TIDMMRC
RNS Number : 2326V
Mercantile Investment Trust(The)PLC
04 April 2023
LONDON STOCK EXCHANGE ANNOUNCEMENT
THE MERCANTILE INVESTMENT TRUST PLC
FINAL RESULTS FOR THE YEARED 31ST JANUARY 2023
Legal Entity Identifier : 549300BGX3CJIHLP2H42
Information disclosed in accordance with the DTR 4.1.3
The Directors of The Mercantile Investment Trust plc announce
the Company's results for the year ended 31st January 2023.
Chairman's Statement
Market Background
A series of extraordinary geopolitical and economic developments
threw markets into turmoil over the year covered by this statement.
Russia's invasion of Ukraine in February 2022 placed severe
pressure on energy and commodity markets, adding to already
worrying inflation trends. The forthright response of central
banks, including the Bank of England, meant fears of inflation were
replaced by fears of recession. UK financial markets were further
destabilised by a mid-year policy vacuum and two new Prime
Ministers. Liz Truss's tenure as Prime Minister proved very short,
but nonetheless damaging, as investors resoundingly rejected her
policies as radical, untested and unfunded. The appointment of
former Chancellor Rishi Sunak as her replacement heralded a
significant improvement in market sentiment and the UK market began
to recover, outperforming its global counterparts in the final
months of 2022. Despite recent upheavals in the global financial
sector with the collapse of some US regional banks and the rescue
of Credit Suisse, there are grounds for cautious optimism based on
hopes that inflation, and thus interest rates, may have peaked, and
that any UK recession will be shorter and shallower than feared
previously.
Performance
As I reported in my Half Year statement, the first half of the
year to the end of July 2022 saw the Company's NAV (based on debt
at fair value) drop 11.5%. The NAV fell further after 1st August
2022 and reached its nadir in mid-September; however, I am pleased
to report we have seen a marked improvement since then such that
for the year to 31st January 2023, the Company's net asset total
return, based on debt at fair was -8.5%; the second half
performance has been 3.9 percentage points better than our
benchmark. With the debt at par, the return for the year was
-12.3%. Over the year, the share price discount to net asset value
(with debt at fair) widened, from 9.7% to 12.6%, resulting in a
total return to shareholders for the year of -11.0%. On all bases,
the Company underperformed its benchmark, which declined by
7.5%.
This overall performance for the year is clearly disappointing,
but since October there has been a much more positive feel to the
market and indeed portfolio companies' businesses have largely
performed well, delivering better than expected results. The
performance during the year has been closely monitored by the
Directors and the subject of much discussion between the Board and
the Investment Managers. The Investment Managers' Report on the
following pages discusses recent performance and portfolio changes
in more detail, as well as considering their outlook for the coming
year.
The Company's recent annual performance also needs to be
assessed within the longer-term context in which the Company
operates. On this basis, this year's underperformance follows a
year of very strong absolute returns during the financial year
ended 31st January 2022, and outperformance over five years and the
longer term. The Company's average annualised return over the ten
years ended 31st January 2023 was 8.8% per annum on a net asset
total return fair value basis and +9.1% in share price terms, both
returns outpacing the benchmark's return of +6.9%.
The Company's long term track record of high absolute returns
and outperformance of the broader small and medium cap market
attests to your Investment Managers' skill at identifying this
sector's future market leaders and outperformers.
Returns and Dividends
The Company aims to provide shareholders with long term dividend
growth at least in line with the rate of inflation over a five to
ten year period, as detailed in the table below. The Company has
paid three interim dividends of 1.35p per ordinary share in respect
of the year to 31st January 2023 and the Board has declared a
fourth quarterly interim dividend of 3.1 per share. This brings the
total dividend for the year to 7.15p per share, an increase of 3.6%
over last year.
CPI Mercantile Dividend Growth
(% per annum) (% per annum)
------------- -------------- ---------------------------
Three Years 5.3% 2.7%
Five Years 3.9% 6.2%
Ten Years 2.7% 7.1%
------------- -------------- ---------------------------
Source: Office of National Statistics/J.P. Morgan
In deciding our dividend payments, we look to pay dividends that
are at least covered by current year earnings, while also allowing
us to build revenue reserves. However, it is a great advantage of
the investment trust structure that the Company is able to
partially fund dividend payments from revenue reserves when
necessary to bolster the dividend during challenging times -
something that the Company has done over the past three years. I am
pleased to confirm that this is the first year since 2020 that the
dividend is fully covered by earnings, meaning that the Company has
not needed to draw on its reserves to partially fund the dividend.
This has been possible because revenues per share over the past
year increased by 10.6% to 7.19p, from 6.50p in the previous year.
After payment of the fourth interim dividend, the Company will have
revenue reserves of in excess of 4.9p per share (2022: 4.9p).
Discount
Over the year ended 31st January 2023, the Company's discount
widened, ending the reporting period at 12.6%, from 9.7% at the
same time the previous year. Your Directors recognise that it is in
the interests of shareholders that the Company's share price does
not differ excessively from the underlying NAV under normal market
conditions. However, the past year's market conditions have been
far from normal, and the widening of the Company's discount is
consistent with the experience of investment companies across many
asset classes. In an effort to equalise supply and demand in the
face of this market turmoil, the Board utilised the Company's
authority to buy back shares, repurchasing a total of 1,442,231
shares at a cost of GBP2.61 million. These shares were purchased at
an average discount to NAV of 15.9%, producing a modest accretion
to the NAV for continuing shareholders.
The Board closely monitors the discount and markets, and will
continue to undertake share buybacks when it deems it appropriate.
The Board therefore recommends that the powers to repurchase up to
14.99% of the Company's shares be renewed by shareholders at the
forthcoming Annual General Meeting, with repurchased shares to be
cancelled or held in Treasury. The Board is also seeking
shareholder approval to issue shares at a premium to NAV and to
disapply pre-emption rights on any such issues. As with buying
shares at a discount, issuing new shares at a premium to NAV
enhances returns to existing shareholders and improves
liquidity.
Gearing
The Company ended the year with gearing of 9.5%. During the
year, the level of gearing ranged between 4.8% and 14.2%. It is the
Board's intention to continue to operate within the range of 10%
net cash to 20% geared, under normal market conditions and having
gone into the downturn mildly geared we were especially keen not to
be ungeared into any upturn. Gearing is regularly discussed by the
Board and the Investment Managers and is implemented via the use of
long-dated, fixed-rate financing, from several sources, consistent
with the Board's aim to ensure a diversification of source, tenure
and cost of leverage available to the Company. The Company has in
place a GBP3.85 million perpetual debenture and a GBP175 million
debenture repayable on 25th February 2030, together with GBP150
million of long-term debt raised in September 2021 through the
issue of three, fixed rate, senior unsecured privately placed notes
(the 'Notes'). The Notes mature between 2041 and 2061 and were
secured with a blended rate of 1.94%, at a time when interest rates
were near their lows.
