Final Results

RNS Number : 6243V

CC Japan Income & Growth Trust PLC

31 January 2017

 

CC JAPAN INCOME & GROWTH TRUST PLC

ANNUAL FINANCIAL REPORT ANNOUNCEMENT

INVESTMENT OBJECTIVE

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

FINANCIAL INFORMATION

					At 31
					October
					2016
Net assets					£98.1m
Net asset value ("NAV") per ordinary share ("share")					123.9p
Share price					122.4p
Share price discount to NAV					1.2%

PERFORMANCE SUMMARY

							%
							Change
NAV total return per share							+24.9%
Share price total return1							+23.5%
Topix index total return1							+32.7%

¹ Source: Bloomberg

All the above returns are stated in GBP terms for the period from the Company's launch on 15 December 2015 to 31 October 2016.

CHAIRMAN'S STATEMENT

I am pleased to present the Company's first Annual Report which reflects the period from listing on the London Stock Exchange on 15th December 2015 to 31st October 2016.   As at 31st October 2016, and measured in Sterling, the share price has risen by 22.4% while the Net Asset Value ("NAV") has increased by 23.9% since launch. On a total return basis including the interim dividend, the share price and NAV rose by 23.5% and 24.9% respectively. Although our investment strategy is unconstrained by any benchmark, it is of note that we underperformed the Topix index which returned +32.7% over the same period in Sterling terms. This reflects a portfolio invested for income and sustainable growth rather than in cyclical stocks which performed strongly. The year was also notable for currency volatility, with Yen strength and a weak market in the first half of our financial year giving way to market strength on pronounced Yen weakness towards the end of the period; a somewhat awkward  investment climate. Under the circumstances, our investment managers, who have considerable experience of our strategy in an open-ended environment, have made a good start with the portfolio in our closed-end form. The shares continued to command a premium to NAV throughout most of the year under review but closed at a 1.2% discount to the share price at our year end, 31st October 2016.

Share issues

The Company listed on the London Stock Exchange in December 2015 after an initial fundraising of £66.5m.  On 13th October 2016, the Company announced the issue of an additional 10.26 million ordinary shares at a price of £1.23 per share exercised under the Placing Programme reserved in the Prospectus. In addition, 2.4m ordinary shares were placed under tap issues earlier in the year. Thus, the current issued share capital is 79.2 million shares with a market capitalisation of £98.1 million as at 31st October 2016. The Board has every intention of continuing to explore ways to expand the size of the Company, market conditions permitting.

Market developments

2016 has seen sentiment across global equity markets continue to be  heavily influenced by Central Bank policies as well as potentially significant political shifts in the UK, the US and Europe.  These events have contributed to gyrations in the foreign exchange markets, which have been a dominant factor in the direction of Japanese equities and sectoral trends within the stock market. The Japanese Yen started the year at Y120.5/US$ but appreciated to a high of Y99.9/US$ in mid-August.  Yen strength against Sterling was exacerbated by the reaction to the United Kingdom's EU referendum vote on June 23 which saw the cross rate move from  Y177.1/£ at the start of the calendar year 2016 to Y128.4/£ at our October period end.  This provided a significant boost to the reported NAV of the Company, although we have now seen some Yen weakness, particularly since our year end. 

In an attempt to contain the strength of the Yen, the Bank of Japan ( "BOJ" ) made the surprise decision at the end of January 2016 to cut interest rates on excess reserves to -10bps, thereby introducing a negative nominal rate for the first time. Financial institutions and banks in particular were negatively affected and this unorthodox monetary policy was heavily criticised.  The BOJ subsequently conducted a comprehensive assessment of the resulting effects on economic activity and prices and at their September policy meeting concluded that a new framework was required.  This introduced a "Yield Curve Control" mechanism to maintain 10 year Government bonds at a Zero yield, together with a commitment to overshoot the price stability target of 2% inflation.  The US yield curve had been steepening even before their Presidential election. President Trump's potential fiscal stimulus for the US economy together with the Federal Open Market Committee 's  incipient plans for raising US interest rates mean that  the BOJ may have to keep expanding  its balance sheet to defend its Zero yield "wicket".  In the event of continuing monetary accommodation the Yen could remain weak against the US dollar. In this context, I should remind shareholders that the Company has a policy of not hedging currencies, as clearly laid out in the Prospectus.

