Share Ownership A Report on Ownership of Shares as at 31 December 2000

Transcription

1 2001 edition United Kingdom Share Ownership A Report on Ownership of Shares as at 31 December 2000 Editors: Ian Hill Shane Duffield London: The Stationery Office

2 Crown copyright 2001 Published with the permission of the Controller of Her Majesty s Stationery Office (HMSO). ISB ISS A ational Statistics Publication ational Statistics are produced to high professional standards set out in the ational Statistics Code of Practice. They undergo regular quality assurance reviews to ensure that they meet customer needs. They are produced free from any political interference. Applications for reproduction should be submitted to HMSO under HMSO s Class Licence: Alternatively applications can be made in writing to: HMSO Licensing Division St. Clement s House 2-16 Colegate orwich R3 1BQ Contact points or enquiries about this publication, contact the Editor, Ian R Hill Tel: share.ownership@ons.gov.uk To order this publication, call The Stationery Office on See also back cover. or general enquiries, contact the ational Statistics Public Enquiry Service on (minicom: ) info@statistics.gov.uk fax: Letters: Room DG/18, 1 Drummond Gate, London SW1V 2QQ You can also find ational Statistics on the Internet at About the Office for ational Statistics The Office for ational Statistics (OS) is the government agency responsible for compiling, analysing and disseminating many of the United Kingdom s economic, social and demographic statistics, including the retail prices index, trade figures and labour market data, as well as the periodic census of the population and health statistics. The Director of OS is also the ational Statistician and the Registrar General for England and Wales, and the agency that administers the registration of births, marriages and deaths there.

3 COTETS SECTIO Page 1. Overview of project, purpose of survey Summary of main findings Analysis by beneficial ownership Analysis by industry of issuing company and investing sector Analysis of TSE 100 companies Geographical analysis of beneficial ownership Analysis of shares of Investment Trusts compared with companies other than Investment Trusts Analysis of shares of technology companies compared with all companies AEX A Sampling methodology B The method of classification of the holdings C Definitions of the Classifications used D Companies selected for the survey E techmark companies selected for the survey Investment Trusts included in the survey G Tables TABLES 1. Total market value by sector of beneficial owner: end Total market value by sector of beneficial owner: end-2000 featuring... pooled and excluded shareholdings reallocated across the other sectors Analysis by sector of beneficial owner and industry of issuing company: end Analysis by sector of beneficial owner and industry of issuing company: end-2000 featuring pooled and excluded shareholdings reallocated across the other sectors Analysis by sector of beneficial owner and industry of issuing company (per cent of... investing sector): end-2000 featuring pooled and excluded shareholdings reallocated across... the other sectors Total market value of holdings in TSE 100 and non TSE 100 companies by sector of beneficial owner: end Total market value of holdings in TSE 100 and non TSE 100 companies by sector of beneficial owner: end Total market value of holdings in TSE 100 and non TSE 100 companies by sector of beneficial owner: end-2000 featuring pooled and excluded shareholdings reallocated across the other sectors Shareholding in Investment Trusts and on-investment Trusts: end Shareholding in Investment Trusts and on-investment Trusts: end-2000 featuring pooled and excluded shareholdings reallocated across the other sectors Percentage of Technology Shares held in the techmark All-Share index by sector of beneficial owner: end Percentage of Technology shares held in the techmark All-Share index by sector of beneficial owner: end-2000 featuring pooled and excluded shareholdings reallocated across the other sectors Percentage of Technology Shares held in the techmark100 index by sector of beneficial owner: end Percentage of Technology shares held in the techmark100 index by sector of beneficial owner: end-2000 featuring pooled and excluded shareholdings reallocated across the other sectors

4 ACKOWLEDGEMETS The Office for ational Statistics would like to thank CrestCo without whose assistance this survey would not have been possible. Enquiries about the survey, or any comments on the findings, would be very welcome, and should be addressed to: Ian Hill, ational Expenditure and Income Division, at the Office for ational Statistics. ational Statistics Zone D3/03 1 Drummond Gate London SW1V 2QQ Tel: ax: share.ownership@ons.gov.uk 4

