Final Results

RNS Number : 9516D

Mercantile Investment Trust(The)PLC

30 March 2011

 



LONDON STOCK EXCHANGE ANNOUNCEMENT

THE MERCANTILE INVESTMENT TRUST PLC

FINAL RESULTS FOR THE YEAR ENDED 31ST JANUARY 2011

Chairman's Statement

Over the year to 31st January 2011, the Company's total return on net assets (ie with net income reinvested) was 27.4%, which compares with a return of 26.6% from the Company's benchmark index, the FTSE All‑Share (excluding FTSE 100 constituents and investment trusts). The dividend payment to shareholders will, once again, be partially funded from reserves, to the value of £9 million (2010: £10 million), which has reduced the total return on net assets by 0.9%.

Returns and Dividends

Earnings per share increased by 15.9% for the year, from 23.2p to 26.9p, partly due to an increase in dividend income received.

The Company has paid three interim dividends of 6.0p per ordinary share, and the Directors have declared a fourth quarterly interim dividend of 18.0p, giving a total dividend of 36.0p for the year, maintaining last year's dividend of 36.0p. The Board recognises, as in previous years, that it is essential to make an appropriate distribution, which both meets shareholders' legitimate expectations, and is prudent in the light of what may be continuing difficult times ahead.

The Board intends therefore to continue to pay three interim dividends at the current rate of 6.0p per ordinary share throughout the year ending 31st January 2012. The level of the fourth quarterly interim dividend will be determined by the Board based on the level of income received by the Company during the year and with regard to the Company's revenue reserve of 19.7p per share.

Share Price Discount

The share price rose by 29.0% during the year and, including dividends paid, the total return to shareholders was 33.8%. The discount to net asset value at year end was 10.3% compared to 14.5% (with debt at fair value) the previous year. The average daily discount, with debt at fair value, during the year, was 12.3%.

Share Repurchases

During the year under review a total of 2,912,249 shares were repurchased for cancellation, amounting to 2.9% of issued share capital at the beginning of the year, at a total cost of £27.3 million. Share repurchases during the year under review have added approximately 4.1 pence to the net asset value per share.

The Board's objective remains to use the share repurchase authority to manage imbalances between the supply and demand of the Company's shares, thereby reducing the volatility of the discount. The Board believes that, to date, this mechanism has been helpful and therefore proposes and recommends that the powers to repurchase up to 14.99% of the Company's shares for cancellation be renewed for a further period.

Gearing

The Company ended the year with gearing of 108.9%. During the year the gearing varied between 97% and 115%. It is the Board's intention to continue to operate within the range of 90% to 120% invested, under normal market conditions, and at the present time, the Board is maintaining gearing in the middle part of the range. Gearing is regularly discussed between the Board and the Investment Manager. A new borrowing facility of £45 million was negotiated with ING Bank in January 2011 in order to provide the Investment Manager with adequate flexibility with respect to gearing. This facility can be used tactically as investment opportunities present themselves.

Board

The new UK Corporate Governance Code introduced in June 2010 requires all directors of companies within the FTSE 350 Index to offer themselves for annual re-election, and with this in mind all of the Company's Directors are standing for re-election from this year onwards. I refer you to the Directors' biographies on page 17 of the Annual Report for further details.

Investment Managers

The Company's investment management team comprises Martin Hudson and Jane Lennard working together with the JPMorgan Asset Management European Equity Group.

The Board continues to monitor the performance of the Manager on a regular basis.

Brokers

As part of the Board's regular review of service providers, it was agreed to appoint Oriel Securities Limited, to act as joint broker with Cenkos Securities plc.

VAT Case

In my statement last year I reported on two ongoing issues relating to VAT. First, the Company's intention to pursue a claim for compound interest on the VAT recovered from HMRC, for which only simple interest has so far been paid. Secondly, the Company is seeking to recover VAT paid over the years 1997 to 2000. Both these issues are unresolved, and may remain so for several years, but the risk/reward ratio is such that it is in the interests of shareholders to see them through to conclusion, although I must emphasise that there is no guarantee of success.

Annual General Meeting

The Company's one hundred and twenty fifth Annual General Meeting will be held at Trinity House, Tower Hill, London EC3N 4DH on Wednesday 18th May 2011 at 12noon. In addition to the formal part of the meeting, there will be a presentation from the Investment Managers who will answer questions on the portfolio and performance. The meeting will be followed by a buffet lunch which will give shareholders an opportunity to meet the Board, the Investment Managers and representatives of JPMAM. I look forward to seeing as many of you as possible at the meeting.

