Private shareholder representative group ShareSoc has set up an action group for Alliance Trust (ATST) investors after being prompted by shareholders concerned about its strategy and operations. It follows a requisition on similar issues by institutional investor Elliott Advisors earlier this year that resulted in a compromise, averting a vote on the appointment of new directors at Alliance Trust's annual general meeting last month. So far the group only has about 50 members but Roger Lawson, deputy chairman of ShareSoc, said there is a strong feeling among the trust's investors and they have only just started out.
Some private shareholders are still concerned on a number of issues including underperformance, the trust's persistent and high discount to net asset value (NAV), high costs relative to its peer group, and losses and risks incurred by the trust's subsidiaries, Alliance Trust Investments and Alliance Trust Savings.
The shareholder action group is also concerned about governance, saying that as it is a self-managed trust this inhibits the strategic options available to the company, and that having two trust executives on the board puts them in a conflicted position. "Specifically, any meaningful debate on outsourcing the management of Alliance Trust to a third party is constrained as to do so implies a lack of confidence in the current management's ability to deliver satisfactory results," says the Shareholder Action Group.
It is also concerned about director remuneration.
The group has proposed a number of changes the board might consider as follows:
• reorganisation of the board into a totally non-executive, independent entity;
• reorientation away from expansion and a refocusing of management's attention on performance of the trust;
• sale of Alliance Trust Savings to a larger competitor as it lacks the scale required to achieve profitability;
• abandoning the management of third-party funds via the divestment or winding down of Alliance Trust Investments;
• cutting costs, for example, by not having multiple offices;
• a specific policy and plan to deal with the high discount to NAV; and
• awarding the management contract to an organisation with an excellent track record and a risk profile similar to that traditionally associated with Alliance Trust, if costs and performance continue to be inferior.
Mr Lawson said the group may request a meeting with Alliance Trust's chairman. He added that they would like to work with the directors to solve the problems.
Alliance Trust shareholders can register their interest in the group at
