AUTUMN 2019

GREATEST INVESTING HITS A look at the ‘best of’

alliancetrustsavings.co.uk Welcome to the Autumn 2019 edition of Taking Stock.

What makes a hit?

When it comes to success in the music charts talent, skill, luck and being in the right place at the right time can all be factors in realising potential. But is the same true for investing?

In this edition of Taking Stock, our expert contributors look at the investing hits that for them might feature in a ‘best of’ compilation – those stock picks and broader strategies that have really delivered for investors – and explain the factors they believe were at work.

Is it the case that investment success factors are unique to each situation? Or are there common themes? And how and where might we look for the hits of the future?

An exciting future ahead

This is also an exciting time of looking ahead for Alliance Trust Savings and Taking Stock. We’re now part of the interactive investor group and if you’re a self-directed customer you’ll soon be moving to use the interactive investor platform.

We know you value Taking Stock for its focus on investment trusts, so you’ll continue to receive it after your move. It will have a new look under the interactive investor brand, but the same informative and interesting content.

It just remains for all of us here at Alliance Trust Savings to thank you for your support over the years, and we hope you’ll continue to benefit from Taking Stock for many years to come.

Sara Wilson Head of Platform Proposition Alliance Trust Savings

This general information is provided • Better value to support you in making your • Better choice own investment decisions. It is not a recommendation to buy or sell. • Better intelligence Please be aware that the value of • Better online services investments can fall as well as rise so you could get back less than you invest. Past performance is not a Explore how you stand to benefit guide to future performance. www.excitingfuture.co.uk

2 | Taking Stock alliancetrustsavings.co.uk 4

8

16

12 20 22

Contents

04 Stars of the future? 16 Digitalisation: Opportunities and risks If the rise, fall and rise again of technology brands has For Lucy Macdonald, digitalisation is a fundamental trend been the story of recent years, what might the future hold? From that has played a particularly important role in recent years, artificial intelligence to climate change, Alliance Trust Savings’ with businesses alert to its impact well positioned for success. James McCafferty looks at what the future gazers have to say. The Brunner Investment Trust’s investment in Microsoft is a case in point. 06 Parklife! The team at Ediston see beyond ‘the death of the high street’ to the 18 A capital idea for growth plentiful life in retail parks. With people shopping more than ever The Baillie Gifford Monks Investment Trust philosophy is based on before, the rise of online shopping is a sign that retail is evolving the idea of investing as the provision of long-term risk capital to rather than dying and retail parks with the right attributes are in businesses seeking to grow. James Budden breaks this broad idea line to benefit. down and explains what it means for the way Monks is managed.

08 Discard the three Ds 20 Realising potential on the financial front line James Budden of Baillie Gifford says long-term investors in Japan Invesco’s Jonathan Brown and Robin West consider the UK equity should cast out the three Ds of debt, demographics and deflation market as one of the most diverse in the world, with smaller often used to sum up the country’s economic problems. Instead companies tending to outperform the larger. They present the they should look to its many visionary businesses, able to challenge facts and highlight three stocks that have delivered for their the status quo. trust over the past few years.

10 The changing face of the Chinese consumer 22 US hits: A case study Dale Nichols, Portfolio Manager of Fidelity China Special Situations Identifying and backing winners of tomorrow is one way that explains why he believes the incredible growth of China’s middle investment managers can help grow investor funds. But it’s easier classes and the country’s seismic shift towards domestic said than done. By way of illustration, Sara Wilson of Alliance consumption presents a significant opportunity for investors. Trust Savings explores the changing fortunes of corporate America.

12 Greatest hits of a value investment approach 24 An investment story of excitement and analytical rigour Merchants Trust Portfolio Manager, Simon Gergel, believes the For the hit-finders at the Allianz Technology Trust, it’s all about highest returns can come either when a company’s prospects identifying major transformative growth themes within technology. have been misunderstood or it changes its business structure Cloud and software-as-a-service are the two most significant over a period, and puts forward Royal Dutch Shell and United themes in the Trust’s current portfolio. Portfolio Manager, Walter Business Media as examples. Price, explains why.

14 Quality breeds success 26 A contrarian approach can pay dividends For Abby Glennie, Investment Manager for the Aberdeen Smaller Alasdair McKinnon of The Scottish Investment Trust explores Companies Income Trust PLC, hit-making is all about investing why his team prefers to plot its own course rather than following in resilient companies with strong balance sheets and cash the herd. They see value in ugly duckling stocks shunned by generation that have a sustainable competitive advantage. others but with potential to improve. From retail to wine.

Taking Stock alliancetrustsavings.co.uk | 3 STARS OF THE FUTURE? If the rise, fall n 1999 money flowed into companies no ownership has increased rapidly 3 and Tencent and one had ever heard of, doubling the value Alibaba are just two of several Chinese brands with and rise again of I of the Nasdaq 1 – the US tech index – as a growing influence on the global economy. technology brands investors sought to identify the big winners from It may seem that these new technology giants the web revolution. Yet investors in what became of the world economy are here to stay. But the has been the story known as the dotcom boom were often piling story of the past 20 years shows how quickly things money into over-valued companies that would can change. PwC has warned, for instance, that of recent years, soon disappear without trace. regulatory developments could mean that “Today’s what might the Amid all the hype, the only technology brands winning business could be tomorrow’s court case”4. among the world’s biggest companies by market If the likes of Facebook, Amazon and Tencent future hold? James capitalisation in 1999 were Microsoft, Cisco and can grow so rapidly, surely others can do likewise McCafferty looks Intel – computing rather than internet-based firms. and, eventually, usurp them. It’s realistic to expect Microsoft has proved the hardy perennial. that 10 years from now, the world’s biggest at what the future- In 2009, it stood alone as the sole tech company companies will include brands that are currently amid the energy giants and Chinese telecoms a long way off that status, or don’t even exist yet. gazers have to say. upstarts that accounted for the 10 most valuable companies in the world. A decade later, the energy giants are conspicuous only by their absence. Giants of tomorrow Now, seven of the world’s 10 most valuable The stock market giants of tomorrow may well companies are tech brands – in 2019, Microsoft still be technology companies, but their activities is joined by Amazon, Apple, Alphabet (owner could be somewhat different to the likes of of Google), Facebook, Alibaba and Tencent 2. Facebook and Apple. The rate at which AI is evolving will likely have a big influence. Is big tech here to stay? Thomas Frey, a leading futurist, predicted last year that “by 2030 the largest company The dramatic shift in the balance of global on the internet is going to be an education- corporate power towards technology firms has based company that we haven’t heard of yet” really only taken place over the past five years. In – not because its technology is particularly that time digitalisation and artificial intelligence sophisticated, but because the company behind (AI) has created new opportunities, smartphone it will be the biggest of its kind 5. Frey believes

4 | Taking Stock alliancetrustsavings.co.uk this company will be producing bots that can deliver tailored online lessons to children, allowing them to learn more quickly. AI is also likely to have an influence on stock markets through the rise of the driverless car and its implications for industries from automobiles and energy to infrastructure and insurance. Tesla may be the best-known brand here, but the likes of Amazon and Alphabet (Google) could be among the biggest beneficiaries due to their capabilities and market advantage in areas such as data analytics 6.

Responding to climate change Some of tomorrow’s biggest companies may also be those that are active in the battle against James McCafferty climate change. We’re already seeing real Platform Proposition Manager innovation in areas such as renewable energy, Alliance Trust Savings Limited water management, recycled materials, energy 7 storage systems and carbon capture . James is Platform Proposition The businesses that thrive amid efforts to Manager at Alliance Trust Savings combat climate change may fall into two camps and has responsibility for the – the established brands that are most effective in ongoing development of the evolving their business models accordingly, and platform and products. He has those that can develop sustainable infrastructure, over 15 years industry experience produce clean fuel technologies, support the gained in the Intermediary transition to a low carbon economy and help Business at Cornelian Asset mitigate climate change effects such as extreme Managers and in previous roles with F&C and Standard Life. weather, drought and rising sea levels 8. Companies identified in 2019 as being leaders in such innovation include those producing plant- based meats (i.e. Beyond Meat, Impossible Foods), STARS OF optimisation of water usage (such as Aqua Spy) and reducing food and plastics usage (among them Olio and The Great Bubble Barrier) 9.

