Final Results
Alliance Trust PLC
12 April 2011
Preliminary Results for the full year ended 31 January 2011
Financial Highlights As at 31/01/11 % change Total Return %
NAV per share 439.0p +16.2% +18.7%
Share Price 364.0p +16.3% +19.2%
Full year dividend 8.395p + 3.0%
Total Expense Ratio 0.63% -Â 6bps
Company Highlights
* Total Shareholder Return was 19.2%, on top of 20.3% last year, and over a
three year period Alliance Trust is now ranked median against the peer group
of comparable investment trusts in the global growth and income sector
* The share price and Net Asset Value reached 3 year highs in early January,
with Net Asset Value increasing by 11.9% in the second half of the year
* Our careful approach to stock selection contributed positively to relative
returns in the UK and Asia. In addition, we raised gearing (which stood at
11% as of year-end) to increase our quoted equity holdings prior to the
market rally in the second half of the year and also to fund our investments
in fixed income
* The full year dividend of 8.395p per share represents a 3% increase on 2010
and is covered by current year earnings, demonstrating our prudent portfolio
management
* The asset management business had a very strong year, with third party
assets under management rising significantly, from £12 million to £83
million at the year-end, and reaching £100m since then
* Improvements at Alliance Trust Savings resulted in a reduction in losses by
30% and a 28% increase in revenues to £12.8 million. 44% of Alliance Trust
Savings' clients are now shareholders in Alliance Trust PLC
* Alliance Trust has also published today its circular to shareholders
outlining the business to be discussed and resolutions to be voted on at the
Company's AGM on 20 May 2011
Commenting on the results, Katherine Garrett-Cox, Chief Executive, said:
"I am pleased with the good progress we have made over the past year and I am
delighted that we are starting to see the impact of the changes we have
implemented over the last three years across all parts of the business coming
through in our results. The strength of our higher conviction portfolio and
dynamic investment strategy has contributed to the positive absolute returns we
have delivered across all regions. It has also helped to underpin the 3% growth
in our dividend, which has risen for the 44th consecutive year while income from
FTSE All-Share companies fell 3%.
As part of our opportunistic and pragmatic approach to buybacks, we have bought
back almost 9.6m shares at a weighted cost of £3.35 and a weighted discount of
21% over the past year. We recognise the importance of buybacks as one element
of our investment strategy and continue to believe that our flexible approach is
in the best interests of our long-term shareholders.
The near term outlook for stock markets remains clouded by a number of
uncertainties, including geo-political risks, rising commodity prices and a
global consumer burdened by debt. However, we are optimistic on the prospects
for global equities and believe we can exploit the volatility to build long-term
positions. We see the best growth prospects in the Emerging Markets and will
continue to increase exposure to take advantage of long-term growth
opportunities in these regions."
Lesley Knox, Chairman, added:
"The executive team have taken firm actions over the last three years to refocus
the Trust on our core competency of investing in global equities and fixed
income. I am pleased that these actions are driving an improved performance and
that the Company is well positioned to take advantage of the opportunities which
are now emerging.
As you will see in the circular we published today, in addition to the normal
business, our shareholders are being asked to vote on two requisitioned
resolutions at our AGM on 20 May. Through regular engagement with our
shareholders, we believe that we have a good understanding of their long-term
investment priorities. We are focused on managing the Trust in the best
interests of these long-term shareholders, not those who are motivated purely to
make a short-term gain. The Board therefore strongly recommends that
shareholders vote against these requisitioned resolutions."
- ENDS -
For more information please contact:
James Leviton and Conor McClafferty
Finsbury Group
020 7251 3801
Evan Bruce Gardyne
Head of Investor Relations, Alliance Trust
01382 321169
Mobile: 07501 500243
Dividend and change of financial year end
Having paid three interim dividends of 2.0625p for last year, the Directors have
declared a fourth interim dividend of 2.2075p per share payable on 3 May 2011.
The total dividend for the year, of 8.395p, is an increase of 3.0% on the 8.15p
paid for the previous year. In the absence of any unforeseen developments, we
expect to be able to recommend quarterly interim dividends of 2.141p, payable on
or around 30 June 2011, 30 September 2011, 3 January 2012 and a fourth interim
dividend of at least 2.141p, payable on or around 2 April 2012.
The Company's financial year end will be changing to 31 December in order to aid
investment performance comparison. Our next year end will be 31 December 2011.
There is no anticipated cost implication as a result of this change. The dates
above reflect this change of the Company's financial year end.
Chairman's Statement
Over the last three years your Company has withstood the impact of dramatic
shifts in the economic climate and its consequences for investments across the
globe. We have made good progress in the modernisation of Alliance Trust to
ensure that we are well-placed to take advantage of the opportunities which are
now emerging. At the same time we have made significant strides in the
development of our subsidiary businesses.
In this year's report we talk about the actions we have taken in order to create
long-term value for shareholders at a time when the opportunities for investment
trusts are increasingly evident.
Investment performance
Our investment philosophy allows us to allocate capital to those asset classes
and regions where we see the best opportunities for growth. We took advantage of
this flexibility during the year to shift our equity portfolio increasingly in
favour of companies in Asia and Emerging Markets, and also to those companies
which generate a significant part of their revenues from these regions. This
contributed to a total return of 19.2% for shareholders over the period.
Over the three year period to 31 January 2011, we are now at the median of our
peer group, reflecting the significant improvements in our investment process
which have been made by the current management team.
Performance management
During the year we reviewed the Key Performance Indicators which are used by the
Board to assess performance. Given the long-term investment focus of the
Company, the Board agreed that the following metrics should be used to
communicate performance to shareholders:
· Percentage change in Net Asset Value against the peer group over 6 months,
1, 3 and 5 years on a rolling basis
· Percentage change in Total Shareholder Return against the peer group over 6
months, 1, 3 and 5 years on a rolling basis
· Dividend growth over 1, 3 and 5 years
· Management of the Company's cost base in line with market conditions
The peer group we have adopted for the future is the AIC Global Growth
investment trust sector.
We are also asking shareholders to approve changes to the long-term incentive
plan to reflect these changes.
