Mercantile Share Price (MRC)

"That said, those sectors which were able to continue showing some progress despite the difficult economic background also performed well: the portfolio benefited from strong performance in the housebuilding and non-life insurance sectors," the investment managers said, The poorest returns in the portfolio in the half year came from the mining sector where its holdings in Aquarius Platinum, African Barrick Gold and Petropavlovsk were hit by rising mining costs and falling platinum and gold prices. The net return on ordinary activities before tax in the half-year period was positive at £74.53m, of which £17.87m was revenue and £56.66m was capital appreciation. A year earlier, the group had reported a loss before tax of £15.63m with revenue of £15.88m more than wiped out by a £31.51m dive in the value of the portfolio. "Despite the ongoing macroeconomic uncertainty, equity markets have continued to move higher through the first half of the year, albeit on low volumes as investors have lacked conviction ahead of a resolution to the issues in Europe and lower global growth prospects. In this environment of low growth and investor uncertainty the board feel that there are likely to be opportunities for stock pickers to outperform and are confident that the strengthened management team's approach, which relies heavily on meeting and engaging with company management teams, will be well placed to benefit from such conditions," said the trust's Chairman, Hamish Melville. "The board continues to believe that UK mid and small cap equities remain attractively valued and will provide investors with solid returns over the long term," Melville declared.

The Mercantile Investment Trust, one of the oldest and largest investment trusts in the UK, showed a decent turn of foot for a 128-year-old company in the first half of the company's financial year. The trust, which aims to provide income and capital growth through opportunities in UK mid and small cap stocks, saw a net asset value total return in the six months to the end of July of 6.7%, four-fifths of a percentage point better than the return of the FTSE All-Share, the index against which it benchmarks its performance. Net asset value per share at the end of July stood at 1,176.5p, down from 1,209.5p a year earlier but up from 1,124.9p at the end of January 2012. During the reporting period, 95,000 shares were repurchased for cancellation at a total cost of £970,373. These purchases added around 1.3 pence to the net asset value (NAV) per share. The share price discount to NAV, with debt assessed at fair value, ranged between 9.8% and 14.6% in the period from February 1st, 2012 to September 14th, 2012, with an average discount during the period of 12.9%. The income received from investments in the first half of the current fiscal year was marginally above that of corresponding period of 2011, reflecting a gradual increase in dividend income for underlying investments. As for the trust's own dividends, a second interim dividend of 6.0p has been proposed, bringing the total dividend for the year to date to 12p. The board anticipates that there will be a third dividend of 6.0p paid in early February 2013. However, as in previous years, the board's decision on the generosity of the fourth interim dividend will depend on the level of revenue received. Mercantile benefited from takeovers for Cove Energy, Cable and Wireless Worldwide, Logica, Misys, Aegis and Nautical Petroleum.

Mercantile Investment Trust (The) Buy 15-May-12 £49,634.90 Jeremy Tigue 5,117 @ 970.00p

Share Repurchases During the period under review, the Board made no share repurchases. However, it continues to maintain its active monitoring of the conditions for buybacks, in order to enhance the asset value per share and minimise the absolute level and volatility of the discount on the Company's shares. The discount, with debt at fair value, has ranged between 9.73% and 13.75% in the period from 1st February 2011 to 16th September 2011, with the average discount during the period of 11.58%. Board Appointment I am pleased to announce the appointment of Helen James as a Director of the Company with effect from today. As a founder of Investis, in 2000, and previously Head of Pan-European Equity Sales at Paribas, she brings a wealth of complimentary experience to the Board. Outlook With global growth slowing, markets volatile and the European Sovereign debt problem still unresolved, we remain cautious and as at the date of this report the Company is not fully invested, taking into account amounts receivable as proceeds from cash bids for companies in the portfolio. However, the valuations of many stocks look attractive on a medium term view; generally companies' balance sheets are now strong and dividend yields attractive. The Company is well placed to take advantage of opportunities as they present themselves. For and on behalf of the Board Hamish Leslie Melville Chairman

Chairman's Statement Performance and Market Review The Company's net asset value total return in the first six months to 31st July 2011 was -0.3% which was 2.5% behind the return of 2.2% from our benchmark index, the FTSE All-Share, excluding FTSE 100 constituents and investment trusts. Whilst this is a disappointing result, it has to be viewed against the backdrop of economic and political uncertainty, which has resulted in the portfolio underperforming against the Managers' expectations. This is explained in the Investment Managers' Report. The use of gearing at times during the period was also a factor in the loss of value against the Company's benchmark. Revenue The income received from investments in the first half is above that of the half year ended 31st July 2010, showing a small increase overall in dividend payments. Dividends A second interim dividend of 6.0 pence per share has been declared by the Board, payable on 1st November 2011 to shareholders on the register at close of business on 30th September 2011. Together with the first interim dividend of 6.0 pence paid on 1st August 2011 this brings the total dividend for the year to date to 12.0 pence (2010: 12.0 pence) and the Board expects that there will be a third dividend of 6.0 pence paid in early February 2012. As ever, the Board's decision as to the quantum of the fourth interim dividend will depend on the progress of the portfolio's dividend receipts for the balance of the year. The extent to which the Board may feel able to pay a partially uncovered fourth dividend will also depend on the outlook for the future dividend receipts by the Company as well as the Company's existing revenue reserves.

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