1977 - JIA 105 _1978_ 85-92

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					JIA 105 (1978) 85-92

      NOTES       ON       THE     FINANCIAL            TIMES–ACTUARIES            EQUITY
                                       INDICES         IN 1977

                            BY J. C. H. BRUMWELL,           M.A.,   F.I.A.

      1. Classification of Stock Exchange Securities by Industry
         The original classifications were set out in the 1970 note in this series (J.I.A. 97,
         At the end of the year three categories were discontinued:
           No. 11. Aircraft & Components
           No. 27. Engineering (Miscellaneous)
           No. 29. Shipbuilding.
      They were replaced by four new categories:
           No.   11.   Cold Formed     Fastenings and Turned Parts
           No.   27.   Miscellaneous    Mechanical Engineering
           No.   29.   Miscellaneous    Engineering Contractors
           No.   34.   Miscellaneous    Metal Forming.
         The above changes were part of a general revision of the Engineering cate-
      gories, which was adopted together with certain changes in the index groupings,
      summarized below.
         The title of category No. 67 was altered to “Pharmaceutical       Products”.
         In addition minor amendments       were ‘made to the definitions of, three other
         As a result of the quarterly meetings of the Joint Index Constituents         and
      Industrial Classification  Committee,    the classifications   of 68 companies were
      changed, mainly reflecting changes in their business: 48 of the changes were made
      at the end of the year to engineering companies, many of them because of the
      changes mentioned above. These changes were only made after notification to
      the companies concerned, and usually after discussion with them. A further 74
      companies were first approached       in 1977, in addition to the 18 with whom
      discussions had begun in earlier years.
         The Stock Exchange Quotations        Department     continued to classify the few
      companies first quoted during the year, and these classifications were scrutinized.

      2. Constituent Changes in the Equity Indices during 1977
         During 1977 forty-three constituents    were removed from the indices—the
      highest figure since 1969’s forty-four. 32 of these removals followed acquisition
      by another company—11        of them from overseas and 2 investment trusts taken
      over by nationalized industry pension funds: a novel fate. In 4 cases quotations
      were suspended, not merely for a few days followed shortly, in 2 to be by the
      appointment    of receivers. The remaining 7 were removed after failing for the

86      Notes on The Financial    Times–Actuaries    Equity Indices in 1977
third successive half-year to attain the necessary market capitalization to permit
their retention.
   These 43 constituents are set out in Table A. Three were 45 new constituents
during the year, which are set out in Table B: these replaced the constituents
removed, together with two added to the Overseas Traders group during 1977.
   Five of the companies reclassified during the year as described above were
index constituents—and       in four cases it was consequently necessary to change
their index classifications: these are set out at the beginning of Table C.
   In 1977, the number of capital changes (not just those involving changes of
constituent) recorded rose to 482—the highest since 503 in 1973.
   The eight constituents which changed their names are set out in Table D.

3. Changes in the Equity Indices at the end of 1977
   With effect from the end of 1977, the four Engineering subsections were either
renamed or discontinued as indicated below. Certain Stock Exchange classifica-
tion categories were allotted to different index subsections at the same time—
their numbers are shown under the appropriate     subsections below:

          1977 Sub-sections                              1978 Sub-sections
Engineering (Heavy)               (05)        Engineering Contractors           (05)
  (categories 20, 25, 29)                       (categories 20,25,29, 30)
Engineering (General)             (06)        Mechanical Engineering            (06)
  (categories 11, 21, 22, 23, 24,               (categories 11, 22, 23, 24, 26,
  26, 27)                                       27, 28, 31)
Machine & Other Tools             (07)          discontinued
  (category 28)
Miscellaneous Capital Goods       (08)        Metals & Metal Forming              (08)
  (categories 30, 31, 32, 33)                   (categories 21, 32, 33, 34)

