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
555.0p


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
550.0p


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
0.9%


Dividend Yield is calculated using the latest full year dividend divided by the current share price.
Dividend Yield
4.9%

Data source DataStream and Allianz Global Investors as at 25.11.2021 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
5.3
British American Tobacco
4.4
Imperial Brands
4.1
BP
3.9
Royal Dutch Shell - B Shares
3.6
Scottish & Southern Energy
3.6
WPP
3.4
BAE Systems
3.3
Legal & General
3.2
National Grid
3.2

Data as of 31.10.2021

Geographic Breakdown (%)

UK 94.2
Europe ex UK 5.8

Data as of 31.10.2021. Excludes Cash

Sector Breakdown (%)

Financials
22.4
Consumer Discretionary
15.2
Consumer Staples
14.7
Industrials
13.7
Energy
10.5
Utilities
9.6
Health Care
6.6
Communication Services
2.9
Materials
2.1
Real Estate
1.5
Cash
0.8

Data as of 31.10.2021

Market Cap Breakdown (%)

FTSE 100 62.1
FTSE 250 23.9
Small Cap 7.4
Other 5.7
Cash 0.8

Data as of 31.10.2021

Fund Manager Comments

In October, the Chancellor of the Exchequer, Rishi Sunak, delivered a high spending budget, with few signs of a return to austerity. Speculation also grew that the Bank of England could enact its first interest rate increase since the pandemic as early as November. This speculation was driven by rising consumer prices inflation on the back of surging UK gas prices, labour shortages and higher global commodity prices. Inflation was running at over 3%, close to its highest level since 2012. This created volatility in the UK government bond market, with 10-year gilt (UK government issued bonds) prices falling sharply, before recovering most of their losses towards the end of the month. In contrast, the equity market level was relatively flat, though several businesses warned about supply chain disruption and rising cost pressures.

The FTSE All-Share index gave a total return of just under 2%, led by the large banks, which benefit from rising interest rates. Other strong performers included many cyclical industrial sectors and utilities. In contrast the more defensive telecommunications and food producer sectors were weak, along with the travel & leisure sector, on fears over further lockdown restrictions being introduced.

The Trust’s NAV total return for the month was 2.6%, ahead of the 1.8% return from the Benchmark. The biggest positive stock contributors to relative performance were Man Group, which reported strong third quarter flows, Drax and Rio Tinto (not owned). The main performance detractors were HSBC (not owned), Tyman and Tate & Lyle.

We made a new investment in emerging markets fund manager Ashmore. The share price had fallen back significantly, since we sold out of the company in 2019, on the back of more challenging performance in their funds and weaker investment flows. However, through that period, we had continued to view this as a strong company, with a solid balance sheet and with exposure to an attractive asset class and at purchase, the valuation was back to a more attractive level, with a 5% dividend yield.

We also added to the holding in retailer Next, where our level of conviction had increased, after interim results confirmed continued strong trading in its online business, even after the shops reopened. These investments were financed by some profit taking in Man Group, Stock Spirits and St James’s Place, as well as a reduction in the energy exposure after recent strong performance.

The FTSE All-Share Index closed October close to its high point for the year, and roughly at the same level where it traded before the pandemic. That may indicate that the best investment bargains during the pandemic are no longer available, although by their nature, the best bargains are usually only around at times of greatest uncertainty. However, the UK stock market remains one of the cheaper markets globally, and valuations in aggregate are not excessive. Furthermore, there remains a high degree of polarisation, providing opportunities for active stock pickers, to identify strong businesses trading at attractive valuations. There are a number of risks emerging, such as supply chain disruption and rising commodity costs. These may put pressure on certain industries and businesses. We aim to mitigate these risks by investing in a diversified portfolio, across defensive and more cyclical industries, and aiming to identify reasonably priced but fundamentally strong businesses, that offer long term value. By doing this, we aim to deliver a combination of income and capital growth in line with Merchants’ objectives.

Simon Gergel19 November 2021

The FTSE All-Share Index closed October close to its high point for the year

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

Performance

Performance (%)

Select period:

    Cumulative Returns (%)

    3M6M1Y3Y5Y
    Share Price8.611.172.137.472.5
    NAV (debt at fair value)8.210.271.837.455.3
    Benchmark3.55.435.417.631.1

    Source: Thomson Reuters DataStream, percentage growth, mid to mid, total return to 31.10.2021.1

    Discrete 12 Month Returns to 30 September (%)

    2021 2020 2019 2018 2017
    Share Price69.8-26.62.29.819.9
    NAV (debt at fair value)66.1-22.9-2.16.816.4
    Benchmark27.9-16.62.75.912.1

    Source: Thomson Reuters DataStream, percentage growth, mid to mid, total return as at 30.09.2021.1

    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.