WALL $TREET RAIDER -- THE BOOK

Copyright © 2015, Michael D. Jenkins

All Rights Reserved

COPYRIGHT NOTICE:

This publication is fully protected by U.S. and international copyright law, and may not
be reproduced or copied in any form without the express written permission of the author.

This edition of the manual is updated for all versions of Wall $treet Raider through
Version 7.80. Last updated September 1, 2015.

Now that this strategy manual is loaded and ready for viewing, click on one of the
highlighted links in the condensed table of contents below to go to a particular chapter or
other section of this strategy manual. Or proceed to page iii, where a Detailed Table of
Contents begins.

 Chapter I -- Introduction
 Chapter II -- Getting Started
 Chapter III -- FAQ'S
 Chapter IV -- Overview of How W$R Works
 Chapter V -- Main Menu (Trading Desk) General Features
 Chapter VI -- Buy/Sell Transactions Menu
 Chapter VII -- Financing Transactions Menu
 Chapter VIII -- Management Transactions Menu
 Chapter IX -- Other Transactions Menu
 Chapter X -- Research Menus and Functions
 Chapter XI -- Other Menu and Functions
 Appendices
 Glossary
 Index
 STRATEGIES AND TACTICS FOR
WALL $TREET RAIDER, VERSION 7.80
THE CORPORATE FINANCIAL SIMULATION

OWNER'S HANDBOOK AND STRATEGY GUIDE

For Windows ® XP/VISTA/Win 7/8/9/10 Based
Personal Computers

NOTICE TO NEW PLAYERS: WE SUGGEST THAT YOU READ CHAPTERS I, II,

AND III OF THE MANUAL BEFORE BEGINNING TO PLAY WALL $TREET RAIDER.
THE REMAINDER OF THE MANUAL IS MADE AVAILABLE AS REFERENCE
MATERIAL ONLY, FOR THOSE WHO WISH TO USE MORE SOPHISTICATED AND
AGGRESSIVE TECHNIQUES.

Wall $treet Raider is published by:

Ronin Software
250 N. Snow Canyon Drive #69
Ivins, Utah 84738
e-mail: mdjenk@aol.com
Internet: http://www.roninsoft.com

ii
 DETAILED TABLE OF CONTENTS

CHAPTER I.

INTRODUCTION

CHAPTER II.
GETTING STARTED

STEP 1--YOU'VE LAUNCHED W$R -- NOW WHAT?

STEP 2--YOUR OPTIONS BEFORE/AFTER STARTING A NEW GAME
STEP 3--START A NEW GAME OF WALL $TREET RAIDER
STEP 4--RESUME A PREVIOUSLY SAVED GAME
STEP 5--SAVING A GAME ON DISK
STEP 6--COMPLETING A GAME

CHAPTER III.
FAQ'S (FREQUENTLY ASKED QUESTIONS)

A. WHAT IS MEANT BY THE "ACTIVE ENTITY"?

B. HOW DO I SELECT AN "ACTIVE ENTITY"?
C. HOW LONG DOES MY TURN LAST?
D. WHAT DO THE NUMBERS MEAN IN "My Balance Sheet"?
E. WHAT IS THE PURPOSE OF THE "Industry Group Selected:" ITEM?
F. HOW REALISTIC IS WALL $TREET RAIDER?
G. WHAT IS MEANT BY "CONTROL" OF A COMPANY IN W$R?
H. WHAT IS CIRCULAR STOCK OWNERSHIP, AND IS IT PERMITTED?
I. WHAT ARE "MARGIN CALLS"?
J. WHAT IS A "LINE OF CREDIT"?
K. WHAT IS "CHEAT MODE" IN WALL $TREET RAIDER?
L. HOW DOES TIME PROGRESS IN THIS SIMULATION?
M. IS THERE A "BACK DOOR" TO WALL $TREET RAIDER?
N. HOW DO I EARN A EXECUTIVE COMPENSATION (SALARY, BONUSES, AND STOCK
OPTIONS) IN WALL $TREET RAIDER?
O. WHAT IS THE "GOODWILL" ITEM ON MY COMPANY'S BALANCE SHEET?
P. WHAT IS A "SHORT SALE" OF STOCK?

iii
CHAPTER IV.

OVERVIEW OF HOW WALL $TREET RAIDER WORKS

A. BASIC STRATEGIES IN WALL $TREET RAIDER

(1) Turn Around a Company

(2) Monopolize an Industry
(3) Startups
(4) Tax Strategies
(5) Speculating in Junk Bonds
(6) Gain Control of Key Lenders
(7) Hardball Tactics and Mean Tricks
(8) Earn Executive Compensation As Company CEO.
(9) Incorporate Yourself!
(10) Passive Investing
(11) Options Trading
(12) Trading Commodity or Stock Index Futures
(13) Trading Physical Commodities

B. GAINING CONTROL OF COMPANIES

C. INCREASING A COMPANY'S PROFITABILITY

(1) Productivity Spending

(2) Increasing Market Share
(3) Diversification and Restructuring
(4) Refinancing
(5) Changing Management

D. FINANCING

(1) Borrowing
(2) Issuing Corporate Bonds
(3) Stock Offerings
(4) Advances from Players

E. INVESTING

(1) Cash/CD's
(2) Bonds
(3) Stocks
(4) Business Assets
(5) Advances to Subs
(6) Stock Options (Puts and Calls)
(7) Commodity and Stock Index Futures
(8) Interest Rate Swaps
(9) Exchange-Traded Funds (ETF’s)

F. STOCK AND OPTION PRICES: HOW ARE THEY DETERMINED?

G. TAXES

(1) Individual Income Taxes

(2) Corporate Income Taxes

iv
 (3) Consolidated Tax Reporting for Corporations
(4) Taxes on Capital
(5) Tax Credits

H. CORPORATE EARNINGS AND ACCOUNTING CONVENTIONS

I. DIVIDEND PAYMENTS

J. THE ECONOMIC ENVIRONMENT

K. BANKS--HOW THEY WORK

L. INSURANCE COMPANIES--HOW THEY WORK

M. HOLDING/TRADING COMPANIES--HOW THEY WORK

N. STOCK OWNERSHIP

O. LINES OF CREDIT

P. ANTITRUST LAW CONSIDERATIONS

Q. BANKRUPTCY AND MARGIN CALLS

(1) Corporations
(2) Individual Players

CHAPTER V.
MAIN MENU (TRADING DESK) GENERAL FEATURES

A. IN GENERAL

B. "TRADING DESK" PULLDOWN MENU ITEMS (MAIN SCREEN)

(1) "FILE" MENU

"New Game" or "Restart" Item
"Open Saved Game" Item
"Save Game" Item
"Save Game As" Item
"Exit - Alt + F4" Item

(2) "GAME OPTIONS" MENU

"High Score" Item

"Updates" Item
"W$R Forum" Item
"Order W$R Manual (or View W$R Manual)" Item
"View Printable Manual" Item
"Customizer Utility" Item
"Online Tutorial” Item

(3) "SETTINGS" MENU

"Ticker Speed" Item
"Currency" Item
"Cheat Mode is: On (or Off)" Item

v
 "Select Law Firm" Item
"Suppress Popups: On (or Off)" Item
"Suppress Earn Rept.: On (or Off)" Item
"AutoSave is: On (or Off)" Item
"Exercise Options? Yes (or No)" Item
“Make Physical Delivery? Yes (or No)” Item
“Take Physical Delivery? Yes (or No)” Item
“Stock Chart Size: Small (or Large)” Item
“AutoAdd To StreamList is: On (or Off)” Item
“AutoPilot is: On (or Off)” Item
“Sweep Cash to Reduce Loan? Yes (or No)” Item

(4) "HELP" MENU

"Wall $treet Raider HELP - F1" Item
"Registration Info" Item
"About" Item

C. "TRADING DESK" INFORMATION DISPLAYS (MAIN SCREEN)

(1) "ACTIVE ENTITY SELECTED" ITEMS

(2) "INDUSTRY GROUP SELECTED" ITEM
(3) "MY BALANCE SHEET" ITEMS
(4) GAME STATUS INFO ITEMS
(5) ECONOMIC DATA DISPLAY ITEMS
(6) STOCK AND NEWS TICKERS
(7) QUICK SEARCH FUNCTION BUTTONS
(8) STREAMING STOCK QUOTES LIST

D. "TRADING DESK" NON-MENU BUTTONS (MAIN SCREEN)

(1) "GO" BUTTON

(2) "TICKER ON/OFF" (or "START TICKER") BUTTON
(3) WALL $TREET RAIDER LOGO IMAGE

CHAPTER VI.
BUY/SELL TRANSACTIONS

A. IN GENERAL

B. "BUY/SELL" BUTTON AND SUBMENU

(1) Buy Stock (or Cover Short Position)

(2) Sell Stock (or Sell Stock Short)
(3) Buy Corporate Bonds
(4) Sell Corporate Bonds
(5) Trade Government Bonds
(6) Merger
(7) Greenmail
(8) LBO (Leveraged BuyOut)
(9) Buy Corporate Assets
(10) Sell Corporate Assets
(11) Buy or Sell Bank Loans
(12) Buy Call Options
(13) Sell Call Options

vi
 (14) Buy Put Options
(15) Sell Put Options
(16) Trade Futures
(17) Trade Commodities

C. "BUY STOCK" BUTTON

D. "SELL STOCK" BUTTON

CHAPTER VII.
FINANCING TRANSACTIONS MENU

A. IN GENERAL

B. "FINANCING" BUTTON AND SUBMENU

(1) Start Up New Corp.

(2) Capital Contribution
(3) Public Stock Offering
(4) Private Stock Offering
(5) Issue Bonds
(6) Buy Back or Call Bonds
(7) Extraordinary Dividend
(8) Tax-Free Liquidation
(9) Taxable Liquidation
(10) Spin-Off Subsidiary

CHAPTER VIII.
MANAGEMENT TRANSACTIONS MENU

A. IN GENERAL

B. "MANAGEMENT" BUTTON AND SUBMENU

(1) Elect Me As CEO
(2) Resign As CEO
(4) Change Managers
(4) Set Dividend Payout
(5) Set Productivity Spending
(6) Set Growth Rate%
(7) Restructure
(8) Antitrust Suit
(9) Set Fund Advisor Fee
(10) Toggle Autopilot ON/OFF

CHAPTER IX.
OTHER TRANSACTIONS MENU

A. IN GENERAL

B. "OTHER TRANS." BUTTON AND SUBMENU

(1) Harassing Lawsuit

vii
 (2) Spread Rumors
(3) Change Bank
(4) Call in Bank Loan
(5) Freeze/Unfreeze Loans
(6) Buy or Sell Bank Loans
(7) Exercise Call Option
(8) Exercise Put Option
(9) Decrease Earnings
(10) Increase Earnings
(11) Interest Rate Swaps
(12) For Sale Items
(13) Buy Subprime Mortgages
(14) Sell Subprime Mortgages

CHAPTER X.
RESEARCH MENUS AND TOOLS

A. IN GENERAL.

B. "SELECT PLAYER" BUTTON

C. "SELECT CORP." BUTTON

D. "ENTITY INFO" (RESEARCH) BUTTON AND SUBMENU

(1) Changing the Active Entity

(2) Research Report
(3) Financial Profile
(4) Earnings Report
(5) List Shareholders
(6) List Portfolio
(7) Diagram of Holdings
(8) Credit Info
(9) Industry Summary
(10) Industry Projection
(11) List Bank Loans
(12) Tax Basis Info
(13) List Advances to Corps.
(14) List Options
(15) List Futures Contracts
(16) My Corps.

E. "GENERAL" (RESEARCH) BUTTON AND SUBMENU

(1) Market Share

(2) Industrial Growth Rates
(3) Industry Projection
(4) Industry Summary
(5) Economic Statistics
(6) Interest Rates
(7) View News
(8) Who's Ahead?
(9) Most Cash
(10) Largest Tax Losses

viii
 (11) Largest Market Cap
(12) Database Search
(13) Who Owns What?

F. "SELECT LAST" (STOCK SYMBOL) BUTTON

G. "MY NEWS" BUTTON

H. "QUICK SEARCH FUNCTIONS" GROUP OF BUTTONS

(1) Database Search

(2) Recall DB Search List
(3) Other Quick Search Buttons

CHAPTER XI.
OTHER MENU FUNCTIONS

A. IN GENERAL.

B. "END TURN" BUTTON

C. "MISC" BUTTON AND SUBMENU

(1) Borrow Money

(2) Repay Loan
(3) Stock Split
(4) Reverse Split
(5) Name Change
(6) Advance To Corp.
(7) Recall Advance
(8) Prepay Income Tax
(9) Offer To Sell Stock
(10) Offer To Sell Assets

D. "CHEAT" BUTTON AND SUBMENU

E. "CHART" BUTTON

APPENDICES:

APPENDIX A--INSTALLATION OF PROGRAM

APPENDIX B--COMPANY NAMES, STOCK SYMBOLS

APPENDIX C--HOW CREDIT RATINGS AND LOAN

RATES ARE DETERMINED

ix
 APPENDIX D--INDUSTRY INFORMATION

(1) LIST OF INDUSTRIES WITH TYPICAL

GROWTH RATES AND VOLATILITY LEVEL
(2) FACTORS AFFECTING DEMAND GROWTH IN
EACH NON-FINANCIAL INDUSTRY

APPENDIX E--STRATEGY AND TACTICS

GLOSSARY: TERMS USED IN WALL $TREET RAIDER

INDEX

x
 INTRODUCTION

CHAPTER I.

Welcome to the Wall Street Wars! WALL $TREET RAIDER (W$R) is a sophisticated real-
time simulation of the no-holds-barred corporate gamesmanship that has occupied the
headlines so much in the last few years. This simulation allows 1 to 5 players to invest in
and manage any one or more of up to 1575 companies in 70 industry groups, or invest in
any of 15 exchange-traded investment funds (“ETF’s”), in a competitive, "smart"
financial environment. There are almost no limits imposed upon your financial creativity,
other than the hard realities of the economy and the marketplace.

To operate Wall $treet Raider, your Windows ® personal computer (running Win
XP/VISTA/Win7 to Win10) only needs to have at least 8 megabytes of random access
memory. Wall $treet Raider does an enormous number of computations every second, to
constantly change and update the current game's database, so it takes full advantage of the
speed of all relatively new computers, made in the last 10 years or so.

The environment in which Wall $treet Raider is played consists of an economic model
within which almost everything is interrelated. GDP growth rates, oil and other commodity
prices, interest rates, bond market prices, housing starts and other economic variables all
interact with each other and affect stock prices and the growth of demand in 67 industry
groups. The other four (financial) industry groups, banks, insurance companies,
holding/trading companies, and exchange-traded funds, are mainly affected by their
investments in stocks and bonds of other companies or, in the case of banks, loans they
make, and are only indirectly affected by the economy, for the most part, although banks
are strongly affected by interest rates.

Each of the 1590 corporations and ETFs operates in a relatively "smart" fashion, reacting
(sometimes slowly, sometimes instantly) to changes in economic and industry conditions,
in an extremely competitive, Darwinian fashion. Once you take control of a corporation,
however, the program turns the management of the company over to you. From then on,
unless you lose voting control of the company, it will be up to you to make decisions about
growth, financing, how much to spend on R & D, whether to pay dividends, whether to
restructure the company, etc.
However, recent versions of the program have an "autopilot" setting you can choose, under
which the companies you control will generally be managed by the program, like other
companies that you don't control. The one exception, if you are using the "autopilot"
setting, is the company (if any) of which you are the President and CEO -- you are fully
responsible for managing it.

Meanwhile, as you play it, a "live" stock ticker runs across the screen most of the time, as
earnings, dividends, taxes, and loan payments are computed for each of the 1590
companies each calendar quarter, and stock and bond prices are recomputed almost every
second. Thus, if the ticker on the main screen is running, the underlying financial and
economic database is undergoing constant change while you plot and scheme mergers,
stock buybacks, and takeovers of opponents' companies, or try to wear down the opposition
with antitrust lawsuits or try to figure out what to do about your own company's sagging
earnings. Or just wait to see what happens.

If you're ready to plunge into your first game of Wall $treet Raider (which you've very
likely done already, since you are reading this strategy manual, which is loaded from a link
in Wall $treet Raider), you will find that it is very easy to play at this simulation at a basic
level -- buying and selling stocks (using the Buy Stock or Sell Stock buttons) is quite
simple to do. However, you will also find out that to play it well, you will need to hone
your investing instincts and expand your knowledge of the stock and bond markets,
economics, and corporate finance. You will learn a lot about all of the above, by trial and
error, if you spend much time playing Wall $treet Raider.

To learn more quickly, this "strategy manual" for Wall $treet Raider will give you a very
detailed look at every part of the simulation, in terms of how every feature in it works, and
also in terms of the underlying economic, accounting, legal and financial models that Wall
$treet Raider attempts to simulate, and where such underlying concepts tend to track, or
differ from, the real financial world.

Our hope is that, after playing with this simulation for a year or two, and seeing what
works, and what generally doesn't, in investing in stocks and bonds, you will be much
better prepared, more skeptical, and more able to analyze corporate financial information
when you make REAL investments in stocks or corporate bonds. If you had played Wall
$treet Raider for years, it is doubtful that you would have been "suckered" into paying 50
times sales for companies with zero earnings during the "Dot.com" bubble and ensuing
collapse of the stock prices of such absurdly overpriced companies, as so many naive
investors did. Those who didn't think it was "cool" to buy stocks of "hot" companies whose
capitalization at one point, for companies like AOL or Cisco, approached the entire GDP of
the nation of Canada, mostly escaped the madness and the crash that followed.

In our opinion, it is much better to lose a few billion a few dozen times playing Wall $treet
Raider, than to lose half your life savings in the real market after being sold a bunch of
grossly overpriced stocks of "trendy" companies by fast-talking financial hucksters.
Playing the investment game with real money, in real markets, without a good
understanding of what it's all about, is the road to instant poverty.

2
We earnestly hope the small sum you spent on Wall $treet Raider will be the best
investment you've ever made, so far.

Enjoy. And take no prisoners!

3
 GETTING STARTED

CHAPTER II.

No one likes to buy or download a computer program and face hours of poring over
complex user manuals to get it properly installed so it can be used. You won't have that
problem with Wall $treet Raider, even if you are a relative computer novice, as it will only
take you a few seconds to start up a game, once you have launched Wall $treet Raider.

However, if you are not a "stock market junkie" or a person who is familiar with corporate
finance and investment concepts, you may find all the financial terminology and the
complex tools and transactions Wall $treet Raider lets you engage in to be somewhat
bewildering. If so, you will find this strategy manual a very useful "primer" on when and
how to use various features in Wall $treet Raider, such as mergers, liquidations, and other
transactions, since it explains how these financial operations work, both in the "real world"
and in this software simulation, which we have tried to make as realistic as possible. There
is also a glossary in this manual, as well as in the "HELP" function if you click on "HELP"
from the main menu screen.

Since you are probably reading this text on your computer, it is very likely that you have
already installed Wall $treet Raider, and you have clicked on the "Game Options Menu"
link to "View W$R Manual," which loaded the Table of Contents for this Wall $treet Raider
strategy manual ("Wall $treet Raider -- The Book"), which then led you to this page.

Just follow the simple instructions below, and, if you are using Wall $treet Raider for the
first time, you will be playing your first game in just a couple of minutes. If you've already
started playing, you may still find the information in the following paragraphs in this
chapter below to be useful, as it will tell you which configuration choices for Wall $treet
Raider can (or must be) selected before or after starting a game.

STEP ONE--YOU'VE LAUNCHED WALL $TREET RAIDER -- NOW WHAT?

You will notice, when you first launch the Wall $treet Raider program, that all of the
buttons on the screen are grayed out. Thus, you cannot use any of those command buttons
until you have either loaded a new game into memory, or loaded in a saved game that you
had saved to disk earlier.

4
As soon as you finish loading a new or saved game, the buttons on the main screen will all
be turned on, except the "Select Last" button, which will turn on once you have selected a
corporation to invest in or do some research on. Some buttons on certain "pop-up"
submenus that only apply to corporations will be missing at times during a game, if the
currently selected "Active Entity" at a particular moment is you, a human player, rather
than a corporation. Or vice versa, for certain buttons that only appear if you, the player, are
the current "Active Entity." Various other buttons on such submenus also may not be
visible at other times, depending on the type of corporation selected as the Active Entity.
(For example, the "CHANGE BANK" button on the "OTHER TRANS." menu will not be
shown if you have selected a bank you control as the "Active Entity.")

At this point, before starting a game, the only parts of the program that will function are
certain functions in the "File," "Game Options," "Settings," and "Help" menus in the upper
left hand part of the main Wall $treet Raider screen. See STEP TWO below, for a
discussion of which of those options you may select before a game is loaded, or only after
loading, or, in some cases, before OR after.

STEP TWO--YOUR OPTIONS BEFORE/AFTER STARTING A NEW GAME. Some of

the items on the "File," "Game Options," and "Settings" menus can only be used before
loading game data into memory; some can only be used after loading; and others can be
used at any time. (The "Help" menu items can be clicked on and used at any time, before or
after starting play.)

The following is a brief summary of which of the menu items can be used at which times.

FILE MENU ITEMS. If you click on the "FILE" menu item, a dropdown menu will show
you the following choices:

 New Game
 Open Saved Game
 Save Game
 Save Game As
 Exit Alt+F4

To start a new game, click on "New Game"; to load a previously saved game, click on
"Open Saved Game".

The "Save Game" and "Save Game As" items will not function until a set of new game data
has been loaded into memory and started, or a saved game file has been loaded. Once game
data has been loaded, the "Open Saved Game" item will be grayed out and no longer
functional, while the "New Game" item will be changed to read "Restart W$R."

The "Exit" item can be used to exit the program at any time, before or after loading a game
into memory.

5
GAME OPTIONS MENU ITEMS. If you click on the "GAME OPTIONS" menu item, a
dropdown menu will show you the following choices:

 High Score
 Customizer Utility
 Updates
 W$R Forum
 Online Tutorial
 View W$R Manual
 View Printable Manual

If you have not purchased the "Full Package" that includes the W$R Manual files, the last
two items will not be shown and the last item will read "Order W$R Manual" and will link
to the ordering page for the "Add-on Package" on the Ronin Software website.

SETTINGS MENU ITEMS. If you click on the "SETTINGS" menu item, a dropdown
menu will show you the following choices (with the default
settings, except for selecting a currency or law firm)::
 Ticker Speed: 50
 Currency
 Cheat Mode is: ON
 Select Law Firm
 Suppress Popups: OFF
 Suppress Earn Rept.: OFF
 AutoSave: OFF
 Exercise Options? NO
 Make Physical Delivery? NO
 Take Physical Delivery? NO
 Sweep Cash To Reduce Loan? Yes
 Stock Chart Size: Small
 AutoAdd to StreamList is: OFF
 AutoPilot (Global) is: OFF

Prior to starting a game, you can select any of the "GAME OPTIONS" menu or
"SETTINGS" menu items, except the "Cheat Mode," "Select Law Firm" and “Sweep”
items, which are grayed out, and the “AutoPilot” item, which can only be selected after a
game has begun, by each player, once the number of players and their names have been
determined, and after a new game data set has been created or a saved game has been
loaded. If you forget to select a law firm (cheap, average, or expensive) after a game is
started, don't worry: the program will assign you an "average" law firm to represent you in
antitrust cases or other lawsuits that may arise during the game. Also, if you don't turn
"Cheat Mode" off, its default status is "On."

After a game is started, you may select any of the items on the "GAME OPTIONS" or
"SETTINGS" menus, including the "Currency" item. However, if you want to change the
selected currency from, say, U.S. dollars to Swiss francs, you will need to make the

6
currency selection BEFORE starting a new game. Otherwise, the currency selection will
not go into effect until the next new game you start. (The currency selected in a saved game
cannot be changed for that game.) The default setting for the "Suppress Popups," "Suppress
Earn Rept.," "AutoSave," "Exercise Options?," "Stock Chart Size," “Sweep Cash to Reduce
Loan” and “AutoAdd to StreamList” items in a new game is whatever was last set by a
player in the last game played.

HELP MENU ITEMS. If you click on the "HELP" menu item, a dropdown menu will show
you the following choices:

 Contents
 Registration Info
 About

You can view any of the above "HELP" menu items by clicking on them any time they are
visible, before or after game data is loaded. The "Contents" item takes you to the Wall
$treet Raider "help" system contents list. Now that you have "Wall $treet Raider -- The
Book" installed, you probably will not have much use for the "HELP" system, since this
strategy manual provides much more detailed information on most subjects, and covers
many areas that are not mentioned in the "HELP" files.

The "Registration Info" and "About" items simply list Wall $treet Raider copyright and
version information for the version or release of Wall $treet Raider you are using and
display your registration number, for your future reference in case you need customer
support or want to upgrade to a newer version at a reduced price.

STEP THREE--START A NEW GAME OF WALL $TREET RAIDER.

To start a new game of Wall $treet Raider, just click on the "FILE" menu and select the
"New Game" item from the dropdown menu that will appear. When you do so, you will
then be asked if you want "computer" to be one of the 2 to 5 players. Answer "Yes" if you
want to play against the computer, which will be Player #1, or "No" if you do not, or else
click on "Cancel" to return to the main menu screen. If you answered "Yes" or "No" to the
question, you will next be prompted to enter the number of players for the upcoming game,
which must be 2, 3, 4 or 5 players.

After you have entered the number of players, a game "Startup Choices" input screen will
appear, on which you can either accept the defaults by clicking on "OK" (the program
"remembers" what you entered from the last new game you started, if any), or you can
enter different names for the players if you like. Also, you can enter a dollar amount that
you want each player to have at the start of the game (U.S. dollars -- which will be
converted to its equivalent in the other currency if you chose another currency, once the
game starts). You can enter any number from 100 to 1000, which will be the number (in
millions) of U.S. dollars or the equivalent that you will start the game with. Also, on this
input screen you can enter the length (in years) that the game will last, from 1 year to 35

7
years, and can select a difficulty level of 1 (easiest), 2 (medium difficulty) or 3 (most
difficult, where computer player is most aggressive).

Once you have set all the game parameters the way you want them, click on the "OK"
button, then click on "OK" again on the small message box that comes up, which says
"Ready to start new game # ...." (assigning a game number to this game). The program will
then take a few seconds to create and randomize a starting database for the new game.
When it has finished, the program will announce which player gets to play first (randomly
selected), and the game will get under way when you click on "OK" on the small message
box or boxes that will appear. At that point, unless the "computer" player played first, the
stock ticker will begin moving, and the game has begun!

NOTE: IN WALL $TREET RAIDER, "TIME" PASSES MAINLY WHEN THE

STOCK TICKER IS MOVING. WHEN THE TICKER IS MOVING, THE
PROGRAM IS CALCULATING QUARTERLY EARNINGS FOR EACH OF THE
NEARLY 1600 COMPANIES IN THE SIMULATION THAT ARE CURRENTLY
ACTIVE, AND DOING THOUSANDS OF OTHER CALCULATIONS EVERY
SECOND, CONSTANTLY CHANGING THE DATA BASE.

STEP FOUR--RESUME A PREVIOUSLY SAVED GAME.

If you have not yet loaded a set of game data into memory, you have the choice of either
starting a new game (using the "File/New Game" menu item), or continuing with a game
you have previously saved to disk. If you have previously saved a game, you can load the
saved game into memory by clicking on the "File/Open Saved Game" menu item.

When you click on "File/Open Saved Game," you will be asked if you want to continue
with the last game you were playing (and the game number, from 1 to 50, will be displayed,
such as "#7"). If you select "Yes," that game will be loaded into memory, and the game will
resume at the point where you were when you saved it. If you select the "No" button, a new
dialog box will appear, asking you to enter the number of the game you saved, which can
be a number from 1 to 50. Or, if you click on the "Cancel" button, you will be returned to
the main menu screen, and you can start a new game, instead, if you wish.

If you have entered the game number of a game that has been saved to disk, the game data
file will then be loaded into memory, or you will see an error message if there is no such
file to be found, and you will be asked to enter another game file number. If the saved game
data file is found and loaded, say for game #7, a message will briefly appear, as follows:

"Saved game # 7 loaded successfully."

The stock ticker will begin moving and your saved game is up and running again at this
point. Loading a saved game will usually only take about 1 or 2 seconds, depending on

8
how fast your hard disk drive is. It can take considerably longer if you are using an old,
slow computer, more than about 5 or 6 years old.

STEP FIVE--SAVING A GAME ON DISK.

After you have started a game, you will find that it can take a number of hours to complete,
depending on the number of years you selected for the game length (up to 35 maximum),
and the speed at which the stock and news headlines tickers are moving. Obviously, there
will be times when you want to save the game at some point, and return to it later.

Saving a game of Wall $treet Raider is quite simple. At any point during the game, just
click on "FILE/SAVE GAME" to save the current game under whatever number it has been
assigned, such as game #7. Also, if you have saved the same game previously as #7, and
think you might want to go back and replay it from where you saved it earlier, you can save
the game at whatever stage you have reached at present, by using "FILE/SAVE GAME AS"
and entering a new game number, such as 8.

EXAMPLE: Assume you start Game #7 in 2015, and it is to last for 35 years, until 2050.
After an hour of play, you might then save it as Game #7 during Year 2017. Later, when
you resume, you might play until the Year 2020, and decide to save the game as Game #8 at
that point. Thus, the next time you launch Wall $treet Raider, you could either choose to
start play again in 2017 (selecting Game #7), or could resume it in 2020 by selecting Game
#8 from disk.

STEP SIX--COMPLETING A GAME. Once a game has ended, at the beginning of the year
that is shown as the ending year, the program will announce that the game is over and will
name the winner. Most buttons will be grayed out and will no longer work, once the game
has ended. However, if you wish to savor your victory (or wallow in your defeat), you may
still pull up various items of information on companies and industries, such as stock and
commodity charts, companies' final earnings reports or players' or companies' Financial
Profiles. If you wish to see the detailed information for a particular player (if not bankrupt)
enter the number “1” in the “Stock Symbol” entry box on the main screen, instead of a
stock symbol, to see information for Player #1 (as listed on the “Who’s Ahead?” screen), or
enter “2” to see information for Player #2, and so forth.

Click on File/Exit to exit the program, when you are finished.

9
Note that in some cases, a game may end prematurely, if all of the players
have been bankrupted (except, perhaps, the Computer player, if any). In that
case the financial records will be expunged, to save all players from further
humiliation and no further access to the game data records for that game will
be allowed....

10
FAQ'S (FREQUENTLY ASKED QUESTIONS) ABOUT
WALL $TREET RAIDER

CHAPTER III.

FAQ'S (FREQUENTLY ASKED QUESTIONS).

The following FAQ's will answer a number of general questions about Wall $treet Raider, if
you are new to this simulation.

 A. WHAT IS MEANT BY THE "ACTIVE ENTITY"?

At any time during a Wall $treet Raider game, the program is focused on one player
(which can only be the player whose turn it is at the moment) or on one corporation.
That player or corporation is the "Active Entity," and the name of the currently
selected Active Entity is always shown in the box on the main menu screen, just
under the words "Active Entity Selected:".

Various research-related or other buttons on various menus, such as "List Portfolio,"

"Financial Profile," "Research Report," "List Shareholders," "Borrow Money,"
"Repay Bank Loan," "Credit Info," "Name Change," or "List Loans" buttons, will
bring up information for the current "Active Entity" when pressed, so you do not
need to select the same company or entity each time you want to view a Financial
Profile, for example, or perform some function like borrowing or repaying a loan.
(However, the borrow, repay, and name change functions can be used only if the
"Active Entity" is one that you control.)

In addition, when you go to any of the Transactions submenus to buy, sell or do

other transactions, the entity that will be doing transactions is the "Active Entity," if
you control that entity (or if the Active Entity is you, yourself, the player). If you
don't control the current "Active Entity," and you click on a Transactions button, the
last "Active Entity" you selected that you DID (and still do) control will be the
entity that does the transactions. Or, if you haven't selected a controlled Active
Entity yet on your current turn, you, the player, will be shown as the transacting
entity on the Transactions submenu that pops up. (If the currently selected Active
Entity is a corporation that you do not control, the textbox on the left side of the
pop-up transactions menu will warn you that you don't control that company, and
that you cannot make it engage in a transaction.)

11
 This may all seem a bit convoluted, but is designed to save you keystrokes and
clicks. For example, let's say you control ABC Company, and you select it as the
"Active Entity." After looking to see how much money or credit line it has, you
decide you want ABC to make an acquisition, so you do some research and look at
several possible target companies, selecting each, in turn, as the Active Entity. Then
you go to the "BUY/SELL" transactions submenu to have ABC Company buy
XYZ. When the Buy/Sell Transactions submenu appears, you will see that the entity
that is ready to do the acquisition is shown as ABC Company -- so you don't have to
go back and re-select ABC as the Active Entity before you have it buy up the stock
of XYZ.

In short, Wall $treet Raider "remembers" the last "Active Entity" you selected that
you controlled (and still control), and makes it easy for you to have it do a
transaction. (Of course, while you're in a Transactions submenu, if you decide you
want to have another entity you control do a transaction, you can always use the
"PLAYER" or "MY CORPS." buttons on that submenu dialog window to change
the Active Entity to you, the player, or to any corporation you control.)

The program will attempt to "read your mind" when you click on a transaction
button to buy or sell stock or corporate bonds, do a merger, file an antitrust suit
against another company, or do various harassing transactions, such as filing a
harassing lawsuit or starting a rumor campaign. The input box for entry of the stock
symbol for the "target" company will usually contain, as the default entry, the stock
symbol of the last company you selected as "Active Entity," if it is not the current
"Active Entity," or else the stock symbol of the currently selected "Active Entity" if
it is a company that is not under your control. If the default stock symbol is the one
you wanted to enter, just click on "OK" to enter it and begin the transaction.

Thus, you can select the entity (yourself or a company you control) that you wish to
have do a transaction, such as buying stock, and then do some research until you
find a stock you like, say XYZ Corp, and view research reports or other information
on XYZ. Then you can then click on the Buy/Sell Transactions submenu button and
simply click on "Buy Stock," and the stock selection input box that pops up will
automatically show "XYZ" as the default stock symbol, so you can just click on
"OK" to proceed with buying the stock of XYZ. The program cannot always "read
your mind," but you will find it often seems able to.

 B. HOW DO I SELECT AN "ACTIVE ENTITY"?

There are several ways:

(1) ENTER A STOCK SYMBOL. If you know a company's stock symbol, type it
into the "Stock Symbol" text box and click on the "Go" button next to it, or press
the [ENTER] key after typing in the symbol. (As in the older DOS versions of Wall
$treet Raider, you can enter a company's number, from 11 to 1600, instead of a
stock symbol, but company numbers are not listed anywhere in this Windows

12
version, except when you bring up a company to edit its name or stock symbol in
the "Customizer" utility program.)

(2) CLICK ON THE "SELECT CORP." BUTTON. After you click on this button,
enter the stock symbol (if you know it) in the "Enter Stock Symbol:" box, in the
small dialog box that pops up. If you don't know the symbol, click on the "Lookup"
button on that dialog box, to bring up a drop-list of all currently-existing companies
(usually over 1000) in the current game, listed alphabetically, and click on the
desired company to select it. Note that, when you click on the "Lookup" button,
rather than taking the time to scroll through the drop-list, you can simply begin
typing the first few letters of the company's name, if you know it.

For example, if you are looking for the stock symbol for Hecla Mining, you could
just start typing the letters of "Hecla" -- by the time you have typed "HEC," the
name and symbol of Hecla Mining will have appeared in the drop-list box, and you
can then click on "OK" at that point to select Hecla (symbol "HCL") as the Active
Entity.

(3) PICK FROM VARIOUS LISTBOXES. When you click on certain information
command buttons on the main screen, such as "List Portfolio," you can double-click
on any company listed there to select it. For example, if you want to pick a
company you own as the "Active Entity," click on "List Portfolio" to show a list of
stocks and bonds you own at present, and simply double-click on the name of the
company you want to select. Or if you are using the "Finan. Profile" to view a
company's financial profile, and you see the name of its bank or another company
name listed there, simply click on the name to select that corporation as the Active
Entity.

(4) CLICK ON "SELECT PLAYER" BUTTON TO SELECT PLAYER. If a

corporation is the currently selected Active Entity, and you want to select yourself
(the player) as the Active Entity, just click on the "Select Player" button on the main
screen or on any of the research or transactions menus.

(5) CLICK ON "MY CORPS" BUTTON TO SELECT A COMPANY YOU

CONTROL. The program includes several "My Corps" buttons, on the main screen
and on various transactions and research menus. Clicking on it will generally cause
a list of all the companies you control to be displayed, as well as certain items of
information about each. Pick any of the companies from the list displayed to make
that controlled company the Active Entity, so it can do transactions or you can see
research information about it or its industry group. If you only control one
corporation, no list will displayed, but it will become the Active Entity. If you
control two corporations, and one is the Active Entity, clicking on the "My Corps"
button will instantly make the other controlled corporation the Active Entity,
instead.

13
 (6) SELECT A COMPANY FROM THE "STREAMING STOCK QUOTES LIST."
If a company's name is shown on your "Streaming Stock Quotes List," click on the
"Select" button at the top of the list, which will cause a "pick list" of all the stocks
on the streaming quotes list to be displayed in a box, from which you can pick any
such company as the Active Entity by double-clicking on its name or highlighting
its name and then clicking on the "OK" button.

(7) CLICK ON THE "CONTROLLED BY" BOX IF A COMPANY NAME OR

STOCK SYMBOL APPEARS THERE. If a company name or stock symbol
appears in the "Controlled By:" item in the "Active Entity Selected" area on the
upper left part of the main W$R screen, you can just click on the name or stock
symbol to select that company as the new Active Entity.

 C. HOW LONG DOES MY TURN LAST?

On each turn, you can do up to 5 transactions from the various Transactions

submenus (Buy/Sell, Financing, Management, and Other Trans.), before your turn
ends. However, to speed things along, 2 of your unused transactions are deducted in
each calendar quarter, one at the mid-point and one at the end of each quarter. Of
course, if you are feeling rushed, you can always turn off the stock and news tickers
for a while, in order to do as many transactions as you need to do on your turn,
before turning the tickers back on. However, some small increment of time elapses
each time you click on any feature, even if the ticker is turned off.

 D. WHAT DO THE NUMBERS MEAN IN THE "My Balance Sheet" SECTION

OF THE MAIN SCREEN?

The 5 text boxes in the "My Balance Sheet" section provide a quick overview of the
financial situation for the current player, updated every few seconds. Think of it as a
simplified personal financial statement. (Click on "Finan. Profile" to see a more
detailed financial statement for your personal holdings, any time you are the
"Active Entity.")

The top box in the balance sheet section simply shows your cash (or, actually, your
interest-bearing bank CD deposits). "Other Assets" gives the total market value of
all your stocks, government bonds, and corporate bonds. The middle box shows
your total assets, and the fourth box shows how much you owe the bank, if
anything, and the bottom box shows your net worth. All amounts are shown in
either U.S. dollars or whatever other currency you may have selected, in millions
(or in billions, for some currencies such as Japanese Yen).

For more details on "My Balance Sheet," click here.

 E. WHAT IS THE PURPOSE OF THE "Industry Group Selected:" ITEM AND

DROP-LIST ON THE MAIN WALL $TREET RAIDER SCREEN?

14
 Each time you select a different (corporate) Active Entity, the name of that
company's industry will instantly appear just beneath the "Industry Group
Selected:" label on the main screen. Thus, if you select LTV Corporation (in the
steel industry), its industry group is automatically selected for you. Then, when you
click on "Industry Projection" or "Industry Summary" on either of the research
submenus, you will see industry projections or summary financial data for the steel
industry, without having to "tell" the software the industry for which you want to
see information.

However, if you want to view information for a particular industry, without first
selecting a company in that industry as "Active Entity," you can just click on the
drop-list where the name of the currently selected industry is shown, and pick any
of the 71 industries from that list. When you select an industry group in this manner,
the "General Research Menu" will show data for that industry if you select an item
such as an "Industry Projection" or "Industry Summary," but the "Entity Research
Menu" will continue to show industry data for the industry to which the currently
selected "Active Entity" belongs. Also, except for the Banking and Insurance and
Holding/Trading Company industries, you can click on the "Industrial Growth
Rates" button on the "General Research Menu" to see industry growth projections
for all of the 67 other industrial groups, and double-clicking on any one of them, or
any of the 4 financial industries listed, will make it the "Industry Group Selected,"
(again, only for purposes of the General Research Menu).

 F. HOW REALISTIC IS WALL $TREET RAIDER, COMPARED TO THE

REAL FINANCIAL WORLD?

Very realistic, for the most part. The author has had several careers since graduating
from Harvard Law School over 40 years ago, as a tax attorney in a large law firm,
as a tax CPA working on giant mergers with one of the Big Four (Big Eight back
then) CPA firms, as an economist with an economics consulting firm in Washington,
D.C., as a million-selling author of a series of business books in the 1980s and
1990s, and as a lifelong active investor in the stock, bond, and option markets. He
has drawn extensively on his background and experience in all those fields to make
Wall $treet Raider as realistic as possible.

Wall $treet Raider contains a number of somewhat humorous and (often) extreme
"ethical choices" that pop up when "Cheat Mode" is turned on, most of which may
seem to go a bit overboard -- but even those are almost entirely based on news
accounts of actual skulduggery in the real world, as are various disaster scenarios
that occur in almost every game. Other futuristic disaster scenarios may also seem
to be pretty extreme, but as the recent unpleasantness of 9-11-2001 so rudely
informed us, it's a crazy and often dangerous world we live in.

"Under the hood," the internal logic of Wall $treet Raider is as realistic as we can
humanly make it, based on our experience and knowledge of corporate finance,
accounting, and business law. For example, in Wall $treet Raider we actually keep 3

15
sets of financial records for each of the 1590 companies -- its "real" (cash)
transactions and earnings, its taxable earnings, and the reported earnings, which
may include non-cash items like "equity" in earnings of a subsidiary, and may
exclude cash income items such as dividends a company receives from subsidiaries.

The Windows version of Wall $treet Raider even provides a somewhat simplified
version of some of the most complex accounting on earth -- consolidated tax return
reporting, where all 80% subsidiaries (and their 80% or greater subsidiaries) pay
income tax on a consolidated basis. Of course, this isn't totally realistic, since U.S.
tax law doesn't generally let a U.S. company file consolidated tax returns with
foreign subsidiaries, and vice versa, and not all other countries allow such
consolidated tax filing.

In Wall $treet Raider, we have chosen to include a proportional share of the

earnings or losses of any (20% or greater) subsidiary in the earnings of the parent
corporation. This is similar to real-world "equity method" accounting, except that
we do the same even with a 100% subsidiary -- in the real world, all the financial
data of a 100% sub would be combined with the parent's data, which Wall $treet
Raider does not attempt to do, as that gets to be far too complex where companies
are constantly being gobbled up and spun off. Wall $treet Raider just combines the
reported income of the parent and its subs for the parent's reporting of earnings (and
shows a sub's earnings separately for it, something not usually done for a
consolidated subsidiary in the real accounting world).

Also, in our "financial profile" balance sheets in Wall $treet Raider, we show
investments in stocks and bonds at their current market value, rather than at cost,
which is a departure from generally accepted accounting practices, but is an
approach which we think makes the "profiles" more useful to players.

We think the stock pricing algorithm in this Windows version of Wall $treet Raider
comes as close to real world price behavior as we are likely to get -- it takes into
account a huge number of factors, including general market conditions, economic
trends, interest rates, company history and future prospects, credit worthiness of the
company, numerous random factors, and much more. The latest release even
"remembers" recent large purchases of sales of any stock, which will tend to hold
up or depress the price for a while, although the effects of the buying or selling that
moved the stock eventually wears off. The source code for updating a stock's price
takes up several pages when printed out, and is so complex, even WE don't really
understand it any more -- but after endless tweaking, it generates stock prices that
seem to closely mimic the behavior of stock prices in real world markets. In our
humble opinion, at least.... You may disagree.

Finally, while the tax rules in Wall $treet Raider are generally similar to U.S. tax
laws, we have treated capital losses of corporations as fully deductible for tax
purposes (under U.S. tax laws, corporate capital losses can only be deducted against
capital gains).

16
 WHAT IS MEANT BY "CONTROL" OF A COMPANY IN W$R AND THIS
MANUAL?

In Wall $treet Raider, if you "control" a company, you get to determine its policies,
such as dividend payout, how fast it expands its capital investments, whether it
floats stock or bonds to raise capital, or borrows from the bank, whether it invests in
other companies, pays you a salary as its CEO, and much more. Thus "control" is an
important concept in Wall $treet Raider, as in real corporate life.

To gain control of a company in Wall $treet Raider, you, or you and one or more
companies that you control, must own at least 20% of the company you want to
control, and your bloc of shares in it must be larger than the amount of its stock held
by any other player or company. For example, if you own 100% each of the stock of
companies A and B, you control both of them -- no doubt about it. However, if you
also own 10% of Company C, and your companies A and B each own 5% of
Company C, that combined ownership of 20% of C will be enough to give you
control. However, if some other company or player owns 21% of Company C, it, or
he or she, and not you, will control Company C.

 WHAT IS CIRCULAR STOCK OWNERSHIP, AND IS IT PERMITTED?

An example of circular stock ownership would be where Company A owns 75% of

the stock of Company B, which owns 51% of Company C, which owns 90% of
Company A. Visualize that setup as being like a snake that has swallowed its own
tail. This is permitted (briefly) in Wall $treet Raider, so you may be able to control
several companies that way, with interlocking stock holdings, even if you reduce
your direct investment to as little as 1% in one company, and still retain your
"control" of the whole circular chain of companies. For a while. However, Wall
$treet Raider is crafty, and thanks to a particularly hairy and complex algorithm, it
will soon find such a circular situation and force one of the companies to sell its
holdings in another, to break up the chain, at which time you will lose control. So,
yes, circular ownership is permitted, but not for long.

 WHAT ARE "MARGIN CALLS"?

In Wall $treet Raider, as on Wall Street, you can buy stocks "on margin," which
generally means that if you buy $100 worth of stock, you can borrow $50 of the
purchase price from your broker (or bank). In Wall $treet Raider, all such loans are
from your bank lender. This gives you greater "leverage," which is wonderful if
your stock goes up, not so wonderful if your stock goes down. In fact, in this
simulation (similar to real Wall Street rules), if your net worth falls to less than one-
third of your bank loan ("margin debt"), you will get a "margin call" from the
lender, which means that you have to pay down enough of your debt to restore the
3-to-1 ratio of margin debt to net worth. That's not a big problem, if you have
enough cash on hand to meet the "margin call" (debt repayment). However, if you
don't have enough cash, you'll notice that you have a negative cash (CD's) balance

17
on your balance sheet, shown on the lower left-hand corner of the main Wall $treet
Raider screen. But not for long. Like your real world broker or banker will do, you
will be forced to sell bonds (first) or stocks (if you have no bonds) until you have
raised enough cash to eliminate your "overdraft" (negative cash balance) at the
bank.

Of course, any such forced sale of stocks you own will tend to further depress the
market price of that the stock you are selling.... Which may often trigger another
margin call, as your net worth falls to less than 33 1/3% of your margin debt
again.... Requiring more stock to be sold.... Get the picture? That's why it its very
risky to buy stocks on margin, using a lot of borrowed money, either in the real
world or in this simulation. You can be wiped out by a temporary dip in the stock,
even if the company is quite solid, since stock prices do tend to fluctuate.

The program will first sell any bonds you own, if you have a margin call, in order to
raise cash. Then, if you only have one stock, it will begin selling off that stock, 1%
at a time, until enough cash is raised to eliminate your negative cash balance. In
versions before Version 2.20, the program would randomly select a stock to sell, if
you owned more than one stock directly.

In that and later versions, if you own more than one stock and you receive a margin
call, and will have to sell a stock to raise cash, you are given a choice of selecting
which stock to sell, or else you can let the program decide on which stock or stocks
will be sold, randomly. This courtesy is extended only if the margin call comes
when it is your turn -- otherwise, if it is another player's turn at the time, the
program will sell your stocks for you, without bothering to ask which ones are to be
sold.

Note that in Wall $treet Raider, you can usually only borrow an amount equal to one
times your "adjusted net worth," and have to only maintain an "adjusted net worth"
equal to one-third of the debt. So if you start a game with $100 million of cash, and
use it to buy $200 million of stock, by borrowing $100 million from the bank, you
will get a margin call if the stock's value falls by more than one-third, so that your
stock is worth less than $133.3 million (in which case you would still have debt of
$100 million, but net worth of $33.3 million or less).

"Adjusted net worth," which is what the simulation uses when computing lines of
credit, credit ratings, and whether a margin call is required, is the same as net worth,
except when you own put or call options. In that case, the options are assumed to
have no value if they are "out-of-the-money," for purposes of calculating your
"adjusted net worth." If they are "in-the-money," only their intrinsic value (the
difference between the stock's price and the strike price) is counted as part of your
adjusted net worth. Thus, for a $30 (strike price) call option that has a market value
of $9 when the stock is at $35, only $5 (the intrinsic value) is counted as part of
your adjusted net worth -- the $4 of time value is not counted unless or until you
actually turn it into cash by selling the option.

18
In Wall $treet Raider, if you have control of the lending bank, you can initially
borrow up to 2 times your adjusted net worth if playing at Difficulty Level 2, or 3
times net worth if playing at Difficulty Level 3 or 4, which gives you more rope
with which to hang yourself, essentially. While you might find the additional
borrowing power can be helpful, it is also MUCH riskier than if you could only can
borrow up to 1 times net worth. (For example, if you borrow fully up to 3 times
your net worth, then ANY DECLINE WHATSOEVER in the market price of your
investments will immediately result in a margin call.)

Version 3.10 introduced an additional kind of margin call -- where you have sold
stock short, and your adjusted net worth falls to less than 1/3 of the value of the
shorted stocks. In that case, money in the restricted "short margin account" will be
used to buy back enough stock, so that your adjusted net worth once again exceeds
the value of the shorted stocks. Of course, this will drive up the value of the stocks
you are forced to buy back, so it will be necessary to contribute more cash to the
short margin account. (And, and by the way -- your net worth will fall as you drive
up the price of the shorted stocks by buying some of them back -- another vicious
circle, which may trigger more short maintenance margin calls of this type, or even
may force the other kind of margin calls described in the preceding paragraphs,
which force you to sell stocks or bonds you own.)

Version 4.0, which implemented options trading, also introduced yet another kind of
margin call and additional margin rules. First, you should note that if you buy
options (puts or calls) and hold them "long," they may be quite valuable, but are not
counted as part of your net worth for purposes of the margin requirements discussed
above, unless they have some intrinsic value -- meaning that options you own must
be "in-the-money" to be counted as having any value, and then only the intrinsic
value is counted, not any additional "time value." In other words, such options are
treated as having a reduced value, limited to their intrinsic value (zero value if they
are "out-of-the-money"), until you actually turn them into cash by selling them.
Thus, buying puts or calls generally reduces your "marginable" net worth until you
sell the options, at which time your net worth is increased to some extent by the
sales proceeds you receive.

When you are buying options, it assumed that the options will have no initial
"marginable" value. But to the extent the option is "in-the-money" (i.e., has intrinsic
value, as opposed to time value), its intrinsic value is counted after you buy it for
maintenance margin purposes (that is, for determining when you will receive a
margin call) and for computing your line of credit or credit rating.

Thus, you must generally be able to buy options for cash, or by borrowing against
the value of other assets you own. However, when you view your portfolio after the
purchase, it will include the full value of any options you own, showing your "real"
net worth, and at the end of the game, any options you own will count as part of
your net worth in determining who won the game.

19
 The reason options are not "marginable" in the real world or in this simulation is
that they are very volatile assets, which can become worthless in a heartbeat, based
on a fairly small fluctuation in the underlying stock. Thus, banks or other lenders,
such as stock brokers, don't like to lend people money based on such ephemeral
"security." (But in this simulation, lenders do give you credit for the intrinsic value
(if any) of options have purchased, for purposes of computing your available line of
credit and your credit rating, and for deciding when you will receive a "margin
call." In the real world, your stockbrokers will treat any options you own as having
zero value for margin purposes.)

If you own long option positions, and receive a margin call that puts you in a cash
deficit with no line of credit to borrow against, your banker (the software program,
in this case) will immediately force you to sell off some or all of the options, if the
only assets you have left to sell are stocks and options. It won't ask your permission
-- it will just sell the options, immediately.

When you sell options short, the value of the shorted options is a liability, offset by
the asset, cash, you receive from selling the options. Thus, there is no net effect on
your net worth. However, there are limits on how many options you may sell short
-- you may not sell so many options that the total liability from such shorted options
is more than twice your net worth (computed by ignoring the value of any LONG
options you own). In addition, if your net worth (adjusted to exclude the value of
long options you own) falls below 1/3 of the value of the options you are short, you
will receive an options maintenance margin call.

An options maintenance margin call will force the sale, first, of any long options
you own, which may increase your "adjusted" net worth instantly, which may solve
your problem. If not, and you run out of long options to sell off, you will next be
forced to buy back some of the options you are short, at the "asking" price for each,
in order to reduce your shorted options liability. This continues until your net worth
exceeds 1/3 of the amount of the shorted options liability (or until you are broke,
whichever comes first). Of course, if you are already in deep financial trouble,
being forced to buy back the shorted options may force you to sell stocks or other
assets you own, if buying back the options creates a cash deficit, creating other
problems for you. It can be a vicious cycle, so be careful not to sell too many
options short, or you can be wiped out very quickly if the shorted options move up
significantly in price.

Beginning with Version 5.0, corporations with a “BBB” or better credit rating (other than
banks or insurance companies) are allowed to sell put or call options short, including
“naked” options. However, if the liability created by such short options exceeds 50% of the
company’s net worth, it will be required to buy back some or all of the shorted options.
Also, if a corporation's credit rating falls to "B" or worse ("CCC," "CC," "C," or "D"), it
will be forced to close options positions until it has at least a "BB" credit rating or has
closed all options it holds or is short.

20
 WHAT IS A "LINE OF CREDIT"?

The amount you see as a player's or company's "line of credit" on the main Wall
$treet Raider screen, or in financial "profiles," is actually the player's or company's
unused line of credit from the lending bank -- that is, the amount which the player
or company in question can borrow (if any) from the bank at that moment. For more
details, click here.

 WHAT IS "CHEAT MODE" IN WALL $TREET RAIDER?

As you may have noted, one of the menu items on the "SETTINGS" menu of the
main Wall $treet Raider screen is either: "Cheat Mode: ON" or "Cheat Mode: OFF".
The default, at the start of any new game, is "ON." Click on this item to toggle
Cheat Mode on or off.

If Cheat Mode is turned "ON," it means that, if you control one or more companies,
you may occasionally be presented with a memo from your staff, asking you to
decide on whether or not the company should engage in certain less-than-honorable
or downright illegal activities, which can sometimes result in very quick profits. All
you need to do is make a "Yes or No" decision in such Cheat Mode scenarios.
Sometimes, if you engage in such activities, you will profit handsomely; other
times, your unethical actions may be discovered or have other unhappy
consequences. Sometime, the choices will be between taking an honorable (and
legal) stance, which can be very costly, or merely avoiding such costs by doing the
sleazy thing, so the choices are not always good ones.

If you would prefer not to be tempted to take such short cuts, you can turn Cheat
Mode "OFF," and try to get rich honestly, and by shrewd investing, rather than by
engaging in abhorrent or corrupt activities. Being somewhat of a student of human
nature, we know most players will choose to "do the right thing." (Heh!)

 HOW DOES TIME PROGRESS IN THIS SIMULATION?

Generally, time moves forward as earnings are calculated for all the existing
companies, one at a time. A calendar quarter ends when all of the existing 1000 to
1590 companies have computed their earnings for that quarter. When the stock
ticker is moving, time progresses fairly rapidly. However, even when you turn off
the stock ticker, you will note that the "news ticker" occasionally moves, as you
move among the various research menus or do transactions. Each time you close a
submenu, several companies earnings are computed, and if "news ticker" items are
generated, the news ticker will move one tick for each such item. The same is true
each time you complete (or cancel) a transaction, when the stock ticker is turned
off.

21
 Also, each time the "Computer" player takes a turn, 50 companies' earnings will
quickly be computed before your next turn can begin, even though the stock ticker
automatically halts when any player's turn ends.

 IS THERE A "BACK DOOR" TO WALL $TREET RAIDER?

Yes. If you are finding it hard to build up enough net worth to take over large
companies, Wall $treet Raider has an unpublicized "back door" you can use to add
all the money to your bank account that you desire. Just double-click on the Wall
$treet Raider logo image on the main screen, and a dialog box will pop up, asking
you how much money you want to have added to your account. (Or you can enter a
negative amount, if you want to bankrupt yourself, just to see how that feels....) Any
amount you add to your bank account, using this feature, will also be added in equal
measure to the bank accounts of the other players, just to keep things even. But if
you enter a negative amount, only your cash balance will be reduced.

Note that this "back door" only works if "Cheat Mode" is turned on. Also, if you
cheat in this manner, your ending score will be disregarded as a possible "High
Score." As you may have noted, you can click on the "GAME OPTIONS" menu
and select the "High Score" item at any time, to see what the highest (legal) game
score is for your copy of Wall $treet Raider. Only a "score" -- ending net worth -- of
over $100 million U.S. will be recorded by the program as a "high score" or record
net worth, and then only if the game length was no more than 35 years. (An
experimental, 999-year version of Wall $treet Raider is available, free of charge, to
any registered user, upon request to Ronin Software in case you were wondering
how you can play a game of longer than 35 years.)

In versions later than v. 7.01, a “CHEAT MENU” pops up when you double-click
on the logo (or in some versions, the Cheat Menu is accessible from the MISC
MENU). The CHEAT MENU has 3 items, the first one being the “add cash” option,
similar to prior releases. Two other cheats, involving inside information, are now
available on this menu – receiving advance notice of upcoming mergers or
information on a surprising upcoming major change in a company’s earnings –
either for the better or for the worse. Buying (or shorting) the stock after received
the “leaked” insider information is usually quite profitable. Your “high score”
possibilities will not be disqualified if you use either of these two new cheats – but
you will risk massive fines for trading on illegal inside “information.” (The more
often you trade on such inside information, the greater the odds that you will be
caught and fined by the authorities, of course.)

 HOW DO I EARN EXECUTIVE COMPENSATION (SALARY, BONUSES,

AND STOCK OPTIONS) IN WALL $TREET RAIDER?

To earn compensation income, you need to obtain control of a company, which

means at least 20% control, and you can then have the company elect you as its
Chief Executive Officer (CEO) and begin paying you salary and bonuses and

22
possibly granting you executive stock options, by clicking on the "Elect CEO"
button on the Management Menu.

Once you become the CEO of a company, you will receive an annual salary, based
on a formula that is based in part on how large the company is (but not counting
non-operating assets, such as cash, bonds, or stock investments of the company).
Salary payments are paid to you in quarterly increments. The minimum annual
salary is $200,000 U.S. (0.2 million).

You may also receive a year-end bonus at the end of each year. In Version 5.10 and
later, the simple rules for executive bonuses have been made more complicated and
bonuses are now more difficult to earn, generally, but if you can generate more than
15% earnings growth each year for several years, you may now earn bonuses of 3, 6
or even 10 times your annual base salary, instead of the old maximum bonus limit
of 3 times salary in prior versions of the game.

Under the new compensation formula, if the company's operating earnings for the
current year are negative, or are no greater than 115% of the earnings in the
previous year, you receive no bonus, (unless you control 51% of the company).
Also, the program now keeps track of when you were hired as CEO, and you only
receive bonuses (generally) if you were hired before the current year, or before any
year that is taken into account in computing your bonus, where you have managed
to put together a string of annual earnings increases of more than 15% each year.

For example, if a company’s earnings increased each year in the years 2014, 2015,
and 2016 by over 15% a year over the prior year, you could earn a maximum bonus
of 5 times base salary in 2016. However, to get credit for the increased earnings in
those 3 years, you would need to have become the company’s CEO in 2013 or
earlier (and have remained as its CEO the whole time). In short, you can’t pick out a
company that has a great earnings growth record, take control, elect yourself as
CEO, and begin receiving huge bonuses based on what the company has already
done. For the company in the above example, you would receive no bonus in 2016
if you became its CEO in that year (except for a 100% bonus if you own or control
51% of the company).

Thus, if you become CEO of a company in Year 1, and increase its earnings by over
15% (and show a profit) in Year 2, you will receive a bonus of 150% of base salary
in Year 2. If you increase its earnings again by over 15% in Year 3, your bonus for
that year will be 3 times salary, and if you increase its earnings by over 15% again
in Year 4, your bonus will be 5 times your salary in Year 4.

However, if you control 51% of the stock of the company, your board of directors
will be more generous (since you have absolute control) and your bonuses will be
twice the amounts noted above: 3, 6, or 10 times salary. In addition, where you
control 51% of the company’s stock, you will always receive a bonus of at least

23
100% of your base salary, no matter how badly the company performs under your
direction and regardless of when you became its CEO.

Starting with Version 4.60 of Wall $treet Raider, if you are the CEO of a publicly-
traded company, you may also receive a grant of executive stock options on that
company's stock at the start of each quarter. The amount of the options you are
granted will depend on your ability to increase the company's earnings.

For example, if you are the CEO of XYZ Company and it had an operating loss in
its most recent quarterly earnings report, you will not receive any stock options.
Even if XYZ earns a profit, if its earnings are down from the same quarter in the
previous year, you will also not be granted any stock options following that
quarter's report. However, if XYZ's per-share profits show an increase compared to
the last year, you will be granted options on at least 1% of the stock of XYZ. If you
are able to increase XYZ's earnings by 15% or more for the quarter, you will instead
be granted options on 2% of XYZ's stock, or 3% if you also happen to control more
than 50% of XYZ's stock, through direct or indirect holdings.

Thus, in short, as CEO you have to perform, by increasing a company's earnings, in

order to be granted stock options. (In Version 7.51 and earlier versions of W$R, you
received options on 2% of the company's stock every quarter, no matter how badly
you managed the company.) If you are able to keep a company's earnings growing
steadily, you will not only receive more options (and bigger
cash bonuses), but the stock should rise, making your options
worth more and more.

In Version 4.70 and later, the granting of the options is a non-taxable event, with the
strike price on each grant set at the current market price. The cost of such options is
not an expense for the company at the date of grant and you are not taxed on receipt
of the options. The options are "restricted," in that you may not (voluntarily) sell
them until one year later. Then, if you do sell them, they will be sold back to the
company at market value (with no commissions charged) and the amount you
receive will be taxable, but at favorable capital gains tax rates. The amount the
company pays you to cancel the options is an expense to the company at that time.
If you hold the options until they expire, and either exercise them or receive cash
settlement at expiration, any bargain element is an expense item for the company,
which either buys back the options from you at their intrinsic value (excess of stock
price over option exercise price) or, if you are exercising the option, the company
issues new stock to you at the exercise price and buys stock on the open market in
an equal amount at the market price, so that there is no dilution of the company's
stock.

If you allow the option to be settled (bought from you) at expiration, the amount
you receive is income (capital gain). If you instead allow the calls to be exercised,
you will not incur any taxable income, but your cost basis for the stock you receive

24
 will be the exercise price. If options expire worthless, there is no expense for the
company and no income taxable to you, the executive.

A company will save money (improving its earnings) if it does not pay a CEO
salary or bonuses, or grant stock options. Thus, you may sometimes choose not to
receive CEO compensation, if you prefer not to clobber your company's earnings. If
you are already the CEO of a company and wish to resign (without becoming CEO
of a different company), click on the "Resign as CEO" button on the Management
Menu.

 WHAT IS THE "GOODWILL" ITEM ON MY COMPANY'S BALANCE

SHEET?

In Wall $treet Raider, when a company acquires profitable capital assets from
another company, it may have part of the purchase price (the premium paid because
the assets were highly profitable) allocated to an account called "goodwill." As in
the real world, this is merely an accounting convention. For example, if a company
acquires another company, such as one in a service business that has almost no
assets but its good name and highly skilled employees who are able to generate
good profits, and the buyer pays many millions for the company, it obviously
cannot allocate all of the purchase price to the few tangible assets of the acquired
company, which may be nothing more than a few pieces of office furniture and a
supply of paper clips. Most of the purchase price would, therefore, instead be
allocated to one or more intangible assets, such as "goodwill." For details on how
"goodwill" accounting works in this simulation, click here.

 WHAT IS A "SHORT SALE" OF STOCK?

In Versions 3.10 and later (for Windows) of Wall $treet Raider, you can sell a stock
"short," if you expect the stock to go down, as well as buy stocks you expect to rise
in price. A short sale simply consists of borrowing stock that you do not own, and
selling it now, with the expectation of buying it back (cheaper, for a profit) in the
future, and returning the borrowed shares to their owner. In W$R, only players (not
your corporations) can sell stocks short. The "computer player" is not allowed to
sell short. However, the computer player may try to "short squeeze" you if you sell
stocks short, and put yourself in a vulnerable position. For example, the computer
player may acquire (by buying, mergers, etc.) enough of a shorted stock that you are
forced to cover (buy back) the stock at a higher price or at an inopportune time.

Short selling, by its nature, is very risky, since you can lose nearly infinite amounts
if a stock you short goes up greatly in value -- unlike buying a stock, where you can
only lose 100% of your investment. That is why, in the bad old days on Wall Street,
there was a famous saying about short selling:

"He who sells what isn't his'n, must buy it back, or go to prison."

25
In W$R, the proceeds of the sale, when you sell stock short, do not go into your
regular cash account. Instead, the money must be kept on deposit in a "short margin
account." You must maintain an amount on deposit in the short margin account at
all times that is equal to the value of all the stock you have sold short (since you
will have to buy it back at some time). Thus, any time the value of the stocks you
have sold short goes up, cash must be added to the short margin account, from your
regular cash balance. Or, if (as you hoped) the stock or stocks you have sold short
decline in value, you will have excess funds in your short margin account, which
are immediately distributed to you.

Accordingly, when you have sold any stocks short, money will be transferred back
and forth between your cash account (bank account) and the short margin account,
as the stocks you have shorted fluctuate in value, and you will notice that your cash
balance fluctuates up and down every few seconds, when the stock ticker is
running. This is because the software "marks to market" your short positions every
few seconds -- that is, it compares the value of the negative (short) positions with
the amount on deposit in the short margin account, and transfers cash back and forth
to keep the short margin account balance equal to the (negative) value of the shorted
stocks, a liability.

The amount you have on deposit in the short margin account is one of your assets,
but is restricted. You don't earn any interest on it, and you can only use the money
in the short margin account to buy back one or more of the stocks in which you
have a short position. If your short positions are all closed out (such as where your
only shorted stock becomes worthless in bankruptcy), any funds remaining in your
short account are distributed to you, since you don't have to buy back stock that has
become worthless.

Note that if you are short a stock when it pays a dividend, you have to pay an
amount equal to the dividend on the shorted shares. (Payable, in theory, to the
person who loaned you the borrowed shares, since the dividend paid by the
company goes to the person who owns the shares now, to whom you sold them.) In
versions after v. 3.10, such "short dividends" you have to pay are no longer
deductible, except as capital losses. (Which is only fair, since, for example, a large
extraordinary dividend of $40 a share that reduces a stock's value from $50 to about
$10 would give you an instant $40 a share capital gain if you covered your short
position right away after incurring the cost of paying the "short dividend" on such a
distribution.)

There are limits on how much stock you can sell short:

o You cannot "sell short against the box" (sell a stock short in which you
retain a "long" position in the stock), a tax avoidance gimmick sometimes
used in the real world, since a gain on "long" stock isn't recognized when
you lock it in by selling an offsetting and equal amount of the stock short);
o You cannot sell short more than 20% of the total stock of any one company;

26
 o Stock of a particular company can only be sold short if there are enough
"public" shares of the stock that can be borrowed, and the maximum amount
that can be borrowed (by all players, total) is 50% of the publicly-traded
shares. This means that if the amount of "public" stock is reduced, such as
by purchases by other players or companies, by mergers, or LBO buybacks,
the total stock shorted may exceed the 50% of publicly-traded stock limit (or
the 20% of the company individual limit), in which case the players who are
short the stock will be forced to buy back some of the shorted stock (or will
have to buy back all of the short position if all of the public stock is bought
up or acquired otherwise, such as in a merger).
o You cannot sell short a stock of a company that you control. Doing so would
be a severe conflict of interest for you, as an "insider," betting against your
own company's stock, so it is not permitted. Also, if you or a company you
control take control of a company whose stock you have sold short, you will
be forced to cover your short position. If you try to take control of another
company that controls the company you have shorted, you will sometimes
be warned before you buy that you will be forced to cover the short position
-- but in some cases, where control of the shorted company is through a long
chain of companies and you buy control of a company near the top of the
chain, you may not be warned, if there is a complex ownership structure.

There are also margin limits that may prevent you from selling stock short, or may
force you to immediately cover (buy back) existing shorted stock positions if you
cease to meet the "maintenance margin" requirements for your short sales positions:

o When making a short sale, you must have a net worth equal to at least 50%
of the value of the short margin account when the sale is completed;
otherwise, the short sale is not permitted; and
o You must maintain (maintenance margin) a net worth equal to at least 1/3
(33 1/3%) of the value of your shorted stock. If your net worth falls below
1/3 of the value of your short account, you will be forced to buy back
enough shorted stock so that your net worth once again exceeds 1/3 of the
value of the shorted stocks. (Naturally, your forced buying will tend to drive
the stock price up further, reducing your net worth, which may trigger more
forced covering.)
o You will also be forced to cover a short position (eventually) if you have a
short position in a stock and later acquire control of the company, through
another company you control. Within one month or less (of game time) you
will be automatically forced to cover the short position in the controlled
company.

Now you know all the basic ground rules you need to know to play WALL $TREET
RAIDER, and you are ready to begin. Depending upon how much you already know about
economics and corporate finance, there may be many more fine points for you to learn
before you become an accomplished player. To get started, however, you do not have to
know anything about corporate liquidations, short selling, or junk bond financing. That will

27
come with experience, as you try different techniques and notice the results. "Learn through
pain -- the best teacher," is our motto. :-)

NOTE: THE REMAINDER OF THIS MANUAL IS FOR REFERENCE ONLY -- YOU

HAVE NOW READ ALL YOU NEED TO IN ORDER TO HAVE A BASIC WORKING
KNOWLEDGE OF WALL $TREET RAIDER. THE REST OF THE MANUAL IS
PRIMARILY FOR THE USE OF THOSE PLAYERS WHO WISH TO UTILIZE MORE
SOPHISTICATED TECHNIQUES AND WANT SOME IDEAS FOR IMPROVING THEIR
FINANCIAL STRATEGIES IN WALL $TREET RAIDER.

28
 OVERVIEW OF HOW WALL $TREET RAIDER
WORKS

CHAPTER IV.

A. BASIC STRATEGIES IN WALL $TREET RAIDER.

The goal of Wall $treet Raider is, very simply, to accumulate as much wealth as possible
and, if possible, to send all your competitors (other players) to the poorhouse (also known
as bankruptcy). How you do it is up to you, as there are many, many possible strategies
(that we know of), and players of Wall $treet Raider keep dreaming up new strategies that
had never occurred to us.

Some of the basic types of strategies we can suggest to help players make their money
grow are as follows:

(1) TURN AROUND A COMPANY. Take control of (which means to buy at least 20%
ownership of) an undervalued company, and seek to "turn it around." In most cases, you
should look for a company with a strong balance sheet (that is, with a good credit rating,
such as AAA or AA), preferably in an industry that is currently suffering from a low level
of profitability, but which you feel may soon take a turn for the better. Look for an industry
where most of the larger companies are growing (in terms of planned capacity expansion)
at a rate that is lower than the rate of demand growth for that particular industry.

The "Research Report" on any industrial company will tell you at a glance whether or not
the supply/demand situation in that industry is improving or deteriorating at any given
moment. You can also use the "Database Search" feature to do a database search, and to
exclude from consideration all those companies in industries where the supply/demand
situation is getting worse.

Ways to make your company more profitable would include spending heavily on R & D or
advertising (depending on the type of industry a company is in), changing (firing) the
existing management team (using the "Change Managers" button on the "Management
Transactions" submenu). Or you can increase your company's growth rate (except for banks
or holding companies) by increasing spending on business assets (plant and equipment,
etc.), which may increase the company's "market share" in its industry. (Use the "Set
Growth Rate%" button to change the growth in business assets.)

29
All other things being equal (they seldom are), the greater a company's market share in its
industry, the more profitable its business, as compared to its competitors.

Restructuring ("Restructure" button in the Management Transactions submenu) is yet

another possibility. This will result in a large charge off against the current quarter's
earnings, so you may have to ride out a temporary drop in the company's stock price in
some cases as a result of doing a restructuring, but the restructuring should improve its
earnings thereafter. In general, the more a company is willing to spend on a restructuring,
the larger the expected increase in its profitability. However, a very large write-off for
restructuring may harm the company's credit rating, causing an increase in interest expense
paid on bank loans.

One way to improve a company's earning power, if it has a large amount of indebtedness, is
to try to reduce its debt burden, or perhaps improve its credit rating, or both. Anything you
can do that improves its credit rating will reduce the interest rates a company pays on its
bank loans.

In some cases, you may be able to decrease your company's interest rate paid on loans by
merely repaying enough of its debts to improve its credit rating, perhaps selling off some of
its assets, if necessary to raise cash. Another approach would be to have the company issue
new stock in a "public offering" or "private offering," or in a merger where it issues stock
to take over another company. Issuing more stock will increase the company's net worth,
thus improving its credit rating, and if the stock was issued for cash, in a public or private
offering, you can further improve the credit rating by using some or all of the cash to pay
off debts.

Or, if a company is losing money on its business capital assets (or earning a low rate of
return on assets), you may want to decrease its asset growth rate to -10%, which means that
it will be turning 10% of its business assets into cash each year, through depreciation,
which cash can be more profitably invested elsewhere.

In some cases, if a company has issued bonds that are trading at well under face value
(under 100, that is), it can be profitable to buy back the bonds on the open market, or from
banks or insurers that may own some of the bonds. Doing so not only will reduce the
amount of bonds outstanding (thus reducing interest expense), but if, for example, $200
million of bonds are bought back at 90, or for a total cost of $180 million, the $20 million
difference is a profit that will increase your company's net worth, and thus, perhaps,
improve its credit rating. However, the gain or loss when buying back its bonds is treated as
an "extraordinary" item of income, and not part of "operating earnings," so it will have
little effect on the company's stock price, even if the gain or loss is large.

(2) MONOPOLIZE AN INDUSTRY. Attempt to gain a monopoly or a near-monopoly

position by controlling the main companies in a particular industry. If you can buy up
control of companies with a large percentage of "market share" in a particular industry, you
can then reduce their rates of capacity growth, which may make the supply/demand
relationship for that industry very favorable. That is, by reducing "supply" while demand

30
increases, you can create artificially high levels of profitability for that industry. Sounds
easy, doesn't it? Also sounds like price-fixing, too.

But beware!

If you control companies in an industry that, together, have over a 50% market share, you
become much more vulnerable to successful "antitrust" lawsuits from opposing players.
While you can be sued for antitrust violations even if your companies have less than a 50%
market share, the odds of a successful suit against you go up exponentially above 50%.
Also, be aware that government antitrust enforcement agencies will make it difficult for
you to take over too many companies in a particular industry, although the really
resourceful player will eventually find loopholes to get around the government anti-trust
restrictions. (However, it is much harder to find any such loopholes in this Windows
version of Wall $treet Raider than it was in the old DOS version, for those of you who are
long-time Wall $treet Raider players.)

For example, if your company is very large and rich, it may adopt a rapid growth strategy
to both increase its market share and make the industry as a whole so unprofitable that
many of the smaller competitors either go out of business or become financially crippled, in
which case they will be forced to sell off their assets and stop growing, all of which will
further increase your company's market share.

(3) STARTUPS. Wall $treet Raider now allows you to do startups of new companies in any
industry. You are limited to creating a maximum of 3 startup companies in any 2-year
period. One advantageous strategy can be to find a very profitable industry, and start up a
new company in that industry. Of course, you could try to buy up an existing company in
that industry, but if the industry is very "hot" at the moment, you may have to pay 5 or 6
times net worth, or more, to acquire the stock of an existing company. Thus, to buy up a
company with $100 million in assets, you might have to pay $500 or $600 million for its
stock.

In contrast, if you put $100 million into a new company in that industry, you would incur
some startup expenses, but you would have nearly $100 million of assets in that industry,
on an investment of only $100 million. Of course, it may take a while before a new
company operates as profitably as most of its competitors, so it is a good idea for it to
spend heavily on R&D or marketing, or do some restructuring shortly after the company is
started up, to improve its return on assets, either of which tactics will reduce its profitability
-- but that will not matter too greatly, since it will have losses initially from its startup
expenses, anyway, so incurring larger losses won't have much effect on the value of its
stock. Also, the initial losses can be carried over and used, for tax purposes, to shelter
earnings from income tax in future quarters or years. For more on tax strategies, see the
next item.

COST SAVING TIP FOR STARTUPS: Since startup costs for a company are a
percentage of the initial capital invested, such as 20% for a typical industrial company, you

31
can save on such expenses by putting in the minimum amount of initial capital, such as
$100 million, instead of the $1,000 million you may want to put into the new company, so
that startup expenses would only be $20 million, instead of $200 million. Then you could
make a capital contribution of the other $900 million, after the company has been started
up.

(4) TAX STRATEGIES. In Wall $treet Raider, as in the real world, income taxes can take
nearly half, or in some cases even more than half, of a company's profits. Thus, if you can
reduce the taxes you or your companies pay, that can greatly increase your after-tax profits
and your personal net worth.

For corporations, note that a company that has a large amount of tax loss carryovers (from
losses it incurred in prior years) can be an excellent company to use to make profitable
investments, either in business assets or in stocks of other companies. For example, if you
own Company A, which has large tax loss carryovers, you might have it merge with
profitable company B, or buy up at least 80% of the stock of Company B, which will
become a subsidiary that can report its taxes on a "consolidated" basis with A.

For example, assume Company A has tax loss carryovers of $1 billion ($1000 million), and
the tax rate is 50%. If Company A earns zero on its assets other than its holdings of
Company B, and Company B earns $300 million in the next quarter, Company B would
"pay" Company A $150 million (its share of any taxes Company A might owe), but
Company A would pay no taxes on its consolidated tax return, because of its large loss
carryover. So Company A's loss carryovers would entirely shelter the earnings of its 80%
or greater subsidiary, Company B.

However, if Company B has the tax loss carryovers, rather than Company A, and Company
A acquires 100% of the stock of B, B's tax loss carryovers can ONLY be used to shelter its
income (or that of ITS subsidiary, Company C, for example), but cannot shelter the taxable
income of the parent Company A.

The solution? In that situation, if A owns 100% of Company B, and both are in the same
industry (other than the holding company, banking or insurance industries), Company A
might want to liquidate Company B, in which case Company A would "inherit" the tax
losses of Company B. (This is somewhat like the real world tax rules in the U.S., although
much more lenient than the real world tax rules, which severely limit the used of tax losses
where there is a change of ownership of the "loss company.") But caution: if either
company is a holding/trading company, then the tax losses of the liquidated subsidiary will
disappear when it is liquidated, and will NOT be "inherited" by the surviving (parent)
company!

Another approach to using a company's tax losses would be where you, as an individual,
have a lot of cash and taxable interest and dividend income, so that you are paying a lot of
individual income tax each year. If you acquire a company that has large tax losses, you can
contribute a lot of your cash (doing a capital contribution) to the company, if you own

32
100% of it. Once the cash is inside the company, the interest earned on that cash will be
sheltered by the corporation's tax losses. While you will pay tax on the dividends if you
pull that money out of the corporation, you can simply hold on to the stock and never pay
that tax -- or, after the tax-free (tax-sheltered) income has increased the value of the
company's stock, you can probably sell the stock for a gain, and you will only pay tax on
the gain at capital gains rates, which are always MUCH lower than ordinary income tax
rates for individuals in Wall $treet Raider (as in the real world, in most countries).

NOTE: In the Wall $treet Raider simulation, any unused tax loss carryovers of a
corporation are reduced by 10% at the end of each year, so such tax losses will gradually
shrink, if not used to shelter taxable income.

Individual tax strategies are also important, such as trying to avoid double taxation, which
occurs when you receive dividend income from stocks you own.

Unlike payments of interest on loans or bonds (or, for banks, interest paid on CD deposits),
a company does not get a tax deduction for dividend payments it makes. This means that
dividends paid out may be subject to double taxation, if paid to an individual player, since a
corporation has already paid tax on its income, and when it then distributes its income to
individual shareholders, the shareholders must also pay tax on the dividend. (This is also
true, to a much lesser extent, on dividends paid to corporate shareholders, but since
corporations that receive dividends only have to pay tax on either 0%, 20%, or 30% of such
dividends, the "double taxation" is either non-existent or relatively minimal, compared to
dividends paid to individual players.)

Accordingly, as a rule, try to avoid receiving a large amount of dividend income from
companies you control. It will often save you money to reduce the amount the company
pays out as dividends, and let the money accumulate in the company, raising the value of
your stock. That way, you don't pay the individual tax on the dividends, and will defer any
tax on the increase in value of the stock until (if ever) you sell the stock. Even then, the tax
rate on the capital gain will be much lower than the tax rate on ordinary income, such as
dividends.

Note that in Versions 2.20 and later, corporate taxes are still computed as before, but the
"tax provision," that is, the amount of tax that is applied to reduce pre-tax earnings (or
losses), is now simply equal to an assumed tax the company would pay on its pre-tax
earnings, rather than the actual cash amount of taxes it has to pay. For example, if
Company X has a tax loss carryover of 200 million from prior years, and earns 300 million
this year, only 100 million of its income is taxed, so it pays only 50 million if the tax rate is
50%. Under older W$R versions, the actual tax paid was used as the "tax provision," so
Company X would have reported, for financial reporting purposes, net income of 250
million (300 million minus 50 million of tax). However, in the current version, a "real
world" tax accounting approach is adopted. So even though X only pays 50 million of tax,
it would now have a "tax provision" of 50% (the tax rate) of 300 million, or 150 million, so
that it would only report net income of 150 million, not 250 million as before.

33
Remember, of course, that if the tax loss of 200 million arose the year before, in the older
versions of W$R the full amount would have been reported as a loss. In the current version,
in the loss year there would have been a negative tax provision (like a refund) of 50% of
the 200 million, or 100 million, so only a 100 million net loss would have been reported
(based on the assumption that the company would eventually get a 50% tax benefit for its
tax loss, in a future year when it turned a profit). Thus, in the older versions, Company X
would report (for financial statement purposes) a 200 million loss in Year 1, and a 250
million net profit in Year 2; while in the current version it would report a 100 million loss
in Year 1 and a 150 million net profit in Year 2. In both cases, the total net profit for the two
years is only 50 million, and the total "tax provision" for the 2 years is 50 million (the same
as was actually paid out). However, in the current version, as in real world corporate
accounting, the bottom line financial income is "smoothed out" considerably, by reporting a
tax provision that is somewhat hypothetical (-100 million in Year 1 and 150 million in Year
2), rather than using the actual cash amount of tax paid (which was zero in Year 1, 50
million in Year 2).

The upshot of this type of tax accounting (for financial reporting purposes) is that it is no
longer possible to generate an easy increase in a company's reported operating income,
merely by finding a way to shelter its income from tax, such as by merging with or
liquidating another company that has tax loss carryovers. You will still save the same
amount of taxes as before through such tactics, which will increase your company's net
worth, but because of the "imputed tax" on earnings (the "tax provision" that is used in
calculating after-tax earnings), the tax savings will not show up as increased net earnings
that would previously have given your company's stock price a huge boost. Now it will
only help your stock price by increasing the company's net worth somewhat, and perhaps,
its credit rating, after a few quarters of enjoying tax-sheltered earnings.

