Final Results

RNS Number : 7892A

CC Japan Income & Growth Trust PLC

24 January 2020

CC JAPAN INCOME & GROWTH TRUST PLC

LEI: 549300FZANMYIORK1K98

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	At
	31 October	31 October
	2019	2018
Net assets (millions)	£214.1	£190.9
Net asset value ("NAV") per Ordinary Share ("Share")¹	158.9p	148.6p
Share price	150.0p	153.0p
Share price premium to NAV²	(5.6%)	3.0%
Ongoing charges²	1.06%	1.09%
¹ Measured on a cum income basis
² This is an Alternative Performance Measure ('APM')

PERFORMANCE SUMMARY
	For the year to	For the year to
	31 October	31 October
	2019	2018
	% change¹	% change¹
NAV total return per share²	+9.9%	+4.1%
Share price total return²	+0.7%	+2.8%
Topix index total return	+7.2%	-0.4%

¹Total returns are stated in GBP sterling, including dividends reinvested.
²These are APMs. Definitions of these and other APMs used in this Annual Report, together with how these measures have been calculated are disclosed in the Annual Report.
Source: Bloomberg

CHAIRMAN'S STATEMENT

Performance

I am pleased to present the results for the Company's fourth annual report. Over the financial year to 31 October 2019, the Company's Net Asset Value (NAV) increased by 9.9% in sterling total return terms while the sterling total return of the Tokyo Stock Exchange (Topix) was up by 7.2%. The Company has recorded a 69.7% NAV total return since listing in December 2015 until the recent financial year end. This compares favourably to the Topix total return of 58.5% over the same period.

During the year to 31 October 2019, the share price, again measured by total return to include dividends paid during the period, rose by only 0.7%. Share price performance reflected weak sentiment across Asian equity markets that has also seen the Company's premium share price rating erode to a discount. Since listing, the share price, measured by total return in sterling, has risen by 62.8%.

In last year's Annual Report, I commented on the deterioration of global liquidity but, during 2019, we have seen a volte face in central banks' monetary policy, with the U.S. Federal Reserve leading the way with three interest rate cuts and renewed balance sheet expansion. This has led to a rebound in markets despite sentiment being heavily affected by President Trump's aggressive trade negotiations, notably with China. The imposition of trade tariffs and protectionist moves are undermining confidence in the direction of global growth, consequently occluding the picture for corporate earnings. Although approximately two thirds of Japanese stock market earnings are generated overseas, the domestic economy still remains relatively robust.

Growing of the Company

The issued share capital has more than doubled since launch, while the net assets of the Company stand at £214 million at the financial year end. An additional 6,278,829 Ordinary Shares were issued by "tap" issues and a Placing during the first half of the financial year, raising some £8.7 million in total. Although the Board remains fully committed to growing the Company, the loss of our share premium precluded any further issuance in the second half of the financial year. Investors should recognise the exceptional potential for harvesting growing and sustainable corporate income distributions in Japan, which in turn should provide our Investment Manager, equipped with an income seeking mandate, with the ability to produce continued strong investment performance coupled with dividend growth for Shareholders of the Company.

The Board has the authority to buy back Ordinary Shares to be held in Treasury and will seek Shareholders' approval to renew this power at the Annual General Meeting, although no Ordinary Shares have been bought back to date.

Income

Reflecting the underlying trend for increased dividends, the net revenue return increased by 37% to £7.0 million for the year, from £5.1 million last year. The revenue account benefitted from a one-off VAT refund of £183,000 received during the year and from a favourable £/Yen cross rate in income translation. This may reverse if sterling benefits from greater clarity over Brexit and the UK's political future. Nevertheless, it is not our policy to hedge currency risk on revenue receivables although the Board and Investment Manager monitor the situation closely.

Dividends

The Board has declared a final dividend for the year of 3.10p per Ordinary Share, which represents a 24% increase over last year's final dividend distribution of 2.50p. This will be paid on 19 March 2020 to those Shareholders on the register at 7 February 2020. The total declared dividend for the year of 4.50p per Ordinary Share (2018: 3.75p) represents a 20% increase over the previous financial year and I am pleased to note that this rebases the dividend yield towards the 3% level offered at launch.

The Board believes that this is a very attractive headline yield, being a "clean" dividend paid out of covered income. Shareholders should note that we have the power to distribute from capital, having created a special reserve at launch for this purpose, although this is very much "held up the Board's sleeve" to act as a contingency facility.

After taking into account the final dividend, the revenue reserve at 31 October 2019 stands at £1.8million representing 1.36p per Ordinary Share.

Over the life of the Company, the overall level of annual dividend distribution has increased by 50%.

Outlook

On 20 November 2019, Shinzo Abe became the longest serving Prime Minister in Japan's history. This is notable not just because of the length of his service but also the stability this has offered during a period of an increasingly uncertain political environment around the world and also Japan's recent history which saw six Prime Ministers in as many years prior to his appointment in December 2012.

While the jury will remain out for some time on the ultimate success of his Abenomics policy initiatives to reinvigorate and reform the economy, the significant progress in the areas of capital efficiency, corporate governance and shareholder return should be highlighted. These trends are particularly relevant to the philosophy of the Investment Manager and the investment case for Japanese equities. There are quantifiable improvements. Return on Equity ("ROE") has doubled for all listed constituents from under 5% to 10.8% between FY12 and FY18. The percentage of Tokyo Stock Exchange 1st Section companies appointing outside independent directors is now 93%, up from 17% in 2012. There is a consistent increase in the total dividends paid from Y6.8 trillion in FY2013 to Y15.0 trillion in FY2019. The corporate sector in Japan has aggregate cash balances of Y240 trillion (US$ 2.2 trillion), which underscores the potential.