For the current year we have continued to report on the previous Key Performance
Indicators to assist comparability.
I am asked occasionally by shareholders why we do not have a fixed asset
allocation benchmark and this is a question we considered during the review.
However, the absence of a benchmark means that we are not constrained by a need
to remain close to the chosen index and instead can deploy the Company's capital
where we see the best opportunities for long-term returns.
Dividend
As noted above, we recognise the importance of a growing dividend to our
shareholders and I am particularly pleased to report that this has continued for
a 44th consecutive year, with an increase in the full year dividend of 3% from
8.15p per share to 8.395p per share which we have been able to cover from
current year earnings rather than out of reserves.
Discount and Share buybacks
Our discount was unchanged over the year, starting and ending at 17.1%, but
having narrowed significantly from levels seen over the summer months. The
discount was less volatile than both the previous financial year and our peer
group average, giving our long-term investors the benefit of stability. We do,
of course, recognise the concerns of shareholders as to the absolute level of
discount, and keep this under constant review.
During the year we undertook our second share buyback, purchasing and cancelling
just under 1% of the Company's shares. Since the year end we have undertaken a
series of further buybacks of a total of 3,575,000 shares. The Board's view
remains that we will use share buybacks as one of the investment tools available
to us to create long-term value for shareholders. We believe this flexible
approach will benefit our long-term shareholders. The introduction of a rigid
discount control mechanism would constrain our investment flexibility while at
the same time increasing our total expense ratio, cost of debt and jeopardising
our ability to maintain a progressive dividend.
Engagement with shareholders
Investment trusts offer an excellent means for individual investors to access a
diversified investment portfolio at relatively low risk and cost. As well as our
institutional shareholders Alliance Trust has over 44,000 individual
shareholders, either directly or through our subsidiary Alliance Trust Savings.
We actively engage with them, not just once a year at the Annual General
Meeting, but also throughout the year, through our regular Investor Forums and
ongoing communications by letter, email and telephone.
The debate around stewardship by institutional investors is well-advanced, and
as an investor Alliance Trust is pleased to have adopted the Stewardship Code
which was issued by the Financial Reporting Council during the year. Action is
still, however, required by all companies to encourage the engagement of
individual investors.
Regulatory change
The pace of regulatory change is relentless and Alliance Trust is determined to
play its part in the debate to shape the regulatory environment in a way that
protects and enhances value for our shareholders.
We continue to take a close interest in developments in relation to the Retail
Distribution Review. We believe that it will create a fairer environment for
investment trusts, although much has still to be done to ensure that advisers
appreciate the key characteristics of investment trusts in general and Alliance
Trust in particular.
The Board
We welcomed Alan Trotter as Finance Director at the start of the year. During
the year we also appointed Timothy Ingram, who recently retired as Chief
Executive of Caledonia Investments PLC, as a Non-Executive Director and I am
delighted to welcome him to the Board. His obvious commitment to the investment
trust sector, combined with his wider financial services experience, is of great
benefit to the Board. Sadly, we are losing Clare Sheikh from the Board at the
Annual General Meeting, having served as a Non-Executive Director for six years.
On behalf of the Board I thank her for her contribution and wish her well for
the future.
We note the continuing debate on the topic of diversity on boards. We concur
with the conclusion of Lord Davies' review that quotas are not the preferred
option and may indeed be counterproductive. Since 2001 women have always
comprised at least 20% of the Board but, more importantly, 17% of our Senior
Leadership Group is female. Only by fostering talent at all levels can companies
expect to achieve diversity around the board table and the resulting benefits.
Annual General Meeting
Our Annual General Meeting will be held in Dundee on Friday 20 May 2011. As
always there will be formal business to consider, and you can read about this in
the notice of meeting, but, first and foremost, this is an opportunity to meet
the management team and hear about your Company's progress and views on the
markets in which we invest. I would encourage shareholders to attend and look
forward to seeing as many of you as possible then. If you are not planning to
attend the meeting I would urge you to return a voting form beforehand so your
views can be heard.
Chief Executive's Review
Performance Summary
The first half of 2010 was dominated by the Sovereign Debt crisis in peripheral
Europe which led ultimately to emergency bail-out programmes being introduced in
Greece and Ireland. After some nervousness, markets stabilised to post positive
returns for the period, the Company's Net Asset Value (NAV) rising 3.8% in the
6 months to 31 July. Against this backdrop, our confidence in the sustainability
of the recovery in corporate earnings in western economies grew, as did our
conviction in the long-term growth opportunities available in Asian and Emerging
Markets. Accordingly, we maintained our high weighting in global equities and
increased further our allocation within our equity portfolio to Asia and
Emerging Markets. Our performance benefited from these moves as our Asian
holdings returned the highest absolute returns among our regional equity
portfolios. These two areas accounted for 26% of our equity portfolio at the
year-end, our highest weighting in over 20 years.
The second half of the year saw momentum in stock markets gather pace as
economic reports confirmed that measures taken by the global authorities were
driving growth, albeit at subdued levels. Markets were encouraged by the Federal
Reserve's commitment to a second round of Quantitative Easing in the US, by
favourable company earnings reports and by evidence of strengthening of
corporate balance sheets. All markets performed strongly over the second half
with our UK, North American, European, Global and Asian portfolios all producing
double-digit returns. We benefited by weighting our portfolios towards companies
in sectors which would perform well in a cyclical upturn, such as Industrials,
Financials, Multi-nationals and Resources. Growth in personal consumption in
Asia was also a consistent positive investment theme across our portfolios.
Stock selection in the UK and Asia contributed positively to our relative
returns in these areas. Our North American portfolio, however, lagged its
benchmark as stocks perceived to have greater recovery potential fared better
than our more defensive growth stocks in the strong market towards the end of
2010. The NAV of the Company rose 11.9% in the second half of the year.
Over the full year, the Company's basic NAV rose 16.2% and produced a total
return of 18.7%. The share price rose16.3% and the Total Shareholder Return
(TSR) was19.2%. Our TSR has increased by 43.3% over the past two years as stock
markets have continued their recovery from the financial crisis in 2008, the
share price having risen from 268p at 31 January 2009 to 364p at 31 January
2011.