5 1. OVERVIEW O PROJECT, PURPOSE O SURVEY Purpose and history of the survey 1.1 This report gives the results of a survey of the ownership of ordinary shares in listed companies in the United Kingdom, carried out by the Office for ational Statistics (OS) using data downloaded from the CREST system. The survey s aim was to discover how the value of UK listed ordinary shares, some 1,811 billion at the time of the survey, was distributed between categories of beneficial owner on 31 December Surveys of the pattern of shareholding in UK companies have been carried out at intervals since the late 1950s (in 1957, 1963, 1969, 1975, with a small survey in 1981). In 1989 the Pickford report on UK economic statistics 1 recommended that surveys should be carried out more frequently in order to improve the ational Accounts. Accordingly, surveys were carried out annually between 31 December 1989 and 31 December 1994 (some were full scale, benchmark, surveys, and some were small scale surveys). After the 1994 survey, it was decided that the costs of carrying out the survey annually were prohibitive, so the survey would in future only be carried out every third year with the next survey covering end rom end-1998 annual publication has been resumed using data downloaded from the CREST system. The results of the surveys are used to supplement or replace other sources of information on company securities in preparing the financial balance sheets and financial transaction accounts in the OS s annual Blue Book 2. End-2000 survey 1.3 The end-2000 survey, the subject of this report, was carried out during It was a full scale survey looking at registers from 197 companies (see Annex D for a full list of companies). Companies were sampled proportional to size at 30 September To do this, companies were ranked according to their market capitalisation. A sampling interval was set, all companies with a market capitalisation greater than the sampling interval were selected, the probability of other companies being selected was directly proportional to their market capitalisation. See Annex A for further details. 1.4 In total, 201 registers were sampled (Schroders, Henderson Eurotrust, M & G Income Investment Trust and Daily Mail and General Trust each had two 5 registers). The companies in the sample represented over 80 per cent of the capitalisation of UK companies ordinary shares listed on the International Stock Exchange in London (which stood at 1,811 billion at 31 December 2000). All shares in these companies held via the CREST system were analysed; further details are given in Annexes B & C. 1.5 urther information to help with the end 2000 survey was obtained from The Waterlow Stock Exchange Yearbook 2000, which details substantial shareholders for many of the listed companies. Considerable efforts were made to accurately identify the underlying shareholders and/or the category of beneficial shareholders to which each CREST account belongs. 1.6 The sample shareholdings were classified into categories, broadly following those of previous surveys and consistent with the definitions used in the ational Accounts. The ational Accounts are based on the European System of Accounts The definitions used in this survey were taken from this classification and this has led to a change in definition for shareholdings held in the UK Offshore Islands (the Channel Islands and the Isle of Man) from the end survey onwards. or the end-1994 survey and previously, these shareholdings were classified to the domestic sector of the UK economy; they are now treated as Rest of the World shareholdings. Details of all the categories used are set out in Annex C. The results presented in the main section of the report have generally been analysed in terms of ational Accounts sectors. This involves the aggregation of some of the categories and the re-allocation of unidentified holdings across known sectors. The detailed tables in Annex show the full detail collected. 1.7 The results of the analysis were grossed in 2 stages. irstly, the sampled companies were grossed up to the entire stock exchange. Secondly, the unidentified holdings and the holdings held in certificated form (i.e. are held off of the CREST system) were apportioned across other sectors. urther details are given in Annex A. 1.8 The registers analysed were run as at 31 December 2000, but due to the settlement period on the CREST system, transactions immediately prior to 31 December may not have been recorded on the registers.

6 1.9 or the 2000 survey, we have sampled a number of companies from both the techmark All-Share and the techmark100 indices. An analysis of this is given in section 8. The methodology is given in Annex A, and a list of companies included are given in Annex E or the 2000 survey, a geographical analysis has been done for the main sample. Comparisons are made between the end-2000 survey and the end-1999 unpublished article. This analysis is given in section As mentioned in the 1999 publication, the analysis of shares held in demutualised companies has been discontinued for 2000 onwards. This step has been taken due to concerns over disclosivity. References 1. Government Economic Statistics. A scrutiny report by Stephen Pickford and others. HMSO United Kingdom ational Accounts (The OS Blue Book). HMSO annual publication. 3. Share Register Survey Report end Economic Trends o. 447 (January 1991). HMSO. 4. The 1991 Share Register Survey (covers 31 December 1990). Economic Trends o. 456 (October 1991). HMSO. 5. The 1992 Share Register Survey (covers 1st January 1992). Economic Trends o. 466 (August 1992). HMSO. 6. Share Register Survey Report end HMSO Also Economic Trends (October 1993). HMSO. 7. Share Ownership, The Share Register Survey Report end HMSO. 8. Share Ownership, A Report on the Ownership of Shares at 31st of December HMSO. 9. Share Ownership, A Report on the Ownership of Shares at 31st of December The Stationery Office. 10. Share Ownership, A Report on the Ownership of Shares at 31st of December The Stationery Office. 11. Share Ownership, A Report on the Ownership of Shares at 31st of December The Stationery Office. 12. European System of Accounts, ESA Office for Official Publications of the European Communities. 13. The Waterlow Stock Exchange Yearbook Published by Waterlow. 6

