IR44                     29 November 1994

     NEW TAX RULES FOR OPEN-ENDED INVESTMENT COMPANIES

The  Chancellor proposes in his Budget to make  rules  for
the taxation of open-ended investment companies and their
shareholders, equivalent  to those  already  applying  to authorised unit
trusts and their unitholders.   They  will also remove tax
impediments to conversion of an authorised unit trust into an open-ended
investment company.

Regulations  setting  out  the  detailed  rules  will   be
introduced once the necessary company-law and  regulatory provision
for these  new vehicles is in place, on  present plans by mid-1995.

                          DETAILS

1.     Open-ended  investment  companies  (OEICs)   cannot
currently  be  formed  under United Kingdom  company  law.  They are,
however,   commonly used elsewhere in the European Union  as  a
vehicle for collective investment.  Treasury Ministers  agreed in
principle in June 1992 to  allow  the establishment of OEICs in the
United Kingdom.  A  decision was  announced  in  June  1993  to
proceed  by means  of secondary  legislation under the European
Communities  Act (ECA)  1972  and  the  Treasury published  a  consultation
document on a proposed structure in December 1993.

2.   The Treasury intend to publish a further consultation
document shortly, including draft ECA  regulations.   The Securities
and      Investments Board will also consult  about draft product
regulations early next year.

3.    Under  the  Chancellor's proposal, OEICs  and  their
shareholders will be taxed on essentially the  same  lines
as currently  apply to authorised unit trusts  and  their
unitholders

- OEICs  will be exempt from tax on capital  gains realised
for the     benefit of their investors;

- their income will be subject to corporation  tax at a
special rate: generally 20 per cent, but 25 per  cent where OEICs are
invested   primarily  in interest-bearing assets;

- shareholders will be taxable each  year  on  the full   net
income earned  for  them,   whether distributed  or accumulated by
the    OEIC.   This income will be treated, at the OEIC's option,
as a   dividend;  a  foreign  income  dividend;   a dividend
paired with a foreign income dividend; or a payment taxable as interest;

- OEICs  will be eligible to distribute income  to non-
resident shareholders  (or  accumulate  it) without deduction of
United   Kingdom tax  if  the OEIC  invests  in  appropriate  assets
and  its shareholders    comply   with   the    necessary
formalities;

- OEICs  will  be  eligible to be held  through  a Personal
Equity Plan on the same terms as  apply to authorised unit trusts.

4.    An  existing authorised unit trust will be permitted
to convert into an OEIC if it chooses (subject  to  rules which
the Securities and Investment Board will lay down in due
course).   The Chancellor  proposes  legislation  to eliminate any
significant tax charges arising from such  a conversion which would tend to
distort this choice.

5.    Regulations will also deal with stamp duty and stamp
duty    reserve tax consequences.

6.    It  is also intended that the VAT treatment of OEICs
should  parallel that of authorised unit trusts.  Secondary
legislation  will be  introduced to  extend  the  present exemption for the
management of authorised unit trusts  by the  operators of those
schemes to the management of OEICs in  equivalent circumstances.  The
existing VAT   exemption for dealing in securities will apply to the sale
of shares  in OEICs.

                     NOTES FOR EDITORS

1.   Open-ended investment companies are open-ended in the
sense that  their shares will be continuously created  or
redeemed, depending  on the net demand  by  investors  to acquire
shares or to redeem their existing holdings.   As with  existing
authorised unit trusts, these  transactions will  be undertaken at a price
derived from the net  asset value of the OEIC's underlying
investments.

2.    The  Treasury  published a consultation  document  -
"Open-Ended Investment Companies: A Proposed Structure"  -
on  6 December 1993 (press notice 130/93).  The follow-up
consultation document will contain  a  summary  of  views expressed.