When we look back over the last three years we have witnessed periods of extreme
volatility, with markets falling sharply in 2008 and recovering since March
2009. Despite these varying conditions, Alliance Trust has outperformed the FTSE
All-Share and is ranked 18/36 in its peer group of investment trusts in the
Global Growth and Global Growth and Income sectors.
As at 31 January 2011 the Company's net assets were allocated thus:-
+---------------------------------------+-------+
| Quoted Equities | 97% |
+---------------------------------------+-------+
| Fixed Income | 5% |
+---------------------------------------+-------+
| Private Equity | 4% |
+---------------------------------------+-------+
| Property | 2% |
+---------------------------------------+-------+
| Other Assets (including subsidiaries) | 3% |
+---------------------------------------+-------+
| Gearing | (11%) |
+---------------------------------------+-------+
Income Generation
A major attribute of the global spread of our portfolio is that we derive income
from a variety of businesses, sectors and regions. Higher income returns from
our holdings across the globe have helped us to pay an increased dividend to
shareholders this year in a continuing difficult environment for income
generation. Total corporate dividends in the UK are reported to have been
reduced by a further 3% in 2010, having fallen by 15% in 2009. The decision of
one of our largest holdings, BP, to suspend its dividend reduced our income by
£2.9 million. Key elements of our investment process are an assessment of the
underlying strength of the cash flow of a company and its ability to sustain its
dividend payments. Keen attention to these factors, combined with our increased
allocation to fixed income securities, has enabled the increased dividend to be
paid from current year earnings, while at the same time adding to our revenue
reserves. Against this backdrop our annual dividend grew by 3%.
Gearing
Net debt was increased by £127 million to £247 million as we used our banking
facilities to increase our quoted equity holdings prior to the rally in markets
in the second half of the year and also to fund our fixed income investments.
Net gearing stood at 11% at the year end, which we believe to be an appropriate
level in the current market environment. During the year we negotiated three new
committed facilities and renegotiated to 36 months an existing committed
facility which was nearing maturity. The competitive terms and length of the
committed facilities secured attest to the financial strength of the Trust.
Asset Allocation
In the first half of the year we increased our exposure to Asian and Emerging
Markets where we expect long-term premium growth rates to be maintained in
economies which are not saddled with the debt burdens afflicting many western
countries. Both areas rose strongly, particularly over the second half of the
year. We added £166 million to the Asian and £124 million to the Emerging
Markets portfolios in the first half of the year. Reflecting our higher
conviction investment approach, this reallocation of assets resulted in the two
portfolios representing 26% of our net assets at the year end, against 14%
twelve months ago.
These additions were funded by reductions of £140 million in our UK quoted
equity portfolio and £150 million from other global equities. UK equities now
represent 34% of net assets, our lowest UK weighting in over 20 years. The
recent UK budget has confirmed our expectations of subdued domestic growth in
2011. While we have reduced the proportion of the equity portfolio invested in
UK large cap companies exposed to western economies, our investment process has
also identified companies which are benefiting from the higher growth
opportunities available in Asia. Asian growth has been a key theme in our UK
portfolio this year. 29% of revenues of the companies in our portfolio are
derived from Asia, while only 6% of revenues are generated in the UK.
We added £50 million to European equities in November as we considered
valuations and dividend growth prospects to be favourable. Sovereign Debt issues
in peripheral European economies have depressed valuations in the Eurozone and
we took advantage of the opportunity by adding to our positions in some solid
long-term growth stocks.
Our allocation to fixed income securities was increased following a commitment
of £100 million to the Alliance Trust Monthly Income Bond Fund in June. This new
Fund is managed by the team of fixed income managers we appointed towards the
end of last year. The Fund is predominantly invested in a diversified portfolio
of investment grade corporate bonds and has an estimated annual distribution
yield of over 6%, making a significant contribution to the income generation of
our investment portfolio and helping us to diversify our sources of income while
supporting our growing dividend. Our preference share portfolio was valued at
£6.3 million at the year end compared to £17.5 million 12 months previously as
we sold down the holdings, re-investing the proceeds into the Fund and our
equity portfolio.
In line with our previously stated strategy, we made two further disposals from
our direct property portfolio which was valued at £28.5 million at the year end.
Since the year end we have announced our intention to close our Private Equity
business which represented 4% of our net assets at 31 January. We intend to wind
down our exposure in order to maximise the return to shareholders.
Key Priorities
Since 2009 we have focused on five key priorities which we believe are necessary
to enable us to achieve our objective of delivering long-term value for
shareholders. These are:
To focus on investment in equities
Quoted equities represented 97% of net assets at the year end, the highest
quoted equity weighting held by the Company in the past 7 years. Net debt was
increased from 5% of net assets at the start of the year to 11% by drawing down
on our banking facilities through the year. This helped us to increase further
our already high weighting in global equities. Within our equity portfolio we
have also made significant moves to increase our allocation to those parts of
the world which we believe offer highest potential for future growth.
To continue to improve investment performance
Our quoted equity portfolio returned a gain of 19% for the year. Almost three
quarters of the return was generated in the second half of the year when equity
markets performed strongly as global policymakers acted to sustain the economic
recovery following the crisis of 2008. Performance benefited from our increase
in net debt levels implemented in the first half of the year, and our higher
conviction approach to asset allocation. We also developed further our risk
management and monitoring systems within our investment process.
To manage our cost base in line with market conditions
The Total Expense Ratio (TER) for the period was 0.63% (0.69%).
We have continued to apply strict cost controls across the Company, while
focusing resources in those areas of the business which we believe offer the
greatest potential for longer term growth. Further efficiencies were delivered
from a new supplier management framework, reducing costs on information systems,
although this was offset by higher overseas custody costs as we increased our
exposure to Asia and Emerging Markets. We invested in new computer servers and
infrastructure hosting capability to ensure we are able to meet industry best
practice. The Company expenses also include necessary professional expenses
associated with preparing a response to the AGM requisitions submitted by Laxey
Partners in December 2010. As a result, Company expenditure increased to £17.0
million (£16.0 million).
