1. Answer the questions:

1. What issues are controlled by shareholders and what are not?

1. What classes of common stock do most companies issue?

1. How does the corporation try to protect itself against «takeover pirates»?

1. In what way does the preferred stock differ from the common one?

1. What are advantages and disadvantages of holding preferred stocks?

1. Is investing in shares risky? Why?

2. Complete sentences by inserting the following words in the gaps:

barometer stocks, deferred shares, mutual fund, preference shares, blue chips equities, ordinary shares, defensive stock, growth stock, participation certificates

1. Another name for stocks and shares is ......, because all stocks or shares of a company - or all those of a particular category - have an equal nominal value.

1. ...... (US: common stock) are often the only kind of shares with voting rights.

1. Some companies issue ...... which, like shares, grant their holders part of the ownership of a company, but usually without voting rights.

1. ......, as their name suggests, usually receive a fixed dividend, which must be paid in full before any dividend is paid on other shares.

1. ...... or stock, again as the name suggests, do not receive a dividend until other categories of shares have had a dividend paid on them, but might earn a higher dividend if the company does well.

1. Securities in companies that are considered to be without risk are known as ...... .

1. Widely-held stocks, e.g. blue chips or 20-year Treasury Bonds that can be considered as indicators of present and future market performance, are known as ...... (GB) or bellwether stocks (US).

1. A ....... or share is one that is expected to appreciate in capital value; it usually has a high purchasing price and a low current rate of return.

1. A ...... or income stock or share is one that offers a good yield but only a limited chance of a rise or decline in price.

1. A way of spreading risks is to invest in a unit trust (in Britain) or a ...... (in the US), organizations that invest small investors’ money in a wide portfolio of securities.

3. Complete the text by inserting the following words in the gaps:

common dividend, common stockholder, dividend, equity security, financing, holder, junior, option, preferred dividend, repayment date, restrictions, voting privilege

Preferred stock, on the other hand, accounts for only a small part of, new issues, and so it will occupy less time later on. However, we shall see that it is a useful method of ......(1) in mergers and certain other special situations.

Preferred stock is legally an ......(2). Despite the fact that it offers a fixed ......(3) like debt, payment of the dividend is almost invariably within the complete discretion of the directors. The only stipulation is that no dividends be paid on the common until after the ......(4) has been paid. For some older issues the firm could pay ......(5) without making up preferred dividends that had been skipped in previous years. This gave an opportunity for considerable abuse. Therefore, almost all new issues specifically provide that the obligation should be cumulative, so that the firm must pay all past ......(6) before common stockholders get a cent.

Like common stock, preferred stock does not have a final ......(7). However, roughly half the issues make some provision for periodic retirement and in many cases companies have ......(8) to repurchase or call preferred stock at a specified price. If the company goes out of business, the claim of the preferred stock is ......(9) to that of any debt but senior to that of common stock.

The contract which sets out the terms of the preferred stock also imposes ......(10) on the company, including some limits on payments to common stockholders either as dividends or through repurchase of the common stock. These restrictions may also stipulate that the company cannot make any payments to ......(11) unless it is able to maintain a minimum level of common equity and a minimum ratio of working capital to debt.

Preferred stock rarely confers full ......(12). However, almost always the consent of two-thirds of the preferred holders must be obtained on all matters affecting the seniority of their claim. Most issues also provide the ......(13) with some voting power if the preferred dividend is skipped.