Alliance Trust PLC : Interim Management Statement

Objective

Alliance Trust is a self-managed investment company with investment trust status. Our objective is to be a core investment for investors seeking increasing value over the long term. We have no fixed asset allocation benchmark and we invest in a wide range of asset classes throughout the world to achieve our objective.

Our focus is to generate a real return for shareholders over the medium to long term by a combination of capital growth and a rising dividend. As part of "Vision 2020", our aim is to grow our reputation as a widely recognised and trusted investment and savings business. Our investment business will enhance its market-leading specialist position, offering solutions to clients with market-rated funds and continuing to leverage on the company's core expertise. We are also targeting strong growth in our savings business, which is well positioned to benefit from favourable market dynamics.

Financial Highlights for the 3 months to 31 March 2014

	31 March 2014	Change (%)	Total Return (%)
Share Price	454.3p	0.9	1.5
NAV per share (inc income)	508.5	(1.3)	(0.8)
Discount (inc income)	10.7%

Key Information

Total Assets (£m):	£3,221.3m	EPIC Code:	ATST
Net Assets (£m):	£2,841.3.m	Year End:	31 December
Total Borrowings (£m):	£380 m	Date of Incorporation:	21 April 1888
Net gearing:	13.4%	Issued Share Capital:	560,094,146

Dividends paid:	March, June, September, December
Ongoing Charges Ratio (to 31 Dec 13):	0.75%

Source: Alliance Trust

 Annual General Meeting

Alliance Trust is holding its AGM in Dundee this morning. Presentations will be given by Karin Forseke, Chair of the Board of Alliance Trust, Katherine Garrett-Cox, Chief Executive and Alan Trotter, Chief Financial Officer. At the meeting, Mrs Garrett-Cox will comment on the progress that the Trust has made towards achieving these long-term objectives and the strong underlying performance of the Trust in 2013, delivering an increase in the NAV of 18.4% which, coupled with a decrease in the discount to NAV, drove a Total Shareholder Return for the year of 22.7%.

The refocusing of the equity portfolio continued to deliver improved returns, with the gross return of 21.6% outperforming the MSCI All Country World Index.

Alliance Trust Investments' assets under management increased by 16% to £2.2bn. The SRI business, which is among the top 5 in Europe, was seamlessly integrated and the funds are already attracting new funds to the business.

Assets under administration on the Alliance Trust Savings platform increased by 33% to £5.4bn in 2013 and, following a period of investment, the business is profitable and self-funding. This excellent progress has continued into the first quarter of 2014, with assets under administration now exceeding £5.7bn. The platform is well positioned to benefit from the changing savings landscape and the requirements of the Retail Distribution Review.

Review of the three months to 31 March 2014

The Trust's Total Shareholder Return for the first quarter of 2014 was 0.9% while the NAV Total Return (with debt at fair value and inclusive of income) was -0.8%. Towards the very end of the period the NAV was adversely affected by our exposure to the UK insurance sector following reaction to the FCA announcement in late March.

The cumulative income discount traded in a tight range between 13.3% and 10.2% and finished the period at 10.7%. There were no buy backs during the period.

Over the quarter, the best performing market sectors were Utilities (+7.3%), Health Care (+5.2%) and Information Technology (+1.5%), while Telecommunication Services performed the worst (-2.5%) followed by Consumer Discretionary (-2.3%) and Industrials (-0.7%).

Portfolio update

Over the period, the gearing rose slightly from 13.2% to 13.4% and the total global equity exposure has risen from 97% to 98.3% of NAV. We have reduced our Fixed Income exposure from 7.6% to 6.9%, mainly due to the outperformance of equities. This asset allocation stance is consistent with our view that there are significant opportunities for equity investors over the medium and longer term and our demand for yield.

We continue to invest in equities on an unconstrained basis which means we can invest without reference to a benchmark and focus on the best investment opportunities regardless of where the companies are listed. The total number of holdings remains around 100 which provides a balance between concentration and diversification. The economic backdrop has improved over the period but we continue to focus on the drivers of stock specific returns which will deliver growth to our shareholders over the long term.

