Half-yearly Report

Alliance Trust - Interim Results for the six months ended 31 July 2009 Highlights Over the last six months Alliance Trust has: * reiterated the focus on investment in equities by reducing cash and increasing core equities exposure to 89% of net assets, adhering to its long term conviction-based investment approach * increased exposure to the UK, US and Asia * increased Net Asset Value by 6.8% * achieved total shareholder return of 8.8% * ranked 36th of 44 Global Growth and Global Growth and Income Investment Trusts for total shareholder return Over the longer-term one year view, Alliance Trust has: * delivered a total shareholder return which has outperformed both the Global Growth Sector and the FTSE All-World Index * ranked 16th of 44 Global Growth and Global Growth and Income Investment Trusts for total shareholder return Progressive dividend * maintained progressive dividend policy and raised the payment by 1.25% compared to the first half of 2008, at a time when over 40% of FTSE 100 companies have cut or held their dividend * two further payments of 2.025p will be paid by the year end - intention is to pay a final dividend of at least 2.025p in April 2010. Discount to net asset value stabilised, ending the period at 15.2% Commenting on the interim results, Katherine Garrett-Cox, Chief Executive, said: "Over the last six months, we have continued to deliver on our stated strategy of investing in a balanced portfolio of well-managed quality companies with strong balance sheets and a proven track record. During the period we have steadily reinvested our cash position, ending the period modestly geared. We look for a combination of capital growth and income from our investments - our policy is to invest in companies and not share prices. This policy is helping us to deliver a progressive dividend to our shareholders. Looking forward, we expect the recovery of the global economy to be a long process, but we strongly believe that with our long term conviction-based investment approach, Alliance Trust is well-positioned to continue to deliver superior returns to investors." Contact Details: Conor McClafferty and Clare Dundas, Finsbury Group, 020 7251 3801 Alliance Trust PLC INTERIM REPORT FOR THE SIX MONTHS ENDED 31 JULY 2009 Statement of Investment Objective and Policy Alliance Trust is a self-managed investment company with investment trust status. Our objective is to be a core investment for investors seeking increasing value over the long term. We have no fixed asset allocation benchmark and we invest in a wide range of asset classes throughout the world to achieve our objective. Our focus is to generate a real return for shareholders over the medium to long term by a combination of capital growth and a rising dividend. We pursue our objective by: • Investing in both quoted and unquoted equities across the globe in different sectors and industries; • Investing internationally in fixed income securities; • Investing in other asset classes and financial instruments, either directly or through investment vehicles; and • Investing in subsidiaries and associated businesses which allow us to expand into other related activities. We are prepared to invest any proportion of the total corporate capital in any of the above asset classes, subject only to the restrictions imposed on us by the regulatory or fiscal regime within which we operate. However, we would expect equities to comprise at least 50% of our portfolio. Changes to the asset allocation will be dependent upon attractive investment opportunities being available. Where market conditions permit, we will use gearing of not more than 30% of our net assets at any given time. We can use derivative instruments to hedge, enhance and protect positions, including currency exposures. Company Statistics 31 July 31 January Change 2009 2009 Net Asset Value (basic) 338.3p 316.8p 6.8% Net Asset Value 337.4p 315.9p 6.8% (diluted) Share Price* 286.8p 268.0p 7.0% Discount to basic Net 15.2% 15.4% Asset Value Performance for 6 Capital Total months to 31 July 2009 Return Share Price 7.0% 8.8% FTSE All-Share Index 13.2% 16.1% FTSE All-World Index 12.1% 4.2% (sterling adjusted) Performance Relative to Peer Group to 31 July 2009 (Total Return) ** 6 months 1 year 3 years 5 years Ranking*** 36/44 16/44 24/37 24/34 *Source: FactSet ** The peer group consists of the companies in the AIC Global Growth and Global Growth and Income sectors and is listed in full in our annual report and accounts for 2009. F&C Managed Portfolio - Growth and F&C Managed Portfolio - Income were added to the peer group in the period. *** Source: Thomson Financial, Fundamental Data, AIC and Cazenove Performance Summary This interim report sets out the results of Alliance Trust PLC for the six months ended 31 July 2009. Over the past six months the Company's basic net asset value per share increased by 6.8%. The Total Shareholder Return (TSR) was 8.8% over the period. The discount to net asset value was much more stable than in the preceding six months ending at 15.2%, broadly in line with the discount at the start of the financial year. The return for the period compares to a total return of 14.2% on the FTSE All-World Index. The TSR is ranked at 16 out of a peer group of 44 Global Growth and Global Growth and Income Investment Trusts over the last twelve months but has fallen to 36 out of 44 when measured over the last six months. This reflects our reluctance to commit aggressively shareholders' capital in a period of rapid, but in many cases narrowly based, recovery in equity markets. The last six months have been marked by an extreme rally in world markets which during March and April saw increases of up to 30%. These increases for the most part reflected changes in the share price of companies that had experienced the greatest falls in the previous twelve months. We believe that in some cases there has been no fundamental change to these companies and that the