ON the SHOULDERS of GIANTS Building on Lessons Learned

SUMMER 2019

ON THE SHOULDERS OF GIANTS Building on lessons learned

alliancetrustsavings.co.uk Welcome to the latest edition of Taking Stock.

Drawing inspiration

It’s natural to be inspired by others who’ve been successful in our eyes. From exceptional bosses and enviable friends to those who seem able to turn everything they touch into gold.

Inspiration doesn’t just come from individuals though. Whilst we all understand that past performance is not necessarily a guide to future performance, inspiration can also come from the established track record of a successful team or investing approach.

Applying lessons learned

In this edition of Taking Stock our expert contributors outline their approach to portfolio management, highlighting lessons learned from those who have come before them.

How do they apply those lessons in the interests of investors today? Are there specific formulas for success? Or is it more about sticking to the basics and working hard to get those right?

I hope, as ever, that you will find this an informative and interesting read. But please do get in touch if you have any feedback or suggestions for future editions.

Sara Wilson Head of Platform Proposition Alliance Trust Savings

This general information is provided to support you in making your own investment decisions. It is not a recommendation to buy or sell. Please be aware that the value of investments can fall as well as rise so you could get back less than you invest. Past performance is not a guide to future performance. 8

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Contents

04 Rise of the activists 14 Inspired to deliver the best of most worlds Whether you see shareholder activists as heroes or villains, For Lucy Macdonald, Portfolio Manager for The Brunner their profile is undoubtedly on the rise. Alliance Trust Investment Trust, successful portfolio composition is all about Savings’ James McCafferty looks at some of the ways that detailed analysis to ensure that every investment held is there investors are being inspired to use their rights to influence for a good reason. And in that, she has taken inspiration the corporate agenda. from at least one investing great.

06 It’s too early to tell 16 A dedicated follower of unfashion The Scottish Investment Trusts’ Alistair McKinnon looks back Alex Wright of Fidelity nails his colours to the mast as a at the 2008/9 financial crisis, considering how major events contrarian investor. He’s inspired by 25 years’ heritage and in human history can cause reverberations for surprisingly history of contrarian investing at Fidelity Special Values PLC, long periods of time and how reality can also be distorted believing it’s a field in which it takes a particular mind-set to suit the interests of those involved. and a highly disciplined approach to succeed.

08 The resilient ones 18 Taking income higher with real estate For the Scottish American Investment Trust, the shoulders on The ability of real estate to generate a high and dependable which it stands are resilient companies that provide investors income and withstand economic volatility continues to make with a dependable dividend income regardless of market it an important element of many investors’ portfolios, says adversity, while also promising future growth. Toby Ross Andrew Allen of Aberdeen Standard Investments – provided explains its approach. you choose assets carefully.

12 Trusting in income 20 Inspiring dividend heroes A focus on paying a consistent level of income can make a For investors in search of income, heroes don’t necessarily trust attractive in its investors’ eyes. Rhys David of Invesco wear capes. Alliance Trust Savings’ Sara Wilson reviews the outlines the approach taken by each of City Merchants High dividend paying track record of investment trusts and Yield Trust Limited and Invesco Enhanced Income Limited to outlines some of the reasons for their potential to pay out go about achieving this. consistently and reliably over the years.

Taking Stock alliancetrustsavings.co.uk | 3 Rise of the ACTIVISTS

hether you see shareholder activists as heroes or villains, their profile W is undoubtedly on the rise. James McCafferty takes a look at some of the ways that investors are using their rights to influence the corporate agenda. When the boss of the world’s biggest asset manager says firms need to do more on everything from “protecting the environment to retirement to gender and racial inequality”, the sense of a shifting mood is difficult to escape. BlackRock Chief Executive Larry Fink made the point in January this year, in his annual public letter to chief executives, alongside his more traditional comments on financial and geopolitical uncertainty 1. It was just the latest indication that major investors are taking their stewardship role increasingly seriously.

Promoting gender diversity Legal & General (L&G) recently revealed that it voted against more than 100 chairmen in 2008 for their failure to increase the presence of women in the boardroom. Its action on diversity represented a marked increase on the 13 chairmen voted against in 2016 for failing to reach gender diversity targets. It also divested from a number of companies that had previously been held in its Future Worlds Funds, which aims to address long-term financial risks related to climate change. Companies were excluded from the fund on the basis of issues such as poor governance and lobbying for policies that contribute to climate change 2. Sacha Sadan, L&G’s director of corporate governance, said it would continue to vote against boards where concerns remain around environmental-based issues, adding that “the point here is that we are facing a climate catastrophe” 3.

Tackling corporate pay and climate change Others have taken similar action on a range of issues, with several prominent recent examples: • In November 2018 the chief executive of housebuilder Persimmon, Jeff Fairburn, stepped down following a shareholder revolt against a proposed pay package. Firms including Royal London Asset Management and Aberdeen Standard Investments were among those voting against the proposal 4/5.

4 | Taking Stock alliancetrustsavings.co.uk Rise of the

• RBS is under renewed pressure from Promoting sustainable investment James McCafferty shareholder rights group ShareSoc to Activists, and those seeking to apply ESG factors Platform Proposition Manager give investors a bigger say on corporate in other ways, can also refer to a widening range Alliance Trust Savings Limited governance. ShareSoc, along with the of policies and guidelines aimed at promoting Investment Association, also wants the bank sustainable investment. James is Platform Proposition to reduce the gap between the pensions of New ESG-related requirements introduced Manager at Alliance Trust Savings top executives and staff 6. by the UK government in 2018, for instance, and has responsibility for the • Investors including Schroders and Hermes require pension fund trustees to take account of ongoing development of the platform and products. He has backed responsible investment charity ‘financially material’ considerations, including over 15 years industry experience Share Action’s call for HSBC to cut back 11 ESG factors, such as climate change . gained in the Intermediary on investments in coal projects and coal- Many fund firms also use the UN’s Principles 7 Business at Cornelian Asset reliant companies . for Responsible Investment as a basis on which to Managers and in previous roles 12 • In October 2018 some 40% of investors incorporate ESG issues into investment practice . with F&C and Standard Life. in Whitehaven Coal, Australia’s biggest The guidelines, which ask firms to commit to independent coal miner, voted in favour of six ESG objectives, are followed by more than a resolution demanding the company reveal 2,200 signatories accounting for over $82 trillion 13 the financial risks it faces as a result of (£61.8trn) in assets under management . climate change, forcing the company to With this spring’s Extinction Rebellion protests review its disclosures policy 8. drawing more attention to climate change issues, it seems likely we can only expect to see These are just some of the recent instances of increased focus on the ability – and willingness major investors seeking to use their shareholdings – of private and professional investors to drive as a force for positive change. The growing positive change. prominence of such activism reflects the rise of broader environment and social governance 1. Blackrock – Larry Fink CEO letter – 01/19. (ESG) issues up the investment agenda, apparently 2. Guardian – L&G steps up action against firms with few Important information: This shifting from a niche concern into mainstream one. female board members – 16/04/19. general information is provided 3. Pensions Age – LGIM warns of ‘climate catastrophe’ as it takes action against corporate boards – 16/04/19. to support you in making your Entering a new phase for activism 4. FT – Persimmon boss at centre of pay storm to leave own investment decisions. It is company 07/11/18. not a recommendation to buy The MSCI defines ESG as “the consideration of 5. FT – Persimmon hit by pay revolt at AGM 25/4/18. or sell. Please be aware that environmental, social and governance factors 6. Yorkshire Post – Showdown for RBS executives over pay the value of investments can fall packets – 22/04/19. alongside financial factors in the investment as well as rise so you could get 7. Share Action – Investors hold HSBC’s feet to the fire on 9 back less than you invest. Past decision-making process” . Jane Sydenham, coal – 06/03/19. performance is not a guide to investment director at Rathbone Investment 8. Market Forces – Investors want Whitehaven Coal to future performance. Management, said recently that the sector was disclose climate risk – but not avoid it – 25/10/18. 9. MSCI – What is ESG? entering a new phase in shareholder activism. This article is issued and 10. Citywire – Asset management firms urged to increase “Across the whole industry investment managers stewardship efforts – 16/04/19. approved by Alliance Trust are realising that their clients, investors or 11. FTAdviser – Pension schemes mandated to disclose Savings Limited. Alliance Trust shareholders want to see companies taking ESG risks – 11/09/18. Savings Limited is a subsidiary 12. on the management where there is a need.” 10 UN PRI – Principles for responsible investment? of Alliance Trust PLC and is 13. UN PRI – PRI CEO Fiona Reynolds addresses meeting registered in Scotland No. SC at G20 – 5 December 2018. 98767; registered office, PO Box 164, 8 West Marketgait, Dundee DD1 9YP; is authorised