Important information: This Building on demographic trends general information is provided to support you in making your THE FUTURE? Ageing populations, primarily in the developed own investment decisions. It is world, may mean that the biggest companies not a recommendation to buy of the future will include those in the healthcare, or sell. Please be aware that pharmaceutical and wellness and biosciences US HITS: A CASE STUDY the value of investments can fall sectors, as well as tech firms able to deliver as well as rise so you could get services such as smart homes 10. In US hits: A case study Alliance Trust back less than you invest. Past In the developing world, we are looking at Savings’ Sara Wilson takes a closer look performance is not a guide to an explosion of middle-class consumers with at the fall and rise of some of corporate future performance. discretionary incomes. McKinsey predicted in America’s biggest companies and the This article is issued and 2015 that globally, middle class spending will potential lessons for investors. have trebled by 2030, driven by emerging approved by Alliance Trust markets. It suggested this would fuel demand Savings Limited. Alliance Trust for greater personalisation and benefit Savings Limited is registered companies able to “make better use of in Scotland No. SC 98767, 1. Forecast-chart.com – NASDAQ 100 Stock Market Index registered office, PO Box 164, digitization, big data, and analytics” 11. Historical Graph – accessed 31/07/19. 8 West Marketgait, Dundee It may of course be that today’s big tech 2. Visual Capitalist – A Visual History of the Largest DD1 9YP; is authorised by the companies have the capabilities in analytics Companies by Market Cap (1999-Today) – 21/06/19. Prudential Regulation Authority and artificial intelligence to seize a long-term 3. Statista – Number of smartphone users worldwide from and regulated by the Financial 2016 to 2021 (in billions) – accessed 31/07/19. advantage that enables them to remain Conduct Authority and the dominant for years to come. 4. World Economic Forum – This is what work will look like by 2030 – 10/01/18. Prudential Regulation Authority, firm reference number 116115. 5. Impactlab.net – The largest internet company in 2030? This prediction will probably surprise you – 14/09/18. ‘Alliance Trust Savings’, ‘ATS’ Look before you leap and ‘AT Savings’ are all brand 6. The Conversation – Cars will change more in the next As history shows – and many investors have decade than they have in the past century – 14/05/19. names of Alliance Trust Savings found out to their cost – trying to predict the future 7. World Economic Forum – Bill Gates: This is what we Limited together with the isn’t easy. It’s worth keeping an eye on the trends need to do to tackle climate change – 21/05/2019. ‘Alliance Trust Savings’ logo that experts believe will produce tomorrow’s big 8. World Resources Institute – Low-Carbon Growth Is a $26 are owned by and used with Trillion Opportunity. Here Are 4 Ways to Seize It – 5/09/18. the permission of Alliance Trust industries and companies, but any investment 9. PLC, the previous owner of decisions you make should always be based Rocketspace – 24 Innovative Startups Making Climate Change Impact in 2019 – 10/04/19. Alliance Trust Savings Limited. on careful research. 10. Forbes – Aging Populations: A Blessing For Business – Twenty years on, the 1999 dotcom experience 23/02/18. This is a financial promotion still serves as a reminder of the potential 11. McKinsey – The consumer sector in 2030: Trends and from Alliance Trust Savings dangers in simply following the herd. questions to consider – 12/15. Limited.

alliancetrustsavings.co.uk | 5 PARKLIFE! espite the ‘death of the high differently. So, while the overall volume street’, there’s plenty of life in of retail sales has been steadily rising, Dretail parks. The internet has the number of sales made at traditional transformed our shopping habits. department stores has been falling fast. Today, with almost anything deliverable And as sales at high-street stores and to our doors, convenience is king. But shopping centres decline, out-of-town providing that convenience requires retail parks are emerging as winners. much more than a warehouse and These retail parks offer retailers a a fleet of delivery vans. Increasingly, wealth of attractions for owners and shoppers are demanding an tenants alike. Their lease lengths tend to ‘omnichannel’ experience. While they be good, and the flexibility of their units want to order from home or from allows for easy upsizing and downsizing the office, they often prefer to pick as business conditions changes. As a up those orders in store, so that, for result, vacancy rates tend to be low. And example, they can try clothes on before retail parks are well placed to benefit taking them home. And they expect the from the shift to online shopping. same convenience in returning goods. That’s because retail parks are According to property agent Savills, perfectly placed to provide the joined-up, by 2022, when the growth of online omnichannel experience that customers shopping is expected to level out, more want. Out-of-town locations allow than 80% of sales will still involve commuters to collect or drop off items physical stores. But our changing habits on their way home. And attractive retail mean that many of those stores will not parks with cafés, restaurants and other be located in city centres. Meanwhile, diversions offer a full ‘experience’ for retailers have to consider not only how families at the weekend. best to balance their online and offline From the retailer’s perspective, both businesses, but also the costs of storage, ‘click and collect’ and returns bring distribution and returns. For shoppers customers off the internet and into and shop-owners alike, out-of-town the stores, where they can be tempted retail parks provide a solution. to make additional purchases. And We’ve all seen the gloomy headlines out-of-town locations are ideal for about high-profile closures on the high ‘last-mile’ delivery and the storage of street. But it’s important to realise that goods bought online. So many retailers people aren’t shopping less in the online are taking advantage of retail parks’ era. In fact, they’re shopping more strategic locations to maximise the than ever before – they’re just doing it efficiency of their deliveries.

6 | Taking Stock alliancetrustsavings.co.uk It’s this combination of online and offline interested in parks that dominate their local that makes retail parks such an attractive area. Nor are we interested in ‘over-rented’ investment. We foresee a future in which the properties – where rents are too high and major chains have fewer stores on the high will be difficult to sustain when leases expire. street and much better out-of-town Instead, we favour parks with affordable rents representation in retail parks. ‘Bricks’ and and the potential for us to improve returns ‘clicks’ will work together to deliver the through intensive asset management. We consumer’s preferred experience – and aim to get under the skin of each property retail parks will be pivotal in facilitating that. we own so that we can secure and improve the income streams for our investors. “...as sales at high-street Our conviction in the right retail parks is so strong that we intend to build one of our own stores and shopping centres at our site in Haddington, outside Edinburgh. We’ve had abundant interest from potential decline, out-of-town tenants, and we expect most of the units to retail parks are emerging be let well before construction starts. Retail isn’t dying – far from it. But it is Calum Bruce as winners.” evolving. We aim to harness that evolution BSC (HONS) MRICS on our investors’ behalf. As e-commerce Manager Not all retail parks are equal, however. evolves into omnichannel, we’re confident Ediston Property At Ediston, our investment approach is highly that the best retail parks have the locations, Investment Company selective. We avoid more than 60% of the facilities and flexibility to prosper in the retail-park subsector because we’re only online age. Calum joined Ediston from Scottish Widows Investment Partnership, where he was involved with both wholesale and institutional Important information: The contents of this article should not be construed as legal, tax, investment or mandates. He was Fund Manager other advice. Each prospective investor should make its own enquiries and consult its professional advisers of the real estate portfolio of the as to the legal, tax, financial and other relevant matters and risks concerning any investment opportunity. Halifax Managed Income Fund and was Deputy Fund Manager of LTGP Past performance is not a reliable indicator of future performance – the value of a stock market investment Limited Partnership Incorporated. and any income from it can fall as well as rise and investors may not get back the amount invested. Prior to this appointment he worked on the SWIP Property Trust. Whilst information contained in this article is believed to be accurate at the date of publication, it is subject to change and does not purport to provide a complete description of Ediston Property Investment Company Plc (the “Company”) or its future prospects or performance. Any forecast, projection or target TIDM: EPIC is indicative only and not guaranteed. In particular, the payment of dividends and the repayment of Web: www.epic-reit.com capital are not guaranteed.

The Company invests in property assets which can be highly illiquid, typically do not grow at an even rate Dividend as at 30/06/2019 of return and may decline in value, all of which may have a negative impact on the value of the Company. Yield: 6.1% To the fullest extent permitted by law, The Company, Ediston Investment Services Limited and their respective Cover: 117% directors, advisers or representatives shall not have any responsibility or liability whatsoever for any loss (whether direct or indirect) arising from the use of this documents or its contents. Paid: monthly

This article is issued and approved by Ediston Investment Services Limited which is authorised and regulated by the Financial Conduct Authority (FRN:706655).

This is a financial promotion from the Ediston Investment Services Limited.

alliancetrustsavings.co.uk | 7 DISCARD THE THREE Ds Long-term investors The value of your investment and any income Currently the trust has a portfolio of 73 from it can go down as well as up and as a holdings and it is worth taking a look at three in Japan should cast result your capital may be at risk. of its top ten holdings (see table) by way of giving a flavour of its proposition to investors. Shares out the three Ds – ommentators have long had a habit of in medical device developer Asahi Intecc have debt, demographics describing Japan as a country defined grown 21 times in the past ten years and have Cby its national isolation, bureaucratic further potential on the upside as the business and deflation – often inertia, and aversion to risk, where coercion grows its market share beyond Japan. Overseas trumps competition. It is portrayed as a fatalistic sales account for two-thirds of revenue, up from used to sum up the society and a culture of subservience. However, one third in recent years. country’s economic whether true or not, none of these things actually problems. matter when you invest in a very long-term patient manner and construct a portfolio from Top ten holdings the bottom up. Either these problems are % of total addressed by the companies you invest in or Holding assets they are superfluous when compared to the long-term growth opportunities which these 1. Bengo4.com 4.4 companies can offer. When you invest in such 2. Asahi Intecc 3.2 a way, Japan can be a land ripe for reward. 3. Infomart 3.0 Baillie Gifford has one of the largest Japanese 4. Istyle 2.8 equities teams outside Japan and runs two high- performing investment trusts – Baillie Gifford 5. GMO Payment Gateway 2.7 Shin Nippon and Baillie Gifford Japan. They 6. Peptidream 2.7 have a combined market capitalisation of £1.2 7. Brainpad 2.7 billion and a distinctive growth style. 8. Nihon M&A Center 2.6 Praveen Kumar, manager of the £527 million Baillie Gifford Shin Nippon, looks for smaller 9. MonotaRO 2.5 Japanese companies whose shares have the 10. Raksul 2.5 potential to grow fivefold over five years. He favours Total 29.2 problem-solvers – companies that offer solutions to endemic structural threats, often run by visionaries Total may not sum due to rounding. who are willing to challenge the status quo.