Negative interest rate policy combined with continuing Japanese Corporate Governance and Stewardship Code reforms are fully supportive of our income strategy.  Japanese companies with excess capital on their balance sheets continue to increase distributions to shareholders with strong growth in dividends and share buy backs. The dividend payout ratio for the Tokyo Stock Exchange has also improved, but at 33.7% in the last fiscal year is still very much lower than other developed markets. There is strong evidence of further dividend trend growth, which is discussed in the Investment Manager's Report.

Dividends

The Prospectus laid out a minimum target dividend for the first financial period of the company of 3p per share. The Company has generated a revenue return of 3.60p per Ordinary Share based on the weighted average number of shares in issue in the period from the commencement of the Company's operations on 15 December 2015 to 31 October 2016.  Therefore, subject to approval by shareholders at the Company's Annual General Meeting, the Board proposes a final dividend of 2p per ordinary share to be paid to shareholders on the register at 17 February 2017, which together with the interim dividend of 1p paid in July 2016, meets the Prospectus target. The strategic objective is to grow the dividend over time. Shareholders should also be aware of the Special Reserve created to allow distributions out of capital, if appropriate.

Outlook

Uncertainty abounds across the global political spectrum, not least the fear of potentially protectionist moves by the new Trump administration. Certainly, it is too early to say what effect President Trump's economic and foreign policies will have on the Asian region, including Japan. The stakes are high, so one hopes that reasoning conducive to continuing free trade will prevail. To some extent, large Japanese manufacturers may escape potential import tariffs or border taxes through their own US production facilities - Nissan is an example.  Notwithstanding the global backdrop, our investment managers believe that BOJ policies have created a favourable environment for investing in income generating assets in Japan. It is remarkable that domestic funds are so wary of returning to the Japanese stock market, which is indicative of entrenched risk-averse, and deflationary convictions. Despite the privatisation of public assets at attractive prices, the introduction of Nippon Individual Savings Accounts in 2014, Yen 6 trillion (and rising) company share buy backs, improving dividend metrics and the BOJ's own equity purchase programme set at Yen 6 trillion annually; an astonishing Y1,700 trillion in savings is still sitting in cash suffering negative rates of interest and has not been tempted back into equities. A weaker Yen and something of a cyclical earnings recovery might be a catalyst for Japanese equities particularly if a gathering perception of some inflation gains any momentum. At any rate, the improvements in corporate capital management and a desire to improve return on equity should continue to provide plenty of scope for our investment managers to find good income and growth opportunities in the continued implementation of our investment strategy.

Harry Wells

31 January 2017

INVESTMENT MANAGER'S REPORT

Market

Historically, Japan has had few obvious attractions for investors seeking direct investment returns from either dividend or share buybacks. However, as corporate attitudes and the general investment landscape have evolved over recent years, it now offers levels of shareholder returns, by way of income, which are comparable, if not superior, to other international equity markets.  In the Japanese Financial Year to March 2016 (confusingly referred to as FY 15) the aggregate dividend payment for all listed companies rose 14.7% year-on-year to its third consecutive annual record.  Share buybacks also achieved a new record high, rising 50% year on year.  This was accompanied by record levels of treasury stock cancellation, reflecting an underlying trend to improve productivity and a desire to raise return on equity ratios. The introduction of a Stewardship Code in 2014 has been central to the improvement in the capital management decisions being made at many companies. 

