Alliance Trust PLC : Half-yearly report
25 July 2013
Alliance Trust PLC
Results for 6 months to 30 June 2013
| Financial Highlights | As at 30 Jun 2013 | Total Return | AIC Global Growth Sector Total Return |
| Net Asset Value per share | 495.6p | 12.5% | 11.1% |
| Share Price | 427.4p | 15.2% | 11.4% |
Company Highlights
Alliance Trust continues to outperform the Global Growth sector on an NAV and TSR basis, due to its global, high conviction portfolio and active stock picking. This builds on the track record of consistent performance in volatile markets, delivering strong double digit returns for shareholders.
Net Asset Value Total Return of 12.5% outperformed the Global Growth sector over 6 months as well as over 1,3 & 5 years
Total Shareholder Return of 15.2% outperformed the Global Growth sector over 6 months as well as over 1,3 & 5 years
The ordinary dividend for the year is expected to rise by at least 3% to 9.548p per share. This will be the 47th consecutive annual increase
Alliance Trust Savings generated an operating profit before tax from continuing operations of £0.2m in the first half of the year. Assets under Administration are now approaching £5bn
The investment team is currently managing total assets of £4.6bn in the Trust and in Alliance Trust Investments (ATI), of which third party Assets under Management accounts for £1.5bn. First half successes include our first segregated mandate and new institutional clients
This year we have been recognised in four high profile awards for our investment performance, our products, our customer service and our transparency.
Commenting on the results, Katherine Garrett-Cox, Chief Executive, said:
"Alliance Trust has delivered another strong set of results and I am pleased with the progress we are making across all parts of the business. The actions we have taken over the last five years are delivering good results for our shareholders. This has been recognised by investors and commentators as well as by Money Observer in their 2013 Trust Awards which "Highly Commended" the Trust in the best global generalist category.
Our subsidiary businesses have contributed to this success. We are delighted with the first half results for Alliance Trust Savings, which generated an operating profit from continuing operations, maintaining the progress made in 2012. We have seen good growth in business generated through intermediaries as they embrace the Retail Distribution Review. We recently won the Your Money Direct Awards for the Best Online Stocks & Shares ISA Provider as well as being recognised by the Platforum Awards for our User Experience. Alliance Trust Investments has focused its business into three core areas - Global Equities, Fixed Income as well as Sustainable and Responsible Investment (SRI) and we now have more than £1.9bn of Assets Under Management of which £1.5bn is made up of third party assets, including institutional clients and a segregated mandate.
The equity portfolio remains the key driver of performance and has enabled us to navigate the choppy waters of financial markets, which rose sharply in the first quarter of the year before suffering a dramatic, short-term correction in the last six weeks of the period. We expect this market volatility to continue and the outlook for the rest of the year remains challenging. Investors are anticipating a likely change in policy towards Quantitative Easing in the US and look for clarity of policy from the new Governor of the Bank of England. However, we are confident that our bottom-up, long-term global approach to stock selection will help us identify and invest in the companies that can thrive in this environment.
We are building on our ambition to become the UK's most trusted investment and savings business. For the second year running we have won the AIC's Best Information to Shareholders Awards for the quality of our Report & Accounts. We are determined to continue to play a leading role in rebuilding the trust which we believe is crucial to the future of our industry."
-ENDS-
Contact
For more information, please contact:
Conor McClafferty & Clare Dundas
RLM Finsbury
T 020 7251 3801
E alliancetrust@rlmfinsbury.com
Evan Bruce-Gardyne
Director of Investor Relations
Alliance Trust PLC
T 01382 321169
M 07501 500243
E investor@alliancetrust.co.uk
Alliance Trust PLC Interim Report 2013
Performance Summary
This interim report sets out the results of Alliance Trust PLC for the six months ended 30 June 2013.
Over the past six months the Total Shareholder Return (TSR) was 15.2%, outperforming the Global Growth Sector and ranking 11 out of 35 in our peer group.
The total return of the Company's Net Asset Value (NAV) per share over the same period was 12.5%, outperforming the Global Growth Sector and ranking 14 out of 35 trusts in our peer group. The equity portfolio return of 14.5% compares favourably with the MSCI All Country World Index which over the same period returned 14.0%.
Over the period we have increased the level of gross gearing from 8% to 12% and the total global equity exposure has risen from 89% to 95% of NAV. The exposure to fixed income has reduced slightly from 9.6% to 8.5%, mainly due to the outperformance of equities.
Company expenses grew from £9.2m to £10.9m for the half year reflecting the higher cost of fund management and increased expenditure required to meet regulatory change. We report in more detail on our investment performance and attribution and on the activities of our subsidiaries below.
| Total Shareholder Return | 6 months | 1 year | 2 years | 3 years | 4 years | 5 years |
| Alliance Trust (%) | 15.2 | 24.3 | 16.5 | 51.5 | 75.1 | 56.8 |
| Global Growth Sector (%) | 11.4 | 19.2 | 10.5 | 38.0 | 68.1 | 35.6 |
| Ranking | 11/35 | 12/34 | 13/32 | 10/32 | 15/32 | 11/32 |
| NAV Total Return | 6 months | 1 year | 2 years | 3 years | 4 years | 5 years |
| Alliance Trust (%) | 12.5 | 19.5 | 14.5 | 40.2 | 69.7 | 39.7 |
| Global Growth Sector (%) | 11.1 | 18.8 | 11.0 | 37.9 | 70.1 | 34.9 |
| Ranking | 14/35 | 18/34 | 13/32 | 15/32 | 19/32 | 15/32 |
source: Morningstar/Factset
Performance
The equity investment portfolio, representing on average 92% of net assets, outperformed its index with a return of 14.5%. The attribution analysis table below gives more information on how this performance was generated from a global sector perspective.
The total return of fixed income investments was affected by the weakness in bond markets in the latter part of the period. Income yield was marginally offset by falls in bond prices, to give an overall total return of -0.8%. The Trust's holding in the Alliance Trust Monthly Income Bond Fund, which accounted for the majority of the investment in fixed income, had a total return of -1.5%, slightly below that of the IBoxx Sterling Corporate Bond 5-15 year index which is the benchmark for that fund. The holdings in the Alliance Trust Dynamic Bond Fund returned +1.4%, showing the robustness of the investment approach during a period of weak markets. The total weight in fixed income started the period at 9.6% but fell as a proportion of total net assets due to the relative strength of equities.
Other Assets - which include Private Equity, Real Estate and Subsidiaries - made a small positive contribution to NAV growth. Cash balances made a negligible return due to the continuing very low level of interest rates.
The low interest rate environment allowed the Trust to borrow at 1.8%. Gearing was increased from £200m to £340m, with the additional funds being mainly invested in equities. The cost of borrowing was low in relation to the returns that were earned on the Trust's investments, leading to an Allocation gain (a contribution to relative performance) of 1.0%.
Expenses reduced NAV by 0.5% during the half-year.
| Contribution | |||
| Average | Rate of | to Total | |
| Contribution Analysis (%) | Weight | Return | Return |
| Equities | 92.2 | 14.5 | 12.9 |
| Fixed Income | 8.8 | -0.8 | 0.0 |
| Other Assets, Cash & FX | 9.9 | 2.6 | 0.2 |
| Gearing (cost of borrowing) | -10.9 | 0.9 | -0.1 |
| Expenses | -0.5 | ||
| Share Buy-backs | 0.0 | ||
| NAV Total Return | 12.5 | ||
| Effect of Discount Narrowing | 2.7 | ||
| Share Price Total Return | 15.2 | ||
| MSCI All Country World | |||
| Index Total Return (Sterling) | 14.0 |
Source: Alliance Trust/Factset
Attribution
The table below analyses the performance of the Trust by sector and the extent to which each part of the portfolio contributed to the Trust's overall return. We do not have a fixed benchmark as we believe that this would constrain our ability to shape the portfolio. However we recognise that many like to measure the Trust against an index and we show our performance relative to the chosen reference index, in this case the MSCI All Country World Index. The table shows the weighting of the assets in the portfolio and the index and the return of each sector or asset class in the portfolio and the index. The index has no exposure to cash, so no weight or return is shown.
The degree of out/underperformance is then attributed to:
Sector/Asset Allocation - This measures the impact of over or underweighting each sector relative to the benchmark sector weightings. e.g. We had less in Materials than the index, and Materials did not perform as well as the index.
Stock Selection - This measures the degree to which the stocks that we held in each sector did better or worse than the benchmark sector. e.g. Although we were overweight in Utilities which did not do very well relative to the index as a whole, we selected good stocks in that sector.
Our investment approach is based on stock selection rather than taking deliberate active positions on a sector basis, but this provides a useful insight into the structure of the portfolio.
From a sector allocation perspective, the biggest overweight this year has been in Health Care: this position contributed to relative performance due to the general strength of the sector, including the holdings in Pfizer and Roche.
Stock selection was strong in Utilities (e.g. Enterprise Product Partners) but was relatively weak in Financials (e.g. Standard Chartered, Mitsubishi UFJ and RSA Insurance) and Information Technology (e.g. Samsung Electronics). The largest overall contributor to relative performance was Materials where we had chosen not to invest in most of the weak mining stocks in the MSCI Index. Strong performers in the Consumer Discretionary sector included Kabel Deutschland, Walt Disney and Mattel, although overall results in the Consumer sectors were mixed.
