Annual Financial Report

RNS Number : 7207I

Mercantile Investment Trust(The)PLC

27 March 2015

 



LONDON STOCK EXCHANGE ANNOUNCEMENT

THE MERCANTILE INVESTMENT TRUST PLC

FINAL RESULTS FOR THE YEAR ENDED 31ST JANUARY 2015

The Directors of The Mercantile Investment Trust plc announce the Company's results for the year ended 31st January 2015.

Chairman's Statement

Over the year to 31st January 2015, performance was slightly disappointing. The Managers marginally underperformed the Company's benchmark with a return of 4.4% against 4.6% for the benchmark. Share price total return was -0.7%.

Returns and Dividends

Earnings per share reduced over the year, from 47.5p to 42.1p, following lower revenue against the previous year. This reduction has resulted from changes in the portfolio, a lowering of special dividend receipts and the level of gearing employed.

The Company has paid three interim dividends of 8.0p per ordinary share, and the Directors have declared a fourth quarterly interim dividend of 17.0p, giving a total dividend of 41.0p for the year, an increase on last year's dividend of 40.0p. The yield continues to compare favourably with the Company's small and mid cap investing peers.

In order to even out the flow of dividends paid during the year, the Board intends to increase the level of each of the three interim dividends from 8.0p to 10.0p per ordinary share throughout the current year ending 31st January 2016. This is a rebalancing exercise and will not necessarily result in an increased total amount for the year. The level of the fourth interim dividend will be determined by the Board towards the end of the financial year and will depend on the level of dividends received and anticipated by the Company. The Board recognises the importance of a strong revenue reserve in protecting the dividend flow for shareholders. The Company continues to receive an inflow of special dividends and to the extent that they are not distributed, they will assist in strengthening the balance sheet.

Share Buy backs and Discount

During the year under review a total of 536,084 shares were repurchased for cancellation, amounting to 0.55% of issued share capital at the beginning of the year, at a total cost of £7.93 million. Share buy backs during the year under review have added approximately 1.3p to the net asset value per share.

The Board's objective continues to be to use the share repurchase authority to manage imbalances between the supply and demand of the Company's shares, thereby reducing the volatility of the discount. The discount widened during the year from 9.8% to 14.6%, in common with many of our peers. The Board believes that, to date, this mechanism has been helpful and therefore proposes and recommends that the powers to repurchase up to 14.99% of the Company's shares for cancellation be renewed for a further period.

Gearing

The Company ended the year with net cash of 0.9%. During the year the gearing varied between 8.7% geared and 3.7% net cash. It is the Board's intention to continue to operate within the range of 10% net cash to 20% geared, under normal market conditions. Gearing is regularly discussed between the Board and the Investment Manager. In addition to the Company's debenture gearing, the Company took out a three year bank facility on 6th November 2013 of £50 million, with Scotiabank Ireland.

Board

I am delighted that Sandy Nairn has agreed to take on the role of the Senior Independent Director, with effect from 3rd December 2014.

Harry Morley was appointed a Director at the conclusion of the 2014 Annual General Meeting, and he will stand for election at the forthcoming AGM. It is planned that he will become Chairman of the Audit Committee from the conclusion of the forthcoming AGM.

I would particularly like to thank Ian Russell on behalf of the Board for the excellent work he has performed as Chairman of the Audit Committee, a role which he has carried out with distinction for eight years.

All other Directors will stand for annual re-election, in line with the Company's policy. I refer you to the Directors' biographies on pages 22 and 23 of the Annual Report for further details.

The Board undertakes a formal and rigorous evaluation of its performance, and that of the individual Directors including myself as the Chairman.

The Directors conduct an assessment of the structure of the Board and the Board's performance each year, which is compiled into a report to the Nomination Committee which in turn reports its conclusions to the Board. An external facilitator was used in 2014, details of which are set out in the Corporate Governance Report.