increase in their share price is not necessarily reflective of any improvement in their underlying value. Our investment philosophy is to focus on well-managed quality companies with strong balance sheets and cashflow generation. Our selective approach in investing only in companies which meet these criteria means that each portfolio has a relatively small number of stocks in which we have a high level of conviction. We firmly believe that this investment strategy will provide greater value and lower risk for our shareholders over the long term. We reinvested cash into stock markets in the early part of the year, increasing our holdings in companies which fit our core philosophy. These are not the type of companies which rallied so strongly at the start of the recovery. When combined with our holdings of non-equity investments, this has meant that during the period we have lost some ground against both the FTSE All-World Index and our peers, although our performance since the main rally in March and April has been broadly in line with the major indices. We have allocated cash back into the UK and Asian markets and both these areas have outperformed the FTSE All-World Index. In the UK we invested for income to protect our dividend and in Asia for capital growth. Over 40% of FTSE 100 companies have cut or held their dividend payments in the last 12 months. We believe that our portfolio is structured to support a continued and progressive dividend for the year to 31 January 2010. In our Annual Report and Accounts we set three corporate targets and five key priorities for the year. After six months, progress towards these is as follows. Corporate Targets % Change in Net Asset Value relative to FTSE All-World Index During the first six months we underperformed the index. Over the longer 1 year view we have also underperformed. Much of this is attributable to being underinvested in the stocks which recovered so sharply in March and April 2009. TSR Rank vs Peer Group above median Our share price performance has lagged the peer group and we are ranked in the 4th quartile over the first 6 months of the year. Over the longer 1 year view, we are ranked 16th out of 44, which places the Company in the 2nd quartile. Dividend Increase in excess of RPI The two quarterly dividends paid for this year represent an increase of 1.25% on the amounts paid for the same period last year and we intend to make two further payments of at least 2.025p. Currently we have an earnings reserve of over £92 million. We expect to achieve this target. Key Priorities To focus on investment in equities Core equities represented 89% of net assets at 31 July 2009 compared to 77% at the start of the period as we steadily allocated cash into our global equity portfolios. With regard to other asset classes, our exposure to Private Equity, Preference Stocks and Commercial Property was largely unchanged. To continue to improve investment performance There has been an improvement in our absolute performance compared to the first six months of last year, albeit our return has been lower than the average of our peer group. To manage our cost base in line with market conditions As a self-managed investment trust, we are acutely aware of the need to manage the cost base of the Company. We have continued to apply tight control over costs, making tough short term decisions which will deliver significant savings in the longer term, only increasing expenditure where we believe it will enhance our investment capability. Expenditure in the six month period was less than for the equivalent period last year. To develop our subsidiary businesses Despite the constraints of our budgetary controls, we have managed to strengthen the skills of our management team and have recruited key personnel who will assist in the development of our subsidiary businesses. To invest in the development of our people Having relocated to our new headquarters in Dundee, we have seen significantly improved communication within the business and this has, in turn, led to improved efficiency. Investment Overview In the early part of the year stock markets were weak as the global outlook was dominated by concerns over the length and depth of economic recession and whether the policy responses of governments would be effective, thereby preventing recession turning into depression. In February we identified a number of good quality investments and invested some £110 million into the market, increasing our equity exposure from 77% to 81%. In March, we saw a very sudden change occur in investor sentiment. Share prices of certain companies rose strongly and quickly from depressed levels, as stock markets began to reflect the belief that the pace of economic decline was slowing. We elected to remain consistent to our long term approach, continuing to invest only in companies which we believe are strong and will generate both sustainable capital growth and income rather than just short term gains. Our performance benefited last year from not holding the weakest of the UK banking stocks, but lagged through the middle of the period by not participating in the dramatic share price rally in these same stocks. We remain of the view that such stocks do not represent good long term value. These companies have, in many instances, experienced substantial dividend cuts and do not meet our core requirement for a strong recurring dividend payment. In general, we have placed great emphasis on the sustainability of dividends in our investment decisions, conscious of the market expectation that UK dividends will decline by around 20% in 2009. Our cautious view of the speed of economic recovery also led to our being underweight in mining and consumer goods, both of which performed well over the period. Gradually, we have altered the bias in our regional equity portfolios towards a more balanced approach, through the addition of some cyclical stocks in areas where we expect to see early benefits