REG - CC Japan Inc&Growth - Half-year Report
24/06/2024 07:00
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RNS Number : 4769T CC Japan Income & Growth Trust PLC 24 June 2024
CC JAPAN INCOME & GROWTH TRUST PLC
LEI: 549300FZANMYIORK1K98
HALF-YEARLY FINANCIAL REPORT ANNOUNCEMENT
FOR THE SIX MONTHS ENDED 30 APRIL 2024
INVESTMENT OBJECTIVE, FINANCIAL INFORMATION AND PERFORMANCE SUMMARY
INVESTMENT OBJECTIVE
The investment objective of CC Japan Income & Growth Trust Plc (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
2024 2023
Net assets (millions) £275.7m £235.1m
Net asset value ("NAV") per Ordinary Share ("Share")(1) 204.6p 174.5p
Share price 190.5p 162.5p
Share price discount to NAV(2) 6.9% 6.9%
Annualised Ongoing charges(2) 1.05% 1.06%
Gearing (net)(2) 20.5% 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 in this report.
PERFORMANCE SUMMARY
For the six months to For the six months to
30 April 2024 30 April 2023
% change(1) % change(1)
NAV ex-income total return per Share(2) +20.6% +12.3%
NAV cum-income total return per Share(2) +19.5% +11.3%
Share price total return(2) +19.7% +13.1%
Tokyo Stock Exchange Price Index ("Topix") total return +14.9% +9.5%
Revenue return per Share 2.66p 2.66p
First interim dividend per Share 1.60p 1.55p
(1) Total returns are stated in GBP sterling, including dividend reinvested.
(2) These are APMs.
Source: Chikara Investments LLP - The Company's Factsheet April 2024.
CHAIR'S STATEMENT
Performance
This is my first statement as Chair of your Company and I am pleased to
present the interim results for the half year ended 30 April 2024. The
Japanese equity market has shown notable strength with the Nikkei 225 reaching
a 33-year high and the TOPIX Index continuing its robust performance from last
year. This has been driven by solid corporate earnings, positive market
sentiment resulting from steady improvement in corporate governance, and
domestic economic reforms including the ending of the negative interest policy
and yield curve control.
During this period, net assets rose by 19.5% on a total return basis while the
share price total return to Ordinary shareholders gained 19.7%, including the
second interim dividend of 3.75p per Ordinary share. The latter represents a
7.1% increase on the previous year. This performance comfortably surpassed the
benchmark, the TOPIX total return index which rose 14.9% in sterling terms.
Since inception in December 2015, net asset value ("NAV") has risen by 159.8%
with the Ordinary Share price, including dividends distributed, rising by
133.2%. Dividends have represented over 34.3% of the share price total return,
reflecting eight years of consistent growth.
Discount
The Company's shares continued to trade at a discount, closing unchanged at
6.9%, compared to the end of the financial year ended 31 October 2023. The
Board monitors the share price rating and the discount level and has
flexibility to buy back shares as authorised by Shareholder Resolution renewed
at the Annual General Meeting ("AGM").
Income and Interim Dividend
Net revenue in the first half of the year remained at 2.66p compared with the
same period last year. The Board has declared a first interim dividend of
1.60p per Ordinary Share, an increase of 3.23% over last year, payable on 2
August 2024 to Shareholders on the register as at 5 July 2024, with an
ex-dividend date of 4 July 2024.
Board of Directors
Harry Wells retired at the end of the Company's AGM in March 2024, having
served as Chair of the Board since 2015. I would like to take this opportunity
to thank Harry for his invaluable contributions and excellent leadership of
the Company. Craig Cleland has stepped into the role of Senior Independent
Director. John Charlton-Jones joined the Board at the end of the last
financial year and brings extensive knowledge of Japan. The Board remains
committed to succession planning to ensure a diverse mix of skills and
perspectives.
Outlook
The Japanese market remains attractive, supported by domestic policies and
improving economic conditions. Japan's corporate governance reforms are
driving capital efficiency and shareholder returns with increasing momentum
behind larger dividend payouts and share buybacks. Rising wages and higher
capital expenditure are also expected to bolster economic resilience and
equity market performance.