7 2. SUMMARY O MAI IDIGS 2.1 The headline findings of the end-2000 Share Register Survey are set out in the following paragraphs, but for full details the appropriate appendices and tables in sections 3 8 should be consulted. The figures quoted below include the unidentified holdings and the holdings held in certificated form (i.e. are held off of the CREST system). These were apportioned across other sectors (see Annex A). 2.2 Institutional shareholders accounted for 47.1 per cent of UK ordinary shares at 31 December 2000, with a combined value of 855 billion. Of this, the largest components were insurance companies 381 billion and pension funds with 321 billion (see paragraph 3.6 below). 2.3 At end-2000, individuals holdings amounted to 290 billion, or 16.0 per cent. This excludes individuals ownership of unit trust units which in turn represented substantial amounts of shares (see paragraph 3.7 below). 2.4 Rest of the World holders owned 32.4 per cent of the ordinary shares, representing investments of 587 billion (see paragraph 3.5 below). 2.5 Of these Rest of the World Holdings, some 33 per cent of the ordinary shares have their beneficial owner in America. The European Union held 37 per cent of the Rest of the World holdings (see paragraph 6.4 below). 2.6 or the larger investing sectors, the proportion of funds invested in TSE 100 companies varied between 55 and 88 per cent, with between 12 and 42 per cent being invested in smaller companies (see paragraph 5.3 below.) 2.7 Holdings by all sectors in both techmark All- Share companies and techmark 100 companies were similar to those of the main survey. Individuals held 16.4 per cent of the shares in the techmark All-Share companies and 16.2 per cent of shares in the techmark 100 companies. Individuals held 16.0 per cent of the shares in all companies (see paragraph 8.2 below). Investments and Unit Trusts are more heavily invested in the smaller techmark 100 (5.8 per cent) than in the techmark All-Share or overall stock market (both 3.9 per cent). 7

8 3. AALYSIS BY BEEICIAL OWERSHIP Introduction 3.1 Shareholdings held via the CREST system are held in a CREST account. Each CREST account is set up and sponsored by a CREST participant. When a CREST account is created the sponsoring participant has to classify the beneficial owner of the account to a ational Accounts Sector. The beneficial owner is the person or organisation who really owns the shares (that is, who benefits from dividends or increases in the share price). Details of the classifications used are given in Annex C. Annex B gives further details of how the CREST system was used. Overall, approximately 80 per cent of shares are held via the CREST system per cent of shareholdings in the sampled companies were classified to their ational Accounts sectors in the survey. 3.2 Table 1 shows the distribution of shareholdings by category of beneficial owner, and Table 2 (Annex G) shows the distribution of shareholdings by category of beneficial owner, after the unallocated shares had been redistributed across the other sectors. Details on the categories of beneficial ownership are set out in Annex C, and the sampling methodology and grossing strategy is explained in Annex A. ational Accounts sectors 3.3 In this and later sections, results are shown by ational Accounts sector. Some of the unidentified accounts ( pooled and those not held via CREST) have been identified from other sources. At the end of the survey 23.2 per cent ( 421 billion) remained unidentified. 3.4 In order to produce estimates for use in the ational Accounts, the value of the unallocated holdings has to be allocated to known beneficial sectors. or these, assumptions have been made about the likely split between sectors. The methodology and proportions used are described in Annex A. Beneficial ownership of shares at end Tables A, B and igure 1 show the major beneficial owners of UK quoted shares. At the end of 2000, the ational Accounts sector with the largest Table A Beneficial ownership, Percent of total equity owned, 31 December Rest of the World Insurance Companies Pension unds Individuals Unit Trusts Investment Trusts Other inancial Institutions { } Charities etc Private on-financial corporations Public Sector Banks Total The apparent trends in these series are affected, particularly for the earlier data, by sampling errors and varying degrees of success in the identification of nominee holdings. 2. Unidentified holders have been allocated proportionately across all beneficial sectors. 3. or 1989 to 1994 holdings in SEPO were allocated one-quarter to other financial institutions with the remaining value allocated proportionately across all benficial sectors. Prior to 1989, SEPO was included in other financial institutions. 4. Data for Pension unds and Insurance Companies were partially estimated in 1992 and or 1998 onwards some Unit Trusts holdings have been classified to Other inancial Institutions leading to discontinuities in these sectors. 6. Some holdings previously categorised to Bank holding companies (under Other inancial Institutions) may, for 1998 onwards have been re-classified to Banks. 8