PLANNING FOR LIFE by the Prudential Regulation SELF-EMPLOYMENT AN AFTERINTRODUCTION WORK Authority and regulated by the TO ESGAND INVESTING YOUR FINANCES INTERESTED IN ESG INVESTING? Financial Conduct Authority Our guide, An Introduction to ESG Investing, is here to and the Prudential Regulation help. Download your free copy at Authority, firm reference www.alliancetrustsavings.co.uk/investor-guides. number 116115. This is just one of the many guides available to help you This is a financial promotion navigate your way around the world of personal finance and from Alliance Trust Savings investment and make the most of your money in the process. Limited.

Taking Stock alliancetrustsavings.co.uk | 5 IT’S TOO EARLY TO TELL In a conversation with US hatever actually happened in the “Firstly, it is President Richard Nixon in 1972, above exchange, the episode does W suggest two things that have relevance reasonable to the Chinese Prime Minister, for today. Firstly, it is reasonable to expect major Zhou Enlai, reputedly quipped events in human history to cause reverberations expect major for surprisingly long periods of time and, that it was ‘too early to tell’ when secondly, reality can be distorted to suit the events in human asked about the impact of the interests of those involved. history to cause The financial world has recently marked the French Revolution on Western tenth anniversary of the defining moment of the reverberations for civilisation. After listening to the financial crisis of 2008/9, namely the collapse surprisingly long translated reply, President Nixon of Lehman Brothers. The occasion prompted more than a dollop of self‑satisfied backslapping periods of time was delighted by this profound from the economics profession, politicians and example of far‑sighted wisdom officials about the inspired actions taken to avert and, secondly, with reference, he presumed, a meltdown. The various measures employed were presented as calmly rationalised options reality can be to the seismic events of 1789. that were deployed with known outcomes. The distorted to suit Disappointingly, witnesses truth, of course, was far less edifying. In reality, increasingly panicked measures were thrown like the interests of to the conversation have mud at a wall in the hope that one of them would subsequently insisted that the stick. Major industries were bailed out, toxic asset those involved.” Prime Minister was, in fact, purchases arranged, sales taxes cut, accounting rules suspended, interest rates slashed to near referring to the Paris student zero and ‘quantitative easing’ (a clever way of riots of 1968. However, the printing money) was introduced. Eventually the misunderstanding was allowed rot was stopped. Of course, something had to be done. But it is to stand, possibly because it worth bearing in mind that some of the policies suited all concerned. employed would have been considered downright heretical by mainstream economists even a

6 | Taking Stock alliancetrustsavings.co.uk Alasdair McKinnon Manager The Scottish Investment Trust

Alasdair joined the Company in 2003 and became Manager in 2015. He has 19 years of diverse global investment experience and a distinctly contrarian investment philosophy. He and his team take a highly active, differentiated approach to investment. Alasdair has an MA (Hons) in Economic & Social History from the University of Edinburgh and an MSc in Investment Analysis (with IT’S TOO distinction) from Stirling University. He is a CFA® charterholder and an Associate of the UK Society of Investment Professionals.

few weeks before they were deployed. Further, If excessive debt was one of the main despite a short history of usage, zero (or even contributing factors to the financial crisis, the negative) interest rates and quantitative easing measures taken over the past ten years have are today treated as legitimate and controllable not addressed this. In fact, they have arguably policy options that can be tweaked as required. made it worse. From this, we can only surmise that, like the It seems unlikely that an entire generation conversation in 1972, reality has been ‘revised’ will commit itself to a life of indentured servitude to suit all concerned. to repay debt that they had no choice but to Despite this desire to paint a picture of certainty accumulate. History would instead suggest that and control, the various crisis rescue measures the rules of the system will be changed. It is, have already introduced a raft of unintended of course, ‘too early to tell’ how the rules will consequences. Perhaps the biggest of these has change but the time‑tested solution is currency been the increase in wealth inequality, particularly debasement, in other words inflation. across generations. There are now fewer people with a meaningful stake in the system and, as they tend to be younger, the full implications of @ScotInvTrust For regular updates, commentaries and contrarian this will take some time to become clear. The Scottish Investment Trust PLC thoughts, visit us at www.thescottish.co.uk For more thought provoking articles, visit www.thescottish.co.uk/blog

This article is issued and Important information: Please remember that past performance may not be repeated and is not a guide approved by SIT Savings Ltd, for future performance. The value of shares and the income from them can go down as well as up as a registered in Scotland No: result of market and currency fluctuations. You may not get back the amount you invest. SC91859. Registered office: The Scottish Investment Trust PLC has a long-term policy of borrowing money to invest in equities in the 6 Albyn Place, expectation that this will improve returns for shareholders. However, should markets fall these borrowings Edinburgh EH2 4NL. would magnify any losses on these investments. Investment Trusts are listed companies and are not T: 0131 225 7781 authorised or regulated by the Financial Conduct Authority. E: [email protected] Please note that SIT Savings Ltd is not authorised to provide advice to individual investors and nothing in W: www.thescottish.co.uk this article should be considered to be or relied upon as constituting investment advice. If you are unsure about the suitability of an investment, you should contact your financial advisor. Issued and approved by This is a financial promotion SIT Savings Limited, authorised and regulated by the Financial Conduct Authority. from SIT Savings Ltd.

