Portfolio & Performance

ISIN GB0005800072
SEDOL 0580007

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 21.03.2019 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 (%)

Royal Dutch Shell 'B' Shares
Imperial Brands
HSBC Holdings
Legal & General
BAE Systems
BHP Group
Scottish & Southern Energy
Standard Life Aberdeen

Data as of 28.02.2019

Geographic Breakdown (%)

UK 96.7
Cash 3.3

Data as of 28.02.2019

Sector Breakdown (%)

Consumer Services
Consumer Goods
Oil & Gas
Health Care
Basic Materials

Data as of 28.02.2019

Market Cap Breakdown (%)

FTSE 100 63.5
FTSE 250 25.8
Fledgling 0.8
Small Cap 6.6
Cash 3.3

Data as of 28.02.2019

Fund Manager Comments

February saw a continuation of January’s stock market recovery, after a tough end to 2018. Sentiment was helped by increasing hopes of a resolution of the trade tensions between the USA and China. In the UK, the prime minister Theresa May hinted for the first time, that there could be an extension to “Article 50”, delaying the UK’s exit from the European Union, and making a “no-deal” exit less likely.

The stock market produced a total return of just over 2%, with many companies reporting their 2018 results. In general, cyclical and financial sectors were the strongest performers, including construction & materials, insurance and general retail, although pharmaceuticals also outperformed. The weakest large sectors were defensive industries, like telecommunications and food producers.

The Trust’s NAV rose by 3.3% over the month, with performance modestly ahead of the FTSE All-Share benchmark, which rose by 2.3%. The biggest positive stock contributors to relative performance were SThree, Greene King and Legal & General. The biggest negative contributions came from BAE Systems, IG Group and from not owning AstraZeneca, which rallied and helped the overall index performance.

We have a strict discipline to review a holding in the portfolio if the investment case changes. In February, we reviewed the case for Marks & Spencer, on new information. Our investment case on M&S had been based upon the company enacting a major restructuring of the business, making profound changes to their store estate and their clothing & home proposition, and growing their online presence. We expected this to be supported by strong underlying cash generation, particularly from their food and international businesses, which would allow the company to restructure, whilst still paying a high dividend to shareholders. We believed that M&S’s strength in food is driven by a differentiated offering, especially targeted at a growing convenience channel.

It became clear in recent weeks, with widely published rumours of M&S’s interest in working with Ocado, that the company was considering a significant push into online food delivery. This suggested that the management’s view of the strength of M&S’s food offering was more related to the large “weekly” shop, rather than the convenience or “buy for tonight” shop. Not only do we see this area as more competitive, but we were concerned about a number of significant risks to a potential tie up. In particular, the average M&S food basket size tend to be small, so not well suited to online shopping, and there could be cannibalisation of in-store sales, if M&S shoppers shift their purchasing to Ocado. Also, we were concerned that any deal could consume a significant amount of cash, reduce future cash flow and threaten the dividend payments. We therefore decided to sell the shareholding.

Later in the month, M&S announced its intention to spend up to £750m on a joint venture with Ocado, to raise £600m in a rights issue and to cut the dividend by 40%. It is a complex deal, in which M&S is not acquiring many assets, and it will be many years before we will be able to judge if this is the right strategy for the group.

Apart from this transaction, the main activity was to add to existing investments at attractive valuations, taking advantage of recent volatility in the market. This included increasing the holdings in WPP and BAE Systems.

This is a favourable environment for active investors, after a period of some volatility in markets. We can identify many strong businesses, trading on unusually attractive valuations, which should, in the medium term, deliver a high and growing income and good total returns, in line with Merchants’ objectives. Uncertainty over the outlook for economies and markets, makes it important to diversify the portfolio, and to pay close attention to balance sheet risks, economic sensitivity and structural concerns at the individual company level.

The portfolio is positioned very differently to the overall stock market. There are large positions in industrial sectors like aerospace & defence and construction & building materials and consumer sectors like travel & leisure and media. Less economically sensitive exposures, include positions in modestly priced tobacco stocks, utilities and pharmaceuticals. Among the financial sectors, we have a preference for life insurance, real estate and general financial stocks, with more modest exposure to banks, which are more sensitive to any weakness in the domestic economy. Elsewhere, Merchants owns several mining and oil companies, which offer solid value and attractive cash flows and dividends.

Simon Gergel 11 March 2019

This is a favourable environment for active investors, after a period of some volatility in markets,

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


Performance (%)

Select period:

    Cumulative Returns (%)

    3M 6M 1Y 3Y 5Y
    Share Price 4.7 -0.9 6.7 38.7 19.3
    NAV (debt at fair value) 4.3 -5.5 1.7 29.3 20.6
    Benchmark 2.6 -3.7 1.7 31.8 27.1

    Source: Thomson Reuters DataStream, percentage growth, mid to mid, total return to 28.02.2019.1

    Discrete 12 Month Returns (%)

    2019 2018 2017 2016 2015
    Share Price 6.7 5.5 23.1 -11.4 -2.9
    NAV (debt at fair value) 1.7 6.6 19.3 -9.2 2.8
    Benchmark 1.7 4.4 24.2 -8.7 5.6

    Source: Thomson Reuters DataStream, percentage growth, mid to mid, total return to 28.02.2019.1

    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 2019 © 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 2019, 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.