Interim Results

INTERIM REPORT OF ALLIANCE TRUST PLC FOR THE HALF YEAR ENDED 31 JULY 2006 (UNAUDITED) This interim report will be made available on the website www.alliancetrust.co.uk upon publication of this announcement. Copies will be posted to shareholders on Monday, 25 September 2006 and will also be made available to the public at the Company's registered office, Meadow House, 64 Reform Street, Dundee DD1 1TJ and at the offices of the Company's paying agents, Computershare Investor Services PLC, Lochside House, 7 Lochside Avenue, Edinburgh Park, Edinburgh EH12 9DJ. This interim report was approved on 18 September 2006. It brings shareholders up to date about the performance of Alliance Trust over the six months to 31 July 2006, the environment in which we have been operating over this period, and how we see the outlook over the next six months, before we report to them again with the final results for the year to 31 January 2007. The figures we report are unaudited. The last audited figures are in the 2006 annual report which was sent to shareholders in March 2006 and is available for reference at www.alliancetrust.co.uk. This is the first set of Interim Accounts following the Merger of the Company with The Second Alliance Trust PLC which became effective on 21 June 2006. As part of the Merger arrangements the Company's shareholders received ten new shares for every one which they previously held increasing the Company's issued share capital to 504,000,000 shares. Pursuant to the Merger the Company issued 8.7453 new shares for every one Second Alliance share resulting in the issue of 167,909,760 new ordinary shares, representing 25% of the Company's enlarged share capital, and the Company acquired the Second Alliance, which represented 25% of its enlarged net assets. The Merger was completed successfully and the Company, which had been run in conjunction with the Second Alliance for over 80 years, is already seeing the benefit of the simplified structure. The day to day management of the Company's portfolio was unaffected by the transaction. INCOME, EXPENSES AND DIVIDEND 2006 2005 Change Interim dividend 3.75p 3.65p +2.7% An interim dividend of 3.75p per share was paid on 16 June 2006 (Restated to reflect the 10:1 subdivision of the Company's ordinary shares.) £000 6 months to 6 months to Year to 31 31 July 31 July January 2006 2006 2005† † Company income: - revenue 35,221 30,630 51,529 - capital 4,898 161,023 396,948 ----------- ----------- ----------- 40,119 191,653 448,477 ======= ======= ======= Subsidiaries' income: - revenue 7,601 4,283 9,949 - capital (1,388) (152) 1,209 ----------- ----------- ----------- 6,213 4,131 11,158 ======= ======= ======= Total income 46,332 195,784 459,635 ======= ======= ======= Company expenses (3,755) (2,872) (6,533) Merger expenses (2,461) - - Subsidiaries' expenses (6,773) (3,061) (7,697) ----------- ----------- ----------- (12,989) (5,933) (14,230) ----------- ----------- ----------- Company finance costs (1,514) (37) (392) Subsidiaries' finance (1,214) (948) (1,909) costs ----------- ----------- ----------- (2,728) (985) (2,301) ----------- ----------- ----------- Foreign exchange gains 2,404 1,555 1,165 ======= ======= ======= Consolidated profit before 33,019 190,421 444,269 taxation ----------- ----------- ----------- † not restated to reflect the Merger CAPITAL 31 July 31 January Change 2006 2006* Net Asset Value 398.8p 404.2p -1.3% Share price 345.25p 349.0p -1.1% FTSE All-Share Index 3,004.28 2,928.56 +2.6% FTSE All-World Index ex UK 281.16 295.28 -4.8% (sterling adjusted) *Restated to reflect the 10:1 subdivision of the Company's ordinary shares Profit for this period reflects that earned by the Company in the period before the Merger and that earned by the enlarged Company after the Merger. The profit for comparative periods (shown in brackets in the narrative below) has not been restated. Over the six months to 31 July 2006 our consolidated profit before tax was £ 33.0m (£190.4m), which comprised £30.6m net revenue (£28.2m) and £2.4m net capital appreciation (£162.2m) on the group's assets. The table on the left analyses the contribution to income between the Company and its subsidiaries. Total Company revenue was boosted through increased income following the Merger, special dividends and royalties from our oil and gas rights. The increase