We believe that this clear improvement in shareholder returns will become an ongoing feature and that total returns will remain a primary consideration for long term investors in Japan.  Despite the encouraging progress so far, the potential for companies to deliver much more to their shareholders is significant.   An estimated 55% of all listed companies in Japan have net cash on their balance sheet.  This has been built up through many years of strong free cash flow as companies responded cautiously to the fallout of the Japanese asset bubble as well as more recent global events such as the late 1990s Asian crash, the technology downturn in 2000 and the financial crisis in 2008.  The evidence now suggests that Japanese company managements are now shedding the ultra-conservative approach that had become entrenched behaviour.  It is notable that the number of companies announcing share buybacks has increased significantly, which reflects a broadening of the practice, both by company size and by industry, as the benefits for both companies and their shareholders have become more widely recognised and understood. 

The Japanese equity market has experienced the strongest dividend growth relative to the other developed markets over the past five years and yet the aggregate payout ratio still remains significantly lower.  This gives companies considerable scope to grow the annual distributions to shareholders through an earnings cycle and also offer sustainable dividend payments during an extended downturn.  We believe that in general companies are favouring a shareholder return policy which as its primary consideration focuses on the delivery of a stable and sustainable dividend going forward.  An increasing portion of companies we meet are now expressing this objective clearly in their dividend policies and this is an important consideration in our investment process. 

Portfolio

The success of the selection process can be identified in the large number of companies within the portfolio that have raised their dividend payments to levels higher than originally expected for either the 2015 fiscal year or the 2016 interim results which are included in the Company's reporting period.  In addition companies such as Mitsubishi UFJ Holdings, Nippon Telegraph & Telephone and Nissan Motor, which are held by the Company have announced large share buyback programmes. 

The NAV total return of the Company was 24.9% between the date of establishment and end of the financial year on 31^st October.  The performance has been significantly influenced by factors only indirectly related to the underlying investment decisions during the period.  The Japanese equity market opened up strongly on the Company's first day of trading reflecting the decision in the US to raise the Federal Funds Rate for the first time since 2006.  In Yen terms, the Topix index reached its twelve month high the following day and the subsequent local currency decline has been detrimental to performance given our policy of managing the portfolio with a structural gearing of 20%.  At the stock level, there has been a strong positive contribution from Daito Trust, the leading rental apartment developer, which has benefited from favourable tax incentives, and Pola Orbis, a cosmetics manufacturer, which has experienced strong demand from inbound tourists to Japan.  Conversely Kaken Pharmaceutical and Aoyama Trading have been weak due to lowered earnings expectations in the short term, although, in both cases, the long term commitment to shareholder return is undiminished.  

The monies raised from the secondary share offering and the smaller tap issues during the year have enabled the Company to purchase additional positions.  There have been three new large company positions established - Tokyo Electron, Nissan Motor and NTT DoCoMo - where the commitment to sustainable shareholder returns has been confirmed by management commentary and actions during the year.  We continue to believe that small and mid-sized companies in Japan offer significant opportunities for the Company, given the opportunities to discover the combinations of underlying business growth, management participation as shareholders and attractive valuations.  Some of the monies raised were used to invest in companies in this area - Asante (pest control services and housing reinforcement services), Yamada Consulting (financial consulting services to small companies), Gakkyusha (operates cram schools in the Tokyo area), Shoei (motorcycle helmets manufacturer) and Nippon Parking Development (car parking services for building owners and also operates ski resorts in central Japan) - which we believe offer significant potential for growth in shareholder returns in coming years.   

Outlook

We move forward into 2017 with a great deal of optimism.  The domestic economy remains robust and continues to benefit from the broad economic initiatives included under the Abenomics umbrella.  In contrast to the political turmoil in other regions of the world, Prime Minister Abe retains strong popular support and is expected to continue with his programme of reforms and incentives.  The majority of Japanese companies remain in a robust financial position with the outlook for aggregate earnings growth boosted by the recent weakness of the Yen. 

