Active management

Active management refers to a style of portfolio management where the manager makes asset allocation decisions with the aim of outperforming an investment benchmark index. This is the opposite of passive management.


Purchase of a business or a business line from another entity.


See General Meetings.


Alpha represents fund performance factoring in the risk due to the specific security, i.e. the excess return of the security relative to the return of the benchmark index is called the alpha.

Alternative Investment Market (AIM)

A junior market compared with the main London Stock Exchange with less onerous listing requirements so it tends to attract smaller companies that have been trading for a short period of time.

Asset allocation

This refers to how invested money is distributed across different asset classes, industry sectors, and geographical regions. Asset allocation should reflect the investment objectives of a fund and the degree of risk the investor is prepared to take.

Asset class

Asset classes comprise of distinct types of investment. The four main classes are equities, bonds, cash and property.

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Balance sheet

A financial statement that summarises a company's assets, liabilities and shareholders' equity at a specific point in time. These three balance sheet segments give investors an idea as to what the company owns and owes, as well as the amount invested by the shareholders.

Base rate

This is the interest rate set by the Bank of England's Monetary Policy Committee.

Bear market

When widespread pessimism across markets leads to a fall in share prices. See Bull market.


Fund managers will compare the performance, risk and holdings of funds against a market measurement, e.g. a stock market index. The Alliance Trust Investment funds use various benchmarks but Alliance trust does not have a fixed benchmark.


A measure of the volatility of a given company relative to the overall market. A beta greater than 1 is more volatile than the market, less than 1 is less volatile.

Bid price

The price at which a market maker will buy a security.


A bond is an instrument which is used by companies and governments to raise money. The money raised is (generally) lent on specific terms for a fixed period of time and for a fixed income, known as a coupon. When the bond matures investors will receive the par value of the bond back.


An investment style whereby the fund manager will build a portfolio based on the favourable characteristics of individual stocks and not based on macro-economic analysis, which is referred to as "top-down".

Broker recommendation

A stockbroker's opinion of the investment quality of a company's shares at the time that it's reviewed in comparison to other stocks in the sector.

Bull market

When widespread optimism across markets leads to a rise in share prices. See Bear market.

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Called up share capital

Nominal value of shares of the company that are issued and fully paid.

Capital employed

Fixed assets plus current assets minus current liabilities. Capital employed is the value of the assets that contribute to a company's ability to generate revenue.

Capital Gains Tax (CGT)

A tax on profit made from the disposal of assets over and above the CGT exemption in any one year. Each year everyone who is liable to capital gains tax gets an annual tax free allowance.

Capitalisation issue

Money from a company's reserves is converted into issued capital, which is then distributed to shareholders in place of a cash dividend. Also known as a bonus or scrip issue.

Cash flow

This provides a measure of the company's financial health. This equals cash receipts minus cash payments over a given period of time.

Cash flow statement

Gives a summary of a company's cash flow over a given period of time.

Closed-ended funds

A closed-ended fund is a collective investment scheme with a limited number of shares, such as Alliance Trust. New shares are rarely issued once the fund has launched, and shares are not normally redeemable for cash or securities until the fund shuts down. See open-ended funds.

Closing price

The last closing mid price quoted for the company.

Corporation tax

A tax paid by limited companies on their profits.


People to whom the company owes something, usually cash or a claim to services.

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Daily high

The highest price reached by a security or index during the day.

Daily low

The lowest price reached by a security or index during the day.


People who owe the company something, usually cash or a claim to services.

Director dealings

When directors buy or sell shares in their company.


Where the share price of an investment trust is below its net asset value.


Sale of a business or business line to another entity.


Refers to the practice of investing in a range of different asset classes that perform differently in any particular set of market conditions, with the aim of spreading the overall risk of investing.


A payment made to shareholders by companies out of their net profits. These payments are at the discretion of the director(s) and are not guaranteed.

Dividend cover

A company's ability to pay ordinary dividends to shareholders out of revenue earned and is calculated by dividing the adjusted Earnings Per Share (EPS) by the total dividend per share.