To develop our subsidiary businesses
Alliance Trust Asset Management currently offers six funds in its range, five of
which invest in equities on a regional basis. Its first fixed income fund, the
Alliance Trust Monthly Income Bond Fund, was launched in June. Third party
assets under management have grown from £12 million twelve months ago, to £83
million at the year end. The extensive sales and marketing activities of the
business, aimed at growing its profile and brand throughout the UK, are also
highly beneficial in raising interest in the Company in the intermediary market.
Alliance Trust Savings, our subsidiary business which offers share dealing
services, a fund platform, ISA and pensions administration, made significant
progress during the year. The company has redeveloped its i.nvest online dealing
platform, which is one of the UK's leading fund platforms and is the UK's
largest investment trust platform. Revenues grew by 28% to £12.8 million. 44% of
Alliance Trust Savings' clients are shareholders in the Company.
To invest in the development of our people
We have invested prudently in leadership development during 2010, building a
framework which we have begun to apply consistently across the entire employment
experience of our leaders, i.e. recruitment, induction, communications,
performance management, development and reward. We have developed a set of
values and behaviours under the headings of "integrity, responsibility,
communications, passion, performance and teamwork" which exemplify how we are
perceived and behave as a company. We have established a Senior Leadership Group
and are introducing appropriate development programmes. We have also introduced
an Emerging Leaders Group and will be delivering a tailored development
programme for this group during 2011.
Economic Background
The major issue in the UK at the moment is that of inflation. For the Monetary
Policy Committee to ensure overall inflation of 2%, it may have to tighten
policy such that it pushes the domestic economy back into recession. The
authorities are walking a tightrope and may be willing to accept a higher rate
of headline inflation in the short term, knowing that growth and inflation are
both expected to be muted in 2012. The planned cuts in fiscal spending in the UK
are severe and will take place over several years. Household spending is likely
to remain muted. On the more positive side the corporate sector remains healthy,
with relatively strong balance sheets.
The economic recovery in the US waned last summer, causing the Federal Reserve
to introduce another round of Quantitative Easing. This additional liquidity has
improved confidence in asset markets and in the corporate sector but has yet to
have an impact on households, which make up the bulk of the economy. We believe
that we need to see recovery in the labour and housing markets, an improvement
in consumer confidence and spending and real wage growth before we can be sure
of a relatively strong and sustainable US recovery.
The benefits of strong Chinese growth are spilling over into the rest of Asia.
Indeed, the global economy has become increasingly dependent on China being able
to continue to achieve a relatively high rate of economic growth. China has
again achieved growth of more than 10%, led by investment funded largely by huge
levels of bank lending. Inflation is also the major concern throughout Asia.
Policy makers now face the tough choice of either tightening monetary policy to
dampen the impact of inflation on their domestic economies or maintaining
extremely loose policy in an attempt to maintain currency stability.
Europe's biggest economic issue over the last year has been the Sovereign Debt
crisis and the need for fiscal austerity packages throughout the periphery of
the region. The resulting weakness of the Euro has largely benefited Germany
which has achieved a relatively high rate of growth based on exports. With
fiscal policy throughout the region likely to remain tight, there is still heavy
reliance on monetary policy. Although there are questions about the
sustainability of the Euro, we do not underestimate the political will to keep
Europe together through this period of crisis.
Outlook
The near term outlook for stock markets remains clouded by a number of
uncertainties. Inflation has been pushed higher by increased food and energy
prices. The oil price has risen rapidly as a result of the political unrest in
some Middle Eastern countries and concerns on the potential impact on oil
supplies. We have no direct holdings in the Middle East. Since the year end we
have increased our exposure to developed markets in Asia at the expense of the
region's emerging markets due to the inflationary outlook. Overall our largest
weightings remain in the Financials, Industrial, Oil & Gas and Consumer Goods
sectors. Our consumer exposure remains biased towards the higher growth markets
rather than developed economies.
Recent events in Japan are tragic. The extent of human loss is a stark reminder
of the risks that are faced daily in some parts of the world. It will be many
years before the damage to property, industry and infrastructure is repaired. We
are greatly encouraged by the immediacy of the response of the Japanese
authorities and by the concerted international efforts that will do much to
assist in stabilisation of the country at both a human and economic level. This
applies particularly to currency markets, as an economy much reliant on exports
would be weakened by further strength in the Yen. There are clearly many
domestic uncertainties to be resolved in Japan over the coming months. We do not
think, however, that these recent events will derail the global economic
recovery.
We expect volatility in markets this year in response to further fiscal and
monetary policy actions. Corporate balance sheets and cash flow are generally
strong and we continue to identify first class stock specific investment
opportunities in all markets. The recent corrections in stock markets, triggered
by the disaster in Japan, have resulted in valuations looking attractive in many
areas. We are optimistic on the outlook for the year and are at present
retaining our high weighting in global equities along with our level of gearing.
We will, however, be quick to reduce gearing and increase our cash levels if we
believe circumstances warrant such a change. Returns will be driven by a
combination of asset allocation and stock selection and we will focus our
resources to make timely and high conviction decisions in both areas.
Risk Factors and Risk Management
The following section sets out our approach to risk management and focuses on
the key risks which we believe could impact on the performance of the business.
Effective risk management is a key component of the business's operating model
and assists in ensuring that the different parts of the business operate within
acceptable risk parameters.
The Board has overall responsibility for setting the level of risk which it is
prepared to accept. The risk framework is overseen by the Risk Committee, which
meets at least quarterly, is chaired by the Finance Director and is made up of
representatives from Alliance Trust and each of its regulated subsidiaries. The
Risk Committee has oversight of the risk and controls self-assessment exercise
and the operation of the risk framework as a whole. Each business unit maintains
and reviews its risk register and the controls in place to mitigate, reduce or
prevent loss arising from their key risks. A common risk categorisation is in
place for all business units.
We continue to enhance the Risk Framework and over the year undertook an
external review of our current risk management practices to help us identify
other areas, based on experience of emerging practices across the industry, for
development.
This year the Board, as a whole, participated in a workshop to fully debate the
risk framework within the group and review the risk appetite statement. This
articulates the Board's position on liquidity, adequacy of capital, investment,
operations and remuneration.
