CC
JAPAN INCOME & GROWTH TRUST PLC
LEI: 549300FZANMYIORK1K98
ANNUAL FINANCIAL REPORT ANNOUNCEMENT
INVESTMENT OBJECTIVE, FINANCIAL INFORMATION AND PERFORMANCE
SUMMARY
INVESTMENT OBJECTIVE
The investment objective of the CC Japan Income
& Growth Trust Plc (the "Company" or "CCJI") is to provide
Shareholders with dividend income combined with capital growth,
mainly through investment in equities listed or quoted in
Japan.
FINANCIAL INFORMATION
|
As
at 31
October 2023
|
As
at 31
October 2022
|
Net assets (millions)
|
£235.1m
|
£203.6m
|
Net asset value ("NAV") per Ordinary
Share ("Share")1
|
174.5p
|
151.1p
|
Share price
|
162.5p
|
138.8p
|
Share price discount to
NAV2
|
6.9%
|
8.1%
|
Transferable Subscription Share
price
|
n/a
|
0.53p
|
Ongoing
charges2
|
1.06%
|
1.06%
|
Gearing (net)2
|
21.2%
|
20.9%
|
|
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|
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|
1 Measured
on a cum income basis.
2 This is an
Alternative Performance Measure ("APM"). Definitions of APMs used
in this report, together with how these measures have been
calculated, are disclosed in the Annual Report for the year ended
31 October 2023 ("Annual Report"), which will be made available on
the Company's website at www.ccjapanincomeandgrowthtrust.com.
PERFORMANCE SUMMARY
|
For the
year to 31 October
2023
% change1
|
For the
year to 31 October
2022
% change1
|
NAV ex-income total return per
Share2
|
+19.3%
|
-6.3%
|
NAV cum-income total return per
Share2
|
+18.9%
|
-5.9%
|
Share price total
return2
|
+20.9%
|
-7.1%
|
Tokyo Stock Exchange Price Index
("TOPIX") total return
|
+12.0%
|
-9.5%
|
Revenue return per Share
|
5.37p
|
5.14p
|
|
--------------
|
--------------
|
Dividends per share:
|
|
|
First interim dividend
|
1.55p
|
1.40p
|
Second interim dividend
|
3.75p
|
3.50p
|
|
--------------
|
--------------
|
Total dividends per Share for the
year
|
5.30p
|
4.90p
|
|
========
|
========
|
1 Total
returns are stated in sterling, including dividends
reinvested.
2 These are
APMs.
Source: Chikara Investments LLP -
The Company's Factsheet October 2023.
CCJI ANNUAL PERFORMANCE SUMMARY
Year to October unless
otherwise stated
|
Launch
to
Oct 2016*
|
2017
|
2018
|
2019
|
2020
|
2021
|
2022
|
2023
|
Share price (p)
|
122.40
|
152.00
|
153.00
|
150.00
|
119.50
|
154.00
|
138.75
|
162.50
|
Share price total return
(%)
|
+23.5
|
+27.2
|
+2.8
|
+0.7
|
-17.3
|
+32.7
|
-7.1
|
+20.9
|
NAV per Share (p)
|
123.90
|
146.00
|
148.60
|
158.90
|
136.80
|
165.40
|
151.09
|
174.50
|
NAV (cum-income) total return per
Share (%)
|
+24.9
|
+20.7
|
+4.1
|
+9.9
|
-11.1
|
+24.3
|
-5.9
|
+18.9
|
TOPIX Index total return in sterling
(%)
|
+32.7
|
+10.1
|
-0.4
|
+7.2
|
+0.3
|
+11.9
|
-9.5
|
+12.0
|
Revenue return per Share (Undiluted)
(p)
|
3.60
|
4.06
|
4.55
|
5.26
|
5.04
|
4.75
|
5.14
|
5.37
|
Dividends per Share (p)
|
3.00
|
3.45
|
3.75
|
4.50
|
4.60
|
4.75
|
4.90
|
5.30**
|
|
========
|
========
|
========
|
========
|
========
|
========
|
========
|
========
|
* Period
from the Company's launch on 15 December 2015 to 31 October
2016.
** Includes second
interim dividend of 3.75p for the year ended 31 October
2023.
CHAIRMAN'S STATEMENT
Performance Review
I am delighted to report a year of strong
performance to 31 October 2023. The Net Asset Value ("NAV") total
return of the Company which includes income, increased by 18.9% in
sterling terms. The Share price, again measured by total return,
rose 20.9%. This represents significant outperformance against the
TOPIX Total Return Index, which rose 12.0% in sterling terms during
the year.
Since launch in December 2015 until
the recent financial year end, the Company's NAV total return,
including dividend distributions, recorded a 117.4% increase,
continuing to outperform the sterling adjusted TOPIX total return
index, which rose 77.0%. Over the same period, the Share price
total return in sterling has doubled. An aggregate of 30.5 pence of
dividends per Share has been paid to Ordinary Shareholders since
inception. Our long-term track record and relative performance
against the AIC Japan investment trust peer group remains robust.
This underscores the validity of our investment mandate which seeks
dividend income combined with capital growth.
Our investment manager, Richard
Aston, has had to navigate another challenging year with an
uncertain geopolitical situation, not least the fallout from wars
on two fronts. Nevertheless, the Japanese stock market has
rebounded after a lacklustre calendar year in 2022 with the Topix
rising 21.9% in local currency terms in the first 10 months of
2023. This has been offset by the weakness of the yen which has
fallen by 13.6% against the US dollar over the same period and
14.0% against sterling. This reflects the continuing disparity
between the ongoing accommodative monetary policy by the Bank of
Japan ("BOJ") as distinct from rising interest rates and tighter
policy agendas pursued by most other Central Banks, including the
Federal Reserve in the United States.
Richard Aston and his team have
handled the market volatility with great discipline by retaining
focus within the scope of the investment mandate which seeks total
return. They have identified and captured opportunities arising
from the post Covid reopening of the Japanese domestic economy with
adroit portfolio positioning notably by being overweight in
financials as the sector recovered. The team had a notable success
with Socionext participating in a Japanese IPO for the first time.
Our manager's aim is to find companies with solid growth prospects,
improving cash flow and dividends. They deservedly picked up the Citywire
award in November 2023 for best performing Japanese equity
investment trust.
Change of investment manager name
On 1 August 2023, Coupland
Cardiff Asset Management LLP, the Company's Alternative Investment
Fund Manager ("AIFM") announced that they were changing their name
to Chikara Investments LLP ("Chikara"). There are no plans at
present to change the name of this Company. Chikara is broadening
their product range with the arrival of the well-regarded Emerging
Markets team from Stewart Investors. It is hoped that this will
raise both Chikara and your Company's profile.
Growing the Company
Although the Ordinary Share price discount to NAV
has narrowed slightly to 6.9% at the year end (31 October 2022:
8.1%), we are not able to issue any more shares until we regain our
premium rating. The Board continues to monitor the share price
rating and the level of discount and has the flexibility to buy
back shares through the authority renewed by Shareholder Resolution
at the Annual General Meeting ("AGM").
As I reported in the interim
statement, it was unfortunate that The Transferable Subscription
Shares ("TSS") expired worthless on the last business day of
February 2023. Indeed, we might have raised up to £40 million with
a little more time. It is ironic that within a fairly short period
the TSS would have been "in the money" with the Ordinary shares
comfortably cresting the Subscription price of £1.61. The scheme is
unlikely to be repeated in the near future.
Other options to grow the company
include merger and acquisition given a marked pickup in activity
reflecting an increased trend of consolidation within the
investment trust industry not least the Japanese sectors. The Board
remains alert to any opportunities that could arise which could be
incremental to our market capitalisation.
The investment trust industry
continues to face regulatory pressures. The PRIIPS and Key
Information Document ("KID") cost disclosure requirements give a
misleading reading by including transactional and finance expenses,
integral to operations, rather than just ongoing costs (i.e.,
investment management fees) and compare unfavourably with the
disclosure required by open ended funds. There is ongoing scrutiny
of this problem by the FCA but so far little traction to resolve
the issue despite pressure from the industry and Association of
Investment Companies ("AIC"). Although investment trusts are not
directly in the scope of the new Consumer Duty regulations, there
may be unintended consequences potentially deterring investor
appetite not only on the basis of fallacious cost comparisons but
also mitigating against those trusts trading at significant
discounts.
The Board continues to invest in
various marketing initiatives to raise the profile of the Company
by way of webinars hosted by third parties and continue to update
our website, which you can visit at: https://ccjapanincomeandgrowthtrust.com.
Our Broker and Investment Manager
organise regular schedules of meetings with wealth managers,
institutions and platforms, besides major Shareholders, which
continue to raise the profile and awareness of our differentiated
total return mandate.
Income and Dividends
For the year to 31 October 2023, the revenue
return increased by 4.5% to 5.37p per Ordinary Share. The
underlying trend of Japanese dividend growth remains intact despite
the weakness of the yen. We translate dividend income into sterling
on receipt. In accordance with our investment policy we do not
hedge currency.
We are maintaining our policy of
paying a second interim dividend in substitution for a final
dividend. Therefore, on the 19 January 2024, the Board
declared a second interim dividend of 3.75p per Ordinary Share,
making a full year distribution of 5.30p per Ordinary Share and
representing an 8.2% increase over last year. This will be paid on
1 March 2024 to those Shareholders on the register as at 2 February
2024 with an ex-date of 1 February 2024.
While the Board is committed to
growing the dividend, it considers it prudent to continue to build
the revenue reserve which now represents 40% of this year's
distribution after the payment of the second interim dividend. As
we have previously reminded Shareholders, the Company has a Special
Reserve of £64.7 million available for distribution in
circumstances where there is an unforeseen revenue
shortfall.
This is the eighth year of dividend
increase for the Company with the annual dividend increasing by
76.7% since launch in December 2015. We currently pay a dividend
yield of around 3% out of covered income. Investors looking for
equity income can continue to look to Japan.
Annual General Meeting ("AGM")
In line with the requirements of
the Companies Act 2006, the Company will hold an AGM of
Shareholders to consider the resolutions laid out in the Notice of
Meeting. The Board encourages Shareholders to attend and
participate in the Company's forthcoming AGM on 5 March 2024 at 12
noon at the offices of Stephenson Harwood LLP, 1 Finsbury Circus,
London EC2M 7SH. Our Investment Manager, Richard Aston, will
provide an update on the portfolio and take questions after the
formal business of the meeting. The Board will also be available to
meet Shareholders and discuss the Company. I do hope that you will
join us. We recognise it is not possible for everyone to attend the
AGM and I would remind Shareholders that any questions relating to
the business of the AGM, can be sent by email to
ukfundcosec@apexfs.group.
To the extent that it is appropriate to do so, the Company will
respond to any questions received in a Q&A which will be posted
on the Company's website. If Shareholders are unable to attend the
meeting in person, they are strongly encouraged to vote by proxy
and to appoint the "Chairman of the AGM" as their proxy. Details of
how to vote, either electronically, by proxy form or through CREST,
can be found in the Notes to the Notice of AGM. The lodging of a
form of proxy (or an appointment of a proxy through CREST) will
not, however, prevent a Shareholder from attending the AGM and
voting in person if they so wish.
Outlook
Despite decent returns over the last decade, the Japanese
equity market remains undervalued. The earnings yield dwarfs the
negative return from cash. The Government and The Tokyo Stock
Exchange are committed to cleaning up capital inefficiencies and
boosting returns on equity. Companies are being forced to change
their behaviour. TOPIX listed companies are still sitting on
considerable amounts of cash estimated at the yen equivalent of
over US $1 trillion. This should steadily be reduced through
increasing shareholder distributions, share buy backs, management
buyouts ("MBOs") and private equity deals. The recent
rationalisation of cross holdings and subsidiaries by the
influential Toyota group and the gathering pace of MBOs executed at
significant premiums to existing share prices are examples. The
drive for efficiency is complemented by PM Kishida's efforts to
mobilise a shift in the mountain of household savings and domestic
institutional funds into income generating assets including
equities. The recent doubling of NISA
allowances, Japan's equivalent of the UK
ISA, is one such initiative to encourage savings into the stock
market. It remains to be seen whether the inevitable but gradual
steps towards normalisation of monetary policy as a corollary of
inflation serve to stimulate equity investment flows. For now, BOJ
monetary policy remains uniquely accommodating compared to other
major Central Banks.
Deflation in Japan has at last given
way to some inflation. Wage growth should help the consumer.
Tourism is picking up. Reshoring manufacturing capacity has seen a
recovery in capital expenditure. The weakness of the yen is an
export opportunity. Forecasts for corporate earnings growth are
healthy with an estimated growth of at least 7.5% for both 2024 and
2025. These virtuous developments will benefit further from any
recovery of the world economy and improvement in global political
tensions. The risks of widening conflict
in the Middle East quite apart from
tensions over Taiwan and Korea are apparent. The recent earthquake
also reminds us that Japan is susceptible to natural disasters.
That aside, most commentators believe that the USA is heading for a
soft landing rather than a deep recession. World equity markets
tend to take a lead from the policy actions of the US Federal
Reserve, but Japanese equities now stand out on their own merits.
Our mandate is well placed to continue to provide solid total
returns and the Board has every confidence in Richard Aston and the
team at Chikara to keep producing them.
Board Composition
Following a search carried out by Cornforth
Consulting, we are pleased to welcome John Charlton-Jones to the
Board. John was appointed as a Director on 1 October 2023. John has
had a 36-year career as a Japanese equities' stockbroker recently
retiring from CLSA where he headed up the institutional sales desk
in London. John possesses a formidable knowledge of many facets of
Japan and will stand for election at this year's AGM.