Japan's Stewardship Code was adopted in 2014 and revised in 2017, while their Corporate Governance Code was adopted in 2015 and revised in 2018. These initiatives have been integral to the positive developments by encouraging dialogue between investors and corporate managers that were not previously evident and is continuing to reap benefits. Cross-shareholdings continue to fall and there has been an acceleration in the unwinding of the parent/subsidiary listing relationship through consolidation or sale, which enhances business focus, decision making and capital allocation.

The clear conclusion from these initiatives and the ongoing discussions is that these improvements are here to stay and have established a foundation for the next leg of progress. The recent slowing of economic growth has not tempered the enthusiasm for change. It is particularly encouraging that corporate managers are demonstrating a commitment to the stability of dividends over time despite earnings volatility and also demonstrating a more flexible approach to share buybacks in order to achieve greater capital efficiencies. The increase in share buybacks over the last twelve months (almost 100% year-on-year, as equity valuations have fallen), is a notable feature of recent market dynamics and a commendable response to any weakness in share prices.

These improvements will feature prominently amongst Prime Minister Abe's legacy achievements. The framework created through the introduction of the codes of behaviour, market index creation and law revisions will ensure that the improvements will be maintained well beyond his tenure. The Investment Manager believes that the favourable characteristics will continue to be recognised by domestic and international investors and should ensure that they are able to differentiate between long term investment opportunities and short term market trends.

Some disquiet has arisen as a result of recent moves to restrict stock activists. Private equity firms have been very busy in Japan. The Japanese parliament (Diet) has amended the Foreign Exchange and Foreign Trade Act (FEFTA) to introduce pre-filing requirements for foreign investors wishing to purchase stakes in certain business sectors deemed of "national security". The Government Pension Fund has also announced that it will cease its stock lending programme which as a major holder of equities will curtail the activities of short sellers. These moves may have affected sentiment but are largely irrelevant to our Investment Manager in the execution of our investment process.

Perhaps the 2020 Tokyo Olympics will act as a catalyst for investor interest in Japan. Additional fiscal stimulus announced in December 2019 is positive and more than offsets the apparently negligible effects of the increase in the Government Sales Tax. Recently, foreign investors have turned net buyers of Japanese equities after nearly two years of net selling. It seems bizarre that domestic savings continue to have an obsessive appetite for foreign high yield products with inherent currency risk, when it is possible to invest in a basket of leading domestic companies offering yields of over 4%. Indeed, the yield on the Topix exceeds that of the S&P 500.

A US - Iranian war would undermine confidence in world equity markets, besides driving oil prices higher, in itself a negative for Japan as an oil importer. We must hope that diplomatic efforts to calm a dangerously unstable Middle Eastern situation will prevail. Any improvement in China / US trade relations would be a positive catalyst for Japanese equities but, irrespective of developments on that score, our Investment Manager remains alert to manifold opportunities in a fertile income landscape.

Harry Wells

23 January 2020

INVESTMENT MANAGER'S REPORT

Performance Review

The portfolio produced a positive return over the twelve months period to 31 October 2019 with the Net Asset Value (NAV) per Ordinary Share rising from 148.6p to 158.9p (+ 6.9%).In addition, Shareholders have received dividend distributions of 3.90p per Share paid during the financial year delivering a total return of 9.9%, which represents an outperformance of the Topix total return index over the same period.

Concerns about the slowing global economy and ongoing political tensions have been prominent features during the year and resulted in a delay to monetary policy normalisation in the major economic regions. Lower interest rates were consequently a factor in the strong performance of the real estate investment trust holdings ("REIT") held by the Company. Invesco Office J-REIT, Invincible Investment Corp, Japan Hotel REIT and MCUBS Mid City Investment were all amongst the top contributors to the performance in the fiscal year. This reflects the attractiveness of their yields which have been further enhanced by strong underlying operating fundamentals of the Japanese real estate market. The operating environment for financial companies, such as banks and leasing companies, undoubtedly becomes more challenging while interest rates are low and yield curves flat. The likes of Sumitomo Mitsui Financial Group, Mitsubishi UFJ Holdings, Resona Bank and Tokyo Century consequently suffered from share price weakness although from a shareholder return perspective, financials delivered attractive year on year increases and continue to offer significant potential for further improvement when the economic backdrop improves.

The arguments for maintaining holdings in world leading companies through an industry cycle are based on their increasing commitment to shareholders' interests and progressive dividend policies. This is evident in the performance of Tokyo Electron (semiconductor equipment) and Shin-Etsu Chemical (silicon wafers and PVC) which have been major positive contributors to performance despite weaker short term operating trends. The performance of a number of the smaller capitalisation companies in the portfolio has been disappointing in recent months after prior strong contributions. Yamada Consulting (business succession planning), Gakkyusha (educational services) and Pola Orbis (skincare) have all encountered share price sell offs as their business momentum has temporarily slowed in each case. These shares were the primary negative contributors in the fiscal year but each has delivered satisfactory shareholder returns and we believe will continue to reward investors consistently as business conditions improve.

