The following firms are listed on the Johannesburg Stock Exchange (JSE) and operate in the financial services sector. Assuming you are the Chief Investment Officer (CIO) at a leading investment firm and have determined the amount of surplus cash for the year, after the investment generated by each firm and the dividend paid for the year as shown in Table 4.1. The average return on equity for the last 5 years is reported below and this is sustainable for the foreseeable future.The following firms are listed on the Johannesburg Stock Exchange (JSE) and operate in the financial services sector. Assuming you are the Chief Investment Officer (CIO) at a leading investment firm and have determined the amount of surplus cash for the year, after the investment generated by each firm and the dividend paid for the year as shown in Table 4.1. The average return on equity for the last 5 years is reported below and this is sustainable for the foreseeable future.

R million R million

Surplus Cash Dividends paid ROE Beta

for the Year in the Year

ABSA Bank Limited	60	40	8	0.80
Barclays Africa Group Limited	65	17	18	1.30
Blue Financial Services Limited	-20	10	4	1.25
First Rand Limited	25	17	2	0.90
RMB Holdings Limited	-10	13	16	1.05

The risk-free rate of return is 7% and the average return on the market was 12%.

Required:

4.1 As an institutional investor, what influence would you try to exert on management regarding the dividend? (Motivate your decisions to influence management with relevant calculations) (10 Marks)

4.2 With the aid of relevant examples critically discuss ANY FIVE (5) factors affecting dividend policy under the following headings; legal constraints (3 Marks), growth prospects (3 Marks), dividends payments (interim and final) (3 Marks), market consideration (3 Marks), the clientele effect (3 Marks), signalling (3 Marks) and agency considerations (3 Marks)