Peter Wolton retired from the Board
on 10 October 2023 after serving as Senior Independent Director
since launch. On behalf of the Board and Shareholders, I would like
to thank Peter for his valuable service, support and contributions
over the first 8 years of the Company's life.
As the remaining founder Director, I
am retiring at this year's AGM and June Aitken will succeed me as
Chair. I am sure that the Company will be in sound hands under her
stewardship, supported by an experienced and professional Board.
Craig Cleland will take over from June as the Senior Independent
Director. The Board will initially revert to its original
complement of four directors.
One summer's day back in 2015,
conversations with Richard Cardiff in a Wiltshire pub, led to the
creation of the Company. Coupland Cardiff, as Chikara were then,
had astutely identified a very different investment approach to
Japan targeting the potential of total return-growth with income -
which still presents a compelling proposition. We were the first
Japanese investment trust to launch for 25 years. It is gratifying
to have been part of the project. Our original Shareholders are now
enjoying more than a 5% yield on their book cost. I would like to
thank all those involved, particularly the Board members past and
present, for all their efforts and support. Hopefully, this is just
the beginning of a new dawn for a Japanese market
renaissance.
Harry Wells
Chairman
24 January 2024
INVESTMENT MANAGER'S REPORT
Performance Review
The Net Asset Value cum-income of the CC Japan
Income & Growth Trust rose by 18.9% in sterling terms in the
twelve-month period to 31 October 2023. The Topix Total Return
Index recorded a rise of 19.8% in yen terms, but the sterling
returns were negatively affected by the 8.1% depreciation of the
yen against the British Pound with the exchange rate falling from
Y170.5/GBP to Y184.4/GBP. This performance continues the strong
record of total return since inception.
It is not unusual for global
developments to have a significant impact on the Japanese economy
and its stock market, and this has been particularly evident during
the last twelve months. Over this period, the Japanese economy has
been less synchronised with its overseas counterparts than in
recent years, due to the later removal of the domestic Covid
advisory procedures at the end of January 2023 and the lifting of
restrictions on international visitors in May 2023. However, the
investment landscape for all assets has been dominated by the post
pandemic re-emergence of inflation and associated response from
Central Banks around the world. Rising political tensions globally
as well as environmental concerns and the development of new
technologies have also featured as prominent investment
considerations, affecting the performance of individual companies
and the dynamics of whole industries, and we anticipate that each
of these will continue to be relevant going forward.
The Japanese equity market performed
strongly in the twelve months to the end of October 2023. The
portfolio was able to improve on the market's overall performance.
The standout performer has been the holding in Socionext in which a
holding was established during the company's Initial Public
Offering in October 2022. For a number of years, we have been
unable to identify attractive investment opportunities suitable for
this mandate in an increasingly buoyant new listings market in
Japan. However, Socionext, which was formed through the merger of
system LSI (large-scale integration) businesses of leading Japanese
semiconductor manufacturers, Fujitsu and Panasonic, listed on the
Tokyo Stock Exchange Prime Market with the growth potential and the
financial attributes required by the investment process. The newly
listed shares performed well as the company exceeded initial
operational performance expectations and its system on a chip (SoC)
technology platform became increasingly appreciated for its
potential in the area of Artificial Intelligence (AI).
April 2023 saw the retirement as
Governor of the Bank of Japan of Haruhiko Kuroda, the architect of
the experimental easy monetary policy that has made an important
contribution to taming deflation in Japan. Before his departure, in
December 2022 he announced the first signs of a reversal of the
progressively easier policies introduced over the last 10 years. By
expanding the range of yields tolerated under the policy known as
Yield Curve Control (YCC), he paved the way for his successor,
Kazuo Ueda, to steadily adjust monetary policy towards more normal
conditions. This has had a favourable impact on the share price
performance of companies in the financial industry. Leading banks
Sumitomo Mitsui Financial Group and Mitsubishi UFJ Financial Group,
which have been long standing holdings in the portfolio on the
basis of the steadily improving business performance and returns to
shareholders, received a significant boost to their share prices.
Other financial company stocks such as SBI Holdings (broad range of
financial services) and JACCS (consumer credit) also performed
strongly.
Despite the uncertain economic
outlook, some of the top performing sectors over the past twelve
months have included cyclical beneficiaries such as iron and steel,
marine transportation, construction and automobiles. These are
industries where this portfolio has little exposure as the key
attributes of the investment strategy - long-term growth and
consistent returns to shareholders - are not evident in their past
performance, or likely in the future under current operating
conditions. While it can be frustrating at times to observe share
price rallies in the sectors in which the exposure in the Company
is low or non-existent, it is an integral discipline of the process
that we believe is important in generating the long-term track
record of dividend progression and total return.
At an individual stock level, it is
disappointing to have experienced the underperformance of Dip
(internet job recruitment services) and Carta Holdings (internet
advertising). While both companies have reiterated their commitment
to shareholders through consistent dividends and share buybacks, it
is apparent that corporate spending on business services has
temporarily weakened as consumer facing companies contemplate
strategies to pass on higher costs. These two companies remain
leaders in their sector and can be expected to recover as corporate
Japan adapts to the end of deflation.
Portfolio Positioning
We believe there is a growing
recognition of the importance of compound returns in Japan and,
with this, increasing opportunities for investment as corporate
management identify strategies to enhance corporate value. We
continue to focus on those that offer the prospect of long-term
business growth, accompanied by rising returns to shareholders, as
opposed to those where the benefit from one-off capital events such
as asset disposal or large share buyback will reap only short-term
reward.
Changing corporate attitudes and
equity market volatility continue to create many new and
interesting investment candidates for us. For example, over the
past twelve months new holdings have been established in JACCS,
En-Japan and Mani, three quite diverse companies.
JACCS is an affiliate of Japan's
largest bank Mitsubishi UFJ Financial Group. It is well established
as one of the leading consumer credit companies in Japan offering
revolving credit, rent guarantees and payment settlements amongst a
range of services which have been successfully expanding in
selective countries around Asia. Their most recent Mid-term Plan
highlights the management's intent to optimize these growth
opportunities, financial soundness and returns to shareholders
through stable and continuous dividend payments.
En-Japan, which provides online
recruitment and staffing services, has announced an interesting
investment plan for areas of the labour
market that will benefit from Prime Minister Kishida's initiative
to improve job mobility. This will limit the potential for
short-term earnings growth, but investors will be compensated for
their patience by a stable dividend until the rapid
growth anticipated by these new business
opportunities is reflected in a commensurate rise in the
distribution to shareholders.
Mani is a global high precision
manufacturer of niche medical equipment used in surgical and dental
procedures. The company has been extremely successful in establishing its products as the premium devices
in parts of Asia and is seeking to replicate this further with
India and North America offering strong potential markets.
Complementing the anticipated growth and healthy balance sheet is
an attractive dividend distribution policy.
The prospect of rising interest
rates has lowered the appeal of real estate investment trusts
("REITS") and the weighting in these specialist investment products
has been reduced to zero for the first time since the
Trust was established with the disposal of
Industrial and Infrastructure REIT and Star Asia REIT. The holding
in Intage was sold following a partial
takeover offer from NTT DoCoMo, Japan's
leading mobile phone operator. Other disposals have included
Fujitec and TRE Holdings where progress towards each company's
business objectives has been disappointing.
Outlook
We believe the prospects for Japanese equities remain
favourable following a year of strong performance. The emergence of
inflation in Japan is a new dynamic for companies and investors to
address. The consequences are likely to lead to many potentially
positive responses over the medium term. Central to this will be
the efforts that Prime Minister Kishida will make with his key
policy initiatives to increase job mobility and wage
levels, and also to double the income generated
from the vast pool of personal savings. Of particular note is the
revamped Nippon Individual Saving Account (NISA) programme which
will be relaunched at the beginning of 2024, offering more flexibility in investment approach, the
potential for larger annual savings amounts and a perpetual tax
exemption period. Given the emergence of inflation and rising
lifespans, this new system corresponds to the growing need for
individuals to take more financial responsibility through better
long-term management of retirement savings.
Bearing that in mind, it seems more
than just a coincidence that in early 2023, the Tokyo Stock
Exchange announced major initiatives to support the considerable
progress in corporate governance seen in Japan since the
Stewardship Code and Corporate Governance
Code were first introduced in 2014 and 2015 respectively. The need
for identification of the relevant cost of capital for each
business and requiring management efforts consistent with an
improvement in corporate value is becoming widely acknowledged.
Indeed, this is already being cited by companies seeking to improve
capital efficiencies, for example, by reducing cross-shareholdings
or raising shareholder returns. We believe
that the ongoing progress in corporate governance reform has been
instrumental for the strong performance of the Japanese equity
market not only over the last twelve months, but really over the
last decade. We believe that these improvements in corporate focus
will continue in the coming years and will be reflected in
favourable total returns for both domestic and international
investors.
RICHARD ASTON
Chikara
Investments LLP
24 January 2024
TOP
TEN HOLDINGS
Mitsubishi UFJ Financial Group
Inc
7.0%
Mitsubishi UFJ Financial Group was established in 2005 through
the merger of Mitsubishi Tokyo Financial Group and UFJ Holdings. It is now one of Japan's leading
financial services groups with established operations around the
world, most prominently in Asia and North America. This includes an
alliance and 20% stake in Morgan Stanley entered into in 2008. The
company continues to promote a balanced capital management policy
maintaining a strong capital base, appropriate allocations to
strategic growth opportunities and enhancing shareholder
returns.
Sumitomo Mitsui Financial Group inc
6.7%
Sumitomo Mitsui Financial Group was established through the
merger of Sumitomo Bank and Sakura bank in 2001. It is one of
Japan's leading financial groups offering services such as
commercial banking, leasing, securities, consumer finance and asset
management. The company targets continued
growth in shareholder value by promoting disciplined investment and
alliances, sound finances and progressive shareholder
returns.
Nippon Telegraph & Telephone corp
4.3%
NTT
provides a broad range of telecommunication and business services
in Japan and increasingly overseas. As well as benefiting from the
focus on data services and IT
infrastructure, the company is also seeking synergies from the
consolidation of mobile telephone subsidiary NTT DoCoMo and cost
cutting initiatives that enhance the earnings growth and potential
for further returns to shareholders.
Itochu
Corp
4.1%
Itochu Corp is one of Japan's leading trading companies
involved in a broad range of business domains from upstream raw
materials to downstream retail. In recent years Itochu has
successfully introduced a business investment strategy based on
high levels of capital efficiency and appropriate cash allocation
including increasing returns to shareholders in the form of
dividend and share buybacks.
Shin-Etsu Chemical co
ltd
3.8%
Shin Etsu Chemical is a manufacturer with top global market
share in PVC, semiconductor silicon wafers and a number of other
semiconductor related and functional materials. The company
established a global production base and developed a list of top
tier international customers, which has allowed it to generate a
strong track record of growth despite underlying volatility in
individual markets. The company has, in recent years, given greater
attention to shareholder returns within their capital policy,
giving emphasis on stability and progression.
SBI
Holdings inc
3.5%
SBI
Holdings is a holding company that offers innovative financial
services in areas such as securities broking, banking, insurance
and asset management. As a group it focuses specifically on organic
growth in each of its businesses whilst maintaining a high return
on equity (RoE) to generate value for shareholders.
Sompo Holdings
inc
3.5%
Sompo Holdings is a financial holding company which operates a
leading domestic property and casualty insurance business as well
as life insurance and healthcare operations in Japan. It has also
established an international presence to increase scale and
diversification alongside initiatives to improve corporate and
capital efficiency, and improve shareholder returns.
Hitachi
Ltd
3.4%
Hitachi Ltd is a globally recognised manufacturer of
industrial equipment and developer of software covering a broad
range of industries including Information Technology, Energy,
Automotive, Transportation and Consumer Electronics. After
restructuring the business operations, management has emphasised
capital efficiency and improving shareholder returns.
Softbank Corp
3.4%
Softbank Corp provides telecommunication and associated
network services in Japan and is a subsidiary of the Softbank
Group. The company continues to demonstrate strong growth in its
business services segment and from its "beyond carrier" strategy
which includes e-commerce leader Yahoo Japan, online fashion
retailer Zozo, social network Line and electronic payment service
PayPay.
Noevir holding
corp
3.1%
Noevir is a leading domestic manufacturer of cosmetics,
specialising in skincare and makeup products, as well as OTC
pharmaceuticals and health foods. The company focuses on specific
categories in the Japanese market where it continues to gain market
share and seeks incremental growth from markets overseas and
duty-free sales. It aims to deliver a stable and continuous
dividend as the primary source of return to their shareholders and
has increased the annual distribution for the last 12 consecutive
years.
INVESTMENT POLICY, RESULTS AND OTHER
INFORMATION
Investment policy
The Company intends to invest in equities listed
or quoted in Japan. The Company may also invest in exchange traded
funds in order to gain exposure to such equities. Investment in
exchange traded funds shall be limited to not more than 20 per
cent. of Gross Assets at the time of investment. The Company may
also invest in listed Japanese real estate investment trusts
("J-REITs").
The Company may enter into long only
contracts for difference or equity swaps for gearing and efficient
portfolio management purposes.
No single holding (including any
derivative instrument) will represent more than 10 per cent. of
Gross Assets at the time of investment and, when fully invested,
the portfolio is expected to have between 30 to 40 holdings,
although there is no guarantee that this will be the case and it
may contain a lesser or greater number of holdings at any
time.
The Company will have the
flexibility to invest up to 10 per cent. of its Gross Assets at the
time of investment in unquoted or untraded companies.
The Company will not be constrained
by any index benchmark in its asset allocation.
