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Alliance Trust PLC – Final Results

Alliance Trust PLC
25 February 2022

Robust results including 32.5% dividend increase

Results for the year ended 31 December 2021

Performance Highlights

  • In 2021 the Company�s Total Shareholder Return1 (TSR) amounted to 16.5%; its Net Asset Value (NAV) Total Return1 was 18.6% while the Company�s benchmark index returned 19.6%.
  • Performance in the year was significantly ahead of the Company�s benchmark index until the fourth quarter when the index became dominated by the performance of a few of the largest US technology companies.
  • The Investment Manager and your Board are confident that the fundamental characteristics of the portfolio mean that it is expected to generate outperformance over the longer term.
  • A significant increase in dividends was introduced for the third and fourth interim dividends resulting in a year-on-year total increase of 32.5%; had we increased the first and second interim dividends to the same level, this would have resulted in an annual dividend yield of 2.3%2.
  • We expect to continue extending our 55-year track record of increasing dividends.

Gregor Stewart, Chairman of Alliance Trust PLC, commented:

�The Company has delivered a strong absolute performance with a Total Shareholder Return of 16.5%. Against the backdrop of new Covid-19 variants, increasing inflation and a few large technology companies dominating returns, this was a robust result although behind our benchmark. A significant increase in dividends was introduced for the third and fourth interim dividends resulting in a year-on-year total increase of 32.5%. Had we applied the same increased level of interim dividend throughout 2021, this would have resulted in an annual dividend yield of 2.3%.2 From here, we expect to continue extending our 55-year track record of annual dividend increases.�

About Alliance Trust PLC

Alliance Trust aims to deliver long-term capital growth and rising income from investing in global equities at a competitive cost. We blend the top stock selections of some of the world�s best active managers, as rated by Willis Towers Watson, into a single diversified portfolio designed to outperform the market while carefully managing risk and volatility. Alliance Trust is an AIC Dividend Hero with 55 consecutive years of rising dividends.


For more information, please contact:

Mark Atkinson
Head of Marketing and Investor Relations

Sarah Gibbons-Cook
Quill PR

Alliance Trust PLCTel: 020 7466 5050
Tel: 07918 724303[email protected]

���1 Alternative Performance Measure
���2 This is based on the Company�s share price on 31 December 2021



The Company has delivered a strong absolute performance with Total Shareholder Return of 16.5%. Against the backdrop of new Covid-19 variants, increasing inflation and a few large technology companies dominating returns, this was a robust result although behind our benchmark. A significant increase in dividends was introduced for the third and fourth interim dividends resulting in a year-on-year total increase of 32.5%. Had we applied the same increased level of interim dividend throughout 2021, this would have resulted in an annual dividend yield of 2.3%.1 From here, we expect to continue extending our 55-year track record of annual dividend increases.�

  • In 2021 the Company�s Total Shareholder Return (TSR) amounted to 16.5%; its Net Asset Value (NAV) Total Return was 18.6% while the Company�s benchmark index returned 19.6%.
  • Performance in the year was significantly ahead of the Company�s benchmark index until the fourth quarter when the index returns became dominated by the performance of a few of the largest US technology companies.
  • The Investment Manager and your Board are confident that the fundamental characteristics of the portfolio mean that we expect it to generate outperformance over the longer term.
  • A significant increase in dividends was introduced for the third and fourth interim dividends resulting in a year-on-year total increase of 32.5%; had we increased the first and second interim dividends to the same level, this would have resulted in an annual dividend yield of 2.3%.1
  • We expect to continue extending our 55-year track record of increasing dividends.

1. This is based on the Company�s share price on 31 December 2021.

Stock markets generally posted strong gains in 2021, led once again by the US, as the global economy initially continued its recovery from the impact of the Covid-19 pandemic. However, in the fourth quarter, with volatile markets, inflation pressures building and further variants of the virus emerging, there was new uncertainty about the outlook for 2022. As a result, valuations of many stocks suffered in this period and most of the performance of the benchmark index in the final quarter of the year was generated by a very small number of large US technology stocks. Overall performance and the effect of the concentration of market returns is further analysed in the report of our Investment Manager, WTW, on pages 11 to 15 of the Annual Report.

As a result of the above factors, the performance of the Company�s portfolio relative to its benchmark declined materially during the final quarter of the year. For the first nine months of the year, as the vaccine-fuelled market recovery broadened in impact, the Company�s NAV Total Return outperformed the benchmark by 3.4%. Although the Company�s portfolio included some of the large US technology stocks it did not mirror the degree of concentration of such stocks in the benchmark index. This resulted in NAV Total Return underperformance relative to the index of 4.0% in the fourth quarter. To illustrate the extreme nature of this concentration, if the portfolio had included Apple and Tesla at the same weight as the benchmark, the portfolio�s performance would have improved by approximately 1.0% in the fourth quarter.

This concentration factor has harmed the performance of the Company relative to the benchmark for significant periods over recent years. This has resulted in the portfolio underperforming relative to the benchmark index, and against our target, since 1 April 2017 when WTW was appointed as the Company�s Investment Manager. In this period, excluding the effect of non-equity investments previously held by the Company, the Company�s annualised NAV Total Return was 0.45% per annum below its benchmark return.

In the past year we have seen encouraging signs that when the individual stock returns from global markets are less concentrated and focus on long-term company fundamentals, returns from our portfolio exceed those of the market index. The Board and WTW remain confident that over the longer term the Company�s diversified but high conviction portfolio is well placed to provide the level of outperformance we target.

We announced a number of changes to our Stock Pickers during the year. Following the termination of Lomas Capital Management�s mandate in February we appointed Sands Capital Management and Metropolis Capital. If and when any further changes are made, we will announce these once the transition of assets to the relevant Stock Pickers has been completed.

The discount remained stable for most of the year closing at 5.3% (2020: 3.5%) and averaging 5.9%. The Company bought back just over 4% of its issued share capital during the year. The widening of the discount is consistent with many other global equity investment trusts.


During 2021 the Board completed a review of the level and funding of the Company�s dividend. After taking account of the Company�s projected investment income and significant accumulated distributable reserves, enhanced by the conversion of the merger reserve, the Board determined it was appropriate and prudent to increase significantly the Company�s dividend. This has been implemented without changing the Company�s investment objective or strategy. Before making this decision, the Board sought views from individual shareholders, institutional investors and wealth managers.

The total dividend paid for 2021 will be 19.05p (2020: 14.38p), representing an increase of 32.5% on that paid for 2020. For illustration, if the Company had paid all interim dividends during the year at the same level as the increased third and fourth interim dividends, the annual dividend yield would have been 2.3%1. Following this increase, through a combination of its investment income and the use of its significant distributable reserves, the Board expects to continue extending the Company�s 55-year track record of dividend increases. Of the Company�s �3.3bn distributable reserves at 31 December 2021, the Board anticipates that �10.5m (2020: �10.1m) will be utilised to support the total dividend declared for 2021. The Board believes that delivering a higher, but still sustainable, level of dividend will benefit existing shareholders and enhance the attractiveness of the Company�s shares.


In 2021 we reaffirmed our focus on Environmental, Social and Governance (ESG) factors through announcing a formal commitment, along with our Investment Manager, that the Company�s portfolio will be managed to target net zero greenhouse gas emissions by 2050. In addition, the aim is to reduce emissions over the medium term on a pathway which may not necessarily show year-on-year improvements but one that will still be consistent with the goals of the Paris Agreement. You can read more about the practical implications of these commitments in our Investment Manager�s report on page 24 of the Annual Report.

While we would much rather encourage positive change through the Company�s stewardship and engagement activities, we will consider excluding certain types of stocks from its portfolio. For example, in July we decided to exclude stocks with significant exposure to thermal coal or producing oil from tar sands. Thermal coal is by far the most carbon-emitting source of energy in the global fuel mix, and tar sands are among the most carbon-intensive means of crude oil production. If we believe that positive change cannot be brought about by engagement alone, we may decide to impose further restrictions on the stocks in which the portfolio may be invested.


I was pleased to welcome Sarah Bates and Dean Buckley to the Board in March 2021. These appointments added to the Board�s existing skills and expertise. Sarah took on the role of Senior Independent Director when Karl Sternberg, who joined the Board in 2015, stood down in June 2021 as part of the Company�s succession plans. Chris Samuel, who became a Director at the same time as Karl, will not seek re-election at the 2022 Annual General Meeting (AGM) and Anthony Brooke, the third of our Directors appointed in 2015, will complete his tenure at the 2023 AGM. I would like to reiterate my thanks to Karl and to thank Chris for the significant and continuing contribution he has made to the Board over the last six and half years.

We are mindful that the Board is currently all white and all British. As we refresh the Board, in addition to ensuring that we have a diverse range of individuals with the necessary skills and knowledge, we are aiming to achieve a more ethnically diverse Board by 2024 or earlier. This is in line with the recommendations of the Parker Review.

In accordance with our succession plan, we anticipate recruiting at least one further Director during 2022, which will both enhance the Board�s existing skills and help us achieve this aim.


The increased use of online meetings and webinars allowed the Company to continue to engage with its stakeholders throughout the year. During 2021 we conducted three online webinars and the number of shareholders receiving regular updates increased to over 14,000.

