Annual Financial Report

RNS Number : 4288Q

CC Japan Income & Growth Trust PLC

26 February 2021

 

CC JAPAN INCOME & GROWTH TRUST PLC

LEI:  549300FZANMYIORK1K98

ANNUAL FINANCIAL REPORT ANNOUNCEMENT

INVESTMENT OBJECTIVE

The investment objective of the 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

	As at 31 October 2020	As at 31 October 2019
Net assets (millions)	£184.4	£214.1
Net asset value ("NAV") per Ordinary Share ("Share")1	136.8p	158.9p
Share price	119.5p	150.0p
Share price discount to NAV2	12.6%	5.6%
Ongoing charges2	1.04%	1.06%
Gearing (net)2	20.7%	21.7%

¹ Measured on a cum income basis.

² This is an Alternative Performance Measure ("APM"). Definitions of APMs used in this report, together with how these measures have been calculated are disclosed in the Annual Report.

PERFORMANCE SUMMARY

	For the year to 31 October 2020	For the year to 31 October 2019
	% change1	% change1
NAV ex-income total return per Share2	-11.2%	+9.6%
NAV cum-income total return per Share2	-11.1%	+9.9%
Share price total return2	-17.3%	+0.7%
Tokyo Stock Exchange Price Index ("Topix") total return	+0.3%	+7.2%
Revenue return per Share	5.04p	5.26p
Dividends per Share:
First interim dividend	1.40p	1.40p
Second interim/final dividend	3.20p	3.10p
Total dividends per Share for the year	4.60p	4.50p
1 Total returns are stated in GBP sterling, including dividends reinvested. 2 These are APMs. Source: Coupland Cardiff Asset Management LLP - The Company's Factsheet October 2020. Period to Oct 2016* Year to Oct 2017 Year to Oct 2018 Year to Oct 2019 Year to Oct 2020 Share price 122.40p 152.00p 153.00p 150.00p 119.50p Share price total return +23.5% +27.2% +2.8% +0.7% -17.3% NAV per Share 123.90p 146.00p 148.60p 158.90p 136.80p NAV (cum-income) total return per Share +24.9% +20.7% +4.1% +9.9% -11.1% Topix Index total return in GBP sterling +32.7% +10.1% -0.4% +7.2% +0.3% Revenue return per Share 3.60p 4.06p 4.55p 5.26p 5.04p Dividends per Share 3.00p 3.45p 3.75p 4.50p 4.60p *Period from the Company's launch on 15 December 2015 to 31 October 2016

CHAIRMAN'S STATEMENT

Performance

I am bound to report to fellow Shareholders that your Company has had a difficult year with the progressive investment performance of the first four and a half years since listing in December 2015 derailed by the global COVID-19 pandemic. Over the financial year to 31 October 2020, and measured by total return, the Company's cum-income NAV returned -11.1% in sterling terms, while the Tokyo Stock Exchange Price Index ("Topix") was fractionally positive at +0.3%. The share price, again measured by total return to include dividends, paid over the period, fell by 17.3%. Since inception to 31 October 2020, the Company has recorded a +52.0% sterling NAV total return, while the Topix total return was +59.0%. Over the same period, the share price rose +35.6%, again measured by total return in sterling, including aggregate distributions of 16.1p per share by way of dividends paid to Shareholders.

Our mandate reflects an investment style that, while seeking total return, looks to identify value and yield opportunities and took a battering as markets fell off a cliff during February 2020. This was exacerbated by our structural gearing during the sell off. Adding insult to injury, the portfolio underperformed the immediate bounce as massive co-ordinated global government fiscal and central bank monetary stimulus favoured a rerating of a narrow range of growth stocks focussed on the virtual economy, technology, media and healthcare. These growth companies tend not to pay dividends and consequently fail to score on our Investment Manager's radar. Poor relative and absolute performance saw our share price discount to NAV widen significantly during the year. The Board is wary of buying back shares in this environment, which could be viewed as cosmetic signalling with little efficacy. The Board believes that investment performance and the growth and level of dividend income are paramount in driving the share price rating.

Post Balance Sheet Event - Subscription Shares - a recovery route to potentially grow the Company

When COVID-19 struck, markets fell precipitously, with the Company's share price and NAV declining by 29% and 22%, respectively, through February and March 2020. The Board determined that this represented an opportunity to try and turn this collapse to Shareholders' advantage. The challenge was to find a way to compensate loyal and patient Shareholders for this period of poor performance, whilst not losing sight of the vision to grow the Company, particularly as the prospects for the Japanese stock market remain attractive. The Board and Investment Manager concur in believing that the Japanese economy is poised to be a strong beneficiary of global reflation.

Consequently, on 26th November 2020, the Company announced that it was considering issuing Transferable Subscription Shares ("TSS") as a free 1 for 5 bonus to existing Shareholders. This announcement allowed for wide consultation across a broad spectrum of Shareholders which gave the Board confidence to proceed with the proposals. Accordingly, a Prospectus was published on 22nd January 2021 and a General Meeting was held on 15th February 2021. 99.95% of Shareholders voting approved the requisite Special Resolution including changes to the Articles of Association. Thus, the Company has now issued 26,946,122 TSS to qualifying shareholders on the Register as at 6.00 pm on 15th February 2021. The Subscription Price of £1.61 was determined at the close of business on 15th February 2021 and announced on the 16th February 2021. The TSS were admitted to trading on 18th the February 2021 with the ticker CCJS and were quoted at 6p at the close of business on the 19th February 2021.

The TSS may be exercised on quarterly basis with the first exercise date on 31 May 2021 at the Subscription Price and subsequently on the last business day of August, November and February each year until the Subscription rights expire on 28th February 2023. Full details are given in the Prospectus published on 22nd January 2021 and available for reference on the Company's website www. ccjapanincomeandgrowthtrust.com.

Effectively, the TSS gives existing Shareholders a free option into post-COVID-19 Japanese recovery. The Japanese authorities have handled the pandemic competently compared to other countries, including the recent outbreak. It is not unreasonable to expect that a return to pre-COVID-19 normality as a realistic prospect. Forecast corporate earnings are steadily being revised up as Japanese stock analysts, notably conservative, are looking through to the financial years ending 2022 and 2023 forecasting a strong recovery.

The Board appreciates that the bonus TSS have little immediate value. Nevertheless, there is considerable potential upside for TSS holders. Providing that investment performance rebounds: the market value of the TSS should increase. If the share price exceeds the TSS exercise price, this will present an opportunity for TSS holders to either exercise their entitlements into new Ordinary Shares, or to sell their TSS in the market. If all the TSS are exercised, the Company would raise over £40 million. Effectively, this represents a deferred rights issue and unlike secondary or tap issues is structured on a pre-emptive basis. A successful outcome would improve market liquidity in the Ordinary Shares, spread costs and potentially attract new investors. If the recovery falters and the portfolio fails to regain its former traction, there is a risk that the TSS could lapse with no monetary value. However, as the TSS are issued for free, existing Shareholders will not lose money.

The overall cost to the Company of the TSS scheme is modest when assessed against the potential benefits. In the investment trust market, where scale matters, increasing the size of the Company is one of your Board's priorities.

Income & Dividend

The revenue account has held up well despite immediate pressures on the Japanese economy where GDP fell 7.8% in the March - June 2020 quarter following a near 10% decline in the two previous quarters. Despite this, we still recorded earnings per share of 5.04p in the year to 31 October 2020, albeit a fall from 5.26p in the previous year. Dislocation from global lockdowns impacted trade and effectively shut down hospitality and tourism, culminating in the postponement of the 2020 Olympics. Tourism has been a significant driver of demand in recent years. We were caught where the portfolio had 14.3% exposure to REITS and a further 12.9% in consumer and service businesses going into the COVID-19 crisis; all previously stable premium dividend payers which cancelled or cut their distributions. Elsewhere, while companies slashed earnings guidance in the pandemic, the dividend picture has been relatively stable with aggregate dividends remarkably now forecast to be flat in the current Japanese financial year to 31 March 2021. Renewed dividend growth is expected in the year to 31 March 2022 and the picture is reasonably healthy, in sharp contrast to other developed markets, notably the UK and Europe, where dividend cancellations and cuts have been severe.

Corporate Japan is cash rich, which augurs well for improving dividend growth as boards and the regulators strive to improve capital efficiency. Improvements in governance and stewardship codes continue to underwrite a more general commitment to stability of dividends and improving pay-out ratios. Those investors looking for equity income should continue to look to Japan. The main risk to the income account is the yen/ GBP cross rate. Shareholders should be aware that we have a currency hedging policy not to hedge, so the level of revenue is potentially at risk from a strengthening of sterling. Conversely, a weaker yen would stimulate Japanese corporate earnings and should boost the portfolio income steam.

The Board declared a second interim dividend of 3.20p per Ordinary Share to be paid on 5th March 2021 to Shareholders on the register as at 5th February 2021. This makes a full year distribution of 4.60p per Ordinary Share (2019: 4.50p). This represents a 2.2% increase on last year's level of distribution, fully covered by revenue. This is the fifth consecutive year of dividend growth for the Company.

Marketing and Shareholder engagement

The Company has retained the services of Kepler to improve distribution to retail investors, particularly through the medium of platforms. Cornerstone acts as our Public Relations agent and continues to develop the Company's media profile. Our website was redesigned during the year to be more user-friendly. Our Investment Manager, Coupland Cardiff Asset Management LLP, has recently employed further senior sales staff, while Peel Hunt, our Brokers, have also broadened their sales coverage with new hires. The Board is conscious that marketing is an integral component of the investment proposition and the Subscription Share issue has given me an opportunity to engage directly with most of our larger Shareholders.

Board constitution

Mark Smith has served as a Director since our listing in 2015 but will not stand for re-election at this year's forthcoming Annual General Meeting. Mark has a full-time senior role at Waverton Investment Management and finds that his duties conflict with the time that he has to devote to his responsibilities as a Director. On behalf of the Board and Shareholders I would like to thank Mark for his service and contribution to the Company.

Annual General Meeting ("AGM")

The Board has been closely monitoring the evolving COVID-19 situation and the safety and security Shareholders and of the Company's service providers is paramount. In compliance with the 'Stay at Home Measures' passed into law in England and Wales on 6 January 2021, the AGM on 26 March 2021 will take place as a closed meeting. Shareholders (other than those required to form the quorum for the AGM) therefore cannot attend the meeting.