Investment Managers

During the year under review, the Company's investment management team appointed by J.P. Morgan comprised Martin Hudson, Guy Anderson and Anthony Lynch. Since the year end some changes have been implemented, resulting in Guy Anderson and Martin Hudson each taking responsibility for 50% of the portfolio and Guy Anderson taking responsibility for communications with the Board. Anthony Lynch works across the whole portfolio. They are supported by Tim Lewis, an analyst, as well as the J.P. Morgan Asset Management European Equity Group. These changes have been put in place by J.P. Morgan as part of a planned evolutionary process of the management of the Company's assets.

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

Annual General Meeting

The Company's one hundred and twenty ninth Annual General Meeting will be held at Trinity House, Tower Hill, London EC3N 4DH on Wednesday 20th May 2015 at 12 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. I look forward to seeing as many of you as possible at the meeting.

Outlook

Following two years of exceptional returns, last year saw volatility increase and markets consolidate gains as geopolitical events took centre stage, overshadowing the UK economy's strongest year since before the recession. Looking forward it now seems that the recent decline in the oil price and ongoing excess supply issues are likely to be a net positive for the UK domestic economy and in particular should favour smaller companies over the FTSE 100 which is more heavily weighted towards natural resource companies.

Global GDP growth by contrast has continued to disappoint, with conflict in Ukraine, Greek economic instability and slowing growth in China all concerning investors. Central banks have increasingly looked to further rate cuts and quantitative easing in order to stimulate economies and avoid deflation.

In the UK, companies and investors have already moved their focus to what is currently being described as the most uncertain General Election in almost a century. Although the Company has remained virtually ungeared since the year end, the Managers feel there are likely to be opportunities for enhanced stock picking and utilising the Company's gearing in the coming 12 months.

Hamish Leslie Melville

Chairman

27th March 2015

Investment Managers' Report

Market Background

Last year was a turbulent, but ultimately positive, year for the UK equity market. The preceding two years had provided exceptional returns for investors in small and medium-sized companies, as the market re-rated in anticipation of an improving economic environment that would facilitate higher company profits. To achieve continued positive returns through calendar year 2014, the market would thus require delivery of these expectations. Against this background, and given the broader macroeconomic and geopolitical uncertainties, an increase in volatility was thus anticipated.

The key annual results season through the first quarter of the year was disappointing, and this, combined with political uncertainty, speculation about when interest rates would rise and global deflationary pressure halted further market progress. In addition, renewed investor interest in larger companies following bid approaches from the US for Shire and AstraZeneca, marked the beginning of a six month period through which the small and medium-sized companies underperformed the broader market.

The market remained volatile through the summer, before weakening substantially in September and October after a string of disappointing economic indicators at home and abroad, a lull in the domestic housing recovery, global deflationary pressures and lingering uncertainty over Central Bank actions around the world. In addition, the US enforced new laws prohibiting tax inversion deals, reducing the financial logic for a number of takeovers of UK firms and this became reflected in share prices, particularly among larger pharmaceuticals companies.

In the final quarter of the year, small and medium-sized companies rallied, supported by weakening oil prices. As a net importer of resources, lower prices have provided an unexpected boost to UK GDP projections. Furthermore, it has had the additional effect of lowering inflation projections, increasing the likelihood of interest rates being held lower for longer. Given their lower relative commodity exposure, small and medium-sized companies also outperformed their larger peers through this period, regaining much of the earlier underperformance.

Portfolio Performance

Your Company produced a total return on net assets of 4.4% for the year ended 31st January 2015. This compares to the Company's benchmark, the FTSE All-Share index excluding FTSE 100 constituents and investment companies, which returned 4.6%. The Company's discount to its net asset value widened through the year, resulting in a return to shareholders of -0.7%.

Earnings per share for the year fell to 42.1p (2014: 47.5p) reflecting a reduced level of income received from investments. This was primarily due to three factors. First, ordinary dividends collected by the fund fell as the portfolio was repositioned towards a number of recent new issues that did not pay full dividends for the year. Secondly, special dividends fell as we reduced our position in Housebuilders, a number of which have been returning significant amounts of cash. Thirdly, the portfolio was in aggregate less geared through the year, which affects the amount of dividends collected.

