REG - CC Japan Inc&Growth - Half-year Report
20/06/2023 07:00
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RNS Number : 2199D CC Japan Income & Growth Trust PLC 20 June 2023
CC JAPAN INCOME & GROWTH TRUST PLC
LEI: 549300FZANMYIORK1K98
HALF-YEARLY FINANCIAL REPORT ANNOUNCEMENT
FOR THE SIX MONTHS ENDED 30 APRIL 2023
INVESTMENT OBJECTIVE, FINANCIAL INFORMATION AND PERFORMANCE SUMMARY
INVESTMENT OBJECTIVE
The investment objective of the Company is to provide shareholders with
dividend income combined with capital growth, mainly through investment in
equities listed or quoted in Japan.
FINANCIAL INFORMATION
At At
30 April 31 October
2023 2022
Net assets £222.0m £203.6m
Net asset value ("NAV") per Ordinary Share ("Share")(1) 164.8p 151.1p
Share price 153.5p 138.8p
Share price discount to NAV(2) 6.9% 8.1%
Transferable Subscription Share price(3) n/a 0.53p
Annualised Ongoing charges(2) 1.05% 1.06%
Gearing (net)(2) 20.0% 20.9%
( )
(1) Measured on a cum income basis.
(2) This is an Alternative Performance Measure ("APM"). Definitions of APMs
used in this report, together with how these measures have been calculated are
disclosed in this report.
(3) The life of the Company's Transferable Subscription Shares expired on 28
February 2023 and the listing was cancelled on 15 March 2023.
PERFORMANCE SUMMARY
For the six months to For the six months to
30 April 30 April
2023 2022
NAV ex-income total return per Share(1,2) +12.3% -2.1%
NAV cum-income total return per Share(1,2) +11.3% -0.7%
Share price total return(1,2) +13.1% -3.7%
Tokyo Stock Exchange Price Index ("Topix") total return(1) +9.5% -7.8%
Revenue return per Share(1) 2.66p 2.37p
First interim dividend per Share(1) 1.55p 1.40p
(1) Total returns are stated in GBP sterling, including dividend reinvested.
(2) These are APMs.
Source: Coupland Cardiff Asset Management LLP - The Company's Factsheet April
2023.
CHAIRMAN'S STATEMENT
Performance
Against a backdrop of turbulent world markets during the first half of the
financial year to 30 April 2023 your Company has recorded positive total
returns. For the six months under review, the Net Asset Value ("NAV") cum
income increased by 11.3% while the share price, again measured by total
return rose by 13.1%, handsomely beating the TOPIX Total Return Index which
rose 9.5%. A second interim dividend of 3.50p per Ordinary Share was paid in
March 2023.
Since inception in December 2015, the cum income NAV has risen by 103.5% while
the Ordinary Share price, including dividends distributed, has risen by 87.3%.
Indeed, income distributions have represented over 30.0% of our total return
over this time. Again, these results have comfortably outperformed the TOPIX
Total Return Index, which we use for reference, and which has risen by 73.1%
since our launch. Dividends paid to Shareholders over this period amount to
28.95p per Ordinary Share, representing seven years of successive dividend
growth totalling 63.3%.
Although global stock markets made a steady recovery from October 2022 lows,
the failure of three regional banks in the USA caused a sharp selloff in March
2023 on concerns of contagion. In Japan, the banking system is robust, and in
your Investment Manager's view, the risk of deposit flight is negligible. The
newly appointed Governor of the Bank of Japan ("BOJ"), Ueda-San was a surprise
choice to replace the retiring Kuroda-San. Monetary policy remains
accommodating even if the new Governor is laying the groundwork towards some
normalisation of policy. Conversely, tightening monetary policies throughout
the rest of the developed world led by the Federal Reserve in the USA have
consequences for not only credit but the potential level of global stock
markets and asset prices. Japan is an outlier and liquidity levels remain
supportive of asset and stock prices.
Growing the Company
It is disappointing to report that the Transferable Subscription Shares
("TSS") issued as a 1 for 5 free bonus to Ordinary Shareholders in February
2021 expired worthless on the last business day of February 2023. The issue
was designed as an opportunity for Shareholders to participate in any post
Covid-19 normalisation of the Japanese economy. Unfortunately, subsequent
world events and markets conspired against the scheme which could have raised
up to £40 million for the Company. While the Ordinary Share price traded
above the Subscription Price level on several occasions, the level was never
sustained to facilitate their exercise. Your Board is still intent on growing
the Company. The Ordinary Shares closed the period on a discount of 6.9% to
NAV. The Board and Managers are hopeful that with the lapse of the TSS rights,
sustained investment performance and dividend growth will provide the
potential to regain our premium share price. This would allow resumption of
tap issuance. Your Investment Managers and brokers, Peel Hunt, run a
co-ordinated marketing programme to raise awareness and profile of the
Company. It is gratifying to see that the results of their efforts and the use
of media distribution have resulted in the broadening of our Shareholder base
with more retail Shareholders coming onto our register through the platforms.
The website has been revamped and it is easy to follow us at
www.ccjapanincomeandgrowthtrust.com
(http://www.ccjapanincomeandgrowthtrust.com) . The excellent monthly
newsletter is a good way of monitoring progress.
Income & Interim Dividend
Net revenue increased by nearly 12.4% in the first half of the year, compared
with the same period last year. The Board has declared a first interim
dividend of 1.55p per Ordinary Share, an increase of 10.7% over last year,
payable on 4 August 2023 to those Shareholders recorded on the register as at
7 July 2023 with an ex-dividend date of 6 July 2023.
Outlook
While inflation is not so rampant in Japan compared to many other countries,
it continues to broaden and climb with core inflation running at over 3.4%.
