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7 Dec 2017 07:00
7 December 2017
ANNUAL REPORT AND ACCOUNTS
Schroder AsiaPacific Fund plc (the "Company") hereby submits its Annual Report for the year ended 30 September 2017 as required by the UK Listing Authority's Disclosure Guidance and Transparency Rule 4.1.
The Company's Annual Report and Accounts for the year ended 30 September 2017 are also being published in hard copy format and an electronic copy will shortly be available to download from the Company's website http://www.schroders.co.uk/asiapacific. Please click on the following link to view the document:
http://www.rns-pdf.londonstockexchange.com/rns/6127Y_-2017-12-6.pdf
The Company has submitted its Annual Report and Accounts to the National Storage Mechanism and it will shortly be available for inspection at www.morningstar.co.uk/uk/NSM.
Enquiries:
Benjamin Hanley
Schroder Investment Management Limited
Tel: 020 7658 3847
Chairman's Statement
Performance
The year to 30 September 2017 was another exceptional year for the Company. The net asset value ("NAV") produced a total return of 23.2% following strong performance in 2016 (40.9%). In addition to strong returns from regional markets, the NAV also outperformed the benchmark by 4.4% driven by stock selection. This performance continues the Company's excellent long-term record and it remains well ahead of the benchmark over three, five and 10 years.
A more detailed comment on performance and investment policy may be found in the Manager's Review on page 6 of the 2017 Annual Report.
Final Dividend
The Directors recommend the payment of a final dividend of 5.60 pence per share for the year ended 30 September 2017, an increase of 17.9% over the 4.75 pence paid in respect of the previous financial year. Net revenue after taxation has increased by 18.6% from £8,040,000 to £9,537,000, due to the increase in investment income receivable. A similar percentage increase in the dividend from that paid to shareholders in respect of the previous financial year is proposed in line with the Company's policy of distributing substantially all its revenue after tax. If the resolution proposed at the Annual General Meeting to pay a final dividend is passed, it will be paid on 6 February 2018 to shareholders on the Register on 29 December 2017.
Ongoing Charges
The Ongoing Charges of the Company have fallen during the year from 1.10% to 0.99%. Following a restructuring of the investment management fee earlier this year and the growth of the NAV, a greater proportion than hitherto of the fee is now charged at a rate of 0.75%.
We also expect a reduction in the dealing commission rates charged to the Company when the portfolio trades, following our Manager's decision not to pass on certain external research costs in the dealing commission from 1 January next year.
Gearing
During the year, the Company's level of gearing has remained relatively modest, starting at 0.4% at the commencement of the year and closing at 4.4%. The Company's gearing continues to operate within pre-agreed limits so that net effective gearing does not represent more than 20% of shareholders' funds.
Discount management
Over the last year, the target maximum discount level was again set at approximately 10%, with the average level being 11.8% over the year. 225,000 shares were bought back in that period.
The Board continues to believe that it is not necessarily in the best interests of shareholders as a whole to adopt a rigid discount control mechanism that seeks to target a defined maximum discount level regardless of market conditions. Instead the Board continues to follow a more flexible strategy that takes into account the level of discount at which the Company's peer group trades as well as the absolute level of its own discount, prevailing market conditions and the views of its major shareholders.
At the Company's last Annual General Meeting, the Company was given the authority to purchase up to 14.99% of its issued share capital. It therefore proposes that share buy back authorities be renewed at the forthcoming Annual General Meeting. Any shares so purchased would be cancelled or held in treasury for potential reissue.
Board succession
As I set out last year. Anthony Fenn will retire from the Board at the Annual General Meeting and will not seek re-election as a Director of the Company. On behalf of the Board, I thank Anthony for his distinguished long service. On his retirement, Rosemary Morgan will become Senior Independent Director and James Williams Chairman of the Management Engagement Committee.
An additional non-executive director, Martin Porter, was appointed with effect from 2 October 2017. His long experience in the industry will be very valuable to us and his biographical details can be found on page 17 of the Annual Report. In accordance with the Company's Articles of Association, a resolution to elect him as a Director of the Company will be proposed at the forthcoming Annual General Meeting.
