Interim Results

ALLIANCE TRUST PLC 16 August 1999 INTERIM REPORT FOR THE HALF YEAR ENDED 31 JULY 1999 (UNAUDITED) --------------------------------------------------------------- THIS INTERIM REPORT WILL BE POSTED TO STOCKHOLDERS ON MONDAY, 23 AUGUST 1999 AND WILL ALSO BE MADE AVAILABLE TO THE PUBLIC AT THE COMPANY'S REGISTERED OFFICE, MEADOW HOUSE, 64 REFORM STREET, DUNDEE DD1 1TJ AND AT THE OFFICES OF THE COMPANY'S PAYING AGENTS, COMPUTERSHARE SERVICES PLC, OWEN HOUSE, 8 BANKHEAD CROSSWAY NORTH, EDINBURGH EH11 4BR. FINANCIAL HIGHLIGHTS (UNAUDITED) -------------------------------- STOCK UNIT DATA --------------- INTERIM DIVIDEND PAYABLE 1 OCTOBER 1999 24.0P +9.1% NET ASSET VALUE AT 31 JULY 1999 £35.73 +4.3% RETURN ------ TOTAL RETURN ON COMPANY'S ASSETS +5.5% (HALF YEAR) RESULTS ------- MARKETS AND ECONOMIES --------------------- THE INTEREST RATE REDUCTIONS LAST AUTUMN CONTINUED TO WORK POWERFULLY AND MANY MARKETS FURTHER RECOVERED LOST GROUND. ALTHOUGH STILL QUITE FRAGILE, CONFIDENCE IN THE REAL ECONOMIES REBOUNDED SHARPLY IN ASIA AND IN EUROPE, INCLUDING THE UK. MEANWHILE, ECONOMIC MOMENTUM IN THE US HAS PROVED VERY STRONG AND THE BALANCE OF PAYMENTS HAS DETERIORATED FURTHER. HOWEVER, THE US ECONOMY IS NOT, AS YET, EXPERIENCING OVERT INFLATION CAUSED BY EITHER LABOUR COSTS OR A WEAKER DOLLAR. THE US FEDERAL RESERVE HAS JUDGED THAT THERE IS NOW ENOUGH DEMAND IN THE WORLD ECONOMY TO ALLOW A RISE IN US INTEREST RATES. THIS HAS ALREADY BEGUN TO CORRECT SOME OF THE SYMPTOMS OF SPECULATIVE EXCESS. ENCOURAGINGLY, AS THE SUPPORT OF LOW INTEREST RATES RECEDES, COMPANY PROFITS, NOTABLY AMONG US CORPORATIONS, HAVE SHOWN STRONG GROWTH. CAPITAL PERFORMANCE ------------------- IN THIS ENVIRONMENT, STOCKMARKETS, MEASURED IN STERLING TERMS, SHOWED A REMARKABLE DEGREE OF DIVERSITY. INCREASES OF 35% IN JAPAN CONTRASTED WITH WEAKNESS IN EUROPE COMPOUNDED BY THE EURO, AN 8.5% INCREASE IN THE UK AND A 5.3% RISE IN THE US. OUR OWN NET ASSET VALUE INCREASE OF 4.3% REFLECTED THE MIX OF AREAS IN WHICH WE ARE INVESTED. AGAINST THE BROAD INDICES, OUR STOCK PERFORMANCE WAS GENERALLY GOOD IN THE US BUT SUFFERED IN THE UK AS THE PERFORMANCE OF SMALLER COMPANIES AND CYCLICAL SECTORS PICKED UP AFTER MANY DULL YEARS. EARNINGS AND DIVIDENDS ---------------------- OUR EARNINGS HAVE BEEN DISTORTED BY SPECIAL PAYMENTS AND THE REINVESTMENT OF CASH IN LOWER YIELDING ASSETS, BUT THE UNDERLYING GROWTH OF DIVIDENDS REMAINS HEALTHY. THE REDUCTION IN THE DISPARITY BETWEEN INTERIM AND FINAL DIVIDENDS IS CONTINUED WITH AN INTERIM DIVIDEND OF 24P PER ORDINARY STOCK UNIT. THE BOARD EXPECTS TO MAINTAIN A FINAL DIVIDEND OF 40.5P, PAYABLE IN MAY 2000. INVESTMENT CHANGES ------------------ VALUATION VALUATION 31 JANUARY APPRCN 31 