This should encourage domestic flows back to the stock market which offers
higher yields compared to the zero return on bank deposits. Surprisingly,
local investors are still selling into strength with the TOPIX hitting a 33
year high up 10.1% in sterling terms in the calendar year to the end of April
2023. However, foreign investors are returning, attracted by economic trends,
policy developments, attractive stock valuations and not least extensive media
and press coverage hailing that the long bear market in Japan is finally over.
Certainly, Warren Buffet has recently highlighted the growing attractions of
Japan and has increased the stakes in the five trading companies that
Berkshire Hathaway first acquired in 2020. The trend of returning cash to
shareholders through share buy backs and dividends has been further stimulated
by recent announcements by the Tokyo Stock Exchange ("TSE") and Japan's
Financial Services Agency ("FSA"). Their measures are designed to accelerate
the restructuring of the many companies that trade below book value, while
encouraging greater balance sheet efficiencies and radical overhaul of capital
allocation. This is all evidence of a continuing and refreshing commitment to
corporate governance reform.
The economy is increasingly gaining traction post the pandemic and with
China's reopening in January 2023. We are seeing increased confidence in
corporate earnings and consistent improvement in the level of dividend
distributions across our holdings in the portfolio. Against this, the growing
disparity of interest rates between sterling and the yen continues to put
pressure on the currency cross rate, reducing Japanese income on translation
to sterling if the yen continues to weaken.
Continued geopolitical tension especially between China and the USA in
addition to the unpredictability of the North Korean regime, also remains a
risk. Providing that these tensions do not worsen, the outlook for Japan is
increasingly rosy, particularly for investors who recognise that income is a
critical component of total return, which encapsulates our mandate.
Your Board has every confidence in Richard Aston and his team to continue to
produce good results by holding and identifying attractive companies across a
broad spectrum. There is no shortage of investment opportunity in Japan.
Harry Wells
Chairman
19 June 2023
INVESTMENT MANAGER'S REPORT
The Company's NAV cum-income rose by 11.3.% on a total return basis for the
six months ended 30 April 2023. This return includes a second interim
dividend of 3.50p, a 4.5% increase over the second interim dividend of the
previous year. This extends the track record of consecutive annual dividend
increases that the Company has established since inception in December 2015
and is firm evidence of the underlying improvement in corporate governance in
Japan.
This strong performance has come at a time of significant geopolitical,
economic and operational uncertainties and the current reporting period has
been no exception. However, there are signs that current developments in
international relations and global monetary policy, as well as the ongoing
improvements in corporate governance, are beginning to define a new era for
Japan. Certainly, the retirement of Bank of Japan ("BOJ") Governor,
Haruhiko Kuroda after a ten-year tenure as the head of the Central Bank, and
at a time when deflationary forces he set out to overcome are easing, creates
a very different backdrop for his successor, Kazuo Ueda.
The outgoing Governor retained his capacity to surprise right to the end with
the unexpected announcement following the BOJ December Policy Meeting that the
board had decided to expand the range in which long term policy rates (10 year
Japanese Government Bond yields) will be allowed to fluctuate. This was the
first reversal of the easy monetary policies established in the Joint
Statement by the Government of Shinzo Abe and the BOJ in 2013.
While this shift is modest in comparison to the increase of interest rates
around the world, it does indicate that even in Japan, the process of
normalisation of monetary policy has begun. This proved a significant boost to
the bank holdings in the portfolio, Sumitomo Mitsui Financial Group and
Mitsubishi UFJ Financial Group, which made notable positive contributions to
performance despite a sell-off in March 2023 following the turbulence of
regional bank failures in the US.
The largest positive contribution to return was Socionext, a new holding
established at its Initial Public Offering ("IPO") in October 2022. This
company designs and develops System on Chip ("SoC") solutions for a range of
industries with particular emphasis on opportunities in mobile communications,
next generation automobiles and applications in artificial intelligence. This
was the first IPO we had chosen to participate in for a number of years due to
concerns about the appropriateness, strategy and valuation of many new
listings. Socionext satisfied our requirements for financial strength,
management quality and attention to shareholder return which gave us the
confidence to invest. We believe that the new issue market is an important
source of potential investment opportunities but will continue to exercise
prudence.
There was notable weakness in the shares of many domestically focussed
companies despite the steady removal of Covid-19 restrictions and the
reopening of international borders to inbound visitors. In response to
rising inflation it appears that many companies have initially sought to
control their costs by reducing demand for online advertising (Carta
Holdings), market research (Intage) and even recruitment (Dip, TechnoPro). We
do not believe that the short-term reversal of well-established trends will
affect the expectations for these companies as the Japanese economy responds
to the challenges ahead.
Portfolio Positioning
The global outlook remains uncertain with economic trends across the major
regions as well as international relations very unpredictable. These
uncertainties increase the importance of identifying investment opportunities
based on their individual characteristics, both in an operational context, and
from a valuation perspective. We own a portfolio of companies across a broad
range of industries, which we believe individually each have the same
underlying attributes of business growth opportunities combined with financial
strength, management quality and a commitment to shareholder return. This
mitigates some of the risks for a patient investor.
