Last checked at 
22 Jun 2018 12:00
CC JAPAN INCOME & GROWTH TRUST PLC
HALF-YEARLY FINANCIAL REPORT
FOR THE SIX MONTHS ENDED 30 APRIL 2018
INVESTMENT OBJECTIVE, FINANCIAL INFORMATION AND PERFORMANCE SUMMARY
INVESTMENT OBJECTIVE
The investment objective of the Company is to provide shareholders with dividend income combined with capital growth, mainly through investment in equities listed or quoted in Japan.
FINANCIAL INFORMATION | At |
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| 30 April |
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| 2018 |
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Net assets | £181.6m |
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Net asset value ("NAV") per Ordinary Share ("Share")* | 156.1p |
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Share price | 160.0p |
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Share price premium to NAV* | 2.5% |
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PERFORMANCE SUMMARY |
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| % change** |
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NAV total return per Share* | +9.2% |
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Share price total return | +6.7% |
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Topix index total return | +2.2% |
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\* These are considered alternative performance measures ('APMs') |
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*\* Total returns stated in GBP sterling for the six months to 30 April 2018 |
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Source: Bloomberg |
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Alternative performance measures ('APMs')
The financial information and performance summary data highlighted in the above footnote are considered to represent APMs of the Company. Definitions of these APMs together with how these measures have been calculated can be found below.
CHAIRMAN'S STATEMENT
I am pleased to present the Company's Half Year Report for the six months ended 30 April 2018.
Performance
During the period, the Company's net asset value ("NAV") and share price total returns in sterling terms were 9.18% and 6.72%, respectively. The Topix Index total return, again expressed in sterling terms over the same period, was 2.16 %.
Since listing in December 2015 and over the near two and a half years until 30th April 2018, the Company's NAV per share has returned 64.80% including 6.45p of dividends paid during that period. For reference, the Topix has advanced 49.59% in sterling terms over the same time.
The Japanese market had a strong run up until the end of January 2018 but sold off through February and March 2018, reflecting a sharp correction in global markets on fears of rising US inflation and a potential US - China trade war.
Growth of the Company and Share Issues
The Board is committed to growing the size of the Company and with the shares trading at a premium to NAV, this is indicative of continued investor demand. In order to satisfy this, the Company held a General Meeting on 19 December 2017 where Shareholders gave authority for further allotment of shares on a non pre-emptive basis by means of a Share Issuance Programme. A tri-partite Prospectus was published on 9 January 2018 with a Supplementary Prospectus on 19 January 2018, enabling the Company to issue up to 100 million shares over the next 12 month period. Following an investor road show, an Initial Issue of 19,986,048 Ordinary Shares was announced on 25 January at 164.5p per share raising £32.9 million. In addition, 7,193,900 Ordinary Shares were issued in a series of "tap" issues between 7 February and 30 April 2018 at prices reflecting a premium to NAV. The issuing prices ranged between 150.9p and 156.0p per share and raised in excess of a further £11 million.
Subsequent to 30 April 2018, 6,578,465 Ordinary Shares have been issued, at prices between 157.8p and 169.0p per share, raising approximately £10.8. Thus in aggregate, the Company has raised £54.7 million new equity so far in this calendar year.
At the time of writing, the issued share capital stands at 122,926,575 Ordinary Shares, with net assets of the Company standing at £198 million, compared to £66.5 million at launch in December 2015, a threefold increase. Market capitalisation has risen from £120 million to over £200 million in the last 12 months and in the last six months to April 2018 from £136m to £186m. The Company was admitted to the FTSE All Share Index with effect from 15th June 2018.
I would like to take the opportunity to thank Shareholders for their support in growing the Company. The Board remains confident of the investment mandate and our Investment Manager's ability to execute it by achieving total returns with an income bias, a strategy that appears well placed to exploit investment opportunities in Japan. It is worthy of note that the returns of the strategy have outperformed a largely momentum and cyclically led market, which is remarkable given our embedded income style.
