Company Announcements

14 November 2019

ANNUAL REPORT AND ACCOUNTS

Schroder Income Growth Fund plc (the "Company") hereby submits its annual report for the year ended 31 August 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 August 2019 are also being published in hard copy format and an electronic copy will shortly be available to download from the Company's webpages www.schroders.co.uk/incomegrowth.  Please click on the following link to view the document:

http://www.rns-pdf.londonstockexchange.com/rns/3394T_1-2019-11-13.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:

Matthew Riley

Schroder Investment Management Limited                      

Tel: 020 7658 6596

Chairman's Statement

Performance

Your Company's record of declaring a rising dividend each year since launch remained unbroken in the year ended 31 August 2019, with a total distribution of 12.4 pence per share representing a rise of 5.1% over the previous year. This increase also compares favourably to the rise of 1.7% in the Consumer Price Index over the same period, and has helped the Company to continue meeting one of its primary objectives: to provide real growth of income, being growth of income in excess of the rate of inflation.

Revenue and dividend

Over the same period the revenue return per share rose by 11.2%, partly reflecting continued dividend growth from the holdings and also the impact of a somewhat weaker pound on foreign-currency denominated dividends. The increase in dividend is well covered by this year's income.

Your Company's net asset value ("NAV") fell by 1.9% in total return terms, behind the FTSE All-Share Index, which grew by 0.4%. The reasons for this are discussed in the Manager's Review, which includes detailed commentary on the portfolio and its performance during the year.

Share price discount and buybacks

Your Company's share price fell by 5.4% in total return terms over the year reflecting a widening in the share price discount to NAV - which increased from 4.6% to 8.3%, with an average discount over the year of 6.5%.

This level of discount remains a concern to the board, which continues to closely monitor it relative to the Company's peer group and to consider whether it would be appropriate to buy back shares, while taking into account prevailing market conditions. While, in the event, no shares were bought back (or issued) during the year, your board continues to believe that retaining the ability to do so is a valuable potential tool in reducing the volatility of the share price discount to NAV and will therefore be seeking to renew the existing authority through the resolutions set out in the notice of annual general meeting.

Gearing

During the year, gearing was increased from 8.3% at 1 September 2018 to 15.5% as at 31 August 2019 consistent

with the Manager's conviction in its chosen investment strategy and the Company's investment policy. The original £20 million facility with Scotiabank Europe plc expired on 22 August 2019 and was replaced by a £35 million facility with Sumitomo Mitsui Banking Corporation Europe plc, which will mature on 23 August 2020.

Board composition and succession planning

I wrote last year that the board was prioritising its succession planning to ensure both progressive refreshment and the retention of an appropriate blend of skills. The Nomination and Remuneration Committee, chaired by Bridget Guerin, reviewed the board's composition, balance and diversity over the year and as a result, Victoria Muir was appointed as a non-executive director on 23 July 2019. Fraser McIntyre is also proposed for election by shareholders at the AGM, as an additional non-executive director. Fraser has extensive  experience as a chief operating officer and a chief financial officer in the investment management sector and is a qualified accountant. The board has already benefited from Victoria's extensive marketing and distribution skills and I am confident that Fraser's relevant and recent financial and operations experience will bolster the board further.

I am also pleased to announce that Bridget Guerin, an existing, very experienced non-executive director, will succeed me as chair of the Company after the AGM on 17 December 2019. Leadership of your Company will therefore be in good hands. 

I should also add that notwithstanding the length of service of David Causer, who chairs your Audit Committee, the board considers that  he remains independent both in character and judgement. David intends to retire at the Company's 2020 AGM.

As I described in the 2019 half year report, at the last AGM, a number of votes were cast against the resolutions to re-elect David and myself, totalling around 2% of the Company's shares in issue, and approximately 26% of the votes cast in respect of such resolutions.

We have liaised with the shareholder responsible for the majority of these votes and we have been advised that it voted in line with its policy that key board committees should be comprised of directors with a tenure of less than nine years due to potential concerns regarding independence. As a result, David and I received votes against our re-appointment to the board.

