Treasury reviews Aberdeen trust

Property developers Mr John Ronan and Mr Richard Barrett have appointed solicitors in Britain to review their arrangements with Aberdeen Asset Management, the company under investigation by UK regulatory authorities.

Mr Ronan and Mr Barrett, who operate the Treasury Holdings property company, are backers of Real Estate Opportunities (REO), a split capital investment trust formed by Treasury and Aberdeen Asset Management.

Aberdeen executives faced a grilling from British members of parliament on the Commons select committee who are examining the 19 investment trusts following accusations that they have resulted in thousands of investors losing their savings.

A spokesman for Treasury Holdings confirmed the appointment of British law firm Slaughter & May to review its contract to manage the assets of the trust.

A number of other directors associated with other trusts have also appointed lawyers to determine the grounds for any future legal action against Aberdeen.

These individuals will be closely watching the outcome of the MPs' inquiry.

Speaking to the committee yesterday, Mr Chris Fishwick, the former head of Aberdeen's split capital trust business, said the remainder of the 19 split trusts that have so far been suspended from trading in their shares are likely to join the seven that have been placed in receivership.

Mr Fishwick recently resigned as a director of REO.

Mr Fishwick, who earned a multimillion pound package, was given a £350,000 (€553,800) payoff when he left his job. Yesterday he rejected a suggestion that he represented the "unacceptable face of the City".

During an often-heated session at Westminster, Mr Fishwick - who failed to appear before a previous hearing of the committee in July - defended his severance terms. He told the committee that he left the company "by mutual agreement" after being "hounded" by the press.

Asked by committee chairman Mr John McFall, the Labour MP for Dumbarton, whether he felt his severance package was justified despite the "catastrophic" performance of his trusts, Mr Fishwick argued that the package was set by independent directors and voted on by shareholders.

"I abide by that decision," said Mr Fishwick.

Asked during the session how it felt to be the unacceptable face of the City, Mr Fishwick responded: "I don't believe that I am the unacceptable face of the City, quite frankly."

Asked by Mr McFall whether he had ever been involved in any corrupt buying practices, Mr Fishwick insisted: "I don't think I was involved in anything corrupt."

Mr Ronan and Mr Barrett own around one-third of REO, which was set up in June 2001 with a diverse portfolio of properties in Britain and the Republic. It also invested in a portfolio of high-yield bonds and high-yielding shares issued by investment companies, held in its income portfolio. Aberdeen Asset Management initially took a 21 per cent stake in REO.

Due to the slump in world stock markets, the value of these assets has fallen from £333 million at the end of July 2001 to £49 million at October 11th. It has proposed that shareholders should seek to realise the remainder of the income portfolio and use the money to repay the bank loan that originally funded it. Some €138 million has been repaid with a further €50 million still outstanding.

It is also proposing to refinance its British property portfolio, which consists of 59 properties valued at £126 million at the end of June. It is also seeking to purchase up to 15 per cent of its ordinary shares and the remainder of its zero-dividend preference shares.

The scandal has sent shares in Aberdeen and other fund firms managing splits plummeting. The Financial Services Authority has accused the company of recklessness and of leaving as many as 50,000 investors with heavy losses. (Additional reporting by Reuters)