Portfolio & Performance


Share Price is the price of a single ordinary share, as determined by the stock market. The share price above is the mid-market price at market close.
Share Price

Net Asset Value (NAV) per Share is calculated as available shareholders’ funds divided by the number of shares in issue, with shareholders’ funds taken to be the net value of all the company’s assets after deducting liabilities. The NAV figure above is based on the fair/market value of the company’s long-term debt and preference shares (known as debt at market value). This allows for the valuation of long-term debt and preference shares at fair value or current market price, rather than at final repayment value (known as debt at par).
NAV per Share

Premium/Discount. Since investment company shares are traded on a stock market, the share price that you get may be higher or lower than the NAV. The difference is known as a premium or discount.

Dividend Yield is calculated using the latest full year dividend divided by the current share price.
Dividend Yield

Data source DataStream and Allianz Global Investors as at 08.07.2020 based on market close mid price.

Awards & Ratings

RSMR Rating: The Merchants Trust has been awarded RSMR’s ‘R’ rating, widely recognised as a mark of quality for funds, ranges and investment trusts that receive this seal of approval. The RSMR research process results in a list of investment trusts which are the trusts that RSMR feel have a robust, repeatable process and the ability to deliver strong performance in the future.
The RSMR rating is designed for use by professional advisers and intermediaries as part of their advice process. This rating is not a recommendation to buy. If you need further information or are in doubt then you should consult a professional adviser.


The data shown is not constant over time and the allocation may change in the future. Totals may not sum to 100.0% due to rounding. All data source Allianz Global Investors unless otherwise stated.

Top 10 Holdings (%)

British American Tobacco
Imperial Brands
BHP Group
Royal Dutch Shell - B Shares
IG Group
Tate & Lyle
BAE Systems
St James's Place

Data as of 31.05.2020

Geographic Breakdown (%)

UK 98.8
Cash 1.2

Data as of 31.05.2020

Sector Breakdown (%)

Consumer Goods
Consumer Services
Oil & Gas
Health Care
Basic Materials

Data as of 31.05.2020

Market Cap Breakdown (%)

FTSE 100 66.2
FTSE 250 22.6
Small Cap 10.0
Cash 1.2

Data as of 31.05.2020

Fund Manager Comments

The stock market continued to react to the spread of the coronavirus pandemic and the economic implications. Although the spread of the virus through North and South America was a concern, investor attention turned towards the gradual easing of lockdown restrictions in much of Europe and the UK. The stock market was relatively firm in the second half of May, with the FTSE All-Share index ending the month up 3.4%, with single digit gains in most international markets.

Apart from the coronavirus news, the Chinese government announced a new national security law for Hong Kong outlawing acts such as sedition and subversion. This raised fears that it could lead to the end of the one country two system status of Hong Kong that has existed since the British handover in 1997. The Hong Kong stock market fell heavily.

Within the UK, there was quite a wide variation of sector performances, with pressure on the sectors most affected by COVID-19 effects for much of the month, reversing sharply in the last week on hopes around the easing of lockdown restrictions. The best performing sectors included mobile telecommunications, reacting to robust results and a maintained dividend at Vodafone, as well as cyclical sectors like mining and general retail. The worst sectors included banks with HSBC falling by 10% on Hong Kong fears, aerospace & defence, and more defensive sectors like food producers and utilities.

The portfolio lagged behind the market return, but with a strong end to the month as sentiment towards the more depressed and lower valued companies improved. The biggest impact to performance came from Imperial Brands, which reported weaker than expected results and a widely anticipated one third cut to the dividend. National Express was also weak as the company carried out a large equity issue and real estate company Landsec also declined as results highlighted continued pressure on asset values, especially in the retail sector. Against this backdrop the Trust’s NAV returned 1.9% in May, lagging the 3.4% return of the market.

On the other hand, strong results from Stock Spirits lifted the share price by 30%, whilst Standard Life Aberdeen and BHP Billiton both produced double digit returns. Not owning HSBC also helped relative performance significantly, given the weakness in the share price.

We have had limited exposure to large UK telecommunications companies in the last few years. For most of that period the sector has been a value trap, with attractive looking valuations being repeatedly undermined by deteriorating industry fundamentals, caused by intense competition, regulatory interventions, such as ending mobile roaming charges within the EU, rising spectrum costs and other factors. We are starting to see fundamentals improve. Governments and regulators are keen to encourage investment in fibre networks and they are adjusting regulatory frameworks, companies are sharing infrastructure, such as mobile phone masts, and we are seeing greater consolidation. We have become more positive on the prospects for UK telcos in recent weeks. Share prices fell sharply in the first quarter of 2020 taking valuations to more attractive levels and despite telecommunications revenues being far more resilient than many other sectors to the economic impacts of the coronavirus pandemic. In March we made a new investment in BT and this month we bought Vodafone.

