CHANGES TO IMA UK EQUITY INCOME SECTOR

Following a review of its UK Equity Income sector, the Investment Management Association is splitting the sector and consulting on a definition for a new IMA UK Equity Income and Growth sector. 

As a result of the review, IMA will:

1. remove from the UK Equity Income sector all funds within the sector that fail the yield test based on 12 months' look-back on 31 December 2008, but taking into account final distributions if these are out of step with a fund's calendar year end, and amend the definition accordingly;
2. create a new sector to be known as the UK Equity Income and Growth sector with effect from 1 January 2009;
3. offer funds that fail to meet the definition of the UK Equity Income sector (based on the yield criterion) a home in the new sector, permitting the retention of track records, if they meet the definition;

Funds in other sectors may apply to move to the new sector if the fund is able to demonstrate that it has complied with the definition on an on-going basis; track record retention will not be automatic.

Sector changes will have formal effect on 1 January 2009.  Information will not be available through the IMA website, or through the data vendors, until the end of February 2009, allowing for the time-lag during which funds are checked for compliance.

- ENDS -

Notes to Editors:

1.  Definition: IMA UK Equity Income sector

Funds which invest at least 80% in UK equities and which aim to achieve a historic yield on the distributable income in excess of 110% of the FTSE All Share yield at the fund's year end.

Note:

1. To ensure compliance with the sector criteria, funds should supply data for monitoring to enable the calculation of historic yield based on the IMA guidelines set out in Yield Calculation and Disclosure by UK Authorised Funds - Guidelines for Managers Sept 2007
2. IMA reserve the right to amend the yield parameters of the UK Equity Income and the UK Equity Income and Growth sector up or down to account for market factors.

2.  Definition: IMA UK Equity Income and Growth sector (new)

Funds which invest at least 80% of their assets in UK equities, aim to have a historic yield of between 90-110% of the yield of the FTSE All Share Index at the fund's year end and which aim to produce a combination of both income and growth.

Note:

1. To ensure compliance with the sector criteria, funds should supply data for monitoring to enable the calculation of historic yield based on the IMA guidelines set out in Yield Calculation and Disclosure by UK Authorised Funds - Guidelines for Managers Sept 2007
2. IMA reserve the right to amend the yield parameters of the UK Equity Income and the UK Equity Income and Growth sector up or down to account for market factors.

General Notes applying to both sectors:

1. The term "aim" is retained and will have discretionary application to be decided on a case by case basis by IMA/the PCRC.
2. As a broad indicator, it could be used for a fund that has to deal with very large cash flows into the fund over a short period, which may impact on the fund's ability in the short term to meet the yield parameter test.  It may also be used, if appropriate, to adjust the year-end test to the fund's year-end rather than to require the test to be run on a calendar year-end.
3. The term "aim" is not retained to suggest that the yield test is aspirational.
4. IMA retains the right to adjust the relative yield parameter tests for the UK Equity Income sector and the UK Equity Income and Growth sector should market conditions dictate that this is necessary to ensure the integrity of both sectors.

About Investment Management Association (IMA)
IMA is the trade body for the UK's £3.4 trillion asset management industry. The money its members manage is in a wide variety of investment vehicles including authorised investment funds, pension funds and stocks and shares ISAs.  Its role is to represent the industry and promote high standards.

For further information, please contact:
Noreen Shah, Press Officer, IMA, 0207 831 0898

Out of hours
Mona Patel, Head of Communications, 07834 089332