Full Report - Alliance Trust

7
Capital
The year under review has, once again, been a volatile one with
the seesaw movement of equity markets. By the year end,
equity markets had recovered and our closing net asset value of
£29.21 per ordinary stock unit showed a net increase of 22.5%.
This was the first increase for three years.
A comparison of our net asset value over the year against the
UK FTSE All-Share index, which rose 27%, is less favourable. We
have a substantial proportion of our assets overseas and
currency moves have had a significant effect. In the US, where
we have close to 21% of our assets, the depreciation of the US
Dollar by nearly 11% against Sterling reduced stock market
returns on a currency adjusted basis, from 32% to just 19%. The
movement of Asian currencies, apart from the Japanese Yen,
were kept close to the US Dollar, either by intervention or by
increasingly fragile pegs. In Europe, returns were boosted by the
4% appreciation of the Euro against Sterling, but our exposure
accounts for just 10% of our portfolio, as we have been deterred
by the lack of visible structural reform and high valuations.
The greater influence, however, has been in terms of stock
selection. While we were sufficiently confident to move to full
investment we maintained our focus on companies better placed
in terms of management, market position, cash flow and
dividend paying capability. The companies which had been most
exposed by the last downturn were those which performed best
for much of the year. With hindsight, we were too cautious
about two areas in particular: Japanese banks, where we had no
exposure, and IT hardware, where our exposure was limited. This
adversely affected our relative performance.
5 Year Discount Record
31 January 1999 to 31 January 2004
4
6
8
10
12
14
16
18
20
22
24
Alliance Trust Discount
Source: Thomson Financial Datastream
Movement in UK FTSE All-Share Index 27.0% 25.3%
Attributable to asset allocation (1.9%) 14.9%
Attributable to stock selection (2.6%) (3.2%)
Movement in net asset value 22.5% 37.0%
Peer Group Discount
1999 2000 2001 2002 2003
Capital Performance
Attribution Analysis 1 year 10 years
The above attribution analysis reconciles the Company's net asset value with
the movement, over the stated time periods, of the UK FTSE All-Share Index
showing the effect of our asset allocation and stock selection. The figures
refer to capital performance only and make no allowance for income. The
FTSE All-Share Index is not used as a benchmark by the Company.
During the year the discount at which the stock price stands to
the Company’s net asset value narrowed to as low as 5% and
ended the year at 10.8%.
Company
Record
The Company’s Capital and Income
(shown in £millions)
Total Assets
less Current
Liabilities
Total Capital
Appreciation
(Depreciation)
Total
Income
Attributable to Ordinary Stockholders
(shown in pence per Ordinary Stock Unit)
Earnings
Capital
Appreciation
(Depreciation)
Dividend
Net Asset
Value
1994 1,079 178 29.7 47.28 353.56 47.0 2,133.1
1995 955 (129) 32.7 53.79 (256.15) 50.0 1,885.5
1996 1,228 272 34.4 56.30 539.42 53.0 2,428.2
1997 1,359 130 34.9 58.61 257.08 55.5 2,688.4
1998 1,565 203 38.8 64.89 402.50 59.0 3,096.8
1999 1,730 164 40.1 65.95 324.47 62.5 3,424.7
2000 1,888 156 41.0* 68.86 310.06 64.5 3,739.1
2001 1,976 87 40.3 67.26 172.30 66.5 3,912.2
2002 1,674 (305) 45.0 74.80 (604.73) 68.5 3,313.7
2003 1,206 (469) 43.6 71.63 (930.82) 69.5 2,385.0
2004 1,476 268 46.1 75.40 531.54 70.5 2,921.5
* From 2000, income excludes the associated tax credit.