Final Results
Alliance Trust PLC
 Final Results for the year ended 31 January 2010
Total
Financial Highlights As at 31/01/10 % change Return %
NAV per share 377.7p 19.2 22.2
Share Price 313.0p 16.8 20.3
Full year dividend  8.15p  1.9
Company expenses £16.0m (4.8)
Discount ended the year at 17.1%
Performance Relative to Peer Group* 1 Year 2 Years 3 Years 5 Years
Ranking ** 34/43 11/37 23/37 20/33
* The peer Group consists of the companies in the AIC Global Growth and Global
Growth and Income sectors
** Source: Funddata
Company highlights
* NAV Total Return per share up over 22% as our portfolio benefited from the
recovery in global equity markets.
* Share price up 16.8% and share price total return up 20.3%.
* While the share price total return for the year ranked 34/43 compared to the
Global Growth and Global Growth and Income peer group, over two years it
ranks 11/37 highlighting the ability of the Trust to invest for the long
term and protect shareholders' capital in a time of extreme volatility.
* Dividend increased for the 43rd successive year, by 1.9% to 8.15p, and
revenue reserves have been increased by £3.8m (4.4%). This has been achieved
at a time when income from the FTSE All-Share is down 15% in the year.
* Company costs down 4.8% to £16m, which contributed to a bottom quartile
Total Expense Ratio of 0.69%.
* During the year, and subsequent to the year end, the Trust bought back a
total of 10.85m shares (1.6% of issued shares) for £35m. This has resulted
in an uplift of 7p per share for the remaining shareholders.
Commenting on the results, Katherine Garrett-Cox, Chief Executive, said:
 "2009 was a year in which global equity markets recovered sharply from the
losses of 2008. Â Against that backdrop, I am pleased to report this set of
results which has been delivered without compromising our long-term,
high-conviction investment philosophy.
Following a challenging first six months, our performance improved significantly
during the second half of the year and continues into the current year. We
benefited from our decision to reinvest back into equities, ending the year
4.7% geared compared to 11.6% cash in January 2009. Â As a result, at the year
end, the Trust held a greater proportion of its assets in listed equities
(94.7%) than it has reported for the last 8 years.
Looking forward, we remain alert to the possibility of a double-dip recession.
However, Asia and Emerging Markets are recovering faster than the West and we
are increasingly looking to those regions to deliver superior returns. We are
reducing our weighting in the UK, as we are concerned that the political and
fiscal uncertainty will impact market returns. Â We maintain our commitment to
delivering improved investment performance, preserving capital and providing
income growth for all shareholders over the long term."
- ENDS -
For more information please contact:
James Leviton and Conor McClafferty
Finsbury Group
020 7251 3801
Douglas Connon
Managing Director, Corporate Affairs, Alliance Trust
01382 321088
Mobile: 07918 741082
Notes to editors
A FTSE 100 investment trust company, Alliance Trust PLC was founded in 1888 and
has grown to become the UK's largest generalist investment trust. As at 31
January 2010, Alliance Trust managed assets of more than £2.5bn.
Dividend
Having paid three interim dividends of 2.025p for last year, the Directors have
declared a fourth interim dividend of 2.075p per share payable on 1 April 2010.
The total dividend for the year, of 8.15p, is an increase of 1.9% on the 8.0p
(excluding the special dividend of 0.5p paid in July 2009) paid for the previous
year.
In the absence of any unforeseen developments, we expect to be able to recommend
quarterly interim dividends of 2.0625p, payable on or around 2 August 2010, 1
November 2010, 31 January 2011 and a fourth interim dividend of at least
2.0625p, payable on or around 3 May 2011.
Chairman's Statement
In my statement 12 months ago, I reflected on the benefits of the Alliance
Trust's long-term investment view for our shareholders. This gave us the
confidence to weight the portfolio towards defensive stocks and cash at a time
when others, with greater exposure to financial and cyclical stocks, suffered
through the worst of the downturn. While some of the stocks which fell so
dramatically during that period have benefited from a recovery in the current
year we continue to follow our philosophy of investing in those companies which
generate long-term shareholder value through financial strength and experienced
management teams.
Investment performance
Over the financial year just ended, the Net Asset Value of the Trust rose by
19.2% while the share price rose by 16.8% ending the year at 313p. This placed
us below the median of our investment trust peer group during a year of volatile
markets. However, on a longer view, over the past two years during which the
most dramatic market swings have played out, our performance ranks us above
average against our investment trust peer group, both in terms of Net Asset
Value and Total Shareholder Return
We report on the performance of the Trust in terms of Total Shareholder Return
compared to our peer group. This allows investors to judge our performance
against other investments trusts, but, unlike many of our competitors, we do not
have a fixed benchmark. We consider this to be an important distinction because
it gives us the scope to invest decisively, taking advantage of the in-depth
research of companies undertaken by our portfolio managers in stock selection
and the experience of our Economic Research Centre which guide our asset
allocation among global markets. It also allows us to protect shareholder value
by moving into cash in periods of severe market downturn.
Dividend
We recognise the importance of a progressive dividend to investors and this has
continued into its 43rd consecutive year. We have declared an increased fourth
interim dividend of 2.075p per share, payable out of strong earnings, making a
total dividend for the year of 8.15p per share (2009: 8.0p, excluding the
special dividend of 0.5p paid in July 2009). We took the decision to make this
payment earlier than our normal practice, a decision which we believe to be in
our shareholders' interests.
Globally, a large number of companies cut their dividends in 2009. Looking
forward, the economic background remains fragile and company prospects in 2010
remain uncertain. We shall, however, continue to manage the portfolio with an
aim of producing both long-term capital growth and a progressive dividend. We
have one of the highest yields of the larger trusts which fall within our peer
group, and our decision to increase our reserves during the year differentiates
us from other investment trusts which have used their reserves to maintain their
dividends.