As previously disclosed the Board believes that it is important for appropriate new skills to be brought to the Board and will look to refresh one Director every two to three years. A Director will serve for a period of more than nine years only in exceptional circumstances. All Directors will be subject to re-election each year at the Annual General Meeting.
Outlook
The 2017 accounts focus on what has been another successful 12 months for the Company, but I have also found it instructive to compare the Company today with a few years ago. It has not just been the scale of the assets that has changed (the NAV is nearly double that of five years ago); it has also been the variety of opportunities.
Nearly two thirds of the portfolio today is in different companies than five years ago, in particular with a new generation of technology-based industries in and around China. The region is changing, and it is exciting to see the potential for new growth. It underpins my confidence that a well-managed portfolio of attractively-valued Asian shares can offer considerable long-term appeal.
Annual General Meeting
The Annual General Meeting will be held on Tuesday, 30 January 2018 at 12.00 noon and shareholders are encouraged to attend. As in previous years, Matthew Dobbs, on behalf of the Manager, will give a presentation on the prospects for Asia and the Company's investment strategy.
Nicholas Smith
Chairman
6 December 2017
Manager's Review
The NAV per share of the Company recorded a total return of +23.2% over the twelve months to end September 2017. This was ahead of the performance of the benchmark, the MSCI All Country Asia ex Japan Index, which was up +18.8% over the same period.
It was another strong year for Asian stock markets, registering a rise of almost one fifth. There was understandable uncertainty for the region in the wake of Mr Trump's victory in the US presidential election last November. However, the consequent fears over greater protectionism and heightened geopolitical tension proved to have only a brief impact on the region. From the beginning of 2017, a number of more positive developments came into play. These included increasing evidence of a co-ordinated recovery in the global economy, with leading indicators in the overwhelming majority of developed economies moving into positive territory, mirrored also by similar developments across Asia itself. After a number of years of stagnation, global trade flows have responded, with total trade in dollar terms reaching record highs.
Supported by the benign environment, earnings estimates for Asian companies have been rising consistently over the year, with expectations for 2017 rising from around 10% growth to over 20% relative to 2016. This has been in contrast to the pattern of the previous three years, and has clearly been very supportive for investor sentiment. Free cash flow has also been rising sharply across the region as capital spending remains generally disciplined, underpinning healthy dividend growth.
Obviously, the period saw a number of potentially troubling geo-political developments, most notably the increasingly belligerent stance of the Democratic People's Republic of Korea, further threatening to destabilize the always delicate relationship between China and the US. Investors have, thus far, been remarkably calm; indeed the market with arguably the greatest proximity to the epicentre, that of South Korea, ended the financial year within 5% of its all-time highs.
China remained an important determinant of sentiment. Although the external environment was supportive to trade growth, the economy has not shown the same pick up in momentum evident elsewhere. To an extent, this has been a deliberate thrust of policy on the part of the Beijing authorities, reflecting confidence that the stimulus measures taken in late 2015 could be withdrawn without undue threat to all important "stability". Consequently, monetary conditions gradually tightened through the summer, augmented by policies to rein in the residential property market and greater regulatory scrutiny of unorthodox financing vehicles and off balance sheet exposures in the banking sector.
In the event, the gentle tightening in China has done no harm to local market returns, although a large measure of the outperformance has been thanks to a strong showing from a relatively small number of large capitalization internet stocks. Taiwan and Korea have been the other strong performers, with the higher export exposure favouring returns. In contrast, more domestically oriented markets such as the emerging ASEAN markets did not perform well.
Performance and portfolio activity
The Company's total return of 23.2% was significantly ahead of the 18.8% return recorded by the benchmark. The main contribution to value added has been stock selection in China, Indonesia, Hong Kong, Korea and Taiwan. The only significant market where stock selection lagged was in India. At a sector level, stock selection was particularly helpful in consumer discretionary, industrial and information technology sectors. Country allocation was of little impact, with the added value from the underweighting in Malaysia offset by the overweight position in Hong Kong.