in subsidiary revenue of £3.3m versus the six month period to 31 July 2005, reflects the benefits of the acquisition of Wolanski & Co. Trustees Ltd, now renamed Alliance Trust Pensions Ltd, as well as an increase in overall customer transaction activity and interest. Dividends already paid have been restated to reflect the issue of ten new shares for every existing share. Alliance Trust has adopted a quarterly dividend policy and with respect to each financial year ending on 31 January will pay dividends on or around 31 July, 31 October, 31 January and 30 April. An interim dividend of 3.75p was paid on 16 June 2006, which equates to the first two quarterly dividends that would otherwise have been payable for this financial year. We expect to be able to declare two further interim dividends for this period of at least 1.875p, payable on or around 31 January 2007 and 30 April 2007. Company expenses were £3.8m compared to £2.9m last year. In addition, merger expenses amounted to £2.5m. Expenses of subsidiary companies rose to £6.8m. The majority of the increase is attributable to the inclusion of the costs of Alliance Trust Pensions Ltd for the first time. Subsidiaries' finance costs principally relate to interest paid to Alliance Trust Savings customers. The increase in Company expenses and subsidiary expenses continues to reflect our ongoing investment in our core business in staff, training, and technology. Continued investment in our business infrastructure will make us more cost effective and enable us to compete more effectively. CAPITAL In the six months to 31 July 2006, the Company's net asset value per share fell by 1.3%, the FTSE All-Share Index rose by 2.6% and the sterling adjusted FTSE All-World Index, excluding the UK, fell by 4.8%. During the period approximately half of the Company's assets were invested in the UK, with the balance invested overseas. Over the six months the share price fell by 1.1% to 345.25p. FINANCIAL SERVICES BUSINESS There was a substantial increase in the Alliance Trust Savings customer base in the six months to 31 July 2006 due mainly to the transfer of customers from Martin Currie Investment Trusts. Sales of SIPPs due to pension simplification also increased with the number of SIPP sales doubling through the Alliance Trust Pensions Ltd business. The transfer in and consolidation of customers' ISAs and PEPs continues to be an attractive proposition with steady growth in both these products. INVESTMENT REPORT Economic and Market Background High oil prices are beginning to take their toll on the global economy. Initially, it was feared that the impact of these would be inflationary, resulting in a general tightening of monetary policy. The Federal Reserve had increased rates on 17 successive occasions, before announcing a pause following its August meeting. Interest rates have been rising steadily in Europe since December and, in the UK, the Monetary Policy Committee recently announced a rise in rates which effectively reversed the cut made last year. Even in Japan, policy makers effectively called an end to a decade of deflation, by raising interest rates in July. Although the initial impact of higher oil prices was inflationary, in recent months we have been seeing increasing evidence that growth may now be slowing. In the US, consumer confidence and spending could be hit further by the fact that the housing market is also cooling following several years of strong growth. This contrasts with both Japan and Continental Europe, where recent signals have suggested that the consumer sector in these economies may be on the verge of recovery following many years of stagnation. Investment Activity Equity markets began the period in a robust mood, buoyed by a strong world economy, soaring commodity prices, corporate activity, and a positive outlook for profits as companies were seen to be able to cope with rising input costs. However, by early May concerns over rising inflation began to take hold and markets fell sharply, more than erasing earlier gains before recovering as these concerns began to wane. Activity saw us taking profits and we withdrew £46m from the markets, primarily from Asia Pacific ex Japan as the region's dominance in manufacturing left it most open to margin erosion as oil and mineral prices climbed higher. Cash positions were also augmented through