Share buybacks
During the year we bought back our own shares for the first time. When we took
the power from shareholders to undertake buybacks in 2006, we were clear that we
would use this power where the Board judged it to be in the interests of all
shareholders to do so. An opportunity to purchase a significant holding emerged
in October. We concluded, following rigorous consideration of the merits of the
transaction from an investment perspective, and taking into account both market
conditions and our own investment process, that the criteria which we had
previously determined were met. We shall use the same criteria to decide whether
to make buybacks from time to time in the future. This should not be confused
with adoption of a discount control mechanism which we do not support. We
believe that our focus should be on improving the long-term performance of the
Trust and that this is the priority for our shareholders.
Shareholders
One of the distinctive features of investment trusts is the preponderance of
individual, rather than institutional, shareholders. This reflects their
suitability as an investment vehicle which offers access to a diversified equity
portfolio at relatively low cost. In the case of Alliance Trust, over 26,000
clients of our financial services subsidiary Alliance Trust Savings hold shares
in the Company, representing 21% of our share capital, an increase from 20% at
the start of the year. Through regular savings plans and reinvestment of
dividends these clients stimulate demand for the Company's shares. Many more
individual investors hold shares in the Company, either directly or through
savings plans administered by other providers.
AIFM Directive
The Alternative Investment Fund Managers (AIFM) directive emerged from the
European Union in response to the perceived role of hedge funds in the financial
crisis. Some elements of this directive threatened the future of the whole
investment trust sector. We have been active in lobbying at both UK and EU
levels for investment trusts to be excluded altogether or, as a minimum, for the
directive to be amended to take account of the distinctive nature of investment
trusts. This work continues, and I am grateful to those shareholders who have
heeded our request to make their concerns known directly to their MPs and MEPs.
The final directive is not likely to be issued before summer 2010.
Board changes
Since the publication of our last Annual Report there have been two additions to
the Board of the Trust. We appointed Robert Burgess to the Board as Chief
Executive of Alliance Trust Savings in September 2009, both to reflect the
significant contribution he has made to the development of that subsidiary, and
to take advantage of his skills and experience in the wider activities of the
Trust. More recently, Alan Trotter joined the Board as Finance Director on 1
February 2010, bringing with him extensive experience in the financial services
sector. I am delighted to welcome them both.
George Stout
The Board was saddened to learn of the death of George Stout during the year.
George Stout was joint Managing Director of Alliance Trust from 1976 to 1987 and
led the Company during a period of significant progress.
Annual General Meeting
Our Annual General Meeting will be held in Dundee on Friday 21 May. I always
look forward to this opportunity to hear the views and concerns of our
shareholders and to provide an update on the progress of the Trust. I hope that
as many of you as possible will spare the time to come and meet the Board and
management team to whom you entrust your investments.
Chief Executive's Statement
The volatility of global stock markets and continuing tough economic conditions
have raised many challenges in my first full year as Chief Executive. Our
primary focus continues to be investment in global equities and throughout the
year we have remained consistent to our long-term investment philosophy. This is
the foundation of our business and we have not compromised the integrity of our
investment decision-making process. The continuation of our progressive dividend
policy, during a period when many companies cut their dividend, and ongoing
building of our reserves have been major achievements for the year.
Performance Summary
Over the year the Company's basic Net Asset Value (NAV) per share rose 19.2%
over the year and generated a total return of 22.2%. By comparison the share
price rose by 16.8% and the Total Shareholder Return (TSR) by 20.3%. The
discount to net asset value, while less volatile than in 2008, ended the year at
17.1%, compared to 15.4% at the start of the financial year, as discounts for
many investment trusts widened in the final months of the period.
Our TSR ranked 34th out of 43 in our peer group of Global Growth and Global
Growth and Income Trusts over the year. It is encouraging to note that over two
years the TSR was ranked 11th out of our peer group of 37 Trusts. On a NAV
basis, the Trust was ranked 32nd over one year and 13th over two years.
Market Recovery
At the start of the year, investor attention was focused on the policy measures
of governments aimed at bringing stability to the global financial system,
following the crisis of 2008, whilst preventing recession turning into
depression. Coordinated responses of low interest rates, quantitative easing and
recapitalisation of bank balance sheets were implemented around the globe. In
March, we saw a reversal of investor sentiment and a rapid rise in stock markets
as belief in the likely success of these policy measures gained momentum.
Many of the companies which performed most strongly at this time were among
those most highly geared and economically-sensitive, and which had fallen
furthest over the previous 12 months. We did not participate in the narrow-based
rally in these stocks, as in many cases we considered their business models to
be unattractive. Much of our relative underperformance over the full year is as
a result of being underinvested in these types of stocks during their extreme
rallies in March and April. This is evidenced by the fact that over those two
months alone, our quoted equity portfolio returned 5.9% less than the FTSE
All-World Index.
A number of these companies subsequently fell in value during the second half of
the year losing much of their first half gains.
Quoted equities
Within our quoted equity portfolio, each of our regional managers is tasked with
outperforming a relevant, regional, Sterling denominated equity index. Last year
we achieved above benchmark returns in Europe and a return broadly in line with
the benchmark index in North America. These returns are noteworthy, following
the strong relative performance also recorded in these areas in the weak stock
markets of 2008.
We reduced cash balances as a percentage of net assets ahead of the recovery in
equity markets, by investing selectively in well-managed companies with strong
balance sheets and positive cash flow generation in which we have a high level
of conviction. A total of £190 million was invested into global equities in the
first half of the year.
We committed a further £100 million to global equity markets in the second half
of the year, drawing down on our banking facilities to take net debt to £120m.
Our ability to borrow at a time when banks were reluctant to lend to financial
companies is testament to the strength of the Company's balance sheet and
reputation. We invested funds into the strongest performing areas of Asia and
Europe, while keeping overall portfolio turnover levels low. Our confidence in
longer-term global economic recovery has increased with some countries having
already exited recession. We have adopted a more balanced approach in the
portfolio and reduced the defensive growth bias of our holdings. The relative
performance of our equity portfolio improved markedly over the second half of
the year as the recovery in markets broadened out from its initial narrow base.
This has continued since the end of the period.
Income Generation
Company dividends and level of yield are key components in defining our
investment universe and strategy. In an extremely challenging environment for
income generation, we have placed great emphasis on the sustainability of
dividends in our investment selection process, both as an indicator of
underlying strength and in order to support our commitment to a progressive
dividend policy.