8 | Taking Stock alliancetrustsavings.co.uk The two other examples illustrate that the with suppliers. Praveen Kumar has something manager is finding exciting opportunities particularly interesting to say about this stock: emanating from the disruption and transform- “It’s worth considering the Galápagos ation of established industries through the use syndrome in Japan where high tech is met with of modern technologies. Luddite or outdated practices. It’s a very curious James Budden Iconoclastic entrepreneur Yasukane paradox that you’ll notice if you visit Japan. Matsumoto, founder and chief executive of online Fax machines remain ubiquitous and crucial to Director of Marketing printing company Raksul, has a 30-year plan to businesses whereas they are a relic and gone and Distribution increase the 3 per cent share online players have the way of the dodo in the west. Restaurant Baillie Gifford of the commercial printing market in Japan. The businesses rely on fax machines, trade shows company has an innovative business model and and pamphlets to order their ingredients. James is a Director of Marketing low capital requirements, acting as a middleman and Distribution in the Clients Infomart brings it all online.” Department. He joined Baillie between printers and customers and charging As a result, this company aims to increase 25 per cent commission while remaining 30-50 Gifford in 2008 having worked the 18 per cent online penetration of this market at Witan Investment Trust and per cent cheaper than factory-laden competitors. as restaurants grapple with tighter margins Henderson Global Investors. amid higher labour costs, which they are not James graduated MA in Classics keen to pass onto customers. from the University of Cambridge “It is a new Japan and To sum up, Baillie Gifford Shin Nippon seeks in 1987. growth from companies with cutting-edge by investing long term in business models disrupting traditional Japanese its smaller companies practices. More often than not, it is the case that such companies are founded by an emerging Shin Nippon, which means breed of dynamic entrepreneurs returning home after being educated overseas. By way of New Japan, is living up diversity, the trust’s portfolio is a blend of domestic to its name.” champions and firms with strong sales in global markets. The manager believes that Japan, far from being in the doldrums, is experiencing a Infomart is also using technology to transform period of secular growth and innovation. It is an old-fashioned industry. It provides an a new Japan and by investing long term in its online business-to-business food information smaller companies Shin Nippon, which means and ordering system, connecting restaurants New Japan, is living up to its name.

Annual past performance to 30 June each year (%) 2015 2016 2017 2018 2019 Baillie Gifford Shin Nippon 14.0 50.0 23.7 39.2 -6.2 Baillie Gifford Japan Trust 26.6 6.2 39.6 26.1 -5.4

Source: Morningstar. Share price, total return. Sterling. Past performance is not a guide to future results.

Important information: Baillie Gifford & Co and Baillie Gifford & Co Limited are authorised and regulated by the Financial Conduct Authority (FCA). The investments trusts managed by Baillie Gifford & Co Limited are listed UK companies and are not authorised and regulated by the Financial Conduct Authority. A Key Information Document for Shin Nippon is available by visiting www.bailliegifford. This article is issued by com. The trust invests in overseas securities and changes in the rates of exchange may also cause the Baillie Gifford & Co Limited value of your investment (and any income it may pay) to go down or up. The trust’s exposure to a single and does not in any way market and currency may increase risk. The trust’s risk could be increased by its investment in unlisted constitute investment advice. investments. These assets may be more difficult to buy or sell, so changes in their prices may be greater. All information is sourced from Investment in smaller companies is generally considered higher risk as changes in their share prices Baillie Gifford & Co and is may be greater and the shares may be harder to sell. Smaller companies may do less well in periods of current unless otherwise stated. unfavourable economic conditions. This recording does not constitute, and is not subject to the protections afforded to, independent research. Baillie Gifford and its staff may have dealt in the investments This is a financial promotion concerned. Investment markets and conditions can change rapidly. The views expressed are those of the from Baillie Gifford & Co speaker, are not statements of fact, and should not be considered as advice or a recommendation to buy, Limited. sell or hold a particular investment. No reliance should be placed on these views when making investment decisions. All information is sourced from Baillie Gifford & Co and is current unless otherwise stated.

Taking Stock alliancetrustsavings.co.uk | 9 The changing face of the CHINESE CONSUMER

While growth has slowed somewhat in China he UK’s largest China investment trust, Fidelity China Special Situations PLC, fully capitalises on Fidelity’s extensive, locally- of late, Dale Nicholls – Portfolio Manager of T based analyst team to help find the opportunities that make Fidelity China Special Situations believes the the most of the immense shifts occurring in local consumer demand. China, although increasingly recognised as being a major driver incredible growth of China’s middle classes and of global growth and investment performance, is still considered by some to be an emerging market and therefore investing can be the seismic shift towards domestic consumption volatile and sentiment driven (which is reflected in the share price presents a significant opportunity; consumption discount which the trust trades on). To help combat this and reduce discount volatility the Board has recently adopted a new formal growth will outpace that of the wider economy. discount control policy where it will seek to maintain the discount in single digits in normal market conditions by repurchasing shares.

Significant opportunity With over 1.3 billion customers, growing income levels and a government committed to promoting a consumption-led economy, I think the opportunity to invest in how and what China consumes remains significant. The scale and scope of this structural shift is borne out by the fact that consumption now accounts for around 75% of overall GDP growth in China. More recently, however, we have seen a combination of trade tensions and a cyclical slowdown in the broader Chinese economy

10 | Taking Stock alliancetrustsavings.co.uk impact consumer confidence. Last year saw From global to local retail sales growth slow to high single digits – still enviable in a global context – with high ticket The Chinese consumer has traditionally been purchases seeing a more significant adjustment. viewed as an aspirational buyer of Western luxury The auto market experienced its first decline in brands. But today there is an increasing trend in over two decades, although there have been the number of Chinese consumers considering notable pockets of strength in the consumer local domestic brands. According to research space, with areas like domestic sportswear, consultancy Prophet, Chinese brands have baijiu (rice wine) and ecommerce remaining overtaken once favoured global multinationals. strong albeit still slowing. Chinese brands now take up thirty of the top fifty brands, a massive increase from 2016 where the number was just eighteen. The likes of Apple, BMW and IKEA have been replaced “...the trust remains by Huawei, Taobao and Meituan Dianping. focused on those areas As the Chinese consumer matures they are also becoming more discerning and focused on that are exposed to China’s value, which increasingly favours local brands Dale Nicholls structural shift towards who understand the local market. Portfolio Manager A number of holdings within Fidelity China Fidelity China Special Special Situations PLC are well positioned to Situations PLC a domestic consumption- capitalise on these shifts. China’s sportswear driven economic model...” market, which is expected to see double digit Dale Nicholls took over as portfolio growth over the next few years, is a good manager of Fidelity China Special example. Nike, a well-established global player, Situations PLC on 1st April 2014. In regard to the ongoing US – China trade has a firm hold on the premium end of the Dale has 20 years of investment negotiations, I think it seems reasonable to market. But on a mass market level local brands experience, and joined Fidelity as expect the noisy macroeconomic and geopolitical such as Li-Ning are developing. Li-Ning, founded a research analyst in 1996. Dale initially focused on Japan and environment to persist for the time being as the by a former Chinese Olympic gymnast, has done a great job in transitioning the brand, appealing managed Japanese sector funds discussions continue. Longer-term I ultimately from 1999. He was subsequently think that a trade deal being agreed remains to a younger and broader audience with reference appointed portfolio manager of the the most desirable outcome due to the mutual to Chinese heritage and characters. While Nike Fidelity Pacific Fund in 2003, which damage a prolonged and full-blown trade war and Adidas will continue to hold impressive focuses on small and mid-caps in would bring to both economies – starting with market share in China’s sportwear market, Li- the Asia Pacific region with a higher prices for US consumers. Ning is certainly leading the domestic charge. significant tilt towards Chinese Against this backdrop, the trust remains stocks. Dale has a Bachelor of Business degree from Queensland focused on those areas that are exposed to China’s Demand for services is rising structural shift towards a domestic consumption- University of Technology. driven economic model, with 90% of the portfolio’s On the services side, the portfolio holds New total revenues coming from Greater China, Oriental which is one of the largest tutoring including Hong Kong and Macau. In these so- companies in China with around 6.3 million called “New China” consumer-related areas, the total student enrolments in 2018. By May 2018 underlying growth drivers are strong, innovation it had 1,081 learning centres in 75 cities across levels high and new players are emerging. China. It’s set to benefit from a growing middle class that is also becoming more aspirational Key trends to watch and which places significant value on education, especially due to a highly competitive jobs market. CHINESE CONSUMER Within consumption there are some key I believe these examples highlight to good trends which I think are being overlooked or effect that while the rate of growth is slowing in underestimated by investors. The shift to a China, there are no shortage of consumer-related preference for local rather than global brands investment opportunities. But as preferences within certain products, the premiumisation evolve and trends change, it’s important to take of consumption trends and also increasing an active approach to stock selection to fully demand for lifestyle services and experiences capitalise on the changing face of the Chinese like education, health care and travel. consumer’.

Important information: This information does not constitute investment advice and should not be used as the basis of any investment decision, nor should it be treated as a recommendation for any investment. This information is not a personal recommendation for any particular investment. Past This article is issued by performance is not a reliable indicator of future results. Fidelity does not give advice. If you’re unsure of Financial Administration the suitability of an investment for you, you should speak to a financial adviser. The value of investments Services Limited, authorised can go down as well as up so investors may get back less than they invest. Overseas investments are and regulated in the UK by the subject are subject to currency fluctuations. The investment trust can gear through the use of bank loans Financial Conduct Authority. or overdrafts and this can be achieved through the use of derivatives. Where this is the case, their use Fidelity, Fidelity International, may lead to higher volatility in the Net Asset Value and Share Price. This trust invests more heavily than The Fidelity International logo others in smaller companies, which can carry a higher risk because their share prices may be more and F symbol are trademarks volatile than those of larger companies. Unless otherwise stated all products and services are provided of FIL limited. SSO UKIT00018 by Fidelity International, and all views expressed are those of Fidelity International. Fidelity, Fidelity International, the Fidelity International logo and F symbol are registered trademarks of FIL Limited. This is a financial promotion The latest annual reports, factsheets and Key Information Document (KID) can be obtained from our from FIL limited. website at www.fidelity.co.uk/its or by calling 0800 41 41 10. The full prospectus may also be obtained from Fidelity. Fidelity Investment Trusts are managed by FIL Investments International.