emerging from a sustainable, long term recovery. Asset Allocation % of net % of net assets assets January 2009 July 2009 UK 31.4 34.8 North America 19.7 20.3 Europe 9.2 9.7 Pan Asia 7.3 12.1 Global 9.4 12.4 Direct Property 3.2 2.7 Private Equity 2.6 2.9 Other investments 3.8 3.0 Preference Shares 0.8 1.0 Subsidiaries 1.7 1.6 Cash & Other Net Assets 10.9 (0.5) Asset Allocation Reflecting our belief in the strength of the Asian markets we committed an additional £80 million to that region. We believe that Asia does not share the fiscal problems of many developed economies. Asia's future expansion will not be hampered by the large government debt burden faced by other economies. Our Asian investments performed very strongly, their 28% rise in Sterling terms representing the highest absolute return among our regional portfolios. We also added to our Global, UK and North American portfolios, all of which showed positive returns. Active decisions on currencies are taken as part of our asset allocation process as currency moves can significantly impact on our investment performance. Our decision to hedge part of our European exposure at a Sterling/ Euro exchange rate of 1.12 in April, based on our forecast of a depreciating Euro, proved a timely move with the Euro standing at 1.17 at the period end. Cash stood at just over 11% of net assets at the start of the period, but by 31 July 2009 we were fully invested and had moved to a position of net gearing of 1%. The high cash position held last year helped to protect the portfolio at that time. However, as a global equity focused investment trust, we recognised that this did not represent a sustainable, or indeed a low risk, position for the long term. Cash returns remain at historically low levels. We partially invested the cash into long term positions in quality investments ahead of the rally which started in March. In July we also added further to income generating UK holdings. We have the capability and willingness to increase gearing further when we believe such a move is warranted by market prospects. Equity Portfolio Statistics From 31 January 2009 to 31 July 2009 Net Portfolio Benchmark Index Relative Assets% Return% Return% Return% UK 34.8 9.2 16.2 (6.0) North 20.3 5.3 8.1 (2.6) America Europe ex UK 9.7 16.4 18.0 (1.3) Pan Asia 12.1 28.3 36.2 (5.8) Global 12.4 8.3 14.2 (5.2) Equity Investment We invested £80 million into our UK equity portfolio during the period in order to support our commitment to a progressive dividend. We have in addition rationalised the number of our UK holdings by combining the former UK Large Cap and UK Mid Cap portfolios to create a single UK portfolio. Primarily, we have reduced our number of Mid Cap holdings and created a more balanced portfolio, retaining a bias towards companies with defensive characteristics, but with exposure to some cyclical stocks where we can anticipate an improvement in demand and have a degree of confidence in visibility of earnings. Holdings in the banking group HSBC, which should benefit from its growth prospects in Asian markets, and mining companies BHP Billiton and Xstrata are representative of this theme. The UK economy has experienced its sharpest contraction of the post-war period. Having reduced interest rates to record lows, the government has initiated a programme of quantitative easing in a bid to stimulate activity. This appears to be having short term success in stabilising the financial system but exacerbates concerns over the scale of government debt in the medium term. Many UK companies, however, generate a large proportion of their earnings in overseas markets which will help protect them from the weakness of the UK economy. Bank lending remains tight and asset sales are unattractive at current prices. There have been a large number of rights issues and share placements by UK companies over the period. We participated in a few of these rights issues including the property investment and development company Great Portland Estates. Underwriting commission was also beneficial to our revenue account. Further equity issuance is likely as companies seek to strengthen their balance sheets. Following two years of very strong relative outperformance, our North American portfolio lagged the benchmark index by 2.6% as higher risk companies, to which we have little exposure, benefited most in the market recovery. Portfolio activity was limited through the period. Our main energy-related investments, InterOil and Petro-Canada, which has now merged with Suncor Energy, performed well. We increased our holding in the waste disposal company, Republic Services, which also performed strongly. Our financial holdings are biased towards strong defensively positioned banks; these have performed poorly against the strong rally in more highly leveraged banking stocks. The unprecedented expansion of the Federal balance sheet has enabled credit markets to ease from their state of extreme stress. Banks have managed to raise fresh capital and, in some cases, have repaid money received from the government's emergency support programme. Investors have been encouraged by the belief that the worst of the financial crisis is past, even if economic fragility persists. Much of the recovery from market lows, however, has been eroded for Sterling investors by the relative strength of Sterling against the US Dollar. We have adopted a less defensive stance in our European portfolio, having increased our weighting in the financial sector by adding to our holdings in BNP Paribas and AXA. We have also initiated a holding in Zurich Insurance. We consider these to be higher quality companies where valuations had fallen to attractive levels. We remain cautious on the longer term outlook for industrials where we consider valuations to be less appealing. Expectations that European economies would fare better than those of the US and the UK were dashed at the start of this year. Germany, in particular, saw a