Alliance Trust PLC : Interim Management Statement

8 May 2012

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.

Financial Highlights for the 3 months to 31 March 2012

	31 March 2012	% Change	Total Return (%)
Share Price	368.3	7.4	8.2
NAV per share (inc income)	437.5p	7.8	8.1
Discount (inc income)	15.8%

Key Information

Total Assets:	£2,829.1m	EPIC Code:	ATST
Net Assets:	£2,529.2m	Year End:	31 December
Total Borrowings:	£299.9m	Date of Incorporation:	21 October 1888
Net gearing:	11.9%	Issued Share Capital:	580,885,146

Dividends paid:	March, June, September, December
Total Expense Ratio (to 31 Dec 11)*:	0.65%

*As the reporting period was 11 months long, we have annualised on-going administrative expenses and added actual incentives paid
Source: Alliance Trust

Review of the three months to 31 March 2012

During the three months to 31 March 2012, the total shareholder return was 8.2% and the NAV total return (with debt at fair value and inclusive of income) was 8.1%.

During the three months to 31 March 2012, Alliance Trust bought back and cancelled 12.4m shares at a cost of £45.4m. The number of shares in issue therefore reduced to 580,885,146 at the end of March, giving the Company a market capitalisation of £2,139.4m.

Within the portfolio there were no material changes of regional allocation, but during the period we were net buyers in the UK, buying on the weakness of the UK relative to other markets in Q1 and we reduced our exposure to the US after a good run. We altered the shape of the Asian portfolio, selling Asian telecoms such as Taiwan Mobile, Singapore Telecoms & Jupiter Telecoms and buying into Consumer Goods and Services stocks such as Honda and Galaxy Entertainment in Hong Kong as well as Industrial stocks such as TDK and SMC Corp.

At a sector level, we increased our exposure to Industrials; in addition to the above, we also initiated positions in Experian and Rolls Royce in the UK and we reduced our exposure to Basic Materials, particularly in the UK, where we sold down our positions in BHP Billiton and Rio Tinto.

Outlook
There are still many questions unanswered on Europe and, as the French Presidential campaign has shown, there is much disquiet over the handling of the crisis. We do not underestimate the potential knock-on effects associated with a renewed crisis in Europe. Although global growth for 2012 will be subdued, it has improved over the period and the prospects for the remainder of the year are more encouraging. The environment for all companies is tough but, over the medium and long term we expect quality companies to provide meaningful returns. We need to see a renewed focus on company fundamentals and not political issues and in such an environment we would expect to see positive moves from equities. However, we are aware that we are not through the debt crisis and with a fragile economic backdrop it is important not to underestimate these risks and the impact they could have on global equities.

Company update
At the Annual General Meeting on 27 April 2012, shareholders voted on normal business matters and an additional resolution, requisitioned by Laxey Partners, which would have required the Board to consider outsourcing the management of the portfolio to an external manager and also to bring forward proposals to allow shareholders to sell their shares at a price closer to NAV. The resolution was rejected by a majority of 79.3% to 20.7% of votes cast.  53% of the Company's share capital was voted. 

While the resolution was rejected, we will continue to focus on our core objectives of restoring investor credibility and regenerating our shareholder base. Both of these will be achieved in whole or in part from delivering against our performance targets:

• Total Shareholder Return  

• Net Asset Value growth 

• A progressive dividend  

• Control of costs  

At the meeting Karin Forseke, Chairman, Katherine Garrett-Cox, Chief Executive and Alan Trotter, Finance Director, stressed a number of points:

• Alliance Trust Savings and Alliance Trust Investments are both making good progress and we expect Alliance Trust Savings to be profitable on a monthly basis by December 2012 

• We remain committed to in-house management of our investments as we believe that it is in the best long-term interests of shareholders 

• We are continuing with our current approach to buybacks in order to narrow the discount and reduce its volatility  

• We are reviewing the recent changes to investment trust regulations, which give greater flexibility on distributions to shareholders, and considering how to maintain a sustainable and progressive dividends at the same time as meeting shareholders' demands for income from their investment  

Shareholders renewed the authority to permit the Directors to buy back up to 15% of the issued shares. 10.2% of the Company's share capital was bought back in the period since the last AGM in May 2011.

