LONDON STOCK EXCHANGE ANNOUNCEMENT

The Mercantile Investment Trust plc

(the 'Company')

Half Year Report & Accounts for the six months ended 31st July 2017

Legal Entity Identifier: 549300BGX3CJIHLP2H42

Information disclosed in accordance with DTR 4.2.2

chairman's statement

I am delighted to write my first statement as Chairman of the Company and to report that the Mercantile has performed strongly in the first half of this financial year.

Performance

The Company's return on net assets for the six months to 31st July 2017 was +16.2%, which compares favourably to the return of +10.7% from the Company's benchmark index, the FTSE All-Share, excluding FTSE 100 constituents and investment trusts. The return to shareholders was +14.5%, as the discount at which the shares trade widened slightly over the half year.

Returns and Dividends

The revenue return in the first half of the Company's current financial year increased to 32.61 pence per share, compared with 27.19 pence per share for the corresponding period last year.

A second interim dividend of 10.50 pence per share has been declared by the Board, payable on 1st November 2017 to shareholders on the register at close of business on 29th September 2017. Together with the first interim dividend of 10.50 pence paid on 1st August 2017 this brings the total dividend for the year to date to 21.00 pence (2016: 20.50 pence). The Board is confident that there will be a third interim dividend of 10.50 pence to be paid in early February 2017.

The level of the fourth interim dividend will depend on income received by the Company for the full financial year. However the Board recognises shareholders' desire for a growing dividend in line with the Company's investment policy, whilst retaining a healthy revenue reserve.

Discount and Share Buy Backs

The Board has continued to use its share repurchase authority to enhance the net asset value and to attempt to address any imbalance between the supply of and demand for the Company's shares in the market. In the six months to 31st July 2017, a total of 3,853,345 shares was repurchased at a cost of £72.6m. All of those shares were repurchased into Treasury and the total number of shares held in Treasury at the half year end was 11,322,144. Those shares are available for reissue by the Board, but only at a premium to net asset value.

Gearing

The Company has maintained a moderate level of gearing and ended the six month period 3.0% geared.

Management Fee

As reported in the last annual report, during the year the Board was pleased to reach agreement with JPMorgan on a reduction in the management fee. With effect from 1st February 2017 the fee has been reduced from 0.5% of the Company's market capitalisation to 0.475% and it will further reduce to 0.45% with effect from 1st February 2018. This agreement recognises the changing conditions within the fund management industry and it ensures that the Company's shareholders benefit from an ongoing charges ratio that remains amongst the most competitive in the investment trust market.

The Board

Hamish Leslie Melville stepped down as Chairman at the conclusion of the AGM in May this year. Hamish had served as a Director of the Company since 1996 and as Chairman since 2003. On behalf of the Board and shareholders I would like to record our thanks to Hamish for his outstanding service to the Company. Its success over that period is due in no small part to him and his dedication to the interests of all shareholders.

Outlook

As is so often the case, the outlook is currently somewhat of a curate's egg, with strengthening economic news around the globe resulting in a positive impact on the portfolio companies' sales prospects, partly offset by a worrying geopolitical situation and continued domestic political uncertainty. With such a background we look to our managers to continue to invest conservatively in the highest quality businesses with strong business models which should deliver long term returns to shareholders. With markets at current levels, and given the economic and political backdrop, we do not currently envisage utilising significant amounts of gearing unless an opportunity were to present itself if, for instance, there was a significant market setback.

Angus Gordon Lennox

Chairman

28th September 2017

Investment Managers' Report

Market Background

Following on from its robust performance last year, the positive trajectory of the UK equity market continued through the first half of this financial year, with a total return of +7.1% (as represented by the FTSE All-Share index). The market was encouraged by the combination of a relatively resilient domestic economy, versus fairly low expectations, and improving international economic growth prospects. In contrast, it absorbed in relaxed fashion the various geopolitical events and associated risks, including the Conservatives' misjudged calling of a General Election and the uncertainty emanating from the Brexit negotiations.

Having fallen behind the FTSE 100 last year, the performance of medium and smaller companies (the 'benchmark') improved, with a return of +10.7% compared with the +6.2% return from the FTSE 100.

Portfolio performance and positioning

Against this backdrop the Company had a positive six months; the return on net assets was +16.2%, ahead of the +10.7% return from the benchmark.

This positive relative performance has been delivered largely from a combination of sector allocation and stock selection, with a further benefit achieved from the use of gearing in a positive market.

