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4 Oct 2019 07:00
4 October 2019
ANNUAL REPORT AND ACCOUNTS
Schroder Japan Growth Fund plc (the "Company") hereby submits its annual report for the year ended 31 July 2019 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 31 July 2019 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/japangrowth. Please click on the following link to view the document:
http://www.rns-pdf.londonstockexchange.com/rns/7329O_1-2019-10-3.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 31 July 2019 has been disappointing, with the Company's net asset value ("NAV") and share price total returns underperforming the Benchmark, producing -4.6% and -8.4%, respectively, compared with +1.0% produced by the Benchmark. As further detailed in the Manager's Review, the Company's value style bias was the main detractor to performance, although global market volatility was also a factor.
Revenue and dividend
I am pleased to report that despite capital performance, revenue per share has increased by 17.4% to 4.79p, due to larger distributions from portfolio companies. Taking this into consideration, the directors have declared a final dividend for the year ended 31 July 2019 of 4.70p per share, representing an increase of 17.5% over the final dividend paid in 2018. This dividend will be paid on 11 November 2019 to shareholders on the register on 18 October 2019 subject to approval by shareholders at the Annual General Meeting ("AGM") on 6 November 2019.
Gearing
The Company continues to maintain a term loan and credit facility, as detailed in the notes to the 2019 annual report. The gearing level increased slightly, beginning and ending the year at 11.7% and 12.3%, respectively. This had a small negative effect on performance. The Company's gearing continues to operate within pre-agreed limits so that net effective gearing does not represent more than 25% of shareholders' funds.
Purchase of shares for cancellation
The directors did not use the authority given to them to purchase shares for cancellation during the financial year ended 31 July 2019. The average discount for the year was 9.8%, widening from 9.3% at the start of the year to 13.0% at the end of the year.
During the year the board continued to closely monitor this discount as the ability to buy back shares is one of a number of tools that, in the right circumstances, may be used to enhance shareholder value and to reduce the discount volatility. The board will be seeking to renew the share buy-back authority granted at the Company's AGM in November 2018 to purchase up to 14.99% of the Company's issued share capital for cancellation.
Board refreshment
As part of the board's ongoing refreshment, Richard Greer will be retiring as a director in the second quarter of 2020. As detailed in the Nomination Committee Report, a search is currently underway to recruit a new non-executive director.
Outlook
The portfolio continues to focus on individual stock ideas in which the Manager sees strong long-term growth potential. The combination of these ideas with a disciplined valuation approach has typically led to a value style bias, which has hampered performance in the last couple of years, but the current portfolio seems to represent a significant opportunity for potential return going forward. This belief is not based just on a reversion to normal conditions, but anticipates further improvements in corporate governance and higher shareholder pay-outs, which are providing more paths by which the value embedded in Japanese companies can be returned to shareholders in future.
The frustration about the short-term performance is well-reflected in the Manager's review. Most stock price movements have been driven by global factors - trade friction, slowing global growth, politics, etc. - rather than reflecting the generally positive developments in the companies in the portfolio.
The single largest frustration is in valuations. Our Manager believes the shares in the portfolio are simply undervalued by a market that has not been focussing on value. I would turn this round, and see it as an opportunity. We know from the history of this Company that, if the Manager can continue to find the right companies, performance will follow.
While mindful of the overall level of portfolio risk, your board is therefore supportive of the Manager increasing the scale of the positions in some of the holdings that have underperformed. We also agree with the Manager's confidence in using the gearing facility.
Continuation vote
The Notice of the Annual General Meeting contains an ordinary resolution proposing that the Company should continue as an investment trust for a further five year period.
The board has reviewed the Company's investment objective and policy, as well as the Manager and its resources. The board believes that Japan remains an attractive proposition for investors and that the investment strategy and process employed by the Manager, which are well known to investors and have been laid out in the Strategic Report, provides a suitable platform to produce superior returns over the longer term.