Note that, in computing the tax provision, no tax provision is computed on exempt income
of a corporation. Exempt income includes:
 The "equity earnings" of a controlled subsidiary (if it is not an 80%-owned
subsidiary, and thus not paying taxes with the parent company on a consolidated
basis). For example, if ABC Corp. owns 20% of SubCo, 20% of SubCo's earnings
"flow through" and get included in ABC's earnings, even if SubCo pays no
dividends to ABC.
 The exempt portion of dividends received from another company. If the dividends
are from a company that is less than 20%-owned and is not under common control
with the receiving company, 70% of the dividend is exempt. If ABC, the parent
company, owns 20% to 79% of the company (SubCo) paying the dividend, 80% of
the dividend is exempt. If ABC owns 80% or more of SubCo, none of the dividends
paid to it by SubCo are taxable.

Version 6.50 of Wall $treet Raider added another wrinkle to the computation of the tax
provision: tax credits (R&D and Investment Credits). For example, a company that earns
200 million pre-tax when the tax rate is 40% would have a tax provision of 80 million,
reducing reported net income to 120 million. However, tax credits that are actually used to
reduce tax (not

34
below zero) will reduce the tax provision. Thus, if the company had 20 million of tax
credits, that would cut the tax provision from 80 million to 60 million, so that the reported
net income would be 140 million, instead of 120 million, reducing the effective (reported)
tax rate to 30% (200 / 60).

In early releases of Wall $treet Raider, corporations did not pay tax or report a gain or loss
on sales of stock at a capital gain or loss. However, in the current version, such gains are
taxable, and losses deductible, at ordinary corporate income tax rates. Since the net gain or
loss is treated as an "extraordinary item," it is included in total reported net income, but not
in the more important figure, "operating earnings." Thus, one new strategy to adopt is to
save taxes by selling a stock on which a company has a loss, and recognizing the loss.
This usually will have no effect on "operating earnings" (unless total "extraordinary items"
for the quarter are 5% or less of total operating income, in which case the extraordinary
item is added to or deducted from "operating income" for financial reporting purposes).
However, recognizing the loss on the stock will save the company some money on actual
cash payments of taxes, so that it will have better cash flow and more cash to invest. It
may also reduce reported losses from the subsidiary, if it owned a 20% or more interest in
the stock of the subsidiary that was sold, if that subsidiary was reporting losses.

There are various corporate tax strategies you can use to reduce your controlled companies'
tax burdens. Some of these would include the following:

 Merging or Combining Companies. If you (individually) own 2 companies, ABC

and XYZ, and ABC is paying taxes, but XYZ has significant tax loss carryovers,
have XYZ acquire ABC, by merger or by your doing a capital contribution of at
least 80% of the ABC stock to XYZ, so that ABC becomes an 80% or greater
owned subsidiary of XYZ. By doing so, the companies will report taxes on a
"consolidated return" basis, so that ABC's profits fill flow upward and be sheltered
from tax by XYZ's tax losses. (Or, if both companies are in the same industry, and
are not holding/trading companies, you might consider merging them and then
liquidating the subsidiary into the parent. In that case, it would not matter which of
the two companies acquired the other.)
 Using Spin-Offs. If Company A owns a controlling interest in Company B (25%, for
instance), and Company B has 80% or more of the stock of Company C, which it
would like to sell, but would incur a large tax bite if it did, it may be possible to
save taxes if Company A has large tax losses that could shelter the gain on the C
stock if IT sold the C stock. This could be accomplished if Company B did a tax-
free spin-off of the 80% of C that it owned, which means Company A would receive
20% of the C stock (the rest would be distributed to the Public, or other
shareholders of Company B). Company A could then sell the C stock, with the gain
being sheltered from tax by Company A's tax losses.
 Making Capital Contributions of Stock. If Company X owns 100% of Company Y
(which has tax loss carryovers), and Company X also owns any amount (say 30%)
of Company Z, which X wishes to sell, but would have a large taxable gain,
consider having X do a capital contribution, where it contributes the 30% holding of

35
 Z stock to Company Y. Company Y could then sell the Z stock, sheltering the
taxable gain with Y's tax loss carryovers.

(5) SPECULATING IN JUNK BONDS. Since the Windows version of Wall $treet Raider
allows players, banks and insurance companies to invest in corporate bonds, it opens up
some possibilities for profitable speculation in junk bonds. Your goal and strategy would be
to find a way to improve the credit rating of the bond issuer by several notches, say from
"C" or "CC" to B or BB, which would boost the price of your bonds, which you could then
sell for a quick profit.

For example, if you see that a small company has a bad credit rating, such as a "C" rating,
you might be able to buy up a large number of its junk bonds at prices of 60 or 70% of face
value in some cases. After doing so, you could then make a relatively small investment in
its stock, to gain control, perhaps using a company whose stock you were getting ready to
sell, anyway, having that company either buy all the stock of the company whose bonds
you bought, and then have it contribute capital to increase the credit rating of the issuer
(and the price of your bonds); or, you or a company you control could buy just a bare
minimum of 20% of the stock, to control the issuer, and the issuer could either do a public
or private offering of stock, or both, to improve its debt/equity ratio and credit rating, or
could merge with another company, which would also increase its equity (net worth), if it is
the acquiring company. Either of those tactics could give you a large and quick increase in
the value of the company's junk bonds that you have acquired, as you improve the issuing
company's credit rating. You might also have the company do other things to improve its
credit rating, such as slowing its growth, paying down bank debt, or buying back some of
its bonds at below par (below face value) from other bondholders.

(6) GAIN CONTROL OF KEY LENDERS. Another strategy you should consider is to
attempt to take over a bank that lends to you, in order to obtain an expanded line of credit,
and to prevent another player from controlling that bank and freezing your line of credit. In
general, a player or company has a line of credit equal to 1 times "adjusted net worth." But
if the player controls the lending bank, the line of credit for a player doubles or triples
(if playing at Difficulty Level 2 or higher), to 2 or 3 times the player's adjusted net worth.
("Adjusted net worth" is simply net worth, reduced by the time value of any options owned
by a player or company. Thus, long option positions are treated as having no value if "out-
of-the-money," and if "in-the-money," only their intrinsic value is counted in adjusted net
worth. For example, if you own a $50 call option on XYZ stock, which is trading at
$53, and the call is trading at $7, only the $3 intrinsic value of the call is counted. Thus the
$4 "time value" of the call is deducted from net worth to arrive at "adjusted net worth,"
when computing your available line of credit.)

Corporate lines of credit remain at 1 times adjusted net worth, even if you control the
corporation and the bank from which it borrows, if playing at Difficulty Level 1 or 2.
However, in Version 6.60 or later, if you are playing at Difficulty Level 3 or 4, a company
can borrow up to 1.5 times its adjusted net worth if the Prime Rate is in the “normal” range
of 6.75% to 8.5%, if the company has an "AAA" credit rating. If the Prime Rate falls below
6.75%, the multiplier of adjusted net worth is increased to as much as 2x adjusted net

36
worth, if the Prime is 4% or lower. If the Prime Rate is above 8.5%, credit becomes tight,
and the multiplier will be less than 1.5x adjusted net worth, dropping to as low as 1.0x
adjusted net worth if the Prime Rate is above 15%.

If a company's credit rating is less than "AAA," the amount of its line of credit, as
calculated above, is then reduced by multiplying that amount by:

 .9, if credit rating is AA

 .8, if credit rating is A
 .7, if credit rating is BBB

You may wonder why, at the higher Difficulty Levels of 2 or 3, you may be able to borrow
2 or 3 times as much on a line of credit, if you control the bank you borrow from, since
being able to borrow more would seem to make it easier to get rich in this simulation.
Right? However, the opposite may be true -- if you are the type who will borrow right up to
the limit, up to 3 times your adjusted net worth, when playing at Difficulty Level 3 or 4, the
odds are quite good that you stocks or bonds may take a dip in value at some point, in
which case you will be forced into selling them off at the worst possible time, to pay
"margin calls." Thus, giving you all that credit at Level 3 or 4 of difficulty is a bit like
giving you enough rope to hang yourself with.... Or to bankrupt you, in any case.

A major advantage of controlling a bank is that, if you control a bank that lends to an
opposing player (or a company controlled by an opposing player), the opponent and his or
her company's line of credit can be frozen, if you use the ("Freeze/Unfreeze Loans" button
in the "Other Trans." submenu). This can sometimes be a crushing blow if the opposing
player or his/her companies are highly "leveraged" with debt or have little cash, or if they
are trying to expand their company rapidly, and suddenly find they can no longer borrow
because you now control the lending bank and have frozen their credit!

You can even call in 50% of the opponent's loan, at any time, if you control his or her bank,
using the "Call in Bank Loan" button command in the "Other Trans." submenu. You may
also call in up to 50% of a corporate loan, if the corporate borrower's credit rating falls
below "BBB," though you may not do a series of such call-ins of a corporation's loans,
where the corporation lacks cash or other liquid assets that can be used to pay off the loan
and already has a cash deficit (overdraft).

Another advantage of controlling a bank is that any company that you control which wishes
to prepay a bank loan (using the "REPAY LOAN" button) will incur a 2% loan prepayment
penalty, payable to the bank -- UNLESS you also control the lending bank, in which case
the prepayment penalty is waived. This also means that, if you control a bank that lends to
companies of opposing players, any loan prepayment by those companies will be subject to
the 2% prepayment penalty, which will benefit your bank. (However, the prepayment
penalty feature only applies if you are playing at Difficulty Level 3 or 4 and only if the
player chooses to make a loan prepayment; regular loan interest and principal payments do
not incur a penalty.)

37
(7) HARDBALL TACTICS AND MEAN, ROTTEN TRICKS. There are a number of
things you can do in Wall $treet Raider, if you want to "play rough." One, as already
mentioned in the preceding paragraph, is to get control of the bank or banks that lend to an
opposing player or to his or her main corporation, and to freeze the player or company's
line of credit, and perhaps even call in 50% of the loan.... And perhaps call in another 50%
of the remaining balance.... And so on.

Another tactic that can sometimes be effective is to have a company that you control file an
antitrust lawsuit against a company controlled by an opposing player, if the player's
company or group of companies are "monopolizing" an industry. Usually, such a lawsuit
will not be successful unless the opposing player controls over 50% market share in that
industry through his or her companies. Use the "AntiTrust Suit" button in the "Management
Transactions" submenu to file such a lawsuit against the target company. (You will have to
have control of a company in the same industry, in order to have it file the antitrust
lawsuit.)

Other, even more vicious (or even desperate) tactics are also possible, but are best used
only when you have a large advantage in net worth over the opponent. These would include
filing a harassing (phony) lawsuit against your opponent's main company, if it is small and
financially weak, or else spreading false rumors about it to harm its business and stock
price. By doing either, using the "Harassing Lawsuit" or "Spread Rumors" buttons in the
"Other Transactions" submenu, you may be able to drive down the price of your opponent's
main company to a point that he or she begins receiving "margin calls" and is forced to sell
off stock at depressed prices to meet the margin calls. Better yet, you might even be able to
completely bankrupt the opponent's company by filing a harassing lawsuit against it.
Naturally, if the opposing player had most of his or her net worth tied up in the bankrupted
company, the player would soon be bankrupt, too.

For example, let us assume you are doing quite well, are worth $10,000 million, and
control a number of companies, while your opponent is heavily in debt, and has most of his
or her net worth invested in small company XYZ, which has a net worth of only $400
million, consisting of $1000 million in assets and $600 million of debts. That might be a
good time to file a phony (harassing) lawsuit against company XYZ, which might cost
XYZ and your large company $500 million each in legal fees. While your company, if it is
large and solidly financed, might easily absorb the $500 million litigation cost, XYZ
company might be forced into bankruptcy, in which case the player's stock would become
worthless, and he or she would go bankrupt as well, and be kicked out of the game, leaving
you as the winner. If XYZ owned stock in a subsidiary, you might also want to do
something like use the "Spread Rumor" feature to start a false rumor about the subsidiary,
causing a fall in its stock price, which would weaken XYZ even further, helping to make
sure you push it over the cliff and into bankruptcy.

These are cruel, but effective tactics, if used in the right situation, to step on your
opponents when they already weak and in precarious financial condition. However, if they
survive, there is always a possibility that, in the harassing lawsuit, the court might decide
that you have filed a frivolous and malicious lawsuit, and could award some large damages

38
to the company you sued, which your company would have to pay to it, so using that
particular dirty trick can backfire on you.

Similarly, when playing against the computer, if you use the "Spread Rumors" feature
against the computer player's company, you can be sure that on its next turn, the computer
player will return the favor, starting a nasty rumor that hurts the stock price (and the
business) of your main company. (Of course, if, after starting a rumor and a harassing
lawsuit, you sell all your stocks and put your money in bonds or cash, then you don't have
to worry about countersuits or rumors hurting your companies, since you won't own any
stocks that will be at risk at the time.)

Another nasty tactic, which is available in v. 3.10 and later Windows versions (which allow
short selling of stocks), is to attempt a "short squeeze" when one of the competing players
has taken a significant short position in a stock. Since the player with the short position can
only maintain it as long as he or she meets short margin requirements and as long as
enough borrowed stock (borrowed from "the Public") is available, there are a number of
ways you can "squeeze" such a player, including:

 Buy up enough of the shorted stock on the open market to force the short seller to
immediately cover. Both your buying and the other player's buying to cover the
short position, if he or she has to, will tend to drive up the price of the stock,
causing the other player losses, and perhaps creating a gain for you, since you are
"long" the stock; or
 Have a company you control merge (take over) the company in which one or more
other players have short positions. This will force a covering of all such short
positions, since the targeted company will become a wholly-owned subsidiary of
your company, with no "public" shares the short sellers can continue to borrow; or
 If the player is in shaky financial condition, do something to drive down his or her
net worth (such as harassing lawsuits), in order to trigger margin calls, possibly
including forced covering of short positions to meet short position maintenance
margin requirements.

(8) EARN EXECUTIVE COMPENSATION AS COMPANY CEO.

In Wall $treet Raider, you can't pass 'Go' and collect $200, as you do in a certain well-
known board game. However, if you gain control of a corporation in Wall $treet Raider,
you can use your voting power to have the board of directors elect you as President or CEO
(Chief Executive Officer), in which case you will earn annual compensation, paid quarterly.
Once you control a company, go to the "Management Transactions" submenu, select that
company as the "Active Entity," and click on the Elect CEO button to elect yourself as
CEO, and you will immediately begin earning executive compensation.

As a general rule, the larger the company you control (in terms of its capitalization or stock
price), the larger the compensation you will be paid. However, for all companies except
banks and insurers, any cash, stocks, or bonds owned by the company reduces the adjusted
value of the company's capitalization, on which your salary is computed, under a fairly

39
complex formula. Thus, the highest salaries will be paid by an industrial company that has
mostly capital assets and "working capital" as assets, and that has relatively little cash or
stock investments in other companies that would reduce the valuation amount on which
your compensation is based.

In addition to your quarterly salary payments, you may also receive a bonus of 1.5, 3 or 5
times the annual base salary rate, if you are able to increase the company's earnings
consistently by more than 15% a year each year over a period of several years.
Furthermore, if you control at least 51% of the employer company's stock, you will receive
a bonus that is twice what it would otherwise be, or up to 10 times your annual salary in
some cases! Note that any earnings increases on which your bonus might be based will
only be taken into account if you were hired as CEO before such increase was achieved.
However, even if earnings are negative or do not increase, you will still receive a year-end
bonus equal to 1 times the annual base salary rate, so it pays to control at least 51% of the
stock of the company you are employed by!

It is generally a good idea to see which of the companies you control, if more than one,
pays the highest CEO compensation. That information is shown in the Financial
Profile for each company, and tends to vary as its stock price goes up or down. Note
that when you click on the "Management" Menu, the small textbox on that menu will tell
you if you could receive a higher annual compensation by becoming CEO of a
different controlled company than the one of which you are currently the CEO.

While your compensation is generally tied to the performance of the company's stock, or to
increases in annual earnings, you will always receive at least a minimum salary as CEO, of
$200,000 U.S. ($0.2 million) a year, or the equivalent in whatever other currency you may
have selected.

In addition to the cash compensation you will earn as CEO, Version 4.60 of Wall $treet
Raider added executive stock options as another form of compensation a CEO can receive.
At the beginning of each quarter, each player who controls a publicly-traded company may
be granted a stock option on up to 3% of the company's stock, with the strike price equal to
the stock's price at the time the option is granted. This can result in an expense charged to
the company if you sell the options back to the company after they have vested or if the
options have value at their expiration date. In either such case the company's earnings for
that quarter will be reduced, which is a significant trade-off, since lower earnings will tend
to depress the company's stock price.

The options you are granted cannot be sold for one year after the date of grant (when they
"vest"), so you cannot immediately turn the options you are granted into cash, but any
options you receive and do sell before they expire will qualify for favorable capital gains
tax treatment.

You should realize that in Wall $treet Raider, you probably won't win a game because of
your executive compensation you earned. It's just an "extra" item of income you can
generate, which is usually fairly insignificant compared to your investment gains or losses.

40
Also, be aware that you can only be the CEO/President of one company at any given time,
in Wall $treet Raider, but if you lose control of the company, you will not lose your job
(and executive perks) until the end of the year, unless you get yourself a new CEO position
at a company that you do control, or another player takes over the company and fires you,
by using either the "Elect CEO" command button to elect himself/herself CEO, or just by
using the "Change Managers" command button to get rid of the current management team
-- which includes you! But once you lose control of a company of which you are the CEO,
you will not be granted any more stock options, although you may continue to receive your
salary until the end of the year, at which time any “unvested” executive stock options you
had received from the company will be forfeited.

Also, note that when you have lost control of a company and eventually get "de-hired" at
the end of the year, you may sometimes receive a "golden parachute" termination bonus,
which can be fairly substantial. But don't count on it....

You should also consider the downside of drawing a salary from a company you control.
The salary it pays you is an expense that, after tax, reduces the company's net income and
cash resources, and thus may lower its stock price. In some cases, you may decide that you
do not need the salary, and that drawing the salary would depress the value of your stock
holdings more than the cash would benefit you. This is particularly true if the company in
question sells at a high multiple (P:E Ratio) of earnings, so that any decrease in earnings
will tend to have a magnified effect on the company's stock price.

To resign as CEO of any company, click on the "Resign as CEO" command button, on the
Management Menu.

(9) INCORPORATE YOURSELF! One simple but useful strategy to follow in Wall $treet
Raider, is to start the game by immediately doing a startup of a holding company, and
putting all your cash into that holding company. It will cost a few million to organize and
set up the holding company, but you can use the holding company for the rest of the game
to hold all your investments. Plan on never borrowing from the bank for yourself,
personally, which can result in margin calls that force you out of the game, broke.

Also, set the holding company's dividend payout ratio to zero, so you don't have any
dividend income to pay taxes on. Don't even pay yourself a salary from the 100%-owned
holding company. It is better to pay yourself a salary from a company in which your
ownership is only about 20% (or effectively less, like 4%, in the case of a 20% subsidiary
of a company you only own 20% of.) That way, the salary payment coming to you is
mostly being paid at the expense of the other shareholders. And don't sell your stock in the
holding company, either, since you will have to pay capital gains tax on it if it has gone up
in value.

There are several good reasons why it is smart to organize your finances this way in Wall
$treet Raider, using a holding/trading company from the very start of a game, instead of
investing directly in other industrial or financial companies:

41
  Corporate tax rates are lower than individual tax rates on income, so it's better if
you don't have any taxable income. So don't pay yourself a salary, unless you only
own a relatively small percentage of the company that is paying you the salary.
 Paying yourself dividends out of companies you own is a form of double taxation,
since the corporation gets taxed on its income, and then you get taxed (at an even
higher rate) when it pays the income out to you as a dividend. So leave the money
in the company and let it grow, increasing the value of your stock, unless you are
paying a lot of interest on bank loans, which can offset the dividend income.
 If the holding company sells stock it invests in and incurs a loss on the sale, the loss
is fully deductible by the selling corporation in Wall $treet Raider, whereas any loss
on stock you personally sell will not be deductible, unless or until you have capital
gains in the same year or a later year, against which the capital loss can be offset.

You don't have to worry about margin calls, if you don't owe any money. If your
corporation invests in stocks and they decline in value, its credit rating will suffer, but it
won't get margin calls, although it might have to accelerate its loan payments, if its credit
rating falls too far. (But beginning with Version 5.0, a corporation can get margin calls if it
has sold "naked" options short.) In a pinch, it can probably issue some stock to raise cash.
If there is no other good alternative, you might even borrow against your holding company
stock and make a contribution to its capital, if you still own 100% of the company, and
need to do that to keep it from going under.

If you do accumulate a little cash in your personal account, from salary payments from a
company you control, after taxes, leave it in cash (CD's), and pay off any debts you might
have incurred (to pay living expenses, for example). However, if interest rates should shoot
up to a very high level, you might want to take most of that personal cash and use it to buy
some long-term government bonds -- and plan on selling them if rates come down and the
bonds go up (significantly) in value.

Or, if you still own 100% of your holding company, contribute most or all of the cash
you've accumulated to the holding company, especially if it has tax loss carryovers.

NOTE: You will need to keep a little cash on hand to pay living expenses, which in Wall
$treet Raider are assumed to be $1 million U.S. (or the equivalent in other currencies) per
year, deducted at the rate of $0.25 million each calendar quarter.

(10) PASSIVE INVESTING. If you wish, you can avoid risky corporate takeover battles,
nasty lawsuits and other "hardball" tactics, or trying to manage one or more corporations in
an often difficult economic environment. Instead, you can just buy and sell stocks and
bonds that you think are likely to increase in value, buying only a few percent of the shares
of any company, so that you do not run the price up too much when you buy or depress the
price too much when you sell. In this way, you may diversify your portfolio into several
stocks (and bonds) at a time, rather than put all of your eggs into one basket by trying to
take over or start up a single company. If you are successful enough at trading, you may

42
decide at some point later in the game to cash in some of your investments and take over a
small company that seems to have unusual potential for appreciation, or start up a new
company in a highly profitable industry.

While the big profits (and risks) are mainly in stocks, you can also make some nice returns
on your investment by trading or investing in bonds, if you are smart (and lucky). When
you invest in either government or corporate bonds, you will be largely betting on the
direction of interest rates. If interest rates fall after you buy bonds, the market price of the
bonds will usually rise. Conversely, if interest rates rise, the value of your bonds will
usually fall.

Credit risk is generally not a problem when you invest in government bonds, which is why
they pay a much lower rate of interest than corporate bonds, which do have some degree of
credit risk, even for AAA-rated bonds. Corporate bonds rated BB, B, CCC, CC or C or D
(in default) are considered "junk" (high risk) bonds. Corporate bonds with AAA, AA, A or
BBB credit ratings are considered "investment grade" or better quality, lower-risk bonds.

Thus, when you invest in corporate bonds, you are not only betting on the direction of
interest rates, but you also want to invest in bonds of a company whose credit rating is
likely to improve (or at least not deteriorate). If a company's credit rating improves, you are
likely to make money if you hold its bonds, even if you are wrong on the direction of
interest rates. On the other hand, even if you are right about interest rates declining, you
may lose money (perhaps all of your money) on corporate bonds of a company whose
credit rating is downgraded, especially if it is downgraded to a "D" rating and perhaps even
goes bankrupt, making your bonds worthless or nearly so.

If you are not satisfied with being a "passive" investor in corporate bonds, see the above
segment on SPECULATING IN JUNK BONDS for some ideas on how to improve your
results when buying low-grade ("junk") bonds.

(11) OPTIONS TRADING. Version 4.0 of Wall $treet Raider added options trading (of put
and call options on stocks) to the arsenal of investment vehicles a player can use to build
(or lose) his or her fortune. There are five primary strategies generally used in buying or
selling (short) put and call options:

 Buying Call Options. A call option gives you the right to buy a stock at a specified
price, for an agreed period of time (up to 24 months in this simulation). Thus, if you
buy a call on a stock and the stock goes up in price, you will make a profit,
generally, if the stock goes up enough above the "strike price" (exercise price of the
option) to more than compensate you for whatever amount you had to pay to buy
the option. Buying calls can also be conservative strategy, if you buy the calls to
hedge your short position in the underlying stock, so you don't get hurt badly if the
stock goes up instead of down. (If the stock goes up, your profits on the calls you
own would offset your losses on the short position in the stock.)
 Selling Call Options Short. This is generally a riskier strategy, similar to selling a
stock short. If the stock goes down, you will make a profit if you sold calls short on

43
 the stock. If the stock goes up, you will usually lose money, although the option
premium you received when you sold it short will give you some protection, if the
stock does not go up too much. Your potential gain, if the option expires worthless,
is 100% of whatever you received for selling the call. However, as with short sales
of a stock, your losses are potentially unlimited if the stock moves against you (up).
You can also use short selling of calls as a conservative investment strategy, where
you are "long" the underlying stock, and want to hedge your bet on the stock.
Selling calls short against your stock position will generate some income for you if
the stock goes nowhere or goes up, and gives you some protection against a drop in
the stock. However, it limits your upside potential, if the stock rises above the
"strike price" at which you have agreed to sell the stock, since you will not share in
any appreciation above the strike price.
 Buying Put Options A put option gives you the right to "put" a stock to the person
who sold you the option -- at a specified price, for an agreed period of time (up to
24 months in this simulation). A put is, in effect, the mirror image of a call option. If
the stock underlying the put option goes down in price below the "strike price"
(exercise price) of the option, the put will have value, since it allows you to sell the
stock at a price above the market price. Accordingly, you want to buy a put option
on a stock if you think the stock is about to fall in price, so that buying puts is
somewhat like selling a stock short, except that your risk from buying a put is
limited to losing the cost of the put if the stock goes up instead of down. Buying
puts can also be a conservative strategy, where you own the underlying stock, and
want to "insure" your position in the stock against losses, but still enjoy the full
upside potential if the stock goes up -- less the cost of buying the put.
 Selling Put Options Short. Selling puts short is somewhat like buying the
underlying stock. If the stock goes up, you will make money, but your gain is
limited to getting to keep 100% of the price you received for selling the put, if it
expires worthless (to the buyer). However, your losses can be large if the stock goes
down, just as if you owned the stock -- except that you at least received the put
"premium" for selling the option, which will reduce your loss somewhat if the stock
falls (or eliminate your loss entirely in some cases, if the stock only goes down a
little). Selling puts short against a short position in the stock can be a conservative
strategy, as it will limit your losses if the stock goes up (so that the puts become
worthless, and you don't have to buy them back). However, doing so will limit your
profit if the stock goes down, far below the strike price.
 Buying or Selling Straddles. A straddle is, in simple terms, just a put option and a
call option with the same exercise price. For example, with XYZ stock at 31, you
might buy a call option at 30 for 4.00 and also buy a put option at 30 for 4.00.
Doing so is a bet the stock will fluctuate wildly before the straddle expires. Since
you've paid 8.00 for the two options, you would profit if, at expiration date, the
stock is more than 8 points above or below the strike price of 30 (above 38, or
below 22 a share). The flip side of buying a straddle is to sell a straddle short. In
that case, you are betting the stock will NOT fluctuate wildly -- below 22 or above
38 in the above example, if you were selling the put and call options short, instead
of buying them.

44
Note that players and most types of corporations may engage in any of the above option
strategies. However, banks and insurance companies in Wall $treet Raider generally cannot
trade options, except that they may buy puts and may sell "covered calls" against any
publicly-traded stocks they own, as a hedge against declining stock prices. Neither players
nor corporations a player controls may use options as a way to, in effect, short the stock of
a controlled company, by selling calls against its stock or buying puts on its stock, as that
would be a conflict of interest. However, you can sell calls or buy puts against a stock you
control and own as a hedge to protect your investment, but if you own, for instance, 20% of
a company you control, you can sell calls against that 20% of its stock, but not more than
that.

(12) TRADING COMMODITY OR STOCK INDEX FUTURES. Version 6.0 of Wall

$treet Raider added a dynamic new tool to your arsenal of investment strategies and tactics
– trading of commodity futures on crude oil, gold, silver, wheat and corn. Version 6.60
added trading in stock index futures, and Version 6.70 added the ability to buy and store
physical commodities (oil, gold, silver, wheat and corn). Futures contracts from 1 to 60
months out into the future can be purchased or sold short on any of those five commodities
or the stock index with only a 5% cash deposit of the “notional value” of the contract, plus
a 1% commission. Obviously, with such enormous 20-to-1 leverage, you can make very
large profits on even a modest move in the price of the underlying commodity or index – or
lose several hundred percent of your investment and be wiped out by margin calls in a
heartbeat if the price of the commodity moves against you. We have gone out of our way to
make the price behavior of the commodity futures as violent, scary, unpredictable, and
capricious as possible -- just as in the real futures markets.
You must at all times maintain a deposit in a commodity account equal to 5% of the
contract value, plus the amount of any accrued loss on the contract, or minus any accrued
gain. Thus, if a commodity's price moves against you, the program will automatically
"sweep" cash from your bank account into the commodity margin deposit account. On the
other hand, if the commodity's price moves in a favorable direction for you, cash will be
transferred from the commodity margin account to your bank account, even if that results
in a negative balance in the margin account. Your account is regularly "marked to market"
to reflect changing market prices of the futures contracts you hold.

When you close out a futures contract, either by selling it or buying it back if short, or
when it expires at its settlement date, you will pay another 1% commission but will receive
back any balance in the account attributable
to the contract that is being closed -- or, if the margin account balance for that contract is
negative, you will pay back that negative amount when closing the position.

Thus, if you have a highly profitable position and have a negative margin balance, you will
actually pay out cash when you close the position. (Your gain will have already been paid
out to you while you held the position, as it was marked to market.) No interest is paid or
charged on the commodity margin account balance in W$R.

A commission is usually paid when a futures contract is settled before expiration, except
for companies in industries that hedge by buying or shorting a certain commodity, such as

45
an oil company that sells its production forward, or an airline that buys oil futures, or a
Packaged Foods company that buys wheat or corn futures. No commission is charged
when a futures contract is settled at expiration, whether it is a cash settlement or when there
is a delivery of the physical commodity to or by the party owning or short the futures
contract.

Be aware that the "spot price" of commodities you see listed on the main screen will almost
always differ from the futures prices. Generally, futures will trade at higher prices than the
spot price (a condition called "contango"). In that case, the more distant the settlement
(expiration) date (up to 60 months out, in W$R), the more the futures price will exceed the
spot price. In some cases, however, usually when interest rates are expected to fall or when
commodity spot prices are expected to fall more than the “cost of carry” of the commodity
(storage, insurance, etc.) futures prices may actually be lower than the spot price, a
condition which is known as "backwardation." That, however, is very unusual, and almost
never occurs in certain non-perishable commodities like gold and silver. (Or in W$R.)

Both players and corporations are allowed to trade futures contracts in W$R, except for
banks and insurance companies. However, due to the risky nature of commodity trading
and the high leverage involved, a player or company must have at least a "BBB" credit
rating to initiate a futures contract. If a company's credit rating falls below the "B" level, it
will be forced to close out some or all of its commodity contracts. In the case of a player, if
the player gets a regular margin call from his or her bank and cannot raise cash by
borrowing, some or all of his or her commodity positions will be liquidated in an attempt to
raise cash. (Naturally, if a commodity's price moves against you, your commodities margin
account will be draining funds from your bank account, which may result in your running
out of cash and getting margin calls from your bank. This can lead to almost instant
bankruptcy if the price of a large futures position suddenly makes a big move opposite to
what you were expecting.)

For players, any gains or losses on trading futures are treated as capital gains or losses for
income tax purposes in W$R. For companies, gains or losses are generally treated as
"extraordinary" items that do not
affect operating income, when they speculate in commodities not closely related to their
sales or cost inputs. However, for an Integrated Oil or Oil Service and Drilling company,
gains or losses on oil futures are considered a "hedging" activity and thus directly affect
operating income.

Similarly, gold or silver futures trading by companies in the Precious Metals industry or
wheat or corn futures trading by companies in the Agribusiness industry, which also benefit
from high prices, are also considered to be operating income or losses. In addition, hedging
gains or losses are treated as operating income or loss for companies in industries that are
harmed by high commodity prices, such as Packaged Foods companies by grain prices, and
transportation industries (Rail, Airline, Shipping, Trucking, Air Freight) and Utilities,
which are greatly affected by oil (fuel) prices.
Companies in all such industries that need to engage in hedging activities, if not controlled
by a (human) player, will automatically sell futures when prices seem high if they have at

46
least a "BBB" credit rating (Oil, Oil Service companies will short oil, Agribusiness
companies will short wheat or corn, Precious Metals companies will short gold or silver),
or users of commodities may buy futures when prices seem low (transport and Utilities
companies will buy oil futures and Packaged Foods companies will buy grain futures).

Companies in the Securities Brokerage industry, if not controlled by a (human) player, will
either buy or sell short stock index futures, to try to take advantage of stock market trends.
The trading profits or losses on
Stock Index futures trades for securities brokers are treated like hedging income, as part of
operating income.

Earnings projections for such companies that hedge may fluctuate wildly when they have
hedges in place, since each updated projection of earnings bases the next quarterly earnings
projection in part on hedges that are likely to be lifted, assuming the current price of the
commodity will remain in effect until the end of the company's quarterly reporting period.
(But obviously, the price of the hedged commodity will fluctuate before then, so the
earnings projections are also likely to fluctuate considerably and the actual earnings may,
therefore, be much more or much less than was projected, depending on the commodity
price action.)

In W$R, commodity contracts are for very large quantities of the underlying commodity.
One oil contract is for 10,000 barrels of oil, a gold contract is for 10,000 Troy ounces of
gold, a silver contract is for one million Troy ounces of silver, and wheat and corn contracts
are each for one million bushels of wheat or corn. When you initiate a trade, the contract
will be for one or more such contracts.

Since players sometimes amass so much money (in the trillions), either fairly or more often
by cheating, the amount of commodities you could buy or sell short with 20-to-1 leverage
could become astronomical -- for instance, thousands of times more oil than exists in all the
oil reserves on the planet. To make things (slightly) more realistic, Wall $treet Raider limits
any single purchase or short sale of commodities to 10,000 contracts, or 100,000 contracts
in the case of crude oil. While you may do multiple transactions, the simulation only allows
you to be net "long" or net "short" a commodity to the extent of five times the above
single transaction
limits -- 50,000 contracts for each commodity other than crude oil, or 500,000 contracts for
crude oil.

(13) TRADING PHYSICAL COMMODITIES. Version 6.70 introduced the ability to buy
and indefinitely store physical commodities – oil, gold, silver, wheat, and corn, but not the
Stock Index. In Version 6.70, only players were allowed to do so, not corporations, but
since Version 7.0, companies other than banks or insurance companies are now also able to
buy and hold physical commodities.

PLANNING TIP: While banks or insurance companies

cannot own physical commodities or trade futures contracts on
commodities, a bank or insurance company control may set up a

47
 subsidiary that can own physical commodities, or trade stock
index or commodity futures.

No particular credit rating is needed, unlike the minimum “BBB” credit rating needed to
enter into futures contracts. All that is needed to buy a physical commodity is cash.

Owning a physical commodity doesn’t give you the enormous leverage that you get when
trading futures on the same commodity, and thus is a more conservative strategy. When
buying futures, the futures often trade at “contango” prices, at a price well above the
current spot price, which tends to reflect interest rates, the costs of storage to the seller of
the futures contract, and sentiment as to the price direction of the commodity. Thus, it may
be cheaper to buy the physical commodity at the current spot price (plus a 1% commission)
and hold it than to buy the futures.

On the other hand, before you complete a physical commodity purchase, you will be
warned that you will need to insure the commodity (at 3% of value, per year) and will
be told what the annual storage fees are. In addition, if storing grain, it will be subject to
gradual shrinkage or spoilage, from things like mildew, rats, or insects, gradually gnawing
away at your stash of wheat or corn. In addition, holding the physical commodity will tie
up some of your capital, which you may have borrowed and are paying interest on it. Thus,
the costs of holding a physical commodity may be less than buying the futures, but there
will be costs.

To buy a physical commodity, a player or corporation (other than a bank or insurance

company) can either click on the “TRADE” button on a price chart for the commodity or
can open the “BUY/SELL” Menu and select the “Trade Commodities” button. Once you
have selected the commodity, for example, gold, the pop-up “Commodity Trading Desk”
menu that will pop up, with your choices of BUY, SELL, RE-SELECT, or POSITIONS, as
when trading futures, but will also display a toggle button that will read
“  FUTURES,” meaning that you are in Physical Commodity Trading Mode. Select one
of the physical commodities if you wish to buy a physical commodity and store it, or if you
wish to sell some or all of an existing physical commodity holding, such as gold. When
you click on the “  FUTURES” toggle button, it will change to “ 
PHYSICAL,” meaning you are in Futures Trading Mode. If you click on it again, you will
be back in Physical Commodity Trading Mode.

In Version 7.0 or later of Wall $treet Raider, it is possible for holders of long futures
contracts on, for example, 1 million bushels of wheat, to take delivery of the physical
wheat at the expiration date of the futures contract at the agreed price, or to make delivery
from a stockpile of a physical commodity at the expiration date, if you have sold a futures
contract short.

For example, if you own 100,000 ounces of physical gold and you have sold short a gold
futures contract for 100,000 ounces, on the expiration date you would “deliver” the
physical gold and receive the agreed futures contract price for it.

48
However, there are “Yes/No” toggle settings you can make on the “Settings” pull-down
menu on the main Wall $treet Raider screen, where you can choose to either make delivery
of a physical commodity (or not), or take delivery (or not).

The Stock Index is not a physical commodity, so you can neither make nor take physical
delivery when a Stock Index futures contract expires. Companies that are not controlled by
a (human) player will make delivery under a “short” futures contract if they own the
underlying physical commodity, but will never take delivery when a “long” futures contract
expires.

B. GAINING CONTROL OF COMPANIES.

Unless you have voting control of a company, all you can do with regard to that company
is buy its stock and hope it does well. You have no control over the dividend it pays, how
fast or how slow the company will try to grow or over anything else it might do. Thus it is
very important to gain control of a company in many cases.

In Wall $treet Raider, you must own (or control through another company you control) at
least 20% of the stock of a company to control it, and your controlling block of stock
must also be larger than that of any other company or player. For example, suppose you
want control of XYZ Corporation, and you own 15% of its stock yourself, and another
company that you control buys 7% of XYZ. Together, you and your other company control
22% of XYZ, so that you would have control of XYZ, if no other single player controls
22% or more of it, and if no "uncontrolled" company (one that is not controlled by any
player) controls 22% or more of XYZ. However, if LMN corporation owns or controls 23%
or more of XYZ, you will be outvoted, and thus you will not control XYZ -- LMN
corporation will. If LMN owns or controls 22% or more of XYZ, no one will control XYZ
-- there will be a deadlock.

Note that stock owned by the "Public" is assumed to be voted in favor of the player
(management) that controls XYZ (except when voting on a merger).

Having control of a company is important for a number of reasons. As the controlling

player, you may:

 Have the company buy or sell stocks or engage in other transactions such as: do
takeovers, issue junk bonds or new stock, buy back its stock, buy/sell business
assets or stock from/to another company you control, file antitrust suits, set R & D
or ad spending levels, start up a subsidiary company, liquidate a subsidiary, merge
with another company, restructure, etc.
 In the case of a bank or insurance company, have the bank or insurance company
buy or sell corporate bonds or government bonds.
 In the case of a bank, buy or sell off loans, freeze or unfreeze loans to other players
or companies controlled by other players, or call in 50% of loans made to any
company or other player.

49
  Fire the company's existing management if they appear to be incompetent in
managing the company's basic business (using the "Change Managers" command
button in the "Management Transactions" submenu).
 Set the company's dividend payout rate.
 Set the company's growth rate in sales/capital assets (or, for an insurer, the rate of
growth in insurance in force).
 Have the company borrow money or repay loans. Also, if you (the player,
individually) control the bank you borrow from, you will automatically have your
normal line of credit doubled or tripled in size, if you are playing at Difficulty Level
2 or 3. (Having a larger line of credit at higher difficulty levels sounds like it would
make the game less difficult -- however, using greater leverage, though tempting, is
very risky, and you are much more apt to go bankrupt if you borrow up to 2 or 3
times your net worth, when you have an expanded line of credit at Difficulty
Level 2, 3 or 4!)
 Elect yourself president of one company you control (using the "Elect CEO"
command button in the "Management Transactions" submenu) and thus receive a
large salary and stock options.

Twenty percent ownership is also important, even when it doesn't result in voting
control, when the owner of stock is a corporation, rather than an individual player. For
financial accounting and earnings calculation purposes, a company is required in Wall
$treet Raider (as is usually true in the real world) to include a percentage of a subsidiary
company's earnings or losses in its own earnings if it owns at least 20% of the stock of the
subsidiary.

For example, if DEF corporation owns 25% of the stock of a subsidiary, XYZ, DEF will be
allowed for accounting purposes to add 25% of XYZ's net income (or losses) to its other
reported earnings, even if XYZ doesn't pay out any of those earnings to DEF or its other
shareholders as dividends.

Since a company's reported earnings have a major effect on its stock price in most cases,
you can see where it may be advantageous for a company to increase its holdings in a
subsidiary from, say, 19% to 20%. As an example, if DEF owns only 19% of XYZ, the
only income DEF is allowed to report from that investment each quarter is the amount of
the dividend it receives from XYZ (if any). If, as usual, XYZ pays out less than 100% of its
earnings as dividends, or no dividend at all, then DEF would be able to report considerably
more earnings on its investment in XYZ if it owns 20% or more of XYZ, rather than 19%.

On the other hand, if DEF owns 20% or more of XYZ, and XYZ is incurring losses in
reported earnings, then DEF will have to include its proportionate share of XYZ's losses in
DEF's income, which will reduce the earnings that DEF reports to its shareholders. In that
case, if you own DEF and you expect XYZ to incur losses for the next few quarters or
years, you might have DEF reduce its holdings of XYZ stock to 19%, in which case DEF
would not have to include any part of XYZ's losses in DEF's income (and, in fact, could
even include in its income the amount of any dividends XYZ might still be paying, even as

50
XYZ is losing money). This is one way of "managing" (i.e., manipulating) company DEF's
earnings.

There is one exception to the 20% ownership rule: If company DEF, which you control,
owns 19% of XYZ, but you also control XYZ (for example, you personally own 1% of
XYZ), then DEF and XYZ are under common control, which means DEF will include 19%
of XYZ's earnings or losses in its own reported earnings, even though it owns less than
20% of XYZ.

Note also for tax purposes, as under federal tax laws, a corporation may receive dividends
from a company in which it owns stock completely tax-free if it owns 80% or more of the
stock of the subsidiary. The dividends are 80% tax-free if a company owns 20% or more,
but less than 80%, of the stock of the subsidiary. If it owns less than 20% of the stock of
another company, the dividends from that company are only 70% tax-free. Dividends
received by an individual player are always fully taxable, however, in Wall $treet Raider.

The above tax rules for dividends are virtually identical to the actual rules under the U.S.
tax law, except that we have added one minor wrinkle: If the company receiving the
dividend from the payor owns less than 20% of the payor, but both companies are under
common control of one player or company, then the receiving company only has to pay tax
on 20%, not 30% of the dividend it receives from the payor, as though it owned 20% to
79% of the payor company.

C. INCREASING A COMPANY'S PROFITABILITY.

Once you take control of a company, there are a number of things you can do that may
increase its profitability, depending upon your luck and skill. These include the following:

(1) PRODUCTIVITY SPENDING. You can spend money on R & D ("Research and
Development") for companies in most industry groups, or on advertising/marketing in
other industries. These are lumped together in Wall $treet Raider as "productivity
spending." While the money spent on R & D or marketing will be a current expense that
will reduce the company's earnings in the short term, such expenditures may (or may not)
increase the company's profitability in the future. The benefits of such productivity
spending will be less long-lasting for companies that are already unusually profitable (as
compared to others in the same industry), since there is a built-in tendency for all
companies that are unusually profitable or unprofitable to regress toward the mean. You
can set the percentage of annual sales or revenues to be spent on R & D or
marketing/advertising by a company that you control at anywhere from 0% to 30% of
revenues, using the "Set Productivity Spending" command button in the "Management
Transactions" submenu.

(2) INCREASING MARKET SHARE. A company that increases its business assets
(capacity) increases its annual sales by the same amount in Wall $treet Raider. The larger a
company's market share percentage is, the more profitable that company will be in terms of
the return on investment in business assets, all other things being equal. Thus, increasing

51
your company's market share is always at the expense of other companies in the industry,
whose market share is thereby reduced. So if your company is growing its capital assets
faster than the other companies in its industry, it will generally increase its market share.

One quick way to increase your company's market share is to buy capital assets from
another company in the industry, which is often possible, if no other player or company
controls the other company that you want to buy assets from.

Another easy way of increasing a company's market share is to take over another company
in the industry and then either buy the other company's business assets, or merge the two
companies and liquidate the subsidiary into the parent company.

EXAMPLE: Parent company has a 20% market share in the steel industry. It acquires all
the stock of Sub, which has a 10% market share in the steel industry. Parent company then
liquidates Sub into Parent (using the "Tax-Free Liquidation" command button in the
"Financing Transactions" submenu). After the transaction, Parent will then have a 30%
market share, which will generally improve its profitability.

Note that if all the companies in an industry are growing too fast in order to try to grab
market share, they may all end up losing money, because the industry may soon begin to
suffer from excess capacity as growth in supply outstrips growth in demand. Thus a large
company, with a market share of 40% or 50% in its industry, will greatly affect overall
profitability of companies in that industry, if it significantly increases or decreases its rate
of growth in capital assets (plant and equipment, etc.). In contrast, if you control a small
company, with only a 1% or 2% market share, for example, it can greatly increase or
decrease its growth rate, with no appreciable affect on the overall balance between supply
and demand for that industry. Thus, there is ample "room" for a small company to greatly
increase its rate of growth in capital assets, provided it has the financial resources to make
the increased investment in capital assets and working capital, which must also expand
with the business.

(3) DIVERSIFICATION AND RESTRUCTURING. A company that is in a "sick" industry

-- one where supply is increasing faster than demand, and where the rate of return on
capital assets is low or negative -- may be better off to take steps to reduce its investment in
business assets and to begin investing in stocks of companies in other industries having
better prospects for growth and profitability. By investing in several different industries
and constantly shifting funds to subsidiaries that can earn higher returns on invested
capital, a company can diversify its risks and, if successful, continue to increase earnings. A
company in a "sick" industry can reduce its investment in "business assets" in two ways:

 By selling assets, using the "Sell Corporate Assets" command button, in the
"Buy/Sell Transactions" submenu. (However, if the company is in an industry
where there is already considerable excess capacity, it may have to sell the assets at
a considerable loss. Also, if the amount of assets being sold is too large, it may not

52
 be possible to find a buyer among other companies in the industry, in which case
the seller may have to sell off the assets as "scrap," at a small fraction of their cost.)
Note that if you control 2 or more companies in the industry, you can also use the
"Buy Corporate Assets" command button to have one of the companies buy assets
from the one that wishes to sell assets.)
 By setting the growth rate for investment in business assets to -10% annually, using
the "Set Growth Rate%" command button in the "Management Transactions"
submenu. (This, in effect, amounts to no new investment, with 10% of the existing
investment in capital assets being converted to cash each year via depreciation.)

Or, in some cases, when your company's stock is priced far below its net worth per share,
its best investment may be to use excess cash to "buy in" some of its stock. This will
increase the percentage ownership of you and any other remaining shareholders, since there
will be fewer shares left in the hands of the public. It may also increase the value of the
remaining stock. Your company can buy in its stock from "the public" or from specific
corporate shareholders, at a premium that rises with the amount of stock being bought, in
an LBO transaction, or at a 10% or greater premium (based on an offer you make) over the
current market price of the stock, in a "greenmail" transaction, using either the "Greenmail"
command button or the "LBO (Leveraged BuyOut)" button in the "Buy/Sell Transactions"
submenu to do either such transaction.

On the other hand, if your company's stock is selling at a high price / earnings ratio and far
over its net worth per share, you may decide the stock is overpriced. In this case, if you
don't want to sell your stock, there are various other ways you can take advantage of the
overvalued stock:

 You can have the company do a public offering of new stock at the high current
price, using the "Public Stock Offering" command button in the "Financing
Transactions" submenu to issue the additional shares of stock of the company. Or, if
the company is unable to do a public offering of stock at the moment, due to market
conditions or other factors, it can sometimes do a "Private Offering" of stock,
instead, using the "Private Stock Offering" command button. Either a public or
private stock offering of stock can bring in a lot of new cash into the company,
although doing so will dilute (reduce) your percentage ownership of the company
somewhat, and will dilute earnings per share, unless the new cash is invested in a
way that generates as high a return as the company was earning on its existing
assets before issuing the additional stock. It is also possible to do a private offering
where you or a company you control is the buyer, thus increasing your percentage
ownership of the issuing company.
 Or you may use the stock to do a stock-for-stock merger with a company that sells
at lower price-to-earnings ("P/E") ratio, which will tend to increase earnings per
share of your company when its results are pooled with those of the acquired
company after the merger. Use the "Merger" command button in the "Buy/Sell
Transactions" submenu to do mergers.

53
(4) REFINANCING. Similarly, a company that is piling up cash, but having a hard time
investing it profitably, may wish to pay down some of its bank loans or buy back any bonds
it has outstanding, in order to reduce its interest expense. If it reduces its debt enough to
improve its credit rating, it will further benefit by lowering the interest rate it must pay the
bank on its remaining loan balance. Corporate bonds may often be bought back at a
price that is less than face value, which not only can save on interest expense, and improve
the company's credit rating, but will also generate one-time earnings, to the extent the
bonds are bought back at less than their face value of 100.

EXAMPLE: If XYZ Corporation buys back $100 million of its own junk bonds at 80% of
face value, it will have spent only $80 million to reduce its debt by $100 million, which
will instantly improve its net worth by $20 million. The $20 million gain will increase its
total pre-tax earnings, as well, for that quarter (but not its reported “operating earnings,”
and thus will not have much effect on its stock price).

(5) CHANGING MANAGEMENT. You may sometimes notice that a company's

management is incompetent (which may be mentioned in research reports on the
company, generated when you click on the "Research Report" command button on the
"ENTITY INFO" research submenu), or which you may notice by comparing its rate of
return on business assets to those of other companies in its industry. (But remember, when
comparing, that the rate of return of a company that spends 20% of sales on R & D or
marketing is actually 20% better than it appears, when comparing to another company that
spends zero on R & D or marketing.)

In order to correct a problem of bad or incompetent management, you can try various
tactics such as increasing productivity spending (R & D or advertising), or doing a
restructuring. However, you can also change (fire) the management team, by using the
"Change Managers" command button in the "Management Transactions" submenu. It will
take a while to see any results, but eventually you will see some sort of news
announcement that the new management team has turned out to be better, worse, or no
better than the old. There are costs and other considerations involved in firing existing
management, of which you will be informed, before you make the final decision to do so.
Take heed. Or don't.

D. FINANCING.

In this simulation, as in the real world, no one ever has enough cash. In Wall $treet Raider,
a player can raise funds (without having to sell anything) only by borrowing from the bank.
(Although there are occasional gimmicks to be used, such as having a controlled company
you own, that has plenty of cash, increase its dividend payout or declare a special
"extraordinary dividend" to its shareholders.) Use the "Set Dividend Payout" command
button to change the percentage of a company's reported earnings that it will pay out as
dividends (always based on the prior year's earnings), or use the "Extraordinary Dividend"
button to pay out a large extra or "extraordinary dividend" to the company's stockholders.

54
These two buttons are found on the "Management Transactions" and "Financing
Transactions" submenus, respectively.

A corporation, on the other hand, can raise money by borrowing from its lending bank, by
issuing corporate bonds, or by issuing new stock to a private investor (you or a corporation)
or in a Public Offering.

(1) BORROWING. Each player and each company has a maximum line of credit equal to 1
times its adjusted net worth, generally. ("Adjusted net worth" is simply net worth reduced
by the time value of any put or call options the player or company owns.) Thus, if a
company has a adjusted net worth of $500 million, it can borrow up to a total of at least
$500 million from the bank. If it already owes $500 million, it can't borrow again until it
either increases its adjusted net worth or pays down part of the loan, or some combination
of the two. However, if a player controls a bank, that player may personally borrow up to
either 2 or 3 times his or her adjusted net worth, if the lending bank is the one the player
controls, and if the game
is being played at Difficulty Level 2 or higher. (There are 50 banks in Wall $treet Raider, at
the start of a new game, and this number can increase up to as many as 75 banks during a
game.)

Note that in Version 6.60 or later, if playing at Difficulty Level 3 or 4, a corporation can
borrow up to 1.5x adjusted net worth, when the Prime Rate is in a “normal” range between
6.75% and 8.5%, if the company has a “AAA” credit rating. When the Prime Rate is higher
than 8.5%, credit becomes tighter, and the multiple will be less than 1.5x, to as low as 1.0x
adjusted net worth, at rates above 15%. Conversely, if the Prime falls below 6.75%, credit
becomes more available, and the multiple can be as high as 2.0x adjusted net worth, if the
Prime Rate is 4% or lower. The line of credit so computed is then reduced, if the company’s
credit rating is less than “AAA,” to .9 times the computed amount if “AA,” to .8 times if
“A,” and to .7 times the otherwise allowable line of credit if the company’s credit rating is
“BBB.”

However, banks are prohibited from lending more than 25% of their total loan portfolio to
any single player or company (or $10,000 million, if greater), so your actual line of credit
may sometimes be less than 100% of your (or your company's) adjusted net worth.

In that case, you may want to change banks, to borrow from a larger bank, one that can
lend you more against your assets. See the Change Bank feature, on the "OTHER
TRANS." submenu that appears when you click on the "OTHER TRANS." button on
the main screen.

Where your lending bank is controlled by another player, that player may choose to
"freeze" your line of credit, or the lines of credit of companies you control or invest in. As
long as that is the case, your company whose line of
credit is frozen must continue to make loan payments, but can no longer borrow more
money from the bank as long as the "freeze" remains in effect. Similarly, another player

55
may freeze your individual line of credit, although you are not required to make loan
repayments, except in the case of a margin call.

Version 7.0 introduced a new feature, whereby banks that are not controlled by any player
may freeze all lending temporarily, if their credit rating falls below "BBB" and they have
liquidity problems. This makes it even more
important for you and your companies to deal with banks that have a strong credit rating, to
prevent a sudden freeze of your line of credit, even when you have a good credit rating.

Each calendar quarter, when its earnings are computed, each borrowing company must pay
interest on its bank loan and also pay back a small part of the principal. In general, the
higher the rate of interest charged on a loan, the more principal that must be repaid each
quarter, under a fairly complex formula. Individual players make interest payments
quarterly, but they are not required to make principal payments, unless they receive a
margin call, which only occurs when their debt is more than 3 times their net worth.

Players and companies pay interest rates ranging from the "prime rate" to as much as 10
percentage points above prime, depending on their credit rating. The "prime rate" is the
best (lowest) interest rate the banks charge to borrowers with the best ("AAA") credit
ratings. The "spread" above the prime rate for borrowers with weak credit ratings will tend
to be wider when the economy is weak, than during a strong economy, since the bank
lender is more concerned about the borrower being unable to repay if the economy is bad.
That is, a company with a given credit rating might pay 4 points over prime during a boom
economy, but might have to pay 5 or 6 percentage points over prime, with the same credit
rating, during a recession or depression in the economy.

In general, the higher the percentage of debt to net worth of the borrower, the lower its
credit rating and thus the higher the interest rate its bank lender charges, since there is a
greater risk the borrower will go broke. See Appendix C for an explanation and table of
credit ratings and how loan interest rates are determined. Note that a company with a "D"
credit rating (negative net worth) pays a reduced rate of interest, equal to the "prime," and
continues to repay principal, on an accelerated basis. This helps keep some marginal
companies out of bankruptcy and helps the banks avoid some large bad debt write-offs, by
giving a troubled companies a chance to regain their financial health. (No such break is
given to individual players.)

Any player who owes an amount more than 3 times his or her adjusted net worth at any
time may receive a "margin call" from the bank, forcing the player, if short of cash, to sell
enough bonds or stocks to pay down the debt to a 3-to-1 ratio. Since selling stock or bonds
will tend to depress the market price of such securities, thus lowering the player's net worth
even further, he or she may receive one or more successive margin calls before breaking
out of the vicious circle. If the player's net worth falls below zero, all of his or her assets
will be sold off to repay debt as a result of such margin calls, and the player will be
banished from the game (to languish in debtor's prison, no doubt).

56
MORAL: Be careful about borrowing too much! A relatively small decline in the value of
your stocks can sometimes trigger a series of margin calls that can put you out of the game,
dead broke, dishonored and humiliated.

(2) ISSUING CORPORATE BONDS. Depending on the level of interest rates, a

corporation may be able to raise funds for expansion, to take over other companies or for
other purposes by issuing corporate bonds (called "Junk Bonds," if the company has a poor
credit rating). Use the "Issue Bonds" command button in the "Financing Transactions"
submenu.

If you are not familiar with what corporate bonds are, just think of them as "I.O.U.'s" or
promissory notes that a company issues when it borrows money, except that the holders of
these notes, or bonds, can freely sell them to anyone who wished to buy them at an agreed
price (which may be less than, equal to, or more than the "face value" of the bond). The
"face value" is simply the amount of the "I.O.U." -- the amount borrowed, and which must
be paid back, in addition to interest payments. Thus, when a corporation (or a government)
issues bonds, it does so as a way of borrowing money. In Wall $treet Raider, all bonds are
traded in $1 million units, which, in the real world, is the typical minimum unit size of
bond trades between banks, insurance companies and other large institutions, although
bonds can often be traded by individuals in units as small as $1,000 or even less -- in the
real world, but not in Wall $treet Raider.

The issuing company must pay interest at a rate that is slightly higher than it would pay on
a similar amount borrowed from the bank, but does not have to repay any principal during
the game, until the year the bonds are due to be paid off. Since bonds issued by a
corporation in Wall $treet Raider are "junior" to bank debts of the corporation in a
bankruptcy situation, it makes sense that the bonds are riskier and therefore pay a
somewhat higher rate of interest than loans, given the same credit rating. As "junior"
creditors, bondholders may lose all of their investment, or will at least lose a larger
percentage than the "senior" creditor -- the bank that has made a bank loan to the bankrupt
company. For example, in a bankruptcy, bondholders of the bankrupt company may have to
"write off" 60% of their investment, while the bank only has to "write off" 20% or 30% of
its loan.

A company that wishes to may (usually, if it is not about to go bankrupt) buy back (prepay)
its previously issued bonds at whatever the current bond price is, although purchases of a
large amount will run up the price a bit. Or, if the bonds mature in 10 years or less, a
company may "call" all or a percentage of its bonds, usually at a price of 105 (105% of face
value), or at 104% 4 years before the bonds are due, 103% 3 years before, etc. Sometimes,
such as when the bonds trade at a price of more than 105 on the open market, it will be less
expensive to call the bonds at 105 (or less), than to try to buy them back at market prices.

Bond financing has its advantages and disadvantages, compared to borrowing from the
bank. While at any given time, bond financing will cost the company about 1% more than
borrowing from the bank, one of the advantages is that a company can borrow more by

57
issuing bonds than it could borrow from the bank. Also, once you issue bonds, you know
in advance what interest rate you will be paying for the next 10 or 15 years, until the bonds
mature. By contrast, when you borrow from the bank, the interest rate will go up and down,
as the prime rate changes. For example, you may borrow from the bank at a time when the
rate on bank loans is only 5%, but a year or two later, the rate your company is paying may
be up to 15%, if the prime rate has gone up a great deal or the company’s credit rating has
worsened.

If interest rates are currently very low, it can be very advantageous to "lock in" a low rate
by issuing bonds, and you can even use the proceeds from the bond issue to pay off part or
all of any existing bank loans at the same time, so that you will get a better interest rate on
the bonds than if you "piled on" the bond indebtedness on top of the existing bank debt,
and then decided to pay off the bank loan. Thus, if you can float a bond issue at a low
interest rate, like 5.5% or 6%, for 15 years or more, your company will have the use of that
money for all that time at that rate, even if the prime rate soars to 20%, and you will not
have to repay any principal until the bonds mature in the distant future. (Also, if your
company borrows from the bank, another player may take control of the bank and "call in"
the loans to your company, which can cause severe problems for the company. That is not a
concern if your company issues bonds, instead of borrowing from the bank.)

Finally, there is no opportunity for a borrower to "buy back" its bank debt as a discount,
but it can do so if it has issued bonds, which may trade at a significant discount to their face
value if interest rates rise considerably (or if your company's credit rating is lowered).

In the old DOS version of Wall $treet Raider, it was not possible for players or companies
to invest in other companies' bonds. In this Windows version, players, banks, and insurance
companies can all invest in corporate bonds, in up to 15 different issues per player or bank
or insurance company.

(3) STOCK OFFERINGS. The third main way a company can raise funds is by selling new
stock in itself via a public offering or in a private offering through a sale to an unrelated
company (using the "Public Stock Offering" or "Private Stock Offering" command buttons
in the "Financing Transactions" submenu).

There are several limitations on doing "public" offerings of stock, which may prevent your
company from doing so at certain times:

 A new, startup company cannot do public offerings unless it has been in business
for 2 or 3 years;
 A company that has recently done a public offering will have to wait a year or two
more before it can do another, or a private offering; A company that has recently
done a private offering will have to wait a year or two more before it can do another
private offering;
 A company with a terrible ("D") credit rating will not be able to do a stock offering
until its credit rating improves; and

58
  At certain times, if a company's rate of return on capital assets is too poor, or its
industry is too depressed, it may be unable to float any of its stock in a public
offering.

Generally, if you cannot do a public offering, you can still do a private offering, except
where your company's credit rating is too bad, or industry conditions in its industry are too
poor.

The main drawback of a stock offering is that it will dilute your ownership of the company,
and could even cause you to lose control.

EXAMPLE: If you own 100% (all 100 million shares) of XYZ and it issues 20 million
new shares in a stock offering, you will own only 100/120 or 83% of its stock after the
offering. The market value of your 83% will be nearly the same as your 100% was before
the offering, since XYZ's net worth will have increased by the amount of cash it got for the
stock, but you will have diluted your ownership somewhat. Going from 100% down to
83% wouldn't affect your control of XYZ, but if you had only owned 20% to begin with
and had that reduced to 17% after the offering, you would find you had lost voting control
of the company, which could be a rude surprise. Furthermore, if you do a private offering
of the maximum size (increasing the company's outstanding stock by 25%), the private
venture capital or "White Knight" investor that purchases the new stock would end up with
25/125ths, or 20%, of the company, which is a situation you may or may not want to
create, since such an unrelated company will tend to vote against mergers and may
otherwise undermine your control of the company, even if you do maintain voting control.

Stock offerings only make sense, in general, when you feel your company's stock is grossly
overvalued, or when the company absolutely MUST raise a certain amount of cash for
some reason, and it can't borrow any more (or you don't want it to borrow any more). Stock
offerings may also make sense when interest rates are extremely high, although stock prices
will tend to be lower when interest rates are high, as a general rule.

(4) ADVANCES FROM PLAYERS. A fourth way that a corporation can obtain
financing, is for the player who controls a corporation to lend (advance) it money, in the
form of a subordinated demand loan, payable at the player's demand (unless the
company has a bad credit rating), and paying interest at the bank Prime Rate to the player.
For more details on advances, click here.

E. INVESTING

There are a number of different types of investments in Wall $treet Raider in which a
player or company can seek to earn income or make a profit if the value of the asset goes
up. These are:

59
(1) CASH/CD'S. In Wall $treet Raider, you need never worry about your cash not being
invested--any cash balance you or your company may have (except for a bank) is always
assumed by the program to be invested in insured bank certificates of deposit ("CD's").

Thus, your "free cash" is always earning interest (paid quarterly) at whatever the going rate
of interest happens to be for CD's, which is usually somewhat less than the Prime Rate
charged by banks to their best (AAA-rated) customers. Banks also earn interest on their
cash balances, to the extent their cash exceeds 3% of the bank’s total outstanding deposits
(CD's and demand deposits), and they also sometimes lend money to other banks as
interbank loans ("federal funds"). However, banks are constantly trading bonds back and
forth and automatically buy bonds (under certain market conditions) when they have too
much cash or sell bonds when they need to raise cash. Again, this goes on in background
computations and transactions almost constantly, so you don't have to worry about it if you
control a bank. A large bank will almost always have about a billion or two in cash, but
seldom much more or less than that for very long.

(2) BONDS. There are two types of bonds in Wall $treet Raider: Corporate bonds (called
"junk bonds if their credit rating is "BB" or lower) and government bonds. Any player,
bank or insurance company can buy or sell either type of bonds at the going market price.
As is generally the case in the real world, other types of business corporations do not invest
in bonds in this simulation. However, a company that issues bonds may buy its own bonds
back on the open market at the current market price, or directly from banks or insurance
companies holding the bonds (generally at 5 points above the market price), or can
sometimes "call" in the bonds before they are due, at a price of 101% to 105% of par (face
value).

Bonds all pay interest at a stated rate, such as 8.5%, based on their par or face value of 100.
All bonds trade in 1 million dollar (or other currency unit) denominations in Wall $treet
Raider. The bond price, generally around 100, is simply the percentage of par (face value)
at which a bond is valued. Thus, a bond quoted at a price of 90 can be bought at 90% of the
face value that will be paid off at maturity. So if you buy $10 million (face value) of a bond
priced at 90, the purchase price will be $9 million (plus brokerage commissions).

If you can correctly predict the direction of bond prices and interest rates, you can make
some fairly good trading profits by buying and selling bonds.

In Wall $treet Raider, as in real bond markets, interest rates are one of the main
determinants of bond prices, for both government and corporate bonds. If bond prices are
low, it is largely because interest rates are high, and vice versa. The other factor that
determines bond prices, for corporate bonds, is the credit rating of the issuing company.
Thus, if the prime rate of interest is 7%, bonds of a top-quality company with a AAA credit
rating might trade at a price that yields an 8% return, while "junk bonds" of a company
with a low "C" or "CC" credit rating might be yielding 15% or more.

Other factors influence bond prices. If the central bank (the Federal Reserve, if you have
configured Wall $treet Raider for the U.S. dollar or Mexican peso as your choice of

60
currency) is applying a "tight" monetary policy, it will constantly be selling government
bonds on the open market, which depresses bond prices. Or if it loosens up on monetary
policy, it will begin buying bonds, driving bond prices up and interest rates down. If central
bank policy is neutral, it will either buy nor sell.

Changes in central bank monetary policy are announced periodically when economic
projections are revised. Watch closely for these announcements, since the future trend of
interest rates is very important to many industries and to any player or company that is
heavily in debt. You can check on the current central bank monetary policy at any time,
which will be shown either as "tightening," "neutral," or "easing," by clicking on the
"Interest Rates" command button on the "GENERAL" (research) submenu.

Finally, bond prices are affected by certain economic news and political events
intermittently. In particular, low tax rates and/or rapid GDP growth tend to depress bond
prices, while high tax rates and/or slow GDP growth tends to increase bond prices (thus
lowering interest rates). And in certain really tough times, there's always the remote chance
the government will default on its bonds, when interest rates get too excessive. However,
that is an extremely rare occurrence in this Windows version of Wall $treet Raider.

TAX NOTE -- AMORTIZATION: Note that in this simulation, any time a player or
company buys government or corporate bonds at a price above or below the "par" value,
the amount of the premium (if paying more than 100 per bond) or the amount of discount
(if paying less than 100) is amortized over the remaining term of the bond.

Therefore, if you pay 80 for $100 million of bonds, due in 10 years, your $80 million
investment will not only pay cash interest each year, but at the end of 10 years you will
receive $100 million when the bonds are paid off. The $20 million difference, or "discount"
on the bonds, is amortized over the ten years you hold the bonds, so you would add
approximately $2 million of "phantom" income to your taxable income each year you hold
the bonds, in simple terms. This amortization is added to the tax basis or cost of your
bonds, so when they pay off at 100 ten years later, you will have no capital gain or loss,
because your tax basis will have increased by $20 million over the ten years you owned the
bonds.

It works just the opposite if you pay a "premium" for bonds (more than 100). For example,
if you buy $100 million face value of bonds at 105, with 5 years until they pay off, you
would reduce your taxable income by an average of $1 million each year, until your tax
basis (cost) for the bonds is reduced to $100 million just before the bonds mature.

The amortization is not computed in a "straight-line" manner, but in a way so the rate of
interest taxable each year or quarter is at a constant rate, based on the adjusted tax basis
(cost plus or minus amortization to date) of the bond investment.

Because of the amortization of bond premium or discount, you will never have a capital
gain on bonds you buy in Wall $treet Raider if you hold them until they are paid off. You

61
will only have a capital gain or loss if you sell the bonds before they mature, or if they are
called early by the issuer. This is generally the way bond investments are treated in the real
world, except that in the U.S., individual bond investors cannot amortize bond premium
unless they make an election on their tax returns to do so (forever, basically).

Each corporation in Wall $treet Raider can issue bonds, but can have only one issue of
bonds outstanding at a given time. The interest rate on a corporation's bonds is set at the
time it issues the bonds, based on the general level of interest ratings and the company's
credit rating immediately after issuance of the bonds. To invest in corporate bonds, or sell
corporate bonds owned by you or by a bank or insurance company you control, click on the
"Buy Corporate Bonds" or "Sell Corporate Bonds" command buttons on the "Buy/Sell
Transactions" submenu.

In this simulation, there are always two different issues of government bonds you can
invest in: the "Long Bonds" and the "Short Bonds." At the start of each new game, the
Long Bonds are bonds that will mature in 20 years, and the Short Bonds are bonds that will
mature in 10 years, and rates on each are set at that time.

Eventually, after 10 years, if you hold any of the short bonds, they will be paid off, and at
that time the "long bonds" will become the new "short bonds," with ten years left until they
mature. The government will then create and auction off a new issue of long bonds, due 20
years from that date, and with an interest rate determined by the current general level of
interest rates.

While the nominal interest rate on the "long bond" may sometimes be lower than on the
short bond, the actual rate of return on an investment in the long bonds (the "yield to
maturity") will always be slightly higher than on the short bonds in this simulation.
However, you may want to invest in the short bonds, rather than the long, in some cases,
because the price of the long bonds will fluctuate much more widely than the short-term
bonds.

To invest in or sell government bonds, click on the "Trade Government Bonds" command
button on the "Buy/Sell Transactions" submenu.

(3) STOCKS. Stocks are the shares representing an ownership interest in corporations.
In Wall $treet Raider, there are up to 1590 different corporations in 71 different industry
categories to choose from as investments. (Generally, only about 1,000 companies are
active at any given moment, but new companies are starting up, or existing companies are
disappearing, all the time, so the number will fluctuate.)

Most companies in this simulation start out with 100 million shares of stock
outstanding, so it is fairly easy, until they begin doing "stock splits" or "buybacks," to
calculate in your head what it will cost to buy a company. If a company sells for $9 a
share, the whole company is worth $900 million. (Of course, if you are buying you will
run the price up some, and if you are selling you will drive the price down.)

62
If a company buys back some of its stock, the number of remaining shares will be reduced
(as in an LBO or Greenmail transaction). A "stock split" may double, triple, or quadruple
the number of shares of stock a company has outstanding (each of which will be worth 1/2,
1/3 or 1/4 what they were just before the split, so there is no financial effect at all on the
owner). A company will increase its outstanding (issued) shares when it does a "public
offering" or private ("White Knight") offering of its stock to raise cash.

Stock ownership in Wall $treet Raider is always represented in terms of a percentage, from
1% to 100%. Thus, if you buy 5% of a company with 100 million shares outstanding, you
are buying 5 million shares. In stock splits, mergers, etc., ownership percentages are always
rounded off to the nearest whole percentage point, but the total percentages of the stock of
a particular company owned by various players and companies will never exceed 100. Any
outstanding stock of a company that is not owned by players or other companies is
considered to be owned by the "Public."

See Section IV.F below regarding factors that influence stock prices.

(4) BUSINESS ASSETS. Each company in every industry except banks, insurance
companies and holding companies has "business assets" or "capital assets" in which it
invests part of its capital. "Business assets" is a catch-all concept to describe factories,
mills, equipment, airplanes for an airline, trains and property for a railroad, etc. On the
"Financial Profile" for any industrial company in this simulation, the business assets or
capital assets are shown as the "Business Assets/Equipment" item on its list of assets in its
Financial Balance Sheet.

A company earns a pre-tax rate of return on its investment in "business assets" that is
determined in part by the overall balance between supply and demand for that industry,
and in part by the percentage of market share a company has, and in part by how well or
efficiently the company is managed. By using the "Industry Projection" command button
(on either of the two research submenus, called up by clicking on "ENTITY INFO" or
"GENERAL" buttons on the main screen), a player can see at any time the projected rate of
return (profit or loss) on business assets 6 months hence, for all the companies in a
particular industry.

The percentage number that is given is AFTER reduction for R & D spending or
advertising/marketing spending. Thus, if a company is projected to earn 5% on its business
assets, but is spending 10% on R & D, it is actually earning 15% on assets before R & D.
Therefore, if you slashed R & D spending to 0%, you could quickly raise the current rate of
return to 15%, at the possible cost of penalizing future long-term profitability.

When a company that has "business assets" makes a capital contribution to a wholly-owned
subsidiary, it has the option of transferring some or all of its business assets to the 100%-
owned subsidiary, if desired, provided that the subsidiary is either in the same industry or is
a holding/trading company.

63
The greater a particular company's share of total "business assets" in its industry, the
greater its relative profitability, in general. However, there is an efficiency factor that
increases or decreases (randomly) from quarter to calendar quarter, which also affects a
company's rate of return on business assets. This factor can be increased (improved) in
many cases by spending money on R & D (research and development) and
advertising/marketing expenditures, both of which are lumped together as "productivity"
expenditures in Wall $treet Raider, and work the same way.

When a company's efficiency factor is substantially above or below zero (neutral), there is
a tendency for it to regress towards zero over a period of time, unless counteracted by
more R & D spending. However, R & D spending or advertising doesn't always increase
profitability. Only if it is successful, and then only in the long run, as such spending will
penalize current profitability in the short run.

The main determinants of profitability, supply and demand, are affected by several factors.
Demand grows in accordance with GDP growth for many industries. Demand in other
industries, such as oil, is affected by oil prices (negatively, in the case of oil users, such as
airline, trucking, rail and shipping industries). Some industries, like housing and building
materials, are affected mainly by interest rates. See Appendix D for details on what factors
influence demand growth in each industry group. In general, your knowledge of how the
real world economy affects various industries will be your best guide.

If supply grows at a slower rate than demand for a particular industry, profits for that
industry will tend to rise, and vice versa. If some weak companies in an industry get in
financial trouble and are forced to sell off business assets in order to pay their bills, that
will reduce supply somewhat and tend to help the profitability of the survivors in the
industry.

Note that a company will automatically sell off business assets (usually at a loss unless the
industry is extremely profitable) if it has no cash, no line of credit and no bonds left to sell
off. Once a company is forced to sell off the last of its business assets, it withdraws from
the industry and becomes a "holding company." If it still has bills to pay, it will then start
selling off its stock or options portfolio--and if it has no stocks or options left to sell, it is
completely bankrupt and will go out of business.

If a company has less than $25 million in business assets (or the equivalent in a currency
other than U.S. dollars), it will automatically sell off its remaining business assets and exit
the industry it was in, since it has become too small to compete.

Use the "Set Growth Rate%" command button ("Management Transactions" submenu) to
change the rate at which a company is increasing or decreasing its investment in business
assets. The "Buy Corporate Assets" or "Sell Corporate Assets" command buttons (both on
the "Buy/Sell Transactions" submenu) can be used to have a company acquire business
assets, or to have it sell off or scrap business assets. The "Buy Corporate Assets" function
can also be used by a "holding company" to enter a different industry, such as by buying
planes from an existing airline to enter the air transport industry. Thus, the number of

64
companies in a given industry can decrease as some companies are liquidated or withdraw
from the business, or can increase as more companies enter the industry.

NOTE: A company can own business assets in only ONE industry at any one point in time,
in Wall $treet Raider. If you want you company to diversify into another industry, you can
have it buy up the stock of a company in that industry, or else use the "Start Up New Corp."
command button ("Financing Transactions" submenu) to start up a wholly-owned new
subsidiary in the industry you desire to enter.

(5) ADVANCES TO SUBS. In Wall $treet Raider, a player also has the option of investing
money by lending it as "advances" to any corporations he or she controls. There are no
limits (other than your available funds) on how much cash you can advance to one or more
companies you control. All such advances are demand loans, payable at any time you wish
to call them in, provided the borrowing company will not be placed in peril of bankruptcy
by repaying you. Advances earn interest for you at a rate that floats, equal to whatever the
bank Prime Rate for loans is at the time interest is paid or accrued. (If a company has a "D"
credit rating, it will not pay you interest on any advances, but will instead add the accrued
interest to the principal amount you are owed, which you will be taxed on.) For more
details on advances, click here.

Use "Advance to Corp." and "Recall Advances" buttons on the "MISC" Menu to make
advances to a company you control, or to call in advances you have made to any company
(whether or not you still control the company). Use the "List Advances to Corps." button on
the "ENTITY RESEARCH" menu to see a list of all advances you have made to various
companies, and the amount each owes you.

(6) STOCK OPTIONS (PUTS AND CALLS). Versions 4.0 and higher of Wall $treet
Raider have added another asset class in which you may invest, or more likely, speculate --
put and call options on stocks. For more on options, see the discussion of options investing
and trading strategies above, in this chapter.

(7) COMMODITY AND STOCK INDEX FUTURES. Version 6.0 introduced commodity
futures trading to the simulation and Version 6.60 added trading in stock index futures.
Players or corporations (other than banks or insurance companies) may now buy or sell
short commodity futures contracts on crude oil, gold, silver, wheat and corn. Players and all
corporations except banks may also trade stock index futures. Contracts may range in
duration from 1 to 60 months. For more on futures trading, see the discussion of trading
futures above, in this chapter.

(8) INTEREST RATE SWAPS. In versions 6.20 and later, players or corporations may
invest in (or, more realistically, gamble on) interest rate swaps, which are bets on the future
direction of interest rates, such as the Prime Rate, or the interest rate on long-term or short-
term government bonds. Swaps with counterparties, usually a brokerage firm, bank, or
insurer, can be done on huge principal amounts, entailing great risk but also an
opportunity to make large profits if you are on the winning side of such derivative

65
contracts. For more on trading in these derivatives, see the discussion of interest rate swaps
in Chapter 9.

(9) EXCHANGE-TRADED FUNDS (ETF’S). Version 6.30 introduced

exchange-traded funds, or ETF's, as another investment option for players and companies.
ETF's are investment companies that invest in small positions, usually under 10%, in up to
15 companies. In W$R, they are similar to holding/trading companies, except that they are
exempt from all taxes as long as they pay out at least 90% of their investment income (from
interest and dividends) and pay out 100% of any net capital gains as special capital gain
dividends to their shareholders each quarter.

However, if any player or company owns or controls more than 15% of the stock of an
ETF, the ETF is immediately disqualified as an investment company and loses its tax-
exempt status, becoming instead a regular (taxable) holding/trading company. In such
cases, if the ETF has unused capital loss carryovers, those carryovers are converted into tax
net operating loss carryovers.

One ETF, the Basic Commodities Fund (Symbol: CMOD), not only invests in stocks of
materials companies, such as steel, copper, precious metals, chemicals, and paper, but also
invests in commodity futures (oil, gold, silver, wheat, or corn). ETF's may occasionally sell
put options short, as a way of replacing stocks in their portfolio when stocks they own have
been bought out, gone bankrupt, or been sold. In addition, in each game one ETF may at
times also engage regularly in selling covered call options against most of the stocks it
owns, to generate additional income and reduce its portfolio risk.

In Version 6.35 and later versions, one ETF, the Financial Shares Fund (FINF), which
invests in banks, insurance companies, and securities brokers, may now also occasionally
engage in risky interest rate swaps (derivatives contracts).

Each ETF invests in a particular sector, such as energy, finance, transportation industries,
retail, services, technology, etc. The shares of an ETF generally trade at or very near
(within about 2%) of the current net asset value per share of the fund, much like real-world
ETF's. The ETF's are often a fairly conservative place for players, holding companies, or
insurance companies to "park" some of their excess cash, when interest rates paid on CD's
or bonds are low, and may also offer some upside potential, generally with less downside
risk than investments in individual stocks, due to their diversified holdings.

In W$R, each ETF pays an annual management fee of 0.2% to 1.0% of its total assets,
paid quarterly at the rate of 0.05% to 0.25% of assets. In Version 6.60 and later, each ETF
pays the management fee to a designated
securities broker or insurance company. A player who controls a securities
broker or insurance company that manages an ETF can change the annual
management fee percentage, but only in the range of 0.2% to 1.0%. To do so, click on the
SET FUND ADVISOR FEE button, which will appear on the Management Menu for any
Securities Broker or Insurance Company you control (but not for companies in other
industries).

66
This fee and any interest on bank borrowings or bonds issued will reduce or in some cases
may eliminate an ETF's net ordinary income that it is required to distribute as dividends
each quarter.

Every two years, each ETF reviews the performance of its investment manager/advisor, as
measured by the ETF stock price over recent years
and in comparison to the performance of the Global Stock Index as a
benchmark. The investment manager may be fired and replaced for poor performance or, if
performance is very good, may be rewarded by the ETF issuing new stock, increasing the
amount of assets under management (and thus increasing the fees it will be paying to the
investment manager/ advisor). The stock issuance may be either 15%, 20%, or 25% of the
existing number of shares, depending on how well the advisor has performed.

An advisor will also be fired if it or the ETF goes through bankruptcy,

or if a brokerage firm that is the advisor sells off or scraps all its business assets, unless the
assets are sold to another broker. When a securities brokerage firm transfers all its assets to
another company, any management contracts with ETF's will also be transferred, whether
the transaction is a sale of assets or a "downstream" contribution to capital of a subsidiary.
The contracts will also be transferred, to the parent company, in an "upstream" transaction,
where a broker or an insurance company goes through a non-taxable liquidation.

To find an ETF to invest in, click on the "Industry Group Selected" drop-list on the left side
of the main Wall $treet Raider screen and select from the list of industries "EXCHANGE-
TRADED FUNDS." Then click on the “General" button to see the General Research Menu.
From that menu, click on "Industry Summary" to see the list of all 15 of the ETF's (or
fewer, if any have been disqualified or liquidated).

Note that the Earnings Reports, Research Reports, Industry Summary, and Financial
Profiles for ETF's are somewhat different from those of other companies.

Note also that when you want to buy stock of a company that has no publicly traded shares
available, you (or your company) will be able to buy any such shares that are owned by an
ETF, at a slight premium over market value.

F. STOCK AND OPTION PRICES: HOW ARE THEY DETERMINED?

Stock prices are determined by a large number of factors, so don't be surprised if you guess
wrong about half the time as to which direction a stock is moving. As in the real world,
stock prices in Wall $treet Raider usually discount future earnings developments of a
company well in advance, so you may be frustrated when you correctly predict a large
increase in a corporation's earnings per share and find that the stock drops when the
earnings are announced. The stock pricing algorithm in Wall $treet Raider takes up several
pages, but fortunately, your computer is fast enough to do hundreds of stock price
recalculations every second. While the exact details of what makes stock prices in Wall

67
$treet Raider go up and down is a closely guarded secret, here are a few hints, all of which
are based as closely as possible on what happens in the real stock market.

Items that affect stock prices include the following:

(1) BUY/SELL TRANSACTIONS. Purchases of stock drive up a stock's price while sales
drive the price down (sharply). Thus if you try to unload a large block of stock, say 10% or
more of a company, you will clobber the market price. Temporarily.

(2) TAKEOVERS, ETC. Transactions such as tender offers, mergers and stock buy-backs
will tend to drive up the price of the target company, while government-mandated
divestitures will lower the stock price of the divested company. Temporarily.

(3) ECONOMY. Changes in the economic forecast for an industry are very quickly
discounted by the stock market, if projected demand growth for a particular industry is
expected to be substantially above or below that industry's "normal" rate of growth. (See
Appendix D for details on industries and their "normal" growth rates.)