Portfolio activity seeks to benefit from the volatility that the uncertainties
create, and this has seen new positions established in Socionext
(Semiconductor design), Nissan Chemical (performance materials and
agrochemicals), Jaccs (consumer financial services) and EnJapan (online
recruiting services). The Company has also added to positions in Nippon
Parking Development, Mitsubishi UFJ Financial Group, Noevir and Technopro into
recent share price weakness. The holding in Toyota Motor has been reduced
significantly while TRE Holdings, SB Technology and Industrial Infrastructure
REIT have been eliminated entirely as in each case concerns have emerged on
the ability of the company to deliver rising shareholder returns over the
medium-term.
Outlook
We believe that Japanese equities currently offer investors a compelling
combination of ongoing considerations that warrant attention from even the
most diehard detractors, not least the domestic individual investor. The
favourable current economic momentum, stable political environment, supportive
policy initiatives, corporate governance reforms and valuation appeal have
created a potent force which builds on the steady market foundations
established in the years that preceded the Covid-19 pandemic.
Fiscal Year 2022 to the end of March 2023 saw aggregate dividends and share
buybacks authorised by listed companies both hit record highs. Despite this
very positive outcome resulting from developments highlighted to date, the
opportunity for further growth is very clear given the high level of dividend
cover and overall financial health of Japanese companies. Raising awareness of
capital efficiency is a key component of the recent initiatives announced by
the Tokyo Stock Exchange and Japan's Financial Services Agency and these can
be expected to underpin the additional improvements that investors seek and
ultimately enhance the exciting investment potential of the much-maligned
Japanese equity market.
Richard Aston
Coupland Cardiff Asset Management LLP
19 June 2023
TOP TEN SECTORS AND HOLDINGS
AS AT 30 APRIL 2023
TOP 10 SECTORS % of net
Sector assets
Information & Communications 13.1
Electrical Appliances 13.1
Chemicals 12.3
Banks 10.9
Services 8.4
Wholesale 6.3
Insurance 6.3
Transport Equipment 5.6
Securities & Commodities 4.9
Other Financing Business 4.4
Top Ten 85.3
Other Sectors* 12.7
Other net assets 2.0
Total 100.0
* Other Sectors comprise of 4 sectors, which individually, is less than 4.2%
each of the net assets.
TOP 10 EQUITY HOLDINGS
% of net
Company Sector assets
Sumitomo Mitsui Financial Group Banks 5.9
Mitsubishi UFJ Financial Group Banks 5.0
Nippon Telegraph & Telephone Information & Communications 4.7
Socionext Electrical Appliances 4.6
Itochu Wholesale 3.9
Shin-Etsu Chemical Chemicals 3.6
Softbank Information & Communications 3.5
Sompo Holdings Insurance 3.5
SBI Holdings Securities & Commodities 3.4
Noevir Holdings Chemicals 3.2
Top Ten 41.3
Other equity holdings n/a 56.7
Total holdings 98.0
Other net assets 2.0
Total 100.0
TOP TEN CONTRACTS FOR DIFFERENCE (CFDs)
Absolute
Absolute value Market
value as a % of Value
Company Sector £'000 net assets £'000
Sumitomo Mitsui Financial Group Banks 2,616 1.2 757
Mitsubishi UFJ Financial Group Banks 2,212 1.0 441
Nippon Telegraph & Telephone Information & Communications 2,079 0.9 504
Socionext Electrical Appliances 2,057 0.9 1,145
Itochu Wholesale 1,749 0.8 452
Shin-Etsu Chemical Chemicals 1,596 0.7 25
Softbank Information & Communications 1,546 0.7 33
Sompo Holdings Insurance 1,535 0.7 185
SBI Holdings Securities & Commodities 1,528 0.7 (191)
Noevir Holdings Chemicals 1,405 0.6 (2)
Top Ten CFDs 18,323 8.2 3,349
Other CFDs n/a 25,197 11.4 (567)
Total CFDs 43,520 19.6 2,782
INTERIM MANAGEMENT REPORT
The Directors are required to provide an Interim Management Report in
accordance with the Financial Conduct Authority ("FCA") Disclosure Guidance
and Transparency Rules. The Chairman's Statement and the Investment Manager's
Report in this half-yearly financial report provide details of the important
events which have occurred during the period and their impact on the financial
statements. The following statements on principal and emerging risks and
uncertainties, related party transactions, going concern and the Directors'
Responsibility Statement, together, constitute the Interim Management Report
for the Company for the six months ended 30 April 2023. The outlook for the
Company for the remaining six months of the year ending 31 October 2023 is
discussed in the Chairman's Statement and the Investment Manager's Report.
PRINCIPAL AND EMERGING RISKS AND UNCERTAINTIES
The Board is responsible for the management of risks faced by the Company and
delegates this role to the Audit and Risk Committee (the "Committee"). The
Committee carries out, at least annually, a robust assessment of principal and
emerging risks and uncertainties and monitors the risks on an ongoing basis.
The Committee has a dynamic risk management register in place to help identify
key risks in the business and oversee the effectiveness of internal controls
and processes. The risk management register and associated risk heat map
provide a visual reflection of the Company's identified risks, including
principal and emerging risks. The Company's risks fall into three categories:
• Strategic and Business risks, including investment
performance, market, geopolitical and leverage risk;
• Operational and Financial risks, including cyber
and business interruption; and
• Regulatory and Compliance risks, including climate
change.
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. A detailed explanation of the principal and emerging risks
and uncertainties to the Company are detailed in the Company's most recent
Annual Report for the year ended 31 October 2022, which can be found on the
Company's website at www.ccjapanincomeandgrowthtrust.com
(http://www.ccjapanincomeandgrowthtrust.com) .