As a result, the board recommends that the Company should continue as an investment trust for a further five year period. The directors will be voting their shares accordingly and wish to encourage all other shareholders likewise to vote in favour of continuation.
Annual General Meeting
The AGM will be held at 12.00 pm on Thursday, 6 November 2019, and I hope as many of you as possible will be able to attend and participate. The meeting, as in previous years, will include a presentation by the portfolio manager on the prospects for the Japanese market and the Company's investment strategy.
Anja Balfour
Chairman
3 October 2019
Manager's Review
Market background
The Company's NAV total return for the year to the end of July 2019 of -4.6% underperformed the Benchmark of +1.0% (source: Morningstar).
In yen terms the market actually declined over the period, due to sharp weakness in the fourth quarter of 2018, in common with many other equity markets. Although there has been some recovery since then, overall sentiment has remained weak. The yen has appreciated significantly against sterling over the year, primarily as a result of Brexit-induced weakness in sterling. As a result, the market decline was reversed to a small positive return in sterling terms.
The main drivers of stock market performance over the 12 months have been macroeconomic and geopolitical issues as trade friction escalated and central banks maintained a very low interest rate environment for longer than initially expected. These factors tended to overshadow the slow but steady improvement in domestic economic conditions in Japan.
Within the low interest rate environment, defensive sectors, with steady growth rates, continued to perform relatively well. More economically sensitive areas, such as steel companies and commodity-related sectors, tended to underperform, along with most financial stocks.
Portfolio Performance
The main impact on performance over the last 12 months came from the Company's "value" style bias - its emphasis on shares on lower valuations - and from the level of gearing. Gearing was 12.3% at the end of July, having generally been in a range of 12-15% during the year. The gearing made a negative contribution as a result of the negative market return in yen terms.
Within the portfolio there were negative impacts from both sector allocation and stock selection, but there were few large individual positive or negative stock contributions. The bulk of the underperformance came from small negative contributions from a wide range of stocks, reinforcing our view that style issues had an unusually large influence on performance.
Among individual stocks, the largest negative contribution came from Hi-Lex, a small-cap auto component supplier. In the absence of any positive stock-specific news, the share price has drifted lower under the influence of trade friction on the global supply chains for autos, exacerbated by the weakness in small caps generally. Softbank, a major telecom conglomerate, which is not held in the portfolio, also had a negative impact on relative performance as the stock price was driven up by several pieces of news flow.
Some of these negative influences were offset by the strong performance of Disco, a maker of specialist equipment used in semiconductor production. After some initial weakness, investors have become more confident that a cyclical slowdown in the company's earnings is coming to an end and the stock has performed strongly since the beginning of 2019. Hitachi Transport, a freight transport and logistics provider, also performed relatively well in the last twelve months, especially during the market decline at the end of 2018.
Activity
New positions have been added in stocks where we feel there are company-specific drivers for earnings growth over the next few years, rather than relying on shorter-term cycles or market trends. As always with our investment process, we look to our local team of analysts to identify these opportunities, asking them for a longer-term view in a market that, as said before, is pre-occupied with short-term macro-economic factors.
The new investments recently added include Ibiden, a ceramics company which works with Intel for semiconductor packaging, and Asahi Breweries, a beer and beverage supplier, which is gradually reallocating resources towards faster-growing overseas markets. Nomura Research Institute was also added. The company provides IT consulting services together with system engineering, and is a beneficiary of the trend towards higher capital expenditure aimed at improving labour productivity.
Conversely, some stocks have been removed from the portfolio where our conviction levels have been reduced. These include Mitsubishi Electric, which supplies electronic equipment and industrial machinery, and Sumitomo Electric, a cable company whose main business is in wire harnesses for automobiles. Overall, there has been a slight reduction in the number of stocks held.