Taking Stock alliancetrustsavings.co.uk | 11 GREATEST HITS of a Value Investment Approach

e follow a value investment style at The Merchants Trust. We aim to buy W high yielding shares when the share price is below our assessment of the company’s intrinsic or fair value. We aim to generate a return from the dividends paid to investors, growth in earnings and also from a capital gain as the shares are revalued over time. The highest returns can come either when a company’s prospects have been misunderstood in the stock market, or when it changes its business structure over a period. This can lead to a significant re-rating of the shares, compounding the return from an attractive initial dividend yield. Two specific examples of our greatest hits illustrate these two types of situations:

Royal Dutch Shell Sometimes investors in the stock market can get far too nervous about an individual company’s prospects, taking its shares to extremely depressed levels. At the start of 2016, Royal Dutch Shell’s shares were very lowly priced. A weak oil price had led investors to question the sustainability of Shell’s dividend, and the shares were paying an unusually high yield of around 9%. We thought the shares were not fairly reflecting Shell’s tremendous asset base, including hydrocarbon resources, chemical refineries, petrol stations and other assets. We believed that investors were underestimating the company’s ability to cut costs and capital expenditure to improve cash generation and sustain dividend payments. And we believed that, as we have seen many times before, a depressed oil price would lead to higher demand for oil, slower growth in oil supply and, in due course, a rebound in the oil price.

“Looking to the future, for where the next investment hits may come from, we are at a particularly interesting stage in the stock market.”

Over the subsequent 3 years, firm management actions enabled Shell to deliver a substantial increase in efficiency and cash generation, helped by the company’s well timed acquisition of competitor BG. Investor sentiment improved, as cash flow improved and the oil price recovered. The share price rose by around 70% to the point where, in 2019, the dividend yield has fallen below 6%. Over these three years, including the

12 | Taking Stock alliancetrustsavings.co.uk substantial dividends that Merchants has received, to the improved prospects. Our returns as Simon Gergel the return from investing in Shell, one of the shareholders were further boosted when Portfolio Manager largest companies in the UK, was exceptional. another media company, Informa, launched The Merchants Trust Shell was a case of a great investment a takeover bid for the company in early 2018. opportunity hiding in plain sight. However, Informa, which was pursuing its own corporate Head of UK Equities the second example is of a company going repositioning, was attracted to UBM’s focus on Allianz Global Investors through a metamorphosis. Whilst it may be exhibitions, helping it to become the largest clear that a company is changing its structure, events company in the world. In this case, as Simon Gergel is head of the UK there can be good money to be made from UBM shareholders, not only did we make a Equity team at AllianzGI and specialises in managing UK equity buying the shares before the frog has been good return from the re-valuation of UBM’s income portfolios. He is supported transformed into a prince. shares as the company focused down on the by a dedicated team of fund attractive exhibitions industry, but we also managers and analysts. United Business Media received a significant premium from Informa as it took control of the company. For many years United Business Media (UBM) had been a media conglomerate, spanning Identifying a turnaround several different activities. But by 2015, under the leadership of Tom Cobbold, it had declared These two situations were both quite different. a strategy to be an “Events First” company, Shell required a turnaround in operational focusing on exhibitions and events. The company performance, whereas UBM was more about was disposing of other activities, most notably a strategic repositioning of the group. However, its PR Newswire public relations company, there was a common theme: Both companies’ which was sold in 2016, and reinvesting into shares were significantly undervalued compared exhibitions. We believe that large exhibitions are to the intrinsic value of the businesses and their excellent businesses. The key trade shows in an future cash generation potential. industry are often critical events for companies Looking to the future, for where the next to attend. There are significant barriers to investment hits may come from, we are at a This article (919814) is issued by competition as the largest events attract the main particularly interesting stage in the stock market. Allianz Global Investors GmbH, exhibitors and the most customers. Exhibitions Many domestically focused companies are an investment company with provide strong cash flow and can make very trading on modest valuations, due to investor limited liability incorporated in high returns for their owners. fears of the potential impact of Brexit. This is Germany, with its registered office at Bockenheimer Landstrasse Initially UBM was a modestly valued company. particularly true amongst smaller companies, 42/44, D-60323 Frankfurt/M. The shares suffered from a “conglomerate as concerns have been exacerbated by investors Allianz Global Investors GmbH discount” as some of the non-core businesses taking money out of the UK market, leading to is registered with the local court within the group were less attractive to persistent selling pressure. This has left many of Frankfurt/M under HRB shareholders than the exhibitions business. Also, perfectly sound businesses trading at unusually 9340 and is authorised and there was a drag on profitability from selling depressed levels. Any resolution to Brexit could regulated by the Bundesanstalt non-core businesses. These disposals improved lead to a recovery in economic activity, and für Finanzdienstleistungsaufsicht the overall quality of the group, but held back possibly an improvement in investor sentiment. (BaFin). Allianz Global Investors growth. However, once the company had This in turn could lead to a significant re-rating GmbH has established a branch become focused on events and started to deliver of these types of companies and attractive in the United Kingdom, Allianz steady profits growth, the share price responded future returns for investors. Global Investors GmbH, UK Branch, which is subject to limited For more information, please visit www.merchantstrust.co.uk regulation by the Financial Conduct Authority (www.fca. org.uk). Details about the Important information: All sources Allianz Global Investors GmbH unless otherwise noted. This is no extent of our regulation by the recommendation or solicitation to buy or sell any particular security. A security mentioned as example above Financial Conduct Authority are will not necessarily be comprised in the portfolio by the time this document is disclosed or at any other available from us on request. subsequent date. Investing involves risk. The value of an investment and the income from it may fall as well The Merchants Trust PLC is as rise and investors may not get back the full amount invested. Past performance is not a reliable indicator incorporated in England and of future results. The views and opinions expressed herein, which are subject to change without notice, Wales. (Company registration no. are those of the issuer and/or its affiliated companies at the time of publication. The data used is derived 28276). Registered Office: 199 from various sources, and assumed to be correct and reliable, but it has not been independently verified; Bishopsgate, London, EC2M 3TY. its accuracy or completeness is not guaranteed and no liability is assumed for any direct or consequential losses arising from its use, unless caused by gross negligence or wilful misconduct. The conditions of any This is a financial promotion underlying offer or contract that may have been, or will be, made or concluded, shall prevail. from Allianz Global Investors.

alliancetrustsavings.co.uk | 13 QUALITY BREEDS SUCCESS

At Aberdeen Smaller Companies Income Trust we believe investing in quality growth businesses is our potential recipe for success. By quality we mean resilient companies with strong balance sheets and cash generation, that have a sustainable competitive advantage and can hopefully deliver repeatable – and profitable – growth.

uality for us is also about good corporate culture alongside management pedigree – Qwe’ve often invested into businesses run by the founder who has built them up from nothing. Good culture might mean low staff turnover and employees having equity or otherwise sharing in the firm’s financial success. We also like companies with control over their growth due to their market position or product. Industrial software group Aveva is a long-term holding of the trust and currently our largest position. Its unique proposition of world-leading technology makes it a go-to provider for information management software. The group has a robust balance sheet and a well-regarded management team, including the Deputy CEO who has been with the business since 2004. Aveva has so far been a winner for us with shares up 60% in the first half of this year and promotion to the FTSE 100 index in June.

14 | Taking Stock alliancetrustsavings.co.uk We are very much ‘bottom up’ investors – – The Company invests in the securities of we look for businesses with stock-specific drivers smaller companies which are likely to carry a and we don’t invest without doing our own in- higher degree of risk than larger companies. depth research, including meeting a company’s – Derivatives may be used, subject to management. We believe this close contact is restrictions set out for the Company, in order key to investment success. to manage risk and generate income. The At a time when the economic outlook is Abby Glennie market in derivatives can be volatile and tougher and markets are volatile, quality Investment Director there is a higher than average risk of loss. growth businesses should be at an advantage, Aberdeen Smaller Companies with healthy cash generation allowing them to – There is no guarantee that the market price Income Trust PLC invest in their operations while others struggle. of the Company’s shares will fully reflect And while smaller companies are often their underlying Net Asset Value. Abby Glennie is a Investment viewed as exposed to a weakening in the – As with all stock exchange investments the Director at Aberdeen Standard UK economy, those with specialist niches value of the Company’s shares purchased Investments. She is responsible for can remain successful. For example Games will immediately fall by the difference the UK Opportunities, Aberdeen Smaller Companies Income Trust, Workshop, which we bought earlier this year, between the buying and selling prices, the is thriving as a manufacturer and retailer and Smaller Companies Pension bid-offer spread. If trading volumes fall, Fund. Abby joined Standard Life in of fantasy wargames. Despite the general the bid-offer spread can widen. malaise on the high street, its 150 UK shops 2013 from Kames Capital where are destination stores, which customers – Certain trusts may seek to invest in higher she was an Investment Analyst. actively visit to make purchases. yielding securities such as bonds, which are Abby graduated with a joint 1st MA, in Economics and Finance Judging which factors will drive share subject to credit risk, market price risk and interest rate risk. Unlike income from a single from University of Aberdeen and prices is always a challenge. Making big is a CFA charterholder. macroeconomic calls is not what we do, but bond, the level of income from an investment in uncertain times we think our disciplined trust is not fixed and may fluctuate. focus on selecting quality growth businesses – With funds investing in bonds there is a risk will help us with our aim to deliver superior that interest rate fluctuations could affect the returns and investment success. capital value of investments. Where long term interest rates rise, the capital value of shares Important information is likely to fall, and vice versa. In addition to the interest rate risk, bond investments – The value of investments and the income are also exposed to credit risk reflecting from them can fall and investors may get back less than the amount invested. the ability of the borrower (i.e. bond issuer) to meet its obligations (i.e. pay the interest – Past performance is not a guide to on a bond and return the capital on the future results. redemption date). The risk of this happening – Investment in the Company may not be is usually higher with bonds classified as appropriate for investors who plan to ‘subinvestment grade’. These may produce withdraw their money within 5 years. a higher level of income but at a higher risk – The Company may borrow to finance further than investments in ‘investment grade’ bonds. investment (gearing). The use of gearing In turn, this may have an adverse impact on This article is issued by is likely to lead to volatility in the Net Asset funds that invest in such bonds. Aberdeen Asset Managers Value (NAV) meaning that any movement in – Specialist funds which invest in small markets Limited which is authorised the value of the company’s assets will result and regulated by the Financial or sectors of industry are likely to be more in a magnified movement in the NAV. Conduct Authority in the volatile than more diversified trusts. – The Company may accumulate investment United Kingdom. Registered positions which represent more than – Yields are estimated figures and may Office: 10 Queen’s Terrace, normal trading volumes which may make fluctuate, there are no guarantees that Aberdeen AB10 1XL. Registered it difficult to realise investments and may future dividends will match or exceed historic in Scotland No. 108419. An lead to volatility in the market price of the dividends and certain investors may be investment trust should be Company’s shares. subject to further tax on dividends. considered only as part of – The Company may charge expenses to – Aberdeen Standard Investments is a brand of a balanced portfolio. Under capital which may erode the capital value the investment businesses of Aberdeen Asset no circumstances should this of the investment. Management and Standard Life Investments. information be considered as an offer or solicitation to deal in investments. You should Find out more at: www.aberdeensmallercompanies.co.uk obtain specific professional advice before making any investment decision.