There will be an opportunity to ask questions in advance of the AGM. If Shareholders have a question relating to the business of the AGM, they should send it by email to [e-mail]. To the extent that it is appropriate to do so, the Company will respond to any questions received in a Q&A which will be posted on the Company's website www.ccjapanincomeandgrowthtrust.com in advance of the AGM. Shareholders should appoint the 'Chair of the meeting' to act as their proxy as any other named person will not be permitted to attend the meeting. Further details on the appointment of a proxy are included in the Notice of AGM.

Outlook

Any return to pre-COVID-19 normality should provide a more fertile investment playing field for our Investment Manager.

Since the Company's year end we have already seen some style rotation back into value and yield, and away from growth stocks, with strong recovery of both our NAV (+12.4%) and share price (+16.3%) as at 31 January 2021, excluding the dividend payable on 5th March 2021.

Markets have already taken succour from the successful development and impending distribution of a range of COVID- 19 vaccines, together with the Biden victory in the US elections; China's economy is picking up smartly, providing stimulus to Japanese exports (20% of their total). With increased focus on security of supply chains in a tariff-ridden, increasingly protectionist world, Japan is an attractive proposition, offering world class industrial solutions in many fields, such as automation and robotics. Critically, Japan also has a stable domestic political environment; the transition of the premiership to Prime Minister Yoshihide Suga after Prime Minister Shinzo Abe's resignation was achieved seamlessly. The new Prime Minister is committed to continuing Abe's legacy reform initiatives and although his and the LDP's popularity has waned, opposition, led by the impressive Mayor of Tokyo, Yuriko Koike, appears to offer a credible alternative in this year's elections due by 22 October 2021, should she decide to stand. Governance is on an improving trend with younger more independent managements buying into better practices boding well for ESG compliance. The Government has launched successive fiscal programmes with a third package worth 30 trillion yen (US $294 billion) to boost spending, critical in the run up to this year's rescheduled Olympics although there is considerable concern that these may be cancelled.

Of course, risks remain, particularly in the area of strained US/China relations. It remains to be seen how the Biden administration approaches diplomatic relations with China, although it appears that an initial improvement is the restoration of communications between Washington and Beijing. China has become more resolute in its foreign policy and there is a strong containment lobby in the Pentagon, so much diplomacy will be required to prevent relations deteriorating further.

The valuation metrics for the Japanese market appear cheap and it is remarkable that foreign investors are so underweight and have actually sold in monetary terms all of the stock they have bought since Shinzo Abe was appointed Prime Minister in 2013. Japanese household savings are still prepared to take foreign exchange risks by buying offshore premium yield products at the expense of ignoring income yield available in their own domestic market. When Warren Buffett took 5% stakes (with options to double the Berkshire Hathaway holding) in five leading trading companies in September 2020, collectively they yielded 4%. This served as a prelude to a return of positive foreign investment flow. M&A activity is also becoming more prevalent as Shareholder activism and private equity funds are targeting asset and cash rich underperforming companies.

The prospects for Japanese investment returns look promising, conditional on the level of global economic demand and a resumption of domestic spending including the reopening of hospitality, travel and tourism. The Board has every confidence that Richard Aston and the team at Coupland Cardiff Asset Management LLP ("CCAM") can get back on track after facing unprecedented challenges last year.

Keeping in touch

Up to date information including the Investment Manager's monthly factsheets can be found on the Company's website www.ccjapanincomeandgrowthtrust.com.

Harry Wells

Chairman

25 February 2021

INVESTMENT MANAGER'S REPORT

Portfolio Review

The COVID-19 pandemic has had a dramatic and well documented impact on the global economy during 2020 and prompted central banks and governments to unleash extraordinary monetary and fiscal stimulus in response. Global equity markets have consequently experienced one of the shortest, sharpest downturns but also the swiftest recovery on record as investors have sought to contend with the near term implications of the healthcare crisis and the longer term risks and opportunities.

The unparalleled nature of the crisis and the reactive corrective measures created a unique and unpredictable set of circumstances. The dispersion in operational performance between different industries has been pronounced and reflected in stock market trends worldwide as they first fell and then rebounded. Many companies in sectors such as financials or industrials have seen share prices fall substantially and have experienced a valuation de-rating, while some in the field of information technology, e-commerce and healthcare have been identified as beneficiaries, with share prices reaching new highs.

These trends had a negative impact on the performance of the Company in the twelve month reporting period and this has undermined the positive record since launch. The portfolio is constructed on the basis of bottom-up analysis and the attributes of the individual companies. However, this does result in inherent, but known, biases. At the beginning of the year the Company held exposure towards some cyclical companies, selected financials, real estate and beneficiaries of discretionary spending on leisure and travel, all consistent with the analysis of the respective companies and their prospects identified at that time. The severe measures imposed to counter the spread of the virus hit many of these industries particularly hard.

For example, the Tokyo Stock Exchange Real Estate Investment Trust ("REIT") Index fell from 2107 to 1100 in less than 10 trading days in March 2020. The impact of the rapid decline of valuations of this asset class has had the greatest negative impact on the returns of the Company during our last financial year. Notably the impact on Japan Hotel REIT and Invincible Investment, two significant long term holdings in the Company's portfolio, was more severe than even the aggregate index as their accommodation facilities were forced, in effect, to suspend operations, creating unforeseen and unprecedented challenges to their businesses. The exposure in the office segment, through Invesco Office REIT, Star Asia Investment and MC-UBS MidCity Investment, were also significant detractors from performance as office workers were encouraged to avoid commuting.

The impact of restrictions on face-to-face meetings and place-to-place movement has been dramatic and affected hitherto robust businesses. The share price performance of the cosmetics manufacturers Kao, Pola Orbis and Noevir has suffered as demand has been disrupted by the disappearance of tourists and a tendency for lower consumption in an environment where people go out less and frequently wear masks.

The challenges to companies such as Bridgestone, Tsubaki Nakashima and Canon following the closure of production facilities across the globe and the dislocation of consumer demand resulted in uncertainties and hurdles that threatened commitments to a stable shareholder policy. In some cases, the need to manage liquidity and conserve resources took precedence over shareholder returns and resulted in dividend cuts. However, in stark contrast to their international peers who were forced to cut or restrict dividend payments at the request of governments or regulators, Japanese banks and insurance companies were allowed to grow their shareholder returns during the year and demonstrate the opportunity for further growth despite the headwinds they currently face. These stocks have not yet been rewarded for this and suffered de-ratings comparable to the international peer group.

The rapidly evolving developments and outlook prompted swift action in the portfolio, with turnover rising to levels much higher than in previous years. Our visits to Japan before the global spread of the virus highlighted some possible risks and resulted in the sale of a number of holdings which we believed to be most exposed at the time. These included Canon, Resona Holdings and Mabuchi Motor. This was followed by the sales of Pola Orbis, Komatsu, Tokyo Century Leasing, Daiwa House and Bridgestone as the full implications of the international lockdowns became apparent. The primary aim of this portfolio restructuring was to focus on companies more resilient in the face of the changing consumer behaviour and business practices, while taking into consideration the widely varying valuations as equity markets remained volatile.

New positions were established in GLP-REIT, whose portfolio of state-of-the art logistics facilities, are benefitting from the upturn in e-commerce demand, Hoya, the leading optical technology company; Japan Exchange Group, operator of the Tokyo Stock Exchange, Denso, a leading auto parts manufacturer; Fujitsu, the restructuring electronics group; Nitto Denko, manufacturer of components and chemicals used in the production of electronic devices; Technopro, outsourced engineering employment services; Dip, job advertisement for part time workers and Aoyama Zaisan Networks, whose services include inheritance tax solutions. While a diverse list, these companies have all demonstrated their clear commitment to shareholders with favourable dividend or share buyback announcements in the last few months and these new holdings have contributed positively to performance.

In these very challenging markets, some of the long term holdings fared well. Technology suppliers Tokyo Electron and Shin-Etsu Chemical were major positives along with Shoei, where demand for motorcycle helmets has experienced a notable increase from the work from home trend in many countries. West Holdings, which is engaged in the design, manufacture and operation of solar energy generation facilities, was the best performer in the portfolio and greatest single contributor to performance in the last twelve months. This company is likely to be a major beneficiary of Prime Minster Suga's ambitious goal of achieving a carbon neutral economy by 2050.

The positives, while significant in number, were not sufficient to offset the large negative contribution from the concentrated holdings whose business performance and share prices have been dramatically impacted by the COVID-19 crisis.

Despite the challenges faced in the last few months, the investment strategy has been and will remain consistent. The new holdings identified all have the focus on consistent shareholder return which we believe remains a key consideration for long term investors. Some of the fallers will be stronger and better positioned when we return to a more normal environment. We believe we will be rewarded for our patience in continuing to hold our positions in Kao, Noevir and Nippon Parking Development with stable or rising dividends in the near term and a full recovery of revenues, profit and dividend growth in the medium term. In other cases, the decision to sell, as painful as it was, was the correct one, given the tougher post-COVID-19 environment and the better opportunities we have identified elsewhere.

Outlook

Many newspaper column inches were dedicated to Prime Minister Abe's decision to resign his position on health grounds in August 2020. This raised questions as to whether 'Abenomics' will survive or undergo a change of tack under the new Prime Minister Yoshihide Suga. Our view has been that the policies and initiatives of Prime Minister Abe will long outlast his tenure as leader. To name but a few: lower corporate tax rates, increase in employment, the Stewardship Code, the Corporate Governance Code, the rejigging of the Government Pension Investment Fund ("GPIF") and the overhauling of duty free and visa rules which launched a tourist boom in Japan, all policies that will survive on the basis of the widespread support they enjoy, and the tangible benefits experienced since their introduction. Consistency has become even more likely given that his successor was a close associate of the former Prime Minister during his leadership and has been an architect of some of the policies. Suganomics is consequently likely to differ from Abenomics only in name.