Outlook
The move by the US Federal Reserve to cut interest rates in early August has reignited the debate on Japanese monetary policy and, specifically, whether there is scope for the Bank of Japan to ease further without having a significant negative impact on the financial sector. The most recent comments from the Bank suggest policy could be eased further in coming months, but the level of the currency remains a significant element in any decision. Meanwhile, the negative yield on 10-year Japanese government bonds has already moved below the levels seen in mid-2016.
Data on Japan's domestic economy will be affected in the short-term by the increase in consumption tax in October. There may be some distortions to data as consumption is brought forward ahead of the tax rise, which is then followed by lower consumption. The extent to which the government can offset any negative impact through its fiscal policy is also uncertain, with some economists even suggesting a net positive impact. Overall, however, these economic influences will be temporary and we see nothing that necessitates any change in our long-term view of the outlook for individual companies.
Although the current profits progress for Japanese companies appears sluggish, we believe that most of this is already discounted in stock prices and the underlying economic fundamentals continue to improve gradually, within a stable policy environment. The scope remains for a profit recovery in the second half of the fiscal year, at a time when we believe that the current level of profits already provides attractive valuations. We continue to base our positive long-term assessment on improvements in corporate governance, which are driving both structurally higher returns on equity and increasing pay-outs to shareholders. The recent evidence of improved shareholder returns, despite the cyclical slowdown in earnings, provides some encouragement, as do anecdotal examples of unwinding of cross-shareholdings (where listed Japanese companies own each other's shares).
Policy
The portfolio remains focused on individual stock opportunities in which we see excellent prospects for long-term earnings growth. The strong valuation discipline, which is inherent in our fundamental research, tends to result in a bias towards "Value" in terms of the portfolio's investment style. Historically this style bias has typically had a positive influence on performance, in addition to the contributions from individual stocks. In the last two years, however, the prolonged period of very accommodative global monetary policy has created an environment characterised by low growth, low inflation and low volatility, which has persistently favoured "Growth" style over "Value".
While these trends have hampered recent performance, we feel that the resultant widening in the spread of valuations across market has reached unsustainable levels. We remain convinced that long-run differences in stock performance must ultimately be driven by companies' underlying profits and valuations, and we remain absolutely focused on these factors. From our perspective, the holdings appear significantly undervalued both relative to the market and in absolute terms. The latter has encouraged us to keep the gearing at around 12%. Overall we believe that the potential return from the portfolio is excellent as the market conditions normalise.
Schroder Investment Management Limited
3 October 2019
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 and risk 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 assessment at least annually. The last assessment took place in September 2019.
Although the board believes that it has a robust framework of internal control 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.
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.
Emerging risks and uncertainties
During the year, the board also discussed and monitored a number of risks that could potentially impact the Company's ability to meet its strategic objectives. These were political risk and climate change risk. The board has determined they are not currently material for the Company
Political risk includes Brexit. The board continues to monitor developments for the UK's departure from the European Union and to assess the potential consequences for the Company's future activities, but believes that the Company's portfolio of Japanese assets positions the Company to be suitably insulated from Brexit related risks. Currency rate and borrowings drawn down by the Company may be affected by geopolitical developments particularly in relation to movements in sterling versus the yen. Note 20 of the 2019 annual report provides more information on the effect of currency and market price movements. The board is also mindful that changes to public policy in the UK, or in Japan, could impact the Company in the future.
Climate change risk includes how climate change could affect the Company's investments, and potentially shareholder returns.
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.
|
The appropriateness of the Company's investment remit is periodically reviewed and the success of the Company in meeting its stated objectives is monitored.
The share price relative to NAV per share is monitored.
The marketing and distribution activity is actively reviewed.
Proactive engagement with shareholders.
|
The Company's cost base could become uncompetitive, particularly in light of open-ended alternatives.
| The ongoing competitiveness of all service provider fees is subject to periodic benchmarking against their 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 its agreed investment restrictions, investment performance and risk against investment objectives and strategy; relative performance; the portfolio's risk profile; and whether appropriate strategies are employed to mitigate any negative impact of substantial changes in markets.
