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Finance Magazine - May 2005 Issue

Life sector wins temporary reprieve
Following urgent representations by the life insurance industry, proposals introduced in the Finance Bill 2005, which would see additional charges being levied on life policies, have been amended by the Minister for Finance, Brian Cowen, and the introduction of the proposals have been suspended, pending a Ministerial Order.
IT drives investment up 35p.c. in Q1 2005
Ireland outperforms European average as deals worth €42 million are transacted in Q1 2005.
First company lists on Ireland’s IEE
Lapp Plats has become the first company to list on the Irish Enterprise Exchange (IEX).
First Asian financing for IL&P
Irish Life & Permanent plc raised $600 million in the group’s first major fund raising exercise in an Asian targeted issue. The funds raised will be used to support permanent tsb’s mortgage lending in the Irish market.
Nominations for ‘Deal of the Year’ 2005
Ireland’s leading corporate financiers have nominated a selection of the most significant corporate finance deals of 2004/2005 for the annual ‘Deal of the Year’ award, which will be announced in next month’s issue.
Hedge funds come into the open
Despite their insignificance in terms of assets under management (approximately $1 trillion), compared with the long-only funds industry (approximately $83 trillion), hedge funds have become the topic ‘de jour’. Open any paper or financial magazine, and you will find pages dedicated to developments in the industry, (including this issue – see pages 2 and 10) with a particular focus on the sector’s recent woes. It seems it will only be a matter of time before Eileen Dunne is discussing the relative merits of convertible arbitrage strategies as opposed to the global macro approach on Six-One.
Bank of Ireland readies second covered bond issue
Bank of Ireland Mortgage Bank has mandated Barclays Capital, Dresdner Bank, IXIS CIB and Davy to lead manage its second Asset Covered Security (ACS) issue. Subject to board approvals, documentation and market conditions, the launch will follow investor meetings, which are intended to take place in early June 2005. BoI launched its first deal in September of last year, a €2 billion issue that was over three times over-subscribed. The deal was the first tranche of a planned €10 billion programme.
CESR gives advice on MiFID
The Committee of European Securities Regulators (CESR) has submitted its second technical advice to the European Commission under the Directive on Markets in Financial Instruments (MiFID). MiFID forms one of the cornerstones of the EU’s securities regulatory regime.
Irish registered PCAOB firms
Last month we reported on Irish accounting firms that are registered with the US Accounting Standards Board, the Public Company Accounting Oversight Board (PCAOB).
New head at ICAI
John Greely of John P Greely and Co., Naas, (pictured above right) will succeed Terence O’Rourke of KPMG as the President of the Institute of Chartered Accountants in Ireland.
New primary dealer in gilts
The Royal Bank of Scotland has been appointed by the National Treasury Management Association (NTMA) as a primary dealer in Irish government bonds.
Deal of the Year 2005: C&C’s €726 million IPO leads the deals in this year’s deal directory
The IPO of food and drinks company C&C on the Dublin and London stock exchanges last May is the largest deal nominated in this year’s FINANCE Deal of the Year survey. Other top deals of the past 12 months as selected by Ireland’s leading corporate financiers for inclusion in the survey, include the Grafton Group’s €353 million takeover of the Heiton Group, and the €117 million acquisition of the Gresham Hotels Group by a group of investors, David Coleman, Bryan Cullen and John Joe Murphy.
Deal directory 2005
Corporate finance update: strong level of growth in market, with deals worth €4bn transacted
The mergers and acquisitions climate in Ireland remains buoyant with a number of high profile transactions already successfully concluded in 2005. Recent data indicates €4 billion of disclosed transactions for the first three months of the year, writes Mon O’Driscoll in this review of the sector.
Authority finds its teeth as it prohibits a proposed merger for the first time
2004 was a remarkable year for the Competition Authority, as it marked the first time that the Authority prohibited a merger – the proposed merger of the business recovery services of IBM and Schlumberger. The Authority also processed some 70 per cent more merger notifications than in 2003, writes Gerald Fitzgerald, with some 81 mergers notified to the Authority in 2004.
Treasury: Ireland follows European innovation in structured products
Following the lead set by the European structured products market, the market in Ireland has grown significantly in the last five years, with the market size now estimated to be approximately €2.5 billion. The most advanced markets for structured investment products in Europe are in France, Spain, Italy, Scandinavia & Switzerland, and Joann Hosey says that future development in the Irish and the UK market will closely follow their European counterparts.