It was disappointing that due to Covid-related government restrictions I was again unable to welcome shareholders to the Company�s AGM. I am hoping that will not be the case in 2022. We will be holding our AGM in Dundee and, subject to there being no restrictions in place at the time, shareholders will be welcome to attend. In any event we will stream the AGM live to shareholders and they will be able to submit questions in advance or during the meeting. If we are unable to address all questions during the meeting, we will answer them in writing afterwards and details of all the questions and answers will be published on the Company�s website. Full details of how to view the meeting and submit questions will be sent to all shareholders and will be on our website. After the formal
meeting we will be holding a webinar where shareholders will be able to hear presentations from not just WTW but also from Metropolis Capital and Vulcan Value Partners, two of the Company�s Stock Pickers.

We will keep shareholders updated on arrangements for the AGM, webinar and other investor events through our website. You can also sign up to receive details of events and the Company�s monthly factsheet and quarterly newsletter via the website.


We note with concern the events in Ukraine taking place as we write this report and the potential consequences this will have. It is difficult to predict how this will impact on global markets.

At its core, our portfolio in aggregate, contains companies that are now cheaper and have stronger and more stable earnings potential than the benchmark. The Board and WTW believes that as Omicron-variant related fears recede, and provided that longer-term fundamentals come back into focus, this will provide the environment for our portfolio to outperform. We have seen some evidence of this in early 2022 with the broadening of index returns. WTW believes that the domination of the market by so few companies is unlikely to persist over the longer term. This should provide further opportunities for our Stock Pickers and portfolio to deliver outperformance.

Gregor Stewart
24 February 2022



2021 was a strong year for equity returns. It began on a positive tone for global markets as vaccine rollouts gained pace and the reopening of economies boosted investor sentiment. The broad economic recovery meant that value stocks, small to mid-cap areas of the market, and stocks which are more cyclical fared better than the large-cap US-based growth companies, which had dominated returns for much of the pandemic. However, this market rotation and move away from �big tech� was short-lived, as US large-cap growth stocks rebounded in June leaving value stocks and smaller and mid-cap companies lagging again. This reversal was, in part, due to comments from the US Federal Reserve suggesting it might act sooner to control inflation, causing investors to pile back into long-duration growth names under the assumption that inflation would be temporary. The trend towards large-cap US stocks was significantly amplified in the last quarter by concerns over the new Omicron variant.

A mix of additional worries emerged: fears of further lockdowns, global supply-chain problems and regulatory shocks in China. Emerging markets equity returns were weighed down by China�s cataclysmic sell-off in the second quarter during their government�s regulatory crackdown on Chinese private education and technology companies. This was later amplified by fears that Chinese real estate giant, Evergrande Group, might default. Our portfolio�s exposure to some Chinese companies detracted value during this period.

Inflation as an ongoing theme continued throughout the year, with increases leading the market to debate whether this was transitory or stickier in nature. By its final meeting of 2021, the Federal Open Market Committee announced that it would end the emergency quantitative easing programme a few months earlier than had been expected, in a bid to curb elevated levels of inflation. Fears of rising interest rates pushed investors out of growth stocks in December, impacting some, but not all growth players as many large technology stocks continued to outperform.

Arguably one of the biggest impacts on markets in 2021 was the growing influence of retail investors. This was particularly true in the US, where individuals� stimulus cheques1 were used to support the equity markets. This became big news in the early part of the year, as GameStop share price volatility hit headlines, and remained a key presence throughout. Another example was the special purpose acquisition company (SPAC)2, Digital World Acquisition Corp., that saw shares soaring nearly 1,000% following the announcement of a merger with Trump Media & Technology Group Corp. Retail investors strongly supported the rally in the stock, and it was one of the most mentioned stocks on social media sites such as Reddit and Twitch. These investors relied on social media platforms to define and coordinate their portfolio strategies, often focused on shorter-term speculative momentum, and markets saw a rise in volatility and trading volumes. This was magnified by the leverage taken over the year by individual investors and led to some already expensive stocks becoming even more expensive.

We believe that it is long-term company fundamentals such as earnings growth, that drive returns over time. Overall, markets finished the year with the MSCI ACWI returning 19.6% over 2021 in sterling terms, and although our portfolio lagged its benchmark, we remain confident that it is very well positioned for strong future returns that, most importantly, are sustainable.


Equity market returns (%)

MSCI US Large Cap 300 Index4.
MSCI ACWI ex-USA Large Cap Index2.65.3-0.91.7
MSCI ACWI Large Cap Index3.

Past performance is not indicative of future returns. MSCI ACWI SMID Cap Index is the MSCI ACWI Small and Mid Cap index. The MSCI US Large Cap 300 Index is designed to measure the performance of the large-cap segment of the US equity market. This index had 303 constituents as of 31 December 2021.

Source: eVestment Alliance LLC and MSCI Inc.


Our portfolio has delivered strong absolute returns, both over 2021 and since our appointment in April 2017. However, returns relative to the MSCI ACWI have been disappointing over both periods. What appeared to be a broadening of market conditions in the earlier part of 2021, ended up being a continuation of the challenging market conditions we have seen over the last few years, where market leadership has remained very narrow in a handful of very large growth companies.

Our Stock Pickers� focus on the longer-term fundamentals of the companies they hold was not sufficiently rewarded by the market. This was largely a result of the last quarter, where the Company�s portfolio lagged the benchmark significantly after being ahead over the first three quarters of the year. The 2021 market environment was challenging for many active equity managers, as illustrated in the AJ Bell �Manager versus Machine� report for 2021.3 Based on that report, 25% of active global equity managers outperformed their passive alternatives last year.

Over the full year, the Company�s Total Shareholder Return was 16.5%. The discount widened from 3.5% as of the end of 2020 to 5.3% as of 31 December 2021, consistent with what was seen in other global equity investment trusts. The Company�s Net Asset Value (NAV) Total Return was 18.6%, 1% below the MSCI ACWI return of 19.6%, but was 7.8% above the MSCI ACWI Equal-Weighted Index which returned 10.8%.

The Board set us a high bar when we were appointed in April 2017 with an outperformance target of 2% per annum after costs over rolling three-year periods. The large-cap skewed, and challenging, market environment experienced since 2018, has meant that our focus on finding the best companies in a wide global universe, regardless of benchmark biases or company size, has resulted in our being behind our target. We have a long track record in identifying quality Stock Pickers. By asking them to pick only their best stock ideas for the Company, and constructing a risk managed portfolio, we believe we are enhancing our portfolio�s alpha potential. We have been managing funds based on our multi-manager, concentrated approach for many years and have experienced tough market environments in the past. Despite temporary drawbacks, markets eventually normalise and long-term fundamentals come back into focus, leading to strong relative returns for our strategies. We therefore have conviction in the fundamental strength of our portfolio and believe it will deliver attractive returns once the narrow leadership of the market dissipates.

Since our appointment, the Company has delivered a Total Shareholder Return of 64.2% (11.0% per annum) and a NAV Total Return of 63.6% (10.9% per annum). If, however, the impact of the Company�s now sold legacy Non-core Assets and subsidiaries is excluded, the Company delivered a NAV (Excluding Non-core Assets) Total Return1 of 66% (11.3% per annum). All these measures are quoted after all costs. The MSCI ACWI returned 69.2% (11.7% per annum) and the MSCI ACWI Equal-Weighted Index 38.1% (7.0% per annum) over the same period. The MSCI ACWI Equal-Weighted Index gives all the stocks in the MSCI ACWI index an equal weighting rather than, as the MSCI ACWI does, weighting them by company size. As a result, it is a better indicator of how the average-sized stock performed and reduces the impact of mega-cap growth names that dominated.

The table below, illustrates the performance of the MSCI ACWI index relative to the MSCI ACWI Equal Weighted Index, on a 12-month rolling basis, along with the performance of the Company�s NAV (Excluding Non-core Assets) Total Return relative to the MSCI ACWI index on the same bases. The MSCI ACWI Equal Weighted Index, is an indicator of how the average stock performed rather than the small number of large-cap companies that dominated the market capitalisation weighted index. In many ways, the equal weighted index is more reflective of how our Stock Pickers think about their portfolios - focusing on their best ideas from anywhere and ignoring short-term risks relative to the benchmark. From the table, you can note that the Company�s portfolio performs better when a broader set of stocks share in the market momentum and underperforms when a few large-cap stocks dominate. In 2021 the bulk of our underperformance occurred in the final quarter when the size bias in the market was largest.

1. https://www.cnbc.com/2020/05/21/many-americans-used-part-of-their-coronavirus-stimulus-check-to-trade-stocks.html
2. Also known as �blank check companies�, SPACs have no commercial operations and are set up to raise capital in the public markets for the purpose of acquiring or merging with an existing company.
3. https://www.ajbell.co.uk/news/aj-bell-active-v-passive-report-2021


Performance from 1 April 2017 to 31 December 2021 (%)

Alliance Trust

Total Shareholder Return64.2
NAV Total Return63.6
NAV (Excluding Non-core Assets) Total Return166.0
BenchmarkMSCI ACWI69.2

MSCI ACWI Equal Weighted Index38.1
Passive alternative � iShares ETF68.8
Peer Group Median268.6

Notes: All figures are measured from 1 April 2017 with data provided as at 31 December 2021. All figures may be subject to rounding differences. The benchmark shown is the MSCI ACWI Net Dividends Reinvested. The passive alternative iShares is the BlackRock iShares MSCI ACWI ETF. The peer group is the Morningstar universe of UK retail global equity funds (open ended and closed ended). The performance of the passive alternative iShares ETF and peer group is after fees. The NAV Total Return and NAV (Excluding Non-core Assets) Total Return are after all manager fees (including Willis Towers Watson�s fees) and allow for any tax reclaims when they are achieved. The NAV Total Return and NAV (Excluding Non-core Assets) Total Return are based on NAV including income with debt at fair value. The Company�s NAV Total Return reflects the impact of holding Non-core investments and Alliance Trust Savings until 30 June 2019. The NAV (Excluding Non-core Assets) Total Return excludes the impact of Non-core investments and Alliance Trust Savings. Sources: Investment performance data is provided by BNY Mellon Performance & Risk Analytics Europe Limited, Morningstar and MSCI Inc. The peer group source is Morningstar.
1. NAV (Excluding Non-core Assets) Total Return is a measure of the performance of the Company�s Net Asset Value (NAV) that excludes the impact of the Non-core Assets held by the Company. 2. Calculated as the median stock return.


