Elliott Advisors, which holds a 12% stake in Alliance Trust, has today called for three directors of its choosing to be put onto the Alliance Trust Board. They say they have concerns over corporate governance which they have raised with the company but didn’t feel they were getting a meaningful response.
The three nominees are Anthony Brooke, Peter Chambers and Rory MacNamara. Brooke is a former financial services industry executive who worked for investment bank SG Warburg & Co in the past, Chambers is the former chief executive of Legal & General Investment Management, the investment arm of FTSE 100-listed insurer Legal & General Group PLC, and McNamara is a former executive at investment bank Morgan Grenfell.
Elliott said its reasons for the move were that the trust has consistently underperformed against its sector peers and relevant benchmarks and they said shareholders are racking up losses due to the continued poor performance of its two operating subsidiaries. It also raised a concern about the “high and inflexible nature of the cost of the trust’s internal investment management function”.
Alliance Trust has confirmed that it has received a requisition for additional AGM resolutions and says a further announcement will be made in due course.
The text below is Elliott’s letter to Alliance Trust shareholders
Letter to shareholders
16 March 2015
Dear fellow shareholder
Funds advised by Elliott Advisors (UK) Ltd (“Elliott” or “we”) are the largest and long standing investors in Alliance Trust plc (“Alliance Trust” or the “Company”), with a beneficial economic interest exceeding 12%. We are writing to urge you to support the proposals at the Annual General Meeting in Dundee on 29 April to strengthen our Company’s Board by adding new independent non-executive directors.
A reputable search firm was engaged to advise on the task of adding experience, independence and a fresh perspective to the Board. They have succeeded in finding three excellent candidates in Anthony Brooke, Peter Chambers, and Rory Macnamara, who have agreed to be put forward for election.
This initiative is the culmination of numerous meetings and communications with the Chairman and other directors over the past four years, as well as frequent interactions with fellow large and small shareholders. We remain hopeful that the Board will recognise the contributions which these candidates could make to our Company and welcome them to the Board.
This letter explains the rationale for these proposals and why they are in the best interests of all shareholders.
Corporate governance concerns
Since we became shareholders in Alliance Trust in 2010, there has been a change of Chairman and all but one of the other non-executive directors. By contrast, the Chief Executive has been in her post longer than any of the non-executive directors. All appointments have been made by the Board itself, without shareholder consultation and without prior notice of a vacancy.
Late last year the Company made a significant management change by replacing its Head of Equities, who was responsible for managing over 95 per cent of the Company’s assets, after many years of poor investment performance. The post was filled without prior notice, through internal promotion without advertisement, without inviting external proposals, and without canvassing shareholder views.
In line with corporate governance guidance by the Association of Investment Companies, boards of investment trusts should regularly consider their form and investment strategy. The Board will be aware that large domestic and international external asset managers would be able to offer our Company several alternative investment strategies, with attractive return potential across the economic cycle and at competitive cost. Whereas other investment trusts have successfully negotiated reductions in asset management fees in recent years, the administrative costs of Alliance Trust have doubled under the present executive management.
We believe that the Board has failed to act in the spirit of this important governance principle by not inviting world-class asset managers to present alternative solutions to the Board, or directly to shareholders, to be considered as an alternative to continued internal investment management. This failure is symptomatic of broader corporate governance deficiencies and an unwillingness of the Board to challenge the status quo.
The result of the persistent underperformance of the investment portfolio and increasing costs is that our Company has among the highest discounts to intrinsic value among comparable investment trusts.
Board response
Over the past months, we have sought to engage constructively with the Board on these governance and substantive matters. We have sent several letters to the Chairman containing detailed questions about the Board’s motivations and the rationale for its decisions, and held meetings with the Chairman, the Senior Independent Director, and the Chief Executive. We are disappointed that we have not received any meaningful response from the Board on matters of substance, which demonstrates a lack of openness and consideration for areas of shareholder concern.
Candidates
As a result of this lack of engagement, we informed the Chairman several months ago that additional independent director candidates should be considered and evaluated. Accordingly, a search firm was instructed to identify individuals with strong professional credentials and relevant experience, in combination with a reputation for independence and concern for shareholder interests.
After a thorough search process, we are pleased to nominate three candidates, all of whom are completely independent of Elliott and who we are confident can make an outstanding contribution to the Board:
Anthony Brooke is a prominent former executive in financial services. During his time at BZW and Warburg he gained extensive experience in international capital markets where he advised companies and governments in the UK, US and Australasia. Subsequently, he was a partner of a fund-of-funds firm during a phase of significant growth in its assets. Mr Brooke is an experienced non-executive director of public and private companies and is a trustee of organisations in the educational and arts sectors and an advisor to a number of major endowments.
Peter Chambers is acknowledged as a leader in the UK investment management sector, with a background as Chief Executive Officer of Legal & General Investment Management and Framlington. After leaving executive service, he has been a consultant to several asset management firms and their investors, advising on business strategy, and serving as a nonexecutive director. Mr Chambers continues to serve on the boards and advisory councils of a number of the most important industry associations.
Rory Macnamara is a distinguished former senior corporate finance professional, with a reputation as a trusted advisor to dozens of boards and executives of renowned companies and governments in the UK and overseas. Subsequent to his executive career at Morgan Grenfell and other firms, he has served as Chairman or director of a number of public and private companies in a broad range of sectors. Mr Macnamara has served on the boards of several investment trusts, and is currently Chairman of a successful investment trust in the UK equity income sector. He has contributed to several charities in the educational sector and in support of disabled children.
Conclusion
We urge all shareholders to support these proposals by voting FOR the resolutions electing Messrs Brooke, Chambers, and Macnamara to the Board of our Alliance Trust.
For full biographies on the candidates and further information, please refer to www.improvealliancetrust.com, email improvealliancetrust@boudiccaproxy.com, or call +44 20 7183 8215 (local / international) or 0808 1893176 (freephone).
Sincerely
Elliott Advisors (UK) Ltd
ATST : Alliance Trust targeted by Elliott