The Merchants Trust



Education Centre

When you invest in an Investment Trust you gain access to a wide range of investments. An Investment Trust can be an effective way of spreading risk by investing in a diversified, managed portfolio.

What are Investment Trusts?

The Merchants Trust PLC is a listed public company that invests in other companies and is quoted on the London Stock Exchange. Investment trusts invest in a wide range of different assets such as the shares and securities of other companies that trade on the world’s stock markets. By investing in an investment trust you gain access to a wider range of investments than you could normally buy yourself. Your investment is also managed by a professional fund manager. Investment trusts are 'closed-end funds' as there are a fixed number of shares and this number does not usually change regardless of the number of investors. The price of the shares reflects the value of the underlying holdings of the trust, but is also affected by the demand for the shares. For example, if there are more buyers than sellers, the share price tends to rise and vice versa.

Investment trusts own shares in a variety of different companies, so buying shares in The Merchants Trust will effectively give you a diversified portfolio of UK large cap stocks. This spreads your risk, as you are not reliant on the success of just one or two companies. And buying shares in an investment trust can be less costly than purchasing the underlying stocks individually.

Because The Merchants Trust is an investment trust and an independent company listed on the London Stock Exchange, the investment manager is accountable to the Trust’s board of directors. The board is completely autonomous and independent of Allianz Global Investors. The directors’ duty is to look after your interests as an investor by ensuring the company is as successful as possible. Each director brings a range of skills and experience to the Merchants board, giving investors the reassurance of a diligent environment of checks and balances, as well as providing the Trust with invaluable knowledge and economic insight.

A meeting held once a year where shareholders can find out how their company is doing, ask questions of the directors and vote on key issues.
A report prepared by a company each year after its year end. It sets out what the company does, how it has performed over the year and its financial position.

The annual report typically contains a financial summary, a chairman's statement and a portfolio review from the fund manager.

A statement on corporate governance and a detailed set of financial statements also forms part of the annual report.
The AIC is the trade body for investment trust companies. Visit www.theaic.co.uk for further information.
An index or other measure against which the performance of an investment trust is compared.

The annual report and accounts will normally compare the Trust's performance with its benchmark and also include an explanation for any under or over performance.
The price at which you sell your shares. It is sometimes shown as the 'sell' price and will be the lower of the two prices shown.
The difference between the prices at which you can buy and sell shares. It can also be known as the 'dealing spread'.

When you buy and sell investment trust shares you may see two prices quoted. The 'offer' price is the price that you would pay to buy the shares and the 'bid' price is the price you can sell the shares for.

The difference between the offer price and the bid price is known as the bid-offer spread.
A trust is known as closed ended because it has a fixed number of shares in issue.

The closed ended structure allows fund managers to take a long term view on their investments as the number of shares will stay the same even when there are more sellers than buyers.
This is an investment 'vehicle' where investors pool their money and invest in a portfolio of assets with other investors.

A fund manager then invests this money on behalf of the investors, with the aim of providing economies of scale, risk diversification and professional fund management expertise.

Because you're investing in a fund that holds a number of different investments, you are not reliant on the fortunes of just one or two investments.

Investment Trusts are collective investment funds, as are Unit Trusts and OEICs.
A debenture is a form of long-term loan that usually pays a fixed rate of interest and is normally repayable on a fixed date.
This is the amount by which the share price is less than the net asset value per share.

If you buy shares at a discount this means that you will be paying less than Net Asset Value.

If an investment trust trades at a discount to net asset value this could present a buying opportunity, although the discount could subsequently widen rather than narrow.

If a Trust's NAV is 100p but its share price is only 90p the Trust is trading at a discount of 10% (shown as -10%).
This is income that is paid from an investment in shares.

Not all investment trusts pay income but those that do can choose to pay dividends monthly, quarterly, half-yearly or annually. This is the amount by which the share price is less than the net asset value per share.

Some investment trusts have a long history of focusing on income for shareholders but such income is not guaranteed and may fall as well as rise.
This is the annual level of dividend expressed as a percentage of the current share price.

It is important to remember that future dividends may be higher or lower than indicated by the current dividend yield.
At its simplest, gearing means endeavouring to enhance returns by borrowing money to buy more assets. A trust does this in the hope that it makes enough profit to pay back the debt and interest and return something extra for shareholders.

Although Gearing can boost a Trust's returns when investments perform well, losses can be magnified when investments lose value.
This is a report prepared by a Trust half way through its financial year, setting out the same type of information as its annual report and accounts but in less detail.

The half-yearly report may also be referred to as the interim report.
An Individual Savings Account (ISA) is not an investment in its own right but rather a 'wrapper' in which you hold investments.

An ISA allows you to save cash or invest in shares without paying tax.

Maximum overall annual subscription limits apply to ISAs and these may change at the beginning of each tax year.
A company employed by an investment trust in order to provide investment management and administrative/secretarial services.

Allianz Global Investors UK Limited (AllianzGI) is the management company for Allianz Technology Trust, The Brunner Investment Trust and The Merchants Trust.
The price at which you buy your shares. It is sometimes shown as the 'buy' price and will be the higher of the two prices shown.
The OCF is published annually in order to indicate the level of operational expenses incurred in the running of the trust.