Borrowing policy
The Company may use borrowings for settlement of
transactions, to meet on-going expenses and may be geared through
borrowings and/or by entering into long only contracts for
difference or equity swaps that have the effect of gearing the
Company's portfolio to seek to enhance performance. The aggregate
of borrowings and long only contracts for difference and equity
swap exposure will not exceed 25 per cent. of Net Asset Value at
the time of drawdown of the relevant borrowings or entering into
the relevant transaction, as appropriate, although the Company's
normal policy will be to utilise and maintain gearing to a lower
limit of 20 per cent. of Net Asset Value at the time of drawdown of
the relevant borrowings or entering into the relevant transaction,
as appropriate. It is expected that any borrowings entered into
will principally be denominated in yen.
Hedging policy
The Company does not currently intend to enter
into any arrangements to hedge its underlying currency exposure to
investment denominated in yen, although the Investment Manager and
the Board may review this from time to time.
Results and dividend
The Company's revenue return after tax for the
financial year amounted to £7,241,000 (2022: £6,930,000). In August
2023, the Company paid an interim dividend of 1.55p (2022: 1.40p)
per Ordinary Share. On 19 January 2024, the
Directors declared a second interim dividend for the year ended 31
October 2023 of 3.75p (2022: 3.50p) per Ordinary Share, which will
be paid on 1 March 2024 to Shareholders on the register at 2
February 2024. Therefore, the total
dividend in respect of the financial year to 31 October 2023 will
be 5.30p (2022: 4.90p) per Ordinary Share.
The Company made a capital gain
after tax of £31,099,000 (2022: loss of £19,818,000). The total
return, including income, after tax for the year was a gain of
£38,340,000 (2022: loss of £12,888,000).
The
Company's Purpose, Values and Culture
The primary focus of the Company
is to provide Shareholders with dividend income combined with
capital growth, mainly through investment in equities listed or
quoted in Japan. The Investment Manager identifies companies which
are undervalued, have strong balance sheets, strong business
franchises, and favourable attitudes to shareholder returns in the
form of sustainable and growing dividends and share buyback
policies.
The Company aims to meet the needs
of investors through the Investment Manager's dual mandate of
generating income and capital growth. The Company has been
investing in Japanese equities since launch in 2015. Whilst the
Company does not have a benchmark, the Board measures performance
against the TOPIX Total Return Index and High Yield
Indices.
To achieve this, the Board of
Directors has engaged Chikara Investments LLP, who have the
appropriate capability, resources and controls in place to actively
manage the Company's assets in order to meet its investment
objective. The Investment Manager has a well-defined investment
strategy and process which is regularly and rigorously monitored
and reviewed by the Board. As the Company has no employees and acts
through its service providers, its culture is represented by the
values and behaviour of the Board and third parties to which it
delegates the provision of services.
To ensure that the Company's
purpose, values, strategy and culture are aligned, the Board
comprises independent Non-Executive Directors, who together bring a
wide range of knowledge, skills and experience. The Board members
contribute to a transparent culture ensuring effective oversight,
critical support and challenge to the Investment Manager, and all
other third-party suppliers. For more information on the Board's
engagement with Stakeholders, please refer to the Company's section 172 statement in the Annual
Report.
Key
performance indicators ("KPIs")
The Board measures the Company's success in
attaining its investment objective by reference to the following
KPIs:
(i)
Long-term capital growth
The Board considers the Company's Net Asset
Value ("NAV") total return figures to be
the best indicator of performance over time and this therefore is
the main indicator of performance used by the Board. The NAV
cum-income total return for the year to 31 October 2023 increased
by 18.9% (2022: -5.9%) in sterling terms, and the NAV total return
from the Company's inception in December 2015 to 31 October 2023
increased by 117.4%.
The Chairman's Statement
incorporates a review of the highlights during the year. The
Investment Manager's Report gives details on investments made
during the year and how performance has been achieved.
(ii) Revenue return per Share and
dividends
The Company's revenue return per Ordinary Share, based on the
weighted average number of shares in issue during the year, was
5.37p (2022: 5.14p). The Company's proposed total dividend payable
in respect of the year ended 31 October 2023, including an interim
dividend of 1.55p per Ordinary Share paid on 4 August 2023 and a
second interim dividend of 3.75p payable on 1 March 2024 is 5.30p
(2022: 4.90p) per Ordinary Share.
(iii) Discount/premium to NAV
The discount/premium relative to
the NAV per share represented by the share price is closely
monitored by the Board. The share price closed at a 6.9% discount
to the NAV as at 31 October 2023 (2022: 8.1% discount).
(iv) Control of the level of ongoing
charges
The Board monitors the Company's operating costs carefully.
Growing the size of the Company offers many benefits, as not all of
the Company's operating costs increase in line with the Company's
assets under management. Based on the Company's average net assets
for the year ended 31 October 2023, the Company's ongoing charges figure calculated in accordance with
the AIC methodology was 1.06% (2022: 1.06%).
Other information
Modern slavery
disclosure
The Company aims to act to the highest standards and is
committed to integrating responsible business practices throughout
its operations. The prevention of modern slavery is an important
part of good corporate governance.
As an investment trust, the Company
does not offer goods or services to consumers and deals
predominantly with professional advisers and
service providers in the financial services industry. As such
the Board considers that the Company is out
of scope of the Modern Slavery Act 2015.
Greenhouse Gas Emissions and Streamlined Energy and Carbon
Reporting ("SECR")
The Company has no employees, physical assets,
property or operations of its own, does not provide goods or
services and does not have its own customers. It follows that the
Company has little to no direct environmental impact. In
consequence, the Company has limited greenhouse gas emissions to
report from its operations, nor does it have responsibility for any
other sources of emissions under the Companies Act 2006 (Strategic
Report and Directors' Reports) Regulations 2013. As the Company has
no material operations and therefore has little energy use, it
falls below the threshold to produce an energy and carbon report.
The Company's ESG policy is contained in the Annual
Report.
Employees
The Company has no employees. As at 31
October 2023, the Company had five
Directors, comprising three males (60%) and two females (40%). On 1
October 2023, John Charlton-Jones joined the Board, bringing with
him additional experience and skills. Peter Wolton, having served
on the Board since launch in December 2015, stepped down as a
Non-Executive Director on 10 October 2023.
Biographical details can be found in the Annual Report. As part of
the recruitment process, the Board was, and continues to be,
mindful of the Company's policy on diversity which is contained in
the Corporate Governance statement.
Anti-bribery, Corruption and Tax
Evasion
It is the Company's policy to conduct all of its business in
an honest and ethical manner. The Company takes a zero-tolerance
approach to bribery, corruption and tax evasion and is committed to
acting professionally, fairly and with integrity in all its
business dealings and relationships
wherever it operates. Taking account of the nature of the Company's
business and operations, the Board has adopted policies and
procedures that allow it to have reasonable assurance that persons
associated with the Company are prevented from engaging in bribery,
corruption or tax evasion; and has adopted the same standard of
zero tolerance.
Viability Statement
The Directors have assessed the viability of the
Company for the period until 31 October 2028 (the "Period'') taking
into account the long-term nature of the Company's investment
strategy and the principal risks and emerging risks.
The Board has chosen a five-year period to assess
the Company's viability because of the
expected long-term nature of equity investment, the Investment
Manager's holding period and the fact that the investment objective
is unlikely to change significantly over this period.
In their assessment of the prospects
of the Company, the Directors have considered each of the principal
and emerging risks and uncertainties and the liquidity and solvency
of the Company. The Directors have considered the Company's income
and expenditure projections and the fact that the Company's
investments comprise securities which can be readily realised and
could, if necessary, be sold to meet the Company's funding
requirements. Portfolio activity and market
developments are discussed at quarterly Board meetings. The
internal control framework of the Company is subject to a formal
review on at least an annual basis.
The Directors do not expect there to
be any material increase in the annual ongoing charges of the
Company over the Period. The Company's income from investments and
cash that can be realised from the sale of its investments provide
substantial cover to the Company's operating expenses, and any
other costs likely to be faced by the Company over the period of
their assessment. Based on this assessment, the Directors have a
reasonable expectation that the Company
will be able to continue in operation and meet its liabilities as
they fall due over the Period.
The Chairman's Statement and
Investment Manager's Report present a positive long-term investment
case for Japanese equities, which also underpins the Company's
viability for the Period.
The continuation of the Company is
subject to approval by Shareholders every three years with the next
continuation vote due to be held at the AGM in 2025.
This assessment takes into account
the impact that higher levels of global inflation are having on
portfolio companies and the investment environment as discussed in
the Chairman's Statement, the Investment Manager's Report and in
the Principal and Emerging Risks section.
Outlook
The outlook for the Company is discussed in the Chairman's
Statement.
RISK AND RISK MANAGEMENT
Principal and emerging risks and
uncertainties
The Board is responsible for the management of
risks faced by the Company and delegates this role to the Audit and
Risk Committee (the "Committee").
The Committee carries out, at least
annually, a robust assessment of principal and emerging risks and
uncertainties and monitors the risks on an ongoing basis. The
Committee has a dynamic risk management register in place to help
identify key risks in the business and oversee the effectiveness of
internal controls and processes.
The risk management register and
associated risk heat map provide a visual reflection of the
Company's identified principal and emerging risks. These fall into
three categories: strategic and business risk, financial and
operational risk, and regulatory and compliance risk. The Committee
considers both the impact and the probability of each risk
occurring and ensures appropriate controls are in place to reduce
risk to an acceptable level.
During the year under review the
Committee was particularly concerned with geopolitical risk
following the outbreak of war in Gaza and Israel, in addition to
the ongoing conflict in the Ukraine, and the political tension
between the US and China.
High levels of inflation globally,
continued uncertainty concerning the level of interest rates and
the threat of recession have led to investors being more risk
averse and generally shunning equities. In this scenario, Japan
with its exceptionally low interest rates has outperformed most global markets, but the weakness of the
Japanese yen against the British pound has impacted the Company's
revenue receipts.
The Committee continues to review
the processes in place to mitigate risk; and to ensure that these
are appropriate and proportionate in the current market
environment. The principal and emerging risks, together with a
summary of the processes and internal controls used to manage and
mitigate risks where possible are outlined below.
The Company's ability to operate as
a going concern and the Company's longer-term viability can be
found in the Annual Report.
Principal Risks
|
Mitigation
|
Movement During the Year
|
Poor investment performance The Company's investment
performance depends on the Investment Manager's ability to identify
successful investments in accordance with the Company's investment
policy.
The Company's Share price may not
always reflect underlying net asset value.
|
The Investment Manager has a well-defined investment strategy and
process which is regularly and rigorously reviewed by the
Board.
The Board monitors the Company's
investment performance against its peer group over a range of
periods.
Whilst the Company does not have a
benchmark, the Board measures performance for reference purposes
against the TOPIX and High Yield Indices. At each meeting, the
Board discusses the Japanese investment environment, and receives
reports on the composition of the portfolio, any recent sales and
purchases, and expectations of dividend income.
The Management Engagement Committee
Reviews the appointment of the investment manager on an annual
basis.
The Board monitors the share price
discount to NAV and has authority to buy back shares.
|
↔
|
Market Risk
Changes in the investment, economic or political conditions in
Japan, and/or in the countries in which the
Company's investee companies operate
could substantially and adversely
affect the Company's prospects.
In addition to changing
economic factors such as interest rates, foreign exchange rates
and employment, unpredictable factors such
as natural disasters, earthquakes
and diplomatic events may impact market risk.
|
The Directors acknowledge that market risk is inherent in the investment process. The Company
maintains a diversified portfolio of quoted
investments.
The Board reviews the impact of
economic indicators on the portfolio with
the Investment Manager at every Board
meeting.
The Company's investment policy
states that no single holding will
represent more than 10 per cent. of the
Company's Gross Assets at the time of
investment and the portfolio is expected to
have between 30 to 40 holdings in normal circumstances.
In addition to regular market
updates from the Investment Manager and
reports at Board meetings, the Board
convenes more often during periods of
extreme volatility.
The Company's policy is not to hedge
against any foreign currency movements.
Income received from investee companies is
translated into sterling on
receipt.
|
↔
|
Geopolitical Risk
War and conflict can impact investor confidence and threaten
global economic growth.
Geopolitical instability in
the region may increase volatility,
reduce economic growth, and affect the prospects of the companies
in the portfolio.
|
The Board discusses the impact of geopolitics on
the portfolio with the Investment Manager at
every Board meeting.
The increased geopolitical tension
between the US and China is both an
opportunity and a threat for Japan.
The portfolio is comprised of
listed, liquid, realisable securities,
which could be sold in the event of a
significant deterioration in global political stability.
The Company has built up a revenue
reserve and the Board regularly reviews the
net income available for distribution using
the Investment Manager's sensitivity
analysis of revenue estimates.
The Company also has a Special
Reserve available for distribution in the
event of unforeseen revenue shortfall.
The Manager's emphasis on companies
which can pay sustainable dividends has
helped alleviate the impact.
|
↑
|
Excess leverage
The Company uses borrowings to seek to enhance investment returns.
While this has the potential to enhance
investment returns in rising markets,
in falling markets the impact could
be detrimental to performance.
|
An ability to gear is a unique advantage of closed-end companies and structural gearing is
a clearly stipulated component of the
Company's investment policy. This is
highlighted in shareholder
communications.
Gearing is monitored and strict
restrictions on borrowings are imposed:
gearing continues to operate within a limit
of 25% of NAV at the time of investment.
The gearing is achieved using
derivatives in the form of Contracts for
Difference (CFDs). Further information on
financial instruments and risk can be found
in note 16 to the Financial Statements.
|
↔
|
Cyber Risk/Fraud
Cybercrime or fraud could impact any of the Company's service
providers; the Investment Manager,
the Depositary or the
Administrator.
Business interruption could
mean service providers are unable to meet their contractual obligations or that information is late, misleading or inaccurate.
Increasing geopolitical
turbulence and the use of artificial intelligence has increased
the risk from cyber crime.
|
The Board has appointed an experienced independent professional Depositary, Custodian
and Administrator.