JULY 1999 PURCHASES SALES (DEPRCN) 1999 £M OIL AND MINERALS 116 4 (3) 53 170 GENERAL INDUSTRIAL 207 20 (20) 14 221 CONSUMER GOODS 316 9 (5) (15) 305 SERVICES 630 58 (26) 14 676 UTILITIES 44 - - (5) 39 FINANCIALS 314 30 (20) 16 340 FIXED INTEREST 24 8 (5) (1) 26 ------ ---- ---- ---- ------ 1,651 129 (79) 76 1,777 ------ ---- ---- ---- ------ INVESTMENT ---------- HAVING TAKEN A CAUTIOUS STANCE THROUGH THE AUTUMN CRISIS OF 1998, WE MADE A NET INVESTMENT OF £50M TO GAIN FULLER EXPOSURE TO IMPROVING MARKETS. THIS TOOK OUR LIQUIDITY DOWN FROM 5 PER CENT TO 2 PER CENT. GEOGRAPHICALLY, THIS WAS APPLIED MAINLY IN EUROPE, IN ANTICIPATION OF RECOVERY IN THE CORE ECONOMIES LATER IN THE YEAR AND IN THE FAR EAST AND JAPAN TO REBUILD WEIGHTINGS FOR SIMILAR REASONS. IN TERMS OF SECTOR FOCUS, ONLY LIMITED ADDITIONS WERE MADE TO TECHNOLOGY AND PHARMACEUTICAL STOCKS FOLLOWING PRICE FALLS AS FURTHER NEGATIVE REACTION TO HIGH VALUATIONS WAS EXPECTED. WE ALLOCATED £7.5M FURTHER CAPITAL TO ALLIANCE TRUST SAVINGS (ATS) PRIOR TO ITS BECOMING AN AUTHORISED INSTITUTION UNDER THE BANKING ACT 1987. THIS WAS DONE IN ANTICIPATION OF THE TRANSITION TO INDIVIDUAL SAVINGS ACCOUNTS (ISAS) AND UNIFIED REGULATION. SAVINGS PRODUCTS ---------------- ATS HAS HAD AN EXCEPTIONALLY BUSY SIX MONTHS WITH THE END OF PEP SUBSCRIPTIONS, THE START OF ISAS AND A NUMBER OF RELATED CHANGES. PEP RECEIPTS IN THE FINAL TWO MONTHS SHOWED A 28% INCREASE ON THE EQUIVALENT PERIOD LAST YEAR AND ATS CONTINUED TO SEE SIGNIFICANT GROWTH IN ITS INVESTMENT AND PENSION PLANS. BY THE END OF JULY INVESTORS' ASSETS TOTALLED £885M, AN INCREASE OF 15% OVER JANUARY 1999. ATS HAS INTRODUCED TO ITS PRODUCT RANGE A STOCKS AND SHARES ISA, A CASH ISA AND THE ONLY INVESTMENT TRUST CAT STANDARD ISA. THESE HAVE BEEN VERY WELL RECEIVED. INVESTMENT OUTLOOK ------------------ THE WORLD'S KEY POLICY MAKERS ARE LIKELY TO AIM FOR SUSTAINABLE GROWTH AND STAND READY, AS THEY DID LAST AUTUMN, TO RESPOND TO NEGATIVE EVENTS. MARKETS HAVE ALREADY BEGUN TO ANTICIPATE QUITE SUBSTANTIAL TIGHTENING IN SHORT TERM INTEREST RATES IN THE US, AND IT CAN BE TAKEN AS A MAJOR SOURCE OF COMFORT THAT THE AUTHORITIES ARE INCREASING THEIR ABILITY TO TAKE SUPPORTIVE ACTION IN ANOTHER EMERGENCY. CORPORATE PROFITS COULD CONTINUE TO BENEFIT FROM THE BETTER GLOBAL ECONOMIC OUTLOOK. GLOBALISATION AND MERGERS, IN PURSUIT OF COST CONTAINMENT AND MARGIN CONTROL, ARE LIKELY TO REMAIN AS A SIGNIFICANT RESPONSE TO THE VERY COMPETITIVE ENVIRONMENT WHICH IS EXPECTED TO PERSIST. WE MAY NOW BE ENTERING A LONG-AWAITED PHASE WHERE EQUITY VALUES MOVE FROM BEING LED PRIMARILY BY FALLING INFLATION AND BOND YIELDS, TO BEING PREDOMINANTLY PROFIT DRIVEN. IT IS POSSIBLE THAT THIS TRANSITION, ALTHOUGH UNLIKELY TO