Aberdeen puts cost of split-caps scandal at £81m

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The Independent Online

A relieved Aberdeen Asset Management finally published its results yesterday - more than four weeks later than scheduled -unveiling a £90m loss after its involvement in the split-capital investment trust débâcle cost the insurer £81m.

Most of the loss was accounted for by a £74m payment to compensate split-cap investors, while £7m was spenton advisers' and lawyers' fees.

Asking the City to let it put the débâcle behind it, Aberdeen said its underlying business remained in good shape, with pre-tax profits before exceptional items of more than £15m for the year to the end of last September - more than three times the previous year's profits.

Having sold off the main part of its retail business to New Star Asset Management at the start of 2003, and half of its property business to management last summer, the group now generates the majority of its profits in the institutional investment market.

Martin Gilbert, the chief executive, said yesterday he believed the conclusion of the split-cap investigations, which have cast uncertainty over the business for the past three years, would ensure the group brings in much higher levels of business in 2005. He said the main reason for failing to win contracts over the past three years had been companies' concerns over Aberdeen's involvement in the split-cap sector.

Mr Gilbert conceded that a £74m contribution to the split-cap compensation pot was not an ideal settlement for the company, which maintains it is innocent of any wrongdoing. "I think the view we had to take was that we had to get this behind us. And unfortunately for us, we were the biggest players in the sector and that was the cost we had to bear," he said.

Of the £74m, about £39m will be paid to investors in Aberdeen's Progressive Growth Fund, an open-ended fund which invested in split-caps and was advertised as "The one-year-old that lets you sleep at night".

Aberdeen sent letters to investors in this fund this week and has already had responses from one-third, accepting the compensation offered, which is aimed at providing full recompense.

The group says it plans to finance its compensation payments through existing and new banking facilities. It added that it may consider refinancing an element of its debt through a convertible bond issue.