All key service providers produce
annual internal control reports for review
by the Audit and Risk Committee. These
reviews include consideration of their
business continuity plans and the associated cyber security risks.
Service providers report on cyber
risk mitigation and management at least
annually.
The Board monitors cyber security
and certification of service
providers.
|
↑
|
ESG
and Climate Change
Shareholders expectations are increasingly focused
on sustainability and ESG factors.
Potential reputational damage from
non-compliance with regulations or incorrect disclosures could
arise.
Climate change leads to additional
costs and risks for portfolio companies. These risks include
operating conditions and reporting obligations.
The Company could suffer as a result
of increased investor demand for products which promote ESG
investments.
|
The Company's ESG Policy, which is updated annually is published on
the Company's website and the AIC website.
The Investment Manager's approach is
to include ESG factors for consideration in the investment process,
such as climate change, where they are relevant and may have a
material impact on stock performance.
Examples of responsible engagement
are detailed in the Annual Report.
Chikara Investments LLP (the
Investment Manager) is a signatory to the Principles of Responsible
Investment Initiative ("PRI") and reports annually according to the
PRI reporting framework.
The Investment Manager is also a
signatory to both the UK Stewardship Code and the Japan Stewardship
Code.
Investment trusts are currently
exempt from the Task Force on Climate-Related Financial Disclosures
("TCFD ") disclosure, but the Board will continue to monitor the
situation.
|
↔
|
|
|
========
|
========
|
========
|
|
|
|
|
| |
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for
preparing the Annual Report and the
financial statements in accordance with applicable laws and
regulations.
Company law requires the Directors
to prepare financial statements for each financial year. Under that
law, the Directors have elected to prepare
the financial statements in accordance with United Kingdom
Generally Accepted Accounting Practice, including FRS 102, which is
The Financial Reporting Standard applicable to 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 the Company's affairs as at the end of the
year and of the net return for the year. In preparing these
financial statements, the Directors are required to:
· select suitable
accounting policies and then apply them consistently;
· make judgements and
estimates, which are reasonable and prudent;
· state whether
applicable accounting standards have been followed, subject to any
material departures disclosed and explained in 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 which disclose with
reasonable accuracy at any time the financial position of the
Company and enable them to ensure that the financial statements
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 Directors are also responsible
for preparing a Strategic Report, Director's Report, Directors'
Remuneration Report and Corporate Governance Statement that comply
with applicable laws and regulations.
The Company Reports and Accounts are
published on its website at www.ccjapanincomeandgrowthtrust.com
which is maintained by the Company's Investment
Manager. The work carried out by the auditors does not involve
consideration of the maintenance and integrity of this website and,
accordingly, the auditor accepts no responsibility for any changes
that have occurred to the financial statements since being
initially presented on the website. Legislation in the United
Kingdom governing the preparation and dissemination of financial
statements may differ from legislation in other
jurisdictions.
Directors' confirmation statement
The Directors each confirm to the
best of their knowledge that:
(a) the
financial statements, prepared in accordance with applicable
accounting standards, give a true and fair view of the assets,
liabilities, financial position and profit of the Company;
and
(b) this
Annual Report includes a fair review of the development and
performance of the business and position of the Company, together
with a description of the principal risks and uncertainties that it
faces.
Having taken advice from the Audit
and Risk Committee, the Directors consider that the Annual Report
and financial statements taken as a whole is fair, balanced and
understandable and provides the information necessary for
Shareholders to assess the Company's performance, business model
and strategy.
For and on behalf of the
Board
HARRY WELLS
Chairman
24 January 2024
FINANCIAL STATEMENTS
INCOME STATEMENT FOR THE YEAR ENDED 31 OCTOBER
2023
|
|
Year
ended 31
October 2023
|
Year
ended 31
October 2022
|
|
Note
|
Revenue £'000
|
Capital £'000
|
Total £'000
|
Revenue £'000
|
Capital £'000
|
Total £'000
|
Gains/(losses) on
investments
|
3
|
-
|
32,435
|
32,435
|
-
|
(18,118)
|
(18,118)
|
Currency gains/(losses)
|
|
-
|
209
|
209
|
-
|
(209)
|
(209)
|
Income
|
4
|
9,283
|
-
|
9,283
|
8,878
|
-
|
8,878
|
Investment management fee
|
5
|
(343)
|
(1,372)
|
(1,715)
|
(327)
|
(1,306)
|
(1,633)
|
Other expenses
|
6
|
(715)
|
-
|
(715)
|
(664)
|
-
|
(664)
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
Return on ordinary activities before finance costs and
taxation
|
|
8,225
|
31,272
|
39,497
|
7,887
|
(19,633)
|
(11,746)
|
|
|
========
|
========
|
========
|
========
|
========
|
========
|
Finance costs
|
7
|
(63)
|
(173)
|
(236)
|
(69)
|
(185)
|
(254)
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
Return on ordinary activities before
taxation
|
|
8,162
|
31,099
|
39,261
|
7,818
|
(19,818)
|
(12,000)
|
|
|
========
|
========
|
========
|
========
|
========
|
========
|
Taxation
|
8
|
(921)
|
-
|
(921)
|
(888)
|
-
|
(888)
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
Return on ordinary activities after taxation
|
|
7,241
|
31,099
|
38,340
|
6,930
|
(19,818)
|
(12,888)
|
|
|
========
|
========
|
========
|
========
|
========
|
========
|
Return per Ordinary Share -
undiluted
|
13
|
5.37p
|
23.08p
|
28.45p
|
5.14p
|
(14.71)p
|
(9.57)p
|
Return per Ordinary Share -
diluted
|
13
|
5.37p
|
23.08p
|
28.45p
|
4.29p
|
(12.26)p
|
(7.97)p
|
|
|
========
|
========
|
========
|
========
|
========
|
========
|
The total column of the Income
Statement is the profit and loss account of the Company. All
revenue and capital items in the above statement derive from
continuing operations.
Both the supplementary revenue and
capital columns are both prepared under guidance from the
Association of Investment Companies. There
is no other comprehensive income and therefore the return for the
year is also the total comprehensive income for the year. There was
no dilution for the "Return per Ordinary Share - diluted" for the
year ended 31 October 2023 (31 October 2022: dilution was due to
the issuance of 26,946,122 Subscription Shares issued on 18
February 2021 and expired in February 2023).
The notes form part of these
financial statements.
STATEMENT OF FINANCIAL POSITION AS AT 31 OCTOBER
2023
|
Note
|
31
October 2023 £'000
|
31
October 2022 £'000
|
Fixed assets
|
|
|
|
Investments at fair value through
profit or loss
|
3
|
231,987
|
199,642
|
|
|
---------------
|
---------------
|
Current assets
|
|
|
|
Cash and cash equivalents
|
|
340
|
1,413
|
Cash collateral in respect of
Contracts for Difference ("CFDs")
|
|
806
|
433
|
Amounts due in respect of
CFDs
|
|
773
|
2,680
|
Other debtors
|
10
|
3,750
|
4,434
|
|
|
---------------
|
---------------
|
|
|
5,669
|
8,960
|
|
|
========
|
========
|
Creditors: amounts falling due within one
year
|
|
|
|
Cash collateral in respect of
CFDs
|
|
(1,266)
|
-
|
Amounts payable in respect of
CFDs
|
|
(738)
|
(2,780)
|
Other creditors
|
11
|
(534)
|
(2,240)
|
|
|
---------------
|
---------------
|
|
|
(2,538)
|
(5,020)
|
|
|
========
|
========
|
Net
current assets
|
|
3,131
|
3,940
|
|
|
---------------
|
---------------
|
Total assets less current liabilities
|
|
235,118
|
203,582
|
|
|
---------------
|
---------------
|
Net
assets
|
|
235,118
|
203,582
|
|
|
========
|
========
|
Capital and reserves
|
|
|
|
Share capital
|
12
|
1,348
|
1,348
|
Share premium
|
|
98,067
|
98,067
|
Special reserve
|
|
64,671
|
64,671
|
Capital reserve
|
|
|
|
- Revaluation gains on equity
investments held at year end
|
3
|
24,636
|
5,841
|
- Other capital reserves
|
|
38,486
|
26,182
|
Revenue reserve
|
|
7,910
|
7,473
|
|
|
---------------
|
---------------
|
Total Shareholders' funds
|
|
235,118
|
203,582
|
|
|
========
|
========
|
NAV
per share - Ordinary Shares - undiluted (pence)
|
14
|
174.51p
|
151.10p
|
NAV
per share - Ordinary Shares - diluted (pence)
|
14
|
174.51p
|
152.75p
|
|
|
========
|
========
|
Approved by the Board of Directors
and authorised for issue on 24 January 2024 and signed on their
behalf by:
Harry Wells
Director
CC Japan Income & Growth Trust
plc is incorporated in England and Wales with registration number
9845783.
The notes form part of these
financial statements.
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 OCTOBER
2023
For
the year ended 31 October 2023
|
Note
|
Share capital £'000
|
Share premium £'000
|
Special reserve £'000
|
Capital reserve £'000
|
Revenue reserve £'000
|
Total £'000
|
Balance at 1 November 2022
|
|
1,348
|
98,067
|
64,671
|
32,023
|
7,473
|
203,582
|
Return on ordinary activities after
taxation
|
|
-
|
-
|
-
|
31,099
|
7,241
|
38,340
|
Dividends paid
|
9
|
-
|
-
|
-
|
-
|
(6,804)
|
(6,804)
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
Balance at 31 October 2023
|
|
1,348
|
98,067
|
64,671
|
63,122
|
7,910
|
235,118
|
|
|
========
|
========
|
========
|
========
|
========
|
========
|
For
the year ended 31 October 2022
|
Note
|
Share capital £'000
|
Share premium £'000
|
Special reserve £'000
|
Capital reserve £'000
|
Revenue reserve £'000
|
Total £'000
|
Balance at 1 November 2021
|
|
1,348
|
98,067
|
64,671
|
51,841
|
6,943
|
222,870
|
Return on ordinary activities after
taxation
|
|
-
|
-
|
-
|
(19,818)
|
6,930
|
(12,888)
|
Dividends paid
|
9
|
-
|
-
|
-
|
-
|
(6,400)
|
(6,400)
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
Balance at 31 October 2022
|
|
1,348
|
98,067
|
64,671
|
32,023
|
7,473
|
203,582
|
|
|
========
|
========
|
========
|
========
|
========
|
========
|
The Company's distributable reserves
consist of the Special reserve, Revenue reserve and Capital reserve
attributable to realised profits.
The notes form part of these
financial statements.
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 OCTOBER
2023
|
Year
ended 31
October 2023 £'000
|
Year
ended 31
October 2022 £'000
|
Operating activities cash flows
|
|
|
Return on ordinary activities before
finance costs and taxation*
|
39,497
|
(11,746)
|
|
---------------
|
---------------
|
Adjustment for:
|
|
|
(Gains)/losses on equity
investments
|
(24,684)
|
18,106
|
Realised (gains)/losses on
CFDs
|
(7,656)
|
184
|
Movement in CFD balances
|
758
|
(646)
|
Increase in other debtors
|
(500)
|
(6)
|
Increase in other
creditors
|
19
|
3
|
Tax withheld on overseas
income
|
(921)
|
(888)
|
|
---------------
|
---------------
|
Net
cash flow from operating activities
|
6,513
|
5,007
|
|
========
|
========
|
Investing activities cash flows
|
|
|
Purchases of equity
investments
|
(57,623)
|
(43,572)
|
Proceeds from sales of equity
investments
|
49,413
|
46,864
|
Realised gains/(losses) on
CFDs
|
7,656
|
(184)
|
|
---------------
|
---------------
|
Net
cash flow (used in)/from investing activities
|
(554)
|
3,108
|
|
========
|
========
|
Financing activities cash flows
|
|
|
Equity dividends paid
|
(6,804)
|
(6,400)
|
Finance costs paid
|
(228)
|
(254)
|
|
---------------
|
---------------
|
Net
cash used in financing activities
|
(7,032)
|
(6,654)
|
|
========
|
========
|
(Decrease)/increase in cash and cash
equivalents
|
(1,073)
|
1,461
|
Cash and cash equivalents at the
beginning of the year
|
1,413
|
(48)
|
|
---------------
|
---------------
|
Cash
and cash equivalents at the end of the year
|
340
|
1,413
|
|
========
|
========
|
* *Inflow from dividends was
£7,888,000 (2022: £8,038,000).
The notes form part of these
financial statements.
NOTES TO THE ACCOUNTS
1.
GENERAL INFORMATION
CC Japan
Income & Growth Trust plc (the "Company") was incorporated in
England and Wales on 28 October 2015 with registered number
9845783, as a closed-ended investment company. The Company
commenced its operations on 15 December 2015. The Company carries
on business as an investment trust within the meaning of Chapter 4
of Part 24 of the Corporation Tax Act 2010.
The Company's investment objective
is to provide Shareholders with dividend income combined with
capital growth, mainly through investment in equities listed or
quoted in Japan.
The Company's shares were admitted
to the Official List of the Financial Conduct Authority with a
premium listing on 15 December 2015. On the same day, trading of
the Ordinary Shares commenced on the London Stock
Exchange.
In 2021, the Company's 26,946,122
TSS were admitted to the London Stock Exchange with the ticker
CCJS. The TSS expired at the end of February 2023.
The Company's registered office is
6th Floor, 125 London Wall, London EC2Y 5AS.
2.
ACCOUNTING POLICIES
The
principal accounting policies followed by the Company are set out
below:
(a)
Basis of accounting
The
financial statements have been prepared in accordance with FRS 102
("the Financial Reporting Standard applicable in the UK and
Republic of Ireland") issued by the Financial Reporting Council,
with the Statement of Recommended Practice "Financial Statements of
Investment Trust Companies and Venture Capital Trusts" issued by
the Association of Investment Companies in July 2022 and the
Companies Act 2006. The financial statements have been prepared on
a historical cost basis except for the modification to a fair value
basis for certain financial instruments as specified in the
accounting policies below.
