Mercantile Inv Tst - Half-year Report
LONDON STOCK EXCHANGE ANNOUNCEMENT
THE MERCANTILE INVESTMENT
TRUST PLC
HALF YEAR REPORT & FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED
31ST JULY 2026Legal Entity Identifier: 549300BGX3CJIHLP2H42
Information disclosed in accordance with the DTR 4.1.3
The Mercantile Investment Trust plc ('MRC' or the 'Company') announces its half-year results for the six months ended 31st July 2026.
Highlights
· NAV total return of +5.6% (with debt at fair value*) for the half year ended 31st July 2026, compared with a +3.9% return for the Company's benchmark (FTSE All-Share Index, ex-FTSE 100, ex-investment trusts, with net dividends reinvested). Share price total return for the period was +5.5%.
· Three-year cumulative NAV total return of +41.4% (with debt at fair value*) compared with +39.3% for the Benchmark; three-year share price cumulative total return of +51.6%.
· Five-year cumulative NAV total return of +18.6% (with debt at fair value*), compared with +22.2% for the benchmark; five-year share price cumulative total return of +18.9%.
· Ten-year cumulative NAV total return of +126.5% (with debt at fair value*), comfortably ahead of the benchmark's +81.9%; ten-year share price cumulative total return of +132.2%.
· Performance in this half-year was supported by strong stock selection in the Software & Computer Services, Financials and Construction sectors while UK housebuilder Bellway detracted.
· The Company repurchased 51,243,883 shares into Treasury at an average discount of 9.7%, providing a 0.7% benefit to the NAV for continuing shareholders.
· Second quarterly interim dividend of 1.60p per share declared, payable on 2nd November 2026. Total dividends for the year so far of 3.20p per share (up from 3.10p per share for the equivalent period last year).
· The Company's dividend has now grown for 13 consecutive years, which has earned it a place among the AIC's next-generation dividend heroes, and it is on track to maintain that record this year.
· Anthony Lynch, who has co-managed the Company's portfolio for the past fourteen years will step-down as Portfolio Manager with effect from 31st October 2026, having taken on new responsibilities within JPMAM. The Company's portfolio will continue to be managed by Guy Anderson. Manasij ("Manny") Hajra, a member of The Mercantile team for the last seven years, will join Guy Anderson as co-Portfolio Manager with effect from 1st November 2026
* J.P. Morgan/Morningstar, using cum income net asset value per share. APM Alternative Performance Measure ('APM').
Rachel Beagles, Chairman, commented:
"The Company's long term performance track record attests to the Portfolio Managers' ability to guide the portfolio through whatever challenges they meet, whilst taking advantage of emergent investment and valuation opportunities. My fellow Directors and I are confident that your Company will continue to deliver both positive real returns and outperformance for its shareholders going forward as it has done in the past."
Guy Anderson & Anthony Lynch, Portfolio Managers, commented:
"The outlook is always uncertain, and this year is no different. However, there are also reasons for optimism… global economic growth remains encouraging and portfolio companies are generally performing well…and yet the valuation of the UK market remains at a substantial discount to both its own history and relative to other developed markets. As with last year, this fact has not gone unnoticed, and we have seen a continued run of corporate acquisitions, alongside an elevated volume of share buybacks being executed by management teams."
"Looking ahead, we will maintain our focus on investing in structurally robust businesses that operate in growing end markets and possess the ability to invest capital at attractive returns while being able to adapt to the changing environments in which they operate. We believe that a portfolio of companies with these characteristics offers the best prospect of delivering compelling returns and outperformance for our shareholders over the long-term, just as it has done in the past."
CHAIR'S STATEMENT
"Despite a challenging backdrop, the investment case for UK medium and smaller companies remains firmly in place - and valuations are compelling"
Rachel Beagles, Chair
Market Background
UK medium and smaller company stocks posted respectable returns over the six months ended 31st July 2026, but the period was characterised by increased uncertainty and volatility. The outbreak of conflict in the Middle East drove up energy and commodity prices, igniting fears of higher inflation and monetary policy tightening. Business and consumer confidence was further undermined by a fresh bout of domestic political turbulence as Andy Burnham waged a protracted but eventually successful campaign to replace Keir Starmer as Prime Minister. So, whilst economic growth, perhaps unsurprisingly, remains low by historic standards, it was notable that UK equities were boosted by ongoing inflows, including by M&A activity.