Pleasingly, the positive contribution from asset allocation and stock selection has been achieved across a diverse range of sectors and individual stocks, as opposed to a limited number of significant wins. The largest contributors were the financial services sector with success across a number of holdings including most notably our position in 3i, the private equity investor and the oil services sector where our decision to minimise exposure given various industry and company specific challenges faced has added relative value.

Having increased the level of gearing through the end of last year, the portfolio benefited from the rising market and gearing peaked at over 6% in March, before being reduced to around 3% at the half year end.

While there have been some alterations to the portfolio during the period reflecting stock specific opportunities or changes, the aggregate shape and key end market exposures remain substantially unchanged. The most significant of these are the industrials companies, many of whom including Spirax-Sarco Engineering and Bodycote are benefiting from improving industrial production globally. In addition the portfolio remains invested in a broad array of generally more domestically oriented businesses, such as Just Eat, which are benefitting from structural growth opportunities in their specific end markets and niches.

Outlook

Lead indicators of economic growth have undoubtedly displayed improving momentum across the globe since the fourth quarter of 2016 and after what have been several sluggish years this is translating into improving end markets for many of the companies that we meet. In the UK the economic outlook is not as strong but the economy is proving to be more resilient than had been expected and monetary policy has been accommodating. These factors combined should provide a positive backdrop for equities.

In contrast to this, the geopolitical landscape presents a host of risks, some of which could present far-reaching challenges in the future but which have not yet caused a discernible impact. The lack of volatility in financial markets has been a surprise, but will not last forever. At this stage the portfolio remains modestly geared.

We remain committed to identifying and investing in those companies that have strong business models, are suitably financed and are well placed to succeed. We expect that the favourable dynamics of medium-and small-sized companies will continue to drive superior returns over the long-term.

Guy Anderson

Martin Hudson

Anthony Lynch

Investment Managers

28th September 2017

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 fall into the following broad categories: investment and strategy; accounting, legal and regulatory; corporate governance and shareholder relations; operational and cybercrime; and financial. Information on each of these areas is given in the Directors' Report within the Annual Report and Accounts for the year ended 31st January 2017.

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 operation existence for at least twelve months from the date of the approval of this half yearly 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 2017 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;

•        prepare the financial statements on the 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 FRS102 in the preparation of the financial statements

and the Directors confirm that they have done so.

For and on behalf of the Board.

Angus Gordon Lennox

Chairman

28th September 2017

Statement of Comprehensive Income
for the six months ended 31st July 2017

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 net return/loss on ordinary activities after taxation represents the profit/(loss) for the period and also the total comprehensive income.

Statement of Changes in Equity
for the six months ended 31st July 2017 (unaudited)

¹ This reserve forms the distributable reserve of the Company and may be used to fund distribution of profits to investors via dividend payments.

Statement of Financial Position
at 31st July 2017

Statement of Cash Flows
for the six months ended 31st July 2017

Notes to the Financial Statements
for the six months ended 31st July 2017

1.     Financial statements

The information contained within the financial statements in this half year report has not been audited or reviewed by the Company's auditors.

The figures and financial information for the year ended 31st January 2017 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 including the report of the auditors 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

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 revised 'SORP') issued by the Association of Investment Companies in November 2014 and updated in January 2017.

FRS 104, 'Interim Financial Reporting', issued by the Financial Reporting Council ('FRC') in March 2015 has been applied in preparing this condensed set of financial statements for the six months ended 31st July 2017.

All of the Company's operations are of a continuing nature.

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 2017.

3.     Dividends paid

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

All dividends paid in the period/year have been funded from the revenue profits.

A second quarterly dividend of 10.5p (2016: 10.25p) per share, amounting to £8,728,000 (2016: £9,471,000), has been declared payable in respect of the six months ended 31st July 2017.

4.     Taxation

The Company's effective corporation tax rate is nil, as deductible expenses exceed income. The tax charge comprises overseas withholding tax.

5.     Return/(loss) per share

6.     Net asset value per share

7.    Reconciliation of total return on ordinary activities before finance costs and taxation to net cash outflow from operations before dividends and interest

8.     Fair valuation of investments

The fair value hierarchy analysis for investments held at fair value at the period end is as follows:

¹Consists only of the holding of unquoted stock of Tennants Consolidated.

9.     Net (debt)/funds

10.   Subsequent events

The Directors have evaluated the period since the year end and have not noted any subsequent events.

For further information, please contact:

Jonathan Latter

For and on behalf of JPMorgan Funds Limited, Company Secretary 020 7742 4000

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

ENDS

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

The half year 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.