REG - CC Japan Inc&Growth - Final Results
22/01/2025 07:00
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RNS Number : 1914U CC Japan Income & Growth Trust PLC 22 January 2025
LONDON STOCK EXCHANGE ANNOUNCEMENT
CC JAPAN INCOME & GROWTH TRUST PLC
FINAL RESULTS FOR THE YEAR ENDED 31 OCTOBER 2024
LEI: 549300FZANMYIORK1K98
Information disclosed in accordance with the DTR 4.1.3 - this announcement
contains regulatory information
CC Japan Income & Growth Trust plc ("CCJI" or the "Company") has today
announced its annual financial results for the year ended 31 October 2024.
The statements below are extracted from the Company's Annual Report for the
year ended 31 October 2024 (the "Annual Report"). The Annual Report, which
includes the notice of the Company's forthcoming annual general meeting, will
be posted to shareholders at the end of January 2025. Members of the public
may obtain copies from Frostrow Capital LLP, 25 Southampton Buildings, London
WC2A 1AL or from the Company's website at
https://ccjapanincomeandgrowthtrust.com
(https://ccjapanincomeandgrowthtrust.com) where up to date information on the
Company, including daily NAV, share prices and fact sheets, can also be found.
The Annual Report will be submitted to the Financial Conduct Authority and
will shortly be available in full, unedited text for inspection on the
National Storage Mechanism (NSM):
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism)
STRATEGIC REPORT
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 As at
31 October
31 October
2024
2023
Net assets (millions) £265.8 £235.1
Net asset value ("NAV") per ordinary share(1) 197.3p 174.5p
Share price 178.8p 162.5p
Share price discount to NAV(2) 9.4% 6.9%
Ongoing charges(2) 1.03% 1.06%
Gearing (net)(2) 19.2% 21.2%
========= =========
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 at the end of this announcement.
PERFORMANCE SUMMARY(1)
For the year to For the year to
31 October
31 October
2024
2023
% change
% change
NAV ex-income total return per share(2) +16.5% +19.3%
NAV cum-income total return per share(2) +16.1% +18.9%
Share price total return(2) +13.2% +20.9%
Tokyo Stock Exchange Price Index ("TOPIX") total return +13.4% +12.0%
Revenue return per share 5.32p 5.37p
Dividends per share: --------------- ---------------
First interim dividend 1.60p 1.55p
Second interim dividend 3.85p 3.75p
--------------- ---------------
Total dividends per share for the year 5.45p 5.30p
========= =========
1 Total returns are stated in sterling, including dividends
reinvested.
2 These are APMs.
Source: Chikara Investments LLP - The Company's Factsheet October 2024.
CCJI ANNUAL PERFORMANCE SUMMARY
Year to October unless Launch to 2017 2018 2019 2020 2021 2022 2023 2024
otherwise stated
Oct 2016(1)
Share price (p) 122.40 152.00 153.00 150.00 119.50 154.00 138.75 162.50 178.75
Share price total return (%) +23.5 +27.2 +2.8 +0.7 -17.3 +32.7 -7.1 +20.9 +13.2
NAV per share (p) 123.90 146.00 148.60 158.90 136.80 165.40 151.09 174.50 197.31
NAV (cum-income) total return per share (%) +24.9 +20.7 +4.1 +9.9 -11.1 +24.3 -5.9 +18.9 +16.1
TOPIX total return in sterling (%) +32.7 +10.1 -0.4 +7.2 +0.3 +11.9 -9.5 +12.0 +13.4
Revenue return per share (p) 3.60 4.06 4.55 5.26 5.04 4.75 5.14 5.37 5.32
Dividends per share (p) 3.00 3.45 3.75 4.50 4.60 4.75 4.90 5.30 5.45(2)
========= ========= ========= ========= ========= ========= ========= ========= =========
1 Period from the Company's launch on 15 December 2015 to 31 October
2016.
2 Includes second interim dividend of 3.85p for the year ended 31
October 2024.
CHAIRMAN'S STATEMENT
PERFORMANCE REVIEW
I am pleased to report a strong performance from the Company over the year to
31 October 2024. The Company's net asset value ("NAV") total return was
+16.1%. Over the year, the discount of the share price to NAV widened
resulting in a total return to shareholders for the year of +13.2%. While the
Company has no official benchmark, it outperformed on a NAV basis the TOPIX
total return, a widely used measure of Japanese equity performance, which
returned +13.4%. All returns include dividends paid and are translated into
sterling terms.
The Company's cumulative return since inception in 2015 to 31 October 2024 was
+152.5% on a NAV total return basis, and +126.7% in share price terms,
comfortably ahead of the TOPIX total return of +100.6%. This long-term track
record of high absolute returns and outperformance of the Index attests to the
Investment Manager's skill in identifying companies paying income to
shareholders whilst still offering strong growth potential.
For details on how the Company's performance was generated, current portfolio
positioning, together with an outlook for the region and Company, please refer
to the Investment Manager's Report below.
DISCOUNT
Over the year, the discount at which the Company's shares trade versus its NAV
has widened, and ended the financial year at 9.4% (2023: 6.9%). This outcome,
whilst disappointing, is comparable with the experience of the Company's
immediate peers, although the Company has maintained the narrowest discount to
NAV in the peer group. The Board will consider buying back shares to manage
the level and volatility of the discount, if it is judged to be in the best
interests of shareholders to do so.
INCOME AND DIVIDENDS
The Company is committed to providing a progressive dividend to shareholders,
although it does not set a specific yield target. The Board aims to increase
dividend payments annually, a trend maintained since inception and continued
this year, despite a marginal 0.9% decrease in revenue return to 5.32 pence
per share, necessitating the use of a small amount of distributable reserves.
The Company paid a first interim dividend of 1.60 pence per share on 2 August
2024 and the Board has declared a second interim dividend of 3.85 pence per
share, bringing the total dividend for the year to 5.45 pence per share, an
increase of 2.8% over last year and representing a yield of 3%. The second
interim dividend will be paid on 3 March 2025 to shareholders on the register
as at 31 January 2025, with an ex-date of 30 January 2025.
In determining dividend payments, the Board prioritises coverage by
current-year earnings while also building revenue reserves. The investment
trust structure enables flexibility, allowing the Company to draw on reserves
to support dividends when needed, as was the case this year. Despite the
recent market volatility, the fundamental attractions of the Japanese equity
market remain, based on a combination of low valuations, commitment to reform
and broader growth opportunities.
GEARING
The Company uses structural gearing to enhance growth and income opportunities
in the portfolio. Gearing is undertaken through long-only contracts for
difference ("CFDs") and equity swaps: derivative contracts which replicate the
financial effect of more conventional sources of gearing such as bank
borrowings.