Performance
During the six months to the end of July 2026, the Company delivered total returns (with dividends reinvested) of +5.6% on net assets (with debt at fair value) and +5.5% on a share price basis. This performance outpaced the benchmark, which rose +3.9% over the period and supports the Company's track record over the long term. Over the five years to 31st July 2026, the Company's NAV delivered an annualised return of +3.5% (with debt at fair value), narrowly falling behind the benchmark's +4.1%. Over the ten years to 31st July 2026 the Company's NAV delivered an annualised return of +8.5% (with debt at fair value), comfortably ahead of the benchmark's +6.2% rise.
The Portfolio Managers' Report below provides details of the Company's recent performance and portfolio changes implemented over the review period. Their report also discusses the market outlook for remainder of 2026 and beyond.
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 and it has fulfilled this commitment. Over the 10 years to 31st January 2026, the Company's dividend grew at an annualised rate of 6.7%, well above CPI inflation of 3.4% over the same period.
The Company's dividend has now grown for 13 consecutive years, which has earned it a place among the AIC's next-generation dividend heroes, and it is on track to maintain that record this year.
A first quarterly interim dividend of 1.60 pence in respect of the current financial year was paid on 3rd August 2026 and a second quarterly interim dividend of 1.60 pence per share has been declared by the Board, payable on 2nd November 2026 to shareholders on the register at the close of business on 25th September 2026. This will bring the dividend for the year so far to 3.20 pence, up from 3.10 pence for the equivalent period last year. A third quarterly interim dividend will be announced in December 2026. The level of the fourth quarterly interim dividend will depend on income received by the Company for the full financial year.
In deciding dividend payments, the Board looks to pay dividends that are at least covered by current year earnings, while also allowing the Company to build revenue reserves. During the financial year ended 31st January 2026 (FY26), all declared dividends were fully covered by earnings, with revenue per share during the year of 9.25p (FY25: 8.96p), comfortably above the full year dividend payment of 8.20p per share (FY25: 7.90p). After payment of the fourth interim dividend for FY26, the Company had revenue reserves of 10.20p per share (2025: 8.00p). It is a great advantage of the investment trust structure that the Company has the capacity to partially fund dividend payments from revenue reserves when necessary, to bolster the dividend during challenging times. This capability should provide shareholders with confidence in the Company's ability to maintain its dividend growth objective throughout investment cycles.
ISA Millionaire 2026
I am very pleased to report that The Mercantile was one of 68 investment trust companies recognised by the AIC in connection with its 2026 ISA Millionaire award. This award recognises the fact that the Company was among those investment trust companies whose shareholders would have built a tax-free pot of £1 million by 31st January 2026, if they invested their full annual ISA allowances in the Company and reinvested dividends from 1999 to 2025. The award is a clear illustration of the Company's strong long-term total returns (including the meaningful contribution of reinvested dividends).
Discount and Share Repurchases
The discount at which the Company's shares trade relative to its NAV (with debt at fair value) widened slightly, from 9.4% at the end of the previous financial year to 9.7% at the end of July 2026.
During the period, to help manage the discount and its volatility, the Board purchased 51,243,883 shares. These shares are held in Treasury and were purchased at an average discount to NAV of 9.7%, providing a 0.7% benefit to the NAV for continuing shareholders. Since the end of the review period, the Company has purchased a further 11,872,284 shares. The discount currently stands at 9.9%.
Gearing
The Company's gearing policy is to operate within a range between 10% net cash and 20% gearing under normal market conditions. The Company ended the six-month reporting period with gearing at 17.2% (compared to 14.4% on 31st January 2026), having averaged 16.9% over the period. This level of gearing is towards the higher end of the Company's historical levels and reflects the Portfolio Managers' confidence in the outlook for your portfolio companies and the availability of attractive investment opportunities.
Gearing is regularly discussed by the Board and the Portfolio 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. Details of these instruments can be found on page 3 of the Half Year Report. During the period, the Company partially repurchased £2.77 million of its £3.85 million 4.25% perpetual debenture stock, leaving £1.08 million outstanding.
Board
During the period, the Board completed the search for a new Non-executive Director, as part of its long term succession planning. I am delighted to report that the process concluded with the appointment of Richard Wilson with effect from 3rd August 2026. Mr Wilson brings a wealth of experience from his long career in asset management, having held senior executive leadership roles including Chief Executive Officer of BMO Global Asset Management and F&C Asset Management plc, alongside non-executive directorships within the investment sector.
The Manager
Anthony Lynch, who has co-managed the Company's portfolio for the past fourteen years will step-down as Portfolio Manager with effect from 31st October 2026, having taken on new responsibilities within JPMAM. The Board would like to thank Anthony for his significant contribution to the management of the Company's portfolio during his tenure and extends its very best wishes to him.