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

The largest positive contributor to performance was our overweight position in the General Retailers sector. This was a sector to which we added exposure as the year progressed, reflecting primarily stock specific opportunities, including several new issues, but also motivated by an increasingly positive view of the outlook for UK consumer spending, resulting from projected increases in household cash flows. Dixons Carphone was the largest positive contributor to the fund, and resulted from the merger of two of our existing holdings. We viewed both the financial and strategic rationale for the transaction as compelling, and this remains a significant holding.

Our negative positioning in the Oil Equipment, Services and Distribution sector contributed positively as the share prices of a number of companies which we do not hold, including Amec Foster Wheeler, were impacted by the rapidly declining oil price through the fourth quarter. Having been the largest negative contributor last year, food producers also performed well, principally due to the performance of New Britain Palm Oil which agreed to a takeover approach at an 85% premium.

The largest detractor from performance was the Support Services sector, driven by our holding in Serco, which is no longer held. This investment was made based upon the expectation that whilst it would take time, the new management team would successfully restructure the business, re-establish its position as a UK government outsourcer, and generate significant improvements to profits and cash flows. In the event, the problems uncovered were greater than anticipated, necessitating an expected substantial capital raise and lowering our long-term financial expectations for the business and thus impairing its value.

Portfolio Positioning

The investment managers have the flexibility to operate within a gearing range of 10% net cash to 20% geared, with a more specific tactical range agreed regularly with the Board. Following two years of exceptional market returns and during which your Company benefitted from being geared, reflecting our expectations of a more volatile environment (as explained above) gearing was reduced such that for the majority of the year the portfolio remained fully invested, albeit un-geared. This is illustrated in the chart on page 6 of the Annual Report, which shows the level of gearing on the left axis, against market levels on the right axis, for the past three years.

The portfolio continues to be diversified across all sectors and comprises 131 stocks, of which 86 are mid-sized and 45 are smaller companies, which by value account for 17% of the portfolio. The ten largest investments represent approximately 19% of net assets.

This was a year of significant change for the portfolio, as we recycled capital out of some of our longstanding investments into new ideas. This can be seen from the ten largest holdings, as shown on page 12 of the Annual Report, as Jardine Lloyd Thompson is the only one that featured last year.

Our significant position in the Housebuilders, which accounted for six of the ten largest holdings last year, was reduced following several years of market outperformance. In addition, following promotion into the FTSE 100, we exited in full from our holdings in Mondi and St. James's Place. New investments were sourced from our existing universe of stocks, such as William Hill and First Group, and from the new issues that came to market, such as SSP Group, TSB Banking Group and B&M European Value Retail. The other new entrants to the top ten were already substantial holdings within the portfolio.

The overall changes to the positioning of the portfolio are illustrated in the table on page 7 of the Annual Report, which shows how the portfolio's exposure has shifted such that the General Retailers sector is now the largest overweight sector. This reflects bottom-up stock selection combined with a top-down view that UK cyclical indicators, such as employment trends, wage growth and the oil price, are positive for consumers. This overweight position of domestic consumer stocks is funded by underweight positions in resources and resource exposed industries, where the outlook is currently weaker, given the rapid falls in commodity prices towards the end of last year..

The pie chart on page 7 of the Annual Report shows, by geography, where the revenues of the companies in which the portfolio is invested are generated. Whilst more than half of this revenue is derived from the UK, there is still material exposure to international growth opportunities through UK quoted mid and small sized companies. Whilst, for example, the focus of the general retailers is in the UK domestic market, the portfolio's investments in insurance, manufacturing, telecommunications and food ingredients companies provide broad international exposure.

Outlook

There were a number of events in 2014 that shaped how the overall market and individual stocks performed. In hindsight, the surprise decision of OPEC, driven by Saudi Arabia, to hold crude oil production levels unchanged was certainly one of the more significant. This decision led to a 40% fall in the price of crude oil in just two months, resulting in a near 60% fall from the peak of $115 per barrel of Brent crude in June to the trough of $46 in January. All market changing events have repercussions, but this was the catalyst for an accelerated shift in the shape of the portfolio (as outlined above), and informs our outlook for the current year.