Annual review of the ongoing suitability of the Manager is undertaken.
|
Financial and currency
The Company is exposed to the effect of market fluctuations due to the nature of its business. A significant fall in Japanese equity markets could have an adverse impact on the market value of the Company's underlying investments and, as the Company invests predominantly in assets which are denominated in yen, its exposure to changes in the exchange rate between sterling and yen has the potential to have a significant impact on returns.
|
The risk profile of the portfolio considered and appropriate strategies to mitigate any negative impact of substantial changes in markets discussed with the Manager.
The board considers overall hedging policy on a regular basis.
|
Custody
Safe custody of the Company's assets may be compromised through control failures by the Depositary, including cyber hacking.
|
The depositary reports on safe custody of the Company's assets, including cash, and portfolio holdings independently reconciled with the Manager's records.
The review of audited internal controls reports covering custodial arrangements is undertaken.
An annual report from the depositary on its activities, including matters arising from custody operations is received.
|
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 daily and strict restrictions on borrowings are imposed: gearing continues to operate within pre-agreed limits so as not to exceed 25% 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.
|
The confirmation of compliance with relevant laws and regulations by key service providers is reviewed.
Shareholder documents and announcements, including the Company's published annual report, are subject to stringent review processes.
Procedures are established to safeguard against the disclosure of inside information.
|
Service provider
The Company has no employees and has delegated certain functions to a number of service providers, principally the Manager, Depositary and Registrar. 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 are appointed subject to due diligence processes and with clearly-documented contractual arrangements detailing service expectations.
Regular reporting are provided by key service providers and monitoring of the quality of their services provided.
Review of annual audited internal controls reports from key service providers, including confirmation of business continuity arrangements and IT controls is undertaken.
|
Cyber
The Company's service providers are all exposed to the risk of cyber attacks. Cyber attacks could lead to loss of personal or confidential information or disrupt operations.
|
Service providers report on cyber risk mitigation and management at least annually, which includes confirmation of business continuity capability in the event of a cyber attack.
|
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 and risk 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 and risk committee's ongoing risk assessment which has been in place throughout the financial year and up to the date of this report.
A full analysis of the financial risks facing the Company is set out in note 20 on pages 46 to 51 of the 2019 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 31 July 2019 and the potential impacts of the principal risks and uncertainties it faces for the review period.
A period of five years 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 2019 annual report and in particular the impact of a significant fall in Japanese equity markets on the value of the Company's investment portfolio. The directors have 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. While the articles of association require that a proposal for the continuation of the Company be put forward at the Company's AGM, the directors have no reason to believe that such a resolution will not be passed by shareholders.
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 FRC in 2014, the directors consider it appropriate to adopt the going concern basis in preparing the accounts.
Statement of Directors' Responsibilities in respect of the Annual Report and Accounts
The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulation.
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 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 profit or loss of the Company for that period. In preparing the financial statements, the directors are required to:
- select suitable accounting policies and then apply them consistently;
- state whether applicable United Kingdom Accounting Standards, comprising FRS 102, have been followed, subject to any material departures disclosed and explained in the financial statements;
- make judgements and accounting estimates that are reasonable and prudent; and
- prepare the financial statements on the 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 Directors' Remuneration Report comply with the Companies Act 2006.
The directors 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 Company's webpages. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
The directors consider that the annual report and accounts, taken as a whole, are fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy.
Each of the directors, whose names and functions are listed in the board of directors on pages 16 and 17 of the 2019 annual report confirm that, to the best of their knowledge:
- the Company financial statements, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland", and applicable law), give a true and fair view of the assets, liabilities, financial position and profit of the Company; and
- the Strategic Report 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.