9 beneficial shareholding was the Rest of the World sector. Rest of the World holders held 32.4 per cent of all shares, representing billion of investments. 3.6 The largest institutional beneficial owners of UK shares were insurance companies with 21.0 per cent, representing billion of investments, and pension funds, with 17.7 per cent ( billion). The collective investment vehicles of Unit and Investment trusts held 3.8 per cent of shares, a value of 69.9 billion. The figure for Unit and Investment trusts combined is, for the 1998, 1999 and 2000 surveys significantly smaller than that of the 1997 survey. However much of this difference is due to reclassification of holdings between these two sectors and Other inancial Companies. Together, all these institutional shareholders accounted for 47.1 per cent of the market, valuing their combined investments at billion. 3.7 The other major holders of shares were individuals, with holdings of billion (16.0 per cent). An analysis of the individuals ownership of investment trusts, and of non-investment trusts is given in section 7. In addition, many individuals also make investments in ordinary shares through unit trusts. However, holdings via unit trusts (which are not listed companies) are not attributed to individuals or other holders of units in these analyses. Table B Beneficial ownership, The other groups of beneficial owners were other parts of the personal sector (mainly trusts, charities and universities: 24.8 billion); and private non-financial companies ( 26.9 billion). Shareholdings by the Public Sector were very small ( 0.6 billion) 3.9 A geographical analysis of shareholdings is given in section 6. This analysis includes a comparison between end-1999 and end or end-2000 an analysis of the TSE techmark index has been done. There is a comparison between shares held in techmark All-Share companies and techmark 100 companies. This analysis is given in section 8. Trends in shareholdings 3.11 igure 1 and Tables A and B set out a comparison of the holdings by beneficial owners in several surveys between 1963 and The changes in the main sectors are illustrated in igures 2 to During the 1980s, the proportion of shares owned by Rest of the World investors increased substantially (igure 2), from 4 per cent in 1981 to around 13 per cent during the period but rose again, to over 16 per cent in 1993 and 1994, 24 per cent in 1997, 27.6 per cent in 1998, 29.3 per cent billions, 31 December Rest of the World Insurance Companies Pension unds Individuals Unit Trusts Investment Trusts Other inancial Institutions Charities etc Private on-financial Companies Public Sector Banks Total , , , , The apparent trends in these series are affected, particularly for the earlier data, by sampling errors and varying degrees of success in the identification of nominee holdings. 2. Unidentified holders have been allocated proportionately across all beneficial sectors. 3. or 1989 to 1994 holdings in SEPO were allocated one-quarter to other financial institutions with the remaining value allocated proportionately across all benficial sectors. Prior to 1989, SEPO was included in other financial institutions. 4. Data for Pension unds and Insurance Companies were partially estimated in 1992 and or 1998 onwards some Unit Trusts holdings have been classified to Other inancial Institutions leading to discontinuities in these sectors. 6. Some holdings previously categorised to Bank holding companies (under Other inancial Institutions) may, for 1998 onwards have been re-classified to Banks. 9

10 in 1999 and 32.4 per cent in This figure represents almost a third of the shares held on the CREST system. This increase since 1994 partly reflects recent international mergers where the new company is listed in the UK, flotations of UK subsidiaries of foreign companies on which the parent has retained a significant stake, companies moving their domicile to the UK, improvements to the classification of holdings and the 1997 reclassification of 6.1 billion of shareholdings in the UK Offshore Islands to Rest of the World The proportion of shares held by individuals (igure 3) has been on a downward trend since 1963 when individuals owned 54.0 per cent of quoted shares. Although the trend was flat at around 20 per cent between 1989 and 1994, it continued downwards to 15.3 per cent in or 2000 this figure has increased slightly to 16.0 per cent. Included in individuals ownership are all the shares in recently demutualised companies which are still owned by individuals. The figures for individuals shareholdings do not give a complete picture of their equity investments, since unit trusts will be overwhelmingly funded by individuals, although they do include shareholdings held directly in Personal Equity Plans (PEPs) igure 4 shows trends in pension funds shareholdings. After accelerating rapidly during the 1960s, 1970s and 1980s, the growth in these funds slowed, probably reflecting their increasing maturity and a natural ceiling as more and more of the population has entered into a pension fund arrangement of some type. Since 1992, the proportion of shares held by pension funds has fallen. The OS pension fund inquiry suggests that this is due to a diversification into bonds The proportion of shares held by insurance companies (igure 5) grew steadily from 10.0 per cent in 1963 to 20.5 per cent in Between then and 1993, it fluctuated around 20 per cent, but increased to 23.5 per cent in 1997, fell back to 21.6 per cent in 1998 and 1999 and the 2000 figure is similar at 21.0 per cent. Taken together, the proportion of shares held by insurance companies and pension funds has been on a downward trend since This trend continued into With the change in the Share Register Surveys to using data from the CREST system, there have been discontinuities starting with the 1998 survey. Where this has had most effect is with some Unit Trusts and Investment Trusts previously classified to these sectors, now classified to Other inancial Institutions. This makes trends in these sectors hard to identify. However, there does appear to have been a small reduction in the overall proportion of shares owned by these sectors. igure 1: Beneficial ownership of UK shares: end-2000 per cent by value Rest of the World Insurance Companies Pension unds Individuals Unit Trusts Investment Trusts Other inanical Institutions Charities etc Private on-inanical Corporations Public Sector Banks

11 35 igure 2: Rest of the World shareholdings per cent In the 1997 Survey the UK Offshore Islands were considered to be overseas shareholdings. In all previous surveys they had been classified to the relevant domestic sector. 60 igure 3: Individuals' shareholdings per cent