With inflation now in double digits and long-term interest rates
significantly higher, the Company's borrowing profile is now very
attractive, and should benefit shareholders, as it provides ample
opportunity to enhance future returns, at relatively low cost.
Marketing, Promotion and Shareholder Interaction
The Company continues to raise its profile with investors and
potential investors, via targeted media and promotional campaigns,
and ongoing interaction with national and investment industry
journalists. It is the Board's view that enhancing The Mercantile's
profile will benefit all shareholders by creating sustained demand
for its shares, particularly from retail investors, where demand
has grown steadily in recent years. We seek to undertake this
promotional activity in the most cost-effective manner.
The Board and the Investment Managers maintain a dialogue with
the Company's shareholders via regular email updates, which deliver
news and views, and discuss the latest performance. If you have not
already signed up to receive these communications and you wish to
do so, you can opt in via tinyurl.com/MRC-Sign-Up or by scanning
the QR code which can be found in the Company's Annual Report &
Accounts for the year ended 31st January 2023 ('2023 Annual
Report').
To further promote the Company to the broader investment
community, the Investment Managers follow an established marketing
and investor relations programme targeting wealth managers,
institutions and private client stockbrokers via video conferences,
podcasts and in-person meetings.
It is the Board's hope that these initiatives will give many
more of the Company's investors and potential investors the
opportunity to interact with the Board and Investment Managers than
has been the case in the past.
I and the Board welcome feedback from shareholders and any
shareholder who wants to contact me should do so by contacting the
Company Secretary on the details provided on page 95 of the 2023
Annual Report.
Environmental, Social and Governance ('ESG') Considerations
In their search for tomorrow's UK market leaders, our Investment
Managers look beyond the near-term financial attributes of a
company. As part of their efforts to identify businesses with
sustainable business models and long-lasting competitive
advantages, they scrutinise the environmental, social and
governance ('ESG') aspects of the companies in which they invest.
The Board shares the Investment Managers' view of the importance of
ESG factors when making investments for the long term. For this
reason, ESG considerations are fully integrated into the investment
process. Equally importantly, the Investment Managers engage
continually with investee companies on ESG issues, as well as on
broader matters of company strategy and performance, throughout the
duration of the investment, with the aim of fully understanding any
ESG risks and encouraging investee companies to adopt best practice
on ESG matters.
Further information on the Investment Manager's ESG process and
engagement is set out in the ESG Report on pages 16 to 18 of the
2023 Annual Report.
Reporting under the Task Force on Climate Related Financial
Disclosures
In accordance with the requirements of the Taskforce on Climate
Related Financial Disclosures ('TCFD'), J.P. Morgan Asset
Management will provide product level reports for the investment
trusts it manages, including The Mercantile, in late June 2023 and
annually thereafter. The report will be made available on the
Company's website.
Key elements of the report will include Scope 1 and 2 greenhouse
gas ('GHG') emissions (i.e. emissions that are owned or controlled
by the Company), total carbon footprint, weighted average carbon
intensity ('WACI') and, from June 2024, scope 3 GHG emissions (i.e.
emissions generated as a consequence of the activities of Company
but occur from sources not owned or controlled by it). The report
will also include a scenario analysis of how climate change is
likely to impact the Company's assets under orderly, disorderly and
hothouse world scenarios, and discussion of the most significant
drivers of performance under those scenarios.
Board Succession
Having served as a Director since 2012, Jeremy Tigue retired
from the Board at the Annual General Meeting in May 2022. Graham
Kitchen succeeded Jeremy in the roles of the Company's Senior
Independent Director and Remuneration Committee Chairman. To spread
the Board responsibilities more evenly, the role of Senior
Independent Director was taken on by Rachel Beagles, with effect
from 1st February 2023.
Harry Morley, who joined the Board in 2014, will be retiring at
the forthcoming Annual General Meeting. On behalf of the Board, I
would like to thank Harry for the significant contribution he has
made to the Company and the wise counsel that he provided the Board
during his tenure. We wish him well for the future. Damien Maltarp
will succeed Harry in the role of Audit Committee Chairman.
The Board plans for succession to ensure it retains an
appropriate balance of skills and knowledge. To this end, the Board
was pleased to announce the appointment of Julia Goh with effect
from 1st January 2023, and we look forward to working with her. For
full details of Julia's experience and current roles please refer
to pages 35 and 40. Following Harry's retirement, the Board will
once again comprise six Directors.
In 2022, the FCA published new rules to encourage companies to
be more transparent about the ethnic and gender diversity of their
boards. The rules take effect for accounting periods starting after
1st April 2022, meaning that The Mercantile will need to report
against these requirements from next year. However, I am able to
confirm that the Company's Board constitution already complies with
the FCA's ethnic and gender diversity guidelines for listed
companies and the recommendations of the Hampton-Alexander Review
concerning female representation on the Board. In the absence of
any unforeseen circumstances, it is the intention that the Company
will remain compliant with these requirements going forward.
The Manager
The Board, through its Management Engagement Committee, monitors
the performance of the Manager, JPMorgan Funds Limited ('JPMF') on
an ongoing basis. It is the Board's opinion that the Manager's
long-term performance record remains strong. Based upon this
record, and taking all factors into account, including other
services provided to the Company and its shareholders, the Board is
satisfied that JPMF should continue as the Company's Manager and
that its ongoing appointment remains in the best interests of
shareholders.
Annual General Meeting
The Company's one hundred and thirty seventh Annual General
Meeting will be held at Trinity House, Tower Hill, London EC3N 4DH
on Wednesday 24th May 2023 at 12.00 noon. 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 J.P. Morgan.
Outlook
Even though there has been significant disruption in the global
financial sector recently, following the collapse of some US
regional banks and the takeover and rescue of Credit Suisse in
Europe, and therefore the resultant jitters in markets, I am
pleased to say that the outlook for your Company and our
investments appears considerably brighter now than when I sat down
in October last year to write my statement for the Company's Half
Year Report. As our Investment Managers have said, credit markets
may tighten somewhat but the financial sector in the UK and our
companies in particular are in a much healthier position. Although
the tragic war in Ukraine drags on, its impact on energy and
commodity prices is beginning to ease. There are signs that
inflation may be peaking, and while central banks are unlikely to
begin easing monetary policy any time soon, interest rates may
stabilise, while monetary authorities take time to assess the
medium-term inflation outlook. In addition, forecasts suggest that
the UK economy, will, at worst, experience a mild recession this
year. Furthermore, the UK's political climate has calmed
considerably, with an improvement in relations with the EU and a
new Pan Pacific trade agreement. The potential for UK companies to
increase business is encouraging.