Income Statement for the year ended 31 July 2019
| 2019 | 2018 | ||||
| Revenue | Capital | Total | Revenue | Capital | Total |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
(Losses)/gains on investments held at fair value through profit or loss | - | (13,985) | (13,985) | - | 23,873 | 23,873 |
Net foreign currency (losses)/gains | - | (3,751) | (3,751) | - | 184 | 184 |
Income from investments | 8,157 | - | 8,157 | 7,204 | - | 7,204 |
Other interest receivable and similar income | 7 | - | 7 | 2 | - | 2 |
Gross return/(loss) | 8,164 | (17,736) | (9,572) | 7,206 | 24,057 | 31,263 |
Investment management fee | (642) | (1,497) | (2,139) | (683) | (1,593) | (2,276) |
Administrative expenses | (619) | - | (619) | (598) | - | (598) |
Net return/(loss) before finance costs and taxation | 6,903 | (19,233) | (12,330) | 5,925 | 22,464 | 28,389 |
Finance costs | (93) | (217) | (310) | (99) | (231) | (330) |
Net return/(loss) on ordinary activities before taxation | 6,810 | (19,450) | (12,640) | 5,826 | 22,233 | 28,059 |
Taxation on ordinary activities | (816) | - | (816) | (720) | - | (720) |
Net return/(loss) on ordinary activities after taxation | 5,994 | (19,450) | (13,456) | 5,106 | 22,233 | 27,339 |
Return/(loss) per share | 4.79p | (15.56)p | (10.77)p | 4.08p | 17.79p | 21.87p |
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 other items of other comprehensive income and therefore the net return on ordinary activities after taxation is also the total comprehensive income for the year.
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 31 July 2019
| Called-up |
| Warrant | Share |
|
|
|
| share | Share | exercise | purchase | Capital | Revenue |
|
| capital | premium | reserve | reserve | reserves | reserve | Total |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
At 31 July 2017 | 12,501 | 7 | 3 | 97,205 | 154,475 | 5,113 | 269,304 |
Net return on ordinary activities | - | - | - | - | 22,233 | 5,106 | 27,339 |
Dividend paid in the year | - | - | - | - | - | (4,375) | (4,375) |
At 31 July 2018 | 12,501 | 7 | 3 | 97,205 | 176,708 | 5,844 | 292,268 |
Net (loss)/return on ordinary activities | - | - | - | - | (19,450) | 5,994 | (13,456) |
Dividend paid in the year | - | - | - | - | - | (5,000) | (5,000) |
At 31 July 2019 | 12,501 | 7 | 3 | 97,205 | 157,258 | 6,838 | 273,812 |
Statement of Financial Position at 31 July 2019
| 2019 | 2018 |
| £'000 | £'000 |
Fixed assets |
|
|
Investments held at fair value through profit or loss | 307,753 | 326,756 |
Current assets |
|
|
Debtors | 1,108 | 1,042 |
Cash at bank and in hand | 11,414 | 6,653 |
| 12,522 | 7,695 |
Current liabilities |
|
|
Creditors: amounts falling due within one year | (1,331) | (42,183) |
Net current assets/(liabilities) | 11,191 | (34,488) |
Total assets less current liabilities | 318,944 | 292,268 |
Creditors: amounts falling due after more than one year | (45,132) | - |
Net assets | 273,812 | 292,268 |
|
|
|
Capital and reserves |
|
|
Called-up share capital | 12,501 | 12,501 |
Share premium | 7 | 7 |
Warrant exercise reserve | 3 | 3 |
Share purchase reserve | 97,205 | 97,205 |
Capital reserves | 157,258 | 176,708 |
Revenue reserve | 6,838 | 5,844 |
Total equity shareholders' funds | 273,812 | 292,268 |
Net asset value per share | 219.04p | 233.80p |
Notes to the Accounts
1. Accounting Policies
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 February 2018. All of the Company's operations are of a continuing nature.
2. Taxation on ordinary activities
The Company's effective corporation tax rate is nil, as deductible expenses exceed taxable income. The tax charge comprises irrecoverable overseas withholding tax.
