Select Committee on Treasury Minutes of Evidence

Examination of Witnesses (Questions 180 - 184)



  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 regime.

  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 that?
  (Mr Godfrey) I have no concerns about that element, no.

  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.

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