(4) EARNINGS PER SHARE. Earnings per share is the main factor in determining stock
prices. The multiplier applied to those earnings is also critical. In general, the faster a
company is increasing sales (and business assets), the higher the earnings multiple will be.
However, the level of interest rates is also a factor. When bond prices are low (and interest
rates high), the price-earnings multiple for all companies will be reduced; and vice versa
when interest rates are low.

(5) EARNINGS CONSISTENCY. Consistency of earnings is also important. A company's

price will tend to rise if it shows an increase in earnings over the previous year, and will
tend to drop if earnings fall, all other things being equal. A company with a consistent
record of increasing its earnings will tend to sell at a high multiple of its earnings (price-
earnings ratio). But look out if it stumbles, and has a bad quarter! That can cause a major
drop in the company's stock price, when a long string of earnings increases is suddenly
interrupted by a loss or a downturn in earnings.

(6) "BOOK VALUE." Another factor given a lot of weight is a company's "book value" or
net worth per share. There is a strong tendency (offset considerably by various other
factors) for a company's stock price to approximate its net book value (net worth) per share.
However, a very profitable company, with a record of consistent earnings growth, will
usually sell at several times its "book value."

(7) DIVIDEND YIELD. A company's dividend yield is also a minor factor used in
determining its stock price. As a rule, the higher the dividend yield, the higher the stock is
likely to be. (However, a high dividend payout will tend to keep a company's net worth
from increasing very much, which may act to depress its stock price in the long run.)

(8) INTEREST RATES. As in the real world, higher interest rates tend to lead to lower
stock prices, since stocks, as an investment, have to compete for investment dollars with

68
interest-bearing investments, such as bonds, which become more attractive when they pay
higher yields. Lower interest rates tend to lead to higher stock prices, generally, though that
may be canceled out by an economic recession or depression that is causing the lower
interest rates.

(9) OTHER FACTORS. Finally, just in case you succeed too well in figuring out the above
factors, there is also a considerable degree of randomness built into the stock pricing
formula. In addition, there are a couple of other factors, such as credit rating and the total
assets of the company, plus a few factors we won't mention, which are designed to make it
hard for you to manipulate a company's stock price too easily.

When the stock "ticker" on the main menu is moving, stock prices are constantly being
updated by trading on the open market. Only about 1 of every 50 to 100 stock trades that
occurs is reported on the stock ticker. Stocks on your "streaming quotes list" are also
updated frequently, on a somewhat random basis.

Thus, the price that comes across the stock ticker is the latest price for the stock in
question, but it is possible that before the quote disappears off the other side of the screen
there will have been another trade in the stock that was not displayed on the ticker. You can
check the price of stocks you own at any time by clicking on the "List Portfolio" command
button to see your stock and bond portfolio. Or you can use the "Financial Profile" or
"Research Report" command buttons (all on the "ENTITY INFO" research submenu) to
check the price of any stock. Also, if the "Active Entity" selected is a corporation, its stock
price is constantly shown and updated in the "Active Entity Selected" box in the upper left
corner of the main menu, along with the company's line of credit and who controls that
company.

Option prices for a given stock are computed based on a numerous factors:

(1) INTRINSIC VALUE. In Wall $treet Raider, an option never trades for less than its
intrinsic value -- which is the amount the option is "in-the-money." An in-the-money call is
one with a strike price that is lower than the current stock price. Thus, if the strike price of
a call option is 30, and the stock trades at 34.50, the call is always worth AT LEAST 4.50.
Similarly a put is in-the-money if the strike price of the put option is higher than the current
stock price. An option that is "out-of-the-money" may still have value, however, depending
on how much time is left before it expires and how far it is out-of-the-money.

(2) TIME VALUE. The more time left before an option expires increases its value, all other
things being equal. Obviously, if there are two options on the same stock, with the same
strike price, and one expires in a month while the other doesn't expire for 24 months, the
one that expires in one month is less valuable than the longer-term option. (A lot can
happen in 24 months.)

(3) VOLATILITY. If a stock is in an industry that experiences high volatility (such as

Securities Brokerage), an option on that stock will be worth more than an option on a stock
in a low-volatility industry, such as utilities, insurance, or food processing. However, the

69
option pricing algorithm will treat a company in a very high or very low volatility industry
the same as a holding/trading company, if only a small percentage of its assets are
operating assets ("capital assets"). In Versions 6.35 and later, the program actually analyzes
the volatility of the underlying stock for its last two years of trading, and adjusts the option
price accordingly.

(4) DIVIDEND YIELD. Call options will tend to be cheaper, and put options more
expensive, on a stock that has a high dividend yield, all other things being equal. That is
because a company that pays out very large dividends is unlikely to increase its net worth
very much, so its stock is unlikely to appreciate very greatly. Since this dividend factor
could be manipulated by players, we've put in a few secret features to minimize your ability
to successfully manipulate option prices on a given stock by just changing the company's
dividend payout. (But don't feel bad -- at least you had the right idea!)

(5) INTEREST RATE LEVEL. Both puts and call options tend to be more expensive when
interest rates are higher, less expensive when interest rates are low.

(6) CALLS MORE EXPENSIVE THAN PUTS. As in the real world of options trading,
calls on a given stock at the same price and expiration as a put on that stock will usually
trade at a price that is significantly greater than the price of the put, where both options are
"at-the-money" (strike price is the same as the current stock price). However, if a stock has
a high enough dividend yield, the puts may trade at a price higher than calls on the same
stock.

(7) ASKING PRICE ALWAYS HIGHER THAN BID PRICE. In Wall $treet Raider, as in
the real world, options are usually sold by investors at the "bid" price, or bought at the
somewhat higher "ask" price. In this simulation, the ask price can be anywhere from 2% to
15% higher than the bid price. The further an option's strike price is "out-of-the-money,"
the larger the bid/ask spread, up to 15%. The spread also increases the further
an option's strike price is "in-the-money," but only up to 5%. In some cases, where an
option is far out-of-the-money and/or expiration is imminent, the bid price may be zero, but
the ask price will not be zero.

G. TAXES.

Corporate and individual tax rates can range from about 25% to 70% in Wall $treet Raider.
Individual tax rates are always slightly higher than the rate for corporations. As in the real
world, individuals' capital gains are usually taxed at a much lower tax rate than "ordinary
income" from dividends, interest income, and salary compensation.

From time to time during the game, the government may raise or lower taxes, which will
usually be announced with considerable fanfare. At any time, you can check on the current
tax rates for individuals and corporations by using the "Economic Statistics" command
button on the "General" research submenu, which will display tax rates, government bond
prices, and various economic statistics.

70
In the current version of Wall $treet Raider, it is no longer possible to generate a deductible
tax loss by selling stock from one entity you control, to another, at a loss. This "tax
loophole" has been plugged, so that any loss to the selling entity is disallowed, and is
instead added to the cost of the stock purchased by the buying entity. For example, if ABC
owns stock of XYZ with a cost of $1500M., but with a market value of only $1000M.,
ABC would generally have a loss of $500M. if it sold the XYZ stock for $1000M.
However, if ABC sells the stock to you (and you control ABC), the purchase price will be
the market price of $1000M., but ABC's loss on the sale will be disallowed. However,
instead of taking a "tax basis" of $1000M. (the price you are paying) for the XYZ stock,
you will "carry over" ABC's basis for the stock of $1500M. Thus, no loss is allowed on a
sale of the XYZ stock until you or an entity you control sells the stock to the "public" or an
unrelated entity that you do not control.

(1) INDIVIDUAL TAXES. Players' taxes are fairly simple in Wall $treet Raider. Players
pay tax on their dividend income from stocks, salary from being president of a company,
interest income from government and corporate bonds owned and on any cash balances
(CD's). They also pay tax, but at a lower capital gains rate, if they have capital gains on
the sale of stocks, bonds, or put or call options. The only allowable income tax deduction
for individuals in Wall $treet Raider is for interest expense on bank loans.

You can get a summary of your current tax situation at any time, by selecting "Player"
(you) as the "Active Entity," and clicking on the "ENTITY INFO" research button, which
will bring up the Entity Info Submenu. The text box on the left side of this pop-up menu
will have an analysis of your tax situation, showing your tax liability so far for the year,
and giving you an estimate of your total tax you are likely to owe for the full year. Also,
you can click on and view your "Financial Profile," by clicking on that button in the same
Entity Info Submenu. The profile will tell you what your accrued taxable income is for the
year, and also the amount of any capital gains or losses. This is helpful information
because, for example, if you know you have a large capital loss, you can use that loss to
shelter a capital gain on stock you might want to sell. Or, if you have capital gains in the
current year, and the end of the year is approaching, you may want to sell a stock or other
asset on which you would have a capital loss when sold, to reduce your income tax.

The program automatically keeps track of a player's "tax basis" (cost) for any stocks,
bonds, or options you buy (or stocks or options you sell "short", in order to compute your
gain or loss when you cover the short position). If you own stock in a company, and it
gets exchanged for stock in another company in merger, you do not pay tax on the
transaction. Your "tax basis" from the shares of the company you owned before the merger
will be transferred, to become your tax basis in the stock of the acquiring company, which
you now own. (Or, if you owned stock in both companies before the merger, your "tax
basis" for each will be combined into one tax basis number for the stock that you wind up
with after the merger.) Click on the "Tax Basis Info" button on the "ENTITY INFO"
submenu, if you (the player) are the current "Active Entity," and a list of your stock and
bond holdings, and the tax basis for each, will be displayed.

71
If you sell a stock or bonds, and the net amount your receive, after commissions, is greater
than your tax basis (cost) for the stock or bonds, you will have a taxable capital gain. If the
amount received is less, or the difference will be a capital loss. If stocks or bonds you own
become worthless, due to the company's bankruptcy, the entire amount of your tax basis
will be a capital loss. Wall $treet Raider now treats as a capital loss the amount you pay
(equal to the dividend) when you have sold a stock of a company short and that stock pays
a dividend. That seems harsh, but W$R gives you a break by treating any profit you make
on covering a short sale position as a capital gain. This plugs a "loophole" in earlier
versions, where a stock you had sold short paid a large extraordinary dividend, which was
allowed as a regular tax deduction; since the large dividend usually reduced the stock price
by a similar amount, you could then cover your short position for a capital gain. That tax
loophole has now been closed....

Capital losses, if they exceed a player's capital gains, cannot be used as a deduction against
other income, but can be "carried over" indefinitely, to offset any capital gains in the
current or in future years. Unlike corporations, players are not allowed to carry over their
"ordinary" tax losses to deduct in subsequent years, however. Therefore, if you have $100
million in interest expense for the year, and only have $20 million in income, you will pay
no tax for that year, but your net "ordinary" loss of $80 million is wasted, and cannot be
carried over to the next tax year. Thus, it is a good idea to try to earn just enough income,
as dividends, interest, and salary, to roughly equal your interest expense, so you neither pay
much tax or waste much of your interest deductions. (Remember: If you can deduct
interest, the government is, in effect, paying half of your interest cost, assuming a 50% tax
rate. If you can't deduct it, the government doesn't pay any part of your interest cost, so you
are, in effect, paying about twice as much interest, after-tax!)

Players are required to pay their estimated income taxes in advance, in the form of
quarterly estimated tax payments, which are automatically computed and paid, based on
90% of the player's taxable income to date, less any prior estimated tax payments already
made for that year. At the end of the year, the final tax liability is computed for that year,
and if more than the player has paid in as estimated taxes, he or she must pay the balance at
year-end; if the tax liability is less than the player has paid in, the difference will be
refunded at year-end.

While taxes owed or taxes prepaid do not show up as liabilities or assets on a player's
balance sheet, if a player is in danger of going bankrupt and being kicked out of the game,
and all other assets of the player have already been sold off, the government will issue an
emergency refund of any prepaid taxes to the player. Of course, at the end of the year, or
the next quarter, the player will have to pay any tax, if owed, since all the estimated
(prepaid) tax has been refunded to him or her. If the tax paid at the end of the year exceeds
the player's net assets, then the player will go bankrupt at that time.

(2) CORPORATE TAXES. Wall $treet Raider not only does all the accounting and
bookkeeping for players and all 1590 companies that may exist from time to time in the
simulation, but it also keeps three sets of books for each company--one for keeping track of
cash and other assets, one for financial reporting purposes (earnings reports) and a third set

72
of income figures for tax purposes. In addition, the program also keeps track of the cost or
"tax basis" (with any adjustments) of any stocks owned by a corporation. A corporation's
taxable income is computed as follows:

Earnings or losses from business assets $XXXXX

Plus: Interest income from bonds and

CD's (and, for banks, from loans) + XXXX

Plus: 0%, 20%, or 30% of dividends from

stocks owned (dividends received from
other corporations are 80% or 70%
tax-free, as in the real world, or
completely tax-free if received from
an 80%-owned, or greater, subsidiary) + XXX

Plus or Minus: Taxable income or loss from any

80%-owned, or greater, subsidiary, with
which the company files a consolidated
tax return +- XXX

Plus or Minus: Gains or losses on sales of

stocks, bonds, options, or commodities,
or profits/losses on interest rate swaps +- XXX

Plus: Antitrust or other damages received

from lawsuit settlements or judgments + XX

Plus or Minus: (For insurance companies only--net

income or loss from underwriting) +- XX

Less: Losses from any forced sale of business

assets, or various disasters -XXX

Less: Amounts spent during the quarter

on R & D or marketing/advertising - XXX

Less: Interest paid on loans or on corporate

bonds issued (or, for banks only, on
outstanding CD's and amounts borrowed
from other banks) - XXX

Less: Interest paid on advances from players - XXX

Less: Legal fees paid in lawsuits and

any antitrust damages paid - XXXX

Less: (For banks only—amounts added to the

bad debt reserve) - XXX

Less: Deduction for prior tax loss carryovers - XXX

Equals: Corporate taxable income. +- XXXX

73
If the company is an 80%-owned (or greater) subsidiary of another company, it will pay no
tax directly. Instead, its taxable income is computed, and passed "upstairs" to the parent
company. If it is a positive amount, the hypothetical tax on the income is paid in cash to the
parent company; if the subsidiary has a loss, the loss passes "upstairs" to the parent
company and the parent company pays cash to the subsidiary, equal to the hypothetical tax
savings, for being able to use the subsidiary's tax loss. Taxable or income (or loss) that
passes (up) to the parent increases (or decreases) the parent corporation's tax basis (used to
compute gain or loss if the stock is sold) in the shares it owns in the subsidiary. Any cash
transferred to the sub (including capital contributions) will increase the tax basis in the
sub's stock; any cash transferred to the parent by the sub (including dividends) will
decrease the tax basis, if the sub is 80% owned by a parent corporation (not by an
individual).

When a corporation is not an 80% or greater sub of another corporation and does not own
80% or more of any other corporation, it computes and pays its taxes separately, since there
is no other corporation with which it can file a consolidated tax return.

For example, if ABC owns 79% of XYZ, ABC reports none of XYZ's taxable income; it
only reports 20% of any dividends XYZ pays to it as taxable income. (However, for
financial reporting purposes, ABC would include 79% of XYZ's AFTER-TAX INCOME
(or losses) in its reported income, on an "equity accounting" basis, and would not report
any dividends it receives from XYZ as income for financial reporting, when reporting
ABC's quarterly earnings.)

Corporate taxes are computed and paid (or refunded) on a quarterly basis, unlike individual
taxes, in Wall $treet Raider.

Note two important tax advantages for corporations:

(a) First, a corporation can "carry over" tax losses from one year to the next, indefinitely,
until utilized or lost. However, any unused losses will "shrink" by 10% at the end of each
year. Such prior year losses can be used to shelter current year taxable income from tax.
Tax losses cannot be carried back to a prior year in Wall $treet Raider, but a loss in one
quarter can be carried back and offset against taxable income earned in prior quarters of the
same year, which can result in a tax refund or credit in the later quarter. In some cases, it
can be very advantageous for a corporation that has no tax loss carryovers to acquire a
bankrupt or nearly bankrupt corporation with large tax loss carryovers and liquidate one
corporation into the other. The tax loss carryover of the acquired company will survive the
liquidation, as long as neither company is a holding company, and the loss carryovers can
thus be used to shelter future earnings of the acquiring company.

This is somewhat like the real world, except that the IRS can often prevent the acquiring
company from utilizing most of such carryovers that it "buys" in the real world. No such
restriction is imposed in Wall $treet Raider, as long as both companies are in the same
industry, and neither is a holding company. However, if a company that is a holding
company changes its industry by acquiring business assets in a different industry, either by

74
a purchase or by liquidating a subsidiary that has business assets, it will lose its loss
carryovers at the time it changes its business. (This is also similar to IRS rules under U.S.
tax law.)

You can easily find out if a corporation has a tax loss carryover by using the "Financial
Profile" command button ("ENTITY INFO" research submenu) to display a financial
profile or financial statement (balance sheet) for the company. If the company has a tax loss
carryover, the amount will be shown in the "Miscellaneous Info" section at the bottom of
the Financial Profile.

(b) Secondly, a corporation that receives dividends from another corporation can exclude
100% of the dividends it receives from a subsidiary, if it owns at least 80% of the stock of
the subsidiary company. Also, it can exclude 80% of the dividends it receives from taxable
income if it owns 20% to 79% of the subsidiary, or can exclude 70%, if it owns less than
20% of the stock of the other company. This can be particularly advantageous when a
company borrows money to take over another company. If it pays 8% interest on the
borrowed money and the tax rate is 50%, its after-tax interest cost is really only 4%. If its
dividend yield earned on the acquired stock is 6%, and it acquires 80% or more of the stock
of the acquired company, it earns 6% after-tax on the dividend received and only pays 4%
interest after-tax, a profit of 2% on the borrowed funds.

You can see how the tax law can help corporate raiders by subsidizing their highly-
leveraged takeovers (although the U.S. tax law limits a company's interest deductions
somewhat, in the real world, on debt incurred to do takeovers).

No special capital gains tax or tax rate applies to corporations in this simulation. Therefore,
when a corporation sells stock of another corporation at a gain or loss, it pays tax at the
regular corporate tax rate on a gain, or deducts the loss against other taxable income, if the
sale results in a loss. (Players, on the other hand, pay a much-reduced tax rate on capital
gains, but do not get a tax deduction for capital losses, unless the losses can be carried over
to offset future capital gains.)

Note, however, that gains and losses on sales of stocks, while taxable in this simulation, do
not affect reported "operating earnings," so you cannot manipulate earnings (and the stock
price of your company) by selling off its appreciated investments. Such gains will usually
be treated as "extraordinary items" that figure in total reported earnings, but are reported
separately from the "operating earnings" on which stock prices are based, in part.

However, banks and insurance companies may incur gains or losses on bond trades, but
these are taxable or deductible like other corporate income or losses, at the regular
corporation tax rate. There is no special capital gains rate for corporations for their gains on
bond trades in Wall $treet Raider.

(3) CONSOLIDATED TAX REPORTING FOR CORPORATIONS.

75
If one corporation owns 80% or more of a subsidiary corporation, the subsidiary will not
directly pay any tax on its income, since it will report its taxes on a "consolidated tax
return" basis, with its parent company. Instead, if such a subsidiary has taxable income for
any quarter, it pays an amount equal to the tax it would owe on that income to its parent
company (which reduces the subsidiary's reported net income). The amount it pays the
parent is (nontaxable) income to the parent, which includes ALL of the subsidiary's taxable
income in its income, and pays the tax for both companies to the government on the
combined companies' taxable income. Therefore, if the parent has large tax loss carryovers,
its tax loss carryovers can shelter the taxable income of the subsidiary, increasing the parent
company's reported earnings significantly.

If, on the other hand, the subsidiary incurs a net loss for tax purposes, it passes the
loss up to the parent to be used in the consolidated tax calculation, and the parent pays the
subsidiary a (nontaxable) amount equal to the tax it saves by using the subsidiary's loss.
In short, where the subsidiary has a loss, the parent reimburses the subsidiary for the tax
saving it enjoys from using the subsidiary's loss. Where the subsidiary has a taxable profit,
it reimburses the parent for paying the tax on the subsidiary's income (even if the parent
pays no tax at all, due to its own current or carryover tax losses).

Note, however, that if a subsidiary company incurs a gigantic tax loss, one so large that the
parent company is unlikely to ever be able to use it all to offset future taxable income, the
program may decide not to have the parent company compensate the subsidiary for the use
of the tax loss, since the parent company may never be able to fully use it, and since paying
the subsidiary such a large amount for its tax loss might force the parent to have to sell off
most or all of its assets (possibly including the stock of the subsidiary).

If Company A acquires 80% or more of Company B, which has large tax loss carryovers,
and does not liquidate Company B, the pre-existing tax losses of Company B can only be
used to shelter subsequent net income of Company B, and cannot be "passed" upstream to
the parent corporation for use in the consolidated tax calculation. Thus, if Company B
continues to have losses, only the current losses "pass" upstream to the parent for the
consolidated tax return, and Company B's tax loss carryover will remain unchanged, until it
begins to generate its own taxable income someday.

In Versions 6.50 and later of Wall $treet Raider, we have introduced Investment Tax Credits
and R&D Tax Credits, as discussed in
Section (G)(5) (below) of this chapter. When a subsidiary company in a consolidated return
group has any such tax credits at the end of its quarter, when reporting earnings, it "sells"
the tax credits to its parent company for cash and recognizes the full amount as a reduction
of its tax provision, thus increasing its after-tax earnings by that amount for the quarter. The
amount the parent pays it for the tax credits is an after-tax expense for the parent company,
but that "washes out" if the parent company is able to use the tax credit fully when it
reports earnings, as the tax credit will reduce its after-tax earnings when utilized (and it also
reports higher earnings from the subsidiary as a result of the subsidiary utilizing the tax
credit).

76
Thus, for example, if ParentCo and SubCo file consolidated tax returns, and the only tax
credits earned by either are $10 million of credits earned by SubCo, the net effect for the
parent's consolidated earnings report will be a $10 million reduction in its tax provision,
thus increasing its reported net income by that amount (assuming it can immediately utilize
the tax credit, which might not always be the case, if it has negative taxable income).
This is not quite the way tax credits are reported in real-world consolidated tax accounting
and financial reporting, but is a simplified and understandable approach that works pretty
well in this simulation.

Wall $treet Raider keeps track of the "tax basis" of stocks owned by corporations, so that
gain or loss can be computed when such stocks are sold, exchanged, liquidated, or become
worthless. The program even does the complex tracking of stock "tax basis" for all the
stockholders in merger transactions, and the acquiring company "inherits" as its basis for
the newly-acquired shares of the target company the sum of the "tax basis" of all the former
holders of the shares of the target company (using current market value for shares that were
held by "the Public").

Thus, where a company owns 80% of a subsidiary, the program must also make certain
"consolidated return" adjustments (similar to real-world IRS Consolidated Tax Return
Regulations adjustments) to its "tax basis" for the stock of the subsidiary. These include:

 Increasing the tax basis of the stock of the 80% subsidiary for any taxable income
of the subsidiary, which is passed to the parent, which pays the tax;
 Increasing the tax basis of the stock of the 80% subsidiary where the parent
"reimburses" the subsidiary for tax savings from its (actual or potential) use of any
tax losses of the subsidiary which are passed up to the parent;
 Increasing the tax basis of the stock of any 100% subsidiary where the parent
company makes a "capital contribution" to the subsidiary;
 Decreasing the tax basis of the stock of the 80% subsidiary for any tax loss of the
subsidiary which is passed to the parent company, which can potentially shelter the
parent's taxable income;
 Decreasing the tax basis of the stock of the 80% subsidiary when the subsidiary
"reimburses" the parent company for the amount of the hypothetical tax on the
subsidiary's taxable income, which the parent may have to pay when it includes the
subsidiary's taxable income in its own income; and
 Decreasing the tax basis of the stock of the 80% subsidiary for any tax-free
dividends paid to the parent by the subsidiary.

In some cases, the various adjustments in a "consolidated return" may reduce the tax basis
of the parent's stock in the subsidiary to less than zero. This is called an "excess loss
account," and some or all of it must be recaptured as taxable income if the parent sells part
or all of the subsidiary stock,

If there is such an "excess loss account" and the parent's stock ownership of the subsidiary
falls below 80% for any reason (such as a sale of stock, issuance by the sub of stock in a
public offering, transfer of the stock in a merger, or even the bankruptcy of the sub), then

77
all of the "excess loss account" must be "recaptured" as taxable income by the parent. (But
the gain is an "extraordinary item," which will not affect reported "operating earnings."
However, the parent company will have to pay tax, in real cash, on any such excess loss
account recapture, unless it has tax losses to offset against the gain.)

The only ways that a parent company can dispose of the stock of a sub without triggering
the "excess loss account recapture," where there is an "excess loss account" with respect to
the stock of the sub, are when a parent company does a tax-free liquidation of a 100%-
owned sub, or contributes all of the stock of the sub to another sub as a capital contribution.
These rules are similar to real-world U.S. tax regulations for "excess loss accounts."

We realize the above is somewhat complex, as in the real world, and your eyes may glaze
over a bit when reading this explanation of consolidated tax reporting, but these rules are
fairly logical and we have tried to make the tax rules in the simulation correspond as
closely as possible to real-world tax rules, which are infinitely more complex for
consolidated tax reporting than the relatively simple consolidated tax reporting system
used in this simulation. In any case, the details of these rules are not anything you need to
be very concerned with, since the program handles all the difficult calculations for you.

Also, please try not to confuse the above consolidated tax return rules with the
consolidated earnings reporting rules, which are described in the following section on
earnings and accounting conventions used in Wall $treet Raider.

(4) TAXES ON CAPITAL.

In addition to income taxes, Version 5.0 introduced six new types of taxes on the capital of
players or corporations, or both. None of these taxes are in effect at the start of a game, but
various events can trigger their imposition by the government, such as excessive
profitability of an oil company, which can cause an Oil Windfall Profits Tax to be imposed,
even on oil or oil-related companies that are not particularly profitable, since the tax will be
imposed on a company’s capital assets, regardless of profits. The new taxes (on capital)
were only imposed if you were playing Wall $treet Raider at Difficulty Level 3. In Version
5.10, we introduced a new Difficulty Level 4, which is the same as Level 3 except that now
only Level 4 allows such taxes on capital to be imposed, so if you don’t want to have to
cope with such nasty taxes, choose a Difficulty Level of 3 or less. (Only the Healthcare
and Wealth taxes are ever imposed during the first two years of play, so the other capital
taxes never are imposed in the “shareware” versions of Wall $treet Raider.)

These six new taxes, one or more of which may be in effect at any given time during a
game, are as follows:

 A Wealth Tax on rich players whose net worth exceeds $1 billion U.S. (or the
equivalent in any other currency), imposed at the end of each year, to the extent
your net worth is in excess of $1 billion U.S. dollars.
 A Corporate Shares Tax on players or corporations, if they own stock in companies
that are incorporated in the U.S. or in one other randomly selected country, which

78
 will vary from game to game. When imposed, this tax is paid quarterly, based on the
value of the taxable shares of stock owned. An 80%-owned (or greater)
subsidiary of a corporation is exempt from this tax, however -- another tax
advantage of owning at least 80% of subsidiary corporations.
 A United Nations Carbon Tax (global warming tax) on the capital of companies in
19 different industries that are either hydrocarbon producers or heavy users of fossil
fuels, such as transportation, auto, and utility industries. The tax is paid quarterly,
based on the value of the company’s business assets.
 A Personal Holding Company tax imposed quarterly on any holding/trading
company that is more than 25%-owned directly by a player, and also can apply to
companies in other industries, other than banks or insurance companies, if they
have less than 20% of their assets employed in an active business, and thus are
similar to a holding company. The tax is imposed quarterly, based on the
company’s total assets, less the value of its capital assets and working capital, and
thus is a tax on a company’s passive investment assets (cash, stocks, commodity or
index futures, and options).
 An Oil Windfall Profits Tax may be imposed quarterly on oil, oil service, and
engineering & construction companies (which build refineries, etc.). This tax, when
enacted, only applies when crude oil trades for $80 or more, and the maximum tax
rate does not apply until the oil price is $200 or more. Thus, if the oil price is
currently $100, the tax would apply at half the specified maximum tax rate. This tax
is imposed on an oil- or oil-related company’s capital assets, not on its profits,
though the tax will not be enacted unless one or more such companies begins to
earn excessive profits on its capital assets.
 A Health Care Tax may be imposed on companies in the Biotechnology,
Pharmaceuticals, Medical Equipment/Supplies, and Health Care Providers
industries. The quarterly tax is imposed based on the value of the capital assets of
companies in those industries, and is paid by the companies.

If any of the above taxes on corporations, as computed for any quarter, is less than 1
million of the selected currency (or 1 billion for some currencies such as the Japanese Yen,
Korean Won, Indian Rupee, or the Icelandic Kronur), then no tax is owed -- a tax break for
small companies. Similarly, if a player's Wealth Tax for the year or quarterly Corporate
Shares Tax is less than 1 million (or 1 billion, in the four named currencies), no such tax
applies for that year or quarter.

None of these taxes on capital are deductible for income tax purposes, so they directly and
fully reduce a company’s reported earnings when incurred by a corporation.

(5) TAX CREDITS.

In Version 6.50 of Wall $treet Raider, we introduced two types of tax credits: an Investment
Tax Credit for non-financial companies that are

79
growing by increasing their business assets, equal to 7% of the new assets purchased; and a
new R&D Tax Credit for non-financial companies that are spending more than 10% of their
sales on R&D (research and development expenses -- but not for other "productivity
spending" such as marketing or advertising).

For a company that spends more than 10% of sales on R&D, the R&D tax credit is 20% of
the amount R&D spending exceeds 10% of sales. Thus, if Company XYZ has $1,000
million in sales during the year, and spends 25% of its sales on R&D, the "excess R&D"
spending of 15% (25%-10%), or
$150 million, would earn it an R&D Tax Credit of 20% of $150 million, or $30 million.

These new tax credits are designed to provide tax breaks to fast-growing companies or
companies that spend heavily on R&D, and also are helpful to non-financial startup
companies, which earn Investment Tax Credits equal
to 7% of their initial investment in business assets. Such tax credits will often shelter all or
much of a start-up company's initial profits, until the credits are used up, and the start-up
may earn more Investment Tax
Credits if it is growing its assets and sales, plus R&D credits if it is spending over 10% of
sales on R&D (for companies in industries where R&D spending is relevant).

The Investment Tax Credits and R&D Credits a company earns (or that are passed up to it
by a subsidiary, if it files consolidated tax returns with the subsidiary) are used dollar-for-
dollar to offset the company's tax liability, thus reducing the "tax provision" and the
company's effective tax rate, increasing net income.

If a company does not owe any income tax (because it has no taxable income), it cannot
use the credits, but must carry them forward for later use. However, if a company is an
80%-owned (or more) subsidiary of another
company, the subsidiary in effect "sells" its tax credits in exchange for cash each quarter,
reducing the subsidiary's tax provision and immediately increasing its reported after-tax
profits (with an offsetting negative adjustment to the parent's after-tax earnings for the
payment).

While financial companies (banks, insurance companies and holding/trading companies)

cannot earn R&D Tax Credits or Investment Tax Credits in W$R, they can use such credits
if they own 80% or more of a subsidiary that "sells" such credits to such parent company.

Unused tax credits can be carried forward indefinitely, although, like net operating loss
carryovers in W$R, a company will lose 10% of any unused tax credit carryovers at the end
of each year.

H. CORPORATE EARNINGS AND ACCOUNTING CONVENTIONS.

As noted in Section G. above, Wall $treet Raider maintains three separate sets of
accounting records for each corporation: for cash flow, tax reporting and financial reporting

80
purposes. This subsection explains some of the accounting theories and conventions that
are used to determine the earnings that corporations report to shareholders.

As was noted in Section IV.B, a company that owns 20% or more of the stock of
another company is permitted to report a percentage of the subsidiary's earnings on a
consolidated basis (which is actually more like the "equity method" of accounting used in
the real world than consolidated reporting). This occurs even if none of those earnings are
actually received in the form of cash dividends. That is, if DEF owns 25% of the stock of
XYZ, DEF includes 25% of XYZ's reported income or loss each quarter in DEF's
accounting income. In that case, any dividends actually received by DEF from XYZ are not
considered as income for financial reporting purposes. (But 20% of such dividends are
taxable income, since DEF owns at least 20% of XYZ, but less than 80% of XYZ.)

On the other hand, if DEF owns only 19% of ABC, DEF may not generally "consolidate"
any portion of ABC's income in DEF's own reported income. But in that case, if ABC pays
dividends, DEF can report 100% of those dividends as income in determining its reported
earnings (even though it reports only 30% of such dividends received for tax purposes).
The one exception to the foregoing is where DEF owns less than 20% of ABC, but both are
controlled by the same player or company, in which case, in this example, DEF would
report 19% of ABC's net income or loss each quarter, if the player who controls DEF also
owns 1% of ABC.

Otherwise, reported income is generally the same as taxable income, except that reported
income is reduced by any income taxes paid (or, in Versions 2.20 and later, by a "tax
provision" for taxes that "deemed" to be paid).

However, Wall $treet Raider uses some accounting conventions of its own to restate the
prior year's earnings when a company acquires another company in a merger, or liquidates
a subsidiary. These are assumptions about whether the acquiring company owned the other
company during the previous year. Since these assumptions aren't always correct, the prior
year's earnings per share after such transactions may seem a bit high or low at times.
However, this is purely comparative information and does not affect current earnings
calculations or cash flow.

In addition, when a company issues new shares of stock in public or private offering, or
reduces its number of shares by doing an LBO or greenmail buyback of its stock, all prior
years' per-share earnings are restated to reflect the change in the number of shares
outstanding, to make earnings after the change in outstanding stock more fairly
comparable with prior per-share earnings.

In Wall $treet Raider, a company's financial statements show stocks and bonds at their
current market value, rather than at their original cost. In the real world, most assets are
shown at their acquisition cost in financial statements, although some assets are required to
be shown at the lesser of cost or current market value.

81
Also, in "true" consolidated financial reporting, in the real world, all the assets and
liabilities of the various companies are combined and shown together, and the parent's
ownership of subsidiary corporations is eliminated (not shown) on the consolidated balance
sheet.

Therefore, the "balance sheet" shown in a company Financial Profile in Wall $treet Raider,
where Company A owns Company B, is considerably different from a real-world
consolidated balance sheet, which would show Company B's assets and liabilities
combined with those of Company A, but would not show the Company B stock as an
asset. However, for your purposes, in playing this game, we felt that being able to see what
assets Company A actually holds, and could sell, if necessary, is more likely to be useful
to you.

(Plus, we have to confess we simply aren't smart enough to do all the myriad adjustments
and eliminations, accounting for minority interests and inter-company transactions, and
enormous additional amount of recordkeeping that would be required to do actual financial
consolidations, especially where whole chains of companies have been created as a
corporate empire by players, and pieces of the empire are constantly being added or sold
off. Hence the simpler approach we have adopted, out of necessity, ignorance and sloth. It
seems to work pretty well, and not to distort reality too greatly.)

In recent versions of Wall $treet Raider, financial reporting has been made more realistic by
reporting some items of income or loss as "extraordinary items" each quarter, which figure
into total income, but the remaining "operating earnings" are the more important number,
which is taken into account for stock market purposes in valuing the company's stock.

Also, a "tax provision" is now calculated on the company's operating earnings and
extraordinary items, separately for each, at the current corporate tax rate. As in real world
corporate accounting, the "tax provision" usually bears little or no relation to the actual
(cash amount) of taxes the company pays in each reporting period. This accounting method
tends to smooth out reported earnings, where a company loses money in one quarter, and
has earnings in the next. Instead of reporting the full loss in the first quarter, the loss is
reduced by a negative "tax provision" at the going tax rate, based on the assumption that
the company will carry over the tax loss and use it to shelter income in a subsequent period.
Thus, if the company lost $100 million (pre-tax) in Quarter 1, and the tax rate is 40%, it
would now report only a $60 million loss, instead of the full $100 million. Then, if it earns
$100 million pre-tax in Quarter 2, instead of reporting the full amount as after tax income
(since it is sheltered by the $100 million prior loss), it would reduce the Quarter 2 income
by a $40 million "tax provision" (even though it actually paid no tax, in cash, that quarter),
and would report only a $ 60 million net profit after-tax in Quarter 2.

I. DIVIDEND PAYMENTS.

Each corporation may pay out dividends to its shareholders. Each company begins a game
with a dividend payout that is randomly determined. A player who controls a company can

82
reset the amount to be paid out per share of stock (within a permissible range) by using the
"Set Dividend Payout" command button (on the "Management Transactions" submenu).

Dividends are paid quarterly. The amount paid is an dollar amount (or other currency
amount) per share, such as $1.40 per share. Unlike earlier versions of Wall $treet Raider,
which did not allow a company to pay regular dividends in excess of 100% of the prior
year's earnings (zero dividends if a loss was incurred in the prior year), the current version
of the game allows a company to pay dividends even if it is incurring losses, as long as it
has a good credit rating, so that the payment of dividends does not threaten to bankrupt
the company and cause creditors, bank depositors or insurance policyholders to risk of loss
due to a bankruptcy. If a company's credit rating becomes too bad, or if the amount being
paid out is too high, the company's creditors (or bank or insurance regulators, for those
types of companies) may force the company to reduce its dividend payout rate. If the
company has a "D" credit rating or negative net worth, it must cease paying dividends
completely.

In general, the better a company's credit rating, the higher dividend it will be allowed to
pay out. A company that is not controlled by a player will have its dividend payout policy
set by the program, taking into account a number of factors besides credit rating, such as
the company's earnings trend, growth rate, industry growth rate, and other factors. The
dividend for a company you control will remain unchanged unless you increase it, except
that the payout may be decreased if the company's credit rating deteriorates too badly or if
the dividend payout becomes excessive (such as a 50% yield). Generally, dividend yields
will be in the range of 1% to 10% to stockholders. Utility companies and insurance
companies tend to pay out higher dividends than companies in most other industries.

When setting the dividend, you can increase it only to certain maximum levels of yield,
based on the current stock price. The "yield" is the annual dividend payout rate per share
divided by the stock price. Thus, if the dividend is set at $7.00 per share, and the stock
price is $100, the yield is 7 / 100, or 7%. The maximum yield you can set, using the "Set
Dividend Payout" command button (on the "Management Transactions" submenu), is as
follows:

Credit Rating Maximum Dividend Yield You Can Set

------------- ----------------------------------
AAA 20% (if company has no debt; otherwise
11%, or 10% if bank or insurer)
AA 20% (if company has no debt; otherwise
11%, or 10% if bank or insurer)
A 10%
BBB 9%
BB 8%
B 7%
CCC 6%
CC 5%
C 4%
D 0%

83
You will set the fixed dollar amount of the dividend, not the yield, however, since the yield
will fluctuate every time the stock's price changes, which is every few seconds or less, in
Wall $treet Raider. Thus, if you set the payout at $1.00 per share on a $20 stock, the yield is
5%. But if the stock falls to $10 a share, and still is paying $1.00 as a dividend, the yield
will have risen to 10%. Or, if the stock goes up to $50 a share, the yield will drop to 2%, as
long as the dividend remains at $1.00 a share.

Note that if you are changing the dividend, and the current yield is higher than the above
limits, due to a fall in the price of your company's stock, you can lower the payout slightly,
even if it is to a yield that is higher than the above limit. Thus, if the current payout is
$2.00, and you could only raise the payout to $1.50 if the payout were less than $1.50, you
can either leave the payout at $2.00, or lower it only slightly, such as to $1.90. (But if you
lower the rate to zero, you won't be able to immediately raise the dividend rate back above
$1.50 in that example.)

Players are often tempted to increase the payout rate of a company they control, in order to
get more cash into their hands. However, if you only own 20% of the company's stock, you
will only receive 20% of the dividends it pays. The other 80% paid out will go to the Public
and to other shareholders. After a few years, a high dividend payout may put a crimp on the
company's growth, since it won't be retaining much of its profits for expansion, and may be
forced to borrow heavily. (Also, you will pay tax on any such dividends you receive, unless
you incur enough interest expense on your bank borrowings to shelter all your income from
tax.)

If a bank begins getting into financial difficulty, the government may step in and force the
bank to cease paying dividends if its net worth falls below zero as a result of massive bad
debt losses, a decline in the value of its bond portfolio or other factors. If so, its dividend
payout rate will be reset at zero.

In addition to paying regular dividends, a company that is controlled by a player may pay
out an "extraordinary dividend," using the "Extraordinary Dividend" command button
("Financing Transactions" submenu), if it has sufficient cash or a line of credit. Banks are
subject to stricter limits on payouts of extraordinary dividends, in order to protect their
depositors from corporate looters. (Like you?) Other companies may pay out a substantial
part of their net worth, but an attempt to make too large a payout may be blocked by a
nervous board of directors of the company, if it would significantly endanger the financial
health of the company, or may be limited in amount by government regulators if the paying
company is an insurance company.

J. THE ECONOMIC ENVIRONMENT.

The Wall $treet Raider simulation operates within the context of a fairly simple, but not
unrealistic, economic model. The state of the economy directly or indirectly impacts every
company in every industry.

84
One of the key economic variables is the growth rate (and absolute level) of Gross
Domestic Product ("GDP"). GDP typically grows at about a 3% rate. When it grows faster,
this tends to spur rapid growth in demand for many industries, which indirectly causes
increased borrowing as companies borrow more in order to expand, which in turn tends to
drive up interest rates. High interest rates and high oil prices are factors that will eventually
tend to slow down the rate of growth in GDP. Low oil prices and low interest rates tend to
stimulate GDP growth.

A "normal" interest rate level is a Prime Rate of 6.75% to 8%.

The price of oil tends to be affected mostly by political developments (OPEC squabbles,
wars in the Middle East, and the like), but also tends to rise when GDP grows rapidly and
to decline in periods of recession or depression. A "normal" oil price is considered to be
$100 (U.S.) per barrel. This is up from $35 or $50 per barrel in previous versions of W$R,
to reflect recent "real world" conditions more accurately. (We may have to lower it back to
$35 if the current worldwide Depression continues to worsen.)

Overall profitability of all industries is affected by the level of tax rates. Obviously, high
taxes will tend to squeeze corporate profits.

Some industries, such as housing and building materials, are strongly affected by the level
of interest rates, as well as by GDP and other factors. High interest rates tend to depress the
number of annual housing starts, which in turn depresses the level of demand growth for
the housing industry. A "normal" level of annual housing starts in the U.S. housing market
is considered to be about 1 million to 1.2 million units.

Interest rates are determined in part by demands for credit throughout the economy, but
even more by the monetary policies of the central bank. If the central bank eases up on
money supply growth, interest rates will usually decline. If it tightens up on money supply,
bond prices will usually drop and interest rates will soar.

The "central bank" is the U.S. Federal Reserve, if a game's currency configuration is for
U.S. dollars or the Mexican peso. If configured for Euros, then the central bank will be the
European Central Bank; for British pounds, it will be the Bank of England; for Canadian
dollars, the Bank of Canada; if configured for Japanese yen, it will be the Bank of Japan.
For other countries, it will just be "the Central Bank."

Needless to say, various actions of the government, such as increasing defense spending,
running deficits, imposing trade restrictions, etc. also will have varying effects on different
sectors of the economy. These actions occur in an unpredictable manner. Your job is to
learn to live with the 800-pound gorilla -- the government.

When you are viewing the General research menu, the sidebar on the left side of the dialog
box will provide a textual summary and analysis of the global economy, including
comments on significant trends in the economic growth rate, interest rates, energy and
other commodity prices, and the stock market index.

85
For a more in-depth description of the economic factors that generally affect demand
growth for each industry, see Appendix D.2.

K. BANKS--HOW THEY WORK.

In Wall $treet Raider, each of the 50 banks that exist at the start of a game are quite large
institutions, and it usually takes a lot of money to buy control of one of them. However,
once you or a company you control has 1000 million (or 1000 billion, depending on the
selected currency), it can start up a new bank with that amount of money, and you or your
company will own 100% of the new bank's stock.

Each player and each company is assigned a bank lender at the beginning of the game, and
generally must do any borrowing from that bank for the rest of the game. Your "cash" must
all be deposited at that bank, in interest-bearing CD's (Certificates of Deposit) at that bank,
so long as it is the bank you borrow from (though it will be shown as "cash" on your
financial balance sheet, and can be spent at any time like cash or a checking account).
However, if you, or a company you control, fully pay off any loan owed to the bank, you
may select a different bank to do business with, using the "Change Bank" command button
in the "Other Trans." submenu. You may generally change banks even if you still owe on a
loan, UNLESS the bank is a "hostile" bank, controlled by another player, as your new
banker will simply buy your loan from the old bank. However, in some cases, the new bank
you wish to change to will be unable or unwilling to acquire your account.

When you change bank lenders, your CD deposits will automatically also be transferred to
your new bank.

If you liquidate one company into another, the combined company that results will continue
to borrow from the surviving corporation's bank. The surviving corporation's bank will
buy (for cash) the loan held by the liquidated company's bank from that bank, thus
combining the two loans of the two companies into a single loan from one bank.

Control of a bank can be advantageous for four main reasons:

 If you are playing at Difficulty Level 2 or higher, you will have your maximum line
of credit increased from 1 times net worth to either 2 or 3 times net worth
(depending on the Difficulty Level selected for that game), so that you will have
much more available credit if you need it. Of course, if you use that much credit,
you will probably get into deep, deep financial trouble, most of the time.
Remember, however, that there are limits on how of its loan portfolio a bank can
loan to one entity, which is the higher of 25% of its loan portfolio or $10 billion
U.S. (or the equivalent in another currency).
 When you take control of a bank, you have the option of freezing the lines of credit
("Freeze/Unfreeze Loans" command button, on the "Other Trans." submenu) or
calling in the loans of other players ("Call Bank Loan" command button, also on the

86
 "Other Trans." submenu) and of companies controlled by other players, if they
borrow from your bank. This may cause some serious liquidity problems for them.
If you have frozen their loans, you can re-select the "Freeze/Unfreeze Loans" button
to un-freeze their loans.
 As long as you control the bank you borrow from, no other player can use that bank
to freeze and/or call in your loan. Thus, controlling the bank you borrow from is
also a good defensive strategy. Of course, unless you own at least 50% of the stock
of the bank, there is always the danger that an opposing player may wrest control
of the bank from you.
 If you are playing at Difficulty Level 3 or 4, any repayment of a corporate loan (but
not a player loan), using the "REPAY LOAN" button, will incur a 2% prepayment
penalty, payable to the bank -- unless the borrowing company and the bank are both
controlled by the same player. Thus, if your company prepays all or part of its bank
loan and you control the bank, you will avoid the prepayment penalty. By the same
token, if you control the bank that lends to a corporation controlled by an opposing
player, any attempt by that player to have such corporation prepay its loan will
generate a 2% prepayment penalty, which will be income for your bank.

If you want to try to take over control of a bank, take a look at who controls the bank, using
the "List Shareholders" command button (on the "ENTITY INFO" research submenu). If
the bank in question is controlled by another company, you may find it easier to take
control of one of the companies in the chain of ownership, rather than buying shares of the
bank directly. For example, if ABC Bank is 30% controlled by XYZ Corporation, which is
in turn controlled by no one, it may take far less money to buy 20% control of XYZ
Corporation to get control of ABC Bank than to buy 31% of the ABC Bank shares directly.
You could get control either way, but will often find that lack of funds for takeovers is a
constraint.

Banks derive a significant part of their income from their holdings of government and
corporate bonds. But they make most of their money by lending money to players and other
companies at the Prime Rate or higher interest rates. Banks also have a portfolio of small
consumer loans and mortgage loans. The interest rate earned on consumer loans (such as
credit cards) is much higher than on business loans to corporations, or mortgage loans.
However, companies usually have to write off a large amount of their consumer loans as
bad debts almost every year, and a small percentage of mortgage loans, so that the net
amount earned is usually about the same on consumer loans as mortgage loans, after bad
debt write-offs. Write-offs tend to increase during recessions and depressions.

Most banking transactions are automatic in this simulation. That is, if a company spends
more money than it has at the end of its quarter for asset purchases, taxes, dividend
payments, regular loan payments, etc., it will automatically borrow enough from its bank to
cover the shortfall (if it has a large enough line of credit). The Wall $treet Raider program
also takes care of computing each borrower's credit rating and applicable interest rate on
loans, and of collecting the interest and principal on loans each quarter. (Players do not
have to make principal repayments on their loans, unless they receive a "margin call," or in
the rare situation in which a player's loan is greater than $10,000 million and exceeds 25%

87
of the lending bank's total loan portfolio, in which case the bank will have to call in part of
the loan, so no single loan, larger than $10,000 million, exceeds 25% of its total loan
assets very long.)

If a bank runs short of cash, it will automatically sell enough bonds to cover the shortage. If
it runs out of bonds to sell, it will then borrow from another bank. These are shown as
"Interbank Debt -- Fed. Funds" in the "Liabilities" section of the financial balance sheet, on
the bank's financial profile (displayed by using the "Financial Profile" command button on
the "ENTITY INFO" research submenu). The borrowing bank pays interest to the other
bank at the current "LIBOR Rate" which can be viewed if you use the "Economic
Statistics" command button (on the "GENERAL" research submenu).

Banks are required to call in portions of any single loan that is greater than $10,000 million
and also amounts to more than 25% of the bank's total loan portfolio, and will do so in
fairly large chunks. Also, banks are now limited as to how much they can borrow as
"interbank loans," with a cap of 2,000 million (in whatever currency you have selected for
the current game). If a bank runs short of cash in current versions of the simulation, it can
no longer borrow near-infinite amounts from another bank as interbank loans, but must sell
off stocks and bonds, and in some cases may be forced to issue bonds or stock, unless
controlled by a player, or to partially call in all its business loans or sell off loans to other
banks, until it has covered its cash deficit.

If a borrower's credit rating slips too low, the bank may begin calling in large portions of
the loan each quarter, to protect itself. Regardless of whether a player controls the bank,
this action will occur automatically. Doing so, of course, can further weaken the borrower's
financial condition.

Each bank has a certain amount of "Demand Deposits" and "Certificates of Deposit"
outstanding. It pays interest on the latter at the "Bank CD Rate" (use the "Interest Rates"
command button to display the Bank CD Rate), but it pays no interest to depositors on
Demand Deposits. Both types of deposits usually grow at an annual rate of about 3 to 5
percent (faster if borrowing Fed Funds) for each bank, on a random basis. But if a bank is
excessively liquid (has large amounts of cash and bonds, in relation to the amount of bonds
it has issued and outstanding ), it may gradually reduce the amount of the CD deposits on
which it has to pay interest. But if a bank has a strong capital position (where net worth
plus bad debt reserve are more than about 8-10% of total deposits), it will be able to rapidly
expand its deposit base, bringing in more cash that it will be able to invest or lend out.
Thus, a strongly capitalized bank should be able to expand its earnings faster than a bank
with a weak capital position, all other things being equal.

Note that in early versions, the program did not actually take into account the supposed CD
deposits of its loan customers in computing its total CD deposits. However, the current
version now keeps track of all cash transactions of players and corporations, and moves
money back and forth between their banks, after every "cash" transaction by a player or
bank. Thus, if you suddenly raise $50 billion by a sale of stock or bonds, you will notice
that your bank's cash balance and liability for CDs outstanding have both instantly

88
increased by $50 billion each, reflecting your receipt of $50 billion of cash which is
immediately deemed to be deposited in Certificates of Deposit (CD's) at your bank.

STRATEGY NOTE: Since banks generally earn higher interest rates on their loans to
players and corporations than they pay out as interest on CD deposits, it will help a bank
you own or control if you have as many of your controlled companies as possible switch
their banking relationship to your bank. That will bring over their bank deposits, which
your bank can then lend out at a profit (usually). In addition, if your controlled companies
then borrow on their lines of credit, they will also be borrowing from your bank, giving it
more business loan customers.

One of the main expenses a bank incurs is bad debt expense. When a company or player
that owes a bank loan goes completely bankrupt, or when a bank is forced to write off part
of a loan when a company goes through a "Chapter 11" type of bankruptcy reorganization,
the bad debt does not impact the bank's earnings report for that quarter all at once. Instead,
the loss reduces the amount in the bank's "Bad Debt Reserve", which in this simulation is
usually about 1% of the bank's total loan portfolio, but may be much higher if the bank has
number of risky loans (to companies with "C" or "D" credit ratings).

Each bank tries to maintain a bad debt reserve at a targeted level, which is generally 1/2 of
1% of all loans, plus an additional 20% of any "D"-rated loans, 3% of "C"-rated loans, and
6% of its consumer loans portfolio. In addition, if over 25% of the bank's total commercial
loans (to players and companies) are extended to one borrower, that is considered a high
risk situation, and the targeted bad debt reserve must add an amount equal to 10% of the
amount by which that particular loan exceeds 25% of the total business loan portfolio.

If, at the end of any quarter, the bank's bad debt reserve is less than the targeted amount, it
will add an amount to the reserve equal to 25% of the shortfall. That amount is a non-cash
expense that will reduce pre-tax income for that quarter. Or, if the reserve is larger than the
targeted amount, the bad debt reserve will be reduced by 25% of the excess, which will
flow back into pre-tax income for that quarter, boosting profits.

If a bad debt loss occurs, and reduces the reserve balance to, for example, only 0.2% of
total loans, then for each quarter for the next year or so, the bank will keep adding amounts
to the reserve until it gets back up to the targeted amount, usually around 1% to 2% of total
loans. The "increase in the bad debt reserve" each quarter, as shown in the earnings report
(use the "Earnings Report" command button to see the bank's latest quarterly earnings
report) is the amount that was charged as an expense against the bank's reported earnings
(and taxable income).

Note that even if a bank does not incur any loan losses, it will have to increase the loan loss
reserve if its total loan portfolio expands. Thus a rapid increase in the amount of loans
outstanding by a bank may temporarily crimp its earnings, until the bad debt reserve gets
back up to about 1% of the larger total loan portfolio amount.

89
Use the "Financial Profile" command button ("ENTITY INFO" research submenu) to see
what a bank's bad debt reserve balance is. Or use the "Research Report" command button
to see if the reserve is considered to be too low and needs to be increased, or is adequate.

The "Research Report" on the bank will also show the bank's bad debt reserve as a percent
of its total loans.

STRATEGY NOTE: When your bank has excess cash, you can invest it in bonds or buy
consumer loans (high-yield, but risky), mortgage loans (low-yield, but low risk) or can buy
loans from other banks, which can vary in risk, depending on the debtor's credit rating.
Note that one way to generate good earnings in the short-term is to have your bank buy
"D"-rated or "C" rated loans from other banks, at a large discount from the amount of the
loan. The discount is immediately added to your bank's bad debt reserve, but is not an
expense. Since such risky loans pay higher interest rates, you will quickly generate nice
profits. In addition, you may increase your bad debt reserve so much that it is excessive,
and some of the excess will be transferred back into earnings for a few quarters, further
increasing earnings. Of course, after a few quarters, some of those risky loans will go bad,
and your bank may have to write off anywhere from 20% or so to much more, if the
borrower goes broke. (So if you use this strategy for a bank you control, you may want to
plan on selling the bank in the next 2 or 3 calendar quarters, if the higher earnings
temporarily run its stock price up -- before the loan portfolio begins to turn sour!)

Banks are pretty strictly regulated, since, as noted bank robber Willie Sutton once noted,
when asked why he robbed banks, "That's where the money is." So you may find that a
number of types of transactions you could do with another kind of corporation will not be
allowed in the case of a bank, such as the following ones:

 Buying stocks. (A bank may buy some stocks, but there are limits on how much it
can invest in stocks of other companies.)
 Buying business assets.
 Doing Greenmail or LBO buybacks of its stock. (Permitted in Versions after 2.41,
but with much stricter limits than for other types of corporations.)
 Paying "Extraordinary Dividends." (Permitted, but with stricter limits than for other
types of corporations.)
 Investing in "start ups."
 Being liquidated into another company (that is not also a bank), or liquidating one
of its own (non-bank) subsidiaries, other than holding companies.
 Filing antitrust lawsuits.
 Doing restructurings.
 Buying or selling put or call options, except for selling “covered” calls or buying
puts to hedge a stock holding.

L. INSURANCE COMPANIES--HOW THEY WORK.

90
The insurance companies, like banks, are also large financial institutions, and pools of
capital. However, unlike banks, the insurance companies in Wall $treet Raider do not
directly lend money. Instead, they invest in bonds, bank CD's and stocks of other
companies. In some (rare) cases, they may also earn fees as the investment manager for an
ETF, but that is a function that is usually only performed by securities brokers in this
simulation. However, when a securities broker is fired as an ETF’s manager, an insurance
company is usually appointed in its place.

Insurance companies can borrow money from their bank or by issuing bonds, but they
seldom need to, except perhaps to take over a bank or another company.

However, each insurance company has what amounts to a permanent interest-free loan
from its customers--its insurance policy reserves. These reserves are referred to on the
financial profile (viewed by clicking on "Financial Profile" command button on the
"ENTITY INFO" research submenu) as "Insurance Policy Reserves."

If you control an insurer, you can change the growth rate of these interest-free reserves by
using the "Set Growth Rate %" command button on the "Management Transactions"
submenu. Obviously, the more insurance an insurer has in force, like an interest-free loan,
the more money it has to invest and make money on, so it would seem better to have an
insurance company rapidly expand its base of policy reserves (insurance in force). Perhaps.

However, there is a slight catch. (There always is, right?) If your insurance company begins
to increase its business too fast, you will increase the probability (and severity) of losses
that it may incur from its "insurance underwriting" business. Usually, if an insurer breaks
even on its underwriting or incurs only small losses, it should do well, since it should be
able to earn about 8% a year or more by investing the policy reserves in stocks, bonds, etc.
But if it increases its growth rate too much, it may incur some disastrous underwriting
losses by insuring bad risks. If this occurs, you may wish to cut back its growth rate in
order to restore current profitability. Of course, if government bonds or CD's are yielding
15%, you may be willing to incur some fairly heavy underwriting losses to get the use of
the additional funds, which you can invest at such exceptionally high yields, but that is not
the usual situation.

An insurer that is reducing its insurance in force by 5 or 10% a year will ordinarily show
some very nice underwriting profits, although it will have a shrinking base of policy
reserves to invest. This strategy makes sense only when interest rates are very low.
Expanding its insurance in force rapidly only makes sense, generally, if interest rates are
high or if the company's management is very capable, and is able to generate an
underwriting profit (or only very small losses) while growing at a fairly rapid pace. The
quarterly earnings report for an insurer will tell you if it is incurring underwriting losses, or
underwriting profits, if any. (Use the "Earnings Rep." button on the main menu screen to
view an insurance company's most recent quarterly earnings report.)

Also, note that if the insurer is spending a high percentage of revenues on marketing and
advertising expenditures, that will worsen its underwriting losses, or reduce its

91
underwriting profits, in the short run. However, spending heavily on marketing/advertising
may increase the company's profitability in the longer term, at which point you can reduce
its spending on marketing/advertising, by again using the "Set Productivity Spending"
command button in the "Management Transactions" submenu.

Beginning with Version 4.60 of Wall $treet Raider, insurance companies are allowed to sell
"covered call options" against any stocks they own, but
may not buy calls or trade put options. In Version 5.0 and later, they may also buy put
options to hedge positions in stocks they own. They may not sell "naked" call options or
buy or sell puts (except to buy puts to hedge a stock holding), as options trading is
generally too risky for insurance companies, a heavily regulated industry. "Covered calls"
are calls that are sold short against stocks that the seller owns. Thus, if Insurance Company
ABC owns 8% of the stock of XYZ Corporation, ABC could sell (short) call options on as
much as 8% of XYZ, to generate additional income and to reduce its risk of investing in
XYZ, or could reduce its risk by buying put options on up to 8% of XYZ. Other than as
noted above, insurance companies generally operate pretty much like other (non-banking)
corporations. However, you may be stopped from doing certain types of transactions by the
friendly Insurance Commissioner's minions. You will find out about these occasional
restrictions--the hard way--just like in the real world, such as when you try to have your
insurance company do an LBO or Greenmail buyback of stock, or pay out an extraordinary
dividend.

M. HOLDING/TRADING COMPANIES--HOW THEY WORK.

In Wall $treet Raider, any company that is not a bank or an insurance company and that
does not have any "business assets" in a particular industry is classified as a
"Holding/Trading Company." A company can become a holding or trading company in one
of several ways:

 Is formed by a player as a startup company, which the player choose to have start up
as a holding company.
 It sells off all of its business assets (voluntarily).
 It is forced to liquidate all of its business assets because of cash flow shortages, or
because its business assets dwindle to such a point that it becomes too small to
effectively compete in its particular industry.

A holding or trading company can be liquidated into any other kind of company, and a
holding/trading company may liquidate any 100% owned subsidiary company it owns,
except a bank or insurance company.

However, note that in any liquidation, any tax loss carryovers of the company to be
liquidated will be lost forever upon its liquidation, if either it or the parent company is a
holding/trading company. Tax loss carryovers of a liquidated company can only be
"inherited" by the surviving parent company after a liquidation if both were industrial
companies, in the same industry, or if both were banks or both were insurance companies.

92
If you see that all the companies in a particular industry are earning obscenely high profits,
but you don't want to buy any of their stocks (perhaps they seem overpriced), you could
start up a new company in that industry. However, you should also consider buying up
an existing holding/trading company, contribute some capital to it (using the "Capital
Contribution" command button on the "Financing Transactions" submenu), and use the
"Buy Corporate Assets" command button (on the "Buy/Sell Transactions" submenu) to
have it purchase business assets from another company in the industry which you want to
enter. Thus, you can take an essentially "busted" company, pump new money into it and
start it up again in a highly profitable industry of your choosing.

However, if the holding company had tax loss carryovers, those will be lost if it enters
another industry by acquiring business assets. Perhaps a better tactic, if the holding
company has large tax loss carryovers, would be to maintain it as a holding company, and
have it start up a new subsidiary in a profitable industry. As long it owns at least 80% of
the subsidiary, they would file a consolidated tax return together, and the subsidiary's
profits would be tax-sheltered by the holding company's tax loss carryovers, a neat little
tax planning gimmick you can do in Wall $treet Raider (but not necessarily in the real
world -- not in America, at any rate--the IRS is too smart for that one).

Beginning with Version 4.60 of Wall $treet Raider, holding/trading companies were
allowed to sell "covered call options" against any stocks they own, and could also buy
calls, but could not buy or sell put options. In Version 5.0 and later, they may now sell
"naked" put or call options (with an adequate credit rating) and may buy put options.

Other than as noted above, holding / trading companies are just the same as industrial
companies. For a financial summary and listing of holding / trading companies, click on the
"Industry Group Selected" listbox on the main menu screen, and select "HOLDING /
TRADING COS.," and then use the "Industry Summary" command button on the
"GENERAL" research submenu to view the list of all currently existing holding / trading
companies.

N. STOCK OWNERSHIP.

There are a few limitations on stock ownership in Wall $treet Raider. In general, you need
to be aware that each corporation can have a maximum of 100 stockholders (other than the
Public), and that each player or corporation can own stock in up to a maximum of 15
companies. Since each company you own can also own up to 15 companies, there is no
practical limit to the size of your corporate empire, except the amount of money you are
able to accumulate and control.

Banks can own stocks in Wall $treet Raider, but are limited in the amount they can invest in
stocks. A bank cannot buy any more stock in any company, if it already owns stock with a
value that is more than 50% of the bank's net worth. However, even if it has over half its
net worth invested in stocks, a bank may still do a merger, and acquire another bank or

93
other type of company that way, or it may acquire stock of a bankrupt company in an
exchange for canceling the debts of the bankrupt company, as part of a bankruptcy
proceeding. (However, bank mergers, between two banks, while possible, will only rarely
be allowed by the government regulators. Very rarely in Wall $treet Raider.)

Most important of all, remember that it takes at least 20% ownership of a company's stock
for a player or another company to control it. If you control a particular company, then you
also control any company that it controls, and any stock it owns. Also, a company must
directly own 20% or more of a subsidiary company (unless they are controlled by the
same player or company) in order to be able to include a portion of the subsidiary's
earnings in the parent company's earnings report. A company must own 80% of another
company in order for the two companies to report their taxes on a consolidated tax return
basis.

For more details on the concept of "control" in Wall $treet Raider, see the FAQ on: What is
meant by "control" in W$R.

O. LINES OF CREDIT.

Each player and company in Wall $treet Raider has a "line of credit" equal to at least the
player's or company's net worth, generally. For example, if a company has $500 million of
assets and owes only $100 million, for a net worth of $400 million, it may have an unused
line of credit of $400 million that it can borrow at any time. The same is true for a player.

However, if you are playing Wall $treet Raider at Difficulty Level 2 or higher and you, as
an individual player who is borrowing, control the lending bank, then you could borrow up
to 2 or 3 times your net worth, or $1200 million in the above example, if playing at
Difficulty Level 3 or 4. On the other hand, if an opposing player controlled the lending
bank, your line of credit might be zero--that is, you could not borrow from the bank at all,
if the opposing player had chosen to have his or her bank "freeze" your line of credit. (The
other player could also "freeze" any line of credit for any company under your control, if it
borrows from the opposing player's bank.)

In fact, the opposing player might even choose to have the bank call in half your loan, or
half of your controlled company's loan, from that bank.

Note that your line of credit, or that of a company you control, may be temporarily frozen
by the bank, if the government Banking Examiners find that you (or your company) has
borrowed an amount that exceeds 25% of the bank's total loan portfolio (but only if the
loan balance also exceeds $10 billion U.S., or the equivalent in another currency). In that
case, not only will your line of credit be frozen, but the bank will start calling in large
chunks of the loan at regular intervals. This is a banking regulatory rule that is designed to
prevent a bank from keeping "too many eggs in one basket."

Refer to Section IV.D above for a more complete discussion of lines of credit and other
types of financing that are available in Wall $treet Raider.

94
P. ANTITRUST LAW CONSIDERATIONS.

There are a few laws in the real world that are designed to protect the innocent and the
downtrodden, but which mainly serve to employ and enrich hordes of bureaucrats and
locust-like infestations of lawyers. Things are pretty much the same in this
game/simulation. In Wall $treet Raider, you need to be particularly conscious of the
simulation's built-in antitrust laws.

On the one hand, if you control companies that, together, hold much over a 50% market
share in any industry, various government antitrust agencies are likely to quash any attempt
you might make to take over another company in that industry by means of a tender offer
or merger. If you are creative and inventive, you may find other ingenious ways of
indirectly acquiring control of a company in an industry you already dominate. However,
we think we have now closed most such "loopholes." Good luck....

On the other hand, if you do succeed in getting much more than a 50% market share in an
industry (which will enable you to limit supply, thus, in effect, fixing prices), look out for
private antitrust damage suits from other players who may horn into the industry and use
the companies they control in such industry to sue you for vast sums. While you can be
sued successfully if you have only a 20% market share, the odds are heavily in your
favor until your market share goes over 50%. You become increasingly at risk as a
defendant as your market share goes up further above that level.

Thus, if you are planning to obtain a monopoly (or oligopoly) position in a particular
industry and start coining money, be prepared to pay a lot of legal fees and antitrust
damages. On the other hand, if you notice that an industry is dominated by a particular
competitor to a company you own, have your company file an antitrust suit against the
competing company--you may be able to not only damage the competitor financially, but to
also pick up some easy money (or at least enough to cover your legal fees) for your
company. Use the "Antitrust Suit" command button in the "Management Transactions"
submenu to initiate an antitrust lawsuit.

Even if you don't own a company in a particular industry, you may happen to notice that a
certain industry is dominated by one company (or several companies controlled by one
player). If so, you can either buy up control of a small company in that industry, or you
can start up a new company to enter the industry, and have that company bring an antitrust
lawsuit against the large company that dominates the industry -- especially if it has a
market share of well over 50%.

Whether your company is the plaintiff (suing), or the defendant (the company being sued),
the outcome will be significantly affected by the quality of your law firm. Using the
"Settings/Select Law Firm" pulldown-menu item from the main Wall $treet Raider screen,
you can select your law firm -- either a cheap, average, or expensive one.

Obviously, you will tend to get better results with an expensive law firm, but you may only
be able to afford a cheap one. Good luck, in either case. You'll often find that, even if you

95
file an antitrust lawsuit and win it, or win a settlement, it will be hard to collect much more
than you had to pay for legal fees. But at least the other company is forced to pay both you
and its legal fees.

Q. BANKRUPTCY AND MARGIN CALLS.

(1) CORPORATIONS. In Wall $treet Raider, companies are allowed to struggle along for
considerable periods of time with a negative net worth--that is, more debts than assets. In
fact, they may default on bond interest payments, and "accrue," rather than pay, the interest
owed to the bond holders if they don't have the cash to make payment -- so that they will
have a better chance to recover without being pushed over the cliff into forced liquidation
of assets and ultimately bankruptcy reorganization.

Once a company’s credit rating has been downgraded to “D,” it is deemed to have filed for
bankruptcy protection. This protects it from having an opposing player’s bank “call” its
bank loan. Also, as noted above, bankruptcy protection in W$R allows a company that has
issued bonds to accrue, rather than pay interest on such bonds as long as it is a “D” rated
company. These protections may sometimes allow a company to recover financially to the
extent that its credit rating will improve and it will not have to go through a bankruptcy
reorganization, which would wipe out most or all of its stockholders and part of its debt
obligations.

However, if assets decline much below 80% of debts, a company will usually go through
"Chapter 11" bankruptcy reorganization. This means that the bank will write off a part of its
loan to the company, which should help put it back on its feet, more or less. If the company
has issued bonds, those bonds will be canceled, or the amount sharply reduced, first, before
the bank incurs a large bad debt write-off. Bondholders are "junior" creditors, and usually
lose a much larger percentage of their investment in the deadbeat company than the bank
lender, since the bank loan is a "senior" obligation of the borrower.

Shareholders also give up all, or nearly all, of their stock in the company during a "Chapter
11 Reorganization." This sounds harsh, but is actually fairly generous, since in the real
world, stockholders typically emerge with nothing but the "sleeves of the vest" after a
"Chapter 11 Reorganization."

TECHNICAL NOTE: In a "Chapter 11" bankruptcy reorganization in this Windows

version of Wall $treet Raider, the program actually makes up to seven "passes," until the
bankrupt company is restored to a point where it has a positive net worth. In the initial pass,
most stock of stockholders is canceled, and if bonds are outstanding, most of the initial bad
debt loss is incurred by the bondholders, and by canceling part of any advances (loans)
from players to the bankrupt corporation, and relatively little bank debt is written off. By
the second pass, if needed, all stock of the stockholders is wiped out, and more bonds,
advances, and bank debt are canceled, with approximately twice as much bond
indebtedness wiped out as bank debt. In subsequent passes, if necessary, more and more
bonds and advances are canceled, until all bonds and advances outstanding may be

96
canceled, as well as a considerable part of the debtor's bank debt. If the debtor still is not
restored to a positive net worth, more and more bank debt is canceled, until, in an extreme
case, all of the bank debt will be canceled, and new stock of the company will be issued to
the bank, in exchange for canceling the bank debt.

All of the above occurs in a tiny fraction of a second, of course, and is transparent to you,
the player, but we thought you might want to know a bit more about the inner workings of
the bankruptcy reorganizations in this simulation....

Notice that when a company, other than a bank, has a negative cash balance (resulting from
operating losses, loan repayments, dividend payouts, etc.) at the end of its calendar quarter,
it will automatically borrow (if it has a line of credit) to cover the deficit cash balance. If it
still has a cash deficit, it will begin selling off assets, in this order:

 Liquidating commodity or stock index futures positions

 Closing out put and call option positions
 Selling bonds (in the case of an insurance company)
 Selling business assets, if any (usually at below cost)
 Selling stocks owned (but stocks are sold before business assets if business
assets are earning a high rate of return)

When a bank has a negative cash balance, at any time, it will soon try to borrow (up to
2,000 million total) as an interbank loan. If it still has a cash deficit, it will begin taking
steps to raise cash, in this order:

 If it has a healthy capital position (net worth plus bad debt reserve is more than 8%
to 12% of total deposits), it will expand its deposit base
 Sell government bonds (most, but not all of them)
 Sell 25% of its consumer loans to another bank
 Sell 25% of its mortgage loans to another bank
 Float a bond issue (if possible, and rates are not too extremely high, but only if the
bank is not controlled by a player)
 Sell off stock holdings (unless controlled by a human player)
 Issue stock in a public or private offering (unless controlled by a player)
 Call in up to 10% of all its business loans to players and companies
 Sell off randomly selected corporate loans to other banks, at prices based on the
credit worthiness of the borrowers

These cash management transactions all occur automatically, when necessary, each quarter,
or more frequently. If you view a quarterly earnings report ("Earnings Report" command
button on the "ENTITY INFO" research submenu), it will include a summary of any such
actions taken by a company to cover a cash shortage at the end of the quarter just
completed, for non-banks.

97
If a company totally runs out of assets to sell off to pay its bills, it will go completely
bankrupt, all loans will be written off and all common stock is canceled (called a "Chapter
7" bankruptcy in the U.S.). (This is relatively rare.) After that, the company will no longer
be "active" in the current game of Wall $treet Raider, although it may later be resuscitated
and recycled as a startup company in some industry, under its old name.

If a bank develops a negative net worth, it may be forced to suspend dividend payments. A
bank that gets in too far over its head will be shut down. The government will then step in
and inject enough cash to make it solvent again -- all former stockholders of the bank come
out with nothing when the bank reopens. Depositors are usually unaffected, but in some
cases the government deposit insurance will not cover large depositors, so you may lose up
to half your bank account balance if your bank goes broke. In addition, if you owned bonds
issued by the bank, they are never insured, so you will usually get only a token cash
payment (usually about 10% of the face value of your bonds, if anything) from the
government when the bank bonds are canceled out by the government regulators.

Similarly, if an insurance company gets into deep financial trouble, it may go through a
"Chapter 11" bankruptcy if it has bonds outstanding or owes money on bank loans.
However, an insurer can also go broke, even if it has no debts in the form of bonds
outstanding or bank loans owed -- where its total assets decline in value to less than its
policy reserves. In that case, the government will step in and wipe out the current
stockholders, issuing new stock to "the Public" and paying off enough of the insurance
policy reserves to make the company financially solvent and healthy again.

Note that in any bankruptcy proceeding where the stockholders are completely wiped out,
the stock price history of that company will also be wiped clean (from memory), and will
start over with the newly issued stock. Thus, where all the old stock has been canceled in
bankruptcy, the stock chart for the company will no longer show the prices for the stock for
periods before the bankruptcy wiped out the old stockholders.

(2) INDIVIDUAL PLAYERS. Individual players can sometimes briefly have a negative net
worth, but not for long. If your net worth is negative, you will go into a "death spiral,"
receiving margin calls from your bank, forcing you to call in advances to your companies
and to sell stocks and bonds you own until you have none left, at which time you will go
bankrupt and will be booted out of the game, a failure and a total disgrace.

Note that the program assumes that you live the "good" life and that it costs you a cool $1
million a year for living expenses, so it quietly deducts a quarter million dollars (U.S.
dollars, or equivalent in any other currency) from your bank account at the end of each
calendar quarter. In most games, you'll never even notice such an inconsequential expense,
but if you come close to bankruptcy, and are down to your last million dollars or two, you'll
find that the living expenses will slowly nibble away at your remaining assets until you
finally are bankrupt, unless you can mount a brilliant comeback by making some very good
investments.

98
If, at any time, your bank debt (margin debt) is more than 3 times your net worth, you will
receive a "margin" call, requiring you to pay down the debt to 3 times your net worth. If
you don't have the cash to make the margin call payment, your friendly banker will sell any
bonds you own, without asking you, and if you only own one stock, will sell that stock
without asking you. You will also be forced to call in "advances" you have made of loans to
creditworthy companies. If you own more than one stock that is publicly traded, and it is
currently your turn, the program will ask you which stock you wish to sell; otherwise, if it
is not your turn at the moment, the program will pick one or more of your stocks to sell
without asking you. Finally, if you have sold all your assets except "advances" to
companies whose credit ratings are too bad to allow them to pay you off, you will be forced
to forgive 10% at a time of the advances to each company, in hopes of improving such a
company's credit rating to a point where it can repay the rest of what it owes you.

Such forced sales of bonds and stocks will tend to depress the value of your remaining
bonds or stocks, which may trigger another margin call, etc., until you either get down to
the required debt level or go broke. So be careful about taking on heavy personal debts,
even if you control your bank lender. Let your controlled companies do the heavy
borrowing--you can only lose what you invested in their stock if they go bankrupt.
Otherwise, you can be bankrupt and out of the game in a heartbeat if you personally borrow
heavily and your stocks take a slight dip.

You can also receive margin calls if you sell stock short, in Wall $treet Raider. When you
sell stock short, the proceeds of the sale do not go into your cash account. Instead, they are
deposited in a "short margin account" which must always equal the value of the stocks you
have sold short. Cash must be added to (or is taken from) this margin account, as the value
of your shorted stocks fluctuates. Thus, the value of the liability (the stocks you are short,
and may have to buy back some day) and the asset (the amount on deposit in the short
margin account) should always net out to zero. But note that if your net worth ("adjusted
net worth," if you own any stock options) falls below 1/3 of the value of the shorted stocks,
you will be forced to "cover" (buy back) some of the shorted stocks -- a "short margin call"
or "maintenance margin call." In addition, if a player sells options short, he or she may also
receive option margin calls, requiring a sale of long option positions or forcing a buy-back
of shorted options.

For more on margin calls, including maintenance margin requirements when you sell
stocks short, see the FAQ on: What Are Margin Calls?.

In Wall $treet Raider, as in real life, going broke is the ultimate humiliation, and the
game ends if all the players go broke, or if the only player left is the computer
player.

99
 MAIN MENU (TRADING DESK) GENERAL
FEATURES

CHAPTER V.

A. IN GENERAL.

Once you have entered players' names, decided on the length of the game and players' turns
and other preliminaries, you will find that most of the time you spend playing Wall $treet
Raider will be spent in the "main menu" (the screen titled as "Trading Desk") portion of the
program, except when you are in the various research or transactions pop-up submenus that
you will use to do your investment research, or to buy or sell stocks, bonds, or business
assets or to engage in other types of transactions.

This chapter describes the workings of the various main menu or "Trading Desk" features,
other than the transaction command buttons and research buttons. The features discussed in
this chapter are mainly pull-down menus used to start, end or save games, or configure the
game in various ways, plus the various informational items displayed on the main screen,
and certain miscellaneous buttons, other than those that are in the "Research Tools,"
"Transactions," or "Other" button groupings.

Research functions, such as viewing financial statements, earnings reports, research

reports, and industry and economic data and forecasts, are mostly accessed by clicking on
the buttons in the "Research" grouping or “Quick Search Functions” grouping on the main
screen. The "Select Player" and "Select Corp." buttons are used to select the player or
corporate "Active Entity" whose information is to be viewed with certain of the research
command button features, as well as for doing transactions. The other two Research buttons
bring up pop-up submenus, either for doing research on a specific entity (player or
company), or general industry and economic research. For instructions on using the
program's research features in the "Entity Info" and "General" (research) submenus, see
Chapter X.

Transactions, such as buying and selling, are all done in the various Transactions
submenus, which are accessed by clicking on any of the six "Transactions" buttons, which
appear together in a group on the main "Trading Desk" menu. The "Buy Stock" and "Sell
Stock" buttons also appear in the submenu that is brought up by the "Buy/Sell" button,
unless the current "Active Entity" is a player, rather than a corporation controlled by the

100
player. These two frequently used buttons are placed on the main screen in order to make it
possible to access the buy- and sell-stock functions with a single keystroke.

For instructions on using commands in the various Transactions submenus, see

 Chapter VI (Buy/Sell),
 Chapter VII (Financing),
 Chapter VIII (Management), and
 Chapter IX (Other Transactions).

Three more buttons, the "End Turn," “Stock Chart,” and "Misc" buttons, are located
together in the "Other" section, on the far right side of the main screen. The "End Turn"
button ends the current player's turn prematurely, and the “Stock Chart” button displays a
stock price chart for the mostly recently selected (corporate) “Active Entity,” while the
"Misc" button brings up a submenu of additional transactions or functions you can do, but
which do not count against the 5 transactions you are allowed on each turn. The "End
Turn," “Stock Chart,” and "Misc" buttons and the functions available on the pop-up menu
that appears when you click on the "Misc" button, are all discussed in Chapter XI (Other
Menu Functions).

Note that the stock ticker runs across the bottom of the screen while you are looking at the
Main Menu, and that various news headlines (including some earnings reports) are
constantly scrolling through a text box in the middle of the main screen, if the stock ticker
is moving (and occasionally will move even when the stock ticker is halted).

Also displayed, just above the news headlines ticker, are information items that include the
name of the player whose turn it is at present, the current game date, and the number of
transactions that can be done before the player's turn ends (which is reduced by one at the
mid-point and again at the end of each calendar quarter). Now let's look at each of the
various Main Menu features, other than the "Research Tools," "Transactions," "Other"
groups of command buttons.

B. "TRADING DESK" PULLDOWN MENU ITEMS

The main screen or "Trading Desk" of Wall $treet Raider contains four pulldown menus --
the "File" menu, the "Game Options" menu, the "Settings" menu, and the "Help" menu.
Any of the 4 menus can be accessed by clicking on the menu name (File, Game Options,
Settings, or Help), or, by using the keyboard, by pressing the "Alt" key and then pressing
the underlined first letter of the menu name (F, G, or H).

(1) "FILE" MENU. The File Menu is located in the upper left corner of the main Wall
$treet Raider screen. It has the following menu items which you may select by clicking on
them:

New Game or Restart. Click on the "New Game" menu item (or press "N" key while
viewing this pulldown menu) to start a new game. This item will instead appear as

101
"Restart" after a new or saved game data set has been loaded into memory. Clicking on the
"Restart" item (or pressing the "R" key while viewing this pulldown menu) will cause the
current or just-finished game data to be dumped from memory, and a new copy of W$R to
be loaded into memory, so you can then either start another new game, or load and resume
playing a saved game.

Open Saved Game. Click on this menu item (or press "O" key while viewing this pulldown
menu) to continue a saved game. When you do so, the program will ask if you want to
continue a game number such as "Game #1" -- which will be the last game file you saved to
disk. If you answer "No," you can then enter the number of the game you wish to load,
which can be any number from 1 to 50 that has been assigned to a game you were playing
previously. This item will be grayed out (and unavailable) after a new or saved game data
set has been loaded into memory.

Save Game. Click on this menu item (or press "S" key while viewing this pulldown menu)
to save the current game to disk, as the game number that has been selected by you or
assigned by the program, in the case of a new game. This item will be grayed out (and
unavailable) until a new or saved game data set has been loaded into memory, or once a
game has ended. DO NOT ATTEMPT TO SAVE A GAME WHILE YOU ARE IN THE
MIDST OF DOING A TRANSACTION, AS THE SAVED DATA MAY REFLECT ONLY
PART OF THE UNCOMPLETED TRANSACTION.

Save Game As. Click on this menu item (or press "A" key while viewing this pulldown
menu) to save the current game to disk, as the game number you will select (which must be
from 1 to 50). This item will be grayed out (and unavailable) until a new or saved game
data set has been loaded into memory.

Exit - Alt + F4. Click on this menu item (or press "x" key while viewing this pulldown
menu) to exit the Wall $treet Raider program. You can also exit without using this menu
item, by pressing the "Alt" key and the "F4" function key at the same time, at any time
while you are viewing the main Wall $treet Raider screen. Note that the game you are
playing at present will not automatically be saved when you exit the program. You will
need to select the "Save" or "Save Game As" menu item to save the game to disk, before
you exit the program, if you wish to continue playing the current game at a later time.

(2) "GAME OPTIONS" MENU. The Game Options Menu is located between the File
Menu and the Settings Menu in the upper left corner of the main Wall $treet Raider screen.
It has the following menu items which you may select by clicking on them, or by pressing
the underlined letter in the name of any menu item:

High Score. Click on this item to see the highest recorded score (converted to U.S. dollars,
for comparability) of any Wall $treet Raider player on your computer. Only an ending net
worth of $100 million or more will be recorded as a high score, since that is the minimum
amount with which you can start a game of Wall $treet Raider.

102
Updates. Click on this item, if you are connected to the Internet, and it will load your web
browser software and take you to the "Updates" page at www.roninsoft.com, where you can
see a description of recent update changes to the program, and, if you wish, order the latest
version of Wall $treet Raider (at a greatly reduced price, if you are already a registered
owner of the software).

