Member Info for LordAdam

The influence of the buy back is simple ... every share you own has missed out on a special dividend of 50p ... and the reduction in the number of shares would pay for an automatic 3% rise in the ordinary dividend -- funny isn't it how we've only got 2% and the board doesn't talk of the reduced number of shares in circulation. One influence not unwelcome to the board is that the EPS is artificially 3% higher ... and well blow me down, they've more or less met their bonus target already ... champagne all round for the board at the expense of our special. And what do we have ... a share price in the doldrums and no way of getting that 50p back without making our own personal investment situation worse. I've said it before and I'll say it again ... Buybacks are a sign of an incestuous, inward looking board that is self serving -- they are bad news for small investors. Mike

The appointment today of an additional broker to work alongside the exisiting NOMAD suggests that the board at least anticipates the company having a larger or more active role in the market place. As my old physics master was rather fond of saying "augurs well for the future" ... Mike

Myself I'm holding at the moment ... I think with the present market uncertainties and the lack lustre result of the buy back (plus I don't agree with it in the first place) there's probably a little bit more dipping to do before we reach the bottom on this one. Also I'm up to weight on SSE for the time being ... there's a big ExDiv date coming in late July ... I may add £10K to the holding some time before then to qualify for the divi. Mike

Sorry Daniel that's just plain wrong ... 600K in any type of joint holding/account on death of the first will be valued at 300K for the purpose of Probate fees and IHT. (See https://www.gov.uk/valuing-estate-of-someone-who-died/assets) If the two accounts are of equal value it makes no difference whether they are held jointly or separately. True there will be no IHT on the first death provided the will leaves the deceased's assets to their partner. But if any asset is held in the deceased persons name then it will be necessary to obtain a grant of representation in order to unfreeze it and transfer it. It is disingenuous in the extreme to think that an estate of 300K+ is not going to need a grant. The fee for an estate of 300-500K is £1000 ... you can't have a joint-ISA so that means you'd have investment income from 300K for one of the individuals ... on my portfolio that would generate income of £15K plus capital gains ... put that with pension income, interest income and what not and you'd be paying tax on it. 20% of 15K is £5,000 per year (plus the same again for your partner). Doesn't make sense to move 2xISA into a joint share/interest account to avoid a one-off charge of £1k of probate fees. Sorry, the government have got us by the short and curlies on this one. You (or rather your estate) are just going to have to put up with paying the probate fees. Mike

As in all cases, the devil is in the detail .... Firstly, there's no such thing as 'Probate Tax' either old or new ... there are of course, Probate fees and they are about to increase. There's no such thing as 'death tax' either -- although most folk would take that to mean Inheritance Tax so I think we can run with that. But, what is very relevant is that Probate charges are levied based on the TOTAL value of the estate, it doesn't matter if you have it in an ISA, shares, bank accounts, art works, stuffed in the mattress or whatever ... wherever it is it counts. If it's in a joint account then half of the balance of the account is considered to be in the estate. Two people who each have 300K in ISAs will not reduce their estate by putting them into a joint account, neither will they reduce the value of the estate on a single death either. BUT ... and this is a big BUT ... all transfers between spouses on death are FREE of inheritance tax ... so on the first death there's no IHT to pay anyway and rejigging the ISA's or assets into joint accounts won't avoid the probate fees either. So you're stuffed if you do and you're stuffed if you don't ... as always, it pays to look very carefully at what the daily's write about, very rarely do they ever get anything right in terms of the fine detail, much preferring a catchy headline to substantive facts and research. Mike

There appear to be a couple of subtleties in the transfer of a deceased persons ISA to the surviving partner. The first is that without special leave of the HMRC the two ISAs have to be with the same broker -- reasonably likely with a couple, but not a foregone conclusion. The second is timing ... the transfer has to take place either, before the estate administration is completed or within 180 days of that date (almost, but not quite 6 months). As they say, the devil is in the detail. But for us, where we intend to have the largest ISAs we can accumulate and live off the tax free income from a high yield portfolio this transfer is a life saver. It means that on the first death the two ISAs get amalgamated and the income stream can continue tax free as before ... With this situation becoming more common and folk having 2x£500K ISAs its not going to be long before the tax man thinks that he's given too much away. What he does then is hard to guess. A life time limit on the value of the isa may be one method as you say, some tax regime for the higher rates of income/withdrawals? Who can say, but there is no end to the devious tricks these characters can play when they themselves write the rules. On the subject of taking money out of ISAs to avoid charges etc on death I can't, myself, see how this makes any sense as the ISA is tax free as regards capital gains, dividend income and importantly on the distribution of those back to the individual. SIPPs and other pension related schemes have an initial advantage in that employment income can have the deducted tax reclaimed but overall I think this is quickly swallowed up by the tax losses at the other end. Under the patio hey ... that seems like a pretty hardcore idea to me ... Mike