CONTINUATION VOTE PURSUANT TO THE COMPANY'S ARTICLES OF ASSOCIATION
Whilst the Company has no fixed life, the Board is required to put a triennial
continuation vote to shareholders. As the last such vote took place in 2022, a
continuation vote will be put to shareholders at the Company's forthcoming
Annual General Meeting. Given the long-term performance and returns, your
Board has no hesitation in recommending to shareholders that they vote in
favour of the Company continuing as an investment trust for a further
three-year period.
COMPANY ADVISERS
This year, the Board conducted a review of its operational arrangements.
Following the completion of that review, the Board appointed Frostrow Capital
LLP ("Frostrow") with effect from 1 January 2025 as its Alternative Investment
Fund Manager ("AIFM"), Administrator and Company Secretary. Frostrow has also
been appointed to provide investor relations and marketing services to the
Company, alongside the team at Chikara Investments LLP ("Chikara"). Frostrow
is an independent investment companies group and AIFM, specialising in
providing services to a number of leading London Stock Exchange-listed
investment companies. The Board is confident that this new appointment will
enhance the quality of financial reporting and improve the standard of
governance by bringing an additional layer of independent oversight. In
consequence of this appointment, the Company's registered office has changed
to 25 Southampton Buildings, London WC2A 1AL and I can be contacted via email
at the following address: cosec@frostrow.com.
REVISED MANAGEMENT FEE ARRANGEMENTS
Your Board believes that, whilst the Investment Manager needs to remain
appropriately incentivised, shareholders should share in the benefits of scale
and the Company should demonstrably represent value for money. To this end,
the Board has agreed with the Investment Manager that, with effect from 1
November 2024, the Company's management fee is calculated on a tiered basis of
0.75% per annum on the first £300 million of net assets and 0.60% on net
assets in excess of £300 million. This compares with the flat fee arrangement
of 0.75% per annum on net assets which has been levied since the Company's
inception. The Company's fee arrangements remain competitive with other
comparable managed investment companies and similar savings products. On
behalf of the Board, I would like to acknowledge the Investment Manager's
constructive approach in engaging with this process.
MARKETING, PROMOTION AND SHAREHOLDER INTERACTION
Following enhancements to investor relations and marketing resource, as
mentioned above, the Board will be working with Chikara, Frostrow and the
Company's broker to continue its efforts to increase the Company's profile
with investors and potential investors across the investment community. This
includes various video conferences, podcasts and in-person meetings, together
with ongoing interaction with national and investment industry journalists. It
is the Board's view that enhancing the Company's profile will benefit all
shareholders, through a better understanding of the Company, and by creating
sustained demand for its shares.
BOARD COMPOSITION
The Board reviews its composition and succession plans on a regular basis,
taking into account the need to refresh membership and maintain diversity,
while also ensuring continuity of Board experience. In an effort to distribute
responsibilities across the Board, Craig Cleland, Senior Independent Director
of the Board, was appointed as Chairman of the Nominations Committee with
effect from 3 October 2024. Although only comprising four Directors, I can
confirm that the Board's current composition is compliant with all applicable
diversity targets for UK listed companies and it is the Board's intention that
this will continue to be the case.
ANNUAL GENERAL MEETING ("AGM")
The Company's ninth AGM will be held at the offices of Stephenson Harwood LLP,
1 Finsbury Circus, London EC2M 7SH at 12 noon on 3 March 2025. Portfolio
Manager Richard Aston will give a presentation to shareholders on the
Company's recent performance, notable portfolio changes and his thoughts on
the outlook for the Japanese equity market. Shareholders will have an
opportunity to meet the Directors, representatives from the Investment Manager
and other Company advisers.
The Board encourages shareholders to attend the AGM but recognises that it is
not possible for everyone to do so. If shareholders are unable to attend the
meeting in person, they are strongly encouraged to vote by proxy and to
appoint the "Chair 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 in the Annual Report. Questions can be put to the Board and
the Portfolio Managers at the AGM, or in writing beforehand, by addressing
questions to the Company Secretary by email to cosec@frostrow.com.
WHY JAPAN AND WHY CC JAPAN INCOME & GROWTH TRUST PLC?
Japan's stock market has delivered strong performance over the last decade and
has proven to be one of the few highlights for investors in recent years. The
Board and Investment Manager believe that the economic environment in Japan is
likely to remain conducive to future strong performance returns and that Japan
remains a favourable environment for investors. For an outlook for the region
please refer to the Investment Manager's Report below.
However, for a plethora of reasons, not least including high costs and lack of
access across platforms, investing directly into Japanese equities is
challenging for individual UK investors and we believe that investment trusts
provide a low cost and effective means by which to do so. In a complex
investment region like Japan, active management is needed to unlock the most
attractive return profile.
We believe the Company offers a differentiated approach for investors seeking
exposure to Japan. It is set apart from its more growth-orientated peers since
the Investment Manager has a focus on total return - considering both capital
and income growth as key components - thus making it potentially less
susceptible to sharp style shifts. The Investment Manager is not restrained in
any way by an index and decisions are not based on one. In fact, the Company's
portfolio tends to diverge strongly from major Japanese equity indices as it
looks for opportunities beyond just the largest stocks found within it. The
Company typically holds a relatively small number of stocks and this approach
has paid off as the Company has historically outperformed the index strongly
and we believe the mandate remains well placed to continue to do so.
We thank you for your ongoing support.
JUNE AITKEN
Chairman
21 January 2025
INVESTMENT MANAGER'S REPORT
PERFORMANCE REVIEW
The net asset value ("NAV") cum-income total return of the Company rose by
+16.1% in sterling terms over the year to 31 October 2024. This return
outperformed the rise of the TOPIX, which returned +13.4%. Yen weakness has
been a notable feature of the year under review and cause of volatility in the
latter months. However, the aggregate increase in sterling terms continues the
strong record of total return of the Company since inception, which we believe
confirms the importance of shareholder distributions as a component of total
return in any long-term investment strategy for Japanese equities.
In several ways, nothing has changed over the last twelve months while in
others, prospects currently appear very different. Global monetary policy and
geopolitical tensions remain prominent considerations for investors and, for
anyone with an interest in Japan so does the impact that these have on the
foreign exchange market. However, Japan is emerging from decades of deflation
and the transition to an inflationary era is creating many new challenges and
opportunities for companies and consumers.
The Governor of the Bank of Japan, Kazuo Ueda, continues to indicate a path of
'normalisation' for domestic interest rates. Following on from the ending of
the negative interest rate policy ("NIRP") in March, a second increase in
interest rates was announced in July with expectations of further rises to
come if the economy maintains its favourable trajectory with regard to wages
and inflation in particular. Interest rate sensitive sectors featured
prominently in the major positive contributors to performance during the
period. Holdings in the banking (Sumitomo Mitsui Financial Group, Mitsubishi
UFJ Financial Group) and insurance (Sompo Holdings, Tokio Marine Holdings)
sectors performed strongly throughout the year as the improving operating
environment resulted in an immediate benefit to financial performance. With
clear targets to balance growth, capital efficiency and shareholder returns,
the operating improvement led to an attractive combination of dividend
increases and share buybacks.