However, challenges include a weak yen, a potential global economic slowdown,
and continued geopolitical uncertainties with conflicts in the Ukraine and the
Middle East contributing to global instability and negatively influencing
energy prices and economic outlook. Additional uncertainty arises from the
upcoming US Presidential elections and the policies that the new
administration may adopt towards China, trade agreements, and international
alliances.
The yen continued its significant decline falling a further 4.0% against the
dollar and 6.9% against the pound during the reporting period. The Bank of
Japan's potential shift from its long-standing ultra-loose monetary policy,
including possible interest rate hikes, could support yen appreciation. The
Federal Reserve is expected to pause or lower rates, narrowing the interest
rate differential between the US and Japan, in the near future. This might
further bolster the yen, however any yen strength could also pose challenges
for Japanese exporters, potentially impacting corporate earnings.
Despite these risks, the ongoing structural reforms and domestic policies, and
the end of deflation offer a compelling case for long term investment into
Japanese equities. The country continues to leverage its technological
expertise, particularly in robotics, artificial intelligence (AI), and
semiconductor manufacturing. Japan is benefitting from the global trend of
"friendshoring" with companies diversifying supply chains to reduce reliance
on China. A significant example is TSMC's investment in a new semiconductor
plant in Japan.
Governance reforms continue to deliver positive outcomes, showing total
shareholder payout ratios (dividends and buybacks) exceeding 50% and dividends
forecast to increase by nearly 10% in fiscal 2024*. The Company is well
positioned to benefit from these changes as the Investment Manager actively
engages with portfolio companies, making corporate governance a focus in every
management meeting.
The Company's long-term performance track record demonstrates Richard Aston
and his team's expertise in identifying high potential stocks across all
sectors, targeting both large and mid-sized companies.
On behalf of the Board, I would like to thank you for your continuing support.
June Aitken
Chair
21 June 2024
* According to Nomura.
INVESTMENT MANAGER'S REPORT
Performance Review
The Net Asset Value ("NAV") of the CC Japan Income & Growth Trust Plc rose
by 19.5% on a total return basis during the period between 31 October 2023 and
30 April 2024. This return includes a second interim dividend of 3.75p, a
7.1% increase year-on-year, fully covered by the income generated from the
underlying holdings in the portfolio.
The Japanese equity market experienced its strongest gains since 2013, when
the aggressive monetary and fiscal easing policies of former Prime Minister
Shinzu Abe first raised optimism for a turnaround in the sluggish domestic
corporate and economic performance of the previous two decades. The fact
that the market has rallied so strongly, as the Bank of Japan has begun to
reverse some of the abnormal monetary policies introduced at the time, is very
meaningful and a recognition of the long-term objectives of Abenomics policies
being realised.
Bank of Japan Governor Kazuo Ueda announced a major revision to the country's
easy monetary policies in the March 2024 Board meeting, ending both the
negative interest rate policy (NIRP) and Yield Curve Control (YCC). This
represents the first increase in domestic interest rates since 2007 and it is
consequently unsurprising that interest rate sensitive sectors featured
prominently in the list of positive contributors to performance in the
period. Holdings in the banking (Sumitomo Mitsui Financial Group, Mitsubishi
UFJ Holdings) and insurance (Sompo Holdings, Tokio Marine Holdings) sectors
were notable given that the improvement in operating environment has resulted
in an immediate enhancement to shareholder returns as the companies seek to
balance growth objectives and capital efficiency.
Global supply chains are being restructured in response to ongoing
geopolitical turmoil and Japan is well positioned to address the strategic
vulnerability in areas of technology where it has retained distinct
competitive advantages. Semiconductor related companies such as Socionext,
Nippon Pillar Packaging, Tokyo Ohka Kogyo and Shin-Etsu Chemical were strong
performers in recognition of their industry leading positions and as potential
beneficiaries of global realignment.
The domestic economy has remained sluggish due to a number of factors, not
least the impact of a weaker yen and the conservative nature of Japanese
consumers. Companies such as Nippon Parking Development and Dip
(recruitment), whose business results are largely determined by their
performance in the domestic market have experienced share price weakness.
Our disappointment in this near-term return is tempered by each company's
focus on long-term growth opportunities and consistent returns to
shareholders.