Interim dividend
The Company has generated a revenue return of 2.2p per Ordinary Share based on the weighted average issued share capital over the period as against 2.1p in the first half of the previous year. The Board has declared an interim dividend of 1.25p per Ordinary Share in respect of the period, which will be paid on 31 July 2018 to Shareholders on the register as at 6 July 2018. This represents an 8.7% increase over last year's interim dividend.
Regulation
The Company and the Investment Manager have complied with the new MiFID II and PRIIPS regulations introduced in January 2018. The Key Information Document (KID) is posted on the Company's website www.ccjapanincomeandgrowthtrust.com, although I would point out that the methodology of projecting return scenarios is determined by the regulator and not by the Board or our Investment Manager. The Company has complied with the new General Data Protection Regulation (GDPR) effective from 25th May 2018 by drawing up a Privacy Policy posted as an updated Privacy Notice, which is available on the Company's website, besides also amending service provider agreements. Your Board spends increasing time ensuring that the Company complies with complex regulation, while at the same time attempting to mitigate costs to Shareholders.
Market Developments and Outlook
Despite winning a resounding victory in the October 2017 General Election, Prime Minister Abe's administration became embroiled in the Moritomo elementary school funding scandal which has resulted in a drop in his popularity and concerns over the sustainability of his reform programme. Nevertheless, Japanese monetary policy remains supportive of economic growth with interest rates in Japan likely to remain near zero, against a background of persistently low inflation. Given that US interest rates and monetary policy are likely to tighten over the coming year, the yen has tended to weaken against the US$, even if the cross - rate with sterling, important for our income account, has been relatively stable, hovering around Y150= £1.
On the international front, risks remain. Clearly, protectionist rhetoric from President Trump in assailing trade negotiations with China, accompanied by tit for tat tariff proposals, has created major uncertainty. Happily, Japan's trade surplus with the USA is much reduced and the supply chain, for instance with components for automobile manufacturing, has largely shifted onshore to North America. While diplomatic efforts to improve relations between North and South Korea and the West is a welcome development for Japan, a deteriorating Middle Eastern situation has seen the oil price rise significantly over the last few months. A resurgent oil price is a negative for the Japanese current account and corporate margins.
However, our Investment Manager continues to believe that many Japanese equities remain attractive compared to the international peer group. Company earnings grew by approximately 22% in the fiscal year ending March 2018. The most recent Tokyo Stock Exchange survey of share ownership shows that holdings by foreign institutions continue to rise and that they are now the largest single category. This is an important consideration and is reflected in the Investment Manager's strategy in seeking to identify investment opportunities that appeal to foreign investors via the combination of valuation, growth and most importantly, the potential for sustainable shareholder returns.
The demands by domestic shareholders for corporate reform are also rising. The Life Insurance Association of Japan recently published results of its FY17 survey entitled "Approaches toward Enhancing Equity Values". A working group of 10 life insurance companies is seeking engagement and dialogue with companies which fail to achieve appropriate targets of capital efficiency and shareholder return. With both rising foreign ownership and increasingly active domestic shareholders, the pressure on corporate managers in Japan continues to increase. Although we have witnessed growth in shareholder returns over the past few years, the aggregate net liquid assets on corporate balance sheets continues to rise and the payout ratio from annual earnings remains stubbornly low by international standards. It is clear that many companies have the ability to improve the levels and consistency of their shareholder returns. The opportunity is significant and the Board and the Investment Manager believe that we are still in the early stages of the fundamental change taking place. The Investment Manager continues to identify companies that are still only at the forefront of this trend.
Harry Wells
Chairman
22 June 2018
INVESTMENT MANAGER'S REPORT
Performance Review
The Company's portfolio of holdings produced a positive return during the six month period to 30 April 2018, with the net asset value (NAV) per Ordinary Share rising from 145.96p per share to 156.12p. In addition, the Company paid a second interim dividend for the year ended 31 October 2017 of 2.30p.
The outperformance of the benchmark index over the period and has been driven by a number of factors. Firstly, wider recognition of the characteristics of individual companies which underpin the investment process, namely companies with expanding business opportunities, strong cash flow and the commitment of management to delivering sustainable returns to shareholders. Secondly, the ability to utilise gearing within the structure of the investment trust has enhanced the returns to investors. Thirdly, at the time of the launch of the Company, we believed that there were many attractive investment opportunities amongst small cap stocks in Japan, which were, and continue to be, particularly suited to a closed end investment trust structure. A number of these portfolio holdings performed well over the period reflecting the general outperformance of small cap stocks in Japan which has been a notable feature of the equity market in recent years.
