| 1) ING Vysya Bank and Kotak Bank announced their intention | a) to approval of the shareholders of Kotak and Vysya. |
| 2) Following the merger ING and Kotak | b) will be merged into Kotak. |
| 3) In the process of transaction, Vysya | c)ING would hold a stake of 7% in the combined company. |
| 4) Shareholders of Vysya | d) to merge their respective businesses. |
| 5) Upon completion of the merger | e) to close in the second half of 2015. |
| 6) The proposed transaction is subject | f) intend to explore areas of cooperation in cross border business. |
| 7)The transaction is expected | g) will receive 0.7 shares in Kotak for each Vysya share. |
Exercise 6. Hostile takeovers look like real battles, and this is reflected through a very colorful vocabulary. In the table that follows you can see takeover terms. Match each term with its translation and definition.
| White Knight | 1) () ( ) | a) a person or legal entity who is aggressively acquiring a company |
| Shark Repellent | 2) , ( , ) | b) a person or organization that tries to take control of a company by buying a large number of its shares |
| Poison Pill | 3) ( , ) | c) contracts giving key executives substantial benefits by the acquirer if they are terminated as a result of the merger or takeover |
| Golden Parachute | 4) ( , , ) | d) a friendly takeover offer to a target company that is facing a hostile takeover from another party |
| Raider | 5) ( , , , ) | e) the practice of buying enough shares in a company to threaten a takeover, forcing the owners to buy them back at a higher price in order to retain control |
| Predator | 6) ; ( , ) | f) a strategy used by corporations to discourage hostile takeovers. The target company attempts to make its stock less attractive to the acquirer. |
| Greenmail | 7) ( ) | g) any number of measures taken by a corporation to discourage an unwanted takeover attempt |
1) Commodity index funds secure investors from exposure to commodity prices and not to the share prices of the businesses associated with them.
2) Pure commodity exposure of this kind at a low cost is a useful way to diversify an investment portfolio given that commodity returns do not move in synch with equities and bonds.
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3) Commodity funds were popular with the investors trying to gain fast returns.
4) The split-capital investment company is a type of open-end investment company that has more than one class of share capital.
5) Usually, one type of share is for income and receives all the incomes generated by the trust, and the other is for capital gain.
6) The trust has an unlimited lifespan, compared with the life of other investment companies.
7) At the end of its life, its remaining assets are distributed among shareholders.
Exercise 2. Find words and expressions in paragraph 2 that mean:
1) returns
2) set up
3) to motivate
4) development
5) typical
6) quoting
Exercise 3. Read paragraph 3 and put correct verbs into the following sentences:
1) Hedge funds are a form of _____ investment mainly for institutional investors.
2) No one agrees on the exact definition of a hedge fund but, in broad terms, it is a specialist type of pooled investment that is free _____ in all financial instruments or markets, including high risk instruments.
3) It is a global operator and may employ a range of investment strategies, involving gearing (borrowings) and taking short positions (selling securities it does not own in order to profit from a falling market), as well as _____ long positions.
4) Structurally, the hedge fund is often _____ partnerships and has unregulated status, but its investments may not be promoted to the general public.
5) Many hedge funds are registered in the Cayman Islands where there is a lighter regulation, but some prefer registration in Dublin for the European exposure that this ____.
Exercise 4. Read paragraph 4 again and put correct prepositions into the following sentences:
1) The hedge fund managers are often ex-investment bankers or other specialist financiers who give up highly lucrative jobs to set up a fund, and who know enough ___ markets to exploit a sophisticated tool book of modern investment vehicles.
2) They also invest their own money alongside that ___ investors, and will reveal how much.
3) They are attracting the capital of sophisticated investors, including, increasingly, pension managers who use hedge funds to diversify their funds ___ a way uncorrelated to their equity positions.
4) The strategies used by hedge funds vary enormously, but have ___ common that they aim at absolute returns.
5) Hedge funds may still hedge, which is to buy shares likely to rise, and take an offsetting short position ___ those likely to sell.
6) This was the theme of the first hedge fund, set up in the late 1940s ___ Alfred Winslow Jones, a former journalist.