offers for BAA and Ladbrokes and our small exposure to tactical gearing was reduced by the repayment of a £20m US Dollar loan. We continued to build our exposure to Continental Europe, adding £ 10m, and to Private Equity, by £15m. In North America, we continued to reduce our exposure to the US while maintaining a positive stance on Canada. Although Japan proved to be a disappointing market after its strong move last year, we remain comfortable with the outlook for company profits there. In the UK our large weighting rose over the period due to relatively higher sales elsewhere, despite a reduction of £19m to the portfolio. It is pleasing to report on performance that all eight of the sub components of the equity portfolio outperformed their benchmarks. Outlook Slower growth in the US economy could have some far-reaching consequences for the rest of the world with Asia, in particular, still highly reliant on exports to the US. The extent to which global growth might slow next year will depend on whether domestic demand can improve significantly in both Japan and Europe over the next few months. In addition, any prospects of US policy makers looking to reverse recent interest rate increases could have a negative impact on the dollar. This deteriorating backdrop has encouraged us to take a short term defensive stance towards equity markets. Our concerns are more weighted to growth rather than inflation and despite the robustness of corporate balance sheets worldwide we are concerned that margins and profits could come under considerably more pressure than is currently being factored in to equity valuations. Having already taken steps to reduce our Asian exposure, after the half year end we have added materially to cash reserves through the sale of our North American mid and small capitalisation exchange traded funds and reductions in the UK Large portfolio to companies most geared to a US consumer slowdown. We are looking for market weakness to re-invest in Asia, to rebuild our US exposure in selected mid and small capitalisation stocks through direct investment, and also to add selectively to our European positions. Our non quoted sectors of property and private equity are earmarked for expansion on a case by case basis, dependent on the quality of deals and opportunities available. Distribution by geography Figures as at 31 July 2006 UK Large 41.6% UK Small 8.3% N America Large 12.4% N America Small 3.0% Europe ex UK 12.0% Asia Pacific ex Japan 6.0% Japan 9.4% Fixed Income 1.0% Subsidiaries 2.0% Private Equity 2.5% Rest of World 0.3% Real Estate 1.5% Distribution by sector Figures as at 31 July 2006 Oil & Gas 12.9% Basic Materials 7.5% Industrials 10.6% Consumer Goods 8.0% Consumer Services 7.8% Health Care 7.8% Utilities 3.2% Telecommunications 2.2% Financials 27.6% Real Estate 1.5% Subsidiaries 2.0% Private Equity 2.5% Technology 4.0% Fixed Interest 1.0% Other Net Assets 1.4% INTERIM FINANCIAL STATEMENTS (UNAUDITED) Consolidated Income Statement 6 months to 31 July 2006 6 months to 31 July 2005 Year to 31 January 2006 £000 Revenue Capital Total Revenue Capital Total Revenue Capital Total Investment income 35,176 - 35,176 29,890 - 29,890 50,809 - 50,809 Gains and losses on investments Increase(decrease) in fair-value of designated investments: - held - (87,284) (87,284) - 78,871 78,871 - 236,790 236,790 - disposed of - 90,344 90,344 - 82,000 82,000 - 161,367 161,367 Revaluation of - 450 450 - - - - - - office premises Foreign exchange - 2,404 2,404 - 1,555 1,555 - 1,165 1,165 gains Other operating 7,646 - 7,646 5,023 - 5,023 10,669 - 10,669 income ----------- ----------- ----------- ----------- ----------- ----------- ----------- ------------------- Total revenue 42,822 5,914 48,736 34,913 162,426 197,339 61,478 399,322 460,800 Expenses (10,466) (62) (10,528) (5,672) (261) (5,933) (13,947) (283)(14,230) Merger expenses - (2,461) (2,461) - - - - - - ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Total expenses (10,466) (2,523) (12,989) (5,672) (261) (5,933) (13,947) (283)(14,230) ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- 32,356 3,391 35,747 29,241 162,165 191,406 47,531 399,039 446,570 Finance costs (1,720) (1,008) (2,728) (985) - (985) (2,071) (230) (2,301) ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Profit before 30,636 2,383 33,019 28,256 162,165 (190,421) 45,460 398,809 