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Conversions

Some securities can be converted into another security at the option of the holder: typically it would be the conversion of Convertible Loan Stock into equity. Conversion can either be allowed at fixed periods or at any time.

Conversion terms are usually set in advance.

Should you choose to convert, or on mandatory conversion, we'll remove the convertible stock and add the new shares to your account.

Exercise of Warrants

Warrants are options to buy shares (usually a company's 'ordinary' shares) at a fixed price. The market value of a warrant is broadly the difference between its 'exercise price' (the fixed price at which you can buy the share) of a warrant and the market price of a share).

You can exercise your Warrants by paying the exercise price of the share at any time up to the expiry date. Warrants that are not exercised will lapse. (If the exercise price is above the normal market price you may prefer to simply allow the Warrant to lapse.)

When exercised, the warrant and cost of the subscription are sent to the Registrar in exchange for shares.

Open-offer

A variation on a Right Issue - existing shareholders are given an entitlement to purchase additional shares (in proportion to their existing shareholding) at a fixed price. Open offers (sometimes referred to as 'entitlements') differ from a Rights Issue in that the nil paid stock cannot be traded, so have no intrinsic value.

We will notify you of the details, showing your entitlement under the offer and the deadline for your response.

Your lapsed entitlement has no monetary value and cannot be sold in the market. Should you not respond by the deadline date, the offer will lapse and your holding will remain unchanged.

In some cases you will be able to purchase more shares under an Open Offer than your direct entitlement: this is known as an 'Open Offer with Excess Entitlements'. Where this applies, you should enter the number of excess shares for which you wish to subscribe. You may not receive the full excess for which you subscribed: if the offer is oversubscribed your application will be 'scaled back' in accordance with the overall allocation policy. We'll advise you of your final allocation once the Offer has closed and put the transactions through your account, debiting the cost of your final allocation and adding the requisite number of additional shares purchased.

Redemption

A Redemption is where the issuer (typically a company or, in the case of a Gilt, the Government) repays the value on maturity.

Holders will have no option other than to accept redemption and hence we will remove the holding and credit your account, under advice by secure message, with the proceeds.

Rights Issue

Used by Companies to raise capital, existing shareholders are entitled to buy additional shares in proportion to their existing holdings (e.g. one new share for every three held).

We'll advise you of the terms of the Issue and ask you to tell us which of the available options you want to choose. Depending upon the circumstances, these could include:

• Take-up your Rights in full (full acceptance). We will debit the cost from your account and, once the Issue is complete, add the new shares
• Take-up some of the Rights (partial acceptance). We will debit the cost for those rights you are taking up and add the new stock once the Issue is complete. You can also sell the Rights you did not take-up or hold them to see whether they acquire a value once the Issues closes (see below).
• Sell sufficient Rights to provide cash to take-up the remainder – a process known as 'tail swallowing'.  We will sell the required number of Rights in the market, credit your account with the proceeds, then use those proceeds to take-up the remaining Rights, deducting the cost from your account and then adding the new stock once the Issue is completed.
• Sell all your Rights in the market.  We'll carry out the sale and credit the proceeds to your account.
• Take no action ahead of the deadline: in which case the Rights are referred to as 'lapsed'.  Lapsed Rights may have a value once the Rights Issue closes: if so, they will be sold automatically and the 'lapsed proceeds' credited to your account.

Rights Issues for stocks held in a Shares ISA: in order to take-up a Rights Issue in a Shares ISA you will need to have sufficient cash available or be able to subscribe further cash in that tax year.  Where this is not possible, you can choose to take-up those Rights outside of your Shares ISA, in a Dealing Account for example.  Naturally, you will need sufficient cash in those accounts to meet the cost of taking-up the Rights.

Scheme of arrangement

This is where a company replaces one or more of its lines of security with other securities, cash, or a combination of securities and cash.

Depending upon the terms of the scheme, we will either: remove the stock and credit your account with the proceeds; remove the original stocks and add the new stock, or remove the original stock and add combination of new stock and cash.

However, the 'book cost' recorded on your account will, where the existing line of stock is retained, remain assigned to the original holding and any new shares will be shown at a nil cost. You can then amend your 'book cost' manually should you wish.

Take-Over (including Mergers and Acquisitions)

Here, one company is acquired by another or agrees to merge with another. Takeovers can be 'friendly' (both parties agree to the proposals), or 'hostile' (the acquiring company's approach is not accepted by the target company's board) where an approach is made direct to the shareholders.

For takeovers, mergers and acquisitions we'll advise you of the terms of the offer and ask you to tell us whether you want to accept or decline the offer. Should sufficient shareholders accept the offer, it becomes 'unconditional' and all shareholders then have no choice but to receive the offer.

Tender offer

Tender Offers are used by companies to return capital to their shareholders by offering to buy-back shares at a price somewhat above their market value.