We believe that maintaining extensive and regular contact with company management as part of our investment process will ensure that we are able to identify companies that offer attractive shareholder returns. We are encouraged that a number of companies have raised their dividend assumptions for the full year ending in March 2020 - Shoei, Noevir, Mitsubishi Corp, Hikari Tsushin, Inpex and Tokio Marine Holdings will all be paying larger distributions than originally expected, while significant share buyback programmes have been announced by a broad range of companies. This includes Toyota Motor (2.94% of outstanding shares), Tokio Marine Holdings (1.8%), Kakaku.com (1.8%) and Mitsubishi Corp (7.5%)

Current Portfolio Positioning

While equity markets, geopolitical developments and economic trends have been volatile, our investment policy remains consistent. It seeks to identify companies with attractive shareholder return policies that will complement underlying business growth in each case. The long average holding periods are a reflection of the time that it can take the market to recognise the improving prospects for shareholder returns and any changes in perception of the underlying business. There are two primary considerations that lead us to sell a position. The first is a fundamental change in the outlook for that particular company and by implication of this, a change to the projected returns to shareholders. The second is valuation. There are times when a share price exceeds the company's potential to deliver growth of the dividend, to an acceptable level in a reasonable time frame.

We are aware of the opportunities that have appeared as a result of the sell down of cyclical stocks and established new positions in Inpex, Kyowa Exeo and Maeda Road in response. Inpex is Japan's largest oil and gas exploration company. Having invested significantly in the Ichthys LNG project in recent years, the company's intention is to utilise the improving cashflow to enhance shareholder returns. Kyowa Exeo is a construction company with two areas of expertise - information and communication networks and urban infrastructure. The company has a strong balance sheet and is focused on improving capital efficiency through buybacks as well as offering a progressive dividend through a Dividend on Equity("DOE") target of 3.5% (well above the market average). Maeda Road is engaged in the construction of pavements and roads as well as the general sale of asphalt mixtures and other construction materials. The company has demonstrated a strong intention to raise its dividend annually and also buy back shares with the surplus cash on its balance sheet. A new position was also established in Nihon Unisys. The investment case is based around a business structure transformation away from legacy operations to a support services, system services and outsourcing role and a commission based fee structure. The dividend has increased for eight consecutive years with the payout ratio rising steadily towards the 40% targeted in their current mid-term plan.

The strong share price performance of stocks such as Avant, Secom, Hikari Tsushin, Kakaku.com and Nomura Co. resulted in much less attractive current yields, so the holdings in these companies have been reduced to fund the above purchases.

Outlook

The aggregate distribution from Japanese companies to their shareholders is set to achieve another all time high in the fiscal year ending March 2020. Despite a turbulent year in overseas economies in particular, Japanese companies have continued to deliver attractive direct returns to their shareholders through dividends and share buybacks. We believe that the potential for further positive development in these trends remains very exciting due to the excess cash that has accumulated on corporate balance sheets, the high level of dividend cover and the changing attitudes in Japan towards capital allocation. This is an attractive combination for both domestic and international investors seeking income but also to those who have historically been deterred from considering the investment opportunities in Japan due to the perception of poor governance.

Richard Aston

Coupland Cardiff Asset Management LLP

23 January 2020

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 £7,003,000 (2018: £5,117,000). In July 2019, the Company paid an interim dividend of 1.40p (2018: 1.25p) per Ordinary Share. The Directors are proposing a final dividend for the year ended 31 October 2019 of 3.10p (2018: 2.50p) per Ordinary Share which, subject to Shareholder approval, will be paid on 19 March 2020 to Shareholders on the register at 7 February 2020. Therefore, the total dividend in respect of the financial year to 31 October 2019 will be 4.50p (2018: 3.75p) per Ordinary Share.

The Company made a capital gain after tax of £12,735,000 (2018: capital loss of £2,953,000). Therefore, the total return after tax for the year was £19,738,000 (2018: £2,164,000).

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 2019 was 9.9% (2018: 4.1%) and the NAV total return from the Company's inception to 31 October 2019 was 69.7% (2018: 57.2%).

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 5.26p (2018: 4.55p). The Company's proposed total dividend payable in respect of the year ended 31 October 2019, including an interim dividend of 1.40p per Ordinary Share paid on 31 July 2019 and a final dividend of 3.10p payable on 19 March 2020, is 4.50p (2018: 3.75p) 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 5.6% discount to the NAV as at 31 October 2019. (2018: 3.0% premium)

(iv) Control of the level of ongoing charges

The Board monitors the Company's operating costs carefully. Based on the Company's average net assets for the year ended 31 October 2019, the Company's ongoing charges figure calculated in accordance with the AIC methodology was 1.06% (2018: 1.09%).

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.

The Company currently holds no unquoted companies.

Management of risks

The Company is invested in a diversified portfolio of quoted investments.

The Company's investment policy states that no single holding (including any derivative instrument) will represent more than 10 per cent. 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. The Company currently holds 43 holdings with a corresponding amount of CFDs.

A maximum of 10 per cent. of the Company's Gross Assets at the time of investment may be invested in unquoted or untraded companies at time of investment.

Whilst the Company does not have a benchmark, the Board measures performance for reference purposes against 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.