The Company's portfolio will continue to be managed by Guy Anderson. Manasij ("Manny") Hajra, a member of The Mercantile team for the last seven years, will join Guy Anderson as co-Portfolio Manager with effect from 1st November 2026. The Board welcomes Manny's appointment and looks forward to working further with him more closely as the Company seeks to deliver strong long-term returns for shareholders.
Marketing, Promotion and Shareholder Interaction
The Board believes that boosting the Company's profile through targeted media and promotional work, as well as via a well-established sales and investor relations programme, is advantageous for all shareholders. The Company has implemented a marketing strategy to seek to generate consistent demand for its shares, especially from retail investors, who over the last few years have made up an increasing percentage of the share register. We aim to carry out these promotional activities cost effectively.
The Board and Portfolio Managers also maintain regular dialogue with shareholders through email updates that share news, insights, and the latest performance, along with invitations to webinars hosted by the Portfolio Managers. The webinars provide portfolio updates and give shareholders the opportunity to ask questions.
If you have not already signed up to receive these communications and you wish to do so, you can opt in via www.Mercantile-Registration.co.uk, or by scanning the QR code in the Half Year Report. The Company also has a LinkedIn page: www.linkedin.com/company/the-mercantile-investment-trust where shareholders can follow updates and thought pieces related to The Mercantile.
It is the Board's hope that these initiatives will give many more of the Company's investors and potential investors the opportunity to remain well-informed about its progress and to interact with the Board and Portfolio Managers.
Outlook
The investment environment looks set to remain challenging for several reasons, most notably the risks to inflation and interest rates posed by ongoing Middle East tensions. In addition, apprehension about the new Prime Minister's first budget is likely to weigh on business and consumer sentiment. Nonetheless, the investment case for UK medium and smaller company stocks is still firmly in place. The Board remains convinced that investing in quality businesses in growing end markets, at compelling valuations, will continue to generate attractive returns over the long term.
And valuations are compelling. Despite the gains seen in recent years, UK medium and smaller company valuations remain low relative to history, larger peers and other markets. This should encourage ongoing rotation into UK markets by international investors, with valuations further supported by company share buybacks. The recent surge in merger and acquisition activity across the UK market is also likely to continue for the same reason, and medium and smaller companies, potentially including some of the Company's portfolio holdings, will be key beneficiaries of this interest, due to their relative affordability. This sector of the market also provides investors with a relatively attractive dividend yield - the current yield on the FTSE 250 Index is 3.4%*, above the FTSE 100 Index yield of 3.2%*, and provides a signal of the value inherent in your Company's benchmark.
The Mercantile offers investors an appealing and competitive means of gaining exposure to UK medium and smaller companies. The portfolio is invested in high quality companies, with conservative balance sheets and strong market positions, that leave them well-positioned to outperform over time. The Company also offers shareholders an attractive dividend yield of 3.0%1, delivered via quarterly dividend payments. Furthermore, the Company's market capitalisation of over £1.8 billion makes it the largest and therefore most liquid investment company amongst its UK medium and smaller company-focused peers by a significant margin. Finally, and most importantly, the Company's long term performance track record attests to the Portfolio Managers' ability to guide the portfolio through whatever challenges they meet, whilst taking advantage of emergent investment and valuation opportunities. My fellow Directors and I are confident that your Company will continue to deliver both positive real returns and outperformance for its shareholders going forward as it has done in the past.
Thank you for your ongoing support.
* As at 30th September 2026. Source: J.P. Morgan Asset Management, Bloomberg.
1 Total cash dividends paid per share over the last 12 months divided by the Company's share price as at 13th October 2026.
Rachel Beagles
Chair 14th October 2026
PORTFOLIO MANAGERS' REPORT
Setting the scene: continued market gains despite the challenges
The UK market delivered a positive total return through the first half of this financial year, with our target market of UK medium and smaller companies (the 'Benchmark') returning +3.9% for the six months ended 31st July 2026.
While performance has been positive, progress has been punctuated by sharp swings in sentiment in reaction to both global and domestic events. The conflict in the Middle East increased uncertainty and raised concerns about energy price volatility and thus inflation more broadly. This rapid shift in inflation expectations led the market to reassess the expected path of future interest rates, directly impacting financing conditions and the cost of capital.
Domestically, the change of UK Prime Minister added a further layer of policy uncertainty, impacting confidence and contributing to short-term swings in risk appetite and further valuation dispersion within the mid and small-cap universe. This lack of confidence has a direct impact on economic growth: businesses remain reticent to invest or to hire more labour, and consumers remain cautious on spending. Against this backdrop and again reflecting the deeply discounted valuation of the UK market, corporates have continued to repurchase their own shares at elevated levels, while we are also witnessing a period of elevated acquisition activity with various major companies within our universe receiving takeover approaches at substantial premia.