Dividend payment date

The date on which the most recent dividend will be paid to shareholders.

Dividend per share growth

The percentage change from the previous year in the dividend paid on each share.

Dividend yield

Dividend Yield is the percentage of a company's share price that it pays out as dividends over the course of a year. The Dividend Yield is calculated as (Total Dividend/ Share Price) *100 Dividend Yield is displayed as a percentage.

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Earnings per share

A company's profitability expressed on a per share basis and calculated by dividing the company's annual earnings after tax by the number of shares in issue. In the case of an investment trust it will be calculated on the revenue account.


See General Meetings.

Environmental, Social and Governance (ESG)

ESG issues relate to additional aspects of the business that can either be risks or opportunities to a business and can materially affect its success, or otherwise, and the value of investments. We believe that how a company interacts with the environment (E) and society (S) as well as how a company is governed (G) influence what a company is worth and should be closely considered when making investment decisions. The term ESG is often used interchangeably with sustainability or sustainable development.

EPS growth

EPS Growth shows the relative growth of a company's earnings over the last year. A negative value indicates the company's earnings fell in the last year. It is calculated as: [ (Current year EPS - Last year EPS)/Last year EPS ] *100. EPS Growth is displayed as a percentage.


Ownership interest in a company in the form of common stock or preferred stock. See fixed income securities.

Ethical investments

Ethical investors take environmental and humanitarian factors into consideration as well as financial gain before placing investments, i.e. a strategy which seeks to maximise both financial return as well as social good.

Exchange traded fund (ETF)

ETFs are a kind of collective investment fund competing with investment trusts and unit trusts for investor's money. ETFs are a lot like conventional tracker funds, pooling the cash of a large number of investors and investing it in a basket of shares in companies that make up an index. ETFs are open ended but they do not usually have initial charges and their annual management charges are much lower.

Ex dividend (Ex)

Used to indicate that the buyer is not entitled to the next dividend payment. This "ex Dividend" or "ex Rights”. The opposite of cum, literally “without”. A share price will be quoted ex Dividend, or XD, for a number of weeks prior to a dividend payment.

Ex-dividend date

The date at which a new shareholder is no longer entitled to the most recent dividend payment.

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FTSE 100

An index of the share prices of the UK’s 100 largest companies by capitalisation.

FTSE Mid 250 Index (FTSE 250)

The share process of the 250 companies that follow the top 100 (comprising the FTSE 100).

Financial Conduct Authority (FCA)

An independent body which regulates the financial services industry in the UK.

Fixed income securities

A type of investment which obligates the issuer to make payments on a fixed schedule. See equities.


A collective investment scheme where money is pooled, which is invested in a portfolio of securities with a common investment purpose.

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Companies are financed by a combination of debt and shareholders equity. Gearing is a ratio that will tell how much a company has borrowed in relation to the amount of shareholders funds in the business. It is normally calculated using net debt, i.e. total borrowings less cash.

Generalist Investment Trust

While most investment trusts invest predominantly in listed equities (generalists), a number invest in private equity and venture capital assets (specialist). The latter are less correlated with equity markets.

General meetings

A meeting of the shareholders of a company usually held on an annual basis - commonly known as an Annual General Meeting (AGM) - at which business such as the reception of the directors' report and accounts, declaration of dividends, election of directors is held. If something happens within the company that requires the shareholders to meet before the next scheduled AGM, then an Extraordinary General Meeting (EGM) will be held.

Gross gearing

Calculated by dividing gross borrowings by shareholder funds.

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A hedge is typically accomplished by offsetting transactions that will eliminate one or more types of risk. The risks that are most commonly hedged are currency risks, credit risks and interest rate risk. For example if we buy a Euro denominated bond, we are exposed to the Euro. To eliminate this risk we would sell Euros against it to offset this risk.

High/Low price

The highest and lowest prices for a security over a certain period - most usually quoted for the day (intraday high/low) and for the year (52 week high/low).