This is a financial promotion from Aberdeen Asset Managers Limited.

Taking Stock | 15 DIGITALISATION Opportunities and Risks

Stock markets can be very volatile in the short term. ne fundamental trend that has played a particularly important role in recent Economic data, current affairs and swings in sentiment O years is digitalisation. Across the world, can all move prices up and down sharply, with little notice. companies are bringing technology into every aspect of our lives, creating new industries and Over longer time periods, these short-term movements forcing mature ones to adapt. From an investment perspective, this has presented both opportunity tend to be outweighed by longer-term fundamental trends. and risk. Some companies – both new and These are powerful forces which impact companies and old – have been able to use technology to their advantage, whilst others have suffered under entire industries more profoundly than anyone thought the brutal force of capitalist logic. Over the past decade, many of Brunner’s possible. For Brunner, we try to identify these long-term best investments have had their roots in trends to select stocks that are on the right side of history. correctly assessing the longer-term impact of new technology. Just as important however, is understanding where our view differs from consensus. This is well illustrated by Microsoft, the Trust’s largest holding.

16 | Taking Stock alliancetrustsavings.co.uk We first bought shares in Microsoft in 2012. We see numerous opportunities for At that time, the company was heavily dependent companies to benefit from digitalisation. And on sales of traditional Windows and Office similar to Microsoft in 2012, many of these are software. Some investors feared Microsoft’s in ways not immediately obvious to the casual earnings would suffer as new mobile and cloud- observer. Nor are they typical “Technology” based operating systems (such as Android) names. Instead, we look for strong business entered the market, potentially disrupting models that have withstood the test of time Microsoft’s lucrative franchise. Consequently, the and where technological innovation may shares were valued on only a price-to-earnings present an opportunity to improve growth and ratio of 11x – a remarkably low valuation for profitability substantially. And of course, as an Lucy Macdonald such an enormously profitable business. asset manager, we want a valuation that doesn’t Portfolio Manager already reflect this upside potential. The Brunner Investment Trust For example, we currently hold media CIO, Global Equities company Informa in the portfolio. It is the global Allianz Global Investors “Today, the theme market leader in the exhibitions industry. This particular niche has been largely immune from Lucy Macdonald is the Chief of digitalisation is the disruptive forces that have impacted other Investment Officer of Global Equities areas of the media industry such as newspapers at AllianzGI. The Global Equity team front and centre of our and TV. Large scale industry exhibitions usually is responsible for international investment landscape.” happen once a year or less. Economies of scale mandates from clients around the make them very profitable and defendable from world. Lucy is a member of the competition. The face-to-face and networking European Management Committee. aspects are very important, making Informa and What the stock market missed was Microsoft’s the exhibitions industry, in our view, unlikely to be ability to transition its own customer base to a disrupted by virtual, non-physical alternatives. We cloud subscription model, thereby ensuring the believe Informa can use technology and data in survival of its valuable monopolistic position. ways that can enhance the customer experience. At the same time, the company built up a Similarly, we hold Howdens Joinery, a powerful web services business. This division manufacturer and supplier of fitted kitchens in services business clients and has been and the UK. It is a vertically integrated business model continues to be a key driver of growth and that only supplies the trade, where they are by profits. These fundamental shifts have led to far the market leader. The business provides a change in the stock market narrative on a popular service to jobbing builders, who get Microsoft, from imminent maturity and decline attractive working capital terms from Howdens towards innovation and growth. This has plus a confidential discount which in turn allows This article (921406) is issued by been reflected in the shares, which have risen them to earn a good margin from the end Allianz Global Investors GmbH, threefold as earnings have grown and the customer. Howden’s track record has impressed. an investment company with valuation has expanded. Even during the uncertain period since the Brexit limited liability incorporated in Today, the theme of digitalisation is front Referendum, they have continued to grow, taking Germany, with its registered office and centre of our investment landscape. That a lot of market share away from competitors. at Bockenheimer Landstrasse 42/44, D-60323 Frankfurt/M. there will be big winners and losers is now In the past, Howdens never really needed Allianz Global Investors GmbH conventional wisdom and this is well reflected to use the internet because they got all their is registered with the local court in stock market valuations. We see investors business from builders with whom they had of Frankfurt/M under HRB crowding into the big names such as Amazon direct relationships. More recently they enhanced 9340 and is authorised and and Google. Both are without doubt successful their online offering to drive consumer leads regulated by the Bundesanstalt companies, but do they really have enough which they can then pass on to their installer für Finanzdienstleistungsaufsicht future growth to justify their now enormous base – an example of how a relatively simple (BaFin). Allianz Global Investors market capitalisations? Even if they do, we application of technology can improve an GmbH has established a branch think there are easier pickings elsewhere. already very strong business. in the United Kingdom, Allianz Global Investors GmbH, UK For more information, please visit www.brunner.co.uk Branch, which is subject to limited regulation by the Financial Conduct Authority (www.fca. Important information: All sources Allianz Global Investors GmbH unless otherwise noted. This is no org.uk). Details about the recommendation or solicitation to buy or sell any particular security. A security mentioned as example extent of our regulation by the above will not necessarily be comprised in the portfolio by the time this document is disclosed or at Financial Conduct Authority are any other subsequent date. Investing involves risk. The value of an investment and the income from it available from us on request. may fall as well as rise and investors may not get back the full amount invested. Past performance is The Brunner Investment Trust PLC not a reliable indicator of future results. The views and opinions expressed herein, which are subject to is incorporated in England and change without notice, are those of the issuer and/or its affiliated companies at the time of publication. Wales. (Company registration no. The data used is derived from various sources, and assumed to be correct and reliable, but it has not 226323). Registered Office: 199 been independently verified; its accuracy or completeness is not guaranteed and no liability is assumed Bishopsgate, London, EC2M 3TY. for any direct or consequential losses arising 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 This is a financial promotion or concluded, shall prevail. from Allianz Global Investors.

alliancetrustsavings.co.uk | 17 A CAPITAL IDEA FOR GROWTH

Monks is a £2 billion global growth investment trust launched in 1929 and managed by Baillie Gifford. It aims to be a core holding in any investor’s portfolio. The trust’s three managers Charles Plowden, Spencer Adair and Malcolm MacColl are like all at Baillie Gifford – out-and-out growth managers. The value of your investment and any income from it can go down as well as up and as a result your capital may be at risk.

18 | Taking Stock alliancetrustsavings.co.uk ut what does growth investing mean to years to come can never be foretold or the market? Increasingly, despairingly, it guaranteed. With this as a starting point, Monks Bmeans the compression of time horizons, deliberately embraces uncertainty. The managers down often to a matter of weeks, the extraction realise that companies which are successful over of capital away from markets through buybacks the long term are those that sacrifice short-term and dividends, and a situation where complexity profitability to embrace and drive far-reaching and gigabytes of data are mistaken for insight. structural change. Big societal shifts over the next Monks takes a very different stance. The decade and beyond are far more powerful than trust’s philosophy has, at its heart, the notion next month’s profit and loss account in driving of investing as the provision of long-term risk long-term returns. As a result, the team always James Budden capital to businesses seeking to grow. looks to the left of the decimal point. Director of Marketing What does that mean? Well, let’s take each and Distribution part of that statement in turn and explain things Baillie Gifford as clearly as possible. Growth Finally, growth. The trust always looks to invest James is a Director of Marketing Long term its shareholders’ capital, not in clever financial and Distribution in the Clients market instruments but in real, return-generating Department. He joined Baillie The Monks managers have no idea what a activities. Fundamentally in businesses that seek Gifford in 2008 having worked company’s share price, or indeed what stock at Witan Investment Trust and to provide for the needs and wants of the people. markets will do over the next three, six, or 12 Henderson Global Investors. As a base, it is looking for a company that can months. They leave crystal ball gazing to others. James graduated MA in Classics But what they do know is that over sustained sustainably grow its earnings at around 10 per from the University of Cambridge periods of time (five years and beyond), share cent per annum. This may not sound spectacular in 1987. prices follow the path of earnings. Therefore, but, given that the average company is unlikely the team spends time trying to understand to grow at more than 5 per cent over the long the fundamental opportunities available to run, the returns from a business growing at 10 companies. That will typically involve looking per cent, compounding year after year after at whether a business operates in a market year, can be very meaningful. with obvious scope for growth, whether the Monks is firmly convinced that the only way business has a clear competitive advantage, and whether management runs the organisation to deliver superior investment returns for in a sustainable and thoughtful manner. This shareholders is to ignore the short-term whims approach provides markers in the sand, against of the market and instead focus on committing which progress may be measured. In the real capital, for long periods of time, to sustainably world this progress takes time. So the managers successful businesses. The portfolio will typically think in decades, rather than trying to second contain around 100 stocks offering diversity guess quarters. across geography and sector. It looks nothing like any index. The performance of the trust should Risk capital be judged on a long-term basis, preferably over five to ten years. It is over such a timeframe that Markets crave certainty. A huge amount of work the managers aim to significantly outperform goes into analysis of the minutiae – being right world markets. Finally, the trust is low cost in of the decimal point. But one thing is for sure – comparison to the majority of global funds, life isn’t certain. The success of a business in with an ongoing charge of 0.5 per cent.

