Final Results

Alliance Trust PLC 20 March 2006 THE ALLIANCE TRUST PLC FINAL RESULTS FOR THE YEAR TO 31 JANUARY 2006 FINANCIAL SUMMARY (Company) 31 January 31 January 2006 2005 One Year Analysis Pence per Pence per ordinary ordinary share share Change Dividend for the year 73.50 71.75 2.4% Net asset value 4042.0 3243.0 24.6% Share Price ++ 3490.0 2741.0 27.3% Return Earnings 86.95 74.98 Capital 784.71 291.21 ------------ ------------ Total 871.66 366.19 ____________ ____________ 31 January 2006 31 January 2005 Discount (S) 13.66% 15.48% Total expense ratio + 0.32% 0.32% 1 year 10 years 10 years One and Ten Year Analysis absolute absolute compound Returns Share price total return ++* 30.6% 116.2% 8.0% Growth Earnings 16.0% 54.4% 4.4% Dividend 2.4% 38.7% 3.3% Net asset value 24.6% 66.5% 5.2% ++ Source: Thomson Financial Datastream. (S) Discount at which the share price stands relative to the net assets of the Company. + Total expenses divided by year end net asset value * The total return on the share price shows the theoretical growth in value over one and ten years, assuming that gross dividends are fully reinvested, and ignoring re-investment charges. The Financial Statements of the Company and the Group have been prepared in accordance with International Financial Reporting Standards (IFRS). Comparative figures for 2005 have been restated to IFRS. DIVIDEND The directors are recommending approval, at the AGM, of a final dividend of 37p per share which, with the 36.5p per share paid in May 2005, makes a total dividend of 73.5p per share for the year. This is an increase of 1.75p per share, or 2.4%, and matches the increase in the Retail Price Index over the same period. The directors remain committed to the Company's progressive dividend policy which is that, subject to there being sufficient distributable reserves, to increase, each financial year, the total dividend paid to shareholders. To this end, we are continuing the process of realigning the portfolio to reduce the dependence on higher yielding securities and, instead, to invest for growth in both capital and income. Subject to approval by the shareholders the final dividend on the Company's ordinary share is payable on Friday, 12 May 2006 to shareholders registered on 21 April 2006. The ex dividend date is Wednesday, 19 April 2006. PERFORMANCE AND OUTLOOK The results for the last year reflect the strong performance across the portfolio. We continued to build upon the strength of our dedicated in-house investment team with the opening of our Hong Kong office earlier in the year. We have already seen the benefit of this investment in the improved performance of our capital managed out of Hong Kong and therefore in increased returns for shareholders. We are looking at ways to develop an Asian asset management business based around this team. During periods when stock markets perform very strongly, historically we have lagged the market because of minimal gearing and our focus on risk management. Over the last year we geared modestly, ending the year with gearing of 2.7% of net assets, and have remained very focussed on risk, but we have been able to increase returns and outperform. The re-alignment of the portfolios onto a geographic basis, coupled with the formal asset allocation process through the Asset, Liability and Income Committee (ALICo), has sharpened our ability to achieve these results without diminishing our cautious approach to risk. The discount at which the Company's shares trade relative to net asset value has narrowed from 15.5% at the start of the period to 13.7% as at the year end. CHIEF EXECUTIVE'S STATEMENT During the year the Company delivered strong investment performance, growing its net assets by a record Â£402m. Asset Allocation and Performance Over 18 months ago we set up our Asset, Liability and Income Committee ('ALICo') which manages the capital of the Company within the investment and asset allocation strategies agreed with the board of directors. ALICo also considers and judges the merits, timing and risks of gearing, and of hedging other exposures such as foreign currencies. Equities remain