Portfolio & Performance

ISINGB0005800072
SEDOL0580007

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
524.0p


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
537.5p


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.
Premium/-Discount
-2.5%


Dividend Yield is calculated using the latest full year dividend divided by the current share price.
Dividend Yield
5.2%

Data source DataStream and Allianz Global Investors as at 17.09.2021 based on market close mid price.

Awards & Ratings

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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.
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Association of Investment Companies (AIC) Shareholder Communication Awards 2021: 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 2021: 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.

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 (%)

GlaxoSmithKline
5.2
Imperial Brands
4.7
British American Tobacco
4.2
BAE Systems
3.6
National Grid
3.3
Royal Dutch Shell - B Shares
3.3
Scottish & Southern Energy
3.3
Vodafone
3.3
St James's Place
3.2
WPP
3.1

Data as of 31.07.2021

Geographic Breakdown (%)

UK 95.6
Europe ex UK 4.4

Data as of 31.07.2021. Excludes Cash

Sector Breakdown (%)

Financials
19.8
Industrials
18.1
Consumer Staples
15.7
Consumer Discretionary
14.5
Energy
9.1
Utilities
8.7
Health Care
6.5
Communication Services
3.3
Materials
2.5
Real Estate
1.4
Cash
0.4

Data as of 31.07.2021. Excludes Cash

Market Cap Breakdown (%)

FTSE 100 61.5
FTSE 250 25.6
Small Cap 8.2
Other 4.4
Cash 0.4

Data as of 31.07.2021

Fund Manager Comments

Investors in the UK continued to focus on developments around the Covid-19 pandemic, and in particular the Delta variant, where infection numbers were growing rapidly at the start of the month, but then began to subside towards the end. The government eased most of the domestic restrictions on activity and social distancing on July 19th. Company results announcements showed a continuing recovery in activity, with some quite striking growth figures, when comparing this year to a very depressed base level a year ago. For example the recruitment company SThree and the broadcaster and content creator ITV, both doubled operating profits for the first half of their financial years.

The stock market was relatively calm, with a modest gain and a slight cyclical bias. Of the larger sectors, the best performers were real estate investment trusts, aerospace & defence and metals & mining. The worst performers included telecommunications, personal care, drug & grocery, food producers and banks.

Portfolio performance was ahead of the benchmark and gave a NAV total return of 1.8% compared to 0.5% from the FTSE All-Share index. BAE Systems and Man Group both appreciated by 10% as they reported strong results. Relative performance also benefitted from not owning AstraZeneca, which underperformed. On the other hand, a few of the portfolio’s cyclical holdings underperformed after a strong run, including Tyman and WPP, whilst not owning Anglo American also held back relative returns.

There was a lower level of portfolio activity during the month than earlier in the year. We continued to build up the new position in Drax, which also announced interim results. We see an exciting medium term opportunity for the business to become a carbon negative electricity generator through carbon capture and storage. We funded that by modestly reducing SThree and Entain, which have been exceptional performers, and were closer to fair value.

It is now halfway through the Merchants Trust fiscal year. Although the stock market has made steady gains this year, and is now close to its pre-pandemic level, UK valuations are not extended. In fact, the FTSE All-Share index is roughly at the same level as four years ago and UK valuations are very cheap compared to most other major stock markets. In addition, there remains a high degree of polarisation, with many companies’ shares trading at significant discounts to the market average, or to our assessment of their fair value. We believe that the portfolio comprises companies with robust fundamentals, trading on attractive valuations and generally offering high dividend yields, that should be capable of meeting Merchants’ income and total return objectives.

Simon Fraser 1959-2021

It is with great sadness that I have to report the passing of Simon Fraser in early August. Simon was chairman of Merchants from 2010 to 2019. With a combination of wisdom and deep experience, he led the company in the aftermath of the Global Financial Crisis, through the refinancing of its debt, and many other situations. Many shareholders will have witnessed Simon’s calm, respectful, yet effective leadership at Annual General Meetings. Outside of Merchants and Simon’s charitable commitments, he was also the founding chairman of the Investor Forum, helping to take it from a concept to a fully functioning organisation. The Investor Forum is now a model for collective stewardship that is not only improving the way British companies operate but is also being closely watched and emulated around the world. Simon provided me with wise counsel, strong, yet always fair challenge and friendship. It was a privilege to have known and worked closely with him.

Simon Gergel19 August 2021

UK valuations are very cheap compared to most other major stock markets

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

Performance

Performance (%)

Select period:

    Cumulative Returns (%)

    3M6M1Y3Y5Y
    Share Price2.321.561.517.859.4
    NAV (debt at fair value)1.922.357.913.655.0
    Benchmark1.812.626.65.532.4

    Source: Thomson Reuters DataStream, percentage growth, mid to mid, total return to 31.07.2021.1

    Discrete 12 Month Returns to 31 July (%)

    2021 2020 2019 2018 2017
    Share Price61.5-25.7-1.915.617.1
    NAV (debt at fair value)57.9-23.7-5.712.321.4
    Benchmark26.6-17.81.39.215.0

    Source: Thomson Reuters DataStream, percentage growth, mid to mid, total return as at 31.07.2021.1

    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 2021 © 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 2021, 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.