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 18.09.2018 based on market close mid price.


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
HSBC Holdings
BHP Billiton
Standard Life Aberdeen
BAE Systems
Legal & General
Imperial Brands
Lloyds Banking Group

Data as of 31.07.2018

Geographic Breakdown (%)

UK 98.0
Cash 2.0

Data as of 31.07.2018

Sector Breakdown (%)

Consumer Services
Oil & Gas
Consumer Goods
Health Care
Basic Materials

Data as of 31.07.2018

Market Cap Breakdown (%)

FTSE 100 65.7
FTSE 250 26.3
Small Cap 5.3
Fledgling 0.8
Cash 2.0

Data as of 31.07.2018

Fund Manager Comments

The UK Prime Minister, Theresa May, unveiled a White Paper on the UK’s future relationship with the European Union, which was widely seen as heading towards a “softer” Brexit than the previous government position. In the process, the Brexit Secretary, David Davies, and Foreign Secretary, Boris Johnson, both resigned from their cabinet posts in disagreement. However, this did not end the uncertainty over Brexit, as it remains unclear whether the EU will accept key parts of the White Paper.

The stock market was not particularly affected by these machinations, but reacted more to developing trade tensions between the United States and China. Overall, the market produced a small positive return over the month. Many of the defensive sectors, like tobacco, pharmaceuticals and fixed line telecommunications were the best performers. However there were also some poor performing defensive sectors, including food producers and utilities, as well as more cyclical sectors, such as software and mining.

The Trust’s NAV rose by +0.91% in July, behind the benchmark return of +1.29%. The biggest impact came from TP ICAP, a broking company, where the shares fell sharply as the company warned about additional costs next year and reduced guidance for the synergy benefits from its recent merger. The company also announced the departure of its Chief Executive Officer. Elsewhere, not owning British American Tobacco and AstraZeneca negatively impacted performance as both shares were strong performers. On the other hand, the industrial companies Meggitt and Morgan Advanced Materials were strong performers on encouraging interim results announcements. Also, the gambling company GVC rallied after announcing a pioneering joint venture with a leading US casino company MGM Resorts, to exploit the deregulating US gambling industry.

There were some encouraging dividend announcements from companies within the Merchants portfolio in July. Oil major BP announced its first dividend increase since 2014. Whilst this was only a small increase, it was particularly notable given market concerns about the sustainability of dividends from the oil majors as recently as 2016. IG Group raised its full year dividend by 34%, in line with earnings growth, even though the company faces a more difficult year in 2019 as new regulations take effect. On 1st August, St James’s Place announced a 20% increase in its interim dividend as the business continues to report strong growth in assets and cash flows.

We added one new company to the portfolio. Keller is the world leader in geotechnical engineering (ground engineering), with roughly a 10% share of this fragmented market. We believe the industry has structural growth opportunities, as rising city populations and ageing infrastructure around the world create increasing demand for complex underground structures and strong foundations for tall buildings and other large structures. Despite a good long term growth record, the company’s shares were trading on a low valuation, possibly suffering from a UK discount, despite the fact that less than 5% of sales come from the UK.

We continued to add to shares on low valuations, typically after a period of poor performance, such as Standard Life Aberdeen, Greene King, TP ICAP and ITV. Elsewhere, we significantly reduced our Informa shareholding which was inherited from the UBM takeover, primarily on valuation grounds. We also further reduced the exposure to Royal Dutch Shell after substantial gains in the last two years.

The recent interim results season has seen most of Merchants’ portfolio companies reporting solid trading results and robust dividend payments, with few significant disappointments. From oil and mining to pharmaceuticals and financial services, the portfolio is broadly diversified both by industry and by geographic exposure. We continue to focus on higher yielding companies with strong business franchises, trading on attractive valuations. We can find many such investment opportunities in the UK stock market at present and we remain optimistic that the portfolio can continue to deliver a high and growing income stream, and good total returns, in line with The Merchant Trust’s objectives.

Side Comment

I have recently read the excellent ‘Prisoners of Geography. Ten maps that tell you everything you need to know about global politics’, by journalist Tim Marshall. This book explains how the geography of regions, including mountains, rivers, forests and deserts has helped shape the borders of countries, and why certain areas are strategically important. For example, Tibet contains important sources for three of China’s great rivers, so the region is critically important for that country’s national water security. Similarly, the Russian naval ports in the Crimea are their only warm water ports, that do not freeze in winter, which helps explain the Russian response to secure the region, as Ukraine attempted to move closer to the EU and western governments.

Simon Gergel 03 August 2018

From oil and mining to pharmaceuticals and financial services, the portfolio is broadly diversified both by industry and by geographic exposure.

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 3.2 8.8 15.6 30.2 33.7
    NAV 3.4 6.5 11.0 29.0 36.9
    Benchmark 3.9 5.0 9.2 31.1 42.3

    Source: Lipper, percentage growth, mid to mid, total return to 31.07.2018.1

    Discrete 12 Month Returns (%)

    2014 2015 2016 2017 2018
    Share Price 3.0 -0.3 -3.8 17.1 15.6
    NAV 2.3 3.7 -2.4 19.1 11.0
    Benchmark 5.3 3.1 4.5 15.0 9.2

    Source: Lipper, percentage growth, mid to mid, total return to 31.07.2018.1

    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 2018 © Lipper, a Thomson Reuters company. All rights reserved. Lipper shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

    © Allianz Global Investors GmbH 2018, 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.