Examination of Witnesses(Questions 646-659)|
TUESDAY 29 OCTOBER 2002
646. Welcome to the Committee. I apologise for
the last session running on but it was very important and we had
precise questions to put to the witnesses. I am looking at the
sponsoring role and we will see who wishes to answer the question.
In your role as sponsor to proposed new investment trusts, what
assessment would you make of the underlying soundness of the proposal?
What input would you expect to make to the proposed board of directors
of the trust to satisfy them that they are taking on a sound proposition?
(Mr Hall) I will pass this one to Mr
Thomas because that is his role.
(Mr Thomas) That is indeed my role, Chairman. I use
modelling, very extensive spreadsheet modelling, to work out the
alternatives in front of me as a designer, if you like. I have
to work out the set of proposals which is put in front of an existing
board. Our aim is to have a prospectus which is gradually written
by a team of people, which enshrines those proposals. There is
a very considerable amount of discussion about the content which
sometimes takes three or four months to settle. Our work ends
when the prospectus is agreed by the Listing Authority, when the
prospectus is handed over to the managers and the board and when
the money has been raised in a placing. That is the end of my
647. How do you set about seeking support from
institutional investors for new issues for placing your sponsoring?
Would you routinely seek support from other splits for a new issue
of the split capital trust?
(Mr Thomas) I have been in this sector
for more than 30 years, so I know all the likely people who will
want to buy high-yielding stocks of this kind. I deal only with
institutional, professional people who can understand the rather
difficult descriptions that I write.
648. Does that mean that none of us can understand
(Mr Thomas) One person around, not you,
sir, wrote on Sunday that they could not understand David Thomas.
649. You are referred to in the Sundays as "Dotty".
That is your affectionate name, is it not?
(Mr Thomas) I hope so, sir.
650. "Dotty, the champion of splits".
You are the Mohammed Ali of splits, they tell you, you have been
around for so long. As the champion, the Mohammed Ali, why did
it all go wrong? Why did it all end in tears?
(Mr Thomas) I am not the Mohammed Ali;
I am not the architect; I am not the father. There were people
long before me who started the modern split trust companies. I
started in 1969, about five years after these people were working.
I can give you their names. I just happen to have been around
a bit longer than my competitors who have obviously started to
651. You come here this morning blameless and
(Mr Thomas) I have a job to do, Sir.
I am very sorry that people have lost money which you are associating
with the job I do. I am prepared to defend myself and say I do
the job properly.
652. I want to look at the memorandum you have
submitted to us in which you go to some lengths to explain which
things you are responsible for and which things you are not. When
you turn to the things which Brewin Dolphin does do, you say specific
roles include advising on corporate capital structure. Mr Hall,
could you expand a little on that and tell us what that means?
(Mr Hall) That is directly, Sir, the
area that our corporate finance department doesthat David
Thomas doesin relation to investment trusts. It is obviously
a small, and kept very separate, segment of our overall business.
653. So you are advising on the structure of
these capital trusts?
(Mr Hall) Yes. David advises and is part
of the team that structures the trusts for the companies, and
with other advisers.
654. So Brewin Dolphin has some hand in the
structure of these split capital trusts?
(Mr Hall) Yes.
655. That is useful. You go on to say that you
have indeed recommended investments in zeros, income shares and
split capital investment trusts to investors. You have recommended
them? That is correct?
(Mr Hall) Yes.
656. You then tell us that you deal with individual
investors, and everyone's investment needs are different, and
in paragraph 11 you say you work with investors depending on what
their time horizon is that they set and what their risk profile
is which you agree with them. Right?
(Mr Hall) Absolutely correct, Sir.
657. Is it the case that you have ever recommended
investment in a split capital trust to a client who specified
they wanted a low risk profile?
(Mr Hall) Are we talking about a zero
here or an income share, or a zero preferred stock?
658. Let me refer you back to your memorandum.
In paragraph 10 you say you have recommended investments in split
capital investment trusts.
(Mr Hall) Yes, the answer would be yes
so far as zero preference shares are concerned.
659. Some of your clients will have specified
in their risk profile they wanted low risk, I assume?
(Mr Hall) Yes, and it is zero preference