The UK is a net importer of energy and whilst there are a multitude of second order effects, this reduction in import costs is positive for the UK consumer and for UK GDP. The price of commodities declining has a temporary downward effect on inflation, which in turn has two clear derivatives. First, it increases the likelihood of consumers experiencing real wage growth for the first time in the last five years. Second, it pushes out, for a period of time, the point at which interest rate tightening will commence. The combination of these factors has made us incrementally more positive on the outlook for household cash flows and consumer discretionary expenditure, and consequently for those companies, such as retailers, that will benefit from this directly.

Conversely, this dramatic fall in the price of crude oil is negative for those companies that are positively correlated to the commodity price. As a result, and given our view that this is not yet fully reflected in valuations and earnings expectations, we are currently negatively positioned in energy and related industries. However this situation is monitored closely, as a time will come when it will be prudent to reverse this positioning.

In addition to the factors above that are most clearly and directly influencing current portfolio positioning, there are many other elements that affect your Company's overall exposure to the market. The timing of the US interest rate cycle, the EU entering a period of Quantitative Easing and thus driving demand for higher risk assets in the search for yield, the growing geopolitical tensions with Russia or across the Middle East, and the unusually uncertain outcome from the UK General Election are a few such factors.

While viewing the next 12 months with more optimism we remain cognisant of such exogenous risks, and so the portfolio is fully invested but un-geared. This leaves capacity to deploy further capital into the market in the event of increased volatility presenting an opportunity, as confidence in growth increases or as these risks unwind.

We believe that the favourable dynamics of investing in small and medium-sized companies will continue to drive superior returns over the long-term.

Guy Anderson

Martin Hudson

Anthony Lynch

Investment Managers                                                                                                                     

27th March 2015

Principal Risks

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

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

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

•   Corporate Governance and Shareholder Relations: Details of the Company's compliance with Corporate Governance best practice, including information on relations with shareholders, are set out in the Corporate Governance report on pages 26 to 31 of the Annual Report.

•   Operational: Disruption to, or failure of, JPMF's accounting, dealing or payments systems or the custodian's records could prevent accurate reporting and monitoring of the Company's financial position. Details of how the Board monitors the services provided by JPMF and its associates and the key elements designed to provide effective risk management and internal control are included within the Risk Management and Internal Control section of the Corporate Governance report on pages 30 and 31 of the Annual Report.

•   Going concern: Pursuant to the Sharman Report, Boards are now advised to consider going concern as a potential risk, whether or not there is an apparent issue arising in relation thereto. Going concern is considered rigorously on an ongoing basis and the Board's statement on going concern is detailed on page 24 of the Annual Report.

•   Financial: The financial risks faced by the Company include market price risk, interest rate risk, liquidity risk and credit risk. Bank counterparties are subject to daily credit analysis by the Manager and regular consideration at meetings of the Board. In addition the Board receives regular reports on the Manager's monitoring and mitigation of credit risks on share transactions carried out by the Company. Further details are disclosed in note 24 on pages 57 to 61 of the Annual Report.

Related Parties Transactions

During the year, no transactions with related parties have taken place which have materially affected the financial position or the performance of the Company.

Statement of Directors' Responsibilities

The Directors are responsible for preparing the annual report and the accounts 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 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 accounts are fair, balanced and understandable, provide the information necessary for shareholders to assess the Company's 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 have been followed, subject to any material departures disclosed and explained in the financial statements; and

•   prepare the financial statements on a 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.

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 Strategic Report, Directors' Report, Directors' Remuneration Report and Statement of Corporate Governance that comply with that law and those regulations.

Each of the Directors, whose names and functions are listed on pages 22 and 23  of the 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); and

•   give a true and fair view of the assets, liabilities, financial position and net return or loss of the Company together with a description of the principal risks and uncertainties that it faces.

The Strategic Report includes a fair review of the development and performance of the business and position of the Company, together with a description of the principle 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 Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

The Board confirms that it is satisfied that the annual report and accounts taken as a whole are fair, balanced and understandable and provide the information necessary for shareholders to assess the strategy and business model of the Company.