Gerry, thank you so much for that link that you posted .... the new rules are perfect for couples (married & civil partnerships) that have large ISAs. Under previous rules the deceased ISA died with the holder and the contents broke out of the ring fenced ISA and into the estate. Under the new rules they can be effectively transferred 'enmasse' to the survivors ISA. They never leave the ISA wrapper and can be transferred as stock rather than cash. We hold our ISAs with the same broker, as most couples do, and the whole process should be relatively (pun intended) easy and cheap. On a point of detail, joint accounts are _not_ frozen on the death of one party .... but the appropriate share of the balance (usually 1/2) is added to the estate value for probate purposes.Indeed joint accounts are often used to enable life to continue in the immediate days following a death. I'm not sure where the figure of £50K came from unless its the value of an estate that doesn't require a grant of probate. If so my experience of handling three estates is that this is a route which looks attractive but is actually more trouble than its worth. Effectively for most folk on these boards probate will be the order of the day ... and like you I'm a great believer in ISAs ... we've more or less maxed out each year for a good while now and have a substantial dividend income (tax free) to reinvest. Ultimately it will become our retirement income in a few years. Mike

I'm just trying to clarify some of the detail surrounding the trade figures that folk often quote when they say ... buys outnumber sells and the price goes down. Often folk then go on to say for every buy there's a sell ... and that's only true if/when you consider the MM as the other party to a trade. When you consider the system as a whole the share that I sell may not be bought by another investor for some time -- because the MM that bought it may be taking on stock. SETS doesn't match buyers and sellers, not in the sense that you and I think of buyers and sellers ... it matches investors with Market Makers. Unless you are a really big player and deal outside the market you can't trade a share without it going through a MM. I don't think that MMs can cherry pick, but by controlling their individual bid/offer prices and looking at the order book they can fine tune when they trade stock and at what price. Though they have to be at the strike price for SETS to match them up with a trade. MMs play the game just like the day traders do too ... they build up and run down their stock levels through the day and day by day maximizing their profit as they go. Have a look at some of the web sites that offer level2 information and watch some of their demo videos to see it in action. Mike

Almost all trades within the larger companies are done by SETS but there are exceptions when off market trading does occur. But SETS doesn't match buyers and sellers ... otherwise the market makers would be out of a job (and a profit). When you sell shares they go to a MM ... when you buy they come from a MM. So if a MM is prepared to hold stock long then the trade can go one way for some time. Similarly the ability to see the order book, which the MMs can ... gives the MMs a great deal of information that they can use to decide how to place their bid/offer prices so as to maximise their gains. Mike

Just to add a couple of things to the discussion ... buys and sells are not necessarily matched/balanced. That's because the MMs hold a stock of shares themselves, and indeed go long/short depending on how they think they can make money. Given that they operate in the market day in day out their position could be heavy or light in a share for several days. The next thing is that we don't operate in a perfect free market ... supply and demand doesn't operate as you think they might as the MMs can see information that the likes of you and I can't. So if there is a heavy sell order lodged on the system at a price higher than the current price, the MMs may keep the price down despite ongoing buying by small investors in order to avoid putting the price up and being forced by the market to take the large sell order coming in. They may well be playing 'chicken' with the other MMs to see who is going to have to take the big order first! It's a complicated old business ... and one that is not easy to make sense of ... and if you can make sense of it, then well, you're a better man than me! Mike

Arsenal ... from a trading point of view you are 100% right of course ... and I do totally agree with you on that front -- it's just that I'm not a trader. You might have made £5 a share (which is 10 times what the special would have been) from successful trading in the last few months but I would, as like, have made a £5 loss to be honest. That's why I rather like the uncluttered certainty of a dividend to the fickle vagaries of a trading position -- and that's why I get annoyed by being deprived of it so that someone can make their multi-million pound bonus secure. Enough said ... this share doesn't suit my profile any more ... I'll be leaving what I have in it here, but I won't be adding to it from dividend payments etc (which would normally be my modus operandi). Mike

However high the yield goes, it doesn't give the board an excuse to put their hand in and take the money that should have gone to holders and use it in a way that virtually guarantees their own bonuses at the expense of those for whom they should be running the company. How dubious this 'buy back' practice is is shown in that the companies act specifically forbids companies from buying the shares of their own company without specific and time limited permission from the shareholders. That's why AGMs routinely have this authority written into them ... sadly, like excessive executive salaries and bonuses, its routinely passed by those who should now better than not to skip the small print. I *always* vote against this power to buy back company shares for the very reason that it is almsot always against the interests of small shareholders. Mike

The buy back continues even .after the recent rise in the SP .... now at £31+ and they are still buying. I can not help but think that the boards major objective is to remove shares from circulation at any price ... seems like careful and prudent buying has gone out of the window -- why didn't they buy the lot at £28? And if the objective is to reduce the number of shares in issue regardless of price what is the purpose? Rather smacks of a group of folk who want to artifically raise the EPS at the share holders expense ... can't help thinking about bonuses that might be tied to performance related figures in turn tied to EPS ... Umm ... doesn't look good for us long term income holders I'm afraid ... anyone keeping a tally of what the next dividend is likely to amount to? Mike

We'll just have to see how it pans it out ... as you say good luck all -- always reminds me that of Tiny Tim saying " God bless us, everyone" in A Christmas Carol. Mike

