Archive for March, 2003

Proposed Techinvest Investment Fund

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In conjunction with Capita Financial Manager (CFM), Techinvest is planning shortly to launch a UK authorised collective investment fund for the smaller investor. CFM is planned to be the authorised operator for the new fund and, Techinvest, through a formal investment management agreement, is planned to provide investment management and advisory services to the fund.

It is intended that the fund will only invest in the technology sector. The majority of the stocks held would be quoted in London. However, around 25% of the fund value would normally be in stocks traded elsewhere, primarily North America. It is intended that the objective of the fund will be to achieve capital growth, holding stocks for the longer term; though there will be sufficient flexibility to take advantage of short term price movements caused by unexpected news or market events. Further, it is planned that any dividend or interest income received by the fund will be credited to the value of the fund, rather than distributed to shareholders.

It is not planned that the fund will make any attempt to duplicate the Trader Portfolio, details of which are published in each issue of the newsletter, though there is likely to be some overlap of holdings. However, the nature and relative sizes of the two mean that what is likely to be suitable for one may not necessarily be suitable for the other.

The fund, which has been provisionally titled “CF Techinvest Technology Fund”, is intended to be an open-ended investment company (OEIC) with variable capital and to be established pursuant to an authorisation order of the Financial Services Authority in the UK. The intended benchmark is likely to be the FTSE techMARK All-Share index.

An OEIC is a particular type of company which invests in securities and was created to take advantage of the UCITS directive common passport for Collective Investment Schemes. UCITS stands for Undertaking for Collective Investment in Transferable Securities. The term comes from a European Community Directive issued in 1985 which deals with the establishment of a Europe-wide market in units trusts.

An OEIC has an open ended capital structure in that its capital can be increased and decreased by issuing and redeeming shares, thereby giving it the same flexibility as a unit trust. One key difference from a unit trust is that an OEIC has a single price based on net asset value but at a mid-market price, rather that the separate bid and offer prices of a unit trust.

An OEIC has an Authorised Corporate Director (ACD) who is responsible for operating the company in accordance with the regulations and with the OEIC’s instrument of incorporation. It must also have a depository who is responsible for the safe-keeping of the scheme’s property and ensuring that the regulations are compiled with.

The roles of the ACD and depository are therefore similar to those of the operator and trustee respectively of an authorised unit trust, and like them they must be independent of each other. The regulations which apply to OEICs are closely based upon those for authorised unit trusts and provide an equivalent level of protection.

The ACD to the CF Techinvest Technology Fund is intended to be London-based Capita Financial Managers (CFM) whose ultimate holding company is The Capita Group, one of the UK’s largest companies and a member of the FTSE 100 index. CFM is currently ACD to over 40 OEICs and is also manager of over 40 unit trusts. All its funds are operated in partnership with specialist investment organisations to which it delegates responsibility for the selection for the funds’ assets.

It is planned that CFM will provide all back-office services for the fund, including the weekly valuation which will he published daily in the Financial Times, and for it also to be responsible for all administrative matters concerning investors, including the processing of orders.

CFM intends to have a dedicated team processing ISA (Individual Savings Account) and Saving Plan applications and to issue twice yearly plan statements informing investors of plan value and transactions over the period. CFM also intends to appoint The Bank of New York Trust and Depository Company, a subsidiary of the Bank of New York, as the Depositary to provide a comprehensive range of trustee and custody services to the fund.

Upon launch a fund prospectus will be available and all applications to the fund will be strictly on the basis of the fund prospectus.

It is intended to provide updates on this site of further progress towards the launch of the fund.

The CF Techinvest Technology Fund is not registered for sale in the Republic of Ireland. We have initiated steps to have it so registered as soon as possible but have no certainty as to when this will happen.

Update

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In the hours before the start of the Initial Offer period on April 29 we were informed by Capita Financial Managers (CFM) of a problem which had just come to their attention in relation to the ISA status of the CF Techinvest Technology Fund. After several days of intensive discussions with all concerned, including legal experts in regulatory and taxation matters, it was concluded that ISA applications into the Fund could not be accepted. Non-ISA applications of course continue to be acceptable.

The problem is that the Inland Revenue in the UK have not yet extended the ISA and PEP regulations to cover a new type of fund, such as the CF Techinvest Technology Fund, which has been set up to comply with rules introduced by the Financial Services Authority in late 2002.

Accordingly, subscription monies received from ISA applicants are being returned. Such applicants are still free to make a non-ISA investment into the Fund. Unlike ISA applications which must be in writing, a direct investment can be made over the telephone. An amended Key Features Document and Application Form will be posted in the next few days by CFM to all who were sent the original Key Features Document. The initial offer price of the shares will remain fixed at 100p until May 19. However, the reduction in the normal Preliminary Charge from 5% to 2% will be extended beyond the initial offer period until the end of May 2003.

CFM are currently awaiting, and anticipate, a change in legislation by the Inland Revenue allowing ISA investments into new funds. Those who have already sent in an ISA application are being offered the choice of making a non-ISA investment now; CFM are offering such applicants the facility to switch up to £7000 of shares in the CF Techinvest Technology Fund into the ISA at no charge when it becomes available. However, if at the time of switch the value of the shares has increased above the £7000 limit, the amount allowable by the Inland Revenue regulations for transfer will still only be £7000.

When the confirmation of legislative change has been received such applicants will be contacted by CFM in writing, enclosing both an ISA application form and PEP-ISA transfer form.

CFM are writing to all such applicants to apologise for any inconvienence this situation has caused and go on to say “Capita Financial Managers wish to make it clear that this is in no way the responsibility of Techinvest, the Investment Adviser to the Fund”.

If you wish to discuss the position further please call CFM’s Investor Services team on 020 7556 8800. If you wish to place an order please telephone their dealing line on 08459 220044.

The price of shares can go down as well as up. The past is not necessarily a guide to future performance. Techinvest is regulated by the Central Bank of Ireland.
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