Taking Stock | 7 THE RESILIENT ONES To impress SAINTS’ managers it’s not enough old Wars, real wars, trade wars, financial crises, oil shocks, downturns, tech bubbles: over four decades all to be a high-growth company or a solid payer C have successively messed with financial markets. None has stopped the Scottish American Investment Company (SAINTS) of dividends. The trust’s joint manager Toby achieving its goal of real dividend growth even in the most Ross talks about the search for companies challenging times. The last time the trust cut its dividend was in 1938, when the world was on the brink of cataclysm. built for bad times as well as good. “The globe-spanning companies the trust invests in must provide investors with a dependable dividend income regardless The value of your investment and any income of market adversity, while promising substantial future growth,” from it can go down as well as up and as a according to Toby Ross. He sums up this rare combination in a single word: resilience. result your capital may be at risk. SAINTS’ managers think very hard about the underlying characteristics of a business and how much it needs to invest capital to boost further growth. Companies free from this requirement can often find cash to pay dividends, even in hard times.

8 | Taking Stock alliancetrustsavings.co.uk Then there is the future growth trajectory. Can As well as strengthening its standing with management look beyond current adversity with clinicians, this philosophy has also made Sonic confidence that the business will be much larger the go-to buyer for independent lab owners in five or ten years’ time? Those that can are much looking to secure a legacy for their business. more likely to stand by dividend commitments. Ross says that “Sonic’s business is very SAINTS also likes management teams that resilient to the ups and downs of the global take a very long-term view of the business, and economy. We think that this management team which see sustaining a dividend as part of their truly understands that what matters is the speed bond with shareholders. and accuracy with which they deliver to doctors “Some boards don’t see the dividend as a and patients.” priority and when things get difficult it will be Another poster child of resilience from SAINTS’ Toby Ross the first thing to be cut. Those businesses are broad range of holdings is C.H. Robinson, a unlikely to be a good fit for SAINTS,” Ross says. Minnesota-based trucking broker that matches Joint Manager of To illustrate the many forms that resilience loads to be transported with available drivers The Scottish American can take, Ross cites two very different global through its Navisphere software platform. Access Investment Company PLC businesses and markets from the trust’s holdings. to the largest pool of customers and the largest Baillie Gifford The first is Sonic Healthcare, an Australian pool of truckers allows it to provide a better Toby graduated MA in English medical diagnostics company whose shares have service than rivals. It has few physical assets Literature from the University of been owned by SAINTS since 2014 and whose and does not require big capital expenditure Cambridge in June 2006 and patience and vision excite the trust’s managers. for further growth. joined Baillie Gifford in the same year. Toby became Joint Manager of The Scottish American Investment “Some boards don’t see the dividend as a priority and when Company P.L.C. (SAINTS) in 2017. things get difficult it will be the first thing to be cut. Those businesses are unlikely to be a good fit for SAINTS.”

“If times get more difficult and revenues slow, SAINTS total dividend per ordinary that’s ok because the business doesn’t need share (net) – pence per share big reinvestment to grow. The management’s commitment to maintaining and growing the 2014 2015 2016 2017 2018 dividend is really high, regardless of whether 10.50 10.70 10.825 11.10 11.50 the margins this quarter are higher or lower,” Ross says. Source: Baillie Gifford & Co, data as at 31 Dec 2018. He also cites the commitment of C.H. Robinson Past performance is not a guide to future returns. management to pay out to shareholders from a sense of corporate duty. “They are very aware that there are lots of retired employees who live on these dividends. Management has been Sonic has invested heavily in the fragmented very clear that they would rather not grow the but fast-growing global market for laboratory dividend too fast but make sure it’s resilient, testing. This includes studying samples of tissue, to allow them to keep growing it even when blood and urine to determine the cause and nature of different cancers and other diseases. business is slower.” Over time, the combination of an ageing Sustaining and improving on the trust’s long population and continued medical innovation legacy of dividend growth, says Ross, is about mean that more of us are being tested for a “trying to understand what has made some wider range of conditions. Ross says that what companies resilient dividend payers even when makes Sonic stand out from its peers is long- things have got really hard”. The nuances can standing CEO Colin Goldschmidt’s culture of be subtle, but the reward is a portfolio dominated ‘medical leadership’. When Ross met by companies in that sweet spot: able to bolster Goldschmidt in Sydney recently, he defined this long-term growth and steadily increasing annual This article is issued by culture as “doing the best for our patients [and] pay-outs to investors for the next four decades Baillie Gifford & Co Limited truly understanding what the doctor needs”. and beyond. and does not in any way constitute investment advice. All information is sourced from Important information: Investments with exposure to overseas securities can be affected by changing stock Baillie Gifford & Co and is market conditions and currency exchange rates. The views expressed in this article should not be considered current unless otherwise stated. as advice or a recommendation to buy, sell or hold a particular investment. The article contains information and opinion on investments that does not constitute independent investment research, and is therefore not This is a financial promotion subject to the protections afforded to independent research. Some of the views expressed are not necessarily from Baillie Gifford & Co those of Baillie Gifford. Investment markets and conditions can change rapidly, therefore the views expressed Limited. should not be taken as statements of fact nor should reliance be placed on them when making investment decisions. A Key Information Document is available by visiting www.bailliegifford.com.

Taking Stock alliancetrustsavings.co.uk | 9 CONSOLIDATE TO SAVE

If you have built up various pension pots over the years, you might be surprised how much you could be saving on fees simply by consolidating.

At Alliance Trust Savings, we charge flat Account fees. So, as your investments grow, your Account fees won’t. And, compared to some of our largest competitors who charge a percentage fee based on the value of your investments, this can make a big difference.

SIPP Account

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Please remember that the value of your investments and any income from them can go down as well as up and you may get back less than the amount originally invested. If you are unsure as to the suitability of any particular investment or product, you should seek professional financial advice.

About the comparisons: • Underlying investment costs (for example the ongoing fees you’ll pay a fund manager) are also excluded and • The tables show the annual costs of holding your the figures we give do not reflect investment returns. We investments with Alliance Trust Savings. assume portfolios are invested in unit trusts and OEICs • The comparisons are of the main Account fee or platform and values stay the same throughout the year. custody charge, including any annual product charges. • The charges figures used for comparison were sourced by • For each Platform we include the cost of four trades, the lang cat from each provider’s website as at 28 May other dealing and service charges are excluded. You 2019. Charges may be subject to change in the future. should check with each provider for the detail of all their • Competitors selected for comparison are direct to charges. For Alliance Trust Savings you can find this in customer platforms offering SIPP accounts, and charging our Charges Guide at alliancetrustsavings.co.uk. percentage based Account fees.

If you are looking to consolidate or simply want to get more for your money, take advantage of the flat fee difference today. Visit alliancetrustsavings.co.uk or call 01382 573737.