collapse in its exports which had a knock-on effect on other European economies. Governments were, however, proactive in introducing stimulus measures such as car scrappage schemes. Although unemployment rates in some countries reached exceptionally high levels, such as Spain at 18%, Germany was less affected as its government introduced financial support for `short term working'. Recent indications show that such measures are helping to bring stability to economies, albeit at lower levels. We have combined our Asia Pacific and Japan investment teams into a Pan Asian capability. We took the opportunity to increase significantly our exposure to Pan Asian equities as we believe that economic growth in this region will be stronger than other major economies. We invested an additional £80 million in the region, focusing on China, India and Indonesia. Our weighting stood at 12% at 31 July against 7% at the previous year end. We added to holdings in financials and consumer goods and in infrastructure companies in China. China's large domestic stimulus package has offset the impact of declining export demand. We have invested in high quality companies such as China Shenhua Energy, the largest coal mining company in China. Our holding in Hon Hai Precision, the largest electronics manufacturing services company in the world, is benefiting from better than expected worldwide demand for computers. The domestic economy in Japan is suffering as deflation has become entrenched. Export companies are, however, benefiting from growth in Asian markets. We increased our Japanese investments in the belief that industrial companies would gain as manufacturing recovers. In Japan, we hold NIDEC Corporation, a maker of precision motors and SUMCO Corporation which produces silicon wafers for the semiconductor industry. We expect the slowdown in Asian economies to bottom in 2009 and are optimistic on the outlook for the Pan Asia region. The composition of our Global Equity portfolio accentuates the broader investment team's highest conviction ideas on a globally diversified basis. The portfolio now reflects expectations of an improvement in the economic environment. This is likely to be driven by a degree of stability returning to the financial system and industrial production recovering as Government stimulus programs generate demand through infrastructure related projects. The portfolio's exposure to oil and gas exploration has been increased given the continued expectation of supply constraint over the medium term. Utility weightings have been reduced as the regulatory environment has proved more stringent. Other Asset Classes Our quoted Private Equity holdings experienced strong performance as discounts to net asset values narrowed. Among the best performers were 3i, Electra and Standard Life European Private Equity. We have not added significantly to our commitment to lower to mid market private equity managers. We continue to consider new pan-European fund opportunities but maintain a cautious outlook while reducing our quoted private equity exposure. The capital value of the Preference Stock portfolio increased by 20% from £13.7 million to £16.4 million over the past six months, as the UK financial sector rose strongly from its depressed levels. The annual income yield on the portfolio remains attractive at more than 9%. We are delighted to have announced, after the period end, the appointment of a new Fixed Income team of four highly experienced fixed income managers from Scottish Widows Investment Partnership. In the present challenging environment, the addition of fixed income expertise will provide greater flexibility in our asset allocation, enhance the income earning potential of our portfolio and help reduce our reliance on equity investments for income. The team will join the Company in early 2010. The value of our Commercial Property portfolio fell by 8.2% to £51.7 million over the past six months. Gross rental income amounted to £2.0 million: currently all properties are currently fully let. Our intention is to reduce our exposure to this asset class, as and when disposals at realistic market valuations can be achieved. Financial Services Subsidiaries Within Alliance Trust Savings, a rigorous programme of service and administration improvements has been undertaken under the leadership of its new Chief Executive, Robert Burgess. We are pleased to report that significant progress has been made. Customer numbers and assets under administration remain largely flat despite the market falls. The loss during the period largely reflects the impact of the current low interest rate environment on the revenues of the business. Alliance Trust Asset Management launched its first two funds in February. Initial market reaction has been encouraging but significant progress will take time in this very competitive market. The two funds enable investors to access directly the expertise of the Trust's UK and North American equity teams. The North American Equity Fund has been awarded an "A" rating by Old Broad Street Research, one of the UK's most influential fund rating agencies. Outlook Twelve months on from the events that led to the financial market crisis of late 2008 it is a good time to look at the current state of the global economy and the outlook for 2010. Several of the leading economic indicators which we monitor closely are showing encouraging signs of recovery and we are more optimistic on the prospects for the global economy than we were earlier in the year. Confidence indicators are improving rapidly, particularly with regard to financial markets and the corporate sector, suggesting that we are entering a period of growth, but of questionable sustainability. There have been many changes in the last quarter. Financial markets have improved sharply, business confidence has returned and some major economies have already exited recession. We expect this favourable trend to continue in the short term while