It is a notable sign of current reality that the markets of Hong Kong, China, Taiwan and Korea comprise four fifths of the Company's assets and only slightly less of the benchmark. Over half the portfolio is in Hong Kong/China, and we have continued to identify a flow of attractive stocks across a range of sectors, including a steady addition to Chinese A shares through the HK Connect which allows us to access these stocks. ASEAN markets have become small parts of the portfolio, but we continue to seek opportunities, retaining the overweight in Thailand and adding to Singapore. We reduced India somewhat over the year primarily on valuation grounds, although the long-term potential of this market remains impressive.
Outlook and policy
Over the last 12 months, investors have taken a relatively sanguine view of global equity markets. The stance has been rewarded and Asian equities have more than participated in this strength. The scale and extent of returns naturally raises the question of whether enough is enough, and at least a pause for breath, or a correction, is imminent.
Perhaps the first point to make is that many fundamental supports to markets remain in force. Purchasing managers' data ('PMIs') paints a picture of an impressively co-ordinated upturn in global growth, with 80% of countries solidly in expansion territory. Equity valuations relative to bonds remain in extremely attractive territory, and there have been few of the usual signals that surround a market peak such as narrowing market breadth, widening credit spreads or excess investment by corporates. This suggests that the outlook for the region's exporters remains relatively sound, although the pace of expansion is likely to moderate over coming quarters as comparisons get more demanding.
As regards the external environment for Asia, the extent of any tapering following on from recent US Federal Reserve and European Central Bank announcements must be taken seriously. However, the $300bn projected withdrawal by the Federal Reserve over the next twelve months must be seen against a total central bank balance sheet expansion globally of $11trn since 2009, and in aggregate central bank balance sheets are likely to still grow until the fourth quarter of next year. The key will remain inflation expectations, and the risks here surround tightening labour markets (including a surge in European companies reporting labour shortages) and the impact of supply curtailments in China.
As regards domestic conditions in Asia, the impact of the self-induced (and hopefully controlled) slowdown in Chinese growth will need to be closely monitored. Our calculation is that this can be smoothly managed, aided by the broadly helpful global environment in terms of liquidity (helped by a gently weaker US dollar) and robust trade flows. The October political transition in China has seen a smooth entrenchment of President Xi, but accompanied by the departure of a number of more pro-reform cadres. In all probability, the prospect of real reform has receded, with the exception of supply curtailments in a number of basic industries driven by the pressing need to tackle pollution. Credit growth will remain a key lever of State economic control. Although there must be an eventual end to the process, we believe it is too early to incorporate the serious long-term consequences of the debt build up given that China continues to enjoy a strong external balance and growth is gradually shifting towards services and the consumer.
As we reported at the half way stage, we also take heart from the fact that the corporate sector around the region is generally in robust health. Outside sectors and companies whose investment patterns are determined by state and government led priorities, capital spending discipline remains impressive, resulting in a strong expansion in underlying cash flows and stronger balance sheets. Valuations remain somewhat below historic averages, suggesting that, barring a reversal in global growth, regional markets can make further progress in the year ahead.
Schroder Investment Management Limited
6 December 2017
Principal risks and uncertainties
The Board is responsible for the Company's system of risk management and internal control and for reviewing its effectiveness. The Board has adopted a detailed matrix of principal risks affecting the Company's business as an investment trust and has established associated policies and processes designed to manage and, where possible, mitigate those risks, which are monitored by the Audit Committee on an ongoing basis. This system assists the Board in determining the nature and extent of the risks it is willing to take in achieving the Company's strategic objectives. Both the principal risks and the monitoring system are also subject to robust review at least annually. The last review took place in November 2017.
Although the Board believes that it has a robust framework of internal controls in place this can provide only reasonable, and not absolute, assurance against material financial misstatement or loss and is designed to manage, not eliminate, risk.