The UK market remains attractively priced relative to many of
its global counterparts, and with sterling still weak, the market
is likely to see continued interest from foreign investors, and
private equity firms and others seeking to acquire UK companies.
These factors should continue to support the market.
The recovery in your Company's fortunes in the second half of
the financial year suggests that the portfolio is well-positioned
to continue benefitting from the improving economic and market
environment, and the Board shares the Investment Managers'
confidence in their strategy, the portfolio and the Company's
prospects for capital and dividend growth over the coming year and
over the long term.
We thank you for your ongoing support.
Angus Gordon Lennox
Chairman
3rd April 2023
Investment Managers' Report
Setting the scene: Challenging times give way to signs of
improvement
This has been an especially challenging year for financial
markets. Having recovered from pandemic-driven losses and climbed
to all-time highs, equity markets subsequently struggled following
the Russian invasion of Ukraine, as investors digested the
conflict's multitude of first- and second-order knock-on effects.
Existing pandemic-induced supply side constraints, combined with
rising and broad-based inflation, were exacerbated by the conflict,
with energy supplies and prices under pressure. Against such a
backdrop, central banks surprised investors by the pace and extent
of monetary tightening, which in turn fuelled fears of global
recession.
Political instability in the UK added further to this negative
dynamic. Investor confidence was unsettled as the ruling
Conservative party faced a series of scandals which eventually led
to a change of leadership. The incoming Truss administration's
attempts to boost growth by implementing unfunded corporate and
individual tax cuts, alongside a two-year energy price guarantee,
were greeted with widespread criticism and market scepticism. This
triggered a surge in financial market volatility: equity markets
dropped sharply, the pound briefly hit an all-time low against the
US dollar, and gilts yields rose so sharply the Bank of England was
forced to implement a multi-day bond-buying programme to stabilise
bond markets.
At its nadir in mid-October, the Company's target market of UK
medium and smaller companies (the 'benchmark'), had declined by 25%
over the financial year-to date. However, the appointment of former
Chancellor Rishi Sunak as Prime Minister to replace Truss, and
Sunak's subsequent reversal of several of her most controversial
policies, calmed markets. Investors were further reassured by a
decline in energy prices thanks to a mild winter, which raised
hopes that inflation was approaching a peak, while fears of a
serious recession were assuaged by resilient consumption. These
factors, combined to fuel a significant recovery in UK equity
markets, which have in fact outperformed other major markets in
recent months. UK medium and small cap companies benefitted from
this recovery, allowing this part of the market to claw back a
portion of its previous losses, closing the financial year ended
31st January 2023 down a more modest 7.5%.
Mercantile performance
Against this backdrop, the Company delivered a return on net
assets, with debt measured at par value, of -12.3%. With debt at
fair value, this decline was -8.5%.
It is worthy of note that all of this underperformance occurred
in the first half of the year, driven by a combination of two
factors. The first was stock selection, which detracted mainly due
to the portfolio's substantial overweight to consumer discretionary
stocks that were especially hard-hit by rising inflation and
interest rates. The second was gearing, which impacted performance
as the trust remained geared into a declining market.
However, relative performance began to improve in the second
half of the year, supported by the recovery in market sentiment,
the better-than-feared macroeconomic outlook, and portfolio
adjustments made in response to events in the first half of the
year, although the pick-up in performance has not yet been
sufficient to recoup the Company's first half losses.
To under-perform over the course of the year has been
frustrating as portfolio companies have for the most part continued
to deliver financial results, including dividends to shareholders,
ahead of the market's expectations, while the broader market has
disappointed. This is partly a result of a decline in valuations
ascribed by the market to many of the higher quality, structurally
growing businesses in which we invest, reflecting higher discount
rates and cautious sentiment.
PERFORMANCE ATTRIBUTION
FOR THE YEARED 31ST JANUARY 2023
Performance attribution analyses how the Company achieved its
recorded performance relative to its benchmark index.
% %
--------------------------------------------------------------------- ------ -------
Contributions to total return
Benchmark total return -7.5%
Allocation/Stock/Sector Effect -2.5%
Effect of Cash & Gearing -1.2%
Cost of Debentures and Senior Unsecured Privately Placed Loan Notes -0.6%
Portfolio Total Return -11.8%
Management Fees/Other Expenses -0.5%
Share Buy-Back/Issuance 0.0%
Cum Par Net Asset Value Total Return(APM) -12.3%
Impact of Debt Valuation 3.8%
Cum Fair Net Asset Value Total Return(APM) -8.5%
--------------------------------------------------------------------- ------ -------
(APM) Alternative Performance Measure ('APM').
Source: JPMAM and Morningstar. All figures are on a total return
basis.
Contributions calculated using an Arithmetic methodology.
A glossary of terms and APMs is provided on pages 91 to 93 of
the 2023 Annual Report .
Spotlight on stocks
Winners
Portfolio highlights in the past year included our longstanding
investment in Telecom Plus, a multi-utility provider with an
everyday low-price proposition, which has been a beneficiary of the
changing landscape in the energy supply market. This had been a
modestly sized position for several years, but we increased
exposure dramatically in late 2021 and early 2022 as the
competitive landscape evolved in their favour, increasing the
potential for accelerated growth in the company's customer base. We
also enjoyed success with our investment in 4Imprint, a provider of
branded promotional materials for corporates. Its recovery from the
pandemic accelerated as conferences and trade fairs resumed. Growth
in new clients has been particularly strong. Finally, another
long-term holding, in asset manager Brewin Dolphin, was subject to
an agreed takeover by Royal Bank of Canada (RBC), which came at a
handsome premium.
Losers
On the negative side, as mentioned above, our holdings in
consumer-facing companies such as Watches of Switzerland, a luxury
watch retailer, and Jet2, an airline and holiday company, detracted
from performance. While the operational performance of both these
businesses has remained encouraging, with continued growth in
earnings and a promising long-term growth runway ahead, their
shares came under pressure due to understandable concerns about the
outlook for discretionary spending.