Alliance Trust Savings Limited is a subsidiary of Alliance Trust PLC and is registered in Scotland No. SC 98767, registered office, PO Box 164, 8 West Marketgait, Dundee DD1 9YP; is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority, firm reference number 116115. Alliance Trust Savings gives no financial or investment advice. Calls may be recorded for training and monitoring purposes.

10 | Taking Stock alliancetrustsavings.co.uk Property Investment Company PLC EPIC for income % Annualised dividend yield* 5.6paid monthly tax free in ISA dividend cover x1.15

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The payment of dividends and the repayment of capital are not guaranteed and any quoted yield is indicative only. The value of a stock market investment and any income from it can fall as well as rise and investors may not get back the amount invested. This promotion should not be construed as legal, tax, investment or other advice. Any prospective investor should make their own enquiries and consult their own professional advisers as to the legal, tax and financial implications and risks concerning any investment opportunity. The tax treatment of ISAs may be subject to change in the future. Issued and approved by Ediston Investment Services Ltd, authorised and regulated by the Financial Conduct Authority (FRN:706655) *As at 31/03/19

Taking Stock alliancetrustsavings.co.uk | 11 Trusting in INCOME

he City Merchants High Yield Trust Limited 1 Income generators (CMHY) and the Invesco Enhanced Income This category forms the core of both funds and is made Limited (IPE) investment companies are both T up of bonds issued by non-financial corporates. The bonds focused on paying a consistent level of income. CMHY typically pay a high level of yield to compensate for the currently targets an annual dividend of 10p per share issuing companies’ high level of borrowing. To manage the while IPE has an annual target of 5p per share 1. risk of the issuer not being able to make interest payments One of the key differences between the two companies is and repay its debt (credit risk) we undertake thorough due- borrowing. Both investment companies have this facility, but diligence on each position and hold a diversified portfolio our approach with CMHY is to do so only on a short-term of around 50 bonds. The determining factor in making an tactical basis. Typically, such borrowing might represent investment is whether the bond pays an appropriate level between 5-10% of the company’s Net Asset Value (NAV). of compensation for the risk of holding it. To determine this, An example of its use might be if we saw a significant re- we seek to get a comprehensive understanding of the credit pricing of the high yield market, we might use borrowing to risk. However, in recent years the influence of central banks increase exposure to areas where we see value and therefore has made this more challenging. potentially enhance returns. As well as the capacity to do so on a tactical basis, IPE maintains a long-term structural level 2 Banks and subordinated financials of borrowing. This approach means that the company can hold higher quality high yield bonds with the borrowing This has been an important sector across all the Henley used to potentially enhance the level of income paid out. managed fixed income portfolios since the global financial crisis. At the time of the crisis, there was huge uncertainty Positioning with the survivability of the financial system being called into question. This degree of uncertainty meant that we The two companies’ current holdings can be split into were able to buy bonds at very attractive prices. Today, three broad categories: income generators, subordinated the market has moved on. Banks are in a much stronger financials and credit intensive bonds. Combined, the position than they were at the time of the crisis. As a result, first two categories typically account of around 85% of the portfolio with the credit intensive allocation and cash making up the remainder.

12 | Taking Stock alliancetrustsavings.co.uk Trusting in the opportunity within this sector is now no Overall, therefore while valuations have longer about capital gains, but about income. become more attractive, the wider fundamentals For example, the ICE BofAML index of Contingent are not as strong as they were a year ago, but Capital (CoCo) bonds (the most junior type of as we have seen central banks can have a bond issued by banks) currently offers a yield to significant impact on markets and so we need to maturity of 6.3% 2. Given the relatively attractive be cognisant of this, but still focus on valuation. levels of yield available within this sector, banks This mixed outlook leads us to be cautious, but and insurers have become an important source constructive on the asset class during 2019. INCOME of income for the investment companies. Investment risks 3 Credit intensive The value of investments and any income Rhys Davies The final category of bonds we hold are will fluctuate (this may partly be the result of what we call credit intensive issuers. This exchange rate fluctuations) and investors may Portfolio Manager and part of the market is bigger than it has been not get back the full amount invested. Senior Credit Analyst for several years and represents a different When making an investment in an investment Invesco opportunity beyond just the income that the company you are buying shares in a company first two categories can offer. In the investment that is listed on a stock exchange. The price of Rhys began his investment career within the Henley-based Product companies these bonds represent around 10- the shares will be determined by supply and 15% of the portfolio. Holdings in this category Support team in January 2002 demand. Consequently, the share price of an before moving to the Fixed Interest might include a troubled company that has a investment company may be higher or lower team in November 2003. In 2014 turn-around plan that we believe in. Often such than the underlying net asset value of the he was appointed deputy fund bonds trade well below par (the amount the investments in its portfolio and there can be no manager for the City Merchants issuer will repay on maturity of the bond) and certainty that there will be liquidity in the shares. High Yield Trust Limited and have double digit yields. The premise with such The portfolios have a significant proportion of Invesco Enhanced Income Limited. investments is that if our analysis is correct, then high-yielding bonds, which are of lower credit He holds a BSc (Honours) in we would expect to earn at least part of the quality and may result in large fluctuations in Management Science from the return on these bonds from capital gains as the NAV of the products. University of Manchester the bond’s price moves back towards par. The products use derivatives for efficient Management School and is a portfolio management which may result in CFA charterholder. Outlook increased volatility in the NAV. The use of borrowings may increase the After a period of challenging performance at volatility of the NAV and may reduce returns the end of 2018, high yield bonds markets when asset values fall. have had a strong start to 2019. Indeed, the The products may invest in contingent European currency high yield bond market has convertible bonds which may result in significant had its strongest start to the year since 2012. risk of capital loss based on certain trigger events. However, this recovery has not been universal with the dispersion in returns creating some 1. Please note that there is no guarantee that these investment opportunities. dividend targets will be achieved. One of the key catalysts of the rally this year 2. Yield to Maturity is the total return anticipated on a has been the pivot by central banks toward more bond if held to maturity with all payments reinvested accommodative monetary policy. This pivot is at the same rate. one of several similarities between 2018/19 and 2015/16. On both occasions, markets were confronted by concerns over global economic growth, China and trade tensions and the central bank response. However, it is worth noting that in 2017 central banks were increasing liquidity through quantitative easing. Today, the stimulus is more limited.

Important information: Data as at 30 April 2019 unless otherwise stated. Where individuals or the business have expressed opinions, they are based on current market conditions, they may differ This article is issued by Invesco from those of other investment professionals and are subject to change without notice. This article is Fund Managers Limited, marketing material and is not intended as a recommendation to invest in any particular asset class, Perpetual Park, Perpetual Park security or strategy. Regulatory requirements that require impartiality of investment/investment strategy Drive, Henley-on-Thames, recommendations are therefore not applicable nor are any prohibitions to trade before publication. The Oxfordshire RG9 1HH, UK. Authorised and regulated by information provided is for illustrative purposes only, it should not be relied upon as recommendations to the Financial Conduct Authority. buy or sell securities. For more information on our products, please refer to the relevant Key Information Document (KID), Alternative Investment Fund Managers Directive document (AIFMD), and the latest This is a financial promotion Annual or Half-Yearly Financial Reports. This information is available using the contact details shown. from Invesco Fund Managers Limited.

