Response to shareholders' requisitioned resolution

3 April 2012

Alliance Trust publishes Circular to shareholders and responds to Laxey Partners' requisitioned resolution

Further to the announcement made by Alliance Trust PLC confirming receipt of a requisition notice from Laxey Partners on 13 March 2012, the Company has today published a Circular containing a letter from the Chairman to shareholders and a statement from Laxey which the Company is also required to send to shareholders. The letter details the Board's response to Laxey's resolution and its voting recommendation.

The full text of the letter is below. Highlights are as follows:

• Laxey's proposals will not benefit shareholders over the medium and long-term and are motivated by its own short-term self-interest 

• The proposal to allow shareholders to exit the Company at closer to NAV is similar to that which shareholders convincingly rejected at last year's AGM and would have a similarly detrimental effect  

• The Board is already committed to narrowing the discount through improving investment performance, ongoing share buybacks and a continuing emphasis on sustainable dividend growth 

• Externalising the investment management of the portfolio would negatively impact the Company's ability to align the interests of its shareholders and investment managers 

• Over the last year, Alliance Trust has delivered top quartile investment performance at bottom quartile cost, narrowed and greatly reduced the volatility of the discount and paid the largest annual dividend increase in 20 years 

Commenting on the Circular, Alliance Trust's Chairman, Karin Forseke, said:

"We are disappointed that Laxey has requisitioned the Board again, having been convincingly defeated last year. This persistent requisitioning wastes shareholders' money and demonstrates Laxey's short-term attitude to its investment. The Board believes strongly that this resolution is not in the best interests of all shareholders. Alliance Trust remains focused on improving investment performance and last year delivered strong results, with TSR in the top quartile. It is crucial that all shareholders make their voice heard and vote at our AGM on 27^th April, and we strongly urge them to vote against Laxey's resolution."

All terms used within this announcement will have the same meaning as applied within the Circular.

- Ends -

For more information please contact:

RLM Finsbury
James Leviton and Clare Dundas
020 7251 3801

Alliance Trust
Evan Bruce-Gardyne, Head of Investor Relations
01382 321169

Notes to editors

Alliance Trust PLC is a self-managed investment company with investment trust status. It is one of the largest generalist UK investment trusts by market value on the London Stock Exchange.

Chairman's Letter to Shareholders Extracted from Today's Circular

Your Company has been requisitioned by Laxey, an offshore-registered hedge fund manager, to put a resolution to the forthcoming AGM. Regrettably, Laxey has chosen to put your Company to the expense of re-proposing a matter, the substance of which shareholders overwhelmingly rejected at last year's AGM. The combined costs relating to this and the previous requisition will be in excess of £2.5 million.

Your Board manages the Company in the long-term interests of all shareholders. By contrast, Laxey has made it clear, through the substance of its resolution, that it is motivated by its own short-term self-interest.

Laxey's proposal will not benefit shareholders over the medium and long-term

• At last year's AGM, shareholders convincingly rejected Laxey's suggestion that the Board should introduce a rigid discount control mechanism. Laxey's latest proposal would have a similarly detrimental effect for shareholders in the long-term.  

Your Board is committed to narrowing the discount on a sustainable basis

• We aim to deliver this through a combination of improving investment performance, an ongoing programme of share buybacks and a continuing emphasis on sustainable dividend growth.  

Your Company is delivering strong investment performance at low cost

• Last year, the Company generated a total shareholder return which outperformed the Sector by 5%, a top quartile performance, and on an NAV total return basis outperformed its Sector by over 2%. This has been achieved alongside a reduction in the absolute discount and volatility of the discount and a 7% increase to the dividend.  

• Laxey suggest that the Board should consider outsourcing the investment management as a way to lower the cost of managing the Company. However, even after including the costs relating to last year's requisition by Laxey, the annualised TER of 0.65% ranks Alliance Trust among the lowest cost trusts in the Sector.  

The Board cannot support actions that might be convenient to a small minority of shareholders but are to the detriment of the Company as a whole. We therefore urge all shareholders to vote once again this year to ensure that the result reflects the interests of the majority.