our key area of focus and we have now had a full year of managing the equity portfolio on a country or regional basis, with the relevant investment managers supported by regional and global analysts. We are encouraged that, within the equity portfolio and as at the year end, six out of the seven regional portfolios have outperformed their local benchmarks. This represented 95% of the value within the equity portfolio. On the equity portfolio as a whole we achieved a return of 25.8% on capital invested. Early in the year we took a relatively cautious stance, conscious of the uncertainties in the oil market and those emanating from terrorist threats. As it became clear that governments and markets were able to accommodate the inflationary pressures of higher commodity prices we again increased our exposure to equities in certain regions and sectors. In the light of increased confidence, we geared the portfolio by a modest 2.7% of net assets to take advantage of the current strength of markets and as a partial hedge to our exposure to the US dollar. We will consider further gearing, at an appropriate pace and level, to increase returns or offset exchange risk. One of the best performing parts of the portfolio was that managed from our office in Hong Kong, with a performance of 36.0% against the local benchmark of 32.4% for Asia-Pacific and 51.6% against the local benchmark of 41.4% for Japan. We have an excellent team in Hong Kong, headed up by Anthony Muh, which has shown clear ability to outperform and manage risk in this volatile part of the world. We are building on this expertise and potential to generate earnings in this area by establishing an asset management company which will operate out of the Hong Kong office and take third party mandates. By leveraging our existing expertise and resource we will seek to generate additional returns for shareholders. We do not benchmark the total portfolio against any index and we retain the freedom to move between equity markets and to invest in other assets. This year we invested Â£20.8m in real estate, and have now, within the property portfolio, two prime properties, both with a good long term income stream and capital growth potential. This investment marked the beginning of a specialisation which we intend to nurture and a property portfolio to which we intend to add as opportunities arise. Our real estate including oil/mineral rights appreciated by 18.3% from Â£24m to Â£28.4m. Financial Services Subsidiary Our investment policy allows for allocation of capital to subsidiary companies and this year we increased our investment in Alliance Trust Savings, convinced of the potential to provide pensions, share dealing services, deposit facilities and investment wrappers to its customers. During the year, Alliance Trust Savings purchased Wolanski & Co. Trustees Limited, one of the leading self-invested personal pension ('SIPP') and small self-administered scheme administrators in the market. Hyman Wolanski joined us as Head of Pensions in ATS, which, after the purchase, has a total of around Â£3.3bn of assets under administration and by plans administered is one of the top five SIPP providers in the UK. Pensions 'A' Day, now only a short time away, provides tremendous opportunity of which we will take advantage both in the individual pensions market and in the corporate SIPP and other employer based pensions market. Investment in resources and people We are in the midst of implementing a programme for the modernisation of all our technology, administration and operations. This programme is being put into place both for our investment company and for Alliance Trust Savings. We are also investing for the future in ensuring that we have the right skill sets and expertise within our staff. In the investment area we will be adding additional expertise in portfolio risk and quantitative analysis, and we are building more capability in dedicated private equity and fixed income areas to strengthen our ability to allocate capital and manage risk in these areas. Investment managers will be given the tools needed for optimum performance and