As part of the current work to refresh the Risk Management Framework, a single
group wide system and process to capture, consolidate and report on Risk within
Alliance Trust and its subsidiary companies was created. This allows us to
capture risks, controls, events and action plans and to provide comprehensive
reporting for Alliance Trust and the subsidiary companies.
The key risks and mitigating actions are discussed below:
+-----------------------------------------+------------------------------------+
|Risks |Mitigation |
+-----------------------------------------+------------------------------------+
|Investment (Market) - unfavourable market|The Asset Allocation Committee meets|
|moves or volatility. The risk typically |monthly to manage the allocation of |
|arises from equity, property and bond |the capital of the Company between |
|exposures, and the impact of interest |and among the asset classes approved|
|rates and property values. |by the Board and within the risk |
| |parameters, policies and other |
| |limits and guidelines set by the |
| |Board from time to time and with a |
| |view to the income derived from the |
| |Company's assets. |
+-----------------------------------------+------------------------------------+
|Liquidity - the risk that the |Cash is managed on a daily basis. |
|Company/subsidiary does not have |The bulk of the Trust's investments |
|sufficient financial resources to meet |are quoted equities which may be |
|its commitments when they fall due, or |realised at short notice if |
|can secure them only at an excessive |required. |
|cost. | |
+-----------------------------------------+------------------------------------+
|Credit - the risk that Alliance Trust or |The Company, and its regulated |
|one of its regulated subsidiaries has |subsidiary companies, comply with |
|insufficient capital to meet its |the requirements of the Internal |
|regulatory capital requirements; that the|Capital Adequacy Assessment Process |
|group has insufficient capital to provide|('ICAAP') under Basel II. This means|
|a stable resource to absorb any losses up|that the Company considers the risks|
|to the confidence levels defined by the |to which it is, or could be, exposed|
|group; that the group loses reputational |in order to ensure that there is |
|status as a result of having capital that|sufficient capital adequacy on an |
|is regarded as inappropriate either in |ongoing basis. |
|quantity, type or distribution; or that | |
|the capital structure is inefficient. | |
+-----------------------------------------+------------------------------------+
|Reputational - the risk that the value of|The Company has a risk framework in |
|the Company is diminished due to adverse |place to reduce the likelihood of |
|publicity regarding the way in which it |such a loss event taking place. In |
|does business. |addition, the Company has in place |
| |arrangements to enable it to respond|
| |to and minimise the impact of any |
| |adverse incident. |
+-----------------------------------------+------------------------------------+
|Strategic - a strategy that does not |The Board allocates time at each |
|maximise value and/or fails to achieve |Board meeting to consider the |
|the initiatives in the agreed strategic |implications of the Company's |
|plan due to changing or flawed |strategy, both for investment and |
|assumptions. |the subsidiary businesses. |
| |Separately, the different Boards |
| |within the Group measure their |
| |performance against agreed business |
| |objectives. |
+-----------------------------------------+------------------------------------+
|Credit and Counterparty - the failure of |Management measure exposure to |
|a party with which we have contracted to |counterparties on a daily basis. |
|meet its obligations both on and off the |Counterparty exposures are set by |
|balance sheet. |the Authorisation Committee and take|
| |into account credit as well as |
| |investment exposure. |
+-----------------------------------------+------------------------------------+
|Operational- |Â |
+-----------------------------------------+------------------------------------+
|Legal, Regulatory and disclosure - loss |The Company has separate legal, |
|arising from failure to comply with |compliance and internal audit |
|applicable laws, regulations and codes. |functions to keep the business |
| |apprised of regulatory developments.|
+-----------------------------------------+------------------------------------+
|Customer Treatment - loss arising from |Our regulated subsidiaries, Alliance|
|inappropriate or poor customer treatment.|Trust Savings and Alliance Trust |
| |Asset Management, monitor this via |
| |regular management information on |
| |Treating Customers Fairly metrics. |
+-----------------------------------------+------------------------------------+
|Process and Resources - loss arising from|Staff members have individual |
|inadequate or failed internal processes |objectives and their performance is |
|and systems. |assessed against these. Investment |
| |managers operate within parameters |
| |set by the Asset Allocation |
| |Committee which in turn operates |
| |within limits set by the Board. |
| |Management Information from |
| |performance and risk measurement |
| |systems are reviewed by management |
| |committees and the Boards. |
+-----------------------------------------+------------------------------------+
|Theft and other criminal acts - loss |We take care to segregate duties |
|associated with financial crime or the |between front and back office |
|failure to put in place effective systems|functions. We do not handle cash. We|
|and controls to comply with regulatory |have anti-money laundering |
|and legal responsibilities to detect and |requirements in place and enforced. |
|prevent financial crime. | |
+-----------------------------------------+------------------------------------+
|Financial and Prudential Reporting - the |The Board receives its internal |
|risk of adopting inappropriate accounting|accounts at each meeting. The Audit |
|policies; ineffective controls over |Committee reviews the internal |
|financial and regulatory reporting. |controls of the Company and its |
| |subsidiaries. During the year it met|
| |on six occasions. At the year end |
| |the accounts are subject to external|
| |audit. |
+-----------------------------------------+------------------------------------+
|People - loss arising from inappropriate |Policies are in place to ensure |
|behaviour, industrial action or health |effective remuneration and that an |
|and safety issues. This includes the |appropriate working environment is |
|failure to retain and motivate staff and |maintained throughout the Group. |
|to recruit appropriately skilled staff to|Employee Key Performance Indicators |
|fulfil the business objectives. |such as absence and turnover are |
| |monitored regularly by management. |
+-----------------------------------------+------------------------------------+
|Management of change - loss arising from |Major projects are considered and |
|projects and business change failing to |monitored by a Project Control Group|
|be introduced on time and within budget, |or other senior committee. |
|and failure to realise the intended | |
|benefits. | |
+-----------------------------------------+------------------------------------+
|Management of third party suppliers - |A supplier framework is in place to |
|loss arising from the service failure |ensure that the appointment, |
|from a third party arising due to |creation and review of contracts and|
|inadequate contractual arrangements; |management of third parties |
|failure to manage third party, or a |appointed are appropriate. |
|failed or discontinued service. | |
+-----------------------------------------+------------------------------------+
|Business continuity - loss arising from |The Company has tested business |
|the interruption or disruption to |continuity management processes and |
|critical processes and could include |plans in place. |
|building unavailability; lack of IT | |
|services; environmental hazards; | |
|unavailability of human resources or an | |
|inadequate response to disruption from | |
|flawed or insufficient planning. | |
+-----------------------------------------+------------------------------------+
Further information on financial instruments and risk as required by IFRS7 can
be found on pages 79 to 85 of the Report and Accounts.