Mercantile performance
Against this backdrop, for the six months to 31st July 2026, the Company delivered a total return on net assets of +5.6% with debt at fair value and +5.1% with debt at par value, compared with the Benchmark's +3.9% total return. The Company's share price total return was +5.5%. This outperformance was driven by positive stock selection and our use of gearing, which averaged 16.9% through the period, as well as the accretion from share buybacks.
Performance in this half-year was aided by strong returns from our holdings in the Software & Computer Services sector, led by Softcat, one of the UK's leading value-added technology resellers, Computacenter, the technology and services provider, and Trustpilot, the digital platform provider for consumer reviews. Highlights elsewhere included Hill & Smith, the infrastructure engineer, Lion Finance, the banking group, and Balfour Beatty, the construction firm.
On the negative side of the ledger, our holding in UK housebuilder Bellway was the largest detractor, although relative returns benefited from not holding Vistry and Taylor Wimpey, both of which performed very poorly during the period. Other detractors included Serco, Telecom Plus and 3i.
While there has not been any material change to the overall shape of the portfolio, or indeed to the level of gearing, during the first half of this financial year we made various stock-specific alterations, with around 10 new investments and disposals. The largest addition was a new holding in EasyJet, the airline, following its demotion from the FTSE 100 but prior to receipt of multiple bids at substantial premia. Beyond that, we substantially increased our position sizes in both Softcat and Rosebank during the market turmoil shortly after the US attacks on Iran. We increased our holding in Softcat as the share price disconnected from the strong financial performance and we participated in Rosebank's major capital raise to fund acquisitions. We also increased our holding in Computacenter, which continues to benefit from strong technology demand related to the broader industry's AI build-out. We initiated new positions in Renishaw, the specialist engineering company that supplies precision measurement and production systems, and Watches of Switzerland, the luxury watch retailer. The largest sales included exiting our holdings in Dunelm, the home furnishings retailer, Carnival, the owner-operator of cruise ships, and Telecom Plus, the multi-utility provider. Furthermore, we exited our position in Just Group, the life insurer, following the completion of its acquisition by Brookfield.
Outlook
The outlook is always uncertain, and this year is no different: the international geopolitical landscape appears primed for generating unanticipated shocks, and the continued rise of populism could have damaging consequences; domestic economic growth is low, and the government's ability - despite a change in personnel - to deliver productive change appears limited; the rapid pace of technological development will both create and destroy industries, and thus winners and losers. As always, we will endeavour to invest in more of the former, and fewer of the latter.
In the near-term, financial markets will be buffeted by changes to the above, as well as by the inter-connected forces of inflation and monetary policy, and their impact upon economic and thus corporate earnings growth expectations.
However, there are also reasons for optimism, which explains our level of gearing, currently sitting around 15.0%. Despite these well-known risk factors, and widespread caution likely as we approach the new Prime Minister's first budget, global economic growth remains encouraging and portfolio companies are generally performing well - some exceptionally so - and yet the valuation of the UK market remains at a substantial discount to both its own history and relative to other developed markets. As with last year, this fact has not gone unnoticed, and we have seen a continued run of corporate acquisitions, alongside an elevated volume of share buybacks being executed by management teams.
Looking ahead, we will maintain our focus on investing in structurally robust businesses that operate in growing end markets and possess the ability to invest capital at attractive returns while being able to adapt to the changing environments in which they operate. We believe that a portfolio of companies with these characteristics offers the best prospect of delivering compelling returns and outperformance for our shareholders over the long-term, just as it has done in the past.
Guy Anderson
Anthony Lynch
Portfolio Managers 14th October 2026
INTERIM MANAGEMENT REPORT
The Company is required to make the following disclosures in its half year report.
Principal risks and uncertainties
The principal risks and uncertainties faced by the Company include, but are not limited to, investment under-performance, cyber crime, geopolitical instability, corporate strategy, discount control and corporate governance & shareholder relations. Information on each of these is given in the Strategic Report within the Annual Report and Financial Statements for the year ended 31st January 2026.
In the view of the Board, these principal risks and uncertainties are as much applicable to the remaining six months of the financial year as they were to the six months under review.
Related parties transactions
During the first six months of the current financial year, no transactions with related parties have taken place which have materially affected the financial position or the performance of the Company.