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Independent Financial Adviser (IFA)

IFAs are unbiased independent professionals who provide their clients with financial advice for a fee, they are usually regulated by the Financial Conduct Authority.


An index is a statistical indicator representing the value of the securities that constitute it. Indices are often used to measure a market or industry's performance. An index may be grouped by market cap (e.g. FTSE 100), business type (e.g. the technology companies in the FTSE Techmark index), sector (e.g. Telecoms) or some other parameter.

Individual Savings Account (ISA)

These are tax-efficient savings plans. There are two types of ISA - cash ISAs and stocks and shares ISAs. Different investment limits apply to each of these. No personal tax is payable by the investor on any interest or net dividend arising in the fund. No capital gains tax is payable by the investor on any gains realised when the investment is cashed in. Alliance Trust Savings only administers stocks and shares ISAs on behalf of its customers.


When prices of a selected group of items are going up, the rate of this increase is the rate of inflation. The rate of inflation depends on the range of goods measured. Inflation results in a reduction in the purchasing power of money. Conversely, deflation results in an increase in the purchasing power of money.

Intangible assets

A company's long-term assets that are usually non-physical in nature, but represent a right or expected future benefit. Examples are goodwill, brands and trademarks.


Monies charged by a bank or other financial organisation for borrowing money. This can also refer to the return earned on an investment, including money on deposit at a bank.

Interim dividend

A dividend which is declared and distributed before the company's annual earnings have been calculated. These dividends are usually distributed quarterly or half-yearly.

Interim results ("Interims")

The results reported by a company for the first six months of its financial year. Generally, interim results are made public within two months of the end of the interim period.


Initial Public Offering, the term used for any company joining the stock market. It is a way for companies to raise cash and increase and diversify the current shareholder base.

Investment trusts

A collective fund in the form of a listed company holding a portfolio of securities on behalf of its own shareholders. An investment trust and its shares are tradable in the same way as other companies and shares. Alliance Trust PLC is an investment trust.

Investment trust status

A collective investment vehicle having investment trust status is given certain tax advantages making it exempt from Capital Gains Tax and Corporation tax on franked investment income received by the trust from its investments. In return it is required to distribute as least 85% of net revenue.


International Securities Identification Number. A unique international 12 digit code which identifies a security issue.

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The ease with which a security can be traded on the market, usually defined by turnover of the shares divided by the number of shares in issue.

Listed company

A company whose securities have been admitted to an official stock exchange. In the UK, the company’s securities will have been admitted to the UKLA's official list and admitted to the trading on the London Stock Exchange.

London Interbank Offered Rate (LIBOR)

The wholesale lending rate.

London Stock Exchange (LSE)

Stock exchange located in the City of London.

Long position

A long position in the stock market means that an investor has purchased an underlying instrument with the expectation that its price will rise and for bonds that its yield will fall.

Long Term

Long term investing means that the investor’s horizon is over 5 years.

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Major shareholders

Shareholders in a company owning more than 3% of the ordinary shares. Investors with such a holding will be disclosed in the Annual Report of the company in which they have the stake.

Managed trusts

The vast majority of trusts are managed (see self-managed). In a managed trust, a contract will exist between the Trust and the asset management company which supplies the management expertise. The investment manager is employed by the management company which will recharge his / her services on an agreed basis, such as a percentage of net assets.

Market capitalisation

The market value of a company, calculated by multiplying the current share price by the number of shares in issue.

Medium term

An investment term referring normally to a time horizon of between three and five years.

Minority interest

Represent the share of the assets of the business in subsidiaries that are not wholly owned.

Money laundering

A process whereby criminals process money gained from illegal activities through the financial system to disguise as money obtained from legitimate sources.

Money market instruments

These are short term, tradable, cash-type investments. They include, for example, Certificates of Deposit, Commercial Bills and Treasury Notes. The value of these can go down as well as up.

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Net assets

The total figure for all assets less all liabilities.

Net asset value (NAV)

The value of the shareholders interest in a company, calculated by subtracting liabilities from assets and dividing by the number of shares in issue.