Please submit, via the Company's website (www.mercantileit.co.uk and click on the Investment Trust Information link) or in writing (to the Company Secretary at Finsbury Dials, 20 Finsbury Street, London EC2Y 9AQ) any detailed questions that you wish to raise at the AGM. Shareholders who are unable to attend the AGM in person are encouraged to use their proxy votes. Shareholders are now able to lodge their proxy votes electronically, whether their shares are held through CREST or in certificate form, and full details are set out on the form of proxy.

Outlook

The outcome of events in Japan and the Middle East is currently unclear, as is the resolution of the debate with respect to sovereign debt in certain European countries. Conditions in the UK are likely to be difficult due to the Government's imperative of reducing the deficit.  However, the Stock Market in the UK appears reasonable value based on historic parameters, and earnings of UK companies are, on the whole, in positive territory.

The Board is confident that the Investment Managers are well positioned to identify and act on suitable investment opportunities.

Hamish Leslie Melville

Chairman                                                         

30th March 2011

Investment Managers' Report

Market Background

The stockmarket continued to recover during the year ended 31st January 2011. With interest rates remaining low and most companies continuing to see recovery in demand, the attraction of equities continued to grow.

After a positive start to the year the stockmarket was hit in May by the prospect of a European Sovereign debt crisis but it recovered strongly from September in anticipation of the US Federal Reserve announcing a further round of Quantitative Easing. In November the Fed announced its intention to purchase $600 billion of Treasuries to reflate the US economy. Meanwhile in the UK the new Government announced its austerity measures to address the budget deficit.

Performance

Small and mid sized UK companies continued to recover more strongly than the stockmarket as a whole as three themes predominated: corporate activity especially takeovers; growth from emerging markets; and re-rating of those stocks where confidence in earnings growth was increasing.

The net asset value total return for the year ended 31st January 2011 was +27.4% which was ahead of the Company's benchmark index, the FTSE All-Share excluding FTSE 100 constituents and investment companies, which returned +26.6%. This compares with a return of 18.1% for the broader FTSE All-Share Index. The contributors to performance are analysed in the table on page 5 of the Annual Report.

The bar chart on page 5 of the Annual Report shows the relative contributions to performance for the year for the five best and five worst sectors within the portfolio. The dark green bars to the right show the positive contributors relative to the benchmark index and reflect both sector weightings and stock selection. The light blue bars to the left show the negative relative contributors.

This shows that the biggest contributor to performance was the Oil and Gas Producers sector, where we benefited from Cove Energy making four big gas discoveries in offshore Mozambique and from Dana Petroleum agreeing to a takeover bid from Korea National Oil Corporation. The portfolio also gained substantially from agreed takeovers for Chloride Group, Tomkins and BSS Group. Some of the cash proceeds from the takeover bids was invested in a range of smaller biotechnology companies such as Renovo, Vectura and Biocompatibles which performed strongly during the year, although Renovo has had a disappointing result on its lead drug since our year end. The new issue market got underway during the year and we had a strong contribution from our investment in Supergroup, the designer and retailer of Superdry clothing. In terms of emerging market exposure, our holdings in palm oil plantations performed well, with New Britain Palm Oil in particular being a strong performer. Turning to the third investment theme of last year, the rerating of stocks with strong earnings momentum, we lost relative performance in Industrial Engineering and Chemicals by not holding stocks such as Weir Group and Croda which benefited from profits forecast upgrades but which we wrongly judged to be too expensive. The mining sector cost us relative performance; despite a strong gold price African Barrick Gold and Petropavlovsk underperformed when they disappointed the stockmarket by missing production targets.

Activity

The investment managers have the flexibility to operate within a gearing range of 90% to 120% invested and a more specific tactical range is agreed regularly with the Board.

Gearing was reduced in the first part of the year reflecting macroeconomic uncertainty after a strong recovery in stock markets and as cash was received from agreed takeover bids, for example, for Dana Petroleum, Chloride Group, Tomkins, Arriva and Dimension Data. As the stockmarket steadied during September, gearing was gradually increased again, ending the year at 108.9%. The new investments were generally biased towards smaller, growth companies and mid sized companies with value characteristics.

