Search results

Parliament has recently approved Treasury legislation defining the structure of the UK‐based open‐ended investment company (OEIC). This paper reports on the changes made in response to messages received in consultation, especially in the area of corporate governance. It also considers proposals for a deregulation order to give OEICs further investment powers. This was in the consultation phase at the time of going to press.

Collective Investment Schemes in Securities (‘CISS’) and Collective Investment Schemes in Property (CISP’) are common business vehicles in the South African economy. Nevertheless, there is still some uncertainty with regard to the tax treatment of these business structures, as the application of the specific income tax and capital gains tax provisions applicable to CISS and CISP results in several anomalies. The purpose of this article is to identify and highlight these anomalies by discussing the specific income tax and capital gains tax provisions applicable to CISS and CISP, and to suggest how some of these anomalies should be treated for tax purposes. It is submitted that the legislator did not consider the legal nature and practical operation of a CISS when the tax provisions for CISS were drafted. The tax treatment of CISP is also not without difficulties, especially where the CISP is constituted as an open‐ended investment company (OEIC’).

Threadneedle Investments, a leading UK Investment management company, was engaged in strategic discussions about future growth in its retail mutual funds business. The firm's Vice Chairman, Alan Ainsworth, was leading the discussion of strategic alternatives. The following options were being considered: expanding distribution of its funds in the UK by distributing directly; expanding its presence in the UK through the independent financial advisor (IFA)network; and/or building a larger presence in Germany, where Threadneedle was already established. The case takes place in June 2000 and draws much of its rationale and immediacy from the great bull market of the 1990's and the arrival of a new millennium. Investors were looking for new investment media to capture these returns. The case is based on field research including conversations with Mr. Ainsworth and his associates, internal company documents, interviews with experts in the field and library research.

Since the Financial Services Act, the regulation of collective investment schemes has evolved. But now, with the merger of regulators, Morgan Grenfell, OEICs and a new UCITS Directive the industry seems to be on the verge of experiencing a quantum leap in the rate of change. This paper explores those forces for change and the direction in which each of them appears to be pressing. It does not so much seek to predict the future as to identify the ingredients in the regulatory mix.

LEGISLATION The Individual Savings Account (Insurance Companies) Regulations 1998 (SI 1998/1871) Effective from: 6th May, 1999. Made pursuant to s. 333B Income and Corporation Taxes Act 1998.

SIB Guidance Release 3/96 — standards for the custody of customer's investments The Treasury has decided to make custody of investments an activity requiring authorisation under the Financial Services Act 1986 so SIB has now published Guidance addressed to self‐regulatory organisations (SROs) and recognised professional bodies (RPBs) setting out standards and guidance notes for the safeguards which Securities and Investments Board (SIB) will expect those bodies to incorporate in their rules and maintain so as to afford protection to investors. The SIB looks to SROs and RPBs to require that authorised firms:

In July 1994, following a lengthy development period, new rules were announced for the disclosure of information in the case of life and pensions products. The new rules, which were scheduled for implementation on 1st January, 1995, contained details of how investors should be informed about product content, the effect of charges and expenses and commission or remuneration paid to advisers. In September 1994 work began on the development of a comparable regime for unit trusts and other non‐life products. In July 1996 the Personal Investment Authority announced its conclusions and rules for this range of products will be implemented in May 1997. This paper contains details of requirements.

Socially responsible investment (SRI): selection of investment portfolios with regard to ethical and social criteria in addition to conventional financial considerations, is often considered to bring reduced financial performance, although empirical evidence is inconclusive. Five possible sources of divergence in the performance of socially responsible and conventional investments have been proposed in the literature, and are further examined here. Two proposed mechanisms (the ‘anticipation effect’ and the ‘positive selection effect’) describe firms in which investment is potentially made. Since such opportunities are available to all investors, these are unlikely sources of systematic divergence. Concern (the ‘diversification effect’) that SRI constraints prevent adequate portfolio diversification is shown to be ill founded. The greater proportion of smaller companies in SRI portfolios links to an ongoing debate regarding the ‘small companies effect’, in which smaller companies have at times appeared to have superior (and more recently, inferior) performance, while other studies suggest that this is merely an artefact of the methodology used. It is argued that none of the above provides a basis for expectations of inferior SRI performance. Furthermore, SRI portfolio managers gather additional company information and also increasingly engage in dialogue with companies. It is argued that this ‘information effect’ is a possible source of superior SRI performance.

The purpose of this paper is to examine motivations underlying UK repurchase activity. Specifically, the paper inquires into the relevance of a range of different explanations for repurchases and perceptions of regulation surrounding them. Emphasis of the paper is, however, on motives linked specifically to repurchases rather than income distribution, more generally.

The study uses a survey approach to capture the views on repurchases of corporate managers and investors. It supplements the survey data with secondary information about the companies to better understand repurchase behaviour.

Results indicate that repurchase use is influenced by motives linked specifically to this tool rather than those associated with income distribution, more generally. In particular, repurchases are used to return surplus cash to investors, signal undervaluation and influence gearing and earnings per share levels. In the latter case, companies appear to use repurchases to perform a value added role, alongside manipulating the EPS level and thus the latter may simply be a by-product of the former. Private investors may nevertheless be vulnerable to such manipulation, given their limited financial literacy.

The study relied on a survey of managers and investors and univariate analysis. In the former case, respondent numbers, particularly for the investor community were low, raising questions as to the generalisability of the data. In the latter, the results may be mis-stated owing to the simplicity of the analysis.

Overall, the survey results suggest that firms use repurchase programmes in different contexts to dividend payments and in appropriate circumstances. While managers and investors broadly share similar views, private shareholders may be in a vulnerable position given their limited financial literacy.

This is the first UK study on repurchases that examines the relative importance of a range of motives underlying repurchases. Moreover, it assesses in detail the core hypotheses that are linked specifically to repurchase programmes to better understand UK repurchase behaviour. It does so by supplementing the survey data with additional company information and comparing the views of the different audiences surveyed.

The UK is one of the few countries in Europe that is not facing a serious pensions crisis. The reasons for this are straightforward: state pensions are among the lowest in Europe, the UK has a long‐standing funded private pension sector, its population is ageing less rapidly than elsewhere in Europe and its governments have, since the beginning of the 1980s, taken measures to prevent a pension crisis developing. This article reviews the policies that have been implemented over the last two decades. It describes and analyses the defects in the Thatcher‐Major governments’ reforms that brought us to the current system, examines and assesses the reforms of the Blair government, and then identifies the problems that remain unresolved and how they might be addressed. Concludes with an examination of the implications of these reforms for the future of occupational pension schemes.