Cumulative performance (%)

	3	6	1	3	5	10
	Months	Months	Year	Years	Years	Years
Share Price	7.4	14.4	1.1	38.5	0.8	22.0
NAV*	7.3	14.9	-2.2	41.0	1.5	27.9

*NAV is calculated with debt at fair value and including accrued income, for all periods except the 10 year NAV return, which is done on an ex-income basis
Source FactSet & Fundamental Data

Asset Allocation (%)

	31 Mar 2012	31 Dec 2011
Equities	98.5	96.4
Fixed Income	5.0	5.0
Private Equity	3.3	3.3
Operating Subsidiaries	0.9	0.9
Property	0.8	0.9
Cash	2.0	2.7
Other Assets	1.4	1.2
Gross Assets	111.9	110.4
Gearing	(11.9)	(10.4)
Net Assets (incl income)	100.0	100.0

Source: Alliance Trust

Equity portfolio geographic breakdown (%)

	31 Mar 2012	31 Dec 2011
United Kingdom	35.6	35.8
North America	30.1	29.6
Asia Pacific	18.5	18.8
Europe Ex UK	15.4	15.5
Emerging Markets	0.4	0.3

Source: Alliance Trust

During the period, we increased exposure to equities, putting more into the US. The weighting was further increased as the region performed well, with the Dow Jones Average recently hitting a four year high, and our portfolio outperformed. Within Asia, our emphasis has moved away from more defensive sectors, such as Telecoms, into more economically sensitive ones, such as Industrials, in line with the improvement in domestic activity in the region. We have also moved away from the emerging countries toward the more developed ones within the region and reduced slightly our exposure to Japan. We maintain our exposure to the UK, US and Europe although we have reduced some of the cyclicality in the UK and European portfolios after strong relative performance from these sectors. These strong moves, combined with a subdued domestic activity, has caused us to favour a more balanced approach in the short term.

Equity portfolio sector allocation (%)

	31 Mar 2012	31 Dec 2011
Financials	19.1	18.1
Industrials	16.0	15.5
Energy (Oil & Gas)	12.2	14.1
Health Care	10.8	13.3
Consumer Goods	9.9	11.7
Basic Materials	9.5	8.5
Technology	9.2	6.5
Consumer Services	8.6	5.1
Utilities	2.5	2.1
Telecommunications	2.0	5.1

Source: Alliance Trust

The largest sector exposures remain in Financials, Industrials and Energy (Oil & Gas) and although we have reduced some of the cyclical exposures we maintain a bias to higher growth markets and stocks which should perform throughout the economic cycle. We continue to look for opportunities by evaluating the longer-term themes and drivers of stock valuations. During the period, we were buyers of Industrials (Experian and Rolls Royce) and we reduced our holdings in BHP Billiton and Rio Tinto.

Equity portfolio top 20 holdings

31 Dec 2011	Direction	31 Mar 2012	Holding	% of Equity portfolio
3	Up	1	BP	2.5
1	Down	2	Royal Dutch Shell	2.4
2	Down	3	GlaxoSmithKline	2.2
4	-	4	HSBC	1.8
8	Up	5	BG Group	1.7
11	Up	6	Prudential	1.5
-	New	7	Legal & General	1.5
-	New	8	Apple	1.5
6	Down	9	British American Tobacco	1.4
9	Down	10	Pfizer	1.4
7	Down	11	BHP Billiton*	1.3
5	Down	12	Rio Tinto	1.3
12	Down	13	American Tower	1.3
20	Up	14	National Grid	1.2
16	Up	15	Clean Harbors	1.1
19	Up	16	Standard Chartered	1.1
14	Down	17	AstraZeneca	1.1
10	Down	18	Diageo	1.1
15	Down	19	Vodafone	1.1
18	Down	20	Philip Morris International	1.0

*Exposure to BHP Billiton is the combination of the position in BHP Billiton PLC (£31.6m) and in BHP Billiton Ltd (£1.8m)
Source: Alliance Trust

For Further Information, please contact:

Evan Bruce-Gardyne		James Leviton / Clare Dundas
Head of Investor Relations		Finsbury Group
Alliance Trust PLC		Tel: [phone]
Tel: [phone]		Email: [e-mail]
Email: [e-mail]		Web: www.rlmfinsbury.com
Web: www.alliancetrust.co.uk

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Source: Alliance Trust PLC via Thomson Reuters ONE

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