Our UK portfolio has a high income requirement: it produces over 50% of the
income of the quoted equity portfolio. This had an adverse impact on its capital
performance over the year, but the income returns from our UK portfolio have
been key in maintaining the Company's progressive dividend policy in a very
challenging year. We are aware of the importance attached by our shareholders to
dividend income and we have increased our dividend by 1.9% while over half of
the companies listed on the FTSE 350 Index have reduced, suspended or maintained
dividends.
Other asset classes
We also invest a small proportion of our total assets in other asset classes,
the long-term returns of which complement those of our quoted equity portfolio.
In private equity, the quoted portfolio experienced a strong year. We sold into
the rally in share prices, choosing instead to increase diversification in our
private equity fund investments. We have previously outlined our intention to
reduce our direct exposure in UK property. We benefited from a recovery in
market valuations towards the end of the year and took the opportunity to sell
two properties, both at prices significantly above last year's valuations, one
of which completed shortly after the year end. Income from the property
portfolio increased to £4.5 million from £4.2 million last year. Substantially
lower US gas prices and a weakening of the US dollar against Sterling over the
year resulted in a fall in revenues from our US mineral interests to their 2008
levels of £1.6 million, against a peak of £2.2 million in 2009.
Business Review
Last year we set the following priorities for the Company after the conclusion
of the business review which followed my appointment as Chief Executive. These
will continue to be our priorities for the coming year.
Key Priorities
To focus on investment in equities
Quoted equities were our preferred asset class throughout the year. We made
steady increases to our holdings of global equities over the year with equities
representing 95% of net assets at the year end compared to 77% at the start of
the year. We reduced net cash balances as a proportion of net assets from an
opening position of 11.6% to net debt of 4.7% as we redeployed capital into our
global equity portfolios. Our total exposure to other asset classes was largely
unchanged, although we actively reduced our commercial property holdings towards
the year end.
To continue to improve investment performance
Our investment performance lagged over the first half of the year, largely due
to not participating fully in the rally in highly cyclical companies in March
and April. Performance improved over the second half of the year as the market
recovery broadened out. For the year, our equity portfolio returned 26% which
compares to a return of 28.4% in the FTSE All-World Index, with a positive
relative return of 1.9% in the last six months of the period.
To manage our cost base in line with market conditions
We have pro-actively managed our cost base throughout the year against a
difficult economic backdrop. Some tough short-term decisions have been made,
where deemed necessary for longer term gains. As a result, overall employee
numbers reduced by 14% over the year. We have, however, increased expenditure in
areas which we believe will enhance our long-term investment performance such as
the recruitment of our Fixed Income team.
In total, our expenses reduced by 4.8% from £16.8 million last year to £16.0
million and our TER reduced in percentage terms to 0.69% (0.70%).
To develop our subsidiary businesses
Alliance Trust Savings, our subsidiary business which offers pension
administration, share dealing services and a fund supermarket, completed an
extensive business review over the course of the year. A highly experienced
management team is now in place with a stronger focus on customer service and
value. The enhanced procedures and processes implemented during the year provide
a solid foundation for the growth of the business.
Alliance Trust Asset Management launched its first three funds during the year.
These funds offer third party investors, many of whom are Alliance Trust Savings
clients, direct exposure to individual areas of expertise within the Company's
investment team. They follow the same long-term investment philosophy as
employed in managing the Company's assets. Further fund launches are expected
this year.
We expect our financial services subsidiaries to deliver long-term value to our
shareholders.
To invest in the development of our people
The year just ended was a challenging one for our people. With fewer than 300
employees, each and every one of them has been expected to play their part in
the progress of the Company, whether managing the investments of the Trust,
meeting the needs of the clients of our subsidiary businesses, or behind the
scenes supporting the business in areas such as information technology, human
resources, communications, facilities and the control functions. I am proud of
them for rising to this challenge.
Business communication and efficiency have improved following the relocation to
our new company headquarters in Dundee. We continue to invest in the future
through our management trainee programme and have found that the calibre of the
candidates is very high. A number of employee development initiatives have been
introduced during the year. These include the establishment of a mentoring
framework, an annual employee opinion survey and our employee recognition
policy. This policy includes the "Alliance Trust Employee Excellence" awards
which recognise outstanding contributions over the year.
Other Developments
In our interim report, we commented on our appointment of a new team of four
highly experienced Fixed Income managers. The addition of fixed income expertise
to our investment team will enhance the income generating potential of our
portfolio and help to reduce our reliance on equity investments, particularly in
the UK, for income. This will not diminish our focus on global equities. We will
have greater flexibility in asset allocation as a result of a reduced yield
requirement from the constituents of our equity portfolio. Our stock selection
process will also be enhanced by the team's experience in corporate credit
analysis.
During the course of the year we had cause to call on our Business Continuity
Plan when a fire in our former head office at Meadow House caused damage to
computer equipment located there. Our Plan operated successfully and we were
able to conduct business with minimal disruption: an endorsement of a
significant element of the risk management procedures of the Company. Since then
we have taken steps to accelerate the migration of the remaining parts of our
systems to our new offices.
We are broadly supportive of the aims of the recently published Financial
Services Authority's Retail Distribution Review as changes to adviser charging
will help to create a state of equality for investment trusts against other
financial products. This should encourage more financial advisers to promote the
attributes of investment trusts to their customers and, over the longer term,
help to grow the number of investment trust shareholders.
Outlook
The International Monetary Fund is forecasting global economic growth of around
4% for 2010, although the background is still challenging. One of the main
drivers of this will be in Asia where, for example, China could experience
growth of over 10%. Another key indicator, which we are monitoring closely, is
the unemployment rate in the United States as the consumer remains the greatest
influence on the US economy.
The uncertain timing and pace of the withdrawal of quantitative easing are
concerns for the strength of the recovery of the UK economy. Public spending
cuts, tax increases and high unemployment provide a difficult backdrop in the
lead up to the general election.
We retain a largely positive outlook for equity markets in 2010. The most
important driver this year, we believe, will be earnings growth, as we continue
the recovery from recession. From a regional perspective, we expect Asia Pacific
and Emerging Markets to maintain their long-term growth and we will continue to
invest in global companies which are benefiting from the positive demographics
and strong financial resources of Asia. We are concerned about the impact of the
fiscal deficits on the prospects for European and UK equities. Since the year
end we have taken advantage of the recent strength in markets to reduce our
exposure to the UK.