Portfolio Positioning
The Company is positioned to capture the exciting opportunities that have
emerged across the Japanese equity market to invest in companies that have
embraced the goals of improving capital efficiency, corporate governance and
returns to shareholders. The attractiveness in terms of depth and breadth of
these opportunities has increased over time as initiatives such as the Tokyo
Stock Exchange Action on Cost of Capital Conscious Management have built on
the original goals of Abenomics.
This potential is now being enhanced by much clearer strategies for growth as
the Japanese economy shifts from a deflationary era to one where persistent
inflation affects consumer and corporate behaviour as well as the exciting
renaissance of many Japanese companies in the global arena. It is however
not universal and the importance of identifying these opportunities on a
company-by-company basis with thorough analysis and research is paramount.
Adjustments to the portfolio have been limited over the period with the main
activity focused on opportunities presented by short-term share price
volatility. The holdings in Socionext and Tokyo Ohka Kogyo were reduced for
example after sustained share price strength with the proceeds reinvested in
existing holdings such as SBI Holdings (financial services), TechnoPro (labour
outsourcing), Macnica (semiconductor distribution), Murata Manufacturing
(semiconductor components) and Softbank Corp (mobile telecommunication and
related services).
Outlook
The Company was established in the early phase of the corporate governance
transformation in Japan to focus specifically on the benefits this was
expected to bring in terms of an enhancement to capital efficiency and returns
to shareholders. The Stewardship Code and Corporate Governance Codes have
been the foundation for the improvements to date and investors in Japan have
been significant beneficiaries of the focus and discipline these have
brought. Further initiatives such as those from Tokyo Stock Exchange,
firstly reconstructing the main indices and more recently demanding greater
attention to capital cost, have accelerated developments in this respect. We
are confident that the momentum behind this progression will continue.
The recent depreciation of the yen has created a number of considerations for
officials, corporate managers and investors alike. However, we highlight the
fact that the single currency based returns of the Japanese equity market have
been strong over the last 10 years despite a wide variance in cross-rates
against other major currencies. Our views are expressed in the underlying
analysis of the individual positions established in the portfolio rather than
overriding top-down view. We believe that long term investment case in
Japanese equities is based on the exciting structural reforms identifiable in
the corporate environment combined with the emerging opportunities for renewed
growth rather than shorter term factors over which companies have no direct
influence.
Richard Aston
Chikara Investments LLP
21 June 2024
TOP TEN SECTORS AND HOLDINGS
AS AT 30 APRIL 2024
TOP 10 SECTORS % of net
Sector assets
Chemicals 13.8
Electrical Appliances 13.4
Banks 12.0
Information & Communications 11.2
Wholesale 7.9
Insurance 7.8
Other Financing Business 5.7
Services 5.2
Retail Trade 4.4
Securities & Commodities 3.7
Top Ten 85.1
Other Sectors* 13.7
Other net assets 1.2
Total 100.0
*Other Sectors comprise of 7 sectors, which individually, is less than 2.6%
each of the net assets.
TOP 10 EQUITY HOLDINGS
% of net
Company Sector assets
Sumitomo Mitsui Financial Group Banks 6.2
Mitsubishi Financial UFJ Financial Group Banks 5.8
Itochu Wholesale 4.3
Hitachi Electrical Appliances 4.2
Shin-Etsu Chemical Chemicals 4.2
Sompo Holdings Insurance 4.0
Tokio Marine Insurance 3.8
SBI Holdings Securities & Commodities 3.7
Softbank Information & Communications 3.7
Mitsubishi Wholesale 3.6
Top Ten 43.5
Other equity holdings 55.3
Total holdings 98.8
Other net assets 1.2
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 3,417 1.2 629
Mitsubishi Financial UFJ Financial Group Banks 3,203 1.2 652
Itochu Wholesale 2,388 0.9 654
Hitachi Electrical Appliances 2,298 0.8 899
Shin-Etsu Chemical Chemicals 2,291 0.8 701
Sompo Holdings Insurance 2,186 0.8 722
Tokio Marine Insurance 2,074 0.8 647
SBI Holdings Securities & Commodities 2,049 0.7 323
Softbank Information & Communications 2,018 0.7 209
Mitsubishi Wholesale 1,984 0.7 744
Top Ten CFDs 23,908 8.6 6,180
Other CFDs 30,544 11.2 3,624
Total CFDs 54,452 19.8 9,804
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 Chair's Statement and the Investment Manager's
Report in this Half-yearly 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 2024. The outlook for the
Company for the remaining six months of the year ending 31 October 2024 is
discussed in the Chair'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 2023, which can be found on the
Company's website at www.ccjapanincomeandgrowthtrust.com
(http://www.ccjapanincomeandgrowthtrust.com) .