Alliance Trust PLC
Consolidated income statement for the year ended 31 January 2011
  2011   2010
--------------------------------------------------------------------------------
£000 Revenue Capital Total Revenue Capital Total
--------------------------------------------------------------------------------
Revenue
Income 101,943 - 101,943 Â Â Â 93,652 - 93,652
Profit on fair value - 404,536 404,536 - 420,327 420,327
designated investments
Profit on investment - 589 589 - 4,691 4,691
property
--------------------------------------------------------------------------------
Total revenue 101,943 405,125 507,068 93,652 425,018 518,670
Administrative expenses (38,138) (2,684) (40,822) (36,819) (1,256) (38,075)
Finance costs (5,306) (4,462) (9,768) (666) (1,267) (1,933)
Impairment losses - (297) (297) - - -
Loss on revaluation of - (47) (47) - (951) (951)
office premises
Foreign exchange 30 95 125 178 (4,505) (4,327)
gains/(losses)
--------------------------------------------------------------------------------
Profit before tax 58,529 397,730 456,259 56,345 417,039 473,384
Tax (4,439) (73) (4,512) (5,567) 355 (5,212)
--------------------------------------------------------------------------------
Profit for the period 54,090 397,657 451,747 50,778 417,394 468,172
Attributable to:
- Minority interest - - - 186 1,583 1,769
- Equity holders of the 54,090 397,657 451,747 50,592 415,811 466,403
parent
--------------------------------------------------------------------------------
 54,090 397,657 451,747 50,778 417,394 468,172
Earnings per share from
continuing operations
attributable to equity
holders of the parent
Basic (p per share) 8.20 60.26 68.46 7.57 62.19 69.76
Diluted (p per share)Â Â 8.17 60.10 68.27 7.55 62.02 69.57
Consolidated statement of comprehensive income
  2011   2010
--------------------------------------------------------------------------------
£000 Revenue Capital Total Revenue Capital Total
--------------------------------------------------------------------------------
Profit for the period 54,090 397,657 451,747 50,778 417,394 468,172
Defined benefit plan net - 3,077 3,077 - (3,244) (3,244)
actuarial gain/(loss)
Retirement benefit obligations - (348) (348) - 14 14
deferred tax
Loss on revaluation of office - (183) (183) - - -
premises
--------------------------------------------------------------------------------
Total recognised income and 54,090 400,203 454,293 50,778 414,164 464,942
expense for the period
Attributable to:
Minority interest - - - 186 1,583 1,769
Equity holders of the parent 54,090 400,203 454,293 50,592 412,581 463,173
--------------------------------------------------------------------------------
 54,090 400,203 454,293 50,778 414,164 464,942
Company income statement for the year ended 31 January 2011
  2011   2010
--------------------------------------------------------------------------------
£000 Revenue Capital Total Revenue Capital Total
--------------------------------------------------------------------------------
Revenue
Income 86,837 - 86,837 81,213 - 81,213
Profit on fair value - 391,349 391,349 - 405,539 405,539
designated
investments
Profit on investment - 589 589 - 4,691 4,691
property
--------------------------------------------------------------------------------
Total revenue 86,837 391,938 478,775 81,213 410,230 491,443
Administrative (15,110) (1,924) (17,034) (14,878) (1,117) (15,995)
expenses
Finance costs (3,244) (2,302) (5,546) (636) (1,267) (1,903)
Loss on revaluation - (47) (47) - (951) (951)
of office premises
Foreign exchange - 862 862 - (3,028) (3,028)
gains/(losses)
--------------------------------------------------------------------------------
Profit before tax 68,483 388,527 457,010 65,699 403,867 469,566
Tax (4,696) 328 (4,368) (4,574) 355 (4,219)
--------------------------------------------------------------------------------
Profit for the period 63,787 388,855 452,642 61,125 404,222 465,347
Attributable to:
Equity shareholders 63,787 388,855 452,642 61,125 404,222 465,347
Earnings per share from continuing
 operations attributable to equity
shareholders
Basic (p per share) 9.67 58.93 68.60 9.14 60.45 69.59
Diluted (p per share) 9.64 58.77 68.41 9.12 60.29 69.41
Company statement of comprehensive income
  2011   2010
--------------------------------------------------------------------------------
£000 Revenue Capital Total Revenue Capital Total
--------------------------------------------------------------------------------
Profit for the period 63,787 388,855 452,642 61,125 404,222 465,347
Defined benefit plan net - 3,077 3,077 - (3,244) (3,244)
actuarial gain/(loss)
Retirement benefit obligations - (348) (348) - 14 14
deferred tax
Loss on revaluation of office - (183) (183) - - -
premises
--------------------------------------------------------------------------------
Total recognised income and 63,787 391,401 455,188 61,125 400,992 462,117
expense for the period
Attributable to:
Equity shareholders 63,787 391,401 455,188 61,125 400,992 462,117
Statements of changes in equity for the year ended 31 January 2011
 Group Company
--------------------------------------------------------------------------------
£000 2011 2010 2011 2010
--------------------------------------------------------------------------------
Called up share capital
At 1 February 2010 16,677 16,798 16,677 16,798
Own shares purchased and cancelled in (150) (121) (150) (121)
the year
--------------------------------------------------------------------------------
At 31 January 2011 16,527 16,677 16,527 16,677
--------------------------------------------------------------------------------
Capital reserves
At 1 February 2010 1,776,750 1,378,674 1,759,022 1,372,536
Profit for the year 397,657 415,811 388,855 404,222
Pension scheme financing 2,729 (3,230) 2,729 (3,230)
Own shares purchased* (19,800) (15,405) (19,800) (15,405)
SMEIP/LTIP reserve movement 1,294 900 845 899
--------------------------------------------------------------------------------
At 31 January 2011 2,158,630 1,776,750 2,131,651 1,759,022
--------------------------------------------------------------------------------
Revaluation reserve
At 1 February 2010 183 183 183 183
Revaluation of office premises (183) - (183) -
--------------------------------------------------------------------------------
At 31 January 2011 - 183 - 183
--------------------------------------------------------------------------------
