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The "Financial Literacy Initiative", is neither intended to
promote or publicize any particular type of investment or product,
nor is it aimed
to endorse any specific kind of financial institution or
market.
The overall objective of the financial literacy initiative is to
promote
the financial skills and the knowledge of the common citizens,
and to
support the agenda for the broader financial inclusion in our
societies.
While the sponsors/partners/promoters of the financial
literacy
initiative may share these broader objectives, however they may
only
support such educational & informational activities/programs
that are
relevant to the social responsibility objectives of their
organizations.
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January 17, 2013
Presented to
National Grammar School
Presented by
Hifsa Siddiqi Investor Relations Department, LSE
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Deposit Accounts Current Accounts PLS Saving Accounts Basic
Banking Account
Time Deposit
General Banking
Credit Cards Home Loans Car Financing
Consumer Financing
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A process by which a firm can obtain the use of a certain
fixed
assets for which it must pay a series of contractual,
periodic,
payments
Finance Lease
Operating Lease
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Musharakah is a contractual relationship formed through mutual
consent of
the parties for sharing of profits and losses in a joint
venture. Assets in the
venture are jointly owned in proportion to each partners
contribution. The
profits are shared in a pre-agreed ratio. Losses, however, are
incurred in
proportion to each partners investment.
Mudarabah is also a form of partnership formed between provider
of
capital and provider of expertise or human resource. Proportions
for sharing
profit are decided upfront. Losses are incurred solely by the
partner
contributing capital.
Ijara: Under this facility a client may take on rent, property,
vehicle or any other real asset belonging to the bank. The bank
transfers the right of use of the asset to the client, while
retaining the ownership of the asset.
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Insurance is a form of risk management primarily used to
hedge
against the risk of a contingent, uncertain loss.
Auto insurance
Property Insurance
Health insurance
Casualty
Life Insurance
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Takaful is an Islamic insurance concept observing the rules
and
regulations of Islamic law. This concept has been practiced in
various
forms for over 1400 years. Muslim jurists acknowledge that the
basis
of shared responsibility) laid the foundation of mutual
insurance.
Principles of Takaful
Policyholders cooperate among themselves for their common
good.
Every policyholder pays his subscription to help those who need
assistance.
Losses are divided and liabilities spread according to the
community pooling
system.
Uncertainty is eliminated concerning subscription and
compensation.
It does not derive advantage at the cost of others.
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A mutual fund is a type of professionally-managed type
collective investment scheme that pools money from many investors.
Open Ended
Closed Ended
Investment Styles/Mandates Money market funds
Fixed Income Funds
Equity Funds
Hybrid Funds
Currently Assets under Management by Mutual Funds Manager exceed
350 Billion Rupees
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Sole Proprietorship
Partnership
Single Member Pvt.
Ltd. Company
Private Limited
Company
Public Limited
Company
Increasing Stature Increasing Financial Standing Increasing
Financing Options Increasing no. of Owners Increasing
Transparency
Decreasing Personal Liability Decreasing Control
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Easy to start up
Subject to fewer regulations relative to other types of
businesses,
Full autonomy with regard to business decisions,
Easy to discontinue as well.
Setting up Sole Proprietorship
1. Decide on and select a Business Name
2. Print Letter Heads, envelopes and your business/visiting
card
3. Write an Account Opening Request to your Bank, stating that
this is your business and you are the sole proprietor of it
4. Open an account at a local bank's branch close to you
5. Next request the bank to issue a letter stating that this is
your account and business
6. Submit the bank certificate and your application with the
Federal Board of Revenue
7. If you are on a job, you already have a NTN (National Tax
Number) - the same NTN will be used for your Sole Proprietorship
status
8. Once the status is added, you are a registered legal
entity
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A partnership is a type of business entity in which partners
(owners) share with each other the profits or losses of the
business.
Partnerships are often favoured over corporations for taxation
purposes, as no dividend tax levied.
owners of a partnership may be exposed to greater personal
liability than they would as shareholders of a company.
Setting Up Partnership
Formed under the Partnership Act, 1932 ("Partnership Act")
A Partnership Deed is written, where both the parties are
identified along with their residential address and CNIC
number.
The profit sharing ratio is stated
The nature of business proposed to be carried out by the firm is
also stated
The amounts being brought in by each partner are stated as
well.
The firm becomes effective from the date of execution or signing
of the Partnership Deed.
The Partnership Deed remains effective as long as the business
is a going concern, thereafter if desired by the partners the firms
may be dissolved.
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Formed under Companies Ordinance 1984
Minimum Paid-up-Capital: PKR 100,000
Minimum/Maximum number of members: 1
Minimum Number of Directors: 1
Requirement of Memorandum & Articles of Association
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Formed under Companies Ordinance 1984
Minimum Paid-up-Capital: PKR 100,000
Minimum number of members: 2
Maximum: 50
Minimum Number of Directors: 2
Requirement of Memorandum & Articles of Association
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Formed under Companies Ordinance 1984
Minimum Paid-up-Capital: PKR 300,000
Minimum number of members: 3
Maximum: Unlimited
Minimum Number of Directors: 3
Requirement of Memorandum & Articles of Association
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Memorandum of Association
Name & Address
Objectives
Share Capital (No. of Shares & face value)
Articles of Association
Shares Related Matter (Allotment, Transfer etc.)
Alteration of Capital
General Meeting (Notice, Proceedings, Voting etc.)
Directors of Company (Names, Powers & Duties)
Dividends
Accounts
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Capital Market Products
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Regular Market
Future Market
Deliverable Futures
Cash Settled Futures
Stock Index Futures
Bonds Market
Margin Trading System
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The term "Margin Trading" refers to the financing of
purchased
securities by equity participation.