Taking Stock | 13 Inspired to deliver the best of MOST WORLDS

When asked for examples of individuals As Portfolio Manager of The Brunner Investment Trust, the essence who have inspired and influenced me in of my investment strategy is to select the best stocks in a ‘bottom my professional career, one name that comes to mind is Anthony Bolton, the up’ approach that comes before sector and country selection. I Fidelity manager and active investor focus on identifying good quality companies at the right time and whose enviable performance record running Fidelity Special Situations for at the right price, wherever in the world they invest. 28 years rightly granted him legendary status. His focus on creating an investment thesis for each stock and monitoring it, his intelligent contrarianism and his emphasis joined AllianzGI in 2001, after 16 on the quality of management and years managing high conviction management meetings are all aspects I portfolios at Baring Asset Management. of my own investment process. Although I began managing Brunner’s overseas Bolton stepped back from running his fund portfolio in 2005. At that time, and for in 2007, he later launched a specialist most of its history, the Trust was managed China fund where his experience was as separate UK and global portfolios and more challenging. This was, in my view, this continued until 2016 when they were due to the fact that he was unable to combined into one and I became sole have the same direct engagement with manager. This move delivered clarity and greater consistency to Brunner investors. management there as he had had in The UK remains important but now Europe and thus proved his point rather constitutes less than 30% of the portfolio, than undermining it. with the vast majority of these investments For Brunner, portfolio composition is being UK-listed international businesses. based on detailed analysis so that every Significantly, the changes have created investment held is there for a good reason. a seamless portfolio that focuses on our As our objective is to deliver growth in both team’s best global equity ideas – what capital value and dividends, the companies we call ‘the best of most worlds’. we choose need to meet certain criteria.

14 | Taking Stock alliancetrustsavings.co.uk Inspired to deliver the best of

We prefer companies in growing industries that appears to present similarly binary outcomes. In can grow through their own innovation. We the event of a deal which prioritises the status quo believe these are the sorts of companies that will for business, London listed companies with largely allocate surplus capital well and invest wisely in international end markets may appear oversold. Lucy Macdonald both business and management. But, we also This backdrop can provide opportunities for Portfolio Manager need our companies to provide a decent yield, successful stock pickers with a bias towards The Brunner Investment Trust to keep a core part of the dividend coming quality growth and a longer term view. Brunner and CIO, Global Equities through. This balance is something we have typically invests in around 65 to 70 companies, Allianz Global Equities achieved over time – Brunner has increased its in a portfolio that has become relatively more dividend for 47 consecutive years and the source concentrated over recent years. The companies Brunner aims to provide its investors of income has become less dependent on the we have added latterly span a range of sectors, with growing dividends and capital UK over time, with more recent exposure given including media, renewable energy and finance. growth by investing in a portfolio to interesting sources of yield overseas. However, they all share a common feature in of global equities. Although past that their business models are not overly cyclical performance is no guide to the i.e. they are capable of increasing revenues future, Brunner has paid a rising dividend to shareholders for 47 independently of global economic conditions. consecutive years. “For Brunner, portfolio Moreover, we have been especially careful composition is based on not to overpay for quality and growth, as this can seriously impact performance in times of detailed analysis so that heightened volatility. Although global markets have been generally every investment held is buoyant so far this year, the International there for a good reason. ” Monetary Fund (IMF) has flagged its concerns on tightening liquidity which would be damaging for the valuations of highly indebted companies. There is already evidence of this happening but As long-term stewards of our clients’ capital, we are high conviction owners, aiming to the positive is that it is opening up the available hold companies for at least three to five years. investment universe again. For, even when Owning companies for longer periods of time markets appear overly challenging, wholesale rotations out of certain sectors or geographies This is a marketing not only means that we are better placed to hold communication issued by can produce excellent entry points into quality management to account on a range of issues, Allianz Global Investors businesses for more discerning investors. China, but also, when things go right, that we continue GmbH, an investment to benefit from their steadily compounding growth. in particular, may present stock opportunities. company with limited liability, In 2018, we witnessed heightened levels Continuing to implement our investment incorporated in Germany, of stock market volatility, and we expect that process and taking a truly active approach will with its registered office at company earnings in the rest of 2019 could be key to navigating the months ahead. Our focus Bockenheimer Landstrasse continue to be challenged by generally weaker on stocks with the potential for structural growth, 42-44, D 60323 Frankfurt/M, global economic momentum as well as the great with good cash returns, strong management and registered with the local court unknown of trade politics. President Trump’s balance sheets has served the company well over Frankfurt/M under HRB 9340, willingness to pursue trade wars with China the long term and we are confident will continue authorised by Bundesanstalt für and Europe has clearly weakened the Industrial to do so in the future. Finanzdienstleistungsaufsicht and Automotive sectors. If the US is now willing (www. bafin.de). Allianz Global Investors GmbH has established to make a deal, this could provide some much To discover more about Lucy’s investment a branch in the United Kingdom, needed support. Closer to home, the UK’s approach, visit www.brunner.co.uk where Allianz Global Investors eventual departure from the European Union you can register for regular updates. GmbH, UK branch, which is subject to limited regulation by the Financial Conduct Important information: This is no recommendation or solicitation to buy or sell any particular security. Authority (www.fca.org.uk). The Any security mentioned above will not necessarily be comprised in the portfolio by the time this document Brunner Investment Trust PLC is disclosed or at any other subsequent date. Investing involves risk. The value of an investment and the is incorporated in England and income from it may fall as well as rise and investors may not get back the full amount invested. The views Wales (Company registration no. 226323). Registered Office: 199 and opinions expressed herein, which are subject to change without notice, are those of the issuer and/ Bishopsgate, London, EC3M 3TY. or its affiliated companies at the time of publication. The data used is derived from various sources, and assumed to be correct and reliable, but it has not been independently verified; its accuracy or This is a financial promotion completeness is not guaranteed and no liability is assumed for any direct or consequential losses arising from Allianz Global Investors. from its use, unless caused by gross negligence or wilful misconduct. The conditions of any underlying offer or contract that may have been or will be made or concluded shall prevail.