They have also been prepared on the
assumption that approval as an investment trust will continue to be
granted. As required by its Articles of Association, the Company's
continuation vote was passed at the AGM in 2022 and will next put
forward a vote for its continuation at the AGM in 2025.
The financial statements have been
prepared on a going concern basis. In forming this opinion, the
Directors have considered any potential impact of war in Ukraine
and the Middle East; and the increase in geopolitical tension
between the US and China, on the going concern and viability of the
Company. In making their assessment, the Directors have reviewed
income and expense projections and the liquidity of the investment
portfolio, and considered the mitigation measures which key service
providers, including the Investment Manager, continue to have in
place to maintain operational resilience.
In reaching this conclusion, the
Directors have also considered the liquidity of the Company's
portfolio of investments as well as its cash position, income, and
expense flows. The Company's net assets as at 31 October 2023 were
£235.1 million (2022: £203.6 million). As at 31 October 2023, the
Company held £232.0 million in quoted investments (2022: £199.6
million) and had cash of £0.3 million (2022: £1.4 million
overdraft). The total expenses (excluding finance costs and
taxation) for the year ended 31 October 2023 were £2.4 million
(2022: £2.3 million), which represented approximately 1.06% (2022:
1.06%) of average net assets during the year. At the date of
approval of this report, based on the aggregate of investments and
cash held, the Company has substantial operating expenses
cover.
The Company's ability to continue as
a going concern for the period assessed by the Directors, being the
period to 31 January 2025 which is at least
12 months from the date the financial statements were authorised
for issue.
The financial statements have been
presented in sterling (£), which is also the functional currency as
this is the currency of the primary economic environment in which
the Company operates. The Board, having regard to the currency of
the Company's share capital and the predominant currency in which
it pays distributions, expenses and its shareholders operate, has
determined that sterling is the functional currency.
In preparing these financial
statements the Directors have considered the impact of ESG and
climate change risk as an emerging risk as set out in the Annual
Report and have concluded that while climate change impacts
operating conditions of portfolio companies and increases
obligations, it does not have a material impact on the value of the
Company's investments. In line with FRS
102, investments are valued at fair value, which for the Company
are quoted bid prices for investments in active markets at 31
October 2023 and therefore reflect market participants' view of
climate change risk.
(b)
Investments
As the Company's
business is investing in financial assets with a view to profiting
from their total return in the form of increases in fair value,
financial assets are held at fair value through profit or loss in
accordance with FRS 102 Section 11: 'Basic Financial Instruments',
and Section 12: 'Other Financial Instruments'. The Company manages
and evaluates the performance of these investments on a fair value
basis in accordance with its investment strategy, and information
about the investments is provided on this basis to the Board of
Directors.
Upon initial recognition,
investments are classified by the Company as "at fair value through
profit or loss". They are recognised on the date they are traded
and are measured initially at fair value, which is taken to be
their transaction price, excluding expenses incidental to purchases
which are expensed to capital on acquisition. Subsequently
investments are revalued at fair value which is the bid market
price for listed investments over the time until they are sold, any
unrealised gains/losses are included in the fair value of the
investments.
Changes in the fair value of
investments held at fair value through profit or loss and gains or
losses on disposal are included in the capital column of the income
statement within "gains on investments held at fair
value".
(c)
Derivatives
Derivatives comprise
Contracts for Difference ("CFD"), which are measured at fair value
and valued by reference to the underlying market value of the
corresponding security. CFDs are held for investment purposes.
Where the fair value is positive the CFD is presented as a current
asset, and where the fair value is negative the CFD is presented as
a current liability. Gains or losses on these derivative
transactions are recognised in the Income Statement. They are
recognised as capital and are shown in the capital column of the
Income Statement if they are of a capital nature and are recognised
as revenue and shown in the revenue column of the Income Statement
if they are of a revenue nature. To the extent that any gains or
losses are of a mixed revenue and capital nature, they are
apportioned between revenue and capital accordingly. The CFD
balance is made up of transactions in relation to the underlying
equity held by the Company, with the risks embedded in the CFDs
disclosed in Note 16.
(d)
Foreign currency
Transactions
denominated in foreign currencies including dividends are
translated into sterling at actual exchange rates as at the date of
the transaction. Assets and liabilities denominated in foreign
currencies at the year end are reported at the rates of exchange
prevailing at the year end. Foreign exchange movements on
investments and derivatives are included in the Income Statement
within gains on investments. Any other gain or loss is included as
an exchange gain or loss to capital or revenue in the Income
Statement as appropriate.
(e)
Income
Investment income has
been accounted for on an ex-dividend basis or when the Company's
right to the income is established. Special dividends are credited
to capital or revenue in the Income Statement, according to the
circumstances surrounding the payment of the dividend. Overseas
dividends are included gross of withholding tax
recoverable.
Interest receivable on deposits is
accounted for on an accrual basis.
(f)
Dividend payable
Interim
dividends are recognised when the Company pays the dividend. Final
dividends are recognised in the period in which they are approved
by the shareholders. This year, as was also the case last year, a
second interim dividend is being paid in substitution for the final
dividend.
(g)
Expenses
All expenses are
accounted for on an accruals basis and are charged as
follows:
· the investment
management fee is charged 20% to revenue and 80% to
capital;
· CFD finance costs
are charged 20% to revenue and 80% to capital;
· investment
transactions costs are allocated to capital; and
· other expenses are
charged wholly to revenue.
(h)
Taxation
The tax expense represents the sum of the tax currently
payable and deferred tax. The tax currently payable is
based on the taxable profit for the year. Taxable
profit differs from net profit as reported in the income
statement because it excludes items of
income or expenses that are taxable or deductible in other years
and it further excludes items that are
never taxable or deductible. The Company's liability for current
tax is calculated using tax rates that were
applicable at the financial reporting date.
Where expenses are allocated between
capital and revenue any tax relief in respect of the expenses is
allocated between capital and revenue
returns on the marginal basis using the Company's effective rate of
corporation taxation for the relevant
accounting period.
Deferred taxation is recognised in
respect of all timing differences that have originated but not
reversed at the financial reporting date,
where transactions or events that result in an obligation to pay
more tax in the future or right to pay less
tax in the future have occurred at the financial reporting date.
This is subject to deferred tax assets only
being recognised if it is considered more likely than not that
there will be suitable profits from which the future reversal of the timing differences can be deducted.
Deferred tax assets and liabilities are measured at the
rates applicable to the legal jurisdictions in
which they arise.
(i)
Other receivables and other payables
Other receivables and other
payables do not carry any interest and are short term in nature and
are accordingly stated at their nominal value.
(j)
Segmental reporting
The Directors are of the opinion that the Company
is engaged in a single segment of business, that of an investment
trust, as disclosed in note 1.
(k)
Accounting estimates, judgements and
assumptions
The preparation of financial statements requires the Directors
to make estimates and assumptions that affect the
reported amounts of assets and liabilities at the
date of the financial statements. Although these estimates
are based on management's best knowledge of
current facts, circumstances and, to some extent, future events
and actions, the Company's actual results
may ultimately differ from those estimates, possibly
significantly.
There have not been any instances
requiring any significant estimates or judgements in the
year.
(l)
Cash and cash equivalents
Cash comprises cash and demand deposits. Cash
equivalents, include bank overdrafts, and short-term, highly
liquid investments that are readily convertible to
known amounts of cash, are subject to insignificant risks
of changes in value, and are held for the purpose
of meeting short-term cash commitments rather than for
investment or other purposes.
(m)
Reserves
Capital
reserves
Profits/(losses) from selling investments and changes in fair
value arising upon the revaluation of investments that
remain in the portfolio are shown in the capital
column of the Statement of Comprehensive Income and
allocated to the capital reserve. Capital
reserves attributable to realised profits are
distributable.
Special distributable reserve
As stated in the Company's
prospectus dated 13 November 2015, in order to increase the
distributable reserves available to
facilitate the flexibility and source of future dividends, the
Company resolved that, conditional upon First Admission to listing on the London Stock Exchange and
the approval of the Court, the net amount standing
to the credit of the share premium account of the
Company immediately following completion of the First Issue
be cancelled and transferred to a special
distributable reserve. This reserve is distributable.
Revenue reserves
The revenue reserve reflects all income and
expenditure recognised in the revenue column of the income
statement and is distributable by way of
dividends.
Share premium
The Company's share premium is the excess of the
issue price of the share over its nominal value on shares
issued subsequent to the First Issue. The
share premium is not available for distribution.
3.
INVESTMENTS
(a) Summary of
valuation
|
As
at 31
October 2023 £'000
|
As
at 31
October 2022 £'000
|
Investments listed on a recognised
overseas investment exchange
|
231,987
|
199,642
|
|
---------------
|
---------------
|
|
231,987
|
199,642
|
|
========
|
========
|
(b)
Movements
During the year ended 31 October 2023
|
2023 £'000
|
2022 £'000
|
Book cost at the beginning of the
year
|
193,801
|
193,643
|
Revaluation gains on non-derivative
investments held at beginning of the year
|
5,841
|
26,628
|
|
---------------
|
---------------
|
Valuation at beginning of the year
|
199,642
|
220,271
|
|
========
|
========
|
Purchases at cost
|
55,890
|
45,505
|
Sales:
|
|
|
- proceeds
|
(48,229)
|
(48,028)
|
- gains on investment holdings sold
during the year
|
5,889
|
2,681
|
Movements in revaluation
gains/(losses) on investment held at year end
|
18,795
|
(20,787)
|
|
---------------
|
---------------
|
Valuation at end of the year
|
231,987
|
199,642
|
|
========
|
========
|
Book cost at end of the
year
|
207,351
|
193,801
|
Revaluation gains on non-derivative
investment held at year end
|
24,636
|
5,841
|
|
---------------
|
---------------
|
Valuation at end of the year
|
231,987
|
199,642
|
|
========
|
========
|
Transaction costs on investment
purchases for the year ended 31 October 2023 amounted to £26,000
(2022: £17,000) and on investment sales for the year amounted to
£22,000 (2022: £19,000).
The Company received £48,229,000
(2022: £48,028,000) from investments sold during the year. The book
cost of these investments when they were purchased was £42,340,000
(2022: £45,347,000). These investments have been revalued over time
and until they were sold any unrealised gains/losses were included
in the fair value of the investments.
(c)
Gains/(Losses) on investments
|
Year
ended 31
October 2023 £'000
|
Year
ended 31
October 2022 £'000
|
Gains on non-derivative investment
holdings sold during the year
|
5,889
|
2,681
|
Movements in revaluation
gains/(losses) on investment held at year end
|
18,795
|
(20,787)
|
Other capital losses
|
(40)
|
(23)
|
|
---------------
|
---------------
|
Total gains/(losses) on non-derivative investments held at
fair value
|
24,644
|
(18,129)
|
|
========
|
========
|
Realised gains/(losses) on CFD assets
and liabilities
|
7,656
|
(184)
|
Unrealised gains on CFD assets and
liabilities
|
135
|
195
|
|
---------------
|
---------------
|
Total gains/(losses) on investments held at fair
value
|
32,435
|
(18,118)
|
|
========
|
========
|
4.
INCOME
|
Year
ended 31
October 2023 £'000
|
Year
ended 31
October 2022 £'000
|
Income from investments:
|
|
|
Overseas dividends
|
9,215
|
8,878
|
Deposit interest
|
68
|
-
|
|
---------------
|
---------------
|
Total
|
9,283
|
8,878
|
|
========
|
========
|
Overseas dividend income is
translated into sterling on receipt.
5.
INVESTMENT MANAGEMENT FEE
|
Year
ended 31
October 2023 £'000
|
Year
ended 31
October 2022 £'000
|
Fee:
|
|
|
20% charged to revenue
|
343
|
327
|
80% charged to capital
|
1,372
|
1,306
|
|
---------------
|
---------------
|
Total
|
1,715
|
1,633
|
|
========
|
========
|
The Company's Investment Manager is
Chikara Investments LLP. The Investment Manager is entitled to
receive a management fee payable monthly in arrears and is at the
rate of one-twelfth of 0.75% of Net Asset Value per calendar month.
There is no performance fee payable to the Investment
Manager.
6.
OTHER EXPENSES
|
Year
ended 31
October 2023 £'000
|
Year
ended 31
October 2022 £'000
|
Secretarial services
|
48
|
48
|
Administration and other
expenses
|
474
|
420
|
Auditor's remuneration - statutory
audit services
|
37*
|
50
|
Directors' fees
|
156
|
146
|
|
---------------
|
---------------
|
Other expenses - Revenue
|
715
|
664
|
|
========
|
========
|
* This
excludes an additional £4,500 (excluding VAT) payable by Apex, the
Company's Administrator for extra statutory audit work performed by
the auditor.
7.
FINANCE COSTS
|
Year
ended 31
October 2023 £'000
|
Year
ended 31
October 2022 £'000
|
Interest paid - 100% charged to
revenue
|
20
|
23
|
CFD finance cost and structuring fee
- 20% charged to revenue
|
42
|
45
|
Structuring fees - 20% charged to
revenue
|
1
|
1
|
|
---------------
|
---------------
|
|
63
|
69
|
|
========
|
========
|
CFD finance cost and structuring fee
- 80% charged to capital
|
169
|
181
|
Structuring fees - 80% charged to
capital
|
4
|
4
|
|
---------------
|
---------------
|
|
173
|
185
|
|
========
|
========
|
Total finance costs
|
236
|
254
|
|
========
|
========
|
8.