current fiscal and monetary policy remains unchanged, but we are concerned about the sustainability of this recovery. Debt levels remain high, particularly in the public sector, and fiscal and monetary stimulus will have to be withdrawn at some stage. That implies higher interest rates and taxes and cuts in government spending. Inflation is expected to trough in the second half of the year and then begin to increase from a low base. Low pricing power will lead companies to retain strict control of costs. Currency volatility should be relatively low, although we may see the US Dollar gaining some strength on speculation of higher US interest rates in 2010 as the US economy strengthens. We are hopeful that the global economy is entering a long term recovery phase but we do not expect the recovery to be smooth or rapid. Against this environment, our strategy for recommitting cash into equities is to invest in a balanced portfolio of quality companies which are able to demonstrate management capability and robust financial performance. We continue to seek opportunities to invest to achieve our aim of providing a combination of capital growth and a rising dividend with a moderate level of risk over the medium to long term. We favour Asian markets as growth rates in the region should remain higher than in other major economies and companies are in sound financial health. In the US our holdings are positioned to benefit from a recovery in the economy. Our relatively high exposure to the UK reflects the income generating attributes of our portfolio. Dividend In accordance with our quarterly dividend policy the Company paid an interim dividend of 2.025p per share on 31 July 2009. A second interim dividend of 2.025p per share will be paid on or around 2 November 2009 to shareholders on the register on 2 October 2009. For the financial year ending 31 January 2010 and in the absence of any unforeseen developments, we expect to be able to recommend a third interim dividend of 2.025p payable on or around 1 February 2010, and a fourth interim dividend of at least 2.025p payable on or around 30 April 2010. Responsibility statement of the directors in respect of the half-yearly financial report We confirm that to the best of our knowledge • The condensed set of financial statements has been prepared in accordance with IAS 34 "Interim Financial Reporting" as adopted by the EU: • The interim management report includes a fair review of the information required by: (a) DTR 4.2.7R of the "Disclosure and Transparency Rules", being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and (b) DTR 4.2.8R of the "Disclosure and Transparency Rules", being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so. Signed on behalf of the Board Katherine Garrett-Cox Lesley Knox Chief Executive Chairman 18 September 2009 18 September 2009 CONDENSED Consolidated Income Statement (Unaudited) For the period ended 31 July 2009 6 months to 6 months to Year to 31 July 2009 31 July 2008 31 January 2009 (audited) £000 Revenue Capital Total Revenue Capital Total Revenue Capital Total Revenue Income 56,010 - 56,010 68,785 - 68,785 117,283 - 117,283 Gain/(Loss) on fair - 151,535 151,535 - (122,904) (122,904) - (551,495) (551,495) value designated investments Loss on investment - (4,620) (4,620) - (15,645) (15,645) - (23,832) (23,832) property held -------- --------- --------- -------- -------- --------- -------- -------- --------- Total revenue 56,010 146,915 202,925 68,785 (138,549) (69,764) 117,283 (575,327) (458,044) Administrative (17,059) (931) (17,990) (18,850) (586) (19,436) (40,069) (1,981) (42,050) expenses Finance costs (301) (554) (855) (2,720) (2,019) (4,739) (4,322) (3,053) (7,375) Impairment Losses - - - - - - (1,759) (9,074) (10,833) Loss on revaluation - (969) (969) - - - - (6,786) (6,786) of office premises Foreign exchange - (3,873) (3,873) - (910) (910) (271) 8,221 7,950 (losses)/gains -------- --------- ------------ -------- --------- --------- -------- --------- --------- Profit/(loss) before 38,650 140,588 179,238 47,215 (142,064) (94,849) 70,862 (588,000) (517,138) tax Tax (4,524) 155 (4,369) (5,421) 560 (4,861) (10,552) 3,627 (6,925) -------- -------- -------- -------- -------- -------- -------- -------- -------- Profit/(loss) for 34,126 140,743 174,869 41,794 (141,504) (99,710) 60,310 (584,373) (524,063) the period ======== ======== ======= ======== ======== ======== ======= ======== ======= Attributable to: - Minority interest 124 403 527 25 (734) (709) 1 (866) (865) - Equity holders of 34,002 140,340 174,342 41,769 (140,770) (99,001) 60,309 (583,507) (523,198) the parent -------- -------- -------- -------- -------- -------- -------- -------- -------- 34,126 140,743 174,869 41,794 (141,504) (99,710) 60,310 (584,373) (524,063) ======== ======== ======= ======== ======== ======== ======= ======== ======= Earnings/(loss) per share from continuing operations attributable to equity holders of the parent Basic (p per share) 5.07 20.94 26.01 6.23 (21.00) (14.77) 9.00 (87.06) (78.06) Diluted (p per 5.06 20.89 25.95 6.22 (21.00) (14.78) 8.98 (87.06) (78.08) share) CONDENSED CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE(Unaudited) 6 months to 6 months to Year to 31 July 2009 31 July 2008 31 January 2009 (audited) £000 Revenue Capital Total Revenue Capital Total Revenue Capital Total Income and expenses recognised directly in equity: Defined benefit plan - 421 421 - (3,339) (3,339) - (3,282) (3,282) net actuarial gains/ (losses) Retirement benefit - (118) (118) - 925 925 - 891 891 obligations deferred tax Loss on revaluation of - - - - (425) (425) office premises Exchange differences - 462 462 - - - - 984 984 on translation of foreign subsidiary Profit/(loss) for the 34,126 140,743 174,869 41,794 (141,504) (99,710) 60,310 (584,373) (524,063) period ======= ======= ====== ======= ====== ====== ====== ====== ====== Total recognised 34,126 141,508 175,634 41,794 (143,918) (102,124) 60,310 (586,205) (525,895) income