   Also with effect from the end of 1977, a new Pharmaceutical       Products sub-sec-
tion (43) was hived out of the Chemicals (42) sub-section: both sub-sections
taking the end of 1977 value as their base. The new sub-section was formed by the
seven constituents in the Stock Exchange category 67, leaving those in categories
66 and 68 in the Chemicals sub-section.
   It was also intended to introduce at the end of the year an Other Groups index
(41) covering the Chemicals. Pharmaceutical      Products. Office Equipment, Ship-
ping and Miscellaneous Unclassified subsections, using as its base the value of
the Industrial (49) index at the end of 1974, but publication of this index began in
the Financial Times of 7 December 1977.
   Twenty index constituents were classified in the Stock Exchange categories 21,
28, 30, 31 or 67; this necessitated a change in their index classifications. A further
fourteen constituents were involved in the year-end Stock Exchange reclassifica-
tions previously mentioned. All thirty-four of these index reclassifications have
been added to Table C.
        Notes on The Financial    Times–Actuaries    Equity Indices in 1977       87
4. Miscellaneous
   In the issue for 1 March 1977 the Financial Times began to use the index
display provided by its own computer, which had previously been calculated by
Extel Communications      Limited. The main changes in presentation involved the
dropping of price/earnings    ratios calculated on a nil tax basis, and (in the daily
tabulations only) the highs and lows in 1977 and since compilation, although the
latter were retained in the Saturday issues. As a result of the change it became
possible to use prices taken later in the day, and the index is now calculated using
the prices actually printed in the newspaper’s Share Information      Service.
    In his Budget speech on 29 March the Chancellor of the Exchequer announced
a conditional reduction in the basic rate of income tax from 35% to 33%, but in
his further statement on 15 July he announced an actual reduction to 34%. The
corresponding    reduction in ACT was also made, and gross preference yields were
decreased by about 1½% with effect from the tabulation for 3 August: however
the effect on gross equity yields was minimal since the Financial Times assumed
that companies would pay supplemental          dividends as permitted in order to
maintain their gross dividends at 110% of those paid in the previous year under
the Treasury controls.
     The equity index values, yields and ratios at the end of 1977 are shown as
Table E.

5. Fixed Interest Index Changes
   Previous notes in this series have included a summary of changes made to the
fixed interest indices.
    On 16 May 1977 the long awaited British Government Securities Indices were
first published, with data based on 31 December 1975. Calculation of the old
Consols 2½% yield and the old 20-year Government      Stocks index terminated at
the same time. The replacement of 20-year Redeemable Debentures & Loans
index and the two Preference indices occurred early in 1978.
    The new indices are fully described in the paper by G. M. Dobbie and A. D.
Wilkie (see page 15), and the changes in the British Government        Securities
indices in 1976 in the note by A. D. Wilkie (see page 27). The changes in 1977 to
the new Fixed Interest indices are to be described in a later note.
    Meanwhile two minor changes were taking place in the old fixed interest

(a) International  Computers (Holdings) 6% Debenture Stock 1983–88 is now
    ICL 6% Debenture Stock 1983–88, and
(b) United States Debenture Corporation’s  5½% Cumulative Preference Stock
    has been redesignated 3·85% Cumulative Preference Stock.
88              Notes      on     The        Financial          Times–Actuaries                       Equity     Indices              in     1977

                                Table     A —Constituents            removed        after     being     taken   over,      etc.

      Date of                                                                                                                      Control acquired by,
     Removal                     Constituent Removed                            Index Classification                              or reason for, revoval