Even with the cyclical downturn created by the COVID-19 pandemic, we believe the structural changes which have resulted in steady underlying improvements in corporate governance are continuing. The proposed buyout of NTT DoCoMo (Japan's largest listed subsidiary) by parent company Nippon Telegraph and Telephone, is one example of significant changes to corporate ownership, all driven by the objective of improving both capital efficiency and business prospects (there are over 600 companies listed on TOPIX that have a controlling listed shareholder - approx. 17% of the market). With a further review of the Corporate Governance Code scheduled for the spring 2021 and the restructuring of the Tokyo Stock Exchange primary indices expected in April 2022 look set to continue.

2020 has presented a considerable challenge to our strategic objectives despite firm evidence that the underlying premise of strengthening corporate governance is very much intact. Consequently, we believe that Japanese equities continue to offer an attractive opportunity for investors looking for total shareholder return. Despite the temporary downturn, the recent commitment to shareholder returns from the majority of Japanese companies stands in stark contrast to their previous behaviour during periods of operational weakness and compares favourably to other parts of the world where dividend cuts have been severe. The more cautious approach to balance sheet management and previous levels of lower distribution compared to other international developed markets have afforded most Japanese companies greater latitude when faced with this tough economic reality. This has delivered much of the more robust shareholder return profile we had expected.

However, the nature of this present crisis has been an unfortunate surprise, with many unique and unprecedented aspects undermining the performance of the Company in the early part of this year and reversing the gains since inception of the Company. Whilst the outlook undoubtedly remains uncertain and different to what seemed likely at the beginning of the year, the core philosophy of investing in high quality, well managed and reasonably priced companies with longer term growth prospects should continue to benefit Shareholders. The goal remains to deliver a rising level of dividend distribution which reflects the attractive overall financial standing of Japanese companies amidst the improving corporate governance environment, while capturing capital growth that, in normal circumstances, can be expected to accompany this.

Richard Aston

Coupland Cardiff Asset Management LLP

25 February 2021

INVESTMENT POLICY, RESULTS AND OTHER INFORMATION

Investment policy

The Company intends to invest in equities listed or quoted in Japan.  The Company may also invest in exchange traded funds in order to gain exposure to such equities. Investment in exchange traded funds shall be limited to not more than 20 per cent. of Gross Assets at the time of investment.  The Company may also invest in listed Japanese real estate investment trusts ("J-REITs").

The Company may enter into long only contracts for difference or equity swaps for gearing and efficient portfolio management purposes.

No single holding (including any derivative instrument) will represent more than 10 per cent. of Gross Assets at the time of investment and, when fully invested, the portfolio is expected to have between 30 to 40 holdings, although there is no guarantee that this will be the case and it may contain a lesser or greater number of holdings at any time.

The Company will have the flexibility to invest up to 10 per cent. of its Gross Assets at the time of investment in unquoted or untraded companies.

The Company will not be constrained by any index benchmark in its asset allocation.

Borrowing policy

The Company may use borrowings for settlement of transactions, to meet on-going expenses and may be geared through borrowings and/or by entering into long only contracts for difference or equity swaps that have the effect of gearing the Company's portfolio to seek to enhance performance.  The aggregate of borrowings and long only contracts for difference and equity swap exposure will not exceed 25 per cent. of Net Asset Value at the time of drawdown of the relevant borrowings or entering into the relevant transaction, as appropriate, although the Company's normal policy will be to utilise and maintain gearing to a lower limit of 20 per cent. of Net Asset Value at the time of drawdown of the relevant borrowings or entering into the relevant transaction, as appropriate.  It is expected that any borrowings entered into will principally be denominated in Yen.

Hedging policy

The Company does not currently intend to enter into any arrangements to hedge its underlying currency exposure to investment denominated in yen, although the Investment Manager and the Board may review this from time to time.

Results and dividend

The Company's revenue return after tax for the financial year amounted to £6,796,000 (2019: £7,003,000). In July 2020, the Company paid an interim dividend of 1.40p (2019: 1.40p) per Ordinary Share. On 14 January 2021 the Directors declared a second interim dividend for the year ended 31 October 2020 of 3.20p (2019: 3.10p) per Ordinary Share, which will be paid on 5 March 2021 to Shareholders on the register at 5 February 2021. The Company made this dividend declaration earlier than last year due to the planned issue of Subscription Shares, as announced on 26 November 2020. Therefore, the total dividend in respect of the financial year to 31 October 2020 will be 4.60p (2019: 4.50p) per Ordinary Share.

The Company made a capital loss after tax of £30,499,000 (2019: capital gain of £12,735,000). Therefore, the total loss after tax for the year was £23,703,000 (2019: profit of £19,738,000).

Key performance indicators ("KPIs")

The Board measures the Company's success in attaining its investment objective by reference to the following KPIs:

(i) Long term capital growth

The Board considers the Company's Net Asset Value ("NAV") total return figures to be the best indicator of performance over time and this therefore is the main indicator of performance used by the Board. The NAV total return for the year to 31 October 2020 was -11.1% (2019: +9.9%) and the NAV total return from the Company's inception in December 2015 to 31 October 2020 was +52.0% (2019: +69.7%).

The Chairman's Statement incorporates a review of the highlights during the year. The Investment Manager's Report gives details on investments made during the year and how performance has been achieved.

(ii) Revenue return per Share and dividends

The Company's revenue return per Ordinary Share based on the weighted average number of shares in issue during the year was 5.04p (2019: 5.26p). The Company's proposed total dividend payable in respect of the year ended 31 October 2020, including an interim dividend of 1.40p per Ordinary Share paid on 24 July 2020 and a second interim dividend of 3.20p payable on 5 March 2021, is 4.60p (2019: 4.50p) per Ordinary Share.

(iii) Discount/premium to NAV

The discount/premium relative to the NAV per share represented by the share price is closely monitored by the Board. The share price closed at a 12.6% discount to the NAV as at 31 October 2020 (2019: 5.6% discount). This is addressed in the Chairman's Statement.

(iv) Control of the level of ongoing charges

The Board monitors the Company's operating costs carefully and growing the Company offers many benefits, since not all costs scale with assets under management. This is reflected in the continued reduction of the Company's ongoing charges ratio. Based on the Company's average net assets for the year ended 31 October 2020, the Company's ongoing charges figure calculated in accordance with the AIC methodology was 1.04% (2019: 1.06%).

Other information

Modern slavery disclosure

Due to the nature of the Company's business, being a company that does not offer goods or services to consumers, the Board considers that it is not within the scope of modern slavery. The Board considers the Company's supply chains, dealing predominately with professional advisers and service providers in the financial service industry, to be a low risk issue.

Greenhouse Gas Emissions and Streamlined Energy and Carbon Reporting ("SECR")

The Company has no employees, physical assets, property or operations of its own, does not provide goods or services and does not have its own customers. It follows that the Company has little to no direct environmental impact. In consequence, the Company has limited greenhouse gas emissions to report from its operations aside from Directors' travel to board meetings, nor does it have responsibility for any other sources of emissions under the Companies Act 2006 (Strategic Report and Directors' Reports) Regulations 2013. As the Company has no material operations and therefore has little energy use, it falls below the threshold to produce an energy and carbon report. The Company's ESG policy is contained in the Annual Report.

Employees

The Company has no employees. As at 31 October 2020, the Company had five Directors, comprising four male (80%) and one female (20%). The Board's policy on diversity is contained in the Corporate Governance Report in the Annual Report.

Anti-bribery and corruption

It is the Company's policy to conduct all of its business in an honest and ethical manner. The Company takes a zero-tolerance approach to bribery, corruption and tax evasion and is committed to acting professionally, fairly and with integrity in all its business dealings and relationships wherever it operates. Taking account of the nature of the Company's business and operations, the Board has adopted policies and procedures that allow it to have reasonable assurance that persons associated with the Company are prevented from engaging in bribery or corruption for and on behalf of the Company.

Prevention of the facilitation of Tax Evasion

In response to the implementation of the Criminal Finances Act 2017, the Board has adopted a zero-tolerance approach to the criminal facilitation of tax evasion.

Viability statement

The Directors have assessed the viability of the Company for the period to 31 October 2025 (the "'Period'') taking into account the long term nature of the Company's investment strategy and the principal risks and emerging risks. The Board has chosen a five year period to assess the Company's viability because of the expected long term nature of equity investment, the Manager's holding period and the fact that the investment objective is unlikely to change significantly over this period. Based on this assessment, the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the Period.

Notwithstanding the foregoing, the continuation of the Company is subject to approval by Shareholders at the Annual General Meeting to be held in 2022, and if passed, every three years thereafter.

In their assessment of the prospects of the Company, the Directors have considered each of the principal and emerging risks and uncertainties and the liquidity and solvency of the Company. The Directors have considered the Company's income and expenditure projections and the fact that the Company's investments comprise readily realisable securities which could, if necessary, be sold to meet the Company's funding requirements. Portfolio activity and market developments are discussed at quarterly Board meetings. The internal control framework of the Company is subject to a formal review on at least an annual basis.

The Directors do not expect there to be any material increase in the annual ongoing charges of the Company over the Period. The Company's income from investments and cash realisable from the sale of its investments provide substantial cover to the Company's operating expenses, and any other costs likely to be faced by the Company over the Period of their assessment.

The Chairman's Statement and Investment Manager's Report present a positive long term investment case for Japanese equities, which also underpins the Company's viability for the Period.

This assessment has included a detailed review of the issues arising from the COVID-19 pandemic as discussed in the Chairman's Statement, the Investment Manager's Report and in the Principal and emerging risks and uncertainties.

Outlook

The outlook for the Company is discussed in the Chairman's Statement.

Strategic Report

The Strategic Report was approved by the Board of Directors on 25 February 2021.

RISK AND RISK MANAGEMENT

Principal and emerging risks and uncertainties

The Board is responsible for the management of risks faced by the Company and delegates this role to the Audit and Risk Committee. The Audit and Risk Committee carries out, at least annually, a robust assessment of principal and emerging risks and uncertainties and monitors the risks on an ongoing basis. The Committee has a dynamic risk management register in place to help identify key risks in the business and oversee the effectiveness of internal controls and processes.

The risk management register and associated risk heat map provide a visual reflection of the Company's identified principal and emerging risks. These fall into four categories; strategic and business risk, financial risk, operational risk, and regulatory and compliance risk. The Committee considers both the impact and the probability of each risk occurring and ensures appropriate controls are in place to reduce risk to an acceptable level.