and expense for the period Attributable to: - Minority interest 124 403 527 25 (734) (709) 1 (866) (865) - Equity holders of 34,002 141,105 175,107 41,769 (143,184) (101,415) 60,309 (585,339) (525,030) the parent ======= ======= ====== ======= ====== ====== ====== ====== ====== 34,126 141,508 175,634 41,794 (143,918) (102,124) 60,310 (586,205) (525,895) CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED) As at 31 July 2009 31 July 31 July 31 January 2009 2008 2009 (audited) £000 Non-current assets Investments held at 2,206,147 2,191,391 1,820,763 fair value Investment property 51,715 64,455 56,335 Property, plant and equipment: Office premises 6,375 6,718 6,375 Other fixed assets 6 57 8 Intangible assets 4,344 15,761 5,251 ---------- ---------- ---------- 2,268,587 2,278,382 1,888,732 Current assets Other receivables 39,469 31,585 17,531 Withholding tax debtor 1,280 1,103 840 Corporation tax debtor 625 500 227 Cash and cash 269,795 559,204 507,033 equivalents ---------- ---------- ---------- 311,169 592,392 525,631 Total assets 2,579,756 2,870,774 2,414,363 Current liabilities Other payables (253,133) (236,676) (231,108) Tax payable (2,854) (1,246) (1,595) Bank overdrafts and (47,964) (50,000) (50,000) loans ---------- ---------- ---------- (303,951) (287,922) (282,703) Total assets less 2,275,805 2,582,852 2,131,660 current liabilities Non-current liabilities Deferred tax (497) (1,501) (381) liabilities Pension scheme deficit (1,144) (1,686) (1,565) ---------- ---------- ---------- Net assets 2,274,164 2,579,665 2,129,714 Equity Share capital 16,798 16,798 16,798 Capital reserves 1,525,272 1,820,368 1,378,674 Translation reserve 1,446 - 984 Merger reserve 645,335 645,335 645,335 Revaluation reserve 183 608 183 Capital redemption 2,200 2,200 2,200 reserve Revenue reserves 76,443 87,071 78,806 --------- ---------- ---------- Equity attributable to 2,267,677 2,572,380 2,122,980 equity holders of the parent Minority interest 6,487 7,285 6,734 Total equity 2,274,164 2,579,665 2,129,714 Net Asset Value per ordinary share attributable to equity holders of the parent Basic (£) 3.38 3.84 3.17 Diluted (£) 3.37 3.83 3.16 CONDENSED CONSOLIDATED CASH FLOW (unaudited) For the period 6 months 6 months Year ended 31 July 2009 to to to 31 July 31 July 31 January 2009 2008 2009 (audited) £000 Cash flows from operating activities Profit/(Loss) 179,238 (94,849) (517,138) before tax Adjustments for: (Gains)/Losses on (146,915) 138,549 575,327 investments Foreign exchange 3,873 910 (7,950) losses/(gains) Scrip dividends - (541) (590) Depreciation 2 27 71 Amortisation of 913 1,335 1,734 intangibles Impairment losses - - 10,833 Loss on 969 - 6,786 revaluation of office premises Share based 302 459 742 payment expense Interest 855 4,284 7,375 --------- --------- --------- Operating cash 39,237 50,174 77,190 flows before movements in working capital Increase in 25,617 20,079 5,963 amounts due to depositors (Increase)/ (15,470) (10,003) 9,948 decrease in receivables Decrease in (8,717) (4,295) (15,510) payables --------- --------- --------- Net cash flow from 40,667 55,955 77,591 operating activities before income taxes Taxes paid (3,950) (2,484) (4,784) --------- --------- --------- Net cash inflow 36,717 53,471 72,807 from operating activities ========= ========= ========= Cash flows from investing activities Proceeds on 482,523 1,062,185 1,644,311 disposal of fair value through profit and loss investments Purchases of fair (717,152) (635,860) (1,272,384) value through profit and loss investments Purchase of plant - (48) (43) and equipment Purchase of (6) (333) (1,055) intangible assets Purchases in (969) (2,834) (9,702) respect of new head office --------- --------- --------- Net cash (outflow) (235,604) 423,110 361,127 /inflow from investing activities ========= ========= ========= Cash flows from financing activities Dividends paid - (30,312) (28,159) (41,534) Equity Purchase of own - (2,587) (2,587) shares Repayment of - (109,000) (109,000) borrowing Minority interest (1,275) (90) 223 investment in PATIF/ATIF* Interest payable (855) (4,284) (9,606) --------- --------- --------- Net cash outflow (32,442) (144,120) (162,504) from financing activities Net (decrease)/ (231,329) 332,461 271,430 increase in cash and cash equivalents Cash and cash 507,033 227,653 227,653 equivalents at beginning of period Effect of foreign (5,909) (910) 7,950 exchange rate changes --------- --------- --------- Cash and cash 269,795 559,204 507,033 equivalents at end of period ========= ========= ========= *Premier Alliance Trust Investment Funds and Alliance Trust Investment Funds Notes to the Financial Statements 1 General Information The information for the period ended 31 July 2009 does not constitute statutory accounts as defined in section 435 of the Companies Act 2006. A copy of the statutory accounts for the year ended 31 January 2009 has been delivered to the Registrar of Companies. The auditors' report on those accounts was not qualified and did not contain statements under section 237(2) or (3) of the Companies Act 1985. The interim results are unaudited. They should not be taken as a guide to the full year and do not constitute the statutory accounts. 2 Accounting Policies The annual financial statements were prepared using accounting policies consistent with International Financial Reporting Standards (IFRS) as adopted for use in the EU. The condensed set of financial statements included in this half yearly financial report have been prepared in accordance with IAS 34 `Interim Financial Reporting', as adopted by the EU. The same accounting policies, presentations and methods of computation are followed in these financial statements as are applied in the Group's latest annual audited financial statements, other than the inclusion for the first time of additional disclosures as required by IFRS 8 `Operating Segments'. No material changes in accounting policy are anticipated in the forthcoming financial statements for the year ended 31 January 2010. 