Hermes Investment Management and Axa Investment Management submitted a proposal to transform the trust into a split fund, with assets divided between a UK index fund and a managed fund. The two shareholders believe that this would have reduced the Scottish Investment Trust's share price discount to its net assets.
But the proposal was rejected by the board of the trust on the grounds that it was too complex and costly. "They [the proposals] would create a complicated structure that would be expensive to put in place and costly to run and therefore not in the interests of shareholders," said Sir Angus Grossart, chairman of the Scottish Investment Trust.
The proposal, which is estimated to cost £22m to implement, would involve shareholders converting their holding into reclassified shares in sub-funds. Grossart also said that the proposal would require the trust to deal with its £222m debt position and also sell up to £290m of its overseas assets and purchase up to £170m of UK equities.
The board of the trust argued that the proposal offers no potential to increase long term value for shareholders in an instrument that has outperformed its benchmark. Over the last five years the Scottish Investment Trust's net asset value has grown by 18.1% while its benchmark has seen an increase in value of 16.7%.