During the year, the Committee were particularly concerned with the risks posed by the COVID-19 pandemic which has had a significant impact in all risk categories. In addition to implementing more regular reviews of investment performance with the Investment Manager, the Committee requested and received assurances from its key service providers that they would be able to maintain high standards of service whilst working remotely. Further information on how the Committee has considered COVID-19 when assessing its effect on the Company's ability to operate as a going concern and the Company's longer-term viability can be found in the Annual Report.

The principal and emerging risks, together with a summary of the processes and internal controls used to manage and mitigate risks where possible are outlined below.

Principal Risks	Mitigation
Poor investment performance The Company's investment performance depends on the Investment Manager's ability to identify successful investments in accordance with the Company's investment policy.	The Investment Manager has a well-defined investment strategy and process which is regularly and rigorously reviewed by the Board.  The Board monitors the Company's investment performance against its peer group over a range of periods. Whilst the Company does not have a benchmark, the Board measures performance for reference purposes against the Topix and High Yield Indices. At each meeting, the Board discusses the Japanese investment environment. The Manager reports on the composition of the portfolio, any recent sales and purchases, and expectations of dividend income. The Company's investment policy states that no single holding will represent more than 10 per cent. of the Company's Gross Assets at the time of investment and the portfolio has between 30 and 40 holdings. An investment management contract is in place which defines the duties and responsibilities of the Investment Manager. Safeguards include the provision to terminate the Management Agreement with 6 months' notice and in line with AIC guidance, the Investment Manager's appointment is considered on an annual basis.
Currency Risk The Company's investments are denominated in Japanese yen. Changes in the Yen / Sterling exchange rate may impact returns and lead to a devaluation of the Company's assets. Income is received from investee companies in Yen. Exchange rate fluctuations could impact distributable income available for dividends.	The currency risk is explained to shareholders in the prospectus and the annual and interim reports. The Board regularly reviews the level of foreign currency exposure and monitors forecast revenues. The revenue forecast presented to the board includes a yen sensitivity analysis. The Company's policy is not to hedge against any foreign currency and income received from investee companies is translated into sterling on receipt. The Company has built up a revenue reserve and the Board regularly reviews the net income available for distribution using the Investment Manager's sensitivity analysis of revenue estimates.
Share price does not reflect underlying net asset value ("NAV") The market value of the Company's shares can fluctuate and may not always reflect their underlying value. Returns achieved are reliant primarily upon the performance of the Company's portfolio and the Company may experience fluctuations in its operating results due to a number of factors. Such variability may lead to volatility in the trading price of the Company's shares, in excess of levels acceptable to the Board or shareholders.	The Board closely monitors the Company's share price relative to NAV and the Company's discount / premium relative to their peer group, and recognises the importance that investors attach to the ordinary shares not trading at a significant discount or premium to the prevailing NAV. Should the shares trade at a significant discount to the prevailing NAV, the Board could consider whether the Company should purchase its own ordinary shares, pursuant to the general authority renewed at each AGM.  Conversely the Board will issue new Ordinary Shares should the shares trade at a premium to their prevailing NAV, pursuant to the general authority renewed at each AGM. Extensive marketing is carried out by the Company's Investment Manager, Broker and a specialist PR company. An investment research consultant is engaged to provide independent research for retail shareholders. Subsequent to the year end, a Special Resolution was approved to issue 26,946,122 Subscription Shares as a 1 for 5 Bonus Issue. The Board was also granted the authority to repurchase up to 14.99% of the issued Subscription Share capital.
Market Risk Changes in the investment, economic or political conditions in Japan, and / or in the countries in which the Company's investee companies operate could substantially and adversely affect the Company's prospects. In addition to changing economic factors such as interest rates, employment, industry conditions and competition, unpredictable factors such natural disasters, earthquakes and diplomatic events may impact market risk. Geopolitical instability in the region may threaten global economic growth and, consequently, companies in the portfolio.	The Directors acknowledge that market risk is inherent in the investment process. The Company maintains a diversified portfolio of quoted investments. The Board has imposed guidelines within its investment policy to limit exposure to individual holdings and limits the level of gearing. Further information on financial instruments and risk can be found in note 16 to the Financial Statements. In addition to regular market updates from the Investment Manager and reports at Board meetings, the Board convenes more often during periods of extreme volatility, for example during the COVID-19 pandemic. The impact on the portfolio from Brexit and other geopolitical changes including the trade war between the US and China are monitored and discussed regularly at Board meetings. Market risk also arises from uncertainty about the future prices of the Company's Japanese equity investments, geopolitical and natural disasters. While it is difficult to quantify the impact of such changes, it is not anticipated that they will fundamentally affect the business of the Company or make the investment case for Japanese equities any less desirable. The longer-term effects of the COVID -19 pandemic, including the unprecedented levels of fiscal stimulus and global travel restrictions are unknown. However, the Board is encouraged by the scope for recovery as Japan emerges from the pandemic.
Key Person Risk The Company depends on the diligence, skill and judgment of the Investment Manager's investment professionals and the information and ideas they generate during the normal course of their activities. The Company's future success depends on the continued service of key personnel. The departure of any of these individuals without adequate replacement may have a material adverse effect on the Company's business prospects and results of operations.	The Board meets regularly with other members of the wider team employed by the Investment Manager. The strength and depth of the investment management team provides comfort that there is not over-reliance on one person with alternative portfolio managers available to act if needed.
Excess leverage The Company may use borrowings to seek to enhance investment returns. While this has the potential to enhance investment returns in rising markets, in falling markets the impact could be detrimental to performance.	An ability to gear is a unique advantage of closed-end companies and structural gearing is a clearly stipulated component of the Company's investment policy and is highlighted in shareholder communications. Gearing is monitored and strict restrictions on borrowings are imposed:  gearing continues to operate within a pre-agreed limit of 25% of NAV.
Cyber Risk The Company's service providers are exposed to the risk of cyber-attacks. Cyber-attacks could lead to disruption to or failure of systems and processes provided by the Investment Manager and other key service providers, creating an unexpected event and/or adverse impact on the portfolio or personnel.	Service providers report on cyber risk mitigation and management at least annually, which includes confirmation of business continuity capability in the event of a cyber-attack.  Penetration testing is carried out by the Investment Manager and key service providers at least annually.
Underperforming key service providers The Company's service providers including the Depositary, the Custodian and the Administrator could fail to provide accurate timely information to the Board. External events, such as cyber-crime, natural disasters or pandemics may mean service providers are unable to meet their contractual obligations.	The Board has appointed an experienced independent professional Depositary, Custodian and Administrator. All key service providers produce annual internal control reports for review by the Audit and Risk Committee. These reviews include consideration of their business continuity plans and the associated cyber security risks.
Emerging risk
Business Interruption due to COVID-19 Failure in services provided by key service providers, meaning information is not processed correctly or in a timely manner, resulting in regulatory investigation or financial loss, failure of trade settlement, or potential loss of investment trust status	Each service provider has business continuity policies and procedures in place to ensure that they are able to meet the Company's needs and all significant breaches are escalated to the Board. Due to the COVID-19 pandemic and the restrictions on gatherings and travel introduced by the UK Government, the Audit and Risk Committee requested assurances from the Company's key service providers that business continuity plans had been enacted where necessary, with service providers enabling remote working arrangements.  This provided a satisfactory level of assurance that there had not been, and there was no expectation of any disruption to service quality. The Company has a business continuity plan in place. Details of the Directors assessment of the going concern status of the Company, which considered the adequacy of the Company's resources and the impacts of the COVID-19 pandemic, are given in the Directors' Report of the Annual Report.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable laws and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice, including FRS 102 which is The Financial Reporting Standard applicable to the UK and Republic of Ireland and applicable law. Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company as at the end of the year and of the net return for the year. In preparing these financial statements, the Directors are required to:

· select suitable accounting policies and then apply them consistently;

· make judgements and estimates, which are reasonable and prudent;

· state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

· prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and which disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Company Reports and Accounts are published on its website at www.ccjapanincomeandgrowthtrust.com which is maintained by the Company's Investment Manager. The work carried out by the auditors does not involve consideration of the maintenance and integrity of this website and, accordingly, the auditor accepts no responsibility for any changes that have occurred to the financial statements since being initially presented on the website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Directors' confirmation statement

The Directors each confirm to the best of their knowledge that:

(a) the financial statements, prepared in accordance with applicable accounting standards, give a true and fair view of the assets, liabilities, financial position and profit of the Company; and

(b) this Annual Report includes a fair review of the development and performance of the business and position of the Company, together with a description of the principal risks and uncertainties that it faces.

Having taken advice from the Audit and Risk Committee, the Directors consider that the Annual Report and financial statements taken as a whole is fair, balanced and understandable and provides the information necessary for Shareholders to assess the Company's performance, business model and strategy.

For and on behalf of the Board

Harry Wells

Director

25 February 2021 

FINANCIAL STATEMENTS

INCOME STATEMENT

FOR THE YEAR ENDED 31 OCTOBER 2020

		Year ended 31 October 2020			Year ended 31 October 2019
		Revenue	Capital	Total	Revenue	Capital	Total
	Note	£'000	£'000	£'000	£'000	£'000	£'000
(Losses)/gains on investments	3	-	(29,495)	(29,495)	-	14,207	14,207
Currency gains/(losses)		-	302	302	-	(124)	(124)
Income	4	8,553	-	8,553	8,671	-	8,671
Investment management fee	5	(285)	(1,140)	(1,425)	(293)	(1,173)	(1,466)
Other expenses	6	(556)	-	(556)	(434)	-	(434)
Return on ordinary activities before finance costs and taxation		7,712	(30,333)	(22,621)	7,944	12,910	20,854
Finance costs	7	(63)	(166)	(229)	(74)	(175)	(249)
Return on ordinary activities before taxation		7,649	(30,499)	(22,850)	7,870	12,735	20,605
Taxation	8	(853)	-	(853)	(867)	-	(867)
Return on ordinary activities after taxation		6,796	(30,499)	(23,703)	7,003	12,735	19,738
Return per Ordinary Share	13	5.04p	(22.64)p	(17.60)p	5.26p	9.57p	14.83p
The total column of the Income Statement is the profit and loss account of the Company. All revenue and capital items in the above statement derive from continuing operations.
Both the supplementary revenue and capital columns are prepared under guidance from the Association of Investment Companies. There is no other comprehensive income and therefore the return for the year is also the total comprehensive income for the year.
The notes form part of these financial statements.