(ii) Corporate governance and internal control risks (including cyber security)

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. Cyber security risks could lead to breaches of confidentiality, loss of data records and inability to make investment decisions.

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 personnel risks as part of its oversight of the Investment Manager. The Company's key service providers report periodically to the Board on their procedures to mitigate cyber security risks.

(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 General Data Protection Regulation, The Listing Rules, Disclosure Guidance 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 portfolio income from dividends is received in Japanese yen but the Company's dividend payable to shareholders is payable in sterling.

Management of risks

The Company converts its dividends received into sterling upon receipt. Further details of financial risks and the management of those risks are disclosed in note 17 to the financial statements.

Viability statement

The Directors have assessed the viability of the Company for the period to 31 October 2024 (the ''Period'') taking into account the long-term nature of the Company's investment strategy and the principal risks outlined above. The Board has chosen a five year period to assess the Company's viability because they believe it to be a period over which the investment objective and the principal risks and uncertainties are not expected to change significantly. 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 in the Period.

In their assessment of the prospects of the Company, the Directors have considered each of the principal risks and uncertainties set out above 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 the positive long-term investment case for Japanese equities which also underpins the Company's viability for the Period.

The continuation of the Company was approved by Shareholders at the Annual General Meeting held in March 2019 and is subject to the approval of Shareholders at the Annual General Meeting of the Company to be held in 2022 and, if passed, every three years thereafter.

Environmental matters

As an investment company with no employees and which does not provide goods or services or operational activity, beyond investment activity, the Company has no greenhouse gas emissions to report from its operations, nor does it have responsibility for any other sources of emissions under the Companies Act 2006 (Strategic Report and Directors' Reports) Regulations 2013.

Employees

The Company has no employees. As at 31 October 2019 the Company had five Directors, four of whom are male and one female. The Board's policy on diversity is contained in the Corporate Governance Report.

Social, community and human rights issues

Having no employees, the Company, as an investment company, has little direct impact on social, community, environmental or human rights matters. The Company's appointed Investment Manager, Coupland Cardiff is a signatory of the Principles of Responsible Investment; the identification of investment opportunities with high governance standards is incorporated into the investment policy.

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 low risk to this matter.

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.

Outlook

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

Strategic Report

The Strategic Report was approved by the Board of Directors on 23 January 2020.

For and on behalf of the Board

Harry Wells

Director

23 January 2020

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 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

23 January 2020

INCOME STATEMENT

FOR THE YEAR ENDED 31 OCTOBER 2019

		Year ended 31 October 2019			Year ended 31 October 2018
		Year ended 31 October 2019			Year ended 31 October 2018
		Revenue	Capital	Total	Revenue	Capital	Total
	Note	£'000	£'000	£'000	£'000	£'000	£'000
Gains/(losses) on investments held at fair value	3	-	14,207	14,207	-	(1,741)	(1,741)
Currency losses		-	(124)	(124)	-	(28)	(28)
Income	4	8,671	-	8,671	6,693	-	6,693
Investment management fee	5	(293)	(1,173)	(1,466)	(262)	(1,046)	(1,308)
Other expenses	6	(434)	-	(434)	(597)	-	(597)
Return on ordinary activities before finance costs and taxation		7,944	12,910	20,854	5,834	(2,815)	3,019
Finance costs	7	(74)	(175)	(249)	(48)	(138)	(186)
Return on ordinary activities before taxation		7,870	12,735	20,605	5,786	(2,953)	2,833
Taxation	8	(867)	-	(867)	(669)	-	(669)
Return on ordinary activities after taxation		7,003	12,735	19,738	5,117	(2,953)	2,164
Return per Ordinary Share	14	5.26p	9.57p	14.83p	4.55p	(2.62)p	1.93p

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 below form part of these financial statements.

STATEMENT OF FINANCIAL POSITION

AT 31 OCTOBER 2019

		31 October 2019	31 October 2018
	Note	£'000	£'000
Fixed assets
Investments at fair value through profit or loss	3	211,240	189,419

Current assets
Cash and cash equivalents		2,472	1,633
Cash collateral in respect of Contracts for Difference ("CFDs")		16	689
Amounts receivable in respect of CFDs		3,258	1,001
Other debtors	10	2,571	2,811
		8,317	6,134
Creditors: amounts falling due within one year
Amounts payable in respect of CFDs		(5,140)	(4,413)
Other creditors	11	(291)	(225)
		(5,431)	(4,638)
Net current assets		2,886	1,496
Net assets		214,126	190,915
Capital and reserves
Share capital	12	1,348	1,285
Share premium		98,437	89,911
Special reserve		64,671	64,671
Capital reserve
-Revaluation gains on investment held at year end	3	26,156	15,157
-Other capital reserves		17,511	15,775
Revenue reserve		6,003	4,116
Total Shareholders' funds		214,126	190,915
NAV per share - Ordinary Shares (pence)	15	158.93p	148.63p

Approved by the Board of Directors and authorised for issue on 23 January 2020 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 below form part of these financial statements.

