Alliance Trust-Elliott row intensifies

The row between Alliance Trust and Elliott Advisors deepened on Thursday as the investment trust rejected accusations from the US hedge fund's UK arm that it is misstating its cost base and not paying high enough dividends.

Alliance, which is seeking to prevent Elliott from appointing three non-executive directors to the board at its annual general meeting on April 29, said it refuted "Elliott's allegation that the true cost to shareholders is higher than reported".

It said its ongoing charges ratio "is audited and is calculated in accordance with the Association of Investment Companies guidelines, which ensures comparability across the sector".

On dividends, Alliance, which is one of the UK's largest trusts with £3.6bn in assets, said its record of increasing dividends for 48 years "is almost unequalled by any FTSE listed company".

Elliott, which owns 12 per cent of Alliance and on Monday increased its voting share from 5.07 per cent to 9.9 per cent, wants to appoint the three new directors in an attempt to improve the trust's performance.

On Tuesday the hedge fund said in a highly-critical statement that Alliance's circular of last week in which it sought to persuade shareholders not to vote for the three new directors "fails to engage on matters of substance and resorts to personal attacks in a manner unbecoming of directors of a public company".

Elliott said that, based on "authoritative third-party data, over all relevant return periods Alliance Trust has underperformed its sector peers and relevant benchmarks".

The trust has delivered a below average return of 52 per cent over a five-year period, according to data from Lipper. Some other trusts investing in global equities have produced returns of more than 100 per cent over the same time period.

Elliott also accused Alliance of distorting its ongoing charges ratio as it excludes "the cost of certain forms of compensation . . . and excludes costs which are recharged from the company to its lossmaking subsidiaries".

It also said Alliance's earnings per share and dividend cover "would have fallen last year absent a temporary and unsustainable revenue increase from legacy assets and an unsustainable and unusual accounting treatment related to a dormant subsidiary".

On Sunday, Tim Ingram, who sat on Alliance's board for two years until 2012, wrote in an open letter to shareholders that the trust's performance had been "dismal" and criticised the pay of its chief executive, Katherine Garrett-Cox.

"I will be voting my shares in favour of the three new directors joining the board, and would suggest that any other shareholder seeking better returns does likewise," Mr Ingram said.

© The Financial Times Limited 2015. All rights reserved.
FT and Financial Times are trademarks of the Financial Times Ltd.
Not to be redistributed, copied or modified in any way.
Euro2day.gr is solely responsible for providing this translation and the Financial Times Limited does not accept any liability for the accuracy or quality of the translation