Select Committee on Treasury Minutes of Evidence

Examination of Witnesses(Questions 500-519)



  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.

Mr Ruffley

  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 of that?

  (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 necessary—dates 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 year?

  (Mr Fishwick) September of 2001.

  506. That is Preferred; what about the other one, Enhanced?

  (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[20].

  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 to?

  (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 the broker.
  (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 know—

  (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[21].

  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[22]. 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 1,010,700

21/1/02 Aberdeen Preferred Securities 2003 ZDP Class Meeting

      POLL Res 1 For 14,578,961 Against 2,732,364  21/1/02 Aberdeen Preferred Securities 2008 ZDP Class Meeting

      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 with that.

  (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 themselves?

  (Mr Fishwick) The board have a duty, as directors of a public company, to look after shareholders' funds.

  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

21   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

22   Note by Witness: Voting was as follows: Back

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