12 35 igure 4: Pension und shareholdings per cent igure 5: Insurance companies shareholdings per cent

13 4. AALYSIS BY IDUSTRY O ISSUIG COMPAY AD IVESTIG SECTOR 4.1 Each shareholding sample in the survey was coded for the broad industry group to which the issuing company belonged. Three industry groups are identified, defined by Standard Industrial Classification codes: financial, manufacturing and nonmanufacturing. This enables a separate analysis of shareholdings in each industry to be obtained, and these are shown in Tables 3 to 5 (Annex G). The results of the survey have also been analysed to show the type of industrial group in which each category of beneficial holder invests (Table 5). Some of the principal points of note are discussed below. 4.2 igure 6 illustrates the holdings of the major beneficiary sectors analysed by the industries in which they are invested. Each beneficial sector has the greatest proportion of its shares in non-manufacturing companies. However, the relative weightings by sector vary. All the comments that follow refer to relative weightings in different industries, not to absolute levels of investment. 4.3 Individuals and pension funds are the most heavily weighted investors in financial companies (30.5 per cent and 26.2 per cent respectively) while private non-financial corporations are least involved (4.9 per cent) in this sector. 4.4 Private non-financial corporations hold a significantly smaller proportion of manufacturing stocks than other sectors (5.8 per cent). Of the other sectors, individuals are less heavily weighted in manufacturing stocks (18.2 per cent) than other investors. By contrast, 35.8 per cent of investment by charities & non-profit making institutions is in manufacturing companies. 4.5 The level of investment in non-manufacturing shares is fairly consistent across all the major beneficial owners, ranging between 44 per cent and 57 per cent. The only major exception is for private non-financial companies where the proportion of non-manufacturing shares held is 89.4 per cent (lower than the 1999 figure of 94.5 per cent). Table C Beneficial ownership of companies by industry: end-2000 Per cent invested in igure 6: Holdings of major beneficiaries (major industry sectors): end-2000 on- Manufac- Manufac- inancial turing turing Companies Companies Companies Total Rest of the World Insurance Companies Pension unds Individuals Unit Trusts Investment Trusts Charities etc Private onfinancial Companies Total per cent Rest of the World Insurance Companies Pension unds Individuals Unit Trusts Investment Trusts inancial on-manufacturing Manufacturing 13

14 5. AALYSIS O TSE 100 COMPAIES 5.1 The sample for the end-2000 survey included most of the companies in the TSE 100 at 31 December An analysis of holdings in these companies has been done, and grossed to cover all TSE 100 companies. In total, TSE 100 companies made up over three-quarters of the total value of the stock market at the end of 2000 (78.5 per cent). The TSE 100 companies included in the sample were separately identified in the data and are indicated in Annex D. A detailed analysis of beneficial holder by size of holding for them is given in Table D. A detailed analysis of beneficial holder together with corresponding data for other companies on the stock market is given in Tables 6 to Table D and igure 7 compare the distribution of ownership of shares in the TSE 100 companies with other companies. The most notable features are the larger percentage of holdings in the TSE 100 by Rest of the World and the smaller percentage holdings by Individuals, Unit Trusts, Investment Trusts, Other inancial Institutions and Private on-inancial Corporations. 5.3 Table D and igure 7 also shows how the value of funds invested by each beneficial holder is split between the TSE 100 and smaller companies. or the larger investing sectors, the proportion of funds invested in TSE 100 companies varied between 55 and 88 per cent, with between 12 and 45 per cent being invested in smaller companies. Table D Beneficial ownership of TSE 100 companies and other companies, end-2000 Per cent of total equity owned Per cent invested in TSE 100 Other All TSE 100 Other All Rest of the World Insurance Companies Pension unds Individuals Unit Trusts Investment Trusts Other inancial Institutions Charities etc Private on-financial Companies Public Sector Banks Total Rest of the World igure 7: Proportion of funds invested in TSE 100 companies compared with other companies: end-2000 per cent Insurance Companies Pension unds Individuals Unit Trusts Investment Trusts TSE 100 companies 14 Other Companies