STATEMENT OF FINANCIAL POSITION

AT 31 OCTOBER 2020

				31 October 2020		31 October 2019
		Note		£'000		£'000
Fixed assets
Investments at fair value through profit or loss		3		180,927		211,240
Current assets
Cash and cash equivalents				2,463		2,472
Cash collateral paid in respect of contracts for difference ("CFDs")				41		16
Amounts due in respect of CFDs				3,014		3,258
Other debtors		10		3,100		2,571
				8,618		8,317
Creditors: amounts falling due within one year
Amounts payable in respect of CFDs				(4,969)		(5,140)
Other creditors		11		(216)		(291)
				(5,185)		(5,431)
Net current assets				3,433		2,886
Total assets less current liabilities				184,360		214,126
Net assets				184,360		214,126
Capital and reserves
Share capital		12		1,348		1,348
Share premium				98,437		98,437
Special reserve				64,671		64,671
Capital reserve
-Revaluation gains on investment held at year end		3		14,746		26,156
-Other capital reserves				(1,578)		17,511
Revenue reserve				6,736		6,003
Total Shareholders' funds				184,360		214,126
NAV per share - Ordinary Shares (pence)		14		136.84p		158.93p
Approved by the Board of Directors and authorised for issue on 25 February 2021 and signed on their behalf by:
Harry Wells
Director
CC Japan Income & Growth Trust plc is incorporated in England and Wales with registration number 9845783.

  The notes form part of these financial statements.

STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 OCTOBER 2020

		Share capital	Share premium	Special reserve	Capital reserve	Revenue reserve	Total
	Note	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 November 2019		1,348	98,437	64,671	43,667	6,003	214,126
Return on ordinary activities after taxation		-	-	-	(30,499)	6,796	(23,703)
Dividends paid	9	-	-	-	-	(6,063)	(6,063)
Balance at 31 October 2020		1,348	98,437	64,671	13,168	6,736	184,360
There were no Ordinary Shares issued or share buybacks during the year ended 31 October 2020.
For the year ended 31 October 2019
		Share capital	Share premium	Special reserve	Capital reserve	Revenue reserve	Total
	Note	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 November 2018		1,285	89,911	64,671	30,932	4,116	190,915
Return on ordinary activities after taxation		-	-	-	12,735	7,003	19,738
Dividends paid	9	-	-	-	-	(5,116)	(5,116)
Issue of Ordinary Shares	12	63	8,665	-	-	-	8,728
Ordinary Shares issue costs		-	(139)	-	-	-	(139)
Balance at 31 October 2019		1,348	98,437	64,671	43,667	6,003	214,126
The Company's distributable reserves consist of the Special reserve, Revenue reserve and Capital reserve attributable to realised profits.
The notes form part of these financial statements.

STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 OCTOBER 2020

	Year ended 31 October 2020	Year ended 31 October 2019
	£'000	£'000
Operating activities cash flows
Return on ordinary activities before finance costs and taxation*	(22,621)	20,854
Adjustment for:
Losses/(gains) on investments	23,290	(12,932)
CFD transactions	48	(857)
Increase in other debtors	(380)	(168)
(Decrease)/increase in other creditors	(75)	65
Tax withheld on overseas income	(853)	(867)
Net cash flow (used in)/from operating activities	(591)	6,095
Investing activities cash flows
Purchases of investments	(92,584)	(38,854)
Proceeds from sales of investments	99,458	30,373
Net cash flow from/(used in) investing activities	6,874	(8,481)
Financing activities cash flows
Issue of Ordinary Share capital	-	8,728
Payment of Ordinary Share issue costs	-	(139)
Equity dividends paid	(6,063)	(5,116)
Finance costs paid	(229)	(248)
Net cash (used in)/flow from financing activities	(6,292)	3,225
(Decrease)/increase in cash and cash equivalents	(9)	839
Cash and cash equivalents at the beginning of the year	2,472	1,633
Cash and cash equivalents at the end of the year	2,463	2,472
* Cash inflow from dividends was £7,396,000 (2019: £8,506,000).
The notes form part of these financial statements.

NOTES TO THE ACCOUNTS

1. GENERAL INFORMATION

CC Japan Income & Growth Trust plc (the "Company") was incorporated in England and Wales on 28 October 2015 with registered number 9845783, as a closed-ended investment company. The Company commenced its operations on 15 December 2015. The Company carries on business as an investment trust within the meaning of Chapter 4 of Part 24 of the Corporation Tax Act 2010.

The Company's investment objective is to provide Shareholders with dividend income combined with capital growth, mainly through investment in equities listed or quoted in Japan.

The Company's shares were admitted to the Official List of the Financial Conduct Authority with a premium listing on 15 December 2015. On the same day, trading of the Ordinary Shares commenced on the London Stock Exchange.

The Company's registered office is 1st Floor, Senator House, 85 Queen Victoria Street, London, EC4V 4AB.

2. ACCOUNTING POLICIES

The principal accounting policies followed by the Company are set out below:

(a) Basis of accounting

The financial statements have been prepared in accordance with FRS 102 ("the Financial Reporting Standard applicable in the UK and Republic of Ireland" issued by the Financial Reporting Council), with the Statement of Recommended Practice "Financial Statements of Investment Trust Companies and Venture Capital Trusts" (issued in October 2019) and the Companies Act 2006. The financial statements have been prepared on the historical cost basis except for the modification to a fair value basis for certain financial instruments as specified in the accounting policies below.

They have also been prepared on the assumption that approval as an investment trust will continue to be granted.

The financial statements have been prepared on a going concern basis. In forming this opinion, the directors have considered any potential impact of the COVID-19 pandemic on the going concern and viability of the Company. In making their assessment, the Directors have reviewed income and expense projections and the liquidity of the investment portfolio, and considered the mitigation measures which key service providers, including the Manager, have in place to maintain operational resilience particularly in light of COVID-19.

The financial statements have been presented in GBP sterling (£), which is also the functional currency as this is the currency of the primary economic environment in which the Company operates. The Board having regard to the currency of the Company's share capital and the predominant currency in which it pays distributions, expenses and its shareholders operate, has determined that sterling is the functional currency.  Sterling is also the currency in which the financial statements are presented.

(b) Investments

As the Company's business is investing in financial assets with a view to profiting from their total return in the form of increases in fair value, financial assets are designated as held at fair value through profit or loss in accordance with FRS 102 Section 11: 'Basic Financial Instruments', and Section 12: 'Other Financial Instruments'. The Company manages and evaluates the performance of these investments on a fair value basis in accordance with its investment strategy, and information about the investments is provided on this basis to the Board of Directors.

Upon initial recognition investments are designated by the Company "at fair value through profit or loss". They are accounted for on the date they are traded and are included initially at fair value which is taken to be their cost. Subsequently investments are valued at fair value which is the bid market price for listed investments.

Changes in the fair value of investments held at fair value through profit or loss and gains or losses on disposal are included in the capital column of the income statement within "gains on investments held at fair value".

(c) Derivatives

Derivatives comprise Contracts for Difference ("CFD"), which are held at fair value by reference to the underlying market value of the corresponding security. Where the fair value is positive the CFD is presented as a current asset, and where the fair value is negative the CFD is presented as a current liability. Gains or losses on these derivative transactions are recognised in the Income Statement. They are recognised as capital and are shown in the capital column of the Income Statement if they are of a capital nature and are recognised as revenue and shown in the revenue column of the Income Statement if they are of a revenue nature. To the extent that any gains or losses are of a mixed revenue and capital nature, they are apportioned between revenue and capital accordingly.

(d) Foreign currency

Transactions denominated in foreign currencies including dividends are translated into sterling at actual exchange rates as at the date of the transaction. Assets and liabilities denominated in foreign currencies at the year end are reported at the rates of exchange prevailing at the year end. Foreign exchange movements on investments and derivatives are included in the Income Statement within gains on investments. Any other gain or loss is included as an exchange gain or loss to capital or revenue in the Income Statement as appropriate.

(e) Income

Investment income has been accounted for on an ex-dividend basis or when the Company's right to the income is established. Special dividends are credited to capital or revenue in the Income Statement, according to the circumstances surrounding the payment of the dividend. Overseas dividends are included gross of withholding tax recoverable.

Interest receivable on deposits is accounted for on an accrual basis.

(f) Dividend payable

Interim dividends are recognised when the Company pays the dividend. Final dividends are recognised in the period in which they are approved by the shareholders. This year a second interim dividend is being paid in substitution for the final dividend.

(g) Expenses

All expenses are accounted for on an accruals basis and are charged as follows: • the basic investment management fee is charged 20% to revenue and 80% to capital; • CFD finance costs are charged 20% to revenue and 80% to capital; • investment transactions costs are allocated to capital; and • other expenses are charged wholly to revenue.

(h) Taxation

The tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on the taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expenses that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company's liability for current tax is calculated using tax rates that were applicable at the financial reporting date.

Where expenses are allocated between capital and revenue any tax relief in respect of the expenses is allocated between capital and revenue returns on the marginal basis using the Company's effective rate of corporation taxation for the relevant accounting period.

Deferred taxation is recognised in respect of all timing differences that have originated but not reversed at the financial reporting date, where transactions or events that result in an obligation to pay more tax in the future or right to pay less tax in the future have occurred at the financial reporting date. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the timing differences can be deducted. Deferred tax assets and liabilities are measured at the rates applicable to the legal jurisdictions in which they arise.

(i) Other receivables and other payables

Other receivables and other payables do not carry any interest and are short term in nature and are accordingly stated at their nominal value.

(j) Segmental reporting

The Directors are of the opinion that the Company is engaged in a single segment of business being that of an investment trust as disclosed in note 1.

(k) Estimates and assumptions

The preparation of financial statements requires the Directors to make estimates and assumptions that affect items reported in the Statement of financial position and Income Statement and the disclosure of contingent assets and liabilities at the date of the financial statements. Although these estimates are based on management's best knowledge of current facts, circumstances and, to some extent, future events and actions, the Company's actual results may ultimately differ from those estimates, possibly significantly.