STATEMENT OF CHANGES IN EQUITY

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


FOR THE YEAR ENDED 31 OCTOBER 2018
		Share capital	Share premium	Special reserve	Capital reserve	Revenue reserve	Total
	Note	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 November 2017		892	28,111	64,671	33,885	2,586	130,145
Return on ordinary activities after taxation		-	-	-	(2,953)	5,117	2,164
Dividends paid	9	-	-	-	-	(3,587)	(3,587)
Issue of Ordinary Shares	12	393	62,980	-	-	-	63,373
Ordinary Shares issue costs		-	(1,180)	-	-	-	(1,180)
Balance at 31 October 2018		1,285	89,911	64,671	30,932	4,116	190,915

The Company's distributable reserves consist of the special reserve, capital reserve and revenue reserve. The notes below form part of these financial statements.

STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 OCTOBER 2019

	Year ended 31 October 2019	Year ended 31 October 2018
	£'000	£'000
Operating activities cash flows
Return on ordinary activities before finance costs and taxation*	20,854	3,019
Adjustment for:
Gains on investments	(12,932)	(123)
CFD transactions	(857)	7,060
Increase in other debtors	(168)	(973)
Increase in other creditors	65	69
Tax withheld on overseas income	(867)	(669)
Net cash flow from operating activities	6,095	8,383
Investing activities cash flows
Purchases of investments	(38,854)	(91,089)
Proceeds from sales of investments	30,373	26,784
Net cash flow used in investing activities	(8,481)	(64,305)
Financing activities cash flows
Issue of Ordinary Share capital	8,728	63,373
Payment of Ordinary Share issue costs	(139)	(1,180)
Equity dividends paid	(5,116)	(3,587)
Finance costs paid	(248)	(188)
Net cash flow from financing activities	3,225	58,418
Increase in cash and cash equivalents	839	2,496
Cash and cash equivalents at the beginning of the year	1,633	(863)
Cash and cash equivalents at the end of the year	2,472	1,633

* Cash inflow from dividends was £8,506,000 (2018: £5,719,000).
The notes below form part of these financial statements.

NOTES TO THE ACCOUNTS

1. GENERAL INFORMATION

CC Japan Income & Growth Trust plc (the "Company") was incorporated in England and Wales on 28 October 2015 with registered number 9845783, as a closed-ended investment company. The Company commenced its operations on 15 December 2015. The Company 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 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 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), with the Statement of Recommended Practice "Financial Statements of Investment Trust Companies and Venture Capital Trusts" (issued in November 2014 and updated in February 2018) 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.

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".

Derivatives which comprise of CFDs 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 accruals 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 declared by the Directors and approved by the shareholders.

(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 explained 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 2019		As at 31 October 2018
	£'000		£'000
Investments listed on a recognised overseas investment exchange	211,240		189,419
	211,240		189,419
(b) Movements
In the year ended 31 October 2019
	2019	2018
	£'000	£'000
Book cost at the beginning of the year	174,262	106,024
Revaluation gains on investments held at beginning of the year	15,157	23,187
Valuation at beginning of the year	189,419	129,211
Purchases at cost	38,854	87,277
Sales:
- proceeds	(29,965)	(27,192)
- gains on investment holdings sold during the year	1,933	8,153
Movements in revaluation gains/(losses) on investment held at year end	10,999	(8,030)
Valuation at end of the year	211,240	189,419

Book cost at end of the year	185,084	174,262
Revaluation gains on investment held at year end	26,156	15,157
Valuation at end of the year	211,240	189,419

Transaction costs on investment purchases for the year ended 31 October 2019 amounted to £19,000 (2018: £62,000) and on investment sales for the year amounted to £15,000 (2018: £17,000).

(c) Gains/(losses) on investments
	Year ended 31 October 2019	Year ended 31 October 2018
	£'000	£'000
Gains on non derivative investment holdings sold during the year	1,933	8,153
Movements in revaluation gains/(losses) on investment held at year end	10,999	(8,002)
Other capital (losses)/gains	(24)	10
Total gains on non derivative investments held at fair value	12,908	161
Realised (losses)/gains on CFD assets and liabilities	(231)	1,510
Unrealised gains/(losses) on CFD assets and liabilities	1,530	(3,412)
Total gains/(losses) on investments held at fair value	14,207	(1,741)

4. INCOME

	Year ended 31 October 2019	Year ended 31 October 2018
	£'000	£'000
Income from investments:
Overseas dividends	8,670	6,693
Deposit interest	1	-
Total	8,671	6,693
Overseas dividend income is translated into sterling on receipt.

5. INVESTMENT MANAGEMENT FEE

	Year ended 31 October 2019	Year ended 31 October 2018
	£'000	£'000
Basic fee:
20% charged to revenue	293	262
80% charged to capital	1,173	1,046
Total	1,466	1,308

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.

6. OTHER EXPENSES

	Year ended 31 October 2019*		Year ended 31 October 2018*
	£'000		£'000
Secretarial services	58		48
Administration and other expenses	382		371
Auditor's remuneration
- statutory	36		30
- non-audit	-		30
Directors' fees	141		118
VAT recovered - Revenue**	(183)		-
Total	434		597
* Excluding VAT where applicable.
** This is in relation to the one-off Value Added Tax ('VAT') recovered on the Company's expenses since inception to 31 October 2019.
7. FINANCE COSTS

		Year ended 31 October 2019		Year ended 31 October 2018
		£'000		£'000
Interest paid - 100% charged to revenue		30		13
CFD finance cost and structuring fee - 20% charged to revenue		43		34
Structure fees - 20% charged to revenue		1		1
		74		48
CFD finance cost and structuring fee - 80% charged to capital		171		134
Structure fees - 80% charged to capital		4		4
		175		138
Total finance costs		249		186

8. TAXATION

		Year ended 31 October 2019					Year ended 31 October 2018
		Revenue	Capital		Total		Revenue	Capital		Total
		£'000	£'000		£'000		£'000	£'000		£'000
(a) Analysis of tax charge in the year:
Overseas withholding tax		867	-		867		669	-		669
Total tax charge for the year (see note 8 (b))		867	-		867		669	-		669

(b) Factors affecting the tax charge for the year:
The Company's effective tax rate for the year is 19.00% (2018: 19.00%), which the standard rate of corporation tax in the UK for a large company currently at 19.00% (2018: 19.00%).