W$R Forum.. Click on this item to access the www.roninsoft.com/forum.htm web page on
the Internet, which will re-direct you to any currently available Wall $treet Raider fan sites
or blogs operated by devotees of the game. There, you can exchange ideas and game
strategies with other players of Wall $treet Raider and post your comments on any subject
related to the game. (NOTE: Any such fan sites are NOT owned or run by the publisher of
Wall $treet Raider, Ronin Software.)

Order W$R Manual (or View W$R Manual). This item will vary: In the shareware version
of Wall $treet Raider, it will display as "Register Online," and clicking on it will launch
your web browser and take you to the Ronin Software web site to order the registered
version. In the registered version, this item will display as "Order W$R Manual" if this
manual is not present, and clicking on it will also launch your browser and take you to the
Ronin Software web site. You will need to be connected to the Internet, of course, to go to
the Ronin Software web site.

Since this manual is present on your system, that menu item should display as "View W$R
Manual," if the HTML and .DOC files that comprise this strategy manual are present in the
same folder or directory as the rest of the Wall $treet Raider files, and clicking on it will
launch your browser and load these strategy manual files into your browser, without your
needing to access the Internet.

View Printable Manual. This item appears only in the registered versions of Wall $treet
Raider and only if you have purchased and installed the W$R Strategy Manual that
includes this .DOC file, which is opened when you select this menu item. Earlier versions
of the Manual were provided as an Adobe .PDF file, rather than a .DOC (Microsoft Word)
file.

Customizer Utility. If this item is not grayed out, click on this item to go to the
"Customizer" utility program, which allows you to (permanently) change the name, stock
symbol, and nation where incorporated, for any of the 1590 companies in Wall $treet
Raider.

This item will be grayed out and non-functional if the Customizer Utility program is not
present in the Wall $treet Raider directory on your hard disk. (Earlier Windows editions of
Wall $treet Raider could be ordered with or without the Customizer Utility. Now it is
included in all registered versions that are purchased.) If you've ordered this strategy
manual, you should also have the Customizer utility program (CUSTOMIZ.EXE), which is
packaged with "Wall $treet Raider -- The Book" in all cases.

103
Use the Customizer to permanently change the name, stock symbol, or nation where
headquartered, for any company in the simulation. Note that once you do so, and save your
changes, the Customizer program will save the original data set of names, symbols, and
country of incorporation in a backup file. The next time you load the Customizer program,
a new "restore" button will appear, which will allow you to restore the original data set, if
you decide not to stick with the changes you've made. So don't be shy about altering
company names, symbols or country of incorporation, using the Customizer, since you can
always go back to using the originals.

NOTE: When you make any changes in the Customizer, the new data set will not apply in
the current game or in any saved game, but will only take effect in the next NEW game of
W$R that you start. However, during a game, you may make changes to the company name
and stock symbol for any company you control, which will apply for the rest of that
particular game. To do so, use the Name Change button on the “Misc.”submenu.

Online Tutorial. Wall Street Raider now offers a very detailed, step-by-step online tutorial,
designed for new users, on the Ronin Software web site. Click on this item to go directly
to the tutorial. (Requires that you have an Internet connection.) The program links to the
following web page:

http://www.roninsoft.com/tutorial.htm

(3) "SETTINGS" MENU. The Settings Menu is located between the Game Options Menu
and the Help Menu in the upper left corner of the main Wall $treet Raider screen. It has the
following menu items which you may select by clicking on them, or by pressing the
underlined letter in the name of any menu item:

Ticker Speed. Click on the Ticker Speed menu item (or press "T" key while viewing this
pulldown menu) to change the speed at which the stock ticker and news ticker move across
the screen. You can select a speed setting of anywhere from 1 to 100, where 1 is the slowest
speed and 100 is the fastest. The speed of the ticker will be determined in part by the speed
of your computer, so a setting of 50 on an old, slow computer may result in a sluggish
ticker, while the same setting on a faster computer might run somewhat faster than you
like. The faster the ticker moves, the faster "time" passes in Wall $treet Raider. We suggest
you experiment with various speed settings until you find a speed that is comfortable for
you, on your computer.

Currency. Click on this menu item to select the currency (U.S. dollars, Euros, or any of 19
other national currencies) in which financial amounts in Wall $treet Raider will be
displayed. Except for per-share amounts, most money amounts or numbers of shares of
stock will be displayed in millions of dollars, pounds, Euros, etc. However, for some
currencies, such as Japanese yen, amounts will be shown in billions (using the U.S. concept
of one billion = 1 thousand million, rather than the British meaning of one billion = 1
million million).

104
You must select the currency before you start a game, if you want the new selection to
apply to a game you are starting. If you change the selected currency after a game is
started, say from Euros to Swiss Francs, the current game (in Euros) will not be affected,
but the next new game you start will be denominated in Swiss Francs.

Cheat Mode is: On (or Off). Click on this item to toggle "Cheat Mode" on or off. The
default is "on." When Cheat Mode is turned on, and you control one or more companies,
you may be presented with occasional "ethical choices" that may allow you to make a lot of
money, fast. Dirty money. Of course, there may also be consequences if you choose to go
for the quick buck (or pound, Euro, etc.). Also, if you want to play with larger amounts of
money, once a game is started, while Cheat Mode is turned on, just double-click on the
Wall $treet Raider logo image, and you will be able to add any amount of money to your
bank account that you desire (or reduce your account, if you want to experience
bankruptcy)....

If you are a straight-arrow kind of person, you may prefer to toggle Cheat Mode "off," so
you won't be tempted over and over with potentially lucrative but grossly unethical (or
criminal) financial opportunities or skulduggery.

NOTE: If you change your mind, you can always toggle Cheat Mode back "on" later on.
Be aware that you can't toggle it "off" if a "cheat" scenario is currently active, and hasn't
yet fully worked itself out. Thus, if you choose to act on a "cheat" scenario, pocket the
money, and then attempt to turn Cheat Mode off, so as to avoid the possible consequences
of getting caught, you won't be allowed to do so. Nice try. You'll have to wait for a few
"months" or "quarters" of game time, until the program finally decides whether or not to let
you get away with your crime.

Select Law Firm. Click on this item to select the level of law firm you want to represent
any companies you control in antitrust lawsuits, or other lawsuits (such as "phony"
harassing lawsuits brought against you or your companies by another player). You can
choose either a cheap, average, or expensive law firm. Obviously, hiring the expensive law
firm is more likely to increase your odds of winning a lawsuit, and relying on the cheapo
law firm is likely to decrease your odds of winning. However, the expensive firm will cost
you much more in legal fees, so it is not an easy choice. Note that you won't have to pay
any legal fees until or unless you get involved in an antitrust suit or other lawsuit. If you
forget to select a law firm, the default is an “average” law firm that will represent you in
antitrust or other lawsuits that you may initiate, or when you or your companies are
defendants.

Suppress Popups: On (or Off). To suppress the display of small popup news
announcements that otherwise would occur when the stock ticker is running, toggle this
item "ON." Doing so will suppress those announcements during the remainder of the
current session of play (or until you toggle this feature "OFF"). This setting can be handy if
you control a very large number of corporations, in which case you might find it annoying
to see news items on one of your companies popping up too frequently, such as every few

105
seconds. Turning suppression mode "On" will prevent those (timed) popups from being
displayed.

Click on this item again, if suppression mode is "On," to turn suppression mode to "Off."

Turning suppression mode "On" will not prevent display of other important news
interruptions, such as a new earnings report for the current "Active Entity," or
announcements of bankruptcy of a bank or insurance company, or total ("Chapter 7"-type)
bankruptcy of other companies. Nor will it suppress occasional announcements of major
economic/political events, such as changes in tax rates, wars breaking out, and the like.

The default setting is "Off," and it is recommended that you use the "Off" setting during the
early part of a game, when you may only control a few companies, and when it will be
important for you to know immediately if some important news has been announced
regarding any of the companies you control. Later in the game, if you acquire control of a
large number of companies, and become annoyed seeing popup news items on your
companies every few seconds, you may want to turn suppression mode "On," to halt the
frequent interruptions.

In a game in which there are two or more (human) players, each player's setting for this
item can be according to his or her preference, and that setting is saved to disk if the game
data is saved.

Suppress Earn Reports: On (or Off). To suppress the automatic display of earnings reports
when they are released by companies you control, which can be annoying if you control a
large number of companies, toggle this item "ON." Doing so will suppress those
announcements during the remainder of the current session of play (or until you toggle this
feature "OFF"). However, toggling this item "ON" will not suppress the pop-up earnings
reports for the currently selected "Active Entity." (We assume you will want to see those
earnings reports, A.S.A.P.)

(If you want to let the ticker run without interruption for ANY earnings reports, turn this
item “ON” and select “Player” as the current “Active Entity.”)

The default setting is "Off," and it is recommended that you use the "Off" setting during the
early part of a game, when you may only control a few companies, and when it will be
important for you to know immediately when one of your companies has issued a new
earnings report. Later in the game, if you acquire control of a large number of companies,
and begin seeing popup earnings reports for your companies every few seconds, you may
want to turn this item "ON," to halt the frequent interruptions.

In a game in which there are two or more (human) players, each player's setting for this
item can be according to his or her preference, and that setting is saved to disk if the game
data is saved.

106
AutoSave is: On (or Off). To automatically save an updated data set for your current game
at the end of each calendar quarter, turn on the AutoSave feature by clicking on that item on
the Settings Menu. To turn this feature off, click on it again. This feature can be useful in
the event you have a power loss or your computer (or Wall $treet Raider) crashes. It can
also come in handy in case you do something that you wish you hadn't, so you can kill the
current game session and go back and reload the data set, as of the end of the previous
quarter.

The default setting for AutoSave is "Off," when beginning a new game session.

Whether AutoSave is turned on or off, if you decide to exit Wall $treet Raider, and wish to
save the game at that point, you will need to use the "Save Game" or "Save Game As"
feature on the File Menu to save the game data for the current game.

In a game in which there are two or more (human) players, each player's setting for this
item can be according to his or her preference, and that setting is saved to disk if the game
data is saved.

Exercise Options? YES. This is another toggle switch or setting. Toggle this item on or off.
("Yes" or "No.") If it is turned off, options you or your controlled companies have bought
or sold short will be settled for cash (sold or bought back) on their expiration date, if they
have any intrinsic value. If turned on, options that are "in-the-money" (calls, where the
stock price is above the exercise price; puts, where the stock price is below the exercise
price) will generally be exercised.

If the Exercise Options setting is “YES,” your stock will be sold at the exercise price if you
own in-the-money puts or if you have a short position in in-the-money calls. If you have no
stock to sell, such options will be settled (sold or bought back) at their intrinsic value. Out-
of-the money options (calls, where the exercise price is above the stock's market price, or
puts, where the exercise price is below the market price) are never exercised.

However, even if you have toggled the "Exercise Options?" item on ("YES") and the
options are in the money, there are several situations where your options may not be
exercised, depending upon various fact situations. If you are long call options or short put
options, where such options are in-the-money, you will purchase the stock at the option
exercise price, if there is adequate publicly-traded stock to be purchased and if you have
sufficient buying power. On the other hand, you or a company you control will not
purchase stock through an option exercise:

 If doing so would give you control of a company that you don't already control, if
that would violate antitrust rules, by giving you too much control of a particular
industry; or
 If doing so would turn the company in question into a private company (one that no
longer has any publicly-traded stock outstanding); or
 If you are currently short the stock and exercising the call would give you (the
player) offsetting long and short positions in the same stock.

107
Similarly, if you are short calls or have a long position in puts, such options (assuming they
are in-the-money) will only be exercised to the extent you have that much stock to sell by
exercise of the options; options will not be exercised to the extent that doing so would
cause you to have a short position in the stock. For example, if you own 6% of IBM stock,
but have sold options on 10% of the stock of IBM, and such options are "in-the-money" on
the date of expiration, only a partial exercise, to sell your 6% of the stock, will be allowed.
The other 4% of the option contract will be settled for cash.

In any case where you are not allowed to purchase or sell stock through an option exercise
at the expiration date, the option contract will instead be settled by selling the option or
buying it back (if short) at its intrinsic value, if any.

In versions later than 4.70, options may now be exercised before their expiration date
(subject to the same limitations as for the exercise of options at expiration). This is the
same as the rules for options trading in the U.S., which allow early exercise of options, if
the holder chooses. In some other parts of the world, options cannot be exercised early.
Wall $treet Raider has now adopted the U.S. rule.

Make Physical Delivery? Yes (or No). Toggle this item to "Yes" or "No," depending upon
whether or not you want to
make delivery (sell) a physical commodity you own, if you have sold short a futures
contract on that commodity, when that futures contract expires. For example, if you set this
toggle item to "Yes" and own physical gold, some or all of the gold will be delivered (sold
at the futures contract price) when a gold futures contract you have sold short expires.

If the futures contract is for more of the physical commodity than you own, all of it will be
delivered, and the remainder of the futures contract will be settled for cash. If you own
more of the physical commodity than is covered by the futures contract, you will only
deliver the amount of the physical commodity covered by the contract. When you deliver a
commodity, you will receive cash for it, at the price agreed to in the futures contract you
sold short.

You will have a taxable gain or loss on the futures contract,

and also a gain or loss on the physical commodity you are selling. In some cases, you may
have a gain on the futures and a loss on the physical sale, or vice versa in other cases.

If you toggle this setting to "No," then all futures contracts

you sell short will be settled for cash at expiration, as in
Versions of W$R prior to Version 7.0 -- even if you own some of the physical commodity.

Note that the Stock Index is not a "physical commodity," so

physical delivery does not apply to the Stock Index, when you are dealing in stock index
futures. Stock Index futures will always be settled for cash.

Take Physical Delivery? Yes (or No). Toggle this item to "Yes" or "No," depending upon
whether or not you want to

108
take delivery of (buy) the physical commodity when a "long" futures contract you have
bought expires. For example, if you buy a futures contract on 1 million barrels of oil at $90
per barrel, and the contract expiration occurs when you have set this toggle item to the
"Yes" setting, no gain or loss will be recognized at the settlement date. Instead, you will
simply take possession of 1 million barrels of oil as a physical commodity holding, and will
pay the $90 million price according to the terms of the futures contract (even if the current
spot price of oil is $125, or $70). If you already own some physical oil, you will add the
new delivery to the amount you owned.

If you toggle this setting to "No," then all futures contracts

you buy will be settled for cash at expiration, as in Versions
of W$R prior to Version 7.0.

Note that the Stock Index is not a physical commodity, so that there can be no physical
delivery (purchase) of the Stock Index when Stock Index futures are settled. They will
always be settled for cash.

CAUTION: While you can buy and sell futures contracts on very large amounts of a
commodity, with only a 5% margin requirement, you had better have a large amount of
cash or credit if you set the "Take Physical Delivery" setting as "Yes," since you will need
to pay the full contract price when a futures contract you own is settled at its expiration
date. For example, if you buy oil futures with a "notional" value of $100 million, you
would only need to deposit $5 million in a
commodity margin account to buy the futures (plus pay a $1 million commission).
However, if you are required to "take delivery" when that contract expires, you will need to
come up with another $95 million of cash to acquire the oil. If you can't, you will be forced
to dump the commodity on the market and possibly sell other assets.

Stock Chart Size: Small (or Large). This is another toggle switch or setting. Toggle this
item back and forth between "Small" (the default setting for the size of stock charts that are
displayed) and "Large.") The small stock charts will appear at the upper left corner of the
screen, while the large charts will cover practically the entire screen.

This item is not enabled in the "shareware" versions of Wall $treet Raider, since stock
charts are only available in the registered versions (4.50 and higher).

Auto Add To Stream List. This is another toggle switch or setting. Toggle this item back
and forth, depending on whether or not you want a stock to be automatically added to the
Streaming Stock Quotes List each time a new "Active Entity" (company) is selected. If this
item is "ON," and the Streaming Stock Quotes List is not yet full, the stock of a newly
selected "Active Entity" will automatically be added to the list (unless it is one of the last
two stocks you have deleted from the list).

AutoPilot. This is another toggle switch or setting. When it is toggled “ON,” all companies
you control will operate independently, as though they were not under your control, except
for the one company of which you have been elected President/CEO and which you still

109
control. The default setting for AutoPilot is “OFF,” so that you have to make all major
management decisions for all companies you control, unless AutoPilot is “ON.”

Note, however, that if AutoPilot is turned on, you can still do transactions, change settings
for R&D, growth rate, dividend payout, etc., for any of your controlled companies. For
example, you may have Company ABC set its growth rate at 30% and buy stock of
Company XYZ. However, if AutoPilot is turned on (and you are not the President/CEO of
ABC), the program may decide at some point to change the growth rate to something other
than 30%, or may even decide it is time to sell the XYZ stock.

Note also, that in Version 7.70 or higher, you can override the "global" AutoPilot setting
that you may have set with this feature, for any individual company you control. To
override the global setting for a particular company, use the "Toggle AutoPilot ON/OFF"
button on the Management Menu. Or, for example, if you haven't turned on the global
AutoPilot setting, you could use the button on the Management Menu to toggle AutoPilot
ON for a particular company.

Where you newly acquire control of a company, its AutoPilot setting will automatically be
whatever your global AutoPilot setting is.

Sweep Cash To Reduce Loan? Toggle this item back and forth, depending on whether or
not you want any cash in your bank account (from sales of assets, income, etc.) to
immediately be "swept" (applied) to your bank loan, reducing the amount of the loan and
thus saving you interest expense on the loan. Toggle this setting to "YES" to do so, or
toggle it to "NO" if you do not want cash to automatically go towards
reducing your bank debt.

Note that one downside of turning this feature on, if you have no line of credit, is that any
expense, such as interest or taxes, that creates a deficit in your bank account will cause you
to have to sell off assets to cover the overdraft. Thus, if you do not have any line of credit
you can draw on, you may want to turn this setting to “NO” so you can stockpile a bit of
cash, in
order to be able to pay any expenses that arise while you are unable to borrow any money.

Your line of credit (ability to borrow) from your bank may be zero if your credit rating is
poor or if your bank has "frozen" your line of credit, such as when your bank is having
liquidity problems (or when another player controls your bank lender and decides to
"freeze" your loan, as a mean,
nasty tactic).

(4) "HELP" MENU.

Wall $treet Raider HELP - F1. Click on the Contents help menu item (or press "H" key
while viewing this pulldown menu, or press "F1" key at any time) to load the Wall $treet
Raider "help" files table of contents. You can then click on any item in the table of contents
to read a brief "help" message on that item. However, since you have this strategy manual

110
installed, you will generally find much more detailed information by clicking on "View
W$R Manual" in the "Options" menu than in the brief summary information provided in
the "help" files.

Registration Info. Click on this item to see your registration number, if you entered it when
you initially installed your registered version of Wall $treet Raider. You will need your
registration number if you go to the "Updates" page on the publisher's website to download
the latest update at a greatly reduced price, which is available only to registered users.

In the shareware version, no registration number will be displayed, since you do not have
one. Instead, you will be asked if you wish to go to the publisher's website now to order the
registered version (if you are connected to the Internet).

About. Click on the About help menu item (or press "A" key while viewing this pulldown
menu) to view Wall $treet Raider copyright information, and to see what version number of
the program you are running. In the registered version of Wall $treet Raider, you will also
see the name of the registered user of this copy of the program, and your registration
number, if you have entered those two items of information. (You will need the registration
number if you wish to upgrade at a greatly reduced price.)

C. "TRADING DESK" INFORMATION DISPLAYS (MAIN MENU SCREEN)

(1) "ACTIVE ENTITY SELECTED" ITEMS. The box in the upper left corner of the main
screen, with the heading "Active Entity Selected," shows several items of information
about the current "Active Entity," which can be either the current player whose turn it is, or
any corporation you have selected for viewing or (if you control the corporation) for action.
The items displayed in this box all relate to that entity, except the "GO" button, which is
used to select a company as Active Entity if you have entered its stock symbol into the
"Stock Symbol" text entry box. The various information items displayed are as follows.

"Entity Name." The name of the "Active Entity" -- player name or corporation name -- is
shown just under the "Active Entity Selected" label.

"Stock Symbol." The "Stock Symbol" text box shows the stock symbol of the currently
selected Active Entity, if it is a corporation. If it is the player, the box will display "N/A" --
meaning "not applicable." This box can also be used to directly enter a stock symbol to
select a particular company as Active Entity, if you know the stock symbol. Just type in the
symbol, such as "IBM", and either press the ENTER key or click on the small "GO" button
next to the text entry box. You may also type in any number from 11 to 1600 to randomly
select a company as Active Entity, since each of the companies in Wall $treet Raider is
assigned an I.D. number, ranging from 11 to 1600. (Note that placing the cursor in the stock
symbol entry box and clicking on it will close any open dialog boxes and clicking on the
"GO" button, even if no symbol is entered, will have the same effect.)

111
After a game has ended, if there are any players who did not go bankrupt, you may enter a
player's number (1 to 5, if there are 5 players) to see the investment portfolio and other
information for that player. An I.D. number, 1 to 5, is assigned to each player and is found
in the list of players you are shown when you click on the "WHO'S AHEAD?" button, on
the "General" research menu. (“PLAYER 1 = Wally Raider,” etc.)

"Stock Price." This box shows the stock price of the currently selected Active Entity if it is
a corporation. The price is automatically updated when the stock ticker is running, any time
the price of the company's stock changes. If the currently selected Active Entity is a player,
rather than a company, this box will display "N/A" -- meaning "not applicable."

"Controlled By" Item. This item shows the stock symbol of the company that controls the
currently selected "Active Entity," if the Active Entity is a corporation. Click on it to select
that company as the new "Active Entity." If the Active Entity is controlled by a player, the
player's name (if not too long) will be shown in this box. If the name of the controlling
player is too long to fit in the box, the display will show "PLAYER 1" or "PLAYER 2," as
the case may be. (Click on the "Who's Ahead?" button to see who PLAYER 1 or 2 is.) If
the currently selected Active Entity is a player, rather than a company, this box will display
"N/A" -- meaning "not applicable." If a company name or symbol is displayed, clicking on
it will select that company as the new "Active Entity."

"Line of Credit." This item shows the amount of the unused line of credit of the currently
selected "Active Entity" -- the amount that player or company can borrow from the bank at
the moment. This item is updated every few seconds, as the stock ticker runs.

(2) "INDUSTRY GROUP SELECTED" ITEM. This item shows the currently "selected
industry" for purposes of viewing industry statistics. Thus, when you click on the "Industry
Projection" or "Industry Summary" buttons on the "GENERAL" research submenu, you
will see industry financial statistics for the selected industry. This saves you from the
trouble of having to pick an industry each time you click on either of those buttons,
especially if you are only interested in following the developments in one particular
industry for a few minutes.

Each time you select a company as the "Active Entity," however, the "selected industry"
will automatically change to that of the industry in which that particular company operates.
However, you can also change the industry without having to change the "Active Entity,"
by clicking on the drop-down listbox where the industry name is shown, just below the
"Industry Group Selected" label, which allows you to select any of the 71 industries in Wall
$treet Raider. Doing so will change the default industry group for industry information
displayed in the GENERAL research menu, but NOT in the ENTITY INFO menu, which
will continue to show industry information for the industry of the company that is the
current “Active Entity” (or no industry information at all, if the current “Active Entity” is
you, the player).

Also, if you click on the "Industrial Growth Rates" button, it will cause a list of projected
growth rates to be shown for 67 of the 71 industries (excluding banks, insurance

112
companies, holding/trading companies, and exchange-traded funds), and if you click or
double-click on any of the 71 industries listed there, you will also thereby change the
"selected industry" to whatever industry you clicked or double-clicked on.

(3) "MY BALANCE SHEET" ITEMS. The middle left portion of the main screen of Wall
$treet Raider displays "My Balance Sheet," with five financial items listed below for the
currently active player. This information is updated constantly, so that any fluctuations in
the prices of stocks or bonds you own directly will instantly show up on your "balance
sheet." The balance sheet will also be updated instantly for any cash inflows, such as salary,
dividends, interest, or bonds being paid off, or for cash outflows such as tax payments or
interest payments. Each of the five items shown is discussed briefly, as follows.

Cash (CD's). This item shows the current player's cash balance (actually interest-bearing
bank certificates of deposit, or CD's, which pay you interest at the going "CD Rate" paid by
banks). This rate is usually rather low, so you may want to invest this cash in stocks or
bonds, or perhaps advance (lend) funds at the prime interest rate to a company you control,
for a better return on your investment.

However, this cash is generally quite safe, except in the rare case where your bank
collapses and government insurance does not fully cover your deposits. Note that your CD
balances are usually in the millions or billions in this simulation, while governments in the
U.S. and other countries with deposit insurance only insure relatively small accounts, such
as $250,000 in the U.S. or about $75,000 in Japan. Thus, in Wall $treet Raider, if your bank
collapses, you can lose up to half the amount you have in Cash/CD's, so if your bank looks
shaky, you may want to go to the "Other Transactions" submenu and change banks, for
both loans and deposits, before your bank goes bust. (There are many ways to lose money
in Wall $treet Raider, as in the real world, if you aren't alert in protecting your assets.)

Other Assets. This item shows the current market value of all the player's other assets, such
as stocks, bonds, and options, plus any advances (demand loans) made to corporations by
the player. Of course, if you try to sell a large block of stock or corporate bonds, you will
depress the price of the security, so you will have to sell it for somewhat less than the
market value, which is an important point to remember.

The "Other Assets" item also includes your short positions in any stocks you have shorted,
as well as the short margin account balance you have. However, those two amounts will be
identical, and thus net out to zero. If you have short positions in put or call options, this
number can sometimes be a negative amount.

Total Assets. This is the total of your assets, including cash (CD's) and all "Other Assets."

Less Debt. This item shows the amount of your debt owed to the lending bank, and is
shown as a negative number, if you owe anything to the bank. This number may change
while you are watching the stock ticker run, as you will automatically borrow if you have a
line of credit, and your cash balance ("CD's") falls below zero, due to living expenses, tax
payments, interest expenses, or certain disasters that may befall you.

113
To see your "credit rating," and to see which bank you are borrowing from, click on the
"Credit Info" button, which is on a submenu you can view by clicking on the "Entity Info"
button on this main screen.

Net Worth. This item is your bottom line net worth. It is the sum of your cash and all your
stock and bond investments, less any loans you owe to the bank. In Version 6.50 or later,
click on this item to see a historical chart of your net worth for the past five years of game
play.

Note that if, at any time, your net worth is less than 1/3 of what you owe the bank, you will
soon receive a margin call from the bank, forcing you to pay down the loan to where it is
no more than 3 times your net worth. If that payment creates a negative cash balance (an
"overdraft" in banking terminology), you will shortly thereafter be forced to sell bonds, and
then, if needed, options or stocks you own, to cover the "overdraft."

If your "net worth" falls below zero, you will generally go bankrupt, and be forced out of
the game. However, in some cases, your net worth may fluctuate below zero, but may rise
back above zero before you have received enough margin calls to force you to sell all your
investments.

(4) GAME STATUS INFO ITEMS. The main screen of Wall $treet Raider has several
items that let you know which player's turn it is at present, where you are in the game, in
terms of the year and month, when the game ends, when the currently selected "active
entity" will next report its quarterly earnings, and how many more transactions you have
left for your turn. These are briefly described below.

Date Label. This label tells you what calendar month and day it is (in the game), and the
current "year" of the game, such as "April 4, 2029." It also shows the date on which the
game will end.

"Next Earnings:" Label. This shows the month, day and year in which the next earnings
report will be released for the current “active entity” (if it is a corporation).

"Player:" Label. This label displays the name of the player whose turn it is, at present. In a
two-player game, where PLAYER 1 is "Computer," this label will never visibly change,
since the computer player's turn is always over in an instant, and it will be your (the human
player's) turn again, in a flash, each time your turn ends.

"Transactions Remaining:" Label. This label shows how many transactions, at most, the
current player can do, before ending his or her turn. The actual number of transactions you
may yet do on your turn may be less if the stock ticker is running, since, as time passes, the
number of remaining transactions is reduced twice during each calendar quarter, at the mid-
point and end of the quarter. So, if you do no transactions on your turn, and simply let the
stock ticker run, you will see the number of remaining transactions drop from 5 to 3 after
one quarter, then to 1 after another quarter ends, and then your turn will end in the middle

114
of the next quarter. The length of your turn can never exceed 3 calendar quarters, even if
you engage in no transactions.

(5) ECONOMIC DATA DISPLAY ITEMS. The main Wall $treet Raider screen has several
colored display boxes that are updated each time any of certain key economic indicators
change. In Versions 6.50 and later, click on any of the numbers that appear in these displays
to see a chart for that item, such as the stock index, Prime Rate, or any of the commodities.
(You may also view a 5-year chart of your net worth by clicking on that display item, on
your Balance Sheet.)

In Version 6.60 and later, each of the commodity charts and interest rate charts, as well as
the Stock Index Chart, will now generally include a “TRADE” button if the current Active
Entity (you, or a company you control) is one that is allowed to trade that particular charted
item, to allow you to quickly do a transaction in that commodity or index, or create an
interest rate swap. Trading of Stock Index futures was not available in Wall $treet Raider
prior to Version 6.60, and insurance companies (but not banks) may now trade this contract,
though they still may not trade commodity futures (on gold, silver, oil, wheat, or corn).

For more economic indicators, government bond prices, and income tax rates, you will
need to click on the "Econ. Stats" button. The indicators that are constantly displayed are as
follows:

"Stock Index" Item. This item shows the stock market "Global 1500" index, which
changes every second when the stock ticker is running, and which is similar to the Dow-
Jones, S&P or Nasdaq indices in the U.S., or stock indexes in other countries, such as the
FTSE 100, CAC-40, DAX, All Ordinaries, Straits Index, or the Nikkei. However, in this
simulation, it is a global index for companies in all 53 nations represented in the Wall $treet
Raider economic universe.

It is an index of the stock prices of all the existing companies in the simulation, adjusted for
stock splits, issuance of new stock in mergers and public or private offerings, and buybacks
of their own stocks by companies. The stock index always begins each game at 5000, and
will go up or down from there. It will tend to rise when earnings are good and interest rates
are low, and to decline sharply in a recession or depression or when interest rates are high,
as do real stock market indexes.

"Prime Rate" Item. This item displays the current "prime rate" of interest charged by
banks to their best ("AAA") customers. It moves up or down in .25 point increments, such
as from 7.0% to 7.25%.

"GDP Growth" Item. This is the current growth rate in the Gross Domestic Product.
However, in this simulation, we use the GDP growth rate as an indicator of growth in the
global economy as a whole, and not just the domestic economy of any one country. A
typical growth rate is about 2.5%. Faster growth rates may tend to lead to higher interest
rates and higher oil prices, eventually, and vice versa if growth is slow, or is negative (as in

115
a recession or depression). However, that is only a general tendency, and there are frequent
aberrations.

"Spot Crude" Item. This is the "spot price" (current market price) for crude oil, on world
markets, and is always shown in U.S. dollars in Wall $treet Raider, even where you have
configured the game using the Euro or a different national currency, other than the U.S.
dollar. (Since world oil trading is generally priced in U.S. dollars on world oil markets.)

In this simulation, $100 (U.S.) is an average or typical oil price. It was $20, $35, or $50 in
earlier Wall $treet Raider versions, but we revised that "normal" figure upwards to reflect
recent "real world" conditions in the oil markets in 2008. (We may have to drastically lower
it again, to reflect current conditions. But we will wait and see….)

Higher oil prices may lead to higher oil industry profits, and depressed profits for various
transport industries, such as shipping, airlines, air freight couriers, trucking and railroads.
Lower prices will tend to have the opposite effect. High oil prices will often lead to a
slowdown in the rate of economic (GDP) growth, just as rapid economic growth will tend
to increase consumption of energy and thus cause higher oil prices. And vice versa, in the
case of low oil prices.

In Wall $treet Raider, as in real economies, everything is related, and affects everything
else.

Remember, if you are trading commodity futures, that the price of your futures contract
will always differ somewhat from the “spot price” that is displayed on the main screen.

Spot Gold Item. In Version 6.0 and later, the spot price of gold is shown, always in U.S.
dollars. In Wall $treet Raider, a typical or “normal” price for gold is $1,200 per Troy ounce.

Spot Silver Item. In Version 6.0 and later, the spot price of silver is shown, always in U.S.
dollars. In Wall $treet Raider, a typical or “normal” price for silver is $20 per Troy ounce.

Spot Wheat Item. In Version 6.0 and later, the spot price of wheat is shown, always in U.S.
dollars. In Wall $treet Raider, a typical or “normal” price for wheat is $6 per bushel.

Spot Corn Item. In Version 6.0 and later, the spot price of corn is shown, always in U.S.
dollars. In Wall $treet Raider, a typical or “normal” price for corn is $5 per bushel.

"Long Bond" Item. This item shows the latest bond yield to maturity of the long-term
government bond. This interest rate is usually lower than the Prime Rate, but higher than
the yield to maturity (interest rate) on the short-term government bond, which matures 10
years earlier than the Long Bond.

"Short Bond" Item. This item shows the latest bond yield to maturity of the short-term
government bond. This interest rate is usually lower than the Prime Rate and lower than the

116
yield to maturity on the long-term government bond, which matures 10 years later than the
Short Bond.

(6) STOCK AND NEWS TICKERS. The main screen of Wall $treet Raider has both a
moving stock ticker and a scrolling "news ticker." The stock ticker shows prices of a
random sampling of companies in the simulation, and the price change on the latest trade in
that stock. The news ticker displays a scrolling list of several of the most recent news
headlines, referring to recent events in the current game, including such events as changes
in central bank monetary policy, economic and political news, bankruptcies, stock and bond
offerings, corporate takeovers, actions taken by players or their companies, various
catastrophes or windfalls affecting companies or industries, and the like. Check these
headlines frequently, to keep abreast of events that may affect your investments, or
transactions that that may have occurred on your opponent's turn. The 60 most recent
headlines are retained in memory, and if you are viewing a research report or earnings
report for a company, any such recent headlines involving that company will be shown at
the end of the report under "Recent News Headlines for ... (that company)."

IMPORTANT NOTE: In Wall $treet Raider, for the most part, time only passes, and the
game only progresses, when the stock and news ticker on the main menu screen are
running. You can toggle the ticker on or off by clicking on the "Ticker On/Off" button.
However, as you click on menu items and close dialog boxes, time also progresses in small
spurts, but only at a snail's pace. A calendar quarter elapses when all (1590 or less)
companies have gone through an earnings calculation for the current quarter. Clicking on
an item on the main screen generally causes one or more company earnings reports to be
calculated.

The tickers stop moving when you click on any button, but will resume, if they were
running, when you close the dialog box that appeared when you clicked on a button.
Otherwise, once they are started the tickers on the main screen will run non-stop until a
player's turn ends, or until a news announcement of some kind pops up (until you close the
displayed message dialog box). In the case of a player's turn coming to an end, the
descriptive text on the "Ticker On/Off" button will change to "Start Ticker" until you click
on the button to restart the tickers.

(7) QUICK SEARCH FUNCTION BUTTONS. The main Wall $treet Raider screen has a
section, containing nine buttons, labeled "Search Functions." The functions of these buttons
are described in Chapter 10, Section H.

(8) STREAMING STOCK QUOTES LIST. The main Wall $treet Raider screen has a
section, labeled "Streaming Stock Quotes List," in Versions 3.0 and later.

This large section on the right-hand side of the main screen is empty at the start of a game.
However, at any time, you can add up to 15 stocks to this list, which will display the
current stock prices for each of the stocks on the list. As the stock ticker moves and prices

117
of stocks on the list are updated, the displayed price on the "streaming quotes" list will also
be updated, and will be shown in green if the last "tick" is up, red if it is down, or in blue
(cyan, actually) if there was no change in price on the last "trade.

To add a stock to the list, you must first select that stock as the "Active Entity." If you have
turned on the “AutoAdd To StreamList” setting in the “Settings” pulldown menu, the stock
will automatically be added to the list, unless the list is already full or you have recently
deleted that company from the list. Otherwise, if the AutoAdd setting is off, just click on
the "Add/Delete Stock" colored button at the top of the streaming quotes list to add the
stock, and if the list is already full you will be asked which company on the list to remove,
in order to make room to add a company to the list. If you click the button again, the stock
will be removed from the list. See the help information for the "Add/Delete Stock" button
for more details on how it works.

Once you have created a streaming quotes list of stocks in which you have an interest, the
list is also a handy way of selecting one of those companies as the "Active Entity." You can
quickly do so by simply clicking on the "Select" colored button at the top of the streaming
quotes list, and then double-clicking on one of the companies on the pick-list that will be
displayed.

A third colored button has been added to the streaming quotes list section in Version 5.10,
the "Clear" button. If you want to clear the list and start a new list, simply click on this
button. If you have five or more stocks on the list, the program will first ask you if you are
sure you want to clear the list before it does so. Also, Version 5.10 added a fourth colored
button, the “Fill” button. Clicking on it will fill any empty slots on the list with stocks you
own or have sold short, then any remaining slots will be filled with stocks of companies
you control (largest first).

When there are two or more (human) players in a game, the program will keep track of
each player's own streaming quotes list, which will be displayed when it becomes that
player's turn. Each player's list is also saved to disk, if you save the game data for later
play.

The functions of the "Add/Delete" button, "Select" button, “Fill” button, and the “Clear”
button are discussed in more detail below.

"Add/Delete" (colored button). Clicking on this button will add the stock of the currently
selected "Active Entity" to the streaming quotes list, or will delete that company from the
list if it is already on the streaming quotes list. If the Active Entity is you, the player, then
the last previously selected active entity will be added or deleted from the list.

The list can display streaming stock quotes for up to 15 stocks. If the list is full, and you try
to add another stock to it, you will be asked which of the 15 stocks already on the list that
you wish to first delete, before the current "Active Entity" stock is added to the list.

118
"Select" (colored button). Clicking on this button, which is at the top right portion of the
"Streaming Stock Quotes List" area of the main screen, will bring up a "pick-list" of all the
companies on the streaming quotes list. Double click on any stock on the pick list to make
it the "Active Entity."

This button is a convenient feature which you can use to quickly pull up information on, or
do transactions for, a company on the streaming quotes list. Thus, it is a good idea to put
some or all of the companies you own or control on the list, or to also add the stocks of
companies you are investigating as possible investment choices. For example, you may
want to invest in a particular stock, but feel the price is currently too high. Put it on the
streaming quotes list and you will be able to notice it immediately if the price drops to a
level more to your liking.

“Fill” (colored button). Clicking on this button, which is at the top center portion of the
"Streaming Stock Quotes List" area of the main screen, fills in any empty slots on the list
with stocks that you own, or in which you have a short sale position. If there are any
remaining open slots, the program then looks for other stocks that you control, but don't
directly own, and fills in the rest of the slots, starting with the stocks you control that have
the largest market cap (stock price per share times total number of shares issued).

“Clear” (colored button). Clicking on this button, which is at the top right portion of the
"Streaming Stock Quotes List" area of the main screen, will clear the current list of stocks,
in the event you want to start over with your list. If there are five or more stocks on the list,
you will be asked if you are sure you want to clear the list before that command is
executed.

D. "TRADING DESK" NON-MENU BUTTON FUNCTIONS (MAIN MENU

SCREEN)

(1) "GO" BUTTON. This button works in conjunction with the text input box it is located
next to, in the "Active Entity Selected" group of items on the main screen. To select a
company as the "Active Entity," you can type in its stock symbol (if known) in the text
input box, and then either press the [ENTER] key, or click on the small "Go" button next to
the text input box. Note that in Version 5.40 and later, clicking the “Go” button will also
close any open submenus, research screens or reports, or transaction dialog boxes, even if
minimized.

(2) "TICKER ON/OFF" (or "START TICKER") BUTTON. This is a toggle button. Click
on it to make the stock and news headline tickers run (if not running), or to stop the tickers
if they are moving. Note that if the tickers are on, they will still be "on" when you click on
a command button to do research or to do some function like borrow money or repay a
loan, even though the tickers will stop moving, but they will resume moving again as soon
as you close the popup window or submenu you activated with a command button.

119
Note that "time" progresses as the stock ticker and the news ticker run. However, time will
progress (somewhat) even if you have turned off the stock ticker. Each time you close a
submenu or complete (or cancel) a transaction, the program will compute earnings for a
few companies, and may advance the "news ticker," although the stock ticker remains
turned off. Thus, you cannot completely "freeze" the passage of time, while you do
transactions or research, with the tickers turned off. Also, if you are playing against the
computer, each time the "Computer" player takes a turn, another 50 or more companies'
earnings are computed. A calendar quarter ends after all 1590 (or fewer) existing
companies have had their earnings computed for that quarter.

(3) WALL $TREET RAIDER LOGO IMAGE. The Wall $treet Raider logo image that
stretches across the top part of the client area of the main menu screen is actually a type of
hidden "button." However, this button responds only to a double-click, and only if a game
has been loaded into memory and started, and if "Cheat Mode" is turned "On" in the
"Settings" pull-down menu. It is the ultimate "cheat" button, since double-clicking on it
allows you to increment your (the player's) cash balance, or decrease it, by any amount you
enter into a small dialog box that will pop up. However, if you add to your cash balance,
the same amount is added to the cash account of each other player, and that game's results
will be disqualified, and thus will not be counted as a "best score," since you have elected
to cheat so blatantly.

This somewhat secret feature can be quite helpful if you are new to playing Wall $treet
Raider, and are finding it difficult to build your net worth to a size where you can take over
some large companies and do great things. By adding a few billion here and there to your
bank account, you can get the money you need to experiment with running large corporate
empires, sort of like "training wheels" on a bicycle. Later, once you have gotten better at
Wall $treet Raider, maybe you can build huge corporate empires on your own, without
using this "cheat" feature as a crutch.

This feature can also be used to decrease your cash balance, if you want to play around
with adverse situations, and see how well you can recover, or else simply see what happens
when you begin spiraling down into poverty or bankruptcy, if you haven't had that
delightful experience yet in Wall $treet Raider. Decreasing your cash will not disqualify
your game, if you end up with a record high score on that game.

120
 BUY/SELL TRANSACTIONS MENU

CHAPTER VI.

A. IN GENERAL.

Except for borrowing money or making loan repayments, all other transactions in Wall
$treet Raider, such as buying or selling stock, bonds, or other assets, are done by clicking
on one of the six buttons on the "Transactions" grouping of buttons on the main menu
screen. Each such transaction selected from the "Transactions" grouping that is completed
counts as one of the 5 transactions allowed on a player's turn. Other actions, such as
borrowing money or repaying loans, or doing stock splits or corporate name changes, can
be done by clicking on the "MISC" button on the main screen and selecting an item such as
"Borrow Money" or "Repay Loan" from the pop-up submenu that will appear, but none of
those actions count against you as one of your 5 allowed transactions per turn.

To initiate a transaction, click one of the six "Transactions" buttons: Buy Stock, Sell Stock,
Buy/Sell, Financing, Management, or Other Trans., on the main menu screen, and, except
when clicking on the Buy Stock or Sell Stock buttons, one of four different submenus will
pop up, each listing anywhere from 2 to 12 possible transactions, with a button for each.
Then click on the appropriate button to begin the type of transaction you wish to do.

Note that, while viewing each Transactions pop-up submenu, the submenu screen will have
a text-box on the left, describing the allowable functions, and sometimes will include
suggestions or other useful information, such as the current buying power (cash plus line of
credit) of the currently selected "Active Entity." The various buttons for the different types
of transactions will appear in a vertical row on the right side of the pop-up submenu.

At the bottom of that dialog screen will be 3 additional buttons: A "Close" button to close
the submenu and exit back to the main menu screen; a "Player" button (click it to instantly
change the "Active Entity" to you, the player, if you, personally, are the entity that will do
the transaction); and a "My Corps." button, which will let you select from a list a corporate
entity you control as the new "Active Entity," which will do the transaction(s) you are
planning to execute.

Any time you begin to do any kind of "buy" transaction, whether it is buying stocks, bonds,
or corporate assets, and need to borrow, the program will display a small

121
YES/NO/CANCEL dialog box. It will explain how much you need to borrow, and how the
borrowing and completion of the transaction will affect the buying entity's debt-to-equity
ratio and credit rating, unless the effect is very minimal. It will ask you if you wish to go
ahead with the transaction, or cancel it. Click on "YES" to borrow the money and proceed
with the transaction, or click on the "NO" or "CANCEL" buttons to cancel it.

Similarly, when you begin to do any kind of "sell" transaction, such as selling stock, bonds
or corporate assets, if the selling entity will have a large enough gain to result in taxable
income and additional tax during the current quarter, except for very minor amounts, the
program will disclose to you the potential tax liability if you proceed with the sale, and give
you a chance to cancel. (If you or your company has large tax losses that would shelter the
gain from tax, you will not receive such a warning. In that case, completing the sale will
merely reduce your tax losses, rather than result in any immediate tax.)

This Chapter VI describes the various "BUY/SELL" transactions that you can do if you
select the "BUY/SELL" button, or the "BUY STOCK" or "SELL STOCK" buttons that
have been added to the main screen in Version 3.0 of the program (and which are identical
in function to the buttons of the same names that also appear on the BUY/SELL Menu and
which are discussed in the following paragraphs).

B. "BUY/SELL" BUTTON AND SUBMENU.

This group of command buttons allows you, or a company you control, to engage in
various types of asset acquisitions and sales, including buying or selling stocks, bonds,
options, bank loans (for a bank), or business assets, as well as doing stock-for-stock
mergers, leveraged buy-outs (LBO's) or "greenmail" buy-backs.

(1) BUY STOCK (or COVER SHORT POSITION). This button will be labeled "Buy
Stock" if the selected Active Entity that is to do the transaction is a corporation. If you, the
player, are the Active Entity doing the transaction, it will be labeled "Buy Stock" if you
have no short sale positions in any stock; or, it will be a "Cover Short Position" button if
you have any short sale positions in any stock.

First, let's consider the "Buy Stock" button on this submenu (which works the same as the
"Buy Stock" button that also appears on the main Wall $treet Raider screen). Click on the
"Buy Stock" command button to acquire shares of stock from "the Public" on the open
market, to buy stock held by a company you control, or to have a company you control buy
stock from you or from another controlled company. All purchases are made, not as a
specific number of shares, but as a percentage of the total stock of the target company, from
1% to 100%.

You can accumulate up to a maximum of 15% of a company's stock by buying its stock
from the public on the open market, and the more you buy, the more you will drive up the
price of the target company's stock -- temporarily, at least. Buying stock directly from an
entity you control is a private transaction, and does not affect the stock price or cost you
any brokerage commissions. If you wish to accumulate over 15% of the stock of any

122
company on the public market, however, you are required by the government to make a
"tender offer" for all the shares you are buying, at a price 20% above market. (This is
similar to U.S. SEC rules, except that the SEC rule generally applies if you acquire over
FIVE percent of the stock of a publicly-traded company, and the real-world SEC doesn't
require you to offer a premium over the market price.)

The tender offer is done automatically when the stock you are buying will increase your
ownership of the target company (through all companies that you control) to more than
15%.

When you select the "Buy Stock" command, you will be asked to identify the stock you
wish to buy in the transaction, by entering the company's stock symbol, or by clicking on
the "Look Up" button for a list of all existing companies, and selecting the one you wish to
buy by clicking on its name on the drop-list.

If any entity under your control already owns some of the stock, you will be asked if you
want to buy the stock from your controlled entity (you, or a company you control), at
market price (with no brokerage commission).

NOTE: This type of off-market purchase of stock, from an entity you control, if it would
result in a tax loss to the seller, will cause the loss to be disallowed to the selling entity, but
the seller's higher-than-purchase-price cost or "tax basis" will carry over to the related
buyer, giving the buyer a tax basis higher than the amount actually paid. So, if the buyer
then dumps the stock on the open market, it will recognize the loss. This rule prevents you
from recognizing a loss on a stock, when you have, in effect, "sold it to yourself" (to a
related entity) -- thus plugging a potential tax loophole... but opening others for the clever
and creative player....

(For example: Buy stock of Company X from one of your controlled companies, Company
Y, on which Y would have a very large tax loss if it sold the X stock. Since the loss is
disallowed for the selling company (Company Y), the "built-in loss" (high tax basis) on the
Company X stock is transferred to you. You can then sell the stock and take a large capital
loss, which you might need to offset your capital gains.)

You will also be able to buy stock that is held by companies you do not control, except if
such a stockholder company is controlled by another player. In that case, you will have to
make a formal offer to the potential selling company’s management and stockholders,
typically at 10% to 40% above the current stock price of the stock it holds, if you
realistically expect the holder to sell any of its stock to you. You will incur legal fees,
whether your offer is accepted or rejected. Note that if the seller is willing to accept a price
that is a 25% premium over the market price, and you bid less, your offer will be rejected
and if you come back with a higher offer, the seller will have jacked up what it will accept

123
to, perhaps, a 30% or even a 35% premium. So trying to buy a stock from another company
is something of a cat-and-mouse game. (Be aware that, all things being equal, a
large shareholder of the target company will want a higher price per share than a small
holder that owns only a few percent of the target company’s stock.)

Next, you will be asked what percent of the company's stock you want to buy from the
Public or the seller.

If the buyer (you or your company) has enough cash, the transaction will then be
completed. Or, if you need to borrow against a bank line of credit to complete the
transaction, you will first be asked if you want to borrow to do the transaction. If you click
on the "Yes" button, the necessary amount will be borrowed, and added to your bank loan
balance, and the transaction will be executed. Once the purchase is completed successfully,
a confirmation message will be displayed on screen, telling you that the transaction was
completed.

If you are short of cash and credit needed to buy as much stock as you want to, try selling
off some bonds or other stocks to raise the needed funds, or else try buying a smaller
amount of stock. If the entity doing the transaction is a corporation, you may even be able
to have it raise money by selling bonds, using the "Issue Bonds" command button on the
"Financing Transactions" submenu.

Other ways for a corporation to raise cash would be to:

 Sell off some of its capital assets, unless it is a bank, insurance company, or
holding/trading company ("Sell Corporate Assets" button on this "Buy/Sell"
submenu);
 Issue new stock, either in a public offering or a private offering, or issue bonds
("Financing Transactions" submenu); or
 Have you, the player, advance (loan) money directly to the corporation ("Advance
to Corp" button on the "Misc" submenu).

As noted above, if the Active Entity is you, the player, this first button on the Buy/Sell
Submenu will be labeled "Cover Short Position," rather than "Buy Stock," if you have any
outstanding short sale position in any stock. This button works much like the "Buy Stock"
feature, except that you can only buy (cover) stocks in which you have a short sale
position. Each 1% you buy will drive up the cost of the stock 1/2 of 1%, so if you buy back
all of a 20% short position at once, you will drive up the price by 10% for the last 1%
purchased, and your average cost will be 5% higher (plus commissions) than the market
price was before your transaction was entered.

When you click on the "Cover Short Position" button, the program will display a list of
each company in which you have a short position, and details, such as tax basis, percent
shorted, and value (all shown as negative amounts). Simply click on a position to select it,
and then enter the percent you want to buy back on the open market. You can buy back

124
shorted stocks even if you have no cash or line of credit, since the funds for the buyback
will first come out of the short margin account.

When you cover a short position, you will recognize a capital gain or loss for income tax
purposes. For example, if you sold stock short for $300M (your tax basis will be shown as
-300M) and you pay $100M to cover the short position, you will recognize a gain of
$200M, which is a capital gain. (In Wall $treet Raider, all capital gains are given
preferential tax treatment -- a lower tax rate than "ordinary" income. In the real world, at
least under U.S. tax laws, such a gain on a short position is considered a short-term capital
gain, which is not taxed at a lower rate, unlike long-term capital gains. But we give you a
tax break, in Wall $treet Raider....)

(2) SELL STOCK (or SELL STOCK SHORT). This button will be labeled "Sell Stock" if
the selected Active Entity that is to do the transaction is a corporation, or will be a "Sell
Stock Short" button, if you, the player, are the Active Entity doing the transaction.

First, let's consider the "Sell Stock" button on this submenu (which works the same as the
"Sell Stock" button that also appears on the main Wall $treet Raider screen. Click on the
"Sell Stock" button to sell shares of stock owned by you or by a company you control. As
soon as you click on it, a screen will pop up with a list of your stock portfolio, showing the
value and tax basis for each holding, and you simply need to click or double-click on the
name of the stock you wish to sell, to select it, after which you will be asked what percent
you want to sell.

Simply press the [ENTER] key or click on the "OK" button if you wish to accept the
default percentage -- which is to sell all of your stock in that corporation. Or, to sell less
than your entire holding, enter a smaller percentage amount to sell. For example, if you
own 20% of XYZ and only want to sell half of your holdings, you would enter "10" percent
(not "50" percent).

Stock is not always immediately saleable, if you are playing at Difficulty Level 2 or 3, and
if you own 100% of a company, such as a new startup company that has not yet "gone
public" with its stock. To be able to sell your stock in such a 100%-owned subsidiary, you
will need to first select that company as the "Active Entity" and have it do a public offering
of stock (which will not be possible for a brand new startup company with no history of
earnings), or else do a private offering of its stock to venture capitalists, if possible.

Once some of its stock has been sold to "the public" or to other private investors, then you,
as a stockholder, will be able to sell your stock in the company on either the public market
or to unrelated private investors. Otherwise, if you try to sell your stock in a new entity
when you own 100% of it, you may be able to do so, but only to a "vulture capitalist" who
will offer to buy it from you at a deeply discounted price.

Any sale of stock you make will tend to depress the price of that stock (temporarily), and
the more stock you are selling, the lower the price will go, and the less per share you will
net on the sale. Thus, if you own a large percentage of a company, and are not in a great

125
hurry to sell it all at once, it will often be better to sell a few percent, let the ticker run for
as while, and when the stock's price has recovered a bit after your selling, sell some more,
repeating that pattern several times until you have sold as much as you want to sell.

Better yet, if the stock is trading at, for example $50 a share, you might sell call options on
it, exercisable at $40 a share in the near future, like the next month. This way, if you have
the “Exercise Options?” setting set as “Yes,” the stock will be called away from you when
the term of the option expires, unless the stock price has fallen below $40, and you will
have gotten very nearly $50 a share, after commissions on the options and exercise. You
could also buy in-the-money put options, to sell the stock at $60, which might not cost you
much more than $10 a share plus commissions.

When the second button on the Buy/Sell Submenu reads "Sell Stock Short," you can only
sell stocks you do NOT currently own. This is done by borrowing the stock from "the
Public" and then selling it. The proceeds of the short sale are not immediately usable by
you, but must be deposited in a "short margin account." You must keep an amount of cash
in that restricted account equal to the total value of all the stocks you are short.

The goal of selling stocks "short" is to profit from a decline in a stock's price, rather than a
rise in the stock.

There a number of restrictions on when you can sell a stock short and how much. For
example, you cannot sell a stock short "against the box" when you already own the stock
and you cannot sell a stock short when you control that company (through another
company that owns its stock). You also may not sell more of a company's stock short than
20% or more than half of the percent that is publicly traded, whichever is less. Also, no
more than 50% of a company's total publicly traded shares can be borrowed and sold short
by ALL players, in the aggregate.

For more on short sales and margin requirements, and limits on when and how much of a
stock you may sell short, see the FAQ on Short Sales in Chapter 3.

(3) BUY CORPORATE BONDS. Click on this button to buy corporate bonds (often called
"junk bonds," since in many cases they are of poor credit quality, and will never be paid
off).

NOTE: In this simulation, all bond trades or transactions are done in units or multiples of 1
million face value, of the applicable currency (dollars, pounds, Euros, etc.), or units or
multiples of 1 billion, for certain currencies (Yen, Korean Won, or Indian Rupees). Thus, if
you buy 100 million face value of the bonds of XYZ Corporation, at a price of 95, you
would pay about 95 million on the purchase (plus commissions, and at somewhat above
market price, due to a slight upward effect on the price of the bonds caused by the
purchase).

126
In Wall $treet Raider, only individual players and companies in the banking and insurance
industries may buy or sell corporate bonds, so this command button will not be visible and
cannot be used if the currently selected "Active Entity" (controlled by you) is any type of
corporation other than a bank or an insurance company.

When you click on the "Buy Corporate Bonds" button, the program will ask you which
corporate bonds you want to buy, and you will be asked to enter the stock symbol of the
company whose bonds you wish to acquire (or use the "Look Up" button to select the
company from a list of all companies that have bonds issued at the moment in the current
game of Wall $treet Raider). Once you select the company whose bonds you want to
acquire, you will be told what amount (face value), if any, of the company's bonds are
publicly traded, and how many million you can afford to purchase, with the buying entity's
available cash and line of credit.

Enter the amount you want to buy and press the [ENTER] key or click on OK to proceed
with the purchase. If you need to borrow money from the bank to complete the purchase,
you will first be asked if you want to borrow, and the transaction will be completed only if
you click on "Yes."

Once your purchase of corporate bonds is successfully completed, a small confirmation

notice will pop up on the screen.

Note that, when either buying or selling corporate bonds, if the amount of such bonds that
are publicly traded is relatively small, you may be given the following warning: "Caution:
This bond issue is very thinly traded." This means that if you buy a significant percentage
of the amount available, or sell a significant percentage of such bonds you own, you will
have a major effect on the price of the bonds, meaning that you will run up the price quite a
bit if buying, or down if selling, either of which will cost you money, so you may want to
buy or sell only a small amount at any one time if the bonds are thinly traded. Otherwise,
you will not see such a warning if, for instance, you are buying only 100 million of
Citibank bonds, when there are 50,000 million publicly traded -- in that case, your purchase
or sale of 100 million of those bonds would hardly have any effect on their market price.

To do research on possible corporate bond investments, use the Database Search research
tool by clicking the “Database Search” button on the General Research menu.

(4) SELL CORPORATE BONDS. Click on this button to sell corporate bonds (often called
"junk bonds," since in many cases they are of poor credit quality, and will never be paid
off).

NOTE: In this simulation, all bond trades or transactions are done in units or multiples of 1
million face value, of the applicable currency (dollars, pounds, Euros, etc.), or units or
multiples of 1 billion, for certain currencies (Yen, Korean Won, or Indian Rupees). Thus, if
you sell 100 million face value of the bonds of XYZ Corporation, at a price of 95, you

127
would receive about 95 million from the sale (less commissions, and at somewhat below
market price, due to a slight depressing effect on the price of the bonds caused by the sale).

In Wall $treet Raider, only individual players and companies in the banking and insurance
industries may buy or sell corporate bonds, so this command button will not be visible and
cannot be used if the currently selected "Active Entity" (controlled by you) is any type of
corporation other than a bank or an insurance company.

When you click on the "Sell Corporate Bonds" button, you (the selling entity) you will
be shown a list of all the corporate bonds owned, showing for each holding the amount
(face value) of the bonds you own, and the current market price and adjusted tax basis of
each. Just click or double-click on the bonds you wish to sell and you will be asked to enter
the amount (face value) you wish to sell.

Once a sale of corporate bonds is successfully completed, a small confirmation notice will
pop up on the screen.

Note that, when either buying or selling corporate bonds, if the amount of such bonds that
are publicly traded is relatively small, you may be given the following warning: "Caution:
This bond issue is very thinly traded." This means that if you buy a significant percentage
of the amount available, or sell a significant percentage of such bonds you own, you will
have a major effect on the price of the bonds, meaning that you will run up the price quite a
bit if buying, or down if selling, either of which will cost you money, so you may want to
buy or sell only a small amount at any one time if the bonds are thinly traded. Otherwise,
you will not see such a warning if, for instance, you own only 100 million of Citibank
bonds, when there are 50,000 million publicly traded -- in that case, your sale of 100
million of those bonds would hardly have any effect on their market price.

(5) TRADE GOVERNMENT BONDS. As in the case of corporate bonds, only players,
banks and insurance companies can invest in government or "Treasury" bonds in Wall
$treet Raider. Thus, this button will appear on the BUY/SELL submenu when the currently
selected "Active Entity" is you (the player) or a bank or insurance company that you
control.

Managers of industrial corporations are generally not paid fabulous salaries to use their
company's money to dabble in bond market investments, and since Wall $treet Raider seeks
to emulate real-world conditions as closely as possible, bond investments are not permitted
in this simulation by companies other than financial institutions (banks and insurance
companies).

Assuming the entity you have selected for the moment to buy or sell government bonds is
either you, the player, or a bank or insurer you control, clicking on the "Trade Government
Bonds" command button will bring up a small dialog screen, listing 4 possible choices for
trading government bonds:

128
  Buy the "Long" government bond (the one that matures in 10 to 20 years);
 Sell the "Long" government bond;
 Buy the "Short" government bond (the one that matures in 10 years or less); or
 Sell the "Short" government bond.

Use the mouse pointer to click on the type of transaction you wish to do, of the ones listed,
and then click on the "GO" button.

If you clicked on either of the "Buy" items, to buy government treasury bonds, after you hit
"GO," you will then be shown the price of the Long or Short bonds you are about to buy,
and told how many (maximum) you can buy, in millions or billions (depending on the
currency you selected, dollars, yen, etc.) of face value. The amount shown is the amount
you may buy "without difficulty." This means you can buy that amount without having any
effect on the huge and liquid government bond market. While you may decide to buy a
larger amount, you will tend to drive up the price of government bonds, if you are buying
over 0.5% of the total "float" of such bond issue, and will be told how much of a higher
price you must pay, if you wish to do the larger transaction.

(You may have wondered, when you viewed the “Economic Statistics” by clicking on that
item on the General Research menu, why the total National Debt is shown, as well as, in a
footnote, a disclosure showing how much of the debt is held by players and companies.
Now you know why, after reading the preceding paragraph.)

Enter a smaller amount if you do not wish to buy the default (maximum that can be bought
"without difficulty") amount of the bonds. If you need to borrow money from the bank to
make the purchase, you will be asked if you wish to borrow, before the transaction is
executed. Click on "Yes" to proceed with the purchase, or "No" to cancel, if you do not
wish to buy "on margin" (i.e., with borrowed money).

If you clicked on either of the "Sell" items, to sell government bonds the transacting entity
owns, you will be shown the current market price of the bonds and the amount (face value)
that you or your bank or insurance company owns, and can sell "without difficulty." Enter

129
the amount you wish to sell, or just hit [ENTER] or press the "OK" button to sell the "safe"
default amount, at the current market price, less commissions.

If your buy or sell transaction in government bonds is completed successfully, a small

confirmation message will pop up on the screen, showing the net proceeds of the sale, or
the total cost of the purchase. Government bonds are very "liquid," so your sales or
purchases will have no noticeable effect on the market price in Wall $treet Raider unless
you are doing a huge transaction, such as buying or selling $50 billion or $100 billion face
value of such bonds; thus your only cost of trading in and out of such bonds will usually be
a small brokerage commission or spread.

(6) MERGER. To do a "Merger" in Wall $treet Raider, you must click on the "Merger"
command button and follow the on-screen instructions. You will be asked to enter the stock
symbol of the "target" company you wish your company to merge with (or can use the
"Look Up" button that will appear, to scan through the list of all the companies currently in
existence, until you find your "target"). Note that, when a company seeks to merge with a
target company, the exchange ratio of stock-for-stock in the merger is based on the value of
the acquiring company versus the value (plus a premium) of all the stock of the target
company. You are able to set the premium percentage over market price that you will offer
to the shareholders of the target company.

Thus, in effect, if you offer a 25% premium, the acquiring company is offering to "pay" a
price that is 25% over market price to acquire the stock of the target company (but is
"paying" for it with its own stock, by issuing new shares of stock, rather than paying cash).
Needless to say, the higher the premium you offer, the more likely it is that the shareholders
of the target company will vote to approve the merger of their company into yours.

In most cases, you can offer anywhere from 5% (good luck!) to 100% over market price.
However, where you already control the target company as well as the acquiring company,
there is a potential conflict of interest, so your underwriters will do a "fairness" (valuation)
study, and give you a narrow price range, such as a 10% to 15% premium over market
value, within which you must choose the amount you wish for the acquiring company to
offer as an acquisition premium.

As a rule, your ("acquiring") company will end up owning all the stock of the other
company after the merger, if the merger is approved. However, if the "target" company
already owns stock of your ("acquiring") company, you will be asked if you want the
"target" company to end up as the company "on top" that will own all the stock of your
company after the merger. There is usually very little practical difference as to which
company is the "parent" and which is the "subsidiary" after the merger, as your ownership
in the combined companies will be the same in either case. However, you will generally
want the company with the lower credit rating or with tax loss carryovers to end up as the
parent company, since holding all of the stock of the other will usually improve its weak
credit rating, or its tax loss carryovers will be able to shelter the future income of its
subsidiary.

130
Mergers are rather complex transactions, even in this simulation, but fortunately, all of this
complexity is handled for you by the program. You need only decide if you want to do a
merger, decide how much of a premium over market price you wish to offer the target
company shareholders, and then run the gauntlet of getting shareholder approval and
avoiding intervention by various government agencies.

Most stockholders of a target company, except those you control, will generally vote
against a merger, except the "Public" shareholders, who are assumed to be none-too-bright,
and who usually will vote heavily in favor of your proposed merger, if you are offering
them a decent premium (such as 20% or 25% over market price) for their stock.
Corporations (not controlled by any player) that hold stock of the target company will vote
against the merger if the premium you are offering is 25% or less, but some or all such
companies may vote for the merger if you offer more than a 25% premium over market
price. Other players or corporations they control that own stock in the target company will
vote against your merger offer.

There are also a flock of government agencies that will consider your merger, and one of
them will occasionally find a good legal reason to block it. It is the job of these gremlins to
be arbitrary and unreasonable. Mergers between two banks are very frequently blocked by
the government, and are only rarely permitted.

Even the public shareholders will generally vote against a merger, if it is an attempt at a
hostile takeover, where a "minnow" is trying to merge with and swallow a "whale," or if
your acquiring company has a "D" credit rating, and is trying to merge with a healthy
company before your company goes down the tubes (bankrupt). In those cases, your
attempted merger will generally be voted down by the stockholders of the target company,
unless, of course, you have bought up 51% of the stock of the target company in advance,
in which case there will be no problem getting shareholder approval. But note that if the
company you are trying to acquire has a "D" credit rating, your own company's minority
stockholders may seek to block the merger, to prevent you from merging their healthy
company with one that is financially crippled.

One further factor in your success in winning shareholder approval is the country of
incorporation of the target company. Public stockholders of U.S. or U.K. companies are
most likely to vote for a merger, at a given price offer. Shareholders of a Japanese or
Korean company, or of most companies based in Third World countries, are least likely to
agree to the acquisition of their company (but are less likely to oppose the merger if the
acquiring company is also based in their country).

The "Merger" feature is very useful, since it allows you to use one company to take over
another by issuing new stock, rather than cash. As such, the parent company after the
merger (which, as noted above, may be either the company doing the acquisition or the
acquired company) will be financially stronger, since it will have obtained 100% of the
stock of the other company, without spending any money.

131
There must be a catch, right? Of course. The shareholders of both companies will have
their percentage of ownership reduced. The stockholders of the subsidiary will have turned
in all of their stock in it in return for a smaller percentage of the stock of the parent
company, and the parent company stockholders will have surrendered part of their stock,
which means that both groups of stockholders will have a smaller piece of a larger pie (but
still worth about the same or more than the stock they traded in). But if one stockholder
happens to own, for example, 20% of the stock of BOTH companies before the merger, he
or she will end up owning 20% of the parent company (only) after the merger, but it will be
worth about as much as his or her stock in the two companies (in total) was worth before
the merger took place.

There are several situations in which mergers can be very useful:

 Stock as a substitute for cash. You wish for a company you control, which has a
high stock price in relation to earnings or its net worth, but has little cash, to take
over some other juicy little company that you would like very much to tuck into the
corporate fold, but, sad to say, your company is growing so fast that it has run out of
cash and credit to make such a purchase. A stock-for-stock merger may be the
perfect solution, although it will dilute your percentage of ownership somewhat.
 A way of diversifying when a stock seems overvalued. When your company's stock
price reaches a price that you think is excessively high, and is likely to start
descending like a kamikaze because its earnings are falling apart, you may want to
sell out, but perhaps you own so much of the stock that you would kill the stock
price if you tried to dump it. That is a perfect time to use the over-priced stock to
have your company go out and do some mergers with companies whose stocks
seem undervalued. Or, you may decide to merge your small company in which you
own, say 51%, with a giant bank or oil company, so that you wind up with only 3 or
4% of the parent company after the merger. Selling off that 3 or 4 percent would
only slightly affect the stock price, so you could sell out after the merger without
taking a "haircut" on the sale. However, note that shareholders of a very large target
company are less likely to vote for a merger if the company proposing to take over
the "whale" is but a "minnow."

NOTE THAT IN WALL $TREET RAIDER, ANY COMPANY CAN DO A STOCK-

FOR-STOCK MERGER WITH ANY OTHER COMPANY. OR CAN AT LEAST
ATTEMPT A MERGER (BUT MERGERS ARE OFTEN BLOCKED FOR
VARIOUS REASONS).

 Improve credit rating and borrowing power. If you own controlling interests in two
companies (say 25% of each), consider merging them. You will still own 25% of the
parent corporation after the merger, and it will own 100% of the other. You will
have just as much control as before, and the parent will be much stronger
financially, and probably able to borrow more, since it will now own all the stock of
the subsidiary. You may even want to liquidate the subsidiary into the parent, if you

132
 can--but see the description of liquidations under the summary of the "Tax-Free
Liquidation" command button, in Chapter VII, on "FINANCING
TRANSACTIONS."

The time when you should be least willing to do a merger transaction is when you own a
company whose stock is very depressed--for example, selling at only 60 or 70% of its net
worth per share. While a merger may be the only way to keep the company afloat in some
cases, its low stock price means that you will greatly "dilute" your ownership if you merge
it with some other corporation you don't control. In fact, you will probably wind up with so
little stock as a result of your company's low price that you may even fall below the 20%
needed to maintain control. Note that when the stock of one of your companies gets very
depressed, it becomes a tempting target for an opposing player or some other predatory
corporation to take over in a cash buyout or merger (unless you have 51% control). Losing
control of the company may mean that you also will be unemployed, if you were drawing a
salary and receiving stock options as the president and CEO of the corporation.

When two companies are merged in Wall $treet Raider, the "target" company's price, as
noted above, is always valued above its market price in determining the exchange ratio, the
"acquiring" company's stock at market price. Thus, if the offering price is 25% above
market price, and if the market value of the target company's stock is $24 billion, it would
have an exchange value in the merger of 1.25 times that amount, or $30 billion. If the
exchange value of one company is $70 billion per share and the other is $30 billion in a
merger, the parent company's stock will be worth about $100 billion after the transaction. If
you owned 100% of the $24 billion target company before the merger, you would end up
with 30% of the $100 billion parent company stock afterwards (assuming you didn't own
any stock of the other company before). You may occasionally receive such a windfall in
Wall $treet Raider when, out of the blue, some company offers to take over a company in
which you own stock in a merger deal, usually at a 25% to 50% premium over market
value.

In the real world, the term "merger" usually means that two companies have all their assets,
liabilities, etc. combined together in a single corporation, although the term is also
used sometimes in a non-technical sense to include swapping stock where one company
ends up as a subsidiary corporation, owned by the other corporation. In Wall $treet Raider,
"mergers" are all of the latter variety.

In Wall $treet Raider, however, you may sometimes take a second step and "liquidate" the
subsidiary company into the parent company. (See the section on the "Tax-Free
Liquidation" command button, in Chapter VII on "FINANCING TRANSACTIONS.") In
that case you would have done a merger in the more commonly-used sense of the word,
where all assets and liabilities of two companies are combined into one company, and one
corporation (the acquired subsidiary) goes out of existence.

Doing mergers can be expensive, in terms of underwriting fees, tax, legal, accounting and
other costs. In Wall $treet Raider, the company proposing the merger pays those costs.

133
Before you proceed with a merger, the program will estimate what the merger costs will be
and inform you, asking you if you wish to proceed with the transaction.

You will only incur the full amount of those fees if the merger is successfully completed;
otherwise, your company pays only a percentage of the total fees. The percentage of the
total fee amount will depend on how far along you have gotten into the process, in cases
where the merger is aborted or called off for any reason, as follows:

 No fees are incurred if you are unable to proceed with the merger due only to the
fact that one of the companies (acquirer or target) already owns 100% of the other.
 Only 20% of the full merger costs are incurred if two banks are denied permission
to merge by bank regulators (which is usually the case);
 Only 40% of the full merger costs are incurred if shareholders of the target
company vote down the merger proposal;
 Only 60% of the full merger costs are incurred if a favorable shareholder vote is
obtained, but the merger is then blocked on antitrust grounds;
 Only 70% of full merger costs are incurred if other government agencies intervene
at a late stage to block the merger; and
 Only 80% of full merger costs are incurred if divestment of a subsidiary is required
as a condition to complete the merger, but you refuse to agree to that condition.

Any option positions (long or short) that a player has in a company that is involved in a
merger transaction will automatically be closed (canceled) if the option is "out-of-the-
money." If the options are "in-the-money," they will be settled at their intrinsic value (the
difference between the exercise price and the market price of the underlying stock) at the
instant before the merger exchange of stock occurs. In Version 4.60 and later, in which
corporations can trade options, any option positions of corporations on the target company
will immediately be settled at their market value and options on the stock of the acquiring
company will be adjusted to reflect the terms of the merger.

Note that the "Merger" button does not appear on the "BUY/SELL" transactions menu if
the currently selected "Active Entity" is you, the player, since mergers are only applicable
to corporations, not to individuals.

(7) GREENMAIL. The "Greenmail" command button allows you to do stock buy-backs
from corporate shareholders of a company you control, if you don't also control the selling
shareholder corporation. The greenmail transaction is one in which your company is able to
buy back its own stock from an unrelated company, in order to get rid of a minor or
unwanted shareholder.

When you click on the "Greenmail" button, the company (which you must control) that is
currently the transacting entity will be presented with the choice of doing the buyback from
any of a list of shareholders, if there are any corporations that own its stock, which are not
controlled by you or any other player. If there are such shareholders, you will be able, if
your company has adequate funds and a good credit rating, to buy back some or all of the
stock of one of the corporations that own some of your company's stock, in a "greenmail"

134
transaction. You cannot force a greenmail buyback, however, if the shareholder corporation
is controlled by you, or by another player, and you cannot do a greenmail buyback of stock
owned directly by another player.

If, on the other hand, there are no corporate shareholders (other than corporations
controlled by you or other players), you will be informed that no greenmail buyback is
possible, since there are no privately held shares you can buy back.

The "Greenmail" transaction is particularly useful when you feel that your company's stock
is greatly undervalued and it is selling at a large discount from its net worth per share. In
such a case, the company's best investment may be to shrink its capitalization by buying
back part of its own stock from a corporate stockholder, even at a premium price of more
than 20% above market price. In Version 6.40 and later, you must make an offer, specifying
how large a premium over market price you are willing to pay, generally in the 10% to 45%
range, if you realistically expect your offer to be accepted.

This also can have the salutary effect of increasing the value of the stock of the remaining
shareholders, since the stock will sometimes rise in value due to the buy-in, if it was selling
at a very large discount from net worth per share. In addition, the remaining owners will
have their stock ownership increased.

EXAMPLE: If you own 40% of a company, and it "buys in" 20% of its stock, you will
own 40/80 or 50% of the stock remaining after the buy-in.

IMPORTANT LEGAL RESTRICTION: Your corporation will not be allowed to pay out
so much for its stock that it reduces its net worth to a level that places its survival in serious
jeopardy. Also, if the company is a bank or insurance company, it will often be prevented
by banking or insurance regulators from doing any such buybacks. These rules give lenders
to a corporation some measure of protection from ruthless corporate raiders (like you), who
might have overly larcenous tendencies.

You can use a "greenmail" or "LBO" transaction as one in a series of steps if you wish to
do a true "leveraged buy out" of a company. The first step would be to buy a controlling
interest in the target company, such as 50%. If its stock is sufficiently undervalued and it
has good enough credit (or issues junk bonds), it may then be able to buy back the
remaining 50% of its shares, leaving you with 100% ownership.

135
In some cases, it may even have enough cash and net worth left to pay out an
"extraordinary dividend" to you after the buy-in, so that you would even get some of your
investment back immediately--but you will probably wind up with stock in a company
that is leveraged to the hilt, and not far away from Chapter 11 bankruptcy proceedings--one
of the frequently encountered risks of doing a leveraged buyout in Wall $treet Raider, as in
the real world.

The "Greenmail" buyback is one way to get rid of a minority (non-controlling) shareholder,
and at the same time increase your percentage of ownership of the company. A greenmail
buyback is identical to an LBO, except that you are buying the stock back from a specific
corporation, rather than from "the public." For example, if you own 25% of XYZ
Corporation, and ABC Company owns 24%, and you are in danger of getting a "margin
call" that might force you to sell 1% or more of your XYZ stock, that could cause ABC
Company to either take control of XYZ, or deadlock your ownership (if you and ABC each
owned 24%). Thus, you might want to have XYZ do a greenmail buyback of 8% or 10% of
ABC's holdings of XYZ, reducing its ownership to less than 20%, and preserving your
control. In this example, if XYZ bought back 8% of its stock from ABC in a greenmail
buyback, your ownership percent would increase to 27% and ABC's would decrease to
17% after the transaction.

The "Greenmail" button is not displayed if you, the player, are the currently selected
"Active Entity," since stock buybacks are only applicable to corporations.

(8) LBO (LEVERAGED BUYOUT). The "LBO (Leveraged BuyOut)" command button,
which allows you to do stock "Leveraged Buy-Outs," is one of the handier functions
available in the Buy/Sell group of transactions.

When you click on this button (when the company which you control is the “Active
Entity”), you will be asked what percentage of the company's stock held by "the public"
you wish to have the company buy back.

If there are no publicly held shares outstanding, you will be informed that no LBO stock
buyback is possible.

The "LBO" transaction is particularly useful when you feel that your company's stock is
greatly undervalued and it is selling at a large discount from its net worth per share. In such
a case, the company's best investment may be to shrink its capitalization by buying back
part of its own stock from the public, generally at a premium price of 25% above market
price, or sometimes at a lesser percentage premium for small LBO buybacks.

This also can have the salutary effect of increasing the value of the stock of the remaining
shareholders, since the stock will sometimes rise in value due to the buy-in, if it was selling
at a very large discount from net worth per share. In addition, the remaining owners will
have their stock ownership increased.

136
EXAMPLE: If you own 40% of a company, and it "buys in" 20% of its stock, you will
own 40/80 or 50% of the stock remaining after the buy-in.

IMPORTANT LEGAL RESTRICTION: Your corporation will not be allowed to pay out
so much for its stock that it reduces its net worth to a level that places its survival in serious
jeopardy. Also, if the company is a bank or insurance company, it will often be prevented
by banking or insurance regulators from doing any such buybacks. These rules give lenders
to a corporation some measure of protection from ruthless corporate raiders (like you), who
might have overly larcenous tendencies.

You can use a "greenmail" or "LBO" transaction as one in a series of steps if you wish to
do a true "Leveraged Buy Out" of a company. The first step would be to buy a controlling
interest in the target company, such as 50%. If its stock is sufficiently undervalued and it
has good enough credit (or issues junk bonds), it may then be able to buy back the
remaining 50% of its shares, leaving you with 100% ownership.

In some cases, it may even have enough cash and net worth left to pay out an
"extraordinary dividend" to you after the buy-in, so that you would even get some of your
investment back immediately--but you will probably wind up with stock in a company that
is leveraged to the hilt, and not far away from Chapter 11 bankruptcy proceedings--one of
the frequently encountered risks of doing a leveraged buyout in Wall $treet Raider, as in the
real world.

The "LBO" buyback is one way of increasing your voting control of a company, to make it
impossible or more difficult for an opposing player or some large company to take away
your control of the company. For example, if you own 45% of the stock of XYZ
Corporation, and are afraid of losing control, but don't have the cash or line of credit to buy
more of its stock, you may be able to have XYZ do an LBO, buying back enough of its
stock from the public to increase your percentage of ownership to 51% or more, which will
guarantee you can maintain control of the company. In this case, XYZ would need to buy
back 11% of its stock, so your ownership (45/89ths of the remaining stock would be 51%,
or 50.56%, rounded off to 51%).

The "LBO (Leveraged BuyOut)" button is not displayed if you, the player, are the currently
selected "Active Entity," since stock buybacks are only applicable to corporations.

(9) BUY CORPORATE ASSETS. The "Buy Corporate Assets" command button is used to
acquire business assets for a corporation, such as by buying plant and equipment. If you
control a company and want it to expand its investment in business assets, either because
such an investment is currently quite profitable or because you want it to quickly increase
its market share to squeeze out the competition, use this command to have it acquire assets.
It can either purchase more assets of the kind utilized in its current industry or, if it is a

137
"holding / trading company," it can select any one of 67 industries which it wishes to enter
into, by buying new or existing assets from a company in that industry.

To acquire business assets, click on the "Buy Corporate Assets" button. If your company is
a holding/trading company, you will be asked first to select the industry you wish it to
enter, and then, if buying "used" assets, to enter the stock symbol to identify the company
you wish to buy the assets from, which can be in any industry except banking, insurance, or
another holding/trading company. If your company already has business assets, and you
choose to have your company buy more assets, you also have the choice of buying "new"
assets, or buying "used" assets from another company in the industry.

If you buy new assets, you will increase the total capacity or "supply" of assets in the
industry, thus tending to depress the profitability of all companies in that industry,
including your own. Note that if you try to buy a very large amount of assets in a small
industry, that would almost immediately bankrupt most of the companies in the industry,
your board of directors may step in and limit the amount of new assets you can buy, as part
of their fiduciary duty as directors of the corporation -- even though they were elected by
you as the controlling shareholder.

If you buy "used" assets from another company in the industry, you might buy them from a
very profitable, well-run company, or from a mismanaged, unprofitable company. In either
case, the rate of return that you will earn on the acquired assets will be "inherited" from the
selling company, and will be blended with the rate of return your company was earning on
its existing assets, which will either raise or lower your company's overall profitability. If
you buy assets from a highly profitable company, you will generally have to pay more than
"book," and the excess ("goodwill") will be set up as an account on your company's balance
sheet. Any "goodwill" will be written off (amortized) as an operating expense over a period
of years, generally at 20% of the remaining balance each year (or 5.4% per quarter), though
certain conditions, such as incurring operating losses on the purchased assets,
restructurings, or going through bankruptcy, can cause much or all of the remaining
goodwill account to be written off at once, as an "extraordinary" expense item.

If you want to avoid such goodwill amortization charges, which can be a drag on your
company's earnings for the next several years, you may find it better to buy the assets from
a relatively mediocre company in the industry, rather than the most profitable and well-run
company, if you have a choice. (Not all companies will be willing to sell assets to your
company, you will find, and especially not the most profitable ones.)

Note that if you buy assets from a highly UNprofitable company, you may be able to buy
them at a discount from "book" value, in many cases. In that case, the difference is
"negative goodwill," which will eliminate some or all of any existing "goodwill" account of
the buying company. If there is still a net negative goodwill amount after such offsetting,
the entire balance is "written up" immediately, as an item of "extraordinary income" for the
buying company. This has little effect, except on actual (cash) tax payments, since the
income item is taxable income, but does not directly affect the buyer's operating income.

138
For more on how Wall $treet Raider accounts for "goodwill," click here.

Any gain or loss on the sale of assets by the selling company (reduced by a 10% sales
commission) is treated as an "extraordinary" item of income or loss.

When buying assets from another company in a particular industry, if the asset purchase
would give you a monopolistic control position in the industry (generally, over 55% of
industry assets), the government will generally limit the amount of assets your company
can buy, or may prohibit such a purchase altogether, so your company may have no choice
in that case other than to try to buy "new" assets, instead, if it wishes to expand.

Notice that if you buy assets from another company in the industry, the industry's overall
supply/demand situation is unchanged -- all that changes is that the market share
percentages for your company and the other (selling) company, in opposite directions, as a
result of one buying assets (and thus future sales) from the other. In Wall $treet Raider, for
the sake of simplicity, it is assumed in all industries that $1 "book value" of capital assets
(business assets) will generate $1 of gross sales per year, on which sales the profit margin
can range from roughly -35% to +65%.