their expertise, which is managed within our transparent investment framework, will be built upon to provide future growth and returns to shareholders. We are proud of our company and our staff and we are committed to increasing the positive momentum going forward. In the coming year we will: â€¢ Further strengthen our asset allocation process. â€¢ Provide the investment tools needed for optimum performance. â€¢ Leverage our investment expertise and risk management skills to ensure even greater benefits to shareholders. â€¢ Complete the integration of Wolanski & Co. Trustees with Alliance Trust Savings to create a leading UK pensions business that offers a full and attractive range suitable for individuals and companies. â€¢ Put in place modern, efficient technology systems across the whole organisation. CONSOLIDATED INCOME STATEMENT For the year ended 31 January 2006 Year to 31 January 2006 Year to 31 January 2005 Â£000 Revenue Capital Total Revenue Capital Total Investment Income Deposit interest 6,930 - 6,930 6,635 6,635 Dividend income 49,878 - 49,878 45,059 - 45,059 Mineral rights income 850 - 850 649 - 649 Rental income 81 - 81 - - - Gains and losses on investment Increase in fair-value designated - 236,790 236,790 - 71,849 71,849 investment held Increase in fair-value investments - 161,367 161,367 - 74,391 74,391 disposed of Other operating income 3,739 - 3,739 2,444 - 2,444 Total revenue 61,478 398,157 459,635 54,787 146,240 201,027 Administrative expenses (13,947) (283) (14,230) (9,504) - (9,504) Finance costs (2,071) (230) (2,301) (1,701) - (1,701) Foreign exchange gains - 1,165 1,165 - 378 378 -------- -------- -------- -------- -------- -------- Profit before tax 45,460 398,809 444,269 43,582 146,618 190,200 Tax (4,146) 106 (4,040) (4,759) (601) (5,360) -------- -------- -------- -------- -------- -------- Profit for the period 41,314 398,915 440,229 38,823 146,017 184,840 ======== ======== ======== ======== ======== ======== Attributable to: Minority interest (49) 297 248 259 23 282 Equity holders of the parent 41,363 398,618 439,981 38,564 145,994 184,558 -------- -------- -------- -------- -------- -------- 41,314 398,915 440,229 38,823 146,017 184,840 ======== ======== ======== ======== ======== ======== Earnings per share 82.07p 790.95p 873.02p 76.52p 289.67p 366.19p CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Â£000 Capital Share Capital Redemption Revenue Minority Capital Reserves Reserve Reserves Interest Total Net assets at 31 January 12,600 1,555,725 - 66,361 9,830 1,644,516 2005 Dividend paid - - - (36,664) - (36,664) Net profit for year - 398,618 - 41,363 248 440,229 Own shares purchased - (112) - - - (112) Decrease in Pension - 25 - - - 25 Scheme deficit Transfer to capital - (2,200) 2,200 - - - redemption reserve Investment in subsidiary - - - - 5,000 5,000 Dividend from subsidiary - - - - (1,000) (1,000) 12,600 1,952,056 2,200 71,060 14,078 2,051,994 COMPANY INCOME STATEMENT For the year ended 31 January 2006 Year to 31 January 2006 Year to 31 January 2005 Â£000 Revenue Capital Total Revenue Capital Total Investment Income Deposit interest 2,170 - 2,170 2,632 - 2,632 Dividend income 51,428 - 51,428 44,198 - 44,198 Mineral rights income 850 - 850 649 - 649 Rental income 81 - 81 - - - Gains and losses on investment Increase in fair-value designated - 233,460 233,460 - 75,144 75,144 investment held Increase in fair-value investments - 161,230 161,230 - 71,849 71,849 disposed of Other operating income - - - 11 - 11 Total revenue 54,529 394,690 449,219 47,490 146,993 194,483 Administrative expenses (6,279) (254) (6,533) (5,193) - (5,193) Finance costs (162) (230) (392) (174) - (174) Foreign exchange gains - 1,165 1,165 - 378 378 -------- -------- -------- -------- -------- -------- Profit before tax 48,088 395,371 443,459 42,123 147,371 189,494 Tax (4,270) 98 (4,172) (4,335) (601) (4,936) -------- -------- -------- -------- -------- -------- Profit for the period 43,818 395,469 439,287 37,788 146,770 184,558 ======== ======== ======== ======== ======== ======== Attributable to: Equity shareholders 43,818 395,469 439,287 37,788 146,770 184,558 ======== ======== ======== ======== ======== ======== Earnings per share 86.95p 784.71p 871.66p 74.98p 291.21p 366.19p (see note 3) COMPANY STATEMENT OF CHANGES IN EQUITY Â£000 Capital Share Capital Redemption Revenue Capital Reserves Reserves Reserves Total Net assets at 31 January 12,600 1,570,906 - 51,180 1,634,686 2005 Dividend paid - - - (36,664) (36,664) Net profit for year - 395,469 - 43,818 439,287 Own shares purchased - (112) - - (112) Decrease in Pension Scheme - 25 - - 25 deficit Transfer to capital - (2,200) 2,200 - - redemption reserve 12,600 1,964,088 2,200 58,334 2,037,222 BALANCE SHEETS GROUP COMPANY 2006 2005 2006 2005 Â£000 Â£ Â£ Â£ Â£ Non-current assets Held at fair-value investments 2,004,743 1,587,311 2,027,760 1,600,288 Investment property 19,500 - - - Property, plant and equipment Office premises 450 450 450 450 Motor vehicles 16 - 7 - Intangible assets 10,152 - 174 - Deferred tax assets 2,627 142 91 112 2,037,488 1,587,903 2,028,482 1,600,850 ---------- ---------- ---------- ---------- Current assets Other receivables 12,152 8,146 8,368 6,417 Cash and cash equivalents 160,176 141,838 60,994 39,750 172,328 149,984 69,362 46,167 Total assets 2,209,816 1,737,887 2,097,844 1,647,017 Current liabilities Other payables (102,731) (90,881) (5,531) (9,841) Bank overdrafts and loans (54,837) - (54,837) - (157,568) (90,881) (60,368) (9,841) Total assets less current liabilities 2,052,248 1,647,006 2,037,476 1,637,176 Non-current liabilities Preference shares - (2,200) - (2,200) Retirement benefit obligations (254) (290) (254) (290) (254) (2,490) (254) (2,490) ---------- ---------- ---------- ---------- Net assets 2,051,994 1,644,516 2,037,222 1,634,686 Equity Share capital 12,600 12,600 12,600 12,600 Revaluation reserves 1,952,056 1,555,725 1,964,088 1,570,906 Capital redemption reserve 2,200 - 2,200 - Retained earnings 71,060 66,361 58,334 51,180 Equity attributable to equity holders 2,037,916 1,634,686 2,037,222 1,634,686 Minority interest 14,078 9,830 - - Total equity 2,051,994 1,644,516 2,037,222 1,634,686 Net Asset Value per ordinary share Â£40.44 Â£32.43 Â£40.42 Â£32.43 CASH FLOW STATEMENT GROUP COMPANY 2006 2005 2006 2005 Â£000 Â£ Â£ Â£ Â£ Cash Flows from operating activity Profit before tax 444,269 190,200 443,459 189,494 Adjustments for Gains on investments (398,157) (146,240) (394,690) (146,993) Foreign exchange gains (1,165) (378) (1,165) (378) Scrip dividends (897) - (897) - Bond premium amortisation 327 417 1 8 Movements in advances and loans - 4,000 - - Depreciation 8 - 3 - Amortisation of intangibles 66 - 23 - Interest 2,301 1,701 392 174 Fixed assets written off 41 - - - Increase in amounts due to depositors 11,063 6,976 - - Operating cash flows before movements in 57,856 56,676 47,126 42,305 working capital (Increase)Decrease in receivables (2,000) 414 (128) (254) Increase(Decrease) in payables 5,935 (1,945) 902 417 --------- --------- --------- --------- Net cash from operating activities before 61,791 55,145 47,900 42,468 income taxes Income taxes paid (5,181) (4,873) (4,974) (4,382) --------- --------- --------- --------- Net cash from operating activities 56,610 50,272 42,926 38,086 ========= ========= ========= ========= Cash flows from investing activities Proceeds on disposal of fair value through 650,618 326,985 639,681 320,985 profit and loss investments Purchases of fair value through profit and (673,328) (301,140) (676,438) (297,680) loss investments Purchase of investment properties (20,307) - - - ---------- ----------- --------- --------- (43,017) 25,845 (36,757) 23,305 Purchase of property, plant and equipment (24) - (10) - Purchase of intangible assets (1,981) - (197) - Purchase of business and subsidiary (10,623) - - - undertaking --------- --------- --------- --------- Net cash (outflow)/inflow from investing (55,645) 25,845 (36,964) 23,305 activities ========= ========= ========= ========= Cash flows from financing activities Dividends paid - Equity (36,664) (35,784) (36,664) (35,784) Dividends paid - Preference shares (49) - (49) - Purchase of own shares (112) - (112) - Repayments of borrowings - - - (12,000) New bank loans raised 