Examination of Witnesses (Questions 180
THURSDAY 11 JULY 2002
180. Do we have a coherent ratings system that
covers this category of investment?
(Mr Godfrey) We do have coherent ratings systems;
I think they could be improved. I think the primary one is an
analyst called David McFadyen with ABN Amro, who has a rating
which measures the amount of bank debt and the quantity of exposure
to other splits which is a very good starting point and very useful.
I hope that with our data project we can perhaps add something
which will speak to the quality of the split portfolio not just
the quantity, because clearly that is very important.
181. What are the advantages for firms setting
up in the Channel Islands, and are you able to influence their
conduct in the same way as United Kingdom based firms?
(Mr Godfrey) One might ask just how much influence
we might have over the conduct of any firm given that we are not
a regulator, but there are advantages to being in the Channel
Islands, both with a more flexible accounting regime but also
with the tax advantages. You have heard about barbell trusts already
from Aberdeen, and barbells as part of their structure are often
invested in high yielding bonds to provide the income part of
the portfolio with shares in other splits and, on the zippy side,
shares in technology and so forth, and there is a tax disadvantage
to holding bonds through being in the United Kingdom compared
with being in the Channel Islands, so there is more than one reason
for being offshore and it is not just a more flexible accounting
182. Is there the same amount of transparency
in the Channel Islands as in the United Kingdom?
(Mr Godfrey) The companies are listed on the United
Kingdom Stock Exchange so they have to fulfil the United Kingdom
requirements in the same way as if they were United Kingdom domiciled.
There is the same amount of transparency required.
183. And you have no concerns in any way about
(Mr Godfrey) I have no concerns about that element,
184. Do you have concerns about any other elements?
(Mr Godfrey) Only to the extent that our view was
that some of the accounting policies went too far.
Chairman: You heard us extend an invitation
to Aberdeen Asset Management at another stage. We are very much
aware that the investment trust sector itself is worth £50
billion but the split capital sector accounts for just £13
million of that and, as we mentioned at the beginning of this
session, we do not want the stain to cover the whole of the investment
trust sector so I think all of us have to work on that issue.
You have been very helpful to us this morning and constructive
in your evidence but we would like to keep a link with you, and
if you feel you can inform the Committee on the way forward then
we will be very grateful for any advice you can give us. Thank
you very much for your appearance and your evidence this morning.