Merger reserve
--------------------------------------------------------------------------------
At 1 February 2010 and 31 January 2011 645,335 645,335 645,335 645,335
--------------------------------------------------------------------------------
Capital redemption reserve
At 1 February 2010 2,321 2,200 2,321 2,200
Own shares purchased and cancelled in 150 121 150 121
the year
--------------------------------------------------------------------------------
At 31 January 2011 2,471 2,321 2,471 2,321
--------------------------------------------------------------------------------
Revenue reserve
At 1 February 2010 72,017 78,806 89,299 85,539
Profit for the year 54,090 50,592 63,787 61,125
Dividends (54,599) (57,363) (54,599) (57,363)
Unclaimed dividends 33 4 33 4
SMEIP/LTIP reserve movement - (22) - (6)
--------------------------------------------------------------------------------
At 31 January 2011 71,541 72,017 98,520 89,299
--------------------------------------------------------------------------------
Translation reserve
At 1 February 2010 - 984 - -
Write back on wind up of foreign - (984) - -
subsidiary
--------------------------------------------------------------------------------
At 31 January 2011 - - - -
--------------------------------------------------------------------------------
Minority interest
At 1 February 2010 11,684 6,734 - -
Profit for the year - 1,769 - -
Net subscriptions** - 3,181 - -
Transfer to liabilities (11,684) - - -
--------------------------------------------------------------------------------
At 31 January 2011 - 11,684 - -
--------------------------------------------------------------------------------
At 1 February 2010 2,524,967 2,129,714 2,512,837 2,122,591
--------------------------------------------------------------------------------
At 31 January 2011 2,894,504 2,524,967 2,894,504 2,512,837
--------------------------------------------------------------------------------
* Own shares purchased in the year relates to the purchase and cancellation of
own shares.
** Premier Alliance Trust Investment Funds and Alliance Trust Investment Funds
Balance sheets as at 31 January 2011
 Group Company
--------------------------------------------------------------------------------
£000 2011 2010 2011 2010
--------------------------------------------------------------------------------
Non-current assets
Investments held at fair value 3,237,614 2,595,849 3,172,639 2,577,599
Investment property 28,515 51,625 28,515 51,625
Property, plant and equipment:
 Office premises 6,270 6,500 6,270 6,500
 Other fixed assets 27 3 27 3
Intangible assets 2,345 3,646 542 735
Pension scheme surplus 846 - 846 -
Deferred tax assets 182 141 151 -
--------------------------------------------------------------------------------
 3,275,799 2,657,764 3,208,990 2,636,462
Current assets
Outstanding settlements and other 47,051 17,025 29,687 10,516
receivables
Withholding tax debtor 1,413 1,099 1,413 1,099
Corporation tax debtor 79 62 79 62
Cash and cash equivalents 295,355 269,475 27,511 55,718
--------------------------------------------------------------------------------
 343,898 287,661 58,690 67,395
Total assets 3,619,697 2,945,425 3,267,680 2,703,857
Current liabilities
Outstanding settlements and other (383,505) (252,860) (32,613) (24,486)
payables
Tax payable (2,260) (2,677) (1,198) (1,613)
Bank overdrafts and loans (338,997) (160,000) (338,997) (160,000)
--------------------------------------------------------------------------------
 (724,762) (415,537) (372,808) (186,099)
Total assets less current liabilities 2,894,935 2,529,888 2,894,872 2,517,758
Non current liabilities
Deferred tax liabilities (303) - (303) -
Cash settled incentive scheme (128) - (65) -
Pension scheme deficit - (4,921) - (4,921)
--------------------------------------------------------------------------------
Net assets 2,894,504 2,524,967 2,894,504 2,512,837
Equity
Share capital 16,527 16,677 16,527 16,677
Capital reserves 2,158,630 1,776,750 2,131,651 1,759,022
Merger reserve 645,335 645,335 645,335 645,335
Revaluation reserve - 183 - 183
Capital redemption reserve 2,471 2,321 2,471 2,321
Revenue reserves 71,541 72,017 98,520 89,299
--------------------------------------------------------------------------------
Equity attributable to equity holders of 2,894,504 2,513,283 2,894,504 2,512,837
the parent
Minority interest - 11,684 - -
--------------------------------------------------------------------------------
Total equity 2,894,504 2,524,967 2,894,504 2,512,837
Net Asset Value per ordinary share
attributable to equity holders of the
parent
Basic (£) £4.39 £3.78 £4.39 £3.78
Diluted (£) £4.38 £3.77 £4.38 £3.77
Cash flow for the year ended 31 January 2011
--------------------------------------------------------------------------------
 Group Company
--------------------------------------------------------------------------------
£000 2011 2010 2011 2010
--------------------------------------------------------------------------------
Cash flows from operating
activities
Profit before tax 456,259 473,384 457,010 469,566
Adjustments for:
Gains on investments (405,125) (425,018) (391,938) (410,230)
Foreign exchange (gains)/losses (125) 4,327 (862) 3,028
Scrip dividends (213) (357) (213) (357)
Depreciation 16 5 16 3
Amortisation of intangibles 1,696 1,605 404 388
Impairment losses 297 - - -
Loss on revaluation of office 47 951 47 951
premises
Share based payment expense 1,294 878 845 893
Interest 9,768 1,933 5,546 1,903
--------------------------------------------------------------------------------
Operating cash flows before 63,914 57,708 70,855 66,145
movements in working capital
Increase in amounts due to 25,930 29,475 - -
depositors
Increase in receivables (12,616) (4,790) (8,346) (3,681)
Increase/(decrease) in payables 7,575 7,397 (1,401) (582)
--------------------------------------------------------------------------------
Net cash flow from operating 84,803 89,790 61,108 61,882
activities before income taxes
Taxes paid (4,998) (4,623) (4,966) (3,737)
--------------------------------------------------------------------------------
Net cash inflow from operating 79,805 85,167 56,142 58,145
activities
Cash flows from investing
activities
Proceeds on disposal of fair
value through profit and loss 1,304,562 925,131 1,295,360 923,385
investments