Since the publication of the 2022 Annual Report and Accounts on 24 January
2023, there continues to be increased risk levels within the global economy.
The ongoing conflict in Ukraine, the subsequent impact on global economies,
deteriorating international relations and increasing levels of inflation
worldwide have undoubtedly raised investment risk. Rising interest rates and
mismatches in asset liability pricing have led to the failure of three US
banks and created fears of global contagion. The Board closely monitors and
assesses these continued uncertainties as to how they could impact and
effect the Company's trading position apropos our investment objectives,
portfolio and thus our Shareholders and where appropriate endeavour to
mitigate the risk.
RELATED PARTY TRANSACTIONS
The Company's Investment Manager is Coupland Cardiff Asset Management LLP.
Coupland Cardiff Asset Management LLP is considered a related party under the
Listing Rules. The Investment Manager is entitled to receive a management fee
payable monthly in arrears at the rate of one-twelfth of 0.75% of Net Asset
Value per calendar month. Investment management fees paid during the six-month
period to 30 April 2023 were £824,000. There is no performance fee payable to
the Investment Manager. There have been no changes to the related party
transactions that could have a material effect on the financial position or
performance of the Company since the year ended 31 October 2022. Further
information can be found in note 12 to the financial statements.
GOING CONCERN
The Board has a reasonable expectation that the Company has adequate resources
to continue in operational existence for at least twelve months from 19 June
2023. In reaching this conclusion, the Directors have 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 30 April 2023 were
£222 million (30 April 2022: £217.0 million). As at 30 April 2023, the
Company held £217.6 million (30 April 2022: £213.9 million) in quoted
investments. In addition, as at 30 April 2023, the Company had gross exposure
to Contracts for Difference of £43.5 million (30 April 2022: £42.8
million). The total expenses (excluding finance costs and taxation) for the
six months ended 30 April 2023 were £1.2 million (30 April 2022: £1.2
million). The Company has a £12 million (or its equivalent in Japanese yen)
bank overdraft facility with Northern Trust Company and as at 30 April 2023,
£0.9 million (30 April 2022: £1.9 million) had been utilised on the Japanese
yen bank account.
As part of their assessment, the Board has performed stress testing and
liquidity analysis on the Company's portfolio of investments, giving careful
consideration to the consequences for the Company of continuing uncertainties
in the global economy and increased geo political tension worldwide A
prolonged and deep global or Japanese stock market decline would lead to a
fall in investment values.
The Company currently has sufficient liquidity available to meet any future
obligations.
DIRECTORS' RESPONSIBILITY STATEMENT
The Disclosure Guidance and Transparency Rules (DTR) of the UK Listing
Authority require the Directors to confirm their responsibilities in relation
to the preparation and publication of the Interim Management Report and
Financial Statements.
The Directors confirm to the best of their knowledge that:
· This set of unaudited condensed financial statements contained within
the half-yearly financial report has been prepared in accordance with FRS 104
Interim Financial Reporting and the Statement of Recommended Practice
"Financial Statements of Investment Companies and Venture Capital Trusts"
issued by the Association of Investment Companies issued in July 2022 (''AIC
SORP'').
· This Interim Management Report, together with the Chairman's
Statement and Investment Manager's Report, includes a fair review of the
information required by 4.2.7R and 4.2.8R of the Financial Conduct Authority's
Disclosure Guidance and Transparency Rules.
Harry Wells
Chairman
For and on behalf of the Board of Directors
19 June 2023
UNAUDITED CONDENSED STATEMENT OF COMPREHENSIVE INCOME
SIX MONTHS TO 30 APRIL 2023
Six months to 30 April 2023 Six months to 30 April 2022 Year ended 31 October 2022*
Revenue Capital Total Revenue Capital Total Revenue Capital Total
Note £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Gains/(losses) on investment - 20,330 20,330 - (3,791) (3,791) - (18,118) (18,118)
Currency (losses)/gains - (2) (2) - 55 55 - (209) (209)
Income 4 4,581 - 4,581 4,141 - 4,141 8,878 - 8,878
Investment management fee (163) (652) (815) (167) (669) (836) (327) (1,306) (1,633)
Other expenses (343) - (343) (327) - (327) (664) - (664)
Return on ordinary activities before finance costs and taxation 4,075 19,676 23,751 3,647 (4,405) (758) 7,887 (19,633) (11,746)
Finance costs 5 (35) (87) (122) (43) (98) (141) (69) (185) (254)
Return on ordinary activities before taxation 4,040 19,589 23,629 3,604 (4,503) (899) 7,818 (19,818) (12,000)
Taxation 6 (455) - (455) (414) - (414) (888) - (888)
Return on ordinary activities after taxation 3,585 19,589 23,174 3,190 (4,503) (1,313) 6,930 (19,818) (12,888)
Return per Ordinary Share - undiluted 10 2.66p 14.54p 17.20p 2.37p (3.34)p (0.97)p 5.14p (14.71)p (9.57)p
Return per Ordinary Share - diluted 10 n/a** n/a** n/a** 1.97p (2.79)p (0.82)p 4.29p (12.26)p (7.97)p
*Audited
** The life of the Company's Transferable Subscription Shares expired on 28
February 2023.
The total column of the above statement is the profit and loss account of the
Company. All revenue and capital items in the above statement derive from
continuing operations.
Both the supplementary revenue and capital columns are both prepared under
guidance from the Association of Investment Companies. There is no other
comprehensive income and therefore the return for the period is also the total
comprehensive income for the period.