Two companies that have contributed significantly to the Company's performance in the six month period to April are Yamada Consulting and Noevir. Each of these companies is a family owned business in which we believe that the Company's interests as minority shareholders are well understood and protected by the management as well as for the majority shareholders. Yamada Consulting offers business advisory services to predominately mid and small sized companies in Japan, an area of strong demand, with many of these companies seeking to address the challenge of business succession planning. The management has enhanced its shareholder return policy alongside the growth of consulting services and associated strong cash flow by steadily raising the dividend pay out ratio. Noevir manufactures and markets one of the leading skincare brands in Japan. Its business has grown through the launch of innovative new products as well as expansion of the brand through international sales and the beneficial spending patterns of visitors to Japan. The improved shareholder distribution has been a consequence of record operating profits and a reassessment of the surplus cash accumulating on the balance sheet.
The success of the strategy is not just measured by the short term share price movements of the portfolio companies but also by the demonstration of sustainable commitment to delivering an appropriate return to their shareholders over time. Companies such as Japan Tobacco, Bridgestone and KDDI, for example, have all announced significant increases in dividends for the fiscal year just completed, and also for the current year, reflecting the positive long term potential for their business operations despite some recent short term operating adjustments or investor fears. There are many examples of companies that have utilized their ability to buy back shares to enhance their shareholder returns during periods of perceived share price weakness. This has again been the case over the last twelve months with companies such as Sumitomo Mitsui Financial Group, NTT and Toyota announcing buyback programmes for a significant percentage of the shares in issue.
Current Positioning
The Company's investment process seeks to identify companies listed in Japan which have attractive shareholder return policies focusing particularly on situations where management are committed to offering a sustainable and rising dividend supported by underlying business growth and strong cash flow generation. The disparate strategies with regard to shareholder return policies evident at different companies, even within the same industry, highlight the need to identify individual companies demonstrating these favourable characteristics.
As demonstrated in the most recent reporting season, leading companies in the telecommunications, banking and automobile sectors have become prominent supporters of improved corporate governance reform. Importantly, with strong balance sheets, healthy cash flow and low payout ratios, companies have the ability to deliver enhanced shareholder returns. These sectors have consequently been well represented in the portfolio since inception. Service companies, albeit a broad selection of companies, also offer many investment opportunities giving the stability of underlying demand and in many cases low capital investment requirements.
Companies such as Tokyo Electron, Komatsu and Daiwa House have repeatedly exceeded initial forecasts for shareholder distributions due to an improving operating environment and also, we believe, an increasing understanding by management of the benefits of providing investors with a progressively rising dividend.
The strong performance and successful investment in smaller companies has created a challenge because the general segment re-rating has resulted in much less attractive valuations, particularly from a yield standpoint. The Company has consequently reduced or eliminated positions held in companies such as Solasto (medical industry outsourcing) and Trust Tech (engineering staff placement) purely for this reason. Here, the rise in the share price has exceeded the company's potential to deliver a growth of dividend to an acceptable level within a reasonable time frame. Companies such as Park24, a leading parking services company, Tokyo Century Corp, a domestic leasing company with exciting overseas ambitions, Kakaku.com, one of Japan's internet services companies, and Katitas, which holds the top market position for refurbished housing sales in Japan, have been added to the portfolio after careful consideration of improving attitudes to shareholders. The sector dispersion of this small list of companies indicates the breadth of opportunities that exist and this diversification across industries helps to enhance the stability of the income received by the Company.
Outlook
The aggregate shareholder returns generated by Japanese companies hit a fourth consecutive annual record in fiscal year 2017 and we believe the trend is set to continue. Despite the favourable improvements in shareholder return in recent years in Japan, the most recent data shows that the total net cash amount accumulated on balance sheets and the number of companies in this position continues to rise. The aggregate payout ratio for the market remains low by international standards and although there are many companies where a notable improvement is visible, at an aggregate level there is considerable scope for improvement.
