Shareholder Action Group Launched for Alliance Trust

PRESS RELEASE 65 (12/5/2015)

Following the Annual General Meeting of Alliance Trust where the Board conceded the appointment of new directors subsequent to the requisition by Elliott Advisors, ShareSoc has been encouraged by a number of private investors to support a shareholder action group to represent their interests. Many investors still have concerns about the strategy of the company and about some aspects of its operations. A shareholder action group has therefore been launched and investors can register their interest on this web page:

More background information on the Key Issues

Until a decade ago, Alliance Trust was a conservatively managed, low cost, investment trust which was focussed on its investment trust activities and performed satisfactorily relative to its benchmark and its peer group.  Since then it has lost its focus, its performance has been unsatisfactory and its costs have escalated at an alarming rate.

Five years ago the Board embarked on a new venture, the management of third party funds through a wholly owned subsidiary of the Trust, Alliance Trust Investments (ATI).  This venture has been, and continues to be, loss making and these losses are being borne by the Alliance Trust’s shareholders.  Less visible are the risks associated with this venture, risks which are being shouldered by the Alliance Trust’s shareholders without any compensating rewards.

A more long standing subsidiary, which was first established in the 1980s, is Alliance Trust Savings (ATS) as a savings scheme for investment in Alliance Trust but is now a generic investment platform.  This savings platform was claimed to be profitable at the operating level at the AGM in April 2015 but actually lost £3.3 million after non-recurring charges and impairments. The risks associated with the ATS subsidiary are being shouldered by the Trust’s shareholders without any compensating rewards.

The governance of Alliance Trust is questionable for two reasons.  First, it is a self managed Trust which can inhibit the strategic options available to the company.  Consequently the Board has tended to focus on supporting the status quo rather than on exploring outsourcing options.  Second, two of the members of the Board are executives of the Trust and are in a chronically conflicted position.  Specifically, any meaningful debate on outsourcing the management of the 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.

The decision to fight the requisition by Elliott Advisors in the way chosen, which was surely unwise and resulted in very high costs of £3 million imposed on shareholders, was a symptom of attempting to defend the status quo.

Summary of the key issues:

a) persistent underperformance relative to benchmark.

b) inflexibility of the Trust’s self managed model.

c) high costs relative to peer group and relative to historical costs (and we question whether the reported “On-going charges” figure accurately reflects the real costs).

d) high remuneration of the directors in comparison with similar companies.

e) persistent and high share price discount to net asset value.

e) losses being incurred in the subsidiary companies, and an apparent desire to expand those operations very substantially effectively turning the company more into a financial services business than a simple investment trust.

Some of the changes that the board might consider are given on the campaign web page mentioned above. The Shareholder Action Group will be urging the board to take action to review the strategy of the company and tackle the issues listed above. 

For further information, please contact:

Roger Lawson
Deputy Chairman, ShareSoc
Telephone: 020-8467-2686  

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