The two planned director resignations described above, agreed by the board prior to the votes against our reappointments, and the new appointments to the board, will mitigate the concerns of this shareholder, whilst allowing for orderly succession.

Amendment to investment policy

After careful consideration and consultation with your investment manager, your board has decided to ask shareholders to approve at the forthcoming AGM (details of which are set out below) the removal of the words 'above average yielding' (preceding 'UK Equities') from the Company's investment policy. We believe that the current wording restricts your Manager's discretion and its removal will allow investment in more stocks having a high likelihood of growing their dividends materially over time, alongside the traditional, higher-yielding stocks in the portfolio.  This change supports the Company's objective of increasing the Company's dividend over time. The full amended text is set out on page 50 of the 2019 annual report .

Annual general meeting

The Company's AGM will be held on Tuesday, 17 December 2019 at 12:00 noon. As in previous years, the meeting will include a presentation by the manager on the Company's investment strategy and market prospects, and shareholders are encouraged to attend.

Outlook 

As this is my last Chairman's Statement I am encouraged to look back over the 14 years that I have been privileged to be a member of your board, and in particular to record my pleasure in the Company's success. Our objective has always been clear: to provide real growth of income, and capital growth as a consequence. In this context, the dividend has risen 86% since 2005, more than double the 34% increase in UK consumer prices, while £1,000 invested in the shares then - would be worth £2,670 today. 

Will my successor, Bridget, have it so good? I suspect that the extent of the gains may be harder to duplicate, not so much because of factors like the Brexit turmoil and the possible cyclical downturn in global growth, but rather because we may have moved into an era where returns on many assets will be lower than in the past. The corollary of a lower-return world, however, is that income growth - the Company's raison d'être - has a demonstrable role in many portfolios. In summary, the shares yield 4.3% at the time of writing, 2.6% above the rise in consumer prices; your board prides itself on the history of increasing the dividend every year since launch; there is a good income reserve; and the Manager's Review speaks of the opportunities to be found in the quality, soundly-financed domestic companies in the portfolio. On this basis I believe that our shareholders should look forward to the future with confidence.

Ian Barby

Chairman

13 November 2019

Manager's Review

The NAV total return in the 12 months to 31 August 2019 was -1.9%. This compares to +0.4% from the FTSE All-Share Index and -2.2% from the median of the peer group (the AIC UK Equity Income Sector, excluding funds that joined the sector this year). The share price total return was -5.4% (source: Morningstar/Schroders).

Income from investments grew 9.1%, driven by four factors. Firstly, and most significantly, income benefited from six months of additional gearing (of around 6% of assets) which was deployed in March. Secondly, the Company benefited from a broadly based increase in dividend payments from many parts of the portfolio. In particular, we were pleased to see strong distributions from student property provider Unite Group, speciality finance and alternatives asset manager Intermediate Capital, leisure company Hollywood Bowl, software business Micro Focus and Portuguese energy company Galp Energia.

Thirdly, there was a 29% increase in special dividends, which compares to a decline of almost half in the year ended 31 August 2018. Income from special dividends is by definition unpredictable and we have cautioned for some time that the level of special dividends could be at unsustainable levels. Those received this year were from the same holdings as in 2018, namely Taylor Wimpey, John Laing and Hollywood Bowl, as well as a new payment from miner Rio Tinto which related to strong financial results (as distinct from the distribution taken to capital from the company's sale of a stake in a mine). Special dividends in 2019 are around two thirds of those in 2017. We received an additional income payment from the holding in British American Tobacco compared with the prior year due to the timing of payments around the Company's year end. Furthermore, the Company had exited positions in stocks earlier in the year which subsequently cut their dividends (Centrica, Nordea, Vodafone).

Lastly, sterling weakness provided a tailwind to income as the exchange rate was beneficial both to translated dividends declared in overseas currencies and to the boost to profits from many companies with overseas operations.