TAXATION
|
Year
ended 31 October 2023
|
Year
ended 31 October 2022
|
|
Revenue £'000
|
Capital £'000
|
Total £'000
|
Revenue £'000
|
Capital £'000
|
Total £'000
|
(a)
Analysis of tax charge in the year:
|
|
|
|
|
|
|
Overseas withholding tax
|
921
|
-
|
921
|
888
|
-
|
888
|
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
Total tax charge for the year (see note 8
(b))
|
921
|
-
|
921
|
888
|
-
|
888
|
|
========
|
========
|
========
|
========
|
========
|
========
|
(b)
Factors affecting the tax charge for the
year:
The effective UK corporation tax rate for the year is 23.00%
(2022: 19.00%). The tax charge for the Company differs from the
charge resulting from applying the standard rate of UK corporation
tax for an investment trust company. The differences are explained
below:
|
Year
ended 31 October 2023
|
Year
ended 31 October 2022
|
|
Revenue £'000
|
Capital £'000
|
Total £'000
|
Revenue £'000
|
Capital £'000
|
Total £'000
|
Total return before taxation
|
8,162
|
31,099
|
39,261
|
7,818
|
(19,818)
|
(12,000)
|
Effective UK corporation tax at
23.00% (2022: 19.00%)
|
1,877
|
7,153
|
9,030
|
1,485
|
(3,765)
|
(2,280)
|
Effects of:
|
|
|
|
|
|
|
Overseas withholding tax
suffered
|
921
|
-
|
921
|
888
|
-
|
888
|
Non-taxable overseas
dividends
|
(2,119)
|
-
|
(2,119)
|
(1,687)
|
-
|
(1,687)
|
Capital (gains)/losses not subject to
tax
|
-
|
(7,509)
|
(7,509)
|
-
|
3,482
|
3,482
|
Finance costs not tax
deductible
|
14
|
40
|
54
|
13
|
35
|
48
|
Movement in unutilised management
expenses
|
228
|
316
|
544
|
189
|
248
|
437
|
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
Total tax charge for the year
|
921
|
-
|
921
|
888
|
-
|
888
|
|
========
|
========
|
========
|
========
|
========
|
========
|
The Company has an unrecognised
deferred tax asset of £1,441,000 (2022: £1,218,000) based on the
long-term prospective corporation tax rate of 25% (2022: 25%). This
asset has accumulated because deductible expenses exceeded taxable
income for the year ended 31 October 2023. No asset has been
recognised in the accounts because, given the composition of the
Company's portfolio, it is unlikely that this asset will be
utilised in the foreseeable future. The Company has not provided
for deferred tax on any tax losses.
9.
DIVIDEND
(i) Dividends paid during the
financial year
|
Year
ended 31
October 2023 £'000
|
Year
ended 31
October 2022 £'000
|
Second Interim - year ended 31
October 2022 3.50p (2021: 3.35p)
|
4,716
|
4,514
|
Interim dividend - year ended 31
October 2023 1.55p (2022: 1.40p)
|
2,088
|
1,886
|
|
---------------
|
---------------
|
Total
|
6,804
|
6,400
|
|
========
|
========
|
(ii) The dividend relating to the year ended 31 October 2023,
which is the basis on which the requirements of
Section 1159 of
the Corporation Tax Act 2010 are considered is detailed
below:
|
Year
ended 31 October 2023
|
Year
ended 31 October 2022
|
|
Pence
per Ordinary Share
|
£'000
|
Pence
per Ordinary Share
|
£'000
|
Interim dividend
|
1.55p
|
2,088
|
1.40p
|
1,886
|
Second interim dividend*
|
3.75p
|
5,052
|
3.50p
|
4,716
|
|
---------------
|
---------------
|
---------------
|
---------------
|
|
5.30p
|
7,140
|
4.90p
|
6,602
|
|
========
|
========
|
========
|
========
|
* Not
included as a liability in the year ended 31 October 2023
accounts.
The Directors have declared a second
interim dividend for the financial year ended 31 October 2023 of
3.75p per Ordinary Share. The dividend will
be paid on 1 March 2024 to Shareholders on the register at the
close of business on 2 February 2024.
10.
OTHER DEBTORS
|
As
at 31
October 2023 £'000
|
As
at 31
October 2022 £'000
|
Accrued income
|
3,552
|
3,146
|
Sales for settlement
|
-
|
1,184
|
VAT receivable
|
128
|
62
|
Prepayments and other
receivables
|
70
|
42
|
|
---------------
|
---------------
|
Total
|
3,750
|
4,434
|
|
========
|
========
|
11.
OTHER CREDITORS
|
As
at 31
October 2023 £'000
|
As
at 31
October 2022 £'000
|
Amounts falling due within one year:
|
|
|
Purchases for future
settlement
|
200
|
1,933
|
Accrued finance costs
|
15
|
7
|
Accrued expenses
|
319
|
300
|
|
---------------
|
---------------
|
Total
|
534
|
2,240
|
|
========
|
========
|
12.
SHARE CAPITAL
Share capital represents the nominal value of
shares that have been issued. The share premium includes any
premiums received on issue of share capital. Any transaction costs
associated with the issuing of shares are deducted from share
premium.
|
As at 31
October 2023
|
As at 31
October 2022
|
|
No. of
shares
|
£'000
|
No. of
shares
|
£'000
|
Allotted, issued & fully paid:
|
|
|
|
|
Ordinary Shares of 1p
|
|
|
|
|
Opening balance
|
134,730,610
|
1,348
|
134,730,610
|
1,348
|
|
---------------
|
---------------
|
---------------
|
---------------
|
Closing balance
|
134,730,610
|
1,348
|
134,730,610
|
1,348
|
|
========
|
========
|
========
|
========
|
Since the year end, the Company has
issued no Ordinary Shares, with 134,730,610 Ordinary Shares in
issue as at 24 January 2024.
13.
RETURN PER ORDINARY SHARE
Total return per Ordinary Share is based on the
return on ordinary activities, including income, a profit for the
year after taxation of £38,340,000 (2022: loss of £12,888,000) and
the weighted average number of Ordinary Shares-undiluted in issue
for the year to 31 October 2023 of 134,730,610 (2022: 134,730,610);
Ordinary Shares-diluted in issue for the year to 31 October 2023 of
134,730,610 (2022: 161,676,732). The Company's Ordinary
Shares-diluted in prior year is due to the 26,946,122 Subscription
Shares in issue for the year to 31 October 2022.
The returns per Ordinary Share were
as follows:
|
As at 31
October 2023
|
As at 31
October 2022
|
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
Return per Ordinary
|
|
|
|
|
|
|
Share - undiluted
|
5.37p
|
23.08p
|
28.45p
|
5.14p
|
(14.71)p
|
(9.57)p
|
Return per Ordinary
|
|
|
|
|
|
|
Share - diluted*
|
5.37p
|
23.08p
|
28.45p
|
4.29p
|
(12.26)p
|
(7.97)p
|
|
========
|
========
|
========
|
========
|
========
|
========
|
* Diluted
figures apply for the year to 31 Oct 2022 and assumed that all the
TSS in issue were fully subscribed at the price of £1.61p per TSS.
The TSS expired on the last business day of February 2023 so there
is no subsequent dilution.
14.
NET ASSET VALUE PER SHARE
Total Shareholders' funds and the net asset value
("NAV") per share attributable to the Ordinary Shareholders at the
year end calculated in accordance with the Articles of Association
were as follows:
NAV
per Ordinary Share - undiluted
|
As
at 31
October 2023
|
As
at 31
October 2022
|
Net Asset Value (£'000)
|
235,118
|
203,582
|
Ordinary Shares in issue
|
134,730,610
|
134,730,610
|
NAV
per Ordinary Share - undiluted
|
174.51p
|
151.10p
|
|
========
|
========
|
NAV
per Ordinary Share - diluted
|
As
at 31
October 2023
|
As
at 31
October 2022
|
Subscription shares issue
|
-
|
26,946,122
|
Proceeds from exercise of TSS
(£'000)
|
-
|
43,383
|
Adjusted Net Asset Value for exercise
of TSS (£'000)
|
235,118
|
246,954
|
Ordinary Shares - post exercise of
TSS
|
134,730,610
|
161,676,732
|
NAV
per Ordinary Share - diluted
|
174.51p
|
152.75p
|
|
========
|
========
|
As at the year end, there was no
dilution effect on the NAV per share.
15.
RELATED PARTY TRANSACTIONS
Transactions with the Investment Manager and the Alternative
Investment Fund Manager ("AIFM")
The Company provides additional
information concerning its relationship with the Investment Manager
and AIFM, Chikara Investments LLP. The fees for the period are
disclosed in note 5 and amounts outstanding at the year ended 31
October 2023 were £151,000 (2022: £134,000).
Research purchasing agreement
MiFID II treats investment
research provided by brokers and independent research providers as
a form of "inducement" to investment
managers and requires research to be paid separately from execution
costs. In the past, the costs of broker research were primarily
borne by the Company as part of execution costs through dealing
commissions paid to brokers. With effect from 3 January 2018, this
practice has changed, as brokers subject to MiFID
II are now required to price, and charge for,
research separately from execution costs. Equally, the rules
require the Investment Manager, as an investment Manager, to ensure
that the research costs borne by the Company are paid for through a
designated Research Payment Account ("RPA") funded by direct
research charges to the Investment Manager's clients; including the
Company.
The research charge for the year 1
January 2023 to 31 December 2023, as agreed between the Investment
Manager and the Company, was US $34,000 (31 December 2022: US
$34,000). The research charge for the year 1 January 2024 to 31
December 2024, as budgeted by the Investment Manager, is US
$31,000.
Directors' fees and shareholdings
The Directors' fees and
shareholdings are disclosed in the Directors' Remuneration
Implementation Report in the Annual Report.
16.
FINANCIAL INSTRUMENTS AND CAPITAL
DISCLOSURES
Risk Management Policies and
Procedures
As an investment trust the Company invests in equities and
equity related derivatives for the long term so as to secure its
investment objective. In pursuing its investment objective, the
Company is exposed to a variety of risks
that could result in either a reduction in the Company's net assets
or a reduction of the profits available for dividends.
These risks, include market risk
(comprising currency risk, interest rate risk, and other price
risk), liquidity risk, and credit risk, and the Directors' approach
to the management of them are set out follows.
The objectives, policies and
processes for managing the risks, and the methods used to measure
the risks, are set out below.
(a)
Market Risk
Economic
conditions
Changes in economic conditions in Japan (for example, interest
rates and rates of inflation, industry conditions, competition,
political events and other factors) and in the countries in which
the Company's investee companies operate could substantially and
adversely affect the Company's prospects. The Company is subject to
concentration risk as it only invests in Japanese companies but has
diversified investments across the different sectors in the
Japanese market.
Sectoral diversification
The Company has no limits on the
amount it may invest in any sector. This may lead to the Company
having significant concentrated exposure to portfolio companies in
certain business sectors from time to time.
Concentration of investments in any
one sector may result in greater volatility in the value of the
Company's investments and consequently its NAV and may materially
and adversely affect the performance of the Company and returns to
Shareholders.
Unquoted companies
The Company may invest in unquoted companies from
time to time. Such investments, by their nature, involve a higher
degree of valuation and performance uncertainties and liquidity
risks than investments in listed and quoted securities and they may
be more difficult to realise. However, the Company does not
currently hold and has never held any unquoted
securities.
Management of market risk
The Company is invested in a
diversified portfolio of investments. The Company's investment
policy states that no single holding (including any derivative
instrument) will represent more than 10% of the Company's Gross
Assets at the time of investment and, when fully invested, the
portfolio is expected to have between 30 to 40 holdings although
there is no guarantee that this will be the case and it may contain
a lesser or greater number of holdings at any time. A maximum of
10% of the Company's Gross Assets at the time of investment may be
invested in unquoted or untraded companies at time of
investment.
The Investment Manager's approach
will in most cases achieve diversification across a number of
sectors as shown in the Holdings in Portfolio in the Annual
Report.
(b)
Currency risk
The majority of the Company's assets will be
denominated in a currency other than sterling (predominantly in
yen) and changes in the exchange rate between sterling and yen may
lead to a depreciation of the value of the Company's assets as
expressed in sterling and may reduce the returns to the Company
from its investments and, therefore, negatively impact the level of
dividends paid to shareholders.
Management of currency risk
The Investment Manager monitors
the currency risk of the Company's portfolio on a regular basis.
Foreign currency exposure is regularly reported to the Board by the
Investment Manager. The Company does not currently intend to enter
into any arrangements to hedge its underlying currency exposure to
investment denominated in yen, although the Investment Manager and
the Board will keep this approach under regular review.
Foreign currency exposures
An analysis of the Company's
assets priced in yen are as follows:
|
As
at 31
October 2023 £'000
|
As
at 31
October 2022 £'000
|
Equity Investments: yen
|
231,987
|
199,642
|
Receivables (due from brokers,
dividends, and other income receivable)
|
3,552
|
4,330
|
CFD: yen (absolute
exposure)
|
35
|
(100)
|
Cash and cash equivalent:
yen
|
(3,640)
|
(1,927)
|
|
---------------
|
---------------
|
Total
|
231,934
|
201,945
|
|
========
|
========
|
Foreign currency sensitivity
If the Japanese Yen had
appreciated or depreciated by 10% as at 31 October 2023 (2022: 10%)
then the value of the portfolio as at that date would have
increased or decreased as shown below.
|
Increase
in Fair
Value As
at 31
October 2023 £'000
|
Decrease
in Fair
Value As
at 31
October 2023 £'000
|
Increase
in Fair
Value As
at 31
October 2022 £'000
|
Decrease
in Fair
Value As
at 31
October 2022 £'000
|
Impact on capital return -
increase/(decrease)
|
23,193
|
(23,193)
|
20,195
|
(20,195)
|
Return after taxation -
increase/(decrease)
|
23,193
|
(23,193)
|
20,195
|
(20,195)
|
|
========
|
========
|
========
|
========
|
(c)
Leverage risk
Derivative
instruments
The Company may utilise long only CFDs or equity swaps for
gearing and efficient portfolio management purposes. Leverage may
be generated through the use of CFDs or equity swaps. Such
financial instruments inherently contain much greater leverage than
a non-margined purchase of the underlying security or instrument.