Net asset value (funds)

The price of each share of a mutual fund. It is calculated by subtracting the fund's liabilities from its total assets, and dividing that figure by the number of shares, or units, outstanding. The NAV is the amount of money that an investor would receive for each share if the mutual fund sold all of its assets, paid off all of its outstanding debts, and distributed the proceeds to shareholders.

Net borrowings

Total borrowings excluding cash and near cash.

Net gearing

Net Gearing is a general measure of indebtedness. This ratio is calculated as: [(Total Liabilities- Cash at Bank & in Hand)/Shareholder Funds ] *100 Net Gearing is displayed as a percentage. See Gearing.

New issue

See IPO.

New York Stock Exchange (NYSE)

The world’s largest stock exchange.

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Offer price

The price at which a market maker will sell a security.

Official list

The UK Listing Authority's list of all listed securities.

Open-ended funds (OEIC)

An open-ended fund, or OEIC, is a type of fund which does not have restrictions on the number of shares issued. Shares in open ended funds are redeemable when investors wish to sell. Alliance Trust Investments manages a range of open-ended funds. See closed-ended funds.

Operating margin

This is the trading margin for each period reported, showing trading profit as a percentage of sales, or total trading revenues. The calculation is as follows: Trading profit/total sales x 100 = margin (%)

Operating profit/loss

A company's profit after deducting operating costs from gross profits.

Ordinary shares

The most common form of share. Holders may receive dividends in line with company's profitability and on the recommendation of its Directors.

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Passive management

Passive investment managers do not make decisions on markets and stock selection or form views on market movements. They simply aim to match their given benchmarks. This is the opposite to active management.

Payment date

The date when a dividend becomes payable.

P/E ratio

The PE Ratio or Price to Earnings ratio is used as a measure of how highly a company is valued, sometimes referred to as it's "rating". The P/E ratio also gives an indication of how quickly the company is expected to grow - a high PE indicates that a company is expected to see EPS grow quickly in the future. For example, technology stocks tend to have much higher P/E ratios than utilities. This means that P/E ratios are only a useful comparison for similar stocks, for example stocks in the same sector. The P/E is calculated as share price/EPS.


A form of issue of securities in the UK, typically with a predetermined number of non-retail investors.


A collection of securities owned by an investor.

Post-tax profit

A company's profit after tax has been deducted.

Preference shares

Fixed dividend shares that rank above ordinary shares if a company is wound up. Preference shares represent partial ownership in a company, although preferred stock shareholders do not enjoy any of the voting rights of common stockholders.

Preliminary results

Listed companies have to announce the annual financial results for the company, also known as prelims or finals. They are considered preliminary until they are reviewed, adjusted and approved by audit. Listed companies also have to announce interim results and some companies also announce quarterly figures.

Pre-tax profit

A company's operating profit before tax is deducted.

Private equity

These are shareholdings in a company which isn't quoted on a stock market. This may be a company that is at an early stage of development and so offers the potential for strong earnings growth (with increased risk). Or it could be a private family company. The company may never have been listed on the stock exchange or shares may never have been issued to raise capital.

Profit and loss account

The profit and loss account provides a record of a firm's trading activities and whether it has made a profit or lost money over a particular period of time. It differs from the balance sheet that records the financial position of the business at a particular snapshot moment in time.

Profit warning

In the UK, when a listed company expects profits to fall below analysts' forecasts by more than 10%, the directors are required to issue a profits warning through the London Stock Exchange.

Public offer

The making available of a new securities issue to the public through an underwriting also called offering. The public can ask for a prospectus and apply to buy shares prior to the company’s admission.

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Record date

The date established by a company to determine who should receive a dividend. The date as set by a company, on which an individual must own shares in order to be eligible to receive a declared dividend.

Regulatory news service

The means by which UK listed companies make announcements to the London Stock Exchange.


The value of funds set aside for emergencies or other future needs. Reserves can arise from the retention of profits or from events such as the issue of shares at a premium or the revaluation of assets.

