SIT dumps chairman's merchant bank as adviser

Scottish Investment Trust yesterday attempted to curry favour with shareholders by saying it would no longer use the merchant bank Noble Grossart as its adviser.

The relationship between the bank and the beleaguered £900m trust has triggered a storm of protest among some of SIT's shareholders because the two organisations share the same chairman, Sir Angus Grossart.

Hermes, the fund manager which takes a proactive approach to companies it invests in, complained that the crossover violated good corporate governance rules because it created a conflict of interest for Sir Angus. Hermes, which owns a 9 per cent stake in SIT, warned it would probably vote against the re-election of Sir Angus when he stands for re-election at the trust's annual meeting on 28 February.

SIT paid Noble Grossart £300,000 in fees in 2001, for its help fending off an attempt by the US vulture fund Sierra Trading to break the trust up. The trust has never retained Noble Grossart, which is owned by Sir Angus, but used it for one-off projects.

SIT issued a statement making it clear it would in the future use different advisers. It said it was clarifying the matter after the Financial Services Authority published a consultation paper this week recommending that directors of investment trusts should not also be their professional advisers.

SIT said: "SIT has used Nobel Grossart's services only five times in 27 years. Sir Angus had no involvement in the decision to use Noble Grossart on those occasions and was not involved in the work carried out by Noble Grossart."

Shareholder bodies welcomed SIT's decision. James Murray, Scottish chairman of the UK Shareholders' Association, said: "We welcome the move, but SIT should have taken action rather than being pushed into it."