MSCI ACWI Total Return less MSCI ACWI Equal Weighted Index Total Return Alliance Trust NAV (Excluding Non-core Assets) Total Return less MSCI ACWI Index Total Return
Mar 2018-0.7%3.5%
Jun 20184.3%1.1%
Sep 20187.6%-0.7%
Dec 20184.8%-1.7%
Mar 20196.0%-2.1%
Jun 20194.2%-2.1%
Sep 20192.9%-3.2%
Dec 20195.7%1.9%
Mar 20207.1%-4.3%
Jun 20206.7%-3.2%
Sep 20205.5%-1.4%
Dec 20203.4%-4.2%
Mar 20210.8%6.3%
Jun 20210.6%4.6%
Sep 2021-0.1%4.0%
Dec 20218.9%-1.0%

All figures may be subject to rounding differences. Past performance is not a reliable indicator of future returns.
Source: FactSet, MSCI Inc., Bank of New York Mellon Performance & Risk Analytics Europe Limited and WTW. Data to 31 December 2021.

While the current narrowness of markets could clearly continue for a while longer (it has already lasted longer than we anticipated was likely), we are confident that at some point there will be a reversal in this trend, as we saw briefly in the first half of 2021. We believe that this reversal could take hold for a much longer period. That would be extremely beneficial for our portfolio and is one of the reasons we are so excited about it today. In the meantime, we are comforted that we own a number of high-quality businesses that are growing faster than the market (have higher earnings per share growth), with more stable earnings and which are cheaper than the market (have a lower Price to Earnings ratio).


Portfolio fundamentals at 31 December 2021

Alliance Trust PortfolioMSCI ACWI Index
Price to Earnings (Trailing)21.523.1
Price to Earnings (Forward 1 Year)17.119.1
Earnings per Share Growth (5 Year)14.513.9
Earnings per Share Growth (Forward 1 Year)21.919.8
Earnings per Share Stability (5 Year)28.424.5

All figures may be subject to rounding differences.

Notes: The Price to Earnings ratio, also called the P/E ratio, is an indication of the worth of a company. It is the amount per share that an investor will pay for each �1 of that company�s earnings. One way to calculate the P/E ratio is to use actual reported earnings over the past 12 months. This is referred to as the trailing P/E ratio. The P/E ratio can also be calculated using an estimate of future earnings (the forward P/E). The lower the P/E ratio the better value that company should be.

Earnings per Share is an indicator of how much money a company makes for each share of its stock, it is a measure of a company�s profitability. Earnings per Share Growth gives a good picture of the rate at which a company has grown its profitability over a given period, with higher levels suggesting a company has products or services in strong demand and is able to grow its earnings faster. Earnings per Share Stability is a measure of the level of fluctuation in a company�s Earnings per Share over a given time period, the higher the value the more predictable future earnings should be.

Source: BNY Mellon Performance & Risk Analytics Europe Limited. Data as of 31 December 2021.


The main reason for our underperformance was that we held more mid and small-cap stocks and less large-cap stocks than the index. The table below show that, based on company size alone, our size positioning cost us approximately 3% in performance terms. This was partially offset by good stock selection which improved performance by approximately 0.8%. This negative effect of the size allocation impacted our stock selection and allocation across the regional and sector level attributions. If we look at the sectors in which we invested, our overweight in Communication Services, which tends to have less large-cap companies in it and which did less well than the index, detracted some value leading to a negative sector allocation effect. Our overweight is a result of our Stock Pickers� company selections as opposed to a macro view on the sector overall. In addition, stock selection was negative as the smaller and mid-cap companies we held in each sector did less well than their larger cap peers. Looking at the regions in which we invest we benefited from being underweight in Asia and the Emerging Markets, this benefit was outweighed by the choice of stocks which reduced performance by 2.8%. This negative stock selection impact was largest in the US, with our underweight to US large-caps significantly penalising the portfolio. In the following section we explain this in more detail and give examples of the stock selections that contributed, both negatively and positively, to performance during the year.

Allocation EffectSelection Effect

Data to 31 December 2021. Past performance is not a reliable indicator of future returns. Estimated attribution metrics calculated using the Brinson methodology. All figures may be subject to rounding differences. Source: FactSet, MSCI Inc., Bank of New York Mellon Performance & Risk Analytics Europe Limited and WTW.

Key detractors to performance:

  • Certain emerging markets stocks, particularly, Chinese stocks, with our holdings in Baidu and New Oriental Education alone detracting -0.9%
  • In the US, we did not hold Apple and Tesla which detracted -0.7% and some US stocks that were held such as Charter Communications, Fleetcor Technologies and Visa, lagged the market
  • Some stocks held within the Information Technology and Consumer Discretionary sectors together with negative allocation impacts from our slight overweight in Communication Services (one of the worse performing sectors) also impacted performance

With the Chinese government regulatory crackdown and market turmoil around Evergrande, several Chinese stocks detracted value over the year.
The two key detractors were Baidu and New Oriental Education. Baidu, China�s internet search and online community leader, was held in the portfolio by both River and Mercantile Asset Management and Black Creek Investment Management. Despite solid fundamentals, shares have suffered with the general sell-off in Chinese equities, with the stock down 30% over the year. Nonetheless, these Stock Pickers remain favourable to Baidu and view the loss as short-term volatility within the context of their long-term investment horizon. Baidu is a technology-driven company and is considered a leader in artificial intelligence (AI) research, including technology for autonomous vehicles. It is also growing its cloud computing service offerings in China and Southeast Asia and is considered a leader in AI cloud services in China. With Baidu�s only modest direct exposure to the areas of increased regulation, its core market of internet advertising is competitive and its areas of growth, such as AI and autonomous vehicles, are strongly supported by the Chinese Communist Party, both Stock Pickers� outlooks for the company are favourable, in particular given its attractive valuation.

The other significant detractor was New Oriental Education, the Chinese for-profit education business, a company that was held by Sustainable Growth Advisers (SGA). SGA had owned New Oriental Education for a long time. It had generated significant value for investors as its share price multiplied. SGA sold down the company�s shares in February 2020 at a significant profit from their original acquisition cost. More recently, regulation in the sector has been expected and SGA�s view was that ultimately regulation would benefit the strongest players as they would be best able to navigate the regulations, absorb the cost and gain market share. SGA bought shares in the company after the share price fell approximately 50% from its peak but, as it became clear the regulatory clampdown was going to materially change the profitability allowed in the sector, SGA quickly exited the position, at a loss. Despite being a major negative contributor to performance over the year, SGA�s holding in New Oriental added value since April 2017.

The next biggest detractor to performance was not holding Apple which rallied by more than 35% over the year. Not holding Tesla also hurt relative performance, with the stock up 51% over the year. Last year, many active growth managers underperformed1, being underweight both stocks. Tesla is valued at more than all other key auto manufacturers in the world combined, despite accounting for just over 1% of global car sales. Over 2021, the company�s market cap increased by over half a trillion dollars, essentially the equivalent of a new JP Morgan, or a Procter & Gamble, whereas Apple added approximately the same amount to its market capitalisation in just 6 weeks from mid-November 2021.

1. https://www.ft.com/content/d1f96d83-1a72-47d7-a4af-2483bd49b024

Key contributors to performance:

  • Stock selection within the Communication Services sector was positive. Our holding in Alphabet and Interpublic Group of Companies added value, as did being underweight Tencent and Verizon Communications Inc.
  • Stock selection within the Health Care sector with a number of our holdings performing strongly such as CVS Health Corporation, UnitedHealth Group and Novo Nordisk
  • Our underweight in Emerging Markets, which was the worst performing region over the period

Internet search leader Alphabet Inc. was the largest contributor to performance during the year, up 66%. Alphabet�s reported revenues grew significantly over the year, largely on the back of strong growth in advertising revenues, including solid growth in YouTube revenues. Google Cloud, another business segment of the tech giant, also delivered solid results despite still being loss making.

The company is held across five Stock Pickers as at the 31 December 2021, with many impressed by the company�s execution and growth potential while remaining cognisant of valuation and rising regulatory risks.

The second largest contributor to performance was Nvidia Corporation (Nvidia), up an impressive 127% over the year. Nvidia designs graphics processing units (GPUs) for the gaming and professional markets, as well as �system on a chip� (SoC) units for the mobile computing and automotive market. The company is benefitting from a sustained increase in demand for its products, driven in part by gaming consoles that use Nvidia�s GPUs (which constitute more than half of its revenue) and in part by cryptocurrency infrastructure. Evergrowing demand for the company�s cloud storage has also fuelled robust spending by Nvidia�s largest customers and has been a source of high margin revenue strength. Continued growth in the firm�s large gaming sector business and a growing automotive pipeline are other key factors in the positive outlook for the company. Nvidia was held in the portfolio by both GQG Partners and Vulcan Value Partners over 2021.