Elsewhere, our investment in Future, a specialist media company,
was disappointing. Having built the business through a series of
acquisitions alongside impressive organic revenue growth and
profitability gains, the CEO announced her intention to step down
once a successor had been appointed. This, combined with market
concerns regarding the outlook for media spending and e-commerce
activity through a widely-anticipated recession, put the share
price under sustained pressure during the year.
Positioning the portfolio for future success
We target UK companies outside of the FTSE 100 Index that have
significant opportunities for growth and which may be overlooked by
other investors. We invest in the shares of companies that we
believe possess the characteristics that may facilitate this
growth, for example nimble business models that can innovate or
disrupt their industries, or companies that occupy prime positions
in rapidly growing markets.
Through the course of any individual year there are adjustments
to the portfolio to reflect the changing environment, as investment
hypotheses run their course or are proved invalid, or as share
price moves open up better opportunities elsewhere. Over the past
few years there have been several turning points for markets as
well as numerous changes to the operating environments of our
portfolio companies. Despite this, turnover has remained somewhat
lower than long-term averages, reflecting what we believe to be a
resiliently positioned portfolio and a clear focus on the long-term
prospects of our holdings.
The last few years have presented a particularly volatile
operating environment for many companies, with Brexit uncertainty,
pandemic restrictions, supply chain challenges, surging inflation,
war in Europe and open talk of souring East-West relations. We
believe that this backdrop has made it even more important to focus
on well-positioned and well-managed businesses that have the
resilience to cope and even thrive in such a situation, and which
may ultimately emerge with stronger competitive positions.
Furthermore, given the broadly negative narrative surrounding the
UK and its economic prospects, the valuations of UK stocks -
including valuations of the future winners - have reduced, which
presents a compelling investment proposition.
In view of the deterioration in the economic outlook, we made
some notable changes to the portfolio over the first half of the
year. The most material of these was the reduction in exposure to
the consumer discretionary sector, offset by increases in the
telecommunications and energy sectors. However, despite the
reduction in consumer discretionary holdings such as DFS and
Moonpig, consumer facing stocks remain an important area of the
portfolio, including some of our largest individual investments,
such as Watches of Switzerland, Dunelm, the UK's leading homewares
retailer, and WH Smith, a travel retailer. In each of these cases,
it is noteworthy that growth is being underpinned by improving
customer propositions and resultant increases in market share,
rather than being solely dependent on the strength of consumer
demand.
The portfolio's exposure to energy has been increased both
directly, via investments in energy producers such as Harbour
Energy that are set to benefit from higher oil and gas prices, and
indirectly, via companies providing goods and services to the
energy industry and indeed those that distribute it, such as the
aforementioned investment in Telecom Plus.
At the sector level, Support Services is now our largest
overweight position, with example holdings including our
longstanding investments in Inchcape, the vehicle distributor, and
the industrial and electronic product distributors Diploma and RS
Group. The Software & Computer Services sector remains another
substantial overweight for the portfolio, with example holdings
including Softcat, one of the UK's leading value-added technology
resellers, Computacenter, a leading technology services provider to
large corporate and public sector organisations, and Big
Technologies, the provider of electronic monitoring systems
primarily to criminal justice systems around the world.
The portfolio also retains substantial investments in the
industrial sectors. Two such examples are IMI and Rotork,
engineering companies that design, manufacture and service a range
of complex and often customised products that control the movement
of fluids and gases in a host of different industries. In both
cases the business leadership has re-emphasised the commercial
focus, aligning new product development more closely with customer
needs and thus driving higher growth.
We have a number of holdings in the financial services industry,
including a large investment in the buy-to-let lender OSB Group.
While recent events in the banking industry have re-emphasised the
risks associated with certain business models, we are reassured by
the high profitability, appropriate capitalisation and diverse
funding sources of our holdings, which should position them for
continued success. We maintained our very large underweight in the
real estate sector on the expectation that valuations could come
under downward pressure in an environment of potentially rapid
increases to interest rates and thus the discount rates upon which
property valuations are based. Having witnessed at least a major
portion of this expected reset, we recently made an initial foray
back into this sector, taking a modest position in LondonMetric
Property, a diversified REIT.
Outlook for the coming year
The economic outlook today is far from rosy, yet there are
reasons for cautious optimism. The US regional bank failures and
the takeover of Credit Suisse by UBS have sent shockwaves through
the financial system and may lead to further credit tightening, but
at this time appear unlikely to materially impact UK banks and
their ability to lend, given their stronger profitability and
liquidity. In addition, a less intense inflationary environment and
continued recovery from the pandemic, have the potential to support
economic growth, with the UK now expected to avoid a recession.
Against this backdrop, valuations of UK equities have fallen, and
despite the recent outperformance of the UK market, this de-rating
has created some exciting investment opportunities.
Despite the natural and widespread caution in outlook
statements, portfolio companies are for the most part performing
well, and we believe they possess the wherewithal to withstand
near-term challenges and continue to thrive and grow. While there
is naturally nervousness around the near-term outlook, we have a
positive view as expressed by the portfolio's 10% gearing and are
excited by the opportunities that we see.
We will maintain our focus on investing in high quality
businesses that operate in growing end markets with the ability to
invest capital at attractive returns and which can also adapt to
the changing environments in which they operate. We believe that a
portfolio of such investments offers the best prospect of
delivering compelling returns for our shareholders over the
long-term.
Guy Anderson
Anthony Lynch
Investment Managers
3rd April 2023
Principal and Emerging Risks
The Directors confirm that they have carried out a robust
assessment of the principal risks facing the Company, including
those that would threaten its business model, future performance,
solvency or liquidity. With the assistance of JPMF, the Audit
Committee has drawn up a risk matrix, which identifies the key
risks to the Company. These are reviewed and noted by the Board.
The key risks identified and the broad categories in which they
fall, and the ways in which they are managed or mitigated are
summarised below. The key principal risks identified by the Audit
Committee are unchanged from the prior year. The AIC Code of
Corporate Governance requires the Audit Committee to put in place
procedures to identify emerging risks. The key emerging risks
identified are also summarised below.
Principal risk Description Mitigating activities
Investment Management and Performance
Underperformance Poor implementation of the investment This risk is managed by diversification
strategy, for example as to thematic of investments and through its
exposure, sector investment restrictions
allocation, stock selection, undue and guidelines, which are monitored and
concentration of holdings, factor risk reported on by the Manager. The Manager
exposure or the provides the
degree of total portfolio risk, may Directors with timely and accurate
lead to underperformance against the management information, including
Company's benchmark performance data and
index and peer companies. attribution analyses, revenue
estimates, liquidity reports and
shareholder analyses. The Board
monitors the implementation and results
of the investment process with the
Investment Managers,
at least one of whom attends all Board
meetings, and reviews data which show
measures of the
Company's risk profile. The Investment
Managers employ the Company's gearing
tactically, within
a strategic range set by the Board. The
Board holds a separate meeting devoted
to strategy
each year.
