2.4 - asset classes: other securities

what do ADR and GDR stand for

american depository reciept

global depository reciept

how does an ADR work

a japanese company listed on the japanese stock exchange can issue ADRs representing their shares so it is easier for american investors to buy the shares

so the US investors will trade the ADRs through US brokers, but the company will ultimately receive the money raised through the arrangement

how does a GDR work

same thing as an ARR but globally, for international investors

what type of security (bearer or registered) is an ADR

bearer

how are ADRs issued

in the US via a depository bank

voting rights with an ADR

holders are entitled to vote

how are dividends on an ADR paid

in USD

how are ADRs traded (what currency)

USD

how are ADRs setlled

using the settlement procedure of the market in which they are traded

how much stamp duty is paid by the underlying investor of an ADR

none

how much stamp duty is paid by the depository bank in an ADR

1.5%

what form can ADRs trade in

pre-release form

how long can they trade in pre-release form

up to 3 months

what is a warrant

similar to a call option, but with differences

4 differences between a warrant and a call option

call option:

right to buy existing shares

traded on derivative exchange

issued by option writer

roughly 3 months duration

warrant:

right to buy new shares

traded on stock exchange

issued by company

more than a year duration

how does a warrant work

u have the right to buy new shares in a company at a fixed price over a fixed period, and when you do these new shares are created upon exercise of the warrant

what are the two times at which the company raises money with a warrant

when the issue the warrant (someone buys the warrant)

when the warrant is exercised (someone buys the shares)

what is a covered warrant

right to buy or sell existing shares in a company at a fixed price over a fixed period

duration of covered warrants usually

6 months to a year

who issues covered warrants

the banks

6 features of property investment

SHUDDI:

subjective value

high transaction cost

unique assets

assets not divisible

difficult to diversify

illiquid market

what does REIT stand for

real estate investment trust

what do REITs do

invest in commercial and/or residential property

tax and REITs

they are free of tax on property income and capital gains AS LONG AS at least 90% of property income is given to shareholders

what type of fund is a REIT

closed-ended

what is a closed ended fund

does not issue new shares or buy back shares directly from investors on a daily basis - it raises afixed amount of capital through a one time IPO with a fixed number of shares

what do REITs allow investors to do

diversify property investments

reduce liquidity risk associated with property investments