KKR & Co. Inc., an American global investment company held by Vulcan Value Partners, was the third largest contributor to performance for the year. KKR is a global investment firm that manages multiple alternative asset classes. It has stable capital with a stable client base and predictable earnings. KKR has enjoyed the favourable tailwind of increasing allocations by investors to private and alternative investments.


In the 12 months to 31 December 2021, only three out of our ten global Stock Pickers outperformed the benchmark index. GQG Partners� emerging markets mandate which has a lower exposure to China outperformed the MSCI Emerging Markets Index over the year.

The cyclical rotation at the beginning of the year allowed our value-based Stock Pickers to recover some of the previous years� losses, with Lyrical Asset Management (Lyrical) posting the strongest returns in the first half of the year. In contrast, the portfolio�s large-cap, growth-oriented Stock Pickers, such as Sustainable Growth Advisers (SGA), were amongst the poorer performers. As concerns over inflation diminished somewhat mid-year, growth-oriented managers recovered ground and the recovery in value-oriented managers� momentum faltered, until December, when value rebounded again. In the 12-month period, which saw fluctuations in terms of style and size dominance, Vulcan Value Partners and Lyrical were the best performing managers, with River and Mercantile Asset Management, the deep-value recovery manager, the biggest underperformer.

The volatility and rotation in markets this year illustrate the importance of maintaining a mixture of different Stock Pickers whose different investment styles allow the portfolio to gain upside in different market scenarios and deliver smoother returns.


Despite disappointing relative returns in the fourth quarter of 2021, we are very excited by the current portfolio�s fundamentals and how these are helping to position the portfolio for 2022. As of the end of 2021, the portfolio looks better value than the benchmark, with stronger and more stable earnings growth. Although long-term fundamentals were less of a focus in 2021, we believe they will come back into the limelight, as they are the driver of long-term equity returns.

Some of our stocks have been hurt on a relative basis by the sentiment-driven market, being overly penalised by short-term considerations despite maintaining very strong long-term credentials. Our Stock Pickers stand by these firms. They include names such as Booking.com, other consumer discretionary names such as Adidas, or payments companies such as MasterCard or Visa. These companies were all hit by the Omicron variant-related uncertainty as well as occasional idiosyncratic concerns. Despite the short-term impacts of the Omicron variant, companies such as Booking.com, with dominant market positions, should flourish over the long term.

With the threat of persistent inflation now present, those growth companies with particularly lofty valuations are most vulnerable to the associated impact of tightening financial conditions, particularly once Omicron fears recede, and as longer-term fundamentals come back into focus. We have already seen volatility in the early part of 2022 as markets weigh up the impact of rising inflation and increasing costs of capital.

We believe the overall growth rate of corporate profits is set to slow in 2022, relative to the recovery levels of growth seen in 2021, returning to pre-pandemic trend growth perhaps as early as the end of 2022. While the outcome is uncertain, we expect inflation rates to slow as commodity prices stabilise, workers continue to return to the workforce after Covid pressures abate; and some of the global supply constraints currently disrupting industry continue to ease.

However, there are risks to the upside in terms of inflation trends and equity market returns. The increased geopolitical tensions surrounding Ukraine and Russia�s recent actions are further fuelling volatility and compounding concerns around inflationary impacts on energy prices associated with this escalating conflict. We could also see elevated price pressures persisting for longer given continued risks of supply-side constraints and the impact of very tight labour markets. As such, a fundamental bottom-up analysis of the resiliency of each company to inflationary pressures is required. Valuations continue to compress driven by rising discount rates and continued recovery in earnings for Covid-hit sectors. We expect margins to be the deciding factor for equity returns (particularly in the US where the economy is further along in the business cycle). Companies best able to pass on (or avoid) rising input prices whilst navigating the impact of rising yields across many developed markets may be set to navigate this environment well. Our Stock Pickers have been actively evaluating the impacts of higher inflation on their companies to ensure they can weather that storm.

Regarding China, recent regulatory changes have dominated 2021 for the region. Navigating these changes may be the main challenge for investors in the short term against a global backdrop of rising inflation in the West and prevailing US-China tensions. Overall, whilst uncertainty does cloud the region, we continue to believe the long-term case for Chinese equities remains and the region provides selective investment opportunities, potentially broadening sources of diversity available to investors.

As current global constraints start to ease, and concerns over the Omicron variant continue to dissipate, we believe we will see a continuation of market recovery, providing great opportunities.


Demand for cloud computing is growing rapidly driven by the constantly increasing amount of global data produced, and the need for complex and flexible computation. Cloud solutions are also offering enhanced employee flexibility � which is critically important due to the increasing permanence of remote working and adaptability companies will need in the future. Covid-19 has accelerated these trends. Cloud has also helped transform software by allowing for a more subscription and consumption-based business model, enabling more frequent and seamless software updates, significantly improving customer profitability, ease of use and functionality.

We hold several stocks that benefit both directly and indirectly from the migration of businesses toward greater cloud computing. From the well known mega-caps such as Alphabet, Amazon, Microsoft or Baidu, to other names such as Oracle, Dell, Western Digital, ServiceNow, Twilio, Autodesk and salesforce.com, these are just a few of the stocks held that benefit from cloud computing.

Ultimately, cloud computing companies are seeing more recurring revenues via longer-term relationships with businesses which has been the source of attractive growth for the segment. While the growth opportunity is massive, selectivity will be increasingly critical.


Semiconductors are an essential component of electronic devices, enabling advances in communications, computing, healthcare, military systems, transportation, clean energy and countless other applications. Due to their role in the fabrication of electronic devices, semiconductors are a high growth segment of the market which will benefit from increasing digitalisation of the economy. One of our Stock Pickers expects annualised industry revenue growth to accelerate from 5% over the past decade to more than 10% over the next 10 years. Historically, the semiconductor industry has been largely driven by devices per human. In the future, it is likely the industry will benefit from trends not limited by human use (The Internet-of-Things), and new technologies that demand greater processing power than traditional smartphone devices (e.g. virtual and augmented reality).

We hold many semiconductor companies, including Nvidia, Qorvo, Skyworks Solutions, ASML Holdings, Taiwan Semiconductor Manufacturing Company and Broadcom, to name but a few. Current demand for semiconductor chips is vastly outstripping supply, impacting production across a number of industries from car manufacturers to consumer appliance producers � a trend that is likely to continue into 2022. The semiconductor industry is also benefitting from the transition to a world aligned with a 2�C climate target, being critical components in electric vehicles (EVs) and other products that form part of the climate solution.

The concentrated market, coupled with demand outstripping supply, has caused our Stock Pickers to focus on the best-in-class companies in the semiconductor space where they see the highest likelihood of sustainable earnings growth going forward.


Climate change is one of the biggest issues facing investors today and both we and our Stock Pickers, are actively looking at climate-related risks within the portfolio. But the climate transition also offers opportunities by investing in those companies that are providing solutions to others in this space.

The portfolio includes a number of companies that are working on solutions to help the economy reduce climate-related risks, including Bureau Veritas, Schneider Electric, Owens Corning, ANDRITZ and many more.

Bureau Veritas is a global leader in the provision of carbon and energy consultancy, verification and certification services. Their team of experts support the development of bespoke energy and carbon management strategies to set objectives, targets and management plans, helping companies in their decarbonisation journey.

Schneider Electric SE is a French multinational company providing energy and automation digital solutions for efficiency and sustainability. It addresses homes, buildings, data centres, infrastructure and industries, by combining energy technologies, real-time automation, software and services. It was ranked the world�s most sustainable corporation by Corporate Knights in 2021.1 Schneider Electric helps customers reduce their carbon footprints via products and software tools that optimise energy management and industrial processes.

Owens Corning is a global building and industrial materials leader. The company�s three integrated businesses are dedicated to the manufacture and advancement of a broad range of insulation, roofing and fibreglass composite materials. Owens Corning provides innovative products and sustainable solutions that address energy efficiency, product safety, renewable energy, durable infrastructure and labour productivity.

ANDRITZ is an international technology group providing plants, systems, equipment and services for various industries. ANDRITZ Hydro is a global supplier of electromechanical systems and services (�from water-to-wire�) for hydropower plants and one of the leaders in the world market for hydraulic power generation. ANDRITZ offers technologies for producing steam and electricity from renewable fuels as well as the efficient use of traditional fossil fuels.

In addition to the above stocks, we also hold a number of energy companies. Although their carbon footprint might be significant now, we believe they are also part of the solution, not only because they have plans to align their carbon reduction trajectory with the Paris Agreement, but also through researching and investing in alternative energy sources and carbon capture technology. Our Stock Pickers incorporate an ESG lens in their evaluation of these companies and also, along with EOS at Federated Hermes (EOS), actively engage with them to steer them towards better practices, reinforcing their engagement via voting activity. We provide a BP engagement case study by EOS via the Climate Action 100+ initiative in our Responsible Investment section on page 25 of the Annual Report.