There have not been any instances requiring any significant estimates or judgements in the year.

(l) Cash and cash equivalents

Cash comprises cash and demand deposits. Cash equivalents, include bank overdrafts, and short-term, highly liquid investments that are readily convertible to known amounts of cash, are subject to insignificant risks of changes in value, and are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes.

3. INVESTMENTS
(a) Summary of valuation
			As at 31 October 2020	As at 31 October 2019
			£'000	£'000
Investments listed on a recognised overseas investment exchange			180,927	211,240
			180,927	211,240
(b) Movements
In the year ended 31 October 2020
			2020	2019
			£'000	£'000
Book cost at the beginning of the year			185,084	174,262
Revaluation gains on investments held at beginning of the year			26,156	15,157
Valuation at beginning of the year			211,240	189,419
Purchases at cost			92,584	38,854
Sales:
- proceeds			(99,607)	(29,965)
- (losses)/gains on investment holdings sold during the year			(11,880)	1,933
Movements in revaluation (losses)/gains on investment held at year end			(11,410)	10,999
Valuation at end of the year			180,927	211,240
Book cost at end of the year			166,181	185,084
Revaluation gains on investment held at year end			14,746	26,156
Valuation at end of the year			180,927	211,240
Transaction costs on investment purchases for the year ended 31 October 2020 amounted to £45,000 (2019: £19,000) and on investment sales for the year amounted to £48,000 (2019: £15,000).
(c) (Losses)/gains on investments
			Year ended 31 October 2020	Year ended 31 October 2019
			£'000	£'000
(Losses)/gains on non-derivative investment holdings sold during the year			(11,880)	1,933
Movements in revaluation (losses)/gains on investment held at year end			(11,410)	10,999
Other capital losses			(31)	(24)
Total (losses)/gains on non-derivative investments held at fair value			(23,321)	12,908
Realised losses on CFD assets and liabilities			(6,101)	(231)
Unrealised (losses)/gains on CFD assets and liabilities			(73)	1,530
Total (losses)/gains on investments held at fair value			(29,495)	14,207

4. INCOME
	Year ended 31 October 2020	Year ended 31 October 2019
	£'000	£'000
Income from investments:
Overseas dividends	8,553	8,670
Deposit interest	-	1
Total	8,553	8,671
Overseas dividend income is translated into sterling on receipt.

5. INVESTMENT MANAGEMENT FEE
	Year ended 31 October 2020	Year ended 31 October 2019
	£'000	£'000
Basic fee:
20% charged to revenue	285	293
80% charged to capital	1,140	1,173
Total	1,425	1,466
The Investment Manager is entitled to receive a management fee payable monthly in arrears and is at the rate of one-twelfth of 0.75% of Net Asset Value per calendar month. There is no performance fee payable to the Investment Manager.

6. OTHER EXPENSES
	Year ended 31 October 2020	Year ended 31 October 2019
	£'000	£'000
Secretarial services	48	58
Administration and other expenses	326	382
Auditor's remuneration - statutory	38	36
Directors' fees	144	141
VAT recovered - Revenue*	-	(183)
Other expenses - Revenue	556	434
* Other expenses for the year ended 31 October 2019 include a credit of £183,000 of VAT recovered on the Company's expenses since inception to 31 October 2019.

7. FINANCE COSTS
	Year ended 31 October 2020	Year ended 31 October 2019
	£'000	£'000
Interest paid - 100% charged to revenue	21	30
CFD finance cost and structuring fee - 20% charged to revenue	41	43
Structuring fees - 20% charged to revenue	1	1
	63	74
CFD finance cost and structuring fee - 80% charged to capital	164	171
Structuring fees - 80% charged to capital	2	4
	166	175
Total finance costs	229	249

8. TAXATION
	Year ended 31 October 2020			Year ended 31 October 2019
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
(a) Analysis of tax charge in the year:
Overseas withholding tax	853	-	853	867	-	867
Total tax charge for the year (see note 8 (b))	853	-	853	867	-	867
(b) Factors affecting the tax charge for the year:
The Company's effective tax rate for the year is 19.00% (2019: 19.00%), which is same as the standard rate of corporation tax in the UK for a large company currently at 19.00% (2019: 19.00%).
The differences are explained below:
	Year ended 31 October 2020			Year ended 31 October 2019
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Total return before taxation	7,649	(30,499)	(22,850)	7,870	12,735	20,605
UK corporation tax at 19.00% (2019: 19.00%)	1,453	(5,795)	(4,342)	1,495	2,420	3,915
Effects of:
Overseas withholding tax suffered	853	-	853	867	-	867
Non-taxable overseas dividends	(1,625)	-	(1,625)	(1,647)	-	(1,647)
Capital losses/(gains) not subject to tax	-	5,547	5,547	-	(2,676)	(2,676)
Finance costs not tax deductible	12	32	44	14	33	47
Movement in unutilised management expenses	160	216	376	138	223	361
Total tax charge	853	-	853	867	-	867
The Company is not liable to tax on capital gains due to its status as an investment trust. The company has an unrecognised deferred tax asset of £562,000 (2019: £431,000) based on the long term prospective corporation tax rate of 19% (2019: 19%). This asset has accumulated because deductible expenses exceeded taxable income for the year ended 31 October 2020. No asset has been recognised in the accounts because, given the composition of the Company's portfolio, it is not likely that this asset will be utilised in the foreseeable future.

9. DIVIDEND
(i). Dividends paid during the financial year
	Year ended 31 October 2020		Year ended 31 October 2019
Final dividend - year ended 31 October 2019 of 3.10p (2018: 2.50p)		4,177		3,230
Interim dividend - year ended 31 October 2020 of 1.40p (2019: 1.40p)		1,886		1,886
Total		6,063		5,116
(ii). The dividend relating to the year ended 31 October 2020, which is the basis on which the requirements of Section 1159 of the Corporation Tax Act 2010 are considered is detailed below:
	Year ended 31 October 2020		Year ended 31 October 2019
	Pence per Ordinary share	£'000	Pence per Ordinary share	£'000
Interim dividend	1.40p	1,886	1.40p	1,886
Second interim dividend / final dividend*	3.20p	4,311	3.10p	4,177
	4.60p	6,197	4.50p	6,063
*Not included as a liability in the year ended 31 October 2020 accounts.
The Directors have declared a second interim dividend for the financial year ended 31 October 2020 of 3.20p per Ordinary Share. The dividend will be paid on 5 March 2021 to Shareholders on the register at the close of business on 5 February 2021. This year a second interim dividend is being paid in substitution for the final dividend.

10. OTHER DEBTORS
	As at 31 October 2020	As at 31 October 2019
	£'000	£'000
Accrued income	2,860	2,556
Sales for settlement	149	-
VAT receivable	48	-
Prepayments and other receivables	43	15
	3,100	2,571

11. OTHER CREDITORS
	As at 31 October 2020	As at 31 October 2019
	£'000	£'000
Amounts falling due within one year:
Accrued finance costs	8	8
Accrued expenses	208	283
	216	291

12. SHARE CAPITAL
Share capital represents the nominal value of shares that have been issued. The share premium includes any premiums received on issue of share capital. Any transaction costs associated with the issuing of shares are deducted from share premium.
			As at 31 October 2020				As at 31 October 2019
			No of shares		£'000		No of shares			£'000
Allotted, issued & fully paid:
Ordinary Shares of 1p
Opening balance			134,730,610		1,348		128,451,781			1,285
Ordinary Shares of 1p issued			-		-		6,278,829			63
Closing balance			134,730,610		1,348		134,730,610			1,348
During the year under review, no Ordinary Shares of 1p each were issued (2019: 6,278,829 Ordinary Shares of 1p each were issued at prices ranging from 138.3p to 144.1p and the total amount raised was £8,278,000).
13. RETURN PER ORDINARY SHARE
Total return per Ordinary Share is based on the loss on ordinary activities, including income, for the period after taxation of £23,703,000 (2019: profit of £19,738,000).
Based on the weighted average number of Ordinary Shares in issue for the year to 31 October 2020 of 134,730,610 (2019: 133,109,302), the returns per Ordinary Share were as follows:
	As at 31 October 2020					As at 31 October 2019
	Revenue	Capital		Total		Revenue		Capital	Total
Return per Ordinary Share	5.04p	(22.64)p		(17.60)p		5.26p		9.57p	14.83p

14. NET ASSET VALUE PER SHARE
Total shareholders' funds and the net asset value ("NAV") per share attributable to the Ordinary Shareholders at the period end calculated in accordance with the Articles of Association were as follows:
	As at 31 October 2020	As at 31 October 2019
Net Asset Value (£'000)	184,360	214,126
Ordinary Shares in issue	134,730,610	134,730,610
NAV per Ordinary Share	136.84p	158.93p

15. 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, CCAM. The fees for the period are disclosed in note 5 and amounts outstanding at the year ended 31 October 2020 were £116,000 (2019: £136,000).
Research purchasing agreement
MiFID II treats investment research provided by brokers and independent research providers as a form of "inducement" to investment managers and requires research to be paid separately from execution costs.  In the past, the costs of broker research were primarily borne by the Company as part of execution costs through dealing commissions paid to brokers.  With effect from 3 January 2018, this practice has changed, as brokers subject to MiFID II are now required to price, and charge for, research separately from execution costs.  Equally, the new 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 2020 to 31 December 2020, as agreed between the Investment Manager and the Company, was £30,000 (31 December 2019: £29,000). The research charge for the year 1 January 2021 to 31 December 2021, as budgeted by the Investment Manager, is £28,000.
Directors' fees and shareholdings
The Directors' fees and shareholdings are disclosed in the Directors' Remuneration Implementation Report in the Annual Report .