From a regional perspective, the equity portfolio benefited in absolute terms from a high weighting (over 45%) in North America and a low weighting in Emerging Markets (both Latin America and EMEA (Europe, the Middle East and Africa)). The performance of UK stocks lagged behind that of the MSCI in sterling terms, mainly due to the weakness of sterling, but this was partly offset by currency hedging. The portfolio had little investment in Japan, which was a very strong (albeit volatile) market.
Index futures were used to reduce our exposure to Europe during the Cypriot banking crisis to protect the portfolio against the impact of potential contagion and removed when the threat had passed. The table also highlights the negative effect of the allocation to fixed income and other non- equity asset classes and cash. The fixed income effect was approximately compensated for by the benefits of gearing.
| Alliance Trust | MSCI All Country World Index | ||||||
| Sector/Asset | Stock | Total | |||||
| Average | Total | Average | Total | Allocation | Selection | Relative | |
| Attribution Analysis (%) | Weight | Return | Weight | Return | Effect | Effect | Effect |
| Consumer Discretionary | 7.6 | 23.2 | 10.9 | 23.1 | -0.2 | 0.0 | -0.2 |
| Consumer Staples | 9.6 | 14.3 | 10.7 | 17.3 | 0.0 | -0.3 | -0.3 |
| Energy | 7.3 | 8.7 | 10.3 | 7.3 | 0.2 | 0.1 | 0.3 |
| Financials | 19.3 | 11.5 | 21.5 | 14.2 | 0.0 | -0.5 | -0.5 |
| Health Care | 13.2 | 23.6 | 9.7 | 26.0 | 0.3 | -0.2 | 0.1 |
| Industrials | 10.1 | 15.4 | 10.4 | 15.5 | 0.0 | 0.0 | 0.0 |
| Information Technology | 13.0 | 9.0 | 11.9 | 12.3 | 0.0 | -0.4 | -0.4 |
| Materials | 5.2 | -2.6 | 6.9 | -8.5 | 0.3 | 0.4 | 0.7 |
| Telecommunication Services | 2.3 | 17.0 | 4.3 | 14.8 | 0.0 | 0.1 | 0.1 |
| Utilities | 5.0 | 27.1 | 3.4 | 12.2 | 0.0 | 0.6 | 0.6 |
| Index Futures | -0.4 | 2.0 | - | - | 0.0 | 0.0 | 0.0 |
| Equities | 92.2 | 14.5 | 100.0 | 14.0 | 0.6 | -0.2 | 0.4 |
| Fixed Income | 8.8 | -0.8 | - | -0.6 | -1.2 | 0.0 | -1.2 |
| Other Assets, Cash & FX | 9.9 | 2.6 | - | - | -1.0 | - | -1.0 |
| Gearing | -10.9 | 0.9 | - | - | 1.0 | - | 1.0 |
| Total | 100.0 | 13.0 | 100.0 | 14.0 | -0.6 | -0.2 | -0.8 |
Source: Alliance Trust/Factset
| Investment Themes | Portfolio Activity |
| Demographics | |
| The population of the world is now over 7bn and rising. Life expectancy is also rising at the same time and the standard of living, particularly in Asia, is increasing. These three factors will combine to have a significant impact on the global economy. More mouths to feed will drive up food prices and encourage producers to increase productivity. As standards of living rise, so the level of disposable income increases. This leads to increased demand for branded/luxury goods and financial services. | We built a stake in Intuitive Surgical, a pioneer in robotic surgery; its technologies are providing highly efficient, minimal invasive surgical solutions in both the US and key international markets such as Europe, Japan and South Korea. In Japan, we created a new holding in Mitsubishi UFJ, a leading bank that we expect to benefit from the structural reforms that will be introduced to cope with the country's demographic and political challenges. We have seen some consolidation in the share price since we invested but we remain convinced that there is the potential for a positive revaluation resulting from improved profit margins and more efficient capital management. |
| Environment | |
| The rising cost of living and wage rates in China has led some US companies to "on-shore" production for example; bringing production back to the US as the cost differential is reduced. In response, Chinese firms are increasing levels of investment in automated systems. We are also investigating the implications of a drive for more fuel efficient production and transport processes which industry is going to require to implement to meet the increasingly stringent targets on emissions being set by regulators all over the world. | We maintained our investment in Fanuc, a global leader in robotics and factory automation. We created three new positions in the energy sector - Noble Energy, Technip and Schlumberger. Noble Energy is one of the leaders in the exploration and production of shale gas, which is revolutionising the energy landscape in the US. Technip and Schlumberger are world-class energy services providers that facilitate the exploration and production activities of their customers in difficult operating environments, such as deepwater and ultra-deepwater installations. |
| Innovation | |
| The rise of the smartphone has spawned a whole raft of innovations that will drive commerce in the future. The pace of change is relentless and is not restricted to technology in its purest sense. We are also closely following developments in personalised medicine which relies on the analysis of an individual patient's DNA to tailor drug programmes to their particular needs, something that has only become possible as the cost of DNA analysis has shrunk from $10m to $10,000 over the past 12 years. | Constant evolution in the technology and media sector have offered the opportunity to introduce Liberty Global and Walt Disney to the portfolio. Liberty Global is an American company focused on creating a "quadruple play" footprint (telephony, mobile, broadband and TV) in Europe - having recently acquired Virgin Media in the UK. Walt Disney is one of the long-term winners in the contest between superior content providers and mere technology enablers. We continue to invest in Roche, the research focused healthcare company based in Switzerland. |
| Global Realignment | |
| We are seeing a shift in power from West to East. Coupled with this is the development of new consumer markets in Asia. Opportunities are developing for companies used to operating in ex-growth markets to expand in these more vibrant economic environments. These opportunities are not without risk and we look here for companies that have a strategy and the capability to execute in these new markets. At the same time we are looking for companies in these new markets which are able to grow alongside their home markets. | Two new consumer staples holdings will benefit from the significant structural growth associated with expansion in the emerging markets - Kraft Foods and Reckitt Benckiser. Kraft is undertaking a deep restructuring that will free up resources for international expansion. Reckitt Benckiser will continue its long term process of transition toward a global consumer powerhouse focusing on brands in the three brand areas of health, hygiene and home. We continue to invest in Perusahaan Gas Negara, the dominant natural gas transmission and distribution company in Indonesia. |
| Income | |
| The Trust aims to generate at least £54 million of income after tax in order to cover the cost of the annual dividend paid to shareholders. Most parts of the investment portfolio contribute to this. The bulk of this income is derived from our equity portfolio however our investment in the Alliance Trust Monthly Income Bond Fund, which has a running yield of 5.7%, contributes around £9m. When investing in this area, we focus on the sustainability of income in a variety of ways - one of which is to ensure that the balance sheets are strong with good dividend cover and a positive cash flow. | We have continued to build our positions in key income holdings such as ENI (Italian oil & gas), Charoen Pokphand Foods (Thai integrated food producer), and Bangkok Bank. We have also introduced a new income holding - Resolution, a UK insurance company extracting significant value from closed life funds. |
| Our business | Objectives for 2013 | Progress to date |
| Alliance Trust PLC | ||
| We are an investment and savings business with a 125 year history of building investor wealth. We are the UK's largest generalist investment trust by market value listed on the London Stock Exchange. As at 30 June 2013 we had net assets of nearly £2.8bn. Our focus is investment in global equities and fixed income, which we believe will provide good long term growth and income. We also hold other investments where we see that value can be achieved over a longer period. |
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| Alliance Trust Investments | ||
| We are a specialist fund management business which launched our first fund in 2009 and which offers a broad selection of open ended funds and investment solutions. As at 30 June 2013 the value of investments under management was £1.9bn. Our purpose is to utilise the experience and skills of our investment managers to provide a flexible and bespoke service which aims to attract third party assets. This is raising the Trust's profile and, through the management fee income earned as the level of investments grows, will provide an additional revenue stream. |
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| Alliance Trust Savings | ||
Since 1986 we have been providing a convenient way for shareholders to hold shares in Alliance Trust. Today we provide high quality financial products to private investors, financial advisers and discretionary fund managers. Over the last three years we have restructured the business and it is now an established, award winning, investment platform providing access to a wide range of shares and investment funds. The focus is to have a business which both adds value and increases the visibility of the Trust to potential investors. |
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Alliance Trust Investments
During the period, Third Party Assets under Management have increased from £1.4bn to £1.5bn. Our loss for the period reduced to £1.7m from a loss of £2.7m for the same period last year reflecting the changes in the business that have taken place over the last 12 months. These changes, outlined below, will allow us to focus on growing the business more effectively.
At the end of January 2013, we completed the transition of the Sustainable Future funds into the Alliance Trust ICVC, renaming them all under the Alliance Trust Investments brand.
Following a strategic review of the funds that we offer, we took the decision to close the North American Equity Fund and the European Equity Fund as we concluded that neither fund fitted our overall long-term strategic aim of focussing our business on core areas of competitive strength, namely Fixed Income, Global Equities and Sustainable & Responsible Investment.