Market background

The FTSE All-Share rose by 0.4% in what was a mixed period for global stock markets. The final calendar quarter of 2018 was one of the worst quarters for global equities in many years as fears over the outlook for the world economy came to a head against the backdrop of tightening global monetary conditions at the time, US-China trade tensions and European political uncertainty. Equities globally bounced back sharply in Q1 in response to dovish commentary from central banks, with the US Federal Reserve (Fed) and European Central Bank (ECB) tempering expectations for tighter monetary policy. Expectations for monetary policy then shifted over Q2, notably so in the US where the market began to speculate that the Fed could cut interest rates.

The Fed subsequently cut base rates in July, the first reduction since 2008. This also had the effect of spurring other central banks to loosen monetary policy. Latest GDP data confirms that growth in the world's major economies has decelerated in 2019, with both the UK and German economies contracting in Q2. Meanwhile, forward-looking indicators pointed to a further softening in the economic and inflation outlook, with the prognosis for manufacturing particularly weak. Brexit and domestic political uncertainty remained elevated as Boris Johnson took over as the UK's new prime minister on a "do or die" pledge to depart the EU by the revised exit date of 31 October.

Portfolio performance

The Company's NAV total return underperformed the FTSE All-Share Index, as stock selection detracted from relative performance.

The Company's lack of exposure for the majority of the period to beverage firm Diageo, which has been sought after by investors for its significant defensive growth characteristics, has been the greatest single stock detractor of relative performance. We do not invest in the company for valuation reasons; believing the stock's attractive characteristics are more than reflected in current valuations.

Stock selection in industrials also detracted from performance. The holding in security services company G4S has struggled but we have increased the position recently, encouraged by solid trading in the security business and the potential for strategic value creation from the sale of their customer cash management division. Meanwhile, not owning certain highly valued perceived growth stocks, such as credit and marketing services business Experian, also detracted.

The Company's holding in broadcasting services company ITV weighed on relative returns as investor concerns over both structural (Free-to-air model versus subscription service models) and cyclical (Brexit related advertising) issues depressed the share price.

Bookmaking company William Hill has been negatively impacted by profit headwinds brought on by tighter regulation in the UK and investor concerns about the scale of investment required for its US expansion. However, we remain positive as management change and an exciting US outlook have led to some recovery in the stock's performance more recently.

Our holding in overseas company Galp Energia suffered as a result of the decline in oil prices. We maintain our conviction in the company because of its rapidly growing Exploration & Production division, driven principally by offshore Brazil operations, as well as the potential for attractive dividend growth compared to other oil companies.

On the positive side, performance benefited from stock selection in mid-sized companies. Shares in Pets At Home have done well on the back of better-than-expected results and growing market confidence in the company's veterinary business strategy. Shares in designer, builder and investor in GP and primary care buildings Assura have benefited from the reduction in bond yields. Intermediate Capital Group shares were re-rated in recognition of its strong franchise within alternatives investment management. Lastly, shares in John Laing, one of the top contributors last year, re-rated on increased optimism about the prospects of growth in the US infrastructure market.

Portfolio activity

We have continued to increase the Company's UK domestic exposure, adding to selected companies on share price weakness and where valuations are attractive, such as Lloyds Banking, Tesco and new holdings in Whitbread and Crest Nicholson.

Whitbread is the UK's largest operator of hotels, restaurants and coffee shops. We believe the sale of Costa Coffee at a significant premium to expectations gives financial flexibility to invest in its remaining business whilst maintaining a strong balance sheet. The proceeds enable continued expansion of UK hotels and accelerated development in Germany, a bolstering of the pension fund and the potential for enhanced shareholder returns. The market underappreciates the quality of the brand and the growth potential of the franchise due to fears over the prospects for UK consumer businesses in the face of Brexit. We have been prepared to take a longer-term view given the strength of the balance sheet and the business model.