The principal risks and uncertainties faced by the Company have remained unchanged throughout the year under review, except in respect of cyber risk relating to the Company's service providers, which has now been extended beyond the custodian. Cyber risk relating to all of the Company's key service providers is considered an increased threat in light of the rising propensity and impact of cyber attacks on businesses and institutions. To address the risk, the Board is seeking enhanced reporting on cyber risk mitigation and management from its key service providers to ensure that it is managed and mitigated appropriately.
Actions taken by the Board and, where appropriate, its Committees, to manage and mitigate the Company's principal risks and uncertainties are set out in the table below.
Risk
| Mitigation and management
|
Strategic
The Company's investment objectives may become out of line with the requirements of investors, resulting in a wide discount of the share price to underlying NAV per share.
|
Appropriateness of the Company's investment remit periodically reviewed and success of the Company in meeting its stated objectives is monitored.
Share price relative to NAV per share monitored and use of buy back authorities considered on a regular basis.
Marketing and distribution activity is actively reviewed.
|
The Company's cost base could become uncompetitive, particularly in light of open ended alternatives.
| Ongoing competitiveness of all service provider fees subject to periodic benchmarking against competitors.
Annual consideration of management fee levels.
|
Investment management
The Manager's investment strategy, if inappropriate, may result in the Company underperforming the market and/or peer group companies, leading to the Company and its objectives becoming unattractive to investors. |
Review of: the Manager's compliance with agreed investment restrictions, investment performance and risk against investment objectives and strategy; relative performance; the portfolio's risk profile; and appropriate strategies employed to mitigate any negative impact of substantial changes in markets.
Annual review of the ongoing suitability of the Manager.
Regular meetings with major shareholders to seek their views with respect to company matters, including the five-yearly continuation vote.
|
Financial and currency
The Company is exposed to the effect of market fluctuations due to the nature of its business. A significant fall in regional equity markets or a substantial currency fluctuation could have an adverse impact on the market value of the Company's investments. |
Risk profile of the portfolio considered and appropriate strategies to mitigate any negative impact of substantial changes in markets or currency discussed with the Manager.
The Company has no formal policy of hedging currency risk but may use foreign currency borrowings or forward foreign currency contracts to limit exposure.
|
Custody
Safe custody of the Company's assets may be compromised through control failures by the Depositary, including cyber hacking. |
Depositary reports on safe custody of the Company's assets, including cash and portfolio holdings, independently reconciled with the Manager's records.
Review of audited internal controls reports covering custodial arrangements.
Annual report from the Depositary on its activities, including matters arising from custody operations.
|
Gearing and leverage
The Company utilises credit facilities. These arrangements increase the funds available for investment through borrowing. While this has the potential to enhance investment returns in rising markets, in falling markets the impact could be detrimental to performance.
|
Gearing is monitored and strict restrictions on borrowings imposed: gearing continues to operate within pre-agreed limits so as not to exceed 20% of shareholders' funds. |
Accounting, legal and regulatory
In order to continue to qualify as an investment trust, the Company must comply with the requirements of Section 1158 of the Corporation Tax Act 2010.
Breaches of the UK Listing Rules, the Companies Act or other regulations with which the Company is required to comply, could lead to a number of detrimental outcomes.
|
Confirmation of compliance with relevant laws and regulations by key service providers.
Shareholder documents and announcements, including the Company's published Annual Report, subject to stringent review processes.
Procedures established to safeguard against disclosure of inside information.
|
Service provider
The Company has no employees and has delegated certain functions to a number of service providers. Failure of controls, including as a result of cyber hacking, and poor performance of any service provider, could lead to disruption, reputational damage or loss. |
Service providers appointed subject to due diligence processes and with clearly-documented contractual arrangements detailing service expectations.
Regular reporting by key service providers and monitoring of the quality of services provided.
Review of annual audited internal controls reports from key service providers, including confirmation of business continuity arrangements and IT controls. |
Risk assessment and internal controls
Risk assessment includes consideration of the scope and quality of the systems of internal control operating within key service providers, and ensures regular communication of the results of monitoring by such providers to the Audit Committee, including the incidence of significant control failings or weaknesses that have been identified at any time and the extent to which they have resulted in unforeseen outcomes or contingencies that may have a material impact on the Company's performance or condition. No significant control failings or weaknesses were identified from the Audit Committee's ongoing risk assessment which has been in place throughout the financial year and up to the date of the 2017 Annual Report.
