War of words worsens as Laxey demands Alliance dividend rise

THE ROW between Alliance Trust and activist investor Laxey Partners deepened yesterday as the hedge fund’s demand for a major hike in the dividend was dismissed as Greek-style economic management.

Laxey received a withering response after it wrote to Alliance chairman Lesley Knox saying the fund will be in a position to pay larger dividends when new tax rules come into force allowing some investment trusts to pay realised capital gains as dividends for the first time.

It also gave an example of how Alliance, run by Katherine Garrett-Cox, could increase its dividend by paying out all 2011 earnings per share and realised capital gains as a dividend.

Alliance said, however that it had already increased its dividend by seven per cent last year and a spokesman added: “The example given by Laxey makes Greek finances look prudent.”

Laxey, based on the Isle of Man, has long called on Alliance to improve the performance of its investments and the discount at which its shares trade relative to their net asset value. Earlier this month it asked Alliance to consider outsourcing the management of its £2.9bn portfolio of assets.

The dispute is likely to come to a head when Alliance’s AGM is held on 27 April.