The recent strength in the equity market has been underpinned by the improvements in corporate performance both in terms of improved operating productivity and also corporate governance. Importantly these improvements are visible by the steady but meaningful increases in the returns to shareholders. This aspect, we believe, is gaining wider recognition and attracting the attention of investors who have historically ignored Japan as a source of income.
Richard Aston
Coupland Cardiff Asset Management LLP
22 June 2018
TOP TEN SECTORS AND HOLDINGS | |
AS AT 30 APRIL 2018 |
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TOP 10 SECTORS |
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Sector | % of net |
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Information & Communications | 13.4 |
Services | 13.2 |
Real Estate | 12.3 |
Banks | 8.7 |
Machinery | 7.6 |
Electrical Appliances | 7.5 |
Chemicals | 7.4 |
Transport Equipment | 7.1 |
Wholesale | 3.2 |
Insurance | 3.2 |
Other sectors | 14.1 |
Other net assets | 2.3 |
Total | 100.0 |
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TOP 10 HOLDINGS |
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Holding | % of net |
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Nippon Telegraph | 3.8 |
Sumitomo Mitsui | 3.5 |
Tokyo Electron | 3.4 |
Tokio Marine | 3.2 |
Itochu | 3.2 |
Toyota | 3.2 |
Tsubaki Nakashima | 3.0 |
Kakaku.com | 3.0 |
Bridgestone Corp | 3.0 |
Japan Hotel REIT | 2.9 |
Top 10 Holdings | 32.2 |
Other equity holdings | 65.5 |
Other net assets | 2.3 |
Total | 100.0 |
CONTRACTS FOR DIFFERENCE (CFDs)
AS AT 30 APRIL 2018
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| Gross | Gross exposure | Market |
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| exposure | as a % of net | value |
Company | Sector | £'000 | assets | £'000 |
Nippon Telegraph | Information & Communications | 1,388 | 0.8 | (27) |
Sumitomo Mitsui | Banks | 1,286 | 0.7 | (98) |
Tokyo Electron | Electrical Appliances | 1,235 | 0.7 | (16) |
Tokio Marine | Insurance | 1,173 | 0.6 | 9 |
Itochu | Wholesale | 1,170 | 0.6 | 122 |
Toyota | Transport Equipment | 1,144 | 0.6 | (28) |
Tsubaki Nakashima | Machinery | 1,104 | 0.6 | (7) |
Kakaku.com | Services | 1,088 | 0.6 | 113 |
Bridgestone Corp | Rubber Products | 1,077 | 0.6 | (124) |
Japan Hotel REIT | Real Estate | 1,063 | 0.6 | 40 |
Top Ten |
| 11,728 | 6.4 | (16) |
Other |
| 23,224 | 12.8 | (224) |
Total |
| 34,952 | 19.2 | (240) |
INTERIM MANAGEMENT REPORT
The Directors are required to provide an Interim Management Report in accordance with the UK Listing Authority's Disclosure Guidance and Transparency Rules and consider that the Chairman's Statement and the Investment Manager's Report in this Half-yearly report, the following statement on related party transactions and the Directors' Responsibility Statement below, together constitute the Interim Management Report for the Company for the six months ended 30 April 2018. The principal risks and uncertainties to the Company are detailed in the Company's most recent Annual Report for the year ended to 31 October 2017. The principal risks and uncertainties facing the Company remain unchanged from those disclosed in the Annual Report.
RELATED PARTY TRANSACTIONS
Details of the investment management arrangements were provided in the Annual Report. There have been no changes to the related party transactions described in the Annual Report that could have a material effect on the financial position or performance of the Company. Amounts payable to the Investment Manager in the period are detailed in the Unaudited Income Statement.
DIRECTORS' STATEMENT OF RESPONSIBILITY FOR THE HALF-YEARLY REPORT
The Directors confirm to the best of their knowledge that:
• The condensed set of financial statements contained within the Half-yearly financial report has been prepared in accordance with FRS 104 Interim Financial Reporting.