Annual Past Performance to 30 June each year (%) 2015 2016 2017 2018 2019 Baillie Gifford Monks Investment Trust 10.4 3.2 59.9 22.1 9.5

Source: Morningstar. Share price, total return. Sterling. Past performance is not a guide to future results. This article is issued by Baillie Gifford & Co Limited and does not in any way Important information: Baillie Gifford & Co and Baillie Gifford & Co Limited are authorised and constitute investment advice. regulated by the Financial Conduct Authority (FCA). The investments trusts managed by Baillie Gifford All information is sourced from & Co Limited are listed UK companies and are not authorised and regulated by the Financial Conduct Baillie Gifford & Co and is Authority. A Key Information Document is available by visiting www.bailliegifford.com. Investment current unless otherwise stated. markets and conditions can change rapidly. The views expressed are those of the speaker, are not statements of fact, and should not be considered as advice or a recommendation to buy, sell or hold a This is a financial promotion particular investment. No reliance should be placed on these views when making investment decisions. from Baillie Gifford & Co The Trust invests in emerging markets where difficulties in dealing, settlement and custody could arise, Limited. resulting in a negative impact on the value of your investment. All information is sourced from Baillie Gifford & Co and is current unless otherwise stated.

Taking Stock alliancetrustsavings.co.uk | 19 REALISING POTENTIAL on the financial front line

The UK equity market is one of the most diverse stock markets in the world. Historically smaller companies have tended to outperform their larger brethren, particularly when taking a medium-term investment horizon (see chart below). We see a number of reasons for this. Smaller businesses tend to be less well researched by the market, leaving room to discover genuinely undervalued stocks. Small-caps also often have a high proportion of founder ownership, which encourages management to focus on long-term shareholder value creation. And, smaller companies are typically more nimble, allowing them to exploit niches in existing characteristics, we believe, allow companies to flourish, even industries and generate organic growth. against a volatile macroeconomic picture. Three stocks that have performed well for the trust over the past few years include:

ithin the Invesco Perpetual UK Smaller Future Companies Investment Trust plc (the Media business Future has been one of the trust’s most trust) we concentrate on bottom-up stock W successful investments in recent years. A change of company selection, believing that company fundamentals are management team has seen the firm’s content move online, the most important factor in generating long-term transitioning the business from a traditional magazine publisher outperformance. We seek growing businesses, which to digital media company. The company also employs innovative have the potential to be significantly larger in the methods of monetising its content, capitalising on the structural medium term. These tend to be companies that shift away from traditional print to online media. either have great products or services, that can enable them to take market share from their competitors, or companies that are exposed to higher growth 4imprint niches within the UK economy or overseas. The firm is the leading supplier of promotional products in the We favour stocks with “self-help” characteristics that highly fragmented US market. 4imprint benefits from a large enable them to grow independently of the economy. customer database, strong market position and supplier This can include the restructuring of underperforming network. The business has transitioned from a catalogue to businesses, pursuing a strategy of acquisitions, internet driven model, delivering organic growth of the or market share gains led by innovation. These business through existing and new customers.

Numis Smaller Companies Index – FTSE All-Share Index 15 Smaller Companies 10 out-performance 5 0 -5 -10 Smaller Companies under-performance

Rolling 5 year CAGR (%) -15 1959 1967 1977 1987 1997 2007 2017

Source: Numis and Invesco as at 31 December 2018 (latest available). Past performance is not a guide to future returns. CAGR = compound annual growth rate.

20 | Taking Stock alliancetrustsavings.co.uk REALISING POTENTIAL on the financial front line

Jonathan Brown Standardised rolling 12-month performance (% growth) UK Equities Fund Manager 2013 2014 2015 2016 2017 31 December -2014 -2015 -2016 -2017 -2018 Jonathan joined Invesco in 2000. He joined the UK Equities team as Numis Smaller Companies Index -1.9 10.6 11.1 19.5 -15.4 a trainee fund manager specialising FTSE All-Share index 1.2 1.0 16.8 13.1 -9.5 in the UK small cap sector in 2004, Invesco Perpetual UK Smaller becoming a fund manager in his Companies Investment trust plc (NAV) 2.8 18.1 12.5 26.5 -11.2 own right in 2007. Invesco Perpetual UK Smaller Companies Investment trust plc (share price) 3.0 28.3 11.4 30.4 -11.4

Source: Morningstar. Index performance shown is total return, sterling, Datastream. Past performance is not a guide to future returns. All performance figures are in sterling as at 31 December 2018 except where otherwise stated. Ordinary share price performance figures have been calculated using daily closing prices with dividends reinvested. NAV performance figures have been calculated using daily NAV with dividends reinvested. The NAV used includes current period revenue and values debt at fair.

Young & Co.’s Brewery (Youngs) The Invesco Perpetual UK Smaller Companies Youngs operates a portfolio of premium quality Investment Trust plc invests in smaller companies which may result in a higher level of risk than pubs within London and the South-East. Their a product that invests in larger companies. wet-led focus has enabled them to withstand the Securities of smaller companies may be subject to proliferation of high-street casual dining. They abrupt price movements and may be less liquid, have an entrepreneurial management team which may mean they are not easy to buy or sell. and have been early to spot trends such as Robin West craft ales and the growth of gin. Youngs has The product uses derivatives for efficient portfolio UK Equities Fund Manager low gearing relative to peers and benefits from management which may result in increased significant asset ownership; it owns most of its volatility in the NAV. Robin started his career at KPMG pub estate and 84% is freehold. Organic growth The use of borrowings may increase the volatility and joined Invesco in 1995, He has been boosted through acquisitions that of the NAV and may reduce returns when asset then joined Oriel Securities as a have enhanced earnings. values fall. small companies analyst and then As active investors we are always seeking Aviva Investors in 2004, before Important information: Where individuals or re-joining Invesco in July 2014. companies with the potential to outperform the business have expressed opinions, they the wider market over time. Given the breadth are based on current market conditions, they and depth of the UK Equity market, we believe may differ from those of other investment that there are plenty of exciting investment professionals and are subject to change without opportunities for the patient, long-term, notice. Past performance is not a guide to future Jonathan and Robin are fund fundamentals focussed investor. Particularly returns. This document is marketing material managers of Invesco Perpetual at the small-cap end of the spectrum. and is not intended as a recommendation to invest in any particular asset class, security UK Smaller Companies Investment Trust plc. Investment risks or strategy. Regulatory requirements that The value of investments and any income require impartiality of investment/investment will fluctuate (this may partly be the result of strategy recommendations are therefore not exchange rate fluctuations) and investors may applicable nor are any prohibitions to trade This article is issued by Invesco not get back the full amount invested. before publication. The information provided Fund Managers Limited, is for illustrative purposes only, it should not be Perpetual Park, Perpetual Park When making an investment in an investment Drive, Henley-on-Thames, trust you are buying shares in a company that relied upon as recommendations to buy or sell is listed on a stock exchange. The price of securities. For more information on our products, Oxfordshire RG9 1HH, UK. the shares will be determined by supply and please refer to the relevant Key Information Authorised and regulated by demand. Consequently, the share price of an Document (KID), Alternative Investment Fund the Financial Conduct Authority. investment trust may be higher or lower than Managers Directive document (AIFMD), and the the underlying net asset value of the investments latest Annual or Half-Yearly Financial Reports. This is a financial promotion in its portfolio and there can be no certainty This information is available using the contact from Invesco Fund Managers that there will be liquidity in the shares. details shown. Limited.

Taking Stock | 21 alf of the $32 trillion net wealth created on the US stock market between 1926 and 2015 was generated by just H90 stocks (less than 0.5% of the total), according to 2017 academic research by Hendrik Bessembinder. This research also found that fewer than half of stocks actually generated returns for US HITS: investors over that 90-year period 1. In other words, for all the big names and heavily hyped business stories that capture investors’ imaginations, spotting the ones that really will produce the goods over the long term can be a challenge. The same applies when it comes to picking up on the warning signs, A CASE suggesting the fortunes of a company might be about to slide.