BE EASY OR PERFECTLY SMOOTH, COULD BE SOMEWHAT LESS TRAUMATIC THAN EARLIER FEARED. NEVERTHELESS, FOR THE SHORT TERM WE ARE CAUTIOUS. WE ARE ALLOWING LIQUIDITY TO REBUILD, AND WE CONTINUE TO TAKE OPPORTUNITIES TO SELL STOCKS WHERE VALUATIONS ARE UNJUSTIFIED. GEOGRAPHICAL SPREAD ------------------- UK 51% USA 25% EUROPE 14% JAPAN 5% REST OF WORLD 3% CASH 2% YEAR 2000 --------- PREPARATIONS FOR THE TRANSITION TO THE YEAR 2000 ARE COMPLETE IN ALL MATERIAL RESPECTS. MARKETING --------- THE ALLIANCE TRUST FOCUSES ON PROVIDING INVESTMENT PERFORMANCE FOR ITS STOCKHOLDERS AND ATS FOCUSES ON PROVIDING CUSTOMERS WITH ADDITIONAL VALUE THROUGH ITS PRODUCTS. MARKETING IS THUS CARRIED OUT BY ATS WITH A VIEW TO GROWING ITS BUSINESS AND RAISING THE PUBLIC AWARENESS OF THE ALLIANCE TRUSTS. TO DATE, GROWTH HAS LARGELY COME BY WORD OF MOUTH RECOMMENDATION AND MARKETING EXPENSE HAS BEEN MINIMAL. THERE HAS BEEN MUCH COMMENT IN THE PRESS ABOUT THE MARKETING OF INVESTMENT TRUSTS AND A GENERIC CAMPAIGN, SPONSORED BY THE ASSOCIATION OF INVESTMENT TRUST COMPANIES, WILL COMMENCE IN THE AUTUMN. WE ARE NOT PARTICIPATING IN THIS CAMPAIGN AS THE COST TO US IS HIGH IN RELATION TO OUR OVERALL EXPENSES AND THE RETURNS ARE TOO UNCERTAIN. OUR RESOURCES ARE DEVOTED TO IMPROVING PRODUCTS AND SERVICE TO INVESTORS AND PROMOTIONAL EXPENDITURE IS ONLY INCURRED WHERE WE JUDGE THIS TO BE EFFECTIVE AND WORTHWHILE. THERE REMAINS CONSIDERABLE SCOPE FOR GROWTH IN OUR ESTABLISHED MARKETS AND ATS WILL CONTINUE TO CONCENTRATE ON THESE. FINANCIAL STATEMENTS (UNAUDITED) -------------------------------- CONSOLIDATED SIX MONTHS SIX MONTHS YEAR TO ------------ TO TO 31 JANUARY £000 31 JULY 1999 31 JULY 1998 1999 REVENUE RETURN -------------- INCOME DIVIDENDS AND INTEREST 26,784 24,455 46,241 OTHER INCOME 1,420 1,550 2,366 ------ ------ ------ TOTAL INCOME 28,204 26,005 48,607 EXPENSES (2,429) (2,240) (4,182) ------ ------ ------ NET RETURN BEFORE INTEREST PAYABLE AND TAXATION 25,775 23,765 44,425 INTEREST PAYABLE (704) (630) (1,292) ------ ------ ------ RETURN BEFORE TAXATION 25,071 23,135 43,133 TAXATION (4,464) (4,747) (9,070) ------ ------ ------ 20,607 18,388 34,063 MINORITY INTEREST - EQUITY (245) (267) (503) ------ ------ ------ REVENUE AFTER TAXATION 20,362 18,121 33,560 DIVIDEND ON PREFERENCE STOCK - NON-EQUITY (49) (34) (83) ------ ------ ------ REVENUE RETURN ATTRIBUTABLE TO EQUITY STOCKHOLDERS 20,313 18,087 33,477 ------ ------ ------ REVENUE RETURN PER ORDINARY STOCK UNIT 40.30P 35.89P 66.42P CAPITAL RETURN -------------- REALISED GAINS ON INVESTMENTS 25,712 56,647 85,687 INCREASE IN UNREALISED APPRECIATION 49,701 91,958 78,190 FOREIGN EXCHANGE LOSSES (749) (182) (429) ------ ------ ------ 74,664 148,423 163,448 MINORITY INTEREST - EQUITY 173 32 (155) ------ ------ ------ CAPITAL RETURN ATTRIBUTABLE TO ORDINARY STOCKHOLDERS 74,837 148,455 163,293 ------ ------- ------- CAPITAL RETURN PER ORDINARY STOCK UNIT 148.49P 294.55P 324.00P TOTAL RETURN ------------ REVENUE RETURN ATTRIBUTABLE TO ORDINARY STOCKHOLDERS 20,313 18,087 33,477 CAPITAL RETURN ATTRIBUTABLE TO ORDINARY STOCKHOLDERS 74,837 148,455 163,293 ------ ------- ------- TOTAL RETURN ATTRIBUTABLE TO ORDINARY STOCKHOLDERS 95,150 166,542 196,770 ------ ------- ------- TOTAL RETURN PER ORDINARY STOCK UNIT 188.79P 330.44P 390.42P SUMMARISED BALANCE SHEET ------------------------ 31 JULY 31 JULY 31 JANUARY 1999 1998 1999 INVESTMENTS AT VALUATION 1,776,808 1,642,934 1,651,282 NET CURRENT ASSETS 37,607 77,257 85,936 --------- --------- --------- TOTAL ASSETS LESS CURRENT LIABILITIES 1,814,415 1,720,191 1,737,218 LONG TERM LIABILITIES AND PRIOR CHARGES (13,541) (10,969) (11,181) --------- --------- --------- ORDINARY STOCKHOLDERS' FUNDS 1,800,874 1,709,222 1,726,037 --------- --------- --------- NET ASSET VALUE PER ORDINARY STOCK UNIT £35.73 £33.91 £34.25 NOTES TO FINANCIAL STATEMENTS ----------------------------- 1. THE REVENUE RETURN STATEMENT IS THE PROFIT AND LOSS ACCOUNT OF THE GROUP. 2. OTHER INCOME INCLUDES INCOME ARISING IN SUBSIDIARY COMPANIES OF £1,329,000 (£1,265,000). EXPENSES INCLUDE £1,083,000 (£1,011,000) INCURRED BY THE SUBSIDIARY COMPANIES. 3. THESE RESULTS SHOULD NOT BE TAKEN AS A GUIDE TO THE FULL YEAR AND DO NOT CONSTITUTE THE GROUP'S STATUTORY ACCOUNTS. 4. THE ACCOUNTING POLICIES ARE CONSISTENT WITH THOSE APPLIED IN THE PREPARATION OF THE ANNUAL STATUTORY ACCOUNTS. IN THE INTERIM STATEMENTS, NET CURRENT ASSETS ARE STATED AFTER THE PROVISION OF £12,096,000 (£11,088,000) FOR PAYMENT OF THE INTERIM DIVIDEND AND £8,217,000 (£6,999,000) BEING THE BALANCE OF REVENUE ATTRIBUTABLE TO ORDINARY STOCKHOLDERS. 5. THE FIGURES FOR 31 JANUARY 1999 ARE EXTRACTED FROM THE FULL ACCOUNTS WHICH HAVE BEEN FILED WITH THE REGISTRAR OF COMPANIES AND WHICH CONTAINS AN UNQUALIFIED REPORT FROM THE AUDITOR. THE DIVIDENDS ON THE COMPANY'S PREFERENCE STOCKS ARE ALSO PAYABLE ON 1 OCTOBER 1999 TO HOLDERS ON THE REGISTER ON 6 SEPTEMBER 1999. THE PRESS RELEASE SUMMARISING THESE INTERIM RESULTS FOLLOWS AND QUESTIONS SHOULD BE ADDRESSED TO MR GAVIN SUGGETT OR MR ALAN YOUNG (TEL 01382 201700 - EXTENSION 2410 AFTER HOURS). PRESS RELEASE ------------- INTERIM DIVIDEND UP 9.1% TO 24.0P PER ORDINARY STOCK UNIT NET ASSET VALUE UP 4.3% TO £35.73 PER ORDINARY STOCK UNIT TOTAL RETURN ON COMPANY'S ASSETS FOR HALF YEAR UP 5.5% ALLIANCE LAUNCHES THE FIRST INVESTMENT TRUST CAT STANDARD ISA THE FULL TEXT OF THE INTERIM REPORT FOLLOWS

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