We expect 2017 to be another good year for shareholder returns in Japan.  Nikkei have recently announced the launch of the Nikkei 225 High Dividend Yield Stock 50 Index which will further raise awareness of the availability and quality of income from Japanese equities.  We continue to believe that initiatives such as these will continue to encourage the move towards best practices in Japan with regard to distributions to shareholders, which are primary considerations for the Company's investment strategy. 

Richard Aston

Coupland Cardiff Asset Management LLP

31 January 2017

PRINCIPAL RISKS AND UNCERTAINTIES

Together with the issues discussed in the Chairman's Statement and the Investment Manager's Report, the Board considers that the principal risks and uncertainties faced by the Company fall into the following main categories:

(i)            Market risks

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.

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.

Performance against benchmark index and competitors

The Board measures performance against the benchmark index, the Topix Index. The Board also monitors performance relative to the Company's peer group over a range of periods, taking into account the differing investment policies and objectives.

Management of risks

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.

(ii)           Corporate governance and internal control risks

The Board has contractually delegated to external agencies the management of the investment portfolio, the custodial services (which include the safeguarding of the assets), the registration services and the accounting and company secretarial requirements.

The main risk areas arising from the above contracts relate to allocation of the Company's assets by the Investment Manager, and the performance of administrative, registration and custodial services.  These could lead to various consequences including the loss of the Company's assets, inadequate returns to shareholders and loss of investment trust status. 

Management of risks

Each of the above contracts was entered into after full and proper consideration of the quality and cost of services offered, including the financial control systems in operation in so far as they relate to the affairs of the Company.  All of the above services are subject to ongoing oversight of the Board and the performance of the principal service providers is reviewed on a regular basis.  The Board monitors key person risks as part of its oversight of the Investment Manager.

(iii)         Regulatory risks

Breaches of Section 1158 of the Corporation Tax Act could result in loss of investment trust status. Loss of investment trust status would lead to the Company being subject to tax on any gains on the disposal of its investments.  Breaches of the FCA's rules applicable to listed entities could result in financial penalties or suspension of trading of the Company's shares on the London Stock Exchange.  Breaches of the Companies Act 2006, The Financial Services and Markets Act, The Alternative Investment Fund Managers Directive, accounting standards, the Listing Rules, Disclosure and Transparency Rules and Prospectus Rules could result in financial penalties or legal proceedings against the Company or its directors.  Failure of the Investment Manager to meet its regulatory obligations could have adverse consequences on the Company.

Management of risks

The Company has contracted out relevant services to appropriately qualified professionals.  The Investment Manager reports on regulatory matters to the Board on a quarterly basis.  The assessment of regulatory risks forms part of the Board's risk assessment programme.

(iv)          Financial risks

The Company's investment activities expose it to a variety of financial risks which include foreign currency risk and interest rate risk. The Company's dividends are received in Japanese Yen but payable in Sterling.

Management of risks

The Company's converts its dividends received into Sterling upon receipt.

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 accounts 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 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 accounts, 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 accounts; 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 accounts 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 accounts are published on the Company's 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 these websites and, accordingly, the auditors accept no responsibility for any changes that have occurred to the accounts 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 accounts, 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 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

John Scott

Director

31 January 2017

INCOME STATEMENT

For the period from 28 October 2015 to 31 October 2016

		Revenue £'000	Capital £'000	Total £'000
Gains on investments held at fair value		-	16,510	16,510
Income		3,220	-	3,220
Investment management fee		(97)	(386)	(483)
Other expenses		(343)	-	(343)
Return on ordinary
activities before finance
costs and taxation		2,780	16,124	18,904
Finance costs		(26)	(61)	(87)
Return on ordinary
activities before taxation		2,754	16,063	18,817
Taxation		(280)	13	(267)
Return on ordinary
activities after taxation		2,474	16,076	18,550
Return per Ordinary Share*		3.60p	23.39p	26.99p

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 period is also the total comprehensive income for the period.