Value stocks have underperformed since the credit crisis took hold in 2007. Value stocks are those companies which are valued at a lower than average multiple of profits or assets. Growth stocks are those companies growing profits or assets at a higher than average rate and associated momentum stocks are those where the share price is showing strength usually in response to profit forecasts continually being upgraded. Over the long term value stocks generally outperform growth stocks and, as a class, we now see them offering opportunities as the market turns its attention back to the fundamentals of companies.

The portfolio retains its style of broad diversification across all sectors, holding about 150 stocks of which 90 are mid-sized and 60 are smaller companies. By value, approximately 75% of the portfolio is invested in mid sized stocks and 25% in smaller companies.

The table below shows that our holdings in companies which are larger than £1 billion in market capitalisation account for more than half of the portfolio. We focus on those successful large companies which are progressing towards promotion into the FTSE 100 index and also newer holdings in a number of those out of favour companies which have recently fallen out of the FTSE 100 Index but which have good recovery prospects. The portfolio is also overweight in the very smallest companies including those capitalised at less than £100 million, which can present outstanding growth opportunities.

Portfolio Size Distribution

	Benchmark
	index	Fund	Relative
Market	weighting	weighting	weighting
Capitalisation	%	%	%
More than £1.5bn	37.2	30.6	-6.6
£1.0bn to £1.5bn	22.4	24.7	2.3
£500m to £1.0bn	22.3	19.7	-2.6
£300m to £500m	8.6	7.2	-1.4
£100m to £300m	8.5	12.0	3.5
£50m to £100m	0.9	3.8	2.9
Less than £50m	0.1	2.0	1.9
Total	100.0	100.0	0.0

As at 31st January 2011

Of the ten largest holdings at the year end only two, ITV and Pennon, were in the top ten a year ago. The largest holding, Cove Energy, had just been bought a year ago, and was an exceptionally strong performer last year after making major gas discoveries. Cable and Wireless Worldwide, Cable and Wireless Communications and London Stock Exchange are examples of value companies which were bought following their demotion from the FTSE 100. The remaining four top ten holdings, Jardine Lloyd Thompson, Persimmon, Hiscox and Tate & Lyle were all held within the portfolio a year ago and the size of those holdings was increased during the year.

Of those no longer in the top ten of a year ago, GKN was sold on its promotion into the FTSE 100, Premier Oil was reduced following its strong performance in sympathy with takeover target Dana, Misys is still held having returned substantial funds to shareholders following the disposal of its US healthcare software business and the positions in Imagination Technologies, Drax, First Group and Songbird Estates have all been reduced.

At the sector level the portfolio is overweight in basic materials and consumer goods because of our exposure to gold miners and to palm oil plantations. It is underweight in consumer services such as retailers and travel & leisure because of the economic headwinds the consumer is facing but offsetting this we have increased our exposure to housebuilders which are very cheaply rated. The portfolio is overweight in healthcare for its growth characteristics and overweight in telecommunications and utilities for their value bias. The largest underweight position is in the large industrials grouping where we are underweight in aerospace & defence, construction and support services which are all facing Government cutbacks and also in industrial engineering which we believe is generally too highly rated following a trend of strong profit growth.

During the year we met or visited more than 250 companies and this remains an important component in our process of evaluating companies. We believe that properly targeted company meetings can help us to analyse smaller companies that are often overlooked by the mainstream, evaluate managers and resolve issues. Our fundamental analysis of companies is aided by JPMorgan's in-house proprietary screening process which helps us to identify companies that exhibit the best value and growth characteristics.

Outlook

The macroeconomic fears are many and varied as a result of public finances having become so strained in the developed world. The problems of Greece and Ireland remind us that Sovereign debt will remain an issue, the US is continuing to grapple with its unsustainable fiscal trajectory by printing money but unemployment there is remaining high and growth low, China is dealing with the problems of overheating and an asset price bubble in the property market and there are fears that currency wars may erupt and spill over into protectionism. All that was the case before the eyes of the world focussed on North Africa and the Middle East. The ramifications of the current unrest will be felt globally. Oil prices have already risen in response to the disruption to supply. Continued uncertainty or more political change in the region could produce a further spike in the oil price which would act as a headwind to the fragile global economic recovery. We therefore expect markets to be volatile in 2011.