The notes form part of these interim financial statements.
UNAUDITED CONDENSED STATEMENT OF FINANCIAL POSITION
AS AT 30 APRIL 2023
30 April 30 April 31 October 2022*
2023 2022
Note £'000 £'000 £'000
Fixed assets
Investments at fair value through profit or loss 3 217,592 213,896 199,642
Current assets
Cash and cash equivalents - - 1,413
Cash collateral in respect of Contracts for Difference ("CFDs") 486 43 433
Amounts due in respect of CFDs 5,063 2,311 2,680
Other debtors 4,168 3,260 4,434
9,717 5,614 8,960
Creditors: amounts falling due within one year
Cash and cash equivalents - Bank overdraft (2,240) (226) -
Amounts payable in respect of CFDs (2,280) (1,659) (2,780)
Other creditors (749) (581) (2,240)
(5,269) (2,466) (5,020)
Net current assets 4,448 3,148 3,940
Total assets less current liabilities 222,040 217,044 203,582
Net assets 222,040 217,044 203,582
Capital and reserves
Share capital 8 1,348 1,348 1,348
Share premium 98,067 98,067 98,067
Special reserve 64,671 64,671 64,671
Capital reserve
- Revaluation gains on investment held at period end 21,671 19,673 5,841
- Other capital reserve 29,941 27,665 26,182
Revenue reserve 6,342 5,620 7,473
Total Shareholders' funds 222,040 217,044 203,582
NAV per share - Ordinary Shares - undiluted (pence) 11 164.80p 161.09p 151.10p
NAV per share - Ordinary Shares - diluted (pence) 11 n/a** 161.08p 152.75p
*Audited
** The life of the Company's Transferable Subscription Shares expired on 28
February 2023.
Approved by the Board of Directors and authorised for issue on 19 June 2023
and signed on their behalf by:
Harry Wells
Director
CC Japan Income & Growth Trust plc is incorporated in England and Wales
with registration number 9845783.
The notes form part of these interim financial statements.
UNAUDITED CONDENSED STATEMENT OF CHANGES IN EQUITY
SIX MONTHS TO 30 APRIL 2023
Share capital Share premium Special reserve Capital reserve Revenue reserve Total
£'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 - - - 19,589 3,585 23,174
Dividends paid - - - (4,716) (4,716)
Balance at 30 April 2023 1,348 98,067 64,671 51,612 6,342 222,040
SIX MONTHS TO 30 APRIL 2022
Share capital Share premium Special reserve Capital reserve Revenue reserve Total
£'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 November 2021 1,348 98,067 64,671 51,841 6,943 222,870
Return on ordinary activities after taxation - - - (4,503) 3,190 (1,313)
Dividends paid - - - - (4,513) (4,513)
Balance at 30 April 2022 1,348 98,067 64,671 47,338 5,620 217,044
Year ended 31 October 2022 (Audited)
Share capital Share premium Special reserve Capital reserve Revenue reserve Total
£'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 November 2021 1,348 98,067 64,671 51,841 6,943 222,870
Return on ordinary activities after taxation - - - (19,818) 6,930 (12,888)
Dividends paid - - - - (6,400) (6,400)
Balance at 31 October 2022 1,348 98,067 64,671 32,023 7,473 203,582
The Company's distributable reserves consist of the Special reserve, Revenue
reserve and Capital reserve attributable to realised profits.
The notes form part of these interim financial statements.
UNAUDITED CONDENSED STATEMENT OF CASH FLOWS
SIX MONTHS TO 30 APRIL 2023
Six months to 30 April 2023 Six months to 30 April 2022 Year ended 31 October 2022*
£'000 £'000 £'000
Operating activities cash flows
Return on ordinary activities before finance costs and taxation** 23,751 (758) (11,746)
Adjustment for:
(Gains)/losses on investments (17,383) 4,631 18,106
Movement in CFD transactions (2,936) (1,008) (646)
Increase/(decrease) in other debtors (546) 31 (6)
Increase in other creditors 144 132 3
Tax withheld on overseas income (455) (414) (888)
Net cash flow from operating activities 2,575 2,614 4,823
Investing activities cash flows
Purchases of investments (27,622) (18,053) (43,572)
Proceeds from sales of investments 26,232 19,912 46,864
Net cash flow (used in)/from investing activities (1,390) 1,859 3,292
Financing activities cash flows
Equity dividends paid (4,716) (4,513) (6,400)
Finance costs paid (122) (138) (254)
Net cash used in financing activities (4,838) (4,651) (6,654)
(Decrease)/Increase in cash and cash equivalents (3,653) (178) 1,461
Cash and cash equivalents at the beginning of the period 1,413 (48) (48)
Cash and cash equivalents at the end of the period (2,240) (226) 1,413
*Audited
** Inflow from cash dividends received were £3,612,000 (30 April 2022:
£3,758,000 and 31 October 2022: £8,038,000).
The notes form part of these interim financial statements.
NOTES TO THE INTERIM FINANCIAL STATEMENTS
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 and, on the same day, trading of the Ordinary Shares commenced
on the London Stock Exchange, with the Company's shares admitted to the
Official List of the UK Listing Authority with a premium listing. 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 principal activity of the Company is that of an investment trust company
within the meaning of section 1158 of the Corporation Tax Act 2010.
The Company's registered office is 6(th) Floor, 125 London Wall, London, EC2Y
5AS.
2. ACCOUNTING POLICIES
The interim financial statements have been prepared in accordance with FRS 104
Interim Financial Reporting and 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.