*The Return per Ordinary Share figure does not take into account share issue expenses.

STATEMENT OF FINANCIAL POSITION

At 31 October 2016

		£'000
Fixed assets
Investments at fair value through profit or loss		96,638
Current assets
Debtors		793
Amounts due in respect of contracts for difference		580
Cash collateral paid in respect of contracts for difference		1,018
Cash at bank		873
		3,264
Creditors: amounts falling due within one year
Creditors		(267)
Amounts payable in respect of contracts for difference		(1,550)
		(1,817)
Net current assets		1,447
Total assets less current liabilities		98,085
Total net assets		98,085
Capital and reserves
Share capital		792
Share premium		14,761
Special reserve		64,671
Capital reserve		16,076
Revenue reserve		1,785
Total shareholders' funds		98,085
NAV per share - Ordinary Shares (pence)		123.91p

STATEMENT OF CHANGES IN EQUITY

For the period from 28 October 2015 to 31 October 2016

			Share capital £'000	Share  premium account £'000	Special reserve £'000	Capital reserve £'000	Revenue reserve £'000	Total £'000
	Beginning of period		-	-	-	-	-	-
	Return on ordinary activities		-	-	-	16,076	2,474	18,550
	Issue of shares		792	80,805	-	-	-	81,597
	Transfer to special reserve		-	(64,671)	64,671	-	-	-
	Share issue costs		-	(1,373)	-	-	-	(1,373)
	Dividends paid		-	-	-	-	(689)	(689)
	Balance at 31 October 2016		792	14,761	64,671	16,076	1,785	98,085

Distributable reserves comprise: the revenue reserve; and capital reserves attributable to realised profits including the special reserve.

Share capital represents the nominal value of shares that have been issued. The share premium account includes any premiums received on issue of share capital. Any transaction costs associated with the issuing of shares are deducted from share premium.

STATEMENT OF CASH FLOWS

For the period from 28 October 2015 to 31 October 2016

					£000
Return on ordinary activities before finance costs and taxation*					18,904
Gains on investments					(18,365)
Increase in debtors					(793)
Increase in other creditors					163
Amounts due in respect of CFDs					(580)
Increase in cash collateral paid in respect of CFDs					(1,018)
Increase in amounts payable in respect of CFDs					1,550
Finance costs paid					(84)
Tax paid on unfranked income - overseas					(267)
Net cash outflow from operating activities					(490)
Cash flows from investing activities
Purchases of investments					(102,831)
Proceeds from sales of investments					24,659
Net cash used in investing activities					(78,172)
Cash flows from financing activities
Issue of ordinary share capital					81,597
Payment of ordinary share issue costs					(1,373)
Equity dividends paid					(689)
Net cash inflow from financing activities					79,535
Increase in cash and cash equivalents					873
Cash and cash equivalents at the beginning of period					-
Cash and cash equivalents at the end of the period					873
Comprised of:
Cash and cash equivalents
Cash and cash equivalents at the end of the period					873

 *Cash inflow from dividends was £ 2,358,461.

NOTES

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 intends to carry 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 UK Listing 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 registered office is Mermaid House, 2 Puddle Dock, London, EC4V 3DB.

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)  and with the Statement of Recommended Practice "Financial Statements of Investment Trust Companies and Venture Capital Trusts" (issued in November 2014). 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.

The financial statements have been presented in Sterling (£).

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/(losses) on investments held at fair value through profit or loss".

c)     Derivatives

Derivatives which comprise of Contracts for Differences (CFDs) are held at fair value by reference to the underlying market value of the corresponding security. Gains and 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 period end are reported at the rates of exchange prevailing at the period 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.

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

(f) 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.

(g) 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 period. Taxable profit differs from net profit as reported in the Statement of Financial Position 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 balance sheet 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 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.