The largest contributors to performance were Zozo and Hitachi. Zozo is Japan's
leading on-line fashion retailer which has benefited in recent years from
improved corporate governance. More recently its business model has delivered
the sustainable cashflow that will allow it to continue to enhance its
shareholder returns consistently. Hitachi, a large business conglomerate, has
undergone a major operational restructuring and rationalisation rendering it
almost unrecognisable from the company it was 20 years ago. Its success has
been increasingly recognised by investors.
The most significant factor in the list of detractors from performance was the
Company's underweight allocation to large capitalisation stocks. Smaller
companies generally lagged the performance of their larger peers which was a
modest headwind for performance. Macnica, an electronics and software
distributor, performed less well than anticipated during the year as demand
suffered from a global inventory adjustment of key semiconductor components.
The company maintained its commitment to shareholders with a dividend increase
and share buybacks and remains confident in its market positioning and
potential once business conditions improve.
PORTFOLIO POSITIONING
In our opinion, the renaissance of the Japanese equity market is now into its
twelfth year. The persistence of the government, regulators and investors over
this timeframe to change the corporate culture in Japan is having a notable
impact on capital efficiency and corporate governance standards. We believe
that these factors are the underlying dynamic which has supported the
favourable investment return for equity investors through not only periods of
economic prosperity but also uncertainty. Further initiatives such as the
action by the Financial Services Authority to urge non-life insurers to sell
their strategic shareholdings, revisions to the Stewardship Code and
substantial changes to the TOPIX inclusion rules will all add greater urgency
to the reform in the corporate sector.
The Company is positioned to capture the exciting investment opportunities
that are emerging in the Japanese equity market as a consequence of these
changes. During the year under review, new holdings have been established in
several companies whose appeal, most importantly, is based on their attractive
long-term growth prospects. This remains a primary consideration for our
investment strategy. In each case these prospects are supported by management
policies consistent with an agenda of delivering sustainable improvements in
capital efficiency and corporate governance.
JAFCO is Japan's leading venture capital investment business. The prospects
for investment growth have been enhanced by government initiatives to promote
a more entrepreneurial culture as well as the greater opportunities created by
corporate restructuring and demography related business succession issues. The
company is achieving a steady, sustainable improvement in capital efficiency
through a redefined investment approach, stronger fundraising capabilities and
an appropriate focus on returns to shareholders.
Japan Securities Finance provides services to securities companies and
financial institutions and is a vital component of the daily operation of
financial exchanges in Japan. Its outlook is enhanced by the healthier
securities market, lending conditions and new business initiatives. Returns
are improving and this has been accompanied by recent initiatives to raise
capital efficiency and shareholder returns through greater distribution to
shareholders.
Dexerials is a leading manufacturer of functional materials used in display
screens and other devices. Advanced investment in R&D and facility
expansion has positioned the company well for the next generation of
technologies. The benefits of this forward-looking strategy are reflected in
the form of an enhanced distribution to shareholders via dividends and share
buybacks.
The above purchases have been funded by a combination of reductions of
established positions or entire disposals. The most significant activity has
been the outright sales of holdings in Nippon Telegraph & Telephone and
Orix. The former is due to a sluggish earnings outlook as the company balances
the challenges of behavioural changes amongst consumers and its regulatory
requirements. The latter was a decision based on valuation due to share price
appreciation and is representative of the opportunities that are created
during periods of market volatility. Similarly other holdings such as
Mitsubishi UFJ Financial and Sompo Holdings were reduced after periods of
strong share price performance.
OUTLOOK
We believe that Japanese equities continue to offer a compelling investment
opportunity despite the strong performance of recent years. With even greater
encouragement from the government, regulators and shareholders, Japanese
companies are adopting ever higher standards of corporate governance and
implementing more attractive capital allocation policies. This is creating a
favourable environment for investors in which significant opportunities to
generate a total return, based on capital growth and compounding shareholder
distributions, are achievable.
Japan has remained on the periphery of investment decisions for foreign and
domestic investors alike for several years, but we believe this is changing.
The more attractive investment landscape has encouraged heavy participation
from international private equity investors seeking the cheap valuations on
offer. Increased participation in the market by domestic investors is a
particularly notable feature, following the revamp of the Nippon Individual
Savings Account ("NISA") savings programme, and recognition that companies are
delivering an attractive return profile for long-term investors. Our optimism
in the outlook is increased by the fact that the investment opportunity
created by corporate developments now coincides with signs of improving
domestic economic fundamentals and the potentially significant positive
benefits to Japan of the global geopolitical realignment.
RICHARD ASTON
CHIKARA INVESTMENTS LLP
21 January 2025
TOP TEN HOLDINGS
SUMITOMO MITSUI FINANCIAL GROUP 7.0%
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 financials and progressive
shareholder returns.
MITSUBISHI UFJ FINANCIAL GROUP 4.9%
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 a strategic
alliance and a 23% stake in Morgan Stanley. MUFJ continues to promote a
balanced capital management policy maintaining a strong capital base,
appropriate allocations to strategic growth opportunities and enhancing
shareholder returns.
ITOCHU 4.4%
Itochu is one of Japan's leading trading companies involved in a broad range
of businesses from the provision of upstream raw materials to downstream
retail activities. 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.
NINTENDO 4.1%
Nintendo is an international console and handheld gaming company with leading
positions in both hardware and software production. Initiatives to improve the
financial return on the company's extensive intellectual property are being
accompanied by efforts to bolster its corporate governance. Management has a
clear policy towards dividends and is taking a more proactive stance towards
share buybacks.
SOFTBANK 4.1%
Softbank 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.
TOKIO MARINE HOLDINGS 3.8%
Tokio Marine Holdings is a financial holding company which operates a leading
domestic property and casualty insurance business as well as life insurance
and other services. It has a significant international presence offering
specialist insurance products in countries such as the US, Brazil, Singapore
and the UK. Management has emphasised the importance of dividends in their
capital management policies.
SHIN-ETSU CHEMICAL 3.7%
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, while maintaining emphasis
on stability and progression.
HITACHI 3.5%
Hitachi 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.
TOKYO METRO 3.5%
Tokyo Metro is the operator of the underground rail network in Japan's
capital. The company was recently listed with strong finances, stable
cashflow, clear growth opportunities from its core operations and associated
assets, and an attractive capital allocation policy. This should reward
shareholders progressively through dividends as the benefits of previous
investment and its clear future strategy are realised.
JAPAN SECURITIES FINANCE 3.4%
Japan Securities Finance provides services to securities companies and
financial institutions and is a vital component of the daily operation of
financial exchanges in Japan. Its outlook is enhanced by the healthier
securities market, lending conditions and new business initiatives. Returns
are improving and this has been accompanied by recent initiatives to raise
capital efficiency and shareholder returns through greater distribution to
shareholders.