A full analysis of the financial risks facing the Company is set out in note 19 on pages 42 to 47 of the 2017 Annual Report.
Viability statement
The Directors have assessed the viability of the Company over a five year period, taking into account the Company's position at 30 September 2017 and the potential impacts of the principal risks and uncertainties it faces for the review period.
This period has been chosen as the Board believes that this reflects a suitable time horizon for strategic planning, taking into account the investment policy, liquidity of investments, potential impact of economic cycles, nature of operating costs, dividends and availability of funding.
In its assessment of the viability of the Company, the Directors have considered each of the Company's principal risks and uncertainties detailed on pages 13 and 14 of the 2017 Annual Report and in particular the impact of a significant fall in regional equity markets on the value of the Company's investment portfolio. The Directors have also considered the Company's income and expenditure projections and the fact that the Company's investments comprise readily realisable securities which can be sold to meet funding requirements if necessary and on that basis consider that five years is an appropriate time period.
Based on the Company's processes for monitoring operating costs, the Board's view that the Manager has the appropriate depth and quality of resource to achieve superior returns in the longer term, the portfolio risk profile, limits imposed on gearing, counterparty exposure, liquidity risk and financial controls, the Directors have concluded that there is a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the five year period of their assessment.
Going concern
Having assessed the principal risks and the other matters discussed in connection with the viability statement set out above, and the "Guidance on Risk Management, Internal Control and Related Financial and Business Reporting" published by the Financial Reporting Council in 2014, the Directors consider it appropriate to adopt the going concern basis in preparing the accounts.
By Order of the Board
Schroder Investment Management Limited
Company Secretary
6 December 2017
Statement of Directors' responsibilities
The Directors are responsible for preparing the Annual Report, the Strategic Report, the Report of the Directors, the Corporate Governance Statement, the Remuneration Report and the financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising Financial Reporting Standard (FRS) 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland" and applicable law). Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the return or loss of the Company for that period. In preparing these financial statements, the Directors are required to:
- select suitable accounting policies and then apply them consistently;
- make judgments and accounting estimates that are reasonable and prudent;
- state whether applicable UK Accounting Standards, comprising FRS 102, have been followed, subject to any material departures disclosed and explained in the financial statements;
- notify the Company's shareholders in writing about the use of disclosure exemptions in FRS 102, used in the preparation of 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.
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 enable them to ensure that the financial statements and the Remuneration Report 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.
The Manager is responsible for the maintenance and integrity of the webpage dedicated to the Company. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Each of the Directors, whose names and functions are listed on pages 16 and 17 of the 2017 Annual Report, confirm that to the best of their knowledge:
- the financial statements, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law), give a true and fair view of the assets, liabilities, financial position and net return of the Company;
- the Strategic Report contained in the Report and Accounts includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces; and
- the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy.
On behalf of the Board
Nicholas Smith
Chairman
6 December 2017
Income Statement
for the year ended 30 September 2017
|
| 2017 |
|
| 2016 |
|
| Revenue | Capital | Total | Revenue | Capital | Total |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
Gains on investments held at fair value through profit or loss | - | 139,076 | 139,076 | - | 186,860 | 186,860 |
Gains on derivative contracts | - | - | - | - | 163 | 163 |
Net foreign currency gains/(losses) | - | 1,714 | 1,714 | - | (3,664) | (3,664) |
Income from investments | 18,464 | 86 | 18,550 | 15,232 | 220 | 15,452 |
Other interest receivable and similar income | 15 | - | 15 | 1 | - | 1 |
Gross return | 18,479 | 140,876 | 159,355 | 15,233 | 183,579 | 198,812 |
Investment management fee | (6,320) | - | (6,320) | (5,006) | - | (5,006) |
Administrative expenses | (878) | - | (878) | (855) | - | (855) |
Net return before finance costs and taxation |
11,281 |
140,876 |
152,157 |
9,372 |
183,579 |
192,951 |
Finance costs | (545) | - | (545) | (304) | - | (304) |
Net return on ordinary activities before taxation |
10,736 |
140,876 |
151,612 |
9,068 |
183,579 |
192,647 |
Taxation on ordinary activities | (1,199) | (11) | (1,210) | (1,028) | (162) | (1,190) |
Net return on ordinary activities after taxation |
9,537 |
140,865 |
150,402 |
8,040 |
183,417 |
191,457 |
Return per share | 5.69p | 84.06p | 89.75p | 4.77p | 108.78p | 113.55p |
The "Total" column of this statement is the profit and loss account of the Company. The "Revenue" and "Capital" columns represent supplementary information prepared under guidance issued by The Association of Investment Companies. The Company has no recognised gains and losses other than those included in the Income Statement and Statement of Changes in Equity.