In the UK the consumer is facing a difficult year as public sector cuts and tax increases are implemented and the threat of inflation has increased the likelihood of interest rates rising this year. Food prices, vehicle tax and insurance, rail fares and petrol prices have all been rising strongly since 2009 and the offsetting deflationary influence of falling mortgage interest payments and clothing prices have now started to reverse.

Of course some inflation helps to make the debt burden more manageable and makes real assets such as equities more attractive. In fact UK companies have been benefiting in many cases from being able to pass on raw material price increases to their customers but have not been experiencing wage inflation as there is plenty of spare capacity in the economy. This has helped profit margins to recover strongly and together with the stockmarket equity issuance of last year means that, generally, small and mid sized quoted company balance sheets have been repaired. As order books and sales have grown there is a real sense of companies having recovered confidence and that they are returning to businesses as usual. This is being reflected in an increase in capital expenditure from the minimal levels of the last two years. As confidence returns we expect corporate activity to increase and that the targets will be strong well managed companies with substantial market shares or assets; just the sort of companies we invest in and which are plentiful in the small and mid sized market. Despite the strong recovery of the last two years, stockmarket valuations in terms of yield and price to earnings ratios still remain below the medium term average and our small and mid cap benchmark index is currently valued on a forward price to earnings ratio of 12.5x. Reflecting a modest value bias, the price to earnings ratio of Mercantile's underlying portfolio is 10.9x.

Therefore, whilst for macroeconomic reasons we expect to see some stockmarket volatility returning during the course of the year, we believe that the environment is still positive for equities. That belief is reflected in your Company's gearing level which is currently 109%.

Martin Hudson
Jane Lennard

Investment Managers                                                                          

30th March 2011

Principal Risks

With the assistance of the Manager, the Board has drawn up a risk matrix, which identifies the key risks to the Company. These key risks fall broadly under the following categories:

•   Investment and Strategy: An inappropriate investment strategy, for example asset allocation or the level of gearing, may lead to underperformance against the Company's benchmark index and peer companies, resulting in the Company's shares trading on a wider discount. The Board manages these risks by diversification of investments through its investment restrictions and guidelines which are monitored and reported by the Manager. JPMAM provides the Directors with timely and accurate management information, including performance data and attribution analyses, revenue estimates, liquidity reports and shareholder analyses. The Board monitors the implementation and results of the investment process with the Investment Managers, who attend all Board meetings, and reviews data which show statistical measures of the Company's risk profile. The Investment Managers employ the Company's gearing tactically, within a strategic range set by the Board.

•   Accounting, Legal and Regulatory: In order to qualify as an investment trust, the Company must comply with Section 1158 of the Corporation Tax Act 2010 ('Section 1158') (formerly Section 842 of the Income and Corporation Taxes Act 1988). Details of the Company's approval are given under 'Business of the Company' above. Were the Company to breach Section 1158, it might lose investment trust status and, as a consequence, gains within the Company's portfolio could be subject to Capital Gains Tax. The Section 1158 qualification criteria are continually monitored by JPMAM and the results reported to the Board each month. The Company must also comply with the provisions of the Companies Acts and, since its shares are listed on the London Stock Exchange, the UKLA Listing Rules and Disclosure & Transparency Rules ('DTRs'). A breach of the Companies Acts could result in the Company and/or the Directors being fined or the subject of criminal proceedings. Breach of the UKLA Listing Rules or DTRs could result in the Company's shares being suspended from listing which in turn would breach Section 1158. The Board relies on the services of its Company Secretary, JPMAM, to ensure compliance with The Companies Acts and The UKLA Listing Rules.

•   Corporate Governance and Shareholder Relations: Details of the Company's compliance with Corporate Governance best practice, including information on relations with shareholders, are set out in the Corporate Governance report on pages 23 to 26 of the Annual Report.

•   Operational: Disruption to, or failure of, JPMAM's accounting, dealing or payments systems or the custodian's records could prevent accurate reporting and monitoring of the Company's financial position. Details of how the Board monitors the services provided by JPMAM and its associates and the key elements designed to provide effective internal control are included within the Internal Control section of the Corporate Governance report on page 25 of the Annual Report.

•   Financial: The financial risks faced by the Company include market price risk, interest rate risk, liquidity risk and credit risk. Bank counterparties are subject to daily credit analysis by the Manager and regular consideration at meetings of the Board. In addition the Board receives regular reports on the Manager's monitoring and mitigation of credit risks on share transactions carried out by the Company. Further details are disclosed in note 23 on pages 46 to 50 of the Annual Report.