Revenue reserves

Investment trusts do not have to distribute all the income they generate, after costs. They may retain up to 15% of revenue generated which will be held in a Revenue Reserve. This reserve can be used at a later date to supplement dividend payments to shareholders.

Rights issue

An invitation to existing shareholders to purchase additional shares in the company.

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S&P 500

Standard and Poors Composite Index; an index comprising shares of 500 US companies reflecting the general trend in the US stock market.

Scrip dividend

An issue of shares available to shareholders that replaces a dividend payment. Shareholders have the option to forgo their dividend for the share alternative.


Grouping of companies having similar products or services.


A security or financial instruments is a tradable assets of any kind. Debt securities such as bank notes, bonds and debentures. Equity securities such as common stock or shares.


The Stock Exchange Daily Official List number, a code used by the London Stock Exchange to identify stocks, especially those that aren't actively traded in the U.S. and don't have a CUSIP number.

Self-managed investment company

Most investment trusts outsource the management of their portfolio to a manager from an asset management company. Alliance Trust is one of about 12 trusts which employ their own managers. Self management provides greater singularity of purpose as the management team all work for one set of shareholders and greater transparency is provided in the accounts. See Managed Trusts.


An individual or organisation owning shares in a company.

Shareholder funds

The sum of all company assets less all liabilities.

Share premium account

Surplus of proceeds from share issue over the nominal value of shares issued.


A unit of ownership that is a proportional amount of a company. The standard class of shares are usually referred to as "Ordinary Shares" but a company may have more than one class of share, including Preference Shares.

Shares in issue

This is the number of shares currently issued for that company.

Short position

This is an investment approach which involves selling an asset which isn't possessed. This is done in the expectation that its price will fall so that it can be bought at a lower price. Short positions are generally considered more risky sophisticated investment strategies.


The difference between the Bid Price and the Offer Price of an investment.

Stamp duty

A tax on certain financial transactions including the purchase and/or transfer of shares. This is currently charged at 0.5% of the amount paid. Gilts and corporate bonds are currently exempt from stamp duty.

Stock Exchange

A stock exchange is an organization of brokers and investment bankers which has the purpose of providing the facilities for trade of company stock and other financial instruments - usually a central location and recordkeeping. The trading of stock on stock exchanges is called the stock market.

Sustainable and Responsible Investment (SRI)

SRI funds aim to outperform a benchmark, while incorporating socially sustainable, environmental and corporate governance issues into the way funds are managed.

Sustainable development

Sustainable development is generally defined as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs” (Source: Brundtland Report ‘Our common future’, 1987).

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Tangible assets

Physical assets owned by a company or individual that can be seen or touched such as buildings, goods for sale or machinery.


The trading symbol assigned to the share (and some types of fund - investment trusts and ETFs) by the exchange on which it trades. Investors often refer to shares by their ticker symbols because of their brevity and because they often remain the same even if a company's name changes.

Time and sales

The official record of trades executed on a stock exchange during the day.


A top-down manager will build a portfolio based on macro-economic research rather than stock specific criteria. See also bottom-up.

Total assets

The sum of all company assets; both fixed and current.

Trading statement

A statement made by a company regarding current business activities and sales experience.


Also known as sales, the amount derived from the provision of goods and services falling within a company's normal activities after the deduction of trade discounts, VAT, etc.

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Unit trusts

These are open-ended funds where private investors pool their money to be invested in a portfolio of securities. Unit trusts issue units to investors. Unit trusts issue units in response to demand. Being open-ended, the unit price is closely aligned to the net asset value (NAV).

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Venture Capital Trusts (VTCs)

A VCT is a type of private equity trust established by the government to encourage investment in high-risk, small, young companies. They have traditionally offered tax concessions to attract risk capital from higher rate tax payers.


A measure of the amount of movement in the price of an instrument.


The number of shares traded over a given time period, usually one day.

VWAP (Volume weighted average price)

A measure of the price at which the majority of a given day's trading in a given security took place. This is calculated by dividing the value of trades executed by the volume of shares traded over a given period.

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The percentage of a portfolio held in a single asset or sector compared with its benchmark.

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