The "Buy Corporate Assets" function can be used to have a company change its industry.
First, have the company in question sell off or scrap all of its existing business assets, so
that it becomes re-classified as a "holding/trading company." Then, if you want it to enter
some other (profitable) industry, have it buy assets from some company in that industry (if
a company can be found that is willing to sell some of its assets), again using the "Corp.
Assets" command button. Note, however, that the change in industry can cause your
company to lose the benefit of any tax loss carryovers it had, as well as tax credit
carryovers, which can be costly if it had large carryovers of either type.

The "Buy Corporate Assets" transaction can only be used by a company you control, as the
transacting entity. Individual players, banks, or insurance companies cannot buy or sell
corporate business assets (plant, equipment, and such) in Wall $treet Raider, so this button
does not appear on the "BUY/SELL" submenu, when the transacting entity is you (the
player), or a bank or insurance company that you control.

(10) SELL CORPORATE ASSETS. The "Sell Corporate Assets" command button is used
to sell off business assets of a corporation, such as plant and equipment. If you control a
company and want it to sell off some or all of its assets, it may do so at a price that may
range from around 60% up to 150% of cost, depending upon the profitability level of the
industry. There is also a 10% sales commission that must be paid on all such sales, further
reducing the net proceeds the company will receive from such a sale.

Selling assets at less than cost will, of course, create a loss, for profit and loss (and tax)
purposes. However, the loss may be worth taking to stop the bleeding, if the company is
losing lots of money on its business assets and there is no immediate prospect of
improvement in its situation.

139
To sell off business assets, click on the "Sell Corporate Assets" button. You will be asked
how much of your company's business assets you wish to have it sell, and will be shown
the total amount it owns, in the event you wish to have it sell all its business assets.

Once you enter the amount you want to sell, your asset broker will then seek to find a
company in the industry (or sometimes a holding / trading company that wants to enter the
industry) that can buy the amount of assets you are trying to sell. If no buyer can be found,
you will be told what the highest bid is, and you can then try to sell that amount of assets,
or less, at market value, or you can sell the assets for scrap -- always at a much bigger
percentage loss. (But "scrapping" will reduce the amount of "supply" in the industry, which
will help everyone's profitability somewhat, in your company's industry), by improving the
supply/demand ratio.

While you will incur a larger loss if you have to scrap any business assets, the scrapped
assets are assumed to be the most antiquated, least profitable parts of your business, so you
will tend to improve the relative profitability of your remaining, newer assets.

This "Sell Corporate Assets" function can be used to have a company change its industry.
First, have the company in question sell off or scrap all of its existing business assets, so
that it becomes re-classified as a "holding/trading company." Then, if you want it to enter
some other (profitable) industry, have it buy assets from some company in that industry (if
a company can be found that is willing to sell some of its assets), using the "Buy Corporate
Assets" command button.

The "Sell Corporate Assets" transaction button can only be used by a company you control,
as the transacting entity. Individual players, banks, insurance companies, or holding/trading
companies cannot buy or sell corporate business assets (plant, equipment, and such) in Wall
$treet Raider. Thus, this button will not appear on the "BUY/SELL" submenu if the
transacting entity is you (the player), or a bank, insurance, or holding/trading company.

(11) BUY OR SELL BANK LOANS. The "Buy or Sell Bank Loans" button appeared in
this BUY/SELL Submenu in versions prior to Version 5.0, but now appears instead in the
"OTHER TRANS." Submenu, when the "Active Entity" is a bank which you control. For a
description of this function, see Chapter 9.

(12) BUY CALL OPTIONS. Click on this button to buy call options, which are options to
buy a stock at a fixed price. You should buy call options when you think the underlying
stock is going to go up in value. For example, if XYZ stock is trading at $59 a share, you
might pay $9 (per share covered) to buy call options on the stock at $60 at any time in the
next 12 months, if you think the stock may rise sharply. If it does rise to $75, for example,
at the time the option expires, you would receive the difference between $75 and $60 (the
"strike price" or "exercise price"), which would be $15 per share, resulting in a $6 per share
profit. But if the XYZ stock only went up to $65 at the end of the year, your options would
"settle" for only $5, so you would lose $4 a share. Or, if the stock price were $60 or lower
(below the "strike price" and thus "out-of-the-money"), the options would expire worthless,
and you would lose your entire investment of $9 per share.

140
Of course, you could sell the options at any time before they expire, at a gain or a loss, if
you decide that the XYZ stock isn't going to do so well, after all, or has gone up as far as
you think it can go.

In Wall $treet Raider versions prior to 4.60, only players (not corporations) could trade
options on stocks. However, in Version 5.0 and later, all companies can now trade call
options, with certain limitations, although banks and insurance companies cannot buy calls
or sell calls except “covered calls” as a hedge against stocks they own. It is possible to buy
or sell newly created options on any publicly traded company, unless its stock trades for
less than 5 or more than 1000 a share.

Buying options is risky, but can have huge rewards, because of the leverage they give you.
Buying options can also be done to reduce your risk, however, such as where you have sold
a stock short, but want to hedge yourself against the possibility that the stock might instead
go up. The call options you buy would offer you protection from losses on your short
position in the stock, if the stock went up, instead of down.

You can also sell calls short, as discussed in the following segment on selling call options.
Note that if you have sold XYZ call options short, and you click on the "Buy Call Options"
button and enter XYZ as the stock you want to buy options on, you will first be asked if
you want to buy back (cover) the XYZ options you sold short. If you answer no, then you
will be buying newly created call option contracts on XYZ.

When trading put or call options in Wall $treet Raider, you cannot buy or sell (or own)
options on a stock that is not publicly traded. Also, if, for example, only 1% of a stock is
owned by "the Public," any new option positions you create by buying new options or
selling options short will be limited to the percent of the stock that is publicly-traded (1%
in this example). However, you may do multiple option transactions, even in such a thinly-
traded stock.

Note also that a new option contract cannot be created on more than 10% of a company's
total number of shares of stock in Wall $treet Raider. However, you may be able to do
multiple transactions of 10% (or less) each. Version 6.50 of Wall $treet Raider has
introduced a limit on the number of call options you may buy. You and all your controlled
companies cannot own call options on more than a total of 100% of the stock of any one
company.

Long option positions cannot be bought on margin, as they are not fully counted as part of
your net worth for margin calculation purposes, even though they may be worth a great
deal. Thus, to buy calls (or put options), you must generally pay cash, or borrow against the
value of other assets.

NOTE: Options can now be exercised before their expiration date in Wall $treet Raider.
Also, if you have chosen to exercise options you own or have shorted, the options will
usually be exercised automatically on the expiration date, if they are "in-the-money." A call
option is "in-the-money" if the stock price is higher than the option's exercise price.

141
However, there are a number of situations where options that are in-the-money will not be
exercised, but will instead be settled at their intrinsic value ($4, for example, if the exercise
price is $60 and the stock price is at $64 when the call option expires). No exercise will
occur, even if an option is in-the-money if:

 The player does not have enough money and buying power to exercise a long call
option position (or where he/she is short put options), to acquire the stock;
 The player would acquire enough stock to give him/her control of the company, if
not already in control, if gaining such control would otherwise be prohibited under
the antitrust laws;
 The player would be acquiring all of the remaining publicly-traded stock of the
company; or
 The player would be selling stock, and does not own that much of the stock, so that
exercise of the option would create a short position in the stock for the player.

Also, you can set the toggle switch item, "Exercise Options?" on the "Settings" pull-down
menu to "NO" if you want all your option positions to be settled at their cash value, rather
than being exercised for or against you.

To profit from buying or shorting an option, you can either sell it (if long) or buy it back (if
it was sold short) before it expires, or you can just wait until it expires, at which time you
will either receive the amount by which the option is "in-the-money," if you own the
option, or you must PAY the amount by which it is in-the-money, if you are short the
option. Or, as discussed above, an option may be exercised, in which case you will be
buying the underlying stock at the exercise price if you own (are long) the call options, or
you will be selling the stock at the exercise price if you are short the call options and long
the underlying stock.

Ordinarily, the holder of the option will have a capital gain if the option is in-the-money
and is settled for cash at expiration, and the short seller will have a loss -- or vice-versa if
the option is just barely in-the-money (by fewer points than was paid for the option). For
example, if you paid $6 for an option that is only $2 in-the-money when it settles at
expiration, you will only receive $2 and will thus have a $4 capital loss when the option is
settled. A seller who had sold the options short for $6 would have a $4 gain if they settled
for only $2.

If an option is exercised, no gain or loss is recognized on the option itself, or if you are
acquiring stock by the exercise of the option. If you are purchasing stock via an option
exercise, the "tax basis" of that stock is the price you pay for it under the option contract,
plus whatever you paid to buy the option (if exercising a call -- but if you acquire stock due
to the exercise of a put option you sold short, your tax basis for the stock you acquire is the
exercise price LESS the amount you received from selling the puts short). If you are selling
stock due to exercise of an option, you will recognize a gain or loss for tax purposes. Your
sales price will be the exercise price plus (if you sold call options short) or minus (if you
bought put options) the price you paid or received for the options.

142
If an option is "out-of-the-money" (the stock price is below the strike price in the case of a
call option, or above the strike price in the case of a put option), then no cash changes
hands when the option expires -- the buyer of the option has a tax loss equal to the entire
amount paid for the option in that case, or the short seller of the option recognizes a profit
of the same amount.

TAX TREATMENT OF OPTIONS. In Wall $treet Raider, all gains or losses on options are
treated as capital gains or losses, for players. (This is not always the case in the real world,
but laws vary from country to country, and we've merely chosen the simplest approach for
this simulation.) For corporations, the gain or loss is taxable or deductible as ordinary
income or loss (but reported as "extraordinary income or loss" for financial reporting
purposes).

(13) SELL CALL OPTIONS. Click on this button if you wish to sell call options you
currently own ("long positions"), or to sell call options short, creating a new options
contract. A call option is an option to buy a certain stock at a certain fixed price over some
length of time (from less than a month to as much as 24 months in Wall $treet Raider). If
you sell a call option short, you are giving (selling, actually, for a price, the "premium") the
other party to the contract the right to buy the stock from you at the fixed price. Thus, like
being short a stock, if you sell a call option short, and do not own the underlying stock, you
have potentially unlimited upside liability, and can lose huge amounts if the stock goes up a
great deal before the option expires. On the other hand, if the stock goes down below the
exercise price ("strike price") of the option, the option will expire worthless, and the entire
amount you received when you sold the call short will be your profit to keep, free and clear.

Generally, you will want to sell calls short if you think the underlying stock is going to go
down (or at least not go up much). You can also sell call options against a stock you own,
when you aren't ready to sell the stock, but feel it may not do much for a while, and you
would like to earn some income on the stock. Doing so will offer you some downside
protection if the stock goes down, but will limit your upside, if the stock does well. This is
known as selling "covered calls."

In Wall $treet Raider, the amount of options you can sell short is limited. You are not
allowed to sell an options contract if doing so would create a total "short liability" (for
shorted options) more than twice your net worth, under the W$R margin rules (in the case
of players). Later, if your net worth falls below 1/3 of the value of your short option
positions, you will be forced to liquidate some of your short option positions, to meet
maintenance margin requirements. Similarly, corporations may not sell options short unless
they have at least a BBB credit rating, or if the sale of the option (other than a “covered
call”) would create a short options liability in excess of 25% of their net worth. After a
corporation has sold options short, if the short options liability should exceed 50% of the
corporation’s net worth, it must buy back some or all of the shorted options.

Any long positions in options are treated as having zero value, except to the extent the
option is "in the money," and thus, while they do increase your net worth, they are not
entirely counted as part of your net worth for "margin" purposes, since they are such

143
volatile assets. Thus, if your net worth (as adjusted for margin calculation purposes) falls
below 1/3 of the value of your short option positions, any long option positions will be sold
first, which will raise cash and may increase your net worth for margin calculation
purposes. If you have no long option positions, then you will instead be forced to buy back
some of your short option positions, until your net worth equals or exceeds 1/3 of the value
of the remaining short option positions. (Or until you run out of money to buy back
options, and go broke.) Needless to say, it is not fun to be forced to buy back options when
you are already short of cash, as that may create a negative cash balance and force you to
sell other assets to cover the overdraft. Selling "naked" options is not for the faint of
heart....

Corporations are also subject to (different) margin rules for options in Wall $treet Raider.
They are not allowed to sell "naked" calls (short), unless they have a credit rating of BBB
or better or if doing so would create a short liability (value of the shorted options) that
exceeds 25% of the corporation's net worth -- but they may sell "covered calls" short, as
they do not have to worry about short margin calls in that case, since any "covered" calls
they sell short are fully offset and hedged by owning the underlying stock. Banks and
insurance companies may not sell "naked" calls or sell puts short at all.

Similarly, a player (or a company controlled by a player) cannot sell "naked" call options
on a stock of a company he or she controls, where the player does not own the stock. You
can hedge your stock position in a controlled company by selling calls against it (and/or
buying puts on it), but the total percentage of stock covered by the shorted calls and long
puts cannot exceed the percent of the stock you DIRECTLY own (or your company directly
owns, if a controlled company is the call seller or put buyer). Thus, if you own 25% of the
stock of a company you control, you can sell covered calls against it, on 25% of the
company's stock, or buy puts on 25% of the company's stock (or some combination of the
two -- short calls and long put positions). But you cannot hedge more than 25% of the stock
if you only own 25%. Doing so would be to bet against your own company's stock, a
severe conflict of interest, so it is not permitted.

Note, also, that in Versions 6.50 and later, you and all your controlled companies cannot be
short call options on more than a total of 100% of the stock of any one company at any
point in time.

In Version 4.60 and later, executive stock options are granted each quarter, expiring in
December of the following year or, in Version 4.70 and later, two years after the date of
grant, which is around the middle of the first month of each quarter. The options are
granted to players who control a publicly-traded corporation. These valuable call options
are "restricted options" and can’t (voluntarily) be sold during the first 12 months after the
date they were granted.

In creating new option positions in Wall $treet Raider, whether long or short, you are
limited to options on 10% of the stock of the company in question for any new option
contract (or less, if the company has less than 10% of its stock owned by "the Public").
Where you are selling options in which you have a "long" position, however, you may sell

144
the entire position at one time, if you wish, even if it is on more than 10% of the company's
stock or more than the percentage of the stock that is publicly traded.

It is possible to buy or sell newly created options on any publicly traded company, unless
its stock trades for less than 5 (dollars or other currency unit) or more than 1,000 per share.

Version 5.0 added a new limitation on options purchases or sales – any time you create a
new option contract by buying (long) or selling short an option, there must be another party
(a corporation in Wall $treet Raider) that can take the other side of the transaction. Thus, it
is possible, if a new option contract you are creating would have a very large value, that it
might not be possible for the Options Exchange to find a counterparty, and thus you might
not be able to do the transaction in such an instance.

NOTE: Options can now be exercised before their expiration date in Wall $treet Raider.
Also, if you have chosen to exercise options you own or have shorted, the options will
usually be exercised automatically on the expiration date, if they are "in-the-money." A call
option is "in-the-money" if the stock price is higher than the option's exercise price.
However, there are a number of situations where options that are in-the-money will not be
exercised, but will instead be settled at their intrinsic value ($4, for example, if the exercise
price is $60 and the stock price is at $64 when the call option expires). No exercise will
occur, even if an option is in-the-money if:

 The player (or corporation in Version 4.60 and later) does not have enough money
and buying power to exercise a long call option position (or where he/she is short
put options), to acquire the stock;
 The player (or his or her corporation) would acquire enough stock to give the player
control of the company, if not already in control, if gaining such control would be
prohibited under the antitrust laws;
 The player (or corporation) would be acquiring all of the remaining publicly-traded
stock of the company; or
 The player or corporation would be selling stock, and does not own that much of
the stock, so that exercise of the option would create a short position in the stock for
the player or corporation that shorted the call options or owned the put options.

Also, you can set the toggle switch item, "Exercise Options?" on the "Settings" pull-down
menu to "NO" if you want all your option positions to be settled at their cash value at
expiration, rather than being exercised for or against you.

To profit from buying or shorting an option, you can either sell it (if long) or buy it back (if
it was sold short) before it expires, or you can just wait until it expires, at which time you
will either receive the amount by which the option is "in-the-money," if you own the
option, or you must PAY the amount by which it is in-the-money, if you are short the
option. Or, as discussed above, an option may be exercised, in which case you will be
buying the underlying stock at the exercise price if you own (are long) the call options, or
you will be selling the stock at the exercise price if you are short the call options and long
the underlying stock.

145
Ordinarily, the holder of the option will have a capital gain if the option is in-the-money
and is settled for cash at expiration, and the short seller will have a loss -- or vice-versa if
the option is just barely in-the-money (by fewer points than was paid for the option). For
example, if you paid $6 for an option that is only $2 in-the-money when it settles at
expiration, you will only receive $2 and will thus have a $4 capital loss when the option is
settled. A seller who had sold the options short for $6 would have a $4 gain if they settled
for only $2.

If an option is exercised, no gain or loss is recognized on the option itself, or if you are
acquiring stock by the exercise of the option. If you are purchasing stock via an option
exercise, the "tax basis" of that stock is the price you pay for it under the option contract,
plus whatever you paid to buy the option (if exercising a call -- but if you acquire stock due
to the exercise of a put option you sold short, your tax basis for the stock you acquire is the
exercise price LESS the amount you received from selling the puts short). If you are selling
stock due to exercise of an option, you will recognize a gain or loss for tax purposes. Your
sales price will be the exercise price plus (if you sold call options short) or minus (if you
bought put options) the price you paid or received for the options.

If an option is "out-of-the-money" (the stock price is below the strike price in the case of a
call option, or above the strike price in the case of a put option), then no cash changes
hands when the option expires -- the buyer of the option has a tax loss equal to the entire
amount paid for the option in that case, or the short seller of the option recognizes a profit
of the same amount.

TAX TREATMENT OF OPTIONS. In Wall $treet Raider, all gains or losses on options are
treated as capital gains or losses. (This is not always the case in the real world, but laws
vary from country to country, and we've merely chosen the simplest approach for this
simulation.) For corporations, the gain or loss is taxable or deductible as ordinary income
or loss (but reported as "extraordinary income or loss" for financial reporting purposes).

(14) BUY PUT OPTIONS. Click on this button to buy "put" options on a stock, or to buy
back put options that you have previously sold short. A put option allows the person who
buys the option to "put" the stock to the other party to the contract at a fixed price over an
agreed period of time (up to 24 months in Wall $treet Raider). Thus, puts can be thought of
as a form of "portfolio insurance" for stocks you own.

For example, if you own a stock that trades at $61 a share, which you feel may have a lot of
downside risk, but don't want to sell it because you feel it also has good upside potential,
you might pay $6 or so to buy a put option at $60 a share, giving you the right to "put" the
stock (sell it) at $60 any time in the next year, limiting your losses if the stock goes below
$54 a share. (The $60 price you could put the stock at, less the $6 you had to pay for the
option.)

Where you don't own the underlying stock, puts are a way to speculate on a stock by
profiting if it declines. Buying a put is much like selling the stock short, but without the
unlimited exposure of selling stock short, if you are wrong and the stock goes up instead of

146
down. If you buy a put on a stock, and the stock goes up, you will only lose what you paid
for the put option, unlike being short the stock, where your losses could be huge and
virtually unlimited.

You can also sell puts short, as discussed in the following segment on selling put options.
Note that if you have sold XYZ Corp. put options short, and you click on the "Buy Put
Options" button and enter XYZ as the stock you want to buy put options on, you will first
be asked if you want to buy back (cover) the XYZ put options you sold short. If you answer
"No," then you will be buying a newly created put option contract on XYZ.

In Version 5.0 and later, all corporations can buy put options, except that banks and
insurance companies may only do so to the extent they are hedging positions in the
underlying stock which they own.

When trading put or call options in Wall $treet Raider, you cannot buy or sell (or own)
options on a stock that is not publicly traded. Also, if, for example, only 1% of a stock is
owned by "the Public," any new option positions you create by buying new options or
selling options short will be limited to the percent of the stock that is publicly-traded (1%
in this example). However, you may do multiple option transactions, even in such a thinly-
traded stock.

Note also that a new option contract cannot be created on more than 10% of a company's
total number of shares of stock in Wall $treet Raider. It is possible to buy or sell newly
created puts on any publicly traded company, unless its stock trades for less than 5 or more
than 1000 a share.

However, you cannot buy put options on a stock of a company you control, where you do
not own the stock directly. You can hedge your stock position in a controlled company by
buying puts against it (and/or selling calls on it), but the total percentage of stock covered
by the shorted calls and long puts cannot exceed the percent of the stock you DIRECTLY
own. Thus, if you own 25% of the stock of a company you control, you can sell covered
calls against it, on 25% of the company's stock, or buy puts on 25% of the company's stock
(or some combination of the two -- short calls and long put positions). But you cannot
hedge more than 25% of the stock if you only own 25%. Doing so would be to bet against
your own company's stock, a severe conflict of interest, so it is not permitted. The same
rule applies to put purchases by a company you control, if it is buying puts on another
company you also control.

Long option positions cannot be bought on margin, as they are not fully counted as part of
your net worth for margin calculation purposes (except to the extent they are “in the
money”), even though they may be worth a great deal. Thus, to buy puts (or call options),
you must generally pay cash, or borrow against the value of other assets.

NOTE: Options can now be exercised before their expiration date in Wall $treet Raider.
Also, if you have chosen to exercise options you own or have shorted, the options will
usually be exercised automatically on the expiration date, if they are "in-the-money." A call

147
option is "in-the-money" if the stock price is higher than the option's exercise price.
However, there are a number of situations where options that are in-the-money will not be
exercised, but will instead be settled at their intrinsic value ($6, for example, if the exercise
price is $60 and the stock price is at $54 when the put option expires). No exercise will
occur, even if an option is in-the-money if:

 The player does not have enough money and buying power to exercise a long call
option position (or where he/she is short put options), to acquire the stock;
 The player would acquire enough stock to give him/her control of the company, if
not already in control, if gaining such control would otherwise be prohibited under
the antitrust laws;
 The player would be acquiring all of the remaining publicly-traded stock of the
company; or
 The player would be selling stock, and does not own that much of the stock, so that
exercise of the option would create a short position in the stock for the player.

Also, you can set the toggle switch item, "Exercise Options?" on the "Settings" pull-down
menu to "NO" if you want all your option positions to be settled at their cash value at
expiration, rather than being exercised for or against you.

To profit from buying or shorting an option, you can either sell it (if long) or buy it back (if
it was sold short) before it expires, or you can just wait until it expires, at which time you
will either receive the amount by which the option is "in-the-money," if you own the
option, or you must PAY the amount by which it is in-the-money, if you are short the
option. Or, as discussed above, an option may be exercised, in which case you will be
buying the underlying stock at the exercise price if you own (are long) the call options, or
you will be selling the stock at the exercise price if you are short the call options and long
the underlying stock.

Ordinarily, the holder of the option will have a capital gain if the option is in-the-money
and is settled for cash at expiration, and the short seller will have a loss -- or vice versa if
the option is just barely in-the-money (by fewer points than was paid for the option). For
example, if you paid $6 for an option that is only $2 in-the-money when it settles at
expiration, you will only receive $2 and will thus have a $4 capital loss when the option is
settled. A seller who had sold the options short for $6 would have a $4 gain if it settled for
only $2.

If an option is exercised, no gain or loss is recognized on the option itself, or if you are
acquiring stock by the exercise of the option. If you are purchasing stock via an option
exercise, the "tax basis" of that stock is the price you pay for it under the option contract,
plus whatever you paid to buy the option (if exercising a call -- but if you acquire stock due
to the exercise of a put option you sold short, your tax basis for the stock you acquire is the
exercise price LESS the amount you received from selling the puts short). If you are selling
stock due to exercise of an option, you will recognize a gain or loss for tax purposes. Your
sales price will be the exercise price plus (if you sold call options short) or minus (if you
bought put options) the price you paid or received for the options.

148
If an option is "out-of-the-money" (the stock price is below the strike price in the case of a
call option, or above the strike price in the case of a put option), then no cash changes
hands when the option expires -- the buyer of the option has a tax loss equal to the entire
amount paid for the option in that case, or the short seller of the option recognizes a profit
of the same amount (ignoring the commissions paid by both parties when the positions
were established).

In Versions 6.50 and later, you and all your controlled companies cannot own put options
on more than a total of 100% of the stock of any one company.

TAX TREATMENT OF OPTIONS. In Wall $treet Raider, all gains or losses on options are
treated as capital gains or losses. (This is not always the case in the real world, but laws
vary from country to country, and we've merely chosen the simplest approach for this
simulation.) For corporations, the gain or loss is taxable or deductible as ordinary income
or loss (but reported as "extraordinary income or loss" for financial reporting purposes.

(15) SELL PUT OPTIONS. Click on this button to sell put options you own, or to sell short
newly created put option contracts. A put option allows the person who buys the option to
"put" the stock to the other party to the contract at a fixed price over an agreed period of
time (up to 24 months in Wall $treet Raider). Puts are like a form of "portfolio insurance"
against a decline in the price of a stock, where the buyer of the put wants to protect against
a large drop in the price of the stock.

If you sell a put short, you are acting somewhat like an insurance company, since you will
have to absorb the loss if the stock goes down. For example, if a stock is trading for $61,
and you sell a put on it at an exercise price of $60, receiving $6 for the put, you will profit
if the stock is anywhere above $54 when the option expires. But if the stock falls to, say,
$35, you will have to pay the difference between $60 and $35 ($25 a share) when the
contract settles, which would cause you a net loss of $19 a share, since you only received
the $6 premium when you sold the put short. (Or you could allow the put to be exercised,
"putting" the stock to you at $60, when it is only worth $35, and you could hold onto the
stock, hoping that it would go back up someday.)

Generally, you only want to sell puts short if you expect the stock is going to go up, or at
least not go down much below the "strike price" (the agreed exercise price of the option). If
the stock is anywhere above the strike price on expiration date, the put option becomes
worthless and you will pocket the entire premium you received when you sold the put
short, all as profit.

In Wall $treet Raider, the amount of options you can sell short is limited. You are not
allowed to sell an options contract if doing so would create a total "short liability" (for
shorted options) more than twice your net worth, under the W$R margin rules. Later, if
your net worth falls below 1/3 of the value of your short option positions, you will be
forced to liquidate some of your option positions, to meet maintenance margin
requirements. Similarly, corporations may not sell options short unless they have at least a
BBB credit rating, or if the sale of the option (other than a "covered call") would create a

149
short options liability in excess of 25% of their net worth. After a corporation has sold
options short, if the short options liability should exceed 50% of the corporation’s net
worth, it must buy back some or all of the shorted options.

Any long positions in options are treated as having zero value, except to the extent the
option is "in the money," and thus, while they do increase your net worth, they are not
entirely counted as part of your net worth for "margin" purposes, since they are such
volatile assets. Thus, if your net worth (as adjusted for margin calculation purposes) falls
below 1/3 of the value of your short option positions, any long option positions will be sold
first, which will raise cash and may increase your net worth for margin calculation
purposes. If you have no long option positions, then you will instead be forced to buy back
some of your
short option positions, until your net worth equals or exceeds 1/3 of the value of the
remaining short option positions. (Or until you run out of money to buy back options, and
go broke.) Needless to say, it is not fun to be forced to buy back options when you are
already short of cash, as that may create a negative cash balance and force you to sell other
assets to cover the overdraft. Selling "naked" options is not for the faint of heart....

In creating new option positions in Wall $treet Raider, whether long or short, you are
limited to options on 10% of the stock of the company in question for any new option
contract (or less, if less than 10% of the company's stock is owned by "the Public"). Where
you are selling options in which you have a "long" position, however, you may sell the
entire position at one time, if you wish, even if it is on more than 10% of the company's
stock or more than the percentage of the stock that is publicly traded. You can buy or sell
newly created options on any publicly traded company, unless its stock trades for less than
5 or more than 1000 a share.

NOTE: Options can now be exercised before their expiration date in Wall $treet Raider.
Also, if you have chosen to exercise options you own or have shorted, the options will
usually be exercised automatically on the expiration date, if they are "in-the-money." A call
option is "in-the-money" if the stock price is higher than the option's exercise price; a put is
“in-the-money” if the stock price is lower than the option’s exercise price.

However, there are a number of situations where options that are in-the-money will not be
exercised, but will instead be settled at their intrinsic value ($6, for example, if the exercise
price is $60 and the stock price is at $54 when the put option expires). No exercise will
occur, even if an option is in-the-money if:

 The player does not have enough money and buying power to exercise a long call
option position (or where he/she is short put options), to acquire the stock;
 The player would acquire enough stock to give him/her control of the company, if
not already in control, if gaining such control would otherwise be prohibited under
the antitrust laws;
 The player would be acquiring all of the remaining publicly-traded stock of the
company; or

150
  The player would be selling stock, and does not own that much of the stock, so that
exercise of the option would create a short position in the stock for the player.

Also, you can set the toggle switch item, "Exercise Options?" on the "Settings" pull-down
menu to "NO" if you want all your option positions to be settled at their cash value at
expiration, rather than being exercised for or against you.

To profit from buying or shorting an option, you can either sell it (if long) or buy it back (if
it was sold short) before it expires, or you can just wait until it expires, at which time you
will either receive the amount by which the option is "in-the-money," if you own the
option, or you must PAY the amount by which it is in-the-money, if you are short the
option. Or, as discussed above, an option may be exercised, in which case you will be
buying the underlying stock at the exercise price if you own (are long) the call options, or
you will be selling the stock at the exercise price if you are short the call options and long
the underlying stock.

Ordinarily, the holder of the option will have a capital gain if the option is in-the-money
and is settled for cash at expiration, and the short seller will have a loss -- or vice-versa if
the option is just barely in-the-money (by fewer points than was paid for the option). For
example, if you paid $6 for an option that is only $2 in-the-money when it settles at
expiration, you will only receive $2 and will thus have a $4 capital loss when the option is
settled. A seller who had sold the options short for $6 would have a $4 gain if they settled
for only $2.

If an option is exercised, no gain or loss is recognized on the option itself, or if you are
acquiring stock by the exercise of the option. If you are purchasing stock via an option
exercise, the "tax basis" of that stock is the price you pay for it under the option contract,
plus whatever you paid to buy the option (if exercising a call -- but if you acquire stock due
to the exercise of a put option you sold short, your tax basis for the stock you acquire is the
exercise price LESS the amount you received from selling the puts short). If you are selling
stock due to exercise of an option, you will recognize a gain or loss for tax purposes. Your
sales price will be the exercise price plus (if you sold call options short) or minus (if you
bought put options) the price you paid or received for the options.

If an option is "out-of-the-money" (the stock price is below the strike price in the case of a
call option, or above the strike price in the case of a put option), then no cash changes
hands when the option expires -- the buyer of the option has a tax loss equal to the entire
amount paid for the option in that case, or the short seller of the option recognizes a profit
of the same amount (ignoring the commissions paid by both parties when the positions
were established).

In Versions 6.50 and later, you and all your controlled companies cannot be short put
options on more than a total of 100% of the stock of any one company.

151
TAX TREATMENT OF OPTIONS. In Wall $treet Raider, all gains or losses on options are
treated as capital gains or losses. (This is not always the case in the real world, but laws
vary from country to country, and we've simply chosen the simplest approach for this
simulation.) For corporations, the gain or loss is taxable or deductible as ordinary income
or loss (but reported as "extraordinary income or loss" for financial reporting purposes).

(16) TRADE FUTURES. Click on this button to buy or sell commodity futures contracts.
Version 6.0 added commodity trading to Wall $treet Raider, allowing you to speculate in
five different commodities: oil, gold, silver, wheat, and corn, for players and all
companies except banks and insurers. Version 6.60 added trading in stock index futures by
players and by all companies except banks. (Versions 6.70 and 7.0 added the ability to buy
and store physical commodities, for players and companies other than banks and insurance
companies. Use the TRADE COMMODITIES button to buy or sell physical commodities,
rather than the futures contracts.)

This button will allow you to trade futures on the five commodities or the Stock Index.
When clicked, it brings up a small "Futures Trading Desk" dialog window, on which you
can either select a commodity to do trades in, or else click on a "POSITIONS" button to
view a list of all of your existing futures positions, and you can then simply click on one of
the position line items to select it for closing, either partly or in full (selling it if long,
buying it back if short).

In Version 6.60 and later, a “TRADE” button will appear on any commodity or stock index
chart, with some exceptions, such as for banks, which aren’t allowed to do futures trading.
Clicking on the “TRADE” button will take you to a screen for buying or selling the
commodity whose chart you were viewing (or stock index futures, in the case of the Global
Stock Index chart).

A 1% commission is charged on the total value of each futures contract when you initiate or
close it, except when the contract terminates at its expiration date, and is settled either by a
cash settlement or where the entity long or short the futures contact will either take or make
delivery of the commodity. The only case where no commission is charged for contracts
closed before expiration is for companies that hedge by buying or shorting a certain
commodity, such as an oil company that sells its production forward, or an airline that buys
oil futures, or Packaged Foods company that buys wheat or corn futures. Those companies
regularly close out part of their hedge positions every one or two calendar quarters, if not
controlled by a human player, which is deemed to simply be selling part of their production
or acquiring fuel or grain they use, for example.

In the current version of Wall $treet Raider, players or companies can obtain physical
delivery of a commodity at expiration when they are long a futures contract, or can make
delivery (sale at the futures contract price) when, for example, you or a company are short
on a futures contract to sell 1 million barrels of oil, and you or the company own some of
the physical oil commodity.

152
(17) TRADE COMMODITIES. Click on this button to buy or sell (but not sell short) any
of the five physical commodities (but not the Stock Index), which you will then store and
hold indefinitely, unlike futures. However, you will be required to pay monthly storage fees
and insurance costs for the stored physical commodities, the terms of which will be
explained to you before you make any such purchase. You will also be warned, when
buying physical grain (wheat or corn), that some shrinkage and spoilage will occur, the
longer you store the grain – Such as being eaten by rats, insects, etc.

In order to buy or sell a physical commodity, first select

the commodity, for example, gold. and then either click on
the "BUY" button to buy physical gold or on the "SELL" button if you already own
physical gold and wish to sell it. Note that the "COVER SHORT" and "SELL SHORT"
buttons will gray out (become disabled) when you are in Physical Commodity Trading
Mode. (Use the TRADE FUTURES button to trade commodity futures contracts, rather
than physical commodities.)

You may also trade a physical commodity by simply clicking on the "TRADE" button on,
for example, a gold price chart. Then, on the Commodity Trading Desk that pops up, if the
toggle button reads " --> PHYSICAL," you are in Futures Trading Mode, so just click on
the toggle button to switch to Physical Commodity Trading Mode. (The toggle button will
then read " --> FUTURES ." Once you are in Physical Commodity Trading Mode, select a
commodity to buy or,
if you own it already, to sell.

To switch back to futures trading mode, click on the same toggle button when it reads " -->
FUTURES. " Note that the " --> PHYSICAL " or " --> FUTURES" toggle button only is
enabled when you, the player, or a corporation other than an insurance company is the
entity that is trading. Otherwise, when an insurance company is trading futures, that button
will simply display a blank line (" -------- ") and is non-functional, since an insurer is not
allowed to trade physical commodities or any futures except stock index futures. The
TRADE COMMODITIES and TRADE FUTURES buttons do not appear at all on the
"BUY / SELL" menu, if a bank is the entity doing transactions.

A 1% commission is charged on the total value of the

physical commodity that is purchased or sold.

Buying physical commodities, where you must pay cash to buy the commodity, is a
conservative way of trading in commodities. In contrast, trading commodities futures, with
enormous leverage, is very treacherous and dangerous.

C. BUY STOCK BUTTON. This button, used to buy stock for the currently selected
Active Entity (if you control that entity), is the same as the "Buy Stock" button discussed
above, which (usually) appears on the BUY/SELL Submenu.

153
D. SELL STOCK BUTTON. This button, used to sell stock for the currently
selected Active Entity (if you control that entity), is the same as the "Sell Stock"
button discussed above, which (usually) appears on the BUY/SELL Submenu.

154
 FINANCING TRANSACTIONS MENU

CHAPTER VII.

A. IN GENERAL.

Except for borrowing money or making loan repayments, all other transactions in Wall
$treet Raider, such as buying or selling stock, bonds, or other assets, are done by clicking
on one of the six buttons in the "Transactions" grouping of buttons on the main menu
screen. Each such transaction selected from the "Transactions" grouping that is completed
counts as one of the 5 transactions allowed on a player's turn. Other actions, such as
borrowing money or repaying loans, or doing stock splits or corporate name changes, can
be done by clicking on the "MISC" button on the main screen and selecting an item such as
"Borrow Money" or "Repay Loan" from the pop-up submenu that will appear, but none of
those actions count against you as one of your 5 allowed transactions per turn.

To initiate a transaction, click one of the six "Transactions" buttons: Buy Stock, Sell Stock,
Buy/Sell, Financing, Management, or Other Trans., on the main menu screen, and, except
when clicking on the Buy Stock or Sell Stock buttons, one of four different submenus will
pop up, each listing anywhere from 2 to 12 possible transactions, with a button for each.
Then click on the appropriate button to begin the type of transaction you wish to do.

Note that, while viewing each Transactions pop-up submenu, the submenu screen will have
a text-box on the left, describing the allowable functions, and sometimes will include other
useful information, such as the current buying power (cash plus line of credit) of the
currently selected "Active Entity." The various buttons for the different types of
transactions will appear in a vertical row on the right side of the pop-up submenu. At the
bottom of that dialog screen will be 3 additional buttons: A "Close" button to close the
submenu and exit back to the main menu screen; a "Player" button (click it to instantly
change the "Active Entity" that is to do the desired transaction to you, the player); and a
"My Corps." button, which will let you select a corporate entity you control as the new
"Active Entity," which will do the transaction(s) you are planning to execute. Notice that if
you only control one corporation, and you click on the "My Corps." button, that company
will instantly be selected -- you will not need to enter its stock symbol, or select it from a
"lookup" list of companies you control.

This Chapter VII describes the various "FINANCING" transactions that you can do if you
select the "FINANCING" button.

B. "FINANCING" BUTTON AND SUBMENU.

155
Clicking on the "FINANCING" button brings up a submenu with a number of command
buttons that allow you, or a company you control, to engage in various types of financing
transactions (other than borrowing from a bank), such as public or private offerings of new
shares of stock, issuing or buying back corporate bonds, contributing capital to a 100%-
owned subsidiary corporation, liquidating a company, having a corporation pay out an
"extraordinary dividend," spinning off (distributing) the stock of a subsidiary, or doing a
startup of a new company. Each of these transactions is a way to get money or other assets
into, or out of, a corporation. Each of the various command buttons on the FINANCING
submenu, which pops up when you click on the "FINANCING" button, is described below.

You will notice that, of the 10 transactions buttons that usually appear on this submenu,
only the first 9 will appear if the "Active Entity" is a bank or insurance company, and only
the first 2 ("Start Up New Corp." and "Capital Contribution") will be visible if the "Active
Entity" is you, the player.

(1) START UP NEW CORP. Click on the "Start Up New Corp." command button on the
"FINANCING" transactions submenu, if you wish to start up a brand new company. You,
or any company you control (except a bank) can start up a new company and put money in
it, after which you or your controlled company will own 100% of the stock of the new
startup company. The startup company can be a holding / trading company, which merely
holds the cash you put into it, until you direct it to do something with the cash, or you can
choose to have the startup be a company in any of the 69 other industry groups in the Wall
$treet Raider simulation.

You can even start up your own bank or insurance company, although you will need $1
billion (U.S.) or the equivalent in whatever currency you have configured the game for, to
start a bank or insurance company. Only $100 million (U.S.), or the equivalent, is needed to
start up any other company. There are substantial startup costs, which will vary, depending
on the size of the company's initial capital, and its industry category. A holding / trading
company is the least expensive kind of company to start up. Banks and insurance
companies are by far the most expensive to start up, as they must obtain many different
government approvals before they can commence doing business, in any civilized country
in the world.

New companies face a number of limitations for 2 to 4 years after they are started up. A
new, startup company is:

 Not able to do IPO's (public offerings of stock) for several years, until it is
"seasoned";
 Not able to issue junk bonds to raise money for several years;
 Not likely to find a merger partner, since most existing companies will not want to
be taken over in a merger by a new company with no "track record" or history; and
 Hard to sell. Unless you are playing at Difficulty Level 1 (the easiest level), you
will not be able to sell your stock in a startup company while you still own 100% of
the company, as there is assumed to be no market for such closely-held stock. (And
you can't take the company public either, as noted above!) So you will be stuck with

156
 your investment in a startup company for several years, unless you have to sell it in
a forced sale, such as when you have a "margin call."

Note that when you form a new startup corporation, it will be given a default name and
stock symbol (but you will be asked then if you wish to change either). Later on, at any
time during the rest of the game, you can also change the name and/or symbol for any
company you control, by clicking on the "MISC" button on the main menu screen, and then
selecting the "Name Change" button from the menu that pops up.)

You will also be informed that your new company will be incorporated and based in a
certain country, and asked if you wish to select a different country as headquarters. If you
answer "Yes," a list of 53 possible countries where the company can be incorporated will
be displayed, and you can select one by clicking or double-clicking on the name of the
country. You may want to incorporate in a country like Korea or Japan, where it will
generally be harder for an opposing player or some large corporation to mount a takeover
of your company, if you later reduce your controlling interest to well below 50%. (Of
course, if it is based in Korea or Japan, that might mean your company will suffer rather
severely if either of those countries gets nuked by North Korean missiles....)

Companies incorporated in the U.S., U.K., Canada, and Australia are the easiest to take
over in a merger, all other things being equal. Those incorporated in other "First World"
countries, such as Denmark, Germany, Hong Kong, Ireland, Netherlands, New Zealand,
Norway, Sweden, the Philippines, Singapore, South Africa, and Switzerland are somewhat
more difficult to take over in mergers. Most difficult to take over are companies
incorporated in Korea, Japan, France, or any of the other 53 countries you can choose from.
Thus, for defensive purposes, to make merger takeovers of your company by hostile
players more difficult, you may want to incorporate your company in a country like Korea,
or a Third World country like Sri Lanka or Uruguay.

The simulation provides for up to 1590 companies, and only about 1000 are in existence at
one time, usually, as companies are constantly being formed or being liquidated out of
existence. Thus, while it is possible that the program might run out of unused "shell"
companies that you can use, and thus you might be unable to find an dormant company to
use as a startup, that is highly unlikely to ever occur.

It is assumed that it takes a considerable amount of your time and energy to start up a new
company in a new business. Thus, each player (and his or her companies) may only start up
3 new companies in any 2-year period, and no more than 2 in any one year.

Doing a startup can be a cheap way to gain entry to a highly profitable industry, since most
of the stocks in such an industry will often be priced at multiples of 5 or 10 times their net
worth. By starting your own company in such an industry from scratch, you can put in, say,
$250 million into the company, and have it acquire about $250 million of business assets,
instead of paying several times that much by buying the stock of an established company.
However, it may be a while before your company starts showing profits, since it will have
substantial startup costs to write off in its first year of operation. By the time it becomes

157
profitable, you may find that its industry is no longer so profitable, but taking risks is what
Wall $treet Raider is all about....

(2) CAPITAL CONTRIBUTION. Click on the "Capital Contribution" button if you wish to
contribute capital (money, stock, or bonds) to a company in which you personally own
100% of the stock, or if you wish to have a parent company that you control contribute
capital (cash, stock, or, in some cases, bonds or capital assets) to a subsidiary company of
which it owns 100% of the stock.

This can be a useful strategy if the subsidiary company has large tax loss carryovers, or a
poor credit rating. Making a large injection of money, stock of another company,
government or corporate bonds, or capital assets into the subsidiary would not only
improve its credit rating (reducing the rate of interest it pays on any bank loans it owes),
but the income earned on the injected capital could be sheltered from taxation by its tax
loss carryovers. (However, be aware that contributing capital assets to a holding company
sub that has tax loss carryovers will cause it to lose its carryovers, due to the "change in
business." You will be warned if the sub is a holding company and it has substantial loss
carryovers.)

This type of tax strategy would make sense only if the parent company that contributes or
injects capital into the subsidiary has no tax loss carryovers of its own, so that, for instance,
contributing a billion dollars to the subsidiary that has tax losses would shift the income
that could be earned on that billion dollars from being taxed (if earned by the parent
company) to NOT being taxed (if earned by the subsidiary).

Note that if you (or a parent company you control) make a capital contribution to a 100%-
owned company, the capital contribution increases the value of the company, but also
increases the "tax basis" (cost) of your or the contributing company's stock holdings in the
company receiving the capital contribution. For example, if you paid 500 million to buy
100% of the stock of XYZ Corporation, you would incur no gain or loss if you sold it for
500 million.

However, if you contribute 1000 million of capital to XYZ, the stock might rise in value to
1500 million, but if you sold it for 1500 million, you would still have no gain, since your
tax basis, or cost, was increased to 1500 million when you made the capital contribution of
1000 million. Wall $treet Raider automatically makes such adjustments, and keeps track of
your "tax basis" in all stocks or bonds you or any companies invest in, in order to compute
the amount of the gain or loss when you or they sell the stocks or bonds.

When contributing stock to a subsidiary, the tax basis of the stock in the hands of the
contributing player or company usually carries over, unchanged, to the subsidiary, and
increases the player or parent company's tax basis in its stock of the subsidiary to which it
made the capital contribution. However, if the contributing parent company has a negative
tax basis ("excess loss account") in the shares of stock it is transferring to the subsidiary,
and retains some shares, but retains less than 80% of the stock of the company whose
shares are being transferred, that will trigger a recognition of taxable gain (income) on the

158
"excess loss account" attributable to the retained shares. But if ParentCo owns 80% of XYZ
Company and transfers all of the XYZ stock to subsidiary ABC Company, the excess loss
account is simply transferred to ABC as its tax basis for the XYZ stock, and no taxable gain
is recognized. (However, if ParentCo owns 80% of XYZ and transfers only 40%, retaining
40%, it will have to pay tax on the recapture of the entire "excess loss account," and ABC
will take a zero tax basis -- instead of the negative tax basis -- in the shares it receives as
the capital contribution.)

Similarly, players or banks or insurance companies that own government or corporate

bonds may contribute such bonds to 100%-owned banks or insurance companies (but not to
other companies, since industrial companies and holding/trading companies are not allowed
to hold bonds in Wall $treet Raider). The tax basis of the contributed bonds "carries over"
to the subsidiary bank or insurance company to which the bonds are contributed, and the
tax basis of the contributed bonds increases the player's or parent company's stock in the
subsidiary. However, if you or a bank or insurer you control holds 100% of the stock of an
industrial company and also owns some of its bonds, you may contribute its own bonds to
the subsidiary. For example, if you own 100% of the stock of XYZ Corporation and also
own some of the corporate bonds issued by XYZ, you may contribute some or all of its
bonds you own to XYZ. In that case, instead of XYZ Corporation becoming the owner of
its own bonds, the contributed bonds are canceled in a non-taxable transaction, reducing the
amount XYZ owes as bond indebtedness.

The mechanics of doing a capital contribution are not complicated -- just click on the
"Capital Contribution" command button, and if you (or the other transacting entity) own
only one 100% subsidiary, you will be asked how much or what you (or your controlled
company) wish to contribute to your, or its, subsidiary.

If you or your company owns two or more 100%-owned subsidiary companies, you will be
asked if you wish to see a list of companies you or the parent company own, and if you
answer "Yes," a list of your (or the parent company's) stock portfolio will be displayed, and
you can select the company to which the capital contribution is to be made by simply
clicking or double-clicking on its name on the portfolio list.

Once you have selected the company to which the capital contribution is to be made, the
following dialog or menu will appear, allowing you to select one of four types of assets that
can be contributed, cash, business assets, stock, or bonds:

159
Think of a "capital contribution" as merely moving money or other assets "downstream"
into a wholly-owned company -- you are just putting cash or other assets into the company,
to strengthen it. This is the opposite of a dividend, where the company distributes money to
its stockholders, sending the money "upstream." If you make a capital contribution to a
company, you may be able to later take the money back out of the corporation as an
"extraordinary dividend," as discussed in the next section. However, as an individual, any
dividend you take out will be fully taxable, and a portion may be taxable to any corporation
shareholder. In addition, if the amount taken out is a significant percentage of the
company's assets, the dividend may be treated as a "partial liquidation" for tax purposes, in
which case it would be fully taxable to either an individual stockholder, or to a corporation
that owns 79% or less of the payor's stock. (However, an 80% or greater corporate
stockholder, receiving a dividend from its subsidiary, will not be taxed at all on the
dividend, but will instead reduce its "tax basis" in the stock of the subsidiary -- which will
increase its taxable gain if it sells the subsidiary's stock for a gain.)

PLANNING TIP: Having a parent company drop capital assets down into a subsidiary
may be a preferable way of exiting an industry, where the parent company is losing money,
or earning a very poor return, on its capital assets in, for instance, the steel industry. Instead
of selling off the assets, perhaps for a very large loss, consider creating a new subsidiary,
dropping the steel industry assets down into the subsidiary, and then either selling off the
sub's stock, or perhaps even merging the sub (with its crummy assets) with a company
controlled by an opposing player, and then selling off the stock in the merged companies.
You may incur a smaller loss than you would by selling off or scrapping the capital assets,
and may be able to stick an opposing player with a "loser" company, as well.

160
IMPORTANT LEGAL RESTRICTION: In some cases, where the parent company is a
bank, bank regulators may limit the amount of capital the bank can contribute to a
subsidiary, if over half of the bank's net worth would be invested in stocks, after such a
capital contribution. (However, this restriction only applies to cash or bond contributions
by a bank to its subsidiary -- there is no limit on contributing stock of one company a bank
owns to another subsidiary, since this does not increase the bank's overall investment in
stocks.)

(3) PUBLIC STOCK OFFERING. Click on the "Public Stock Offering" command button
to have a corporation you control make a public offering of its stock, in order to raise new
capital.

You will be advised that the company has, for example, 100 million shares of stock issued
at present, and that your underwriters (brokers) advise that you should be able to issue from
5 to 25 million new shares, if 100 million are currently issued and outstanding (roughly 5%
to 25% of the existing number of shares). Enter a number in the range specified for the
number (in millions, or billions if configured to play in Yen, Korean Won, or Indian
Rupees) of shares you want to have the company issue. The actual number of shares your
underwriters will be able to sell will not always be exactly the number you wanted to sell,
as in real life, but will usually be pretty close to that number. Also, if your company
becomes extremely large, the capital markets may not be able to absorb as large a public
offering of stock as you may want to issue. An attempt to issue over $100 billion (U.S.) of
new stock may not be successful. (However, the $100 billion limit on public stock offerings
is indexed, or increased, after the third year of a game, increasing by 6% each year,
compounded quarterly.)

Note that issuing new stock will dilute your percent of ownership, which may even cause
you to lose control of the company. For example, if you own 20% of a company and it
issues 20 million new shares, your percentage ownership will be 20/120 of the total, or less
than 17% after the transaction, causing you to lose voting control. (After such a transaction,
you will still own your 20 million shares, but they will only represent 16.7% of the 120
million total shares that will exist after the offering, versus your 20% ownership bloc just
before the offering.)

A Public Stock Offering is useful as a last resort when a company must raise funds for
some purpose (a takeover perhaps), and cannot do so by borrowing, issuing junk bonds or
selling off assets. It may also make sense when stock of a company you control has run up
to a ridiculously high price, and you think it may be getting ready to head south. That's the
time to sell some new shares to the long-suffering Public and raise a lot of hard cash,
increasing the company's net worth considerably to ride out any hard times that may be
coming. That money may come in handy a year or two later when the price of the stock has
fallen out of bed and you want to buy back the publicly-held shares at bargain basement
prices.

161
A company can only do an occasional public offering. It may be a year or two or more
before you can do another, so use this command sparingly.

Also, a new company, with less than 2 or 3 years of "seasoning," is not ready to do an
"IPO" (initial public offering), so you will be unable to offer stock to the public for a
startup company. However, you may be able to do a "private offering" (see next section) to
a venture capital investor (an unrelated corporation) or to yourself or to another company
you control. But if your company has a negative net worth, and is on the brink of
bankruptcy, it will not be able to do either a public offering or a private offering, since most
investors don't want to pour their money into a company that is on its deathbed. Most will
prefer to wait, like vultures, until the company goes bankrupt and sheds a lot of its debt,
and then may buy into it. That won't do you much good, of course, if you own stock in the
company that is going down the drain.... You will probably be broke by then, too, and will
be standing out on some street corner selling apples or begging for dimes, or reduced to
dealing with pawnbrokers, rather than stockbrokers.

Even if your company is in satisfactory financial condition and has been in business for
many years, it may sometimes be impossible to sell stock in it, in either a public offering or
a private offering, if the conditions in your company's industry are so bad, with companies
incurring serious losses, that your brokers are unable to find buyers for stock in such a
depressed industry group -- doing so would be like trying to sell stock in a "dot.com" IPO
in the aftermath of the dot.com bubble and ensuing crash, in 2002 -- not an easy task.

(4) PRIVATE STOCK OFFERING. A private offering of stock works just like a "public
offering" described in the preceding section, except that your brokers will try to find a
private investor to buy new stock that your company will issue. Usually, your brokers will
be able to find a sucker -- excuse us, er... an investor -- to buy stock in your company,
unless the company, or its industry group, is in dire financial condition. In Version 4.70 and
later, this function also gives you a choice of having your controlled company do a private
stock offering to you (the player) or to any other company you control, other than a bank.

Unlike public offerings, there is no size limit on a private offering. However, if your
company is trying to raise too large an amount of capital from a private offering, your
underwriters (brokers) may sometimes be unable to find a buyer that can come up with that
amount of cash. Private offerings to unrelated “white knight” companies are done at a
slight (5%) discount from the current market price, in order to induce a large buyer to take
a substantial position in your company.

A "private offering" can also sometimes be used as a defensive "White Knight" maneuver,
as this tactic is known on Wall Street. For example, if you control less than 51% of a
company and are getting nervous about a possible takeover of your company by another
player, but don't have the financing to shore up your position, consider using the "Private
Stock Offering" transaction feature. Your company's creative investment bankers will do
their usual magic and try to find a LARGE neutral company to sell the new shares to, and
you can even use some of the proceeds of the offering to buy back some stock from the

162
public, using the "LBO (Leveraged BuyOut)" function, thereby keeping the shares off the
public market where an opponent could easily get at them.

Since the shares held by the "White Knight" will usually be voted against any attempted
merger takeover, you can make it tough for the circling sharks to take control of your
company with the overpriced stock of some cat-and-dog company they own. Thus you can
do a fairly good job of "shark-proofing" your company from hostile raids by creatively
utilizing the "Private Stock Offering" and "LBO" (or "Greenmail") transactions in
conjunction with each other.

EXAMPLE: If you own 34% of XYZ Corporation and a "White Knight" investor (neutral
-- not controlled by you or another player) owns 17% of XYZ, an opponent will be hard-
pressed to force you to accept stock of his or her nearly comatose (but high-priced)
company in a stock-for-stock merger, since 51% of the stock of XYZ will be voted against
such a merger. Thus, at worst, an opponent could do a cash tender offer for the Public's
49%. (A very clever and vicious opponent might then make XYZ Corporation propose a
merger with his/her over-priced company, once he/she has control of XYZ, and then dump
his/her stock in the merged company, driving the price down before you have a chance to
sell your stock in the merged entity. And it goes without saying that, if you were CEO of
the company, he or she would first fire you, to cut off your salary.)

Having your controlled company do a private offering can

also be a way of increasing your percentage of control of
the company, without having to do a "tender offer" purchase of stock at a price well above
the market price. Simply have your company issue new stock to you or another company
you control at the current market price. This can also be useful if, for instance, your
company ABC controls 77% of XYZ, with the other 23% held by an opposing player or his
or her company. XYZ could sell new shares to ABC to increase ABC's holdings of XYZ to
80% or more, in order to allow the two companies to pay their taxes on a consolidated tax
return basis (so that, for example, ABC's tax losses could offset XYZ's taxable income).

(5) ISSUE BONDS. An alternative mode of financing, other than borrowing from the bank
or issuing new stock, is for a company to use this command button to issue corporate bonds
(considered to be "investment grade" if they are given a credit rating of AAA, AA, A or
BBB, or considered "junk bonds" if your company will have a credit rating of BB or lower
after issuing the bonds). If your company has no unused line of credit from its lending
bank, either because it has already borrowed up to its line of credit, or because an opposing
player controls the lending bank and has frozen your line of credit, your company may still
be able to borrow by issuing bonds, unless it already has a bond issue outstanding.

Corporate bonds are a security, like stocks, but represent a debt the issuing company owes
to anyone who buys the bonds, unlike stock, which represents an ownership interest in the
company. Thus, if you buy a company's bonds, even if you buy them from some person
other than the issuing company, it is as though you had loaned money to the company in

163
exchange for its "I.O.U.," or as if you had bought an "I.O.U." from the person who did lend
money to the company. ("I.O.U." means "I owe you....")

Many people have no idea what a bond is -- it is really just an I.O.U. issued by a
corporation (or by a government, in the case of treasury bonds, or government bonds, or
"gilts" as they are called in the U.K.); an I.O.U. where the issuer agrees to pay a certain rate
of interest until a certain date in the future, when it must repay the principal amount of the
debt to whomever owns the I.O.U. at that time, at the bond's "face value" or par value
(100% of face value). If the company decides to pay off the bonds early, it may be able to
"call" the bonds for redemption, but it if does, it usually must pay a little more than par,
such as 105 (105% of face value). It's not really that complicated, when you realize that a
bond is just a glorified I.O.U. or promissory note, is it?

In Wall $treet Raider, a company can only have one issue of its bonds outstanding at any
one time. To issue new bonds, it must first pay off any old bonds it has issued, either by
buying them up on the public bond market, or by "calling" the bonds at above par, usually
at a price of 105 (or in the last 4 years before the bonds mature, at 104, then 103, then 102
then 101). However, in Wall $treet Raider, an issue of bonds cannot be called early if there
are ten or more years remaining before they are due to be paid off, at maturity.

There is a limit to how much capital can be raised by a very large company, through a bond
issuance -- which is $150 billion (U.S.), or the equivalent in whatever other currency the
current game is configured for. (But the $150 billion limit is indexed, or increased, after
three years of play, increasing by 6% each year, compounded quarterly.)

Sometimes bonds will be held by an opposing player or a company controlled by another

player, and you cannot force them to sell the bonds back to your company, and you may be
unable to call the bonds for early redemption, if they do not mature for another 10 years, so
you may be completely unable to pay off the existing bond issue when you want to float a
larger issue of new bonds, to raise more capital. You might want to remember that fact, and
buy a few bonds in an opposing player's main company, just to make sure his or her
company can't call in its bonds and refinance with a much larger bond issue.

If your company is able to issue bonds, the underwriters (stockbrokers) will tell you how
much (face value) you can issue. The larger the amount you issue, generally, the more you
will reduce your company's credit rating, and thus the higher interest rate you will have to
agree to pay on the bonds. When you enter an amount you want to issue, the underwriting
brokers will tell you what the credit rating will be, and if it is not "AAA" or "AA" will
suggest that you might want to issue a smaller amount, and seek to get a better credit rating
and a lower "coupon" or interest rate. Thus, you might try to issue the maximum amount
your brokers say they can float for your company, say $10,000 million, with a "CC" credit
rating, and a 12.0% interest rate. You will be given the choice of going ahead with that
transaction, by clicking on the "Yes" button, or clicking on "No" and entering a smaller
amount. For example, you might decide to issue only $3,000 million, and would find
(depending on the general level of interest rates) that that would improve the credit rating
on the bonds to "BBB" and lower the interest you would be paying on them to only 9.25%,

164
and thus you might choose to go with the smaller amount of $3,000 million. (Or else cancel
the offering altogether, if interest rates seem too high.)

Note that your company's total debt, immediately after the bond offering, including accrued
taxes and bank loans, as well as the new bonds that will be outstanding, is taken into
account in determining your credit rating when the bonds are issued. Thus you are always
offered the option of applying some or all of the proceeds of the bond issue to pay off some
or all of your company's bank loan at the same time the bonds are issued, which will help
you to get a lower interest rate than if you issued the bonds on top of the bank loan, and
then later decided to use some of the money to pay off the bank loan.

A good time to issue bonds is when interest rates are at a very low level, such as a "prime
rate" of about 5% or 6%. Since bank loans have a floating interest rate, it is often a good
idea, even though you will pay a slightly higher interest rates on bonds than you are
currently paying on a bank loan, to issue bonds when rates are low and pay off your bank
loans, locking in the low interest rate on the bonds for 10 or 15 years or more. In short,
sock away a lot of capital when money rates are cheap. Then, if the prime rate goes up to
12% or 15% a year or two later, you won't be stuck paying the bank 14%, 16%, 18% or
even more on a floating rate loan. You may still be paying interest (fixed) on the bonds at
about 6%, and can invest the money at a much higher interest rate.

Also, if interest rates soar after you issue bonds, you may be able to buy back your
company's bonds from the public at a discounted price of about 60% or 70% of par. Since
you issued the bonds at par (100), if you can buy back 200 million (face value) of the bonds
for a price of 60 (120 million total), your company will have an instant gain (taxable,
unfortunately) equal to the difference, or some 80 million of profit, in this example.

If you click on the "Issue Bonds" button and your company has bonds already outstanding,
a long message will appear, informing you that you can't issue new bonds until the old ones
are paid off, and asking you if you want to try to redeem (call) the bonds at a certain price,
such as at 105. If there are bonds in public hands, the message will tell you their current
market price, and will note how many can be bought from public bondholders. If, for
example, the bonds were trading at 88, or could be called ("redeemed") at 105, it would
obviously be better to answer "No" and buy back the bonds on the open market at 88 cents
on the dollar, rather than redeem them at 1.05 on the dollar.

If none of the bonds are in the hands of the public, and you answer "No," that you don't
want to call (redeem) the bonds, you will be given a chance to buy some of the bonds back
from various banks and insurance companies that hold your company's bonds, not at
market price, but at a price 5 points above market price (or at 93, in the above example).
Thus, there may be several possible ways in which your company can buy back some or all
of its bonds, at widely differing prices.

If, like most players of Wall $treet Raider, you have a cunning, larcenous mind, you may
see a company whose bonds are trading at 70 cents on the dollar, but has the money to buy
them back, so you may think, "Aha! I'll buy up all the bonds, then buy enough stock to

165
control the company briefly, and have it 'call' all its bonds (owned by me) at 105!
Hmmm.... So I pay 70 for them, and quickly sell them back to the company at 105, a 50%
instant profit. How sweet it is!"

Sorry, but that would be a breach of ethics, a conflict of interest situation, so you would not
be allowed to call in the bonds, if they were trading at much less than the call price of 105.
Nice try, though. It shows you are beginning to think like one of the larcenous yellow-eyed
wolves that lurk on Wall Street, ever on the lookout for quick ways to fleece the
unsuspecting public.

Congratulations!

One way you CAN sometimes make a large, quick profit on bonds, without having to bet
right on the direction of bond prices, is to buy bonds selling well below par in a company
with a weak credit rating, then have it merge with (acquire) a somewhat larger company,
which will greatly improve its credit rating, causing the bonds to rise sharply in price. Of
course, you may lose as much money trying to get in and out of the company's stock as you
made on the bonds, so this tactic will not always work to perfection, but it can add to your
profits if you like the company and were planning to buy control of it and do a merger with
another company anyway. A quick profit on the side, on the company's junk bonds, when
its credit rating suddenly is upgraded after the merger, could never hurt.

Note that when interest rates get very high, your company may be unable to float "junk
bonds" at any price. Also, if your company's credit rating is too poor or the company is too
small, or too new (such as a startup company) you may be unable to get an investment
banker to underwrite (peddle) the bonds for you. Junk bonds are a sometime thing, mostly
issued in “bull” markets.

In Wall $treet Raider, junk bonds have a lower priority in bankruptcy than bank loans, so
they tend to have a higher yield, when issued, than the company would have to pay on the
same amount of bank debt. But you will notice that when you do a new issuance of bonds,
the bonds will initially trade at well above the issue price, and their yield to maturity at the
current market price will often be LOWER than the interest rate the company pays on bank
loans. How can that be? That is because, in pricing the bonds, the market takes into account
the fact that the company still has the cash available, and could pay off that much debt
easily. However, once the issuing company invests the cash (for example, in stocks or
business assets), the bonds will then tend to trade at a lower price, as the company is no
longer as liquid as it was.

Thus, if you had plans to manipulate the price of your company's bonds up and down,
simply by borrowing from the bank to reduce the company's credit rating, buying the
bonds, then having the company pay back down its bank debt, restoring its good credit
rating and running the bond price back up, as was possible in earlier versions of Wall $treet
Raider (before v. 2.0), you will discover that that particular tactic no longer has any effect
on the bond price. Another good "loophole" closed....

166
NOTE: This button will not appear on the "FINANCING" submenu if the current "Active
Entity" is you, the player, rather than a corporation you control -- since you can't, as an
individual, issue bonds.

(6) BUY BACK OR CALL BONDS. Click on this button to have a company you control
buy back its bonds, either on the public bond market, at slightly above market price, or
directly from existing bank or insurance company holders of its bonds, at 5 points above
the market price. A company you control can also buy back bonds that are owned by you or
by another company you control, at the current market price of the bonds.

In general, you would want to buy back a company's bonds when their market price is
significantly below par (100). For example, if XYZ Corporation's bonds were trading at 88,
you could have the company buy them back for roughly that price. To the extent the
buyback price is less than 100 (100% of face value), the difference will all be reported as
income by the issuing company, since the company is paying off its debt at a discount.

Alternatively, you can sometimes have the company "call" its bonds for early redemption
(wholly or in part). "Calling" in or "redeeming" its bonds prior to their date of maturity
would usually be done when interest rates have declined, and the company is still paying a
high rate of interest on a bond issue, say 12%, when it could sell new bonds at only 7% or
8%. In that case, the bonds might be trading on the market at about 109 or 110, so it would
be better to "call" in the bonds at 105 or whatever the current call price may be (which will
be less than 105 if the bonds have only 4 years or less until maturity). Better to call them at
105 (with no brokerage commissions), than to try to buy them on the open market at 109
plus commissions, for example. Redemption prices depend on how many years are left
until the bonds are to be paid off (maturity):

Years to Maturity Call Price as % of Face Value -----------------

-----------------------------

More than 10 (Not callable) 5 to 10 years

105 4 years 104
3 years 103 2 years
102 1 year 101 Less
than 1 year 100

However, it is not always possible to do an early "call" or "redemption" of bonds. In Wall

$treet Raider, the rule is that bonds are not callable at all until there are less than ten years
remaining before they maturity. Thus, when you float new bonds, it may be several years
before they become "callable." Also, if you (or a company you control) owns any of the
bonds, and you try to have the issuer call the bonds early, that is a "conflict of interest" and
is not permitted, unless the bonds' market price is somewhat above par (above 100) at the
time.

If company buys back or calls its bonds at a price greater than 100, the excess over face
value (100) that it pays is treated as an expense item, which can hurt its reported earnings
for that quarter. In addition, it will pay half of a quarter's accrued interest at the time of the
buyback or redemption.

167
NOTE: The "Buy Back or Call Bonds" button will not appear on the "FINANCING"
submenu if the current "Active Entity" is you, the player, rather than a corporation.

(7) EXTRAORDINARY DIVIDEND. Click on this button if you wish to have the currently
selected transacting entity pay out a special, or "extraordinary" dividend to its stockholders.
This transaction is for corporations only -- individual players don't pay dividends to
anyone. To prevent you from thoroughly looting a corporation, and leaving its bank lender
and bondholders holding the bag when the company implodes, there are strict limits on
how much you can have a company pay out as an "extraordinary dividend." Also, banks
and insurance companies are sometimes prohibited from doing so by government
regulators, as well, and are much more limited in the amount they can pay out than other
companies, when they are allowed to make such a distribution at all.

Any company that has a very poor credit rating will also be unable to pay an extraordinary
dividend, and the amount a company is allowed to pay out will be limited, to prevent a
payout that is so large it would nearly bankrupt the company.

Generally, an extraordinary dividend is taxable to the same extent as regular, quarterly

dividends a company pays out. That is, it is fully taxable to an individual player; only 30%
of the payout is taxable to a corporation that owns less than 20% of the stock of the payor;
only 20% is taxable to a corporation that owns 20% to 79% (or that is under common
control with the payor, even if it owns less than 20%) of the stock; and none of the
dividend is taxable to a company that owns 80% to 100% of the payor.

That is the general rule. However, if the dividend represents a significant percentage (which
varies) of the assets of the paying company, or if the payor company tries to do multiple
extraordinary distributions, then you will be warned that the payout will be considered a
"partial liquidation" by the tax authorities, and thus will be fully taxable to ALL recipients,
including corporations (except a parent corporation owning 80% or more of the payor's
stock), and you will be given a chance to call off the transaction, rather than have any
corporate recipients of the dividend incur large tax liabilities.

You will notice that when a company pays out a large "extraordinary dividend," the price of
its stock will drop immediately after, roughly reflecting the reduction of its net worth (and
credit rating) that results from paying out the dividend.

The "Extraordinary Dividend" is an tool used for many decades past by real corporate
"raiders" (looters) to strip a company of its liquid assets after they have bought up its stock
at a depressed price. It works well in Wall $treet Raider too, if you don't get hit by too large
a tax bite.

Note that if you have sold a stock short in a company that pays out an extraordinary
dividend, or even regular quarterly dividends, you must pay, as an expense item, an amount
equal to the dividend you would have received if you had been "long" that amount of
shares. That expense is not deductible, except as a capital loss against any capital gains you
may realize in the same year or later. (Which is only fair, since the reduced value of the

168
shorted stock after the company pays a large dividend will increase your capital gain when
you cover your short position in the stock.)

(8) TAX-FREE LIQUIDATION. The "Tax-Free Liquidation" function is used to liquidate

one wholly-owned corporation into another, in a nontaxable liquidation. Click on this
command button to begin either of type of liquidation. If it is allowable, a nontaxable
liquidation will be done. If not, you will be asked if you want the company to instead do a
"taxable" liquidation (if possible). Tax-free liquidations are discussed in this segment, and
"taxable" liquidations in Section VII(B)(9) below.

To liquidate the currently selected transacting entity into its parent corporation in a
nontaxable liquidation, the liquidating company must be a 100%-owned subsidiary of
another company in the same industry group, which you control, generally. However, it is
also possible to do a nontaxable liquidation of any 100%-owned holding/trading company
or to liquidate any 100%-owned industrial corporation (but not a bank or insurance
company) into a holding/trading company.

If the transacting entity (which you will also control if you control its parent corporation) is
not a 100%-owned holding company or 100%-owned subsidiary of another company in the
same industry, a nontaxable liquidation will not be possible, but the program will give you
a chance to instead attempt to do a "taxable" liquidation (unless the company you wish to
liquidate is a bank or an insurance company, in which case it can only be liquidated, if at
all, in a nontaxable subsidiary liquidation, into another bank or insurance company).

Let's assume that the transacting entity that you wish to liquidate is XYZ Corporation, a
100%-owned subsidiary of ABC Corporation, in the same industry. Once you have selected
XYZ Corporation as the transacting entity and you click on the "Tax-Free Liquidation"
button to commence the process of liquidating XYZ Corporation into ABC Corporation, its
parent company, you will be asked to confirm that you want to liquidate XYZ Corporation.
If you answer "Yes" (by clicking on the "Yes" button), the nontaxable liquidation will
usually occur.

However, in some cases a government agency will require the company that is to be
liquidated to first "divest" (sell off) its stock in a company it owns, before the liquidation
will be approved. In that case, you will be given a choice of making the divestment, or
canceling the planned liquidation of XYZ Corporation. Then, even if you agree to do the
divestiture, you might be informed that XYZ must divest another stock it owns.... And so
on.

In other cases, inexplicably, you may just be told, with no further explanation, that a
government banking or insurance regulatory agency has decided not to allow the
liquidation of the company, if the company is a bank or insurance company. That's the way
bureaucracies work, often very arbitrarily. Such is life and commerce. You can always try it
again at a later date, and you might have better luck at that time.

169
Even if you get past all the government regulatory hurdles, if both ABC and XYZ have
issued bonds, and neither has enough money or line of credit to fully pay off its bonds
before completing the liquidation, then the bondholders of either ABC or XYZ may well
block the liquidation. However, if the two companies have similar credit ratings for their
bonds, and their bonds are trading at nearly the same prices, the bondholders may not
object, and the bondholders of XYZ will swap their XYZ bonds for new ABC bonds as part
of the liquidation. Or, if only the liquidated company has bonds issued and outstanding
before the liquidation, the surviving company (ABC in this example) will assume the
liability for those bonds, so the name of the issuing company will change on the bonds, but
nothing else.

In some cases, the bondholders of one company or the other may block the liquidation,
unless you, or companies you control, own over 50% of the bonds of both companies -- the
parent and the subsidiary you are attempting to liquidate into the parent. If that occurs, you
may need to go into the bond market and buy up more than half of the total bonds issued by
each of the two companies, before trying again to complete the liquidation.

If your company meets all the above requirements for a nontaxable liquidation, the
liquidation is very simple to do in Wall $treet Raider. This type of liquidation is not a
taxable transaction.

The real question is: When should you liquidate a company into another? Understand that
when you liquidate one company into another in a nontaxable type of liquidation, all the
various assets, liabilities, tax losses, etc. of the liquidated company are generally
transferred to the parent company and added to its assets, etc., and the liquidated company
ceases to exist. (Although, as a dormant "shell" company, it may later be resuscitated as a
startup company. We recycle everything in Wall $treet Raider!)

While tax losses of a liquidated company generally carry over to the surviving parent
company in a nontaxable liquidation, that is true only if neither of the two companies are
holding / trading companies. If one or both of the two companies are holding / trading
companies, the tax loss carryovers of the liquidated company, if any, will disappear forever,
and be wasted, when you liquidate the subsidiary. Or, if the parent company is a holding /
trading company that has tax losses, those losses will also disappear if it liquidates a
subsidiary that is NOT a holding company. However, you will be warned about the
potential loss of any large tax loss carryovers, and given an opportunity to cancel the
liquidation, if either the parent company or the subsidiary has tax loss carryovers that
would be lost upon doing the liquidation.

Here are a few suggestions as to when you might want to liquidate a company in a
nontaxable liquidation (or not):

 To increase market share. If you control two companies in the same industry, and
each has a 20% market share, neither may be very profitable. However, if you
liquidate one into the other, the combination of their "business assets" will mean

170
 that the surviving company will have a 40% market share, which should make it the
"800-pound gorilla" in its industry and increase its profitability considerably.
 To realize net asset values. If one company you control owns 100% of a subsidiary
and the subsidiary's stock value is much less than its net worth, liquidating the
subsidiary will immediately increase the net worth of the parent company. However,
if the subsidiary's stock sells for more than its net worth, liquidation may not be a
good idea, since doing so will reduce the net worth of the parent company. That is,
if the sub's stock is worth $100 million and its net assets are only $75 million, the
stock is a $100 million asset in the hands of the parent -- but if it liquidates the sub,
it will instead receive the $75 million of net assets in place of the stock, lowering its
net worth by $25 million, and possibly affecting its credit rating and borrowing
power adversely.
 To shelter a profitable company from taxes. If a company you control has a high
income on which it is paying taxes, and no tax losses to shelter such income, it can
acquire a nearly bankrupt company in the same industry (other than a
holding/trading company) with tax loss "carryovers" and liquidate it. It will
"inherit" the liquidated company's tax losses. Or if your company has large tax
losses it can't use, have it acquire and liquidate a profitable subsidiary in the same
industry. The future earnings from the assets acquired from the subsidiary will be
sheltered by your company's tax losses. (However, in the latter case, you can
accomplish the same thing by having your "loss" company acquire any kind of
profitable subsidiary, in any industry -- and as long as the parent ("loss") company
owns at least 80% of the stock of the subsidiary, they will file consolidated tax
returns, which means that the profits of the subsidiary will be sheltered by the tax
loss carryovers of the parent company.)
 To affect credit rating. If you liquidate a subsidiary that has a low credit rating into
a parent company with a good credit rating, the parent company's credit rating may
be hurt and it may have its line of credit reduced or eliminated as well. On the other
hand, liquidating a sub with a good credit rating may (sometimes) improve the
parent's credit rating, saving on interest expense, if the subsidiary is free of debt, or
nearly so, and if its stock was trading at less than its net worth per share.

NOTE: The "Tax-Free Liquidation" button will not appear on the "FINANCING" menu if
the current "Active Entity" is you, the player, rather than a corporation. Humans don't get
liquidated, at least not in a financial sense.

(9) TAXABLE LIQUIDATION. Any company that you control can usually be liquidated in
a "taxable" liquidation, except for a bank or an insurance company (which can only be
liquidated, if at all, in a nontaxable liquidation, as described in the preceding segment).
However, you cannot do a taxable liquidation of a company if it does not have enough
assets to pay off all of its debts and tax liabilities. (That is, no taxable liquidation is allowed
if the company has a negative net worth.)

In Wall $treet Raider, a "taxable" liquidation is quite different from a nontaxable one.
Instead of transferring all the liquidated company's assets and liabilities to a 100% owner
(parent) corporation, in a "taxable" liquidation the company to be liquidated must first sell

171
all of its non-cash assets, pay off bondholders, and pay off any bank loans and accrued
income taxes it owes. Then the company will distribute the remaining cash to each of its
shareholders, in proportion to their percentage of stock ownership in the company, and then
goes out of existence.

We refer to it as a "taxable" liquidation because any shareholders (including both players

and corporation shareholders) who own stock in the liquidating corporation will receive
cash in exchange for their stock, and will recognize a taxable gain or loss for income tax
purposes, depending on whether the cash received in the liquidation is more or less than the
shareholder's cost or "tax basis" for the stock. For an individual player, any gain or loss will
be a capital gain or loss, with a capital gain taxed at the lower capital gains tax rate, and a
capital loss deductible only against other capital gains. Corporations that have a gain or loss
on their stock of the liquidated company will include the gain or loss in their taxable
income, paying tax at regular corporate rates if the transaction results in a gain.

Unlike most nontaxable liquidations, in a "taxable" liquidation any tax loss carryovers of
the liquidated company always disappear and are lost forever. However, you will be
warned and given a chance to cancel the taxable liquidation if the company you are about
to liquidate has large tax loss carryovers.

While it is usually possible to do a taxable liquidation of any company you control (other
than a bank or insurance company), there may be situations where it will not be possible,
such as where the company is unable to pay off all its bondholders, or where it may not be
able to sell its business assets (capital assets) at a reasonable price, and the loss from
"scrapping" those assets might be so great that it would make the liquidation financially
inadvisable, from the standpoint of the stockholders, such as you.

In other cases, the company you wish to liquidate might be unable to sell the stock of a
nearly bankrupt subsidiary to anyone, so you may have to wait until the subsidiary's stock
becomes worthless in bankruptcy, or recovers and becomes marketable again, before your
company can sell off that particular stock and complete the liquidation process.

There are not many situations where you will want to do a taxable liquidation of a company
in Wall $treet Raider, but we have added this type of liquidation to the program, at the
request of a number of users, and we hope you will find it to be a useful new financial tool.
Since the company that is going through a "taxable" liquidation will need to turn all of its
assets into cash before it liquidates, and will often have to sell the assets at prices somewhat
less than their current value, you may often come away with more cash by simply selling
your stock in the company, rather than liquidating the company to get at its cash.

Some situations where it might be advisable to do a "taxable" liquidation of a company you

control would be as follows:

 When the stock sells at a large discount. If you control a company, especially one
that already has most of its assets in the form of cash, or other assets that can be
sold at close to their current value, and its stock trades at a very deep discount to net

172
 worth per share, it may make sense to liquidate it and get the company's net cash
after it sells off its assets. For example, if a company has most of its assets in the
form of cash, and has a net worth per share of $20 per share, but is trading for only
$13 a share, and you control it (whether or not you own 100% of the stock), you
would be better off to liquidate the company and perhaps receive about $20 a share
(or even $15 a share, if it had to sell off stocks or capital assets and incurred large
selling costs). That would be better than selling your stock at $13 a share (and
perhaps getting only $10 or $11 net, if you owned a large bloc of the stock, sale of
which would drive down the market price even further when you unloaded it).
 When you are unable to sell your stock. In some cases, where you own 100% of
the stock of a company, you may be unable to sell your stock until the company is
able to do a public or private offering of its stock, to make its shares you own
salable by you. And in some cases, it may not be able to do an offering, due to
market conditions or other factors, or if it has recently done stock offerings, and you
bought up all of its stock. If you don't want to own the company any more, and can't
sell its stock, you can always consider liquidating it in a taxable liquidation and
turning your investment into cash in that way, as a reasonable alternative. (Unless it
is a bank or an insurance company, of course.)

NOTE: The "Taxable Liquidation" button will not appear on the "FINANCING" submenu,
if the current "Active Entity" is you, the player, or is a bank or insurance company, since
none of those types of entities are allowed to do a taxable liquidation in Wall $treet Raider.

(10) SPIN-OFF SUBSIDIARY. Any parent corporation may, in most cases, spin off
(distribute) the stock of a subsidiary company, or part of such stock, to the stockholders of
the parent company, in proportion to their holdings of the parent's stock. For example, if A
owns 60% of ParentCo, B owns 30% of ParentCo, and "the Public" owns the other 10%,
and ParentCo spins off 50% of SubCo, A will receive 30% of SubCo, B will receive 15% of
SubCo, and "the Public" will receive 5% of SubCo (60%, 30%, and 10% of 50%,
respectively).

Because a spin-off is, in effect, a dividend (but paid in the form of stock of another
company, rather than in cash), it is similar to an extraordinary dividend, and too large a
spin-off, in terms of value of the spun-off stock, may harm the parent company's credit
rating and financial viability. For that reason, the government may prevent this kind of
potential fraud on creditors of the parent company, and may block the spin-off, if the
distribution would reduce the parent company's credit rating by more than 3 notches (such
as from AAA to BB, which would be 4 notches -- to AA, to A, to BBB, and to BB). Also, if
the spin-off would reduce the credit rating to CCC or lower, it will not be permitted, nor
will it be permitted if the credit rating is already CCC or lower. (For banks or insurance
companies, the restrictions are somewhat tighter -- no spin-off is allowed that will reduce
the credit rating of the bank or insurer to less than BBB.)

Taxability is usually a very important factor when doing a spin-off. A taxable spin-off can
be a disaster, financially. If the tax authorities rule that a spin-off is taxable, it will be
treated as taxable income to each shareholder receiving stock, except an 80% or greater

173
corporate owner); the value of the stock received will be the taxable amount (and will
become the "tax basis" of such stock) for each recipient of the spun-off shares. In addition,
if the value of the stock being spun off is greater than its "tax basis," the parent company
will be treated as though it sold the stock at the current market value, and will have an
extraordinary gain on the distribution of the stock. Such gain, fully taxable to the parent
company, may further reduce its credit rating, because of the tax it will soon have to pay on
such gain.

Note that if the stock distributed has a market value that is less than its tax basis, the loss
will not be allowed as a taxable loss or deduction. (This is essentially the same as U.S.
Internal Revenue Service rules on taxable distributions of property by a corporation.)

In Wall $treet Raider, a spin-off can qualify as a nontaxable transaction only if four
requirements are all met:

 At least 80% of the stock of subsidiary company must be distributed in the spin-off;
 The stock of the spun-off company must not currently be a holding/trading
company;
 The company being spun off must have a history of having been engaged in an
active trade or business (which includes banking or insurance industries, but not
holding/trading companies) for at least the last five years, without interruption, as
an 80% subsidiary of the parent company that is doing the spin-off; and
 The company being spun off must not have cash as over 2/3 of its total assets.

If the spin-off distribution does not meet all four of the above tests, it will be ruled a
taxable spin-off by the tax authorities. (These rules also rather closely follow the general
rules for tax-free spin-offs under U.S. tax laws, as administered by the Internal Revenue
Service.)