1. Corporate Knights is a media, financial information and research company.
Source: https://www.corporateknights.com/leadership/top-company-profile-schneider-electric-leads-decarbonizing-megatrend25289/


During 2021 we maintained a balanced exposure to sectors, regions, and styles, ensuring we took no significant bets against the benchmark on any of these macro factors. Stock selection remains the key driver of performance and of the portfolio�s risk profile. The portfolio maintained a regional and sector allocation approximately in line with that of the benchmark as a result.

By far the largest country weighting is to the US, which saw strong returns throughout 2021. At 57.6% of the portfolio as at 31 December 2021, this represents a slight underweight to the benchmark weight which was 61.2%. The portfolio had an allocation to the UK of 10.5% as at 31 December 2021, an overweight of 6.9% versus the MSCI ACWI, and our biggest regional overweight position. Most UK investments are opportunities selected by our value Stock Pickers and, whilst many of these companies are based in the UK, they tend to be global in nature.

The best performing sector over the period was Energy, up 38% for the year, with our allocation of 3.4% within the portfolio being in line with the index weight. The sector was boosted by soaring energy prices throughout the year. Consumer Discretionary was the worst performing sector over the year and the portfolio was slightly underweight, with a position of 10.8% as of 31 December 2021 versus a weight of 12.4% in the MSCI ACWI.



Portfolio Weight
North America59.8%
Asia & Emerging Markets13.0%
Stock Picker Cash2.4%

All figures may be subject to rounding differences.
Source: The Bank of New York Mellon (International) Ltd and MSCI Inc., data as at 31 December 2021.


Portfolio Weight
Information Technology24.6%
Communication Services15.4%
Health Care11.1%
Consumer Discretionary10.8%
Consumer Staples4.8%
Real Estate0.0%
Stock Picker Cash2.4%

All figures may be subject to rounding differences.
Source: The Bank of New York Mellon (International) Ltd and MSCI Inc., data as at 31 December 2021.


The Company has both long-term and short-term borrowing facilities to provide it with flexibility to manage gearing. In 2021, we maintained a gross level of gearing of between 9.2% and 10.2%, reflecting our positive view of equity markets. Given the strong equity returns in 2021, gearing added value over the period. In December we recommended the Company increase its short-term borrowing facility by up to �100m. At 31 December 2021 the Company has unsecured long-term loans amounting to �160.0m. In addition the Company had drawn �180.5m of its approved borrowing facilities of �250.0m plus an accordion option of a further �50.0m.

Portfolio turnover was 65.7% for the 12 months to December 2021. The level of turnover was higher than might otherwise be expected, in part due to the addition of Sands Capital Management and Metropolis Capital as Stock Pickers and the termination of Lomas Capital Management�s mandate during the year.

Annualised expected volatility was 19% p.a. for the portfolio and 18.3% p.a. for the benchmark as at 31 December 2021. Active Share, the measure of how different the portfolio is to the benchmark, was 75%, with Active Risk (or tracking error) at 2.7% p.a. as at 31 December 2021. We have retained a broadly balanced exposure to styles, sectors, and geographical regions in 2021 relative to the benchmark. This is in line with our process and has been an appropriate method to manage risk, as performance of the different investment styles, markets and sectors differed significantly, in another particularly volatile year. During 2021, we did not implement any currency hedging for the portfolio. Our reference benchmark is unhedged, and our currency exposure is in line with our country allocations. As part of our portfolio risk management, we monitor and manage country and currency exposure, aiming not to diverge significantly from the benchmark allocations. However, we can hedge currency risk as required, depending on our view of the risk profile.

Risk summary
Active Risk2.7%
Active Share75.0%
Portfolio volatility19.0%
Benchmark volatility18.3%

Number of Companies as at 31 December 2021*

All figures may be subject to rounding differences.
The Glossary on page 114 of the Annual Report explains the meaning of the above terms.
*The figures shown in the Number of Companies table above for Portfolio and Benchmark are different from those used for the calculation of the corresponding risk analysis. This is due to the classification of stocks for risk purposes, as we may invest in more than one class of share in a company and limited data coverage for certain stocks.

Source: FactSet and MSCI Inc.



A list of all Stock Pickers as of 31 December 2021 is provided below. We monitor and continuously review the performance of each Stock Picker. Changes can be made at any time if we believe there is the potential to improve expected risk-adjusted returns. Changes in our views on the Stock Pickers are driven by factors that impact on their sustainability of competitive advantage, such as changes to key personnel or company culture and to corporate activity or investment style drift. The Company will usually announce any changes of Stock Pickers once the transition of assets to the new appointee(s) has been completed.

Stock PickerBackgroundInvestment Style % of portfolio by value at 31 December 2021
Black Creek Investment ManagementBlack Creek is based in Toronto and was founded in 2004. Assets under management as at 31 December 2021 were $11.3bn.Long-term contrarian value-orientated buyers of leading businesses across the
market cap spectrum.
11% (11% at 31 Dec 2020)
GQG PartnersGQG is a boutique investment management firm focused on global and emerging markets equities. Headquartered in Fort Lauderdale, Florida, USA, it managed assets of around $91.2bn as at 31 December 2021.Seeks high-quality
sustainable businesses at reasonable prices whose strengths should outweigh the macro environment.
19% (18% at 31 Dec 2020) (Includes both global and emerging markets mandates)
Jupiter Asset Management1Jupiter was established in London in 1985 as a specialist investment boutique. Since then it has expanded beyond the UK and managed �60.7bn as at 30 September 2021 (latest available figure).Looks for out-of-favour and undervalued businesses with prominent franchises and sound balance sheets.7% (7% at 31 Dec 2020)
Lyrical Asset ManagementLyrical Asset Management is a boutique advisory firm based in New York, with 250 clients and discretionary assets under management (AUM) of over $8.7bn as at 31 December 2021.Looks for US companies in
cheapest decile of valuation
with high returns on invested capital and ability to grow profitability.
7% (10% at 31 Dec 2020)
Metropolis Capital2Metropolis is a UK-based firm with a value-based investment style. It had $2.5bn assets under management at 31 December 2021.Focuses on long-term market recognition of the fundamental value of their investments and income generated from those investments.10% (nil at 31 Dec 2020)
River and Mercantile Asset ManagementRiver and Mercantile Group was formed in 2014 and is based in London. Its advisory and investment solutions serve a large client base predominantly in the UK. As at 30 September 2021 (latest available figure), they managed �4.6bn.Seeks smaller companies and recovery situations where it can identify value at different stages of a company�s lifecycle.6% (8% at 31 Dec 2020)
Sands Capital Management2Sands is an independent, employee-owned firm based in Greater Washington DC, USA. As at 31 December 2021, it had assets under management of $73.1bn.Focuses on finding high-quality businesses that are innovative and can sustain above-average growth over the long term.8% (nil at 31 Dec 2020)
Sustainable Growth
Advisers (SGA)
SGA is based in Stamford, USA, and manage US, global, emerging markets & international large-cap growth portfolios. It had client assets of $26.9bn as at 31 December 2021.Seeks differentiated
companies that have strong
pricing power, recurring
revenue generation and long runways of growth.
11% (14% at 31 Dec 2020)
Veritas Asset
Veritas was established in 2003 and is run with a partnership structure and culture. They have offices in London and Hong Kong. As at 31 December 2021 it managed �25bn.Aims to grow real wealth
over five-year periods by
researching thematic trends
that drive medium-term
13% (14% at 31 Dec 2020)
Vulcan Value PartnersVulcan is based in Birmingham, USA, and was founded in 2007. As at 31 December 2021 it managed $20.7bn for a range of clients including endowments, foundations, pension plans and family offices.Focuses on protecting capital by investing in companies with high-quality business franchises trading at attractive prices.8% (9% at 31 Dec 2020)

*As rated by Willis Towers Watson. 1. �JUPITER� and the Jupiter logo are the trade marks of Jupiter Investment Management Group Ltd. 2. Appointed 16 April 2021.
Lomas Capital Management was a Stock Picker until 3 February 2021.


We have overall responsibility for the management of the Company�s portfolio. We have built and manage a team of diverse, best-in-class* Stock Pickers, each of whom invest in a bespoke selection of typically 10-20 of their �best ideas�. �Investing For Generations� is the backbone of the philosophy of the Company. It brings long-term principles into how we invest your money, including ESG considerations. This helps us define our investment approach, ensuring that the Stock Pickers� thinking and practices are aligned with the core beliefs of the Company and that they invest responsibly. We consider this a key factor for long-term success.


We aim to forge abiding partnerships with our Stock Pickers, enabling them to focus on what they do best. Our Stock Pickers are focused on the long term and do not necessarily look at volatility as a risk, but more as an opportunity: risk is more associated with the permanent loss of capital.

After a number of years where no significant manager changes were made, this year saw a number of changes. Following the termination of Lomas� mandate in February, due to the surprise decision of the firm to wind down its business, we appointed two new Stock Pickers: Sands Capital Management, LLC (Sands) and Metropolis Capital Limited (Metropolis). Sands is a growth manager. It seeks out opportunities in businesses offering sustainable, above-average earnings growth with leadership positions and significant competitive advantages, clear value-add and financial strength. Metropolis adopts a value-based approach to investing. It looks to identify mispriced opportunities across a broad universe. This ranges from high-quality companies in industries with poor economics or out-of-favour sectors, to ones where its assessment of growth differs to the market or where growth investors are selling due to decelerating growth momentum.

