Guide to Analysing Companies

TURN
03 Essential Finance 10/11/06 2:22 PM Page 300

---

Uu
UCITS
Short for Undertakings for Collective Investments in Transfer-
able Securities, Euro-speak for mutual funds. The European
Commission passed a special law authorising the sale of ucits
through the European Union, believing that it is the product
most likely to become pan-European.
Underweight
The degree to which a fund manager may hold fewer
shares in its fund than that stock’s weighting in a partic-
ular index or other benchmark; the opposite of over-
weight. A manager may also be underweight (or overweight)
in a particular sector, market or type of security. The fund
manager may have decided to remain underweight on invest-
ment grounds or may sometimes be unable for some reason to
buy enough stock to bring the fund up to its weighting.
Underwriter
Most commonly, an institution that commits itself (usually as
part of a group or syndicate of other institutions), for a fee, to
buying up the whole of a new issue of securities to the
public. The difference between the price that the underwriters
pay for the issue and the price at which they sell it to the public
is their profit, known as the underwriting spread. If the
public spurns the issue (or the market moves against it), then the
underwriters are stuck with the issue and may make a big loss
unless they can subsequently sell it.
The term has its origin in the 17th century when under-
writers wrote their names at the bottom of insurance poli-
cies, thus guaranteeing to provide cover according to the
terms of the policy. lloyd’s insurance market still works
with a similar system of underwriters, who accept risk on
behalf of syndicates.
301
03 Essential Finance 10/11/06 2:22 PM Page 301

---

Unfunded
Something for which no money has been expressly set aside.
An unfunded pension plan is therefore one that is funded out
of current income as and when funds are needed by retired
people or other beneficiaries. Most German companies have un-
funded pension schemes, simply providing for the cost of a
pension each year as it is incurred.
Unitary tax
A system of taxing institutions based on a calculation of the pro-
portion of the company’s business that is done in the tax au-
thority’s jurisdiction rather than on the (more normal) basis of
the profit earned in the jurisdiction. The most notable propo-
nent of unitary tax is California.