Note that you can get around the second requirement in Wall $treet Raider by having the
subsidiary that is a holding/trading company acquire business assets, so it is no longer a
holding/trading company. But even so, you will have to wait for 5 years to pass before it
can be spun-off in a nontaxable transaction. Similarly, if the company that wants to spin off
a subsidiary owns less than 80% of the subsidiary, it can increase its ownership percentage
to at least 80%, but will still have to wait for at least five years until it can do a tax-free
spin-off.

Note also, with regard to the 5-year holding period, in versions later than 3.01 of Wall
$treet Raider, where SubCo is spun-off in a "nontaxable" (to shareholders) spin-off by
ParentCo, and thus becomes an 80% or greater owned sub of GrandParentCo, its original
acquisition date will "carry over" as a sub of GrandParentCo (or else it will become the
acquisition date on which GrandParentCo acquired ParentCo). For example, let us say
SubCo become an active business 100% subsidiary of ParentCo in 2008, and
GrandParentCo acquired 100% control of ParentCo in 2017 (assuming ParentCo is also an
active business since 2017). Then, in 2020, ParentCo spins off 100% of the SubCo stock,
tax-free, to ParentCo's parent company, GrandParentCo. The 5-year holding period by

174
ParentCo is easily met, since it held 80% or more of SubCo since 2008. SubCo's
acquisition date would (generally) carry over as a subsidiary of GrandParentCo, which now
owns 100% of SubCo, but since ParentCo wasn't acquired by GrandParentCo until 2017,
that later date becomes the deemed acquisition date of SubCo, rather than 2008 (or the date,
2020, it was spun-off to GrandParentCo). In this example, GrandParentCo could not
immediately do a nontaxable spin-off of the SubCo stock, but it would only have to wait
for 2 years, to 2022 (2022 - 2017 deemed acquisition date = 5 years), in order to be able to
do a tax-free spin-off of SubCo. Changing the facts a bit, if GrandParentCo had held 80%
or more of ParentCo since 2006, then SubCo's (later) acquisition date of 2008 (by
ParentCo) would "carry over" after it is spun-off by ParentCo to GrandParentCo. Under
those facts, GrandParentCo could IMMEDIATELY, without waiting, do a tax-free spin-off
of the SubCo stock. This is all a bit complex, but simply look at the bottom of the
"Financial Profile" page for an 80% subsidiary that you wish to spin-off, to see what year it
became an 80% "active business" subsidiary of the parent company. If at least 5 years
earlier, then a tax-free spin-off of the subsidiary may be possible, if all the other tax-free
spin-off requirements are met.

In a nontaxable spin-off, the parent company (usually) will not recognize any gain on the
stock it spins off, and none of the shareholders recognize any taxable income, unless a
shareholder receives less than 1% of the spun-off company, in which case the fractional
percentage is cashed out, treated as immediately sold at the current value, with a zero tax
basis, but is treated as a capital gain. The shareholder's tax basis for the stock received in a
nontaxable spin-off is an allocated fraction of the recipient's tax basis in the shares of the
parent company.

TAX BASIS EXAMPLE: You own stock in ParentCo, in which your "tax basis" is $150
million. ParentCo spins off stock of SubCo to you, and immediately after the spin-off the
ParentCo stock has a total market value of $2,000 million and the SubCo stock you
received has a value of $1,000 million. The total value of your ParentCo stock and the
SubCo stock you received is, therefore, $3,000 million. Since the SubCo stock is worth 1/3
of the total value, its tax basis in your hands would be 1/3 of the $150 million basis you had
in ParentCo, or $50 million, and your basis for the ParentCo shares would be reduced to
$100 million. Thus, your total tax basis is still $150 million, but your investment has been
split into two companies, so your tax basis has to be allocated between the two companies'
stocks, in proportion to their relative values.

Some "nontaxable" spin-offs are not entirely nontaxable. If ParentCo has a negative tax
basis, or excess loss account for the stock it owns in SubCo, any spin-off that reduces
ParentCo's ownership of SubCo below 80% will trigger the "recapture" of the excess loss
account (as taxable income), either immediately, or fairly soon after the spin-off occurs.
This is true even if the spin-off is of 80% or more of the SubCo stock, and otherwise
qualifies as nontaxable. Thus, in such a case, stockholders of ParentCo will not be taxable
on the stock they receive in a "nontaxable" spin-off, and the amount of gain the parent

175
corporation must include in taxable income is limited to the amount of the excess loss
account that must be recaptured as taxable income.

For example, if the stock of SubCo has an excess loss account (a tax basis of $-400 million
in the hands of ParentCo), but is worth $10,000 million, ParentCo would have to report a
taxable gain of $10,400 million in a taxable spin-off, but only $400 million, the excess loss
account amount, in a "nontaxable" spin-off.

PLANNING TIPS: Doing a spin-off of a subsidiary that is losing money currently, but
which you don't want to sell, can be a good way to retain ownership of it, but will stop its
losses from harming the reported income of its parent company. For example, if you own
100% of (profitable) ParentCo, and ParentCo owns 80% of SubCo, which is reporting
losses (perhaps because it is spending heavily on R & D or marketing), and thus is dragging
down ParentCo's results, consider spinning off all 80% of SubCo in a nontaxable spin-off.
After the spin-off you will own a slightly shrunken but more profitable ParentCo and will
now directly own 80% of SubCo. The fact that SubCo is losing money will not affect you
directly, when you hold its stock as an individual player (though, of course, its stock value
may decline or it may become bankrupt and worthless if the losses continue). Once the
losses stop, if you turn SubCo around (due to heavy R & D spending, for example), you
could then contribute its stock back to ParentCo as a nontaxable capital contribution (if you
own 100% of ParentCo).

Another use of spin-offs is to take the place of mergers or cash buy-outs (and save on
merger expenses). For example, assume Company A owns 100% of Company B, which
owns 80% of Company C. You would like for Company A to own the Company C stock
directly, but Company B will have a big taxable gain if A buys the C stock from B. Or, if A
merges with C, there will be merger fees to pay. Instead of either of those approaches,
consider having Company B spin off its 80% holdings of C in a tax-free spin-off, after
which Company A will then own 80% of the C shares directly, without incurring any
merger fees or taxes.

A spin-off can also be a useful tactic where you control Company A, which is saddled with
ongoing losses from asbestos litigation or from "Superfund" (environmental clean-up) costs
that are devastating the company. If Company A has a large and profitable subsidiary,
Company B, you may want to spin-off all of the stock of Company B (if allowed) before
Company A is bankrupted. Once you have extracted A's valuable asset, the stock of B, then
you can get rid of the A stock by selling it (or better yet, by merging it with a stock of a
competing player and then selling it).

Certain other tax-free transactions do not affect a company’s 5-year holding period under
the spin-off rules, in Versions 4.51 or later. For example, if Company A owns 100% of B
and B owns 80% or more of C, and A drops 80% or more of the C stock down into B as a

176
capital contribution, C’s 5-year (or less) holding period as an 80%-owned active business
will not be affected. The same is true if A owns 100% of B, which owns 80% or more of C,
and B goes through a nontaxable liquidation, so that the C stock is distributed tax-free up to
A in the liquidation.

N
OTE: The "Spin-Off Subsidiary" button won’t appear on the "FINANCING" submenu, if
the current "Active Entity" is you, the player, since only a corporation may do a spin-off to
its shareholders in Wall $treet Raider (or in real life)
.

177
 MANAGEMENT TRANSACTIONS MENU

CHAPTER VIII.

A. IN GENERAL.

Except for borrowing money or making loan repayments, all other transactions in Wall
$treet Raider, such as buying or selling stock, bonds, or other assets, are done by clicking
on one of the six buttons on the "Transactions" grouping of buttons on the main menu
screen. Each such transaction selected from the "Transactions" grouping that is completed
counts as one of the 5 transactions allowed on a player's turn. Other actions, such as
borrowing money or repaying loans, or doing stock splits or corporate name changes, can
be done by clicking on the "MISC" button on the main screen and selecting an item such as
"Borrow Money" or "Repay Loan" from the pop-up submenu that will appear, but none of
those actions count against you as one of your 5 allowed transactions per turn.

To initiate a transaction, click one of the six "Transactions" buttons: Buy Stock, Sell Stock,
Buy/Sell, Financing, Management, or Other Trans., on the main menu screen, and, except
when clicking on the Buy Stock or Sell Stock buttons, one of four different submenus will
pop up, each listing anywhere from 2 to 12 possible transactions, with a button for each.
Then click on the appropriate button to begin the type of transaction you wish to do.

Note that, while viewing each Transactions pop-up submenu, the submenu screen will have
a text-box on the left, describing the allowable functions, and sometimes will include other
useful information, such as the current buying power (cash plus line of credit) of the
currently selected "Active Entity." The various buttons for the different types of
transactions will appear in a vertical row on the right side of the pop-up submenu. At the
bottom of that dialog screen will be 3 additional buttons: A "Close" button to close the
submenu and exit back to the main menu screen; a "Player" button (click it to instantly
change the "Active Entity" that is to do the desired transaction to you, the player); and a
"My Corps." button, which will let you select a corporate entity you control as the new
"Active Entity," which will do the transaction(s) you are planning to execute. Notice that if
you only control one corporation, and you click on the "My Corps." button, that company
will instantly be selected -- you will not need to enter its stock symbol, or select it from a
"lookup" list of companies you control.

178
This Chapter VIII describes the various "MANAGEMENT" transactions that you can do if
you select the "MANAGEMENT" button.

B. "MANAGEMENT" BUTTON AND SUBMENU. Clicking on the

"MANAGEMENT" button brings up a pop-up submenu that has various command buttons
which allow you do a number of different transactions that affect the way your controlled
company is managed, such as by setting the rate at which it will expand its investment in
business assets, by determining how much it will spend each year on productivity expenses
(such as Research & Development, or marketing/advertising), or by setting the amount per
share that the company will pay out as dividends.

Other management functions in this group of transaction buttons include changing (firing)
the management team, electing yourself as CEO of the corporation (thus earning a fat
salary), resigning as CEO, filing antitrust lawsuits against competitors in your company's
industry, and doing corporate "restructurings," in an attempt to "turn around" an
unprofitable and inefficient, poorly-performing company.

The text box that appears when you are viewing the Management SubMenu will always tell
you if you could be drawing a larger executive pay package (salary and bonus) if you had
yourself elected CEO of the company you control which offers the highest CEO pay (not
counting executive stock options). The text box also will offer advice from time to time on
other tactics you may want to adopt, such as filing an antitrust suit against a company in the
industry your currently selected company is in, or other suggestions such as changing a
company's management or doing a restructuring if it is poorly run.

The use of each of these management tools is described below, in the following paragraphs.

You will note that, if the current "Active Entity" is you, the player, rather than a
corporation, that only the first two buttons described below will appear on the
"FINANCING" submenu, since the other transaction buttons on this submenu are for
corporations only. Also, certain other buttons will not appear if the "Active Entity" is a
bank, an insurance company, or a holding / trading company. All eight buttons appear only
if the "Active Entity" is an "industrial" type of corporation (any corporation but a bank,
insurer, or holding company).

(1) ELECT ME AS CEO. The "Elect CEO" command button can be used to elect yourself
president or CEO (chief executive officer) of a company you control. Clicking on this
button. will automatically make you the president and CEO of whichever transacting entity
(company) you have currently selected, if any, if you control the company. Or, if you only
control one company at the moment, clicking on this button will cause you to be elected as
its CEO, even if it is not the currently selected transacting entity.

While you will already control the company and its board of directors, by virtue of your
stock holdings, even if you are not its CEO, having the board of directors elect you to the
position of CEO means that you will then be able to draw a salary from the company and

179
you may also be granted (restricted) executive stock options from time to time. This is
good, usually.

You may also receive an annual performance bonus of 150%, 300%, or 500% of salary (or
twice those amounts if you control 51% of the company's stock), if you are able to
consistently increase your company's earnings by more than 15% a year for several years
while you are its CEO, and you will receive a 100% bonus each year even if you do a
terrible job of running the company, as long as you
control 51% of its stock, directly or indirectly.

To receive more than a 100% bonus, not only must earnings increase by over 15% a year,
but you must also have been the CEO since before the years in which such earnings growth
was achieved. (Wall $treet Raider keeps track of the year you were hired.) Thus, "seniority"
is important, so if you click on this button to become CEO of a company and already are
CEO of another company with which you have seniority that will be lost, you will be asked
if you are sure you are willing to lose that "seniority" and start from zero as a new CEO of
another company, with no seniority.

For more details on how bonuses are computed, see the FAQ item on Executive
Compensation.

When you select this command button, you will be shown what your estimated annual
compensation will be from that company. (The greater the company's stock price, the
higher your salary will be, in general). Base salary compensation is paid quarterly, so long
as you remain president/CEO, while any bonuses you receive are paid at the end of each
year. Any cash compensation paid to you is taxable income to you, and is a deductible
expense for the corporation, which reduces its income. The value of stock options granted
to you is a cash expense to the company if the options have value at the time they expire, or
if you sell the vested options back to the company before expiration.

Stock options are granted in the first month of each quarter (but no options are granted if
the company's stock is not publicly traded). Each grant is for 2% of the company's stock, or
8% over the course of a year. The options all expire in two years after the date of grant and
are restricted -- meaning that you cannot (voluntarily) sell them during the first year after
the date they were granted. If you do sell them, the amount you receive will be taxable
income, but qualifies for favorable capital gains tax rates. You recognize no taxable income
if the options expire worthless, or if you exercise them to buy newly issued stock from the
company (which will buy an equal amount of publicly traded stock on the open market, to
prevent dilution of its stock). However, if you exercise the options, you will be buying the
stock at below its current price, so if you immediately sell the stock you may have a capital
gain, because of the bargain purchase price.

You can only serve as president of one company at any time, so you will usually want to be
CEO of whichever company you control that can pay the largest CEO salary. But once you
lose "control" of a company of which you are the president/CEO, you will also lose your
job, by the end of the current calendar year, or sooner if you take another CEO job or are

180
fired by another player who takes over the company. If you lose your job as CEO of a
company and no longer control the company, any unvested executive options the company
has granted you in the last year will immediately be canceled -- that is, forfeited, so losing
your position and control of your company can be expensive.

Using this command button counts as one of your 5 plays per turn (unless you are already
president of the company selected, in which case it will merely show you your estimated
salary level, but will not count as a play).

As a rule, the greater the size of your company, the larger the CEO salary it will pay you
and the more your executive stock options will be worth. However, the compensation
calculation is fairly complex. Its starting point is the total stock market value of the
company, but that is reduced for any "passive assets" the company holds, such as cash or
stocks of other companies, after adding back debt. In short, you don't get paid a lot to just
have the company sit on a lot of cash, or invest in a few stocks -- it has to have a lot of
money invested in business assets and working capital in order for you to be able to justify
a large cash compensation package.

Thus, if the company's passive assets, less debts, are greater than its market value, the
"base" number on which your salary is computed would be less than zero, in which case
you would only receive the minimum annual CEO salary of $0.2 million ($200,000) U.S.,
or the equivalent in any other currency. Hence, if you can get the company's stock up to
where it trades for more than its net worth per share, you will be able to increase your pay,
plus cash in big on your stock options. This, in the real world, is called "incentive
compensation" for "getting the stock up." It works the same way here.

The CEO salary for banks and insurance companies starts out as being calculated at half
that for other companies, but the capitalization number (stock value) on which it is based is
not reduced by the value of bonds owned by the bank, or by stocks or bonds owned by an
insurance company. Those are not treated as "passive assets" for those kinds of companies,
as those kinds of assets are part of their main businesses of investing in financial
instruments. The CEO salary for an insurance company may also be increased somewhat in
some cases, based on the amount of insurance the company has in force (or its policy
reserves).

Note that if you are CEO of a company, and an opposing player takes control of the
company, they may fire you immediately, either by electing themselves as the new CEO,
using this command button, or else by using the "Change Managers" button discussed in
subparagraph (3) below to fire the existing management team (including you).

(2) RESIGN AS CEO. The "Resign as CEO" command button allows you to resign from
your position as President and CEO of a company. Use this feature if you prefer not to
draw a salary or bonus from any company you control. This may be advisable, since
drawing a salary from one of your companies will constitute a considerable expense for the
company and will reduce its reported earnings and cash flow somewhat, which may also
reduce its stock price. Resigning as CEO of a company will be particularly appropriate if

181
the company is either in weak financial condition, or has accumulated tax loss carryovers,
and thus is unable to obtain an immediate tax benefit from the expense of paying salary
and/or bonuses to you.

To receive more than a 100% bonus as a company CEO, not only must its earnings increase
by over 15% a year, but you must also have been the CEO since <em>before</em> the
years in which such earnings growth was achieved. (Wall $treet Raider keeps track of the
year you were hired.) Thus, "seniority" is important, so if you click on this button to resign
as CEO of a company with which you already have seniority that will be lost, you will be
asked if you are sure you are willing to lose that "seniority," since you might be eligible for
large bonuses if you could turn the
company around and increase its earnings in subsequent years.

For more details on how bonuses are computed, see the FAQ item on Executive
Compensation.

(3) CHANGE MANAGERS. The "Change Managers" command button (to change a
company's management team) is a tool that allows a player who controls a company to fire
the management team of the company if they appear to be incompetent or lackluster. In
Wall $treet Raider, you can usually tell if an industrial company (any non-financial
company) is incompetently managed if its return on business assets, adjusted for its level of
productivity spending (R & D, or marketing/advertising) is significantly lower than that of
other companies with similar market share in its industry. Or, when reading a research
report on the company in the "ENTITY INFO" research submenu (using the "Research
Report" command button), you will note that there is usually a comment in the report on
the management's capabilities, good, bad, or indifferent.

In any case, if you want to re-throw the dice for your company, by putting in a new
management team, use the "Change Managers" command button to do so. Simply click on
that button on the "MANAGEMENT" submenu that pops up when you click on the
"MANAGEMENT" button on the main menu screen, and you will be informed as to how
much it is going to cost the company to pay off the managers you are firing, before you
give your final approval to their termination.

Note that if you fire management of a particular company too frequently, you will develop
a bad reputation, and may have a hard time attracting qualified replacements.

In any case, once you have fired and replaced a company's management team, nothing will
happen immediately, except that the severance pay and other costs of the termination may
put a fairly good-sized dent in the company's earnings for that calendar quarter. Then it
may be months or even a year or two later before you begin to see any results. It may turn
out that the new management team is made up of geniuses....or idiots....or something in
between. In any case, if you watch the news headlines carefully, you will eventually see an
announcement, describing how the new management team has turned the company around;
or is no better than the old managers; or has turned out to be a complete disaster!

182
This function is separate from the "Elect CEO" feature described above, which is used only
to elect yourself as president and CEO of one of the companies you control. The "Elect
CEO" function is not generally used for firing existing managers, except in the rare case
where you take control of a company whose CEO is one of the other players. In that case,
whether you have the company's board of directors elect you as the new CEO, using the
"Elect CEO" command button, or you use the "Change Management" command button to
fire all of the existing management team, the other player who is CEO of the company will
immediately be fired, and will cease drawing a salary (but will receive a "golden
parachute" payment, usually).

Note that, since you control the company, your firing of the management team will never
mean that you are also fired, if you happen to be the CEO of the company when you fire
the management team. As long as you control the company, your job is safe, even if you are
doing a miserable job of running the company. Only your underlings lose their jobs in the
"house-cleaning." (By the way, this is EXACTLY the way things work in the real world....
It's the Golden Rule -- "He who has the gold, makes the rules.") May it ever be so....

NOTE: This button will not appear on the "MANAGEMENT" submenu if the current
"Active Entity" is you, the player, as it is only relevant for a corporate entity.

(4) SET DIVIDEND PAYOUT. Click on the "Set Dividend Payout" button if you want to
change the amount a company pays out each quarter as dividends. The amount of payout
will be based on the payout amount per share that you set. The program will tell you how
much per share you may set the dividend at, from zero to a certain amount, such as $1.50
per share. In general, the better your company's credit rating, the higher the dividend
payments it can make.

If the company has a negative net worth or "D" credit rating, it will cease paying out any
regular dividends, and it may be forced to reduce its dividend if its credit rating falls too
low, such as to "CCC" or lower.

Be aware that dividends paid out by a company to a player may result in double taxation,
unless the player has enough expenses (such as interest on loans) to shelter the dividends he
or she receives from tax. Thus, in the simplest case, if a company earns $100 million pre-
tax, and pays a 40% income tax, its after-tax earnings will be $60 million. If it then pays
out 100% of its net income (the $60 million) to its owner, assuming the player owns 100%
of the company's stock, that $60 million will be taxed to the player at, for example, 45%, so
that the player only gets to keep $33 million after income taxes -- out of the $100 million
the company earned and paid out! Thus, the "double taxation" of the company's earnings
would add up to $67 million, or 67% of the $100 million the company earned, a very
confiscatory tax rate. And if rates were very high, such as 70% and 75% corporate and
individual rates, for example, the combined rates would amount to 92.5%, leaving you with
only $7.5 million after taxes on the $100 million earned by the company. Ouch! That's no
way to get rich!

183
Therefore, it is often better not to pay out dividends, unless the player needs the cash to pay
interest expenses on a bank loan. To the extent you can, it is usually best to leave profits in
the corporation you control, which should eventually cause its earnings and stock price to
rise. Then, if you sell the stock, you will pay the second tax at the much lower capital gains
tax rate. Or, if you hold the stock until the end of the game, you NEVER pay the double tax
at all. (Which is somewhat like the real-life tax planning strategy of dying before you have
to sell your stocks.)

Remember, if your company owns stock in one or more subsidiaries, its reported income
from those subsidiaries will increase its net income, and thus increase the amount it is
paying out, if, for example, it pays out 40% of its earnings as dividends. But its reported
income from those subsidiaries may be much more (or less) than any cash it receives as
dividends from the subsidiaries, so you may notice that the parent company has plenty of
reported income, but little or no cash coming in, and may be forced to borrow more and
more, in order to keep paying out dividends. One solution in that case would be to make
sure the subsidiaries are also paying out a similar percentage of their income, in cash, to the
parent company.

Using the "Set Dividend Payout" command button, you can set a company's dividend
payout within a range that is permitted by the program (which is generally based on the
company's credit rating). The maximum yield you can set, using the "Set Dividend Payout"
command button is as follows:

Credit Rating Maximum Dividend Yield

You Can Set
------------- ----------------------
AAA 20% (if company has
no debt; otherwise
11%, or 10% if it is
a bank or insurer)
AA 20% (if company has
no debt; otherwise
11%, or 10% if it is
a bank or insurer)
A 10%
BBB 9%
BB 8%
B 7%
CCC 6%
CC 5%
C 4%
D 0%

The program computes the above maximum yield, and, based on the current price of the
company's stock, computes the per share dividend amount equal to that dividend yield,
which is displayed as the maximum you can increase the dividend rate to when using the
"Set Dividend Payout" feature.

A stock may have a dividend yield that is higher than the percentages in the above table, if
its stock price declines after you have set the dividend at the maximum level. In that case,

184
you can change the dividend to a lower payout, which can still be higher than in the above
table, but lower than the current payout amount. If no player controls a company and its
dividend yield percentage is very high, the program will generally reduce the dividend
payout to a more reasonable level; or, if the company gets into financial trouble, will cut
out the dividend entirely.

NOTE: This button will not appear on the "MANAGEMENT" submenu if the current
"Active Entity" is you, the player, as it is only relevant for a corporate entity.

(5) SET PRODUCTIVITY SPENDING. Click on the "Set Productivity Spending" button
to change a company's level of spending on various productivity programs that may
improve its long-term efficiency and profitability. This expenditure setting will be a
percentage of sales to be spent, in the case of companies other than banks or insurance
companies (in their case it will be a different measure). For certain industrial companies,
mostly "high-tech" companies, but also including companies such as auto manufacturers,
this setting will be for "R & D" (Research and Development) expenditures, while for all
other companies productivity spending will be assumed to be for marketing and advertising
expenditures.

Except for banks and insurance companies, setting "productivity" spending at any
percentage will directly reduce current profit margins (which in this simulation are the
same as return on investment on business assets), by that percentage , but such
expenditures may result in increases in a company's long-term profitability, such as from
technical breakthroughs in R & D programs, or from successful advertising and marketing
campaigns.

EXAMPLE: Your computer company is spending 0% of sales on R & D, and is projected

to earn a 20% profit margin on sales (which means a 20% return on capital assets, in Wall
$treet Raider). You might decide that the company is not operating very efficiently, if most
of its competitors are earning about 40%. Thus, you might increase your company's R & D
spending to 15% of sales.

The immediate effect of the increase in R & D spending would be to reduce the projected
rate of return by 15 percentage points, or from 20% the next quarter to only 5%. Ouch!

However, you may find after a few quarters that the company is improving its relative
profitability, thanks to the R & D spending, and is earning about 20% again, even AFTER
paying 15% of sales each quarter for R & D, and that research reports on the company now
say that its management is "very capable." Nice! In that case, you might slash R & D
spending back to zero, in which case the company would now suddenly be earning 35% on
its assets.

Of course, increased R & D spending or spending on marketing does not always pay off, or
it may take years before it pays off. In effect, high spending on "productivity" factors, such

185
as R & D or marketing/ advertising, will penalize short-term profitability, but may (or may
not) increase long-term profits. The higher the percentage spent on such productivity items,
the more you will penalize earnings in the near term, but the more likely you are to increase
profits due to achieving some kind of breakthrough in your R & D program, or building
customer loyalty through effective marketing.

Naturally, you can use such productivity spending to "manage" a company's earnings to a
considerable extent. However, the stock market is not entirely stupid, and so the stock price
of your company will tend to reflect the level of productivity spending, so that such
expenditures are quietly added back to reported earnings, when calculating a company's
"real" earning power, in the Wall $treet Raider stock pricing algorithm. So, while using this
setting to manipulate your company's earnings may have some effect on its stock price, the
effect will be a lot less than you might have expected.

You can set a company's level of productivity spending at anywhere from 0% to 30% of
sales.

Productivity spending by a bank tends to improve the bank's profit margins, by enabling it
to bring in more deposits and loan business for a given amount of overhead expense
(salaries, facilities, etc.), thus improving its profitability on its lending "spread" (the
difference between what it has to pay for money and what it earns from lending it out). Of
course, in the short run, the additional marketing and advertising costs will tend to hurt its
profit margins.

Productivity spending by an insurance company can increase its underwriting ratio, either
increasing its underwriting profits or reducing underwriting losses on its insurance
operations, in the long run, though it will reduce such profits or increase losses in the short
run.

NOTE: A company with a high or mediocre management rating will tend to become less
profitable over time, as a rule, if it spends little or nothing on productivity (R & D,
marketing/advertising) to maintain its edge. Thus, if your company's management is rated
"very capable" and you want to keep it that way, you may need to dedicate a fairly high
percentage of sales to productivity spending, say 6% or more. Anything less than 4% will
generally do little or nothing to prevent a decline in the efficiency of management, although
it may make current profitability look better.

NOTE: This transaction button does not appear on the "MANAGEMENT" Transactions
submenu if the current "Active Entity" is a player or a holding / trading company.

(6) SET GROWTH RATE%. Click on this button to set the growth rate, in capital assets
(business assets) for your non-financial company, or the growth rate of insurance in force,

186
for an insurance company. If the current transacting entity is you, the individual player, or a
bank or a holding / trading company, this button does not appear on the
"MANAGEMENT" submenu.

For an industrial company (meaning, in this simulation, a company in any industry other
than banking or insurance, or a holding/trading company), increasing its growth rate means
that it will put more money each year into expanding its asset base (plant and equipment).
This may improve its earnings, but may put a dent in the company's cash flow. For
example, if you set the growth rate at 40%, and a company has 1 billion in business assets,
it will need to purchase another 400 million of assets over the coming year, which will need
to be funded out of profits, its existing cash, or cash that the company raises by borrowing,
issuing bonds, issuing new stock, or selling off stock investments it holds in other
companies.

Rapid growth (if your company has the cash flow to support it) can be good in two ways: It
increases the amount of assets on which the company earns a return on investment (sales
are assumed to increase in a 1-to-1 relationship to a company's business assets), and may
increase the company's market share in the industry, if it is growing faster than the rest of
the companies in the industry. In general, the larger a company's market share, the more
profitable it is likely to be, at any given level of management competence.

The downside of rapid growth of your company is that, if it is unprofitable (earning a lower
return on its investment in business assets than the rate of interest it has to pay), such rapid
expansion will reduce the company's profits, or will increase its losses if it is losing money
on its business operations. In addition, if your company has a significant market share such
as 30 or 40% of the industry's sales/assets, its rapid growth may help its relative
profitability, but may cause the total "supply" or "capacity" of the industry to increase faster
than demand growth, thus lowering profitability of all the companies in the industry. In that
case, if a company has a large market share and is growing at 30%, and you suddenly
change its growth rate to, for example, -10%, you will notice that the projected profitability
of all the companies in the industry, including yours, will suddenly be much better than a
moment before, since your large company is now expected to DISinvest in capital assets,
rather than rapidly investing and expanding its capacity.

Note that if a company's growth rate is negative, it will generally begin to lose "market
share" in its industry (unless the rest of the companies in the industry are shrinking even
faster, on average). However, the good side of this is that if your company has 1 billion in
assets and its growth rate is set at -10%, that means that after one year, its assets will have
depreciated to 900 million. The 100 million shrinkage of assets will be tax-free cash flow
the company will receive, from assumed depreciation at the 10% rate. In effect, it is turning
business assets to cash, at a rate of 10% a year.

Notice also that, for any amount of business assets, a company will need to tie up a certain
amount in "working capital" -- such as inventory and accounts receivable. The cash needed
to finance working capital does not earn any interest -- it is simply "dead money" tied up in
inventory and/or accounts receivable. The larger the size of your business, the more cash

187
that will have to be devoted to working capital. In this simulation, we assume that, on
average, working capital needs to be about 12% of business assets (but can range from 5%
to 20%, as noted below). Thus, in the above examples, if your $1 billion company grows at
40% for a year, it will not only need to pour $400 million of cash into the new business
assets, but might also need 12% of that amount, or another $48 million, to commit to its
increased needs for working capital, so you really need to invest $448 million of cash to
increase your income-producing business assets by $400 million.

On the other hand, if your company with $1 billion of business assets is shrinking its sales
and business assets by -10% a year, it not only generates $100 million in cash flow from
the depreciation (shrinking) of assets, but will also need $12 million less working capital,
so that such shrinkage actually "frees up" $112 million in cash that it can invest, or use to
pay down its debts.

If you increase the profitability of your company, due to R & D spending, restructuring or
otherwise, you will tend to reduce the percentage of business assets that must be tied up in
working capital, to as little as 5% (rather than 12%), due to greater management efficiency.
On the other hand, if your company is poorly managed, the amount that may be tied up as
working capital may rise to as much as 20% of business assets.

For an insurance company, the growth rate you set for it is the rate at which it expands its
"insurance in force" (and policy reserves). The insurance policy reserves are like an
interest-free loan -- cash received from customers that must be put aside in order to pay
insurance claims, but which the company can invest meanwhile to earn investment income
or gains. The company may even earn an "underwriting profit" on its insurance in force, if
it is well-run and if insurance claims it must pay out are less than the amount it takes in
from customers as premium income. Usually, the goal is to roughly break even on
underwriting, since the company gets to keep whatever profits it makes after-tax on
investing the policy reserves.

Growing its reserves means the insurance company will have more of such "interest-free
loans" from customers to invest and earn dividends, interest and (perhaps) capital gains on,
so it would seem that growing as fast as possible would be a good thing. However, as in the
real world of insurance, things are never that simple.

In Wall $treet Raider, the faster an insurer grows its reserves, the less profitable its
"underwriting ratio" will be. Thus, a well run insurer with $1000 million of reserves,
growing at 0% a year, might earn a 5% underwriting profit on its insurance business,
meaning it pays out only $950 million in claims for $1000 million it receives from
customers as premiums, for a $50 million underwriting profit, in addition to any investment
income it earns on the $1000 million of reserves. However, if you increase its growth rate
to 20%, it might increase its reserves to $1200 million in a year, but its underwriting profit
of 5% might turn into an underwriting loss of 3%, or a $36 million loss. However, it will
have permanently increased the amount of its reserves it can invest by $200 million, so it
may be worth the temporary losses, to get access to that much capital, which can be
invested for many years to come, like a long-term interest-free loan.

188
An insurance company's underwriting ratio is a function of three factors in this simulation:
The competence of the insurer's management; its growth rate (the faster the growth, the
lower the profitability, all other things being equal); and the percentage of revenues spent
on advertising and marketing (which will decrease current profitability, but may improve
long-term profitability, by improving the competence level or efficiency of management).

Conversely, if the insurer decreases its growth rate, perhaps even to a negative rate, its
reserves will shrink, but its underwriting ratio will improve (as it is assumed it is "weeding
out" its most unprofitable, high-risk customers). If an insurance company you control is
losing a large amount each quarter on underwriting losses, you can do two things to
improve profitability in the short run -- reduce its growth rate of insurance in force
(reserves), and slash its spending on "productivity" expenditures (advertising and
marketing) to 0%, using the "Set Productivity Spending" function described above. These
actions will be harmful in the long run, but can improve profits in the short term.

The maximum growth rate you can set for a company in Wall $treet Raider is +60% (30%
for insurance companies); the lowest growth rate (shrinking rate) is -10%. However, where
your company is forced to sell off business assets due to a lack of cash or line of credit, and
a deficit in cash, the program will automatically reduce the company's growth rate, without
awaiting your permission, sometimes to levels of even less than -10%, to as low as -25%.

(7) RESTRUCTURE. The "Restructure" command button can be used, when all else fails,
to try to turn around a company's poor profitability. When you select this function, you will
be prompted to enter a percentage, up to 50 percent, of the business assets of the company
that you wish to write down to zero. The effect of the write-off will be to scrap assets, close
factories, and send hordes of faithful, lifelong employees out into the streets to become
homeless beggars and to sleep under bridges. That's sad, and unfortunate, but the bottom
line is the bottom line, isn't it? And this should improve the company's profits. Right?

A restructuring write-off will also drastically slash current earnings and net worth of the
company, so you may be limited to writing off considerably less than 50% of business
assets, if your company is already in weak financial condition, with a low credit rating.

But... the restructuring will tend to increase the profitability of the company's remaining
assets in subsequent periods, unless the company was already well run and doing about as
well as possible in earning a return on its assets. (The research reports generated by the
"Research Report" command on the "ENTITY INFO" research submenu will give you a
reading on whether management is doing a good or poor job, or something in between.)

The large loss generated in the quarter of the write-off will save taxes and may also help to
make earnings comparisons for the next year or so look very good, as the situation turns
around, and the company starts to earn profits again. Or so you hope -- if you can afford to
hold onto the company's stock that long, without getting margin calls from your bank
lender.... However, note that if the restructuring charge is large enough, your accountants
may decide to classify the restructuring write-off as an "extraordinary item," which will not

189
be reflected in your current "operating earnings," which is what the market looks at in
valuing your company's stock.

CAUTION: A large restructuring write-off by a company that is already in weak financial

condition may push it much closer to bankruptcy! As in the real world, there are always
tradeoffs, tradeoffs, tradeoffs....

NOTE: This button is not displayed if the currently selected "Active Entity" is you, the
player, as this function is only applicable to corporations. It is also not displayed if the
current "Active Entity" is a bank, insurance company, or a holding / trading company, none
of which have "capital assets" to write down, in Wall $treet Raider.

(8) ANTITRUST SUIT. If you can't compete with them, sue them!

That is what the "Antitrust Suit" command button is for. Click on this button if you wish to
have your company file a lawsuit against another company that is monopolizing your
industry (other than in the banking, insurance, or holding / trading company industries).
This button is not displayed if the current "Active Entity" is you, the player, or is a bank,
insurance company or holding / trading company that you control.

The "Antitrust Suit" command button permits a company you control to sue another
company in the same industry for ANTITRUST damages of up to $250 billion (U.S.). As in
the real business world, antitrust suits in Wall $treet Raider can be brought just to harass a
financially weak competitor, or they can be a powerful force for preventing a monopoly
from developing in a particular industry. Note, however, that there is always a chance that
you will be successfully countersued if the jury finds you guilty of frivolous or malicious
prosecution.... Litigation is a very risky business.

But if you see that another player has a stranglehold on market share in a particular
industry, particularly if her company (or several of her companies, in the aggregate) control
more than a 50% market share, consider buying up control of a company in that industry
and having it file an antitrust suit against one of the offending companies. It may also be
profitable to bring suit against a large company that dominates an industry, even if no
opposing player owns or controls it.

In Wall $treet Raider antitrust suits, your suit will not have a prayer of success, and you
will be countersued, if the defendant company and companies under common control with
it have less than a 20% market share in the industry in question. Furthermore, you don't
have much chance of getting a good settlement and only a long shot chance of winning at
trial if the defendant has (or controls) less than a 50% market share. But at over 50%
market share the odds of your winning or extracting a very healthy settlement from the
defendant go up at an almost exponential rate, the greater the defendant's market share.

190
Before you file an antitrust suit, note that you can select the level of legal representation
you will have -- cheap, average, or expensive -- using the "Select Law Firm" item on the
"SETTINGS" menu on the main Wall $treet Raider menu screen. As you might guess, your
odds of getting a good settlement or winning the case are considerably better with a better
law firm than with a cheapo firm of ambulance-chasers -- but you may not be able to afford
the best. Once you select a law firm, your company and the defendant both have to pay
their legal fees, just before the case goes to trial or when it is settled.

The defendant's fees will be for a randomly selected law firm, cheap, average or expensive,
and thus may be more, less than, or the same as yours. (If the defendant company is
controlled by an opposing player, its law firm will be whichever firm that player has
selected to represent him or her in all Wall $treet Raider litigation.)

When you click on the "Antitrust Suit" button, you will be asked to enter the stock symbol
of the company that you wish for your company to file suit against. The defendant
company must be in the same industry as your company, and your suit will be thrown out
of court if your firm has already filed an antitrust suit in recent years, so you can't keep
suing someone over and over, unless you wait a while.

Once you have selected the target (defendant), you will be told how much you can sue for,
at a maximum, which is the lesser of $250 billion (U.S.), the defendant company's net
worth, or the largest amount you can afford to sue for, using your selected law firm. Since
the legal fees you pay are based on the size of the suit that is being filed, you can obviously
sue for a bigger amount if you hire a "cheap" law firm, like Shyster, Finagle & Whiplash,
than if you have selected a more expensive law firm to represent you.

If you are able to pay the legal fees, the litigation begins. As part of the pre-trial
maneuvering, your attorneys will want to know how much is the minimum you would
accept if the defendant makes you an offer in settlement. For example, if you are suing for
$1000 million, and you know your legal fees for your "cheap" law firm will be $35 million,
you might enter $75 million, if you know you have a weak case. On the other hand, if you
know you have a strong case, such as where the defendant has a 70% market share, you
might only be willing to settle for a minimum of $200 million, or even $500 million.

Once your case comes up for trial, which may take a few quarters or years of play, a
message will pop up on the screen, during your turn, informing you that the defendant has
either accepted your settlement offer, or rejected it. If the defendant decides to take your
settlement offer, it will pay that amount to your company and the case is closed. If it rejects
your settlement offer, the case goes to trial -- in that case, sit back and hope for the best...
anything can happen. You might win a lot of money with a favorable decision, or the jury
may instead find for the defendant, in which case no one wins (but you both lose, by having
to pay legal fees); and in some cases, if your case was found to be frivolous, the court may
force your company to pay damages in a countersuit by the defendant. Note that an
antitrust suit will be decided on the basis of how much market share the defendant
company had at the time you initiated the suit.

191
Needless to say, winning a large antitrust judgment can make your company's net worth
and stock price go up quite a lot, even after taxes -- while losing a big judgment may put
your company in bankruptcy court and its shareholders on welfare. In either case, your
winnings or loss from a case will be “extraordinary” income or loss, and won’t improve or
decrease your company’s operating earnings it reports. However, if a case is settled out of
court, the net gain or loss (after legal fees) will directly affect operating earnings for both
parties to the litigation.

What, you may ask, do you do if an opponent succeeds in buying up every company in an
industry, establishing a complete monopoly? If you can't get control of a company in that
industry, how can you hope to bring an antitrust suit against one of the opponent's
companies? Easily. You use the "Start Up" button to start up a new company in that
industry, and have it file the lawsuit. Since the other player will still control almost 100%
of the industry, now you're ready to file suit against one of his or her companies, and you
should have an almost open and shut case. Take no prisoners...!

After you have played Wall $treet Raider for a while, you will notice that every time a
company becomes very dominant in an industry and is on the verge of completely driving
all its competitors out of business, it wisely cuts back its growth to avoid getting much over
a 50% market share. As we mentioned earlier, companies that are not controlled by a player
in Wall $treet Raider are fairly "smart"--and no one with even half a brain wants to become
a clay pigeon for a horde of money-hungry lawyers to take shots at.

Of course, you will be trying to gain a commanding market share in any industry that your
company is in, so you can earn monopolistic profits, but it is rather difficult in the Windows
version of Wall $treet Raider to achieve such dominance (legally), just as it is in the real
world. Any attempts to buy up or merge with competitor companies that would give you a
very large market share, over 55%, will usually be blocked by a government agency, to
prevent you from obtaining a monopoly, as will any attempts to buy the assets directly from
your competitors. Your own board of directors will even prevent you from making huge
purchases of new business assets that would create excessive capacity conditions in the
industry, as well.

Thus, to monopolize its industry, your company will usually need to simply grow faster
than the rest of the companies in the industry, until it starts to squeeze them out and
bankrupt them. And once it gets to that point, beware -- as your company will almost
certainly be sued by other companies in the industry, once your market share gets up to
about 50%.

(9) SET FUND ADVISOR FEE. In Version 6.60 or higher, each ETF (exchange-traded
fund) is assigned a fund investment manager/advisor by the program. The ETF will pay an
annual fee to the advisor that ranges from 0.2% to 1.0% of the fund's total assets. The
randomly selected
advisor is usually a securities brokerage firm, but can
sometimes be an insurance company. If you control a
securities broker or an insurance company, the "SET

192
FUND ADVISOR FEE" button will show up on the Management Menu for that company,
and if your company is the advisor to any ETF's, you may change the annual advisory fee
charged, to anywhere from 0.2% to 1.0% of fund assets. Otherwise, for any other company
you control, other than a securities broker or insurance company, this button is not
displayed on the Management Menu.

If your company manages more than one ETF, you will be

asked, for each ETF, if you want to change the management fee, unless you click on the
"Cancel" button, to return to the menu, when given the choice of Yes/No/Cancel.

While it might seem like a no-brainer to set the fee as high as possible, a high fee will
create a significant drag on the ETF's performance over a period of several years, while a
low fee will enable the ETF to grow faster. If an ETF's stock price (adjusted for any capital
gains distributions) does very poorly relative to the Stock Index over a 5-year period, your
company may in some cases be fired by the ETF, which will randomly select some other
broker or insurer to manage it. On the other hand, if the fund significantly outperforms the
market over a 5-year period, your company's fees will not only be growing, but your
company may be rewarded by the ETF issuing new stock, increasing the amount of assets
under
management by 10% to 25% and thereby increasing your
company's management fees accordingly.

Other than being fired as fund manager for poor performance of the fund, the only other
ways in which a broker or insurer can lose its management contract with an ETF are as
follows:

 The ETF goes bankrupt.

 The ETF is disqualified and becomes a regular (taxable) holding/trading company,
when some player or company acquires over 15% of its stock.
 The company that is the fund advisor goes through bankruptcy.
 The fund advisor goes through a liquidation. However, if it is a non-taxable
liquidation in which all of its assets are transferred to the parent corporation, the
investment management contract transfers over to the parent corporation. Similarly,
if a brokerage firm (the advisor) sells all of its business assets to another company,
or does a capital contribution of all of its business assets to a 100%-owned
subsidiary, the management contract will also be transferred to the other company.
 The fund advisor, if it is a securities broker, is forced to sell off all of its business
assets or scrap them, becoming a holding/trading company.

(10) TOGGLE AUTOPILOT ON/OFF. In Version 7.70 or higher, it is now possible to

change the AutoPilot setting for an individual company that you control, even if you have a
different "global" AutoPilot setting that you have set on the "Game Options Menu." For
example, you may have used the Game Options Menu to turn the AutoPilot setting "ON"
for all your companies, but may decide for a particular company that you do not want to
delegate its management to the program, so you can use this Toggle AutoPilot ON/OFF
button (on the Management Menu) to turn off AutoPilot for that company. Or turn it back
ON.

193
 OTHER TRANSACTIONS MENU

CHAPTER IX.

A. IN GENERAL.

Except for borrowing money or making loan repayments, all other transactions in Wall
$treet Raider, such as buying or selling stock, bonds, or other assets, are done by clicking
on one of the six buttons on the "Transactions" grouping of buttons on the main menu
screen. Each such transaction selected from the "Transactions" grouping that is completed
counts as one of the 5 transactions allowed on a player's turn. Other actions, such as
borrowing money or repaying loans, or doing stock splits or corporate name changes, can
be done by clicking on the "MISC" button on the main screen and selecting an item such as
"Borrow Money" or "Repay Loan" from the pop-up submenu that will appear, but none of
those actions count against you as one of your 5 allowed transactions per turn.

To initiate a transaction, click one of the six "Transactions" buttons: Buy Stock, Sell Stock,
Buy/Sell, Financing, Management, or Other Trans., on the main menu screen, and, except
when clicking on the Buy Stock or Sell Stock buttons, one of four different submenus will
pop up, each listing anywhere from 2 to 12 possible transactions, with a button for each.
Then click on the appropriate button to begin the type of transaction you wish to do.

Note that, while viewing each Transactions pop-up submenu, the submenu screen will have
a text-box on the left, describing the allowable functions, and sometimes will include other
useful information, such as the current buying power (cash plus line of credit) of the
currently selected "Active Entity." The various buttons for the different types of
transactions will appear in a vertical row on the right side of the pop-up submenu. At the
bottom of that dialog screen will be 3 additional buttons: A "Close" button to close the
submenu and exit back to the main menu screen; a "Player" button (click it to instantly
change the "Active Entity" that is to do the desired transaction to you, the player); and a
"My Corps." button, which will let you select a corporate entity you control as the new
"Active Entity," which will do the transaction(s) you are planning to execute. Notice that if
you only control one corporation, and you click on the "My Corps." button, that company
will instantly be selected -- you will not need to enter its stock symbol, or select it from a
"lookup" list of companies you control.

194
This Chapter IX describes the various "OTHER TRANS." transactions that you can do if
you select the "OTHER TRANS." button.

B. "OTHER TRANS." BUTTON AND SUBMENU. The following transactions, most of

which do not fit neatly into any one category, are all called by clicking on the "OTHER
TRANS." button on the main screen, which will bring up the "OTHER TRANSACTIONS"
pop-up submenu. However, most of the transaction buttons on that submenu might come
under the heading of "dirty tricks," other than the "Change Bank" and "Buy or Sell Bank
Loans" buttons.

Each of the "OTHER TRANSACTIONS" submenu command buttons and their functions
are described below. Note that only the first 3 buttons, "Harassing Lawsuit," "Spread
Rumors," and "Change Bank," will appear if the "Active Entity" is not a bank. If the
"Active Entity" is a bank you control, then five of the six buttons described below are
shown (all but the "Change Bank" button, which is not applicable to a bank itself, and thus
will not appear when the "Active Entity" is a bank).

(1) HARASSING LAWSUIT. If you are feeling particularly mean and aggressive, this
"Harassing Lawsuit" command button (which is used to file a nuisance lawsuit) is an ideal
way of harassing a competitor's company, by filing a phony lawsuit against them. While
both sides in the legal fray will spend about the same amount of money on legal fees and
litigation expenses, all of which is utterly wasted, this can be a handy way to crush a small
or weak competitor (you choose the amount to be expended, up to $500 million U.S.).

For example, if you control IBM, which may have billions of dollars in the bank, and tens
of billions of assets, and another player controls a small but profitable company with only a
few hundred million in assets, you could have IBM file a nuisance lawsuit on some flimsy
pretext against the other player's company, causing both IBM and the smaller company to
spend, say, $500 million each in legal fees and expenses.

While these lawsuit expenses might put a slight nick in IBM's quarterly earnings, it would
probably drive your opponent's company into almost immediate bankruptcy, which might
also bankrupt your opponent and put him or her out of the game! Not a nice thing to do, but
life isn't always fair, and the investment game never is.... Of course, you won't necessarily
get away with this rotten conduct -- your company might get hit for substantial damages for
filing a malicious, frivolous lawsuit. There are always trade-offs in this simulation, as in the
real world, and especially if you have accumulated a lot of bad "kharma," which Wall $treet
Raider keeps track of when you do slimy (or noble) things....

One word of advice on filing a phony lawsuit -- use a good law firm (selected on the
"SETTINGS MENU/Select Law Firm" menu item on the main Wall $treet Raider menu
screen). It will cost you more, but will reduce your chances of being successfully sued for
malicious prosecution by your intended victim. In short, if you are going to hire an assassin
or intimidator, hire the best!

195
(2) SPREAD RUMORS. The "Spread Rumors" command button (which can be used to
spread false rumors about an opponent's company) is a form of financial terrorism. This
menu item is, shall we say, the last resort of scoundrels. Sounds interesting? We thought so!
Use this command if you want to start a "whispering" campaign on Wall Street about a
company, preferably a company in which an opposing player has a large investment. The
rumors will immediately reduce the target company's stock price, and may even adversely
impact its business and profitability, sometimes very severely. Of course, there are
sometimes consequences for spreading such scurrilous lies -- including payback by your
opponent if you stoop to using such gutter tactics. What goes around, comes around, as the
saying goes.... It's the Law of Kharma.

In fact, using these feature may even trigger a slander or libel lawsuit against you by the
victim, if you overuse this nasty tactic, or if you spread rumors even once, if you have built
up a lot of "bad kharma" from other nefarious deeds in the current game. Note that in
Version 5.0 and later, you may no longer use this feature in the last year of the game, which
means that if you do resort to this dirty trick, there will be adequate time before the game
ends for the offended competitor to sue you for slander, and perhaps win a judgment
against you.

(3) CHANGE BANK. Clicking on this button will allow the currently selected transacting
entity (player or company) to change bank lenders -- but if your current bank is controlled
by an opposing player, the change of banks will be allowed only if the borrower has fully
paid off any bank loan it may have owed.

If you (or your company) owe nothing to your current bank lender, you will be able to
select any other bank as the new "banking relationship" (bank lender, and bank where you
or your company keeps its cash deposits). Thus, even if you or your company owe nothing
on a loan at the moment, you may want to change the bank lender to a bank that you
control, so when you do borrow, your loan will come from (and give business to) a bank
that is under your control. Your company will also move its deposits over to the bank you
control, which will give your bank more money to lend out at a profit, since it should earn
more than it pays you on the certificates of deposit (CD's). Furthermore, if you have solid
control the bank you borrow from, it is thus not as likely to be taken over by an opposing
player, who could then use the bank to call in most of your loan, an action which might be
a crippling financial blow to you. (See "Call in Bank Loan" button in the next section
below.)

Note that you cannot foist off a bad loan on a bank that is controlled by another player
(unless it is a fairly small loan, of under $300 million), by changing the borrowing
corporation's bank to one that is controlled by another player, sticking his or her bank with
the loss when the company goes broke. When you attempt to do so, the other player's bank
will flatly refuse to buy your company's loan from the bank that currently holds it.

If you owe a loan balance, and wish to change banks, you can only do so if the new bank
you select has enough cash on hand to buy your loan from your existing bank. (The

196
purchase may be at a price above or below the face value of the loan, depending upon the
credit rating of the borrower.)

Another reason why you might want to change banks is if your current bank is in very
shaky financial condition, and likely to go bankrupt, in which case you could lose a large
amount of your cash (which is assumed to be deposited in the same bank you borrow
from). Thus, you may want to change your banking relationship to one with a bank that has
a top-quality credit rating, which is less likely to fail, or else invest your cash in something
safer, like short-term government bonds, rather than leaving it in bank deposits.

Even if you control the new bank to which you wish to move your account, you will not be
allowed to in all cases,
in Version 5.0 and later. If the size of your deposit is too large, the banking authorities will
not allow you to move such a large account (in relation to that bank's total assets) if doing
so would be disruptive to the bank’s normal business operations, or where the removal of
such "hot money" deposits could have a disastrous effect on the bank. Deposits are
considered to be too large to transfer if all three of the following conditions are true:

 The cash (deposit amount) is greater than $3,000 million (U.S.); and
 The deposit amount is greater than 20% of the "new" bank’s total assets; and
 The deposit amount is more than 1.5 times the amount of the loan that will also be
transferred to the "new" bank.

NOTE: If the currently selected transacting entity is a bank, this button will not appear on
the menu.

(4) CALL IN BANK LOAN. The "Call in Bank Loan" command button can be used to
create immediate financial discomfort for a competitor, by "calling in" up to half of the
loan of another player or company. If you enjoy playing dirty, you will love using this
command, although you have to use it in the right circumstances for it to be effective. To
use it, you must take control of the bank that is the lender to the particular player or
company. Then just click on the "Call Bank Loan" button and follow the instructions to
either call in part of a player's loan, or that of a company. You can even call in the loan of a
company that is not controlled by any player, although calling in any loan may do no good
if you do not first "freeze" such a player's or company's line of credit (if any).

You will be asked, when using this function, if you want to call in 1% to 50% of ALL loans
to companies controlled by a particular player, from all banks you control, as part of the
same transaction (when you call in part of that player's loan from a bank you control, or
call in a loan from any one company that is controlled by an opposing player).

Note: You cannot call in a loan of a company that maintains a "BBB" or better credit
rating.

When you execute this transaction, your bank will call in a percentage, 1% to 50%, as you
specify, of the victim's loan. The targeted player or company will be forced to find some

197
way to raise cash to make the large and unexpected loan principal repayment. As a rule,
don't use this tactic unless the opponent (or company) owes considerably more than one
times net worth and has very little in the way of cash and bonds.

Also, be sure to use the "Freeze/Unfreeze Loans" command button (see below) to freeze
lending to competitors by your bank, before you call in part of a loan -- otherwise, the
victim may be able to simply borrow back some of the cash needed to cover the liquidity
crisis you are trying to create for that player or company, if you have not cut off his/her/its
line of credit by freezing it.

Note that you cannot call in the loan of a company that has a deficit in net worth, since it is
deemed to have filed for bankruptcy protection from creditors. But for a company with a
very poor credit rating, such as "C" or "CC," this can be a devastating blow, if the company
has little in the way of cash and liquid assets that it can easily sell off.

LIMITATIONS: You will not be able to call in a loan immediately, in all cases. For
instance, once a company's (or player's) credit rating has fallen to "D" (default), he/she or it
is protected from such tactics by the Bankruptcy Court. Similarly, if a company already has
an overdrawn bank balance (a cash deficit), and has no readily saleable assets, such as
stocks or bonds, you will not be able to call in 50% of its loan immediately, since it has no
liquid assets you can seize; you will have to wait until the company liquidates some of its
capital assets before you can grab its liquid funds -- this prevents you from making
repetitive "calls," one after another, in short succession, where one "call" created a cash
deficit for the borrower.

Also, if a corporation maintains at least a BBB credit rating, you may not call in its loan. A
corporate loan may only be called if the borrower's credit rating falls below investment-
grade, which is, at a minimum, a BBB credit rating. (However, you can call in a player's
loan, no matter how good his or her credit rating is.)

Used in the right situation, where an opponent or his or her company is leveraged to the
eyeballs and low on cash, calling in part of a loan can be the coup de grace, leaving the
victim with a huge cash deficit that will have to be paid off soon by a forced liquidation of
business assets or stocks and bonds. For an opposing player, in particular, it can be enough
to trigger the series of margin calls that will expel him or her from the game -- sort of a
kick in the pants to the poor devil who is already standing out on the ledge outside a 30th
story window, trying to decide whether or not to jump....

To find out which bank a particular player/opponent borrows from, use the "Who's Ahead?"
command button on the "GENERAL" research submenu, which lists each player's debts,
assets, and which bank he or she borrows from and has a bank account with. To find out
which bank a particular company borrows from, use the "Financial Profile" command
button on the "ENTITY INFO" research submenu. This information appears in the
"CREDIT INFO" portion of the corporation's financial profile display.

198
CAUTION: In the interest of family harmony, we suggest that you never use the "Call in
Bank Loan" function against a spouse -- it is simply not worth the years of recriminations
and bitterness that are sure to ensue, not to mention possible marriage counseling fees
and/or hospital emergency room costs.

NOTE: This button only appears on the "OTHER TRANS." submenu if the currently
selected "Active Entity" is a bank (which you control).

(5) FREEZE/UNFREEZE LOANS. The "Freeze/Unfreeze Loans" command button allows

you to either "freeze" or "unfreeze" lines of credit to other players or companies who
borrow from a bank which you control. Thus, when you "freeze" their credit lines from
your bank, the opposing players and companies will have to continue to pay interest and
(for companies) amortize the principal of their loans, but will have a $ 0 (zero) line of
credit from your bank, so they won't be able to borrow any more money from your bank,
even if they have a AAA credit rating. If you decide your bank could make more money by
going ahead and allowing loans to your competitors, and you aren't afraid that the
competition will do anything too brilliant with the money they borrow, you may want to
"unfreeze" their lines of credit.

This function is also handy, if you are concerned that one company is borrowing too much
from your bank. You can halt any further borrowing by freezing that company's line of
credit.

This command button is essentially an "on / off" toggle switch for freezing or unfreezing
lines of credit for players or companies who borrow from your bank. When you click on
this button, when a bank you control is the selected transacting entity, you will be shown a
list of players and companies that borrow from your bank (with "FROZ." beside the loan
info for any loan that has been frozen). To select a borrower to change the setting from
"freeze" to "unfreeze" or vice versa, just double-click on the name of the borrower. An
asterisk (*) will appear beside the loan info for a loan to any competing player, or company
controlled by another player, that is not currently frozen. This makes it easy for you to
identify and freeze loans made to opponents’ companies.

When viewing the list of your bank's loans that may be frozen or unfrozen, if you click on
the "OK" button or otherwise close that dialog window without selecting a loan for
freezing or unfreezing, you will be asked if you wish to freeze/unfreeze all loans to
opposing players and the companies that they control. However, changing this setting will
not affect those loans you have frozen (or not frozen) for other, "neutral" companies (those
not controlled by any player).

The usual default situation, when you take control of a bank, is that all lines of credit from
that bank are "unfrozen." Thus, to freeze your opponents' lines of credit, you now have to
take the affirmative step of utilizing the "Freeze/Unfreeze Loans" command button and

199
selecting the entities whose lines of credit you wish to freeze. Note, also, that if you lose
control of the bank in question, all lines of credit it froze will soon be UNfrozen.

Your own line of credit, or that of a company you control, may be temporarily frozen, and
rapid repayment required, even if you control the lending bank, in some cases. This can
occur if the government Bank Examiners find that you (or your company) have borrowed
an amount that exceeds 25% of the bank's business loan portfolio, and also exceeds $10
billion U.S. In that case, your line of credit (or that of your company, if it is the borrower)
will be frozen, and rapid, large principal repayments will be required, until the loan is either
reduced to $10 billion, or no longer exceeds 25% of the bank's total business loans.

NOTE: This button only appears on the "OTHER TRANS." submenu if the currently
selected transacting entity is a bank (which you control -- not necessarily the current
"Active Entity," if the "Active Entity" is a company you do not control).

(6) BUY OR SELL BANK LOANS. Clicking on this button will allow the "Active Entity"
(if it is a bank that you control) to buy or sell various types of loans, and will bring up the
small menu with 8 options, shown below:

The main use of this transaction button is to enable your bank to utilize any uninvested
cash it may have on hand to buy more loans, on which it can earn interest, or to sell off
loans for various reasons, such as to raise cash, or get rid of risky loans. You are given the
choice of buying or selling four types of loans:

 Business loans. (Your bank can buy corporate loans, from some other bank, or you
can sell either player or corporate loans if another bank can be found as a buyer, to
purchase the loan from your bank.);

200
  Consumer loans. (Your bank can buy or sell a specific dollar amount of such
loans.);
 Mortgage loans. (Your bank can buy or sell a specific dollar amount of such loans.);
or
 “Subprime” mortgage loans. (Your bank can buy or sell a specific dollar amount of
these risky, but high-yield mortage loan securities. Insurance companies can also
buy or sell subprime mortgage securities, but must use button commands on the
Other Trans. Menu, which only appear on that menu if the Active Entity is an
insurance company that you control.)

If you choose to buy a corporate loan, you can enter the amount (limited to your bank's
cash on hand) that you want to spend to buy such a loan, and the program will search the
loan portfolios of other banks until it finds (usually) a suitable loan, which will generally be
for an amount as close to as possible, but less than, the amount you entered. Thus, if you
enter $5000 million as the amount you want the bank to spend to buy a business (corporate)
loan, a search might find a loan from ABC Bank to XYZ Corporation in the amount of
$4700 million, and will purchase that loan for your bank from ABC Bank. However, any
such purchase will generally be of a loan that is no larger than about 35% of your total loan
portfolio.

The purchase price for such business loans is usually at or near face value, but will
occasionally be at a large discount of 35% to 80% below face value for a more risky D-
rated loan. the price will be at a slight premium for a loan from a company with a very
good credit rating (BBB or better).

You may also choose to buy a specific corporate loan, from a list of all corporate loans that
are being offered for sale (that your bank can afford to buy) by banks other than those
controlled by other players. Certain loans will not be listed as available for purchase, such
as loans held by certain small banks or banks holding only a few corporate loans. The loans
of other players also are not available to be purchased by your bank with this feature,
except when you are playing at the highest difficulty levels (Difficulty Level 3 or 4), and
then only if no competing player controls the bank that currently holds the player's loan. If
you are playing at Difficulty Level 1, your bank will not be allowed to purchase loans owed
by companies controlled by other players, even if no competing player controls the bank
that holds such loans. However, at Difficulty Levels 2 or higher your bank can buy loans of
companies controlled by other players, as long as the selling bank is not controlled by a
player. In other words, the higher the Difficulty Level chosen for a game, the more
ruthless players who control banks can be in buying up opponents' loans and then
freezing or calling in their loans.

If you choose to sell business loans (loans to players or corporations), you will see a list of
all such loans currently held by your bank, with a selling price for each, determined in the
same way as described above, when selecting a loan to buy. However, when your bank is
the seller, the offering price will never be greater than 101% of face value of the loan. Also,
it will not always be possible to find a buyer for some loans that are "D-rated," if there is a
high likelihood that the borrower will soon have to go through bankruptcy.

201
 NOTE: This button only appears on the "OTHER TRANS."
submenu if the currently selected "Active Entity" is a bank (which
you control).

(7) EXERCISE CALL OPTION. Clicking on this button will allow you to do an early
exercise of a call option you own, or that your controlled company owns, if the option is
currently "in-the-money." (That is, the price of the underlying stock is above the strike
price.) You may do an early exercise of an option (before its expiration date) even if your
current setting for exercising options is "No" (off). However, the various exceptions to
exercising call options at the time of expiration also will apply to an early exercise (such as
not being able to obtain control of a company by exercising the option, if that would violate
antitrust rules, not having enough cash and line of credit to purchase the stock, etc.).

(8) EXERCISE PUT OPTION. Clicking on this button will

allow you to do an early exercise of a put you own, if the option is currently "in-the-
money." (That is, the price of the underlying stock is below the strike price.) You may do an
early exercise of a put option (before its expiration date) even if your current setting for
exercising options is "No" (off). However, you can only exercise a put option to the extent
you own the underlying stock that you will be selling by exercise of the put.

(9) DECREASE EARNINGS. Click on this button to add to a "Reserve for Contingencies"
account, in order to "smooth out" and manipulate the earnings of a company you control.
For example, if you expect your company's earnings in the current quarter to rise 25% over
the same quarter in the past year, you may want to "hide" some of those earnings in this
reserve account (non-cash), since you realize it may be hard to match that level of earnings
in the future, which could cause a big drop in the stock when the earnings growth falters.
The weak justification (to the company’s auditors) for setting up this reserve is to anticipate
all manner of future liabilities, such as litigation, product liability, warranty reserves,
potential environmental liability, or deferred tax liabilities.

Thus, you might bury 5% of the current quarterly earnings in the reserve, so that the current
quarter only shows an increase of 20% or so over the prior year period, instead of the
(actual) 25% increase. At some later date, when earnings are in danger of no longer
increasing, you could take some or all of that reserve out of the account (using the
"Increase Earnings" command button), in order to create the appearance that earnings are
still rising every quarter, so as to keep the stock price aloft. These additions to or
withdrawals from the reserve are not cash transactions, but are merely accounting
adjustments.

(NOTE: Additions to the reserve have no tax effect, as they are not deductible, except in
the case of a bank -- see next paragraph. Similarly, withdrawals from this account are not
taxable.)

If the company which you control is a bank, it will not

202
maintain a Reserve for Contingencies account. Instead, this adjustment will simply be an
addition to the bank's bad debt reserve, which will depress this quarter's (pre-tax) earnings
by the amount you are adding to the bad debt reserve, but will have the good effect of
reducing future (required) additions to the bad debt reserve. Additions to the bad debt
reserve ARE tax-deductible.

The amount you can add to the Reserve for Contingencies

account for any one quarter by using this button is limited to 5% of the company's
projected quarterly profits, or 10%
of any projected loss (not counting "extraordinary items" in either case). Those percentages
are doubled in the case of a bank's addition to its bad debt reserve, which are PRE-tax
expenses. Companies not controlled by a (human) player will add to or draw from their
own contingency reserves under certain conditions.

NOTE: Additions to the Reserve for Contingencies, although they are for hypothetical
estimated future expenses, nevertheless create a balance sheet liability and thus can lower
your company's credit rating and reduce its line of credit. However, a smart investor will
realize that this is a "phony" liability and one that can quickly be extinguished, painlessly.

(10) INCREASE EARNINGS. Click on this button (if it appears) in order to give an
artificial boost to your company's earnings for the current quarter. (It only appears
for a company which you control and only if the company has some amount in a "Reserve
for Contingencies" on its balance sheet.) Use this button if your company's earnings are
faltering, and you want to continue to show improved earnings for the coming quarter. This
function allows you to take out part or all of the amount in this account and add it to net
income for the company at the end of the current quarter. The amount added increases net
income dollar-for-dollar, since the additions to or withdrawals from this reserve account are
not taxable transactions. Reducing or zeroing out this liability account may also improve
your company's balance sheet and credit rating, as well as increasing its bank line of credit.

Companies that are not controlled by you will also occasionally build up a Reserve for
Contingencies and draw upon it to "smooth out" earnings fluctuations. You may find a
company with such a large reserve to be an
attractive takeover target, after which you could draw
down or eliminate the reserve in order to improve the
reported profits and credit rating of the company.

Once a company's net worth drops below zero, the program will automatically schedule a
complete elimination of any balance in the Reserve for Contingencies account, which
will flow back into reported income at the end of the quarter for that company, improving
its balance sheet and net worth. This will happen automatically, even if the company is
controlled by a player.

203
This button will never appear where the active entity is a bank, since banks do not have a
Reserve for Contingencies account in Wall $treet Raider -- but they do have a reserve for
bad debts (which is similar) that is required to be maintained at certain minimum levels by
the national banking regulatory authorities. Making discretionary withdrawals from the bad
debt reserve is not allowed.

(11) INTEREST RATE SWAPS. Click on this button to create, view, or cancel an interest
rate “swap” derivative contract. You can draw up terms you desire for one of these
derivative contracts, which are “bets” on the direction of interest rates. The screen that pops
up when you click on this button has places where you can enter the desired terms and
whether you want to be the “long” or the “short” party. There are also buttons at the bottom
of this dialog screen that will let you make your offer of terms, view and analyze any
existing swaps you are a party to, or list the contracts and select one to terminate by making
a termination payment.

Players or companies with a credit rating of "B" or better

may enter into interest rate swap agreements with a counterparty, if one can be found. The
counterparty to the contract will generally be a bank, brokerage firm, or an insurance
company. Think of the counterparty as the “bookie,” while you or your company are the
bettor. (The “sucker,” generally.)

The "long" party to such a swap agrees to receive a fixed rate of interest from the other
party for an agreed period of time, for up five years into the future. Thus, if you are betting
on a change in the interest rate on long- or short-term government bonds, you are in effect
betting that the price of the bond will be rising, if you are “long” on the swap contract –
meaning that you are betting that that interest rate will be declining.

The "short" party will, in exchange, receive a variable rate of interest of the type chosen,
which can be the banks' Prime Rate, or the yield-to-maturity rate on either the long
government bond or the short-term government bond.

The varying rate is computed at the end of each quarter and is

compared to the fixed rate that is to be received by the "long"
party to the swap. If the fixed rate is higher, the net interest
rate differential, as a percentage of the notional principal
amount of the contract, is paid to the "long" party. If the
varying rate is higher than the fixed rate, the "long" party
pays the difference to the "short" party. Interest is calculated on an agreed "notional"
principal amount, which you specify when you draw up the proposed contract and put it out
to bid.

As an example, if you are the “long” party, betting an interest rate will fall, and you are
receiving the fixed rate of 11% when that rate has fallen to 9% at the end of a quarter, you
will receive a payment equal to an annual rate of 2% (1/2 of 1% for that quarter),
multiplied times the notional principal amount of the swap agreement.

204
No money changes hands when a swap agreement is entered into. Instead, one party pays
the other party the interest rate
differential at the end of each calendar quarter. Thus, in
effect, if the contract is based on the Prime Rate, the "long"
party is betting that the Prime Rate will fall, while the
"short" party is betting the Prime Rate will rise. Similarly,
if the "bet" is on one of the government bond rates, the
"long" party is betting that interest rate will fall (usually
because the price of the bond is rising) and vice versa in
the case of the "short" party.

NOTE: If the "bet" you are making is on the long-term government bond interest rate, and
the short-term bond will mature before the contract expires (at which time the long-term
bond becomes the new short-term bond, paying the same coupon interest rate), the subject
interest rate will become that of the “new” short-term bond once the “old” short-term bond
has expired. (At that time, a new 20-year long-term bond comes into existence.) Also, you
cannot create an interest rate swap on the short-term bond unless the swap contract expires
before the short-term bond matures.

PLANNING POINT:

Note that, all other things being equal, the interest rate on the short-term bond will
steadily decrease as it approaches its maturity date, in the last five years before
the short-term bond matures.

Since you will be dealing with financial "sharks" (brokers and banks, usually), you will
seldom be able to enter into a swap agreement where you actually receive the current Prime
Rate as the "fixed rate," if you are the long party (or the current Long Bond or Short Bond
Rate, if the swap is based on either of those current rates). For example, if you want to be
"long" on a Prime Rate swap when the Prime is 9%, a bank or brokerage house may only
offer to pay you 8.5% as the fixed rate, not 9% -- "Take it or leave it."

Or, if you want to be the "short" party on a Prime Rate swap when the Prime Rate is 9%,
you might have to agree to pay a fixed rate of 9.75% if you want a counterparty to take
your "bet" that the Prime Rate will increase. However, in some rare cases, a counterparty
will accept your offer without making a counter-offer. (Usually because you appear to be
making a pretty dumb bet.)

Note, however, than in v. 6.21 and later versions, if your controlled bank, insurer or
securities broker initiates a swap transaction, it will get a better offer than you or one of
your other companies would be offered from the counterparty bank, broker, or insurer. Your
bank, broker, or insurer will still be offered a somewhat unfavorable rate, but your bank, for
example, will only take a “haircut” that is ½ as bad as you or one of your industrial
companies would have to take to do a swap deal. For example, if you are going “long” on

205
the Prime Rate when it is 10%, the counterparty might only offer to pay you (the player) or
one of your industrial companies a fixed rate of 9%. However, in the same situation, if it is
your bank seeking to do a swap, the counterparty would offer it a 9.5% fixed rate instead of
only 9%.

To create a contract, you must do the following:

 First, select an interest rate on which it will be based (Prime, Long Bond, or Short
Bond Rate);

 Choose whether you want the "long" side of the contract or the "short" side;

 Enter a notional principal amount (which can't be more than the lesser of 100 times
your (or your company’s) net worth, or 500,000 million of the currency in which
you are playing (500,000 billion, for some currencies), whichever is less;

 The size of contract you may enter into may be further limited it it would increase
you net long or net short total of swaps to an amount greater than 500 times your
net worth, or if the trading entity is a company, to an amount no greater that 100
times its net worth if playing at Difficulty Level 1 (200 times net worth at Level 2,
or 300 times net worth at Levels 3 or 4); and

 Finally, you must select the year and quarter in which the swap will begin and end,
starting no sooner than the next quarter and ending no later than 5 years after the
next quarter. A swap cannot begin until the next calendar quarter, although it can
begin at a later date, up to 5 years in the future.

Once you have entered your desired terms, click on the "OFFER" button to attempt to find
a counterparty. If one is found, it may accept your terms, but will usually make a counter-
offer at a fixed rate that is usually lower (if you are "long") or that is higher (if you are the
"short" party) than the current rate.

You can either accept a counter-offer, or reject it, if you feel

it is too unfair. (Don't expect any charity, when dealing with
the likes of a Goldman Sachs or a J.P. Morgan.)

There are 3 ways a swap contract, once entered into, can terminate:

(1) By its terms, when it expires;

(2) Automatically, if either party goes bankrupt (Chapter

11 or total bankruptcy); or

(3) When you choose an early termination.

206
Note that you can choose to terminate a swap contract, but to do so you must pay the
counterparty a termination fee, an amount equal to at least a half-year's interest rate
differential at the rates then in effect, if the rate differential is currently unfavorable to you.
(If the current rate differential is favorable to you, you probably would not want to
terminate the contract!) However, in any case the termination fee will rarely be less than
0.5% of the notional principal amount the contract is based upon (or from 1% to as much as
3% if the contract has more than one year left to run). The longer the remaining term of the
contract, the higher the termination fee, and the longer its beginning date is deferred, the
higher the termination fee.

As in the real world, these swap agreements are derivative instruments that do not show up
as assets or as liabilities on companies' balance sheets, except as a brief footnote. As such,
they are "weapons of mass financial destruction," as Warren Buffett has termed them,
which can destroy banks or other entities that have a large exposure from such derivatives.
In the real world, some of the major U.S. banks have various types of derivatives, including
swaps, with a total “notional” amount as much as $75 trillion or more at a single bank, so
the size of these transactions in W$R may seem stupendous, but they are actually pretty
change small compared to the derivatives exposure of a real-world megabank like a J.P.
Morgan-Chase.

Since you will be betting against the "house," on their terms,

when you enter into a swap agreement, much like playing cards at a casino, you should
expect to lose much of the time, though you may occasionally win a jackpot. Think of
doing swaps as a last, desperate resort -- sort of like trying to get out of debt or to buy Baby
a new pair of shoes by going to Las Vegas and trying your luck at the gaming tables....

In the real investment world, the terms of the swap agreements that a company has entered
into are usually kept secret, with very little disclosure in financial statements. Similarly, in
Wall $treet Raider, only a small footnote will appear in a company's Financial Profile,
disclosing only the total "notional amount" of all such swaps contracts a company has
entered into, if any, so you will have no clue as to whether the company is "long" or "short"
in such contracts, or whether the swaps are likely to be profitable or disastrous for the
company. However, beginning with Version 7.0, you may view all existing swaps contracts
by “looking under the hood,” using the “Who Owns What?” button on the General
Research Menu.

Occasionally, you may see a news item or a brief sentence in a Research Report on a
company, stating that it is generating large profits or losses on interest rate swaps. You can
get a rude surprise when an otherwise profitable company in whose stock you have
invested suddenly reports that it is incurring huge losses on interest rate swaps, which may
go on for years in some cases.

Paying attention to that kind of information can be very profitable in itself. For example, if
a company you control has a highly profitable swap agreement in place, you may want to
consider selling short (or buying puts on) the stock of the counterparty, which you will

207
know is likely to incur some very large losses under the swap agreement, for as long as it
remains in effect.

(12) FOR SALE ITEMS. Clicking on this button will

display a list of stocks and business assets that are being
offered for sale by players or companies. Stocks that are
offered may be purchased (without a commission) from the
seller at 95% of the current market price at the time you
accept the offer. Business assets may be purchased (also
without a commission) from the selling company at 95% of
the seller's cost, as shown on its balance sheet. Items are generally offered for sale when the
seller is having cash flow problems and has no line of credit to borrow on. Click on any
item on the list if you wish to accept the offer to sell.

If you accept an offer, you may choose to either buy all of the stock or assets offered, or
only a portion. If, for example, another player is offering 100% of XYZ Corp. for sale, and
you choose to buy only 51%, the rest of the offer (for the other 49% of XYZ) will remain
in effect until its expiration date.

Offers to sell corporate business assets may only be accepted by a company in the same
industry group or by a holding / trading company. Offers to sell stock can generally be
accepted by any player or company that has enough cash and/or credit to make the
purchase, except that a company cannot buy back its own stock from a shareholder who
offers it for sale, but instead can only do so by making a "greenmail" buyback offer, using
the "Greenmail" button on the "BUY / SELL" menu. Some other restrictions on stock
purchases may also apply that would apply otherwise in any attempt to buy a stock, such as
when there are anti-trust restrictions, or if a bank is not allowed to invest more of its capital
in more stock holdings.

If you wish to cancel an offer of stock or assets that you or a company you control have
listed for sale, find the offer on this list and click on it, and you will be asked if you wish to
cancel the offer and remove it from the list of items for sale. Otherwise, an offer will
remain in effect until it is either accepted in full or expires at the end of a calendar quarter.

(13) BUY SUBPRIME MORTGAGES. This button only appears on the Other Trans.
Menu when the Active Entity (controlled by you) is an insurance company. Click on this
button to buy “subprime” mortgage securities, which pay a very high interest rate, but are
backed by very low-quality “subprime” mortgages, which tend to become nearly worthless
at times, in a bad economy.

(14) SELL SUBPRIME MORTGAGES. This button only appears on the Other Trans.
Menu when the Active Entity (controlled by you) is an insurance company. Click on this
button to sell “subprime” mortgage securities owned by an insurance company you control.

208
 RESEARCH MENUS AND TOOLS

CHAPTER X.

A. IN GENERAL.

Wall $treet Raider has a wide range of research features you can use, to help you find and
manage your investments. Six buttons on the main screen are grouped together in the
"Research Tools" area, two of which ("Select Player" and "Select Corp.") can be used to
select the "Active Entity" that you are studying or, if you control the entity, that will do one
or more transactions.

Two other Research buttons are "Entity Info," which brings up a menu of research tools
that focus on a particular company or on you, the player; and the "General" button for
general research on a particular industry or comparisons of industries, or general economic
data, plus certain other information or research tools. Finally, in versions 3.0 and later, two
additional buttons were added in this group, a "My News" button, to list headlines affecting
you and your companies, and a "Select Last" button to reselect, as the "Active Entity," the
corporate entity that was previously the Active Entity before the current selection

The functions of each of these six buttons, and the two research submenus that pop up
when you click on the "Entity Info" or "General" research buttons, are discussed in the
following paragraphs.

B. "SELECT PLAYER." This button provides a quick way for you to change the "Active
Entity" from a corporation to you, the player. Just click on this button and you become the
"Active Entity." After you do so, when you select any of the research or transaction
functions, such as "List Portfolio" or "Buy Stock," the information shown in a research
feature will be about you, or the entity doing a transaction will be you, as the "Active
Entity."

C. "SELECT CORP." Click on this button to change the "Active Entity" being
researched, or to select a corporation (that you control) that will do transactions. When you
do so, an input box will pop up, and you can either type in the company's stock symbol (if
you know it), and click on OK or the [RETURN] key, or else click on the "Look Up"
button, to display a scrollable drop-list of all currently existing corporations, listed in
alphabetical order. If you click on the "Look Up" button, you can then begin typing in the
first 3 or 4 or more letters of the company's name, in order to jump quickly to the
company's name/stock symbol in the list, and then either click on "OK" or press the
[RETURN] key to select that company as the "Active Entity."

209
The "Active Entity" does not have to be a company that you control. Thus, once selected,
you can do any of several types of research on it, by simply clicking on the "Research
Report," "Earnings Report," "Credit Info" or "Financial Profile" buttons, and information
for that company will instantly be displayed. However, if you go to a Transactions submenu
while the "Active Entity" is a company you do not control, and you click on a transaction
button, such as "Buy Stock," the entity doing the buying will be the LAST "Active Entity"
you selected that you DO control (if you still control it), or if there was none, or you no
longer control that company, the buying/selling (transacting) entity will be you, the player.

This system greatly simplifies and reduces the number of necessary steps required to do a
transaction, such as buying a stock. For example, if you control ABC Company, you might
make it the "Active Entity," and check to see if it has available cash or credit to buy stock
in another company. Then you could do some research on several companies, selecting
each as "Active Entity," until you find one that you want ABC to buy, which we will call
XYZ Corp. Once you have decided, you don't need to change the Active Entity back to
ABC -- you can just click on the "BUY/SELL" button to pull up the "Buy/Sell
Transactions" submenu, click on the "Buy Stock" button, and the last company you have
selected as "Active Entity," XYZ Corp., will have its stock symbols already displayed in
the symbol entry box, as the stock that ABC is buying, so all you will need to do to initiate
the trade is click on the "OK" button. (In effect, the program tries to "read your mind" and
anticipate which company you are planning to buy, buy bonds of, merge with, etc., based
on the last company whose Research Report or financial statements you viewed.)

Notice that if you use the either the "SELECT PLAYER" button or the "SELECT CORP."
button on the main menu screen when a submenu is open, doing so will close the submenu
dialog. Thus, unless you WANT to close a particular submenu dialog, you can instead use
the "SELECT PLAYER" or "MY CORPS." buttons that also appear on each pop-up
research or transactions submenu. Doing so will not just close the submenu dialog, but will
instead close it and instantly reopen a new version of the submenu after you have changed
the "Active Entity," revised to reflect the newly selected "Active Entity." The submenu
choices will differ considerably, depending on the type of entity: player, bank, insurer,
holding/trading company, or other (industrial) company.

Beginning with Version 5.0, when you select a company as the “Active Entity,” it will
automatically be listed as one of the 15 companies on your “Streaming Stock Quotes”
watch list, unless the list is already full or unless you have recently deleted that company
from the watch list, in which case it will not be added back to the list.

D. "ENTITY INFO" BUTTON AND SUBMENU. Click on this button to bring up a

pop-up submenu with as many as 11 buttons on the right side of the submenu dialog box.
Each of those buttons, if clicked, will display financial statements, research reports, or
other types of information pertaining to the company or player that is the currently selected
"Active Entity." In addition, the dialog box will contain a text window, with instructions for
using the Entity Info submenu (during the first year of a game only), and will give
company information, such as its latest earnings (and trend), next quarter's projected
earnings, who controls the company, and an analysis of the company's industry situation or

210
an industry forecast (except for Holding/Trading Companies). Industry projections are only
given for banks or insurance companies when there are somewhat extreme economic
conditions.

However, if the "Active Entity" is you, the player, and not a corporation, several of the
buttons on this submenu will be absent or different, since there are no Research Reports,
Shareholder lists, or quarterly Earnings Reports for individuals, only for corporations. Also,
for an individual player, the text box on the left side of the submenu will contain different
information than for a corporation -- information about your personal tax liability and the
estimated income tax you will owe for the current year, based on current and projected
data.

You can select any of the 16 buttons described below to obtain detailed financial and
investment information about the currently selected "Active Entity." Note that anywhere
from 8 to 11 of the buttons listed below will appear on the "Entity Info" pop-up menu,
depending on whether the currently selected "Active Entity" is a player, a holding
company, a bank, an insurance company, or an industrial corporation (any corporation in
any other industry).

(1) CHANGING THE ACTIVE ENTITY. At any time while you are viewing the "Entity
Info" pop-up menu, if you wish to view information for another entity, click on the "Player"
button near the bottom of the pop-up menu to select yourself as the "Active Entity," or click
on the "Select Corp." button, also at the bottom of the pop-up dialog, to select any
corporation as the "Active Entity." If you, the player, are the "Active Entity," a "My Corps"
button will also be displayed. Clicking on it will display a list of only those corporations
you control, from which you may select one by clicking on it. (If you only control one
corporation, it will automatically become the "Active Entity" when you click on "My
Corps.")

