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Alliance Trust CEO steps down from board as Elliott forces overhaul

Alliance Trust Chief Executive Officer Katherine Garrett-Cox speaks at the Commonwealth Games Business Conference in Glasgow, Scotland, July 23, 2014. REUTERS/Suzanne Plunkett

By Nishant Kumar and Matt Scuffham

LONDON (Reuters) - Katherine Garrett-Cox, one of the City of London's most high profile women CEOs, is to step down from the board of Alliance Trust in an overhaul of the fund manager which has faced pressure from activist investor Elliott to make changes.

Garrett-Cox, who will continue as chief executive of Alliance Trust Investments, has long been battling demands from shareholders to tackle the fund's underperformance and the gap between its shares and the value of the assets it holds.

The 127-year old trust, with total assets of 3.3 billion pounds ($5 billion), said on Thursday it planned to sell non-core investments, including its fixed income, mineral rights and property assets, and cut costs to produce savings of 6 million pounds next year. It plans to make its board fully independent, consisting solely of non-executive directors.

Chairman Karin Forseke dismissed suggestions by shareholder advisory group ShareSoc that the changes may not be enough to satisfy Elliott, which has a 14 percent stake in Alliance Trust.

"This is not the thin end of the wedge," Forseke told Reuters, adding that the changes had been made in consultation with all of the trust's investors, including its 70 percent retail shareholder base.

"We have looked at every possibility, there have been no sacred cows in this organization."

Elliott declined to comment.

The group will create separate boards for its fund management division Alliance Trust Investments and its Alliance Trust Savings business to increase accountability.

The trust will aim to implement its cost cuts by end of 2016. Forseke said the cost-saving program would lead to job cuts, without specifying a number.

Alliance Trust will adopt the MSCI All Country World Index as its benchmark and aim to outperform it by at least 1 percent per annum after fees.

It said if its performance does not consistently deliver against a new benchmark, it will begin a full review and consider external managers.

"We see this as step one in an evolutionary process," Roger Lawson, deputy chairman of shareholder advisory group ShareSoc said in a statement.

"But it is not clear that these changes will quickly make the Trust more attractive to investors, or ensure that Elliott Advisors do not come back with more demands for changes in the future."

Forseke declined to say whether Garrett-Cox's pay would drop, but said the trust's remuneration committee would take the planned changes into consideration.

"It is not quite clear where the changes will leave Katherine Garrett-Cox in the long term. Her influence over the board has been significantly reduced," Charles Cade, analyst at Numis said.

The overhaul follows a campaign by Elliott Advisors earlier this year to improve the fund group's performance and reduce its discount to net asset value.

Alliance Trust had agreed a ceasefire in April with Elliot, its largest individual shareholder, agreeing to revamp its board by appointing two of the three directors backed by Elliot.

The group's shares rose more than 2 percent to 468 pence at 1447 GMT, narrowing the discount to its net asset value but trimming gains from an earlier 4 percent rise.

Before the announcement, the shares traded about 12.4 percent below its net assets. That compared with 4.9 percent for its peers, which include Scottish Mortgage and F&C Investment Trust, data from trade body AIC showed.

(Additional reporting by Carolyn Cohn; Editing by Jane Merriman)