--------------------------------------- ----------------------------------------
Market and Economic Risk Market risk arises from uncertainty This risk is managed to some extent by
about the future prices of the diversification of investments and by
Company's investments, regular communication
which may reflect underlying with the Manager on matters of
uncertainties arising from economic, investment strategy and portfolio
social, fiscal, climate construction which will directly
and regulatory changes. In the past or indirectly include an assessment of
few years the COVID-19 pandemic has these risks. The Board receives regular
been a major source reports from
of uncertainty and has contributed to the Manager regarding market outlook
elevated levels of market volatility, and gives the Investment Mangers
whilst more recently discretion regarding
interest rate risk has also become a acceptable levels of gearing and/or
key driver of market and economic cash. Currently the Company's gearing
uncertainty. policy is to operate
Geopolitical risks have risen markedly within a range of 10% net cash to 20%
following the Russian invasion of geared.
Ukraine. While direct The Board considers thematic and factor
linkages to the UK from Russia tend to risks, stock selection and levels of
be small, the impact of sanctions has gearing on a
been significant regular basis and has set investment
and the rise in commodity prices has restrictions and guidelines which are
lead to a cost of living crisis in the monitored and reported
UK, which has on by the Manager.
hindered the Company's holdings in the The Board can, with shareholder
consumer sectors in particular. approval, look to amend the investment
These risks represent the potential policy and objectives
loss the Company might suffer through of the Company to gain exposure to or
holding investments mitigate the risks arising from
in the face of negative market geopolitical instability.
movements.
--------------------------------------- ----------------------------------------
Corporate Strategy The corporate strategy, including the Our investment strategies aim to
investment objectives and policies, position The Mercantile as a clear and
may not be of sufficient core investment choice
interest to current or prospective available for investment through a
shareholders. Other factors, such as number of channels. The Manager
the Company not being continues to deliver on
classified as an ESG integrated the Company's objective and integrates
investment vehicle, may also deter ESG considerations into its investment
shareholder interest. process. The
Board regularly reviews its strategy,
and assesses, with its brokers,
shareholder views.
Marketing and investor relations
campaigns continued throughout the year
and we have identified
appropriate promotional opportunities
for the Company (including advertising,
events and research
coverage) in order to maintain a strong
platform presence. A Mercantile
'Preference Centre'
has been set up to provide the Company
with the ability to communicate
directly and more effectively
with investors.
--------------------------------------- ----------------------------------------
Discount Control Risk Investment trust shares often trade at The Board monitors the level of both
discounts to their underlying NAVs, the absolute and sector relative
although they can premium/discount at
also trade at a premium. Discounts and which the shares trade. The Board
premiums can fluctuate considerably reviews both sales and marketing
leading to volatile activity and sector relative
returns for shareholders. performance, which it believes are the
primary drivers of the relative
discount level. In
addition, the Company has authority,
when it deems appropriate, to buy back
its existing shares
to enhance the NAV per share for
remaining shareholders and to reduce
the absolute level of
discount and discount volatility.
--------------------------------------- ----------------------------------------
Operational Risks
Mid and Smaller Company Investment Investing in mid and smaller sized The Board discusses these risk factors
companies is inherently more risky and at each Board meeting with the
volatile, partly Investment Managers.
due to a potential lack of liquidity The Board has placed investment
in the shares, which could lead to the restrictions and guidelines to limit
Investment Managers these risks. Ultimately
obtaining a lower market price in the the Company is protected to some extent
extremely rare event of them being given its closed end structure.
forced sellers.
--------------------------------------- ----------------------------------------
Cyber Crime The threat of cyber attack, in all The Company benefits directly or
guises, is regarded as at least as indirectly from all elements of
important as more traditional JPMorgan's cyber security
physical threats to business programme. The Board reviews the cyber
continuity and security. security precautions taken by its third
In addition to threatening the party suppliers
Company's operations, such an attack on a regular basis. The information
is likely to raise reputational technology controls around the physical
issues which may damage the Company's security of JPMorgan's
share price and reduce demand for its data centres, security of its networks
shares. and security of its trading
applications are tested
by independent reporting accountants
and reported on every six months
against the AAF Standard.
--------------------------------------- ----------------------------------------
Regulatory Risks
Regulatory Change The Company's business model could The Board receives regular reports from
become non-viable as a result of new its broker, depositary, registrar and
or revised rules or Manager as well
regulations arising from, for example, as its legal advisers and the industry
policy change or financial monitoring trade body (the Association of
pressure. Investment Companies)
on changes to regulations which could
impact the Company and its industry.
The Company monitors
events and relies on the Manager and
its other key third party providers to
manage this risk
by preparing for any changes, adverse
or otherwise.
--------------------------------------- ----------------------------------------
Emerging risks Description Mitigating activities
--------------------------------------- ----------------------------------------
Environmental Risks
Climate Change Climate change is one of the most The Manager's investment process
critical emerging issues confronting integrates consideration of
asset managers and environmental, social and governance
their investors. Climate change may factors into decisions on which stocks
have a disruptive effect on the to buy, hold or sell. This includes the
business models and profitability approach investee
of individual investee companies, and companies take to recognising and
indeed, whole sectors. mitigating climate change risks.
In the Company's and Manager's view,
companies that successfully manage
climate change risks
will perform better in the long-term.
Consideration of climate change risks
and opportunities
is an integral part of the investment
process.
--------------------------------------- ----------------------------------------
ESG requirements from investors The Company's policy on ESG and The Manager has integrated the
climate change may be out of line with consideration of ESG factors into the
ESG practices which Company's investment
investors are looking to invest in process. Further details are set out in
accordance with. the ESG report on pages 16 to 18.
--------------------------------------- ----------------------------------------
Pandemic Risks
Pandemics The emergence of COVID-19 illustrated During the COVID-19 pandemic the Board
the speed and extent of economic received reports on the business
damage that can arise continuity plans of
from a pandemic. the Manager and other key service
Whilst the impact of COVID-19 has now providers. The effectiveness of these
subsided, at least in the UK, measures was assessed
pandemics in general remain throughout the course of the COVID-19
an emerging risk. Evidence suggests pandemic and no issues were identified.
that the likelihood of pandemics has The Board is mindful that implications
increased over the arising from future pandemics will vary
past century due to increased global and hence the
travel and integration, urbanisation, ability to assess mitigation activities
changes in land is unknown.
use, and greater exploitation of the
natural environment.