Currently we have a balanced portfolio, combining industrial and energy related
companies which we expect to benefit from economic recovery with a number of
high-quality defensive growth companies with above average yields.
We continue to refine and to enhance our investment decision-making so that we
are positioned to take advantage of the current environment while remaining true
to our long-term investment philosophy.
Asset Allocation
We increased our exposure to several of our favoured global equity markets over
the period by investing a total of £290 million in a risk-controlled manner. Our
strategy was to take advantage of longer-term opportunities in companies we
identified as being undervalued through our fundamental research and assessment
of current stock valuations. Our largest additional allocation was £120 million
to companies in Asia, based on our view that Asia's future growth will not be
hindered by the debt burdens faced by other economies. £80 million was allocated
to income generating holdings in the UK. We added £30 million to US equities as
we considered valuations to be attractive and £40 million to European equities,
in view of their favourable valuations and dividend outlook. We also took the
opportunity to initiate several investments in non-Asian emerging markets by
investing a total of £20 million into Brazil, Mexico, Turkey and Russia.
At the year end, UK listed companies accounted for 40% of our quoted equity
portfolio. Much of our UK exposure is through multinational companies which
generate a large proportion of their revenues overseas, often in the faster
growing economies of Asia. On a "Revenue Profile" basis, only 9% of the revenues
of the companies we hold in the portfolio are generated in the UK.
Contrastingly, whilst only 18% of our portfolio is directly invested in Asian
and other emerging markets, 37% of company revenues are derived from these
higher growth areas. We believe that, by investing in this way, we gain a more
balanced exposure to the higher growth opportunities available in emerging
markets.
At our final Asset Allocation Committee meeting of the year, we concluded that,
while we may see short-term volatility in markets, the outlook over the medium
term is positive and therefore the current risk profile, level of gearing and
equity allocation remain appropriate.
Investment Activity
Our investment process focuses on the identification of high quality companies
which are expected to deliver superior long-term capital and income growth. At
the beginning of the year, our portfolio emphasised defensive growth companies
as we sought to maintain a low risk profile in the uncertain economic and market
environment. In March, the risk appetite of investors changed suddenly, and
share prices of some of the companies which formerly had been regarded as among
those most likely to fail, rose strongly. Whereas our performance benefited last
year from not holding the weakest of the UK banking stocks, our returns lagged
over the following months through not participating in the dramatic share price
rally in these same stocks.
Throughout the market volatility of the year, we have remained consistent to our
investment approach, seeking to hold only those companies which we believe are
strong and will provide sustainable long-term returns rather than short-term
gains. We have enhanced our risk framework and are paying due attention to good
corporate governance practice in our portfolio holdings. We have gradually
altered the bias of our regional portfolios towards a more balanced approach
through the addition of some cyclical stocks. In terms of sector exposure, as
the year progressed we have increased our holdings in more economically
sensitive sectors, such as Technology, Industrials, Oil & Gas and Financials. We
have reduced our holdings in more defensive areas such as Utilities and
Telecommunications. This has been an ongoing theme over the period as our
conviction in longer-term global economic recovery has grown.
Income
The global recession has resulted in the yield of the FTSE All-World Index
falling by 40% over the course of the financial year, from 4.15% to 2.49%. Total
dividend payments have been reduced by over 20% over the same period. In the UK,
we have seen a swathe of dividend cuts by companies most exposed to the economic
recession. Indeed, a recent report suggests that total corporate dividend
payments suffered a reduction of £10 billion, or 15%, in 2009, compared to the
previous year.
Against this backdrop, we have placed great emphasis on the sustainability of
dividends in our investment selection process. Many of the defensive growth
holdings we have retained in our portfolio have been able to increase their
dividend payouts.
Investment Team
Teamwork and communication are foundations of our investment function. The
centralisation of our investment team in Scotland was completed during the year
and the move to our new headquarters in Dundee has greatly improved the flow of
information and ideas. Our Edinburgh office enables our investment managers to
attend a greater number of company and analyst meetings.
Our investment team benefits from the macro-economic input of our Economics
Research Centre, an in-house team of economists. They provide proprietary
analysis of global and regional economic trends, which has been a positive
influence on our asset allocation decision making during the extreme conditions
of the last two years.
We believe that the stability of our investment team and average length of
service give us a competitive advantage. Each of our regional teams is headed by
an individual with over 20 years' investment experience. They have managed
portfolios across political, economic and market cycles.
We have continued to enhance our investment capabilities by recruiting specific
expertise. Notably, we have appointed a team of Fixed Income specialists, who
will help us to maintain our progressive dividend policy. Their experience and
expertise in corporate credit analysis will also strengthen our equity
investment selection process.
Risk Factors
The following section sets out our approach to risk management and focuses on
the key risks that we believe could impact on the performance of the business.
Effective risk management is a key component of the business's operating model
and assists in ensuring that the different parts of the business operate within
acceptable risk parameters.
The Board has overall responsibility for setting the level of risk which it is
prepared to accept. The level of risk appetite acceptable to each business is
agreed at Board level and regularly reviewed.
The risk framework is overseen by the Risk Committee, which meets quarterly, is
chaired by the Finance Director and is made up of representatives from Alliance
Trust and each of its regulated subsidiaries. The Risk Committee has oversight
of the risk and controls self-assessment exercise and the operation of the risk
framework as a whole. Each business unit maintains and reviews its risk register
and the controls in place to mitigate, reduce or prevent loss arising from their
key risks. A common risk categorisation is in place for all business units.