A look at the charts The changing shape of the Fortune 500 biggest US companies list STUDY over the years underlines this point emphatically 2. Thousands of companies have appeared in the annual ranking of America’s biggest companies. The 2019 list marks the 65th time it has been run. Some big names have been ever-present over the Identifying and backing winners years, including the likes of Walmart, which tops the list in 2019, of tomorrow is one way that General Motors and Exxon Mobil. But other names have fallen dramatically from grace and the composition of the list in terms investment managers can help of the most prominent industries is evolving too. grow investor funds. But it’s easier said than done. Sara Wilson FORTUNE 500: 2019 TOP TEN explores the changing fortunes of 1. Walmart 6. UnitedHealthGroup corporate America and considers 2. Exxon Mobil 7. McKesson the implications for investors. 3. Apple 8. CVS 4. Berkshire Hathaway 9. AT&T 5. Amazon.com 10. AmerisourceBergen

22 | Taking Stock alliancetrustsavings.co.uk Rise of the tech giants A cautionary tale While Walmart, Exxon and Berkshire Hathaway The 20th biggest revenue earner in America in (the US conglomerate that famous investor Warren 1994, Eastman Kodak is often held up as an Buffet is Chairman and Chief Executive of) account example of a company that paid the ultimate for three of the top five, tech giants Apple and price for a reluctance to evolve its business model. Amazon have now muscled their way in 3. As new camera technologies became available, Sara Wilson Kodak – which actually invented digital camera Amazon in particular jumps out from a top Head of Platform Proposition technology in 1975 but didn’t release it for fear 10 that is comprised primarily of historic US Alliance Trust Savings Limited of the impact on its traditional business – declared brands. Walmart, for example, opened its first 4 bankruptcy in 2012 having failed to respond to store in 1962 , while other top 10 names AT&T, digital disruption 11. Sara joined Alliance Trust Savings in March 2013 as Head of Platform Berkshire Hathaway and ExxonMobil have Technology firms – including some of those existed in some form since the mid-1800s 5. Proposition, taking on responsibility rising fast today – may be particularly vulnerable for the products and investment to getting left behind by the pace of digital choice available on the platform. From zero to hero advance. For instance, while IBM is still 38th in Previously, she worked for Standard the Fortune list, it has fallen a long way from its Life as International Proposition Amazon, by contrast, launched in 1995 as 1994 position of fourth, when it was by some Manager. Before moving to an online bookseller operating out of founder distance America’s biggest technology company. Scotland, Sara worked for Xansa, Jeff Bezos’ garage 6. It first listed on the stock Some of the world’s largest brands may be a technology outsourcing company. under threat from the pace of technological She received a BA Honours in market in 1997 and on 4 September 2018 International Business from the became just the second company to reach a change – exactly which brands may not yet be University of Teesside and a Post market value of $1 trillion. From $18 a share clear, however. As Warren Buffett once said, Graduate Diploma in Marketing at launch, Amazon’s price reached a new high “In the business world, the rear-view mirror is at Napier University, Edinburgh. 12 of $2050.50 per share on the day it hit the always clearer than the windshield” . £1 trillion mark 7. Another relative newcomer to the Forbes list A lesson for investors Important information: This is Facebook, which launched in 2004 and sits Professional fund managers will, of course, use general information is provided at 57th place, on revenue earned. That may to support you in making your their skills, experience and careful research to try sound low, until you discover that it’s above own investment decisions. It is and keep ahead of the game for their investors. not a recommendation to buy well-established, iconic global brands such It’s what we pay them for. as Goldman Sachs, American Express, Nike, or sell. Please be aware that While there may be similar themes behind the value of investments can fall Coca Cola, McDonald’s and Visa. shifts in company fortunes, the difference between as well as rise so you could get Similarly, Netflix is further below at 197th success and failure may equally be about luck, back less than you invest. Past place, but after just 22 years in business 8 it timing or other forces outside an organisation’s performance is not a guide to is already above names such as Goodyear, control. The lesson for investors may simply be future performance. Paypal, Mastercard, BlackRock, Kellogg, to recognise that company fortunes can change and ensure their portfolios are sufficiently This article is issued and Hertz and Newscorp. And Google – which approved by Alliance Trust diversified to give them a chance of gaining launched in 1998 and in 2004 languished Savings Limited. Alliance Trust in 353rd place 9 – is now just outside the top from the winners without being over-exposed Savings Limited is registered 10, appearing at number 15 in the form of to those that do fall away. in Scotland No. SC 98767, Alphabet, the entity that since 2015 has registered office, PO Box 164, been its parent company. 8 West Marketgait, Dundee 1. MOI Global – What Are the Odds? Superstocks, Fat Tails, DD1 9YP; is authorised by the and Rule Number One – 18 Jan 2019 and Citywire – James Prudential Regulation Authority Anderson: the three steps to investment success – 17/05/18. The swings of fortune 2. and regulated by the Financial Fortune 500, 2019. All 2019 rankings included in this article Conduct Authority and the The rapid pace of change is even clearer have been taken from this list. Use the ‘fastest growing’ filter to see the list reconfigured in this way. Prudential Regulation Authority, when the 2019 Fortune 500 is reconfigured to 3. Forbes – The 2019 Fortune 500 List: The Prize of Size 16/05/19. firm reference number 116115. show the fastest growing companies – Amazon 4. Walmart – Our history – n/a. ‘Alliance Trust Savings’, ‘ATS’ is top, Facebook is third (up from 19 the previous 5. ExxonMobil – Our history – n/a and AT&T – The historical and ‘AT Savings’ are all brand year) and Netflix is seventh (up from 64). brands of AT&T – n/a and Investopedia – How Warren Buffett names of Alliance Trust Savings These companies are all evidence of the Made Berkshire Hathaway – 02/11/18. Limited together with the 6. Business Insider – 15 fascinating facts you probably didn’t ‘Alliance Trust Savings’ logo dramatic swings of fortune that can affect know about Amazon – 17/06/19. are owned by and used with organisations of all shapes and sizes. A glimpse 7. Investopedia – If You Had Invested Right After Amazon’s the permission of Alliance Trust of the 20 biggest companies in 1994 10 – 25 years IPO – 05/05/19. PLC, the previous owner of ago – offers several cautionary tales for the big 8. Netflix – About Netflix – n/a. Alliance Trust Savings Limited. players of 2019. That list included major brands 9. Forbes – The 2019 Fortune 500 List: The Prize of Size – 16/05/19. This is a financial promotion such as Altria Group (down from 7th in 1994 to 10. Fortune 500 archive for 1994. from Alliance Trust Savings 162nd by 2019), Motorola (down from 23rd to 11 Harvard Business Review – Kodak’s downfall wasn’t about Limited. 416th), Xerox (down from 26th to 318th) and, technology – 15/07/16. perhaps most famously, Eastman Kodak. 12. Quotes.net – https://www.quotes.net/quote/11412.

Taking Stock alliancetrustsavings.co.uk | 23 TECHNOLOGY an investment story of excitement and analytical rigour

Technology’s impact on the global economy is expanding. As Over the past several decades the technology has broadened its reach into more and more industries, technology sector has charted a varied its command of value creation has increased steadily. Enterprise is fundamentally shifting from legacy to next generation technologies. path from a tentative investment As of 30 June 2019, technology related stocks represented over 27% of the S&P 500 Index. newcomer, through shining star, So, for the Allianz Technology Trust, what has been the secret to success in following this multi-faceted sector development? In short, deflated bubble and now, via years the common theme across all successes within the portfolio has been the team’s process. The team seeks to identify major transformative of incredible innovation and growth, secular growth themes within technology. Once we identify a theme to all-pervasive global driving force. we like, the team looks to identify the leaders within the theme. The most significant themes in the current portfolio are cloud and Software-as-a-Service (SaaS), which have been extremely profitable. Cloud computing offers a wide range of benefits for corporations, ith every year, the reach and influence of technology and we see the transformational shift from physical client-server grows. It disrupts new industries and moves into different to cloud as a multi-year journey which is still in the early stages W parts of our lives. Technology is present in the way we of adoption with plenty of room to grow. drive, the way we shop, in our workplaces, in our homes. It helps The cloud enables businesses to build sufficient scale to cope us communicate effectively and manage our lives more efficiently. with the demands of data-intensive services and the influence The companies that create that technology are in a powerful of ‘big-data’ and Artificial Intelligence (AI). This is driving wider position to grow even in stagnant economic conditions. adoption of cloud-based systems.