--------------------------------------- ----------------------------------------
Geopolitical Risks
--------------------------------------- ----------------------------------------
Geopolitical Instability Geopolitical Risk is the potential for There is little direct control of this
political, socio-economic and cultural risk possible. The Company addresses
events and developments these global developments
to have an adverse effect on the value in regular questioning of the Manager,
of the Company's assets. including challenging the Manager on
The Company and its assets may be the extent of
impacted by geopolitical instability, geopolitical exposure within individual
in particular concerns investee companies, or the portfolio
over global economic growth. The more broadly.
crisis in Ukraine has already affected The Board has the ability, with
energy and commodity shareholder approval, to amend the
markets and may cause further damage policy and objectives of
to the global economy. the Company to mitigate the risks
The ongoing conflict between Russia arising from geopolitical concerns.
and Ukraine has heightened the
possibility that tensions
will spill over and intensify
geopolitical unrest between other
countries sharing a common
border.
--------------------------------------- ----------------------------------------
Transactions with the Manager and related parties
Details of the management contract are set out in the Directors'
Report on page 37 of the 2023 Annual Report. The management fee
payable to the Manager for the year was GBP6,907,000 (2022:
GBP9,191,000) of which GBPnil (2022: GBPnil) was outstanding at the
year end.
Included in administration expenses in note 6 on page 69 of the
2023 Annual Report are safe custody fees amounting to GBP32,000
(2022: GBP50,000) payable to JPMorgan Chase of which GBP7,000
(2022: GBP4,000) was outstanding at the year end.
The Manager may carry out some of its dealing transactions
through group subsidiaries. These transactions are carried out at
arm's length.
During the year, brokerage commission on dealing transactions
amounting to GBP1,000 (2022: GBP44,000) was payable to JPMorgan
subsidiaries of which GBPnil (2022: GBPnil) was outstanding at the
year end.
The Company also holds cash in JPMorgan Sterling Liquidity Fund,
managed by JPMorgan. At the year end this was valued at GBP157.2
million (2022: GBP62.9 million). Interest income amounting to
GBP3,036,000 (2022: GBP30,000) was receivable during the year of
which GBPnil (2022: GBPnil) was outstanding at the year end.
Handling charges on dealing transactions amounting to GBP14,000
(2022: GBP15,000) were payable to JPMorgan Chase during the year of
which GBP2,000 (2022: GBP5,000) was outstanding at the year
end.
At the year end, total cash of GBP386,000 (2022: GBP2,765,000)
was held with JPMorgan Chase. A net amount of interest of
GBP113,000 (2022: GBP3,000) was receivable by the Company during
the year from JPMorgan Chase of which GBPnil (2022: GBPnil) was
outstanding at the year end.
Full details of Directors' remuneration and shareholdings can be
found on page 49 and in note 6 on page 69 of the 2023 Annual
Report.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Annual Report
and the Financial Statements in accordance with applicable law and
regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law, the Directors
have elected to prepare the financial statements in accordance with
United Kingdom Generally Accepted Accounting Practice (United
Kingdom Accounting Standards, comprising Financial Reporting
Standard 102, the Financial Reporting Standard applicable in the UK
and Republic of Ireland ('FRS 102') and applicable law). Under
Company law the Directors must not approve the financial statements
unless they are satisfied that taken as a whole, the Annual Report
and Financial Statements are fair, balanced and understandable,
provide the information necessary for shareholders to assess the
Company's position and performance, business model and strategy and
that they give a true and fair view of the state of affairs of the
Company and of the total return or loss of the Company for that
period. In order to provide these confirmations, and in preparing
these financial statements, the Directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and estimates that are reasonable and prudent;
-- state whether applicable UK Accounting Standards, comprising
FRS 102, have been followed, subject to any material departures
disclosed and explained in the financial statements;
-- prepare the financial statements on a going concern basis
unless it is inappropriate to presume that the Company will
continue in business; and
-- notify the Company's shareholders in writing about the use,
if any, of disclosure exemptions in FRS 102 in the preparation of
the financial statements
and the Directors confirm that they have done so.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and to enable them to ensure that
the financial statements comply with the Companies Act 2006. They
are also responsible for safeguarding the assets of the Company and
hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
Under applicable law and regulations the Directors are also
responsible for preparing a Directors' Report and Directors'
Remuneration Report that comply with that law and those
regulations.
Each of the Directors, whose names and functions are listed on
pages 35 and 36 of the 2023 Annual Report confirms that, to the
best of his/her knowledge, the financial statements, which have
been prepared in accordance with 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 net return or loss of the
Company.
The Board confirms that it is satisfied that the Annual Report
and Financial Statements taken as a whole are fair, balanced and
understandable and provide the information necessary for
shareholders to assess the Company's position and performance,
business model and strategy.
The Board also confirms that it is satisfied that the Strategic
Report and Directors' Report include a fair review of the
development and performance of the business, and the Company,
together with a description of the principal risks and
uncertainties that it faces.
The Financial Statements are published on the
www.mercantileit.co.uk website, which is maintained by the Manager.
The maintenance and integrity of the website maintained by the
Manager is, so far as it relates to the Company, the responsibility
of the Manager. The work carried out by the Auditor does not
involve consideration of the maintenance and integrity of this
website and, accordingly, the Auditor accepts no responsibility for
any changes that have occurred to the accounts since they were
initially presented to the website. The accounts are prepared in
accordance with UK legislation, which may differ from legislation
in other jurisdictions.