Taking Stock alliancetrustsavings.co.uk | 15 A DEDICATED FOLLOWER OF UNFASHION 25 years of contrarian investment

n 17 November 2019, Fidelity Special Values PLC will celebrate its 25th birthday and, at that O time, I will be only the third Portfolio Manager to have been responsible for the company, having run the portfolio since 2012. During my time as manager, I have continued to invest on behalf the company’s shareholders using the same value-focused, contrarian approach used since it was established under the care of Anthony Bolton twenty- five years ago. The Board and I hope and believe this is appealing to both existing and potential UK investors alike. I focus on unloved companies where things can improve, and invest in companies of all sizes. I hope, in doing so, to position the company as the investment of choice for those seeking exposure to UK-listed companies, but with the benefit of investing up to 20% of the portfolio in listed companies on overseas exchanges, in order to enhance shareholder returns. My investment style is very much in keeping with Fidelity Special Values’ heritage and history – looking for companies whose potential for share price growth or recovery has been overlooked by the market. As a contrarian, I’m drawn to unfashionable stocks ‘credit crunch’ financial crisis of 2008. These companies that trade on cheap valuations. I’m looking for positive have spent the last 8 years building capital buffers and change that others haven’t seen yet. I also look to invest reducing risk, and although there are limited new growth only in companies where I understand the potential drivers, these have been over-discounted in share prices downside risk, to limit the possibility of losses. considering the robust profitability of the sector today. For example, for some time now I have been investing Investing against the tide is a psychologically difficult in Financials domestically and abroad, including thing to do. Humans are social animals, and behave Citigroup, RBS and Aviva. These have been unloved, socially when making investment decisions. It takes a and in my view undervalued, partially since the particular mind-set and a highly disciplined approach to reputational damage caused to the sector during the execute a contrarian investment process successfully.

Highly differentiated from FTSE All-Share benchmark Source: Fidelity, 28 February 2019 Fidelity Special Values PLC has greater exposure to medium sized (FTSE 250) and small (FTSE Small Cap) companies than its comparative benchmark – the FTSE All Share, as well as having exposure to companies listed elsewhere.

100 80 60 40 20 0 -20 FTSE 100 FTSE 250 FTSE Small CapNon FTSE -40 -60 Fidelity Special Values FTSE All Share Overweight/Underweight

16 | Taking Stock alliancetrustsavings.co.uk A DEDICATED “It takes a particular mind- FOLLOWER OF set and a highly disciplined approach to execute a UNFASHION contrarian investment process successfully.”

build up a picture of the true state of a company’s Alex Wright fundamentals. It is this work that allows us to Portfolio Manager form a view of the company’s future profitability Fidelity UK and ultimately decide whether we consider it an attractive investment for our shareholders. Ideally, I want to invest in companies that are Alex Wright (Portfolio Manager from 1 September 2012) joined Fidelity exceptionally cheap on relevant measures, or in 2001 as a research analyst and which have some kind of asset that should has covered a number of sectors prevent their share prices falling below a certain across the market cap spectrum level. This can be anything from inventory to both in the UK as well as developed intellectual property that gives a margin of safety. and emerging Europe. He has been I look for companies where I believe perception portfolio manager of Fidelity UK by the wider market may shift due to changes Smaller Companies Fund since its in the company’s competitors or market, a new launch in February 2008. He took product line or an expansion into new business over responsibility for the areas. I also impose a strict sell discipline on Company’s portfolio on 1 myself once the recovery has taken place. September 2012 and was also Within the investment trust structure, I am appointed as manager of Fidelity able to take positions in smaller and less-liquid Special Situations fund in 2013. companies; its closed-ended structure and stable Alex has a BSc (Economics) from pool of assets allow me to establish larger weights, Warwick University, where he which would not be possible if I had to worry graduated with First Class Honours, and he is also a CFA Charterholder. about flows into and out of the fund. In fact – the portfolio of the trust is only about 30% invested in companies within the FTSE 100 and has nearly 40% invested in companies which aren’t part of FTSE at all. (See chart on previous page showing the highly differentiated nature of the Trust compared to the FTSE All-Share benchmark). Central to the long-term success of our approach The relative illiquidity of holdings can have been company research and making full use sometimes make their share prices more volatile, of the insight and expertise of our large team of but I am not a forced-seller in downward markets analysts. Fidelity’s philosophy is to base investment (indeed I often view them as opportunities to buy decisions on company fundamentals such as more shares at good value), and I believe in the competitive position, management strength, growth long-term rewards of smaller companies. opportunities, valuation and so on. Overarching Within the trust, I can also use gearing to trends in the economy (top-down factors) play a enhance long-term capital growth – and to supplementary rather than primary role in our take advantage of shifts in market valuations. investment decisions. I use Contracts for Difference to gear, as these Our investment team spend many thousands represent the most flexible and cost-effective of hours meeting company management, speaking option, and also occasionally to short stocks to suppliers, competitors and customers in order to if I feel they are significantly overvalued.

Important information: Past performance is not a reliable indicator of future results. The value of This article is issued by investments can go down as well as up so investors may get back less than they invest. Overseas Financial Administration investments are subject to currency fluctuations. This fund uses financial derivative instruments for Services Limited, authorised investment purposes, which may expose the fund to a higher degree of risk and can cause investments and regulated in the UK by the to experience larger than average price fluctuations. This fund invests more heavily than others in smaller Financial Conduct Authority. companies, which can carry a higher risk because their share prices may be more volatile than those Fidelity, Fidelity International, of larger companies. This information does not constitute investment advice and should not be used as The Fidelity International logo the basis of any investment decision, nor should it be treated as a personal recommendation for any and F symbol are trademarks investment. If you are unsure about the suitability of an investment you should speak to an authorised of FIL limited. SSO UKIT00015 financial adviser. Investors should note that the views expressed may no longer be current and may have already been acted upon. Reference to specific securities should not be construed as a This is a financial promotion recommendation to buy or sell these securities and is included for the purposes of illustration only. from FIL limited. The latest annual reports and factsheets can be obtained from our website at www.fidelity.co.uk/its or by calling 0800 41 41 10. The full prospectus may also be obtained from Fidelity.

Taking Stock alliancetrustsavings.co.uk | 17 Taking income higher with REAL ESTATE

The ability of real any of us are inclined towards real estate income. However, with interest rates at persistently estate to generate a investing because the asset class is a subdued levels, they currently offer only modest Mfamiliar feature in our daily lives. The way returns. By comparison, real estate can provide high and dependable we shop, receive goods, work and enjoy leisure both higher income and more secure strategies. income and withstand time all support the underlying real estate economy. As a result, we see many investors keenly seeking Investing in real estate tends to produce a income-oriented real estate strategies. economic volatility relatively high and dependable income stream. It also is notable to see the high regard continues to make it Over time, investors can typically expect around investors place on real estate assets with long- 75% of the return from real estate to come from term secured leases. In some parts of the market, an important element the rental income paid by tenants. The remainder tenants are demanding more flexible and variable of many investors’ comes from the potential growth in value of lease terms. However, this is not universally the portfolios, says the real estate assets. This could be through case and strategies can easily be set that target improvements made to the assets, or market dependable income. Andrew Allen, Global value appreciation, or both. If the tenants sign leases that extend for many Head of Investment Focus on quality Research (Real Estate), years, a portfolio of diversified real estate assets can offer highly predictable income. Moreover, it The four main sectors of the UK real estate market at Aberdeen Standard should be able to withstand short-term economic are the Retail sector, the Logistics sector, the Office Investments – volatility. For this reason, investors typically use sector and Alternatives which includes student real estate to help diversify their portfolio, with housing, budget hotels, data centres, pubs and provided you choose risk-reward characteristics that lie somewhere leisure premises. In short, the UK real estate assets carefully. between equities and fixed-income investments. market – like the global market – is undergoing some important shifts as shopping, working, living Demand for income strategies and leisure patterns change. Finding the real estate assets that are going to thrive in this shifting In recent years, there has generally been growing market demands an active focus on quality – be interest in income-oriented investments. Fixed- it the quality of buildings, location or tenants. income investments, such as UK government But the appeal of quality real estate assets as a gilts and investment-grade corporate bonds, are potential source of reliable income and portfolio considered a comparatively low-risk source of diversification remains as strong as ever.