Directors' Responsibilities

The Directors each confirm to the best of their knowledge that:

(a)        the financial statements, prepared in accordance the United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and Applicable Law), give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and

(b)        the Annual Report includes a fair review of the development and performance of the business of the Company, together with a description of the principal risks and uncertainties that it faces.

Hamish Leslie Melville

Chairman                                                         

30th March 2011

Income Statement

for the year ended 31st January 2011

	2011			2010
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Gains on investments held at fair value through profit or loss	-	249,190	249,190	-	362,020	362,020
Net foreign currency gains/(losses)	-	26	26	-	(78)	(78)
Income from investments	30,631	-	30,631	27,899	-	27,899
Other interest receivable and similar income	1,606	-	1,606	4,349	-	4,349
Gross return	32,237	249,216	281,453	32,248	361,942	394,190
Management fee	(1,407)	(3,282)	(4,689)	(1,971)	(1,971)	(3,942)
Other administrative expenses	(723)	-	(723)	(1,022)	-	(1,022)
Net return on ordinary activities before finance costs and taxation	30,107	245,934	276,041	29,255	359,971	389,226
Finance costs	(3,320)	(7,748)	(11,068)	(5,489)	(5,489)	(10,978)
Net return on ordinary activities before taxation	26,787	238,186	264,973	23,766	354,482	378,248
Taxation	(18)	-	(18)	(63)	-	(63)
Net return on ordinary activities after taxation	26,769	238,186	264,955	23,703	354,482	378,185
Return per share (note 2)	26.91p	239.48p	266.39p	23.18p	346.63p	369.81p

All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the year.

The 'total' column of this statement is the profit and loss account of the Company, and the 'revenue' and 'capital' columns represent supplementary information prepared under guidance issued by the Association of Investment Companies. The total column represents all the information that is required to be disclosed in a Statement of Total Recognised Gains and Losses ('STRGL'). For this reason, a STRGL has not been presented.

Reconciliation of Movements in Shareholders' Funds

	Called up		Capital
	share	Share	redemption	Capital	Revenue
	capital	premium	reserve	reserves	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
At 31st January 2009	25,580	23,459	11,190	577,602	59,467	697,298
Repurchase and cancellation of the Company's own shares	(93)	-	93	(3,299)	-	(3,299)
Net return on ordinary activities	-	-	-	354,482	23,703	378,185
Dividends appropriated in the year	-	-	-	-	(36,808)	(36,808)
At 31st January 2010	25,487	23,459	11,283	928,785	46,362	1,035,376
Repurchase and cancellation of the Company's own shares	(728)	-	728	(27,273)	-	(27,273)
Net return on ordinary activities	-	-	-	238,186	26,769	264,955
Dividends appropriated in the year	-	-	-	-	(35,792)	(35,792)
At 31st January 2011	24,759	23,459	12,011	1,139,698	37,339	1,237,266

Balance Sheet

at 31st January 2011

	2011	2010
	£'000	£'000
Fixed assets
Investments held at fair value through profit or loss	1,347,562	1,158,236
Current assets
Debtors	4,030	19,647
Cash and short term deposits	89,530	40,225
	93,560	59,872
Creditors: amounts falling due within one year	(26,859)	(5,831)
Net current assets	66,701	54,041
Total assets less current liabilities	1,414,263	1,212,277
Creditors: amounts falling due after more than one year	(176,997)	(176,901)
Net assets	1,237,266	1,035,376
Capital and reserves
Called up share capital	24,759	25,487
Share premium	23,459	23,459
Capital redemption reserve	12,011	11,283
Capital reserves	1,139,698	928,785
Revenue reserve	37,339	46,362
Total equity shareholders' funds	1,237,266	1,035,376
Net asset value per share (note 4)	1,249.3p	1,015.6p

Company registration number 20537

Cash Flow Statement

for the year ended 31st January 2011

	2011	2010
	£'000	£'000
Net cash inflow from operating activities	26,671	25,045
Servicing of finance
Interest paid	(10,954)	(10,882)
Net cash outflow from servicing of finance	(10,954)	(10,882)
Financial investment
Purchases of investments	(1,154,341)	(1,019,054)
Sales of investments	1,236,936	912,996
Other capital charges	(31)	(24)
Net cash inflow/(outflow) from financial investment	82,564	(106,082)
Dividends paid	(35,780)	(36,820)
Net cash inflow/(outflow) before financing	62,501	(128,739)
Financing
Increase in short term loans	15,000	-
Repurchase and cancellation of the Company's own shares	(28,222)	(2,350)
Net cash outflow from financing	(13,222)	(2,350)
Increase/(decrease) in cash in the year	49,279	(131,089)