The risks as outlined in the 2023 Annual Report and Accounts released on the
24 January 2024 remain largely unchanged. The continued weakness of the yen
has put some pressure on dividend receipts. The Company continues to grow
revenue reserves and retains a Special Reserve of £64.7m available for
distribution in circumstances where there is an unforeseen revenue shortfall.
The Board closely monitors and assesses these continued uncertainties as to
how they could impact and affect 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 Chikara Investments LLP. Chikara
Investments 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 during the six-month period to 30 April 2024
were £980,000. 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 2023. 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 the
publication of this Half-yearly Report. 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 2024 were £275.7 million (30 April
2023: £222.0 million). As at 30 April 2024, the Company held £272.3 million
(30 April 2023: £217.6 million) in quoted investments. In addition, as at 30
April 2024, the Company had gross exposure to Contracts for Difference of
£54.5 million (30 April 2023: £43.5 million). The total expenses (excluding
finance costs and taxation) for the six months ended 30 April 2024 were £1.4
million (30 April 2023: £1.2 million). The Company has a £12.0 million (or
its equivalent in Japanese yen) bank overdraft facility with Northern Trust
Company and as at 30 April 2024, £2.0 million (30 April 2023: £0.9 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 geopolitical tension worldwide. A
prolonged and deep global or Japanese stock market decline would lead to a
fall in investment values. However, the Company currently has sufficient
liquidity available to meet any future obligations.
In accordance with the Company's Articles of Association, Shareholders have
the right to vote on the continuation of the Company as an investment trust
every three years and a resolution to that effect was last approved at the AGM
in March 2022.
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 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 Chair'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.
June Aitken
Chair
For and on behalf of the Board of Directors
21 June 2024
UNAUDITED CONDENSED STATEMENT OF COMPREHENSIVE INCOME
SIX MONTHS TO 30 APRIL 2024
Six months to 30 April 2024 Six months to 30 April 2023 Year ended 31 October 2023*
Revenue Capital Total Revenue Capital Total Revenue Capital Total
Note £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Gains on investment - 42,179 42,179 - 20,330 20,330 - 32,435 32,435
Currency gains/ (losses) - 744 744 - (2) (2) - 209 209
Income 4 4,659 - 4,659 4,581 - 4,581 9,283 - 9,283
Investment management fee (196) (784) (980) (163) (652) (815) (343) (1,372) (1,715)
Other expenses (389) - (389) (343) - (343) (715) - (715)
Return on ordinary activities before finance costs and taxation 4,074 42,139 46,213 4,075 19,676 23,751 8,225 31,272 39,497
Finance costs 5 (33) (104) (137) (35) (87) (122) (63) (173) (236)
Return on ordinary activities before taxation 4,041 42,035 46,076 4,040 19,589 23,629 8,612 31,099 39,261
Taxation 6 (460) - (460) (455) - (455) (921) - (921)
Return on ordinary activities after taxation 3,581 42,035 45,616 3,585 19,589 23,174 7,241 31,099 38,340
Return per Ordinary Share 10 2.66p 31.20p 33.86p 2.66p 14.54p 17.20p 5.37p 23.08p 28.45p
*Audited
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 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 2024
30 April 30 April 31 October 2023*
2024 2023
Note £'000 £'000 £'000
Fixed assets
Investments at fair value through profit or loss 3 272,259 217,592 231,987
Current assets
Cash and cash equivalents - - 340
Cash collateral in respect of Contracts for Difference ("CFDs") - 486 806
Amounts due in respect of CFDs 3 10,699 5,063 773
Other debtors 3,907 4,168 3,750
14,606 9,717 5,669
Creditors: amounts falling due within one year
Cash and cash equivalents - Bank overdraft (288) (2,240) -
Cash collateral in respect of CFDs (9,700) - (1,266)
Amounts payable in respect of CFDs 3 (894) (2,280) (738)
Other creditors (301) (749) (534)
(11,183) (5,269) (2,538)
Net current assets 3,423 4,448 3,131
Total assets less current liabilities 275,682 222,040 235,118
Net assets 275,682 222,040 235,118
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 equity investment held at period end 55,866 21,671 24,636
- Other capital reserve 49,291 29,941 38,486
Revenue reserve 6,439 6,342 7,910
Total Shareholders' funds 275,682 222,040 235,118
NAV per share - Ordinary Shares (pence) 11 204.62p 164.80p 174.51p
*Audited
Approved by the Board of Directors and authorised for issue on 21 June 2024
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 form part of these interim financial statements.