"wouldn't you try and prop up the business when their paying you those salaries?" ... Well no I wouldn't to be honest ... If I were in the mangement or on the board of a company that was heading for the rocks I wouldn't let anyone talk me into using 50-75-100% of my gross salary to buy shares in it. (And as for getting 70-75% of a finance director's salary out of him, that's unheard of -- they are some of the tightest most sceptical folk around!). Being on the inside the reality is that these characters know how this thing is going to play out. But to a man these guys put in a lot, and the non-executive directors as well, and some of the long-term institutional investors too. On that basis some people know some thing that makes them feel very confident, I'm prepared to stay in because of that. As for the dividend, I wouldn't treat it as a given that it will be cut ... after all it's now a bonus for a lot of the management, who realistically can't sell their shares like you and I can. Mike

About a week before the results which confirmed your fears that it would be a buy-back rather than a special dividend the SP was indeed about 1580. At that time the FTSE-100 was trading around the range 6800-6900. Today the SP is down about 7.3% on that level whereas the FTSE is up about 7.3% on where it was when the buy-back was announced -- a relative loss of about 15% -- and that's before you add the real loss of the 50p special in! So not an impressive performance from this Board ... I won't be topping up here ... I won't be getting out as I'm here for the standard dividend, but it will be a long time before I get over how these directors secured their bonuses at my expense. Sadly experience teaches me that once they do this they tend to do it again. Mike

I must say that I find it rather galling to see the relentless stream of RNS's day by day detailing how the board are spending what should have been my 50p special dividend on propping up the EPS by 3% in order to secure their own bonuses. Perhaps it's just me, but I see no sign of the 'shareholder value' that they have returned to me so far ... I certainly haven't seen it in my bank account as I would have with a special. As for share price, the chart shows it fell on the news of the buy back and it still hasn't recovered. Next time they get a windfall and talk of distributing it to share holders I think I'll sell on the rumour ... folk who did that in Oct/Nov would have got 1580 rather than the 1500 today (and that at market all time highs). Mike

Some really excellent information here and discussion about how the market is meant to operate and how it actually does. I'll just throw a couple of observations in ... 1) UT trades at the start/end of the day are generally (but not always) aggregated trades between market makers, as such they really aren't buys or sells rather just a movement of shares from those in surplus to those who are short. It used to be the case that a gentleman's agreement existed for these movements and they were dealt at the mid-price. These days its done automagically by the computers to maximise the trade volume. ... 2) delayed reporting of trades is common for large deals, can be by an hour or two, or the end of the day, or even the next day or so for really big parcels of shares. ... 3) Market makers can quote what ever price they like, but SETS which actually places the deals will always choose the most competitive at the time. So unless they all operated together I don't see how the market can be manipulated for a share like VOD where there is a large volume of shares, there are a lot of market makers and the spread is typically 0.05p Now if you do want to see a share that is almost certainly controlled by the Market Makers you need to go over to AIM and look at TRAK (Trakm8) ... there the spread is about 10% and there's only 2-3 market makers who often push the price around to suit themselves and I believe that the prices are largely set manually. Mike

I'd forgotten about the AIM exemptions not applying to porperty/investment companies ... still it was just an idea in passing really as the cost and the hassle of listing on AIM is not insubstantial. Back in the 80's I got my father into 'SPLIT' investment companies. Essentially these were companies set up with a preset life span and two classes of shares. One class had all the income, the other had all the capital gains. It was an oddity but suited my father rather well as he needed the income, whereas most middle aged investors wanted the capital gain rather than income. I wondered if I couldn't do something similar with us oldies keeping all the income shares, and our kids having the capital growth shares. If the windup date is sufficently short term then the value of the income shares is small and attracts little IHT. In the meantime the capital shares could be vested many years before D-Day and so avoid the PET problems. Of course the devil is in the detail and I'd both need to research it carefully and seek good knowledge/advice. Mike

IHT ... it's a mess isn't it? Kind of like a train wreck that you can see coming but there's not much you can do to stop it happening. I guess the most important thing that I/we've done is to teach each of our three kids how to invest and how to handle their money. Now I know that doesn't solve the IHT problem but it's very satisfying to see your kids making money out of what they've set aside from their own labours -- they are well on their way to having their own IHT problems to deal with. Basically for ourselves the best solution is to give the stuff away a good time before we die. Trouble is whilst I've constructed an investment machine that basically protects capital and provides a good inflation linked income, at the end there will be a significant investment pool that will drop into the estate. I/we are thinking and looking at forming an investment company with two parents and three kids as the shareholders ... if we created some preference shares then that would deal with the income side of things, and it might reduce the investment pool to 40% of what it would have been. But would HMRC view it as a sham? The AIM exemption is interesting, but long term wise I'm reluctant to have a very large chunk of cash tied up in that market. It can be very profitable, but then it can be very much the other way. There is always the idea of putting the investment company itself onto AIM! Thanks for reminding me of the IHT question ... it's something that I'd forgotten about over the last few months and I really should have a long-term strategy for it. What's your plans? Mike