HOLDINGS IN PORTFOLIO AS AT 31 OCTOBER 2024
Company Main Business Area Tokyo Stock Exchange Market value % of net
("TSE") Sector
£'000
assets
Sumitomo Mitsui Financial Group Banks Banks 18,532 7.0
Mitsubishi UFJ Financial Group Banks Banks 13,122 4.9
Itochu Trading Company Wholesale 11,577 4.4
Nintendo Gaming Other Products 10,879 4.1
Softbank Mobile Telecoms & Services Information & Communications 10,829 4.1
Tokio Marine Holdings Insurance Insurance 10,109 3.8
Shin-Etsu Chemical Silicon Wafers & PVC Chemicals 9,862 3.7
Hitachi IT & Infrastructure Electrical Appliances 9,260 3.5
Tokyo Metro Land Transport Land Transport 9,218 3.5
Japan Securities Finance Specialist Financial Services Other Financing Business 9,025 3.4
SBI Holdings Financial Services & Investment Securities & Commodities 9,000 3.4
Mitsubishi Trading Company Wholesale 8,582 3.2
Zozo Online Fashion Retail Retail Trade 8,474 3.2
Nissan Chemical Industries Functional Materials Chemicals 7,332 2.8
Noevir Cosmetics Chemicals 6,600 2.5
JAFCO Venture Capital Other Financing Business 6,225 2.3
Dexerials Functional Materials Chemicals 5,777 2.2
Nitto Denko Functional Materials Chemicals 5,680 2.1
Nippon Parking Development Real Estate Real Estate 5,473 2.1
DIP Online Recruitment Services 5,435 2.0
ARE Holdings Recycling Precious Metals 5,425 2.0
Tokyo Electron Semiconductor Electrical Appliances 5,312 2.0
Sompo Holdings Insurance Insurance 5,008 1.9
Nippon Gas Utilities Electric Power & Gas 4,745 1.8
En-Japan Online Recruitment Services 4,740 1.8
Mani Medical Devices Precision Instruments 4,618 1.7
Kao Cosmetics & Toiletries Chemicals 4,617 1.7
Tokyo Ohka Kogyo Semiconductor Production Materials Chemicals 4,537 1.7
Denso Automotive Components Transport Equipment 4,360 1.6
Pillar Industrial Materials Machinery 4,344 1.6
Technopro Holdings Engineer Outsourcing Services 4,171 1.6
Macnica Holdings Semiconductor Trading Wholesale 4,102 1.5
Carta Holdings Online Marketing Information & Communications 3,884 1.5
Kyocera Electronic Components Electrical Appliances 3,567 1.3
Socionext Semiconductor Solutions Electrical Appliances 3,302 1.2
GMO Internet Internet Services Information & Communications 2,673 1.0
Shoei Motorbike Helmets Other Products 2,493 1.0
Aoyama Zaisan Networks Property Consulting Real Estate 2,287 0.9
Nareru Group Engineer Outsourcing Construction 589 0.2
--------------- ---------------
Total holdings 255,765 96.2
========= =========
Other net assets 7,363 2.8
--------------- ---------------
Royal London Short-Term Money Market Fund Open-End Fund Cash and cash equivalents - 2,713 1.0
========= =========
Net asset value 265,841 100.0
========= =========
INVESTMENT POLICY, RESULTS AND OTHER INFORMATION
INVESTMENT POLICY
The Company invests 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 has 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 is not 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 ("CFDs") 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 CFDs 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 investments 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
£7,173,000 (2023: £7,241,000). In August 2024, the Company paid an interim
dividend of 1.60p (2023: 1.55p) per ordinary share. On 17 January 2025, the
Directors declared a second interim dividend for the year ended 31 October
2024 of 3.85p (2023: 3.75p) per ordinary share, which will be paid on 3 March
2025 to shareholders on the register at 31 January 2025. Therefore, the total
dividend in respect of the financial year to 31 October 2024 will be 5.45p
(2023: 5.30p) per ordinary share.
The Company made a capital gain after tax of £30,758,000 (2023: gain of
£31,099,000). The total return, including income, after tax for the year was
a gain of £37,931,000 (2023: gain of £38,340,000).
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 these 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,
· 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 with conflicts in both the Middle East and Ukraine impacting
investor confidence. Levels of inflation globally started to abate during the
year, and interest rates in both the US and the UK have started to fall. By
contrast Japan's monetary policy continues to be very accommodative with the
Bank of Japan attempting to stimulate inflation. Whilst the differential
between Japanese and US rates has narrowed it has still been beneficial for
global investors to borrow in yen and invest in dollar denominated assets. The
Committee continues to assess the impact of the exchange rate movements on
dividend receipts and to consider the impact of an unwinding of the so called
"Yen carry trade".
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 risks, together with a summary of the processes and
internal controls used to manage and mitigate risks where possible, are
outlined on the following pages.
EMERGING RISKS
A newly installed Republican administration in the US increases the likelihood
of a global trade war. The Investment Manager and the Board will continue to
monitor closely the impact that any significant increase in global trade
tariffs has on Japan's economy. This emerging risk represents both a threat
and an opportunity to investors in Japanese equities.
It was announced on 13 December 2024 that following a review of service
providers, the Board had appointed Frostrow Capital LLP to provide
administration and company secretarial services. The Committee is confident
that this new appointment will enhance the accuracy and quality of financial
reporting. Frostrow Capital LLP has also been appointed as the Company's AIFM
in accordance with the Alternative Investment Fund Managers Directive
("AIFMD"). Whilst the Board believes that a 'new' independent AIFM will
improve the standard of governance by bringing an additional layer of
independent oversight, the Committee is closely monitoring the short-term
risks associated with transition to a new provider.
Principal Risks Mitigation Movement During the Year
Poor investment performance - The Investment Manager has a well-defined investment strategy çè
The Company's investment performance depends on the Investment Manager's and process which is regularly reviewed by the Board.
ability to identify successful investments in accordance with the Company's
investment policy. - The Board monitors the Company's investment performance
against its peer group over a range of periods.
The Company's share price may not always reflect underlying net asset value.
- 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 - The Directors acknowledge that market risk is inherent in the çè
Changes in the investment, economic or political conditions in Japan, and/or investment process. The Company maintains a diversified portfolio of quoted
in the countries in which the Company's investee companies operate could investments.
substantially and adversely affect the Company's prospects.
- The Board reviews the impact of economic indicators on the
In addition to changing economic factors such as interest rates, foreign portfolio with the Investment Manager at every Board meeting.
exchange rates and employment, unpredictable factors such as natural disasters
and diplomatic events may impact market risk. - 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 receiving 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 - The Board discusses the impact of geopolitics on the portfolio é
War and conflict can impact investor confidence and threaten global economic with the Investment Manager at every Board meeting.
growth.
- The increased geopolitical tension between the US and China is
Geopolitical instability in the region may increase volatility, reduce both an opportunity and a threat for Japan.
economic growth, and affect the prospects of the companies in the portfolio.
- The portfolio is comprised of listed, liquid, realisable
securities.
