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 06.08.2020 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.
Association of Investment Companies (AIC) Shareholder Communication Awards 2020: The Merchants Trust won the award for ‘Best Report and Accounts – Generalist’. The judges praised the winning entry for the quality of its case studies and investment report, its use of language that was easy to understand, and the level of detail provided on the portfolio.
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.
Association of Investment Companies (AIC) Shareholder Communication Awards 2020: The Merchants Trust won the award for ‘Best Report and Accounts – Generalist’. The judges praised the winning entry for the quality of its case studies and investment report, its use of language that was easy to understand, and the level of detail provided on the portfolio.


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
National Grid
Scottish & Southern Energy
IG Group
Royal Dutch Shell - B Shares
Tate & Lyle
St James's Place

Data as of 30.06.2020

Geographic Breakdown (%)

UK 97.8
Cash 2.2

Data as of 30.06.2020

Sector Breakdown (%)

Consumer Goods
Consumer Services
Oil & Gas
Health Care
Basic Materials

Data as of 30.06.2020

Market Cap Breakdown (%)

FTSE 100 67.7
FTSE 250 19.5
Small Cap 10.7
Cash 2.2

Data as of 30.06.2020

Fund Manager Comments

Last month saw the sharpest ever reported contraction in the British economy, with a 20% fall in monthly gross domestic product (GDP) recorded for April, due to the government’s lockdown measures to control the coronavirus pandemic. However, investor attention seemed more focused on the gradual lifting of restrictions on most retailers in June and air travel, restaurants and pubs from July. There were positive developments in the UK and across much of Europe as the rate of reported Covid-19 infections and deaths declined significantly over the month. However, the trend was more concerning in the USA, where contagion was accelerating in certain large states, such as California and Florida.

Stock markets were supported by optimism over easing lockdown restrictions, low interest rates and government stimulus packages, recording a small positive return for the month. This took the UK market’s total return for the quarter to over 10%, one of the strongest returns in the last decade, whilst the US stock market and European indices returned high teens percentage gains or better.

The volatility and divergence within the UK market was not as extreme as in the last few months, but there were still some notable sector moves. The strongest sectors included life insurance, utilities and mining, whilst the weakest included healthcare equipment, travel & leisure and beverages.

Portfolio performance was marginally behind the FTSE All-Share benchmark in June. The NAV returned 1.4%, also marginally behind the 1.5% return of the benchmark. Strong performers included double digit share price total returns at recruitment company SThree, which reported more resilient demand than expected for temporary workers in specialist STEM areas, SSE which met market expectations for its final dividend, and Legal & General which was supported by rising markets. On the other hand, Landsec was weak on general concerns about the real estate market, especially retail property. Man Group pulled back in response to weak performance in some of their investment funds. Also, Redrow shares fell back at the end of the month as a trading update included a write-down of assets in London, as the company scales down its homebuilding operations in the capital.

We made a modest new investment into retailer Next Plc. Next has migrated the business successfully from predominantly shop and catalogue based retailing towards online, whilst broadening the product range and earning consistently high returns and strong cash flows. Whilst current trading is under huge pressure from the lockdown and social distancing, Next has reacted in its characteristically decisive way to protect its financial position and reposition for the future. Although the business cancelled its recent dividend, we would expect Next’s historically strong cash flow to recover, in the medium term, and for ordinary and possibly special dividends to resume.

We also added to National Grid and SSE, two large UK utilities which reaffirmed their attractive dividend policies in June. Both companies are investing significant amounts into their growing infrastructure businesses, and exploiting rising demand for renewable power generation, whilst they are well placed to benefit from any “green recovery” investment plans backed by the government. Although both are exposed to an element of regulatory risk, regulators also need to help facilitate a transition to cleaner energy, which requires substantial investment over very long time scales.

These investments were financed primarily from taking profits on shares that had outperformed in recent months and offered lower upside potential, such as the building materials and construction firms CRH and Balfour Beatty, and gambling company GVC. We also reduced holdings in the banks sector to reinvest into Next where we have higher conviction.

Investment markets are being heavily influenced by cheap money and stimulus from central banks. These money flows are also influencing share prices, with more dependable, higher quality or growth stocks finding particular favour. A small group of very large US technology stocks, which are relatively resilient to the impact of the Covid-19 pandemic, have driven the technology heavy Nasdaq index to record highs, despite the continuing health and economic problems in that country. In the UK we have also seen certain company share prices appreciate to high valuations, which we find hard to justify in many cases. However, the picture is not uniform. According to Morgan Stanley, the valuation gap between UK “value” and “growth” companies is the widest in 45 years, whilst the UK market is as lowly valued compared to the world index as it has been over that entire period. By implication, therefore, UK ”value” shares offer an extraordinary valuation opportunity compared to broader equity markets.

Anecdotally we see this dispersion of opportunities when we look at individual companies. There are many fundamentally sound businesses, trading on really attractive valuations, which we believe are likely to be re-rated as the economy recovers from its period of forced shut-down. Whilst we are maintaining a balance in the investment portfolio, with a combination of more cyclical and more defensive businesses, the average valuation of the companies owned by Merchants is significantly below the average for the broader UK market.

Simon Gergel15 July 2020

UK ”value” shares offer an extraordinary valuation opportunity compared to broader equity markets

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


Performance (%)

Select period:

    Cumulative Returns (%)

    Share Price6.5-28.6-16.4-4.79.0
    NAV (debt at fair value)15.1-26.7-15.0-8.25.8

    Source: Thomson Reuters DataStream, percentage growth, mid to mid, total return to 30.06.2020.1

    Discrete 12 Month Returns to 30 June (%)

    2020 2019 2018 2017 2016
    Share Price-16.4-2.617.024.8-8.3
    NAV (debt at fair value)-15.0-6.916.021.7-5.3

    Source: Thomson Reuters DataStream, percentage growth, mid to mid, total return as at 30.06.2020.1

    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.