UNAUDITED CONDENSED STATEMENT OF CHANGES IN EQUITY
SIX MONTHS TO 30 APRIL 2024
Share capital Share premium Special reserve Capital reserve Revenue reserve Total
£'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 - - - 42,035 3,581 45,616
Dividends paid - - - - (5,052) (5,052)
Balance at 30 April 2024 1,348 98,067 64,671 105,157 6,439 275,682
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
Year ended 31 October 2023 (Audited)
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 - - - 31,099 7,241 38,340
Dividends paid - - - - (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 form part of these interim financial statements.
UNAUDITED CONDENSED STATEMENT OF CASH FLOWS
SIX MONTHS TO 30 APRIL 2024
Six months to 30 April 2024 Six months to 30 April 2023 Year ended 31 October 2023*
£'000 £'000 £'000
Operating activities cash flows
Return on ordinary activities before finance costs and taxation** 46,213 23,751 39,497
Adjustment for:
Gains on equity investments (32,469) (17,383) (24,684)
Realised losses/(gains) on CFDs 46 - (7,656)
Movement in CFD transactions (530) (2,936) 758
Increase in other debtors (157) (546) (500)
(Decrease)/Increase in other creditors (36) 144 19
Tax withheld on overseas income (460) (455) (921)
Net cash flow from operating activities 12,607 2,575 6,513
Investing activities cash flows
Purchases of equity investments (17,561) (27,622) (57,623)
Proceeds from sales of equity investments 9,558 26,232 49,413
Realised (losses)/gains on CFDs (46) - 7,656
Net cash flow used in investing activities (8,049) (1,390) (554)
Financing activities cash flows
Equity dividends paid (5,052) (4,716) (6,804)
Finance costs paid (134) (122) (228)
Net cash used in financing activities (5,186) (4,838) (7,032)
Decrease in cash and cash equivalents (628) (3,653) (1,073)
Cash and cash equivalents at the beginning of the period 340 1,413 1,413
Cash and cash equivalents at the end of the period (288) (2,240) 340
*Audited
** Inflow from cash dividends received were £3,996,000 (30 April 2023:
£3,612,000 and 31 October 2023: £7,888,000).
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. The Company carries on business as an investment trust within
the meaning of Chapter 4 of Part 24 of the Corporation Tax Act 2010.
The Company's investment objective is to provide Shareholders with dividend
income combined with capital growth, mainly through investment in equities
listed or quoted in Japan.
The Company's shares were admitted to the Official List of the Financial
Conduct Authority with a premium listing on 15 December 2015. On the same day,
trading of the Ordinary Shares commenced on the London Stock Exchange.
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 Report is unaudited and does not include all the information
required for full annual financial statements. The Half-yearly Report should
be read in conjunction with the Annual Report and Accounts of the Company for
the year ended 31 October 2023. The Annual Report and Accounts for the year
ended 31 October 2023 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 2023 in this Half-yearly Report has been extracted from
the audited Annual Report and Accounts for that year end. The accounting
policies in this Half-yearly Report are consistent with those applied in the
Annual Report and Accounts for the year ended 31 October 2023.
The interim financial statements have been presented in GBP sterling (£).