10 January              Kinloch (Provision                           Food Retailing                                 Booker         McConnell
15 February             Atlantic Shipping &                          Shipping                                       Quotation         suspended
 7 March                Williams      Hudson                         Miscellaneous                                  Argo Group             SA
                           Group                                        Unclassified
17 March                Dunford & Elliott                            Miscellaneous                                  Lonrho
                                                                        Capital Goods
25 March                Weyburn Engineering                          Engineering (General)                          Carborundum
29 March                Ozalid Group                                 office Equipment                                                      Océ-van der Grinten
                        F. J. Wallis                                 Food Retailing                                 International Stores
31 March                British Dredging                             Building Materials                             See Note
                        Francis Parker                               Building Materials                             See Note
                        Wilkins & Mitchell                           Household Goods                                See Note
25 April                Standard Trust                               Investment Trusts                              Prudential Assurance
26 April                Lamson Industries                            Office Equipment                               Moore Corporation
  8 June                British Rollmakers                           Engineering                                    Johnson & Firth
                           Corpn                                        (Heavy)                                      Brown
10 June                 Centre Hotels                                Entertainment &                                Coral Leisure Group
                           (Cranston)                                   Catering
29 June                 AVP Industries                               Miscellaneous                                      Lonrho
 8 July                 Skater, Walker                               Merchant Banks,                                Quotation         suspended
                          Securities                                    Issuing Houses
 8 August               Beaverbrook                                  Newspapers      &                              Trafalgar        House
                          Newspapers                                    Publishers
                        Bond      WorthHoldings                      Household Goods                                Receiver appointed
                        Concrete                                     Building Materials                             National Chemical
                        M. K. Refrigeration                          Miscellaneous                                  Charter Consolidated
                                                                       Capital Goods
25 August               Dolan    Packaging                           Packaging & Paper                              A. B. Statens
                        A. Gallenkamp                                Miscellaneous                                  Fisons
                                                                       Capital Goods
 9 September            Tollemache &                                 Breweries                                      Ellerman         Lines
                           Cobbold Breweries
12 September            Matthews Holdings                            Food Retailing                                  Thomas Borthwick & Son
20 September            Cable Trust                                  Investment Trusts                              Globe Investment     Trust
21 September            Clarke Chapman                               Engineering (Heavy)                            Northern Engineering
                        Clayton Dewandre                             Motors &                                       American Standard (UK)
                           Holdings                                     Distributors
                        Reyrolle Parsons                             Electricals (excl. Lt.                         Northern Engineering
                                                                        Electronics,   Radio                          Industries
                                                                        & TV)
23 September            Cavenham                                     Food Retailing                                 Générale Occidentale
30 September            Brittains                                    Miscellaneous                                  See Note
                        Maple (Holdings)                             Stores                                         See Note
                        R. C. F. Holdings                            Machine & Other                                See Note
                        S. Simpson                                   Textiles                                       See Note
 4 October              Storey Brothers                              Chemicals                                      Turner & Newall
12 October              Fairey                                       Engineering                                    Receiver appointed
17 October              Charrington                                  Miscellaneous                                  Coalite & Chemical
                          Industrial Holdings                           Unclassified                                   Products
17 November             Dorman Smith Holdings                        Electricals (excl.                             B.I.C.C.
                                                                        Lt. Electronics
                                                                        Radio & TV)
24 November             Lankro Chemicals                             Chemicals                                      Diamond           Shamrock      Corpn.
29 November             TPT                                          Packaging & Paper                              Sonoco Products
  1December             Kleeman Industrial                           Engineering                                    Selection Trust
                           Holdings                                     (General)
14 December             Crane Fruehauf                               Motors &                                       Fruehauf         Corpn
15 December             The British                                  Investment Trusts                              Black Diamonds              Pensions
                          Investment Trust
                        Edinburgh & Dundee                            Investment     Trusts                         Britrailpen
Note: The seven companies listed on 31 March             and 30 September were removed after failing for the third successive                   six monthly      check
                    to achieve a capitalization           of 0·006% of the total of all constituents of the All Share index.
             Notes   on The Financial      Times–Actuaries    Equity   Indices    in   1977        89

                     Table B—New Constituents replacing those removed in Table A
     Date of
Introduction                       New Constituent                        Index Classification

10 January                Wm Low                                   Food Retailing
15 February               Sketchley                                Miscellaneous Unclassified
 7 March                  Whitecroft                               Miscellaneous Unclassified
17 March                  Bellway Holdings                         Contracting & Construction
25 March                  William Leech (Builders)                 Contracting & Construction
29 March                  Dolan Packaging                          Packaging & Paper
                          Hillards                                 Food Retailing
31 March                  Benford Concrete Machinery               Engineering (General)
                          Esperanza Trade & Transport              Overseas Traders
                          Gibbons Dudley                           Miscellaneous Unclassified
                          Watts Blake Bearne                       Miscellaneous Unclassified
25 April                  Aberdeen Trust                           Investment Trusts
26 April                  Sangers Group                            Chemicals
 8 June                   F. J. C. Lilley                          Contracting & Constructing
10 June                   Leisure Caravan Parks                    Entertainment    & Catering
29 June                   L.W.T. (Holdings) ‘A’                    Entertainment    & Catering
 8 July                   Standard Chartered Bank                  Miscellaneous Financial
 8 August                 Allied Textile                           Textiles
                          Friedland Doggart Group                  Household Goods
                          Manders (Holdings)                       Building Materials
                          Tecalemit                                Motors & Components
2.5 August                Blagden & Noakes (Holdings)              Packaging & Paper
                          York Trailer Holdings                    Motors & Components
 9   September            Sotheby Parke Bernet Group               Miscellaneous Unclassified
12   September            J. W. Spear & Sons                       Toys & Games
20   September            Drayton Commercial Investment            Investment Trusts
21   September            Butterfield Harvey                       Engineering (General)
                          Dale Electric International              Electricals (excl. Lt. Electronics
                                                                       Radio & TV)
                          Northern Engineering Industries          Engineering (General)
23 September              Bishop’s Stores                          Food Retailing
30 September              Brent Chemicals International            Chemicals
                          Cornet Radiovision Services               Stores
                          Diploma Investments                       Miscellaneous Unclassified
                          Newarthill                                Contracting & Construction
                          Steel Brothers Holdings                   Overseas Traders
 4 October                British Vita                              Chemicals
12 October                Time Products                             Stores
17 October                Hunting Associated Industries             Miscellaneous Unclassified
17 November               Imperial Metal Industries                 Miscellaneous Capital Goods
24 November               Pentos                                    Miscellaneous Unclassified
29 November               Pork Farms                                Food Manufacturing
 1 December               HTV Group                                 Entertainment   & Catering
14 December               RFD Group                                 Textiles
15 December               English & New York Trust                  Investment Trusts
                          Outwich Investment Trust                  Investment Trusts
90          Notes   on The   Financial      Times–Actuaries          Equity   Indices   in 1977
                                         Table C—Reclassifications