This half-yearly Financial Report is unaudited and does not include all the
information required for full annual financial statements. The half-yearly
Financial Report should be read in conjunction with the Annual Report and
Accounts of the Company for the year ended 31 October 2022. The Annual Report
and Accounts for the year ended 31 October 2022 were prepared in accordance
with FRS 102 The Financial Reporting Standard applicable in the UK and
Republic of Ireland ("FRS 102") and received an unqualified audit report. The
financial information for the year ended 31 October 2022 in this half-yearly
Financial Report has been extracted from the audited Annual Report and
Accounts for that year end. The accounting policies in this Half-yearly
Financial Report are consistent with those applied in the Annual Report and
Accounts for the year ended 31 October 2022.
The interim financial statements have been presented in GBP sterling (£).
3. INVESTMENTS
As at 30 April 2023 As at 30 April 2022 As at 31 October 2022
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Investments listed on a recognised overseas investment exchange 217,592 213,896 199,642
217,592 213,896 199,642
Fair Value Measurements of Financial Assets and Financial Liabilities
The financial assets and liabilities are either carried in the balance sheet
at their fair value, or the balance sheet amount is a reasonable approximation
of fair value (due from brokers, dividends receivable, accrued income, due to
brokers, accruals and cash and cash equivalents).
The valuation techniques for investments and derivatives used by the Company
are explained in the accounting policies notes 2 (b and c) in the Annual
report for the year ended 31 October 2022.
The table below sets out fair value measurements using fair value hierarchy.
Level 1 Level 2 Level 3 Total
30 April 2023 (Unaudited) £'000 £'000 £'000 £'000
Assets:
Equity investments 217,592 - - 217,592
CFDs - Unrealised fair value gains - 5,063 - 5,063
Liabilities:
CFDs - Unrealised fair value losses - (2,280) - (2,280)
Total 217,592 2,783 - 220,375
Level 1 Level 2 Level 3 Total
30 April 2022 (Unaudited) £'000 £'000 £'000 £'000
Assets:
Equity investments 213,896 - - 213,896
CFDs - Unrealised fair value gains - 2,311 - 2,311
Liabilities:
CFDs - Unrealised fair value losses - (1,659) - (1,659)
Total 213,896 652 - 214,548
Level 1 Level 2 Level 3 Total
31 October 2022 (Audited) £'000 £'000 £'000 £'000
Assets:
Equity investments 199,642 - - 199,642
CFDs- Unrealised fair value gains - 2,680 - 2,680
Liabilities:
CFDs - Unrealised fair value losses - (2,780) - (2,780)
Total 199,642 (100) - 199,542
There were no transfers between levels during the period (2022: same).
Categorisation within the hierarchy has been determined on the basis of the
lowest level input that is significant to the Fair Value measurement of the
relevant asset as follows:
Level 1 - valued using quoted prices in active markets for identical assets.
Level 2 - valued by reference to valuation techniques using observable inputs
including quoted prices.
Level 3 - valued by reference to valuation techniques using inputs that are
not based on observable market data. There are no Level 3 investments as at 30
April 2023 (2022: nil).
4. INCOME
Six months to 30 April 2023 Six months to 30 April 2022 Year ended 31 October 2022
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Income from investments:
Overseas dividends 4,552 4,141 8,878
Deposit interest 29 - -
Total 4,581 4,141 8,878
Overseas dividend income is translated into sterling on receipt.
5. FINANCE COSTS
Six months to 30 April 2023 Six months to 30 April 2022 Year ended 31 October 2022
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Interest paid - 100% charged to revenue 13 19 23
CFD finance cost and structuring fee - 20% charged to revenue 22 24 45
Structuring fees - 20% charged to revenue - - 1
35 43 69
CFD finance cost and structuring fee - 80% charged to capital 87 96 181
Structuring fees - 80% charged to capital - 2 4
87 98 185
Total finance costs 122 141 254
6. TAXATION
Six months to 30 April 2023 Six months to 30 April 2022
(Unaudited) (Unaudited)
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Analysis of tax charge in the period:
Overseas withholding tax 455 - 455 414 - 414
Total tax charge for the period 455 - 455 414 - 414
Year ended 31 October 2022
(Audited)
Revenue Capital Total
£'000 £'000 £'000
Analysis of tax charge in the year:
Overseas withholding tax 888 - 888
Total tax charge for the year 888 - 888
7. INTERIM DIVIDEND
During the six months ended 30 April 2023, the Company paid a dividend of
3.50p per Ordinary Share in respect of the year ended 31 October 2022.
These interim financial statements have been prepared in accordance with the
requirements of section 838 of the Companies Act 2006 and constitute the
Company's interim accounts for the purpose of justifying the payment of an
interim dividend for the year ending 31 October 2023.
The Directors have declared an interim dividend for the six months ended 30
April 2023 of 1.55p (2022: 1.40p) per Ordinary Share. The dividend will be
paid on 4 August 2023, to Ordinary Shareholders who appear on the register as
at the close of business on 7 July 2023. The Ordinary Shares will go
ex-dividend on 6 July 2023 and the dividend will be funded from the Company's
Revenue reserve.
8. SHARE CAPITAL
Share capital represents the nominal value of shares that have been issued.
The share premium includes any premium received on issue of share capital. Any
transaction costs associated with the issuing of shares are deducted from
share premium.