- 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.
Key Person Risk - The Board ensures that adequate resources are in place to çè
Loss of investment manager or key personnel. manage the Company.
The Departure of any key individuals from the Investment Manager without - Richard Aston attends all Board meetings, and the Board also
adequate succession planning could have a material impact on the Company's meets regularly with other members of the Chikara team.
business.
- During the year under review, Chikara have announced the
recruitment of another experienced Japanese equity investor to join the team.
- The Investment Manager's key individuals are significantly
invested in the Company ensuring interests with the Company's shareholders are
aligned.
Excess leverage - An ability to gear is a unique advantage of closed-end çè
The Company uses borrowings to seek to enhance investment returns. While this companies and structural gearing is a clearly stipulated component of the
has the potential to enhance investment returns in rising markets, in falling Company's investment policy. This is highlighted in shareholder
markets the impact could be detrimental to performance. 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 the Annual Report.
Cyber Risk - The Board has appointed an experienced independent é
Cyber crime or fraud could impact any of the Company's service providers, the professional Depositary, Custodian and Administrator.
Investment Manager, the Depositary or the Administrator.
- All key service providers produce annual internal control
Business interruption could mean service providers are unable to meet their reports for review by the Audit and Risk Committee. These reviews include
contractual obligations or that information is late, misleading or inaccurate, consideration of their business continuity plans and the associated cyber
or data privacy is breached. security risks.
- Penetration testing is carried out by the Investment Managers.
- Advances in AI and recent events like the CrowdStrike incident
have increased vulnerability to cyber attacks.
Service Provider Operational Risk - The performance of appointed professional service providers is çè
Poor performance of appointed services providers including Company Secretary, closely monitored by the Board to ensure they meet contractual obligations.
Depositary, Custodian, Administrator and/or Registrar can result in
operational disruption, business interruption or reputational damage. - The Company Secretary provided a summary of internal controls
reports from all service providers.
- During the year under review and after assessing competitive
alternatives, the Board decided to appoint Frostrow Capital LLP to provide
Administration and Company Secretarial Services. The Board is confident that
this new appointment will enhance the accuracy and quality of financial
reporting. Frostrow Capital LLP has also been appointed as the Company's AIFM
in accordance with the Alternative Investment Fund Managers Directive
("AIFMD").
ESG and Climate Change - The Company's ESG Policy, which is updated annually, is çè
Potential reputational damage from non-compliance with regulations or published on the Company's website and the AIC website.
incorrect disclosures.
- The Investment Manager's approach is to include ESG factors
Climate change leads to additional costs and risks for portfolio companies. for consideration in the investment process, such as climate change, where
they are relevant and have a material impact on stock performance.
- Examples of responsible engagement are detailed in the Annual
Report.
- Chikara Asset Management LLP (the Investment Manager) is a
signatory to the UN Principles of Responsible Investment ("PRI") and reports
annually according to the PRI reporting framework.
- The Investment Manager also complies with the obligations of
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,
Directors' 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
JUNE AITKEN
Chairman
21 January 2025
FINANCIAL STATEMENTS
INCOME STATEMENT FOR THE YEAR ENDED 31 OCTOBER 2024
Year ended Year ended
31 October 2024
31 October 2023
Note Revenue Capital Total Revenue Capital Total
£'000
£'000
£'000
£'000
£'000
£'000
Gains on investments 3 - 34,432 34,432 - 32,435 32,435
Currency (losses)/gains - (1,841) (1,841) - 209 209
Income 4 9,357 - 9,357 9,283 - 9,283
Investment management fee 5 (400) (1,599) (1,999) (343) (1,372) (1,715)
Other expenses 6 (759) - (759) (715) - (715)
--------------- --------------- --------------- --------------- --------------- ---------------
Return on ordinary activities before finance costs and taxation 8,198 30,992 39,190 8,225 31,272 39,497
========= ========= ========= ========= ========= =========
Finance costs 7 (97) (234) (331) (63) (173) (236)
--------------- --------------- --------------- --------------- --------------- ---------------
Return on ordinary activities before taxation 8,101 30,758 38,859 8,162 31,099 39,261
========= ========= ========= ========= ========= =========
Taxation 8 (928) - (928) (921) - (921)
--------------- --------------- --------------- --------------- --------------- ---------------
Return on ordinary activities after taxation 7,173 30,758 37,931 7,241 31,099 38,340
========= ========= ========= ========= ========= =========
Return per ordinary share 13 5.32p 22.83p 28.15p 5.37p 23.08p 28.45p
========= ========= ========= ========= ========= =========
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 were derived
from continuing operations.
Both the supplementary revenue and capital columns are 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.
The notes below form part of these financial statements.
STATEMENT OF FINANCIAL POSITION AS AT 31 OCTOBER 2024
Note 31 October 31 October
2024
2023
£'000
£'000
Fixed assets
Investments at fair value through profit or loss 3 258,478 231,987
--------------- ---------------
Current assets
Cash and cash equivalents 4,006 340
Cash collateral in respect of Contracts for Difference ("CFDs") 413 806
Amounts due in respect of CFDs 8,027 773
Other debtors 10 4,062 3,750
--------------- ---------------
16,508 5,669
========= =========
Creditors: amounts falling due within one year
Cash collateral in respect of CFDs (8,837) (1,266)
Amounts payable in respect of CFDs (17) (738)
Other creditors 11 (291) (534)
--------------- ---------------
(9,145) (2,538)
========= =========
Net current assets 7,363 3,131
Total assets less current liabilities 265,841 235,118
========= =========
Net assets 265,841 235,118
========= =========
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 35,561 24,636
- Other capital reserves 58,319 38,486
Revenue reserve 7,875 7,910
--------------- ---------------
Total shareholders' funds 265,841 235,118
========= =========
NAV per share - ordinary shares (pence) 14 197.31p 174.51p
========= =========
Approved by the Board of Directors and authorised for issue on 21 January 2025
and signed on their behalf by:
JUNE AITKEN
Director
CC Japan Income & Growth Trust plc is incorporated in England and Wales
with registration number 9845783.
The notes below form part of these financial statements.
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 OCTOBER 2024
FOR THE YEAR ENDED 31 OCTOBER 2024
Note Share Share Special Capital Revenue Total
capital
premium
reserve
reserve
reserve
£'000
£'000
£'000
£'000
£'000
£'000
Balance at 1 November 2023 1,348 98,067 64,671 63,122 7,910 235,118
Return on ordinary activities after taxation - - - 30,758 7,173 37,931
Dividends paid 9 - - - - (7,208) (7,208)
--------------- --------------- --------------- --------------- --------------- ---------------
Balance at 31 October 2024 1,348 98,067 64,671 93,880 7,875 265,841
========= ========= ========= ========= ========= =========
FOR THE YEAR ENDED 31 OCTOBER 2023
Note Share Share Special Capital Revenue Total
capital
premium
reserve
reserve
reserve
£'000
£'000
£'000
£'000
£'000
£'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
========= ========= ========= ========= ========= =========
The Company's distributable reserves consist of the Special reserve, Revenue
reserve and Capital reserve attributable to realised profits.