All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the year.
Statement of Changes in Equity
for the year ended 30 September 2017
| Called-up share capital £'000 | Share premium £'000 | Capital redemption reserve £'000 | Warrant exercise reserve £'000 | Share purchase reserve £'000 | Capital reserves £'000 | Revenue reserve £'000 | Total £'000 |
At 30 September 2015 | 16,923 | 100,956 | 3,221 | 8,704 | 36,301 | 304,540 | 7,225 | 477,870 |
Repurchase and cancellation of |
|
|
|
|
|
|
|
|
the Company's own shares | (143) | - | 143 | - | (3,905) | - | - | (3,905) |
Net return on ordinary activities | - | - | - | - | - | 183,417 | 8,040 | 191,457 |
Dividend paid in the year | - | - | - | - | - | - | (7,101) | (7,101) |
At 30 September 2016 | 16,780 | 100,956 | 3,364 | 8,704 | 32,396 | 487,957 | 8,164 | 658,321 |
Repurchase and cancellation of |
|
|
|
|
|
|
|
|
the Company's own shares | (23) | - | 23 | - | (821) | - | - | (821) |
Net return on ordinary activities | - | - | - | - | - | 140,865 | 9,537 | 150,402 |
Dividend paid in the year | - | - | - | - | - | - | (7,960) | (7,960) |
At 30 September 2017 | 16,757 | 100,956 | 3,387 | 8,704 | 31,575 | 628,822 | 9,741 | 799,942 |
Statement of Financial Position
at 30 September 2017
| 2017 £'000 | 2016 £'000 |
Fixed assets |
|
|
Investments held at fair value through profit or loss | 836,358 | 661,405 |
Current assets |
|
|
Debtors | 1,009 | 1,654 |
Cash at bank and in hand | 7,213 | 18,196 |
| 8,222 | 19,850 |
Current liabilities |
|
|
Creditors: amounts falling due within one year | (44,638) | (22,934) |
Net current liabilities | (36,416) | (3,084) |
Total assets less current liabilities | 799,942 | 658,321 |
Net assets | 799,942 | 658,321 |
Capital and reserves |
|
|
Called-up share capital | 16,757 | 16,780 |
Share premium | 100,956 | 100,956 |
Capital redemption reserve | 3,387 | 3,364 |
Warrant exercise reserve | 8,704 | 8,704 |
Share purchase reserve | 31,575 | 32,396 |
Capital reserves | 628,822 | 487,957 |
Revenue reserve | 9,741 | 8,164 |
Total equity shareholders' funds | 799,942 | 658,321 |
Net asset value per share | 477.38p | 392.33p |
These accounts were approved and authorised for issue by the Board of Directors on 6 December 2017 and signed on its behalf by:
Nicholas Smith
Chairman
Notes to the Accounts
1. Accounting policies
Basis of accounting
The accounts are prepared in accordance with the Companies Act 2006, United Kingdom Generally Accepted Accounting Practice ("UK GAAP"), in particular in accordance with Financial Reporting Standard (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 November 2014 and updated in January 2017. 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 held at fair value through profit or loss. The accounts are presented in sterling and amounts have been rounded to the nearest thousand. The accounting policies applied to the 2017 accounts are consistent with those applied in the accounts for the year ended 30 September 2016.
