Alliance : Why there is sense in sustainability

the goal of the alliance trust equity portfolio is simple; to outperform the MsCi aC World index and the global investment trust peer group. We aim to do this by investing in a balanced portfolio of sustainable companies. the equity process focuses on finding companies which are more sustainable, have strong business fundamentals and are attractively valued. in addition, we aim to deliver a dividend yield in excess of the benchmark and to continue our record of 48 consecutive years of dividend increases. With that in mind, our focus is to look for companies that display three key attributes; growth, income and quality.

Why there is sense in

sustainability

So the question is; what makes a company more sustainable, and how does investing in these companies help us achieve our goal of long-term outperformance over our peers and the market? We believe that a company is more sustainable if it is able to produce its goods and services for the present world, without compromising the ability of future generations to do the same. Our investment process is based around the core belief that companies that are more sustainable will deliver better long-term investment performance.

The success of the Alliance Trust equity investment process, and our ability to reach our goals, relies
on our ability to find companies that are both more sustainable, but also leaders in their own right. Our approach is threefold and encompasses robust business fundamentals, sustainability

criteria and attractively valued opportunities.

V

Fundamentals

When considering business fundamentals, we place important emphasis on the quality of a company's assets. We search for businesses that are industry leaders, with leading market
share and companies growing their market share within an industry. Quantitatively, this tends
to lead to companies with higher returns. We screen for factors such as high Return on Invested Capital (ROIC), high asset turnover and high and stable operating margins. We then overlay our sustainability criteria on companies that have strong business fundamentals which provides us with a powerful tool for selecting stocks that can help portfolios outperform over the long term.
The third and final layer we then add to our process is valuation. A fundamental premise of fund management is that success depends on the ability to select companies which are mispriced. The combination of sustainable companies,
which also have strong business fundamentals, and are fundamentally mispriced, gives us an investment process which equips us with the tools we need to outperform.

Using this process helps us to sift through the thousands of stocks in the global universe and arrive at a list of companies which we feel suit our shareholders' objectives. This then helps
us to build our portfolio. The key to success when constructing a portfolio is to ensure a balance of diversification and high conviction.
A well-balanced, well- diversified portfolio helps to avoid unnecessary volatility in terms of the patterns of returns. A high conviction portfolio ensures our shareholders' capital is only allocated to superior companies. Striking this balance is as important as finding the right stocks to put in the portfolio. The Alliance Trust equity portfolio now holds 70 companies, but these are spread across all the global sectors we think are appropriate.
It is a well-balanced, portfolio of sustainable, attractively priced companies, with strong business fundamentals.

The objective of the portfolio is to focus on three key simple attributes in terms of the companies in which we invest; income, quality and growth. With respect to the income element, we believe
that a growing dividend is something that is both attractive to our shareholders, while helping us to deliver our goal of strong, outperforming returns, We have, in fact, delivered a rising dividend for over 48 years - one of very few companies in the FTSE 250 which can claim such a thing.

Our deep understanding of environmental, social and governance (ESG) considerations
gives us an edge in terms of gauging the quality of the companies we analyse. It is an extra lens by which we can judge both the quality of the assets in which we invest, and the quality of people (or companies) we entrust to manage these assets. We believe that it makes sense to invest in companies that are developing the technologies and infrastructure that support a more prosperous and resilient future, and that our team of equity analysts have the right skills to identify these on our shareholders' behalf.
You can watch a short animation demonstrating why these sustainability objectives make sense on our website www.alliancetrust.co.uk

Please note that the value of investments and any income from them can go down as well as up. Your capital is at risk and you may not get back what you originally invested. Past performance is not a guide to future performance.

Funds which undertake ethical screening to meet their investment aims are unable to invest in certain sectors and companies. Our exclusion of some

areas of the market (on ESG grounds) may result in periods of under-performance with respect to relevant benchmarks. For instance if tobacco stocks were enjoying extremely strong returns we would not be able to participate in their gains.

simon Clements Investment Manager Global Equities Alliance Trust PLC

Simon has worked in fund management for over 18 years. Prior to joining Alliance Trust in August 2012, Simon spent 12 years working at Aviva Investors (previously Morley Fund Management) where most recently he was Head of Global Equities.

In his early career Simon worked as a Portfolio Risk Analyst before joining Aviva Investors to help develop their global equity and SRI propositions.

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