion of five-year dollar-
denominated Sukuk bonds in order to offset pressure on its balance of payments and return
foreign loans maturing in year 2016. The five-year bond has been issued at a rate of 5.5 per
cent.

Salient Features of domestic SUKUK Bonds are:

Issuer : Government of Pakistan
Rental Payment : Semi-annual rental (Lined to weighted
average of 6 month Treasury Bills)
Tenor : 3 Years (Fixed and Floating Instrument)
Denominations : Multiple of 100,000 PKR
Withholding Tax : Deducted at Source (currently 10%)
Sale of Bills : Through Designated Primary Dealers
Redemption : Shall not be redeemable before maturity
Tradable : Traded freely in the Secondary Market and
are transferable.

Latest Bond Issues

ISSUE ISIN* COUPON VOLUME END OF MATURITY
PLACEMENT DATE
PAKISTAN, PIB 7 23MAR2020 7% 26,285,060,000 PKR 03/22/2017 03/23/2020
3Y – DOMESTIC BONDS
PAKISTAN, PIB 7.75 7.75% 1,053,450,000 PKR 03/22/2017 03/23/2022
23MAR2022 5Y – DOMESTIC
BONDS
PAKISTAN, PIB 8.75 8.75% 1,229,265,000 PKR 03/22/2017 03/23/2027
23MAR2027 10Y - DOMESTIC
BONDS
PAKISTAN, PIB 7 27JAN2020 7% 28,985,767,000 PKR 01/25/2017 01/27/2020
3Y - DOMESTIC BONDS
PAKISTAN, PIB 7.75 7.75% 10,409,659,000 PKR 01/25/2017 01/27/2022
27JAN2022 5Y - DOMESTIC
BONDS
PAKISTAN, PIB 8.75 8.75% 1,061,000 PKR 01/25/2017 01/27/2027
27JAN2027 10Y - DOMESTIC
BONDS
PAKISTAN, 5.5% 13OCT2021, XS1501659384 5.5% 1,000,000,000 USD 10/05/2016 10/13/2021
USD - INTERNATIONAL BONDS

*International Security Identification Number - ISIN

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Conclusion
Now you know the basics of bonds. Here is a recap of what we discussed:

 Bonds are just like loans. Buying a bond means you are lending out your money.
 Bonds are also called fixed-income securities because the cash flow from them can be
fixed.
 Stocks are equity; bonds are debt.
 The key reason to purchase bonds is to diversify your portfolio.
 The issuers of bonds are usually governments and corporations.
 A bond is characterized by its face value, coupon (interest) rate, maturity and issuer.
 Yield is the rate of return you get on a bond.
 When price goes up, yield goes down, and vice versa.
 When interest rates rise, the price of bonds in the market falls, and vice versa.
 Bills, notes and bonds are all fixed-income securities classified by maturity.
 Government bonds are the “safest” bonds, followed by municipal bonds, and then
corporate bonds.
 Municipal bonds, issued by local governments or agencies can earn tax-free interest
for residents.
 Bonds are not risk free. It's always possible – especially in the case of corporate bonds
– for the borrower to default on the debt payments.
 High-risk/high-yield bonds are known as junk bonds and are issued by riskier issuers.
 Other types of bonds include convertible bonds, callable, and putable bonds.
 You can purchase most bonds through a brokerage or bank. If you are a U.S. citizen,
you can buy government bonds through Treasury Direct.
 Often, brokers will not charge a commission to buy bonds but will mark up the price
instead.

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 Stocks
Introduction
A stock is a type of security that signifies ownership in a corporation and represents a claim
on part of the corporation's assets and earnings.

There are two main types of stock: common and preferred. Common stock usually entitles
the owner to vote at shareholders' meetings and to receive dividends. Preferred stock
generally does not have voting rights, but has a higher claim on assets and earnings than the
common shares. For example, owners of preferred stock receive dividends before common
shareholders and have priority in the event that a company goes bankrupt and is liquidated.
Stocks are also knows as ‘shares’ or ‘equity’

A holder of stock (a shareholder) has a claim to a part of the corporation's assets and earnings.
In other words, a shareholder is an owner of a company. Ownership is determined by the
number of shares a person owns relative to the number of outstanding shares. For example,
if a company has 1,000 shares of stock outstanding and one person owns 100 shares, that
person would own and have claim to 10% of the company's assets.