This is due to the fact that, generally, only a very small portion
(and in some cases none) of the value of the underlying security or
instrument is required to be paid in order to make such leveraged
investments. As a result of any leverage employed by the Company,
small changes in the value of the underlying assets may cause a
relatively large change in the Net Asset Value of the Company. Many
such financial instruments are subject to variation or other
interim margin requirements, which may force premature liquidation
of investment positions.
Borrowing risks
The Company may use borrowings to seek to enhance
investment returns. While the use of borrowings can enhance the
total return on the Ordinary Shares where the return on the
Company's underlying assets is rising and exceeds the cost of
borrowing, it will have the opposite effect where the return on the
Company's underlying assets is rising at a lower rate than the cost
of borrowing or falling, further reducing the total return on the
Ordinary Shares. As a result, the use of borrowings by the Company
may increase the volatility of the Net Asset Value per Ordinary
Share. The Company had no borrowings at the
year end.
Any reduction in the value of the
Company's investments may lead to a correspondingly greater
percentage reduction in its Net Asset Value (which is likely to
adversely affect the price of an Ordinary Share). Any reduction in
the number of Ordinary Shares in issue (for example, as a result of
buy backs) will, in the absence of a corresponding reduction in
borrowings, result in an increase in the Company's level of
gearing.
To the extent that a fall in the
value of the Company's investments causes gearing to rise to a
level that is not consistent with the Company's gearing policy or
borrowing limits, the Company may have to sell investments in order
to reduce borrowings, which may give rise to a significant loss of
value compared to the book value of the investments, as well as a
reduction in income from investments.
Management of leverage risk
The aggregate of borrowings and
long only CFD and equity swap exposure will not exceed 25% of Net
Asset Value at the time of drawdown of the relevant borrowings or
entering into the relevant transaction, as appropriate, although
the Company's normal policy will be to utilise and maintain gearing
to a lower limit of 20% of Net Asset Value at the time of drawdown
of the relevant borrowings or entering into the relevant
transaction, as appropriate. It is expected that any borrowings
entered into will principally be denominated in yen.
The Company's level of gearing as at
31 October 2023 is disclosed in the Alternative Performance
Measures section of the Annual Report.
(d)
Interest rate risk
The Company is exposed to interest rate risk
specifically through its cash holdings and on positions within the
CFD portfolio. Interest rate movements may affect the level of
income receivable from any cash at bank and on deposits. The effect
of interest rate changes on the earnings of the companies held
within the portfolio may have a significant impact on the valuation
of the Company's investments. Movements in interest rates will also
have an impact on the valuation of the CFD derivative contracts.
Interest receivable on cash balances or paid on overdrafts is at
fixed rate.
Management of interest rate risk
The possible effects on Fair
Value and cash flows that could arise as a result of changes in
interest rates are taken into account when making investment
decisions. Derivative contracts are not used to hedge against the
exposure to interest rate risk.
Interest income earned on deposits
and paid on overdraft by the Company is primarily derived from
fixed interest rates, as such do not have a material exposure to
interest rate risk.
The bank overdraft is an integral
part of cash management and the Company has a legal right of offset
and has the intention to settle this at net.
Interest rate exposure
The exposure at 31 October 2023
of financial assets and liabilities to interest rate risk is shown
by reference to floating interest rates - when the interest rate is
due to be reset. Due to the current low interest rate environment
in Japan, no sensitivity analysis is shown as the total impact will
not be material.
|
As
at 31
October 2023 due within
one year
£'000
|
As
at 31
October 2022 due within
one year
£'000
|
Exposure to floating interest rates:
CFD derivative contract - (absolute exposure)
|
46,397
|
39,926
|
Collateral paid in respect of
CFDs
|
806
|
433
|
|
========
|
========
|
(e)
Credit risk
Credit risk is the possibility of a loss to the Company due to
the failure of the counterparty to a transaction discharging its
obligations under that transaction.
Cash and other assets held by the
Depositary
The cash and other assets held by the Depositary, or its
sub-custodians are subject to counterparty credit risk as the
Company's access to its cash could be delayed should the
counterparties become insolvent or bankrupt.
Derivative instruments
The Company's holdings in CFD
contracts present counterparty credit risks, with the risk of the
counter party (Morgan Stanley & Co International plc)
defaulting.
Management of credit risk
Cash and other assets held by the
Depositary
Cash and other assets that are required to be held in custody
will be held by the depositary or its sub-custodians. Cash and
other assets may not be treated as segregated assets and will
therefore not be segregated from any custodian's own assets in the
event of the insolvency of a custodian. Cash held with any
custodian will not be treated as client money subject to the rules
of the Financial Conduct Authority ('FCA') and may be used by a
custodian in the course of its own
business. The Company will therefore be subject to the
creditworthiness of its custodians. In the event of the insolvency
of a custodian, the Company will rank as a general creditor in
relation thereto and may not be able to recover such cash in full,
or at all. The Company has appointed Northern Trust Investor
Services Limited as its depositary. The
credit rating of Northern Trust was reviewed at time of appointment
and will be reviewed on a regular basis by the Investment Manager
and/or the Board. The Fitch's credit rating of Northern Trust is
AA-.
Derivative instruments
Where the Company utilises CFDs
or equity swaps, it is likely to take a credit risk with regard to
the parties with whom it trades and may also bear the risk of
settlement default. These risks may differ materially from those
entailed in exchange-traded transactions that generally are backed
by clearing organisation guarantees, daily marking-to-market and
settlement, and segregation and minimum capital requirements
applicable to intermediaries. Transactions entered into directly
between counterparties generally do not benefit from such
protections and expose the parties to the risk of counterparty
default. CFD contracts generally require variation margins and the
counterparty credit risk is monitored by the Investment
Manager.
The Investment Manager monitors the
Company's exposure to its counterparties on a regular basis and the
position is reviewed by the Directors at Board meetings. Investment
transactions are carried out with a number of brokers, whose
credit-standing is reviewed periodically by the Investment Manager,
and limits are set on the amount that may be due from any one
broker.
In summary, the exposure to credit
risk as at 31 October 2023 was as follows:
|
As
at 31
October 2023 3 months or less
£'000
|
As
at 31
October 2022 3 months or less
£'000
|
Cash at bank
|
340
|
1,413
|
Amounts due in respect of
CFDs
|
773
|
2,680
|
Collateral paid in respect of
CFDs
|
806
|
433
|
Debtors
|
3,750
|
4,434
|
|
---------------
|
---------------
|
Total
|
5,669
|
8,960
|
|
========
|
========
|
None of the above assets or
liabilities were impaired or past due but not impaired.
(f)
Other Price Risk
Other price risk is the risk that the fair value
or future cash flows of a financial instrument will fluctuate
because of changes in market prices (other than those arising from
interest rate risk or currency risk), whether those changes are
caused by factors specific to the individual financial instrument
or its issuer, or factors affecting similar financial instruments
traded in the market.
The Company is exposed to market
price risk arising from its equity investments and its exposure to
the positions within the CFD portfolio. The movements in the prices
of these investments result in movements in the performance of the
Company.
The Company's exposure to other
changes in market prices at 31 October 2023 on its equity
investments was £231,987,000 (2022:
£199,631,000).
In addition, the Company's gross
market exposure to these price changes through its CFD portfolio
was £46,397,000 through long positions (2022:
£39,926,000).
The Company uses CFDs, as part of
its investment policy. These instruments can be highly volatile and
potentially expose investors to a higher risk of loss. The low
initial margin deposits normally required to establish a position
in such instruments permit a high degree of leverage. As a result,
a relatively small movement in the price of a contract may result
in a profit or loss which is high in proportion to the value of the
net exposures in the underlying CFD positions. In addition, daily
limits on price fluctuations and speculative position limits on
exchanges may prevent prompt liquidation of positions resulting in
potentially greater losses.
The Company limits the gross market
exposure, and therefore the leverage, of this strategy to
approximately 200% of the Company's net assets. The CFDs utilised
have a linear performance to referenced stocks quoted on exchanges
and therefore have the same volatility profile to the underlying
stocks.
Market exposures to derivative
contracts are disclosed below.
The Company's exposure to CFDs is
the aggregate of long CFD Positions. The gross and net market
exposure is the same as the Company does not hold Short CFD
Positions.
Exposures are monitored daily by the
Investment Manager. The Company's Board also reviews exposures
regularly.
The gross underlying notional
exposures within the CFD portfolio as at 31 October 2023
were:
|
As at 31
October 2023
|
As at 31
October 2022
|
|
£'000
|
% of
net assets
|
£'000
|
% of
net assets
|
CFDs - (absolute exposure)
|
46,397
|
19.73%
|
39,926
|
19.61%
|
CFDs - (net exposure)
|
46,397
|
19.73%
|
39,926
|
19.61%
|
|
========
|
========
|
========
|
========
|
The Board of Directors manages the
market price risks inherent in the investment portfolio by ensuring
full and timely access to relevant information from the Investment
Manager. The Board meets regularly and at each meeting reviews
investment performance. The Board monitors the Investment Manager's
compliance with the Company's objective.
Concentration of exposure to other price
risk
A
sector breakdown of the portfolio is contained in the Portfolio in
the Annual Report.
Other price risk sensitivity
The following table illustrates
the sensitivity of the profit after taxation for the period to an
increase or decrease of 10% in the fair
values of the Company's equities and CFDs. This level of change is
considered to be reasonably possible based on observation of
current market conditions. The sensitivity analysis is based on the
notional exposure of the Company's equities
investments and long CFDs.
|
As at 31
October 2023
|
As at 31
October 2022
|
|
Increase
in Fair
Value £'000
|
Decrease
in Fair
Value £'000
|
Increase
in Fair
Value £'000
|
Decrease
in Fair
Value £'000
|
Impact on capital return -
increase/(decrease)
|
27,835
|
(27,835)
|
23,967
|
(23,967)
|
Return after taxation -
increase/(decrease)
|
27,835
|
(27,835)
|
23,967
|
(23,967)
|
|
========
|
========
|
========
|
========
|
(g)
Liquidity Risk
The securities of small-to-medium-sized (by market
capitalisation) companies may have a more limited secondary market
than the securities of larger companies. Accordingly, it may be
more difficult to effect sales of such securities at an
advantageous time or without a substantial drop in price than
securities of a company with a large market capitalisation and
broad trading market. In addition, securities of
small-to-medium-sized companies may have greater price volatility
as they can be more vulnerable to adverse market factors such as
unfavourable economic reports.
Management of liquidity risk
The Company's Investment Manager
monitors the liquidity of the Company's portfolio on a regular
basis.
Liquidity risk exposure
The undiscounted gross cash
outflows of the financial liabilities as at 31 October 2023, based
on the earliest date on which payment can be required, were as
follows:
|
As
at 31
October 2023 less than 3 months
£'000
|
As
at 31
October 2022 less than 3 months
£'000
|
Amounts payable in respect of
CFDs
|
2,004
|
2,780
|
Other payables
|
534
|
2,240
|
|
---------------
|
---------------
|
Total
|
2,538
|
5,020
|
|
========
|
========
|
The Company is exposed to liquidity
risks from the leverage employed through exposure to long only CFD
positions. However, timely sale of trading positions can be
impaired by many factors including decreased trading volume and
increased price volatility. As a result, the Company could
experience difficulties in disposing of assets to satisfy liquidity
demands. Liquidity risk is minimised by holding sufficient liquid
investments which can be readily realised to meet liquidity
demands. The Company's liquidity risk is managed on a daily basis
by the Investment Manager in accordance with established policies
and procedures in place.
(h)
Fair Value Measurements of Financial Assets and Financial
Liabilities
The financial assets and liabilities are either carried in the
balance sheet at their Fair Value, or the balance sheet amount is a
reasonable approximation of Fair Value (due from brokers, dividends
receivable, accrued income, due to brokers, accruals and cash and
cash equivalents).
The valuation techniques for
investments and derivatives used by the Company are explained in
the accounting policies notes 2 (b and c).
The table below sets out Fair Value
measurements using Fair Value Hierarchy.
31 December 2023
|
Level
1 £'000
|
Level
2 £'000
|
Level
3 £'000
|
Total £'000
|
Assets:
|
|
|
|
|
Equity investments
|
231,987
|
-
|
-
|
231,987
|
CFDs - Unrealised Fair Value
gains
|
-
|
773
|
-
|
773
|
|
---------------
|
---------------
|
---------------
|
---------------
|
Liabilities:
|
|
|
|
|
CFDs - Unrealised Fair Value
losses
|
-
|
(738)
|
-
|
(738)
|
|
---------------
|
---------------
|
---------------
|
---------------
|
Total
|
231,987
|
35
|
-
|
232,022
|
|
========
|
========
|
========
|
========
|
31 December 2022
|
Level
1 £'000
|
Level
2 £'000
|
Level
3 £'000
|
Total £'000
|
Assets:
|
|
|
|
|
Equity investments
|
199,642
|
-
|
-
|
199,642
|
CFDs - Unrealised Fair Value
gains
|
-
|
2,680
|
-
|
2,680
|
|
---------------
|
---------------
|
---------------
|
---------------
|
Liabilities:
|
|
|
|
|
CFDs - Unrealised Fair Value
losses
|
-
|
(2,780)
|
-
|
(2,780)
|
|
---------------
|
---------------
|
---------------
|
---------------
|
Total
|
199,642
|
(100)
|
-
|
199,542
|
|
========
|
========
|
========
|
========
|
There were no transfers between
levels during the year (2022: same).