Going concern
The Directors believe, having considered the Company's investment objectives, risk management policies, capital management policies and procedures, nature of the portfolio and expenditure projections, that the Company has adequate resources, an appropriate financial structure and suitable management arrangements in place to continue in operational existence for the foreseeable future and, more specifically, that there are no material uncertainties pertaining to the Company that would prevent its ability to continue in such operational existence for at least 12 months from the date of the approval of this half year financial report. For these reasons, they consider there is sufficient evidence to continue to adopt the going concern basis in preparing the accounts.
Directors' responsibilities
The Board of Directors confirms that, to the best of its knowledge:
(i) the condensed set of financial statements contained within the half year financial report has been prepared in accordance with FRS 104 'Interim Financial Reporting' and gives a true and fair view of the state of affairs of the Company, and of the assets, liabilities, financial position and net return of the Company as at 31st July 2026 as required by the UK Listing Authority Disclosure Guidance and Transparency Rules ('DTRs') 4.2.4R; and
(ii) the interim management report includes a fair review of the information required by 4.2.7R and 4.2.8R of the DTRs.
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 accounting estimates that are reasonable and prudent;
• state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business;
and the Directors confirm that they have done so.
For and on behalf of the Board
Rachel Beagles
Chair 14th October 2026
CONDENSED STATEMENT OF COMPREHENSIVE INCOME
(Unaudited)
(Unaudited)
(Audited)
Six months ended
Six months ended
Year ended
31st July 2026
31st July 2025
31st January 2026
Revenue
Capital
Total
Revenue
Capital
Total
Revenue
Capital
Total
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
Gains on investments held at
fair value through profit or loss
-
51,711
51,711
-
70,232
70,232
-
156,764
156,764
Net foreign currency exchange
gains
-
1
1
-
75
75
-
78
78
Income from investments
36,957
-
36,957
44,053
-
44,053
72,304
-
72,304
Interest receivable
705
-
705
1,082
-
1,082
2,139
-
2,139
Gross return
37,662
51,712
89,374
45,135
70,307
115,442
74,443
156,842
231,285
Management fee
(1,144)
(2,669)
(3,813)
(1,171)
(2,733)
(3,904)
(2,348)
(5,478)
(7,826)
Other administrative expenses
(882)
-
(882)
(798)
-
(798)
(1,575)
-
(1,575)
Net return before finance costs
and taxation
35,636
49,043
84,679
43,166
67,574
110,740
70,520
151,364
221,884
Finance costs1
(2,074)
(3,868)
(5,942)
(2,087)
(4,869)
(6,956)
(4,173)
(9,738)
(13,911)
Net return before taxation
33,562
45,175
78,737
41,079
62,705
103,784
66,347
141,626
207,973
Taxation (note 3)
(280)
-
(280)
311
-
311
(120)
-
(120)
Net return after taxation
33,282
45,175
78,457
41,390
62,705
104,095
66,227
141,626
207,853
Return per ordinary share (note 4)
5.09p
6.90p
11.99p
5.66p
8.57p
14.23p
9.25p
19.78p
29.03p
1 During the six months ended 31st July 2026, the Company partially repaid £2,774,000 par value of the original £3,850,000 4.25% perpetual debenture stock. As the debenture was repaid early at a discount to the par value, the amount paid was £1,803,000, realising a gain of £970,000 which is netted against finance costs of £6,912,000.
All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the period.
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 net return after taxation represents the profit for the period/year and also the total comprehensive income for the period/year.
CONDENSED STATEMENT OF CHANGES IN EQUITY
Called up
Share
Capital
share
premium
redemption
Capital
Revenue
capital
account
reserve
reserves1
reserve1
Total
£'000
£'000
£'000
£'000
£'000
£'000
Six months ended 31st July 2026 (Unaudited)
At 31st January 2026
23,612
23,459
13,158
1,803,261
104,303
1,967,793
Repurchase of ordinary shares into Treasury
-
-
-
(134,032)
-
(134,032)
Net return after taxation for the period
-
-
-
45,175
33,282
78,457
Dividends paid in the period (note 5)
-
-
-
-
(44,398)
(44,398)
At 31st July 2026
23,612
23,459
13,158
1,714,404
93,187
1,867,820
Six months ended 31st July 2025 (Unaudited)
At 31st January 2025
23,612
23,459
13,158
1,819,986
85,253
1,965,468
Repurchase of ordinary shares into Treasury
-
-
-
(65,026)
-
(65,026)
Net return after taxation for the period
-
-
-
62,705
41,390
104,095
Dividends paid in the period (note 5)
-
-
-
-
(36,183)
(36,183)
Proceeds from forfeiture of unclaimed
dividends (note 5)
-
-
-
-
3
3
At 31st July 2025
23,612
23,459
13,158
1,817,665
90,463
1,968,357
Year ended 31st January 2026 (Audited)
At 31st January 2025
23,612
23,459
13,158
1,819,986
85,253
1,965,468
Repurchase of ordinary shares into Treasury
-
-
-
(158,351)
-
(158,351)
Net return after taxation for the year
-
-
-
141,626
66,227
207,853
Dividends paid in the year (note 5)
-
-
-
-
(47,180)
(47,180)
Proceeds from forfeiture of unclaimed
dividends (note 5)
-
-
-
-
3
3
At 31st January 2026
23,612
23,459
13,158
1,803,261
104,303
1,967,793
1 These reserves form the distributable reserves of the Company and can be used to fund distributions to investors via dividend payments or share buybacks.