444,269 taxation Taxation (3,488) 306 (3,182) (3,210) 78 (3,132) (4,146) 106 (4,040) ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Profit for the 27,148 2,689 29,837 25,046 162,243 187,289 41,314 398,915 440,229 period ======= ======= ======= ======= ======= ======= ======= ======= ======= Attributable to: - Minority interest (664) 202 (462) 67 (38) 29 (49) 297 248 - Equity 27,812 2,487 30,299 24,979 162,281 187,260 41,363 398,618 439,981 shareholders of the parent ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- 27,148 2,689 29,837 25,046 162,243 187,289 41,314 398,915 440,229 ======= ======= ======= ======= ======= ======= ======= ======= ======= Earnings per share 5.02p 0.50p 5.52p 4.96p 32.20p 37.16p 8.21p 79.09p 87.30p (see note 4) 6 months to 31 July 6 months to 31 July Year to 31 January 2006 2005 2006 Per share Per share Per share Ordinary 3.75p 3.65p 7.35p dividends for period CONSOLIDATED BALANCE SHEET ------------------------ Group ------------------------ £000 31 July 2006 31 July 2005 31 January 2006 Non-current assets - Held as Fair Value 2,583,623 1,716,756 2,004,743 Investments - Investment property 37,940 - 19,500 - Fixed assets 943 741 466 - Intangible assets 11,713 - 10,152 - Deferred tax assets 2,036 - 2,627 Current assets 221,912 204,518 172,328 Current liabilities (179,012) (108,390) (157,568) Non-current liabilities (51) - (254) ----------- ----------- ----------- Net assets 2,679,104 1,813,625 2,051,994 ======= ======= ======= Equity attributable to 2,679,104 1,803,766 2,037,916 equity shareholders of parent Minority interest - 9,859 14,078 ----------- ----------- ----------- Total equity 2,679,104 1,813,625 2,051,994 ======= ======= ======= Net asset value per 398.8p 358.0p 404.2p ordinary share (see note 4) CONSOLIDATED CASH FLOW STATEMENT ---------------------- Group ---------------------- £000 6 months to 6 months to Year to 31 July 2006 31 July 2005 31 January 2006 Net cash from operating 55,815 35,239 56,610 activities Investing activities 33,665 24,858 (55,645) Financing activities (37,541) (18,270) (36,664) - Equity dividends paid - Preference dividends - - (49) paid - Repayment of preference - (3,848) (3,848) and debenture stocks - Bank loans (repaid) (10,721) - 54,798 raised - Interest paid (2,071) (672) (1,956) - Issue of shares to - - 5,000 minority interest - Dividends paid to - - (1,000) minority interest - Increase in bank - - 39 overdrafts Own shares acquired (321) (132) (112) ----------- ----------- ----------- Net increase in cash and 38,826 37,175 17,173 cash equivalents Cash and cash equivalents 160,176 141,838 141,838 at beginning of period Effect of foreign exchange 2,404 1,555 1,165 rates ----------- ----------- ----------- Cash and cash equivalents 201,406 180,568 160,176 at end of period ======= ======= ======= STATEMENT OF CHANGES IN EQUITY ------------------------ Group ------------------------ £000 6 months to 6 months to Year to 31 July 2006 31 July 2005 31 January 2006 Opening total equity 2,051,994 1,644,516 1,644,516 Total income 29,837 187,289 440,229 Dividends paid (37,541) (18,270) (36,664) Own shares purchased (321) (112) (112) Merger reserve 645,335 - - New shares created 4,198 - - Movement in minority (14,540) - - interest Decrease in pension scheme 142 202 25 deficit Issue of shares to - - 5,000 minority interest Dividend paid to minority - - (1,000) interest ----------- ----------- ----------- Closing equity 2,679,104 1,813,625 2,051,994 shareholders' funds ======= ======= ======= NOTES TO THE FINANCIAL STATEMENTS 1 Information for the year to 31 January 2006 is extracted from the financial statements for that year which were prepared under IFRS, which have been filed with the registrar of companies, and which contain an unqualified report from the auditor. Information for the year to 31 January 2006 and for the six months to 31 July 2005 has not been restated to reflect the Merger. 2 The results are unaudited. They should not be taken as a guide to the full year and do not constitute the statutory accounts. 