March 7, 2014 / 7:46 AM / 4 years ago

UPDATE 3-Alliance Trust sets up English companies ahead of Scotland vote

* NAV/shr 516.5p, reflecting total return of 18.4 pct

* FY dividend up 12.5 pct at 10.83p/shr

By Chris Vellacott

LONDON, March 7 (Reuters) - Alliance Trust Plc, a Scotland-based investment manager, has begun preparations for a possible move to England ahead of the Scottish independence referendum, adding to evidence of corporate unease over the looming vote.

Alliance said on Friday it was creating companies in England into which it could transfer activities, in a precautionary move because of uncertainty over the implications of a pro-independence vote on tax, financial regulation, currency and EU membership.

“We are extremely proud of our 126 year Scottish heritage but I think the reality is you have to be very aware of the risks that your customers are facing and ensure you can provide certainty and continuity of services,” Chief Executive Katherine Garrett-Cox told Reuters in an interview.

The comments by Alliance Trust, based in Dundee on Scotland’s east coast and which employs around 250 staff, come after similar plans by larger Edinburgh-based peer Standard Life Plc announced last month.

Scots will vote in September in a referendum on whether they want to split from the rest of the United Kingdom, ahead of which a political row has erupted over whether an autonomous Scotland will be able to keep the pound.

Scottish leader Alex Salmond wants to share the currency with the rest of the UK, but the major British parties have rejected this idea.

It is also unclear how easy it would be for Scotland to join the European Union, since European Commission President Jose Manuel Barroso has said states breaking away from existing EU countries would struggle to gain membership.

Garrett-Cox said Alliance Trusts’ clients, 80 percent based in England, had become increasingly concerned about the impact independence would have on money invested with the firm. The firm has gross assets of more than 3.2 billion pounds ($5.4 billion), according to its website.

“What is very clear from conversations ... we’ve had with our customers is that this is at the top of their list of risks, and that’s why we felt that we needed to be completely transparent about what’s happening here,” she said.

Alliance did not say if it envisaged moving its operations or just its legal domicile in the event of a “yes” vote.

Responding to the Alliance Trust statement, Scotland’s Finance Secretary John Swinney reiterated Scotland - which already has a form of devolved government - would keep the pound even if it splits from the UK.

“The issues raised by Alliance Trust are entirely addressed by the propositions put forward by the Scottish Government and show exactly why our proposals for a formal currency area are the right proposals,” Swinney said.


Among other Scotland-based financial firms, Royal Bank of Scotland Group Plc has also warned independence could affect its credit ratings, impacting its costs.

Such comments are important given Scotland is home to the second-largest financial services centre in the United Kingdom after London, accounting for about 150,000 jobs.

Some other companies have also voiced disquiet over the implications of independence. In the energy sector - also crucial for Scotland given the oil and gas reserves in the North Sea - Royal Dutch Shell Plc has urged Scotland to stay in the UK.

Among other major Scottish companies, Aggreko Plc, a provider of temporary power generators, said independence would likely add significantly to its administration costs, though two airlines - British Airways and Ryanair Holdings Plc - have said Scottish independence could be good for them due to proposals to abolish air passenger tax.

Alliance also posted annual results showing a net asset value of 516.5 pence per share, reflecting a total return of 18.4 percent. The group also announced a 12.5 percent increase in its yearly dividend to 10.83 pence.

Activist investor Elliott Management recently increased its exposure to Alliance Trust to more than 10 percent. A market filing last month showed the hedge fund had increased its direct ownership of shares to just over 5 percent. It also holds contracts for difference - a type of derivative - amounting to just over 5 percent.

Garrett-Cox said the investor had not been in touch since the market filing.

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