We now have a range of 11 funds, seven of which are ranked above median in their peer group for the period. Nine of our funds have a three year track record and of these five are ranked above median in their peer group over that period.
We have entered into two investment management agreements with institutional investors for almost £50m of assets since the end of last year. We look forward to further successes as more of our funds build the three year track record that is usually a prerequisite to be included in a selection process.
The fair value of the business remains as stated in our Annual Report and Accounts as £10.1m.
| Third Party Assets Under Management | Third Party Net Revenue | ||
| June 13 | £1.5bn | June 13 | £3.5m (six months) |
| December 12 | £1.4bn | December 12 | £1.8m (annual) |
| December 11 | £129m | December 11 | £0.4m (annual) |
| January 11 | £83m | January 11 | £0.3m (annual) |
Alliance Trust Savings
We have continued the good progress from last year into 2013. We have seen assets under administration rise in the period by 15% to £4.7bn. We have focussed on the intermediaries market with our new sales team and increased marketing and we have generated a fourfold increase in the number of accounts opened through intermediaries during the period compared to the whole of 2012.
We have reported an operating profit of £0.2m for the period for our continuing operations. This excludes a gain of £5.2m relating to the sale of our Full SIPP business and non-recurring expenditure of £1.0m which we have incurred to promote the RDR readiness of our business.
Our charging structure is now fully embedded and provides us with greater confidence as to the ability of the business to generate sustainable revenue.
The prospects for the business are further enhanced by the changes in the industry landscape that are being brought about by the Retail Distribution Review (RDR). The forthcoming introduction of RDR2 in April 2014 will benefit customers, and also Alliance Trust Savings, as the charges that are made on direct platforms will be transparent and make the benefit of our proposition clearer to customers. For this reason, in anticipation of these changes, we have incurred a significant non-recurring expense during the period in order to promote our readiness for RDR.
The outlook is positive with platforms being the preferred method of accessing the market for clients and intermediaries. We believe that our flat rate pricing structure will enable us to capture an increasing market share of the growing platform market and we are confident that the business will deliver an operating profit for the full year.
The fair value of the business remains as stated in our Annual Report and Accounts as £24.7m.
| Assets Under Administration | Revenue | ||
| June 13 | £4.7bn | June 13 | £5.4m (six months) |
| December 12 | £4.1bn | December 12 | £9.6m (annual) |
| December 11 | £3.3bn | December 11 | £6.9m (annual) |
| January 11 | £3.2bn | January 11 | £6.9m (annual) |
Discounts and Share Buybacks
The discount narrowed from 15.6% at the end of 2012 ending the period at 13.8%.
We have seen demand drive the discount in, but remain committed to the ongoing flexible use of buybacks.
Dividends
The Company's policy is that we will aim to pay a sustainably rising dividend, paying out all of each year's net revenue earnings under normal circumstances. Where our current year's earnings exceed our previously published guidance we may pay a special dividend from those earnings. We have also decided that, unless there are exceptional circumstances, we will not pay dividends out of our realised capital reserves as we believe that, in the longer term, this is not sustainable.
The Company paid an interim dividend of 2.387p on 1 July 2013. A second interim dividend of 2.387p will be paid on 30 September 2013 to shareholders on the register on 30 August 2013. In the absence of any unforeseen developments we expect to be able to recommend a further quarterly interim dividend of 2.387p payable on or around 31 December 2013 and a fourth interim dividend of at least 2.387p, payable on or around 31 March 2014. The total ordinary dividend for 2013 is therefore expected to be at least 9.548p, an increase of at least 3%.
Outlook
As we predicted in our Annual Report the rally in equity markets was unsustainable. In the event, the S&P 500 is down around 5% from its peak in May and the Nikkei 225 is down 14% although it is still ahead by 32% this year. In the UK we have seen equities fall by 10% reducing the advance in the six months to 30 June 2013 to 5%.
This volatility highlights the problem in trying to second-guess macroeconomic conditions which, despite being shaped by very long term trends, are characterised by short term sentiment and political factors. If we focus too closely on these factors we run the risk of increasing the turnover of the portfolio and the resultant costs, as well as being at the mercy of political and economic mismanagement.
The correlation between local stock markets and regional economies is low, particularly when looking at developed markets over meaningful time horizons. The global reach of the largest companies that make up the regional indices is one of the main reasons for this as they are able to adapt their strategies and target higher growth areas. This is why we remain committed to our rigorous and thematic bottom up approach to focus on finding high quality companies with strong fundamentals.
This thematic approach is forward looking and targets the key drivers of long-term stock specific returns. These are consistency of earnings, strong cash flows, sound management teams and compelling business models that ensure these companies are best placed to weather changes to the environment in which they operate. However, not all high quality companies make high quality investments for us as sometimes their valuations can be stretched. This is why our formal investment process is made up of idea generation, idea validation, portfolio construction and risk management; these interconnecting elements ensure that the equity portfolio, which targets around 100 stocks, is best placed to deliver above market returns over the long term whilst sufficiently diversifying the stock specific risks.
As we look forward through the second half of 2013 and beyond, our assessment is that equities remain good value over the medium to long term. This is true both on an absolute and a relative basis when compared to other asset classes, particularly government bonds. We will continue to add to holdings where we see value, take profits in stocks that have reached their potential and initiate new holdings in companies with sustainable long term prospects. We continue to see significant stock specific opportunities which give grounds for optimism for the long term investor.
Central bankers across the world are treading a very fine line between stimulating growth and trying to reduce the overall level of debt in their respective economies, which is having a knock-on effect on global liquidity. Every statement by the Chairman of the US Federal Reserve and the newly appointed Governor of the Bank of England is dissected. Markets are looking for an early indication of a change of policy particularly in relation to forward guidance for the unwinding of Quantitative Easing.
This is going to shape monetary policy across the globe for many years to come and we expect sentiment in equity markets to be correspondingly fragile. As a consequence, markets are jittery and are liable to remain so for the foreseeable future. The resulting repatriation of capital and reduced global liquidity is acting as a block on economic growth across the world. Increasing levels of liquidity would be a signal of a return to higher levels of economic growth which will help balance budgets.
In a period of continuing volatility, we feel confident that the current holdings in the portfolio are well placed to drive sustainable returns, irrespective of the economic and political backdrop, and are consistent with our long term investment approach.
Risks and Uncertainties
The Company invests in both quoted and unquoted securities, fixed income securities, its subsidiary businesses, other asset classes and financial instruments for the long term in order to achieve its investment objectives. Its principal risks and uncertainties are therefore:
Strategic
Market
Operational
Legal, Regulatory and Disclosure
These risks, and the way in which they are managed, are described in more detail within the Risk Factors section on pages 24 and 25 of the Company's Annual Report and Accounts for the year ended 31 December 2012, which is available on the Company's website at www.alliancetrust.co.uk.
The Directors do not consider that the nature of the Company's principal risks and uncertainties has changed materially since the year end. In reaching that assessment they have had regard to the forecasts for the economies of the Eurozone area and have in place plans to mitigate the Company's exposure by reducing investment in the geographical areas most susceptible to economic failure. We have in place business continuity and damage limitation plans to minimise the impact on the Company should any country leave the Euro common currency.
We do not expect our principal risks to change for the remainder of the financial year.
RelatedPartyTransactions
The nature of related party transactions has not changed significantly from those described in the Company's Report and Accounts for the year ended 31 December 2012. There were no transactions with related parties during the six months ended 30 June 2013 which have a material effect on the results or the financial position of the Company or of the Group.
Going Concern Statement
The factors impacting Going Concern are set out in detail in the Accounting and Audit section of the Company's Report and Accounts for the year ended 31 December 2012.
As at 30 June 2013 there have been no significant changes to these factors. The Directors, who have reviewed budgets, forecasts and sensitivities, consider that the Group has adequate financial resources to enable it to continue in operational existence for the foreseeable future. Accordingly
the Directors believe it is appropriate to continue to adopt the going concern basis for preparing the financial statements.
Responsibility Statement
We confirm that to the best of our knowledge:
The financial statements have been prepared in accordance with IAS 34 "Interim Financial Reporting" as adopted by the EU;
The interim management report includes a fair review of the information required by:
DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the year; and
DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity
during that period, and any changes in the related party transactions described in the last annual report that could do so.