CONDENSED STATEMENT OF FINANCIAL POSITION
(Unaudited)
(Unaudited)
(Audited)
At
At
At
31st July 2026
31st July 2025
31st January 2026
£'000
£'000
£'000
Fixed assets
Investments held at fair value through profit or loss
2,188,906
2,253,898
2,251,397
Current assets
Debtors
7,063
10,780
3,019
Current asset investments
3,847
40,854
49,514
Cash at bank
2,614
250
287
13,524
51,884
52,820
Current liabilities
Creditors: amounts falling due within one year
(9,176)
(9,329)
(8,271)
Net current assets
4,348
42,555
44,549
Total assets less current liabilities
2,193,254
2,296,453
2,295,946
Non current liabilities
Creditors: amounts falling due after more than one year
(325,434)
(328,096)
(328,153)
Net assets
1,867,820
1,968,357
1,967,793
Capital and reserves
Called up share capital
23,612
23,612
23,612
Share premium account
23,459
23,459
23,459
Capital redemption reserve
13,158
13,158
13,158
Capital reserves
1,714,404
1,817,665
1,803,261
Revenue reserve
93,187
90,463
104,303
Total shareholders' funds
1,867,820
1,968,357
1,967,793
Net asset value per ordinary share (note 6)
295.7p
273.4p
288.2p
CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
(Unaudited)
(Audited)
Six months ended
Six months ended
Year ended
31st July 2026
31st July 2025
31st January 2026
£'000
£'000
£'000
Cash flows from operating activities
Net return before finance costs and taxation
84,679
110,740
221,884
Adjustment for:
Net gains on investments held at fair value through profit
or loss
(51,711)
(70,232)
(156,764)
Net foreign currency exchange gains
(1)
(75)
(78)
Dividend income
(36,957)
(44,053)
(72,304)
Interest income
(705)
(1,082)
(2,139)
Realised gains on foreign currency exchange
transactions
1
75
78
(Increase)/decrease in other debtors
(34)
(32)
23
Decrease in accrued expenses
(106)
(321)
(245)
Net cash outflow from operations before dividends, interest
and taxation
(4,834)
(4,980)
(9,545)
Dividends received
34,679
39,663
72,244
Interest received
888
1,082
1,956
Overseas withholding tax recovered
315
665
665
Net cash inflow from operating activities
31,048
36,430
65,320
Purchases of investments
(361,627)
(248,438)
(478,361)
Sales of investments
473,250
304,414
625,448
Net cash inflow from investing activities
111,623
55,976
147,087
Dividends paid (note 5)
(44,398)
(36,183)
(47,180)
Proceeds from forfeiture of unclaimed dividends (note 5)
-
3
3
Repurchase of ordinary shares into Treasury
(132,933)
(65,366)
(158,775)
Debentures, loan notes and overdraft interest paid
(6,877)
(6,904)
(13,802)
Partial repayment of debenture2
(1,803)
-
-
Net cash outflow from financing activities
(186,011)
(108,450)
(219,754)
Decrease in cash and cash equivalents
(43,340)
(16,044)
(7,347)
Cash and cash equivalents at start of period/year
49,801
57,148
57,148
Cash and cash equivalents at end of period/year1
6,461
41,104
49,801
Cash and cash equivalents consist of:
Cash at bank
2,614
250
287
Current asset investment in JPMorgan GBP Liquidity Fund
3,847
40,854
49,514
Total
6,461
41,104
49,801
1 The term 'cash and cash equivalents' is used for the purposes of the Statement of Cash Flows.
2 During the six months ended 31st July 2026, the Company partially repaid £2,774,000 par value of the original £3,850,000 4.25% perpetual debenture stock. As the debenture was repaid early at a discount to the par value, the cash amount paid was £1,803,000.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
For the six months ended 31st July 2026
1. Financial statements
The information contained within these condensed financial statements in this half year report has not been audited or reviewed by the Company's Auditor.