24 | Taking Stock alliancetrustsavings.co.uk It is also saving companies money: moving to Within SaaS, Square has been a strong SaaS and cloud computing lets companies avoid long-term contributor to the Trust, returning costly hardware upgrade cycles. Rather than 569% whilst held in the portfolio. Having having to support expensive in-house technology started life as a payment processing company, capability, they can pick and mix their technology it has evolved into a valuable SaaS option for requirements to suit their business requirements. small business. Initially, it just allowed small They can move data storage to the cloud and businesses – hairdressers, cab drivers, corner buy their software on a subscription basis. shops – to accept credit card payments, many In addition to reduced costs, cloud customers of whom had been cash-only. have reported benefits such as; better security, However, increasingly those same businesses more frequent upgrades, opportunities for are starting to use Square’s software to new revenue streams, lower downtime, faster manage other aspects of their businesses – analytics, improved performance and productivity, staffing costs, inventories, supply chains. It faster innovation and time to market, and lower risk of getting locked into one vendor. allows far more efficient business management In terms of identifying a beneficiary of the for small merchants and has continued to cloud theme, we would highlight our investment build its position. in Okta. Okta provides cloud security software Trends such as cloud and SaaS have helped Walter Price CFA that helps companies manage employee access make technology a successful investment in Portfolio Manager to applications and data. It came to the public recent years. That said, just because technology Allianz Technology Trust markets in 2017, having been founded in 2009 is pervasive and high growth, it doesn’t Managing Director by a team of former Salesforce.com executives guarantee good returns. This was seen starkly AllianzGI Global led by Todd McKinnon. Okta sells six services, in 2018, when strong revenue growth provided Technology Team including a single sign-on option that acts as little protection in the technology rout in the a gateway to a number of different systems, last quarter of the year. While technology Walter co-heads the the AllianzGI including Gmail, Salesforce.com and Slack. It companies can justify a premium to the wider Global Technology Team which also offers Application Programming Interface market, valuation levels are important and currently has $4bn in assets under (API) authentication services. As the corporate need a discriminating eye. management. Located in San sector has continued its cloud adoption over Technology investment demands that Francisco, the team benefits from recent years, demand for innovative cloud investors uncover the trends of the future, its close proximity to Silicon Valley security solutions has dramatically increased. where many of the world’s looking to see where industries are going, key technology companies are As a result, security names such as Okta have and who is likely to win or lose from those done quite well. During the time we have held headquartered. Walter is also a developments. In this way, it forces investors Director of the M.I.T. Club of Okta in the portfolio, it has returned 306%. to keep pace with changing markets. At each Northern California and heads stage, therefore, the technology investor the Educational Council for M.I.T. should be aligned with the winners from in the Bay Area. change, rather than those at the wrong end AN AWARD-WINNING TRUST of it. We continue to see new industries being created, while old industries die or are forever The award-winning Allianz Technology altered and technology sits at the heart of this This article (920892) is issued Trust PLC offers investors access to the global innovation. and approved by Allianz Global fast moving world of technology with the The Allianz Technology Trust portfolio Investors GmbH,an investment reassurance that investment decisions are management team has a collective wealth company with limited liability made by Walter Price who has 45 years of of knowledge and experience of predicting incorporated in Germany, experience of investing in technology. Most technology trends as well as identifying the with its registered office at recently, the Trust won the Best Large Trust leaders in those fields. The team will continue Bockenheimer Landstrasse 42/44, D-60323 Frankfurt/M. category in the Money Observer Investment to conduct deep research to identify the winners Allianz Global Investors GmbH Trust Awards 2019, in recognition of its of the future. Some current attractive themes is registered with the local court consistent, high achievement. This accolade where we see the potential for exciting future is an independent, statistical and qualitative of Frankfurt/M under HRB developments include Artificial Intelligence assessment of ATT’s performance. 9340 and is authorised and (AI) applications, 5G, autonomous vehicles regulated by the Bundesanstalt and robotics/automation. für Finanzdienstleistungsaufsicht (BaFin). Allianz Global Investors For more information, please visit www.allianztechnologytrust.com GmbH has established a branch in the United Kingdom, Allianz Global Investors GmbH, UK Important information: All sources Allianz Global Investors GmbH unless otherwise noted. This is no Branch, which is subject to limited recommendation or solicitation to buy or sell any particular security. Investing involves risk. The value of an regulation by the Financial investment and the income from it may fall as well as rise and investors may not get back the full amount Conduct Authority (www.fca. invested. Competition among technology companies may result in aggressive pricing of their products and org.uk). Details about the services, which may affect the profitability of the companies in which the Trust invests. In addition, because extent of our regulation by the of the rapid pace of technological development, products or services developed by these companies may Financial Conduct Authority are become rapidly obsolete or have relatively short product cycles. This may have the effect of making the available from us on request. Trust’s returns more volatile than the returns of a fund that does not invest in similarly related companies. Allianz Technology Trust PLC is Past performance is not a reliable indicator of future results. A ranking, a rating or an award provides no incorporated in England and indicator of future performance and is not constant over time. The views and opinions expressed herein, Wales. (Company registration no. which are subject to change without notice, are those of the issuer and/or its affiliated companies at the 3117355).Registered Office: 199 time of publication. The data used is derived from various sources, and assumed to be correct and reliable, Bishopsgate, London, EC2M 3TY. but it has not been independently verified; its accuracy or completeness is not guaranteed and no liability is assumed for any direct or consequential losses arising from its use, unless caused by gross negligence or This is a financial promotion wilful misconduct. The conditions of any underlying offer or contract that may have been, or will be, made from Allianz Global Investors. or concluded, shall prevail. A security mentioned as example above will not necessarily be comprised in the portfolio by the time this document is disclosed or at any other subsequent date.

Taking Stock alliancetrustsavings.co.uk | 25 A CONTRARIAN APPROACH CAN PAY DIVIDENDS

As contrarian investors, we prefer to plot our own course rather than follow A the herd. Our quest is to find ‘ugly ducklings’ – companies that are shunned by Alasdair McKinnon others but offer a real prospect of improvement. Manager And while the obvious upside to this approach The Scottish Investment Trust is the potential for share price appreciation, it can also offer another valuable source of Alasdair joined the Company in 2003 returns as unfashionable companies often and became Manager in 2015. have higher than average dividend yields. He has 20 years of diverse global investment experience and a distinctly contrarian investment philosophy. Seeing the value in ugly ducklings He and his team take a highly active, It goes without saying that the ‘ugly ducklings’ to an elegant swan, before we decided to sell our differentiated approach to investment. we choose are unloved, but we believe that they stake (or, to continue with the metaphor, it flew Alasdair has an MA (Hons) in have the potential to improve their businesses. our nest) leaving a £39 million profit – almost Economic & Social History from We look for companies that have the strength three times our original investment. While not all the University of Edinburgh and and flexibility to adapt and thrive over the of our investments will prove fruitful, this example an MSc in Investment Analysis (with longer term. A sustainable dividend from such demonstrates why patience can be such a virtue. distinction) from Stirling University. ® companies is attractive to us as it offers a return He is a CFA charterholder and while we wait for our thesis to unfold. an Associate of the UK Society Enduring growth of Investment Professionals. Of course, not every investment in our portfolio pays dividends and we wouldn’t Paying dividends to our own shareholders has necessarily overlook a prospective investment been part of our heritage of 132 years. We’ve for that reason. A company navigating the low recently increased the frequency of our dividend point in its cycle might opt to forgo a dividend payment to quarterly. One of our aims is to grow to reinvigorate its business. This prudent the dividend ahead of UK inflation and this is approach can hasten the company’s recovery supported by a record of raising our dividend in and potentially allow more sustainable dividend each of the last 35 years. However, it should be payments to recommence. Indeed, a dividend remembered that dividends are not guaranteed reinstatement can be an important signal that and can fall as well as rise. the company’s rehabilitation is underway. Interested to learn more about the fund? This scenario is currently playing out at Visit www.thescottish.co.uk or follow us on Tesco, one of our biggest holdings. Tesco cut its dividend after a difficult period, during which @ScotInvTrust profits fell and discounting rivals gained market share. Since then, the company has regained its The Scottish Investment Trust PLC footing, allowing management to reintroduce the dividend. While Tesco, in line with all the other UK based retailers, will need to cope with Important information: Please remember that the potential fall out from the Brexit process, it past performance may not be repeated and is not For regular updates, a guide for future performance. The value of shares commentaries and contrarian remains, in our view, well placed to be able to execute its recovery plan. and the income from them can go down as well as thoughts, visit us at up as a result of market and currency fluctuations. As long-term investors, we have time on www.thescottish.co.uk You may not get back the amount you invest. our side as we wait for a nascent recovery to become established. Patience is key to contrarian The Scottish Investment Trust PLC has a long-term investing. A certain fortitude is also required to policy of borrowing money to invest in equities in This article is issued and withstand the anxiety of the market, while holding the expectation that this will improve returns for approved by SIT Savings Ltd, steadfastly to our convictions. But the potential shareholders. However, should markets fall these registered in Scotland No: pay-off can be more than worth the wait. borrowings would magnify any losses on these SC91859. Registered office: investments. Investment Trusts are listed companies 6 Albyn Place, From sour grapes to an and are not authorised or regulated by the Edinburgh EH2 4NL. exceptional vintage Financial Conduct Authority. T: 0131 225 7781 Please note that SIT Savings Ltd is not authorised to One of the most notable successes of this patient E: [email protected] provide advice to individual investors and nothing in approach is Treasury Wine Estates, formerly the W: www.thescottish.co.uk this article should be considered to be or relied upon biggest holding in our portfolio. We invested as constituting investment advice. If you are unsure This is a financial promotion in this company in August 2015, when it was about the suitability of an investment, you should from SIT Savings Ltd. very much out of favour. The catalyst for change contact your financial advisor. Issued and approved was a new management team, whose strategy by SIT Savings Limited, authorised and regulated transformed the business from an ‘ugly duckling’ by the Financial Conduct Authority.

26 | Taking Stock alliancetrustsavings.co.uk 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 August Top 20 in August 2019

1 Scottish Mortgage Investment Trust 1 Scottish Mortgage Investment Trust 2 Alliance Trust 2 Alliance Trust 3 City of London Investment Trust 3 Personal Assets Trust 4 Personal Assets Trust 4 City of London Investment Trust 5 Finsbury Growth & Income Trust 5 TR Property Investment Trust 6 Edinburgh Worldwide Investment Trust 6 Merchants Trust 7 F&C Investment Trust 7 Finsbury Growth & Income Trust 8 Murray International Trust 8 Edinburgh Investment Trust 9 Monks Investment Trust 9 Aberforth Smaller Companies Trust 10 Edinburgh Investment Trust 10 F&C Investment Trust 11 Merchants Trust 11 Monks Investment Trust 12 Smithson Investment Trust 12 Murray International Trust 13 Allianz Technology Trust 13 Capital Gearing Trust 14 RIT Capital Partners 14 Monks Investment Trust 15 Caledonia Investments 15 Caledonia Investments 16 Witan Investment Trust 16 The Mercantile Investment Trust 17 CapitalGearing Trust 17 Allianz Technology Trust 18 Temple Bar Investment Trust 18 Witan Investment Trust 19 Woodford Patient Capital Trust 19 Bankers Investment Trust 20 TR Property Investment Trust 20 The Henderson Smallers Companies 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.

Taking Stock alliancetrustsavings.co.uk | 27 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.

Alliance Trust Savings Limited PO Box 164 8 West Marketgait Dundee DD1 9YP

Send us your instruction form and cheque and we’ll process your trades. For full details of all charges, please visit alliancetrustsavings.co.uk.

Speak to your financial adviser

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.

Alliance Trust Savings Limited 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 Limited gives no financial or investment advice. ‘Alliance Trust Savings’, ‘ATS’ and ‘AT Savings’ are all brand names of Alliance Trust Savings Limited together with the ‘Alliance Trust Savings’ logo are owned by and used with the permission of Alliance Trust PLC, the previous owner of Alliance Trust Savings Limited.

ATS GEN MAG 0034 (Autumn 2019)