2. Taxation on ordinary activities
Analysis of tax charge for the year
|
| 2017 |
|
| 2016 |
|
| Revenue | Capital | Total | Revenue | Capital | Total |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
Irrecoverable overseas withholding tax | 1,199 | - | 1,199 | 1,028 | - | 1,028 |
Overseas capital gains tax | - | 11 | 11 | - | 162 | 162 |
Taxation on ordinary activities | 1,199 | 11 | 1,210 | 1,028 | 162 | 1,190 |
The Company has no corporation tax liability for the year ended 30 September 2017 (2016: nil).
3. Dividends
| 2017 | 2016 |
| £'000 | £'000 |
2016 final dividend of 4.75p (2015: 4.20p) paid out of revenue profits | 7,960 | 7,101 |
| 2017 | 2016 |
| £'000 | £'000 |
2017 final dividend proposed of 5.60p (2016: 4.75p) to be paid out of revenue profits | 9,384 | 7,970 |
4. Return per share
| 2017 |
| 2016 |
|
| £'000 |
| £'000 |
|
Revenue return | 9,537 |
| 8,040 |
|
Capital return | 140,865 |
| 183,417 |
|
Total return | 150,402 |
| 191,457 |
|
Weighted average number of shares in issue during the year | 167,581,798 |
| 168,605,440 |
|
Revenue return per share | 5.69 | p | 4.77 | p |
Capital return per share | 84.06 | p | 108.78 | p |
Total return per share | 89.75 | p | 113.55 | p |
5. Called-up share capital
| 2017 | 2016 |
| £'000 | £'000 |
Ordinary share allotted, called up and fully paid: |
|
|
Ordinary shares of 10p each: |
|
|
Opening balance of 167,795,716 (2016:169,225,719) shares | 16,780 | 16,923 |
Repurchase and cancellation of 225,000 (2016: 1,430,000) shares | (23) | (143) |
Closing balance of 167,570,716 (2016: 167,795,716) shares | 16,757 | 16,780 |
6. Net asset value per share
| 2017 |
| 2016 |
|
Net assets attributable to the shareholders (£'000) | 799,942 |
| 658,321 |
|
Shares in issue at the year end | 167,570,716 |
| 167,795,716 |
|
Net asset value per share | 477.38 | p | 392.33 | p |
7. Disclosures regarding financial instruments measured at fair value
The Company's financial instruments within the scope of FRS 102 that are held at fair value comprise its investment portfolio.
No derivative financial instruments were held at the year end (2016: nil).
FRS 102 requires financial instruments to be categorised into a hierarchy consisting of the three levels below. Note that the criteria used to categorise investments include an amendment to paragraph 34.22 of FRS 102, issued by the Financial Reporting Council in March 2016, and which the Company has early adopted.
Level 1 - valued using quoted prices in active markets.
Level 2 - valued by reference to valuation techniques using observable inputs other than quoted market prices included within Level 1.
Level 3 - valued by reference to valuation techniques using inputs that are not based on observable market data.
Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair value measurement of the relevant asset.
Details of the valuation techniques used by the Company are given in note 1(b) on page 35 of the 2017 Annual Report.
At 30 September 2017, the Company's investments were all categorised in Level 1 (2016: same).
There have been no transfers between Levels 1, 2 or 3 during the year (2016: nil).
8. Status of announcement
2016 Financial Information
The figures and financial information for 2016 are extracted from the published Annual Report and Accounts for the year ended 30 September 2016 and do not constitute the statutory accounts for that year. The 2016 Annual Report and Accounts have 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.
2017 Financial Information
The figures and financial information for 2017 are extracted from the Annual Report and Accounts for the year ended 30 September 2017 and do not constitute the statutory accounts for the year. The 2017 Annual Report and Accounts include 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 2017 Annual Report and Accounts will be delivered to the Registrar of Companies in due course.
Neither the contents of the Company's webpages nor the contents of any website accessible from hyperlinks on the Company's webpages (or any other website) is incorporated into, or forms part of, this announcement.