The differences are explained below.
		Year ended 31 October 2019					Year ended 31 October 2018
		Revenue	Capital		Total		Revenue	Capital		Total
		£'000	£'000		£'000		£'000	£'000		£'000
Total return before taxation		7,870	12,735		20,605		5,786	(2,953)		2,833
UK corporation tax at 19.00% (2018: 19.00%)		1,495	2,420		3,915		1,099	(561)		538
Effects of:
Overseas withholding tax suffered		867	-		867		669	-		669
Non-taxable overseas dividends		(1,647)	-		(1,647)		(1,272)	-		(1,272)
Capital gains not subject to tax		-	(2,676)		(2,676)		-	336		336
Finance costs not tax deductible		14	33		47		10	26		36
Movement in unutilised management expenses		138	223		361		163	199		362
Total tax charge		867	-		867		669	-		669
9. DIVIDEND
(i). Dividends paid during the financial year
	Year ended 31 October 2019 £'000					Year ended 31 October 2018 £'000
Final dividend - year end 31 October 2018 of 2.50p				3,230					-
Second interim - year end 31 October 2017 of 2.30p				-					2,051
Interim - year end 31 October 2019 of 1.40p (2018: 1.25p)				1,886					1,536
Total				5,116					3,587

(ii). The dividend relating to the year ended 31 October 2019, 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 2019					Year ended 31 October 2018
	Pence per Ordinary Share			£'000		Pence per Ordinary Share			£'000
Interim dividend	1.40p			1,886		1.25p			1,536
Final dividend*	3.10p			4,177		2.50p			3,230
	4.50p			6,063		3.75p			4,766

*Not included as a liability in the year ended 31 October 2019 financial statements.

The Directors have declared a final dividend for the financial year ended 31 October 2019 of 3.10p per Ordinary Share. The dividend will be paid on 19 March 2020 to Shareholders on the register at the close of business on 7 February 2020.

10. OTHER DEBTORS

	As at 31 October 2019	As at 31 October 2018
	£'000	£'000
Accrued income	2,556	2,392
Sales for settlement	-	408
Prepayments	15	11
Total	2,571	2,811

11. OTHER CREDITORS

		As at 31 October 2019			As at 31 October 2018
		£'000			£'000
Amounts falling due within one year:
Accrued finance costs		8			7
Accrued expenses		283			218
Total		291			225
12. SHARE CAPITAL
Share capital represents the nominal value of shares that have been issued. The share premium includes any premium received on issue of share capital. Any transaction costs associated with the issuing of shares are deducted from share premium.

	As at 31 October 2019			As at 31 October 2018
	No of shares		£'000	No of shares		£'000
Allotted, issued & fully paid:
Ordinary Shares of 1p
Opening balance	128,451,781		1,285	89,168,162		892
Ordinary Shares of 1p issued	6,278,829		63	39,283,619		393
Closing balance	134,730,610		1,348	128,451,781		1,285

During the year under review, 6,278,829 (2018: 39,283,619) Ordinary Shares of 1p each were issued. The issue prices ranged from 138.3p to 144.1p (2018: 150.9p to 169.0p) and the total amount raised was £8,728,000 (2018: £63,373,000).

13. FINANCIAL COMMITMENTS
As at 31 October 2019 there were no commitments in respect of unpaid calls and underwritings (2018: nil).

14. RETURN PER ORDINARY SHARE
Total return per Ordinary Share is based on the return on ordinary activities, including income, for the year after taxation of £19,738,000 (2018: £2,164,000).

Based on the weighted average number of Ordinary Shares in issue for the year to 31 October 2019 of 133,109,302 (2018: 112,507,653), the returns per share were as follows:

	As at 31 October 2019			As at 31 October 2018
	Revenue	Capital	Total	Revenue	Capital	Total
Return per Ordinary Share	5.26p	9.57p	14.83p	4.55p	(2.62)p	1.93p

15. NET ASSET VALUE PER SHARE
Total Shareholders' funds and the net asset value ("NAV") per share attributable to the Ordinary Shareholders at the year end calculated in accordance with the Articles of Association were as follows:

	As at 31 October 2019	As at 31 October 2018
Net Asset Value(£'000)	214,126	190,915
Ordinary Shares in issue	134,730,610	128,451,781
NAV per Ordinary Share	158.93p	148.63p

16. 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 year are disclosed in note 5 and amounts outstanding at the year ended 31 October 2019 were £136,000 (2018: £123,000).