3 Revenue £000 6 months 6 months Year to to to 31 July 31 July 31 January 2009 2008 2009 Deposit 1,492 8,614 16,189 Interest Dividend 46,868 51,889 79,212 Income Mineral rights 833 932 2,170 income Property 2,057 2,189 4,197 income Other 4,760 5,161 15,515 operating income --------- -------- -------- 56,010 68,785 117,283 --------- -------- -------- 4 Finance Costs £000 6 months to 6 months to Year to 31 July 2009 31 July 2008 31 January 2009 Revenue Capital Total Revenue Capital Total Revenue Capital Total Interest payable Payable to 23 - 23 1,710 - 1,710 2,772 - 2,772 depositors Bank loans and 278 554 832 1,010 2,019 3,029 1,550 3,053 4,603 overdrafts --------- -------- -------- --------- -------- -------- --------- -------- -------- Total finance 301 554 855 2,720 2,019 4,739 4,322 3,053 7,375 costs --------- -------- -------- --------- -------- -------- --------- -------- -------- 5 Dividends £000 6 months 6 months Year to to to 31 July 31 July 31 January 2009 2008 2009 Fourth interim dividend for the year ended 31 - 14,758 14,758 January 2008 of 2.20p per share First interim dividend for the year ended 31 - 13,401 13,401 January 2009 of 2.00p per share Second interim dividend for the year ended 31 - - 13,401 January 2009 of 2.00p per share Third interim dividend for the year ended 31 - - 13,401 January 2009 of 2.00p per share Fourth interim dividend for the year ended 31 13,401 - - January 2009 of 2.00p per share Special dividend for the year ended 31 January 3,350 - - 2009 of 0.50p per share First interim dividend for the year ended 31 13,570 - - January 2010 of 2.025p per share 6 Earnings per share From continuing operations The calculation of the basic and diluted earnings per share is based on the following data: 6 months 6 months Year to to to 31 July 31 July 31 January 2009 2008 2009 Revenue Capital Total Revenue Capital Total Revenue Capital Total Ordinary Shares Earnings for 34,002 140,340 174,342 41,769 (140,770) (99,001) 60,309 (583,507) (523,198) the purposes of basic earnings per share being net profit/ (loss)attributable to equity holders of the parent (£000) Number of shares Weighted 670,114,650 670,223,550 670,227,004 average number of ordinary shares for the purposes of basic earnings per share Weighted 671,909,760 671,909,760 671,909,760 average number of ordinary shares for the purposes of diluted earnings per share The weighted average number of ordinary shares is arrived at by excluding 1,770,197 (1,856,020 at 31 July 2008 and 1,842,670 at 31 January 2009)ordinary shares acquired by the Trustee of the Employee Benefit Trust with funds provided by the Company. IAS 33 requires that shares should only be treated as dilutive if they decrease earnings per share or increase the loss per share. The earnings/(loss) per share figures on the income statement reflect this. 7 Pension Schemes The Group sponsors two pension arrangements. The Alliance Trust Companies' Pension Fund (`the Scheme') is a funded defined benefit pension scheme which is now closed to new entrants. Members continue to accrue benefits under the Scheme. Employees who joined the Group pursuant to an offer made after 1 March 2005 are not entitled to join the Scheme but are entitled to receive contributions into their own Self Invested Personal Pension (`SIPP') provided by Alliance Trust Savings Limited. Defined Benefit Scheme The net actuarial loss made in the period and recognised in the statement of recognised income and expense (`SORIE') was £303,000 (31 July 2008 net actuarial loss of £2,414,000, 31 January 2009 net actuarial loss of £2,391,000). Certain actuarial assumptions have been used to arrive at the retirement benefit scheme deficit of £1.1m as at 31 July 2009 (31 July 2008 deficit of £1.7m, 31 January 2009 deficit of £1.6m). These are set out below: 31 July 31 July 31 January 2009 2008 2009 %per annum %per annum %per annum Inflation 3.40 3.90 3.40 Salary increases 4.40 4.90 4.40 Rate of discount 6.30 6.00 6.20 Allowance for pension in payment increases of 3.40 3.90 3.40 RPI or 5% p.a. if less Allowance for revaluation of deferred pensions 3.40 3.90 3.40 of RPI or 5% p.a. if less 8 Net Asset Value Per Ordinary Share The calculation of the net asset value is based on the following: 31 July 31 July 31 January 2009 2008 2009 Equity shareholder funds (£000) 2,267,677 2,572,380 2,122,980 Number of shares at period end - Basic 670,139,563 670,053,740 670,067,090 Number of shares at period end - Diluted 671,909,760 671,909,760 671,909,760 The number of ordinary shares has been reduced by 1,770,197 (1,856,020 at 31 July 2008 and 1,842,670 at 31 January 2009)ordinary shares held by the Trustee of the Employee Benefit Trust in order to arrive at the Basic figures above. 9 Segmental Reporting Alliance Trust PLC's operating segments are strategic business units that offer different products and services. They are managed separately because of the differences in the products and services provided. They are however all complementary to the core business of investing in various asset classes to generate increasing value over the long term. Alliance Trust PLC's primary operating segments are the Company and Alliance Trust Savings Limited (`ATS'). The Company is a self managed investment company with investment trust status. ATS provides share dealing and pension administration services. The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies. Alliance Trust PLC evaluates performance based on the operating profit before tax. Intersegment sales and transfers are accounted for on an arms length basis, i.e. market price. £000 6 months to 31 July 2009 Revenue Company ATS Other Total External customers - 4,925 160 5,085 Investment income 49,216 - 24 49,240 Investment gains/ 139,050 (14) - 139,036 (losses) Intersegment - - 1,065 1,065 --------- -------- -------- -------- Segment Revenue 188,266 4,911 1,249 194,426 --------- -------- -------- -------- Segment profit/ 