We invest significant time, research and effort in identifying Stock Pickers for the Company�s portfolio, leveraging our extensive research network, robust process and expertise. Our approach involves identifying the skills and characteristics we believe are essential in good Stock Pickers. We believe the key to identifying tomorrow�s high-performing Stock Pickers lies in extensive due diligence combined with qualitative and quantitative analysis. This due diligence focuses on:

  • the investment processes, resources and decision-making that make up the Stock Picker�s competitive advantage;
  • the culture and alignment of the organisation that leads to sustainability of that competitive advantage;
  • their approach to responsible investment. We expect our Stock Pickers to have a demonstrable process in place that identifies and assesses material ESG factors; we aim to appoint Stock Pickers who actively engage with the companies in which they invest and have an effective voting policy. When necessary, we engage with the Stock Pickers and guide them towards better practices; and
  • the operational infrastructure that minimises risk from a compliance, regulatory and operational perspective.

We do not believe that quantitative assessments on their own provide enough information to give us an advantage in assessing the potential of a Stock Picker to outperform. Our Manager Research team formulates a view on each Stock Picker we seek to rate over a series of meetings. We look beyond past performance numbers to try to understand what �competitive edge� each Stock Picker has and whether that edge is likely to be sustainable in the future. We dig deeper into the investments made by each Stock Picker using a case study methodology to understand the depth of fundamental analysis involved in investment decisions. We look at matters such as the team�s process for selecting stocks, adherence to this process through different market conditions, relevant team dynamics, training and experience as well as performance track record. We see the track record as just a single data point and, without the context of the additional data we assess, it is unlikely to persuade us that a Stock Picker is skilled. Our expectation of success further rises where we engage with Stock Pickers to structure bespoke high conviction, concentrated strategies usually of 10 to 20 stocks, at an attractive cost and we believe portfolios are more robust when we diversify across Stock Pickers with differing approaches. High active share and concentrated portfolios are advantageous. Academic research supports this.1 The broadest opportunity set is provided by unrestricted global mandates, to allow skilled Stock Pickers the widest scope.

1. Sebastian & Attaluri, Conviction in Equity Investing, The Journal of Portfolio Management, Summer 2014.



A core part of our manager research, selection and monitoring procedure is an assessment of ESG risks and opportunities. We require our Stock Pickers to have a demonstrable process in place that identifies and assesses material ESG factors. We expect our Stock Pickers to act where they determine an ESG risk is likely to affect the performance of an investee company and that this risk is outweighing any potential financial reward. Although we consider the �E�, �S� and �G� factors within our approach, in our report for this year we have focused more on the �E� component and, in particular, climate risk.


Whilst climate-related risk is first and foremost a physical environmental risk, it is also a financial risk. It is one of the key areas that we require our Stock Pickers to identify and assess when they select stocks for the portfolio.

In 2021, both we and the Board recognised the impact that climate-related risks could have, and made a commitment to a target of net zero greenhouse gas emissions from the portfolio by 2050 and, on the way, to halve them by 2030. In addition to playing a part in the necessary transition to a low-carbon world, we believe that this will be beneficial to the expected returns of the portfolio, ensuring we reduce the transition risks in the portfolio and investing ahead of other investors moving in this direction.

This means that, by the middle of the century, the amount of greenhouse gases across the portfolio must overall net off to zero, taking account of the emissions arising from the day-to-day operations of the companies held in the portfolio.

This target is consistent with the goals of the Paris Agreement and meets the principles of the Institutional Investors Group on Climate Change (IIGCC), Net Zero Investing Framework (NZIF)1 and the Net Zero Asset Managers Initiative (NZAMI) of which we are signatories. We have always recognised the power of collaboration and that it is particularly important in the area of ESG. WTW is a signatory to the Principles for Responsible Investment and the 2020 UK Stewardship Code, signalling the robustness of our approach to stewardship, including our partnership with EOS, a stewardship specialist, which provides our Stock Pickers with voting recommendations and engages with companies, legislators, regulators, and industry bodies on our and the Company�s behalf.

Climate risk is a key consideration and engagement priority for EOS as well as our Stock Pickers. EOS and a number of our Stock Pickers are involved in Climate Action 100+, a collaborative engagement initiative which aims to ensure the world�s largest corporate greenhouse gas emitters take necessary action on climate change. We illustrate a case study of their engagement with BP below.


Plotting the net zero journey, is a developing science; identifying what data we should collect and how best to measure and analyse it is part of our evolving Carbon Journey Plan methodology. This will include a rigorous framework with which to measure and evaluate our progress, along with controls to help keep the portfolio on track.

Our aim is to align our Carbon Journey Plan to limiting global temperature increases well below 2�C above pre-industrial levels. We have also set a mid-way milestone where, by 2030, we plan to have achieved a 50% reduction in portfolio emissions relative to 2019. This provides the Company with a strategic framework to manage and monitor the reduction in carbon exposure over time. Our triggers and intermediate targets will be developed and shared as we report, in the years to come, on our progress on this journey.

1. The Net Zero Investment Framework, published in March 2021, provides a common set of recommended actions, metrics and methodologies through which investors can maximise their contribution to achieving global net zero global emissions by 2050 or sooner.

BP plc
Climate Action 100+

In the 2019 Annual Report we described EOS and Climate Action 100+ engagement with BP which culminated with the 2019 shareholder resolution calling for the company to set out a business strategy that is consistent with the goals of the Paris Agreement on climate change. The resolution gained management support and was co-filed by nearly 10% of the shareholder base, passing with a very large majority at the shareholder meeting in 2019.

In early 2020, the newly-appointed CEO, Bernard Looney, announced a new ambition for the company to transition to net zero by 2050 or sooner, supported by 10 underpinning corporate aims. The company has since laid out a detailed strategy by which it intends to transition the energy it produces from high carbon to low carbon, including short, medium and long-term targets and aims on the journey to net zero. The company also has market-leading disclosures demonstrating how it evaluates new material capex investments for consistency with the Paris Agreement goals.

EOS further intervened at the 2020 shareholder meeting, asking the company to reconsider its assumptions for Paris-consistent investment and its long-term oil-and-gas price assumptions in light of the coronavirus pandemic. During its Q2 2021 results, BP reduced the long-term oil-and-gas price assumptions used in its financial statements, giving shareholders greater visibility about the firm�s climate-related risks.

EOS continue to engage with BP to seek assurances that it has in place a rigorous investment process, with economic criteria consistent with the company�s purpose and a range of price scenarios including assumptions consistent with the Paris goals. They are also requesting that BP extends its net zero goal beyond the energy produced by the company to apply also to the energy products it markets and sells to customers.

Note: BP plc is held by Jupiter Asset Management.
Source: FactSet and EOS at Federated Hermes.


Divestment from carbon intensive industries can often be self-defeating. We want to encourage corporates, industries and countries to move towards low-carbon solutions. Starving them of investment can potentially discourage them from making a positive change. Many climate solutions are being developed by companies that are currently highly carbon intensive but which will provide a path for the whole economy to decarbonise more quickly.

It might not always be in the Company�s shareholders� financial interests to be ahead of the pathway to net zero. This year, some of our Stock Pickers found attractive opportunities in the Energy sector, leading to an increase in the portfolio�s carbon footprint. These stocks contributed positively to the portfolio, as energy prices sky-rocketed, driven by supply chain issues. Many of these companies are, however, on a decarbonisation path that is consistent with the Paris Agreement, something that we and our Stock Pickers monitor. Often they are heavy investors in green energy and will be a key part of the solution.

This approach means that we place greater importance on effective stewardship and, more specifically, voting and engagement as a means to support the transition to a low-carbon economy.

We provide an illustration of the carbon emissions and Weighted Average Carbon Intensity (WACI) of the current holdings in the portfolio and the index, as well as the trend in the emissions and WACI of these stocks through time. Carbon emissions for the portfolio is higher than for the benchmark, due to some of our Stock Pickers having
increased their allocation to energy stocks earlier in the year. Our exposure will depend on opportunities that arise and, at any given point in time, we will not necessarily always be ahead of the pathway to net zero. The weighted average carbon intensity, a measure of a portfolio�s exposure to carbon-related potential market and regulatory risks, is however lower than the benchmark. Critically, in terms of both measures, the carbon emissions of the stocks in the portfolio are reducing at a faster rate than the stocks in the benchmark.


Carbon Emissions Trend of Current Holdings

Metric Tons CO2/$M Invested

Alliance TrustMSCI ACWI
Most recent*109.379.0

Weighted Average Carbon Intensity (WACI) Trend of Current Holdings

Weighted Average Carbon Intensity

Alliance TrustMSCI ACWI
Most recent*121.6151.1

*The timeline charts compare the historical and most recent emissions and weighted carbon intensity of the portfolio to the benchmark, based on the constituents and weights of each, as of the 31 December 2021. The most recent data point is based on the most recently available data for each company on the date of running the report (10 January 2022). When reported data is not available for a company, Scope 1 & 2 carbon emissions are estimated using MSCI�s proprietary carbon estimation model.

Source: MSCI ESG Research, portfolio as at 31 December 2021.


EOS engaged with 128 companies on 571 issues and objectives

There are numerous �layers� of engagement within the Company�s portfolio. These include our engagement with the Stock Pickers in order to assess how well climate-related issues, as well as wider sustainability issues, are factored into their investment process and stewardship activities and when needed, steering them towards better practices. We also engage with the asset management industry at large regarding sustainability and stewardship practices, and with industry bodies, governments, regulators, and policy makers, both individually and via several collaborative initiatives.