Please read and consider the entirety of this Circular before voting.

Your Board recommends that shareholders VOTE AGAINST the Laxey Resolution, as they intend to do with their own shares.

TIMETABLE FOR AGM
Latest time and date for receipt of Form of Direction from ATS Investors		11.00 a.m. on 23 April 2012
Latest time and date for receipt of Form of Proxy from Shareholders		11.00 a.m. on 25 April 2012
Time and date of the Annual General Meeting		11.00 a.m. on 27 April 2012

The Requisition

LPL UK 1 Ltd and 100 other companies (LPL UK 2 Ltd to LPL UK 100 Ltd and LACV Ltd), all of which are associated with Laxey Partners Limited, an Isle of Man registered hedge fund manager ("Laxey"), and together hold a total of 404,000 shares or 0.07% of your Company, have requisitioned an additional resolution, as permitted by the Companies Act 2006, at the AGM of your Company which will be held at the Apex City Quay Hotel, 1 West Victoria Dock Road, Dundee DD1 3JP, on 27 April 2012, commencing at 11.00 a.m.

Shareholders should already have received notice of the AGM which was published along with the Annual Report on 12 March 2012. Laxey chose to submit their requisition on that date meaning that it has been necessary to prepare this Circular separately resulting in additional cost to shareholders and the Company. The requisition notice requires the Board to put to the AGM the following resolution (the "Laxey Resolution"):

"THAT the Directors shall, as soon as practicable following the passing of this resolution, conduct a comprehensive review of the Company to determine what steps can be taken to improve the management of the Company's affairs (in terms of addressing the investment performance of the Company and the discount at which the Company's ordinary shares trade to their net asset value). This review should include the possibility of externalising the investment management of the Company's portfolio and should also bring forward proposals which would enable shareholders who wish to sell their ordinary shares, to do so at a price which more closely reflects net asset value."

The Board recommends shareholders to VOTE AGAINST the Laxey Resolution.

Background

Shareholders will recall that Laxey requisitioned two resolutions at last year's AGM, one of which sought to impose a rigid discount control mechanism on your Company (such that short-term shareholders could sell their shares at a narrower discount to net asset value than the price at which they had bought) at a cost of impaired investment flexibility and an increased TER for long-term shareholders. Laxey appears to be seeking, in essence, the same short-term exit this year, in calling for the Board to bring forward proposals to enable shareholders who wish to do so to exit at a price closer to net asset value.

This repetitive requisitioning appears to be motivated by Laxey's own short-term self-interest and is very expensive to your Company. As a consequence of last year's requisition and this new Laxey Resolution, the Company will have incurred advisory, legal, printing, registrar and UK Listing Authority and other costs in excess of £2.5 million. These costs are payable by your Company whether or not the Laxey Resolution becomes effective.

The Laxey Resolution and the Board's response

The first part of the Laxey Resolution seeks to require the Board to

"conduct a comprehensive review of the Company to determine what steps can be taken to improve the management of the Company's affairs (in terms of addressing the investment performance of the Company and the discount at which the Company's ordinary shares trade to their net asset value). This review should include the possibility of externalising the investment management of the Company's portfolio"

As you would expect, the Board of your Company continuously assesses and evaluates investment performance and the Company's structure in the best interests of shareholders.

Shareholders can be assured that the Board has considered and will continue to consider the appropriateness of the current internalised investment management of its assets. As such, this proposal represents an unnecessary and expensive repetition of an essential and regular component of your Board's business.

Performance and Discount Improvements

Improving investment performance remains a priority and the Board is pleased to report that much has been achieved in the last year:

Improved performance:

• The performance of the Company has improved significantly since last year's AGM. Over the 12 months to 28 March 2012 your Company has outperformed the Sector by 2.4%, whereas at the time of the AGM it had underperformed; and 

• Between July 2010, when your Board became aware of Laxey's position in the Company, and 28 March 2012, the NAV total return and TSR are 17.1% and 21.9% respectively, both of which outperform the Sector average. 