3. INVESTMENTS
As at 30 April 2024 As at 30 April 2023 As at 31 October 2023
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Investments listed on a recognised overseas investment exchange 272,259 217,592 231,987
272,259 217,592 231,987
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 2023.
The table below sets out fair value measurements using fair value hierarchy.
Level 1 Level 2 Level 3 Total
30 April 2024 (Unaudited) £'000 £'000 £'000 £'000
Assets:
Equity investments 272,259 - - 272,259
CFDs - Unrealised fair value gains - 10,699 - 10,699
Liabilities:
CFDs - Unrealised fair value losses - (894) - (894)
Total 272,259 9,805 - 282,064
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
31 October 2023 (Audited) £'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 period (2023: none).
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 2024 (2023: nil).
4. INCOME
Six months to 30 April 2024 Six months to 30 April 2023 Year ended 31 October 2023
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Income from investments:
Overseas dividends 4,595 4,552 9,215
Deposit interest 64 29 68
Total 4,659 4,581 9,283
Overseas dividend income is translated into sterling on receipt.
5. FINANCE COSTS
Six months to 30 April 2024 Six months to 30 April 2023 Year ended 31 October 2023
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Interest paid - 100% charged to revenue 8 13 20
CFD finance cost and structuring fee - 20% charged to revenue 25 22 42
Structuring fees - 20% charged to revenue - - 1
33 35 63
CFD finance cost and structuring fee - 80% charged to capital 102 87 169
Structuring fees - 80% charged to capital 2 - 4
104 87 173
Total finance costs 137 122 236
6. TAXATION
Six months to 30 April 2024 Six months to 30 April 2023 (Unaudited)
(Unaudited)
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Analysis of tax charge in the period:
Overseas withholding tax 460 - 460 455 - 455
Total tax charge for the period 460 - 460 455 - 455
Year ended 31 October 2023
(Audited)
Revenue Capital Total
£'000 £'000 £'000
Analysis of tax charge in the year:
Overseas withholding tax 921 - 921
Total tax charge for the year 921 - 921
7. INTERIM DIVIDEND
During the six months ended 30 April 2024, the Company paid a dividend of
3.75p per Ordinary Share in respect of the year ended 31 October 2023.
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 2024.
The Directors have declared an interim dividend for the six months ended 30
April 2024 of 1.60p (2023: 1.55p) per Ordinary Share. The dividend will be
paid on 2 August 2024, to Ordinary Shareholders who appear on the register as
at the close of business on 5 July 2024. The Ordinary Shares will go
ex-dividend on 4 July 2024 and the dividend will be funded from the Company's
Revenue reserve. This dividend has not been accrued in the financial
statements for the six months to 30 April 2024.
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 2024 (Unaudited) As at 30 April 2023 (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 2023 (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 Ordinary Shares, with
134,730,610 Ordinary Shares in issue as at date of publication of this report.
9. FINANCIAL COMMITMENTS
As at 30 April 2024 there were no commitments in respect of unpaid calls and
underwritings (30 April 2023: nil and 31 October 2023: 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 £45,616,000 (30 April
2023: £23,174,000 and 31 October 2023: £38,340,000) and the weighted average
number of Ordinary Shares in issue for the period to 30 April 2024 of
134,730,610 (30 April 2023: 134,730,610 and 31 October 2023: 134,730,610).
The returns per Ordinary Share were as follows:
As at 30 April 2024 As at 30 April 2023 As at 31 October 2023
(Unaudited) (Unaudited) (Audited)
Revenue Capital Total Revenue Capital Total Revenue Capital Total
Return per Ordinary Share 2.66p 31.20p 33.86p 2.66p 14.54p 17.20p 5.37p 23.08p 28.45p
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
As at As at As at 31 October 2023
30 April 2024 30 April 2023
(Unaudited) (Unaudited) (Audited)
Net Asset Value (£'000) 275,682 222,040 235,118
Ordinary Shares in issue 134,730,610 134,730,610 134,730,610
NAV per Ordinary Share 204.62p 164.80p 174.51p
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, Chikara Investments LLP. Investment
Management fees for the six-month period ended 30 April 2024 were £980,000
(30 April 2023: £815,000 and 31 October 2023: £1,715,000). The Investment
Management fees outstanding at the period ended 30 April 2024 were £172,000
(30 April 2023: £136,000 and 31 October 2023: £151,000).