The key risks, and mitigating actions are discussed below:
Risks Mitigation
+-----------------------------------------+------------------------------------+
|Strategic - a strategy that does not |The Board allocates time at each |
|maximise value and /or fails to achieve |board meeting to consider the |
|the initiatives in the agreed strategic |implementation of its strategy, both|
|plan due to changing or flawed |for investment and the subsidiary |
|assumptions. |businesses. Separately, the |
| |different Boards within the Group |
| |measure their performance against |
| |agreed business objectives. |
+-----------------------------------------+------------------------------------+
|Market - unfavourable market moves or |The Asset Allocation Committee meets|
|volatility. The risk typically arises |regularly, attended by senior |
|from equity, property and bond exposures,|investment managers and our |
|and the impact of interest rates and |economist, to consider and take |
|currency values. |action to realign investments. |
+-----------------------------------------+------------------------------------+
|Credit - the failure of a party with |Management measure exposure to |
|which we have contracted to meet its |counterparties on a daily basis. |
|obligations both on and off the balance |Counterparty exposures are set by |
|sheet. |the Authorisation Committee and take|
| |into account credit as well as |
| |investment exposure |
+-----------------------------------------+------------------------------------+
|Liquidity - the risk that the |Cash is managed on a daily basis. |
|Company/subsidiary does not have |The bulk of the Trust's investments |
|sufficient financial resources to meet |are quoted equities which may be |
|its commitments when they fall due, or |realised at short notice if |
|can secure them only at excessive cost. |required. |
|For Alliance Trust Savings and Alliance | |
|Trust Asset Management this is also a | |
|regulatory requirement. | |
+-----------------------------------------+------------------------------------+
|Capital - the risk that Alliance Trust or|The Company, and all regulated |
|one of its regulated subsidiaries has |subsidiary companies, comply with |
|insufficient capital to meet its |the requirements of the Internal |
|regulatory capital requirements; that the|Capital Adequacy Assessment Process |
|group has insufficient capital to provide|('ICAAP') under Basel II which means|
|a stable resource to absorb any losses up|that the Company considers the risks|
|to the confidence level defined within |to which it is, or could be, exposed|
|the group; that the group loses |in order to ensure that there is |
|reputational status as a result of having|sufficient capital adequacy on an |
|capital that is regarded as inappropriate|ongoing basis. |
|either in quantity, type or distribution;| |
|or that the capital structure is | |
|inefficient. | |
+-----------------------------------------+------------------------------------+
|Financial and Prudential reporting - the |The Board receives its internal |
|risk of adopting inappropriate accounting|accounts at each meeting. The Audit |
|policies; ineffective controls over |Committee reviews the internal |
|financial and regulatory reporting. |controls of the Company and its |
| |subsidiaries. During the year it met|
| |on six occasions. At the interim |
| |stage the accounts are reviewed by |
| |the external Auditor and at the year|
| |end are subject to external audit. |
+-----------------------------------------+------------------------------------+
|Reputational - the risk that the value of|The Company has a risk framework in |
|the Company is diminished due to adverse |place to reduce the likelihood of |
|publicity regarding the way in which it |such a loss event taking place. In |
|does business. |addition, the Company has in place |
| |arrangements to enable it to respond|
| |to and minimise the impact of any |
| |adverse incident. |
+-----------------------------------------+------------------------------------+
|Operational Risk Is the risk of a |Â |
|reduction in earnings and/or value, | |
|through financial or reputational loss, | |
|from inadequate or failed internal | |
|processes and systems, or from people or | |
|external events. In order to more | |
|accurately manage operational risks, | |
|Alliance Trust places them into the | |
|following sub categories: | |
+-----------------------------------------+------------------------------------+
|Legal & regulatory disclosure - loss |The Company has separate legal, |
|arising from failure to comply with the |compliance and internal audit |
|laws, regulations and codes applicable. |functions to keep the business |
|Â |apprised of regulatory developments.|
+-----------------------------------------+------------------------------------+
|Customer Treatment - loss arising from |All employees are required to |
|inappropriate or poor customer treatment.|undertake training and are tested to|
| |ensure that they have a good |
| |understanding of the requirement to |
| |treat customers fairly. Our |
| |regulated subsidiary, Alliance Trust|
| |Savings, monitors this as a Key |
| |Performance Indicator. |
| |Â |
+-----------------------------------------+------------------------------------+
|Process and Resources - loss resulting |Staff members have individual |
|from inadequate or failed internal |objectives and their performance is |
|processes and systems, people related |assessed against these. Investment |
|events and deficiencies in the |managers operate within parameters |
|performance of external suppliers and |set by the Asset Allocation |
|service providers. |Committee and Equity Strategy Review|
| |Committee which in turn operate |
| |within limits set by the Board. |
| |Management Information from |
| |performance and risk measurement |
| |systems are reviewed by management |
| |committees and the Boards. |
+-----------------------------------------+------------------------------------+
|Theft and other criminal acts - loss |We take care to segregate duties |
|associated with financial crime or the |between front and back office |
|failure to put into place effective |functions. We do not handle cash and|
|systems and controls to comply with |have anti-money laundering |
|regulatory and legal responsibilities to |requirements in place and enforced. |
|detect and prevent financial crime. This | |
|can also include regulatory sanctions and| |
|costs. | |
+-----------------------------------------+------------------------------------+
|People Risk - loss arising from |Policies are in place to ensure |
|inappropriate behaviour, industrial |effective remuneration and that an |
|action or health and safety issues. This |appropriate working environment is |
|includes the failure to retain and |maintained throughout the Group. |
|motivate staff and to recruit |Employee Key Performance Indicators |
|appropriately skilled staff to fulfil the|such as absence and turnover are |
|business objectives. |monitored regularly by management. |
+-----------------------------------------+------------------------------------+
|Management of change - loss arising from |Major projects are considered and |
|projects and business change failing to |monitored by a Project Control Group|
|be introduced on time and within budget, |or other senior committee |
|and failure to realise the intended | |
|benefits. | |
+-----------------------------------------+------------------------------------+
|Management of third party suppliers - |Significant contracts are reviewed |
|loss arising from the service failure |by our internal legal team to ensure|
|from a third party arising due to |that the Company's interests are |
|inadequate contractual arrangements; |protected so far as can be |
|failure to manage the third party, or a |commercially negotiated. |
|failed or discontinued service. | |
+-----------------------------------------+------------------------------------+
|Business continuity - loss arising from |The Company has tested business |
|the interruption or disruption to |continuity management processes and |
|critical processes and could include |plans in place. |
|building unavailability; lack of IT | |
|services; environmental hazards; | |
|unavailability of human resource or an | |
|inadequate response to disruption from | |
|flawed or insufficient planning. | |
+-----------------------------------------+------------------------------------+
Further information on financial instruments and risk as required by IFRS7 can
be found on pages 77 to 83 of the Report and Accounts.