15 6. GEOGRAPHICAL AALYSIS O BEEICIAL OWERSHIP 6.1 The geographical analysis has been largely based on information on the geographical location of shareholders identified in the end-1997 survey. This has been supplemented with more recent information from various other sources including CREST. 6.2 On the 31 December 2000, the value of all UK listed ordinary shares was 1,811 billion. Of this, 32.4 per cent, or 587 billion was held by the Rest of the World. 6.3 At the end of 2000 the United States of America held 33 per cent of the Overseas shares. This figure was significantly lower than the end-1999 survey figure of 42 per cent. 6.4 European holdings at end-2000 were 39 per cent; this compares with the end-1999 figure of 30 per cent. This increase was solely attributable to companies which comprise the European Union. 6.5 Another major change between the end-1999 and end-2000 survey s was in Asia. These shareholdings have increased from 18 per cent to 21 per cent over twelve months. This increase has largely been due to an increase in Hong-Kong based shareholdings. Table E Geographical analysis by beneficial owner: end-2000 percentage 1999 percentage 2000 Europe of which European Union European ree Trade Association 2 2 Offshore UK 1 1 America Asia Africa 8 7 Australasia and Oceania 1 0 All sectors The breakdown of countries is taken from the OS Balance of Payments: The Pink Book The breakdown is limited to 42 countries as well as international organisations and because of the limited information have been aggregated for this publication. The figures for the European Union relate to membership, as at 31 December At the end of the survey there was a proportion of unallocated holdings. or continuity, these were apportioned across all sectors except for the USA. It was felt that USA holdings would all have been picked up through the classification process because of American Depository Receipts which would have been allocated. 3. Australasia and Oceania holding totalled 0.3 per cent but have been rounded down to The Offshore UK category represents the Channel Islands and the Isle of Man. 15

16 7. AALYSIS O SHARES O IVESTMET TRUSTS COMPARED WITH COMPAIES OTHER THA IVESTMET TRUSTS 7.1 or the ational Accounts, shares of investment trusts are classified as mutual fund shares. Accordingly analysis has been done, separating out investment trusts for ational Account purposes. The results are given in Tables 9 and Table and igure 8 show that overall, individuals held 37.2 per cent of Investment Trusts shares compared with 15.1 per cent of other companies. The figure for individuals holding shares within Investment Trusts is significantly lower than the 1998 figure of 48.9 per cent but similar to the 1999 figure of 38.3 per cent. Insurance companies held 17.9 per cent of Investment Trust shares compared with 21.2 per cent of other companies and Pension funds held 15.8 per cent of Investment Trust shares compared with 17.8 per cent of other companies. In contrast Rest of the World shareholders only held 12.4 per cent of Investment Trust shares compared with 33.3 per cent of other companies. Table Beneficial ownership of Investment Trusts and other companies: end-2000 Value of shares owned, Percentage of shares billion owned Investment Other Investment Other Trusts Companies Trusts Companies Rest of the World Insurance Companies Pension unds Individuals Unit Trusts Investment Trusts Other inancial Institutions Charities etc Private on-financial Companies Public Sector Banks Total , igure 8: Breakdown of beneficial ownership of Investment Trusts compared with other companies: end-2000 Percentage of sector held by: Rest of the World Insurance Companies Pension unds Individuals Unit Trusts Investment Trusts Other Investment Trusts Other Companies

17 8. AALYSIS O SHARES O TECHOLOGY COMPAIES COMPARED WITH ALL COMPAIES 8.1 In September 1999 the TSE launched the new techmark indices, they have been set up to provide investors with a view of all the technology shares listed on the London Stock Exchange. The techmark All- Share Index comprises all these companies whereas the techmark 100 comprises the medium and smaller technology companies with a market capitalisation of under 4 billion. The sample was taken during 2000 as described in Annex A, but was based on both, the companies which comprise the techmark All-Share index and those which comprise the techmark100. A full list of companies used in the sample can be found in Annex E. 8.2 Tables G, H and igure 9 below show the comparative values for the techmark shareholdings and the main sample. Individuals hold 16.4 per cent of the techmark All-Share companies compared with 16.0 per cent of all companies. Insurance companies were slightly under weight in the techmark All-Share, holding 20.5 per cent (21.0 per cent of all companies). 8.3 Investment Trusts and Unit Trusts and Other financial institutions both hold a far greater percentage of shares in the smaller companies that comprise the techmark 100 (5.8 per cent and 8.1 per cent respectively) than they did in either the techmark All-Share or in all companies. Investment Trusts and Unit Trusts together hold shares in the same proportion in the techmark All-Share as for all companies. 8.4 Rest of the World shareholdings in the techmark All-Share were 32.3 per cent, similar to the 32.4 per cent in all companies. This is a similar effect to that of the end-1999 survey. However, Rest of the World shareholdings were under weight in the smaller techmark 100 companies at 27.5 per cent. Table G Beneficial ownership of shares in the techmark All-Share, techmark 100 companies: end-2000 techmark techmark All All-Share 100 Companies Individuals Insurance Companies Pension unds Investment Trusts & Unit Trusts Other inancial Institutions Rest of the World Other sectors All sectors Table H Beneficial ownership of shares in the techmark All-Share techmark techmark All-Share All-Share end-1999 end-2000 Individuals Insurance Companies Pension unds Investment Trusts & Unit Trusts Other inancial Institutions Rest of the World Other sectors All sectors