16. FINANCIAL INSTRUMENTS AND CAPITAL DISCLOSURES
Risk Management Policies and Procedures
As an investment trust the Company invests in equities and equity related derivatives for the long-term so as to secure its investment objective. In pursuing its investment objective, the Company is exposed to a variety of risks that could result in either a reduction in the Company's net assets or a reduction of the profits available for dividends.
These risks include market risk (comprising currency risk, interest rate risk, and other price risk), liquidity risk, leverage risk and credit risk, and the Directors' approach to the management of them are set out as follows.
The objectives, policies and processes for managing the risks, and the methods used to measure the risks, are set out below.
(a) Market Risk
Economic conditions
Changes in economic conditions in Japan (for example, interest rates and rates of inflation, industry conditions, competition, political and diplomatic events and other factors) and in the countries in which the Company's investee companies operate could substantially and adversely affect the Company's prospects. The Company is subject to concentration risk as it only invests in Japanese companies but has diversified investments across the different sectors in the Japanese market.
Sectoral diversification
The Company has no limits on the amount it may invest in any sector. This may lead to the Company having significant concentrated exposure to portfolio companies in certain business sectors from time to time.
Concentration of investments in any one sector may result in greater volatility in the value of the Company's investments and consequently its NAV and may materially and adversely affect the performance of the Company and returns to Shareholders.
Unquoted companies
The Company may invest in unquoted companies from time to time. Such investments, by their nature, involve a higher degree of valuation and performance uncertainties and liquidity risks than investments in listed and quoted securities and they may be more difficult to realise.
Management of market risk
The Company is invested in a diversified portfolio of investments. The Company's investment policy states that no single holding (including any derivative instrument) will represent more than 10% of the Company's Gross Assets at the time of investment and, when fully invested, the portfolio is expected to have between 30 to 40 holdings although there is no guarantee that this will be the case and it may contain a lesser or greater number of holdings at any time. A maximum of 10% of the Company's Gross Assets at the time of investment may be invested in unquoted or untraded companies at time of investment.
The Investment Manager's approach will in most cases achieve diversification across a number of sectors as shown in the Holdings in Portfolio in the Annual Report.
(b) Currency risk
The majority of the Company's assets will be denominated in a currency other than sterling (predominantly in yen) and changes in the exchange rate between sterling and yen may lead to a depreciation of the value of the Company's assets as expressed in sterling and may reduce the returns to the Company from its investments and, therefore, negatively impact the level of dividends paid to shareholders.
Management of currency risk
The Investment Manager monitors the currency risk of the Company's portfolio on a regular basis. Foreign currency exposure is regularly reported to the Board by the Investment Manager. The Company does not currently intend to enter into any arrangements to hedge its underlying currency exposure to investment denominated in yen, although the Investment Manager and the Board will keep this approach under regular review.
Foreign currency exposures
An analysis of the Company's equity investments and CFD that are priced in a foreign currency is:
				As at 31 October 2020		As at 31 October 2019
				£'000		£'000
Equity Investments: yen				180,927		211,240
Receivables (due from brokers, dividends, and other income receivable)				3,100		2,571
CFD: yen (absolute exposure)				36,183		42,247
Cash: yen				(1,535)		(1,174)
Total				218,675		254,884
Foreign currency sensitivity
If the Japanese yen had appreciated or depreciated by 10% as at 31 October 2020 then the value of the portfolio as at that date would have increased or decreased as shown below:
		Increase in Fair Value	Decrease in Fair Value	Increase in Fair Value		Decrease in Fair Value
		As at 31 October 2020	As at 31 October 2020	As at 31 October 2019		As at 31 October 2019
		£'000	£'000	£'000		£'000
Impact on capital return - increase/(decrease)		21,868	(21,868)	25,488		(25,488)
Total return/(loss) after taxation -		21,868	(21,868)	25,488		(25,488)

(c) Leverage risk

Derivative instruments
The Company may utilise long only CFDs or equity swaps for gearing and efficient portfolio management purposes.  Leverage may be generated through the use of CFDs or equity swaps. Such financial instruments inherently contain much greater leverage than a non-margined purchase of the underlying security or instrument. This is due to the fact that, generally, only a very small portion (and in some cases none) of the value of the underlying security or instrument is required to be paid in order to make such leveraged investments. As a result of any leverage employed by the Company, small changes in the value of the underlying assets may cause a relatively large change in the Net Asset Value of the Company. Many such financial instruments are subject to variation or other interim margin requirements, which may force premature liquidation of investment positions.
Borrowing risk
The Company may use borrowings to seek to enhance investment returns. While the use of borrowings can enhance the total return on the Ordinary Shares where the return on the Company's underlying assets is rising and exceeds the cost of borrowing, it will have the opposite effect where the return on the Company's underlying assets is rising at a lower rate than the cost of borrowing or falling, further reducing the total return on the Ordinary Shares. As a result, the use of borrowings by the Company may increase the volatility of the Net Asset Value per Ordinary Share.
Any reduction in the value of the Company's investments may lead to a correspondingly greater percentage reduction in its Net Asset Value (which is likely to adversely affect the price of an Ordinary Share). Any reduction in the number of Ordinary Shares in issue (for example, as a result of buy backs) will, in the absence of a corresponding reduction in borrowings, result in an increase in the Company's level of gearing.
To the extent that a fall in the value of the Company's investments causes gearing to rise to a level that is not consistent with the Company's gearing policy or borrowing limits, the Company may have to sell investments in order to reduce borrowings, which may give rise to a significant loss of value compared to the book value of the investments, as well as a reduction in income from investments.
Management of leverage risk
The aggregate of borrowings and long only CFD and equity swap exposure will not exceed 25% of Net Asset Value at the time of drawdown of the relevant borrowings or entering into the relevant transaction, as appropriate, although the Company's normal policy will be to utilise and maintain gearing to a lower limit of 20% of Net Asset Value at the time of drawdown of the relevant borrowings or entering into the relevant transaction, as appropriate. It is expected that any borrowings entered into will principally be denominated in yen.
The Company's level of gearing as at 31 October 2020 is disclosed in the Alternative Performance Measures section.
(d) Interest rate risk
The Company is exposed to interest rate risk specifically through its cash holdings, the interest payable on the overdraft facility and on positions within the CFD portfolio. Interest rate movements may affect the level of income receivable/payable from any cash at bank and on deposits and overdraft facilities. The effect of interest rate changes on the earnings of the companies held within the portfolio may have a significant impact on the valuation of the Company's investments. Movements in interest rates will also have an impact on the valuation of the CFD derivative contracts. Interest receivable on cash balances or paid on overdrafts is at fixed rate.
Management of interest rate risk
The possible effects on Fair Value and cash flows that could arise as a result of changes in interest rates are taken into account when making investment decisions. Derivative contracts are not used to hedge against the exposure to interest rate risk.
Interest income earned on deposits and paid on overdraft by the Company is primarily derived from fixed interest rates, as such do not have a material exposure to interest rate risk. The bank overdraft is an integral part of cash management and the Company has a legal right of off set and has the intention to settle this at net.
Interest rate exposure
The exposure at 31 October 2020 of financial assets and liabilities to interest rate risk is shown by reference to floating interest rates - when the interest rate is due to be reset. No sensitivity analysis is shown as the exposure to interest rate risk is not material in relation to the Company's finance cost and investments in CFDs.
					As at 31 October 2020 due within one year	As at 31 October 2019 due within one year
					£'000	£'000
Exposure to floating interest rates: CFD derivative contract - (absolute exposure)					36,183	42,247
Collateral in respect of CFDs					41	16
(e) Credit risk Credit risk is the possibility of a loss to the Company due to the failure of the counterparty to a transaction discharging its obligations under that transaction. Cash and other assets held by the Depositary The cash and other assets held by the Depositary or its sub-custodians are subject to counterparty credit risk as the Company's access to its cash could be delayed should the counterparties become insolvent or bankrupt. Derivative instruments The Company's holdings in CFD contracts present counterparty credit risks, with the risk of the counter party (Morgan Stanley & Co International plc) defaulting. Management of credit risk
Cash and other assets held by the Depositary
Cash and other assets that are required to be held in custody will be held by the depositary or its sub-custodians. Cash and other assets may not be treated as segregated assets and will therefore not be segregated from any custodian's own assets in the event of the insolvency of a custodian. Cash held with any custodian will not be treated as client money subject to the rules of the Financial Conduct Authority ('FCA') and may be used by a custodian in the course of its own business. The Company will therefore be subject to the creditworthiness of its custodians. In the event of the insolvency of a custodian, the Company will rank as a general creditor in relation thereto and may not be able to recover such cash in full, or at all. The Company has appointed Northern Trust Global Services SE as its depositary. The credit rating of Northern Trust was reviewed at time of appointment and will be reviewed on a regular basis by the Investment Manager and/or the Board. The Fitch's credit rating of Northern Trust is BBB.
Derivative instruments
Where the Company utilises CFDs or equity swaps, it is likely to take a credit risk with regard to the parties with whom it trades and may also bear the risk of settlement default. These risks may differ materially from those entailed in exchange-traded transactions that generally are backed by clearing organisation guarantees, daily marking-to-market and settlement, and segregation and minimum capital requirements applicable to intermediaries. Transactions entered into directly between counterparties generally do not benefit from such protections and expose the parties to the risk of counterparty default. CFD contracts generally require variation margins and the counterparty credit risk is monitored by the Investment Manager.
The Investment Manager monitors the Company's exposure to its counterparties on a regular basis and the position is reviewed by the Directors at Board meetings. Investment transactions are carried out with a number of brokers, whose credit-standing is reviewed periodically by the Investment Manager, and limits are set on the amount that may be due from any one broker.
Other risks to the Company are detailed in the Company's prospectus dated 22 January 2021.
In summary, the exposure to credit risk as at 31 October 2020 was as follows:
					As at 31 October 2020 3 months or less	As at 31 October 2019 3 months or less
					£'000	£'000
Cash at bank					2,463	2,472
Amounts due in respect of CFDs					3,014	3,258
Collateral paid in respect of CFDs					41	16
Debtors					3,100	2,571
Total					8,618	8,317
None of the above assets or liabilities were impaired or past due but not impaired.
(f) Other Price Risk
Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting similar financial instruments traded in the market.
The Company is exposed to market price risk arising from its equity investments and its exposure to the positions within the CFD portfolio. The movements in the prices of these investments result in movements in the performance of the Company.
The Company's exposure to other changes in market prices at 31 October 2020 on its equity investments was £180,927,000 (2019: £211,240,000).
In addition, the Company's gross market exposure to these price changes through its CFD portfolio was £36,183,000 through long positions (2019: £44,129,000).
The Company uses CFDs as part of its investment policy. These instruments can be highly volatile and potentially expose investors to a higher risk of loss. The low initial margin deposits normally required to establish a position in such instruments permit a high degree of leverage. As a result, a relatively small movement in the price of a contract may result in a profit or loss which is high in proportion to the value of the net exposures in the underlying CFD positions. In addition, daily limits on price fluctuations and speculative position limits on exchanges may prevent prompt liquidation of positions resulting in potentially greater losses.
The Company limits the gross market exposure, and therefore the leverage, of this strategy to approximately 200% of the Company's net assets. The CFDs utilised have a linear performance to referenced stocks quoted on exchanges and therefore have the same volatility profile to the underlying stocks.
Market exposures to derivative contracts are disclosed below.
The Company's exposure to CFDs is the aggregate of long CFD Positions. The gross and net market exposure is the same as the Company does not hold Short CFD Positions. Exposures are monitored daily by the Investment Manager. The Company's Board also reviews exposures regularly.
The gross underlying exposures within the CFD portfolio as at 31 October 2020 were:
	As at 31 October 2020				As at 31 October 2019
	£'000		% of net assets		£'000	% of net assets
CFDs - gross exposure	36,183		19.63%		42,247	19.73%
CFDs - net exposure	36,183		19.63%		42,247	19.73%
The Board of Directors manages the market price risks inherent in the investment portfolio by ensuring full and timely access to relevant information from the Investment Manager. The Board meets regularly and at each meeting reviews investment performance. The Board monitors the Investment Manager's compliance with the Company's objective.
Concentration of exposure to other price risk
A sector breakdown of the portfolio is contained in the Portfolio disclosed in the Annual Report.
Other price risk sensitivity
The following table illustrates the sensitivity of the profit after taxation for the period to an increase or decrease of 10% in the fair values of the Company's equities and CFDs. This level of change is considered to be reasonably possible based on observation of current market conditions. The sensitivity analysis is based on the notional exposure of the Company's equities investments and long CFDs.
	As at 31 October 2020				As at 31 October 2019
	Increase in Fair Value		Decrease in Fair Value		Increase in Fair Value	Decrease in Fair Value
	£'000		£'000		£'000	£'000
Impact on capital return - increase/(decrease)	21,906		(21,906)		25,537	(25,537)
Return after taxation - increase/(decrease)	21,906		(21,906)		25,537	(25,537)
(g) Liquidity Risk
The securities of small-to-medium-sized (by market capitalisation) companies may have a more limited secondary market than the securities of larger companies. Accordingly, it may be more difficult to effect sales of such securities at an advantageous time or without a substantial drop in price than securities of a company with a large market capitalisation and broad trading market. In addition, securities of small-to-medium-sized companies may have greater price volatility as they can be more vulnerable to adverse market factors such as unfavourable economic reports.
Management of liquidity risks
The Company's Investment Manager monitors the liquidity of the Company's portfolio on a regular basis.
Liquidity risk exposure
The undiscounted gross cash outflows of the financial liabilities as at 31 October 2020, based on the earliest date on which payment can be required, were as follows:
					As at 31 October 2020 less than 3 months	As at 31 October 2019 less than 3 months
Amounts payable in respect of CFDs					4,969	5,140
Other payables					216	291
Total					5,185	5,431
The Company is exposed to liquidity risks from the leverage employed through exposure to long only CFD positions. However, timely sale of trading positions can be impaired by many factors including decreased trading volume and increased price volatility. As a result, the Company could experience difficulties in disposing of assets to satisfy liquidity demands. Liquidity risk is minimised by holding sufficient liquid investments which can be readily realised to meet liquidity demands. The Company's liquidity risk is managed on a daily basis by the Investment Manager in accordance with established policies and procedures in place.
(h) Fair Value Measurements of Financial Assets and Financial Liabilities
The financial assets and liabilities are either carried in the balance sheet at their Fair Value, or the balance sheet amount is a reasonable approximation of Fair Value (due from brokers, dividends receivable, accrued income, due to brokers, accruals and cash and cash equivalents).
The valuation techniques for investments and derivatives used by the Company are explained in the accounting policies notes 2 (b and c).
The table below sets out Fair Value measurements using Fair Value Hierarchy.
	Level 1		Level 2		Level 3	Total
As at 31 October 2020	£'000		£'000		£'000	£'000
Assets:
Equity investments	180,927		-		-	180,927
CFDs - Fair Value gains	-		3,014		-	3,014
Liabilities:
CFDs - Fair Value losses	-		(4,969)		-	(4,969)
Total	180,927		(1,955)		-	178,972
		Level 1		Level 2	Level 3		Total
As at 31 October 2019		£'000		£'000	£'000		£'000
Assets:
Equity investments		211,240		-	-		211,240
CFDs- Fair Value gains		-		3,258	-		3,258
Liabilities:
CFDs - Fair Value losses		-		(5,140)	-		(5,140)
Total		211,240		(1,882)	-		209,358
There were no transfers between levels during the year (2019: 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 31 October 2020 (2019: nil).
(i) Capital Management Policies and Procedures
The Company's capital management objectives are:
- to ensure that the Company will be able to continue as a going concern; and
- to provide dividend income combined with capital growth, mainly through investment in equities listed or quoted in Japan and by utilising the leverage effect of CFDs.
The key performance indicators are contained in the strategic report in the Annual Report .
The Company is subject to several externally imposed capital requirements:
- As a public company, the Company has to have a minimum share capital of £50,000.
- In order to be able to pay dividends out of profits available for distribution by way of dividends, the Company has to be able to meet one of the two capital restriction tests imposed on investment companies by company law.
The Company's capital at 31 October 2020 comprises called up share capital and reserves totalling £184,360,000 (2019: £214,126,000).
The Board regularly monitors, and has complied with, the externally imposed capital requirements.