As at 30 April 2023 (Unaudited) As at 30 April 2022 (Unaudited)
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
As at 31 October 2022 (Audited)
No. of shares £'000
Allotted, issued & fully paid:
Ordinary Shares of 1p
Opening balance 134,730,610 1,348
Closing balance 134,730,610 1,348
Since the period end, the Company has issued no further Ordinary Shares, with
134,730,610 Ordinary Shares in issue as at 19 June 2023.
9. FINANCIAL COMMITMENTS
As at 30 April 2023 there were no commitments in respect of unpaid calls and
underwritings (30 April 2022: nil and 31 October 2022: nil).
10. RETURN PER ORDINARY SHARE
Total return per Ordinary Share is based on the return on ordinary activities,
including income, for the period after taxation of £23,174,000 (30 April
2022: £1,313,000 and 31 October 2022: £12,888,000) and the weighted average
number of Ordinary Shares in issue for the period to 30 April 2023 of
134,730,610 (30 April 2022: 134,730,610 and 31 October 2022: 134,730,610);
Ordinary Shares-diluted in issue for the period/year to 30 April 2022/31
October 2022 respectively of 161,676,732.
The returns per Ordinary Share were as follows:
As at 30 April 2023 As at 30 April 2022 As at 31 October 2022
(Unaudited) (Unaudited) (Audited)
Revenue Capital Total Revenue Capital Total Revenue Capital Total
Return per Ordinary Share-undiluted 2.66p 14.54p 17.20p 2.37p (3.34)p (0.97)p 5.14p (14.71)p (9.57)p
Return per Ordinary Share-diluted* n/a n/a n/a 1.97p (2.79)p (0.82)p 4.29p (12.26)p (7.97)p
* This table shows the effect of dilution on returns had the Transferable
Subscription Shares ("TSS") been exercised in full. However, the TSS expired
on the last business day of February 2023 and none were exercised so there was
no dilution of Ordinary Shares.
11. NET ASSET VALUE PER SHARE
Total shareholders' funds and the NAV per share attributable to the Ordinary
Shareholders at the period end calculated in accordance with the Articles of
Association were as follows:
NAV per Ordinary Share - undiluted
As at As at As at 31 October 2022
30 April 2023 30 April 2022
(Unaudited) (Unaudited) (Audited)
Net Asset Value (£'000) 222,040 217,044 203,582
Ordinary Shares in issue 134,730,610 134,730,610 134,730,610
NAV per Ordinary Share - undiluted 164.80p 161.09p 151.10p
NAV per Ordinary Share - diluted
As at As at As at 31 October 2022
30 April 2023 30 April 2022
(Unaudited) (Unaudited) (Audited)
Subscription shares issue - 26,946,122 26,946,122
Proceeds from exercise of TSS (£'000) - 43,383 43,383
Adjusted NAV for exercise of TSS (£'000) 222,040 260,427 246,965
Ordinary Shares - post exercise of TSS 134,730,610 161,676,732 161,676,732
NAV per Ordinary Share - diluted 164.80p 161.08p 152.75p
12. RELATED PARTY TRANSACTIONS
Transactions with the Investment Manager and the Alternative Investment Fund
Investment Manager ("AIFM")
The Company provides additional information concerning its relationship with
the Investment Manager and AIFM, Coupland Cardiff Asset Management LLP.
Investment Management fees for the six-month period ended 30 April 2023 were
£824,000 (30 April 2022: £836,000 and 31 October 2022: £1,633,000). The
Investment Management fees outstanding at the period ended 30 April 2023 were
£136,000 (30 April 2022: £133,000 and 31 October 2022: £134,000).
Research purchasing agreement
The Markets in Financial Instruments Directive II ("MiFID II") treats
investment research provided by brokers and independent research providers as
a form of "inducement" to investment managers and requires research to be paid
separately from execution costs. In the past, the costs of broker research
were primarily borne by the Company as part of execution costs through dealing
commissions paid to brokers. With effect from 3 January 2018, this practice
has changed, as brokers subject to MiFID II are now required to price, and
charge for, research separately from execution costs. Equally, the rules
require the Investment Manager, as an investment Manager, to ensure that the
research costs borne by the Company are paid for through a designated Research
Payment Account ("RPA") funded by direct research charges to the Investment
Manager's clients, including the Company.
The research charge for the year 1 January 2023 to 31 December 2023, as agreed
between the Investment Manager and the Company, was $34,000 (31 December 2022:
$34,000).
Directors' fees and shareholdings
Directors' fees are payable at the rate of £27,000 per annum for each
Director other than the Chairman, who is entitled to receive £40,500. The
Chairman of the Audit and Risk Committee is also entitled to an additional fee
of £5,500 per annum and the Senior Independent Director ("SID") is entitled
to an additional fee of £1,000 per annum.
The Directors had the following ordinary shareholdings in the Company, all of
which were beneficially owned.
Ordinary Shares as at 30 April 2023 Ordinary Shares as at 30 April 2022 Ordinary
Shares as at 31 October 2022
(Unaudited) (Unaudited) (Audited)
Harry Wells 40,000 40,000 40,000
Peter Wolton 67,250 67,250 67,250
Kate Cornish-Bowden 50,000 40,000 40,000
June Aitken 41,251 40,000 40,372
Craig Cleland 40,000 40,000 40,000
13. POST BALANCE SHEET EVENTS
There are no post balance sheet events other than as disclosed in this
half-yearly financial report.
14. STATUS OF THIS REPORT
These interim financial statements are not the Company's statutory accounts
for the purposes of section 434 of the Companies Act 2006. They are unaudited.
The half-yearly financial report will be made available to the public at the
registered office of the Company.