The figures and financial information for the year ended 31st January 2026 are extracted from the latest published financial statements of the Company and do not constitute statutory accounts for that year. Those financial statements have been delivered to the Registrar of Companies and include the report of the auditor which was unqualified and did not contain a statement under either section 498(2) or 498(3) of the Companies Act 2006.
2. Accounting policies
FRS 104, 'Interim Financial Reporting', issued by the Financial Reporting Council ('FRC') has been applied in preparing this condensed set of financial statements for the six months ended 31st July 2026.
The condensed financial statements are prepared under the historical cost convention, modified to include fixed asset investments at fair value, in accordance with the Companies Act 2006, United Kingdom Generally Accepted Accounting Practice ('UK GAAP'), including FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' 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 December 2025.
All of the Company's operations are of a continuing nature.
The Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for at least 12 months from the date of approval of these condensed financial statements. Accordingly, the Directors consider it appropriate to adopt the going concern basis of accounting in preparing these condensed financial statements. This conclusion takes into account the Directors' assessment of the risks faced by the Company as detailed in the Interim Management Report above.
The accounting policies applied to this condensed set of financial statements are consistent with those applied in the financial statements for the year ended 31st January 2026.
3. Taxation
The Company's effective corporation tax rate is 25%, however as the current period deductible expenses exceed taxable income, no corporation tax is payable. Furthermore, the Company does not pay tax on capital gains due to its status as an investment trust company. The tax recognised in the period comprises overseas withholding tax. Withholding tax amounts that were initially considered irrecoverable but have been recovered during a period are recognised as a tax credit in that period.
4. Return per ordinary share
(Unaudited)
(Unaudited)
(Audited)
Six months ended
Six months ended
Year ended
31st July 2026
31st July 2025
31st January 2026
£'000
£'000
£'000
Return per ordinary share is based on the following:
Revenue return
33,282
41,390
66,227
Capital return
45,175
62,705
141,626
Total return
78,457
104,095
207,853
Weighted average number of ordinary shares in issue
654,356,396
731,616,104
716,006,034
Revenue return per ordinary share
5.09p
5.66p
9.25p
Capital return per ordinary share
6.90p
8.57p
19.78p
Total return per ordinary share
11.99p
14.23p
29.03p
5. Dividends paid
(Unaudited)
(Unaudited)
(Audited)
At 31st July 2026
At 31st July 2025
At 31st January 2026
Pence
£'000
Pence
£'000
Pence
£'000
Dividend paid
Third quarterly dividend in respect of prior year1
1.55
10,660
-
-
-
-
Fourth quarterly dividend in respect of prior year1
3.55
23,484
3.40
24,884
3.40
24,884
First quarterly dividend
1.60
10,254
1.55
11,299
1.55
11,297
Second quarterly dividend
-
-
-
-
1.55
10,999
Total dividends paid in the period/year
6.70
44,398
4.95
36,183
6.50
47,180
Forfeiture of unclaimed dividends over 12 years old2
-
-
-
(3)
-
(3)
Net dividends
6.70
44,398
4.95
36,180
6.50
47,177
1 For the year ended 31st January 2026, the third and fourth quarterly dividends were paid after the year end and therefore are reflected in the financial statements for the six months ended 31st July 2026.
2 The unclaimed dividends were forfeited following an extensive exercise which attempted to reunite the dividends with owners.
All dividends paid in the period/year have been funded from the revenue reserve.
The first 2027 quarterly dividend of 1.60p (2026: 1.55p) per share, amounting to £10,254,000 (2026: £11,297,000) was paid on 3rd August 2026 in respect of the six months period ended 31st July 2026.
A second 2027 quarterly dividend of 1.60p (2026: 1.55p) per share, amounting to £9,952,000 (2026: £10,999,000), has been declared payable in respect of the six months period ended 31st July 2026.
6. Net asset value per ordinary share
The net asset value per ordinary share and the net asset value attributable to the ordinary shares at the period/year end are shown below. These were calculated using 631,624,600 (July 2025: 719,883,043, January 2026: 682,868,483) ordinary shares in issue at the period/year end (excluding shares held in Treasury).
