Select Committee on Treasury Minutes of Evidence

Examination of Witnesses(Questions 520-539)



  520. So you do not think you are under any duty to any regulator, whomsoever that may have been; you did not think there was any necessity to advise anyone of the difficulties that you had identified?

  (Mr Fishwick) I think it was very important to advise the people who matter, the people who own the company, the shareholders, which we did.

  521. Can I finally ask: when you did not grace us with your charming presence, Mr Fishwick, on 11 July, Mr Gilbert had to stand in for you. One of the questions that was asked by the Chairman of this Committee was to the effect: Has not the behaviour of some of the trusts you manage tarnished the whole sector, the split capital trust sector? Mr Gilbert said "no". Then when he was asked "Why not?" his answer was: "This has happened before. This happened in the 30s and in the 70, so this is history repeating itself. I know that causes general mirth, etc", and a few tears I fancy as well, Mr Gilbert, but then you went on to say: "But that is the case: this is caused by a prolonged bear market". Let me return to a question my colleagues have asked: why did you bog it up so much more than other split capital trusts? Why have the trusts you have been associated with lost more money than others in this sector? I am asking you that.

  (Mr Fishwick) We have not bogged it up any more than other people in the sector.

  522. I am sorry, will you say that again? For the record, can you repeat that?

  (Mr Fishwick) I do not believe that we have bogged it up any more than anyone else in the sector. Let us get the facts straight. There are 19 trusts that have been suspended or are in administration. I think seven of the 19 are in administration or liquidation. The rest of them will go there. Let us not try and con people, they will. There are still four or five trusts whose assets are now currently below their debt and markets need to rise for shareholders of any class to get anything back.

  523. Mr Fishwick, you are trashing the whole of the sector. That is not true, is it?

  (Mr Fishwick) There are 10 to 15 that will get into further trouble if markets fall. I am not trashing the whole sector. I am saying that we—

  524. You seem to be doing a good impression of it.

  (Mr Fishwick) There are 40 trusts in trouble. When you borrow money and assets fall, you get into trouble. As I said, there are 78 of the 135 ordinary shares that have a value of nothing, and the markets will have to perform well to become something. I am not trashing the sector, Mr Ruffley. I am just telling you the facts.

  525. How many trusts are not going to be in difficulty, in your estimation?

  (Mr Fishwick) How many are not going to be in difficulty? It depends on what circumstances you are referring to. If medium-term interest rates keep falling and people do not manage to repay their debt more and more, if assets fall, depending on what asset class you are—

  526. Status quo, as we speak at the moment?

  (Mr Fishwick) As we speak at this moment in time, I do not believe that five trusts will make it, and I would suspect that of the following 15, half will have to work very hard.

  527. Leaving how many not going under like your outfits?

  (Mr Fishwick) Like some of ours. It would leave about 90 to 100 out of the 135.
  (Mr Gilbert) Mr Ruffley, we have the top performing split capital investment trusts.

  528. You also have some of the duds, do you not, Mr Gilbert?

  (Mr Gilbert) Yes, we have the whole range. We are bound to have.

  529. You certainly have the full set. Can I ask you one final question and then I will wrap it up, Chairman. How does it feel to be the unacceptable face of the City, Mr Fishwick?

  (Mr Fishwick) Actually, I do not believe that I am the unacceptable face of the City, quite frankly.

Mr Laws

  530. Mr Gilbert, when we met back in July, I was asking you then about the compensation schemes that you envisage potentially for investors. I said, "Can I ask you what proportion of the retail investors who bought the zero dividend preference shares will receive compensation from you?" Your answer was, "100 per cent, if they bought through us or bought our unit trust." Is that still the situation and when will the investors in those areas get compensation from you?

  (Mr Gilbert) It is still the case. As I said earlier, we are still committed to the uplift package. The Aberdeen Asset Management Board have specifically stated that they are committed to the uplift package going forward.

  531. Will that uplift package give people all of their money back, as you said in July?

  (Mr Gilbert) Yes, it will give them their money back. The delay in getting the details out actually is not to the disadvantage of people because the uplift package we are proposing is a certain time period out. What we are trying to do, and my colleague Gary Marshall probably would be better able to pick this up, is work our way through what is a very complex scheme.
  (Mr Marshall) I think I clarified the point the last time that when we are talking about compensation to all investors in zeros, we are saying basically that where a zero has been mis-sold, anyone who has been mis-sold a zero, we will compensate. As far as the unit trust is concerned, we remain entirely committed to the uplift package we have proposed. As Martin was saying, the reality is that this is the first time that anything like this has ever been attempted and we are having to go through really a large number of advisers and deal with issues which have never surfaced before. It is not just a regulatory issue. There are trustees to consider. We have to consider legal advice, tax advice, the financial implications, audit and so on.

  532. When do you think people will get their money back?

  (Mr Marshall) We are currently proposing that the plan will come into effect in August 2005.

  533. August 2005? Why is it going to take that long?

  (Mr Marshall) Because what we are looking at here is this. The proposal was always framed around the proposition that any stock exchange investment should be for the medium term. If you make any venture into the stock exchange, however, whatever the risk profile is, we would make it clear that people should be looking for an investment over the medium term. In that case, 2005 would be five years from the launch of the fund.

  534. Can you just be very clear about which individuals are going to get their money back and precisely how much they will get back in relation to the amount that they put in?

  (Mr Marshall) I am talking purely about our unit trust, which is the Progressive Growth Unit Trust, and I am talking about all investors in that fund. I cannot go into the details at this point about how people will be treated as existing investors compared to people who have sold out and so forth. I do not have that information.

  535. When we had the discussion in July, we were told that your uplift package would mean that investors would receive back their original investment.

  (Mr Gilbert) That is correct.

  536. So they will receive back all of the money they initially put in, plus an uplift for any other aspect?

  (Mr Gilbert) We cannot go into too much detail here. Suffice to say, Mr Laws, that they will get their money back. We are still working on the scheme but the key thing as far as people are concerned is that Aberdeen are still committed to the uplift package.

  537. Can I just ask you, in that case, Mr Gilbert, about this, and you will be aware why I am asking these questions. The investment editor of The Observer this weekend wrote an article entitled "Aberdeen U-Turn on Rescue Deal", which said that you had abandoned a rescue package for the Progressive Growth Unit Trust because of concerns over the package.

  (Mr Gilbert) We have no idea where that story came from, absolutely none. It is absolutely untrue.


  538. May I say, Mr Gilbert, we asked them and they agreed.

  (Mr Gilbert) It is absolutely untrue. There is constant speculation every day in the press and we see stories like that.

Mr Laws

  539. Following the questions from the Chairman at the beginning of the session about some of the other split capital trusts and the way in which people purchase those, is there any possibility of you extending your own compensation package to include other investors who may have been mis-sold these products?

  (Mr Gilbert) What I can say, and this is not answering your question—

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