3. Dividends
Dividend paid and proposed
| 2019 | 2018 |
| £'000 | £'000 |
2018 final dividend of 4.00p (2017: 3.50p) paid out of revenue profits | 5,000 | 4,375 |
| 2019 | 2018 |
| £'000 | £'000 |
2019 final dividend proposed of 4.70p (2018: 4.00p) to be paid out of revenue profits | 5,875 | 5,000 |
The proposed dividend amounting to £5,875,000 (2018: £5,000,000) is the amount used for the basis of determining whether the Company has satisfied the distribution requirements of Section 1158 of the Corporation Tax Act 2010. The revenue available for distribution by way of dividend for the year is £5,994,000 (2018: £5,106,000).
4. Return/(loss) per share
| 2019 | 2018 |
| £'000 | £'000 |
Revenue return | 5,994 | 5,106 |
Capital (loss)/return | (19,450) | 22,233 |
Total (loss)/return | (13,456) | 27,339 |
Weighted average number of ordinary shares in issue during the year | 125,008,200 | 125,008,200 |
Revenue return per share | 4.79p | 4.08p |
Capital (loss)/return per share | (15.56)p | 17.79p |
Total (loss)/return per share | (10.77)p | 21.87p |
5. Creditors: amounts falling due after more than one year
| 2019 | 2018 |
| £'000 | £'000 |
Bank loan | 45,132 | - |
The bank loan comprises a yen 6.0 billion three-year term loan from SMBC, expiring in January 2022, carrying a fixed rate of interest of 0.64% per annum. The loan is unsecured but is subject to certain undertakings and restrictions, all of which have been complied with. This loan replaced a yen 6.0 billion three-year term loan, from Scotiabank, which expired in January 2019. The directors consider that the carrying amount of the loan approximates to its fair value.
6. Called-up share capital
| 2019 | 2018 |
| £'000 | £'000 |
Ordinary shares allotted, called-up and fully paid: |
|
|
125,008,200 ordinary shares of 10p each | 12,501 | 12,501 |
7. Net asset value per share
| 2019 | 2018 |
Net assets attributable to shareholders (£'000) | 273,812 | 292,268 |
Shares in issue at the year end | 125,008,200 | 125,008,200 |
Net asset value per share | 219.04p | 233.80p |
8. 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. The Company currently holds no derivative financial instruments.
FRS 102 requires financial instruments to be categorised into a hierarchy consisting of the three levels below.
Level 1 - valued using unadjusted quoted prices in active markets for identical assets.
Level 2 - valued using observable inputs other than quoted prices included within Level 1.
Level 3 - valued using inputs that are unobservable.
Details of the valuation techniques used by the Company are given in note 1(b) on page 39 of the 2019 annual report.
The following table sets out the fair value measurements using the FRS 102 hierarchy at 31 July:
| 2019 | |||
| Level 1 | Level 2 | Level 3 | Total |
| £'000 | £'000 | £'000 | £'000 |
Financial instruments held at fair value through profit or loss |
|
|
|
|
Equity investments | 297,076 | 10,677 | - | 307,753 |
Investments allocated to Level 2 are valued using unadjusted quoted prices, but in markets which are less active.
| 2018 | |||
| Level 1 | Level 2 | Level 3 | Total |
| £'000 | £'000 | £'000 | £'000 |
Financial instruments held at fair value through profit or loss |
|
|
|
|
Equity investments | 326,756 | - | - | 326,756 |
9. Status of announcement
2018 Financial Information
The figures and financial information for 2018 are extracted from the published annual report and accounts for the year ended 31 July 2018 and do not constitute the statutory accounts for that year. The 2018 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.
2019 Financial Information
The figures and financial information for 2019 are extracted from the annual report and accounts for the year ended 31 July 2019 and do not constitute the statutory accounts for the year. The 2019 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 2019 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.