| Examination of Witnesses(Questions
TUESDAY 29 OCTOBER 2002
640. Do you know what unfettered means?
(Mr Fishwick) I do now.
641. Mr Gilbert, I will ask you this. To me
at the last hearing you said, and I quote from evidence 23: "We
stress-tested these products to a 30 per cent fall in the market;
we did not expect the falls to be greater than that. Now, you
might say, "You should have known the market was going to
fall to the extent that it did", but either I was not clever
enough or did not know enough to foresee that the market was going
to fall to those levels." Could you explain then how St David's
Fund radically reconstructed and changed investment policy, appointing
Aberdeen as managers, which included investment into income shares
of other splits, and no prizes for guessing which ones. It was
predominantly UK-invested and the reconstruction took place on
25 February 2000. The company, as you know, first breached its
banking covenant on 1 August 2001, although the bank decided to
raise its covenants in response. Between those two dates, the
FTSE-100 had fallen from 6,230 to 5,530, which is roughly 11 per
cent, not 30 per cent." So did you not just stress-test the
underlying assets; it was not the market itself?
(Mr Gilbert) I will answer it quickly
and then pass on to Chris. I think that on the stress-testing
the brokers that issued them would have as good an understanding
of that as I have. But on specifically, St David's, Chris, do
you want to pick that up?
(Mr Fishwick) Unfortunately, what happened with St
David's is that the previous manager passed away. Therefore the
board had a beauty parade and we attended the beauty parade with,
I believe, six or seven other managers, to put forward proposals
for a company which we believed at the time was in difficulties
and needed a radical restructuring. It already was a significant
investor in Income Shares; we did not introduce Income Shares
into the structure. They were already there.
(Mr Gilbert) This is a contract we won in a beauty
642. Exactly, but what you said to me is that
you stress-tested to 30 per cent, but in this case with St David
breaching its banking covenant, the FTSE only fell 11 per cent.
(Mr Fishwick) Breaching your banking
covenant does not mean you are bust because your banking covenant
might mean that you have to have two times the debt; you might
need to have £200 of assets to cover £100. It does not
make you bust. If you fall down to £190, you still have £90
left, which belongs to the shareholders.
643. One of my favourite novels is Bonfire
of the Vanities where Sherman McCoy, Wall Street bond-dealer,
master of the universe, billion-footed beast who has booked himself
a life of luxury and has a telephone number salary, just like
yourself, Mr Fishwick, but for others he has booked them into
a one-way ticket to disaster. Do you recognise yourself as Sherman
(Mr Fishwick) Coming from Wigan, of course
not, no, I do not.
644. You have a big salary number. You are going
to live in luxury.
(Mr Fishwick) Yes, and I have lost a
lot. Just like the shareholders that co-invested, I have lost
a lot of money too, and I apologise to these people. I feel sorry.
I do know them. These are not faceless individuals.
645. But apologies are not enough. We have got
to get compensation and that is the issue in this Committee today
and this is the issue that we are going to be looking at. Can
I say in finishing that I thank you for your attendance. I am
sorry it has gone on so long but is was a discourtesy that you
performed to the Committee by giving us this information this
morning, which we could not digest. Please, please, if you come
before this Committee again, cease the discourtesies.
(Mr Gilbert) I apologise again profusely,
Chairman. I am very, very sorry for that. Thank you very much.