Done through a separate platform provided by NCCPL
Available only in Eligible Securities
Mark-up rate = KIBOR + 8%
Marked-to-Market Losses
Maximum contract duration = 60 calendar days
Trading Financiers: Broker Clearing Members, Non Beoker
Clearing Members and any other corporate entity admitted by
NCCPL Board and SECP
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ULTRA
NCSS
Financing
Through
Financier (75% & 25%)
Settlement and Parking
of Securities in Blocked
Account of Financier
Forced Release of one forth
quantity
- Sale
- Settlement
- Finance
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LSE launched LSE-25-Index on December 20, 2002, which replaced
the 101- Index. The Index has a Base Figure of 1000.
The Index closed at 2,817.25(2nd January, 2012)
LSE 25-Index includes the top 25 traded companies at LSE and
captures 37% of the market capitalization and 76% of the total
trading volume of LSE.
The Index was last reconstituted on Dec 31st, 2011, in line with
the regular review policy.
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Used to gauge collective performance
Considered barometer of market performance
May be biase
Index = Market Capitalization of Day 1 * 1000
Market Capitalization of Base Day
Day 0 Company Share Price Outstanding Shares Market Value
A 20 1000 20,000
B 50 2000 100,000
C 10 5000 50,000
170,000
Base Index Figure 1,000.00
Base index point value 170
Base Index Capitalization
Day 1 Share Price Outstanding Shares Market Value %age
Change
A 30 1000 30,000 50%
B 40 2000 80,000 -20%
C 20 5000 100,000 100%
210,000 24%
New Index Value 1,235.29 24%
New Index Capitalization
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LSEs Listing Regulations
Public Limited Company
Minimum Paid-up Capital: Rs.
200 Million
Companys Equity has NOT
been eroded by more than 40%
P
P
P
Issue offered to public must be subscribed by a minimum of 500
Applicants
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LSEs Listing Regulations
NOT Associate of a Listed Company in default
of Listing Regulations
NOT Subsidiary of a Listed Company in
default of Listing Regulations
Promoters/Sponsors/Controlling directors are
NOT Promoters/Sponsors/Controlling
directors of a company in default of Listing
Regulations
CEO had NOT been a CEO of a company in
default of Listing Regulations
P P P P
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Application for Listing
Complete Documents
Received by Exchange along
with Prospectus
Checked by
Exchange
Approval by Company Affairs
Committee
Application for Approval of
Prospectus from SECP
Application for Trading
Symbol to NCCPL
Application for Prospectus Publication
+
Subscription Date
Checked by
Exchange Approval
Publication of
Prospectus
Provisional Listing
in case of Public Offer of Rs. 150 Million or above
IPO
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IPO
Dispatch of Physical and
CDC Shares
Balloting in case of Over
Subscription
Underwritten by Underwriters if Under-
subscribed
Approval Application for NOC and release of funds along
with Auditors Certificate in case of under-Subscription
Advertisement in
Newspapers Live in CDC
Results Notification to
Exchange
FORMAL LISTING ON
EXCHANGE
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Individual/Sole Proprietor
Income less than PKR 350,000 0%
Income more than PKR 1,500,000 25%
Partnerships 25%
Companies
Small Companies 25%
Other Companies 35%
Other Taxes
Cash Withdrawal 0.02% (Advance)
Supplies 2.5% (Adjustable)
Services 6.0% (Adjustable)
Dividend Income 10.0% (Adjustable)
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Application for
Membership
Complete
Documents
Received by
Exchange
Checked by the
Exchange
Notice inviting
objections of
Members
NOC from various
Departments of the
Exchange
Membership
Committee
Meeting
Notice to SECP,
KSE, ISE, NCCPL,
CDC and all
concerned entities
and Issuance of
Membership
Certificate
Approval
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Submits required Documents
to SECP
Issuance of Certificate of
Broker Registration by SECP
Activation of Membership With
Exchange
Formally Becomes a
Broker of the Exchange
Live in Trading
Applies
and open
account in
CDS &
NCSS
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One of the most important decisions when trading in stock market
is choosing a brokerage firm and an individual broker. In choosing
a broker, several factors should be considered:
Ethical Business Record
Length Of Time in Business
Type of Service
Commissions
Research
IT/Online
Individual/ SMC/ Private/Public Member
Network/ Branches
Online Reporting
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Are knowledgeable about the markets.
Keep their clients informed about the market and the conditions
of their accounts.
Have good personal contacts in the marketplace that often can
provide background information on market news that is not otherwise
readily available.
Do not pressure clients to trade.
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Member Means a Member of a Stock Exchange.
Broker Means any person engaged in the business of effecting
transactions in securities for the account of others.
Agent Means a person appointed by a Member of a Stock Exchange
to
act on his behalf for the purpose recognized by a Stock Exchange
and includes a sub-Broker or head of a branch office.
Trader Means an employee of a Member who is authorized by
such
Member to execute trades of the investors through the automated
trading system in such Exchange.
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Trading Products
Regular Market
Automated trading of Equities & Funds
Debt Securities Trading
Automated trading of Debt Securities
Futures
30-days Deliverable Future Contracts
90-days Cash Settled Future Contracts
7-days Cash Settled Future Contracts
90-days Stock Index Futures Contracts (KSE Only)
Margin Financing
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T+2 Settlement System
In the T+2 settlement system, purchase and sale of
securities is netted and the balance is settled on the
second
day following the day of trade.
Spot/T+1 Transaction
Spot transactions imply delivery upon payment. Normally in
spot transactions the trade is settled within 24 hours.
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