Purchases of fair value through (1,510,954) (1,280,596) (1,465,954) (1,254,099)
profit and loss investments
Purchase of plant and equipment (40) - (40) -
Purchase of intangible assets (692) - (211) -
Purchases in respect of new head - (1,076) - (1,076)
office
--------------------------------------------------------------------------------
Net cash outflow from investing (207,124) (356,541) (170,845) (331,790)
activities
Cash flows from financing
activities
Dividends paid - Equity (68,071) (57,292) (68,071) (57,292)
Unclaimed dividends repaid 33 4 33 4
Purchase of own shares (19,800) (15,405) (19,800) (15,405)
New bank loans raised 178,997 110,000 178,997 110,000
Third party investment in 71,662 3,181 - -
subsidiary OEICs*
Interest payable (9,747) (2,345) (5,525) (1,962)
--------------------------------------------------------------------------------
Net cash inflow from financing 153,074 38,143 85,634 35,345
activities
Net increase/(decrease) in cash 25,755 (233,231) (29,069) (238,300)
and cash equivalents
Cash and cash equivalents at 269,475 507,033 55,718 297,046
beginning of period
Effect of foreign exchange rate 125 Â (4,327) 862 (3,028)
changes
--------------------------------------------------------------------------------
Cash and cash equivalents at end 295,355 269,475 27,511 55,718
of period
*Premier Alliance Trust Investment Funds and Alliance Trust Investment Funds.
The financial information set out above does not constitute the Company's or
Group's statutory accounts for the years ended 31 January 2011 or 2010 but is
derived from those accounts.
Statutory accounts for 2010 have been delivered to the Registrar of Companies
and those for 2011 will be delivered following the Company's Annual General
Meeting. The auditor has reported on those accounts. The report was unqualified.
1.  Expenses comprise £17,034,000 (£15,995,000) incurred by the Company, and
£23,788,000 (£22,080,000) incurred by subsidiary companies. Taking guidance from
the Statement of Recommended Practice "Financial Statements of Investment Trust
Companies and Venture Capital Trusts" the cost of the Senior Management Equity
Incentive Plan and Long Term Incentive Plan deemed to be related to the capital
performance of the Company has been treated as a capital expense of £1,924,000
(£1,117,000).
2. Â The diluted earnings per share is calculated using the weighted average
number of ordinary shares, which is arrived at by taking account of 1,770,203
(1,789,960) ordinary shares acquired by the Trustee of the Employee Benefit
Trust ("EBT") with funds provided by the Company. Â The basic earnings per share
is calculated by adding back these shares.
The Net Asset Value per share excludes, for the purpose of these disclosures,
the 1,770,203 (1,789,960) ordinary share acquired by the Trustee of the EBT with
funds provided by the Company.
3. All expenses are accounted for on an accruals basis. In respect of the
analysis between revenue and capital items presented within the income
statement, all expenses have been presented as revenue items except as follows:
- Expenses which are incidental to the acquisition of an investment are included
within the cost of that investment.
- Expenses which are incidental to the disposal of an investment are deducted
from the disposal proceeds of the investment.
- Â The Directors have determined to allocate annual bonus and costs of the
Senior Management Equity Incentive Plan and Long Term Incentive Plans which
relate to the achievement of investment manager performance objectives and total
stockholder return performance objectives against capital profits, and those
that relate to the achievement of job performance objectives against revenue
profits.
- Â The Directors have determined to allocate two thirds of the cost of bank
indebtedness incurred to finance investment against capital profits with the
balance being allocated against revenue profits, save for the costs associated
with seeding the fixed income bond fund which are all charged to revenue.
- Â There have been no related parties transactions that have taken place in the
financial year  that have materially affected the financial position or the
performance of the Company during the year.
Number of Issued Shares as at 31 January 2011
Ordinary Shares of 2.5p     661,059,760
After our year end, the Company acquired and cancelled 3,575,000 shares at a
total consideration of £12.4 million. The Company's issued share capital after
these transactions was 657,484,760 ordinary 2.5p shares.
Posting Arrangements
The Report and Accounts will be posted to shareholders on Friday, 15 April 2011
and will be available on the Company's website  www.alliancetrust.co.uk on that
day. It will also be made available to the public at the Company's registered
office, 8 West Marketgait, Dundee DD1 1QN and at the offices of the Company's
Registrar, Computershare Investor Services PLC, Lochside House, 7 Lochside
Avenue, Edinburgh Park, Edinburgh EH12 9DJ on and after Monday 18 April 2010.
In addition to the full annual report, up-to-date performance data, details of
new initiatives and other information about the Company can be found on the
Company's website.
Annual General Meeting
The Company's Annual General Meeting will be held on Friday, 20 May 2011 at
11.00 am at the Apex City Quay Hotel, Dundee.
Statement of Directors' Responsibilities
The responsibility statement below has been prepared in connection with the
Company's Annual Report and Accounts for the year ended 31 January 2011.
We confirm that to the best of our knowledge:
· the financial statements, prepared in accordance with the applicable set of
accounting standards, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the company and the undertakings
included in the consolidation taken as a whole; and
· the Directors' report includes a fair review of the development and
performance of the business and the position of the Company and the undertakings
included in the consolidation taken as a whole, together with a description of
the principal risks and uncertainties it faces.
Lesley Knox       Katherine Garrett-Cox
Chairman          Chief Executive
11 April 2011 Â Â Â Â Â Â 11 April 2011
This announcement is distributed by Thomson Reuters on behalf of
Thomson Reuters clients. 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
[HUG#1505347]
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