Mediaboss Marketing

By Tommy Wilkes

LONDON (Reuters) - Laxey Partners is calling on Alliance Trust to raise its dividend, the latest move by the Isle of Man-based hedge fund to try to shake up performance at one of Britain's largest investment trusts.

In a letter addressed to the trust's chairman Lesley Knox, Laxey said Alliance will be in a position to pay larger dividends when new tax rules come into force allowing some investment trusts to pay realized capital gains as dividends for the first time.

Laxey, which has waged a campaign dating back to 2010 to try and force Alliance to boost shareholder value, is upping its pressure on the trust to improve performance ahead of its annual general meeting next month.

Earlier this month, it put forward a resolution to fellow shareholders demanding the trust consider outsourcing management of its 2.9 billion pound portfolio of assets, and criticizing the performance of Alliance as "completely unacceptable."

Alliance Trust said on Thursday in response it had already hiked its dividend by 7 percent last year, the largest annual rise in two decades. Laxey also gave an example of how Alliance could increase its dividend by paying out all 2011 earnings per share and realized capital gains as a dividend.

"The example given by Laxey makes Greek finances look prudent," a spokesperson for the trust said.

Last year Alliance defeated a controversial shareholder resolution pushed by Laxey to set up an automatic buyback policy, which would have been triggered when a discount of its shares to net asset value fell below 10 percent.

A discount to net asset value occurs when the market places a lower value on a company - measured by its share price - than the value of its component assets. This is often because investors believe those assets are poorly managed or illiquid, and so their full value is not reflected in the shares.

Many investment trusts trade at such a discount, but few as wide as Alliance.

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Hedge fund Laxey urges dividend hike at Alliance Trust