Signed on behalf of the Board
| Karin Forseke | Katherine Garrett-Cox | |
| Chair | Chief Executive | |
| 24 July 2013 | 24 July 2013 | |
All quoted equity holdings as at 30 June 2013
| Stock | Country of | Sector | Value | % of |
| listing | £m | quoted | ||
| equities | ||||
| Pfizer | United States | Pharmaceuticals | 73.1 | 3.0% |
| Walt Disney | United States | Media | 58.0 | 2.4% |
| United Technologies | United States | Aerospace & Defense | 57.8 | 2.4% |
| QUALCOMM | United States | Communications Equipment | 56.0 | 2.3% |
| Enterprise Products Partners | United States | Gas Utilities | 53.7 | 2.2% |
| Samsung Electronics | South Korea | Semiconductors & Semiconductor Equipment | 49.1 | 2.0% |
| HSBC | United Kingdom | Commercial Banks | 45.2 | 1.9% |
| Express Scripts | United States | Health Care Providers & Services | 43.1 | 1.8% |
| Prudential | United Kingdom | Insurance | 42.2 | 1.7% |
| CVS Caremark | United States | Food & Staples Retailing | 41.9 | 1.7% |
| Diageo | United Kingdom | Beverages | 38.8 | 1.6% |
| Kraft Foods | United States | Food Products | 38.6 | 1.6% |
| Wells Fargo | United States | Commercial Banks | 37.9 | 1.6% |
| Zurich Insurance | Switzerland | Insurance | 37.5 | 1.5% |
| Reckitt Benckiser | United Kingdom | Household Products | 36.2 | 1.5% |
| Deutsche Post | Germany | Air Freight & Logistics | 35.2 | 1.4% |
| ENI | Italy | Oil Gas & Consumable Fuels | 33.9 | 1.4% |
| Sanofi | France | Pharmaceuticals | 33.7 | 1.4% |
| Mitsubishi UFJ | Japan | Commercial Banks | 33.4 | 1.4% |
| Danaher | United States | Industrial Conglomerates | 33.3 | 1.4% |
| Coach | United States | Textiles Apparel & Luxury Goods | 31.9 | 1.3% |
| Roche | Switzerland | Pharmaceuticals | 31.5 | 1.3% |
| Total | France | Oil Gas & Consumable Fuels | 31.2 | 1.3% |
| Visa | United States | IT Services | 31.1 | 1.3% |
| GlaxoSmithKline | United Kingdom | Pharmaceuticals | 30.9 | 1.3% |
| Legal & General | United Kingdom | Insurance | 29.9 | 1.2% |
| Noble Energy | United States | Oil Gas & Consumable Fuels | 29.2 | 1.2% |
| Royal Dutch Shell | United Kingdom | Oil Gas & Consumable Fuels | 28.7 | 1.2% |
| Standard Chartered | United Kingdom | Commercial Banks | 28.6 | 1.2% |
| Amgen | United States | Biotechnology | 28.1 | 1.2% |
| Apple | United States | Computers & Peripherals | 28.0 | 1.2% |
| National Grid | United Kingdom | Multi-Utilities | 27.0 | 1.1% |
| Microsoft | United States | Software | 26.6 | 1.1% |
| BNP Paribas | France | Commercial Banks | 26.1 | 1.1% |
| Mattel | United States | Leisure Equipment & Products | 25.9 | 1.1% |
| Fanuc | Japan | Machinery | 25.6 | 1.1% |
| Adecco | Switzerland | Professional Services | 25.4 | 1.0% |
| Barclays | United Kingdom | Commercial Banks | 25.1 | 1.0% |
| Resolution | United Kingdom | Insurance | 24.9 | 1.0% |
| Rogers Communications | Canada | Wireless Telecommunication Services | 24.5 | 1.0% |
| Toronto-Dominion Bank | Canada | Commercial Banks | 24.1 | 1.0% |
| Henkel | Germany | Household Products | 23.1 | 1.0% |
| AmerisourceBergen | United States | Health Care Providers & Services | 23.0 | 1.0% |
| Cadence Design Systems | United States | Software | 23.0 | 0.9% |
| Bank of Nova Scotia | Canada | Commercial Banks | 22.8 | 0.9% |
| Monsanto | United States | Chemicals | 22.7 | 0.9% |
| BorgWarner | United States | Auto Components | 22.4 | 0.9% |
| Infineon Technologies | Germany | Semiconductors & Semiconductor Equipment | 22.3 | 0.9% |
| Liberty Global | United States | Media | 21.7 | 0.9% |
| Bangkok Bank | Thailand | Commercial Banks | 21.7 | 0.9% |
| United States | Internet Software & Services | 21.6 | 0.9% | |
| The Mosaic Co. | United States | Chemicals | 21.1 | 0.9% |
| Melrose Industries | United Kingdom | Machinery | 21.1 | 0.9% |
| Citigroup | United States | Diversified Financial Services | 21.0 | 0.9% |
| Technip | France | Energy Equipment & Services | 20.7 | 0.9% |
| Unilever | United Kingdom | Food Products | 20.5 | 0.8% |
| Novo Nordisk | Denmark | Pharmaceuticals | 20.5 | 0.8% |
| Glencore Xstrata | United Kingdom | Metals & Mining | 20.4 | 0.8% |
| Praxair | United States | Chemicals | 20.4 | 0.8% |
| Oceaneering International | United States | Energy Equipment & Services | 19.4 | 0.8% |
| SAP | Germany | Software | 18.8 | 0.8% |
| Cummins | United States | Machinery | 18.6 | 0.8% |
| RSA Insurance | United Kingdom | Insurance | 18.4 | 0.8% |
| Accenture | United States | IT Services | 18.1 | 0.8% |
| American Tower | United States | Real Estate Investment Trusts (REITs) | 17.7 | 0.7% |
| Schlumberger | United States | Energy Equipment & Services | 17.5 | 0.7% |
| Taiwan Mobile | Taiwan | Wireless Telecommunication Services | 17.5 | 0.7% |
| Plum Creek Timber | United States | Real Estate Investment Trusts (REITs) | 17.5 | 0.7% |
| Experian | United Kingdom | Professional Services | 17.4 | 0.7% |
| Charoen Pokphand Foods | Thailand | Consumer Staples | 17.2 | 0.7% |
| Bpost | Belgium | Industrials | 17.1 | 0.7% |
| SNAM | Italy | Gas Utilities | 16.7 | 0.7% |
| Kabel Deutschland | Germany | Media | 16.6 | 0.7% |
| Pearson | United Kingdom | Media | 16.5 | 0.7% |
| China Gas | China | Gas Utilities | 16.4 | 0.7% |
| BASF | Germany | Chemicals | 16.3 | 0.7% |
| Marsh & McLennan | United States | Insurance | 16.3 | 0.7% |
| Taiwan Semiconductor Manufacturing Corporation | Taiwan | Semiconductors & Semiconductor Equipment | 16.3 | 0.7% |
| Perusahaan Gas Negara | Indonesia | Gas Utilities | 16.2 | 0.7% |
| Malayan Banking | Malaysia | Commercial Banks | 15.7 | 0.7% |
| Intuitive Surgical | United States | Health Care Equipment & Supplies | 15.5 | 0.6% |
| Ascendas Real Estate Investment Trust | Singapore | Real Estate Investment Trusts (REITs) | 15.4 | 0.6% |
| VTECH | Hong Kong | Communications Equipment | 14.6 | 0.6% |
| GTECH | Italy | Hotels Restaurants & Leisure | 14.3 | 0.6% |
| Hyundai Mobis | South Korea | Auto Components | 13.8 | 0.6% |
| Humana | United States | Health Care Providers & Services | 13.8 | 0.6% |
| Rolls-Royce | United Kingdom | Aerospace & Defense | 13.0 | 0.5% |
| DaVita HealthCare Partners | United States | Health Care Providers & Services | 12.5 | 0.5% |
| Ashmore Global Opportunities | United Kingdom | Mutual Fund | 12.5 | 0.5% |
| Cerner | United States | Health Care Technology | 12.1 | 0.5% |
| Verizon Communications | United States | Diversified Telecommunication Services | 12.0 | 0.5% |
| M1 | Singapore | Wireless Telecommunication Services | 11.0 | 0.5% |
| Fomento Economico Mexicano | Mexico | Beverages | 11.0 | 0.5% |
| Telecom Corp. of New Zealand | New Zealand | Diversified Telecommunication Services | 10.5 | 0.4% |
| Grupo Financiero Banorte | Mexico | Commercial Banks | 10.5 | 0.4% |
| Power Assets | Hong Kong | Electric Utilities | 10.3 | 0.4% |
| Housing Development Finance | India | Thrifts & Mortgage Finance | 8.0 | 0.3% |
| BPZ Resources (Conv. Note 6.5% 2015) | United States | Energy | 7.6 | 0.3% |
| Fook Woo Group | China | Household and Personal Products | 0.3 | 0.0% |
| Total | 2,434 | 100% |
Funds as at 30 June 2013
| Fund | Country of Listing | Sector | Value (£m) |
| Alliance Trust Global Thematic Opportunities Fund | United Kingdom | Collective Investment | 192.6 |
| Alliance Trust Monthly Income Bond Fund | United Kingdom | Collective Investment | 163.3 |
| Alliance Trust Dynamic Bond Fund | United Kingdom | Collective Investment | 51.6 |
| Total | 407.5 |
Other Assets as at 30 June 2013
| Investment | Country of Listing | Value (£m) |
| Private Equity | United Kingdom/Europe | 128.8 |
| Subsidiaries | United Kingdom | 65.0 |
| Property | United Kingdom | 9.1 |
| Mineral Rights | North America | 9.5 |
| Total | 212.4 |
A full portfolio listing, similar to that displayed above, is available on a monthly basis on our website at http://investor.alliancetrust.co.uk/ati/investorrelations/holdings.jsp
Consolidated Income Statement (Unaudited)
For the period ended 30 June 2013
| 6 months to 30 June 2013 | 6 months to 30 June 2012 | Year to 31 December 2012 (audited) | ||||||||
| £000 | Note | Revenue | Capital | Total | Revenue | Capital | Total | Revenue | Capital | Total |
| Revenue | ||||||||||
| Income | 3 | 64,459 | - | 64,459 | 58,962 | - | 58,962 | 105,260 | - | 105,260 |