178,312 (3,579) (1,029) 173,704 (loss) before tax £000 6 months to 31 July 2008 Revenue Company ATS Other Total External customers - 8,585 328 8,913 Investment income 57,503 - 100 57,603 Investment losses (141,080) (15) - (141,095) Intersegment - - 28 28 --------- -------- -------- -------- Segment Revenue (83,577) 8,570 456 (74,551) --------- -------- -------- -------- Segment loss (95,716) (454) (1,822) (97,992) before tax £000 Year to 31 January 2009 Revenue Company ATS Other Total External customers - 16,386 341 16,727 Investment income 95,299 - 278 95,577 Investment(losses/ (583,898) 10 - (583,888) gains Intersegment - - 1,187 1,187 --------- -------- -------- -------- Segment Revenue (488,599) 16,396 1,806 (470,397) --------- -------- -------- -------- Segment loss (508,560) (1,550) (3,279) (513,389) before tax Reconciliation of reportable segment revenues and profit/(loss) to consolidated amounts £000 6 months 6 months Year to to to 31 July 31 July 31 January Revenues 2009 2008 2009 Total revenues for reportable segments 194,426 (74,551) (470,397) ATS interest payable 24 1,711 2,772 Elimination of intersegment revenues (1,065) (28) (1,187) Elimination of movement in investment in 9,540 3,104 10,768 subsidiaries --------- -------- -------- Consolidated revenue 202,925 (69,764) (458,044) --------- -------- -------- £000 6 months 6 months Year to to to 31 July 31 July 31 January Profit/(Loss) 2009 2008 2009 Total profit/(loss) for reportable segments 173,704 (97,992) (513,389) Elimination of movement in investment in 5,534 3,143 (3,749) subsidiaries --------- -------- -------- Consolidated profit/(loss) before tax 179,238 (94,849) (517,138) --------- -------- -------- Total net assets £000 6 months to 31 July 2009 Company ATS Other Total Total net assets 2,267,148 12,270 5,537 2,284,955 6 months to 31 July 2008 Company ATS Other Total Total net assets 2,566,297 18,408 7,588 2,592,293 Year to 31 January 2009 Company ATS Other Total Total net assets 2,122,592 13,704 6,546 2,142,842 Reconciliation of reportable segment total net assets to consolidated amounts £000 As at As at As at Total net assets 31 July 31 July 31 January 2009 2008 2009 Total net assets for reportable segments 2,284,955 2,592,293 2,142,842 Elimination of subsidiaries (10,791) (12,628) (13,128) --------- -------- -------- Consolidated total net assets 2,274,164 2,579,665 2,129,714 --------- -------- -------- 10 Related Party Transactions There are no significant changes in the type or nature of related party transactions from those disclosed in the accounts for the year to 31 January 2009. 11 Financial Commitments As at 31 July 2009 the Group and Company had financial commitments, which have not been accrued, totalling £152.4m (£219.3m at 31 January 2009 and £76.9m at 31 July 2008). Of this amount £152.4m (£157.8m at 31 January 2009 and £76.9m at 31 July 2008) was in respect of uncalled subscriptions in investments structured as limited partnerships of which £140.5m (£150.1m at 31 January 2009 and £76.9m at 31 July 2008) relates to investments in our private equity portfolio. This is the maximum amount that the Company may be required to invest. These Limited Partnership commitments may be called at any time up to an agreed contractual date. The Company may choose not to fulfil individual commitments but may suffer a penalty should it do so, the terms of which vary between investments. 12 Share Based Payments The group operates three share based payment schemes. Full details of these schemes are disclosed in the 2009 annual report and financial statements and the basis of measuring fair value is consistent with that disclosed therein. In the period to 31 July 2009 participating employees applied a proportion of their annual cash bonuses for the year ended 31 January 2009 to purchase 288,730 (197,247 at 31 July 2008 and 31 January 2009) Company shares at a weighted average price of £2.84 (£3.51 at 31 July 2008 and 31 January 2009) per share. Matching awards of up to 527,449 (376,672 at 31 July 2008 and 31 January 2009) shares, and performance awards of up to 650,544 (958,560 at 31 July 2008 and 31 January 2009) shares were granted. Matching awards and performance awards made during the period were valued at £903,627 (£444,232 at 31 July 2008 and 31 January 2009) and £1,114,070 (£1,048,086 at 31 July 2008 and 31 January 2009) respectively. The fair value of the awards was calculated using a binomial methodology. The cumulative charge to the income statement during the period for the cost of the awards referred to above was £302,111 (£459,090 at 31 July 2008, £741,975 at 31 January 2009) for the Group. Per IFRS 2 the costs of matching awards for each plan are expensed over the three year performance period. These costs are adjusted if certain vesting conditions are not met, for example if a participant leaves before the end of the three year vesting period. 13 Principal Risks and Uncertainties As an investment trust the Company invests in both quoted and unquoted equities, fixed income securities, its subsidiary businesses, other asset classes and financial instruments for the long term in order to achieve its investment objectives. Its principal risks are therefore market risk (comprising currency risk, interest rate risk and other price risk), liquidity risk and credit risk. Other risks faced by the Company include regulatory, reputational, operational and financial risks. These risks, and the way in which they are managed, are described in more detail within the Business Review in the Company's Annual Report and Accounts for the year ended 31 January 2009. The nature of the Company's principal risks and uncertainties has not changed materially since the date of that report. Note on Audit This half-yearly financial report has not been audited or reviewed by our auditors pursuant to the Auditing Practice Board guidance on Review of Interim Financial Information.

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