The 'Tender Price' may either be agreed at the outset, or be set within a range. With a fixed price we'll ask you whether or not you wish to accept the tender and, where accepted remove the stock after expiry of the acceptance period and credit your account with the cash proceeds.

Where a price range is quoted you'll be asked to advise us the price you would want in order to accept the offer. You may wish to balance your desire to 'sell' your shares via the tender at the best price you can get against the risk of having it rejected when the company sets a 'strike' price upon the completion of the issue.

Since the company will typically set aside a pre-determined amount of cash from the outset, Tender Offers are often subject to 'scaling down'.

If your 'offer' is at or below the final price set by the company taking into account all the offers it receives (the 'strike price'), we'll remove the stock and credit your account with the proceeds. In the event of scaling-back some shares will remain in your account and the proceeds will reflect the number of shares actually sold.

If your 'offer' is not accepted the stock will remain in your account.

Capital reorganisation - consolidation

A share 'consolidation' is where the 'unit' of each share (the nominal value) is increased in order to reduce the number of shares in issue.

For example, Ordinary 5p shares become Ordinary 25p shares and holdings are reduced five-fold and, in theory the share price at the time of consolidation should increases five-fold.

We'll advise you of the arrangement and adjust your holdings accordingly. There is no adjustment needed to your 'book cost' since this is the cost of the total holding and is therefore unchanged by the reorganisation.

Capital reorganisation - subdivision

A share subdivision (also referred to as a 'split') is where the 'unit' of each share (the nominal value) is divided: this is typically used when the share price has risen to a point where it is believed to be unattractive to potential investors.

For example: Ordinary 25p shares become Ordinary 5p shares and your holding is increased 5 fold, albeit the share price should decreases proportionally.

We'll advise you of the arrangement and adjust your holdings accordingly. There is no adjustment needed to your 'book cost' since this is the cost of the total holding and is therefore unchanged by the reorganisation.

Dividend payment

We all hope for dividends from our investments and when they are paid we'll credit them directly into your portfolio, sending you a secure message as notification.

Companies typically publish their dividend distribution dates but this will not usually be the date it reaches your portfolio.  We will receive one bulk payment on the due date for all of our customers holding that stock and then allocate it according to each individual's holding.  This can take a day or two.  From some stocks, payment is received in a currency other than sterling and will be converted to sterling ahead of individual allocation.

In the case of payments from a Real Estate Investment Trust (REIT) you may receive two payments – an income distribution and a dividend: income distributions are subject to a different tax rate than dividends.

For some dividends, principally originating from FTSE100 companies, you can choose to have your dividends reinvested - see Dividend Reinvestments for more information.

Remember, dividends are paid net of 'dividend tax credit': current rates are shown on our Tax Card. For more information about taxation of dividends, visit the HMRC website.

Once a year we'll send you a Consolidated Tax voucher (along with your annual statement and valuation) showing income received and the tax deducted at source.

Redemption

A Redemption is where issuer (typically a company or, in the case of a Gilt, the Government) repay the value on maturity.

Holders will have no option other than to accept redemption and hence we will remove the holding and credit your account, under advice by secure message, with the proceeds.

Scheme of arrangement

This is where a company replaces one or more of its lines of security with other securities, cash, or a combination of securities and cash.

Depending upon the terms of the scheme, we will either: remove the stock and credit your account with the proceeds; remove the original stocks and add the new stock, or remove the original stock and add combination of new stock and cash.

However, the 'book cost' recorded on your account will, where the existing line of stock is retained, remain assigned to the original holding and any new shares will be shown at a nil cost. You can then amend your 'book cost' manually should you wish.

Scrip Issue

Sometimes, although less so that in the past, offered by Companies whereby shareholders receive additional shares in proportion to their existing holding. Sometimes referred to as a ‘bonus issue’. It also refers to occasions where shareholders can choose to receive their dividends as additional shares, at a pre-determined price, rather than as cash.

Tender offer

Tender Offers are used by companies to return capital to their shareholders by offering to buy-back shares at a price somewhat above their market value.

The 'Tender Price' may either be agreed at the outset, or be set within a range. With a fixed price we'll ask you whether or not you wish to accept the tender and, where accepted remove the stock after expiry of the acceptance period an credit your account with the cash proceeds.

Where a price range is quoted you'll be asked to advise us the price you would want in order to accept the offer. You will wish to balance your desire to 'sell' your shares via the tender at the best price you can against the risk of having it rejected when the company sets a 'strike' price upon the completion of the issue.

Since the company will typically set aside a pre-determined amount of cash from the outset, Tender Offers are often subject to 'scaling down',

If your 'offer' is at or below the final price set by the company taking onto account all the offers it receives (the 'strike price'), we'll remove the stock and credit your account with the proceeds. In the event of scaling-back some shares will remain in your account and the proceeds will reflect the number of shares actually sold.

If your 'offer' is not accepted the stock will remain in your account.