In addition, we partner with EOS, who engages with companies, regulators, and governments on our and the Company�s behalf. Our Stock Pickers and EOS regularly engage with companies to ensure they improve disclosure and change behaviours to enhance their climate resilience. This includes collaborative initiatives such as Climate Action 100+. Over the course of 2021, EOS engaged with 128 companies held within the Company�s portfolio on 571 issues and objectives. Of these engagements within the environmental category, which accounted for 25% of total engagement, 74% of environmental engagements related to climate change.


We excluded companies with significant exposure to tar sands and thermal coal

Exclusion can be warranted in situations where, for example, exposure to climate risk cannot be resolved via other means such as engagement. Where a company�s business relies heavily on activities that are likely to be phased out in the �net zero world�, engagement is unlikely to be fruitful. In 2021, the Board decided to exclude companies with significant revenue exposure to tar sands and thermal coal from the portfolio.


Our Stock Pickers will hold companies trying to develop more energy efficient alternatives and new technology solutions

Finally, we should note that climate change also presents attractive investment opportunities for our Stock Pickers. Many companies are involved in addressing climate resilience and our Stock Pickers actively invest in a number of them. This includes companies in some traditionally �dirty� sectors, working on developing more energy efficient alternatives, as well as new innovative companies offering new technology and/or solutions.


Whilst this year we report more on climate risk, we do not forget other factors that appear closer to home. Social and ethical topics regularly represent approximately a quarter of EOS�s engagement activity.

During the last couple of years, EOS has recognised how the pandemic has put key workers in supermarkets, retail pharmacies, logistics and the caring professions under acute pressure � but the ongoing pandemic has also demonstrated their true value to society more clearly than ever. As a result, EOS has engaged closely with companies on how they have treated their employees, given their importance to overall business performance.

In their engagements with companies, EOS recognised that companies in certain sectors faced unenviable choices � between making workers redundant or going out of business, for example. Hospitality, travel and high street retail were all badly hit, triggering thousands of job losses. EOS wrote an open letter to the CEOs of the companies in its engagement programme, asking how they were making difficult decisions in relation to their employees, supply chains, customers and other stakeholders. Companies that made workers redundant after benefitting from taxpayer-funded bailouts or furlough schemes have attracted public criticism, particularly if they had spent the pre-crisis years using surplus cash for share buybacks. EOS has encouraged a responsible approach to the use of government furlough schemes, and fairness between executive and staff pay.

In addition to the engagement activity undertaken by EOS, our Stock Pickers also engage on social issues with their companies. SGA, for instance, engaged with Walt Disney on the topic of modern slavery risk within the supply chain of their licensed merchandised goods.


Walt Disney is one of the world�s largest licensors with brands spanning Walt Disney Studios, DisneyPixar, Marvel, ESPN and more. Given the company�s broad exposure to its suppliers, Disney takes a risk-based approach to auditing suppliers with the vast majority of audits conducted by third parties in high-risk areas. If corrective issues are identified, suppliers are given one chance to remedy the issue before termination of the relationship. Audits currently prioritise the health and safety of the manufacturing environment and while forced labour is an area of audit, it is not currently a significant feature. Disclosures into Walt Disney�s supply chain are limited and the company has opportunities to increase transparency, particularly into its suppliers further down the chain. SGA encouraged management to take action and publicly map these supply chains; they will continue to monitor the company�s progress in these areas of risk.

Source: Sustainable Growth Advisers.


Good governance gets great results

Stock Pickers are expected to promote good governance by exercising their investor rights and by engaging with companies on issues of governance and shareholder value and in the long-term interest of the Company�s shareholders.

It is no surprise that the majority of voting activity and a significant proportion of engagement activity therefore continues to relate to Governance-related issues. This can be on a number of issues such as Board Diversity, Board Independence, Executive Remuneration, Shareholder Rights and Succession Planning.

Voting: Stock Pickers voted on 3,290 resolutions

In addition to engagement, EOS provides voting recommendations to our Stock Pickers, who exercise the voting rights in respect of the stocks they hold. Over the course of 2021 the Stock Pickers voted on all voteable proposals, casting votes on 3,290 resolutions at company meetings. Of these, they voted against company management on 323 and abstained from voting on 59. Of the votes against management, the key issues voted on were governance-related issues such as remuneration and Directors-related topics. Voting against management, and in particular, against the re-election of certain Directors or on specific climate-related resolutions, allows the Stock Pickers to communicate dissatisfaction following a lack of progress achieved via engagement.


Number of votes with management88.4%
Number of votes against management9.8%
Number of votes abstained1.8%

Source: EOS at Federated Hermes, data to 31 December 2021


Anti-takeover Related0.6%
Director Related34.7%
Non-Salary Comp.23.5%
Reorganisation and Mergers1.9%
Shareholder � Compensation0.9%
Shareholder � Corporate Governance1.5%
Shareholder � Director Related5.0%
Shareholder � Health/Environment2.2%
Shareholder � Other/Miscellaneous7.4%
Shareholder � Routine/Business4.0%
Shareholder � Social Proposal2.8%

Percentage figures above are of the eligible votes exercised that were against management.
Note: vote categories starting with �Shareholder� indicate resolutions brought forward by shareholders.
Source: EOS at Federated Hermes, data to 31 December 2021



The Company has significantly increased its total dividend for 2021, up 32.5% from 14.38p in 2020 to 19.05p in 2021. This was achieved by increasing the third and fourth interim dividends for 2021 by 62.0% from that paid at the same time last year. Had we increased the first and second interim dividends to the same level this would have resulted in an annual dividend yield of 2.3%.1

The increase in the Company�s dividend was implemented by the Board after a review of the level and funding of the dividend which included obtaining and listening to the views of shareholders. The Board believes that the increased level of dividend is both sustainable and affordable and it expects to extend the Company�s 55-year track record of annual dividend increases for many years.

The Company�s Dividend Policy and its investment objective (see page 2 of the Annual Report) and investment strategy remain unchanged.

The aim is to continue delivering a rising dividend year after year as well as capital growth.

1. This is based on the Company�s share price at 31 December 2021.


Subject to market conditions and the Company�s performance, financial position and outlook, the Board will seek to pay a dividend that increases year on year. The Company expects to pay four interim dividends per year, on or around the last day of June, September, December and March, and will not, generally, pay a final dividend for a particular financial year.

In determining the level of future dividends, the Board will take into account factors such as any anticipated increase or decrease in dividend cover, projected income, inflation and yield on similar investment trusts.

The Board will continue to take advantage of the Company�s structure as an investment trust and will use both its investment income and its significant accumulated distributable reserves to fund dividend payments.

The Company policy of paying quarterly interim dividends means that shareholders have certainty of the date on which they will receive their income but means they are not asked to approve the final dividend. However, each year shareholders are given the opportunity to share their views on the Company�s dividend by being asked to approve the Company�s Dividend Policy.


The Company�s distributable reserves at 31 December 2021, including the merger reserve which was converted into a distributable reserve in July 2021, were �3.3bn (2020: �2.3bn). Of these, the Company�s revenue reserve was �95.2m (2020: �99.2), realised capital reserves were �2.8bn (2020: �1.9bn) and unrealised capital reserves were �0.5bn (2020: �0.4bn). Both elements of the capital reserves are readily convertible to cash. The Board expects to utilise �10.5m (2020: �10.1m) to support the total dividend declared for 2021. Details of the Company�s reserves can be found on page 90 of the Annual Report.


The Ordinary Dividend for 2021 will increase by 32.5% to 19.054p. A fourth interim dividend of 5.825p will be paid on 31 March 2022 to shareholders who are on the register on 11 March 2022. The payment dates for the 2022 financial year can be found on page 119 of the Annual Report.



The Company�s income from dividends in 2021 saw a significant increase to �61.9m from �45.6m, also above the �58.7m received in 2019.


The Company�s Ongoing Charges Ratio (OCR) was 0.60% (2020: 0.64%). Total administrative expenses were �5.9m (2020: �6.0m). Investment management expenses were �14.1m (2020: �12.0m). The Company incurred property and other costs not connected with the ongoing investment business of the Company for the year of �0.5m (2020: �0.4m). The main contributor to the lower OCR was an increase in the average daily NAVs. This meant that the Company�s fixed costs became a smaller proportion of its expenses.

The Board has a policy of adopting a one-quarter revenue and three-quarters capital allocation for management fees, financing costs and other indirect expenses where this is consistent with the Association of Investment Companies (AIC) Statement of Recommended Practice: Financial Statements of Investment Trust Companies and Venture Capital Trusts.

The Company�s costs remain competitive for an actively managed multi-manager global equity fund.


  • A stable discount
  • 4.2% of our share capital bought back in 2021


The discount remained stable for most of the year except for one day in March 2021 when it rose to 9.3% before returning to the range of between 7.0% and 4.5% that it occupied for most of the year. The discount at 31 December 2021 was 5.3% (2020: 3.5%) and the average for the year was 5.9% (2020: 5.6%). The widening of the discount is consistent with what was seen in other global equity investment trusts.

The Company bought back 4.2% of its issued share capital during the year, purchasing 13,480,500 shares and adding �8.0m to the Net Asset Value for remaining shareholders. The total cost of the share buybacks was �131.0m. The weighted average discount of shares bought back in the year was 6.1%. All the shares bought back were cancelled.

Share buybacks, combined with the effect of the change in the discount, contributed a total of 0.3% to the Company�s performance in the year.