Notes to the Accounts

for the year ended 31st January 2011

1.         Accounting Policies

            Basis of accounting

The accounts are prepared in accordance with the Companies Act 2006. United Kingdom Generally Accepted Accounting Practice ('UK GAAP') and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' (the 'SORP') issued by the Association of Investment Companies in January 2009. All of the Company's operations are of a continuing nature.

The accounts have been prepared on a going concern basis under the historical cost convention, as modified by the revaluation of investments at fair value.

The policies applied in these accounts are consistent with those applied in the preceding year.

2.         Return per share

The revenue return per share is based on the earnings attributable to the ordinary shares of £26,769,000 (2010: £23,703,000) and on the weighted average number of ordinary shares in issue during the year of 99,461,672 (2010: 102,264,780).

The capital return per share is based on the capital return attributable to the ordinary shares of £238,186,000 (2010: £354,482,000) and on the weighted average number of ordinary shares in issue during the year of 99,461,672 (2010: 102,264,780).

The total return per share is based on the total return attributable to the ordinary shares of £264,955,000 (2010: £378,185,000) and on the weighted average number of ordinary shares in issue during the year of 99,461,672 (2010: 102,264,780).

		2011 £'000	2010 £'000
3.	Dividends
	Dividends paid and declared
	Unclaimed dividends refunded to the Company1	-	(12)
	2010 fourth quarterly dividend of 18.0p (2009: 18.0p) paid to shareholders in May	17,961	18,418
	First quarterly dividend of 6.0p (2010: 6.0p) paid to shareholders in August	5,945	6,139
	Second quarterly dividend of 6.0p (2010: 6.0p) paid to shareholders in November	5,944	6,139
	Third quarterly dividend of 6.0p (2010: 6.0p) paid to shareholders in February2	5,942	6,124
	Total dividends paid in the year	35,792	36,808

¹Represents dividends which remain unclaimed after a period of 6 years and thereby become the property of the Company.

²Paid to the Registrars in January.

		2011	2010
		£'000	£'000
	Fourth quarterly dividend declared of 18.0p (2010: 18.0p) payable to shareholders in May	17,826	18,351

The fourth quarterly dividend declared in respect of the year ended 31st January 2010 amounted to £18,351,000, however the actual payment amounted to £17,961,000 due to shares repurchased and cancelled after the Balance Sheet date but prior to the share register Record Date.

The fourth quarterly dividend has been declared in respect of the year ended 31st January 2011. In accordance with the accounting policy of the Company, this dividend will be reflected in the accounts for the year ending 31st January 2012.

4.   Net asset value per share

      Net asset value per share is based on the net assets attributable to the ordinary shareholders of £1,237,266,000 (2010: £1,035,376,000) and on the 99,035,719 (2010: 101,947,968) shares in issue at the year end.

5.   Status of announcement

2010 Financial Information

The figures and financial information for 2010 are extracted from the published Annual Report and Accounts for the year ended 31st January 2010 and do not constitute the statutory accounts for that year.  The Annual Report and Accounts has been delivered to the Registrar of Companies and included the Report of the Independent Auditors which was unqualified and did not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006.

2011 Financial Information

The figures and financial information for 2011 are extracted from the Annual Report and Accounts for the year ended 31st January 2011 and do not constitute the statutory accounts for the year. The Annual Report and Accounts includes the Report of the Independent Auditors which is unqualified and does not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006. The Annual Report and Accounts will be delivered to the Registrar of Companies in due course.

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement

JPMORGAN ASSET MANAGEMENT (UK) LIMITED

For further information please contact:

Juliet Dearlove

On behalf of:

JPMorgan Asset Management (UK) Limited, Secretary

020 7742 6000

30^th March 2011

ENDS

A copy of the annual report will shortly be submitted to the National Storage Mechanism and will be available for inspection at www.hemscott.com/nsm.do

The annual report will also shortly be available on the Company's website at www.mercantileit.co.uk where up to date information on the Company, including daily NAV and share prices, factsheets and portfolio information can also be found.

 

END

 

 

FR UROVRABAOOAR