Activist investor Laxey Partners yesterday walked away from its two-year campaign against the £2 billion Alliance Trust after its resolutions won only 20% support at a packed annual meeting in Dundee.
But the 124-year-old trust's new chairwoman Karin Forseke, a former non-executive at the Financial Services Authority, was given an uncomfortable baptism, as private shareholders queued up to attack the £1 million pay package of chief executive Katherine Garrett-Cox.
Ms Forseke dismissed Laxey's call for the dividend to be trebled and the trust's management outsourced to the likes of Aberdeen Asset Management, which has canvassed shareholders and formally notified Alliance of its interest. She said: "This is not the time to disband the team that has started to deliver, and hand the mandate over to somebody else."
Laxey's questions were all aimed at "getting out at a profit", she said, while the board would consider new relaxations on dividend rules with a view to the interests of "genuine long-term shareholders".
Ms Garrett-Cox said the trust had outperformed its major competitors without taking as many risks and had "in many cases" delivered better returns.She added that, on the path of long-term investment, Alliance must "beware of the trolls".
Laxey's chief executive Colin Kingsnorth, who last year delivered a stinging 33% vote against the board and for modest reforms, told the meeting: "We are happy to say we won't do it again next year, but it has been necessary and it has helped to improve how the company operates." He said Laxey had forced Alliance to initiate share-buybacks to steady the discount, and to address more openly the losses of its subsidiaries Alliance Trust Savings and Alliance Trust Investments. But a year after warning that management was on notice to improve investment performance, he made no comment on the issue.
The trust lifted the dividend by 7% this year, the biggest rise in 20 years, despite falling equity markets. Ms Garrett-Cox said it was "well positioned to be able to grow dividends more quickly than in the past, but on a sustainable basis".
She said ATS was poised to return to profitability this year, while the process of reducing last year's £4.1m loss at ATI – a rise from the previous year's £3.4m – was being "accelerated". Questioned by a shareholder, finance director Alan Trotter said ATS losses totalled £33m since 2005.
Philip Graves, a shareholder and Glasgow fund manager, said the welter of comparisons with other trusts had not extended to discounts: "The market is telling you that the discount relative to peers is what you should be looking at."
He added that shareholders saw red when net asset value dropped 5.7% but the chief executive had earned a near-maximum bonus. Other shareholders weighed in, with Neil Walker saying that years ago Alliance paid directors reasonable salaries and no bonuses. "Now they get very large bonuses and very large salaries for very pedestrian results."
Tim Ingram, chairman of the remuneration committee, said it used its own knowledge and took advice from Towers Watson on the reward levels needed to "attract, retain and motivate", adding: "We have had an extremely good result, in the top quartile for total shareholder return, with net asset value above average, and management has achieved a lot of the objectives set for them."
But shareholder John Steen called Mr Ingram "patronising", claiming advisers were "paid to say that", and that there was a "vulgar belief that big bonuses and big pay packets give you value". He said Alliance excluded from its chosen comparator trusts Murray International and Personal Assets, up 44% and 28% respectively over a period in which Alliance was down 6%.
Mr Kingsnorth said later he was "heartened" that 28% of shareholders had not supported the board.
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