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www.InvestmentGuide.co.uk STOCK
(Also called Indexed Gilts or Obligations Assimilables du Trésor indexée)
Lump sum invested with the French Government in return for
an interest payment which rises in line with a prices index (excluding
tobacco). There are six stocks. They each have a fixed life at the end of which
the French Government guarantees to repay the nominal value of about 100
in full plus the rise in the relevent prices index since each stock was issued.
Both interest and capital are index-linked and all stocks are denominated in
Euros.
French Government Index-Linked Stock is an excellent long term
investment for people who are risk averse, even if high rates of inflation
don't return. However the prices of the stocks seem to fluctuate rather
unpredictably in the short term and may suffer if the Government decides to
issue a lot more of this type of stock or if interest rates rise sharply.
Who can invest Anyone.
How worthwhile Good value for higher rate taxpayers, who don't need a high income but wish to protect income and capital against inflation especially over periods of 10 years or more. The interest and repayment value depends on the current and expected rate of inflation. Compare with UK Government Index Linked Stock. The prices can fluctuate quite widely, especially with the longer dated stocks. But if you hold the stock until it matures, it will grow by at least the rise in Retail Prices from date you bought. Less suitable for non-taxpayers. For amounts up to £30,000 per person consider instead National Savings Index Linked Certificates.
Minimum Around £5,000 through a stockbroker because of minimum commission.
Maximum None.
Suitable Lump sums.
Money back At the redemption date. Or 3 working days if you sell before then; you can sell the stock at any time at the current market price.
Interest Variable. Changes at each interest payment to reflect changes in the price index over a previous period. When you buy a stock (or if you sell before it matures) your contract note giving details of the transaction shows accrued interest as an addition or deducton from what you pay or receive. Whether it is an addition or deduction depends on when you buy or sell in relation to the next or last interest payment date. There are special rules for taxing this, see Taxbelow.
Interest paid Half-yearly by cheque to you or direct to bank account.
Tax Interest is liable to UK income tax. No tax is deducted from interest but taxpayers should declare the interest on a tax return. You are not liable to French tax unless you are resident in France. Gains are exempt from capital gains tax.
Any accrued interest added to your contract note (see Interest above) is liable to income tax. If accrued interest is deducted, you can deduct it from other interest you receive from the stock and claim a tax rebate if applicable. These rules don't apply if the nominal value of all your stocks is £5,000 or less. For more details from the taxman, see Accrued Income Scheme. Gains on stock are exempt from capital gains tax.
Fees to pay Stockbrokers commission when you buy and sell.
Passbook None. Stock certificate or statement of ownership from your stockbroker if your stock is held by your stockbroker as nominee.
Children Unsuitable.
Risk None if you hold until redemption. Some if sold before, but interest rate rises will not cause the price to fall as much as it does with stocks which have a fixed rate. Stocks with a longer period to redemption tend to fluctuate in price more than those with a shorter period. There is an exchange rate risk if you want to spend the proceeds in a currency other than the €.
How to invest See more information in English at the French Treasury Web site for OATi. There are eight stocks available: three are linked to a French Prices Index 3% 2009, sicovan 018766; 2011; 2013; and 3.4% 2029) and three are linked to a Euro Price Index (3% 2012; 1.6% 2015, 2020; and 2032).
Where from A stockbroker which deals on the Paris stock exchange. You can usually trade by phone and know the price you are dealing at or on-line.
Last updated 17
December 2007.