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 12.09.2019 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
BAE Systems
British American Tobacco
Standard Life Aberdeen
Legal & General

Data as of 31.07.2019

Geographic Breakdown (%)

UK 97.5
Cash 2.6

Data as of 31.07.2019

Sector Breakdown (%)

Consumer Goods
Consumer Services
Oil & Gas
Health Care
Basic Materials

Data as of 31.07.2019

Market Cap Breakdown (%)

FTSE 100 63.5
FTSE 250 26.0
Small Cap 8.0
Cash 2.6

Data as of 31.07.2019

Fund Manager Comments

Boris Johnson became the new Prime Minister in the UK, and took decisive action to try to ensure the UK leaves the European Union at the end of October, expressing a desire for a deal with the EU, but stressing that the country would be prepared to leave “without a deal” if necessary. The pound weakened notably against the dollar, on fears of “no deal” but this helped to support the stock market.

The stock market made steady progress, supported by hopes of a US interest rate cut, which came on the last day of the month. Whilst the overall stock market was steady, there was a high degree of polarisation at the sector and company level. In general, the best performing sectors were those with significant overseas earnings and more defensive cash flows, such as mobile telecommunications, aerospace & defence, tobacco and pharmaceuticals. The worst performing sectors were more cyclical, including software, chemicals, mining and real estate.

The Trust’s NAV rose 7.4% though the portfolio lagged behind the stock market return, with a number of large individual stock moves in both directions. Many companies in the portfolio reported interim results in July. Trading statements were generally reassuring, with good dividend growth at SThree, National Express and Informa amongst others. However, among the key negative performance contributors, St James’s Place shares were weak on slightly disappointing interim figures, despite robust fund flows which support long term growth. The most disappointing announcement was at Tyman, where the new Chief Executive has had to deal with problems caused by a factory consolidation exercise and a new product introduction in America. Tyman shares underperformed, but were supported by a depressed valuation and confidence in the recovery plan. Hammerson shares also fell on results, amid investor concern about the general retail property environment, although the company made an encouraging asset sale, which supports the balance sheet.

On the positive side, Imperial Brands shares produced a double digit total return as they rebounded from depressed levels. The company announced that it would change its dividend strategy to a progressive policy, from next year, after paying another 10% increase this year, and it also announced a share buy-back. This was well received, against a background where investors had questioned the sustainability of 10% annual dividend increases from a starting yield of over 9%. Meggitt shares were strong performers, helped by takeover activity in the aerospace sector, which highlighted the value of the business. BAE Systems also produced a double digit return, supported by solid operating results and confidence in increasing defence spending.

We added a new company to the portfolio. Stock Spirits is a London listed Eastern European spirits company, primarily focused on Vodka but with several other complementary brands and distribution arrangements. The company is the market leader in the Czech Republic and number two in the much larger Polish market. The company is benefitting from consumers trading up to premium spirits. Our proprietary market research highlighted the strength of its Polish market position and explains why Stock Spirits has been gaining market share. The shares are modestly valued, with strong cash generation.

Elsewhere, we continued to add to lowly valued companies that had lagged the market like Inchcape, Imperial Brands and SThree. We also switched part of the HSBC holding into Barclays on valuation grounds. The purchases were funded by selling down stronger performing shares that were more fully valued, including Informa, BHP and TP ICAP.

Despite the rally in the stock market this year, the market remains extremely polarised. There are many lowly priced companies offering high dividend yields with scope for significant capital appreciation. Share prices are being driven by two opposing forces. On the one hand, central bank policies of low, or in some cases negative interest rates, are forcing investors to take money out of bonds and cash to place into riskier assets, in order to generate a decent return. This money is inflating certain types of companies that are seen as relatively safe and defensive. The outperformance of these “quality” and “growth” companies is fuelling further investor money flows into these successful investment styles, and exacerbating this trend. On the other hand, investors are concerned about multiple risks, ranging from US / China trade tensions and Brexit to geopolitical risks. This is putting investors off investing in more cyclical companies and many UK domestic and smaller companies. Outflows from funds exposed to these factors and into passive investments is further amplifying this trend too. There is therefore a large and growing gap between these types of investments and the stock market is not performing its normal function of arbitraging the difference. Benjamin Graham famously described the stock market as a voting machine in the short term but a weighing machine in the long term. Currently investors voting with their money are overpowering the weighting process.

Whilst this trend in the stock market has made shorter term performance difficult for our investment style, it is providing numerous opportunities for us to invest in good companies trading at exceptional prices. We believe the portfolio can provide a high and growing income stream, along with superior long term returns.

Simon Gergel 13 August 2019

In general, the best performing sectors were those with significant overseas earnings and more defensive cash flows

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 -1.2 5.1 -1.9 32.8 27.3
    NAV (debt at fair value) -1.1 7.4 -5.7 28.6 28.8
    Benchmark 2.6 10.6 1.3 27.1 36.9

    Source: Thomson Reuters DataStream, percentage growth, mid to mid, total return to 31.07.2019.1

    Discrete 12 Month Returns (%)

    2019 2018 2017 2016 2015
    Share Price -1.9 15.6 17.1 -3.8 -0.3
    NAV (debt at fair value) -5.7 12.3 21.4 -3.5 3.8
    Benchmark 1.3 9.2 15.0 4.5 3.1

    Source: Thomson Reuters DataStream, percentage growth, mid to mid, total return to 31.07.2019.1

    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.

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    © 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.