•The interim management report includes a fair review of the information required by 4.2.7R and 4.2.8R of the FCA's Disclosure Guidance and Transparency Rules.
Harry Wells
Chairman
For and on behalf of the Board of Directors
22 June 2018
UNAUDITED INCOME STATEMENT | |
SIX MONTHS TO 30 APRIL 2018 |
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| Six months to 30 April 2018 | Six months to 30 April 2017 | Year ended 31 October 2017 | ||||||
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| Revenue | Capital | Total | Revenue | Capital | Total | Revenue | Capital | Total |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
Gains on investments held at fair value | - | 8,839 | 8,839 | - | 142 | 142 | - | 18,540 | 18,540 |
Income | 2,975 | - | 2,975 | 2,151 | - | 2,151 | 4,361 | - | 4,361 |
Investment management fee | (115) | (461) | (576) | (74) | (296) | (370) | (162) | (647) | (809) |
Other expenses | (295) | - | (295) | (199) | - | (199) | (417) | - | (417) |
Return on ordinary activities before finance costs and taxation | 2,565 | 8,378 | 10,943 | 1,878 | (154) | 1,724 | 3,782 | 17,893 | 21,675 |
Finance costs | (36) | (121) | (157) | (18) | (42) | (60) | (47) | (84) | (131) |
Return on ordinary activities before taxation | 2,529 | 8,257 | 10,786 | 1,860 | (196) | 1,664 | 3,735 | 17,809 | 21,544 |
Taxation | (298) | - | (298) | (205) | - | (205) | (371) | - | (371) |
Return on ordinary activities after taxation | 2,231 | 8,257 | 10,488 | 1,655 | (196) | 1,459 | 3,364 | 17,809 | 21,173 |
Return per Ordinary Share | 2.21p | 8.16p | 10.37p | 2.06p | (0.24)p | 1.82p | 4.06p | 21.47p | 25.53p |
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.
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Both the supplementary revenue and capital columns are both prepared under guidance from the Association of Investment Companies. There is no other comprehensive income and therefore the return for the period is also the total comprehensive income for the period. | ||||||||
UNAUDITED STATEMENT OF FINANCIAL POSITION |
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AS AT 30 APRIL 2018 |
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| 30 April 2018 | 30 April 2017 | 31 October 2017 |
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Fixed assets |
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Investments at fair value through profit or loss | 177,532 | 101,663 | 129,211 |
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Current assets |
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Debtors | 2,197 | 1,190 | 1,427 |
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Amounts due in respect of contracts for difference | 1,252 | 1,961 | 4,931 |
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Cash collateral paid in respect of contracts for difference | 160 | - | 71 |
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Cash at bank | 2,188 | - | - |
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| 5,797 | 3,151 | 6,429 |
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Creditors: amounts falling due within one year |
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Bank overdraft | - | (258) | (863) |
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Creditors | (201) | (172) | (3,970) |
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Amounts payable and collateral held in respect of contracts for difference | (1,491) | (2,082) | (662) |
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| (1,692) | (2,512) | (5,495) |
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Net current assets | 4,105 | 639 | 934 |
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Total assets less current liabilities | 181,637 | 102,302 | 130,145 |
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Total net assets | 181,637 | 102,302 | 130,145 |
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Capital and reserves |
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Share capital | 1,163 | 826 | 892 |
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Share premium account | 70,894 | 19,068 | 28,111 |
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Special reserve | 64,671 | 64,671 | 64,671 |
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Capital reserve |
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-Revaluation of investments unrealised gain | 27,403 | 10,929 | 23,187 |
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-Other capital reserves | 14,739 | 4,951 | 10,698 |
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Revenue reserve | 2,767 | 1,857 | 2,586 |
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Total Shareholders' funds | 181,637 | 102,302 | 130,145 |
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NAV per share - Ordinary Shares (pence) | 156.12p | 123.84p | 145.95p |
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Approved by the Board of Directors and authorised for issue on 22 June 2018 and signed on their behalf by:
Harry Wells |
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Director |
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CC Japan Income & Growth Trust plc is incorporated in England and Wales with registered number 9845783.