The report will also be available on the Company's website
www.ccjapanincomeandgrowthtrust.com
(http://www.ccjapanincomeandgrowthtrust.com)
The information for the year ended 31 October 2022 has been extracted from the
last published audited financial statements, unless otherwise stated. The
audited financial statements have been delivered to the Registrar of
Companies. The Auditors reported on those accounts and their report was
unqualified, did not draw attention to any matters by way of emphasis and did
not contain a statement under sections 498(2) or 498(3) of the Companies Act
2006.
GLOSSARY AND ALTERNATIVE PERFORMANCE MEASURES ('APM')-
Administrator
The Company's administrator, the current such administrator being Apex Listed
Companies Services (UK) Limited. Apex Group acquired Sanne Group in August
2022 and subsequently the name of the Company's Administrator and Company
Secretary changed from Sanne Fund Services (UK) Limited to 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 a 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.
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.
Cum Dividend
A dividend that has been declared but not yet paid out.
Custodian
An entity that is appointed to 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 (with effect from 27 November 2021).
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 30 April 2023
NAV per Ordinary Share a 164.8
Share price b 153.5
Discount (b÷a)-1 6.9%
Ex-dividend date
The date from which you are not entitled to receive a dividend which has been
declared and is due to be paid to Shareholders.
Financial Conduct Authority or "FCA"
The independent body that regulates the financial services industry in the UK.
Gearing (APM)
A way to magnify income and capital returns, but which can also magnify
losses. The Company may be geared through the CFDs and if utilised, the
overdraft facility, with The Northern Trust Company.
As at 30 April 2023 £'000
CFD Notional Market Value* a 43,520
Non-base cash borrowings** b 861
NAV c 222,040
Gearing (net) ((a+b)/c) 20.0%
* CFD positions in underlying asset value.
** Non-base cash borrowings represents borrowings in Yen
Gross assets (APM)
The Company's total assets including any leverage amount.
Index
A basket of stocks which is considered to replicate a particular stock market
or sector.
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 30 April 2023 Gross Commitment
£'000
£'000
Security Market value a 217,592 217,592
CFD Notional market value b 43,520 43,520
Cash and cash equivalents c 3,732 1,719
NAV d 222,040 222,040
Leverage (a+b+c)/d 119% 118%
Market liquidity
The extent to which investments can be bought or sold at short notice.
Net assets
An investment company's assets less its liabilities.
Net Asset Value (NAV) per Ordinary Share
Net assets divided by the number of Ordinary Shares in issue (excluding any
shares held in treasury).
Net exposure
The difference between the Company's long positions and short positions
Ordinary Shares
Ordinary shares of £0.01 each in the capital of the Company.
Ongoing charges (APM)
A measure, expressed as a percentage of average NAV, of the regular, recurring
annualised costs of running an investment company.
Period ended 30 April 2023
Average NAV a 221,537,147
Annualised expenses b 2,316,000
Ongoing charges (b÷a) 1.05%
Portfolio
A collection of different investments 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 of a company's 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.
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 includes both income and capital returns. This
takes into account capital gains and reinvestment of dividends paid out by the
Company into its Ordinary Shares on the ex-dividend date.
Period ended 30 April 2023 Share price NAV
Opening at 1 November 2022 (in pence) a 138.8 151.1
Closing at 30 April 2023 (in pence) b 153.5 164.8
Price movement (b÷a)-1 c 10.6% 9.1%
Dividend reinvestment* d 2.5% 2.2%
Total return (c+d) 13.1% 11.3%
* The dividend reinvestment is calculated on the assumption that dividends
paid out by the Company are reinvested into the shares of the Company at NAV
at the ex-dividend date.
Volatility
A measure of how much a share moves up and down in price over a period of
time.
COMPANY INFORMATION
DIRECTORS, INVESTMENT MANAGER AND ADVISERS
DIRECTORS INVESTMENT MANAGER
Harry Wells (Chairman) Coupland Cardiff Asset Management LLP
Kate Cornish-Bowden (Audit & Risk Committee Chair) 31-32 St James's Street
Peter Wolton (Senior Independent Director) London
June Aitken SW1A 1HD
Craig Cleland Website - www.couplandcardiff.com (http://www.couplandcardiff.com)
BROKER REGISTERED OFFICE*
Peel Hunt LLP 6(th) Floor
100 Liverpool Street 125 London Wall
London London
EC2M 2AT EC2Y 5AS
DEPOSITARY AND CUSTODIAN COMPANY SECRETARY AND ADMINISTRATOR
Northern Trust Investor Services Limited Apex Listed Companies Services (UK) Limited
50 Bank Street 6(th) Floor, 125 London Wall
London London
E14 5NT EC2Y 5AS
Website - www.apexgroup.com (http://www.apexgroup.com)
REGISTRAR AUDITOR
Link Group Johnston Carmichael LLP
10th Floor Central Square 7-11 Melville Street
29 Wellington Street Edinburgh
Leeds EH3 7PE
LS1 4DL
LEGAL ADVISER
Stephenson Harwood LLP
1 Finsbury Circus,
London
EC2M 7SH
COMPANY SECURITY INFORMATION AND IDENTIFICATION CODES
WEBSITE www.ccjapanincomeandgrowthtrust.com
(http://www.ccjapanincomeandgrowthtrust.com)
ISIN GB00BYSRMH16
SEDOL BYSRMH1
BLOOMBERG TICKER CCJI LDN
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
For further information contact:
Apex Listed Companies Services (UK) Limited
Tel: 020 3327 9270
END
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