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 as follows:
Level 1 - valued using quoted prices
in active markets for identical assets.
Level 2 - valued by reference to
valuation techniques using observable inputs including quoted
prices.
Level 3 - valued by reference to
valuation techniques using inputs that are not based on observable
market data.
There were no Level 3 investments as
at 31 October 2023 (2022: nil).
(i)
Capital Management Policies and
Procedures
The Company's capital management objectives are:
- to ensure that the
Company will be able to continue as a going concern; and
- to provide dividend
income combined with capital growth, mainly through investment in
equities listed or quoted in Japan and by utilising the leverage
effect of CFD.
The key performance indicators are
contained in the strategic report.
The Company is subject to several
externally imposed capital requirements:
- As a public company, the
Company has to have a minimum share capital of £50,000.
- In order to be able to
pay dividends out of profits available for distribution by way of
dividends, the Company has to be able to meet one of the two
capital restriction tests imposed on investment companies by
company law.
The Company's capital at 31 October
2023 comprises called up share capital and reserves totalling
£235,118,000 (2022: £203,582,000).
The Board regularly monitors, and
has complied with, the externally imposed capital
requirements.
17.
DISTRIBUTABLE RESERVES
The Company's distributable reserves consist of
the Special reserve, Revenue reserve and Capital reserve
attributable to realised profits. As at 31 October 2023 the total
Capital reserve distributable is 38,486,000 (2022: £26,182,000),
total Capital reserve not distributable is
£24,636,000 (2022: £5,841,000).
Special reserve: As stated in the
Company's prospectus dated 13 November 2015, in order to increase
the distributable reserves available to facilitate the flexibility
and source of future dividends, the Company resolved that,
conditional upon First Admission to listing on the London Stock
Exchange and the approval of the Court, the net amount standing to
the credit of the share premium account of the Company immediately
following completion of the First Issue be cancelled and
transferred to a special distributable reserve. Following approval
by the Court, the cancellation became effective on 23 March 2016
and an amount of £64,671,250 was transferred to the above Special
reserve at that time.
The Special reserve is
distributable.
18.
POST BALANCE SHEET EVENTS
There were no post balance sheet events other than
those already disclosed in this report.
GLOSSARY AND ALTERNATIVE PERFORMANCE MEASURES
("APMS")
Administrator
|
The Company's administrator, the
current such administrator being Apex Listed Companies Services
(UK) Limited (which acquired Sanne
Group).
|
|
AIC
|
Association of Investment
Companies
|
|
Alternative Investment Fund or "AIF"
|
An investment vehicle under AIFMD.
Under AIFMD (see below) the Company is classified as an
AIF.
|
|
Alternative Investment Fund Managers Directive or
"AIFMD"
|
The UK version of an European Union
Directive which came into force on 22 July 2013 and which is part
of UK law by virtue of the European Union (Withdrawal) Act 2018, as
amended by The Alternative Investment Fund Managers (Amendment etc.) (EU Exit)
Regulations 2019.
|
|
Alternative Performance Measure or "APM"
|
A financial measure of historical or
future financial performance, financial position, or cash flows,
other than a financial measure defined or specified in the
applicable financial reporting framework.
|
|
Annual General Meeting or "AGM"
|
A meeting held once a year, which
Shareholders are entitled to attend, and where they can vote on
resolutions to be put forward at the meeting and ask Directors
questions about the Company.
|
|
Absolute exposure
|
The absolute difference between the
Company's long positions and short positions.
|
Bonus Issue
|
The distribution of subscription
shares to qualifying Shareholders. In this report pertinent to the
issue to qualifying Shareholders of new Transferable Subscription
Shares on the basis of one new Transferable Subscription Share for
every five existing Ordinary Shares.
|
Cum-dividend
|
A dividend that has been declared
but not yet paid out.
|
CFD
or Contract for Difference
|
A financial instrument, which
provides exposure to an underlying equity with the provider
financing the cost to the buyer with the buyer receiving the
difference of any gain or paying for any loss.
|
Custodian
|
An entity that is appointed to hold
and safeguard a company's assets.
|
Depositary
|
Certain AIFs must appoint
depositaries under the requirements of AIFMD. A depositary's duties
include, inter alia, safekeeping of the Company's assets and cash
monitoring. Under AIFMD the depositary is appointed under a strict
liability regime. The Company's Depositary is Northern Trust
Investor Services Limited.
|
Diluted NAV per Ordinary Share
|
Diluted NAV per Ordinary Share
calculates a Company's NAV if all subscriptions shares were
converted.
|
Dividend
|
Income receivable from an investment
in shares.
|
Discount (APM)
|
The amount, expressed as a
percentage, by which the share price is less than the NAV per
Ordinary Share.
|
As
at 31 October 2023
|
|
|
|
|
NAV per Ordinary Share
|
|
a
|
|
174.5
|
Share price
|
|
b
|
|
162.5
|
Discount
|
|
(b÷a)-1
|
|
6.9%
|
|
|
|
|
|
As
at 31 October 2022
|
|
|
|
|
NAV per Ordinary Share
(pence)
|
|
a
|
|
151.1
|
Share price (pence)
|
|
b
|
|
138.8
|
Discount
|
|
(b÷a)-1
|
|
8.1%
|
Ex-dividend date
|
The date from which you are not
entitled to receive a dividend which has been declared and is due
to be paid to shareholders.
|
Financial Conduct Authority or "FCA"
|
The independent body that regulates
the financial services industry in the UK.
|
Gearing (APM)
|
A way to magnify income and capital
returns, but which can also magnify losses. The Company may be
geared through the CFDs and if utilised, the overdraft facility,
with The Northern Trust Company.
|
As
at 31 October 2023
|
|
|
|
£'000
|
CFD notional market
value*
|
|
a
|
|
46,397
|
Non-base cash
borrowings**
|
|
b
|
|
3,380
|
NAV
|
|
c
|
|
235,118
|
Gearing (net)
|
|
((a+b)/c)
|
|
21.2%
|
|
|
|
|
|
As
at 31 October 2022
|
|
|
|
£'000
|
CFD notional market
value*
|
|
a
|
|
39,926
|
Non-base cash
borrowings**
|
|
b
|
|
2,652
|
NAV
|
|
c
|
|
203,582
|
Gearing (net)
|
|
((a+b)/c)
|
|
20.9%
|
* CFD positions in underlying asset
value.
** Non-base cash borrowings represents borrowings in Yen
|
|
|
|
Gross assets (APM)
|
The Company's total assets including
any leverage amount.
|
Index
|
A basket of stocks which is
considered to replicate a particular stock market or
sector.
|
Gross market exposure
|
The Company's total exposure
investment value in the financial market prices.
|
Gross underlying notional exposure
|
The company's total exposure value
on the underlying asset of its derivatives.
|
Investment company
|
A company formed to invest in a
diversified portfolio of assets.
|
Investment trust
|
A closed end investment company
which is based in the United Kingdom ("UK") and which meets certain
tax conditions which enables it to be exempt from UK corporation
tax on its capital gains. This Company is an investment
trust.
|
Leverage (APM)
|
Under the Alternative Investment
Fund Managers Directive ("AIFMD"), leverage is any method by which
the exposure of an Alternative Investment Fund ("AIF") is increased
through borrowing of cash or securities or leverage embedded in
derivative positions.
Under AIFMD, leverage is broadly
similar to gearing, but is expressed as a ratio between the assets
(excluding borrowings) and the net assets (after taking account of
borrowing). Under the gross method, exposure represents the sum of
the Company's positions after deduction of cash balances, without
taking account of any hedging or netting arrangements. Under the
commitment method, exposure is calculated without the deduction of
cash balances and after certain hedging and netting positions are
offset against each other.
Under both methods the AIFM has set
current maximum limits of leverage for the Company of
200%.
|
As
at 31 October 2023
|
|
|
Gross
£'000
|
Commitment
£'000
|
Security Market value
|
|
a
|
231,987
|
231,987
|
CFD Notional market value
|
|
b
|
46,397
|
46,397
|
Cash and cash equivalents
|
|
c
|
3,841
|
321
|
NAV
|
|
d
|
235,118
|
235,118
|
Leverage
|
|
(a+b+c)/d
|
120%
|
119%
|
|
|
|
|
|
As
at 31 October 2022
|
|
|
Gross
£'000
|
Commitment
£'000
|
Security Market value
|
|
a
|
199,642
|
199,642
|
CFD Notional market value
|
|
b
|
39,926
|
39,926
|
Cash and cash equivalents
|
|
c
|
2,676
|
1,098
|
NAV
|
|
d
|
203,582
|
203,582
|
Leverage
|
|
(a+b+c)/d
|
119%
|
118%
|
* Cash and cash equivalents represent
gross overdraft and net overdraft with Northern Trust
Market liquidity
|
The extent to which investments can
be bought or sold at short notice.
|
Net
assets
|
An investment company's assets less
its liabilities.
|
Net
Asset Value (NAV) per Ordinary Share
|
Net assets divided by the number of
Ordinary Shares in issue (excluding any shares held in
Treasury).
|
Net
exposure
|
The difference between the Company's
long positions and short positions.
|
Ordinary Shares
|
The Company's Ordinary Shares in
issue.
|
Ongoing charges (APM)
|
A measure, expressed as a percentage
of average NAV, of the regular, recurring annual costs of running
an investment company.
|
Year end 31 October 2023
|
|
|
|
|
Average NAV
|
|
a
|
|
228,765,739
|
Annualised expenses
|
|
b
|
|
2,430,000
|
Ongoing charges
|
|
(b÷a)
|
|
1.06%
|
|
|
|
|
|
Year end 31 October 2022
|
|
|
|
|
Average NAV
|
|
a
|
|
217,165,791
|
Annualised expenses
|
|
b
|
|
2,297,000
|
Ongoing charges
|
|
(b÷a)
|
|
1.06%
|
Portfolio
|
A composition of different investment
holdings constructed and held in order to deliver returns to
Shareholders and to spread risk.
|
Share Premium to Net Asset Value (APM)
|
The amount, expressed as a
percentage, by which the share price is more than the Net Asset
Value per share.
|
Share buyback
|
A purchase by a company of its own
shares. Shares can either be bought back for cancellation or held
in Treasury.
|
Share price
|
The price of a share as determined by
buyers and sellers on the relevant stock exchange.
|
Subscription Share Price
|
The price at which the Transferable
Subscription Share Rights
are exercised in accordance with the
terms and conditions of the Transferable Subscription
shares.
|
Transferable Subscription Share Rights
|
The right conferred by each
Transferable Subscription Share to subscribe for one Ordinary Share
as detailed in the prospectus.
|
Transferable Subscription Shares (TSS)
|
The transferable subscription shares
in the capital of the Company as a Bonus Issue.
|
Treasury shares
|
A company's own shares held in
Treasury account by the company but which are available to be
resold in the market.
|
Total return (APM)
|
A measure of performance that takes
into account both income and capital returns.
|
|
|
|
|
|
|
Year end 31 October 2023
|
|
|
Share price
|
NAV
|
|
Opening at 1 November 2022 (in
pence)
|
a
|
|
138.8
|
151.1
|
|
Closing at 31 October 2023 (in
pence)
|
b
|
|
162.5
|
174.5
|
|
Price movement (b÷a)-1
|
c
|
|
17.1%
|
15.5%
|
|
Dividend reinvestment
|
d
|
|
3.8%
|
3.4%
|
|
Total return
|
(c+d)
|
|
20.9%
|
18.9%
|
|
|
|
|
|
|
|
|
Year end 31 October 2022
|
|
|
Share price
|
Cum-income
NAV
|
|
Opening at 1 November 2021 (in
pence)
|
a
|
|
154.0
|
136.8
|
|
Closing at 31 October 2022 (in
pence)
|
b
|
|
138.8
|
151.1
|
|
Price movement (b÷a)-1
|
c
|
|
-9.9%
|
10.4%
|
|
Dividend reinvestment*
|
d
|
|
2.8%
|
-16.3%
|
|
Total return
|
(c+d)
|
|
-7.1%
|
-5.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
* The dividend reinvestment is
calculated on the assumption that dividends paid out by the Company
are reinvested into the shares of the Company at NAV at the
ex-dividend date.
Volatility
|
A measure of how much a market share
price, currency or other instrument moves up and down in price over
a period of time.
|
FINANCIAL INFORMATION
This
announcement does not constitute the Company's statutory
accounts. The financial information for the year to 31
October 2023 is derived from the statutory accounts for 2023, which
will be delivered to the Registrar of Companies. The auditor has
reported on the 2023 accounts; their report was unqualified and did
not include a statement under Section 498(2) or (3) of the
Companies Act 2006.
The Annual Report for the year ended
31 October 2023 was approved on 24 January 2024. It will be made
available on the Company's website at www.ccjapanincomeandgrowthtrust.com.
The Annual Report will be submitted
to the National Storage Mechanism and will shortly be available for
inspection at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism
This announcement contains regulated
information under the Disclosure Guidance and Transparency Rules of
the FCA.
ANNUAL GENERAL MEETING
The
Annual General Meeting of the Company will be held on 5 March 2024
at 12 noon at the offices of Stephenson Harwood LLP, 1 Finsbury
Circus, London, EC2M 7SH. Investment Manager, Richard Aston, will
provide an update on the investments and take questions after
the formal business of the meeting. Members of the Board, will also
be available to discuss the Company.
25 January 2024
For further information contact:
Company Secretary and registered
office:
Apex Listed Companies Services (UK) Limited
6th Floor, 125 London Wall,
London.
EC2Y 5AS
Tel: 020 3327 9270
END