18 Individuals igure 9: Breakdown of beneficial owership of techmark All-Share compared with other companies: end-2000 Percentage of sector held by: Insurance Companies Pension unds Investment Trusts and Unit Trusts Other inancial Institutions techmark All-Share end-2000 techmark All-Share end-1999 Rest of the World Other sectors

19 AEX A: SAMPLIG METHODOLOGY A.1 The sample of share holdings was selected in two stages. The first stage was a random selection of a sample of companies. The second sampling of share holdings from within each share register was not random, but covered all those shareholdings held via the CREST system. The objective for the sampling of the companies was that the probability of selection for any company should be proportional to its market capitalisation (for the techmark sample the probability of a company being selected was proportional to its weight in either the techmark All- Share or techmark100 Indices). The need to select the sample in advance of the survey date of 31 December 2000 meant that the sampling frame used related to 30 September A.2 Sampling of companies The end-2000 survey was similar to both the end-1999 and end-1998 survey which was a benchmark survey, so the sample was drawn afresh from all companies listed on the London Stock Exchange. A systematic sample of these companies was drawn with probability of selection proportional to size (market capitalisations). The aim was to select 200 companies. In the event 197 companies were surveyed which comprised: a. the 78 largest companies by market capitalisation as at 30 December 2000; b. 119 small companies, selected proportional to size (so the larger the company the more likely it was to be selected). or the techmark All-Share index, the aim was to select 30 companies. In the event, 29 companies were surveyed which comprised: a. the largest 14 companies by techweight (see A.1 above) as at 29 December 2000; b. 15 small companies, selected proportional to size (so the larger the company the more likely it was to be selected). or the techmark 100, the aim was to select 30 companies. In the event 29 companies were surveyed which comprised: A.3 Sampling of Shareholdings This survey is similar to the 1999 survey and has been conducted using data downloaded via the CREST system. Every shareholding in the sampled companies which was held via the CREST system was sampled. A number of shares are still held in certificated form outside of the CREST system. or these and for other pooled holdings a number of adjustments have been made to the data, these adjustments are more fully described in Annex B. A.4 Grossing up the sample The grossing up of the sample was done in two stages. irst the companies sampled were grossed to cover the entire Stock Market (or Index in the case of the techmark companies). Secondly, the unidentified pooled holdings, and the unidentified holdings not held via the CREST system were grossed out of the results. A.5 Population Estimates Companies were selected, such that companies with market capitalisations greater than the sampling interval were covered completely, while smaller companies were sampled with probability proportional to size. or these smaller holdings the best estimate for the distribution of the whole population will be proportional to the distribution of the sampled companies. The distribution of companies listed on the Stock Exchange was obtained from a database supplied by the London Stock Exchange. In the results, the company estimates have been combined to produce the population estimates. This is done separately for the largest 78 companies, and the others. A.6 Estimates for Unallocated holdings The methodology used for adjusting the raw data received via the CREST system is described in Annex B. Holdings which still remained unallocated were apportioned according to the following fixed percentages, which had been previously estimated: Holdings not in the CREST system a. the largest 11 companies by techweight (see A.1 above) as at 29 December 2000; Private Individuals Overseas investment 80 per cent 20 per cent b. 18 small companies, selected proportional to size (so the larger the company the more likely it was to be selected). 19

20 Holdings classified as Pooled in the CREST system. Pension unds Insurance Companies Overseas investment Investment Trusts Unit Trusts Other inancial Private Individuals 50 per cent 20 per cent 20 per cent 3 per cent 3 per cent 3 per cent 1 per cent ote: the same allocation of holdings not in the CREST system and pooled holdings was used for the techmark shareholdings. A.7 The market values are derived by multiplying the numbers of shares by the share price at 31 December A.8 The 119 small companies (those with a market capitalisation less than the sampling interval) were selected with probability proportional to size (in the case of the techmark, 15 small companies), so the sample is, in principle, self-weighting. The arithmetic average of the percentage distributions for the companies in the sample is therefore the best estimate of the overall percentage distribution for all small companies. In order to produce a distribution of the values of shareholdings in each sector, this overall percentage distribution is then applied to the total market capitalisation for all other companies. One effect of this grossing methodology is that although the total market value of the grossed companies equals the total value of the London Stock Market, for some of the dis-aggregations (such as Investment Trusts) this may not necessarily be the case. SAMPLIG ERRORS A.10 As only a sample of company registers were analysed, the quoted results can as a result, differ slightly from the population values. The likely amount of this sampling error has not been calculated. A.11 In practice, it is likely that the errors will be rather greater than the amount suggested by the sampling errors, as there are other causes of error beside sampling. or example, some holdings may have been allocated to the wrong sector due to accident or erroneous coding on the CREST system. There will also be errors arising from the grossing factors used to apportion the unidentified holdings. A.12 The new system of collecting the data has, in some cases led to different interpretations of the coding. In a number of cases this may have improved the quality of the coding, but in other cases the classifications may have been misunderstood and the holding may have been mis-classified to a similar sector. A.13 The size of these errors, and the changes associated with the new method of coding must be borne in mind when assessing changes between surveys. A.9 In practice, the sample is not quite selfweighting because there were inevitably changes in the market capitalisation of companies between the sample selection date of 30 September 2000 and the analysis of 31 December This was taken into account during the second stage grossing by weighting each company s results by the relative change in its market capitalisation since the sample was drawn. 20