7) Selling short, usually with a long position as well ___ hedging, is in itself a strategy. It has been the most profitable one since 2008.
Exercise 5. Find words or phrases from paragraph 4 to replace the words in italics in the sentences below:
1) The hedge fund managers are often former investment bankers or other specialist financiers who drop highly lucrative jobs to set up a fund, and who know enough about markets to use a sophisticated tool book of modern investment vehicles.
2) They also invest their own money alongside that of investors, and will disclose how much.
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3) They are attracting the capital of sophisticated investors, including, increasingly, pension managers who use hedge funds to diversify their funds in a way unrelated to their equity positions.
4) The strategies used by hedge funds differ enormously, but have in common that they aim at absolute returns.
5) Hedge funds may still hedge, which is to buy shares likely to soar, and take an offsetting short position in those likely to sell.
6) This was the theme of the first hedge fund, launched in the late 1940s by Alfred Winslow Jones, a former journalist. Selling short, usually with a long position as well for hedging, is in itself a strategy.
7) It has been the most beneficial one since 2008.
Over to you
Prepare dialogues discussing the following:
What are the benefits and risks of hedging? What investment strategies seem to be the most relevant in the current economic situation?
UNIT XII
1. In December 2008, news broke that the FBI (Federal Bureau of Investigation) had arrested investment advisor Bernard Madoff and charged him and his brokerage firm with securities fraud. Madoff had told relatives that his investment advisory business was just one big lie according to the SEC complaint.Madoff once ran a legitimate business, which went wrong, at which point he started a Ponzi scheme, paying existing investors with money coming in from new ones. His victims were particularly among the Jewish community, which was his own, making this an example of affinity fraud, where bonds of trust in ethnic communities make it easier for con men. But the net had spread far more widely across the world, with victims including colleges, charitable organizations, pension funds, banks, hedge funds and individuals.
2. The SEC is under investigation for its failure to investigate the fraud despite the fact that whistle-blowers had alerted it to warning signals. The SEC enjoyed cordial relationships with Madoff. Meanwhile, Madoffs niece Shana Madoff, a compliance lawyer at Madoffs firm, is married to Eric Swanson, former SEC assistant director in the office of compliance inspections and examinations. Swanson started his romantic relations with his wife-to-be only after the compliance team he helped to supervise inquired about Bernard Madoffs securities operations.
3. In 2008, Bernard L Madoff Investment Securities had US$700 mln of equity capital and had dealt with 10% of New York Stock Exchange trading volume. A suspiciously small number of employees operated his investment strategy, a warning sign in itself. Madoff claimed that he had made 10-12% a year on a consistent basis and he was clever enough to reduce the return slightly in bad years to make it seem more plausible. Madoff had seemed to achieve the steady returns using what he called the split-strike conversion strategy with options, which is also known as a collar. He sold out-of-the-money call options and bought out-of-the-money put options, both on the S&P 100 index, while holding stocks correlated to that index. The sale of the call options would offset gains of the underlying stock portfolio beyond a certain level and the purchase of the put options would similarly offset losses.
4. An obvious warning sign was that Madoff conducted his own custodian and administrator functions, and traded his managed accounts through his own broker-dealer, meaning there were no independent checks. Madoff did not answer questions or see many customers. Madoff did not provide customers with electronic account access as other brokers do, he sent only paper tickets, sometimes without time stamps.
5. The collar strategy he declared he had chosen was too expensive for a portfolio the size of Madoffs according to the financial investigators. If implemented, it would have led to more volatility than his returns suggested. There are a lot of questions with regard to the Madoffs case which need further clarification, including whether he had been front-running, which means using information from market making to trade securities ahead of placing client orders, and whether he had been operating alone. One overwhelming issue is how the SEC missed the Madoffs scandal and similar frauds. Boston accountant Harry Markopolos first told the SEC in 1999 that he suspected Madoffs business was a Ponzi scheme, he had a small group of investigators working on the case, and kept trying to warn the SEC without success. The SEC is no doubt under-resourced and its staff are not always sufficiently skilled or experienced to recognize a scam, but the legitimate question has arisen whether the SEC has had the will to investigate high-profile Wall Street figures generally.
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Discussion
