Alliance Trust PLCInvestor forum

Round table discussionFixed Income Team

3 May 2013

Themes and outlook

Themes

• Carney takes over as the new Governor of the Bank of England

• UK governments austerity measures fail to deliver deficit reduction

• QE could lead to rampant inflation in the future

• UK growth misses forecasts

• UK loses AAA rating

• Unemployment in the UK running at around 8%

• In the last few years the Treasury has issued more debt than at any time.

• UK 10year yield close to all time low

• £ vulnerable in period of competitive devaluations

• QE central to policy elsewhere in the developed world

10 year gilt yield at historic low

Source: Reuters EcoWin

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RPI

10Y

UK – RPI vs 10Y

Investment grade spread versus US 10 year yield

US IG YTM vs government bmrk YTM

Holdings in bond funds versus yields

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NAHB Index

ProspectiveBuyers

£ Corporate bond FUM Vs UK 10Yr gilt yields

Index

Source: IMA, Bloomberg, 31 Jan 2013

• Bond markets have benefited from a 20 year rally

•Ownership has increased throughout this period

• Life funds

• Pension funds

• Retail investors

• Inflation is now a threat

Traditional bond funds exposed to market correction

Important information

• Whilst considerable care has been taken in compiling the content of this presentation, no representation or warranty, expressed or implied, is made by Alliance Trust PLC as to its accuracy or completeness.

• The value of investments and the income from them may go down as well as up and are not guaranteed. The original amount invested may not be returned.

• Any examples are for illustration purposes only, the figures are not guaranteed and should not be relied on.

• Past performance is not a guide to future performance.

• Further information is available on our website www.alliancetrust.co.uk

• All figures and graphs are sourced at Alliance Trust PLC unless otherwise stated.

• Nothing said or covered by the presentation today should be construed as being an inducement or invitation in investment activity. No advice is given by Alliance Trust PLC.