There have been a number of stock specific changes to the portfolio although the overall investment themes remain largely unchanged. The table below shows our top 20 holdings some of which are new additions. Key trades over the period are purchases of Continental AG, Toyota, Petrofac and Eaton Group. These have been funded by profit-taking in some holdings and sales of others including Kraft Foods, BorgWarner, Samsung Electronics and Hyundai Mobis. We have also topped-up on some of our high conviction holdings such as Visa, BNP Paribas and Citigroup. Our regional equity exposure is largely unchanged during the quarter. Sector and regional allocations are a function of the stock selection process rather than the result of top-down asset allocation decisions.

Alliance Trust Investments

Alliance Trust Investments manages £2.2bn of assets, of which around £1.8bn is on behalf of third parties. We have seen net inflows of £22m in the first quarter of the year, primarily into the Dynamic Bond Fund and the Monthly Income Bond Fund. 63% of the funds that we manage are ranked above median over 1 year and 78% of our funds that have a 3 year track record are ranked above median over that time frame.

Our Sustainable Future fund range continues to increase in popularity as intermediaries, charities and universities seek managers who can provide both a sustainable approach to investment and good returns. We are now one of Europe's leading Sustainable and Responsible Investment (SRI) managers and have a well-established track record of generating strong investment performance which compares favourably, not only with other SRI funds but also against traditional equity funds and broad industry benchmarks. The Alliance Trust Monthly Income Bond Fund is currently one of the highest yielding funds in the corporate bond sector with a net distribution yield of over 5.5% and we are seeing continuous recognition of the importance of a high income within the intermediary market. We launched the Alliance Trust Dynamic Bond Fund 18 months ago and as it builds a longer track record of delivering strong risk adjusted returns, in line with its investment objective, it is attracting increasing levels of interest in both the Wealth Management arena and institutional investors.

Alliance Trust Savings

Alliance Trust Savings (ATS) has made progress in the first quarter of 2014, on the back of having reported its first full year's operating profit on continuing activities since 2006. There has been a large amount of activity in the sector with most of our competitors revising their charging structure in order to comply with the new rules relating to transparent charging for platforms as part of the Retail Distribution Review. ATS has been a beneficiary of these changes as it has always had a transparent charging model and its flat-fee structure is attracting positive attention in both the intermediary and direct channels. This has had a positive impact on the business in both channels with overall new business up over 45% on the same period in 2013. Assets under Administration are now £5.7bn, (up 5% year to date), at a time when equity markets have been flat. ATS is one of the top 5 direct platforms in the UK, by assets under administration, in a market that is expected to see significant growth over the next few years.

On 1 February 2014 we increased prices by 56% for ISAs and dealing accounts and by 15% for SIPPs and took the opportunity to incorporate more services into the annual administration fee, which now covers the majority of our customers' standard requirements to have their accounts managed by us. This has strengthened our flat-fee structure and gives us greater visibility of future earnings.

ATS is operating in a market which is expected to grow by 20% per annum, helped by the most radical shake up in pensions in a generation which was announced in the last Budget.  We see that 2014 is going to be about growth and also about self-financing investment in new systems, using the proceeds from the gain on sale of the Full SIPP business. Such investment is required to ensure we have a scalable platform to serve both retail and intermediary customers going forward. Despite this ongoing investment in the business, we are confident that ATS will be profitable in 2014.

We are gaining momentum in the intermediary channel where our new business is up over 300% on the same period in 2013, and with the planned future enhancements and differentiated pricing structure, we believe that we can grow our intermediary channel business significantly over the coming years.

We have announced that we are making an investment in the technology that underpins our platform and have signed an agreement with GBST to provide our platform software going forward. This will bring enhancements for customers and intermediaries when we fully migrate onto the new software in 2015. We are also investing in marketing to ensure that customers and intermediaries understand the benefits of using Alliance Trust Savings as their platform for investments. This will take the form of increased marketing awareness and further enhancements to our website.