54,798 - 54,798 - Issue of shares to minority interest 5,000 - - - Dividends paid to minority interest (1,000) - - - Repayment of Debenture Stock (1,648) - (1,648) - Repayment of Preference Stock (2,200) - (2,200) - Increase in bank overdrafts 39 - 39 - Interest (1,956) (1,701) (47) (174) --------- --------- --------- --------- Net cash inflow(outflow) from financing 16,208 (37,485) 14,117 (47,958) activities ========= ========= ========= ========= Net increase in cash and cash equivalents 17,173 38,632 20,079 13,433 Cash and cash equivalents at beginning of year 141,838 102,828 39,750 25,939 Effect of foreign exchange rate changes 1,165 378 1,165 378 --------- --------- --------- --------- Cash and cash equivalents at end of year 160,176 141,838 60,994 39,750 ========= ========= ========= ========= The revenue return statement is the profit and loss account of the Company. The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 January 2006 or 2005 but is derived from those accounts. Statutory accounts for 2005 have been delivered to the Registrar of Companies and those for 2006 will be delivered following the Company's Annual General Meeting. The auditor has reported on those accounts. The report was unqualified and did not contain statements under Section 237(2) or (3) of the Companies Act 1985. Notes to the Financial Statements 1 Information for the year to 31 January 2005 is extracted from the financial statements for that year which were prepared under UK GAAP, have been filed with the registrar of companies and which contain an unqualified report from the auditor. Historic financial information has been restated to conform to IFRS. 2 Expenses comprise Â£6,533,000 (Â£5,193,000) incurred by the Company, and Â£7,697,000 (Â£4,311,000) incurred by subsidiary companies. Taking guidance from the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies' the costs of repaying the Company's debenture stock and preference stocks and those costs of the Senior Management Equity Incentive Plan ('SMEIP') deemed to be related to the capital performance of the Company have been treated as a capital expense of Â£283,000 in aggregate. 3 The earnings per share are calculated using the weighted average number of ordinary shares, which is arrived at by taking account of 4,682 ordinary shares acquired by the Company on 27 May 2005 and held by the Trustee of The Employee Benefit Trust for the Company. The net asset value per share exclude, for the purposes of these disclosures, the 4,682 ordinary shares acquired by the Company on 27 May 2005 and held by the Employee Benefit Trust ('EBT') and held by the Trustee of the Employee Benefit Trust for the Company. 4 At the AGM of the Company on 29 April 2005 approval was given to convert the ordinary stock into ordinary shares. In this report, references are to ordinary shares. 5 Expenses are charged through the revenue column except where they directly relate to the acquisition or disposal of an investment, in which case they are added to the cost of the investment or deducted from the proceeds and reflected in the capital column. 6 The restated consolidated income statement for the year to 31 January 2005, which takes IFRS into account, will be set out in the full Report and Accounts. NUMBER OF ISSUED SHARES Ordinary Shares of 25p 50,400,000 POSTING ARRANGEMENTS The Report and Accounts will be posted to shareholders on Tuesday, 28th March 2006 and will be available on the Company's website www.alliancetrusts.com on Wednesday, 29th March 2006. It 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 Registrar, Computershare Investor Services PLC, Lochside House, 7 Lochside Avenue, Edinburgh Park, Edinburgh EH12 9DJ on and after 29th March 2006. ANNUAL GENERAL MEETING The Company's Annual General Meeting will be held on Wednesday, 10 May 2006 at 11.30 am at The Apex Hotel, 1 West Victoria Dock Road, Dundee DD1 3JP. 