Weak trading in house builder Crest Nicholson's end markets resulted in a period of relatively poor share performance. With the shares trading at around tangible book value, we saw this as offering compelling value in a sector which generates attractive returns and has favourable long-term supply/demand dynamics. These characteristics are being muddied by short-term trading concerns, in some part related to Brexit. We are granted additional comfort by the strength of the balance sheet and management team buying shares. The shares yielded over 10% on purchase and we considered the dividend to be sustainable given it was twice covered by earnings. The purchase was in part funded by switching out of the longstanding holding in Bellway.

Later in the Company's financial year, we added Empiric Student Property REIT, an owner and operator of student accommodation in university towns. The stock had de-rated from a premium to net assets to a discount during 2017 as management failed to control administration costs as it moved to a more full integrated operational business. This also led to a rebasing of the dividend and a change in management. We believe the shares offer an attractive opportunity given cost control has tightened and the dividend (c.5% yield) appears sustainable.

Other additions have included G4S as noted above, and BAE Systems on weakness. We believe investors are giving too little credit to the strength of its order book. We also increased exposure to Pearson, the publishing and education firm, where we were more confident in the group's medium-term prospects than what was in our view a pessimistic market consensus. Unfortunately, in news after the Company's year end, the company has warned that this year's profits would be at the low end of consensus.

The additions have in part been funded by sales in Centrica, Halfords and Vodafone, where we believed weak operating performance threatened the sustainability of the dividends. We have also reduced the exposure to industrials given the deterioration in global growth. We sold out of paper manufacturer Smurfit Kappa, autos and aerospace components manufacturer Melrose and mining and oil & gas services company Weir. Part of the proceeds were used to augment the holding in specialty chemicals company Johnson Matthey, where we believe the valuation is unduly low.

Regarding the Company's overseas exposure, we took the decision to sell out of the long-standing position in Nordea following another quarter of poor results. Revenues declined further with little prospect of the inflection point we had been looking for. Cost control was insufficient to prevent further slippage in earnings forecasts, leaving dividends in both the current and next year exposed with cover reducing to 91% and 101% respectively. Our confidence in the path of future revenues eroded such that we believed a dividend cut was a strong possibility and post period end has become a reality. The position in German property company Deutsche Wohnen was also sold due to the fact that politicians in Berlin were proposing to cap rental increases, thereby negating our investment thesis. Proceeds were subsequently redeployed in Empiric Student Property REIT, mentioned above.

We have reduced the positions in Aviva and HSBC in favour of Legal & General and Lloyds Banking. We believe L&G has brighter prospects for growth, while we believe HSBC is fully-valued and Lloyds attractively priced.

Outlook

The global nature of UK equities has resulted in international developments setting the tone for the market. Recent global economic data increasingly points to deteriorating fundamentals. This has caused central banks to again loosen monetary policy in order to try and keep economies stable.

One particular market distortion resulting from the loose monetary policy of the last decade has been the outperformance of growth companies versus value stocks. Growth has become an increasingly sought after commodity and these companies have been valued off the back of very low bond yields (which have declined further over the course of the period), a dangerous yardstick to use.                

As bottom-up stock pickers, our job is to calculate the fundamental value of a business in order to identify mispriced opportunities and dividend opportunities that will help the portfolio deliver attractive levels of income that grow in real terms. However, given the valuation distortions, while we admire many of the aspects of the business models of some highly-valued 'quality growth' stocks, in many instances we cannot justify buying the shares at the current extended valuations. Accordingly the portfolio has a slight bias towards more lowly-valued stocks, where we can find companies that are not priced for perfection. We continue to seek out companies able to grow their profits and dividends, but where valuations are reasonable, such as BAE Systems, Johnson Matthey, Intermediate Capital and Rio Tinto, as well as certain turnaround situations where we have confidence in management's ability to effect change or to release value to the benefit of shareholders, such as GlaxoSmithKline, G4S and Burberry.