Alliance Trust PLC
Consolidated income statement for the year ended 31 January 2010
  2010   2009
--------------------------------------------------------------------------------
£000 Revenue Capital Total Revenue Capital Total
--------------------------------------------------------------------------------
Revenue
Income    93,652 - 93,652 117,283 - 117,283
Profit/(loss) on fair - 420,327 420,327 - (551,495) (551,495)
value designated
investments
Profit/(loss) on - 4,691 4,691 - (23,832) (23,832)
investment property
--------------------------------------------------------------------------------
Total revenue 93,652 425,018 518,670 117,283 (575,327) (458,044)
Administrative (36,819) (1,256) (38,075) (40,069) (1,981) (42,050)
expenses
Finance costs (666) (1,267) (1,933) (4,322) (3,053) (7,375)
Impairment losses - - - (1,759) (9.074) (10,833)
Loss on revaluation - (951) (951) - (6,786) (6,786)
of office premises
Foreign exchange 178 (4,505) (4,327) (271) 8,221 7,950
(losses)/gains
--------------------------------------------------------------------------------
Profit/(loss) before 56,345 417,039 473,384 70,862 (588,000) (517,138)
tax
Tax (5,567) 355 (5,212) (10,552) 3,627 (6,925)
--------------------------------------------------------------------------------
Profit/(loss) for the 50,778 417,394 468,172 60,310 (584,373) (524,063)
period
Attributable to:
- Minority interest 186 1,583 1,769 1 (866) (865)
- Equity holders of 50,592 415,811 466,403 60,309 (583,507) (523,198)
the parent
--------------------------------------------------------------------------------
 50,778 417,394 468,172 60,310 (584,373) (524,063)
Earnings/(loss) per
share from continuing
operations
attributable to
equity holders of the
parent
Basic (p per share) 7.57 62.19 69.76 9.00 (87.06) (78.06)
Diluted (p per 7.55 62.02 69.57 8.98 (87.06) (78.08)
share)
Consolidated statement of comprehensive income
  2010   2009
--------------------------------------------------------------------------------
£000 Revenue Capital Total Revenue Capital Total
--------------------------------------------------------------------------------
Profit/(loss) for the period 50,778 417,394 468,172 60,310 (584,373) (524,063)
Defined benefit plan net - (3,244) (3,244) - (3,282) (3,282)
actuarial loss
Retirement benefit - 14 14 - 891 891
obligations deferred tax
Loss on revaluation of - - - - (425) (425)
office premises
Exchange differences on - - - - 984 984
translation of foreign
subsidiary
--------------------------------------------------------------------------------
Total recognised income and 50,778 414,164 464,942 60,310 (586,205) (525,895)
expense for the period
Attributable to:
Minority interest 186 1,583 1,769 1 (866) (865)
Equity holders of the parent 50,592 412,581 463,173 60,309 (585,339) (525,030)
--------------------------------------------------------------------------------
 50,778 414,164 464,942 60,310 (586,205) (525,895)
Company income statement for the year ended 31 January 2010
  2010   2009
--------------------------------------------------------------------------------
£000 Revenue Capital Total Revenue Capital Total
--------------------------------------------------------------------------------
Revenue
Income 81,213 - 81,213 95,299 - 95,299
Profit/(loss) on - 405,539 405,539 - (560,066) (560,066)
fair value
designated
investments
Profit/(loss) on - 4,691 4,691 - (23,832) (23,832)
investment property
--------------------------------------------------------------------------------
Total revenue 81,213 410,230 491,443 95,299 (583,898) (488,599)
Administrative (14,878) (1,117) (15,995) (15,168) (1,632) (16,800)
expenses
Finance costs (636) (1,267) (1,903) (1,543) (3,053) (4,596)
Loss on revaluation - (951) (951) - (6,786) (6,786)
of office premises
Foreign exchange - (3,028) (3,028) - 8,221 8,221
(losses)/gains
--------------------------------------------------------------------------------
Profit/(loss) before 65,699 403,867 469,566 78,588 (587,148) (508,560)
tax
Tax (4,574) 355 (4,219) (9,094) 1,255 (7,839)
--------------------------------------------------------------------------------
Profit/(loss) for 61,125 404,222 465,347 69,494 (585,893) (516,399)
the period
--------------------------------------------------------------------------------
Attributable to:
Equity shareholders 61,125 404,222 465,347 69,494 (585,893) (516,399)
Earnings/(loss) per share from
continuing  operations
attributable to equity
shareholders
Basic (p per share) 9.14 60.45 69.59 10.37 (87.42) (77.05)
Diluted (p per 9.12 60.29 69.41 10.34 (87.42) (77.08)
share)
Company statement of comprehensive income
  2010   2009
--------------------------------------------------------------------------------
£000 Revenue Capital Total Revenue Capital Total
--------------------------------------------------------------------------------
Profit/(loss) for the period 61,125 404,222 465,347 69,494 (585,893) (516,399)
Defined benefit plan net - (3,244) (3,244) - (3,282) (3,282)
actuarial loss
Retirement benefit - 14 14 - 891 891
obligations deferred tax
Loss on revaluation of - - - - (425) (425)
office premises
--------------------------------------------------------------------------------
Total recognised income and 61,125 400,992 462,117 69,494 (588,709) (519,215)
expense for the period
Attributable to:
Equity shareholders 61,125 400,992 462,117 69,494 (588,709) (519,215)
Statements of changes in equity for the year ended 31 January 2010
 Group Company
--------------------------------------------------------------------------------
£000 2010 2009 2010 2009
--------------------------------------------------------------------------------
Called up share capital
At 1 February 2009 16,798 16,798 16,798 16,798
Own shares purchased and cancelled in (121) - (121) -
the year
--------------------------------------------------------------------------------
At 31 January 2010 16,677 16,798 16,677 16,798
--------------------------------------------------------------------------------
Capital Reserves
At 1 February 2009 1,378,674 1,966,300 1,372,536 1,962,892
Profit/(Loss) for the year 415,811 (583,507) 404,222 (585,893)
Pension scheme financing (3,230) (2,391) (3,230) (2,391)
Own shares purchased* (15,405) (2,587) (15,405) (2,587)
SMEIP/LTIP reserve movement 900 859 899 515
--------------------------------------------------------------------------------
At 31 January 2010 1,776,750 1,378,674 1,759,022 1,372,536