The notes below form part of these financial statements.
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 OCTOBER 2024
Year ended Year ended
31 October
31 October
2024
2023
£'000
£'000
Operating activities cash flows
Return on ordinary activities before finance costs and taxation(1) 39,190 39,497
--------------- ---------------
Adjustment for:
Gains on equity investments (26,332) (24,684)
Realised gains on CFDs (122) (7,656)
Movement in CFD balances (11) 758
Increase in other debtors (73) (500)
(Decrease)/increase in other creditors (52) 19
Tax withheld on overseas income (928) (921)
--------------- ---------------
Net cash flow from operating activities 11,672 6,513
========= =========
Investing activities cash flows
Purchases of equity investments (63,521) (57,623)
Proceeds from sales of equity investments 62,923 49,413
Realised gains on CFDs 122 7,656
--------------- ---------------
Net cash flow used in investing activities (476) (554)
========= =========
Financing activities cash flows
Equity dividends paid (7,208) (6,804)
Finance costs paid (322) (228)
--------------- ---------------
Net cash flow used in financing activities (7,530) (7,032)
========= =========
Increase/(decrease) in cash and cash equivalents 3,666 (1,073)
========= =========
Cash and cash equivalents at the beginning of the year 340 1,413
--------------- ---------------
Cash and cash equivalents at the end of the year 4,006 340
========= =========
1 Inflow from dividends was £8,314,000 (2023: £7,888,000).
The notes below 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 on 15 December 2015. On the same day, trading of the
ordinary shares commenced on the London Stock Exchange.
The principal activity of the Company is that of an investment trust within
the meaning of section 1158 of the Corporation Tax Act of 2010.
With effect from 1 January 2025, the Company's registered office changed from
6th Floor, 125 London Wall, London, EC2Y 5AS to 25 Southampton Buildings,
London, WC2A 1AL, following the appointment of Frostrow Capital LLP as AIFM,
Administrator and Company Secretary.
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,
a vote for the Company's continuation will be put forward at the next AGM to
be held on 3 March 2025, having last been passed at the AGM in 2022.
The financial statements have been prepared on a going concern basis. In
forming this opinion, the Directors have considered any potential impact of
wars 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.
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 2024 were £265.8 million (2023: £235.1
million). As at 31 October 2024, the Company held approximately £258.5
million in quoted investments (2023: £232.0 million) and had cash of
£4.0million (2023: £0.3 million). The total expenses (excluding finance
costs and taxation) for the year ended 31 October 2024 were £2.8 million
(2023: £2.4 million), which represented approximately 1.03% (2023: 1.06%) of
average net assets during the year. At the date of approval of this report,
based on the aggregate net assets 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 2026 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 on page
• 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 2024 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 ("CFDs"), which are measured at
fair value and valued by reference to the underlying market value of the
corresponding security, the valuation of which is detailed in Note 2b. 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 below.
(d) Foreign currency
Transactions denominated in foreign currencies including dividends are
translated into sterling at 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) Dividends 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 a 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, including 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) Cash collaterals
Cash collaterals are held in segregated accounts on behalf of brokers against
the CFDs. Cash collaterals are accounted for and shown on the Statement of
Financial Position either as a receivable or payable, depending on whether
cash is due from or due to the broker.
(n) 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 Income Statement 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 As at
31 October 2024
31 October 2023
£'000
£'000
Investments listed on a recognised overseas investment exchange 258,478 231,987
--------------- ---------------
258,478 231,987
======== ========
(b) Movements
During the year ended 31 October 2024
2024 2023
£'000
£'000
Book cost at the beginning of the year 207,351 193,801
Revaluation gains on equity investments held at beginning of the year 24,636 5,841
--------------- ---------------
Valuation at beginning of the year 231,987 199,642
======== ========
Purchases at cost 63,321 55,890
Sales:
- proceeds (63,162) (48,229)
- gains on investment holdings sold during the year 15,407 5,889
Movements in revaluation gains on investments held at year end 10,925 18,795
--------------- ---------------
Valuation at end of the year 258,478 231,987
======== ========
Book cost at end of the year 222,917 207,351
Revaluation gains on equity investments held at year end 35,561 24,636
--------------- ---------------
Valuation at end of the year 258,478 231,987
======== ========
Transaction costs on investment purchases for the year ended 31 October 2024
amounted to £26,500 (2023: £26,000) and on investment sales for the year
amounted to £27,200 (2023: £22,000).
The Company received £63,162,000 (2023: £48,229,000) from investments sold
during the year. The book cost of these investments when they were purchased
was £47,755,000 (2023: £42,340,000). 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 Year ended
31 October 2024
31 October 2023
£'000
£'000
Gains on equity investment holdings sold during the year 15,407 5,889
Movements in revaluation gains on investment held at year end 10,925 18,795
Other capital gains/(losses) 3 (40)
--------------- ---------------
Total gains on equity investments held at fair value 26,335 24,644
======== ========
Realised gains on CFD assets and liabilities 122 7,656
Unrealised gains on CFD assets and liabilities 7,975 135
--------------- ---------------
Total gains on investments held at fair value 34,432 32,435
======== ========
4. INCOME
Year ended Year ended
31 October 2024
31 October 2023
£'000
£'000
Income from investments:
Overseas dividends 9,278 9,215
Deposit interest 79 68
--------------- ---------------
Total 9,357 9,283
======== ========
Overseas dividend income is translated into sterling on receipt.
5. INVESTMENT MANAGEMENT FEE
Year ended Year ended
31 October 2024
31 October 2023
£'000
£'000
Fee:
20% charged to revenue 400 343
80% charged to capital 1,599 1,372
--------------- ---------------
Total 1,999 1,715
======== ========
The Company's Investment Manager during the financial year is Chikara
Investments LLP. The Investment Manager is entitled to receive a management
fee payable monthly in arrears which until 31 October 2024 was payable at the
rate of one-twelfth of 0.75% of net assets per calendar month. With effect
from 1 November 2024, the Company's management fee is calculated on a tiered
basis of 0.75% per annum on the first £300 million of net assets and 0.60% on
net assets in excess of £300 million. There is no performance fee payable to
the Investment Manager.
6. OTHER EXPENSES
Year ended Year ended
31 October 2024
31 October 2023
£'000
£'000
Secretarial services 48 48
Administration and other expenses 525 474
Auditor's remuneration - statutory audit services 41 37(1)
Directors' fees 145 156
--------------- ---------------
Other expenses - Revenue 759 715
======== ========
1 For the year ended 31 October 2023, this excludes an additional
£4,500 (excluding VAT) paid by Apex for extra statutory audit work performed
by the Auditor.
