Alliance Trust will today answer to shareholders on its dramatic climbdown which will see two directors proposed by activist shareholder Elliott Advisors welcomed to its board.

Since March 16 when the New York hedge fund which holds 12 per cent of the shares lodged its resolutions for the appointment of three directors, Alliance has bitterly resisted any interference in its governance or questions over its performance and strategy.

But after a weekend which saw respected institutional shareholders Legal and General and Aberdeen Asset Management line up behind the Elliott camp, and predictions from the rebels of a close-run vote today, Alliance sued for peace.

Karin Forseke, chairman, who has spent the past six weeks campaigning against any involvement by Elliott in board affairs, said: "On behalf of the whole board, I would like to express my gratitude to our shareholders for engaging with us on this important issue. Having considered this feedback we have worked with Elliott to find a compromise which we believe is in the best interests of all our shareholders."

Two of Elliott's three candidates will now join the company's seven-strong board, despite Alliance's previous insistence that any non-executive must always go through its own rigorous selection process.

Both sides have also agreed to call off the war of words and abandon all hostilities, though only for a minimum 12 months.

Jason Hollands, managing director at Tilney Bestinvest, commented: "This is a sure sign that having seen the scale of proxy votes from shareholders mounting up in favour of a shake-up, the board has rightly determined compromise is better than a very public defeat."

In the shock announcement issued barely 24 hours before today's meeting, Alliance said Elliott had agreed to withdraw its three resolutions and had committed to support the board and management on all other resolutions.

"The board and Elliott have also agreed on certain mutual non-disparagement undertakings and that Elliott will not call a general meeting or seek to agitate against the company, its board or management publicly until after the company's 2016 AGM at the earliest.

"The board has agreed to appoint Anthony Brooke and Rory Macnamara to the board of the company once customary regulatory approvals have been obtained and that they will act as board observers in the interim period."

Elliott said: "We are pleased to have reached an understanding with Alliance Trust and look forward to following the enlarged board's progress on strategic and business matters over the next year and beyond.

"Elliott acknowledges and appreciates the widespread engagement and support from fellow shareholders of the company and others in recent weeks. We believe that this solution is in the best interests of all shareholders." It said Peter Chambers had agreed to stand aside as its third candidate in favour of Alliance's ongoing process to recruit a new non-executive.

Ms Forseke had told shareholders that the nominees were "completely unacceptable" , were a "pre-cursor for further disruptive actions from Elliott", and might seek to "exert undue influence". She had told shareholders that the move "potentially threatens the very existence of the company, and rides roughshod over our long-term shareholders, our customers and our over 250 employees".

Only a few days ago she told The Herald that diversity of skills and backgrounds was one of the watchwords of non-executive selection.

But yesterday Ms Forseke said: "I would also like to welcome Anthony and Rory to the Board where their significant experience will be a considerable asset."

Laith Khalaf, senior analyst at Hargreaves Lansdown, said: "I suspect Elliott will be significantly happier with this truce than the board of Alliance Trust. The agreement at least draws the matter to a close, and prevents any further public bickering for at least a year."

Mr Khalaf said investors "may justifiably feel a bit miffed" at having had the decision taken out of their hands at the last minute, and at the fact that Alliance Trust had told them the two new directors were not independent.

He added: "The key question for investors remains whether the recent changes made by the trust will lead to improved performance. On that score, the jury is still out."