--------------------------------------------------------------------------------
Revaluation Reserve
At 1 February 2009 183 608 183 608
Revaluation of office premises - (425) - (425)
--------------------------------------------------------------------------------
At 31 January 2010 183 183 183 183
--------------------------------------------------------------------------------
Merger Reserve
--------------------------------------------------------------------------------
At 1 February 2009 and 31 January 2010 645,335 645,335 645,335 645,335
--------------------------------------------------------------------------------
Capital Redemption reserve
At 1 February 2009 2,200 2,200 2,200 2,200
Own shares purchased and cancelled in 121 - 121 -
the year
--------------------------------------------------------------------------------
At 31 January 2010 2,321 2,200 2,321 2,200
--------------------------------------------------------------------------------
Revenue reserve
At 1 February 2009 78,806 73,550 85,539 71,107
Profit for the year 50,592 60,309 61,125 69,494
Dividends (57,363) (54,961) (57,363) (54,961)
Unclaimed dividends 4 25 4 25
SMEIP/LTIP reserve movement (22) (117) (6) (126)
--------------------------------------------------------------------------------
At 31 January 2010 72,017 78,806 89,299 85,539
--------------------------------------------------------------------------------
Translation reserve
At 1 February 2009 984 - - -
Translation of foreign subsidiary - 984 - -
Write back on wind up of foreign (984) - - -
subsidiary
--------------------------------------------------------------------------------
At 31 January 2010 - 984 - -
--------------------------------------------------------------------------------
Minority interest
At 1 February 2009 6,734 7,376 - -
Profit/(Loss) for the year 1,769 (865) - -
PATIF/ATIF** net subscriptions 3,181 223 - -
--------------------------------------------------------------------------------
At 31 January 2010 11,684 6,734 - -
--------------------------------------------------------------------------------
At 1 February 2009 2,129,714 2,712,167 2,122,591 2,698,940
--------------------------------------------------------------------------------
At 31 January 2010 2,524,967 2,129,714 2,512,837 2,122,591
--------------------------------------------------------------------------------
* Â Own shares purchased in the year end 2009 relates to funds provided by the
Company to the Trustee of the Employment Benefit Trust (EBT). Â In the year end
2010 this relates to the purchase and cancellation of own shares.
** Premier Alliance Trust Investment Fund and Alliance Trust Investment Fund
Balance sheets as at 31 January 2010
 Group Company
--------------------------------------------------------------------------------
£000 2010 2009 2010 2009
--------------------------------------------------------------------------------
Non-current assets
Investments held at fair value 2,595,849 1,820,763 2,577,599 1,841,092
Investment property 51,625 56,335 51,625 56,335
Property, plant and equipment:
Office premises 6,500 6,375 6,500 6,375
Other fixed assets 3 8 3 6
Intangible assets 3,646 5,251 735 1,123
Deferred tax assets 141 - - -
--------------------------------------------------------------------------------
 2,657,764 1,888,732 2,636,462 1,904,931
Current assets
Other receivables 17,025 17,531 10,516 8,615
Withholding tax debtor 1,099 840 1,099 840
Corporation tax debtor 62 227 62 -
Cash and cash equivalents 269,475 507,033 55,718 297,046
--------------------------------------------------------------------------------
 287,661 525,631 67,395 306,501
Total assets 2,945,425 2,414,363 2,703,857 2,211,432
Current liabilities
Other payables (252,860) (231,108) (24,486) (36,342)
Tax payable (2,677) (1,595) (1,613) (527)
Bank overdrafts and loans (160,000) (50,000) (160,000) (50,000)
--------------------------------------------------------------------------------
 (415,537) (282,703) (186,099) (86,869)
Total assets less current liabilities 2,529,888 2,131,660 2,517,758 2,124,563
Non current liabilities
Deferred tax liabilities - (381) - (407)
Pension scheme deficit (4,921) (1,565) (4,921) (1,565)
--------------------------------------------------------------------------------
Net assets 2,524,967 2,129,714 2,512,837 2,122,591
Equity
Share capital 16,677 16,798 16,677 16,798
Capital reserves 1,776,750 1,378,674 1,759,022 1,372,536
Translation reserve - 984 - -
Merger reserve 645,335 645,335 645,335 645,335
Revaluation reserve 183 183 183 183
Capital redemption reserve 2,321 2,200 2,321 2,200
Revenue reserves 72,017 78,806 89,299 85,539
--------------------------------------------------------------------------------
Equity attributable to equity holders of 2,513,283 2,122,980 2,512,837 2,122,591
the parent
Minority interest 11,684 6,734 - -
Total equity 2,524,967 2,129,714 2,512,837 2,122,591
Net Asset Value per ordinary share
attributable to equity holders of the
parent
Basic (£) £3.78 £3.17 £3.78 £3.17
Diluted (£) £3.77 £3.16 £3.77 £3.16
Cash flow for the year ended 31 January 2010
--------------------------------------------------------------------------------
 Group Company
--------------------------------------------------------------------------------
£000 2010 2009 2010 2009
--------------------------------------------------------------------------------
Cash flows from operating
activities
Profit/(loss) before tax 473,384 (517,138) 469,566 (508,560)
Adjustments for:
(Gains)/losses on investments (425,018) 575,327 (410,230) 583,898
Foreign exchange (gains)/losses 4,327 (7,950) 3,028 (8,221)
Scrip dividends (357) (590) (357) (590)
Depreciation 5 71 3 9
Amortisation of intangibles 1,605 1,734 388 392
Impairment losses - 10,833 - -
Loss on revaluation of office 951 6,786 951 6,786
premises
Share based payment expense 878 742 893 389
Interest 1,933 7,375 1,903 4,596
--------------------------------------------------------------------------------
Operating cash flows before 57,708 77,190 66,145 78,699
movements in working capital
Increase in amounts due to 29,475 5,963 - -
depositors
(Increase)/Decrease in (4,790) 9,948 (3,681) 523
receivables
Increase/(Decrease) in payables 7,397 (15,510) (582) 2,744
--------------------------------------------------------------------------------
Net cash flow from operating 89,790 77,591 61,882 81,966
activities before income taxes
Taxes paid (4,623) (4,784) (3,737) (7,888)