For and on behalf of the Board
Angus Gordon Lennox
Chairman
3rd April 2023
Statement of Comprehensive Income
For the year ended 31st January
2023 2022
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------- --------- ----------- ----------- -------- --------- ---------
(Losses)/gains on investments held at fair value
through profit or loss - (317,548) (317,548) - 228,162 228,162
Net foreign currency gains - 64 64 - 23 23
Income from investments 61,589 - 61,589 60,986 - 60,986
Interest receivable and similar income 3,149 - 3,149 33 - 33
------------------------------------------------- --------- ----------- ----------- -------- --------- ---------
Gross return/(loss) 64,738 (317,484) (252,746) 61,019 228,185 289,204
Management fee (2,072) (4,835) (6,907) (2,757) (6,434) (9,191)
Other administrative expenses (1,413) - (1,413) (1,439) - (1,439)
------------------------------------------------- --------- ----------- ----------- -------- --------- ---------
Net return/(loss) before finance costs and
taxation 61,253 (322,319) (261,066) 56,823 221,751 278,574
Finance costs (4,245) (9,906) (14,151) (3,851) (8,984) (12,835)
------------------------------------------------- --------- ----------- ----------- -------- --------- ---------
Net return/(loss) before taxation 57,008 (332,225) (275,217) 52,972 212,767 265,739
Taxation (128) - (128) (1,494) - (1,494)
------------------------------------------------- --------- ----------- ----------- -------- --------- ---------
Net return/(loss) after taxation 56,880 (332,225) (275,345) 51,478 212,767 264,245
------------------------------------------------- --------- ----------- ----------- -------- --------- ---------
Return/(loss) per share 7.19p (42.02)p (34.83)p 6.50p 26.88p 33.38p
------------------------------------------------- --------- ----------- ----------- -------- --------- ---------
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. Net return/(loss) after
taxation represents the profit/(loss) for the year and also total
comprehensive income/(loss).
The notes on pages 66 to 83 of the 2023 Annual Report form an
integral part of these financial statements.
Statement of Changes in Equity
For the year ended 31st January
Called up Capital
share Share redemption Capital Revenue
capital premium reserve reserves(1) reserve(1) Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------- ---------- -------- ----------- ------------ ----------- ----------
At 31st January 2021 23,612 23,459 13,158 1,863,612 63,158 1,986,999
Net return - - - 212,767 51,478 264,245
Dividends paid in the year (note 3) - - - - (53,033) (53,033)
------------------------------------- ---------- -------- ----------- ------------ ----------- ----------
At 31st January 2022 23,612 23,459 13,158 2,076,379 61,603 2,198,211
Repurchase of shares into Treasury - - - (2,623) - (2,623)
Net (loss)/return - - - (332,225) 56,880 (275,345)
Dividends paid in the year (note 3) - - - - (54,567) (54,567)
------------------------------------- ---------- -------- ----------- ------------ ----------- ----------
At January 2023 23,612 23,459 13,158 1,741,531 63,916 1,865,676
------------------------------------- ---------- -------- ----------- ------------ ----------- ----------
(1) These reserves form the distributable reserves of the
Company and may be used to fund distributions to shareholders.
Statement of Financial Position
At 31st January
2023 2022
GBP'000 GBP'000
--------------------------------------------------------- ---------- -----------
Fixed assets
Investments held at fair value through profit or loss 2,042,758 2,465,122
--------------------------------------------------------- ---------- -----------
Current assets
Debtors 2,737 4,271
Cash and short term deposits 386 2,765
Cash equivalents: liquidity fund 157,220 62,896
--------------------------------------------------------- ---------- -----------
160,343 69,932
Creditors: amounts falling due within one year (9,599) (9,124)
--------------------------------------------------------- ---------- -----------
Net current assets 150,744 60,808
--------------------------------------------------------- ---------- -----------
Total assets less current liabilities 2,193,502 2,525,930
Creditors: amounts falling due after more than one year (327,826) (327,719)
--------------------------------------------------------- ---------- -----------
Net assets 1,865,676 2,198,211
--------------------------------------------------------- ---------- -----------
Capital and reserves
Called up share capital 23,612 23,612
Share premium 23,459 23,459
Capital redemption reserve 13,158 13,158
Capital reserves 1,741,531 2,076,379
Revenue reserve 63,916 61,603
--------------------------------------------------------- ---------- -----------
Total shareholders' funds 1,865,676 2,198,211
--------------------------------------------------------- ---------- -----------
Net asset value per share 236.1p 277.7p
--------------------------------------------------------- ---------- -----------
Statement of Cash Flows
For the year ended 31st January
2023 2022
GBP'000 GBP'000
---------------------------------------------------------------- ---------- ----------
Net cash outflow from operations before dividends and interest (8,172) (10,642)
Dividends received 62,063 58,827
Interest received 3,149 34
Overseas tax recovered 604 429
Interest paid (14,058) (11,638)
---------------------------------------------------------------- ---------- ----------
Net cash inflow from operating activities 43,586 37,010
---------------------------------------------------------------- ---------- ----------
Purchases of investments (507,308) (693,957)
Sales of investments 612,839 682,614
Settlement of foreign currency contracts - 7
---------------------------------------------------------------- ---------- ----------
Net cash inflow/(outflow) from investing activities 105,531 (11,336)
---------------------------------------------------------------- ---------- ----------
Dividends paid (54,567) (53,033)
Repurchase of shares into Treasury (2,623) -
Drawdown of loans - 149,659
Repayment of loan - (80,000)
---------------------------------------------------------------- ---------- ----------
Net cash (outflow)/inflow from financing activities (57,190) 16,626
---------------------------------------------------------------- ---------- ----------
Increase in cash and cash equivalents 91,927 42,300
---------------------------------------------------------------- ---------- ----------
Cash and cash equivalents at start of year 65,661 23,347
Exchange movements 18 14
---------------------------------------------------------------- ---------- ----------
Cash and cash equivalents at end of year 157,606 65,661
---------------------------------------------------------------- ---------- ----------
Cash and cash equivalents consist of:
Cash and short term deposits 386 2,765
Cash held in JPMorgan Sterling Liquidity Fund 157,220 62,896
---------------------------------------------------------------- ---------- ----------
Total 157,606 65,661
---------------------------------------------------------------- ---------- ----------
Reconciliation of net debt
As at Other As at
31st January non-cash 31st January
2022 Cash flows movements 2023
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------------------- ------------- ----------- ---------- -------------
Cash and cash equivalents
Cash 2,765 (2,397) 18 386
Cash equivalents 62,896 94,324 - 157,220
--------------------------------------------------- ------------- ----------- ---------- -------------
65,661 91,927 18 157,606
Borrowings:
Debentures falling due after more than five years (178,060) - (97) (178,157)
Private Placement due after more than five years (149,659) - (10) (149,669)
--------------------------------------------------- ------------- ----------- ---------- -------------
(327,719) - (107) (327,826)
--------------------------------------------------- ------------- ----------- ---------- -------------
Net debt (262,058) 91,927 (89) (170,220)
--------------------------------------------------- ------------- ----------- ---------- -------------
Notes to the Financial Statements
1. Accounting policies
(a) Basis of accounting
The financial statements have been prepared in accordance with
the Companies Act 2006, FRS 102 'The Financial Reporting Standard
applicable in the UK and Republic of Ireland' of the 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 July 2022.