| Profit on fair value designated investments | - | 263,268 | 263,268 | - | 78,002 | 78,002 | - | 221,313 | 221,313 | |
| Loss on investment property held | - | (67) | (67) | - | - | - | - | (812) | (812) | |
| ------- | -------- | --------- | -------- | -------- | --------- | --------- | -------- | --------- | ||
| Total Revenue | 64,459 | 263,201 | 327,660 | 58,962 | 78,002 | 136,964 | 105,260 | 220,501 | 325,761 | |
| Administrative expenses | (21,870) | (1,443) | (23,313) | (19,118) | (714) | (19,832) | (41,234) | (1,625) | (42,859) | |
| Finance(costs)/income | 4 | (6,242) | 3,314 | (2,928) | (4,730) | (7,742) | (12,472) | (10,678) | (25,358) | (36,036) |
| Loss on revaluation of office premises | - | - | - | - | - | - | - | (1,900) | (1,900) | |
| Foreign exchange gains | - | 3,228 | 3,228 | 18 | 9,950 | 9,968 | 5 | 9,026 | 9,031 | |
| ------- | -------- | --------- | -------- | -------- | -------- | ------- | --------- | --------- | ||
| Profit before tax | 36,347 | 268,300 | 304,647 | 35,132 | 79,496 | 114,628 | 53,353 | 200,644 | 253,997 | |
| Tax | 5 | (3,162) | - | (3,162) | (2,377) | - | (2,377) | (4,249) | (103) | (4,352) |
| ------- | -------- | -------- | -------- | -------- | -------- | ------- | -------- | -------- | ||
| Profit for the period/year | 33,185 | 268,300 | 301,485 | 32,755 | 79,496 | 112,251 | 49,104 | 200,541 | 249,645 | |
| ===== | ====== | ====== | ====== | ===== | ====== | ===== | ====== | ====== | ||
| All profit for the period/year is attributed to equity holders of the parent. | ||||||||||
| Earnings per share from continuing operations attributable to equity holders of the parent | ||||||||||
| Basic (p per share) | 7 | 5.93 | 47.92 | 53.85 | 5.74 | 13.93 | 19.67 | 8.61 | 35.17 | 43.78 |
| Diluted (p per share) | 7 | 5.91 | 47.78 | 53.69 | 5.72 | 13.89 | 19.61 | 8.58 | 35.06 | 43.64 |
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (Unaudited)
| 6 months to 30 June 2013 | 6 months to 30 June 2012 | Year to 31 December 2012 (audited) | ||||||||
| £000 | Note | Revenue | Capital | Total | Revenue | Capital | Total | Revenue | Capital | Total |
| Profit for the period/year | 33,185 | 268,300 | 301,485 | 32,755 | 79,496 | 112,251 | 49,104 | 200,541 | 249,645 | |
| Defined benefit plan net actuarial gain/(loss) | 8 | - | 2,102 | 2,102 | - | (2,103) | (2,103) | - | (405) | (405) |
| Retirement benefit obligations deferred tax | - | - | - | - | 146 | 146 | - | 48 | 48 | |
| -------- | -------- | -------- | -------- | -------- | -------- | -------- | -------- | -------- | ||
| Other comprehensive gain/(loss) | - | 2,102 | 2,102 | - | (1,957) | (1,957) | - | (357) | (357) | |
| Total comprehensive income for the period/year | 33,185 | 270,402 | 303,587 | 32,755 | 77,539 | 110,294 | 49,104 | 200,184 | 249,288 | |
| ====== | ====== | ====== | ===== | ===== | ====== | ===== | ====== | ====== | ||
| All total comprehensive income for the period/year is attributed to equity holders of the parent | ||||||||||
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)
For the period ended 30 June 2013
| 6 months to 30 June 2013 | 6 months to 30 June 2012 | Year to 31 December 2012 | |
| £000 | (audited) | ||
| Called up share capital | |||
| At 1 January | 14,040 | 14,833 | 14,833 |
| Own shares purchased and cancelled in the period/year | (1) | (758) | (793) |
| ---------- | ---------- | ---------- | |
| At 30 June | 14,039 | 14,075 | 14,040 |
| ---------- | ---------- | ---------- | |
| Capital reserves | |||
| At 1 January | 1,754,368 | 1,665,692 | 1,665,692 |
| Profit for the period/year | 268,300 | 79,496 | 200,541 |
| Defined benefit plan acturial net gain/(loss) | 2,102 | (1,957) | (357) |
| Own shares purchased and cancelled in the period/year | (214) | (107,307) | (112,721) |
| Share based payments | 713 | 538 | 1,213 |
| ---------- | ---------- | ---------- | |
| At 30 June | 2,025,269 | 1,636,462 | 1,754,368 |
| ---------- | ---------- | ---------- | |
| Merger reserve | |||
| At 1 January and 30 June | 645,335 | 645,335 | 645,335 |
| ---------- | ---------- | ---------- | |
| Capital redemption reserve | |||
| At 1 January | 4,958 | 4,165 | 4,165 |
| Own shares purchased and cancelled in the period/year | 1 | 758 | 793 |
| ---------- | ---------- | ---------- | |
| At 30 June | 4,959 | 4,923 | 4,958 |
| ---------- | ---------- | ---------- | |
| Revenue reserve | |||
| At 1 January | 68,202 | 73,348 | 73,348 |
| Profit for the period/year | 33,185 | 32,755 | 49,104 |
| Dividends | (28,356) | (28,255) | (54,237) |
| Unclaimed dividends | 37 | 37 | (13) |
| ---------- | ---------- | ---------- | |
| At 30 June | 73,068 | 77,885 | 68,202 |
| ---------- | ---------- | ---------- | |
| Total equity | |||
| At 1 January | 2,486,903 | 2,403,373 | 2,403,373 |
| ---------- | ---------- | ---------- | |
| At 30 June | 2,762,670 | 2,378,680 | 2,486,903 |
| ---------- | ---------- | ---------- |
CONSOLIDATED BALANCE SHEET (UNAUDITED)
As at 30 June 2013
| £000 | Note | |||
| 30 June 2013 | 30 June 2012 | 31 December 2012 | ||
| (audited) | ||||
| Non-current assets | ||||
| Investments held at fair value | 3,111,746 | 2,613,162 | 2,722,042 | |
| Investment property | 9,120 | 9,775 | 9,120 | |
| Property, plant and equipment: | ||||
| Office premises | 4,125 | 6,025 | 4,125 | |
| Other fixed assets | 483 | 8 | 587 | |
| Intangible assets | 7,223 | 1,296 | 1,408 | |
| Pension scheme surplus | 8 | 8,020 | 2,555 | 4,305 |
| Deferred tax asset | 989 | 907 | 990 | |
| ---------- | ---------- | ---------- | ||
| 3,141,706 | 2,633,728 | 2,742,577 | ||
| Current assets | ||||
| Outstanding settlements and other receivables | 197,586 | 474,093 | 23,882 | |
| Recoverable overseas tax | 1,151 | 1,337 | 1,106 | |
| Cash and cash equivalents | 519,432 | 512,615 | 444,916 | |
| ---------- | ---------- | ---------- | ||
| 718,169 | 988,045 | 469,904 | ||
| Total assets | 3,859,875 | 3,621,773 | 3,212,481 | |
| Current liabilities | ||||
| Outstanding settlements and other payables | (754,846) | (941,485) | (523,605) | |
| Tax payable | (141) | (141) | (141) | |
| Bank overdrafts and loans | 14 | (340,000) | (300,000) | (200,000) |
| ---------- | ---------- | ---------- | ||
| (1,094,987) | (1,241,626) | (723,746) | ||
| Total assets less current liabilities | 2,764,888 | 2,380,147 | 2,488,735 | |
| Non-current liabilities | ||||
| Deferred tax liability | (990) | (761) | (990) | |
| Finance lease | (293) | - | (254) | |
| Amounts payable under long term Investment Incentive Plan | (935) | (706) | (588) | |
| ---------- | ---------- | ---------- | ||
| (2,218) | (1,467) | (1,832) | ||
| Net assets | 2,762,670 | 2,378,680 | 2,486,903 | |
| Equity | ||||
| Share capital | 15 | 14,039 | 14,075 | 14,040 |
| Capital reserves | 2,025,269 | 1,636,462 | 1,754,368 | |
| Merger reserve | 645,335 | 645,335 | 645,335 | |
| Capital redemption reserve | 4,959 | 4,923 | 4,958 | |
| Revenue reserve | 73,068 | 77,885 | 68,202 | |
| ------------- | -------------- | -------------- | ||
| Total equity | 2,762,670 | 2,378,680 | 2,486,903 | |
| All net assets are attributable to equity holders of the parent | ||||
| Net asset value per ordinary share attributable to equity holders of the parent | ||||
| Basic (£) | 9 | 4.93 | 4.24 | 4.44 |
| Diluted (£) | 9 | 4.92 | 4.23 | 4.43 |
CONSOLIDATED CASH FLOW (unaudited)
| For the period ended 30 June 2013 | 6 months to | 6 months to | Year to |
| 30 June 2013 | 30 June 2012 | 31 December 2012 | |
| £000 | (audited) | ||
| Cash flows from operating activities | |||
| Profit before tax | 304,647 | 114,628 | 253,997 |
| Adjustments for: | |||
| Gains on investments | (263,201) | (78,002) | (220,501) |
| Foreign exchange gains | (3,228) | (9,968) | (9,031) |
| Scrip dividends | - | (455) | (455) |
| Depreciation | 107 | 7 | 91 |
| Amortisation of intangibles | 373 | 435 | 702 |
| Loss on disposal/revaluation of property | - | - | 1,900 |
| Share based payment expense | 713 | 538 | 1,213 |
| Interest | 2,928 | 12,472 | 36,036 |
| Movement in pension scheme surplus | (1,613) | (1,508) | (1,512) |
| --------- | --------- | --------- | |
| Operating cash flows before movements in working capital | 40,726 | 38,147 | 62,440 |
| Increase in amounts due to depositors | 37,557 | 28,503 | 34,745 |
| (Decrease)/increase in receivables | (18,665) | (447,950) | 3,015 |
| Increase in payables | 17,919 | 9,222 | 4,577 |