For and on behalf of the Board

Hamish Leslie Melville

Chairman

27th March 2015

Income Statement

for the year ended 31st January 2015

		2015			2014
		Revenue	Capital	Total	Revenue	Capital	Total
		£'000	£'000	£'000	£'000	£'000	£'000
Gains on investments held at fair value through
profit or loss		-	43,822	43,822	-	336,198	336,198
Net foreign currency gains/(losses)		-	41	41	-	(13)	(13)
Income from investments		47,091	-	47,091	52,385	-	52,385
Other interest receivable and similar income		1,045	-	1,045	719	-	719
Gross return		48,136	43,863	91,999	53,104	336,185	389,289
Management fee		(2,132)	(4,975)	(7,107)	(1,986)	(4,633)	(6,619)
Other administrative expenses		(1,180)	-	(1,180)	(859)	-	(859)
Net return on ordinary activities before finance
costs and taxation		44,824	38,888	83,712	50,259	331,552	381,811
Finance costs		(3,359)	(7,838)	(11,197)	(3,301)	(7,703)	(11,004)
Net return on ordinary activities before taxation		41,465	31,050	72,515	46,958	323,849	370,807
Taxation		(113)	-	(113)	(312)	-	(312)
Net return on ordinary activities after taxation		41,352	31,050	72,402	46,646	323,849	370,495
Return per share (Note 2)		42.10p	31.61p	73.71p	47.46p	329.52p	376.98p

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

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

Reconciliation of Movements in Shareholders' Funds

for the year ended 31st January 2015

	Called up	Share	Capital
	share	premium	redemption	Capital	Revenue
	capital	account	reserve	reserves	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
At 31st January 2013	24,614	23,459	12,156	1,271,741	29,463	1,361,433
Repurchase and cancellation of
the Company's own shares	(54)	-	54	(2,739)	-	(2,739)
Net return on ordinary activities	-	-	-	323,849	46,646	370,495
Dividends paid in the year (Note 3)	-	-	-	-	(41,279)	(41,279)
At 31st January 2014	24,560	23,459	12,210	1,592,851	34,830	1,687,910
Repurchase and cancellation of
the Company's own shares	(134)	-	134	(7,927)	-	(7,927)
Net return on ordinary activities	-	-	-	31,050	41,352	72,402
Dividends paid in the year (Note 3)	-	-	-	-	(39,289)	(39,289)
At 31st January 2015	24,426	23,459	12,344	1,615,974	36,893	1,713,096

Balance Sheet

at 31st January 2015

		2015	2014
		£'000	£'000
Fixed assets
Investments held at fair value through profit or loss		1,722,405	1,831,759
Current assets
Derivative financial instruments		-	1
Debtors		2,573	16,925
Cash and short term deposits		193,167	27,211
		195,740	44,137
Creditors: amounts falling due within one year		(27,666)	(10,699)
Net current assets		168,074	33,438
Total assets less current liabilities		1,890,479	1,865,197
Creditors: amounts falling due after more than
one year		(177,383)	(177,287)
Net assets		1,713,096	1,687,910
Capital and reserves
Called up share capital		24,426	24,560
Share premium account		23,459	23,459
Capital redemption reserve		12,344	12,210
Capital reserves		1,615,974	1,592,851
Revenue reserve		36,893	34,830
Total equity shareholders' funds		1,713,096	1,687,910
Net asset value per share (Note 4)		1,753.3p	1,718.1p

Company registration number 20537

Cash Flow Statement

for the year ended 31st January 2015

		2015	2014
		£'000	£'000
Net cash inflow from operating activities		39,852	44,648
Servicing of finance
Interest paid		(11,057)	(10,892)
Net cash outflow from servicing of finance		(11,057)	(10,892)
Taxation
Overseas tax recovered		62	-
Financial investment
Purchases of investments		(1,148,222)	(876,282)
Sales of investments		1,328,276	775,371
Other capital charges		(27)	(24)
Net cash inflow/(outflow) from financial investment		180,027	(100,935)
Dividends paid		(39,289)	(41,279)
Net cash inflow/(outflow) before financing		169,595	(108,458)
Management of liquid resources
Net (purchases)/sales of Term Deposits		(165,900)	112,800
Net cash (outflow)/inflow from management of liquid resources		(165,900)	112,800
Financing
Repurchase of ordinary shares and cancellation of the
Company's own shares		(3,681)	(4,196)
Net cash outflow from financing		(3,681)	(4,196)
Net increase in cash for the year		14	146