3 Normal expenses comprise £3,755,000 (£2,872,000) incurred by the Company with a further £2,461,000 incurred in connection with the merger, and £6,773,000 (£3,061,000) incurred by subsidiary companies. Taking guidance from the Statement of Recommended Practice "Financial Statements of Investment Trust Companies" the costs of the Senior Management Equity Incentive Plan ("SMEIP") deemed to be related to the capital performance of the Company have been treated as a capital expense of £62,000 in aggregate. Otherwise, expenses are charged through the revenue column except where they directly relate to the acquisition or disposal of an investment, in which case they are added to the cost of the investment or deducted from the proceeds and reflected in the capital column. 4 The earnings per share and the net asset value per share exclude, for the purposes of these disclosures, the 162,940 shares held by the trustee of the SMEIP. Comparative Earnings per Share, dividend per share and Net Asset Value have been adjusted to reflect the 10:1 subdivision of the ordinary 25p shares of the Company. The press release summarising these interim results follows: PRESS RELEASE Alliance Trust PLC Press release Embargoed until 07.00 Monday 18 September 2006 ALLIANCE TRUST PLC REPORTS RISE IN HALF-YEAR REVENUE Revenue climbs despite choppy stock markets Alliance Trust PLC, the largest generalist investment trust company listed on the London Stock Exchange, reported today (Monday) that pre-tax revenue rose to £30.6m in the six months to the end of July, up from £28.2m in the same period last year. Increased income from dividends, interest, oil and gas royalties and subsidiaries helped push revenue higher. A downturn in overseas stock markets, where nearly 42% of the company's assets are invested, restrained capital growth, which appreciated £2.4m in the half year, although all the company's regional portfolio managers outperformed local benchmark indices. Consolidated pre-tax profit from capital and revenue was £ 33.0m for the half-year. Subsidiary revenue increased by 77%, reflecting the benefits of the acquisition of Wolanski & Co. Trustees Ltd, now renamed Alliance Trust Pensions Ltd, as well as an increase in overall customer transaction activity and interest. The half-year results are the first that the Alliance Trust has reported since it successfully merged with The Second Alliance Trust PLC on 21 June 2006. As part of the merger, which streamlined the structure of the two companies, the Company carried out a ten-for-one share split. An interim dividend of 3.75p was paid on 16 June 2006, up 2.7% from the first half of 2005. Alliance Trust Chief Executive Alan Harden said, "Despite a more difficult backdrop for equities over the last half-year, we are pleased that our revenue has continued to climb. I'm particularly delighted that the reorganisation and investment in the quoted equity team has continued to deliver superior investment performance. All of our investment managers continue to outperform their respective geographic indices. Our simpler corporate structure following the merger allows us to focus on growing our existing financial services business and continuing to seek new opportunities." Head of Equities Grant Lindsay said, "We have taken a more defensive stance towards equity markets in the short term because of our expectations of lower growth from the US. A sharply deteriorating housing market could materially dent consumer confidence and any ripple effect will be felt well beyond North America. Over the six months we reduced our exposure to the US and to companies elsewhere most vulnerable to a US consumer slowdown. Since the end of the period we have further built up our cash reserves and have no tactical gearing, but continue to seek long term opportunities to return to full investment as they arise." 31 July 2006 31 January Change 2006 Net Asset 398.8p 404.2p -1.3% Value per share Share Price 345.25p 349.0p -1.1% FTSE 3,004.28p 2,928.56p 2.6% All-Share Index FTSE World 281.16p 295.28p -4.8% Index ex UK (sterling adjusted) Notes to editors 1. Alliance Trust PLC is the largest generalist investment trust listed on the London Stock Exchange. A FTSE-250 company, it had £2.7bn of assets at the end of July 2006. 2. Photographs of Alan Harden and Grant Lindsay are available. Contacts Jane Holligan, Media Relations Manager Kelly O'Donnell, Head of Investor Relations Alliance Trust Alliance Trust Tel +44 (0)1382 306064 Tel +44 (0)1382 306036 Mobile 07745 783212 Email kelly.o'donnell@alliancetrust.co.uk Email jane.holligan@alliancetrust.co.uk Web www.alliancetrust.co.uk

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