| --------- | --------- | --------- | |
| Net cash inflow/(outflow) from operating activities before income taxes | 77.537 | (372,078) | 104,777 |
| Taxes paid | (3,302) | (2,746) | (4,490) |
| --------- | --------- | --------- | |
| Net cash inflow/(outflow) from operating activities | 74,235 | (374,824) | 100,287 |
| Cash flows from investing activities | |||
| Proceeds on disposal of fair value through profit and loss investments | 494,088 | 644,795 | 1,825,622 |
| Purchase of fair value through profit and loss investments | (593,205) | (99,068) | (1,685,709) |
| Foreign exchange gains on foreign exchange contracts | 2,522 | 7,403 | 7,437 |
| Purchase of plant and equipment | (3) | - | (663) |
| Net purchase of intangible assets | (6,188) | (104) | (512) |
| --------- | --------- | --------- | |
| Net cash (outlflow)/inflow from investing activities | (102,786) | 553,026 | 146,175 |
| Cash flows from financing activities | |||
| Dividends paid - Equity | (28,356) | (41,035) | (67,016) |
| Unclaimed dividends | 37 | 37 | (13) |
| Purchase of own shares | (214) | (107,307) | (112,721) |
| New bank loans raised | 140,000 | 51,232 | - |
| Repayment of borrowing | - | - | (48,768) |
| Net third party investment in subsidiary OEIC - Alliance Trust Investment Funds | (904) | 20,291 | 23,449 |
| Interest payable | (8,202) | (6,805) | (13,506) |
| --------- | --------- | --------- | |
| Net cash inflow/(outflow) from financing activities | 102,361 | (83,587) | (218,575) |
| --------- | --------- | --------- | |
| Net increase in cash and cash equivalents | 73,810 | 94,615 | 27,887 |
| Cash and cash equivalents at beginning of period/year | 444,916 | 415,435 | 415,435 |
| Effect of foreign exchange rate changes | 706 | 2,565 | 1,594 |
| --------- | --------- | --------- | |
| Cash and cash equivalents at end of period/year | 519,432 | 512,615 | 444,916 |
Notes to the Financial Statements
1 General Information
The information contained in this report for the period ended 30 June 2013 does not constitute statutory accounts as defined in section 435 of the Companies Act 2006. A copy of the statutory accounts for the year ended 31 December 2012 has been delivered to the Registrar of Companies. The auditor's report on those financial statements was prepared under section 495 and section 496 of the Companies Act 2006. The report was not qualified, did not contain an emphasis of matter paragraph and did not contain statements under section 498(2) or (3) of the Companies Act.
The interim results are unaudited. They should not be taken as a guide to the full year and do not constitute the statutory accounts.
2 Accounting Policies
Basis of preparation
The annual financial statements were prepared using accounting policies consistent with International Financial Reporting Standards (IFRS) as adopted by the EU. The condensed set of financial statements included in this half yearly financial report have been prepared in accordance with IAS 34 'Interim Financial Reporting', as adopted by the EU.
Going concern
The directors have a reasonable expectation that the Company has sufficient resources to continue in operational existence for the forseeable future. Accordingly the financial statements have been prepared on a going concern basis.
Changes in accounting policies
The same accounting policies, presentations and methods of computation are followed in these financial statements as are applied in the Group's latest audited financial statements. Apart from the application of IFRS10 and 12 to the forthcoming financial statements, no material changes in accounting policies are anticipated for the year ended 31 December 2013.
Revisions to the accounting standard IAS 19 (Employee Benefits) are applicable in the period to 30 June 2013.The revised standard has replaced the interest cost and expected return on the defined benefit scheme assets with a net interest charge. For the current period the profit and other comprehensive income are both £43,000 lower than they would have been under the previous version of this accounting standard. The comparatives have not been restated as the impact is not material to the overall results of the Group. Had we restated the comparatives, the profit and other comprehensive income figures would have been £25,000 higher than we have reported.
As the Group has always recognised actuarial gains and losses immediately there has been no effect on the prior year defined benefit obligation.
3 Revenue
| £000 | 6 months to | 6 months to | Year to |
| 30 June 2013 | 30 June 2012 | 31 Dec 2012 | |
| Deposit interest | 1,043 | 1,666 | 3,137 |
| Dividend income | 53,881 | 50,270 | 86,011 |
| Mineral rights income | 973 | 489 | 1,070 |
| Property income | 313 | 383 | 757 |
| Savings and Pension Plan charges | 4,679 | 5,678 | 11,823 |
| Other income | 3,570 | 476 | 2,462 |
| --------- | -------- | -------- | |
| Total revenue | 64,459 | 58,962 | 105,260 |
| --------- | -------- | -------- |
4 Finance Costs/(Income)
| 6 months to | 6 months to | Year to | |||||||
| 30 June 2013 | 31 July 2012 | 31 Dec 2012 | |||||||
| £000 | Revenue | Capital | Total | Revenue | Capital | Total | Revenue | Capital | Total |
| Interest payable | |||||||||
| Payable to depositors | 6 | - | 6 | 3 | - | 3 | 3 | - | 3 |
| Bank loans and overdrafts | 1,476 | 1,476 | 2,952 | 1,378 | 1,649 | 3,027 | 2,560 | 2,730 | 5,290 |
| Net gains/(losses) attributable to third party investment in subsidiary OEIC | 4,760 | (4,790) | (30) | 3,349 | 6,093 | 9,442 | 8,115 | 22,628 | 30,743 |
| --------- | -------- | -------- | --------- | -------- | -------- | --------- | -------- | -------- | |
| Total finance costs/(income) | 6,242 | (3,314) | 2,928 | 4,730 | 7,742 | 12,472 | 10,678 | 25,358 | 36,036 |
| --------- | -------- | -------- | --------- | -------- | -------- | --------- | -------- | -------- | |
5 Taxation
UK Corporation Tax for the period to 30 June 2013 is charged at 23% (24.5% for the period to 30 June 2012) of the estimated taxable profits for the period. A reduction in the main rate of UK Corporation Tax to 23% was substantively enacted in March 2012. Taxation levied by other jurisdictions is calculated at the rates prevailing in those jurisdictions. Such taxation mainly comprises withholding taxes levied on the investment return generated on foreign investments such as overseas dividend income.
6 Dividends
| £000 | 6 months to | 6 months to | Year to |
| 30 June 2013 | 30 June 2012 | 31 Dec 2012 | |
| Fourth interim dividend for the period ended 31 December 2011 of 2.577p per share | - | 14,986 | 14,986 |
| First interim dividend for the year ending 31 December 2012 of 2.3175p per share | - | 13,269 | 13,269 |
| Second interim dividend for the year ended 31 December 2012 of 2.3175p per share | - | - | 13,005 |
| Third interim dividend for the year ended 31 December 2012 of 2.3175p per share | - | - | 12,977 |
| Fourth interim dividend for the year ended 31 December 2012 of 2.3175p per share | 12,973 | - | - |
| Special dividend for the year ended 31 December 2012 of 0.36p per share | 2,015 | - | - |
| First interim dividend for the year ending 31 December 2013 of 2.3870p per share | 13,368 | - | - |
7 Earnings per share
From continuing operations
The calculation of the basic and diluted earnings per share is based on the following data:
| 6 months to 30 June 2013 | 6 months to 30 June 2012 | Year to 31 Dec 2012 | ||||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | Revenue | Capital | Total | ||||
| Ordinary Shares | ||||||||||||
| Earnings for the purposes of basic earnings per share being net profit attributable to equity holders of the parent (£000) | 33,185 | 268,300 | 301,485 | 32,755 | 79,496 | 112,251 | 49,104 | 200,541 | 249,645 | |||
| Number of shares | ||||||||||||
| Weighted average number of ordinary shares for the purposes of basic earnings per share | 559,901,145 | 570,523,019 | 570,233,465 | |||||||||
| Weighted average number of ordinary shares for the purposes of diluted earnings per share | 561,553,530 | 572,293,236 | 572,003,682 | |||||||||
The weighted average number of ordinary shares is arrived at by excluding 1,580,671 (1,770,218 other periods) ordinary shares acquired by the Trustee of the Employee Benefit Trust with funds provided by the Company.