Research purchasing agreement

MiFID II treats investment research provided by brokers and independent research providers as a form of "inducement" to investment managers and requires research to be paid separately from execution costs. In the past, the costs of broker research were primarily borne by the Company as part of execution costs through dealing commissions paid to brokers. With effect from 3 January 2018, this practice has changed, as brokers subject to MiFID II are now required to price, and charge for, research separately from execution costs. Equally, the rules require the Investment Manager, as an investment manager, to ensure that the research costs borne by the Company are paid for through a designated research payment account ("RPA") funded by direct research charges to the Investment Manager's clients, including the Company.

The research charge for the year 1 January 2018 to 31 December 2018 was £34,000 which was in line with the budget agreed between the Investment Manager and the Company. The research charge for the period from 1 January 2019 to 31 December 2019 as budgeted by the Investment Manager is £29,000.

Directors' fees and shareholdings

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

17. 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 stated above. In pursuing its investment objective, the Company is exposed to a variety of risks that could result in either a reduction in the Company's net assets or a reduction of the profits available for dividends.

These risks, include market risk (comprising currency risk, interest rate risk, and other price risk), liquidity risk, and credit risk, and the Directors' approach to the management of them are set 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

Sectoral diversification

Unquoted companies

Management of market 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.

The Investment Manager's approach will in most cases achieve diversification across a number of sectors as shown in the Holdings in Portfolio above.

(b) Currency risks

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 risks

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 keep this approach under regular review.

Foreign currency exposures

An analysis of the Company's equity investments and CFDs that are priced in a foreign currency is:

As at 31 October 2019

As at 31 October 2018

£'000

Equity Investments: yen

211,240

189,419

Receivables (due from brokers, dividends, and other income receivable)

2,571

2,811

CFD: yen (gross exposure)

42,247

37,928

Cash: yen

(1,174)

(3,934)

Total

254,884

226,224

Foreign currency sensitivity
If the Japanese yen had appreciated or depreciated by 10% as at 31 October 2019 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 2019		As at 31 October 2019	As at 31 October 2018		As at 31 October 2018
		£'000		£'000	£'000		£'000
Impact on capital return - increase/(decrease)		25,488		(25,488)	22,622		(22,622)
Return after taxation - increase/(decrease)		25,488		(25,488)	22,622		(22,622)

(c) Leverage risks
Derivative instruments
The Company may utilise long only CFDs or equity swaps for gearing and efficient portfolio management purposes. Leverage may be generated through the use of CFDs or equity swaps. Such financial instruments inherently contain much greater leverage than a non-margined purchase of the underlying security or instrument. This is due to the fact that, generally, only a very small portion (and in some cases none) of the value of the underlying security or instrument is required to be paid in order to make such leveraged investments. As a result of any leverage employed by the Company, small changes in the value of the underlying assets may cause a relatively large change in the Net Asset Value of the Company. Many such financial instruments are subject to variation or other interim margin requirements, which may force premature liquidation of investment positions.

Borrowing risks
The Company may use borrowings to seek to enhance investment returns. While the use of borrowings can enhance the total return on the Ordinary Shares where the return on the Company's underlying assets is rising and exceeds the cost of borrowing, it will have the opposite effect where the return on the Company's underlying assets is rising at a lower rate than the cost of borrowing or falling, further reducing the total return on the Ordinary Shares. As a result, the use of borrowings by the Company may increase the volatility of the Net Asset Value per Ordinary Share.
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 risks
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 2019 is disclosed in the published Annual Report.

(d) Interest rate risks
The Company is exposed to interest rate risk specifically through its cash holdings and CFD portfolio. Interest rate movements may affect the level of income receivable from any cash at bank and on deposits. The effect of interest rate changes on the earnings of the companies held within the portfolio may have a significant impact on the valuation of the Company's investments. Movements in interest rates will also have an impact on the valuation of the CFD derivative contracts.

Management of interest rate risks
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.
Due to the low interest rate environment no sensitivity analysis is shown because the direct impact of a significant increase in interest rates would be immaterial due to the relatively small proportion of the Company's investment exposure achieved using CFDs.

Interest rate exposure
The exposure at 31 October 2019 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.

	As at 31 October 2019 due within one year			As at 31 October 2018 due within one year
	£'000			£'000
Exposure to floating interest rates: CFD derivative contract - notional long positions	44,129			41,290
Cash at bank	2,472			1,633
Collateral paid in respect of CFDs	16			689

(e) Credit risks
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.

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.

Management of credit risks
The Company has appointed Northern Trust Global Services Limited as its depositary. The credit rating of Northern Trust was reviewed at time of appointment and will be reviewed on a regular basis by the Investment Manager and/or the Board.

The 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.

Other risks to the Company are detailed in the Company's prospectus dated 9 January 2018.

The cash is subject to counterparty credit risk as the Company's access to its cash could be delayed should the counterparties become insolvent or bankrupt.

The Company's holdings in CFD contracts present counterparty credit risks, with counter party stockbrokers Morgan Stanley & Co International plc. The Company is exposed to counterparty credit risk from the parties with which it trades and will bear the risk of settlement default. Counterparty credit risk to the Company arises from transactions to purchase or sell instruments and through its investments in long CFDs. CFD contracts generally require variation margins and the counterparty credit risk is monitored by the Investment Manager.

Investment transactions are carried out with a number of brokers, whose credit-standing is reviewed periodically by the Investment Manager, and limits are set on the amount that may be due from any one broker.