The OCF covers investment management and administrative fees as well as other fees.

The OCF can help you compare the annual operating expenses of different investment trusts (and funds in general).
These are funds where the number of shares in issue varies from day to day, dependent on demand.

Open Ended Investment Companies (OEICs) and Unit Trusts are open ended funds.
This is the amount by which the share price is more than the net asset value per share.

If you buy shares at a premium this means that you will be paying more than Net Asset Value.

A premium could indicate that the trust or its sector as a whole is in demand, i.e. there are more buyers than sellers.

If a Trust's NAV is 100p but its share price is 110p the Trust is trading at a premium of 10% (shown as 10%).
The price of a share, as determined by the stock market.
This is the difference between a share's bid price and its offer price.
This is a tax payable on the purchase of shares, including investment trust shares.
The tax year runs from 6th April to 5th April of the following year.
This is the annual income return you receive from holding certain investments.

The yield of a share is calculated using the latest full year dividend divided by the current share price.

Some investment trusts are focused purely on capital growth in which case they will not pay a dividend (so that the dividend yield will be zero).

Allianz Global Investors

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  • Warning to Shareholders

    We are aware that some shareholders may have received unsolicited telephone calls or correspondence concerning investment matters. These are typically from overseas based organisations who target UK shareholders offering to sell them, what often turn out to be, worthless or high risk shares in US or UK investments. They can be extremely persistent and persuasive. Shareholders are therefore advised to be very wary of any unsolicited advice or offers.

    Please note that it is most unlikely that either the company or the company’s Registrar, Link Asset Services, would make unsolicited telephone calls to shareholders. Any such calls would only ever relate to official documentation already circulated to shareholders and never in respect of investment ‘advice’.

    If you are in any doubt about the veracity of an unsolicited telephone call, please call the Company Secretary +44 (0)800 389 4696 or the Registrar on +44 (0) 371 664 0300.

    You can also report and get advice about fraud or cyber crime by contacting Action Fraud – National Fraud & Cyber Crime Reporting Centre 0300 123 2040 and visiting their website at www.actionfraud.police.uk.


    Please read this important information before proceeding further. It contains legal and regulatory notices relevant to the information contained on this website. By pressing ‘Confirm’ you agree that you have read and understood the following information.

    Investing involves risk. The value of an investment and the income from it may fall as well as rise and investors may not get back the full amount invested.

    Please note that the products referred to on this website are only available to persons normally resident for tax purposes in the United Kingdom of Great Britain and Northern Ireland. Allianz Global Investors UK Limited has taken reasonable care to ensure the accuracy of information available through the site. However, the information may be amended at any time by Allianz Global Investors UK Limited without notice. As far as it is permitted under the Financial Services Act, Allianz Global Investors UK Limited does not accept liability for any loss, direct or indirect owing to reliance on any information contained herein. Opinions expressed whether in general or both on the performance of individual funds and in a wider economic context represent the views of the contributor at the time of preparation. They are subject to change and should not be interpreted as investment advice which Allianz Global Investors UK Limited is not authorised to give. If you are unsure of the suitability of any investment contained in this website, please contact a Financial Adviser. This site may provide links to third party websites over which Allianz Global Investors UK Limited has no control. These links are provided for your convenience and Allianz Global Investors UK Limited accepts no responsibility for the content of such websites. For your security we may record or randomly monitor all telephone calls.

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    Allianz Global Investors represents products and services of Allianz Global Investors UK Limited. Allianz Global Investors UK Limited is an investment company incorporated in the United Kingdom, with its registered office at 199 Bishopsgate, London, EC2M 3TY. 

    Allianz Global Investors UK Limited, company number 11516839, is authorised and regulated by the Financial Conduct Authority.  Details about the extent of our regulation are available from us on request and on the Financial Conduct Authority's website (www.fca.org.uk). The duplication, publication or transmission of the contents, irrespective of the form, is not permitted; except for the case of explicit permission by Allianz Global Investors UK Limited.

    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.

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    Investments

    You should always bear in mind that:

    Past performance does not predict future returns.

    The value of an investment and the income from it may fall as well as rise and investors might not get back the full amount invested. You should not make any assumptions about the future on the basis of this information.

    Changes in rates of exchange may cause the value of investments and the income from them to go down or up.

    In a building society your money is secure, whereas in a stock market-based investment it is exposed to a degree of risk and the value of your investment will fluctuate up and down.

    The Merchants Trust PLC is a quoted company listed on the London Stock Exchange. Its share prices are determined by factors including demand which means that the shares may trade below (at a discount) or above (at a premium to) the underlying net asset value.

    The Trust seeks to enhance returns for its shareholders through gearing, in the form of long-term, fixed rate debentures. Gearing can boost the Trust’s returns when investments perform well, though losses can be magnified when investments lose value. You should be aware that this Trust may be subject to sudden and large falls in value and you could suffer substantial capital loss.

    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. Your capital could also decrease if income paid out of capital exceeds the growth rate of the Trust. Derivatives are used to manage the trust efficiently.

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