Shareholder
A shareholder is any person, company or other institution that owns at least one share of a
company’s stock. Because shareholders are a company's owners, they reap the benefits of
the company's successes in the form of increased stock valuation. If the company does poorly,
however, shareholders can lose money if the price of its stock declines.

Unlike the owners of sole proprietorships or partnerships, corporate shareholders are not
personally liable for the company's debts and other financial obligations. This means that if
the company goes under, its creditors cannot demand payment from shareholders like they
could from the owners of privately held entities.

Preference Shares
Preference shares, more commonly referred to as preferred stock, are shares of a company’s
stock with dividends that are paid out to shareholders before common stock dividends are
issued. If the company enters bankruptcy, the shareholders with preferred stock are entitled
to be paid from company assets first. Most preference shares have a fixed dividend, while
common stocks generally do not. Preferred stock shareholders also typically do not hold any
voting rights, but common shareholders usually do.

Types of Preferred Stocks

There are four types of preferred stocks:

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 1. Cumulative preferred stock includes a provision that requires the company to pay
preferred shareholders all dividends, including those that were omitted in the past,
before the common shareholders are able to receive their dividend payments.

2. Non-cumulative preferred. If the company chooses not to pay dividends in any given
year, the shareholders of the non-cumulative preferred stock have no right or power
to claim such forgone dividends at any time in the future.

3. Participating preferred stock provides its shareholders with the right to be paid
dividends in an amount equal to the generally specified rate of preferred dividends
plus an additional dividend based on a predetermined condition. This additional
dividend is typically designed to be paid out only if the amount of dividends received
by common shareholders is greater than a predetermined per-share amount.

4. Convertible preferred stock includes an option that allows shareholders to convert

their preferred shares into a set number of common shares, generally any time after
a pre-established date. Under normal circumstances, convertible preferred shares are
exchanged in this way at the shareholder's request.

Common Stock
Common stock is a security that represents ownership in a corporation. Holders of common
stock exercise control by electing a board of directors and voting on corporate policy.
Common stockholders are on the bottom of the priority ladder for ownership structure; in
the event of liquidation, common shareholders have rights to a company's assets only after
bondholders, preferred shareholders and other debtholders are paid in full.

If a company goes bankrupt, the common stockholders do not receive their money until the
creditors and preferred shareholders have received their respective share of the leftover
assets. This makes common stock riskier than debt or preferred shares. The upside to
common shares is they usually outperform bonds and preferred shares in the long run.

Control Stock
Equity shares owned by major shareholders of a publicly traded corporation. These
shareholders have either a majority of the shares outstanding or a portion of the shares that
is significant enough to allow them to exert a controlling influence on the firm's decisions.

In situations where companies have more than one class of common shares, shares with
superior voting power or vote weighting are considered to be control stocks, relative to the
inferior class. Shareholders who control a majority of a company's shares effectively have
enough voting power to dictate the firm's decisions. As such, their shares can be referred to
as control stock.

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 Agriculture
Agriculture or farming is the cultivation and breeding of animals, plants and fungi for food,
fiber, biofuel, medicinal plants and other products used to sustain and enhance human life.
Agriculture was the key development in the rise of sedentary human civilization, whereby
farming of domesticated species created food surpluses that nurtured the development of
civilization. The study of agriculture is known as agricultural science. The history of agriculture
dates back thousands of years, and its development has been driven and defined by greatly
different climates, cultures, and technologies. Industrial agriculture based on large-scale
monoculture farming has become the dominant agricultural methodology.

Agriculture sector is a vital component of Pakistan’s economy as it provides the raw materials
to down the line industries and helps in poverty alleviation. This sector contributed 19.8% in
GDP and it remains by far the largest employer absorbing 42.3$ of the country’s total labor
force.

The agriculture sector growth is contingent on favorable weather conditions. There is a strong
relationship between agriculture and climate—temperature, precipitation, floods and other
aspects of weather that finally affect economic performance including agriculture production,
commodity prices and finally economic growth.