18 | Taking Stock alliancetrustsavings.co.uk Andrew Allen Global Head of Investment Research Aberdeen Standard Investments

Andrew is Global Head of Investment Research at Aberdeen Standard Investments, and is also a member of the Real Estate Investment Management Committee. Andrew manages a team of analysts located in the US, Singapore, Norway, Germany and • The Company may borrow to finance further the UK. He is primarily responsible investment (gearing). The use of gearing is for the creation and dissemination ABERDEEN STANDARD likely to lead to volatility in the Net Asset of real estate investment research. INVESTMENTS MANAGES Value (NAV) meaning that any movement in Andrew joined Aberdeen Asset Management in 2011 from Oriel ASSETS FOR THREE PROPERTY the value of the company’s assets will result Securities (now Stifel) where he INVESTMENT COMPANIES: in a magnified movement in the NAV. was a partner and analyst in the • The Company may accumulate investment real estate securities team. • Aberdeen Standard European Logistics positions which represent more than normal Income PLC – aims to provide a regular trading volumes which may make it difficult to and attractive level of income return realise investments and may lead to volatility together with the potential for long-term in the market price of the Company’s shares. income and capital growth by investing in European logistics real estate. • Movements in exchange rates will impact on both the level of income received and the • Standard Life Investments Property capital value of your investment. Income Trust Limited – aims to provide an attractive and growing level of • There is no guarantee that the market price income along with the prospect of capital of the Company’s shares will fully reflect growth by investing in a diversified UK their underlying Net Asset Value. commercial property portfolio. • As with all stock exchange investments the • UK Commercial Property REIT – aims value of the Company’s shares purchased to provide an attractive and growing level will immediately fall by the difference of income together with the potential for between the buying and selling prices, the capital growth by investing in a diversified bid-offer spread. If trading volumes fall, This article is issued by portfolio of UK commercial property. the bid-offer spread can widen. Aberdeen Asset Managers • The Company invests in emerging markets Limited which is authorised and regulated by the Financial which tend to be more volatile than mature Conduct Authority in the markets and the value of your investment Important information United Kingdom. Registered could move sharply up or down. Office: 10 Queen’s Terrace, Aberdeen Standard Investments is a brand of • Specialist funds which invest in small markets Aberdeen AB10 1XL. Registered the investment businesses of Aberdeen Asset or sectors of industry are likely to be more in Scotland No. 108419. An Management and Standard Life Investments. volatile than more diversified trusts. investment trust should be Risk factors you should consider prior to investing: considered only as part of • Yields are estimated figures and may fluctuate, a balanced portfolio. Under • The value of investments and the income from there are no guarantees that future dividends no circumstances should this them can fall and investors may get back less will match or exceed historic dividends and information be considered as than the amount invested. certain investors may be subject to further an offer or solicitation to deal • Past performance is not a guide to future results. tax on dividends. in investments. • Investment in the Company may not be This is a financial promotion appropriate for investors who plan to For more information, please visit from Aberdeen Asset withdraw their money within 5 years. www.invtrusts.co.uk Managers Limited.

Taking Stock | 19 For investors in search of income, heroes don’t necessarily wear INSPIRING capes. Sara Wilson reviews the dividend paying track record of investment trusts and outlines DIVIDEND some of the reasons for their potential to pay out consistently HEROES and reliably over the years. ne particular theme always stands out whenever we review the best selling Oinvestments on the Alliance Trust Savings platform – what seems like an insatiable hunger for income. Our top selling shares are almost invariably companies with a reliable and recent track record for paying dividends.

An impressive record The investment trust sector has a well-documented and impressive record when it comes to growing dividends year after year. Whilst we need to be clear that past performance is not a guide to future performance, there are now 20 investment trusts that have increased their dividends for at least 20 consecutive years, including, remarkably, four – City of London, Bankers, Alliance Trust and Caledonia – that have done so for more than 50 years in a row, according to the latest dividend heroes index from the Association of Investment Companies (AIC) 1.

The next generation of heroes The AIC also revealed its ‘next generation’ of dividend heroes, comprising more than 20 investment trusts that have raised their dividends for at least 10 years but less than 20 consecutive years.

Dividends drive growth too The compounding effect of dividends can make them a big driver of investment growth too. Again, past performance is not a guide to future performance, but the most recent Barclays Equity Gilt Study found that if you had invested £100 in the UK stock market at the end of 1945 but not reinvested the dividends, you’d now have £244 to show for it, after inflation. And with the dividends reinvested, the original capital would now be worth £5,573 3. This carries extra weight in an era of low growth and low interest rates, making the continued success of investment trusts in growing their dividends year after year so significant.

Investment trust super powers So why exactly can investment trusts be so reliable when it comes to growing dividends? Some of the reasons may be familiar, but with many trusts offering such consistency at a time when income is in scarce supply elsewhere, it’s worth reminding ourselves of the chief factors. Investment trusts have several inherent, structural advantages that maximises their ability to maintain dividends.

20 | Taking Stock alliancetrustsavings.co.uk Top 10 AIC Dividend Heroes for 2019 1 Dividend Company AIC sector increase* Yield (%)** City of London UK Equity Income 52 4.53 Bankers Global 52 2.33 Alliance Trust Global 52 1.83 Caledonia Flexible Investment 51 1.95 Sara Wilson BMO Global Smaller Companies Global 48 1.15 Head of Platform Proposition F&C Investment Trust Global 48 1.63 Alliance Trust Savings Limited Brunner Global 47 2.44 JPMorgan Claverhouse UK Equity Income 46 3.92 Sara joined Alliance Trust Savings in March 2013 as Head of Platform Murray Income UK Equity Income 45 4.38 Proposition, taking on responsibility Witan Global 44 2.50 for the products and investment choice available on the platform. Previously, she worked for Standard Top 10 AIC Next Generation Dividend Heroes 2 Life as International Proposition Dividend Manager. Before moving to Company AIC sector increase* Yield (%)** Scotland, Sara worked for Xansa, Perpetual Income & Growth UK Equity Income 19 4.58 a technology outsourcing company. She received a BA Honours in Aberdeen Standard Equity Income UK Equity Income 18 4.88 International Business from the Athelney UK Smaller Companies 16 3.96 University of Teesside and a Post TR European Growth European Smaller Companies 16 2.53 Graduate Diploma in Marketing at Napier University, Edinburgh. BlackRock Smaller Companies UK Smaller Companies 15 2.11 BlackRock Throgmorton Trust UK Smaller Companies 15 2.04 Establishment Investment Trust Flexible Investment 15 2.91 Henderson EuroTrust Europe 15 2.94 Henderson Smaller Companies UK Smaller Companies 15 2.62 Aberdeen New Dawn Asia Pacific Excluding Japan 14 1.86