21 AEX B: THE METHOD O CLASSIICATIO O THE HOLDIGS B.1 Shareholdings held within the CREST system are held within a particular Account managed by a CREST Participant. Whenever a new CREST Account is created by a CREST Participant the beneficial owner of the Account is classified by the CREST Participant. A description of the codes is given in Annex C. If the sector of the beneficial owner later changes, it is unlikely that the classification of the CREST account will be revised. B.2 When the end-1997 Survey was conducted, details of the beneficial ownership of a number of CREST Accounts was obtained via the traditional method (see Annex B of Share Ownership - A Report on the Ownership of Shares at 31st December 1997). This enabled a comparison to be made with end-1997 data downloaded from the CREST system. B.3 The results of this comparison were, in general very reassuring. Most CREST Participants appeared to have made a great deal of effort to classify their accounts correctly. In some cases there appears to have been some misunderstanding about the classification of some holders. This has led to some discontinuities between closely related sectors (further details are given later in this annex). In a few cases it unfortunately appeared that CREST Participants had not made much effort to classify the holders correctly, this was disappointing and has affected the quality of the results. The adjustments made by the OS to minimise this effect are detailed below. In a number of cases there were differences between the coding done in the traditional way and the coding on the CREST System, but it appears that the coding on the CREST system is of better quality and based on more information. This has led to some small discontinuities, particularly UK based individuals being re-classified to overseas based individuals and Private on-inancial Companies holdings being reclassified to their Pension funds. B.4 Unfortunately, many brokers had been unable to separate EU and non-eu shareholdings, leading to a high proportion of holdings classified to non-eu as unknown country. This means that the quality of the split between EU and non-eu holdings was very poor, and it has not been possible to do any analysis using this information. B.5 Using the results of the end-1997 survey the OS has created a database of CREST Accounts where the OS believes the coding to be incorrect. Every shareholding held by one of these accounts has had the beneficial owner revised by the OS. The main effect of this has been to reduce the number of pooled holdings (where an account is pooled, but we know that the vast majority of holders belong to one particular sector, the entire account has been classified to that sector). B.6 The Stock Exchange Year Book published by Waterlow provides details for some companies of substantial ordinary shareholders. Whilst this information may well be out of date it nevertheless provides useful information. B.7 or every company, the data downloaded from CREST was searched for the shareholders. with substantial holdings of ordinary shares. In many cases the shareholding could be identified, and was classified to the correct sector. In some cases the shareholding could be identified but was classified to Pooled. Such shareholdings have been reclassified by the OS to the correct sector. In many cases the shareholding could not be identified and it is highly likely that the shareholding is held in certificated form outside of the CREST system. In these cases adjustments were made by the OS to re-classify these holdings from Excluded to the correct sector. In some cases it appeared that the shareholders listed no longer held the shares, so no adjustments were made. B.8 or a number of companies, the OS is aware that large numbers of shares are held by UK based individuals in certificated form (i.e. not via the CREST system). or these companies, after all other adjustments have been made the Excluded shareholdings have been apportioned to UK-based individuals. Similarly in cases where there have been large international mergers, adjustments have been made to include the certificated overseas shareholders. 21

22 B.9 Even after all these adjustments were made a large number of shareholdings were still classified as Pooled or Excluded. or the text and the tables in the text, these unidentified holdings have been grossed out using the methodology described in Annex A. B.10 Some of the tables in Annex have had the unidentified holdings re-allocated, since these are recommended for data analysis. Annex also includes tables where the unidentified holdings have not been re-allocated so that users can see the size of the reallocation and can re-allocate the unidentified holdings using their own methodology if they prefer. B.11 At the end of the coding process, before reallocation of the Excluded and Pooled shares, 77.1 per cent of shareholdings by value in the sampled companies had been classified. B.12 Areas where discontinuities appear to have occurred between the traditional means of coding and the CREST coding: Pooled Pensions managed by Insurance companies which should be classified to insurance being classified to Pensions. on-pooled pension funds managed by Insurance Companies which should be classified to Pensions being classified to Insurance. Pension funds previously being incorrectly classified to the company now being correctly classified to the pension fund. Authorised Unit Trusts being classified as unauthorised (in Other inancial). Investment Trusts holdings being classified to Other inancial. Holdings by Bank Holding companies appear in the current and previous surveys to have been classified to banks rather than Other inancial. The degree of misclassification in this case appears to have varied from year to year. 22