The table below the high level of discount that persisted in the years prior to the adoption of the current investment strategy in 2017 and the stability of the average discount since. It also shows that the cost of share buybacks since 2017 to maintain a stable discount have been roughly equal to the cost in the years immediately prior to that date. The Board will continue to monitor the stability of the discount and will take advantage of any significant widening of the discount to produce additional return for shareholders.


Discount and share buybacks (2021)

Discount %

for the
month (%)

Source: WTW, Investec and BNY Mellon.

Cost of share buybacks versus average discount (2021)

Cost of share buybacks (�000m)

Cost of

Source: Alliance Trust


The Directors confirm to the best of their knowledge:

The financial statements have been prepared in accordance with the applicable set of accounting standards and give a true and fair view of the assets, liabilities, financial position and profit and loss of the Company.

The Annual Report includes a fair review of the development and performance of the business and the financial position of the Company, together with a description of the principal risks and uncertainties that they face.

Gregor Stewart
24 February 2022


Year to 31 December 2021Year to 31 December 2020
�000RevenueCapital TotalRevenue Capital Total
Income��������62,282 - 62,282 46,244-46,244
Change in the fair value through profit or loss- 500,959 500,959 -230,268230,268
Profit /(loss) on fair value of debt- 11,957 11,957 -(13,142)(13,142)
Total revenue��������62,282 512,916 575,198 46,244217,126263,370
Investment management fees(3,532)(10,595)(14,127)(2,991)(8,973)(11,964)
Administrative expenses(5,003)(919)(5,922)(5,227)(762)(5,989)
Finance costs(1,958)(5,876)(7,834)(1,798)(5,322)(7,120)
Foreign exchange losses- (3,999)(3,999)-(8,378)(8,378)
Profit before tax51,789 491,527 543,316 36,228193,691229,919
Profit for the year48,679 491,344 540,023 36,375193,691230,066

All profit for the year is attributable to equity holders.

Earnings per share attributable to equity holders
Basic (p per share)15.48 156.23 171.71 11.1659.4270.58
Diluted (p per share)15.48 156.22 171.70 11.1659.4070.56

As the Company does not have any other comprehensive income, the profit for the year, as disclosed above, is the same as the Company�s total comprehensive income.

Distributable reserves
�000 Share
Realised capital
Unrealised capital reserve Revenue
Total distributable reserves


At 1 January 20208,22710,771645,3351,863,282242,613109,1642,215,0592,879,392
Total Comprehensive income:
Profit for the year---46,554147,13736,375230,066230,066
Transactions with owners, recorded directly to equity:
Ordinary dividend paid-----(46,514)(46,514)(46,514)
Unclaimed dividends returned-----149149149
Own shares purchased(187)187-(59,793)--(59,793)(59,793)
At 31 December 20208,04010,958645,3351,850,043389,75099,1742,338,9673,003,300

Total Comprehensive income

Profit for the year---399,91791,42748,679540,023540,023
Transactions with owners, recorded directly to equity:
Ordinary dividend paid-----(52,680)(52,680)(52,680)
Unclaimed dividends returned-----494949
Own shares purchased(337)337-(131,512)--(131,512)(131,512)
Transfer to capital reserves *--(645,335)645,335--645,335-
At 31 December 20217,70311,295-2,763,783481,17795,2223,340,1823,359,180

*Following the approval by shareholders at the Company�s Annual General Meeting held on 22 April 2021 to convert its �645.3m Merger reserve into a distributable reserve, the Court on 8 July 2021 approved the reduction of the bonus shares. The Court Order became effective on 9 July 2021 completing the process such that the former Merger reserve is now distributable. At this time the Merger reserve was transferred into Capital reserves.

The �481.2m of capital reserve arising on the revaluation of investments is subject to fair value movements and may not be readily realisable at short notice, as such it may not be entirely distributable.


Non-current assets��������
Investments held at fair value3,650,282 3,269,556
Right of use asset504 594
3,650,786 3,270,150
Current assets
Outstanding settlements and other receivables14,624 25,357
Cash and cash equivalents88,579 112,730
Total assets3,753,989 3,408,237
Current liabilities
Outstanding settlements and other payables(15,863)(49,397)
Bank loans(180,500)(145,000)
Lease liability(251)(228)
Total assets less current liabilities3,557,375 3,213,612
Non-current liabilities
Unsecured fixed rate loan notes held at fair value(197,823)(209,780)
Lease liability(372)(532)
Net assets3,359,180 3,003,300
Share capital7,703 8,040
Capital redemption reserve11,295 10,958
Merger reserve- 645,335
Capital reserve3,244,960 2,239,793
Revenue reserve95,222 99,174
Total Equity3,359,1803,003,300

All net assets are attributable to equity holders.

Net Asset Value per ordinary share attributable to equity holders
Basic and diluted (�)�10.90 �9.34

Cash flow statement for the year ended 31 December 2021

Cash flows from operating activities
Profit before tax543,316229,919
Adjustments for:
Gains on investments(500,959)(230,268)
(Gains)/losses on fair value of debt(11,957)13,142
Foreign exchange losses3,999 8,378
Depreciation203 203
Finance costs7,834 7,120
Scrip dividends(854)(279)
Operating cash flows before movements in working capital41,582 28,215
(Increase)/decrease in receivables(1,074)887
Decrease in payables(1,206)(1,318)
Net cash inflow from operating activities before income tax39,302 27,784
Taxes paid(3,454)(3,652)
Net cash inflow from operating activities35,84824,132

Cash flows from investing activities
Proceeds on disposal at fair value of investments through profit and loss3,817,847 2,878,460
Purchases of fair value through profit and loss investments(3,717,464)(2,845,677)
Net cash inflow from investing activities100,38332,783
Cash flows from financing activities
Dividends paid - Equity(52,680)(46,514)
Unclaimed dividends returned49 149
Purchase of own shares(131,512)(59,793)
Drawdown of bank debt35,500 80,000
Principal paid on lease liabilities(250)(251)
Interest paid on lease liabilities(25)(31)
Finance costs paid(7,465)(6,853)
Net cash outflow from financing activities(156,383)(33,293)

Net (decrease)/increase in cash and cash equivalents(20,152)23,622
Cash and cash equivalents at beginning of year112,730 97,486
Effect of foreign exchange rate changes(3,999)(8,378)
Cash and cash equivalents at end of year88,579112,730

The financial information set out above does not constitute the Company's statutory financial statements for the years ended 31 December 2021 or 2020, but is derived from those financial statements. Statutory accounts for 2020 have been delivered to the Registrar of Companies and those for 2021 will be delivered following the Company's Annual General Meeting. The auditors have reported on those accounts; their reports were unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under s498(2) or (3) Companies Act 2006.

The same accounting policies, presentations and methods of computation are followed in these financial statements as were applied in the Company�s last annual audited financial statements, other than those stated in the Annual Report.

Basis of accounting

While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of UK-adopted international accounting standards (IASs), this announcement does not itself contain sufficient information to comply with IASs. The Company will publish full financial statements that comply with IASs on its website.

1. Income

An analysis of the Company's revenue is as follows:

Income from investments
Listed dividends - UK12,961 7,511
Listed dividends - Overseas48,913 38,041
Other income
Property rental income321 318
Mineral rights income- 20
Other interest54 246
Other income33 108
Total income62,28246,244

2. Total Company expenses of �20,049k (�17,953k) consist of investment management fees of �14,127k (�11,964k) and administrative expenses of �5,922k (�5,989k). Administrative expenses include property and other costs not connected to the ongoing investment business of the Company of �471k (�394k).

3. The diluted earnings per share is calculated using the weighted average number of ordinary shares, which includes 1,611 (22,331) shares held in a trust that was set up to satisfy awards made under historic share award schemes. The basic earnings per share is calculated by excluding these shares. The basic Net Asset Value per share calculation also excludes these shares.

4. All expenses are accounted for on an accruals basis. Where there is a connection with the maintenance or enhancement of the value of the Company�s investments and it is consistent with the AIC SORP, the Company attributes indirect expenditure including management fees and finance costs, 25% to revenue and 75% to capital profits. Specific exceptions to this general principle are:

  • Expenses which under the AIC SORP are chargeable to revenue profits are recorded directly to revenue.
  • Expenses connected with rental income and mineral rights income are included as administrative expenses.


The Annual Report will be available in due course on the Company's website www.alliancetrust.co.uk. It will also be made available to the public at the Company's registered office, River Court, 5 West Victoria Dock Road, Dundee DD1 3JT and at the offices of the Company's Registrar, Computershare Investor Services PLC, Edinburgh House, 4 North St Andrew Street, Edinburgh EH2 1HJ after publication. Due to Covid-19 restrictions these offices may not currently be open or may have restricted opening hours.

In addition to the full annual report, up-to-date performance data, details of new initiatives and other information about the Company can be found on the Company's website.


The 134th Annual General Meeting (AGM) of the Company will be held at 11am on Thursday 21 April 2022 at the Apex City Quay Hotel, 1 West Victoria Dock Road, Dundee, DD1 3JP. Subject to there being no restrictions in place at the time, shareholders will be welcome to attend in person. In any event we will stream the AGM live to shareholders and they will be able to submit questions in advance or during the meeting. Full details of how to view the meeting and submit questions will be sent to all shareholders and will be on the Company�s website. Shareholders are recommended to lodge proxies for their votes before the meeting so that they can be certain their votes will be counted.

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