Your guide to owning shares

Transcription

1 Your guide to owning shares

2 If Royal Mail is floated on the London Stock Exchange, eligible UK employees will receive Free Shares automatically through the Free Shares Offer. They can also apply to buy shares through the Employee Priority Offer. But, if you don t know your Footsie from your Futures, then this guide can help you. Whether you purchase shares or are given them for free, the guide explains what share ownership involves in plain terms. What is a share? Imagine dividing a business up into thousands of equally sized pieces (its financial value that is, not the actual buildings and equipment) then selling or giving the pieces away. That s really all shares are. Why divide up any business and share it out? To give that business access to the money it needs to become an even better business and to give employees a bigger stake in its future. If you buy or receive shares you become a shareholder. This means you own a piece of the business and may be entitled to a share of any profits it makes. These profits are paid to you as dividends. Generally, the better a business does, the bigger the dividends it pays you - although the opposite applies too. Shares have been around since the Roman Republic - so they re at least 2,000 years old Contents What is a share? 03 Why are Free Shares for employees a good idea? 04 What is the stock market? 05 What are the benefits? 06 What are the risks? 07 I ve discovered the share! Your guide to owning shares 03

3 Why are Free Shares for employees a good idea? There are a number of potential benefits of receiving Free Shares in the business you work for: What is the stock market? Businesses can sell shares to raise money - and as a shareholder you can do the same. You can keep your shares, buy more for yourself, or sell your shares on to other people.* You could share in your business future success at no personal cost You could receive dividends while you hold your shares You could also receive cash if you are able to sell your shares (potentially tax free) at a later stage As a shareholder you ll have a say in the future of your business You may feel more involved and motivated in a business you not only work for but also own in part together with other shareholding colleagues The Pirate Code introduced by Portuguese buccaneers in the 17th century gave every employee, from captain to cabin boy, a part share in any buried treasure they discovered. Some people keep the shares they buy or are given. They re happy to take whatever dividends they receive. Other people try to make extra money by buying and selling shares - typically they try to buy at a low price then sell at a higher price when the business they ve invested in becomes more successful. A stock market is simply a place where shares are bought and sold. The London Stock Exchange is one market. There are others in New York, Tokyo and other major cities around the world. The world s first stock exchange opened in Amsterdam in the Netherlands in the 17th century. * See your Guide to the Royal Mail Employee Share Offers: the Free Shares Offer and the Employee Priority Offer for details and conditions of the Free Shares scheme I ve worked hard. So this is my share. What do you make of this Professor? It looks like the stock market. 04 Your guide to owning shares 05

4 What are the benefits? If you hold just one share in a business then you actually own a small piece of the value or capital of that business. What are the risks? If a share price was based only on what a business owned (its buildings, equipment, contracts etc.) things would be relatively straightforward. And together with all the other shareholders you may be entitled to a number of benefits: You may get a share of any profits your business makes as a dividend payment You have the right to vote on a range of issues that affect shareholders, such as approving the payment of a dividend If you decide to sell your shares and can do this at a higher price than you paid for them, then you can make some extra money. All the money you may make from selling your Free Shares will be extra money, as you do not have to pay for them There s no official Best Performing Share Ever but the US business Berkshire Hathaway must come close. In 1965 a single share in the company cost $15 - in 2007 shares traded briefly at $150,000 each. But share price is also influenced by what is called sentiment - in simple terms, what people believe or expect will happen in the future. So there are risks in buying or holding shares in any business: If the business you invest in does poorly in the future, then the value and the price at which its shares are traded may go down If you buy shares in a business that doesn t make a profit, then you may not be paid a dividend You may have to pay certain taxes when you buy or sell shares Buying shares in a business you hope will do better in the future is also a risk - because if it doesn t do as well as you expect you may not get your money back Ever since the 18th century, investors have referred to rising share prices and high confidence as a Bull market, while a Bear market means falling share prices and low confidence. When this place does well, so do we. Life s full of ups and downs. 06 Your guide to owning shares 07

5 This document is directed at employees of Royal Mail Group Limited only. The information contained in this document does not constitute an offer for sale of securities in the United States, Canada, Australia or Japan or any other jurisdiction and is not for distribution in the United States, Canada, Australia, or Japan or any other jurisdiction where such distribution would be unlawful. The securities referred to in this document have not been registered, and will not be registered, under the U.S. Securities Act of 1933, as amended (the U.S. Securities Act ), or under the securities laws of any state or other jurisdiction of the United States and may not be offered or sold in the United States unless they are registered under the U.S. Securities Act or pursuant to an exemption from, or in a transaction not subject to the registration requirements of the U.S. Securities Act. There will be no public offering of securities in the United States. This document is an advertisement and not a prospectus. Any purchase of securities in any proposed offering should be made solely on the basis of the information contained in the prospectus to be issued by Royal Mail in connection with any such offering which will be published in electronic form and made available to persons resident in the United Kingdom on Royal Mail s website. Please note that the value of shares can go down as well as up. There is no guarantee that Royal Mail will float and no one should base any financial decisions on the Government s flotation plans for Royal Mail at this stage.