17. SUBSEQUENT EVENTS

On 22 January 2021, the Company published a prospectus (the "Prospectus") setting out details of the proposed Bonus Issue and convening a general meeting to consider a resolution to allow the Company to implement a Bonus Issue, including the adoption of New Articles. Amendments to the Company's articles of association provide for the rights of the Subscription Shares and obtain authority to allot the Subscription Shares.

The Special Resolution put forward at the General Meeting held on 15 February 2021 to approve the 1 for 5 Bonus Issue of Subscription Shares was passed.

On 16 February 2021, the Board announced a Subscription Price of 161 pence, payable on exercise of each Subscription Share. The Board also announced the allotment of 26,946,122 Subscription Shares pursuant to the terms of the Bonus Issue.

Following admission of the Subscription Shares on 18 February 2021 there were 134,730,610 Ordinary Shares and 26,946,122 Subscription Shares in issue.

ALTERNATIVE PERFORMANCE MEASURES ("APM")

Discount (APM)

The amount, expressed as a percentage, by which the share price is less than the Net Asset Value per share.

As at 31 October 2020
NAV per Ordinary Share (pence)				a			136.8
Share price (pence)				b			119.5
Discount				(b÷a)-1			12.6%
As at 31 October 2019
NAV per Ordinary Share(pence)			a				158.9
Share price(pence)			b				150.0
Discount			(b÷a)-1				5.6%

Gearing (APM)

A way to magnify income and capital returns, but which can also magnify losses. A bank loan is a common method of gearing.

As at 31 October 2020							£'000
CFD notional market value (note 16)			a				36,183
Non-base cash borrowings*			b				1,893
NAV			c				184,360
Gearing (net)			((a+b)/c)				20.7%
As at 31 October 2019								£'000
CFD notional market value (note 16)				a				42,247
Non-base cash borrowings*				b				2,864
NAV				c				214,126
Gearing (net)				((a+b) ÷c)				21.1%

*Overdraft cash balance in JPY with Northern Trust.

Leverage (APM) An alternative word for "Gearing".

Under AIFMD, leverage is any method by which the exposure of an 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.

As at 31 October 2020			Gross £'000	Commitment £'000
Security market value		a	180,927	180,927
CFD notional market value		b	36,183	36,183
Cash and cash equivalents*		c	1,385	2,653
NAV		d	184,360	184,360
Leverage		(a+b+c)/d	119%	119%

As at 31 October 2019			Gross £'000	Commitment £'000
Security market value		a	211,240	211,240
CFD notional market value		b	42,247	42,247
Cash and cash equivalents*		c	4,554	2,488
NAV		d	214,126	214,126
Leverage		(a+b+c)/d	121%	120%
* Calculation under the commitment method.

Ongoing charges (APM)

A measure, expressed as a percentage of average net assets, of the regular, recurring annual costs of running an investment company.

Year end 31 October 2020
Average NAV						a			190,442,282
Annualised expenses						b			1,981,000
Ongoing charges						(b÷a)			1.04%
Year end 31 October 2019
Average NAV					a				195,678,342
Annualised expenses*					b				2,083,000
Ongoing charges					(b÷a)				1.06%

Total return (APM)

A measure of performance that takes into account both income and capital returns.

Year end 31 October 2020					Share price		NAV
Opening at 1 November 2019 (in pence)	a				150.0		158.9
Closing at 31 October 2020 (in pence)	b				119.5		136.8
Price movement (b÷a)-1	c				-20.3%		-13.9%
Dividend reinvestment	d				3.0%		2.7%
Total return	(c+d)				-17.3%		-11.2%
Year end 31 October 2019						Share price		NAV
Opening at 1 November 2018 (in pence)		a				153.0		148.6
Closing at 31 October 2019 (in pence)		b				150.0		158.9
Price movement (b÷a)-1		c				-2.0%		6.9%
Dividend reinvestment		d				2.7%		3.0%
Total return		(c+d)				0.7%		9.9%

ANNUAL GENERAL MEETING

The Annual General Meeting will be held at 12 noon on 26 March 2021. As a result of the COVID-19 pandemic and associated UK Government guidance, physical attendance at the AGM will not be possible. The AGM will be held virtually via video conference as the safety of Shareholders and of the Company's service providers is the Board's primary concern.

26 February 2021

Secretary and registered office:

PraxisIFM Fund Services (UK) Limited

1st Floor, Senator House

85 Queen Victoria Street

London

EC4V 4AB

For further information contact:

PraxisIFM Fund Services (UK) Limited

Tel: [phone]

END

 

END

 

 

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