Katherine Garrett-Cox faces fresh scrutiny of her seven-year reign at Alliance Trust as its biggest shareholder Elliott Advisors campaigns to place three experienced independent directors round the boardroom table in Dundee.
The £2.7billion trust's 15,000 shareholders are being urged in individual letters and an 'ImproveAllianceTrust' website to back the election of the additional directors at the annual meeting on April 29.
Alliance shares raced up 2.7per cent to an all-time high of 510p, on hopes that the US hedge fund and activist investor would succeed in shaking up the management of the 127-year-old trust.
In its letter to shareholders, Elliott says the board would benefit from "added expertise, experience, and a fresh perspective".
It also implies checks are needed on £1.4m a year chief executive Ms Garrett-Cox, saying she has been "in her post longer than any of the non-executive directors", and adding that the trust's investment management was changed last year "without inviting external proposals, and without canvassing shareholder views".
Ms Garrett-Cox appointed investment chief Ilario di Bon in 2012 to overhaul the trust's performance but replaced him last autumn with two internal appointments, after the trust advanced by only 0.4per cent in the first half against 4 per cent for its sector.
Aberdeen Asset Management made a behind the scenes bid to land management of the internally-run trust in 2012.
The proposed directors are already being characterised by Alliance sources as "not independent", but are said by Elliott to be "wholly independent" with strong investment industry credentials.
Elliott Advisors (UK) and the funds it advises have built a 12per cent stake in the trust since 2010 and follow the trail of Isle of Man hedge fund Laxey Partners, which mustered over 30per cent of shareholder votes in 2011 for its campaign to secure controls on the trust's discount.
Elliott says the three key issues are the "persistent underperformance of Alliance Trust's investment portfolio against its sector peers and relevant benchmarks", the "high and inflexible" cost of internal management, and the continuing losses in the two operating subsidiaries Alliance Trust Investments and Alliance Trust Savings. "As a result, the company has among the highest discounts to intrinsic value among its relevant peers."
The trust's discount has failed to narrow from the 12per cent to 15per cent range in recent years, in sharp contrast to its big global growth trust rivals such as Baillie Gifford's £3bn Scottish Mortgage, which trades at a premium to asset value due to strong performance. Alliance's discount at the weekend was 13.2per cent, compared with 9.1 per cent at Scottish Investment Trust, 6.9per cent at Foreign & Colonial, 1.6per cent at Witan, and a premium of 1.8per cent at Scottish Mortgage, according to Trustnet figures.
Alliance is marshalling its defences, and will point to a 54per cent total shareholder return from the trust since March 2011 when Elliott declared a stake, above the 50per cent from the MSCI world index and 44per cent from all global growth trusts. It also says costs are falling and the dividend has risen by over 14per cent.
But Elliott sources say the vote will be "a referendum on the direction of Alliance Trust" and it believes it is "representative of the concerns of the wider shareholder base". It says absolute running costs have doubled since 2008.
Elliott's nominees are Anthony Brooke, a former SG Warburg executive and a veteran non-executive director and trustee, Peter Chambers, former chief executive of Legal & General Investment Management and Framlington, and a consultant in the asset management sector, and Rory Macnamara, former Morgan Grenfell corporate financier and experienced company and investment trust non-executive and chairman.
Alliance's current non-executives, apart from chairman Karin Forseke, are Alastair Kerr, former chief executive of Virgin Retail Europe, John Hylands former finance director at Standard Life, Susan Noble former head of global equities at Goldman Sachs, and Gregor Stewart, former finance director at Scottish Widows.
Alliance Trust said: "The board will consider the resolutions in detail and advises shareholders to take no action at this time."
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