As soon as you have made your new selection, the pop-up submenu will be re-drawn, and
changed to reflect the newly selected entity.

(2) RESEARCH REPORT. Click on this item to view a "research report" on the current
"Active Entity," if it is a corporation. The research report is an analytical report on the
company's financial performance and situation, as well as a recommendation as to the
company's stock, if it is publicly traded, which will be either "Strong Buy," "Buy," "Hold,"
or "Sell." Such recommendations tend to be right more often than not, but as in the real
world, are frequently wrong, so you should not totally rely on the "Analyst's
Recommendation" on any stock. As they say on Wall Street, "Those who know don't tell,
and those who tell don't know." So you still have to rely on your own judgment. Analysts
tend to be inherently over-optimistic.

The Research Report will also include a listing of any recent news headlines that include
the stock symbol of the company in question. The Research Report also includes a per-
share earnings projection for the company, for the coming quarter. As in the real world,
such "analysts' estimates" are often off the mark, especially in the case of diversified

211
companies with numerous subsidiaries and other holdings, and tend to be more accurate for
relatively simple companies engaged in a single line of business, with no subsidiaries or
bond holdings, loans, etc., to muddy the waters. (Earnings projections are updated at least 2
or 3 times for every company during each quarter, or more often when the company is
involved in certain major transactions, such as mergers.)

This button is visible only if the current "Active Entity" is a corporation. If the Active
Entity is a player, this button is not shown. In Version 5.0 and later, this button also appears
(at all times) on the main Wall $treet Raider screen, so you do not have to open the Entity
Info Submenu to access it. If you click on this button on the main screen when the currently
selected “Active Entity” is you, the player, a Research Report will be displayed for the last
company that had been the “Active Entity,” since there are no research reports on players,
only on corporations.

(3) FINANCIAL PROFILE. Click on this button to see a detailed financial profile of the
currently selected "Active Entity" -- either the current player whose turn it is, or any
corporation. The profile will include a financial balance sheet, showing the value of the
player or company's assets, the amount of any debts or other liabilities, such as accrued
taxes of corporations, and the net worth of the player or company -- total assets minus total
liabilities.

The "financial profile" will show a considerable amount of additional information about the
player or company, which will vary, based on the type of entity (player, bank, insurance
company, holding/trading company, or industrial company). Items shown for an individual
player will include year-to-date taxable ordinary income or loss, the amount of any capital
gains or capital losses, and the player's employment status and estimated (approximate)
CEO salary, if any.

The profile for a bank will show as assets the totals of its business loans, consumer loans,
and mortgage loans. As liabilities for a bank, the amount of its demand deposits, certificates
of deposit (interest-bearing accounts), and interbank debt will be shown. The profile for an
insurance company will show as a liability the amount of its insurance policy reserves.
Profiles for any industrial companies (those other than banks, insurers and holding/trading
companies) will show as assets the company's Business Assets/Equipment, and its Working
Capital (accounts receivable from customers and inventories, if any).

Profiles for any player, bank or insurance company will show the amount of government
bonds and corporate bonds, if any, that are owned, as assets.

Depending on the type of corporation, certain variables that may be set by the controlling
player are shown, such as the percent of sales or revenues spent on R & D or marketing; the
dividend payout ratio, as a percent of net income; and (except for banks) the company's
growth rate in investment in business assets, or growth rate in insurance in force (policy
reserves) for an insurance company.

212
The financial profile for any corporation will show a number of other important items of
information about the company, such as its earnings for the current year and the past four
full years; net worth per share, and the current stock market price per share of its stock; the
amount of any bonds issued and owed by the company, and the market price of such bonds;
the number of shares of stock issued, and the "total stock capitalization" of the company --
the market value of all its stock. Various other items shown for all types of companies
include certain financial ratios, such as the price-to-earnings ratio for its stock, debt-to-
equity ratio, return on equity, and, if the company is paying dividends on its stock, the
dividend yield.

Other miscellaneous information is also given, such as a company’s industry group

category; who, if anyone controls the company; the country where the company is
incorporated; the amount of any tax loss carryovers from prior years; and the amount of
salary the company pays to its CEO or President. Versions 4.0 and later show the current
day of the year and the day on which the next earnings report is due to be released.

If a company has issued bonds, a footnote will be provided at the bottom of the profile,
giving details about the bonds, such as interest rate paid, yield at current market price, and
when the bonds must be paid off. If there are antitrust lawsuits against the company, either
pending or threatened, this will also be disclosed in a footnote.

Financial profiles for both players and companies provide credit information such as credit
rating, ranging from "AAA" to "D"; the unused line of credit, if any, from the player's or
company's lending bank; the interest paid on borrowings; and the name of the player or
company's bank, from which it borrows. Also will be shown for a player is his or her
employment status, either "Unemployed" or the name of the
company of which the player is the CEO and the year in which the player first became
CEO.

Note that you can click on the name of any company that appears in the financial profile,
and that company will then become the selected "Active Entity" when you close that
window, in the event you want to look up various types of information on that company.
(Or double-click on the company's name to select that company and close the window.) If
the current player's name (you) appears in the financial profile of a corporation, you can
also click on your name to select yourself as the "Active Entity."

In Version 5.0 and later, this button also appears (at all times) on the main Wall $treet
Raider screen, so you do not have to open the Entity Info Submenu to access it.

(4) EARNINGS REPORT. Click on this button to see the most recent news release of
quarterly earnings for the company (and of annual earnings, at the end of the 4th quarter of
each year). The report will give the company's per-share earnings (and total amount earned)
for the most recent quarter, and gives comparative per-share earnings for the same quarter
of the prior year, as well as the most recent calendar quarter, plus a comparison of year-to-
date earnings for the current year versus the prior year. It also shows the company's profit

213
margin (which equals the return on business assets in Wall $treet Raider), and other
information items such as the amount of taxes paid, if any, and rate of growth of its sales.

Other items of information, specific to banks or insurance companies, are shown for those
types of companies, such as underwriting profits and growth of insurance in force for an
insurance company, or additions to bad debt reserves for banks. Various cash-raising
actions may also be shown, such as sales of business assets, or sales of stocks or bonds, or
bank borrowings (or repayments on bank loans).

Dividends paid or any changes in dividend payments will also be mentioned in the earnings
report.

The Earnings Report will include a listing of any recent news headlines that include the
name or stock symbol of the company in question.

This button is shown only if the current "Active Entity" is a corporation. It does not appear
if the "Active Entity" is the player. In Version 5.0 and later, this button also appears (at all
times) on the main Wall $treet Raider screen, so you do not have to open the Entity Info
Submenu to access it. If you click on this button on the main screen when the currently
selected “Active Entity” is you, the player, an Earnings Report will be displayed for the last
company that had been the “Active Entity,” since there are no earnings reports on players,
only on corporations.

(5) LIST SHAREHOLDERS. Click on this button to see a list of shareholders of the
company that is the currently selected "Active Entity." The list will show the percentage of
the company that is owned by each major shareholder, and the percentage owned by "the
Public."

Note that you can click on the name of any company that is shown in the shareholder list
screen, and that company will then become the selected "Active Entity" as soon as you
click on the “OK” button to close that window, in the event you want to look up various
types of information on that company. (Or double-click on the company's name to select
that company and close the window.) Clicking on a player's name will not cause that player
to become the "Active Entity" unless it is the name of the player whose turn it is at the
moment (you). You cannot make another player the “Active Entity” during your turn.
(However, once the game is ended, clicking on the name of another player who is a
shareholder will make that player the "active entity," in which case you will then be able to
view his or her options and bond portfolios and all other financial information. Otherwise,
during a game, another player's holdings and tax situation are generally private
information, not accessible to the other players, except for stock holdings.)

This button is visible only if the current Active Entity" is a corporation; it will not be
shown if the current "Active Entity" is an individual player (since no one can own shares in
the player -- slavery is illegal, even in Wall $treet Raider). In Version 5.0 and later, this
button also appears (at all times) on the main Wall $treet Raider screen, so you do not have
to open the Entity Info Submenu to access it. If you click on this button on the main screen

214
when the currently selected “Active Entity” is you, the player, a Shareholder List will be
displayed for the last company that had been the “Active Entity.”
(6) LIST PORTFOLIO. Clicking on this button allows you to instantly view the stock and
bond portfolio of the currently selected "Active Entity," which can be either the current
player or any company that is the "Active Entity." Doing so will give a listing of each
company in which the player or company owns stock (or is "short"), the stock symbol of
each stock owned or shorted, the percent of the company's stock the player or other Active
Entity owns or is short, the current price per share of the stock, the dividend yield
percentage for the stock and the total value of the shares owned. The total value of all the
stocks owned will also be shown, as well as any "Analyst's Rating" (buy/sell
recommendations) regarding each stock, if it is publicly traded. Short positions are shown
as negative amounts.

If the "Active Entity" is the player, the portfolio list will also show the total values of any
options owned or shorted by the player. If the net value of "short" positions is greater than
"long" (owned) option positions, the net value figure will be a negative amount.

If the "Active Entity" is one that can invest in bonds, such as an individual player, a bank or
an insurance company, the portfolio listing will also have a section that shows each
government or corporate bond owned, a description of the bond, the current market price of
the bond, the amount (face value) owned and market value of that particular bond holding,
and the bond's yield to maturity. The total value of the bond portfolio is also shown.

In addition, this screen will show the total value of the entire stock, option, and bond
portfolios of the selected "Active Entity."

You can click on the name of any company whose stock or bonds are listed in the portfolio
and that company will then become the selected "Active Entity" as soon as the portfolio list
window is closed by clicking on the “OK” button, in the event you want to look up various
types of information on that company. (Or double-click on the company's name to instantly
select that company and close the window.)

Beginning with Version 5.0, this button also appears (at all times) on the main Wall $treet
Raider screen, so you do not have to open the Entity Info Submenu to access it.

(7) DIAGRAM OF HOLDINGS. Clicking on this button causes a graphic diagram to be

drawn and displayed, showing an entity's stock holdings (and in the case of a corporation,
who owns it). Each stockholder or holding is shown in a small box, above or below the
name of the "Active Entity," with stockholders shown above, and stock portfolio holdings
shown below. Each such box in the diagram contains a company's stock symbol and the
percentage of ownership of the "Active Entity." Short positions in a stock are also shown,
with ownership represented as a negative percentage.

Click on the box for any company (or player, where the player is you), and the diagram is
immediately redrawn with that company or player now shown as the "Active Entity," with

215
your or its stock holdings and/or the holders of its stock. (The one exception is if you click
on a shareholder who is one of the competing players -- you don't get to see a list of the
other players' portfolios -- that is private information, which you will have to dig for, to
find.)

(8) CREDIT INFO. Click on this button to see credit information for the currently selected
"Active Entity" (player or a corporation). The entity's credit rating and unused line of
credit, if any, will be shown, as well as the interest rate he/she/it must pay on bank loans,
and the identity of the player or company's lending bank. However, if the "Active Entity"
for which credit information is being shown is a bank, then the only information that will
be shown for it is its credit rating and the rate it pays on interbank loans (i.e., the LIBOR
rate).

(9) INDUSTRY SUMMARY. The "Industry Summary" command button, when it is

clicked, gives you several comparative financial yardsticks for all the companies in a
particular industry. For example, you can quickly eyeball the book values (net worth) per
share of each company in the industry you selected, since the display shows each
company's book value per share as a percentage of its stock price per share. Also listed is
each company's "P/E RATIO" (price-earnings ratio), its "RETURN ON EQUITY" (after
tax earnings as a % of the company's current net worth), its dividend yield percentage, and
current credit rating. For each company shown in the summary, the current "Analyst's
Rating" (Buy, Sell, Hold, etc.) will be shown, if the company's stock is publicly traded.

Adjacent to the percentage numbers in the "Price to Net Worth" column of figures, you
may see any of 3 notations:

 A "_P" notation (signifying a company controlled by you, the player);

 A "_H" notation (signifying a company controlled by another player); or
 A "_C" notation (signifying a company that is controlled by another company, but
not controlled by any player).

The above markers make it easier for you to see, at a glance, which companies in the
industry are controlled by whom, or by other companies.

(10) INDUSTRY PROJECTION. If you click on this button you will see displayed, for the
current "selected industry" group (which will be the industry of the current "Active Entity,"
if that entity is a corporation), a projection for each company in the industry of its rate of
return on investment in "business assets" and its estimated market share percentage,
projected 6 months into the future. This screen also displays certain information that is also
displayed in the "Industry Summary" projection, such as credit rating, price as a percent of
net worth per share, and dividend yield, for each company shown.

Adjacent to the percentage numbers in the "Projected Market Share" column of figures, you
may see any of 3 notations:

 A "_P" notation (signifying a company controlled by you, the player);

216
  A "_H" notation (signifying a company controlled by another player); or
 A "_C" notation (signifying a company that is controlled by another company, but
not controlled by any player).

The above markers make it easier for you to see, at a glance, which companies in the
industry are controlled by whom, or by other companies.

On the "Industry Projection" information display, you will also see the current rate of
growth in capacity (growth in business assets such as plant and equipment) for each
company in the industry. The "Industry Projection" function also shows the percentage, if
any, of sales or revenues being spent on productivity improvements, for each company in
the industry being reported on. This expenditure would be for R & D (research and
development) for companies in tech-oriented industries, or for marketing and/or advertising
for companies in those industries where R & D spending is not relevant, such as retailing.

The projections of rate of return on capital assets are based on the anticipated rate of
growth in demand for the industry's product and the planned rate of growth in supply
(capacity) for all the companies in the industry, as well as the planned growth rate and
productivity spending for the individual company. As such, these projections are never
precisely accurate, since the industry demand growth projection can change at the drop of a
hat, and since companies in the industry are constantly revising their capacity growth plans
in reaction to changes in their own situation, industry demand, and in the economy.

As in the real world, these types of projections can be very useful, but take them with a
grain of salt. However, you can usually tell at a glance whether the growth in capacity is
outstripping the projected rate of demand growth (or vice versa). For example, if all the
major companies in an industry are planning to expand capacity at an annual rate of 30 to
40%, and projected demand growth is only 5%, it's a safe bet that that industry is going to
have a severe problem of oversupply within a few months or calendar quarters, unless
something changes very soon.

Projections are not available for the banking, insurance and holding company industry
groups. Thus the "Industry Projection" command button does not appear when any of those
three types of financial industries is the "selected industry." Also, if the current "Active
Entity" is you, the player, this button does not appear.

(11) LIST BANK LOANS. If the currently selected "Active Entity" is a bank, this button
will allow you to see a list of all the bank's corporate (and player) loan customers. The list
that is displayed when you click on this button will show all the business loans made by the
bank, giving for each loan the name of the borrower (player or company), the amount of
the loan balance, the borrower's credit rating, the current (floating) interest rate on the loan,
and the percentage that each loan accounts for, of the bank's total loan portfolio.

If the player who controls the bank has frozen lending to any of the bank's loan customers
on the list, a "FROZ." notation will appear after the data listed for a player or company's
frozen loan.

217
Also shown are the total amount of consumer and mortgage loans, and the average interest
rates on each. Clicking or double-clicking on any company's name in the list will select that
company as the current "Active Entity."

NOTE: This button does not appear if the currently selected "Active Entity" is not a bank.

(12) TAX BASIS INFO. Clicking on this button will display the stock and bond portfolio
holdings of the currently selected "Active Entity," in the same manner as the "List
Portfolio" button described above, except that the last column of data on the right side of
the window will display your tax cost, or "tax basis" for each stock or bond investment of
the "Active Entity," instead of the "Analyst's Rating" that is shown in that column if you
click on the "List Portfolio" button. For stocks that have been sold short, negative values
will be shown for the current value and the tax basis. In that case, the "tax basis" is the
amount you received when you sold the stock short.

If the "Active Entity" whose portfolio is being displayed owns or has sold short options, a
single line item will also show the total value and total tax basis of the options holdings
and/or options that have been sold short. The values shown for options may be negative
amounts if some or all of the options positions are short positions.

(13) LIST ADVANCES TO CORPS. Clicking on this button will display a list of all
advances (demand loans) you have made to companies you control (or which you
controlled at the time you made the advances to them). The list will show each company
that owes you money, the amount of the advance, and the company's credit rating. Click or
double-click on any company's name to select that company as the "Active Entity." For the
glossary description, with more details on advances, click here.

NOTE: This button only appears when the currently selected Active Entity is you, the
player.

(14) LIST OPTIONS. Clicking on this button allows you to see a listing of all of the put
and call option positions for the current “Active Entity,” and to see whether theres is a gain
or loss on each position at the moment. All option prices are shown at the "bid" price for
the option. That is the price you will receive when selling an option, and at the last instant
before an option expires, if it is "in-the-money," will be equal to the amount the option is in
the money. However, when you buy (or buy back, if short) an option, you will have to pay
an "asked" price, which is generally about 2% greater than the "bid" price and which,
unlike the bid price, is never zero.

Wall $treet Raider can keep track of up to 1,000 option contracts at any point in time. Since
options are constantly expiring as time progresses, it is unlikely that you could ever create
that many separate contracts at one time, although, beginning with Version 5.0, there are
some random options transactions by uncontrolled companies, most of which are intended
to increase their holdings of stock in their major subsidiaries.

218
(15) LIST FUTURES CONTRACTS. Click on this button to see a list of all the
commodities or index futures positions held (long or short) by the current Active Entity
(you or a company). The display will show the unit price (per barrel, ounce bushel, etc.)
agreed upon when you entered into the futures contract and will also show the "notional
value" of each contract (the contract price per unit times the number of units you have
agreed to buy or sell at a future date) and the current value of the contract. The difference is
the gain or loss you are currently showing on the contract, which is shown in the far right-
hand column.

To sell any of the futures contracts which you are "long" or to buy back any contracts you
are short (you may close any portion, or the entire amount, of any
contract), just click on the line item for that futures contract to trade it. (This only works
if you control the "Active Entity" whose contracts are being viewed.)

(16) MY CORPS. Clicking on this button will display a list of all the corporations which
you currently control, listing the name and various other items of information for each,
such as recent and projected quarterly earnings, credit rating, and "analyst's ratings" (buy,
sell, hold, etc.) for the company's stock. Click or double-clicki on any company's name on
the list to select that company as the "Active Entity." (If you control only one company,
clicking on this button will select that company as "Active Entity"; if you control only two
companies and one is currently the "Active Entity," clicking on this button will
automatically select the other as the new "Active Entity.")

NOTE: This button only appears on the Entity Info Submenu when the currently selected
Active Entity is you, the player. However, this button also appears at all times on the main
Wall $treet Raider screen, in the “Quick Search Functions” group of buttons.

E. "GENERAL" (RESEARCH) BUTTON AND SUBMENU Click on this button to

bring up a menu of "general" research features. These functions are for doing general
investment research (not on any particular company), such as economic data, tax rates,
interest rates, news headlines, industry information, and pre-configured database searches.

The right-hand side of the "General Research" submenu that pops up has 12 buttons, each
of which is a research tool described below. The left-hand portion of the dialog box
contains a text box with instructions for using this submenu, and also contains other current
information, such as central bank monetary policy and an analysis and a forecast for the
currently selected industry (which can be selected from the "Industry Group Selected" drop
list on the left side of the main screen, or by selecting a company in the desired industry
group as the "Active Entity").

The text box also contains a textual analysis of the current state of the economy and
forecast.

Besides doing research on industry groups or database searches for companies with largest
market share or market cap, or companies with the largest cash hoards or tax losses, the
functions on this submenu also provide a number of economic statistics and interest rate

219
information that will help you to shape your investment decisions. Thus, for example, if
interest rates are high and the Federal Reserve (or other Central Bank)
is tightening the money supply, you may want to stay away from
investments in stocks of companies that are sensitive to interest rates, such as housing
development or building materials stocks. Or if the economy (Gross Domestic Product, or
GDP, is the term used for the overall economy) is growing rapidly, various cyclical stocks
like autos, steel, base metals, and airlines should usually do well.

Similarly, you need to be aware of trends in oil prices, since high oil prices tend to be
detrimental to transportation industries such as airlines, trucking, shipping, and railroads,
while low oil prices benefit those industries, and tend to eventually stimulate economic
growth, as well. High oil prices tend to mainly benefit oil companies and oil service
companies, though the resulting inflationary effects may also benefit the precious metals
industry at times.

Several key indicators are updated every few seconds on the main Wall $treet Raider
screen, including the Prime Rate of interest charged by banks, yields on government bonds,
crude oil prices, the economic growth rate, and the stock market index. For more details on
economic indicators and interest rates, see the descriptions of the "Economic Statistics" and
"Interest Rates" buttons, described below.

The various general research functions (buttons) on the "General (Research)" submenu are
described in the paragraphs below.

(1) MARKET SHARE. Clicking on this button does a database search in which all
companies with a market share of 20% or more in their respective industries (not including
banking, insurance or holding/trading company industries) are listed, ranked in order of
their market share percentage, starting with the company with the largest market share.
This is a good starting point for finding potential targets for anti-trust lawsuits.

Even if a company has well under 50% market share, and is thus not, by itself, a prime
target for anti-trust suits, it may be under common control with other companies in the
industry, which together may have a combined market share of 50%, 60%, or more. A
quick way to find out if a company with a large market share (say 35%) is a potential target
of an anti-trust lawsuit is to view a Research Report for the company. A Research Report
(in versions 6.40 or later) will tell you if a company, together with any "affiliated
companies" (other companies controlled by the same player or company) in the same
industry, have a combined market share of more than 25% in that industry and will also tell
you what the combined percentage market share is.

Note that market share is not a relevant concept for banks, insurance companies, holding
companies, or ETF's, in Wall $treet Raider.

(2) INDUSTRIAL GROWTH RATES. If you want to see a broad overview of the growth
in demand projected for the next year for each of 67 industries, click on this button, and
you will see displayed a list of all 71 industries and the projected annual demand growth

220
rate for 67 of them (not relevant for the 4 financial industries), based on the current
economic forecast, as well as the industry's expected long-term growth rate. See
APPENDIX D for a list of industries' usual growth rates and the basic characteristics
relating to each industry.

The list of industries will also show the current rate of return on capital assets (business
assets, such as plant and equipment) for each non-financial industry, which in Wall $treet
Raider is the same as the pre-tax profit margin on sales, assuming $1 of capital assets
generates $1 of sales per year.

This listing does not include financial companies: the banking, insurance, or
holding/trading company industry groups.

Click on and highlight any industry before closing this window, and that will make the
industry you highlighted the "selected industry," whose data will be shown when you click
on either the "Industry Projection" button or the "Industry Summary" button (in the
"GENERAL" Research submenu -- those two buttons in the "ENTITY INFO" Research
submenu will continue to show data for the industry of whatever company, if any, is the
currently selected "Active Entity"). Double-click on any industry listed to close the window
and select that industry as the one whose data is to be shown in this "GENERAL" Research
submenu.

(3) INDUSTRY PROJECTION. If you click on this button you will see displayed, for the
current "selected industry" group (shown as the "Industry Group Selected" on the left side
of the main screen), a projection for each company in the industry of its rate of return on
investment in "business assets" and its estimated market share percentage, projected 6
months into the future. This screen also displays certain information that is also displayed
in the "Industry Summary" projection, such as credit rating, price as a percent of net worth
per share, and dividend yield, for each company shown.

On the "Industry Projection" information display, you will also see the current rate of
growth in capacity (growth in business assets such as plant and equipment) for each
company in the industry. The "Industry Projection" function also shows the percentage, if
any, of sales or revenues being spent on productivity improvements, for each company in
the industry being reported on. This expenditure would be for R & D (research and
development) for companies in tech-oriented industries, or for marketing and/or advertising
for companies in those industries where R & D spending is not relevant, such as retailing.

The projections of rate of return on capital assets are based on the anticipated rate of
growth in demand for the industry's product and the planned rate of growth in supply
(capacity) for all the companies in the industry. As such, these projections are never
precisely accurate, since the demand growth projection can change at the drop of a hat, and
since companies in the industry are constantly revising their capacity growth plans in
reaction to changes in their own situation, industry demand, and in the economy.

221
As in the real world, these types of projections can be very useful, but take them with a
grain of salt. However, you can usually tell at a glance whether the growth in capacity is
outstripping the projected rate of demand growth (or vice versa). For example, if all the
companies in an industry are planning to expand capacity at an annual rate of 30 to 40%,
and projected demand growth is only 5%, it's a safe bet that that industry is going to have a
severe problem of oversupply within a few months or calendar quarters, unless something
changes very soon.

Note that projections are not available for the banking, insurance and holding company
industry groups. Thus the "Industry Projection" command button does not work when any
of those three types of financial industries is the "selected industry."

(4) INDUSTRY SUMMARY. The "Industry Summary" command button, when it is

clicked, gives you several comparative financial yardsticks for all the companies in a
particular industry. For example, you can quickly view the book values (net worth) per
share of each company in the industry you selected, since the display shows each
company's book value per share as a percentage of its stock price per share. Also listed is
each company's "P/E RATIO" (price-earnings ratio), its "RETURN ON EQUITY" (after
tax earnings as a % of the company's current net worth), its dividend yield percentage, and
current credit rating. In addition, for each company shown in the summary, the current
"Analyst's Rating" (Buy, Sell, Hold, etc.) will be shown, if the company's stock is publicly
traded.

(5) ECONOMIC STATISTICS. For a summary of various economic indicators and tax
rates, click on the "Economic Statistics" command button on the this submenu and you will
see the following items:

 Current Growth Rate, U.S. GDP: This is the current annual rate of growth for U.S.
Gross Domestic Product ("GDP"), which is used in Wall $treet Raider as a proxy
for the growth rate of the world economy. This indicates how fast the world
economy as a whole is growing. A normal growth rate in this simulation is about
2.5% to 3.0%. Note that the growth rate of demand for many industries depends in
large part on growth in GDP, so this is a very important economic indicator.
 Prime Interest Rate: This is the rate of interest that banks are currently charging on
loans to their best customers -- players or companies with "AAA" credit ratings.
Players or companies with lesser credit ratings pay higher interest rates, as is
detailed in APPENDIX C.
 Prices of Government Bonds: The prices of the government "long bond" (10 to 20
years maturity) and "short bond" (0 to 10 years maturity) are shown, as well as the
coupon, or nominal interest rate on each.
 Annual Housing Starts: This figure is a projection (in '000s of units) of annual
housing starts, which is obviously of great importance to the housing and building
materials industries. A typical number for annual housing starts at the beginning of
a game is around 1000 to 1200 ('000), or 1.0 to 1.2 million.
 Corporate/Personal Tax Rates: Self-explanatory. These are the current rates of tax
paid by corporations and by individual players. The rates for corporations and

222
 individuals vary from time to time, ranging from about 30% to 70%. Capital gains
of individuals are taxed at much lower rates than "ordinary income" (salary, interest
and dividend income). As in the real world, you will find that although there is an
occasional tax cut, tax rates tend to rise over the years, since the government's need
for money (to attract or buy votes in the next election) is always insatiable.
 Other Tax Rates: Self-explanatory. Tax rates for any of six different types of taxes
on capital (when imposed) will be listed here, and footnotes below explain each
such tax. None of these taxes are ever imposed unless you are playing at Difficulty
4 (in Versions 5.10 or later).
 Crude Oil Price Per Barrel: Self-explanatory. High oil prices are usually good for
the oil and oil service industries and not so good for the various transportation
industries. An average price for oil is $100 (U.S.) per barrel (previously $50 or $35)
in the current version of this simulation. The price of spot crude oil in Wall $treet
Raider is always quoted in U.S. dollars (the way OPEC prices oil), even if you have
configured a game for a different currency.
 Global 1500 Stock Index: This is an indicator of stock market prices, an average
based on the prices of all of the stocks of corporations in existence at any given
moment, in the Wall $treet Raider database. The index is a capitalization weighted
index. That is, it is based on the value of the total of the stock price times number of
shares for every corporation, added up, and then divided by a divisor. The divisor is
adjusted each time any company issues new stock, such as in a startup, a merger or
public offering, or when it buys back its stock in an LBO. The index is always at
5,000 at the start of a game.
 National Debt: This item shows the total amount of the government's national debt,
represented by government bonds issued, and grows throughout the game. (We
won't say which government's debt it is.) Usually, this item is accompanied by a
footnote that shows the total amount of such debt currently held by the players and
corporations in the simulation. The remaining government debt is the amount of
long- and short-term bonds that are available for purchase from the public. This
figure is usually not very relevant to you, unless you have trillions of dollars (Euros,
etc.) to invest, and want to buy government bonds, in which case any purchase or
sale of more than 1/2 of 1% of the "float" of the bond you are buying or selling will
be the maximum you can trade without affecting the market price of the bonds.

(6) INTEREST RATES. Click on this button to see what various key interest rates are at the
moment. The different rates shown are as follows:

 Prime Interest Rate: This is the rate of interest that banks are currently charging
their best customers -- players or companies with "AAA" credit ratings.
 YTM: Government Bonds: The "yield to maturity" for both the "long" and the
"short" government bond are shown. These are the percentage rates of return on
both types of bonds at the current bond price, if held to maturity, and are computed
by using standard discounted cash flow equations, but based on quarterly payments
of interest. (In the real world, most bonds pay interest semiannually, but is
becoming more common for bonds to pay quarterly or even monthly.) If the price of

223
 a bond is below par (less than 100), then the yield on the bond will be more than its
nominal, or "coupon" yield; and vice versa if the bond price is over 100.
 Bank CD Rate: This is the rate of interest banks are currently paying on Certificates
of Deposit ("CD's"), and which a player or a company automatically earns in Wall
$treet Raider on cash that is not otherwise invested.
 LIBOR Rate: LIBOR stands for "London Interbank Offer Rate." This is the rate of
interest banks have to pay when they must borrow from another bank overnight.
interbank loan transactions all take place automatically in Wall $treet Raider, so this
is merely for your information, in case you are wondering why a particular bank is
doing so well or so poorly. At times the LIBOR interbank loan rate may be well
above or below the rate banks are earning on their loan portfolios. In W$R, banks
don't generally borrow from each other unless they are out of cash and have sold off
most or all of their government bond holdings.
 Consumer Loans Rate: This is the average rate banks are currently earning on
consumer loans, such as car loans and credit cards, and is usually several points
higher than the "prime rate" or the rate on mortgage loans. This is because there are
frequent large bad debt charge-offs on a bank's consumer loan portfolio, usually
occurring about once a year, which are often 3% or more of the consumer loan
portfolio, so the apparent high rate of return on these loans is somewhat misleading,
as the net return is about the same as on mortgage loans, after bad debts write-offs
are considered.
 Mortgage Loans Rate: This is the average rate banks are currently earning on
mortgage loans, which is usually just a bit higher than the "prime rate," since these
are pretty safe loans, with only small annual bad debt losses.

(7) VIEW NEWS. Click on this command button to display a list of up to 60 of the most
recent news headlines, including such recent events as changes in central bank (such as the
U.S. Federal Reserve) monetary policy, political news, news of corporate takeovers,
earnings reports, actions taken by players or their companies, various catastrophes or
windfalls affecting companies or industries, and the like. Check the headlines frequently, to
keep abreast of events you may not have noticed on the scrolling news ticker, or that may
have occurred on your opponent's turn (such as transactions by your opponent).

(8) WHO'S AHEAD? If at any time during play, you want to know who is winning the
current game of Wall $treet Raider, you just need to click on the "Who's Ahead?" button,
which will tell you. In addition, the Difficulty Level (1 to 4) you have chosen for the
current game will be shown. You will also be shown simplified balance sheet information
for each player: Cash, other assets, total assets, bank debt, and net worth.

Other, more detailed information is also shown for each player, including the identity of the
player's largest controlled company, a list of some or all of the stocks directly owned by the
player, the bank from which each player borrows, the player's credit rating, and
employment status, such as "CEO of XYZ Corporation" or "Unemployed" or "On the
dole."

224
Click on any line of text that shows a company name or a single stock symbol, and that
company will be selected as the "Active Entity."

The same information as above is shown at the end of a game, including an announcement
of who the winner of the game was.

(9) MOST CASH. This is a pre-configured database search button that allows you, with a
single button click, to see a list of the 100 companies with the largest cash balances at the
moment, ranked from 1 to 100. You will be shown the name of each company and its cash
balance, plus you will also see the credit rating and market capitalization of each company.

(10) LARGEST TAX LOSSES. This is a pre-configured database search button that allows
you, with a single button click, to see a list of all the companies with tax loss carryovers,
ranked from largest to smallest. The displayed information will also show the credit rating
and market capitalization of each company. This information can be very useful in your tax
strategy, enabling you to find a company with large tax losses that you can use to hold an
80% or greater interest in your profitable companies, sheltering their profits from taxes
(since they will report their taxes on a consolidated basis with the parent company that has
the tax loss carryovers).

(11) LARGEST MARKET CAP. This is a pre-configured database search button that
allows you, with a single button click, to see a list of the 100 companies with the largest
market capitalizations – that is, with the largest market value – ranked from 1 to 100. A
company’s market cap is simply its stock price multiplied by the number of shares of its
stock that are issued and outstanding. Also displayed for each company listed is its credit
rating and the stock symbol of the company that controls it, if any. If it is controlled by you
or another player, it will display the code “_P” if controlled by you, or “_H” if controlled
by a hostile (competing) player, instead of a stock symbol. (This function is handy for
finding large companies that may be good targets for antitrust lawsuits.)

(12) DATABASE SEARCH. Clicking on this button will bring up an extensive dialog box
that allows you to search for stocks or bonds according to various search criteria or
combinations of criteria that you can select. This button was formerly on the main screen,
but has now been moved to the General Research Menu. For a detailed description of all
the Database Search functions, see the discussion in Chapter 10, Section H(1).

(13) WHO OWNS WHAT? Use this button to "look under

the hood" (peek at corporate data). A menu will appear that allows you to see lists of any of
the following:

 Companies with long or short positions in commodity or stock index futures,

showing the amount and size of each position, as well as the contract price to be
paid or received at expiration.
 Companies that own physical commodities, showing the commodity and the
amount owned, plus the price (cost) per barrel, ounce, or bushel owned.

225
  Entities that are parties to interest rate swap agreements, listing the "long" parties
alphabetically, showing the fixed interest rate they are receiving, and the stock
symbol for the counterparty to whom they will be paying the varying interest rate
each quarter (Prime, Long Bond, or Short Bond interest rate), as well as showing
the period the swap is or will be in effect.
 Companies that have long or short options positions, showing for each position
whether the company is long or short, the type of option (puts or calls), and the
stock which is subject to the option.
 Companies, other than Exchange-Traded Funds (ETF's), that own stocks in other
corporations, showing each stock owned, the percentage of that company that is
owned, and the currently stock analyst rating of the stock.

F. "SELECT LAST (or stock symbol)" BUTTON. Click on this button to make the last
corporate entity that was selected by you as the "Active Entity" the new "Active Entity."
This button will be grayed out at start of a game, but once you have selected an Active
Entity, such as ABC Company, and then select another Active Entity, such as DEF
Company, then ABC Company will be the company whose stock symbol appears on the
button. The button will then read "Select ABC" (rather than "Select Last"), and if you click
on it, ABC will again become the Active Entity and the button will then read "Select DEF."

In short, each time you click on this button, generally, it will toggle back and forth between
the two most recently selected active entities (unless you select yourself, the player, as
Active Entity).

This button is provided as a convenience, to make it easier for you to switch back and forth
between two entities, quickly selecting one or the other as the "Active Entity," with a
minimum of keystrokes or button clicks.

G. "MY NEWS" BUTTON. Click on this button to view a list of recent news headlines to
be displayed, if any of the recent headlines contains your player name, or the stock symbol
of any stock you directly own, or the stock symbol of any company in which you directly
or indirectly have a controlling interest. It allows you to see any recent news items affecting
you or any companies in which you have an investment or which you control.

In Version 4.80 and later, this feature will not only collect and display any recent news
items regarding you, companies you control, or stocks you own directly (or are short), but
now will also look for news items on any stocks on which you (or any company you
control) has an options position or owns any stock in.

H. "QUICK SEARCH FUNCTIONS" GROUP OF BUTTONS. Versions 5.0 and later

of Wall $treet Raider include a group of nine “Quick Search” buttons in the middle lower
portion of the main screen that allow you to access a number of program features without
first opening a menu, with a single button click. Eight of these buttons are the same as
buttons that are also found in the Entity Info Submenu:

 Research Report

226
  Financial Profile

 Earnings Report

 List Portfolio

 List Put and Call Options

 List Shareholders

 List Futures Contracts

 My Corps

See the description for each of the above buttons in the section on the Entity Info Submenu.

This group of buttons also includes the Recall DB Search List button,
which recalls your customized database search of companies, updated for
current values. This group previously also included the Database Search button (which is
now found on the General Research Submenu in versions 6.20 or later of Wall $treet
Raider). Both of these buttons and their functions
are discussed below.

(1) DATABASE SEARCH. In doing your investment research, looking for possible
bargains, it is helpful in Wall $treet Raider, as in the real world, to have the help of
computer "screens" to assist you in finding likely investment candidates. Clicking on the
"Database Search" button does just that in this simulation, enabling you to sift through the
large database of companies to find stocks or corporate bonds that might be good
investments. When you click on this button, it brings up a search screen, which has
checkboxes for 12 search factors you can use, and all but three of them can be further
modified, if you select them.

NOTE: THIS BUTTON HAS BEEN MOVED TO THE GENERAL RESEARCH

MENU IN VERSIONS 6.20 AND LATER OF WALL $TREET RAIDER.

To select any of the 12 search factors listed on the Database Search screen, just check the
checkbox by that item. Then either enter a number in the right-hand column if you want to
set your own parameter, such as 6% as a minimum dividend yield, or in some cases, click
on the "Change" button to change certain non-numerical settings, such as minimum credit
rating or quality of management.

When you make any changes in checkboxes or amounts shown in the changeable boxes in
the right-hand column, the program immediately updates the number of companies that
meet your search parameters, shown in a highlighted box near the bottom of the screen. To
view the list of companies that meet your search criteria, click on the Display Results
button. (But if more than 1000 companies meet your search criteria, you will need to

227
change the factors you are using, to narrow down the number of companies to 1000 or
fewer, before you can display the results.)

Note that if a company fails to meet your criteria for any single checked item, then that
company will not be included in the list of qualifying companies.

A brief description of each of the 12 search factors is as follows:

 High Return on Equity (At Least x%): If this box is checked, and a whole
percentage number is entered in the textbox for this item, such as 20%, the database
search will only include companies that earned at least x% (20% for example) on
their equity or net worth, in the last full calendar year (based on net worth at the end
of that year). You can enter any value from -99% to +1000% in the text box.
 Low P/E Ratio Stocks -- P/E Less Than: If this box is checked, the database search
will exclude any company that has a P/E ratio higher than the amount entered in the
textbox for this item. Thus, if you enter 10 (for a price-earnings ratio of 10), the
only companies that qualify will be those with P/ E ratios of 10 or less, based on the
last calendar year's earnings. (If you enter zero or less, the checkbox for this item
will be turned off, automatically.)
 Stock Price Less Than x% of Net Worth: If you check this box, the database search
will exclude from consideration any company whose stock sells for more than the
percentage entered in the textbox for this item, in relation to its net worth per share.
Thus, if you enter 95%, and a company sells for 110% of its net worth per share, it
will not be included in the list of companies that meet your search criteria. (If you
enter zero or less, the checkbox for this item will be turned off, automatically.)
 Dividend Yield Is x% or More: If you check this box, the only companies that will
meet your criteria are those whose dividend yield is equal to or higher than the
percentage you enter in the textbox for this item. (If you enter zero or less, the
checkbox for this item will be turned off, automatically.)
 Minimum/Maximum Market Capitalization: If this box is checked, the only
companies that will meet your screening criteria are those whose total market value
is equal to or greater than the minimum amount (in millions or billions) you enter in
the minimum capitalization textbox, and whose total market value is equal to or less
than the amount you enter in the maximum capitalization textbox for this item. The
default values are a minimum capitalization of 200 million, and a maximum of
1,000 million. Thus, for example, a company whose total market value (of its stock)
is greater than 1,000 million would not meet your search criteria if you accept the
default values. (If you enter zero or less in either of the input boxes for this feature,
the value for that input item will be reset at the default value of 200 or 1,000,
automatically.)

 This screening factor is very helpful if you have only a certain amount to invest, say
$2,000 million, and want to put most of it into one company with a 20% ownership.
Thus you might set this screen for companies with total market caps of about
$5,000 minimum to about $8,000 maximum, of which you could afford to buy 20%
of their stock.

228
 Earnings Up Last Quarter by x% or More: If this box is checked, the only
companies that will meet your criteria are companies whose earnings are projected
to be up by the percentage you specify in the textbox for this item. This search
factor is a comparison of the earnings for the most recently reported quarter and the
current quarter (for which earnings have not yet been reported), so this is a very
sensitive indicator of a company's changing fortunes. (If you enter zero or less, the
checkbox for this item will be turned off, automatically.)

 Earnings Up Last 1, 2 or 3 Years: If this box is checked, the only companies that
will meet your criteria are those whose earnings have gone up in the last year, or the
last 2 years in a row, or 3 years in a row, as you select. The textbox for this item is
not editable, but you can click on the 'Change' button to change the number of years
to 1, 2, or 3, or back to 1. If this item is checked, the company must also show a
year over year quarterly earnings increase if it has reported earnings for 1 to 3
quarters of the current year, or it will be treated as not meeting this test.

 Management Rated at Least: If this box is checked, you can select only companies
that, relative to others in their industry, are considered to have Good, Average, or
Poor management. Use the "Change" button to select one of the above. If you select
"Good," then only companies with good management will meet your test. If you
select Average, then companies with either "Average" or "Good" management will
qualify. If you select "Poor," it is the same as not checking the box for this item,
since all companies have at least "Poor" management, if not better.

 Credit Rating Is at Least: If this box is checked, the database search only picks out
companies that have at least as good a credit rating as listed in the box for this item.
While the textbox is not editable, clicking the 'Change' button will change the credit
rating displayed, which ranges from lowest minimum of D, to C, to CC, to CCC, to
B, to BB, to BBB, to A, to AA to the highest credit rating, which is AAA. If you
select this search factor, note that the list of companies that will be displayed will
show the credit rating for each.

 Analyst Rating is: If this box is checked, the database search only picks out
companies that have the stock analyst performance and valuation rating as listed in
the box for this item. While the textbox is not editable, clicking the "Change" button
will change the rating level displayed, which ranges from highest of "Strong Buy,"
to "Buy," "Hold," "Sell," and the lowest rating of "Strong Sell." Note that as in real
life the Wall $treet Raider stock analyst's ratings are not always that reliable, but
this still can be a useful addition to other criteria you are using to find a company to
invest in, by selecting only stocks with the "Strong Buy" or "Buy" rating. Or, if you
are looking for short sale candidates, use this criterion to search for companies with
"Strong Sell" or "Sell" ratings.
 Industry Supply/Demand Improving: If this box is checked, companies in any
industry where the supply/demand situation is not improving will be excluded,
except that this factor applies only to 'industrials,' and not to banks, insurance

229
 companies, or holding / trading companies. None of the three latter groups of
companies will be excluded due to your checking this factor.
 Don't Show If Company's Stock Is Not Publicly Traded: If this box is not checked,
the program will show all the companies that meet your search criteria, including
companies that are wholly-owned by other companies or players, and are not
"publicly traded"; thus, even if such a company's stock looks attractive, you would
not be able to buy it, since none is available. To exclude such companies from the
list of companies that will be displayed, check this box. Note, however, that if you
are looking for companies that might be merger targets, you may want to leave this
box unchecked, since you may be able to merge with even a 100%-owned
subsidiary of another company, if you control the parent -- or even if you don't
control the parent company, if you make a sweet enough bid, you may be able to
merge with the subsidiary (but you may have to offer as much as 100% over market
price in that case). Note, also, that checking this box has no effect if you have also
checked the "Has Bonds Issued and Outstanding" item described in the next
paragraph, since you will be interested in buying the companies' bonds in that case,
not their stock -- so whether or not the stock is publicly traded will be irrelevant
when searching for bonds to buy.
 Has Bonds Issued and Outstanding: All of the above search criteria are useful in
trying to find stocks to invest in. This search criterion is only useful as part of your
search for corporate bonds to invest in. If this box is checked, the database search
will exclude from consideration any company that does not have a bond issue
outstanding. You would generally check this item only if you are looking for good
corporate bonds to invest in, and perhaps select only a few other criteria, such as
credit rating, good management, and whether or not the industry supply/demand
situation is improving for a given bond issuer. Factors like P/E ratio or Price to Net
Worth would not be very relevant if you are doing a search for corporate bonds to
invest in. If you select this factor, the list of companies displayed will show the
bonds' credit rating and the year they mature. Checking this box causes the search
routine to assume you are interested only in finding corporate bonds to invest in,
rather than stocks (though many of the criteria, such as credit rating, earnings
trends, and the like, may be the same for both stocks and bonds). Thus, if you have
checked this box, the listing of corporate bonds will show a number of bond details,
such as interest rate, yield to maturity, date of maturity, credit rating, the amount
issued, and the amount in public hands that are available for purchase, and the list
of all bonds that meet your criteria will be displayed in descending order of their
credit rating.

NOTE: If you check this box, to search for bonds, the database search program will
ignore the fact that you may have checked the box for "Don't show if company's
stock is not publicly traded," since, if you are buying bonds, you do not care
whether any of the stock of the company is available for purchase.

Once you have selected all the factors you want to apply in your search, and if the number
of companies that qualify is greater than zero but not more than 1000, click on the "Display
Results" button to view the list of companies that meet your criteria. You can then double-

230
click on any such company to select it as the 'Active Entity,' for doing further research on
the company.

Note that when you exit the Database Search function, and re-enter it later, your search
criteria are preserved from before (but the number of companies that now qualify will
probably have changed). Thus, once you have selected what you consider a good set of
search parameters, you can periodically click on the Database Search button and see what
companies, if any, newly fit the search parameters you have determined. There is also a
"Recall DB Search List" button in the same group of “Quick Search” buttons, which you
can click on to instantly bring up your search list without first having to open the "Database
Search" data entry screen.

To clear all the checkboxes and search parameters on the DataBase Search screen, click on
the "Clear Checkboxes" button.

(2) RECALL DB SEARCH LIST. This button, when clicked, brings up a list of companies
that now meet your search parameter specifications that you last entered using the
DataBase Search function, saving you the trouble of bringing up the DataBase Search data
entry screen or re-entering your search parameters. The list of companies displayed will
vary as time passes, since more or fewer companies will meet your search specifications at
any given point in time.

(3) OTHER QUICK SEARCH BUTTONS. The seven other buttons in the “Quick Search
Functions” grouping are all the same as similarly named buttons on the Entity Research
Menu (Entity Info button), and their functions are explained in the section on the Entity
Research Menu. However, note that if the current active entity is you, the player, and you
click on the Research Report, Earnings Report, or List Shareholders buttons in this
grouping, those items are not relevant for a player, so clicking on them will instead cause
information to be displayed (such as a Research Report) for the corporation that you had
most recently selected as the active entity.

231
 OTHER MENU FUNCTIONS

CHAPTER XI.

A. IN GENERAL.

In addition to the transactions you can do by clicking on any of the "Transactions" buttons,
as described in Chapters VI, VII, VIII and IX, each of which will use up one of the 5
transactions you are allowed to do on each turn, the "Other" buttons ("END TURN,"
"MISC" and "STOCK CHART") allow you to either end your turn immediately, do certain
miscellaneous transactions that do NOT use up any of your 5 transactions per turn, or view
a stock chart for a corporation that is the currently selected "Active Entity." The "MISC"
item brings up a menu that allows you to perform various functions which include
borrowing from the bank, making a bank loan repayment (for yourself or a corporation you
control), doing a stock split or reverse stock split for a company you control, making cash
advances (personal loans) to a company you control or recalling such advances, or
changing the name and stock symbol of a company you control (for the rest of the current
game).

B. "END TURN" BUTTON.

Click on this button to end your turn, and allow the next player to take his/her/its turn
before your turn expires due to time passage or use of all five of your maximum allowable
transactions. If you are playing against other (human) players, you can get tricky and try to
end your turn just before a quarter ends, or just before mid-quarter, if you can figure out
when that is. One of a players 5 allowable deductions is lost at the end and again at the
mid-point of each calendar quarter. (Hint: Use the "Select Corp." button and instead of
entering a stock symbol, type in the company number "748" or "1500" instead. Then, when
an earnings report pops up for that "Active Entity," it will be very near the middle or the
end of the quarter, so click on "End Turn" then to end your turn.) Then, when the next
player begins his or her turn, if he/she starts the ticker, the current calendar quarter will
immediately end, and that player will only have four transactions left to do, since one
transaction is deducted each time a quarter ends (as well as at mid-quarter). This is sneaky,
but effective, at least for the first time you pull that trick out of the hat.

C. "MISC" BUTTON AND SUBMENU. Clicking on this button brings up a short

submenu with only three or five of eight possible buttons for doing transactions:

232
borrowing, repaying a loan, doing stock splits or reverse splits, prepaying estimated income
tax, advancing money to a controlled company or recalling such an advance, or changing a
company's name and/or its stock symbol for the rest of the game. Unlike other transactions,
doing any of these will NOT use up any of your 5 allowable transactions per turn.

(1) BORROW MONEY. When you click on this box, if you, or a company you control are
the "Active Entity," a small dialog box will pop up, telling you the maximum you can
borrow on your line of credit from the bank (if anything). (If the current "Active Entity" is
a company you do not control, then the action will be taken by the last selected "Active
Entity" that you do control, which may be a company or you, the player.) The amount you
can borrow will also be shown as the default amount in the input area of that dialog box, so
if you wish to borrow the maximum amount, you need only to click on the "OK" button or
press the [ENTER] key. If you wish to borrow a smaller amount, type the amount into the
input area, and then click on the "OK" button or press the [ENTER] key.

If you click on the "Borrow Money" button when the "Active Entity" is a company you do
not control, you will see an error message, telling you that you do not control that company,
and thus you cannot make it borrow money. This will prevent you from accidentally
borrowing money for the wrong company, when the currently selected "Active Entity" is a
company that you think you control, when you have just lost your control of it.

If the currently selected "Active Entity" (one controlled by you) is a bank, or if the last
"Active Entity" you selected that you controlled was a bank, this button will not appear,
since banks don't borrow on lines of credit.

(2) REPAY LOAN. If you wish to repay all or part of a loan from the bank owed by you, or
owed by a corporation you control, click on this button. A small dialog box will appear, and
you can enter the amount you want to repay. If you, or your company, want to pay off the
entire loan, or as much as you can with available cash, just click on "OK" or press the
[ENTER] key. Otherwise, type in the lesser amount to be repaid before you click on "OK"
or press [ENTER].

If you do not control the lending bank, and one of your corporations you control is making
the loan repayment, a 2% "prepayment penalty" will apply, if you are playing a game at
Difficulty Level 3 or 4, unless the lending bank is also controlled by you. (You will be
warned of the prepayment penalty, if it would apply, before you complete the repayment.)

MONEY-SAVING TIP: Before you have your company make a loan repayment that
would incur a prepayment penalty, you may want to have it change banks to a bank you
control, if that is possible, either by using the "Change Bank" button on the "OTHER
TRANS" submenu, or by taking action to acquire control of the bank that is the lender to
your company, before the company makes the repayment. Or, you might have a bank you
control buy the loan from the other bank, if it is for sale, using the "Buy or Sell Bank
Loans" button on the "OTHER TRANS" (or on the "BUY/SELL") submenu.

233
Note that the prepayment penalty does not apply to repayments of loans by players -- it
applies only to corporate loan prepayments. The penalty is an expense (like additional
interest) to the borrower, and is additional income for the bank lender that holds the loan.

If you click on the "Repay Loan" button when the "Active Entity" is a company you do not
control, you will see an error message, telling you that you do not control that company,
and thus you cannot make it repay the loan.

If the currently selected "Active Entity" (one controlled by you) is a bank, or if the last
"Active Entity" you selected that you controlled was a bank, this button will not appear,
since banks don't borrow on, or make repayments on, lines of credit.

(3) STOCK SPLIT. Click on this button if you want to declare a stock split for the stock of
a company you control (which is currently selected as the "Active Entity"). You will be
able to "split" the stock by increasing the number of shares by a multiplier of any amount
from 1 to 10. Note that this will have no effect on the value of your holdings -- just as
cutting a pizza into 8 slices instead of 4 will not increase the total amount of pizza for your
family of 4 people, just by giving each person two small slices instead of 1 large slice.
However, many novice investors think stock splits are important and have asked us to add
this feature to the program, so we have done so.

In the real world, a stock split usually occurs after a stock has had a large run up, to, say,
$100 per share, and many small investors believe that they somehow will receive
something for nothing when a split occurs, so they often rush to buy a stock when the
company announces it will do a stock split, so that a split does often add to the momentum
of a stock, in the short run, a perfect example of a "self-fulfilling prophecy."

Also, by reducing the price of a stock from $100 to $25 or $33 by doing a 4- or 3-for-1
split, the stock may become somewhat more attractive to small "odd-lot" investors, many
of whom would be unable to afford the purchase of 100 shares (a "round lot" in U.S.
markets) at the higher price, so there is usually some minor increase in demand for a stock
after it has split. However, as investors have become more educated in recent years, and
small investors become less of a factor in markets, splits no longer have very much effect
on a stock's price, usually.

SPLIT EXAMPLE: If a company has 100 million shares (and you own 10 million of
them, or 10% of the stock), and the stock trades for $200 per share, your stock is worth $2
billion (or $2,000 million in the British numbering system). If you split the stock 2-for-1,
the company will have 200 million shares outstanding, and you will still own 10% of them,
or 20 million shares. However, the stock price will drop by a half, to $100 per share, so
your holdings will still be worth $2 billion ($2,000 million).

Note that you can only split a stock that trades for at least 10 per share in Wall $treet
Raider. Also, no split is allowed that would reduce the stock's price per share below 3.00

234
(in dollars, yen, Euros, etc.). If the stock price gets to be too high, above 1,000 a share, the
program will automatically split the stock for you.

Any time a split occurs, all prior earnings, losses, etc. are automatically adjusted to reflect
the split. Thus, if your stock earned $5.00 per share the previous year, and you do a 2-for-1
stock split, the prior year's earnings will be restated as $2.50 per share.

For companies that are not controlled by a player, the program will usually do a stock split
if the stock of the company gets up to about 100 a share.

The Stock Split button does not appear when the currently selected "Active Entity" is you,
the player, and does not appear if the currently selected "Active Entity" is a company that
you do not control.

(4) REVERSE SPLIT. Click on this button to do a reverse stock split. Reverse stock splits
are usually done when a stock's price has gotten embarrassingly low, so that it appears to be
a nearly worthless "penny stock." You can reduce the number of outstanding shares and
increase the per-share price, by selecting any reverse split factor greater than 1, up to 10
(which will be the divisor). Thus, if your stock, which is in a company you control, is all
the way down to $2.50 a share, you might choose to do a 1-for-10 reverse split, which
would increase the per-share price to $25. The number of shares would be reduced by
dividing by 10.

TIP FOR OPTIONS TRADERS: If you are unable to buy or sell put or call options on a
stock because the market price is less than 5.00 a share and you control the company, have
it do a reverse stock split to get the price per share up above 5.00, so you can do the option
trades.

No reverse split is allowed if the stock price is already over 100 per share (in whatever
currency you have selected for the current game).

If your company's stock price falls below 3.00 per share, the program may automatically do
a 1-for-10 reverse split, in some cases. As with stock splits, reverse splits have no effect on
the value of your holdings.

Any time a reverse split occurs, all prior earnings, losses, etc. are automatically adjusted to
reflect the reverse split. Thus, if your stock earned $.25 per share the previous year, and

235
you do a 1-for-10 reverse stock split, the prior year's earnings would be restated as $2.50
per share.

The Reverse Split button does not appear when the currently selected "Active Entity" is
you, the player, and does not appear if the currently selected "Active Entity" is a company
that you do not control.

(5) NAME CHANGE. Click on this button if you wish to change the name of a company
you control, for the rest of the current game. When prompted for the new name, type in a
company name, not less than 5 nor more than 25 characters in length. You can also change
its stock symbol, by entering a stock symbol of from 1 to 4 letters. The new name will be
saved as part of the data of the current game, if you save the game, to be continued later.

However, using this "Name Change" feature will not have any effect on the company
names for the next new game you start. To make permanent name changes, you need to
have the "Customizer" utility program (file name CUSTOMIZ.EXE), installed in the same
directory as the main Wall $treet Raider file (file name WSR.EXE). If the Customizer is
present, use the Game Options Menu, "Customizer Utility" menu item, to branch to that
utility program, which allows you to change the name, stock symbol, and country where
incorporated, for any company in the simulation -- permanently (unless you decide to
change it back, or to something else, later).

NOTE: The "Name Change" button will not appear on the "MISC" submenu unless the
current "Active Entity" is a corporation you control, or unless the last "Active Entity" that
you selected during your current turn was a company you control. Only company names
can be changed. (You cannot change the player name you selected at the start of a game,
once the game has begun.)

(6) ADVANCE TO CORP. Click on this button if you wish to loan (advance) funds to any
company that you control. This is a useful tool in many situations, such as where you
control a company that has bonds outstanding that sell at a deep discount, and you would
like to have the company buy them back, but it has no cash or line of credit, and is thus
unable to do so. It is also a good way to finance a company you control, when you don't
wish for it to issue bonds, at a time when interest rates are too high, or its credit rating is
poor and it either cannot issue bonds, or would pay too high an interest rate if it did. You,
the player, will also usually earn a somewhat higher interest rate on the funds you advance
to a corporation than if you left the money in the bank, earning at the CD rate (in most
cases).

The loans you make will pay you interest at the same Prime Rate charged by banks at the
time interest is paid, but no principal payments will be made, unless you demand payment,
in full or in part. If the borrowing company's credit rating falls to "D" (the lowest rating), it
will no longer pay you interest in cash, but will instead "accrue" the interest and add it to
the amount it owes you.

236
Advances are "demand loans," meaning that you can demand full or partial repayment at
any time from the borrowing corporation, regardless of whether or not you still control the
corporation at the time. However, your loan or advance is a subordinated debt. That means
it has a lower priority than bank loans, bonds issued, or other liabilities (such as deposits of
a bank, or policy reserves of an insurer), in the event the borrower gets in financial trouble
or goes bankrupt.

Thus, unless the borrower has at least a "BB" or better credit rating (BBB, A, AA, or
AAA), you may not always be able to call in an advance, if doing so would result in the
borrower still having a low credit rating. Since calling in some or all of the advance will
reduce the borrower's debts and, therefore, may improve its credit rating, it may sometimes
be possible to call in some or all of an advance when the borrower's credit is worse than BB
before the loan repayment is made, however.

See the next section, regarding the "Recall Advance" button, which is used when you wish
to call in (demand repayment of) an advance you have made to any company. If you control
a company and wish for it to repay an advance to you, you must select "PLAYER" as the
"Active Entity" and use the "Recall Advance" button to call in the advance. If you control a
company that owes an advance to an opposing player, and wish to have it pay off the
advance to the other player, select the company as Active Entity and use the "Repay Loan"
button (also on this MISC Menu) to repay the advance (or attempt to, if your company has
an adequate credit rating). If a player advances funds to a controlled bank, and then loses
control, the advance will automatically be repaid, almost immediately (unless the bank's
credit rating is less than "BB").

NOTE: The "Advance to Corp." button is only displayed if the currently selected "Active
Entity" is you, the player.

(7) RECALL ADVANCE. Click on this button if you wish to call in an advance (a demand
loan) that you have made to a corporation that you control (or controlled at the time you
made the advance).

You can call in an advance at any time, provided the borrowing corporation is in relatively
sound financial condition, with a credit rating of BB, BBB, A, AA, or AAA. In some cases,
you may also be able to call in (demand repayment of) some or all of an advance even if
the company's credit rating is lower than "BB" (but not if its credit rating is "D").

In instances where repayment to you of an advance would impair the company's ability to
pay off its senior creditors, such as bank lenders or bondholders (or bank depositors,
general creditors, or insurance policy holders, if the company that owes you money is a
bank or insurance company), you will be given an opportunity to "forgive" (write-off, as a
capital loss) a percentage of your advance to the company in question. That may improve
its credit rating enough so that you can then be repaid the rest of the advance. (The amount
of the advance that you forgive is nontaxable income to the borrower company, but will
reduce or eliminate any tax loss carryovers of the company, dollar for dollar. The debt
forgiveness is a capital loss to you, for tax purposes. However, note that if you directly own

237
100% of the stock of the borrower company, the debt forgiveness is not a capital loss to you
and does not reduce tax loss carryovers of the company, but is instead treated as a capital
contribution by you, which increases your tax basis in the stock.)

Some clever players, realizing that forgiving advances to a company will instantly improve
its balance sheet and thus drive up the company's stock price, may be tempted to buy a
huge number of call options on the stock (or sell a huge number of put options short on it,
which is roughly the same), before doing the forgiveness of the advance. Nice try, but in
Versions later than 4.0 this is considered a conflict of interest, and you will have to close
out any such long call option positions or short put option positions on the stock before you
can do a debt forgiveness of an advance to a corporation.

NOTE: The "Recall Advance" button will not appear on the MISC menu
unless you, the player, are the currently selected "Active Entity."

(8) PREPAY INCOME TAX. Click on this button to prepay some or all of your estimated
income tax for the current year. While the program automatically prepays some of your
estimated taxes at the end of each quarter during the year, you may want to add to the
amount prepaid, so that you do not get a rude shock by having to pay taxes at the end of the
year, at a time when you may be fully invested and may be forced to sell some of your
holdings in order to pay the tax. You can prepay any amount up to 20% of your net worth in
any one payment (if you have sufficient cash and line of credit). Note that once you make a
tax prepayment, your net worth is reduced, which will also reduce your line of credit and
may lower your credit rating.

While this new feature, added in Version 5.30, is mainly for prepaying your income taxes,
any income tax refund at the end of the year can be used to pay other taxes, such as the
Wealth Tax or Corporate Shares Tax that may apply if you are playing at Difficulty Level 4.
Thus, in some cases you may want to overpay your expected income tax liability in order to
make sure you are able to pay the Wealth Tax on billionaires or the Corporate Shares Tax
on stocks you owe, if either of those taxes is applicable to you.

NOTE: The "Prepay Income Tax" button will not appear on the MISC menu unless
you, the player, are the currently selected "Active Entity."

(9) OFFER TO SELL STOCK. Click on this button if you wish to offer for sale a stock
owned by you or by a company you control. All offers to sell are at a 5% discount from the
market price, determined at the time the offer is accepted by another player or company. If
you have a large block of stock, and would greatly depress the market price if you tried to
dump it all, this may be a better way to dispose of the stock, and without paying a
brokerage commission.

238
The higher the Analyst's Rating for the stock you are offering, the more likely the offer is to
be snapped up by a buyer. However, if the stock has a "Strong Sell" rating, the offer
probably will not be accepted.

All offers expire at the end of the current quarter or, if you choose, at the end of the next
calendar quarter.
If you wish to cancel an offer that you have listed, go to the "OTHER TRANS." menu and
click on the "For Sale Items" button and select the item for the stock you have offered from
the list of items for sale. You will then
be asked if you wish to cancel the offer and remove it from the list.

Posting an offer of an item for sale does not count as one of the five transactions on your
turn. However, if the offer, or part of the offer, is accepted, it will count as a transaction.

(10) OFFER TO SELL ASSETS. Click on this button if a company you control wishes to
sell some or all of its business assets. All offers to sell are at a 5% discount from the cost of
the assets. You may receive a better price, even at a 5% discount, than you would if you
tried selling them otherwise,
and there is no 10% commission if a buyer accepts your offer. However, there is no
guarantee that your offer will be accepted before it expires.

All offers expire at the end of the current quarter or, if you choose, at the end of the next
calendar quarter.

If you wish to cancel an offer that you have listed, go to the "OTHER TRANS." menu and
click on the "For Sale Items" button and select the offer of assets your company has listed
for sale. You will then be asked if you wish to cancel the offer and remove it from the list.

Posting an offer of an item for sale does not count as one of the five transactions on your
turn. However, if the offer, or part of the offer, is accepted, it will count as a transaction.

D. "CHEAT" BUTTON AND SUBMENU. Click on this button to bring up a small

"Cheat Menu." The CHEAT MENU has 3 items, the first one being the “add cash” option,
similar to prior releases. Two other cheats, involving inside information, are now available
on this menu – receiving advance notice of upcoming mergers or information on a
surprising upcoming major change in a company’s earnings – either for the better or for the
worse.

Buying (or shorting) the stock after received the “leaked” insider information is usually
quite profitable. Your “high score” possibilities will not be disqualified if you use either of
these two new cheats – but you will risk incurring massive fines for trading on such illegal
inside “information.” (The more often you trade on such inside information, the greater the
odds that you will be caught and fined by the authorities, of course.)

Once you have been "prosecuted" (or acquitted), you will no longer be able to obtain tips
from your "insider" source for the rest of the game. The Cheat Menu is not accessible when

239
 “Cheat Mode” setting is turned off. Note that in the "shareware" version, only one tip per
game (per player) is allowed.

E. "CHART" BUTTON. Clicking on this button causes a stock chart to be displayed for the
current "Active Entity" if that entity is a corporation or, if you (the player) are the current
“Active Entity,” the chart that will be displayed is for the last corporation that WAS the “Active
Entity.” The program keeps track of the monthly high, low, and ending stock price of each of the
companies in the simulation as a game is played, for the most recent five years of play. Thus
charts will display up to 60 months of stock price information for a company and can give you a
quick view of how the company has been faring in the stock market.

The price action for each month is shown as a vertical bar on the graph, with the upper end of
each bar representing the highest stock price for that month and the bottom end representing the
lowest price. The short horizontal marker on each such bar shows where the stock traded on the
last day of the month. Stock prices are calibrated on the right side of the chart, and dates are
marked on the bottom of the chart, with the larger date markers representing the point where
each year ends and the smaller markers representing the end of each calendar quarter.

Stock prices used in making the charts are stored by the program when you save a game file.
Note that game files will save or be retrieved a bit slower than in prior versions of Wall $treet
Raider, since the large mass of stock price data has more than doubled the size of saved game
files, from about 500kb in Version 4.10 and earlier versions, to about 5 to 10 megabytes in
Version 4.50 and later that save the stock price records.

While a stock price chart is a bit unrealistic for a company that is privately owned (has no
publicly traded shares), the stock chart can be thought of as tracking its fair value from month to
month, as though its stock were being traded.

Note that when a new company is started up at any time during a game, it will not be possible to
view its price charts until it has been in existence for three months or more. Similarly, if all of the
stock of a company is canceled when it goes through a "Chapter 11" bankruptcy, with new stock
issued, the price history of its old stock will be wiped clean, since the company is essentially
starting over, from the standpoint of stock ownership.

The only other situation (rare) where a stock's chart cannot be displayed is where the stock price
has exceeded 10,000 dollars (Euros, pounds, etc.) per share during the last five years of game
play. In that unlikely event, you could do one or more stock splits, so that the restated (split)
price would no longer exceed 10,000 at any point in the period covered by the stock chart.

In Version 6.60 of Wall $treet Raider, a “BUY” button was added to stock charts, allowing you to
click on it to begin the process of quickly buying the displayed stock. In some cases, where the
charted stock is not the current “Active Entity,” or if it is the entity that would be buying (itself),
or in certain other cases, the “BUY” button is not always displayed, such as where the buying
entity (you or a company you control) already owns and/or has short positions in 15 other stocks.

240
NOTE: The stock charts feature is not enabled in the "shareware" version of Wall
$treet Raider.

241
 APPENDICES

CONTENTS:

APPENDIX A...... INSTALLATION OF PROGRAM

APPENDIX B...... COMPANY NAMES AND STOCK SYMBOLS

APPENDIX C...... HOW CREDIT RATINGS AND LOAN RATES ARE DETERMINED

APPENDIX D...... INDUSTRY INFORMATION:

(1) List of industries with typical growth rates and volatility level

(2) Factors affecting demand growth in each non-financial industry

APPENDIX E...... STRATEGY AND TACTICS SUGGESTIONS

APPENDIX A: INSTALLATION OF PROGRAM (SECTION DELETED)

NOTE: THE APPENDIX SECTION ON INSTALLATION OF THE PROGRAM

HAS BEEN DELETED FROM THIS EDITION OF THE MANUAL. Since Wall $treet
Raider now is distributed in a self-installing format, and we no longer publish this Manual
in printed form, your ability to read this HTML file means you have already successfully
installed Wall $treet Raider, so that formerly lengthy section of this Manual has become
superfluous, and thus has been deleted.

Accordingly, see the instructions in Chapter II (entitled "GETTING STARTED") of this

Manual, for instructions on starting a game in the future, after you have initially installed
the program and run it the first time from the install file (generally, a file with a name such
as "SETUPWSR.EXE or SETUPPKG.EXE or the like).

242
APPENDIX B: COMPANY NAMES AND STOCK SYMBOLS

When prompted to enter a company's stock symbol in Wall $treet Raider, you may enter
either the ticker symbol ("IBM", "GE", etc.) or the company ID #, which can range from
#11 to #1600. The program will accept either. However, unlike the DOS version of Raider,
company ID numbers are never shown in this Windows version, except in the Customizer
Utility add-on program (and sometimes the company ID number in the Customizer Utility
may be the same as for the same company of the same name in the main program, since
newly formed companies' names during a game are picked from the list of available
company names somewhat at random).

Please note that the stock symbols used in this simulation are not necessarily the same as
the stock symbols for the real companies. For example, some companies traded in over-the-
counter or Nasdaq markets in the U.S. have 5-letter symbols, while this simulation only
uses stock symbols consisting of 1 to 4 letters. In many cases we have "made up" stock
symbols that we feel will be easier to remember than the real stock symbols, such as
"DURB" for Durban Deep Mining, rather than its real Nasdaq symbol of "DROOY."

Wall $treet Raider is our hobby (or addiction, our more honest friends would say), and is
almost constantly under revision, as we see things in the financial news that we find
interesting, and which we can devise a way to recreate in the program in some fashion that
will be realistic and add to the realism and "texture" of the simulation.

Thus, for example, any time we see that a name change has been made by a major "real
world" corporation that appears in this simulation, or we see that one such company has
been gobbled up by another, we try to keep the Wall $treet Raider database of companies
up to date by changing the names or ownership of the company in question. For example,
when Hewlett Packard acquired Compaq Computer, we changed the stock ticker symbol
for the parent company to "HPQ" and changed the stock ownership of Compaq so it
became a 100% subsidiary of Hewlett Packard, as in real life. Or, when American Home
Products changed its name to Wyeth Corporation a while back, we updated Wall $treet
Raider immediately to reflect the new corporate name.

We welcome your input, any time you may notice that some company in the simulation has
gone through a name change or been merged out of existence in the real world. Please let
us know, and we will update the database. We are willing to tolerate a certain amount of
nit-picking.... However, we will not always eliminate a company from the simulation just
because it has merged into another. For example, we didn't do away with Time-Warner
when it was acquired by AOL a few years ago, because the two companies continue to
exist, and one or the other may (soon) be sold off or spun off by the other -- sort of like the
way it can work in this simulation!

243
APPENDIX C: HOW CREDIT RATINGS AND LOAN RATES ARE DETERMINED

In Wall $treet Raider, except for banks, a player or company's credit rating and the rate of
interest paid on bank loans are both determined by the player or company's ratio of debt to
net worth. A player or company whose debt is less than 5% of net worth may have the
highest credit rating ("AAA") and, if so, pays interest at the "Prime Rate." Those with
lower credit ratings generally pay rates that are progressively higher than whatever the
current Prime Rate is. The following table shows the relationship between debt-to-equity
(or debt-to-net worth) ratios of the borrowers, credit ratings, and rates of interest paid, for
players and for all corporations except banks.

DEBT-TO-EQUITY RATIO CREDIT RATING INTEREST RATE PAID

-------------------- ------------- ------------------
Under .05 AAA * Prime Rate
.05 to .20 AA Prime + 1/2%
.20 to .50 A Prime + 1%
.50 to 1.0 BBB Prime + 1 1/2% + ADJ **
1.0 to 1.5 BB Prime + 2% + ADJ **
1.5 to 2.0 B Prime + 2 1/2% + ADJ **
2.0 to 3.0 CCC Prime + 3% + ADJ **
3.0 to 5.0 CC Prime + 3 1/2% + ADJ **
Over 5.0 C Prime + 4% + ADJ **
Deficit (Corps.) D Prime Rate + 5%

Notes:
------
* In addition to having zero or very little debt, in order
to earn an "AAA" rating, a company must have had net income
in each of the last 4 years, and must not have a loss for
the current year-to-date.

** + ADJ means an additional adjustment factor is added to the

rates shown. The adjustment is based on a combination of factors,
including the growth rate of the economy, and the Difficulty Level
selected for the current game. In general, the worse the condition
of the economy, based on GDP growth, and the higher the Difficulty
Level, the larger the adjustment factor, which means the "spread" over
Prime Rate is larger. In the most extreme case, the "spread" over Prime
Rate for a "BBB" borrower can be as much as 2.5% over Prime, or for a
"C"-rated borrower can be as much as 9.5% above Prime, for example. The
ADJ factor is smaller if the economy is growing rapidly, and if the game
is played at a lower Difficulty Level, and can even be a zero adjustment
in some cases, but only for a "BBB"-rated (or better) borrower under
ideal conditions.

Note that a company with a "D" credit rating not only has a negative net worth, but is also
in default on its bonds, if it has any bonds outstanding and lacks the cash to pay interest.
Instead of it paying interest on its bonds in cash, the interest will merely "accrue" and be

244
added to the total amount of bond principal it owes. So, if you own $100 million of the 8%
bonds of a company that is in default on its bonds, you may notice that, after one quarter of
default, you will then own $102 million of the bonds (since the issuer would be paying 2%
per quarter, if it were able to pay cash interest), but you won't have received any cash
interest. (And the bondholder does not pay income tax on the accrued interest, until the
bonds pay off or are sold.)

In Wall $treet Raider, credit ratings for banks are used mainly to determine the interest
rate on bonds a bank may issue, and bank credit ratings are not determined by the above
schedule. Instead, the credit rating for a bank is based on a number of factors relating to
the amount of its capital (net worth) and the size of its bad debt reserves, combined, as a
percentage of its total liabilities. Thus, a bank may actually have a deficit in net worth, but
might still not have a "D" credit rating, if it has ample bad debt reserves.

In this simulation, all banks pay the same rates on CD's (Certificates of Deposit), and banks
with "AAA" or credit ratings pay the same rate on interbank borrowings, which are made at
the "LIBOR" rate. Banks with less then "AAA" credit ratings have to pay somewhat higher
rates on interbank loans than the LIBOR rate, up to as much as 5.7% above the LIBOR
rates for some "D" rated banks.

Click on the "Interest Rates" command button on the "GENERAL" research submenu to
see the current interest rates paid on CD's, the LIBOR rate, the Prime Rate, and other key
interest rates. (All of which fluctuate constantly, as in the real world.)

APPENDIX D: INDUSTRY INFORMATION:

(1) List of industries, level of volatility (1 is least volatile, 10 is most volatile), and typical
demand growth rates for each industry group.

INDUSTRY VOLATILITY TYPICAL DEMAND

(1 TO 10) GROWTH RATE

BANKING N/A NOT APPLICABLE

INSURANCE N/A NOT APPLICABLE
AUTO -- NORTH AMERICA 4 4%
BIOTECHNOLOGY 9 15%
HOUSING DEVELOPMENT 8 5%
BUILDING MATERIALS 7 5%
INTEGRATED OIL CO'S 6 5%
OIL SERVICES & DRILLING 8 6%
BASE METALS & MINING 6 3%
ELECTRONICS 6 9%
N. AMERICAN RAILROADS 3 2%
STEEL 4 2%
CAPITAL GOODS 8 6%
DEFENSE & AEROSPACE 3 7%
AGRIBUSINESS 2 5%
AIR TRANSPORTATION 7 6%
BREWING & DISTILLING 1 3%

245
TIRE AND RUBBER
TEXTILES/APPAREL
CHEMICALS/COMMODITY
PHARMACEUTICALS
MEDICAL EQUIPMENT/SUPPLIES
SHIPPING
COMPUTER
TRUCKING
SOFTWARE
PUBLISHING
PACKAGED FOODS
ENTERTAINMENT/BROADCAST
GLOBAL TELECOMMUNICATIONS
TOBACCO PRODUCTS
HOUSEHOLD/PERS. PRODUCTS
PAPER PRODUCTS
BEVERAGE
SEMICONDUCTOR
ADVERTISING
SECURITIES BROKERAGE
OFFICE EQUIPMENT
INTERNET SERV./CONTENT
COMPUTER PERIPHERALS
RETAIL -- SPECIALTY
RETAIL -- BROAD LINE
RETAIL -- DRUGSTORES
RETAIL -- BOOKSTORES
RETAIL -- SPORTING GOODS
RETAIL -- SUPERMARKETS
RETAIL -- APPAREL
RETAIL -- DISCOUNTERS
ELECTRICAL EQUIPMENT
PRECIOUS METALS
CHEMICALS -- SPECIALTY
AIR FREIGHT -- COURIERS
TRANSPORTATION EQUIPMENT
HEAVY MACHINERY
AUTO PARTS
HEALTH CARE PROVIDERS
RESTAURANTS
RECREATIONAL PRODUCTS
HOTELS/CASINOS
FURNISHINGS/APPLIANCES
NETWORK & TELECOM EQUIP.
SECURITY SERVICES
ENGINEERING/CONSTRUCTION
POLLUTION CONTROL
CABLE T.V. -- U.S.
FOOTWEAR
AUTO -- EUROPE
AUTO -- ASIA
U.S. ELECTRIC/GAS UTIL.
HOLDING COMPANY
EXCHANGE-TRADED FUNDS (ETF’S)
5 4%
3 1%
6 5%
3 9%
2 10%
8 3%
7 8%
3 5%
6 13%
3 7%
1 4%
3 8%
7 8%
2 1%
2 6%
5 5%
2 7%
9 11%
6 7%
10 8%
7 7%
10 16%
8 10%
4 6%
5 4%
3 7%
4 3%
4 6%
2 4%
3 3%
4 8%
6 6%
9 2%
5 7%
4 8%
6 5%
7 4%
1 5%
3 8%
4 5%
6 7%
6 6%
5 3%
9 18%
2 8%
6 7%
8 12%
4 6%
3 2%
5 3%
6 5%
2 4%
N/A NOT APPLICABLE
N/A NOT APPLICABLE
246
(2) Factors affecting demand growth in each non-financial industry (industries other than
banking, insurance and holding/trading companies):

INDUSTRY FACTORS AFFECTING DEMAND GROWTH

AUTOS -- NORTH AMERICA, Mainly affected by GDP growth;

EUROPE, AND ASIA adversely affected by high oil
prices.

BIOTECHNOLOGY GDP growth affects somewhat; growth is

usually very rapid and fairly steady,
but eventually tapers off in later years.

HOUSING DEVELOPMENT Affected primarily by number of

housing starts, which are affected
by interest rates (adversely) and
size of GDP. Extremely cyclical.
Industry has considerable exposure to
asbestos litigation liability.

BUILDING MATERIALS Affected by level of housing starts,

plus increase in capacity in Housing
Development Industry. Very cyclical.
Industry has considerable exposure to
asbestos litigation liability.

INTEGRATED OIL CO'S Affected by level of oil prices (high

price is favorable) and GDP growth.

OIL SERVICES/DRILLING Affected by expansion or contraction

of capacity (drilling rigs, etc.) in
the Integrated Oil Co.'s Industry.
Tends to be very cyclical, and growth
or contraction often lags behind trend
in Integrated Oil Co.'s Industry.

BASE METALS AND MINING Affected greatly by rate of growth of

GDP. Very cyclical.

ELECTRONICS Affected considerably by changes in

the rate of GDP growth; rapid but
cyclical growth pattern, eventually
slowing down.

N. AMERICAN RAILROADS Affected by changes in rate of GDP

growth. Fairly cyclical, slow-growing.

STEEL Heavily dependent on expansion or

contraction in the Auto Industry, and
significantly affected by GDP changes.

CAPITAL GOODS Very sensitive to changes in GDP growth

rate. Extremely cyclical.

DEFENSE & AEROSPACE Somewhat dependent upon expansion or

contraction of capacity in the Air
Transportation Industry (airplanes,

247
 etc.), but often immune to general
economic conditions in times of war,
due to defense spending component.

AGRIBUSINESS Affected adversely by high oil prices and

vice versa. Slow growing at first, but
growth rate tends to increase later.

AIR TRANSPORTATION Affected considerably by changes in the

size of GDP; affected adversely by high
oil prices and vice versa. Very cyclical.

BREWING/DISTILLING Largely unaffected by GDP growth or

other economic factors. Slow, but very
steady, predictable growth.

TIRE AND RUBBER Follows GDP growth trends fairly closely,

affected adversely by high oil prices.

TEXTILES Mature, very slow-growing industry, but

still considerably affected by rate of
GDP growth.

CHEMICALS -- COMMODITY Affected mainly by GDP growth trends;

somewhat cyclical growth pattern.

PHARMACEUTICALS Rapid, fairly steady growth. Not

affected by economic trends.

MED. EQUIP/SUPPLIES Rapid, fairly steady growth. Usually

not affected by GDP growth rate.

SHIPPING Affected by changes in GDP growth rate;

affected somewhat adversely by high
oil prices; very cyclical growth.

COMPUTERS Rapid, but uneven growth. Affected

significantly by GDP growth trends.
Rate of growth eventually slows with
maturity.

TRUCKING Affected primarily by growth rate

of the economy, but severely affected
by high oil prices.

SOFTWARE Rapid, fairly steady growth, for a

number of years, then tapering off.
Somewhat affected by GDP growth.

PUBLISHING Relatively steady, fairly fast

growth, only slightly affected by
GDP growth rates.

PACKAGED FOODS Very steady, predictable growth,

faster than GDP, but not affected
by GDP growth rates.

ENTERTAINMENT/BROADCAST Fairly rapid growth, reasonably

steady. Only slightly affected by
rate of GDP growth.

GLOBAL TELECOM. Rapid, but very volatile and

cyclical growth, somewhat affected
by trends in GDP growth.

TOBACCO Almost no growth; a mature industry,

but dominated by a few big companies,
with little competition, so tends
to be a profitable "cash cow." But

248
 susceptible to cancer lawsuit exposure.

HOUSEHOLD PRODUCTS Fairly high rate of growth, very

steady and predictable, almost entirely
independent of the overall economy.

PAPER & FOREST PRODUCTS Modest growth rate, very cyclical

and very dependent on the overall
economy; Tends towards boom or bust.

BEVERAGE Fairly good rate of growth, very

safe and steady; dominated by Coke
and Pepsi, with little price
competition, resulting in normally
high profitability. Almost immune
to economic conditions.

SEMICONDUCTOR Very high (but extremely volatile)

growth industry, populated by
many exceptionally competitive,
cannibalistic companies. Greatly
affected by GDP growth rate changes,
but growth rate gradually slows down.

SECURITIES BROKERAGE Fairly high but erratic growth rate,

does well in low-interest rate
environment, very poorly when rates
are high; also is extremely sensitive
to GDP growth rate changes.

OFFICE EQUIPMENT Rapid but volatile growth, very much

affected by growth rate of GDP.

INTERNET SERV./CONTENT Very rapid growth rate, but with the

greatest volatility of any industry;
frequent boom or bust cycles, of
extreme profitability or of excess
capacity; seriously affected by changes
in the economic growth rate (GDP);
growth eventually tapers off after a
number of years.

COMPUTER PERIPHERALS Rapid growth industry, but is quite

cyclical, and influenced by GDP growth
rates.

RETAIL INDUSTRIES Mostly growing at or near GDP growth

(VARIOUS SECTORS) rate, except Retail -- Specialty,
Retail -- Sporting Goods, Retail --
Drugstores, and Retail -- Discounters,
which typically grow considerably faster
than GDP. Retail -- Supermarkets group
is characterized by slow but very steady
growth.