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. Press release 20 March 2006 For immediate release Alliance Trust year-end net asset value gains 24.6% â€¢ Net asset value rose 24.6% to Â£2.0bn, as at 31 January 2006 â€¢ Total Shareholder return of 30.6% â€¢ Capital Growth of Â£395.5m versus Â£146.7m in previous year â€¢ Dividend up for 39th consecutive year to 73.5p per share The Alliance Trust's net asset value grew by 24.6% to end the financial year at Â£2.04bn. Total Shareholder Return was 30.6%. Chief Executive Alan Harden said, 'During the last year we have delivered strong investment performance, growing net assets by a record Â£402m. This reflects our focus on performance and our decision to reorganise our equity investment process onto a geographic basis. Equities remain our key area of focus and as at year end, six out of the seven regional portfolios, representing 95% of the equity portfolio, have outperformed their benchmarks.' During the year, Alliance Trust opened an office in Hong Kong and the portfolios managed from that office were among the best performing, with a gain of 36% against the local benchmark's gain of 32.4% for the Asia-Pacific portfolio and a 51.6% increment for the Japan portfolio against a 41.4% rise in the local benchmark. Alliance Trust is building upon its expertise in this area by establishing a company which will operate out of the Hong Kong office and will take third-party mandates. By leveraging existing expertise, Alliance Trust is seeking to generate additional returns for shareholders. Head of Equities Grant Lindsay said, 'Our equity portfolio has had an outstanding year, especially in the Japanese and UK Smaller cap portfolios. We benefited from moving capital away from North America and from overweight positions in oil and mining stocks. Looking forward we expect growth to continue and equity markets to remain positive, although oil and terrorism risks will persist and there will be pressures from rising interest rates outside the UK.' As part of its focus on investment performance, Alliance Trust can move between equities and other assets. This year, Alliance Trust invested Â£20.8m in real estate. This marks the beginning of a specialisation that will be added to as opportunities arise. Alliance Trust increased its investment in its financial services subsidiary Alliance Trust Savings, which purchased in October 2005 Wolanski & Co. Trustees Ltd., one of the leading SIPP and SSAS administrators in the market. Hyman Wolanksi has joined as Head of Pensions in Alliance Trust Savings, which now administers customer assets of around Â£3.3bn with approximately 39,000 customers and is ranked as one of the top five SIPP providers in the UK by plans administered. Harden said, 'Pensions 'A' Day is now just a short-time away and this provides a tremendous opportunity in both the individual pensions market and in the corporate SIPP and employer-pensions market.' The Alliance Trust announced a final dividend of 37.0p, making a total dividend of 73.5p for the year ending 31 January 2006, the 39th year in a row that the company has increased its dividend. NOTES TO EDITORS 1. The Alliance Trust PLC is an investment company with investment trust status that has been investing since the 1880s. Based in Dundee, the company is the 3rd-largest UK investment trust by assets, according to January 2006 figures published by Thomson Financial Datastream. 2. Financial services company Alliance Trust Savings (ATS) is 75%-owned by Alliance Trust, with the remainder owned by the Second Alliance Trust PLC. Following the acquisition of Wolanski & Co. Trustees Limited, ATS administers more than Â£3.3bn of assets on behalf of around 39,000 customers. ATS offers share-dealing, investment wrapper plans such as self-select ISAs, PEPs and SIPPs, as well as a bespoke range of full SIPPs and SSASs. 3. Photographs of Alan Harden and Grant Lindsay are available on request 4. An interview with Chief Executive Alan Harden can be viewed on website: www.cantos.com or www.alliancetrusts.com For more information please contact: Jane Holligan Media Relations Manager Alliance Trusts Phone: (01382) 201700 Mobile: (07745) 783212 Email: jane.holligan@alliancetrusts.com Ends This information is provided by RNS The company news service from the London Stock Exchange

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