Sub-investment grade corporates should reduce their weighted average cost of capital through securitisation
New research shows that financial stress has increased dramatically for sub-investment grade companies across Europe, in contrast to A rated counterparts which have been hardly affected. Declan Lynch analyses the implications for European sub-investment grade companies.
‘Published accounts will always be like bikinis’
‘Published accounts will always be like bikinis - much more interesting for what they conceal than for what they reveal -regardless of more exacting accounting standards,' one of the unique expressions used by Charlie McCreevy In the six months since he assumed the role of Internal Markets Commissioner. Here we reprint some more of his words of wisdom.
Commission’s investigation will have serious implications
The EU’s Competition Commissioner, Neelie Kroes, is due to start investigating the financial services sector to identify obstacles to competition, be they ‘regulation, State aid or private barriers’. Tom Carney says that this is an opportunity for the Irish financial services industry to shape future regulation of competition in financial services.
Arbitrage opportunities come and go - hedge funds will live to fight another day
New reports are emerging in the financial media every day about the poor performance of hedge funds, and the impact this will have on the long-term potential of the sector. Fiona Reddan reports from the annual Dublin Funds Industry Association (DFIA) conference, where speakers attempted to put the recent losses in perspective, and were bullish about the prospects of this sector, which is now valued at over $1 trillion.
Book review: The Automatic Millionaire – or how to get rich without trying
With the ‘get rich quick’ phenomenon currently taking hold in Ireland, something which is evident by the number of investment clubs and property seminars springing up all over the country, books by American self-help gurus such as the ‘Rich Dad, Poor Dad’ books by Richard T. Kiyosaki, have become increasingly popular. New kid on the block is David Bach, whose new book ‘The Automatic Millionaire’ has just been published in Europe. Bach offers some very good pointers on how to get your money working for you, and how becoming a millionaire is realistic for everyone – provided you think long-term.
Issuers need to use Sarb-Ox deadline extension wisely
The SEC has recently announced an extension in the deadline for compliance with Sarbanes-Oxley for US listed Foreign Private Issuers (FPIs). But if Irish FPIs are to navigate the pitfalls in terms of time, effort, and euro that their US counterparts have endured, they will need to use the extension wisely. Dealing with resource issues early will be the key to achieving success and avoiding some of the potential issues, writes Paul Regnard.
Security costs
The tax relief for employees and directors requiring security precautions by reason of their employments is so tightly drafted that the exclusions from its benefit appear almost immoral.
Life assurance bruised
The Finance Act has assaulted the Life Assurance industry on three fronts. It has introduced periodic tax charges on policies; charged CGT on the foreign assets of life assurance companies operating here through branches; and granted special investigation powers to the Revenue Commissioners in relation to life assurance policies. Are Life Assurance companies to join the banking industry as popular whipping boys?
Tax relief on cross-border losses - crunch time in Europe
The draft judgement from the Marks & Spencer case before the European Court of Justice leaves open the possibility of retrospective claims for tax relief on cross border losses. The draft judgement places a limit on the possibility of such claims. The limit is debateable both as regards its meaning and its validity, writes Pat McDaid in this month's KPMG Tax Monitor.
Sharpe practices in evaluating investment performance
Bernard Murphy outlines the uses and limitations of the Sharpe Ratio, which can be a useful analytic tool for evaluating the impact of asset allocation decisions across different investment classes. Next month he looks at its impact on risk diversification.
Listening to the industry
As chief executive of the Irish Bankers Federation, keeping in touch with both industry members and policy makers is a key element of Pat Farrell’s day.
Who’s who in Finance: Michael Brennan, CEO, Eagle Star
Who's who in Finance: Tony Jeffery, Actuarial Director, Hibernian Life & Pensions
Irish pension funds shouldn’t be looking to diversify away from Irish equities - just yet
Despite the excellent performance of the Irish equity market over the past number of years, with allocation to Irish equities by managed funds standing at around 20 per cent, many funds have started to move out of Irish equities in order to lower the perceived risk profile. While in FINANCE February, Grainne Alexander of Mercer believed that this was a welcome development, this month Pramit Ghose takes a differing view, arguing that a holding now in Irish equities of around 21 per cent for a typical Irish pension fund is correct. He says the key principle to remember is that you cannot divorce market conditions from investment decisions and simply look at investment models in isolation and ignore the investment outlook for different ‘stock markets’.
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