Notes to the Financial Statements

for the year ended 31st January 2015

1.   Accounting Policies

(a)  Basis of accounting

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

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

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

2.   Return per share

The revenue return per share is based on the revenue earnings attributable to the ordinary shares of £41,352,000 (2014: £46,646,000) and on the weighted average number of ordinary shares in issue during the year of 98,228,869 (2014: 98,277,527).

The capital gain per share is based on the capital gain attributable to the ordinary shares of £31,050,000 (2014: £323,849,000) and on the weighted average number of ordinary shares in issue during the year of 98,228,869 (2014: 98,277,527).

The total gain per share is based on the total gain attributable to the ordinary shares of £72,402,000 (2014: £370,495,000) and on the weighted average number of ordinary shares in issue during the year of 98,228,869 (2014: 98,277,527).

	2015	2014
	£'000	£'000
3. Dividends
(a) Dividends paid and declared
Unclaimed dividends refunded to the Company¹	(7)	(8)
2014 fourth quarterly dividend of 16.0p (2013: 18.0p) paid to shareholders
in May	15,719	17,710
First quarterly dividend of 8.0p (2014: 8.0p) paid to shareholders in August	7,859	7,859
Second quarterly dividend of 8.0p (2014: 8.0p) paid to shareholders
in October	7,859	7,859
Third quarterly dividend of 8.0p (2014: 8.0p) paid to shareholders
in February²	7,859	7,859
Total dividends paid in the year	39,289	41,279

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

²Paid to the Registrars in January.

	2015	2014
	£'000	£'000
Fourth quarterly dividend declared of 17.0p (2014: 16.0p) payable to
shareholders in May	16,610	15,719

The fourth quarterly dividend has been declared in respect of the year ended 31st January 2015. In accordance with the accounting policy of the Company, this dividend will be reflected in the accounts for the year ending 31st January 2016.

(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 £41,352,000 (2014: £46,646,000).

	2015	2014
	£'000	£'000
First quarterly dividend of 8.0p (2014: 8.0p) paid in August	7,859	7,859
Second quarterly dividend of 8.0p (2014: 8.0p) paid in October	7,859	7,859
Third quarterly dividend of 8.0p (2014: 8.0p) paid in February	7,859	7,859
Fourth quarterly dividend of 17.0p (2014: 16.0p) payable in May	16,610	15,719
	40,187	39,296

4.   Net asset value per share

The net asset value per share is based on the net assets attributable to the ordinary shareholders of £1,713,096,000 (2014: £1,687,910,000) and on the 97,704,635 (2014: 98,240,719) shares in issue at the year end.

5.   Status of announcement

2014 Financial Information

The figures and financial information for 2014 are extracted from the published Annual Report and Accounts for the year ended 31st January 2014 and do not constitute the statutory accounts for that year.  The Annual Report and Accounts has been delivered to the Registrar of Companies and included the Report of the Independent Auditors which was unqualified and did not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006.

2015 Financial Information

            The figures and financial information for 2015 are extracted from the Annual Report and Accounts for the year ended 31st January 2015 and do not constitute the statutory accounts for the year. The Annual Report and Accounts includes the Report of the Independent Auditors which is unqualified and does not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006. The Annual Report and Accounts will be delivered to the Registrar of Companies in due course.

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

JPMORGAN FUNDS LIMITED

27th March 2015

For further information:

Juliet Dearlove

JPMorgan Asset Management (UK) Limited              020 7742 4000

ENDS

A copy of the annual report will shortly be submitted to the National Storage Mechanism and will be available for inspection at www.morningstar.co.uk/uk/NSM

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

JPMORGAN FUNDS LIMITED

 

END

 

 

ACSUBUORVUAOUAR