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 2024 to 31 December 2024, as agreed
between the Investment Manager and the Company, is US $31,000 (31 December
2023: US $34,000).
Directors' fees and shareholdings
Directors' fees are payable at the rate of £28,500 per annum for each
Director other than the Chair, who is entitled to receive £42,750. The Chair
of the Audit and Risk Committee is entitled to an additional fee of £6,000
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 2024 Ordinary Shares as at 30 April 2023 Ordinary
Shares as at 31 October 2023
(Unaudited) (Unaudited) (Audited)
June Aitken 42,409 41,251 41,631
Kate Cornish-Bowden 50,000 50,000 50,000
Craig Cleland 40,000 40,000 40,000
John Charlton-Jones(1) 22,403 - 12,185
Harry Wells(2) - 40,000 40,000
Peter Wolton(3) - 67,250 -
(1)John Charlton-Jones was appointed on 1 October 2023.
(2) Harry Wells resigned on 5 March 2024.
(3) Peter Wolton resigned on 10 October 2023.
13. POST BALANCE SHEET EVENTS
There are no post balance sheet events other than as disclosed in this
Half-yearly 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 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 2023 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')
Absolute exposure
The absolute difference between the Company's long positions and short
positions.
Administrator
The Company's administrator, the current such administrator being 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 2024
NAV per Ordinary Share a 204.62
Share price b 190.50
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 2024 £'000
CFD Notional Market Value* a 54,452
Non-base cash borrowings** b 2,004
NAV c 275,682
Gearing (net) ((a+b)/c) 20.5%
* CFD positions in underlying asset value.
** Non-base cash borrowings represent borrowings in Yen
Gross assets (APM)
The Company's total assets including any leverage amount.
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.
Index
A basket of stocks which is considered to replicate a particular stock market
or sector.
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 30 April 2024 Gross Commitment
£'000
£'000
Security Market value a 272,259 272,259
CFD Notional market value b 54,452 54,452
Cash and cash equivalents* c 11,703 9,988
NAV d 275,682 275,682
Leverage (a+b+c)/d 123% 122%
* Cash and cash equivalents represent gross overdraft and net overdraft with
Northern Trust.
Market liquidity
The extent to which investments can be bought or sold at short notice.
Net assets
An investment company's assets less its liabilities.
Net Asset Value (NAV) per Ordinary Share
Net assets divided by the number of Ordinary Shares in issue (excluding any
shares held in treasury).
Net exposure
The difference between the Company's long positions and short positions
Ordinary Shares
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 2024
Average NAV a 262,345,758
Annualised expenses b 2,753,044
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 2024 Share price NAV
Opening at 1 November 2023 (in pence) a 162.50 174.51
Closing at 30 April 2024 (in pence) b 190.50 204.62
Price movement (b÷a)-1 c 17.2% 17.3%
Dividend reinvestment* d 2.5% 2.2%
Total return (c+d) 19.7% 19.5%
* 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
June Aitken (Chair) Chikara Investments LLP (formerly Coupland Cardiff Asset Management LLP)
Kate Cornish-Bowden (Audit & Risk Committee Chair) 31-32 St James's Street
Craig Cleland (Senior Independent Director) London
John Charlton-Jones SW1A 1HD
Website - www.chikarainvestments.com (http://www.chikarainvestments.com)
BROKER
Peel Hunt LLP REGISTERED OFFICE*
100 Liverpool Street 6(th) Floor
London 125 London Wall
EC2M 2AT London
EC2Y 5AS
DEPOSITARY AND CUSTODIAN
Northern Trust Investor Services Limited COMPANY SECRETARY AND ADMINISTRATOR
50 Bank Street Apex Listed Companies Services (UK) Limited
London 6(th) Floor, 125 London Wall
E14 5NT London
EC2Y 5AS
REGISTRAR Website - www.apexgroup.com (http://www.apexgroup.com)
Link Group
10th Floor Central Square AUDITOR
29 Wellington Street Johnston Carmichael LLP
Leeds 7-11 Melville Street
LS1 4DL Edinburgh
EH3 7PE
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
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