In addition to the global trends influencing UK equities, Brexit continues to dominate sentiment, creating considerable uncertainty for the UK economy and political environment. As a result, we are presented with a compelling valuation opportunity in some good quality, soundly-financed domestic companies taking a long-term perspective. This is reflected in holdings such as Crest Nicholson, Hollywood Bowl, Legal & General, Lloyds Bank, Pets At Home, Tesco and Whitbread. We continue to be very selective in the types of business model and financial characteristics we choose to invest in. We are wary of companies whose business models are particularly susceptible to disruption, such as areas of general retail. In addition, we place a large emphasis on balance sheets and accounting, as a weak balance sheet can hamper the ability of a company to invest in its operations or respond to changing market conditions.

Dividend outlook

The Company's future income is likely to be subject to foreign exchange moves in either direction given the current political situation in the UK. Approximately 30% of income is receivable in foreign currency. While in absolute terms a strengthening of sterling would provide a headwind to the Company's income, it would be less than that experienced by the market as a whole given that the Company is overweight the domestic areas of the market.

Looking at UK market dividends more generally, there has been a moderation in underlying dividend growth. Headline rates have remained buoyant but this reflects both the exchange rate tailwind of sterling weakness, which may change depending on how Brexit plays out, and from a substantial special dividend contribution, which may be a consequence of corporate uncertainty over the economic environment and a lack of confidence to invest for longer-term projects.

Investment policy

We remain disciplined investors using a long-term fundamental approach and the team's significant investment experience. We are acutely conscious of the need to balance the risks relative to the potential reward from opportunities that can be thrown up in such unpredictable markets. Our investment process focuses on building a diversified portfolio within a risk-controlled framework, aiming to deliver attractive levels of income growth ahead of inflation over time. This is reflected in some of the Company's highest conviction positions, such as BAE Systems, GlaxoSmithKline and John Laing Group.

We continue to actively monitor the holdings and the investment universe to identify mispriced opportunities. We are working closely with our in-house analysts who provide proprietary research to help to identify attractive investment candidates and to assess the validity of the investment case for current holdings. We continue to prioritise balance sheet strength and sustainable dividend yields, and have kept faith in stocks with short-term issues provided we have conviction in the long-term investment case.

Schroder Investment Management Limited

13 November 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. The principal risks, emerging risks and the monitoring system are also subject to robust assessment at least annually. The last assessment took place in October 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, save for the addition of currency and cyber risk.

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 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 that 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 investments' geographically diversified exposures, positions the Company to be suitably insulated from Brexit related risks. The board is also mindful that changes to public policy in the UK, or in other regions in which the Company invests, 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 assessment and internal controls

Risk assessment includes consideration of the scope and quality of the system of internal controls 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 19 on pages 45 to 48 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 August 2019 and the potential impact 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 and dividends.

In their assessment 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 the UK equity market 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.

Based on the Company's processes for monitoring operating costs, the share price discount, the Manager's compliance with the investment objectives, asset allocation, the portfolio risk profile, 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 to 31 August 2024.

In reaching this decision, the board has taken into account the Company's next continuation vote, to be put forward at the AGM in 2020. The directors have no reason to believe that such a resolution will not be passed by shareholders.

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 ("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, Strategic Report, the Directors' Report, the Corporate Governance Statement, the Directors' Remuneration 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 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;

-              state whether applicable UK Accounting Standards 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 provide the information necessary for shareholders to assess the Company's position and performance, business model and strategy.

Each of the directors, whose names and functions are listed on pages 16 and 17 of the 2019 annual report, confirm that to the best of their knowledge:

-              the Company's 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 loss 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 August 2019

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 August 2019

Statement of Financial Position at 31 August 2019

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 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. Taxation on ordinary activities comprises irrecoverable overseas withholding tax.

3.             Dividends

Dividends paid and declared

All dividends paid and declared to date have been paid, or will be paid, out of revenue profits.

4.             (Loss)/return per share

5.             Called-up share capital

6.             Net asset value per share

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.

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 38 of the 2019 annual report.

At 31 August 2019, all investments in the Company's portfolio are categorised as Level 1 (2018: same).

8.             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 August 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 August 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.