Examination of Witnesses(Questions 500-519)|
TUESDAY 29 OCTOBER 2002
500. Some of them are, are they not?
(Mr Gilbert) No, the ones that own other
split capital investment trusts or zeros are fund of funds. Enhanced
Zeros was a fund of funds.
501. Could I ask Mr Fishwick about the rescue
operations you referred to when various of the trusts that you
managed got into difficulty. What was the date and what was the
name of the trust which first got into difficulty?
(Mr Fishwick) There are two parts to
that question and I will answer the second part at the end. A
number of trusts got into difficulty, some of which were Aberdeen,
some were others in the sector. The first trust that got into
difficulty actually was the most successful trust launch of all
time. It was the European Technology Income Trust which was launched
by UBS Warburg. It was a placing of £400 million
502. I am asking about the ones that you managed.
(Mr Fishwick) We managed this one.
503. You personally were involved in the management
(Mr Fishwick) As Head of Closed End Funds,
I helped set that up. This fund had no cross-holdings. It was
the biggest launch. It raised £400 million. We sent £80
million back to shareholders because we raised so much money.
At the end of the day, it got into trouble for two reasons: technology
shares collapsed, as we know; and the other side of the portfolio
which provided income from high yield bonds and high yield telecom
bonds had also been a disaster. So you put together two assets
with massive demand and both failed. It had no cross-holdings,
and that was the first of the trusts to get into trouble. It was
acquired by another technology trust.
504. Can I ask the same question for Aberdeen
Preferred Income and the Enhanced Zero. When did you first think
you were in difficulty and that action may be necessarydates
for those two?
(Mr Fishwick) Aberdeen Preferred started
to get into difficulty in, and I am trying to remember the year
505. The months would be nicer rather than the
(Mr Fishwick) September of 2001.
506. That is Preferred; what about the other
(Mr Fishwick) Enhanced Zero started to
get into serious trouble in October/January the following year.
507. The reason I ask this is because I want
to know what discussions you, or any of those under your control,
had with the regulator? Which regulator were you talking to when
you were first aware of these difficulties in those two trusts?
(Mr Fishwick) None of these trusts, as
Mr Tiner said to you, are regulated.
508. I know what Mr Tiner said. I want an answer
to the question about their relationship.
(Mr Fishwick) We never spoke to the regulator,
nor did they ever ask us about it. They do now but they did not
then, and I am not aware of them asking about the trust being
in trouble at all, nor the trade body.
(Mr Gilbert) The proposals would go to the UKLA if
we were doing a reconstruction.
509. For clarification, who was it at the material
times that Mr Fishwick has just listed? For the particular months
he listed, who was the UK Listing Authority and who were you speaking
(Mr Fishwick) Our regulator at that time
would have been IMRO.
510. No, they are separate things. There are
different regulators. You raised Listing Authority. Let us deal
with that first, then deal with IMRO next.
(Mr Gilbert) The UKLA is dealt with by
(Mr Fishwick) Can I take this question because we
are getting into trouble here. What you are asking me is when
did we first think that we were
511. I am not getting into trouble. You are
the one in trouble. Now answer the question.
(Mr Fishwick) I will answer the question,
if you will let me. The question you asked me is: when did I think
they were getting into trouble?
512. You have given me two answers. I want to
(Mr Fishwick) When did the rescue operation
go through? February. When were the authorities aware of it? The
document goes to the Listing Authority in January.
513. January of which year and which trust?
You are getting very confused here. Come on. Get serious. Be specific.
(Mr Fishwick) Mr Ruffley, you are getting
confused and if you let me answer, I will.
514. Can you tell me which trusts you are talking
about and which year you are talking about?
(Mr Fishwick) Aberdeen Preferred: in
September of last year, the trust started getting into trouble.
You meet with the board and its advisers and try come up with
a plan to rescue it or decide not to. Right? That is an option
you have. Once you decide a plan, you see if you can implement
it. You take the documentation to the UK Listing Authority to
be approved, but that is three or four months later. The UK Listing
Authority approves your documentation; the plan then gets put
to shareholders; it is voted on.
If they vote in favour of it, the plan goes ahead, because it
is their company. If they do not like it, they vote it down. The
shareholders voted it through and accepted it.
14/1/02 Subordinated Unsecured Loan Stock holders'
meeting 12,521,181 votes for NIL against
21/1/02 EGM Aberdeen Preferred Income Trust
Res 1 For 93,868,724 Against 29,263
Res 2 For 93,679,008 Against 14,295
Res 3 For 93,679,008 Against 14,295
Res 4 For 93,679,008 Against 14,295
Res 5 For 93,682,403 Against 14,295
Res 6 For 93,679,008 Against 14,295
Res 7 For 93,679,008 Against 14,295
21/1/02 Aberdeen Preferred Securities EGM
POLL Res 1 For 112,276,966 Against
21/1/02 Aberdeen Preferred Securities 2003 ZDP Class
POLL Res 1 For 14,578,961 Against
2,732,364 21/1/02 Aberdeen Preferred Securities 2008 ZDP Class
POLL Res1 For 3,689,490 Against 544,239. 515.
We know all that. What I want to know is when you were aware of
difficulties. Forget the Listing Authority element. We have dealt
(Mr Fishwick) September
516. What about IMRO?
(Mr Fishwick) A company like Aberdeen
Preferred was not regulated by IMRO and therefore did not need
to go to IMRO for approval.
517. What about any other regulator?
(Mr Fishwick) I do not believe there
are any other regulators for it.
518. So far as you are concerned you do not
have to talk to anyone when these difficulties were manifesting
(Mr Fishwick) The board have a duty,
as directors of a public company, to look after shareholders'
519. What is the answer: that there was no one
at the FSA you felt beholden to, or indeed any other authority
when you were first aware of the difficulties? What is the answer
to that question?
(Mr Fishwick) There is no one directors
of a company can turn to. If the directors of an investment trust
are perceived to get into trouble, they cannot just pick up the
phone and say, "FSA, I think I am in trouble". He would
say, "Look, you are not in my jurisdiction".
20 Note by Witness: Investment trusts, unlike
Unit Trusts and other financial products, are not regulated by
the FSA or pre-N2, by any other regulator. However, they are subject
to the rules of the UKLA and the Companies Act 1985 in line with
other listed companies. Back
Note by Witness: The prospectus dated 19 December 2001,
which was approved by UKLA, relating to the reconstruction of
Aberdeen Preferred Income Trust PLC has been supplied to the Committee. Back
Note by Witness: Voting was as follows: Back