--------------------------------------------------------------------------------
Net cash inflow from operating 85,167 72,807 58,145 74,078
activities
Cash flows from investing
activities
Proceeds on disposal of fair
value through profit and loss 925,131 1,644,311 923,385 1,641,725
investments
Purchases of fair value through (1,280,596) (1,272,384) (1,254,099) (1,288,772)
profit and loss investments
Purchase of plant and equipment - (43) - (10)
Purchase of intangible assets - (1,055) - (41)
Purchases in respect of new head (1,076) (9,702) (1,076) (9,702)
office
--------------------------------------------------------------------------------
Net cash (outflow)/inflow from (356,541) 361,127 (331,790) 343,200
investing activities
Cash flows from financing
activities
Dividends paid - Equity (57,292) (41,559) (57,292) (41,559)
Unclaimed dividends repaid 4 25 4 25
Purchase of own shares (15,405) (2,587) (15,405) (2,587)
New bank loans raised 110,000 - 110,000 -
Repayment of borrowing - (109,000) - (109,000)
Minority interest investment in 3,181 223 - -
PATIF/ATIF*
Interest payable (2,345) (9,606) (1,962) (5,660)
--------------------------------------------------------------------------------
Net cash inflow/(outflow) from 38,143 (162,504) 35,345 (158,781)
financing activities
Net (decrease)/increase in cash (233,231) 271,430 (238,300) 258,497
and cash equivalents
Cash and cash equivalents at 507,033 227,653 297,046 30,328
beginning of period
Effect of foreign exchange rate  (4,327) 7,950 (3,028) 8,221
changes
--------------------------------------------------------------------------------
Cash and cash equivalents at end 269,475 507,033 55,718 297,046
of period
* Premier Alliance Trust Investment Funds and Alliance Trust Investment Funds.
The income statement is the profit and loss account of the Company and the
Group.
The financial information set out above does not constitute the Company's or
Group's statutory accounts for the years ended 31 January 2010 or 2009 but is
derived from those accounts.
Statutory accounts for 2009 have been delivered to the Registrar of Companies
and those for 2010 will be delivered following the Company's Annual General
Meeting. The auditor has reported on those accounts. The report was unqualified.
1.  Expenses comprise £15,995,000 (£16,800,000) incurred by the Company, and
£22,080,000 (£25,250,000) incurred by subsidiary companies. Taking guidance from
the Statement of Recommended Practice "Financial Statements of Investment Trust
Companies and Venture Capital Trusts" the cost of the Senior Management Equity
Incentive Plan and Long Term Incentive Plan deemed to be related to the capital
performance of the Company has been treated as a capital expense of £1,117,000
(£1,632,000).
2. Â The diluted earnings per share is calculated using the weighted average
number of ordinary shares, which is arrived at by taking account of 1,789,960
(1,842,670) ordinary shares acquired by the Trustee of the Employee Benefit
Trust ("EBT") with funds provided by the Company. Â The basic earnings per share
is calculated by adding back these shares.
The Net Asset Value per share excludes, for the purpose of these disclosures,
the 1,789,960 (1,842,670) ordinary share acquired by the Trustee of the EBT with
funds provided by the Company.
3. All expenses are accounted for on an accruals basis. In respect of the
analysis between revenue and capital items presented within the income
statement, all expenses have been presented as revenue items except as follows:
- Expenses which are incidental to the acquisition of an investment are included
within the cost of that investment.
- Expenses which are incidental to the disposal of an investment are deducted
from the disposal proceeds of the investment.
- Â The Directors have determined to allocate annual bonus and senior management
equity incentive plan costs which relate to the achievement of investment
manager performance objectives and total stockholder return performance
objectives against capital profits and those that relate to the achievement of
job performance objectives against revenue profits.
- Â The Directors have determined to allocate two thirds of the cost of bank
indebtedness incurred to finance investment against capital profits with the
balance being allocated against revenue profits.
- Â There have been no related parties transactions that have taken place in the
financial year  that have materially affected the financial position or the
performance of the Company during the year.
Number of Issued Shares as at 31 January 2010
Ordinary Shares of 2.5p     667,059,760
Subsequent to the year end on 10 March 2010 the Company acquired and cancelled
6,000,000 Ordinary Shares of 2.5p. The Company's issued share capital after this
transaction was 661,059,760 Ordinary 2.5p shares.
Posting Arrangements
The Report and Accounts will be posted to shareholders on Wednesday, 21 April
2010 and will be available on the Company's website www.alliancetrust.co.uk
<
http://www.alliancetrust.co.uk/> on Thursday 22 April 2010. It will also be
made available to the public at the Company's registered office, 8 West
Marketgait, Dundee DD1 1QN and at the offices of the Company's Registrar,
Computershare Investor Services PLC,Lochside House, 7 Lochside Avenue, Edinburgh
Park, Edinburgh EH12 9DJ on and after Thursday 22 April 2010.
Annual General Meeting
The Company's Annual General Meeting will be held on Friday, 21 May 2010 at
11.00 am at the Apex City Quay Hotel, Dundee.
In addition to the full annual report, up-to-date performance data, details of
new initiatives and other information about the Company can be found on the
Company's website.
Report of Directors and Responsibility Statement
We confirm that to the best of our knowledge:
the financial statements, prepared in accordance with the applicable set of
accounting standards, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the company and the undertakings
included in the consolidation taken as a whole; and
the Directors' report includes a fair review of the development and performance
of the business and the position of the Company and the undertakings included in
the consolidation taken as a whole, together with a description of the principal
risks and uncertainties it faces.
Lesley Knox Katherine Garrett-Cox
Chairman Chief Executive
16 April 2010 16 April 2010
[HUG#1404923]
Friday, 31st May 2024
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