Risks and Features


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Investment trusts are quoted companies listed on the London Stock Exchange. Their share prices are determined by factors including the balance of supply and demand in the market, which means that the shares may trade below (at a discount to) or above (at a premium to) the underlying net asset value.

Merchants seeks to enhance returns for its shareholders through gearing, in the form of long-term, fixed rate debentures. Gearing can boost the Trust’s returns when investments perform well, though losses can be magnified when investments lose value. You should be aware that this Trust may be subject to sudden and large falls in value and you could suffer substantial capital loss. This investment trust charges 65% of its annual management fee to the capital account and 35% to revenue. This could lead to a higher level of income but capital growth will be constrained as a result. Derivatives are used to manage the trust efficiently.

Investment Policy
Asset Allocation
The majority of the Trust’s investments are in equities.
Risk Diversification
The Trust aims to achieve a spread of investments, with no single investment representing more than 15% of the underlying assets at the time of acquisition. The Trust seeks to diversify its portfolio into at least five industrial sectors, with no one sector comprising more than 35% of the portfolio.
The Trust seeks to enhance returns over the long term through gearing. The Board monitors the level of gearing and makes decisions on appropriate action based on the advice of the manager and the future prospects of the Trust’s portfolio. Historically, gearing has been in the form of long term fixed rate debentures. Other than in exceptional market conditions, it is unlikely that, at the time of investment, gearing (calculated after deducting the value of holdings in government securities, held to offset some of the long term debentures issued) will exceed 20% of net assets. The Trust’s authorised borrowing powers state that the Company’s borrowings may not exceed its called up share capital and reserves.

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"The companies listed on the London Stock Exchange provide investors with a means to gain exposure to business across the globe whilst benefiting from the UK's leading corporate governance."

Simon Gergel
Fund Manager

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