7. FINANCE COSTS
Year ended Year ended
31 October 2024
31 October 2023
£'000
£'000
Interest paid - 100% charged to revenue 39 20
CFD finance cost and structuring fee - 20% charged to revenue 57 42
Structuring fees - 20% charged to revenue 1 1
--------------- ---------------
97 63
======== ========
CFD finance cost and structuring fee - 80% charged to capital 230 169
Structuring fees - 80% charged to capital 4 4
--------------- ---------------
234 173
======== ========
Total finance costs 331 236
======== ========
8. TAXATION
Year ended 31 October 2024 Year ended 31 October 2023
Revenue Capital Total Revenue Capital Total
£'000
£'000
£'000
£'000
£'000
£'000
(a) Analysis of tax charge in the year:
Overseas withholding tax 928 - 928 921 - 921
--------------- --------------- --------------- --------------- --------------- ---------------
Total tax charge for the year (see note 8 (b)) 928 - 928 921 - 921
======== ======== ======== ======== ======== ========
(b) Factors affecting the tax charge for the year:
The effective UK corporation tax rate for the year is 25.00% (2023: 23.00%).
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 2024 Year ended 31 October 2023
Revenue Capital Total Revenue Capital Total
£'000
£'000
£'000
£'000
£'000
£'000
Total return before taxation 8,101 30,758 38,859 8,162 31,099 39,261
Effective UK corporation tax at 25.00% (2023: 23.00%) 2,025 7,690 9,715 1,877 7,153 9,030
--------------- --------------- --------------- --------------- --------------- ---------------
Effects of:
Overseas withholding tax suffered 928 - 928 921 - 921
Non-taxable overseas dividends (2,320) - (2,320) (2,119) - (2,199)
Capital gains not subject to tax - (8,148) (8,148) - (7,509) (7,509)
Finance costs not tax deductible 24 59 83 14 40 54
Movement in unutilised management expenses 271 399 670 228 316 544
--------------- --------------- --------------- --------------- --------------- ---------------
Total tax charge for the year 928 - 928 921 - 921
======== ======== ======== ======== ======== ========
The Company has an unrecognised deferred tax asset of £1,543,000 (2023:
£1,441,000) based on the long-term prospective corporation tax rate of 25%
(2023: 25%). This asset has accumulated because deductible expenses exceeded
taxable income for the year ended 31 October 2024. 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 Year ended
31 October 2024
31 October 2023
£'000
£'000
Second Interim - year ended 31 October 2023 3.75p (2022: 3.50p) 5,052 4,716
Interim dividend - year ended 31 October 2024 1.60p (2023: 1.55p) 2,156 2,088
--------------- ---------------
Total 7,208 6,804
======== ========
(ii) The dividend relating to the year ended 31 October 2024, 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 2024 Year ended 31 October 2023
Pence per £'000 Pence per £'000
Ordinary
Ordinary
Share
Share
Interim dividend 1.60p 2,156 1.55p 2,088
Second interim dividend(1) 3.85p 5,187 3.75p 5,052
--------------- --------------- --------------- ---------------
5.45p 7,343 5.30p 7,140
======== ======== ======== ========
1 Not included as a liability in the year ended 31 October 2024
accounts.
The Directors have declared a second interim dividend for the financial year
ended 31 October 2024 of 3.85p per ordinary share. The dividend will be paid
on 3 March 2025 to shareholders on the register at the close of business on 31
January 2025.
10. OTHER DEBTORS
As at As at
31 October 2024
31 October 2023
£'000
£'000
Accrued income 3,588 3,552
Sales for settlement 239 -
VAT receivable 193 128
Prepayments 42 70
--------------- ---------------
Total 4,062 3,750
======== ========
11. OTHER CREDITORS
As at As at
31 October 2023
31 October 2023
£'000
£'000
Amounts falling due within one year:
Purchases for future settlement - 200
Accrued finance costs 24 15
Accrued expenses 267 319
--------------- ---------------
Total 291 534
======== ========
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 2024 As at 31 October 2023
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 not issued any ordinary shares and there
were134,730,610 ordinary shares in issue as at 21 January 2025.
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 £37,931,000 (2023:
profit of £38,340,000) and the weighted average number of ordinary shares in
issue for the year to 31 October 2024 of 134,730,610 (2023: 134,730,610).
The returns per ordinary share were as follows:
As at 31 October 2024 As at 31 October 2023
Revenue Capital Total Revenue Capital Total
Return per ordinary share 5.32p 22.83p 28.15p 5.37p 23.08p 28.45p
======== ======== ======== ======== ======== ========
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
As at As at
31 October 2024
31 October 2023
Net Asset Value (£'000) 265,841 235,118
Ordinary shares in issue 134,730,610 134,730,610
--------------- ---------------
NAV per ordinary share 197.31p 174.51p
======== ========
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 its former AIFM, Chikara Investments LLP. The fees
for the period are disclosed in note 5 and amounts outstanding at the year
ended 31 October 2024 were £171,000 (2023: £151,000).
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 2024 to 31 December 2024, as agreed
between the Investment Manager and the Company, was US $31,000 (31 December
2023: US $34,000). The research charge for the year 1 January 2025 to 31
December 2025, 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, is 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 above.
(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 As at
31 October 2024
31 October 2023
£'000
£'000
Equity Investments: yen 258,478 231,987
Receivables (due from brokers, dividends, and other income receivable) 3,827 3,552
CFD: yen (absolute exposure) 8,010 35
Cash and cash equivalent: yen (4,849) (3,640)
--------------- ---------------
Total 265,466 231,934
======== ========
Foreign currency sensitivity
If the Japanese yen had appreciated or depreciated by 10% as at 31 October
2024 (2023: 10%) then the value of the portfolio as at that date would have
increased or decreased as shown below.
Increase in Decrease in Increase in Decrease in
Fair Value
Fair Value
Fair Value
Fair Value
As at
As at
As at
As at
31 October
31 October
31 October
31 October
2024
2024
2023
2023
£'000
£'000
£'000
£'000
Impact on capital return - increase/(decrease) 26,547 (26,547) 23,193 (23,193)
--------------- --------------- --------------- ---------------
Return after taxation - increase/(decrease) 26,547 (26,547) 23,193 (23,193)
======== ======== ======== ========
(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 with 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 CFDs 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 2024 is disclosed in the
Alternative Performance Measures section below.
(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, and as such does 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 2024 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 As at
31 October 2024
31 October 2023
due within
due within
one year
one year
£'000
£'000
Exposure to floating interest rates: CFD derivative contract - (absolute 51,153 46,397
exposure)
Collateral paid in respect of CFDs 413 806
======== ========
(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 2024 was as follows:
As at As at
31 October 2024
31 October 2023
3 months or less
3 months or less
£'000
£'000
Cash at bank 4,006 340
Amounts due in respect of CFDs 8,027 773
Collateral paid in respect of CFDs 413 806
Debtors 4,062 3,750
--------------- ---------------
Total 16,508 5,669
======== ========
None of the above assets or liabilities was 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 2024 of
its equity investments was £258,478,000 (2023: £231,987,000). In addition,
the Company's gross market exposure to these price changes through its CFD
portfolio was £51,153,000 through long positions (2023: £46,397,000).