     Date             Constituent                Former Classification              New Classification

 1 March        Simon Engineering               Engineering (Heavy)            Engineering (General)
                John Waddington                 Toys & Games                   Packaging & Paper
26 May          Fine Art Developments           Printing & Publishing          Stores
                Turner & Newall                 Building Materials             Miscellaneous Unclassified
Year-end        Averys                          Miscellaneous Capital          Mechanical Engineering
                Barton & Sons                   Engineering (General)          Metals & Metal Forming
                Beecham Group                   Chemicals                      Pharmaceutical Products
                Bowater Corporation             Miscellaneous                  Packaging & Paper
                John Brown                      Machine & Other                Mechanical    Engineering
                Brown Boveri Kent               Miscellaneous                  Mechanical    Engineering
                                                   Capital Goods
                Crown House                     Engineering (General)          Engineering Contractors
                Desoutter Brothers              Machine & Other                Mechanical Engineering
                  (Holdings)                       Tools
                B. Elliott                      Machine & Other                Mechanical      Engineering
                Glaxo Holdings                  Chemicals                      Pharmaceutical Products
                Glynwed                         Building Materials             Metals & Metal Forming
                Guest. Keen &                   Engineering (General)          Metals & Metal Forming
                Haden Carrier                   Miscellaneous Capital          Engineering     Contractors
                A. A. Jones &                   Machine & Other                Mechanical      Engineering
                   Shipman                        Tools
                L.R.C. International            Chemicals                      Pharmaceutical Products
                F.H. Lloyd Holdings             Engineering (General)          Metals & Metal Forming
                Macarthys                       Chemicals                      Pharmaceutical Products
                Myson Group                     Miscellaneous Capital          Engineering     Contractors
                James Neill Holdings            Machine & Other                Mechanical      Engineering
                Reckitt & Colman                Chemicals                      Pharmaceutical Products
                Reed international              Miscellaneous                  Packaging & Paper
                Sangers Group                   Chemicals                      Pharmaceutical  Products
                Sheepbridge                     Engineering (General)          Motors & Distributors
                Simon Engineering               Engineering   (General)        Engineering Contractors
                Smith & Nephew                  Chemicals                      Pharmaceutical Products
                Spear & Jackson                 Machine & Other                Mechanical      Engineering
                  International                   Tools
                UKO International               Miscellaneous Capital          Miscellaneous      Unclassified
           Notes     on The       Financial   Times–Actuaries           Equity     Indices   in 1977             91

                                     Table C—Reclassifications      (continued)

  Date                   Constituent                Former Classification                New Classification

Year-end       United Scientific                  Miscellaneous Capital             Mechanical    Engineering
                 Holdings                           Goods
               Wadkin                             Machine & Other Tools             Mechanical Engineering
               Thomas W. Ward                     Engineering (General)             Metals & Metal Forming
               Wellman Engineering                Engineering (Heavy)               Mechanical Engineering
               Wolf Electric Tools                Machine & Other                   Mechanical Engineering
                 (Holdings)                         Tools
               Wolseley-Hughes                    Miscellaneous Capital             Engineering    Contractors
                   Wolstenholme      Bronze       Miscellaneous Capital             Chemicals
                    Powders                         Goods

                                  Table D—Changes     of name, reconstructions

                           Former name                                      New name

             Anglia Television                                   Anglia Television Group
             Berry Wiggins                                       K.C.A. International
             H. P. Bulmer                                        H. P. Bulmer Holdings
             Leonard Fairclough                                  Fairclough Construction Group
             International Computers                             ICL
             William Mallinson & Denny Mott                      Mallinson-Denny
             Trafalgar House Investments                         Trafalgar House
             Vosper Thornycroft                                  Vosper
92   Notes on The Financial Times–Actuaries   Equity Indices in 1977

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