The emerging challenges of national food security and climate change have shifted the policy
focus globally towards the development of agriculture sector during past few years. The high
potential of this sector in earning valuable foreign exchange has been greatly realized through
taping the potential in value addition sectors.

Pakistan’s agriculture community consists of small farmers having various limitations in their
day to day farming practices that have been translated into the fact that per yield level in
Pakistan has been graded in the lower to middle ranged economy fulfilling the propensity to
cater the food requirements of its growing population and with current pace of development
envisages to slip to the lower ranged economies having ability to cater the nutritional needs
of its population by the year 2030.

Pakistan has two crop seasons, "Kharif" being the first sowing season starting from April-
June and is harvested during October-December. Rice, sugarcane, cotton, maize, moong,
mash, bajra and jowar are “Kharif" crops. "Rabi", the second sowing season, begins as on
October-December and is harvested in April-May. Wheat, gram, lentil (masoor), tobacco,
rapeseed, barley and mustard are "Rabi" crops.

Pakistan’s agricultural output is closely linked with the availability of irrigation water. During
2015-16, the availability of water for Kharif 2015 stood at 65.5 million acre feet (MAF) showing
a decrease of 5.5 percent over Kharif 2014 and 2.4 percent less than the normal supplies of
67.1 MAF. During Rabi season 2015- 16, the water availability remained at 32.9 MAF, which
is 0.6 percent less than Rabi 2014-15 and 9.6 percent less than the normal availability of 36.4
MAF.

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Important Crops
1) Cotton
Cotton being a cash crop and an essential source of raw material to the textile, enables the
textile industry to survive and expand its base. The cotton has share of 1.0% in GDP and
contributes 5.1% in agriculture value addition. This year the production of cotton massively
declined therefore, to maintain the supply chain of cotton to the textile industry, the import
of raw cotton during March-July 2015-16 has increased to 345.363 thousand tonnes
compared to 97.354 thousand tonnes during same period last year showing a growth of
254.75% while in value terms it reached to US$ 588.236 million against US$ 224.647 million
witnessing growth of 161.85 %. 2015-16, the cotton crop was sown on an area of 2917
thousand hectares, showing a decrease of 1.5% over last year’s area of 2961 thousand
hectares. Cotton production for the year 2015 stood at 10.074 million bales against 13.960
million bales last year showing a decline of 27.8%.
Cotton crop suffered multiple shocks this season such as prolonged and frequent rains badly
hit the standing cotton crop, additional crop losses came from severe attack of pink bollworm.
While the crop generally becomes more susceptible to pest attacks during rainy season, the
risk heightened further this year as the plant was still in the early stage of growth due to
sowing delays.

2) Sugarcane
Sugarcane is high value cash crop of Pakistan and significantly important for sugar and sugar
related industries in the national economy of our country. Its production accounts for 3.2% in
agriculture’s value addition and 0.6% in overall GDP. During 2015-16, the sugarcane crop
stood at 1132 thousand hectares compared to last year’s area of 1141 thousand hectares
showing a decline of 0.8%. Sugarcane production for the year 2015 increased to 65.5 million
tonnes from 62.8 million tonnes of last year’s production showing an increase of 4.2%. The
decline in area is due to disposal problem of cane and payment difficulties restricted acerage
of sugarcane that shifted sugarcane area to other competitive crops. The increase in
production is due to favorable weather condition.

3) Rice
Rice is an important food and cash crop in Pakistan and it is the second staple food after
wheat. It accounts for 3.1 percent in the value added in agriculture and 0.6% of GDP. During
2015-16, rice crop was cultivated on an area of 2748 thousand hectares showing a decrease
of 4.9% over last year’s area of 2891 thousand hectares. Rice production remained 6811
thousand tonnes, showing a decline of 2.7% over corresponding period of last year’s record
production of 7003 thousand tonnes.
Rice area decreased due to less economic returns to the farmers on account of decline in rice
prices both domestically and globally during last year’s crop. Depressed prices and rising cost
of production encouraged farmers to substitute rice with fodder and maize. The heavy
downpours in July, 2015 also affected paddy cultivation.