All of the Company's operations are of a continuing nature.
The financial statements have been prepared on a going concern
basis. The disclosures on going concern on page 43 of the
Directors' Report in the 2023 Annual Report form part of these
financial statements.
The policies applied in these accounts are consistent with those
applied in the preceding year.
2. Return/(loss) per share
2023 2022
GBP'000 GBP'000
------------------------------------------------------------ ------------ ------------
Revenue return 56,880 51,478
Capital (loss)/return (332,225) 212,767
------------------------------------------------------------ ------------ ------------
Total (loss)/return (275,345) 264,245
------------------------------------------------------------ ------------ ------------
Weighted average number of shares in issue during the year 790,696,064 791,522,893
Revenue return per share 7.19p 6.50p
Capital (loss)/return per share (42.02)p 26.88p
------------------------------------------------------------ ------------ ------------
Total (loss)/return per share (34.83)p 33.38p
------------------------------------------------------------ ------------ ------------
The total (loss)/return per share represents both basic and
diluted return per share as the Company has no dilutive shares.
3. Dividends
(a) Dividends paid and declared
2023 2022
GBP'000 GBP'000
--------------------------------------------------------------------------------------- ------------ ------------
Dividends paid
2022 fourth quarterly dividend of 2.85p (2021: 2.65p) paid to shareholders in May
2022(1) 22,558 20,975
First quarterly dividend of 1.35p (2022: 1.35p) paid to shareholders in August 2022(1) 10,677 10,686
Second quarterly dividend of 1.35p (2022: 1.35p) paid to shareholders in November
2022(1) 10,666 10,686
Third quarterly dividend of 1.35p (2022: 1.35p) paid to shareholders in February
2023(1) 10,666 10,686
--------------------------------------------------------------------------------------- ------------ ------------
Total dividends paid in the year 54,567 53,033
--------------------------------------------------------------------------------------- ------------ ------------
2023 2022
GBP'000 GBP'000
----------------------------------------------------------------------------------------------- -------- --------
Dividend declared
Fourth quarterly dividend declared of 3.1p (2022: 2.85p) payable to shareholders in May
2023(1) 24,493 22,558
----------------------------------------------------------------------------------------------- -------- --------
(1) The Company irrevocably transfers the funds to its Registrar
in the month prior to which the dividend is paid to
shareholders.
All dividends paid and proposed in the year have been funded
from the revenue reserve.
The fourth quarterly dividend has been declared in respect of
the year ended 31st January 2023. In accordance with the accounting
policy of the Company, these dividends will be reflected in the
financial statements for the year ending 31st January 2024.
(b) Dividends for the purposes of Section 1158 of the
Corporation Tax Act 2010 ('Section 1158')
The requirements of Section 1158 are considered on the basis of
dividends declared in respect of the financial year as shown below.
The revenue available for distribution by way of dividend for the
year is GBP56,880,000 (2022: GBP51,478,000).
The maximum amount of income that the Company is permitted to
retain under Section 1158 is GBP9,711,000 (2022: GBP9,153,000),
calculated as 15% of total income. Therefore the minimum
distribution required by way of dividend is GBP47,169,000 (2022:
GBP42,325,000).
2023 2022
GBP'000 GBP'000
------------------------------------------------------------------------------------------- -------- --------
First quarterly dividend of 1.35p (2022: 1.35p) paid to shareholders in August 2022(1) 10,677 10,686
Second quarterly dividend of 1.35p (2022: 1.35p) paid to shareholders in November 2022(1) 10,666 10,686
Third quarterly dividend of 1.35p (2022: 1.35p) paid to shareholders in February 2023(1) 10,666 10,686
Fourth quarterly dividend declared of 3.1p (2022: 2.85p) payable in May 2023(1) 24,493 22,558
------------------------------------------------------------------------------------------- -------- --------
56,502 54,616
------------------------------------------------------------------------------------------- -------- --------
(1) The Company irrevocably transfers the funds to its Registrar
in the month prior to which the dividend is paid to
shareholders.
4. Net asset value per share
The net asset value per Ordinary share and the net asset value
attributable to the Ordinary shares at the year end are shown
below. These were calculated using 790,080,662 (2022: 791,552,893)
Ordinary shares in issue at the year end (excluding Treasury
shares).
2023 2022
Net asset value attributable Net asset value attributable
GBP'000 pence GBP'000 pence
---------------------------------------------------- ------------------ ----------- ------------------ -----------
Net asset value - debt at par 1,865,676 236.1 2,198,211 277.7
Add: amortised cost of GBP175 million 6.125%
debenture stock 25th February 2030 174,307 22.1 174,210 22.0
Less: fair value of GBP175 million 6.125% debenture
stock 25th February 2030 (201,864) (25.5) (232,730) (29.4)
Add: amortised cost of GBP3.85 million 4.25%
perpetual debenture stock 3,850 0.5 3,850 0.5
Less: fair value of GBP3.85 million 4.25% perpetual
debenture stock (3,791) (0.5) (8,473) (1.0)
Add: amortised cost of senior unsecured privately
placed loan notes 149,669 18.9 149,659 18.9
Less: fair value of senior unsecured privately
placed loan notes (93,602) (11.8) (145,272) (18.4)
---------------------------------------------------- ------------------ ----------- ------------------ -----------
Net asset value - debt at fair value 1,894,245 239.8 2,139,455 270.3
---------------------------------------------------- ------------------ ----------- ------------------ -----------
5. Status of results announcement
2022 Financial Information
The figures and financial information for 2022 are extracted
from the Annual Report and Financial Statements for the year ended
31st January 2022 and do not constitute the statutory accounts for
the year. The Annual Report and Financial Statements include 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.
2023 Financial Information
The figures and financial information for 2023 are extracted
from the published Annual Report and Financial Statements for the
year ended 31st January 2023 and do not constitute the statutory
accounts for that year. The Annual Report and Financial Statements
include the Report of the Independent Auditors which is unqualified
and did not contain a statement under either section 498(2) or
section 498(3) of the Companies Act 2006. The Annual Report and
Financial Statements for the year ended 31st January 2023 will be
delivered to the Register 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.
3rd April 2023
For further information:
Alison Vincent,
JPMorgan Funds Limited
020 7742 4000
ENDS
A copy of the annual report will shortly be submitted to the
FCA's Electronic Submission System and will be available for
inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
The annual report will 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.
Stay Informed
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Trust, to include occasional news and views, as well as performance
updates, you can sign up and 'keep in the know', by opting in here:
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JPMORGAN FUNDS LIMITED
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