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&#3915% of trusts set to pay out nothing&#39

One-third of split-cap investment trusts stand to lose everything or offer only minimal returns, AITC director general Daniel Godfrey told the Treasury select committee last week.

Testifying before the committee on the same day as Aberdeen chief executive Martin Gilbert and FSA managing director John Tiner, Godfrey estimated that as many as 20 out of 136 trusts will not return anything to investors.

He said 20 will offer reduced returns and another 20 will probably recover despite their exposure to bank debt.

Godfrey told MPs the AITC was concerned about possible collusion between split-cap managers as early as 1998 but had not yet seen any definitive evidence.

Godfrey said he believed the real problems began in 1999 when bank debt began to be introduced as a means of allowing gearing.

Unlike Gilbert, who was reluctant to accept blame, Godfrey apologised repeatedly for marketing zero-dividend trusts inappropriately and not providing investors with sufficient information. He said: “I am not going to use the word hindsight, I think we made a mistake. I want to apologise to shareholders who have lost money.”

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