(Unaudited)
(Unaudited)
(Audited)
At 31st July 2026
At 31st July 2025
At 31st January 2026
Net asset value
Net asset value
Net asset value
attributable
attributable
attributable
£'000
pence
£'000
pence
£'000
pence
Net asset value - debt at par value
1,867,820
295.7
1,968,357
273.4
1,967,793
288.2
£175 million 6.125% debenture stock
25th February 2030:
Add back: amortised cost
174,647
27.6
174,549
24.3
174,598
25.6
Deduct: fair value
(185,049)
(29.3)
(189,498)
(26.3)
(189,257)
(27.7)
£1.08 million 4.25% perpetual debenture stock1:
Add back: amortised cost
1,076
0.2
3,850
0.5
3,850
0.5
Deduct: fair value
(725)
(0.1)
(2,733)
(0.4)
(2,792)
(0.4)
Senior unsecured privately placed loan notes:
Add back: amortised cost
149,711
23.7
149,697
20.8
149,705
21.9
Deduct: fair value
(73,548)
(11.6)
(76,001)
(10.6)
(77,977)
(11.4)
Net asset value - debt at fair value
1,933,932
306.2
2,028,221
281.7
2,025,920
296.7
1 During the six months ended 31st July 2026, the Company partially repaid £2,774,000 par value of the original £3,850,000 4.25% perpetual debenture stock. As at 31st July 2026, the outstanding par value of the debenture was £1,076,000.
7. Fair valuation of investments
The fair value hierarchy analysis for investments held at fair value at the period/year end is as follows:
(Unaudited)
(Unaudited)
(Audited)
At 31st July 2026
At 31st July 2025
At 31st January 2026
Assets
Liabilities
Assets
Liabilities
Assets
Liabilities
£'000
£'000
£'000
£'000
£'000
£'000
Level 1
2,183,136
-
2,248,493
-
2,245,992
-
Level 21
3,847
-
40,854
-
49,514
-
Level 32
5,770
-
5,405
-
5,405
-
Total
2,192,753
-
2,294,752
-
2,300,911
-
1 Current asset investment in the JPMorgan GBP Liquidity Fund, a money market fund.
2 Consists only of unquoted holdings in Tennants Consolidated Limited (ordinary shares and preference shares), which are still held at 31st July 2026.
A reconciliation of the fair value measurements using valuation techniques and non-observable data (Level 3) is set out below.
At
At
At
31st July 2026 (Unaudited)
31st July 2025 (Unaudited)
31st January 2026 (Audited)
Fixed
Fixed
Fixed
Equity
Interest
Equity
Interest
Equity
Interest
Investments
Investment
Total
Investments
Investment
Total
Investments
Investment
Total
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
Level 3
Opening balance
5,311
94
5,405
6,288
94
6,382
6,288
94
6,382
Change in fair value
of unquoted
investment during
the period/year
365
-
365
(977)
-
(977)
(977)
-
(977)
Closing balance
5,676
94
5,770
5,311
94
5,405
5,311
94
5,405
8. Analysis of changes in net debt
Interest and
As at
Non cash
amortisation
As at
31st January 2026
Cash flows
movement3
charges
31st July 2026
£'000
£'000
£'000
£'000
£'000
Cash and cash equivalents
Cash at bank
287
2,327
-
-
2,614
Current asset investments1
49,514
(45,667)
-
-
3,847
49,801
(43,340)
-
-
6,461
Borrowings
Debentures falling due after more than
one year
(178,448)
7,224
951
(5,450)
(175,723)
Privately placed loan notes due after more than
one year
(149,705)
1,455
-
(1,461)
(149,711)
Bank overdraft interest2
-
1
-
(1)
-
(328,153)
8,680
951
(6,912)
(325,434)
Net debt
(278,352)
(34,660)
951
(6,912)
(318,973)
1 JPMorgan GBP Liquidity Fund, a money market fund.
2 A settlement overdraft is available from the custodian to cover timing differences between settlement of cash inflows and outflows. Bank overdraft interest is charged by the custodian when overdrawn. The Company does not utilise an overdraft for the purpose of long-term borrowing.
3 Following the early repayment of £2.77 million par value of the £3.85 million 4.25% debenture at a discounted amount of £1.80 million, a gain of £970,000 was realised. After accounting for a £19,000 change in accrued interest at the period end, this resulted in a net non cash movement of £951,000.
JPMORGAN FUNDS LIMITED
15th October 2026
For further information, please contact:
Sachu Saji
For and on behalf of
JPMorgan Funds Limited
Telephone: 0800 20 40 20 or +44 1268 44 44 70
E-mail: jpmam.investment.trusts@jpmorgan.com
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.
ENDS
A copy of the Half Year Report will be submitted to the National Storage Mechanism and will shortly be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism
The Half Year 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.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our Privacy Policy.ENDIR QZLFFQBLFFBX