IAS 33 requires that shares should only be treated as dilutive if they decrease earnings per share or increase the loss per share. The earnings per share figures on the income statement reflect this.
8 Pension Schemes
The Group sponsors two pension arrangements.
The Alliance Trust Companies' Pension Fund ('the Scheme') is a funded defined benefit pension scheme which closed to future accrual on 2 April 2011.
Employees (other than Executive Directors) are entitled to receive contributions into their own Self Invested Personal Pension ('SIPP') provided by Alliance Trust Savings Limited.
Defined Benefit Scheme
The net actuarial gain made in the period and recognised in the Consolidated Statement of Comprehensive Income was £2,102,000 (30 June 2012 net actuarial loss of £2,103,000 and 31 December 2012 net actuarial loss of £405,000).
Certain actuarial assumptions have been used to arrive at the retirement benefit scheme surplus of £8m as at 30 June 2013 (30 June 2012 surplus of £2.6m and 31 December 2012 surplus of £4.3m). These are set out below:
| 30 June 2013 % per annum | 30 June 2012 % per annum | 31 Dec 2012 % per annum | |
| Inflation - (RPI) | 3.3 | 3.0 | 2.9 |
| Inflation - (CPI) | 2.4 | 2.0 | 2.4 |
| Rate of discount | 4.8 | 4.5 | 4.4 |
| Allowance for pension in payment increases of RPI (subject to a maximum increase of 5% p.a.) | 3.2 | 2.9 | 2.8 |
| Allowance for revaluation of deferred pensions of CPI (subject to a maximum increase of 5% p.a.) | 2.4 | 2.0 | 2.4 |
9 Net Asset Value Per Ordinary Share
The calculation of the net asset value per ordinary share is based on the following:
| 30 June 2013 | 30 June 2012 | 31 Dec 2012 | |
| Equity shareholder funds (£000) | 2,762,670 | 2,378,680 | 2,486,903 |
| Number of shares at period end - Basic | 559,948,475 | 561,205,928 | 559,808,928 |
| Number of shares at period end - Diluted | 561,529,146 | 562,976,146 | 561,579,146 |
The number of ordinary shares has been reduced by 1,580,671 (1,770,218 other periods) ordinary shares held by the Trustee of the Employee Benefit Trust in order to arrive at the Basic figures above.
10 Segmental Reporting
Alliance Trust PLC's operating segments are strategic business units that offer different products and services. They are managed separately because of the differences in the products and services provided. They are however all complementary to the core business of investing in various asset classes to generate increasing value over the long term.
The Group's primary operating segments are the Company, Alliance Trust Savings Limited ('ATS') and Alliance Trust Investments ('ATI').
The Company is a self-managed investment company with investment trust status. ATS provides pension administration services, share dealing services and a fund supermarket. ATI is an investment management company.
The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies in the Annual Report and Accounts for the year ended 31 December 2012.
Alliance Trust PLC evaluates performance based on the profit before tax. Intersegment sales and transfers are accounted for on an arms length basis.
| £000 | 6 months to 30 June 2013 | ||||||
| Revenue | Company | ATS (continuing operations) | ATS (discontinuing operations) | ATS Total | ATI | Total | |
| Investment gains | 273,932 | - | - | - | - | 273,932 | |
| Net interest income | 67 | 883 | - | 883 | 38 | 988 | |
| Non interest income | 50,041 | 4,469 | 209 | 4,678 | 4,527 | 59,246 | |
| --------- | --------- | --------- | --------- | --------- | --------- | ||
| Segment revenue | 324,040 | 5,352 | 209 | 5,561 | 4,565 | 334,166 | |
| Expenditure Foreign exchange gains | (3,228) | - | - | - | - | (3,228) | |
| Depreciation and amortisation | 245 | 213 | - | 213 | 273 | 731 | |
| Other expenses | 13,628 | 4,940 | 510 | 5,450 | 5,963 | 25,041 | |
| --------- | --------- | --------- | --------- | --------- | --------- | ||
| Total expenses | 10,645 | 5,153 | 510 | 5,663 | 6,236 | 22,544 | |
| Operating profit/(loss) before tax | 313,395 | 199 | (301) | (102) | (1,671) | 311,622 | |
| Net gain on sale of Full SIPP business | - | - | 5,158 | 5,158 | - | 5,158 | |
| Non recurring RDR marketing expenses | - | (1,025) | - | (1,025) | - | (1,025) | |
| Segment profit/(loss) before tax | 313,395 | (826) | 4,857 | 4,031 | (1,671) | 315,755 | |
| £000 | 6 months to 30 June 2012 | |||||||
| Revenue | Company | ATS (continuing operations) | ATS (discontinuing operations) | ATS Total | ATI | Total | ||
| Investment gains | 69,832 | - | - | - | - | 69,832 | ||
| Net interest income | 159 | 1,429 | - | 1,429 | 16 | 1,604 | ||
| Non interest income | 47,336 | 3,154 | 2,524 | 5,678 | 1,139 | 54,153 | ||
| --------- | -------- | -------- | -------- | -------- | -------- | |||
| Segment revenue | 117,327 | 4,583 | 2,524 | 7,107 | 1,155 | 125,589 | ||
| Expenditure | ||||||||
| Foreign exchange gains | (9,968) | - | - | - | - | (9,968) | ||
| Depreciation and amortisation | 97 | 303 | - | 303 | 39 | 439 | ||
| Other expenses | 12,076 | 4,974 | 2,740 | 7,714 | 3,859 | 23,649 | ||
| --------- | -------- | -------- | -------- | -------- | -------- | |||
| Total expenses | 2,205 | 5,277 | 2,740 | 8,017 | 3,898 | 14,120 | ||
| Operating profit/(loss) before tax | 115,122 | (694) | (216) | (910) | (2,743) | 111,469 | ||
| Net gain on sale of SSAS business | - | - | 398 | 398 | - | 398 | ||
| Segment profit/(loss) before tax | 115,122 | (694) | 182 | (512) | (2,743) | 111,867 | ||
| £000 | Year to 31 Dec 2012 | ||||||
| Revenue | Company | ATS (continuing operations) | ATS (discontinuing operations) | ATS Total | ATI | Total | |
| Investment gains | 198,466 | - | - | - | - | 198,466 | |
| Net interest income | 491 | 2,582 | - | 2,582 | 32 | 3,105 | |
| Non interest income | 79,556 | 7,000 | 4,812 | 11,812 | 3,819 | 95,187 | |
| --------- | --------- | --------- | -------- | -------- | -------- | ||
| Segment revenue | 278,513 | 9,582 | 4,812 | 14,394 | 3,851 | 296,758 | |
| --------- | --------- | --------- | -------- | -------- | -------- | ||
| Expenditure | |||||||
| Foreign exchange gains | (9,026) | - | - | - | - | (9,026) | |
| Depreciation and amortisation | 214 | 530 | - | 530 | 91 | 835 | |
| Other expenses | 25,629 | 9,496 | 5,131 | 14,627 | 10,323 | 50,579 | |
| --------- | --------- | --------- | -------- | -------- | -------- | ||
| Total expenses | 16,817 | 10,026 | 5,131 | 15,157 | 10,414 | 42,388 | |
| Operating profit/(loss) before tax | 261,696 | (444) | (319) | (763) | (6,563) | 254,370 | |
| Net gain on sale of SSAS business | - | - | 366 | 366 | - | 366 | |
| --------- | --------- | --------- | --------- | --------- | --------- | ||
| Segment profit/(loss) before tax | 261,696 | (444) | 47 | (397) | (6,563) | 254,736 | |
Reconciliation of reportable segment revenue and profit to consolidated amounts
| Revenue | 6 months to | 6 months to | Year to |
| £000 | 30 June 2013 | 30 June 2012 | 31 Dec 2012 |
| Total revenue for reportable segments | 334,166 | 125,589 | 296,758 |
| Other revenue | 8,259 | (2,785) | 96,540 |
| Elimination of intersegment revenue | (1,099) | (771) | (1,519) |
| Elimination of movement in investment in subsidiaries | (13,666) | 14,931 | (66,018) |
| --------- | -------- | -------- | |
| Consolidated revenue | 327,660 | 136,964 | 325,761 |
| --------- | -------- | -------- |
| Expenditure | 6 months to | 6 months to | Year to |
| £000 | 30 June 2013 | 30 June 2012 | 31 Dec 2012 |
| Total depreciation and amortisation | 731 | 439 | 835 |
| Other expenses | 22,282 | 21,897 | 70,929 |
| --------- | -------- | -------- | |
| Consolidated expenses | 23,013 | 22,336 | 71,764 |
| Profit/(Loss) | 6 months to | 6 months to | Year to |
| £000 | 30 June 2013 | 30 June 2012 | 31 Dec 2012 |
| Total profit for reportable segments | 315,755 | 111,867 | 254,736 |
| Elimination of movement in investment in subsidiaries | (11,108) | 2,761 | (739) |
| --------- | -------- | -------- | |
| Consolidated profit before tax | 304,647 | 114,628 | 253,997 |
| --------- | -------- | -------- |
Assets and Liabilities
| £000 | As at 30 June 2013 | ||||
| Company | ATS | ATI | Total | ||
| Reportable segment assets | 3,252,360 | 407,136 | 29,000 | 3,688,496 | |
| Reportable segment liabilities | (477,178) | (384,338) | (14,015) | (875,531) | |
| --------- | -------- | -------- | -------- | ||
| Total net assets | 2,775,182 | 22,798 | 14,985 | 2,812,965 | |
| Assets and Liabilities | As at 30 June 2012 | ||||
| £000 | Company | ATS | ATI | Total | |
| Reportable segment assets | 3,137,068 | 353,405 | 8,177 | 3,498,650 | |