(h) 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

(i)   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 explained in note 1.

(j) 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 period.

3.   INCOME

	Period ended 31 October 2016 £000
Income from investments
Overseas dividends	3,220
	3,220

4.   INVESTMENT MANAGEMENT FEE

	Period ended 31 October 2016 £000
Basic  fee:
20% charged to revenue	97
80% charged to capital	386
	483

The Company's Investment Manager is Coupland Cardiff Asset Management LLP. The Investment Manager is entitled to receive a management fee payable monthly in arrears and is at the rate of one-twelfth of 0.75% of net asset value per calendar month. There is no performance fee payable to the Investment Manager.

5.   OTHER EXPENSES

	Period ended 31 October 2016 £000
Secretarial services	46
Administration expenses	160
Auditor's remuneration  - audit services	42
-non-audit *	8
Directors' fees	87
	343

*Ernst & Young LLP non - audit services relates to corporation tax compliance work.

In addition to the above, Ernst & Young LLP was paid £60,600 for work performed in connection with the Company's launch. 

6.   FINANCE COSTS

	Period ended 31 October 2016 £000
Interest paid	11
CFD finance cost and structuring fee - 20% charged to income	14
Structure fees - 20% charged to income	1
	26
CFD finance cost and structuring fee - 80% charged to capital	56
Structure fees - 80% charged to capital	5
	61
7.              TAXATION

Period ended 31 October 2016

a) Analysis of tax charge in the period:

			Revenue		Capital	Total
			£000		£000	£000
Corporation tax			13		(13)	-
Overseas tax			267		-	267
Total tax charge for the period (see note 7 (b))			280		(13)	267

b) Factors Affecting the Tax Charge for the Period:

The tax assessed for the period is lower than the 20% standard rate of corporation tax in the UK for a large company. The differences are explained below:

				Period ended
				31 October 2016
			Revenue	Capital	Total
			£000	£000	£000
Total return before taxation			2,754	16,063	18,817
UK corporation tax at 20%			551	3,212	3,763
Effects of:
Overseas tax suffered			267	-	267
Non-taxable overseas dividends			(543)	-	(543)
Capital gains not subject to tax			-	(3,301)	(3,301)
Finance costs			5	12	17
Movement unutilised management expenses expenses			-	64	64
Total tax charge			280	(13)	267

The Company is not liable to tax on capital gains due to its status as an investment trust. Due to the Company's status as an investment trust and the intention to continue meeting the conditions required to obtain approval in the foreseeable future, the Company has an unrecognised deferred tax asset of £54,000 based on the long term prospective corporation tax rate of 17%. This asset has accumulated because deductible expenses exceeded taxable income in the period ended 31 October 2016. 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 utilised in the foreseeable future.

8.      DIVIDEND

The dividend relating for the period ended 31 October 2016 which is the basis on which the requirements of Section 1159 of the Corporation Tax Act 2010 are considered is detailed below:

		Period ended
	Pence per	31 October
	Ordinary Share	2016
		£000
First interim dividend -  Paid	1.00p	689
Final dividend - payable*	2.00p	1,583
Total	3.00p	2,272

*Not included as a liability in the period ended 31 October 2016 accounts.

The Directors have declared a final dividend for the financial period ending 31 October 2016 of 2.00p per ordinary share. Subject to shareholder approval, the dividend will be paid on 29 March 2017, to Shareholders on the register at the close of business on 17 February 2017.