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 4) Wheat
Wheat is the most popular food crop of Pakistan and its products are used in a number of
ways. Being the staple diet of most of the people, it dominates all crops in acreage and
production. Wheat accounts for 9.9 percent of the value added in agriculture and 2% of GDP
of Pakistan
During 2015-16, area under wheat cultivation has increased to 9260 thousand hectares from
last year’s area of 9204 thousand hectares which shows an increase of 0.6%. While production
of wheat stood at 25.482 million tonnes during 2015-16, showing an increase of 1.6% over
the last year’s production of 25.086 million tonnes. The production increased as crop was
sown at appropriate time and available moisture particularly in Barani Track supported
germination/growth and availability and use of inputs remained adequate.

5) Maize
Maize contributes 2.2% to the value added in agriculture and 0.4% to GDP. During 2015-16,
cultivated area under maize crop has increased to 1144 thousand hectares, showing an
increase of 0.2% over last year’s area of 1142 thousand hectares. Maize crop production stood
at 4.920 million tonnes during 2015-16 showing a decrease of 0.3% over the last year’s
production of 4.937 million tonnes.

6) Oilseeds
The major oilseed crops grown in the country include Sunflower, Canola, Rapeseed/Mustard and
Cotton. During the year 2014-15 total availability of edible oil was 3.523 million tonnes. Local
production of edible oil contributed 0.556 million tonnes while import of edible oil/oilseeds was 2.967
million tonnes. The edible oil import bill during 2014-15 was Rs.269.412 billion (US$ 2.663 billion).

7) Other Crops
The production of Jawar and Bajra crops during 2015-16 witnessed positive growth of 40%
and 1.4% respectively, due to increase in area cultivated. While Gram crop, one of the largest
Rabi pulse crop in Pakistan, accounting for the 76% of the total production of pulses in the
country and it occupies about 5% of the Rabi cropped area witnessed a decline 17.7% as the
production of gram during last few years’ showed erratic trends due to mainly dependence
on intensity of rains .The production of Barley and Rapeseed & Mustard witnessed decline in
its production by 3.2% and 1.0% respectively, during 2015-16 as compared to the same period
last year. The decrease in production is due to decrease in area cultivated. While the
production of Tobacco remained the same when compared to the production of same period
last year as there is no change in area cultivated.

Livestock and Poultry

1) Livestock
Livestock is an important sector of agriculture. Its role is pivotal towards rural socio economic
development. Nearly 8 million families involved in livestock raising deriving more than 35
percent income from livestock production activities. It is central to the livelihood of the rural
poor in the country. It is a source of cash income, providing a vital and often the only source
of income for the rural and most marginal people. It can play an important role in poverty

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alleviation and foreign exchange earnings for the country. Livestock contributed
approximately 58.6% to the agriculture value added and 11.6% to the overall GDP during
2015-16 compared to 56.4% and 11.7% during the corresponding period last year,
respectively. Gross value addition of livestock at constant cost factor of 2005-06 has increased
from Rs. 1247 billion (2014-15) to Rs.1292 billion (2015-16), showing an increase of 3.63%
over the same period last year.

2) Poultry
Poultry sector is one of the vibrant segments of livestock sector in Pakistan. This sector
provides employment (direct /indirect) to over 1.5 million people. The current investment in
Poultry Industry is more than Rs.200 billion. Pakistan has become the 11th largest poultry
producer in the world with the production of 1.02 billion broilers annually. Poultry today has
been a balancing force to keep check on the prices of mutton and beef, but also serving as
backbone of agriculture sector, as it consumes over 7 million metric tons of agro residues.
Poultry meat contributes 30% of the total meat production in the country. Poultry sector has
shown a growth @ 8-10% annually which reflects its inherent potential. The poultry has
contributed 1.4% in GDP during 2015-16 while its contribution in agriculture and livestock
value added stood at 6.9 percent and 11.7 percent respectively.

3) Fishery
Fishery and fishing are important means of food in Pakistan’s economy and is considered to
be a source of livelihood for the coastal areas. A part from marine fisheries, inland fisheries
(based in rivers, lakes, ponds, dams etc.) is also very important activity throughout the
country. Fisheries share in GDP although very little but it adds substantially to the national
income through export earnings. The exports of fish and fish preparations have been
decreased by 7.3% in quantity and in value have been decreased by 5.28% during 2015-16
(March-July).

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