In summary, the exposure to credit risk as at 31 October 2019 was as follows:

	As at 31 October 2019 3 months or less			As at 31 October 2018 3 months or less
	£'000			£'000
Cash at bank	2,472			1,633
Amounts receivable in respect of CFDs	3,258			1,001
Collateral receivable in respect of CFDs	16			689
Debtors	2,571			2,811
	8,317			6,134

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 2019 on its equity investments was £211,240,000 (2018: £189,419,000).

In addition, the Company's gross market exposure to these price changes through its CFD portfolio was £44,129,000 through long positions (2018: £41,290,000).

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 underlying notional exposures within the CFD portfolio as at 31 October 2019 were:

	As at 31 October 2019				As at 31 October 2018
	£'000		% of net assets		£'000	% of net assets
CFDs - gross exposure	44,129		20.61%		41,290	21.63%
CFDs-net market exposure	44,129		20.61%		41,290	21.63%

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 risks A sector breakdown of the portfolio is contained in the Portfolio section of the published accounts.

Other price risk sensitivity
The following table illustrates the sensitivity of the profit after taxation for the year 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 exposure of the Company's equities investments and long CFDs.

	As at 31 October 2019				As at 31 October 2018
	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)	25,537		(25,537)		23,071	(23,071)
Return after taxation - increase/(decrease)	25,537		(25,537)		23,071	(23,071)

(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 2019, based on the earliest date on which payment can be required, were as follows:

	As at 31 October 2019 less than 3 months £'000				As at 31 October 2018 less than 3 months £'000
Amounts payable in respect of CFDs			5,140			4,413
Other payables			291			225
Total			5,431			4,638

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. Liquidity risk is not significant as the majority of the Company's assets are investments in quoted equities and CFDs that are readily realisable.

(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) above.

The table below sets out Fair Value measurements using Fair Value Hierarchy.

	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

	Level 1	Level 2	Level 3	Total
As at 31 October 2018	£'000	£'000	£'000	£'000
Assets:
Equity investments	189,419	-	-	189,419
CFDs- Fair value gains	-	1,001	-	1,001
Liabilities:
CFDs - Fair value losses	-	(4,413)	-	(4,413)
Total	189,419	(3,412)	-	186,007

There were no transfers between levels during the year (2018: 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 2019 (2018: 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 above.

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 2019 comprises called up share capital and reserves totalling £214,126,000 (2018: £190,915,000).

The Board regularly monitors, and has complied with, the externally imposed capital requirements.

OTHER INFORMATION

ALTERNATIVE PERFORMANCE MEASURES ('APMs')

Discount
The amount, expressed as a percentage, by which the share price is less than the NAV per Ordinary Share.
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%

Total return
A measure of performance that includes both income and capital returns. This takes into account capital gains and reinvestment of dividends paid out by the Company into its Ordinary Shares on the ex-dividend date.

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%

Ongoing charges
A measure, expressed as a percentage of average NAV, of the regular, recurring annual costs of running an investment company.

Year end 31 October 2019
Average NAV		a		195,678,342
Annualised expenses*		b		2,083,000
Ongoing charges		(b÷a)		1.06%
*Annualised expenses excluding non-recurring VAT recovered amount of £183,000.
Gearing
A way to magnify income and capital returns, but which can also magnify losses. The Company may be geared through the CFDs and if utilised, the overdraft facility with The Northern Trust Company.
As at 31 October 2019				As at 31 October 2019
CFD notional value		a		42,247
Non-base cash borrowings		b		2,864
NAV		c		214,126
Gearing (net)		((a+b) ÷c)		21.1%
Leverage
Under the Alternative Investment Fund Managers Directive ("AIFMD"), leverage is any method by which the exposure of an Alternative Investment Fund ("AIF") is increased through borrowing of cash or securities or leverage embedded in derivative positions.
Under AIFMD, leverage is broadly similar to gearing, but is expressed as a ratio between the assets (excluding borrowings) and the net assets (after taking account of borrowing). Under the gross method, exposure represents the sum of a company's positions after deduction of cash balances, without taking account of any hedging or netting arrangements.
Under the commitment method, exposure is calculated without the deduction of cash balances and after certain hedging and netting positions are offset against each other. Under both methods the AIFM has set current maximum limits of leverage for the Company of 200%.
As at 31 October 2019			Gross (£'000)	Commitment (£'000)
Security market value		a	211,240	211,240
CFD 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%

*Calculated under the commitment method

18. 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 and will be put forward for approval at the Company's Annual General Meeting. The statutory accounts for the period ended 31 October 2018 have been delivered to the registrar of companies. The auditors have reported on the accounts for the year ended 31 October 2019 and the year ended 31 October 2018, their reports were unqualified and did not include a statement under Section 498(2) or (3) of the Companies Act 2006.

The Annual Report for the year ended 31 October 2019 was approved on 23 January 2020. 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.

19. ANNUAL GENERAL MEETING

The Annual General Meeting will be held at 12 noon on 10 March 2020 at the offices of Stephenson Harwood, 1 Finsbury Circus, London, EC2M 7SH.

24 January 2020

Secretary and registered office:

PraxisIFM Fund Services (UK) Limited

Mermaid House

2 Puddle Dock

London

EC4V 3DB

For further information contact:

Brian Smith/ Jenny Thompson

PraxisIFM Fund Services (UK) Limited

Tel: 020 7653 9690

END

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

FR KKNBQOBKDNDB

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