ELECTRICAL EQUIPMENT Somewhat higher than average growth rate

and volatility, affected considerably by
GDP growth rate.

PRECIOUS METALS Very slow long-term growth, but extremely

volatile and contra-cyclical; that is,
tends to do very well in very weak economy,
and to do poorly when economy is strong.
Also tends to rise with high oil prices
and inflation, and vice versa.

CHEMICALS -- SPECIALTY Fairly rapid growth, average volatility,

only moderately affected by GDP growth
trends.

AIR FREIGHT / COURIERS Fairly rapid growth rate, relatively steady,

249
 but strongly affected by growth in GDP.

TRANSPORTATION Above-average growth rate, tends to closely

EQUIPMENT follow GDP growth rate, but somewhat faster
growth than GDP; negatively affected by high
oil prices, and does better when oil prices
are low.

HEAVY MACHINERY Average growth rate, about same as GDP, but

considerably more cyclical.

AUTO PARTS Average to slightly above average growth,

but extremely steady, barely affected by
GDP growth rate trends, often does well
even when sales of new autos are weak.

HEALTH CARE PROVIDERS Well above average growth rate, generally

quite consistent, and not affected by the
general economy.

RESTAURANTS Average to slightly above average growth,

fairly steady and only mildly affected by
general economic trends, except at the
extremes of depression or very rapid GDP
growth.

RECREATIONAL EQUIPMENT Above average growth rate, somewhat cyclical

and considerably affected by GDP growth.

HOTELS/CASINOS Above average growth rate, somewhat volatile

and strongly affected by GDP growth rates.

FURNISHINGS/APPLIANCES Average or below average growth, roughly in

line with economic growth, and with average
volatility; affected adversely by high
interest rates.

NETWORK & TELECOM Fastest growing sector, and one of the most
EQUIPMENT volatile and unpredictable, but eventually
experiences a slowing of growth rate. Has
frequent boom or bust cycles, but is only
moderately affected by GDP growth trends.

SECURITY SERVICES Well above average growth rate, and very

steady. Actually does somewhat better when
economy is weakest and most chaotic.

ENGINEERING/CONSTRUCT. Above average growth rate, with slightly

above average cyclicality, very much tied
to GDP growth, but considerably faster.

POLLUTION CONTROL Rapid growth, and quite steady, only very

slightly affected by economic conditions.

CABLE T.V. -- U.S. Above average growth, with average volatility,

and only mildly affected by GDP growth rate.

FOOTWEAR Slow growing, but fairly steady, and only

slightly affected by the general economy.

U.S. ELECTRIC/GAS UTIL. Average rate of growth, but very steady

and consistent; but adversely affected by
high interest rates.

HOLDING/TRADING COS. No typical growth rate. Holding/trading

companies simply hold stocks of other
companies.

250
APPENDIX E: STRATEGY AND TACTICS

(1) STRATEGIC GOALS.

For a more detailed look at strategies to employ in Wall $treet Raider, see the section on
BASIC STRATEGIES in CHAPTER 4.

In general, your strategic goals in Wall $treet Raider should include the following:

Take the high ground. Seek to obtain control of the strongest company in an industry, in
terms of large market share, solid credit rating, and high rate of return on its business assets
as compared to other companies in its industry. Try to obtain control without paying a stock
price significantly higher than the company's net worth per share, which will tend to limit
your downside risk.

Monopolize. Attempt to reduce competition in your company's industry, by taking control

of other large, fast-growing or highly profitable competitors. Then use the "Set Growth
Rate %" command button in the "Management Transactions" submenu to reduce their
capacity growth rates. But beware of possible antitrust suits that might be brought against
your companies by opponents if you control too much of an industry's capacity. Price-
fixing, like other forms of fraud, is always an inherently dicey proposition.

Get a bank. Attempt to gain control of a key bank, one that either lends to you or your main
company, or to other players (or their main companies). You may be able to leverage your
control of one bank into control of several banks, which can put you in a very strong
position by freezing your opponents' lines of credit. Often you can get control of a bank by
taking control of a company that already controls it, or by getting control of an insurer,
since insurance companies will usually have ample funds and borrowing power with which
to mount a bank takeover.

Turn around slow growers. As investments, look for slow-growing companies in fast-
growing or highly profitable industries to take over. Once you have control, up the
company's growth rate (if it is earning a good return on its investment in business assets).
After a while, its P/E ratio (and stock price) should go up unless earnings decline, as the
market tends to recognize the company's faster growth rate.

Stay liquid. Always try to keep a substantial amount of cash (cash equivalents, such as
CDs) on hand, for your companies and for yourself, even if you have to borrow a bit more,
unless you have absolute (51%) control of the lender, since you never know when another
player might take over the bank you thought you had a large line of credit from, leaving
you stuck without either cash or credit.

251
Don't Use Too Much Leverage. Don't take on too much debt, either for your own account
or for companies you control. Try to maintain a good credit rating, at least "BBB" or
preferably "A" or better, most of the time, which will generally keep you out of trouble
when sudden, unexpected market changes occur or unanticipated disasters strike out of
nowhere. If you (or your companies) are in deeply in debt, you not only pay higher interest
rates, but are likely to be forced into bankruptcy or a crippling forced sale of assets at the
worst possible time, if anything you didn't foresee goes wrong. Keep your debts to a
minimum, and you can withstand most anything that happens, and survive to play another
day. Take on too much debt, and you can quickly be bankrupted, or reduced to a pauper.

Build Equity Pyramids. If you absolutely must get your hands on some large company or
industry, and don't have the money to do it, don't just ignore our advice in the preceding
paragraph, by floating bonds or otherwise borrowing every penny you can borrow. There
are ways to "pyramid" your small holdings into a chain of companies, requiring the use of
little or no debt, where the company at the bottom is huge. The idea, in short, is to create a
chain of companies, each 20%-owned by the company above them in the chain, or
pyramid. (Of course, your percentage interest in the company at the bottom of the pyramid
will be diluted to almost nothing, but you WILL control it, and may be able to use it to do
some damage to your opponents in the game.)

The "equity" pyramid scheme is simple. For example, put all your money in a "startup"
holding company, a billion dollars, for example (1000 million). Call the startup "Company
#1." Have it do several "private offerings" of stock, until your stock percentage in it is
down to about 20%, so now it will have about 5 billion in assets. Then let it borrow a bit
from its bank, say 2 billion. Next, have it buy up 100% of a small, existing holding
company (Company #2), or other company with very few assets (one with tax loss
carryovers would be ideal). Then have Company #1 contribute all its cash, say 7 billion, to
Company #2. Then have Company #2 do a public offering and a series of private offerings,
until Company #1 owns only about 20% of Company #2, by which time #2 may have about
35 billion in cash, and no debt. Then have it borrow, say, 15 billion, and buy up another
small holding company, Company #3.

Can you see where this is going? It may take a while, since you won't always be able
to float stock offerings as often as you like, but you can eventually create a chain of
companies with a huge amount of assets. Of course, your stock in Company #1 will still
only be worth about 1 billion, which you started with, plus or minus any market price
gains, but you will control a huge amount of assets, especially in Company #3, which
can be used to buy up banks, call loans owed by opposing players, file harassing lawsuits
against small companies owned by opposing players, and so on.... And of course, if you
control a huge company, you can become its CEO and receive a huge salary, plus possible
bonuses and executive stock options!

Minimize Taxes. With tax rates often approaching 50%, or sometimes even more, in Wall
$treet Raider, cutting or eliminating taxes can provide a major boost to your ability to
grow your net worth and your corporate empire. This can be done rather easily by having
a profitable (i.e., heavily taxed!) company you control (other than a Holding/Trading

252
Company) acquire all the stock of a small company in the same industry that has big tax
loss carryovers. This can often be done for a relatively small price, as the "loss company"
is often somewhat of a sick puppy, if it has been incurring big losses. Then do a nontaxable
liquidation of the loss company into your profitable one, so it can shelter its income with
the tax loss carryovers of the acquired "loss company."

But what if you can’t find a "loss company" in your company’s industry? Or what if your
company is a Holding/Trading Company? There are still some clever ways to shelter its
income. For example, if you own at least 80% of RichCo, you can individually buy up
100% of LossCo (which can be a company in any industry). Then, do a capital contribution
to LossCo, of your 80% (or more) holdings of RichCo. That will make RichCo an 80%
subsidiary of LossCo, which means the two companies will pay taxes on a "consolidated
return" basis, so that RichCo’s taxable income will be sheltered by LossCo’s tax loss
carryovers, since after adding up LossCo’s current taxable income (zilch, for instance) and
RichCo’s current taxable income that "flows" up to its parent, LossCo, the latter will report
all the combined taxable income of the two companies, but will be able to offset the income
with its tax loss carryovers. (Note – this won’t work if RichCo is the parent and LossCo is
the sub, since the taxable income of RichCo doesn’t flow "downstream" to its sub(s). In
IRS tax parlance, the sub’s losses in that case are from a "Separate Return Loss Year," or
SRLY, and losses from a SRLY can only be used to offset the SUB’s current taxable
income, or that of its 80% subs.)

Another key point to remember, for bonds you, the player, own directly. If you have a big
gain on bonds you have bought, when interest rates decline after you bought the bonds, you
can either (a) continue to collect the high interest rate until the bonds are paid off by the
company (all taxable at "ordinary" income tax rates, or (b) you can sell the bonds now for a
capital gain. As you will note, tax rates on capital gains are generally about half as high as
the tax rate on "ordinary" income in W$R. Thus, it will often make sense to sell the bonds
for a capital gain instead of collecting the high rate of interest until the bonds mature, at
which time you will have neither gain or loss, due to the accrual of bond discount or bond
premium each year you hold the bonds, until your tax basis exactly equals par (100) at
maturity. Taking the capital gain makes even more sense if you have large capital losses
that would completely offset the capital gain, in which case your tax rate on the gain will be
zero!

Minimize Trading Costs. In Wall $treet Raider, buying or selling large blocks of stock can
drive the price way up (if you are buying) or way down (if selling). Thus, for example, if
you own 20% of a $100 stock and you sell it all at once, you may only net about $90 a
share, due to the effect on the market price. One way to avoid this is to instead sell deep in-
the-money call options (or buy deep in-the-money put options) on the stock, expiring in the
next month. For instance, if you own 20% of a $100 stock, sell call options on all 20% of
the stock at a $750 exercise price, expiring in the next month. Such an option will usually
trade right at or near its intrinsic value (about $25), so you are virtually assured of getting
$100 (less commissions) per share, in total, when the stock is called away at $75 next
month. Your only risk is that the company incurs some calamity and the stock price falls
below $75 before the expiration of the option a month (or less) later.

253
Even that risk could be avoided by instead buying put options at an exercise price of $125,
which would cost you about $25 per share, but which would assure you of getting $125
when you "put" the stock a month later at that price, so you would get a net
amount of $100 ($125 per share minus the $25 you paid for the puts).

The same type of option strategy can be used to buy stock without running the price way
up, except that you would buy deep in-the-money call options or sell (short) deep in-the-
money puts.

(2) SNEAKY TACTICS.

There are all kinds of possibilities for doing sneaky, tricky, villainous things in Wall $treet
Raider, as on the real Wall Street. A few of the better ones include the following:

Dump a competitor's stock. If an opponent engages in a takeover battle with you and winds
up taking control of a company you have stock in, take a look at the stock's price when it
becomes your turn. If you believe it is somewhat overpriced, dump your shares on the
market--you'll drive down the value of your opponent's holdings dramatically, perhaps
even inducing a margin call. It's a great way to inflict pain, for the truly ruthless.

Unloading stock. If you own a chain of companies, use companies at the bottom of the
chain (in which your ultimate percentage of ownership is much diluted) as dumping
grounds for stocks you wish to sell. You can have such a subsidiary company buy stock
from you without your depressing the market price, as would happen if you had to dump
your shares on the open market.

Manipulate the stock price. Or, use such bottom-level subsidiaries to buy stock of your
parent company, in order to run up the price to discourage hostile takeovers, or before
the parent company uses its stock to do a merger, or makes a "Public Stock Offering."
Or before you get ready to sell the garbage, at an inflated price.

Hostile takeovers. If you control a company that is grossly overpriced, in your opinion, in
light of changing economic or industry conditions, do everything you can (see ideas above)
to pump its stock price up a bit more, then do a merger of it into your opponent's main
company if possible, so your opponent will be stuck with owning a piece of this soon-to-be
loser. (This is a particularly dirty trick if your company is saddled with Superfund
environmental cleanup or asbestos liability.) Then dump your shares on the market, before
your hapless opponent has a chance to sell his or hers. That way, you will (or so you hope)
have gotten out of the turkey near the top and will have left it, sitting like a brick, in your
competitor's lap.

Use unfair tactics. Wall $treet Raider allows you to do some mean, rotten things to your
opponents, not to mention the various ethical choices that will be presented to you from
time to time, if you control one or more corporations, and if "Cheat Mode" is turned on (it
can be turned on or off in the "SETTINGS MENU").

254
You can use various functions in the "OTHER TRANSACTIONS" submenu to stomp on
an opponent who is temporarily down, to make sure he or she doesn't survive. On Wall
Street, these kinds of churlish tactics are known as "shooting the wounded."

Other unkindly tactics include getting control of the other player's lending bank and using
the "Call in Bank Loan" command button to call in part of his or her loan at a time when
doing so will force a distress sale of stocks or bonds; or using a large, wealthy corporation
that can afford to pay a lot of legal fees (to file a nuisance lawsuit), utilizing the "Harassing
Lawsuit." command button, in order to financially cripple or even bankrupt a small
company owned by your opponent; or, even less charitably, start a rumor campaign about a
company controlled by your opponent, to drive down its stock price and sometimes hurt its
business profitability as well.

However, be careful when using the "Spread Rumors" command button, since two can
play the false rumor game, and your opponent is likely to respond in kind. Similarly, if you
file a harassing lawsuit, there is always a chance of getting countersued successfully for
instigating a "frivolous" lawsuit, so there are numerous risks in using such dirty tactics.

Of course, if your nasty tactics succeed in bankrupting your opponent before he or she gets
a chance to retaliate, then there's no problem, is there? It's a dog-eat-dog financial world,
and the winners write the history books....

Hey! No one ever said you had to be nice to succeed on Wall Street, did they....? After all,
there is no code of honor among the Money Runners. The same set of jungle rules apply in
Wall $treet Raider -- "Let the devil take the hindmost...." Take no prisoners...!

255
 GLOSSARY OF TERMS USED IN WALL $TREET
RAIDER

ALPHABETIZED GLOSSARY:

ACCOUNTANT--A shy, retiring, denizen of large downtown office buildings, the species
Beancounteris self-effacius is often deceptively obsequious in appearance and eager to
please, yet potentially dangerous to the financial health of those who must deal with
members of this odd clan. This mainly nocturnal, balding creature frequently is known for
its uncanny creativity in arranging and presenting financial numbers in novel and complex
ways that totally conceal and obscure the underlying reality from civilians. Its victims, who
are often confused and lulled into a false sense of security by the bland assurances of these
seemingly mild-mannered and trustworthy creatures of the night, will awaken one morning
to find themselves suddenly impoverished, while the beancounter has migrated to its usual
nesting place, Brazil. See also, "Assassins, Certified Public."

ADVANCES--Funds advanced (loaned) by a player to a corporation he or she controls. In

Wall $treet Raider, such advances are "demand loans," on which the borrowing corporation
pays interest at the same rate as the banks' Prime Rate, and which must be repaid whenever
demanded by the lending player. However, advances are a low-ranking, or subordinated
debt, so that if a repayment would endanger the credit worthiness of loans to the
corporation from banks or bondholders, repayment may not be allowed. In general, any
time the corporation has a credit rating of BB, BBB, A, AA, or AAA, the player has the
right to recall (call in) the advance, in part or in full, in Wall $treet Raider. Note that in
bankruptcy, bank lenders and bondholders will be paid off first, or will realize a higher
percentage payoff of their claims, than players' advances to the corporation. If a player is
receiving margin calls, he or she will automatically be forced to call in advances (from
creditworthy corporate borrowers), and if you (the player) have sold off all other assets and
are still getting margin calls, the program will cause you to "forgive" part of your advances
to companies from which you cannot recall your advances, in an attempt to improve those
companies' credit ratings to a point where you CAN receive repayment of the rest of the
advance, in order to meet your margin calls. Often, this will result in your forgiving 100%
of such advances.

ANTITRUST LAWS--Laws designed to prevent unfair business practices, including

monopolies or other activities intended to reduce competition. In Wall $treet Raider, as in
the real world, your company may be sued by competitors for antitrust damages or by the

256
public for price-fixing, and may also be restrained by various government enforcement
agencies from taking over competing companies in an industry that your company or
companies already dominate. In both the real world and Wall $treet Raider, the main effect
of such laws is usually to punish companies that are too successful and well-run and extract
money from them - usually in the form of extortion (political campaign contributions or
damage awards).

ASBESTOS LITIGATION--The corporate equivalent of having cancer -- financial

cancer. If you live in the U.S., and invest in stocks, you are probably aware of major
companies that have been bankrupted by endless class-action lawsuits brought by trial
lawyers over asbestos exposure, ever since it became clear that asbestos was hazardous to
one's health to work with or around; companies such as Johns-Manville and Dresser
Industries (a Halliburton subsidiary) are some of the major casualties in recent years. Just a
hint of "asbestos liability exposure" for a particular company in the news can also be
hazardous to your financial health, if you own stock in such a company. Once on the hook,
the lawyers begin running advertisements, recruiting victims for whom they can sue the
company for damages, a process that, once started, eventually leads to financial
dismemberment or death of the company. Wall $treet Raider simulates that experience, so if
a company you own stock in develops "asbestos exposure" in W$R, it is usually a good
idea to sell it, immediately, while you still can, before it is bled dry by the financial
vampires.

BACKWARDATION--A term used in commodity futures trading to describe the very

unusual situation where the prices of futures contracts for a commodity are less than the
current "spot" price. The more normal condition, where futures prices are higher than the
spot price, is referred to as "contango." Backwardation only occurs, generally, when
interest rates are very low, or when the price of a commodity is expected to decline in
future months. Backwardation almost never occurs in non-perishable commodities like
gold or silver.
BAD DEBT RESERVE--For banks, an accounting entry on their books, designed to be a
"reserve" for anticipated future bad debt losses. The reserve is evaluated each quarter and if
it is too low, an amount is added to the reserve and charged as an expense against operating
income of the bank. Actual bad debts, when incurred, are thus applied against (reduce) the
reserve, rather than being charged directly against income. As a result, bad debt expenses
tend to be spread out more evenly, over a period of years, rather than all bunched in the
year when the debt is recognized as having gone bad. This generally allows a banker to
sleep better at night when a big loan goes bad.

BALANCE SHEET--A financial statement that shows a company's (or player's) assets,
liabilities, and net worth, with net worth being what is left after subtracting total liabilities
from total assets.

BANKRUPTCY--In simple terms, going broke; either because the debtor (a person or a
corporation) can't pay debts as they come due, or in some cases because the value of
remaining assets is far below the amount owed, even though the debtor may still have
considerable amounts of cash.

257
In Wall $treet Raider, a player is ejected from the game in utter disgrace if he or she goes
bankrupt. If a corporation goes completely bankrupt, all of its assets are used to pay off as
much of its debt as possible, and the lenders (bank and any bondholders) take bad debt
losses on the rest; all stock of shareholders usually becomes worthless and is canceled. In a
"Chapter 11" bankruptcy, the company continues in business, while its capital structure is
"reorganized." In some cases, that will mean the bank lender winds up owning all or part of
the stock of what is left of the company, in exchange for writing off its loans to the
bankrupted company. See "CHAPTER 11 BANKRUPTCY" below.

BEAR MARKET--A grim, pitiless stock market, where all your stocks are plunging to
new depths every day, and where everyone else is losing gobs of money, too. This is
different from a BULL MARKET, where all your stocks are plunging to new depths every
day, while everyone else, from your barber to the cabbie to the shoeshine boy, is bragging
about getting filthy rich in the stock market.

BOOK VALUE--Net worth. In the real world, "book" value usually refers to the COST of
a company's assets, as carried on its books, less the amount of its debts. (Cost doesn't
necessarily bear any relationship to what the assets are currently worth.) In Wall $treet
Raider, all marketable assets (stocks and bonds) are reflected at current market value, so
"book value" or "net book value" in Wall $treet Raider more nearly reflects a company's net
worth and credit worthiness. However, a company's stock may trade at much more or less
than its "book value," depending on whether its business is highly profitable or not and
other factors.

BUBBLE--The name given to a rip-roaring bull market in retrospect, after the souffle has
collapsed and everyone but the insiders who got out early has been left with nothing more
than the sleeves of the vest. A "bubble" is invariably followed by years of plunging stock
prices, soaring unemployment, angry recriminations, and endless government hearings and
investigations, usually by the same foxes who were supposed to be guarding the hen house
while the bubble grew to grotesque proportions.

BUSINESS ASSETS--In Wall $treet Raider, the operating assets (sometimes referred to as
"capital assets") of a business; a catchall term to describe plant and equipment, trucks,
planes, ships or whatever kind of operating assets a company invests money in to increase
the size of its business and its sales – other than "working capital," such as inventory and
accounts receivable. In Wall $treet Raider, $1 of business assets is assumed to generate $1
per year of sales. ("Non-business assets" in Wall $treet
Raider would include working capital, cash, bonds, stocks of other
companies, derivatives contracts such as options, futures or interest rate swaps, or, in the
case of a bank, its loan portfolio. These are all "intangible" assets, except to the extent
"working capital" is assumed to include inventory items.)

BUYBACK--A transaction, such as an LBO ("leveraged buy-out") or a "Greenmail"

buyback, in which a corporation buys (and cancels) its own stock from certain
shareholders, which will tend to increase the per share value of the remaining shareholders'
stock, if the company's stock is bought back at a discount to net worth per share.

258
CD'S OR CERTIFICATES OF DEPOSIT--Interest-earning deposits in a bank. In Wall
$treet Raider, all cash of players and companies (except banks) is assumed to be fully
invested at all times in CD's, earning interest quarterly. It is not necessary in Wall $treet
Raider to convert CD's back to cash to spend the money. The "CD Rate" is the rate of
interest players and companies earn on their cash, and is the rate that banks pay out on CD
deposits.

CALL OPTION--An option to buy a stock at a specified price over an agreed period of
time. The person who buys a call option is betting that the underlying stock is going to go
up. The person who sells, or sells short, a call option is betting that the stock will either go
down, go nowhere, or only will go up slightly.

CAPACITY GROWTH--Growth in "business assets" such as plant and equipment. In

Wall $treet Raider, as in the real world, an industry's profitability will tend to suffer if
industry-wide capacity (supply) grows faster than demand for that industry's product for
very long (or will tend to improve if demand grows faster than supply).

CAPITAL ASSETS--In Wall $treet Raider, the same as "business assets." It is assumed in
Wall $treet Raider that each dollar of investment in business/capital assets generates a
dollar of sales. Thus, 100 million of business assets that generates 100 million of sales
might have a "return on capital" of 12 million, or 12%. This is essentially the same as the
profit margin on sales, since Wall $treet Raider assumes sales = capital assets. It does not
take into account any non-operating expenses (or CEO salaries), such as interest, taxes,
gains or losses on disposition of assets, or other types of income such as interest or
dividends. "Return on capital assets" in Wall $treet Raider has very little relation to "return
on equity." See the definition of RETURN ON EQUITY for more details.

CAPITAL CONTRIBUTION--Money or assets injected into, or "contributed" to a

subsidiary corporation by its controlling shareholder. In Wall $treet Raider, the controlling
shareholder must own 100% of the subsidiary's stock before he/she/it is allowed to make a
contribution of capital to the subsidiary. A capital contribution is used to move money,
stock, bonds, or business assets owned by a player or by a parent corporation to a
subsidiary when the subsidiary needs the capital for some reason, such as when the
subsidiary has a tax loss carryover that will shelter any income it may earn from investing
the funds or assets, or when the subsidiary is in a highly profitable industry and needs to
expand rapidly.

CHAPTER 11 BANKRUPTCY--Also sometimes referred to as "operating bankruptcy,"

where the debtor continues in operation, rather than being dismantled. A less severe form of
corporate bankruptcy, Chapter 11 Bankruptcy (or reorganization) is sort of a "halfway
house" where the wayward corporation gets some relief from its debts, in the hope that it
may change its ways and somehow survive (which is usually wishful thinking). In Wall
$treet Raider, this means that the stockholders and junk bond holders have to write off part
or all of their stock or what the company owes them, and the bank also writes off a
(smaller) percentage of what the bankrupt company owed the bank.

259
In Wall $treet Raider, as in the real world, the shareholders are usually completely wiped
out in a bankruptcy reorganization, and the bondholders and players who have made
advances (demand loans) to the bankrupt company take a much larger hit than the banks.
The bank loans are "senior" to the bond indebtedness owed to the bondholders. (In practical
terms, this means that bank presidents don't want to give up riding to work in chauffeured
limousines, so you and other small investors need to lose your life savings you invested in
the bankrupt's bonds, and give up eating regularly, rather than have their bank suffer a loss
along with you.)

COLLECTIVE BARGAINING--As practiced between governments and government

employee unions, collusive bargaining.

CONSOLIDATED TAX RETURNS--In the Windows version of Wall $treet Raider, as in

the real world, a company that owns 80% or more of another company will generally file
"consolidated" tax returns with the subsidiary company, where the taxable income of the
two is combined, and a single tax is paid for both. If one company has taxable income, and
the other a loss, corporate law usually provides (and Wall $treet Raider requires) that the
company that has taxable income must compensate the "loss company" for the taxes saved
by utilizing some or all of the "loss company's" tax losses. This is all done automatically in
Wall $treet Raider.

In the real world, consolidated tax returns can't always be filed, such as in situations where
the parent company is incorporated in a different country than the subsidiary, but Wall
$treet Raider does not impose that limitation. All 80%-owned (or greater) subsidiaries pay
tax on a "consolidated return" basis, together with their parent corporation, in Wall $treet
Raider.

CONTANGO--In commodity futures trading, contango is the usual situation where futures
prices for a commodity are somewhat higher than the "spot" price, a condition which tends
to reflect the time value of money. The much less usual situation, where futures prices are
actually lower than the spot price, is referred to as "backwardation."

CONTROLLED CORPORATION--In Wall $treet Raider, a corporation that is at least

20% owned by a player (and by companies he or she controls), or by a single corporation,
is considered to be under the control of its largest shareholder (and of whomever might also
control that shareholder company, if anyone). Thus, if you own 51% of company ABC, you
control it. If you also own 10% of company XYZ, and ABC owns another 10%, you may
also control company XYZ, unless some other player or corporation owns 20% or more of
XYZ.

COVERED CALL OPTIONS--Options that are sold short, but where the seller owns the
underlying stock. This is generally a conservative investment technique, since it decreases
your risk in owning a stock, because you receive a significant sum (the “option premium”)
from selling the option. Although you have a short position in the options, which could
otherwise be risky if the stock went up sharply, you are "covered" against that risk, since
you own the stock and can simply let the option be exercised, calling away your stock, if

260
you choose not to buy back the option. A "covered call" is the opposite of a "naked call" --
a call that is sold short when you do not own the underlying stock, which is a high-risk
maneuver. In Wall $treet Raider, any corporation, including banks or insurers may sell
covered call options.

CPA--Certified Public Assassin, also known as a Certified Public Accountant or Bean

Counter. A CPA firm is a supposedly independent outside auditor, paid handsomely by the
company that it audits, to "certify" that it has reviewed a company's financial statements,
and has blessed the numbers that the company's financial officers have made up, no matter
how absurd and outlandish those numbers may be, and no matter how close to its financial
deathbed the company issuing the rosy financial statements may be. CPA's are not known
to bite the hand that feeds them.

CYCLICAL--As applied to an industry, an up-and-down or boom-and-bust cycle that is

typical of the industry, where demand grows very rapidly for a while, and then stops or
shrinks for a while. In other words, an industry that is not characterized by steady or
predictable growth.

DEBT-TO-EQUITY RATIO--A decimal amount that shows the ratio of a company's total
debts to its net worth. For example, if a company has $1400 million of assets, less $400
million of debts, its net worth ("equity") would be the difference, or $1000 million. Thus,
its debt-to-equity ratio would be .40, or 40%, the ratio of its $400 million of debt to its
$1000 million of equity. In general, the higher the ratio, the more "leveraged" and risky the
company is likely to be, with such a capital structure. A very high debt-to-equity ratio, such
as 5-to-1, would indicate that the company is VERY highly leveraged, and that only a
modest period of losses could wipe out its thin amount of "equity" and perhaps push it into
bankruptcy. In Wall $treet Raider, companies can (generally) borrow up to 1 times (100%
of) their net worth, under a bank line of credit, though a line of credit may be frozen if the
company's bank loan exceeds 25% of the lending bank's total loan portfolio. However, for
this purpose, any options owned by the borrower are not counted as part of its net worth,
except to the extent any such options are "in-the-money." For example, a $30 call option
might have a market value of $9 when the stock is trading for $35 a share, but only its $5 of
"intrinsic value" ($35 – $30) would be counted when computing its debt-to-equity ratio.

DEMAND DEPOSITS--Non-interest-bearing deposits in a bank, which the bank can lend

out at interest. In Wall $treet Raider, banks' demand deposits usually grow at a rate of about
3 to 5% per year. See "CD's OR CERTIFICATES OF DEPOSIT" above.

DIVIDEND--A distribution of profits by a corporation to its shareholders, usually in the

form of cash. In Wall $treet Raider, dividends are always in cash, except for distributions
which occur in the nontaxable liquidation of a subsidiary into its parent corporation or
when a company does a "SPIN-OFF" of some or all of the stock of a subsidiary corporation
to the parent company's shareholders.

DIVIDEND PAYOUT RATIO--The percentage of a company's annual reported earnings

that is paid out to shareholders as regular dividends. State or national laws usually prohibit

261
a company from paying out dividends when net worth is negative, although an exception is
generally made for dividends paid out of current earnings, where the company is currently
profitable ("springing dividends"). In Wall $treet Raider, a company is not allowed to pay
out dividends when it has a "D" credit rating (meaning it has filed for bankruptcy
protection).

DIVIDEND YIELD--The rate of return on investment in a stock, based on the dividends it

pays, expressed as a percent of the current value of the stock. For example, if a stock sells
for $100 a share and pays an annual dividend at the rate of $6 per share, the dividend yield
would be 6% (6/100).

EPS--An abbreviation for "earnings per share." If a company in Wall $treet Raider has 100
million shares of stock outstanding, and it earns $4.00 per share, that means it earned a total
of $400 million. A company's EPS is usually a major determinant of its stock price, in the
real world as well as in Wall $treet Raider.

EQUITY METHOD OF ACCOUNTING--A recognized method for corporations to

account for their investment in subsidiary corporations, usually subsidiaries in which they
own at least 20% of the stock, but not enough stock to "consolidate" the subsidiary's
finances with the parent company's in full. However, the parent is allowed to include its
percentage share of the subsidiary's earnings (or losses) in the parent's reported earnings.
Wall $treet Raider adopts this latter rule for any company that owns 20% or more of
another company (even if it does not control the other company), and also adopts it even if
the parent company owns less than 20% of the subsidiary, if both are controlled by the
same player or company. Where earnings or losses from stock holdings in another company
are reported on the equity method, dividends received from the other company are not
treated as income to the recipient.

ETF (EXCHANGE-TRADED FUND)--An investment company that invests in a

diversified portfolio of stocks or, in some cases, other assets, such as options or
commodities. In Wall $treet Raider, there are 15 "sector" ETF's, each of which invests in
certain industry sectors, such as technology, energy, retail, consumer goods companies,
natural resources, transport, etc.

EXCESS LOSS ACCOUNT--A negative "tax basis" for the stock one company owns in
an 80% (or greater) owned subsidiary corporation. This situation can arise, in rare
situations only, due to adjustments from consolidated tax return filing by a parent company
and its 80% (or greater) owned subsidiary. If the parent company sells some of a stock that
has an excess loss account (negative tax basis), but still owns at least 80%, its gain on the
sale will be the sale price plus a proportionate part of the excess loss account. For example,
if the excess loss account or negative tax basis is -90 million, and the parent owns 90% of
the sub's stock and sells 10% for 300 million, the taxable gain will be 300 million plus 1/9
of 90 million, or 10 million, a total gain of 310 million.

After the sale, the excess loss account for the remaining 80% of the stock of the sub would
be -80 million. However, if the parent company's stock ownership in the sub is ever

262
reduced to below 80%, any excess loss account must be fully "recaptured" as taxable
income, in almost every case, including a sale of the stock, worthlessness of the sub's stock
due to bankruptcy, or reduction of the parent's ownership due to a stock offering, merger
transaction or (otherwise tax-free) spin-off of the sub's stock. The one exception, when the
excess loss account does not become taxable, is when the sub is a 100%-owned sub and is
liquidated in a nontaxable liquidation. In that case, the excess loss account will never have
to be recaptured, a nice "tax loophole" in both Wall $treet Raider and the real world (under
U.S. tax laws).

FDIC--Abbreviation for "Federal Deposit Insurance Corporation," the U.S. federal agency
that insures bank deposits, in case a bank goes broke. In Wall $treet Raider, the FDIC may
force a bank to cut or eliminate dividend payments if in financial trouble. Or, as in the real
world, if a bank gets in too deep a financial pit, the FDIC may pull the plug by taking over
the bank, canceling the stock held by former stockholders and reviving the bank, under new
ownership, often after an injection of new capital to restore the bank to solvency.

FTC--Abbreviation for the U.S. "Federal Trade Commission," the federal agency that acts
as a watchdog (more often as a sleeping lapdog) to prevent consumer fraud and other unfair
trade practices. It also may occasionally wake up long enough to block mergers and
takeover attempts that it feels could tend to reduce competition in the marketplace, or just
to create the appearance that it is actually doing something, rather than just sleeping on the
job. In Wall $treet Raider, various U.S. or foreign government agencies may also intervene
to block planned mergers, liquidations, or LBO/Greenmail transactions.

FEDERAL FUNDS--Funds banks borrow from each other to meet certain Federal Reserve
(or other Central Bank) requirements, usually on a very temporary basis. In Wall $treet
Raider, this term refers to money that banks borrow from each other or elsewhere when
they run short of funds and have no more bonds to sell off. "Federal Funds" or "interbank
borrowings" are quickly paid off in Wall $treet Raider when a borrowing bank obtains the
money to do so.

FEDERAL RESERVE BANK--The U.S.'s central bank, whose job it is to print money --
endlessly -- when the U.S. Treasury can't borrow enough money to pay its bills. The
Federal Reserve is a government-licensed counterfeiting operation, as well as America's
largest printer of bad paper.

FRAUD--The chief industry on Wall Street, Fleet Street, Bay Street, and other major
bourses/gambling dens around the world, responsible for creating thousands of extremely
lucrative jobs, all of them funded by sucking up the life savings of millions of the "little
people" -- those unfortunate peons who actually work for a living -- and redistributing the
booty to the rich and well-connected. For performing this necessary service to society
(separating the weak and the stupid from their loot), the most successful cads, cons, liars,
frauds, poltroons and mountebanks are frequently awarded honorary doctorates at places
like Harvard and Oxford.

263
GDP--Abbreviation for "Gross Domestic Product." See definition of "GROSS DOMESTIC
PRODUCT" below. (Formerly GNP, Gross National Product)

GOLDEN PARACHUTE--Large sums of money and benefits paid to departing

executives of large companies, typically paid to reward them for running their company
into the ground, or for thoroughly looting it. Managers who steal over $100 million rarely
go to prison; more often, they are given honorary doctorates at prestigious universities, for
being generous enough to share a small percentage of their ill-gotten loot with some grant-
hungry institution.

GOODWILL--In accounting terminology, "goodwill" is an intangible asset to which part

of the purchase price of a business, or part of a business, may be allocated. In theory,
"goodwill" reflects the superior earning power of the acquired business assets. For
example, if you were to acquire a profitable service business for $100,000, which had no
"real" assets other than a few dollars worth of office supplies and few beat-up pieces of
furniture, most of your purchase price would have to be allocated to goodwill (assuming
the paper clips and a few old desks aren't worth very much).

In W$R, if your company purchases 1000M of business assets from another company, and
such assets are currently earning an above-average rate of return on investment (above
10%, ignoring the seller's market share and spending on R&D or marketing/advertising),
you will have to pay an additional price, depending on the level of profitability of the
acquired assets. Thus, you might have to pay 1200M, for 1000M of assets, or a premium of
200M.

That premium is called "goodwill" and will show up on the buyer's financial statements as
an asset, called "Unamortized Goodwill." Realistically, it is not a "real" asset, except under
accounting theory -- it generates no income, and has to be written off (expensed), sooner or
later. In W$R, this asset is expensed (or "amortized") gradually, at 5.4% per quarter (equal
to about 20% annually, on the remaining balance of that account). Thus, if acquiring 200M
of goodwill, the buyer would amortize (write-off) about 40M in the first year, reducing the
Unamortized Goodwill balance to 160M. In the next year, it would write off 20% of that, or
32M, and so on.

The amortization is a non-cash expense, which is tax-deductible, but it also reduces

reported operating income. A more rapid write-off of the goodwill balance can occur if the
business assets should begin to generate losses, due to a bad economy or mismanagement,
or if the amount of goodwill amounts to more than 100% of the company's net worth, or
becomes more than 75% of the amount of the company's business assets (such as where it
sells off most of its assets). If the balance is reduced to below 10M, the remaining balance
will be written off in the next quarter. A company that goes through bankruptcy will have to
write off all of the goodwill that remains on its books, during the bankruptcy proceeding,
under the theory that the "goodwill" no longer exists, since the company is no longer
operating at a superior level of profitability. (Obviously.) Thus, lenders will tend to lose
more in a bankruptcy where the borrower had a large amount of goodwill as an asset, as
that "asset" will evaporate into thin air, and cannot be turned into cash, unlike other assets.

264
GREENMAIL--A practice made popular in recent years by certain corporate raiders who
take a large position in a target company's stock. Management of the target company,
fearful of a takeover that would cause them to lose their jobs, stock options, chauffeured
limousines, palatial homes, ski chalets, Learjets, high-maintenance mistresses, and other
God-given birthrights, quite consistently find it to be in the company's best interest to buy
back the raider's stock holdings for a price well above current market prices, in exchange
for a promise by the raider to go away and pick on some other company. The money
extracted from the target company is frequently referred to as "greenmail," perhaps due to
the uncanny resemblance of such a payment to its only slightly less savory cousin,
blackmail.

In Wall $treet Raider, a "greenmail" buyback can be made of the stock held by a non-
controlling corporate shareholder, but not of stock held by a player, and not of stock held
by a company controlled by the same player whose company is paying the greenmail. That
would be a blatant form of fraud -- not merely immoral, but illegal. Too blatant, even for
Wall Street.

GROSS DOMESTIC PRODUCT-- An economic statistic that represents the estimated

value of all goods and services produced in a country in a year, which is a measure of an
economy's overall size and its level of activity.

HOLDING/TRADING COMPANY--A corporation that does not actively engage in

business itself, but instead holds the stocks of one or more operating subsidiaries. In Wall
$treet Raider, any company, other than a bank or insurance company, that no longer has any
"business assets," is classified as a "holding/trading company." In Wall $treet Raider, once a
company has become a holding company, it can enter into any industry you choose for it,
other than banking, insurance, or exchange-traded funds (ETF’s), by using the "Buy
Corporate Assets" command button on the "Buy/Sell Transactions" submenu to acquire
business assets from an existing company in that industry or acquire new business assets.
However, if the holding company has tax loss carryovers, they will be lost if it enters a new
line of business by acquiring business assets. In Wall $treet Raider, holding/trading
companies are allowed to buy and sell put and call options and trade commodity or stock
index futures and do interest rate swaps.

INSURANCE IN FORCE--A technical term used in the insurance industry to describe the
amount of insurance a company has written, and which is still in force. In Wall $treet
Raider, it is used more loosely, and is deemed to be proportional to the insurance
company's "policy reserves." See definition of "POLICY RESERVES" below.

INTEREST RATE SWAP--A derivative instrument which is a contract or agreement

between two parties. In an interest rate swap, one party agrees to receive interest payments
at a fixed rate, based on some published interest rate like the banks’ Prime Rate (usually set
at or near the current rate at the time the swap is agreed to), while in exchange paying the
other party whatever that published rate rises to or falls to as it fluctuates in the future, over
an agreed time period. The interest is computed on a specified “notional” principal amount,
such as $100 billion. The net difference between the fixed rate and the varying rate at

265
certain dates in the future is paid from one party to the other. In Wall $treet Raider, swaps
can begin as early as the next calendar quarter and can remain in effect for up to 5 years.
Interest calculations and payments to the “winning” party are made at the end of each
quarter during the term of the agreement.

INVESTMENT ANALYST--On Wall Street, a highly-paid, highly skilled specialist, one

whose job it is to analyze the investment outlook for companies and to get caught napping
when a company surprises everyone by filing for bankruptcy, shortly after the investment
analyst has issued a "strong buy" on the company's stock, and attested to the company
being "sound as the dollar." Synonyms: "Eternal optimist; scoundrel; huckster; dreamer;
charlatan."

JUNK BONDS--In Street language, high-yielding, high-risk bonds issued by companies of

dubious credit worthiness, often for the purpose of taking over another company or for a
"leveraged buy out" in which the company buys back most of its own stock, allowing
holders of a few shares (usually management) to become the only remaining shareholders.

In Wall $treet Raider, junk bonds are any bonds issued by a highly-leveraged, risky
corporation; they pay interest at a rate that depends on their credit rating. As in the real
world, companies in Wall $treet Raider that issue a lot of junk bonds face a high risk of
bankruptcy if their business hits a few rough spots. Not all corporate bonds are considered
junk -- if a company's credit rating is BBB, A, AA, or AAA, the corporate bonds are not
"junk," but are considered to be "investment grade" bonds. (At least until they are later
downgraded to "junk," after the skeletons come out of the closet.)

Any bonds rated BB or lower (B, CCC, CC, C, or D) are very risky, however, and are thus
quite properly called "junk bonds." To Wall Street insiders, "junk bonds" are those that are
issued with neither the hope nor the intention of ever paying back the principal amount
thereof to the investors/suckers who are foolish enough to buy the stuff.

To certain churlish types, like your esteemed author, who have repeatedly been badly
burned by making massively stupid investments in these unsavory securities, junk bonds
are known as "certificates of confiscation."

LAWYER--The larval form of a politician.

LBO OR LEVERAGED BUY OUT--A transaction in which one or a few people buy a
small part of the stock of a company and then have the company borrow enough money to
buy out all of the other shareholders, so that the buyers obtain most or all of the stock of the
company with little or no investment on their part. In some cases, they may even extract
dividends from the company afterwards, in order to quickly recoup part or all of their
investment (or more). In Wall $treet Raider, a player (or a company controlled by the
player) can sometimes do an LBO by buying minimal control of a target company (say
20%), and then having the company borrow or issue junk bonds to finance a buyback of the
other 80% of its stock (using the "LBO" or "GreenMail" commands button in the "Buy/Sell
Transactions" submenu), leaving the acquiring player or company with 100% ownership of

266
a highly leveraged corporation. It can be a great strategy if the company does well. If things
don't work out, though, all the added debt (leverage) can result in a financial meltdown for
the LBO'd company -- which happens more often than not when a company is that
massively leveraged with debt.

LIBOR RATE--The name given to a benchmark interest rate, usually quite low, which is
the rate banks charge each other for overnight loans. LIBOR is an acronym, which stands
for "London Interbank Offer Rate." In the real world, various interest rates on loan
instruments are based on the LIBOR rate. In Wall $treet Raider, it is used only as the rate at
which banks pay interest on interbank loans, and is loosely related to the Prime Rate. Banks
with less-than-Sterling credit ratings may pay somewhat more than the LIBOR rate on their
interbank borrowings.

As recent (2012) real world news has disclosed, the LIBOR rate has been rigged for years
by crooks at 20 or more of the world's largest banks, manipulated to increase their
profitability on various debt instruments.

In Wall $treet Raider, a "LIBOR rate" is used only as the rate at which banks pay interest
on interbank loans, and is loosely related to the Prime Rate and rates paid on CD's.

LIMIT ORDER--An order a customer places with a broker to buy or sell a security, in
which the customer specifies the price he or she is willing to accept. A limit order does not
always get executed, if the stock price moves
away from you. It stands in contrast to a "market order," in which you indicate you will
take whatever price the stock specialist is willing to give you, like a common beggar. In
short, a limit order is often a safer way of
trading stocks or other securities, while regularly doing market orders is a good way to
become a homeless beggar. See "MARKET ORDER" below.

LINE OF CREDIT--An amount a lender, such as a bank, agrees in advance to lend to a

customer, if the customer wishes to borrow it. In Wall $treet Raider, each player and
company normally has a line of credit allowing him or it to borrow up to a maximum of 1
times net worth. To have a line of credit, you must demonstrate to your financial institution
that, basically, you don't need to borrow. Bankers are, in short, the type of people, as Alan
Abelson once put it, who will only lend you an umbrella on a sunny day.

In Wall $treet Raider, a company or player can usually borrow on a line of credit until its
debt is equal to 100% of net worth. Thus, if you have $500 million cash and no debt, you
can borrow up to $500 million on your line of credit. If playing at Difficulty Level 2 or 3, a
player may be able to borrow up to 2 or 3 times his or her net worth, if he or she obtains
control of the lending bank. Thus, at Difficulty Level 2 or 3, a player can actually have a
larger line of credit, which might seem like an advantage of playing at a higher difficulty
level than "1," but it actually increases your risk of bankruptcy greatly, if you succumb to
the temptation of borrowing up to 2 or 3 times your net worth, because even a slight
decline in your stock holdings will be magnified if you are using that much leverage.

267
However, your sharp-eyed banker may not always give you full credit for put or call
options owned by you (or by a company), when considering a loan to you or a company or
determining credit ratings. If you own put or call options, only the net intrinsic value of the
options will be counted (the amount by which the options are "in-the-money"). Thus
options that have value but that are "out-of-the-money" (such as a call option at $35 on a
stock that is selling at $32) will have zero intrinsic value, and thus the market value of such
long option positions will not be counted in determining your net worth, when calculating
how much you may borrow on your line of credit or when calculating your credit rating
(and thus the interest rate you must pay). Similarly, if you own a call option with a strike
price of $43, and the stock is at $45, its intrinsic value is only $2, even though the market
value of the call may be $6 at the moment, if it has several months of time value before it
expires.

Note, also, that your borrowing may be subject to a $10 billion (U.S. or equivalent) dollar
limit for any player or company, or 25% of the lending bank's total loan portfolio, if that is
greater. Your line of credit will be temporarily frozen if it goes above the greater of those
two amounts. (In which case you may want to try to switch your banking relationship to a
larger bank that can give you a larger line of credit.)

Also, if an opposing player can gain control of the bank you (or companies you control)
borrow from, the other player may choose to "freeze" your line of credit, or even call in
large portions of your bank loan.

See Section IV.D for details regarding potentially expanded lines of credit for corporations
in Version 6.60 and later.

LIQUIDATION--A corporate transaction in which a parent corporation, in effect, merges a

wholly-owned subsidiary corporation into itself, so that all of the assets, debts, etc. of the
subsidiary become property or debts of the parent, and the subsidiary corporation ceases to
have any further activity, and ceases to exist. In Wall $treet Raider, as in the real world,
such liquidations of wholly-owned subsidiaries are usually non-taxable events. However, it
is also possible to do taxable liquidations, where the corporation turns all of its assets into
cash, pays off its debts and any taxes it owes, and distributes the cash to shareholders
before it ceases to exist, with the shareholders recording a gain or loss, as though they had
sold their stock for the cash they receive in the liquidation.

LITIGATOR--An often despised subspecies of the much-feared reptilian species Lex

disputatis; half literate, half alligator; known for its aggressive, ferocious, pit bull-like
characteristics, and its penchant for going for the opponent's jugular and the client's
pocketbook, often simultaneously. Like others of its species, heavy infestations of Lex
disputatis intimidatum are found in California, New York, or wherever there are large
concentrations of filthy lucre, on which it thrives.

The litigator subspecies is easily recognized by its sharp tongue and elbows, quick reflexes,
its habit of toting large briefcases (often filled only with peanut butter sandwiches), and its
highly developed aptitude for lying to and hypnotizing judges and juries. As it multiplies at

268
an exponential rate under favorable breeding conditions, it is widely considered a pest
throughout its range, and large infestations are often mistaken for clouds of devouring
locusts.

LOAN PORTFOLIO--The loans made by a bank, on which it hopes to earn interest. The
value of a bank's loan portfolio is offset by a reserve for potential bad debts. See definition
of "BAD DEBT RESERVE" above. In Wall $treet Raider, banks invest some of their funds
in consumer and mortgage loans, as well as making business loans to players and
corporations. Consumer loans are made at high interest rates, but the banks have frequent
large charge offs for bad consumer loans. Mortgage loans earn much lower rates, but have
far smaller bad debt charge offs.

Corporate loans and loans to players earn interest rates based on the banks' Prime Rate,
which is the lowest rate charged, to AAA credit-rated borrowers. Other borrowers pay
higher rates that depend on their credit rating.

LOBBYIST--In America, a political courtesan; one who greases the wheels of the political
system; a legal bribe-giver. Lobbyists are recognizable by their Gucci shoes, Louis Vuitton
briefcases, Beltway addresses, Aspen chalets and unlimited expense accounts, or, more
recently, by their neatly pressed Chinese People's Liberation Army Generals' uniforms.
Noted for their self-proclaimed public spiritedness and altruism, lobbyists aver that they
provide foreign travel junkets, first-rate hookers, and suitcases full of cash to high-ranking
government and political party officials solely out a sense of civic duty, all with no
expectation whatsoever of receiving any quid pro quo.

MARKET ORDER--An order a customer places with a broker to buy or sell a security "at
the market" -- an often suicidal financial strategy or an invitation to be financially raped.
See "STOCK SPECIALIST" below and "LIMIT ORDER" above.

MARKET SHARE--A company's percentage share of total sales in a particular industry.

In Wall $treet Raider, this is the same as the company's share of "business assets" in that
industry. In general, the larger a company's market share percentage, the more profitable
the company tends to be, compared to other companies in the industry. Thus, it is a good
strategy to merge two or more companies you own (and liquidate one into the other), if
they are in the same industry, so that they become one large company, with a larger market
share than either had alone, which will usually improve profitability, due to economies of
scale. During the great "tech bubble" at the end of the 20th century, it became the
conventional wisdom that "market share" was more important than profitability, leading
many companies to expand wildly, floating huge amounts of stock and junk bonds to
finance their rapid expansion. (Most of them are now bankrupt, or "penny stocks," at best.)
Over-expansion works the same way in Wall $treet Raider.

MERGER--In the real corporate financial world, the term usually refers to a transaction
where the assets and liabilities of two companies are legally brought together in a single
"surviving" corporation. It also is often used to describe stock-for-stock swaps between a
company and the shareholders of a target company, where the target company ends up as a

269
wholly-owned subsidiary of the acquiring company. A "merger" in Wall $treet Raider
(using the "Merger" command button in the "Buy/Sell Transactions" submenu) is of the
latter variety.

The "Tax-Free Liquidation" command button can often be used in Wall $treet Raider to
effect what is essentially a merger of the type described in the first sentence of this
definition, but only after one corporation acquires 100% of the stock of the corporation to
be liquidated, either by purchase or merger.

NOTIONAL VALUE--The face value or agreed total contract value for a derivatives
contract, such as a commodity futures contract. For example, a contract to buy 10,000
barrels of oil at $91 per barrel at an agreed future date would have a notional value of
$910,000. In the interim, before the delivery date, the contract would usually trade at a
market price above or below its notional value and at settlement (before or on the
expiration date) in W$R the difference between market value and notional value is a
gain or loss to the contracting player or company, when the contract is closed out on the
commodities exchange.

In the case of an interest rate swap contract, the notional value is the amount on which
interest is calculated at the agreed fixed rate and the actual current rate, with the difference
in interest calculated both ways being paid by one party to the other.

P/E RATIO--Wall Street jargon for "price/earnings ratio," or the multiple of earnings per
share that a stock sells for. For example, a $100 stock of a company earning $5 per share
would be said to have a P/E ratio (or earnings multiple) of 20; that is, the stock sells for 20
times its earnings per share. Stocks of rapidly growing companies often sell at high P/E
ratios, because the stock market is "anticipating" much higher earnings in the future. Stocks
of all companies tend to sell at lower P/E ratios when interest rates are at high levels (and
vice versa). During major bull markets ("bubbles"), investors are always told by the experts
that earnings, and therefore P/E ratios (even if ridiculously high), are no longer important
and thus can be ignored.

POLICY RESERVES--Accounting reserves insurance companies are required to set up

on their books when they sell an insurance policy. Policy reserves are, in effect, estimates
of how much money the insurer needs to set aside to pay future insurance claims. They
might also be considered as a kind of "loan" (without interest) from the insurance
company's customers. Most insurance companies make most or all of their profits from
investing these reserves for the period between the time they collect a premium and when
they eventually have to pay a claim. For example, in a given year, an insurer might take in
$100 in premiums and pay out $103 in claims and expenses, so that it would have an
underwriting loss of $3, but might earn $10 interest on the "float" during the year, resulting
in an overall profit for that year. In Wall $treet Raider, an insurer's policy reserves are
assumed to grow at the same rate as its "insurance in force," defined above.

PRODUCTIVITY EXPENDITURES--In Wall $treet Raider, money a company spends

each year on either R & D (Research & Development), or on marketing/advertising, to try

270
to improve its profitability. The higher the percentage of sales or revenues a company
spends, the better its chances of improving long-term profitability, but the high costs or R
& D or marketing/advertising will penalize the company's earnings in the short-term. It is a
form of short-term pain, for (hoped-for) long-term gain.

PUBLIC OFFERING--An issuance of securities for sale to the public, usually (but not
always) by the issuing company. In Wall $treet Raider, a Public Offering is a sale of new
stock by a corporation to the Public for cash, to raise new capital for the corporation. (By
contrast, a "private offering" is a sale of stock to only one or a few investors--see "White
Knight," described in this Glossary, regarding a private stock offering in Wall $treet
Raider.)

PUBLIC RELATIONS--An organized method of mass communication, calculated to

circumvent critical thinking and induce a state of prolonged stupor; also, in politics, a term
used to describe relatives who feed at the public trough.

PUT OPTION--An option to sell a stock at a specified price over an agreed period of time.
The person who buys a put option is betting that the underlying stock is going to go down.
A lot. The person who sells, or sells short, a put option is betting that the stock will either
go up, go nowhere, or only will go down slightly. In Wall $treet Raider, corporations may
trade put options, but banks and insurance companies may only do so to hedge stocks they
own.

R & D (RESEARCH AND DEVELOPMENT)--R & D expenditures are funds spent to

create new products or production processes or to improve existing ones. Since R & D
expenses usually penalize current earnings, even though they may greatly increase long run
profits, managements are often tempted to cut out R & D spending in the short term to
make earnings look better. In Wall $treet Raider, companies in certain industries are faced
with this same choice between short-term vs. long-term profitability, in deciding how much
money to spend on R & D. Besides lowering current earnings, a company runs the risk that
money spent on R & D projects will not even pay off in the long run or may not pay off
soon enough to avert bankruptcy.

RESTRUCTURING--Selling the family jewels; throwing out the baby with the bath
water. Also, in financial parlance, "downsizing" a company by selling off assets, jettisoning
employees by the thousands, looting the company pension plan, and using other time-
honored scorched-earth tactics to improve the bottom-line profitability of the company, if it
ultimately survives the bloodletting. As Conan the Barbarian once said, "Zat vich doesn't
kill you makes you shtronger..."

(Or was that Conan the Contrarian???)

RETURN ON CAPITAL ASSETS--In Wall $treet Raider, this terminology has a very
specific meaning -- the amount of profit generated each year by a given amount of
"business assets" (which we sometimes refer to as "capital assets" in the simulation).
Accordingly, if a company has $100 million of business/capital assets earning a 12% return

271
on capital, that means it is earning $12 million for the year. Since earnings are computed
quarterly and vary from quarter to quarter, a $3 million profit in one quarter would be
reported as an annualized 12% "return on capital assets." Note that this profit figure does
not take into account other types of income, such as interest, dividends, or gains on various
transactions, or expenses such as interest or taxes. Thus, a company may have a 12% return
on capital, but if it is paying a 17% interest rate on a bank loan and is highly leveraged, it
may actually have a net loss. However, even if it does have a net profit, even that will be
further reduced by income taxes, so its "RETURN ON EQUITY" will bear little
resemblance to the "return on capital assets," since we are comparing apples to oranges.

RETURN ON EQUITY--A way of calculating a company's level of profitability; a

percentage figure determined by dividing its net income by its net worth. Returns on equity
are typically in the 10 to 15% range for many global corporations. Returns of over 20% are
considered to be unusually good, and tend to attract (unwanted) new competitors, much as
honey tends to attract flies. In Wall $treet Raider, returns on equity tend to be very much in
the same range as in the real world, and a highly profitable industry will tend to attract new
entrants.

In W$R, when "return on equity" is shown for any company, it is the last full year's
earnings divided by its net worth at the end of that year.

SEC--Abbreviation for "Securities and Exchange Commission," the federal agency charged
with acting as a watchdog over investment markets in the USA, which usually behaves
more like a lap dog. Its main job seems to be to get caught napping each time a major
investment fraud is perpetrated against millions of investors. All publicly-traded companies
are required to regularly file financial reports with the SEC, which from time to time takes
legal action to prevent the boiler-room types from fleecing the public investors too
flagrantly.

In Wall $treet Raider, the SEC is merely another annoying American government agency
that may intervene at inopportune times to block those too-clever transactions you thought
you could get away with.

SHORT SALE-- Selling a stock (or other investment vehicle) that you do not own, by
borrowing the stock from a person who owns it and selling it now, with the hopes of buying
the stock back later at a lower price, returning the shares to the owner, and making a profit
on the decline in the price of the stock. Of course, if the stock goes up, and you have to buy
it back, you will lose money on the transaction. As the old saying on Wall Street goes, "He
who sells what isn't his'n, must buy it back, or go to prison."

SPIN-OFF--A transaction, usually done tax-free, where a parent corporation distributes the
stock of a subsidiary to the parent corporation's shareholders. See the description of the
Spin-off Subsidiary command button on the FINANCING submenu, which is used to do a
spin-off, tax-free or otherwise. A spin-off is usually done when the subsidiary is generating
large losses that, when combined with the parent's results, are making the reported earnings
of the parent look bad, so the parent spins off the stock to its shareholders and lets THEM

272
worry about it. It is one of the many ways corporate managers manipulate earnings to make
them look better (and hide their own incompetence, by burying the bodies where no one
can find them).

SPOT PRICE--In commodity futures trading, the price of a commodity for immediate
delivery, as opposed to the futures price for future delivery. In W$R, the spot prices of
commodities are the prices displayed on the main screen.

STOCK SPECIALIST--One of the clan of wolves with yellow eyes and sharp fangs who
works tirelessly on the floor of the stock exchange, betting against the sheep who wish to
buy or sell stocks, who must trade against these cunning beasts. Members of the public who
buy stock from or sell stock to such traders are like players in a poker game, where the
stock specialist is the dealer and gets to see your hand before he bets. These remorseless,
feral creatures harvest much of their profits from unsuspecting,
naive investors who are foolish enough to place "market orders" with their stockbrokers.

STOCKBROKER--A professional person who dials for dollars, dispensing free

(nevertheless grossly overpriced) investment advice to all who will listen, from an
inexhaustible list of bad, worse, or terrible investments, usually recommending that one
buy a stock that he or she, personally, is selling short; typically, a person who was selling
shoes or aluminum siding before the latest market frenzy, and who will leave you dealing
with pawnbrokers, not stockbrokers, once your life savings have been reduced to pocket
change.

STRADDLE OPTION--A combination of a call option (to buy a stock at a specified

price) and a put option (to sell the stock at that same specified price). The person who buys
a straddle option is betting that the underlying stock is going to fluctuate greatly from the
current stock price, by the time the put and the call expire, and that either the put or the call
option will be worth a great deal at that time. The person who sells, or sells short, a straddle
option is betting that the stock will NOT fluctuate greatly by the time the put and call
expire. The call side of the transaction will be worthless when expiration date arrives, while
the put side will have some value, if the stock price is below the "strike price" (exercise
price) of the options at that time; and vice versa if the stock is above the strike price at
expiration. (Of course, neither side would have value if the stock price is at exactly the
strike price at expiration, but that almost never happens.) The only question for the buyer
and the seller of a straddle is: How MUCH value will one side of the straddle have at
expiration? More than the price paid for the options? Or less?

STRIKE PRICE (OR STRIKING PRICE)--The price at which a put option or call
option is exercisable. Sometimes also called the "exercise price." This is the price you pay
for a stock if you exercise a call option, or the price you receive if you exercise a put
option.

TAKEOVER--The act of taking "control" of a corporation, by acquiring enough of its

voting stock to elect a majority of the board of directors, thus allowing the person doing the
takeover to direct the actions of the corporation. In Wall $treet Raider, a takeover may be

273
effected through a cash tender offer for stock held by the Public, using the "Buy Stock"
command button in the "Buy/Sell Transactions" submenu, or by a stock-for-stock merger,
using the "Merger" command button. (On Wall Street, a takeover is that step which often
immediately precedes the looting of a once-healthy corporation.)

In Wall $treet Raider, the player or company doing a takeover must always obtain a
minimum of 20% of the target company's stock in order to gain control. Also, in Wall $treet
Raider, you can buy up to 15% of a company's stock on the open market, which will tend to
run up the price of the stock somewhat. However, if you are acquiring (in total, counting
existing holdings) more than 15% of a company's stock, you have to do so by a tender offer
to the public at 20% above the current market price. (The "Buy Stock" command
automatically computes the correct purchase price either way, depending on whether you
are making open market purchases of 15% or less, or "tendering" to acquire more than a
15% interest in a company.) If the stock you or your company want to buy is already
owned by another company, you can make a formal offer to buy the stock, which will
sometimes be accepted, other times refused if the price you offer is not high enough.

TAX AUDIT--A financial proctoscopic exam, performed by malevolent and sadistic civil
servants in a medieval setting, without benefit of anesthesia.

TAX BASIS--The cost, or price paid for an asset, used to determine whether there is a gain
or loss when it is sold or exchanged, or becomes worthless. In Wall $treet Raider, the
program keeps track of the tax basis of all stocks and bonds owned by players or
corporations, in order to determine gain or loss when the stock or bond is sold or becomes
worthless. Note that in Wall $treet Raider, any amount paid in excess of par (over face
value) for a bond is amortized as a non-cash expense each quarter over the remaining life
of the bond, and gradually reduces the tax basis of the bond, until it is equal to face value
(par) at the time the bond matures. Or, if you pay less than par for a bond, the discount on
the purchase is amortized as a non-cash taxable income item each calendar quarter, over the
remaining life of the bond, gradually increasing your tax basis for the bond until it is equal
to face value (par) at the time the bond matures. A player or company can see the tax basis
of all stocks and bonds he, she, or it owns, by clicking on the "Tax Basis Info" button on
the "ENTITY INFO" submenu, when the player or a particular company is the currently
selected "Active Entity."

TAX LOSS CARRYOVER--If a corporation has more losses than income during a year, it
will usually pay no taxes, and the net loss becomes a "tax loss carryover" that can be used
to offset taxable income in another year. In the real world (in the U.S., at least), a
corporation can carry back a tax loss to either of the two preceding years, or carry it
forward to any of the 20 following years, until it is "used up." In Wall $treet Raider, a
corporation is only allowed to carry a tax loss forward, not backward in time. You can find
out if a company has a tax loss carryover by using the "Financial Profile" command. In the
real world, tax loss carryovers usually expire after a certain number of years. In Wall $treet
Raider, the losses don't expire, but the unused loss from prior years shrinks by 10% at the
end of each year. In short, you need to use it, or lose it.

274
TENDER OFFER--An offer by a person or company to acquire part or all of the stock of
a company, usually made at an attractive price (considerably above the current market price
of the stock). A "tender offer" is usually made as part of a takeover attempt (see
"TAKEOVER" above), and the offer is usually only effective if a certain minimum number
of shares are "tendered" for sale. In Wall $treet Raider, a "Tender Offer" is made at a price
20% above the existing stock price, and the offer is only effective if the buyer is able to
acquire the percentage of stock specified. A "tender offer" is required if you will control
over 15% of the target company's stock after the purchase.

TICKER TAPE--In a broker's office, the moving electronic display of stock prices which
shows the price of each trade of a stock (and the number of shares or "lots" traded) that
occurs on a stock exchange. Stock prices are usually quoted in dollars per share and
decimal amounts. (In times past, the quotes were printed mechanically on a narrow paper
tape by a "ticker tape" machine--hence the name.) In Wall $treet Raider, the electronic
"ticker tape" moves across the bottom part of the screen, reporting a random sampling of
one of every 50 to 100 stock trades that occurs in the 1500 + stocks that make up the Wall
$treet Raider investment universe. Volume is not shown.

WHITE KNIGHT--A friendly or neutral company (often quite large) that purchases a
substantial percentage of the stock of a company at the request of that company's
management, in order to keep the shares out of the hands of a potential corporate raider
who might attempt an unfriendly takeover of the company. In Wall $treet Raider, the
"Private Stock Offering" command button (on the "Financing Transactions" submenu) can
be used to implement the "White Knight Defense," enabling a company to raise money by
selling a substantial block of new stock to a "neutral" company. The funds raised can then
be used to "buy in" ("LBO" command button) publicly-owned shares, if desired, in order to
make it even more difficult or impossible for an opponent to buy up enough stock of the
company to take control away from you. In the real financial world, this is an important
form of job security for overpaid corporate executives.

WORKING CAPITAL--Money that a company has tied up in non-productive assets such

as inventory or accounts receivable, as a necessary part of its business. In Wall $treet
Raider, the more "business assets" a company has, the larger the amount of cash it must
invest in "working capital," which, unlike cash that can be invested in CD's or elsewhere,
does not generate any investment income. If "business assets" are reduced, part of the
working capital will be freed-up and turned back into freely spendable cash. The more
efficient and well-managed the company, in general, the smaller the percentage of business
assets (as little as 5%) that must be committed to working capital; or for the worst-managed
companies, as much as 20% of business assets must be tied up in working capital. The
average is about 12%.

YIELD--The percentage rate of return on an investment, such as the interest yield on a

bond or certificate of deposit, or the dividend yield on a stock. Yield is a percentage
calculated by dividing the annual income from the investment by the value or cost of the
investment. For example, a $100 stock that pays $6.00 per share in annual dividends would
be said to have a "dividend yield" of 6% ($6 dividend / $100 stock price).

275
YIELD TO MATURITY--On a bond investment, the percentage rate of return on the
investment, if the bond is held until it is paid off at its maturity date. While the "current
yield" is merely the annual interest payment divided by the price of the bond, the Yield to
Maturity involves a number of complex present value calculations, which take into account
the fact that the price of the bond at present is either higher or lower than the face amount
that will be paid at maturity. Thus, a 7% bond trading at face value (100) has a current yield
of 7%, and also a Yield to Maturity of 7%. But if it matures in one year, and trades at 97,
you will earn another 3%, approximately, when it pays off at 100, so the current yield on
such a bond would be 7.22% (7 divided by 97) and the effective "Yield to Maturity" would
be 10.23%, assuming semiannual interest payments.

Bonds usually pay interest twice a year, although some pay on a quarterly or monthly basis.
In Wall $treet Raider, bonds pay interest quarterly (four times a year), so an 8% bond pays
2% each calendar quarter, for example, in Wall $treet Raider. The "yield to maturity"
(YTM) figure shown for bond issues in Wall $treet Raider is computed using standard
present value equations, but based on quarterly payments, rather than semiannual.

276
 INDEX TO "WALL $TREET RAIDER - THE BOOK"

[All references in this index are to chapter and section numbers, with Roman
numerals indicating the chapter number]

ACCOUNTING--Principles of accounting used in W$R, IV.H

ACTIVE ENTITY, defined as the company or player whose information is being

viewed, or which is the transacting entity (if controlled by the player whose turn it is,
III.A

"Add/Delete" button (colored button atop Streaming Stock Quotes List), V.C(8)

ADVANCES--Demand loans made to a controlled corporation by a player. XI.C(6)

"Antitrust Suit" button--To bring an antitrust suit against a competitor company in

the same industry, VIII.B(8)

ANTITRUST LAWSUITS--In general, IV.P

--To bring a suit, see "Antitrust Suit" button" immediately above

BAD DEBTS--Effect on banks' earnings, IV.K

BALANCE SHEET--Financial balance sheets described:

--Description of items on a player's balance sheet, "MY BALANCE SHEET," V.C(3)
--Balance sheet shown in company's or player's "Financial Profile," X.D(3)

BANKRUPTCY--In general, IV.Q

BANKS--How they work in W$R, IV.K

--Advantages of controlling, IV.A(6)
--Bad debt expenses, IV.K

277
BONDS--As an investment, IV.E(2)
--Junk bonds, issuance of, IV.D(2)
--Price of govt. bonds displayed with "Economic Statistics" button, X.E(5)
--Factors affecting bond prices, IV.E(2)
--Command button to issue corporate bonds, see "Issue Bonds" button VII.B(5)
--Command to buy or sell govt. bonds, see "Trade Govt. Bonds" button VI.B(5)
--Command to buy corp. bonds, see "Buy Corp. Bonds" button VI.B(3)
--Command to sell corp. bonds, see "Sell Corp. Bonds" button VI.B(4)

BORROWING MONEY--See "LINE OF CREDIT"

--Limits on, IV.D(1)
--"Borrow Money" button, used to borrow money from bank lender, XI.C(1)

BUSINESS ASSETS--General information about, IV(E)(4)

--How to acquire assets, see "Buy Corp. Assets" button, VI.B(9)
--How to sell assets, see "Sell Corp. Assets" button, VI.B(10)
--Changing growth rate in business asset capacity, see "Set Growth Rate%" button,
VIII.B(6)

"Buy Corporate Bonds" button, used to buy corporate bonds, VI.B(3)

"Buy or Sell Bank Loans" button, functions described, IX.B(6)

"Buy Stock" button--To buy stock on the open market or from another company you
control, VI.B(1)

CD or Certificates of Deposit--Interest-bearing deposits in a bank, by a player or

corporation, defined, in GLOSSARY

"Call in Bank Loan" button--To call in the bank loan of a competing player or
corporation, by the player who controls the lending bank, IX.B(4)

CALL OPTIONS, see "OPTIONS TRADING"

"Capital Contribution" button--Used to contribute capital to a 100%-owned

subsidiary company, VII.B(2)

"Change Bank" button, functions described, IX.B(3)

"Chart" button, functions described, XI.E

CHANGING MANAGEMENT--Advantages, of IV.C(5), and use of "Change

Managers" button, VIII.B(3)

"Cheat Mode" Menu item--To toggle Cheat Mode On/Off, menu item in "SETTINGS
MENU", V.B(3)

278
"Cheat" button, Cheat Menu functions described, XI.E

CIRCULAR STOCK OWNERSHIP--Limits on circular ownership, III.H

"Clear" button (colored button atop Streaming Stock Quotes List), V.C(8)

COMMODITY FUTURES TRADING—For players and corporations, except banks

and insurance companies, IV.A(12)

CONSOLIDATED TAX REPORTING--For 80%-owned corporations, IV.G(3)

CONTROL--How to obtain control of a corporation, IV.B, and the meaning of

"control" explained in FAQ's, III.G

CORPORATE ASSETS--Buying, VI.B(9), or selling, VI.B(10)

CORPORATE BONDS--In general, see Junk Bonds below.

"Credit Info" button--To display credit rating, lending bank, interest rate, and line of
credit information for a player or company, X.D(8)

CREDIT RATING--The credit quality or safety rating assigned to a player or

company, that determines the interest rate that he/she/it must pay on loans, or when
issuing bonds:
--Displayed in company financial profile, X.D(3)
--How determined, APPENDIX C
--Displayed when clicking on "Credit Info" button, X.D(8)

"Database Search" button--To use computer to search W$R database for stocks with
certain specified characteristics, X.H(1)

DIVERSIFICATION--Advantages of, IV.C(3)

DIVIDENDS--In general, IV.I

--70%, 80% or 100% tax deduction for dividends received by corporations, IV.G(2)
--extraordinary dividend, see "Extraordinary Dividend" button, VII.B(7)

EARNINGS--How corporate earnings determined, IV.H

"Earnings Report" button, to view a company's most recent quarterly earnings

report and report of year-to-date earnings, X.D(4)

"Economic Statistics." button--Display of economic indicators and interest rates,

X.E(5)

279
ECONOMY--In general IV.J, and effect on industries and companies, APPENDIX D.
(2)

"Elect CEO" button--Click on to elect yourself president and CEO of a company you
control, VIII.B(1)

"End Turn" button--To end a player's turn before time is up, XI.B

ENTERING STOCK SYMBOLS--Enter either symbols or company ID#, or look up

and select from drop-list, APPENDIX B

EXERCISE OPTIONS--See "Exercise Options? Yes/No" menu item, on the

"SETTINGS" menu, a toggle switch to cause options bought or sold short to be
exercised at expiration date, V.B(3)

EXTRAORDINARY DIVIDEND--Using "Extraordinary Dividend" button to have a

company pay out an extra dividend, VII.B(7)

"FILE" MENU, description of menu items on, V.B(1)

"Fill" button (colored button atop Streaming Stock Quotes List), V.C(8)

"Financial Profile" button--Financial profile of a company or player, X.D(3)

FINANCING--How to obtain, IV.D

--Borrowing, IV.D(1)
--Issuing corporate bonds, IV.D(2)
--Issuing new stock, IV.D(3)

"Freeze/Unfreeze Loans" button--To freeze or unfreeze the bank lines of credit for
competing players and companies that borrow from your bank, IX.B(5)

"GAME OPTIONS" MENU, description of menu items on, V.B(2)

"Greenmail" button--To do a "greenmail" buyback of stock held by an unrelated

corporation, VI.B(7)

GREENMAIL--See "Greenmail/LBO" button (immediately above)

--Used in conjunction with "Priv. Offering" command button to "sharkproof" a
company from takeovers, see "Private Stock Offering" button, VII.B(4)

GROSS DOMESTIC PRODUCT--Displayed with "Econ. Statistics" command

button, X.E(5)
--Effect on various industries' demand growth, APPENDIX D(2)

GROWTH RATES--Pros and cons of changing a company's rate of growth, IV.E(4)

280
"Harassing Lawsuit" button--To file harassing lawsuits, IX.B(1)

"HELP" MENU, description of menu items on, V.B(4)

HOLDING/TRADING COMPANIES--How they work in W$R, IV.M

Industrial Growth Rates" button--Comparative summary of growth rates and current

profitability of all non-financial industries, X.E(2)

"Industry Projection" button--Industry projections of growth and rates of return on

investment, X.D(10)

"Industry Summary" button--Industry summary of returns on equity, credit ratings,

and price/net worth ratios of companies in currently selected industry, X.D(9)

INSTALLATION--See APPENDIX A for message regarding instructions on installing

the program.

INSURANCE COMPANIES--How they work in W$R, IV.L

--Insurance in force, IV.L
--Policy reserves like interest-free loan, IV.L
--Underwriting profits/losses, IV.L

INVESTING--In general, IV.E

--Cash, CD's, IV.E(1)
--Bonds (government and corporate bonds), IV.E(2)
--Stocks, IV.E(3)
--Business assets (by corporations only), IV.E(4)

JUNK BONDS--Investing in bonds, IV.E(2)

--"Buy Bonds" button--To buy corporate bonds, VI.B(3)
--"Issue Bonds" button--To issue bonds, VII.B(5)
--speculating in junk bonds, IV.A(5)

"Largest Market Cap" button, X.E(11)

"Largest Tax Losses" button, X.E(10)

"LBO (Leveraged BuyOut)" button--To do a buyback of stock (leveraged buyout),

repurchasing shares held by the public, VI.B(8)

LENGTH OF GAME--Set number of "years" at start of new game, (Step Three),

II(3)

LENGTH OF TURN--See FAQ, "How long does my turn last?", III.C

281
LEVERAGED BUYOUT or LBO--How to do, see "LBO" button above

LIBOR RATE--London Interbank Offer Rate, described, X.E(6)

LINE OF CREDIT--How determined, IV.O and IV.D(1)

LIQUIDATION--Of a corporate subsidiary, see:

--"Tax-Free Liquidation" button, used to do a liquidation of a 100%-owned
subsidiary into its parent corporation, VII.B(8)
--"Taxable Liquidation" button, used to liquidate any controlled corporation, other
than bank or insurer, VII.B(9)

"List Bank Loans" button--To list a bank's loan portfolio (shown only when "Active
Entity" is a bank), X.D(11)

"List Options" button--To list a player's or company's put and call option positions,
long and short, X.D(14)

"List Portfolio" button--Used to list a player's or company's stock and bond

portfolios, X.D(6)

"List Shareholders" button--To list stockholders (shareholders) of a company and to

see who ultimately controls it, X.D(5)

MAIN MENU buttons and functions--Described, in general, V.A

MARGIN CALL--Described in FAQ, III.I

"Market Share" button, X.E(1)

MERGER--See "Merger" button, VI.B(6)

"Merger" button--To do a stock-for-stock merger, VI.B(6)

"Most Cash" button, X.E(9)

"My News" button--To display list of recent news items, if any, that affect you or your
companies you own stock in or control, X.G

"Name Change" button--To change the name of a company you control, for the rest of
the game (on main menu screen) XI.C(5)

OIL--Effect of price of oil on various industries, APPENDIX D(2)

--Price displayed with "Economic Statistics" command button, X.E(5)
--Displayed constantly on main menu screen, as "spot crude" price, V.C(5)

282
OPTIONS TRADING--Trading put and call options, in general IV.A(11)
--Option prices, how determined, IV.F
--Buying call options, VI.B(12)
--Selling call options, VI.B(13)
--Buying put options, VI.B(14)
--Selling put options, VI.B(15)
--Listing options you own X.D(14)

PARTIAL LIQUIDATION--Corporation's extraordinary dividend may sometimes be

treated as a taxable partial liquidation, VII.B(7)

PLAYERS--Number of, selected at start of game, II (Step Three)

PORTFOLIO--See "List Portfolio" button above, used to view player's or company's

stock and bond holdings

PRIME RATE--Displayed by using "Economic Statistics" command button, X.E(5)

PRIVATE OFFERING--Of stock to "White Knight" or venture capital investor,

IV.D(3)
--See also "Private Stock Offering" button, VII.B(4)

PRODUCTIVITY--Expenditures to increase a company's productivity, (R & D or

marketing/advertising), see "Set Productivity Spending" button, VIII.B(5), and
IV.C(1)

PROFITABILITY--Factors determining, IV.C

--Productivity spending, to increase profits, IV.C(1) and "Set Productivity Spending"
button, VIII.B(5)
--Market share, IV.C(2)
--Industry supply/demand factors, IV.E(4)
--Insurance companies, IV.L

"Public Stock Offering" button, to issue new stock in a company you control, VII.B(3)

PUBLIC OFFERING--Of stock, IV.D(3)

--Of corporate bonds, IV.D(2)
--See "Public Stock Offering" button, immediately above

PUT OPTIONS, see "OPTIONS TRADING" item

QUICK SEARCH FUNCTION buttons, X.H

283
R & D EXPENSES--See "Productivity Spending"--To set level of research &
development and modernization expenditures, or of marketing/advertising
expenditures, IV.C(1)

"Recall DB Search List" button, X.H(2)

REFINANCING--Advantages of, IV.C(4)

"Repay Loan" button, functions described, XI.C(2)

RESEARCH REPORTS--See "Research Report" button, below.

"Research Report" button--Click on to call up detailed, full-text, customized research

report and analyst's rating of the stock, for any company, X.D(2)

"Resign as CEO" button--To resign your position as President and CEO of a

company, VIII.B(2)

"Restructure" button--To restructure a company you control by liquidating assets,

downsizing, etc, VIII.B(7)

RESERVE FOR CONTINGENCIES, Decreasing or increasing the reserve, to

manipulate earnings, IX.B(9) and IX.B(10)

RESTRUCTURING--Advantages of, IV.C(3)

REVERSE SPLITS--Splitting stocks to decrease number of shares outstanding and

increase stock price, see Reverse Split button.

RUMORS--Spreading false rumors, as a desperate tactic, to hurt a competitor's

company, see "Spread Rumors" button, IX.B(2)

SAVE GAME--See "Save Game" menu item, and "Save Game As" menu item, both
on the "FILE" menu, and used to save game data on disk, in order to resume game
later, V.B(1)

"Select" button (colored button atop the Streaming Stock Quotes List), V.C(8)

"Select Corp." button, functions described, X.C

"Select Last" (or Stock Symbol) button--To reselect previously selected "Active
Entity" again, X.F

"Select Player" button, functions described, X.B

"Sell Corporate Assets" button, used to sell a corporation's business assets, VI.B(10)

284
"Sell Corporate Bonds" button, used to sell corporate bonds, VI.B(4)

"Sell call options" button, used to sell call options, VI.B(13)

"Sell put options" button, used to sell put options, VI.B(15)

"Sell Stock (or Sell Stock Short)" button--To sell stock you own, or owned by a
company you control, VI.B(2)

"Set Dividend Payout %" button--To change a company's dividend payout ratio, as
percentage of earnings, VIII.B(4)

"Set Growth Rate %" button--To change rate of growth from investment in business
assets, as an growth percentage, VIII.B(6)

"Set Productivity Spending" button--To change the percentage of its revenues a

company spends on R & D, or on marketing and advertising, VIII.B(5)

"SETTINGS" MENU, description of menu items on, V.B(3)

"SPIN-OFF" command button, used to spin-off (distribute) the stock of a corporate

subsidiary, VII(b)(10)

"Spread Rumors" button--To spread scurrilous rumors about competitor's company,

X.B(2)

STARTING--Getting started, II

"Start Up" button, used to start up a new company, VII.B(1)

"Stock Chart Size menu item, on the SETTINGS MENU, V.B(3)(i)

STOCKS--As an investment, see "INVESTING"

--Issuing to raise funds, see "PUBLIC OFFERING" and "PRIVATE OFFERING"
--Stock prices, factors influencing, IV.F
--Limitations on ownership, IV.N and III.H

STOCK SPLITS--Splitting stocks to change number of shares outstanding, see Stock

Split button and Reverse Split button.

STOCK SYMBOLS--About, and how to enter, see APPENDIX B

STRATEGY--Game strategies and tactics, IV.A and APPENDIX E

STREAMING STOCK QUOTES LIST, V.C(8)

285
"Tax Basis Info" button, to view the tax basis or cost of stocks and bonds owned
directly by a player or corporation, X.D(12)

TAXES--Rates, displayed with "Economic Statistics" command button, X.E(5)

--Rates, and how calculated, IV.G
--Tax break on dividends received by corporations, IV.G(2)
--Consolidated Tax Returns, IV.G(3)
--Tax basis of stocks, bonds displayed, X.D(12)

TAX LOSS CARRYOVERS--How they may reduce taxes, IV.G(2) and GLOSSARY

TICKER DISPLAYS--Stock and news headline tickers, V.C(6)

"Ticker On/Off" (or "Start Ticker") button, functions described, V.D(2)

"Ticker Speed" menu item--Item on "SETTINGS" menu, used to change the speed at
which stock ticker moves, V.B(3)

TIME LIMIT--Number of "years" game is to last, set by players at start of game, II.3
(Step Three)

TRANSACTIONS--Player limited to maximum of 5 per turn, II.3 (Step Three)

"Trade Government Bonds" button--To buy or sell government (treasury) bonds,

VI.B(5)

"View News" button--To view recent news headlines, X.E(7)

"WHITE KNIGHT"--An unrelated company that can take a position in your

company by buying its stock, to help you keep control of the company; "White
Knight" placement of stock can be done with "Private Stock Offering" button
VII.B(4)

"Who's Ahead?" button--Summary of assets, liabilities, and net worth of each player
and other basic information about each player, X.E(8)

286