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 exposure to derivative contracts is 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 2024 were:
As at 31 October 2024 As at 31 October 2023
£'000 % of net £'000 % of net
assets
assets
CFDs - (absolute exposure) 51,153 19.24% 46,397 19.73%
--------------- --------------- --------------- ---------------
CFDs - (net exposure) 51,153 19.24% 46,397 19.73%
======== ======== ======== ========
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 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 2024 As at 31 October 2023
Increase in Decrease in Increase in Decrease in
Fair Value
Fair Value
Fair Value
Fair Value
£'000
£'000
£'000
£'000
Impact on capital return - increase/(decrease) 30,162 (30,162) 27,835 (27,835)
--------------- --------------- --------------- ---------------
Return after taxation - increase/(decrease) 30,162 (30,162) 27,835 (27,835)
======== ======== ======== ========
(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 it
would be for 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 2024, based on the earliest date on which payment can be required,
were as follows:
As at As at
31 October 2024
31 October 2023
less than 3 months
less than 3 months
£'000
£'000
Amounts payable in respect of CFDs 8,854 2,004
Other payables 291 534
--------------- ---------------
Total 9,145 2,538
======== ========
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 Statement of
Financial Position at their Fair Value, or the Statement of Financial Position
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) above.
The table below sets out Fair Value measurements using Fair Value Hierarchy.
31 December 2024 Level 1 Level 2 Level 3 Total
£'000
£'000
£'000
£'000
Assets:
Equity investments 255,765 2,713 - 258,478
CFDs - Unrealised Fair Value gains - 8,027 - 8,027
Liabilities:
CFDs - Unrealised Fair Value losses - (17) - (17)
--------------- --------------- --------------- ---------------
Total 255,765 10,723 - 266,488
======== ======== ======== ========
31 December 2023 Level 1 Level 2 Level 3 Total
£'000
£'000
£'000
£'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
======== ======== ======== ========
There were no transfers between levels during the year (2023: nil).
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 2024 (2023: 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 in the
Annual 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 2024 comprises called up share capital and
reserves totaling £265,841,000 (2023: £235,118,000).
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
2024, the total distributable Capital reserve was £58,319,000 (2023:
£38,486,000), and the total undistributable Capital reserve was £35,561,000
(2023: £24,636,000).
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.
OTHER INFORMATION
GLOSSARY AND ALTERNATIVE PERFORMANCE MEASURES
Administrator The Company's administrator, the current such administrator effective 1
January 2025 being Frostrow Capital LLP, and prior to that Apex Listed
Companies Services (UK) Limited.
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.
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 2024
NAV per ordinary share (pence) a 197.3
Share price (pence) b 178.8
--------------- ---------------
Discount (b÷a)-1 9.4%
======== ========
As at 31 October 2023
NAV per ordinary share (pence) a 174.5
Share price (pence) b 162.5
--------------- ---------------
Discount (b÷a)-1 6.9%
======== ========
Ex-dividend date The date from which a shareholder is 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 2024 £'000
CFD notional market value(1) a 51,153
Non-base cash borrowings(2) b -
NAV c 265,841
--------------- ---------------
Gearing (net) ((a+b)/c) 19.2%
======== ========
As at 31 October 2023 £'000
CFD notional market value(1) a 46,397
Non-base cash borrowings(2) b 3,380
NAV c 235,118
--------------- ---------------
Gearing (net) ((a+b)/c) 21.2%
======== ========
1 CFD positions in underlying asset value.
2 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 2024 Gross Commitment
£'000
£'000
Security market value a 258,478 258,478
CFD notional market value b 51,153 51,153
Cash and cash equivalents(1) c 4,616 4,186
NAV d 265,841 265,841
--------------- --------------- ---------------
Leverage (a+b+c)/d 118% 118%
======== ======== ========
As at 31 October 2023 Gross Commitment
£'000
£'000
Security market value a 231,987 231,987
CFD notional market value b 46,397 46,397
Cash and cash equivalents(1) c 3,841 321
NAV d 235,118 235,118
--------------- --------------- ---------------
Leverage (a+b+c)/d 120% 119%
======== ======== ========
1 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.
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 2024
Average NAV a 266,974,122
Annualised expenses b 2,758,000
--------------- ---------------
Ongoing charges (b÷a) 1.03%
======== ========
Year end 31 October 2023
Average NAV a 228,765,739
Annualised expenses b 2,430,000
--------------- ---------------
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 2024 Share price NAV
Opening at 1 November 2023 (in pence) a 162.5 174.5
Closing at 31 October 2024 (in pence) b 178.8 197.3
Price movement (b÷a)-1 c 10.0% 13.1%
Dividend reinvestment(1) d 3.2% 3.0%
Total return (c+d) 13.2% 16.1%
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(1) d 3.8% 3.4%
Total return (c+d) 20.9% 18.9%
1 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 statistical measure of how much and how quickly an asset's price changes
over time.
COMPANY SECURITY INFORMATION AND IDENTIFICATION CODES
WEBSITE www.ccjapanincomeandgrowthtrust.com
ISIN GB00BYSRMH16
SEDOL BYSRMH1
BLOOMBERG TICKER CCJI LN
LEGAL ENTITY IDENTIFIER (LEI) 549 300 FZANMYIORK 1K98
GLOBAL INTERMEDIARY IDENTIFICATION NUMBER (GIIN) 6 HEK HT-99 999-SL-826
Registered in England no. 9845783
STATUS OF RESULTS ANNOUNCEMENT
The figures and financial information for 2024 are extracted from the Annual
Report and financial statements for the year ended 31 October 2024 and do not
constitute the statutory accounts for the year. The Annual Report and
financial statements for the year ended 31 October 2024 include the Report of
the Independent Auditor which is unqualified and does not contain a statement
under either section 498(2) or section 498(3) of the Companies Act 2006. The
Annual Report and financial statements have not yet been delivered to the
Registrar of Companies.
The figures and financial information for 2023 are extracted from the
published Annual Report and financial statements for the year ended 31 October
2023 and do not constitute the statutory accounts for that year. The Annual
Report and financial statements for the year ended 31 October 2023 have been
delivered to the Registrar of Companies and included the Report of the
Independent Auditor which was unqualified and did not contain a statement
under either section 498(2) or section 498(3) of the Companies Act 2006.
21 January 2025
Frostrow Capital LLP
Company Secretary
- ENDS -
Neither the contents of the Company's website nor the contents of any website
accessible from hyperlinks on the Company's website (or any other website) is
incorporated into, or forms part of, this announcement.
For further information please contact:
AIFM, Administrator and Company Secretary
Frostrow Capital LLP
Email: cosec@frostrow.com (mailto:cosec@frostrow.com)
Tel: 0203 709 2481
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