* Number of consecutive years dividend increased. ** Dividend yield at 28/02/19 (%). Important information: This general information is provided to support you in making your own investment decisions. It is One of those is dividend smoothing, a Trust, for example, cites the portfolio diversification not a recommendation to buy mechanism that allows investment trusts to that enables it to benefit from different stages of or sell. Please be aware that set aside up to 15% of their income in reserve the economic cycle. Many trusts are increasing the value of investments can fall each year so that they can maintain payouts to their exposure to income-producing companies as well as rise so you could get investors during more turbulent periods. around the world, benefiting from a growing back less than you invest. Past This means that even with several big dividend culture in Asia in particular 6. performance is not a guide to corporates either cutting their dividends in recent The trusts highlighted by the AIC as being future performance. months or warning of potential future cuts – dividend heroes are all available on the Alliance 4 5 This article is issued and such as Saga and Centrica – investors can still Trust Savings platform. Investment returns can approved by Alliance Trust rely on investment trusts using this mechanism go down as well as up, of course, and as with Savings Limited. Alliance Trust being able to continue producing a regular all investments you could get back less than you Savings Limited is a subsidiary and potentially growing income. pay in to an investment trust. But with a track of Alliance Trust PLC and is Trusts also have the ability to gear (borrow), record of being able to provide consistency of registered in Scotland No. SC another feature that sets them apart from open- income in an uncertain world, it comes as little 98767; registered office, PO ended investment vehicles. Gearing allows surprise to me that investment trusts remain a Box 164, 8 West Marketgait, managers of investment trusts to enhance both popular choice. Dundee DD1 9YP; is authorised capital and income returns in order to cover by the Prudential Regulation dividend payments, although gearing can lead 1. The AIC – Investment company dividend heroes – 12/03/19. Authority and regulated by the to amplified losses too. UK-domiciled investment 2. The AIC – Next generation of dividend heroes – 18/03/19. Financial Conduct Authority and the Prudential Regulation trusts are also allowed to pay income out of 3. Moneyweek – Stocks beat cash and bonds over the long their capital reserves, following a rule change term – 19/04/19. Authority, firm reference in 2012, although few are doing this. 4. Morningstar – Saga Plunges on Dividend Cut and Profit number 116115. Warning – 04/04/19. 5. Proactive Investor – While UK dividends hit record £19.7bn This is a financial promotion Looking to the future in first quarter, some FTSE 100 companies could be headed from Alliance Trust Savings for cuts 19/04/19. Limited. The different trusts have their own strategies for 6. Funds Europe – Dividend culture spreads internationally – growing dividends. City of London Investment 16/07/18.

Taking Stock | 21 Investment trust TOP s Take a look at which investment trusts Alliance Trust Savings’ customers have2 been buying.0 These tables are based on the monetary value of purchases made by our investors on the dates stated below. They do not give any indication of the investment performance of the investment trusts stated. This information is provided for educational and informational purposes only.

Top 20 for 2019 to 31 May Top 20 in May 2019

1 Scottish Mortgage Investment Trust 1 Scottish Mortgage Investment Trust 2 Alliance Trust 2 Alliance Trust 3 City of London Investment Trust 3 City of London Investment Trust 4 Finsbury Growth & Income Trust 4 Finsbury Growth & Income Trust 5 Personal Assets Trust 5 Murray International Trust 6 F&C Investment Trust 6 Merchants Trust 7 Witan Investment Trust 7 RIT Capital Partners 8 Edinburgh Worldwide Investment Trust 8 Edinburgh Investment Trust 9 Murray International Trust 9 Personal Assets Trust 10 Merchants Trust 10 Edinburgh Worldwide Investment Trust 11 Smithson Investment Trust 11 F&C Investment Trust 12 Monks Investment Trust 12 Witan Investment Trust 13 Edinburgh Investment Trust 13 Smithson Investment Trust 14 RIT Capital Partners 14 Monks Investment Trust 15 AEW UK REIT 15 Mercantile Investment Trust 16 Worldwide Healthcare Trust 16 Scottish American Investment Company 17 Temple Bar Investment Trust 17 Allianz Technology Trust 18 Caledonia Investments 18 Bankers Investment Trust 19 Lowland Investment Company 19 Scottish Investment Trust 20 Henderson Smaller Companies Investment Trust 20 JP Morgan Asian Investment Trust

Investments can go down as well as up and investors can get back less than they originally invested. If you are unsure if a particular investment trust is suitable for you, you should seek independent financial advice before making any investment decision. Past performance is not a guide to future performance. Investments trusts may borrow to finance further investment (gearing). The use of gearing is likely to lead to volatility in the Net Asset Value (NAV), meaning that a relatively small movement down or up, will result in a magnified movements in the same direction, of that NAV. This may mean that you could get back nothing at all.

22 | Taking Stock alliancetrustsavings.co.uk OUR EMAILS HAVE CHANGED

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Alliance Trust Savings Limited is a subsidiary of Alliance Trust PLC 01382 573737 and is registered in Scotland No. SC 98767, registered office, PO Box 164, 8 West Marketgait, Dundee DD1 9YP; is authorised by the Prudential Regulation Authority and regulated by the [email protected] Financial Conduct Authority and the Prudential Regulation Authority, firm reference number 116115. Alliance Trust Savings alliancetrustsavings.co.uk gives no financial or investment advice. Calls may be recorded for training and monitoring purposes.

Taking Stock alliancetrustsavings.co.uk | 23 WAYS TO DO BUSINESS

Manage your Account online at alliancetrustsavings.co.uk • Buy and sell online • Same day set-up and trading (conditions apply) • Online monthly dealing

Call 01382 573737 Our real-time telephone dealing service is available during normal UK market opening hours. Calls may be recorded for training and monitoring purposes.

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Alliance Trust Savings Limited does not give advice. If you are unsure whether an investment is right for you, you should seek professional advice. The articles in this magazine from other investment trusts have been paid for and as such are published without any representation or endorsement made by or from us of any kind whether express or implied, including but not limited to the opinions expressed, appropriateness of any recommendation made, fitness for a particular purpose, compatibility with any investment strategy or accuracy. We will not be liable for any indirect or consequential loss or damage whatever (including without limitation loss of business, opportunity, data, profits) arising out of or in connection with your reliance on any article or the contents of any article contained in this magazine.

ATS GEN MAG 0033 (Summer 2019)