9.      INVESTMENTS

(a)   Summary of valuation		As at 31 October 2016 £000
Investments listed on a recognised overseas  investment exchange		96,638
		96,638
(b) Movements In the period ended 31 October 2016
	Quoted        Overseas	Total 2016
	£000	£000
Book cost at beginning of period	-	-
Gains on investments held at beginning of period	-	-
Valuation at beginning of period	-	-
Purchases at cost	102,932	102,932
Sales:
- proceeds	(24,659)	(24,659)
- gains on investment holdings sold	1,796	1,796
in the period
Movements in gains on investment	16,569	16,569
holdings held at end of period
Valuation at end of period	96,638	96,638
Book cost at end of period	80,069	80,069
Gains on investment holdings at period end	16,569	16,569
Valuation at end of period	96,638	96,638

Transaction costs on investment purchases for the period ended 31 October 2016 amounted to £68,000 and on investment sales for the period amounted to £21,000.

(c) Gains/(losses) on investments

	Period ended
	31 October 2016 £000
Gains on investment holdings sold in period	1,796
Movements in gains on investment holdings held at the period end	16,569
Total gains on investments	18,365
Realised losses on CFD assets and liabilities	(1,178)
Unrealised losses on CFD assets and liabilities	(677)
Total gains on investments held at fair value through profit or loss	16,510

10.    RETURN PER ORDINARY SHARE

Total return per ordinary share is based on the return on ordinary activities, including income, for the period after taxation of £18,550,000. 

Based on the weighted average of number of 68,726,923 ordinary shares in issue from commencement of the Company's operations on 15 December 2015 to 31 October 2016, the returns per share were as follows:

	Revenue	Capital	Period ended 31 October 2016 Total
Return per ordinary share	3.60p	23.39p	26.99p

Based on the weighted average of 59,629,844 ordinary shares in issue during the period from the Company's incorporation on 28 October 2015 to 31 October 2016, the returns per share were as follows:

	Revenue	Capital	Period ended 31 October 2016 Total
Return per ordinary share	4.15p	26.96p	31.11p

11.    NET ASSET VALUE PER SHARE

Total shareholders' funds and the net asset value per share attributable to the ordinary shareholders at the period end calculated in accordance with the Articles of Association were as follows:

	Net Asset Value per share As at 31 October 2016 pence	Net assets available As at 31 October 2016 £000
Ordinary Shares (79,160,162 shares in issue)	123.91	98,085

The net asset value per share is based on total shareholders' funds above, and on 79,160,162 ordinary shares in issue at the period end.

12.    RELATED PARTY TRANSACTIONS

Transactions with the Investment Manager and the Alternative Investment Fund Investment Manager ("AIFM")

The Company provides additional information concerning its relationship with the Investment Manager and AIFM, Coupland Cardiff Asset Management LLP. The fees for the period are disclosed in note 4 and amounts outstanding at the period ended 31 October 2016 were £58,272.

Directors' fees and shareholdings

The Directors' fees and shareholdings are disclosed in the Directors' Remuneration Implementation Report in this Annual Report.

13.    FINANCIAL INFORMATION

This announcement does not constitute the Company's statutory accounts.  The financial information is derived from the statutory accounts, which will be delivered to the registrar of companies following the Company's Annual General Meeting.  The auditors have reported on the accounts; their report was unqualified and did not include a statement under Section 498(2) or (3) of the Companies Act 2006.

The Annual Report for the period from 28 October 2015 to 31 October 2016 was approved on 31 January 2017.  It will be made available on the Company's website at www.ccjapanincomeandgrowthtrust.com

The Annual Report will be submitted to the National Storage Mechanism and will shortly be available for inspection at: http://www.morningstar.co.uk/uk/NSM

This announcement contains regulated information under the Disclosure Rules and Transparency Rules of the FCA.

14.    ANNUAL GENERAL MEETING

The Annual General Meeting will be held on 22 March 2017 at 12 noon at the offices of Stephenson Harwood LLP, 1 Finsbury Circus, London, EC2M 7SH.

31 January 2017

Secretary and registered office:

PraxisIFM Fund Services (UK) Limited

Mermaid House

2 Puddle Dock

London

EC4V 3DB

For further information contact:

Anthony Lee

PraxisIFM Fund Services (UK) Limited

Tel: [phone]

END

 

END

 

 

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