| Reportable segment liabilities | (761,851) | (334,716) | (2,981) | (1,099,548) | |
| --------- | -------- | -------- | -------- | ||
| Total net assets | 2,375,217 | 18,689 | 5,196 | 2,399,102 | |
| Assets and Liabilities | As at 31 Dec 2012 | ||||
| £000 | Company | ATS | ATI | Total | |
| Reportable segment assets | 2,701,566 | 359,661 | 13,342 | 3,074,569 | |
| Reportable segment liabilities | (210,947) | (340,810) | (4,734) | (556,491) | |
| --------- | -------- | -------- | -------- | ||
| Total net assets | 2,490,619 | 18,851 | 8,608 | 2,518,078 | |
Reconciliation of reportable segment assets to consolidated amounts
| Assets | As at | As at | As at |
| £000 | 30 June 2013 | 30 June 2012 | 31 Dec 2012 |
| Reportable segment assets | 3,688,496 | 3,498,650 | 3,074,569 |
| Third party liabilities and other subsidiaries | 171,379 | 123,123 | 137,912 |
| --------- | -------- | -------- | |
| Consolidated assets | 3,859,875 | 3,621,773 | 3,212,481 |
Reconciliation of reportable segment liabilities to consolidated amounts
| Liabilities | As at | As at | As at |
| £000 | 30 June 2013 | 30 June 2012 | 31 Dec 2012 |
| Reportable segment liabilities | (875,531) | (1,099,548) | (556,491) |
| Third party liabilities and other subsidiaries | (221,674) | (143,545) | (169,087) |
| --------- | -------- | -------- | |
| Consolidated liabilities | (1,097,205) | (1,243,093) | (725,578) |
11 Hierarchical valuation of financial instruments
The Group refines and modifies its valuation techniques as markets develop. While the Group believes its valuation techniques to be appropriate and consistent with other market participants, the use of different methodologies or assumptions could result in different estimates of fair value at the balance sheet date. Financial instruments excludes the Investment Property.
The tables below analyse financial instruments carried at fair value by valuation method. The different levels have been defined as follows:
Level 1 Quoted prices (unadjusted) in active markets for identical assets and liabilities.
Level 2 Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (prices) or indirectly (derived from prices).
Level 3 Inputs for the asset or liability that are not based on observable market data (unobservable inputs).
Group valuation hierarchy fair value through profit and loss
As at June 2013
| £000 | Level1 | Level2 | Level3 | Total |
| Listed investments | 2,978,894 | - | - | 2,978,894 |
| Credit default swaps | - | 1,053 | - | 1,053 |
| Interest rate swaps | - | 108 | - | 108 |
| Private equity | - | - | 131,691 | 131,691 |
| 2,978,894 | 1,161 | 131,691 | 3,111,746 |
As at June 2012
| £000 | Level1 | Level2 | Level3 | Total |
| Listed investments | 2,509,248 | - | - | 2,509,248 |
| Credit default swaps | - | - | - | - |
| Interest rate swaps | - | - | - | - |
| Private equity | - | - | 103,914 | 103,914 |
| 2,509,248 | - | 103,914 | 2,613,162 |
As at December 2012
| £000 | Level1 | Level2 | Level3 | Total |
| Listed investments | 2,607,869 | - | - | 2,607,869 |
| Credit default swaps | - | (3,189) | - | (3,189) |
| Interest rate swaps | - | - | - | - |
| Private equity | - | - | 117,362 | 117,362 |
| 2,607,869 | (3,189) | 117,362 | 2,722,042 |
The following table shows the reconciliation from the beginning balances to the ending balances for fair value measurement in level 3 of the fair value hierarchy.
| £000 | Group |
| --------- | --------- |
| Balance at 31 December 2012 | 117,362 |
| Net gain from financial instruments at fair value through profit or loss | 1,469 |
| Purchases at cost | 13,226 |
| Sales proceeds | (840) |
| Realised gain on sales | 474 |
| --------- | --------- |
| Balance at 30 June 2013 | 131,691 |
Private equity included under level 3 is valued in accordance with the International Private Equity and Venture Capital Valuation Guidelines issued in September 2009.
Unlisted investments in private equity are stated at the General Partner's valuation. The General Partner's policy in valuing unlisted investments is to carry them at fair value. The General Partner will generally rely on the fund investment manager's fair value at the last reported period rolled forward for any cash flows. However if the General Partner does not feel the manager is reflecting a fair value they will select a valuation methodology that is most appropriate for the particular investments in that fund and generate a fair value. In those circumstances the General Partner believes the most appropriate methodologies to use to value the underlying investments in the portfolio are:
Price of a recent investment
Multiples
Net assets
Industry valuation benchmarks
The Directors consider any valuations of level 3 investments based on reasonably alternative assumptions to be immaterial to the results of the Company and the Group.
12 Financial Commitments
As at 30 June 2013 the Group and Company had financial commitments, which have not been accrued, totalling £52m (£74m at 30 June 2012 and £61m at 31 December 2012). Of this amount £52m (£74m at 30 June 2012 and £61m at 31 December 2012) was in respect of uncalled subscriptions in investments structured as limited partnerships all of which relates to investments in our private equity portfolio. This is the maximum amount that the Company may be required to invest. These limited partnership commitments may be called at any time up to an agreed contractual date. The Company may choose not to fulfil individual commitments but may suffer a penalty should it do so, the terms of which vary between investments.
13 Share Based Payments
The group operates two share based payment schemes. Full details of these schemes (LTIP and AESOP) are disclosed in the December 2012 annual report and financial statements and the basis of measuring fair value is consistent with that disclosed therein.
LTIP
In the period to 30 June 2013 participating employees applied a proportion of their annual cash bonuses for the year ended 31 December 2012 to purchase 106,557 (113,061 at 30 June 2012 and 31 December 2012) Company shares at a weighted average price of £4.34 (£3.73 at 30 June 2012 and 31 December 2012) per share. Matching awards of up to 213,264 (204,131 at 30 June 2012 and 31 December 2012) shares, and performance awards of up to 728,314 (807,804 at 30 June 2012 and 31 December 2012) shares were granted.
Matching awards and performance awards made during the period were valued at £356,000 (£327,509 at 30 June 2012 and 31 December 2012) and £1,216,000 (£1,064,000 at 30 June 2012 and 31 December 2012) respectively. The fair value of the awards was calculated using a binomial methodology.
The cumulative charge to the income statement during the period for the cost of all LTIP awards was £713,000 (£538,000 at 30 June 2012 and £1,213,000 at 31 December 2012) for the Group. Per IFRS 2 the costs of matching and performance awards for each plan are expensed over the three year performance period.
These costs are adjusted if certain vesting conditions are not met, for example if a participant leaves before the end of the three year vesting period.
14 Bank Loans
| £000 | As at | As at | As at |
| 30 June 2013 | 30 June 2012 | 31 Dec 2012 | |
| Bank loans repayable within one year | 340,000 | 300,000 | 200,000 |
| --------- | -------- | -------- | |
| Analysis of borrowings by currency: | |||
| Bank loans - Sterling | 340,000 | 300,000 | 200,000 |
| The weighted average % interest rates payable: | |||
| Bank loans | 1.80% | 1.51% | 1.57% |
| The Directors' estimate of the fair value of the borrowings: | |||
| Bank loans | 340,000 | 300,000 | 200,000 |
15 Share Capital
| £000 | As at | As at | As at |
| 30 June 2013 | 30 June 2012 | 31 Dec 2012 | |
| Allotted, called up and fully paid: 561,529,146 (562,976,146 at 30 June 2012 and 561,579,146 at 31 December 2012) ordinary shares of 2.5p each | 14,039 | 14,075 | 14,040 |
Share Buy Backs
| £000 | As at | As at | As at |
| 30 June 2013 | 30 June 2012 | 31 Dec 2012 | |
| Ordinary shares of 2.5p each | |||
| Opening share capital | 14,040 | 14,833 | 14,833 |
| Share buy back | (1) | (758) | (793) |
| --------- | -------- | -------- | |
| Closing share capital | 14,039 | 14,075 | 14,040 |
The Interim Report and Accounts will be available on the Company's website www.alliancetrust.co.uk later today.
The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and other applicable laws; and
(ii) they are solely responsible for the content, accuracy and originality of the
information contained therein.
Source: Alliance Trust PLC via Thomson Reuters ONE
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