Outlook

This quarter has been challenging for stock pickers. We have seen considerable sector rotation, volatility and unexpected external factors, all causing a polarisation of returns at both a sector and country level. For investors this emphasises how important it is to remain focused on the factors that drive stock specific returns over the medium to long term. We remain convinced that fundamentals favour equities and that they remain relatively good value, particularly when compared to other asset classes despite some developed markets reaching close to all-time highs. We continue to look for opportunities in well-managed companies with strong fundamentals and sustainable business models which can only be achieved by thorough bottom-up company analysis.

Cumulative returns (%) periods to 31 March 2014

	YTD	1 Year	2 Years	3 Years	5 Years
Share Price	0.9	5.6	23.4	24.7	70.8
NAV#	-1.3	1.2	16.2	14.1	64.6

Source FactSet & Fundamental Data

^#NAV is calculated with debt at fair value and including accrued income.
Past performance is not a guide to future performance.

Asset Allocation (%)*

	31-Mar-14	31-Dec-13
Equities	98.3	97.0
Fixed Income	6.9	7.6
Private Equity	4.1	4.1
Operating Subsidiaries	1.4	1.3
Property	0.5	0.5
Cash	1.0	1.6
Other Assets	1.2	1.1
Gross Assets	113.4	113.2
Gearing	(13.4)	(13.2)
Net Assets (incl income)	100.0	100.0

Equity portfolio sector allocation (%)*

	31-Mar-14	31-Dec-13
Financials	22.8	23.6
Health Care	14.4	13.5
Information Technology	12.2	11.8
Consumer Discretionary	11.4	11.1
Industrials	11.1	11.0
Energy	9.6	8.1
Consumer Staples	7.4	8.8
Materials	4.0	3.0
Utilities	3.6	5.3
Telecommunication Services	3.5	4.0

Source: Alliance Trust

Equity portfolio geographic breakdown (%)*

	31-March-14	31-Dec-13
North America	47.6	47.2
United Kingdom	21.6	22.4
Europe Ex UK	19.2	18.2
Asia & Emerging Markets	11.6	12.2

Source: Alliance Trust

Equity portfolio top 20 holdings*

31 Dec 2013	Change	31 Mar 2014	Holding	% of Equity Portfolio
1	-	1	Pfizer	2.7
3	Up	2	Walt Disney	2.6
7	Up	3	Visa	2.5
4	-	4	Qualcomm	2.3
6	Up	5	Enterprise Products Partners	2.0
2	Down	6	United Technologies	2.0
5	Down	7	Prudential	2.0
11	Up	8	Express Scripts	2.0
10	Up	9	CVS Caremark	1.9
9	Down	10	Accenture	1.9
20	Up	11	SAP	1.7
15	Up	12	Wells Fargo	1.7
14	Up	13	Amgen	1.6
18	Up	14	National Grid	1.5
-	New	15	Google	1.5
19	Up	16	Reckitt Benckiser	1.5
13	Down	17	Danaher	1.5
-	New	18	Roche	1.5
12	Down	19	HSBC	1.4
-	New	20	Noble Energy	1.4

Source: Alliance Trust

*Weightings are calculated on a look-through basis whereby the Trust's exposure is combined with that of its holdings in Alliance Trust Investments' funds in order to calculate total exposure.

The views, information and data in this statement should not be deemed as a financial promotion or recommendation. Alliance Trust PLC, Alliance Trust Savings and Alliance Trust Investments are not authorised to give financial advice.

For further information, please contact:

Evan Bruce-Gardyne                                    Conor McClafferty / Clare Dundas
Director of Investor Relations                       RLM Finsbury
Alliance Trust PLC                                               
Tel: [phone]                               Tel: [phone]
Email: [e-mail]              Email: [e-mail]
Website: www.alliancetrust.co.uk                  Website: www.rlmfinsbury.com

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Source: Alliance Trust PLC via Globenewswire

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