Vodafone is one of Europe’s largest telecommunications companies. Whilst this year will be impacted by COVID-19, the company has confirmed an attractive dividend yield of over 6% paid from strong underlying cash generation.

BT surprised the market in May by completely cancelling dividend payments for 18 months, followed by halving future payouts to fund a massive fibre investment programme to connect 20m homes by the mid to late 2020’s. When we purchased BT we anticipated a significant dividend cut, although we did not expect a complete cancellation. We understand the rationale for the company’s Openreach division to ramp up investment into fibre connectivity. In fact, BT shares did not react that significantly to the dividend hiatus and ended the month unchanged. We continue to hold a reasonable position in BT, but due to our requirement for income we switched part of the holding into Vodafone.

We added another new company to the portfolio, Diversified Gas and Oil (DGOC). We have followed the business for some time and took advantage of its move up to a premium listing in the main stock market index from AIM to make an investment. DGOC owns a large portfolio of gas producing wells, pipelines and associated assets in North America. These are generally mature, but undermanaged assets that have been sold by companies, which are typically focused on drilling new wells for oil. The gas wells generate significant cash flows, much of which is hedged against commodity price volatility for several years into the future. The clear focus that DGOC management brings to these assets improves efficiency and prolongs well lives. The strong cash generation allows the company to pay a dividend yield of over 10%. Our investment coincided with a fund raising by the company to fund two acquisitions which further expand its scale and provide significant synergy potential.

The UK stock market staged quite a strong recovery from its low point in March, to the end of May, but remained down by over 15% since the beginning of our financial year. We find it hard to call the direction of the equity market in the short term, given the wild swings in investor sentiment we are witnessing in response to news on the pandemic. However, the stock market remains highly polarised. There are many companies that appear fully valued, or expensive, and we do not hold these in the portfolio. But we can still find many other businesses across a variety of sectors that are fundamentally sound, have strong market positions and are trading on attractive valuations. Some of these are economically sensitive businesses where profits are under pressure in the short term and a recovery in earnings will take time to come through, whereas others are more economically defensive and continue to generate robust cash flows and pay significant dividends.

We believe that a portfolio of these companies should deliver attractive returns to investors in line with Merchants’ objectives. Whilst dividend income is undoubtedly under pressure in the short term, we would expect most of the companies in the portfolio that have cancelled dividends to resume payments within the next two years, even if some will resume at a lower rate. Also, Merchants has significant revenue reserves, which the board has used previously to smooth dividend payments to shareholders at times when income has been under pressure.

Simon Gergel17 June 2020

Whilst dividend income is undoubtedly under pressure in the short term, we would expect most of the companies in the portfolio that have cancelled dividends to resume payments within the next two years

This is no recommendation or solicitation to buy or sell any particular security.


Performance (%)

Select period:

    Cumulative Returns (%)

    Share Price-16.5-22.2-12.8-6.63.1
    NAV (debt at fair value)-15.2-22.6-12.5-12.4-2.8

    Source: Thomson Reuters DataStream, percentage growth, mid to mid, total return to 31.05.2020.1

    Discrete 12 Month Returns to 31 May (%)

    2020 2019 2018 2017 2016
    Share Price-12.8-5.913.927.1-13.2
    NAV (debt at fair value)-12.5-10.912.425.9-11.8

    Source: Thomson Reuters DataStream, percentage growth, mid to mid, total return as at 31.05.2020.1

    1Past performance is not a reliable indicator of future returns. You should not make any assumptions on the future on the basis of performance information. The value of an investment and the income from it can fall as well as rise as a result of market fluctuations and you may not get back the amount originally invested.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.

    Copyright 2020 © DataStream, a Thomson Reuters company. All rights reserved. DataStream shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

    © Allianz Global Investors GmbH 2020, Registered Office: Frankfurt am Main, Register: HRB 9340, Local court: Frankfurt am Main. All Rights Reserved. The Merchants Trust PLC is incorporated in England and Wales. (Company registration no. 28276). Registered Office: 199 Bishopsgate, London, EC2M 3TY. The Company is a member of the Association of Investment Companies - Category: UK Equity Income.