This improvement has been achieved as a result of a strengthening of the investment process, recruitment of additional high-calibre investment personnel and good progress by the subsidiaries. The Board believes that the improvement is increasingly being recognised by current and potential investors.  

Discount tightening:

Since the Company's decision to implement a more active share buyback policy, the discount has narrowed materially and stabilised. Indeed, the volatility of the discount during the period since last year's AGM is less than half of the volatility during the equivalent period before last year's AGM, at a time when discount volatility elsewhere in the Sector has increased. In addition, since the date of the Company's first share buyback (in October 2009), the discount has narrowed from 18.9% to 15.8%. Accordingly, the Company will continue with its share buyback programme.

Dividend increase:

Your Board increased the dividend for the period ended 31 December 2011 by 7.2% - our 45th consecutive dividend increase and our highest increase in regular dividends in 20 years. The Directors recognise the importance to shareholders of a reliable and steadily increasing source of income and intend to continue our emphasis on sustainable dividend growth.

Key Benefits of the Internalised Structure

Laxey has proposed that the Board should investigate the possibility of "externalising the investment management" on the basis that such a move would result in "excessive costs being removed". However, the suggestion that "excessive costs" exist to be removed from the TER of your Company, is not supported by the evidence.

The annualised TER of the Company to 31 December 2011 was 0.65%. The asset weighted average TER for the Sector, based on the most recently published results of its constituents, was 0.97%. If the self-managed trusts are removed from this calculation, the average TER for the Sector rises to 1.04%, whereas for the self-managed trusts the average TER is 0.78% - in other words, lower than that of their externally managed peers. In contrast to Laxey's suggestions of excess cost, the evidence demonstrates that your Company is one of the lowest cost companies in the Sector when compared to both internally and externally managed peers.

Whilst your Board remains open-minded to the merits of other structures, it has conviction in the focus and flexibility which internal management brings to your Company, in addition to the prospect of building a valuable third party asset management business over time. As shown above, investment costs are lower through our internal management structure than by external management of the Company's assets.

The second part of the Laxey Resolution requests that proposals be brought forward to enable shareholders to sell closer to NAV.

The latter part of the Laxey Resolution seeks to achieve essentially the same outcome that was intended by one of the requisitioned resolutions put by Laxey to the AGM last year. The Board continues to believe, as it did last year, that the structural mechanisms implied by such a resolution are not in the interests of long-term shareholders as they typically deliver one-off benefits that favour shareholders looking to exit rather than those looking to support long-term value generation.

The Board believes that the interests of long-term shareholders are best served by increasing demand for the Company's shares coupled with a sustainable strategy to manage supply. In that context:

• The key drivers of investor demand are investment performance and prospective dividend distributions. The Board continually reviews all options available to it with a view to enhancing the attractiveness of the investment proposition. As noted above, recent investment performance has been stronger and the Board aims to continue its long record of progressive dividend distributions. 

• Supply of your Company's shares in the market continues to be managed through an active share buyback programme. Over the last 12 months, the Company has invested almost £275 million in share buybacks, which has materially reduced discount volatility in the Company's shares. As noted above, the volatility of the discount has been halved and the discount itself has narrowed. 

At the AGM last year shareholders voted convincingly against a similar proposal and the Board once again urges all shareholders to vote against the current Laxey Resolution.

Finally, your Board has been advised that the Laxey Resolution is, at least in part, likely to be ineffective as the requirement to bring forward proposals would not be binding on the Board under the Company's constitution.

Your Board believes that the Laxey Resolution is not in the best interests of the Company and shareholders as a whole and strongly recommends shareholders to VOTE AGAINST the Laxey Resolution.

The Circular will be posted to shareholders and ATS investors today, 3 April 2012. It will also be available at www.alliancetrust.co.uk/agm2012. A copy of the Circular has been submitted to the National Storage Mechanism and will shortly be available for inspection at: www.hemscott.com/nsm.do

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Source: Alliance Trust PLC via Thomson Reuters ONE

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