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UNAUDITED STATEMENT OF CHANGES IN EQUITY |
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SIX MONTHS TO 30 APRIL 2018 |
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| Share capital | Share premium | Special reserve | Capital reserve | Revenue reserve | Total | ||||||
| £'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 | - | - | - | 8,242 | 2,246 | 10,488 | ||||||
Issue of Ordinary Shares | 271 | 43,646 | - | - | - | 43,917 | ||||||
Share issue costs | - | (863) | - | - | - | (863) | ||||||
Dividends paid | - | - | - | - | (2,050) | (2,050) | ||||||
Balance at 30 April 2018 | 1,163 | 70,894 | 64,671 | 42,127 | 2,782 | 181,637 | ||||||
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SIX MONTHS TO 30 APRIL 2017 |
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| Share capital | Share premium | Special reserve | Capital reserve | Revenue reserve | Total | ||||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||
Balance at 1 November 2016 | 792 | 14,761 | 64,671 | 16,076 | 1,785 | 98,085 | ||||||
Return on Ordinary Shares | - | - | - | (196) | 1,655 | 1,459 | ||||||
Issue of Ordinary Shares | 34 | 4,364 | - | - | - | 4,398 | ||||||
Share issue costs | - | (57) | - | - | - | (57) | ||||||
Dividends paid | - | - | - | - | (1,583) | (1,583) | ||||||
Balance at 30 April 2017 | 826 | 19,068 | 64,671 | 15,880 | 1,857 | 102,302 | ||||||
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YEAR ENDED 31 OCTOBER 2017 |
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| Share capital | Share premium | Special reserve | Capital reserve | Revenue reserve | Total | ||||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||
Balance at 1 November 2016 | 792 | 14,761 | 64,671 | 16,076 | 1,785 | 98,085 | ||||||
Return on ordinary activities | - | - | - | 17,809 | 3,364 | 21,173 | ||||||
Issue of Ordinary Shares | 100 | 13,507 | - | - | - | 13,607 | ||||||
Share issue costs | - | (157) | - | - | - | (157) | ||||||
Dividends paid | - | - | - | - | (2,563) | (2,563) | ||||||
Balance at 31 October 2017 | 892 | 28,111 | 64,671 | 33,885 | 2,586 | 130,145 | ||||||
UNAUDITED STATEMENT OF CASH FLOWS |
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SIX MONTHS TO 30 APRIL 2018 |
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| Six months to 30 April 2018 | Six months to 30 April 2017 | Year ended 31 October 2017 | |
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Return on ordinary activities before finance costs and taxation* | 10,943 | 1,724 | 21,675 | |
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Gains on investments | (8,171) | (142) | (12,926) | |
Increase in other debtors | (538) | (397) | (634) | |
Increase/(decrease) in other creditors | 43 | 7 | (8) | |
Tax paid on overseas income | (298) | (205) | (371) | |
Net cash flow from operating activities | 1,979 | 987 | 7,736 | |
Cash flows from investing activities |
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Purchases of investments | (67,754) | (34,023) | (49,350) | |
Proceeds from sales of investments | 23,087 | 27,136 | 33,282 | |
CFD transactions | 4,885 | 2,071 | (4,150) | |
Net cash flow used in investing activities | (39,782) | (4,816) | (20,218) | |
Cash flows from financing activities |
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Issue of Ordinary Share capital receipts | 43,917 | 4,397 | 13,607 | |
Ordinary Share issue costs paid | (863) | (56) | (178) | |
Equity dividends paid | (2,050) | (1,583) | (2,563) | |
Finance costs paid | (150) | (60) | (120) | |
Net cash flow from financing activities | 40,854 | 2,698 | 10,746 | |
Increase/(decrease) in cash and cash equivalents | 3,051 | (1,131) | (1,736) | |
Cash and cash equivalents at the beginning of the period | (863) | 873 | 873 | |
Cash and cash equivalents at the end of the period | 2,188 | (258) | (863) | |
* Cash inflow from dividends was £2,518,000 (30 April 2017: £1,752,214 and 31 October 2017: £3,728,000). | |||
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NOTES TO THE INTERIM FINANCIAL STATEMENTS |
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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 conducts its 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 Company's registered office is Mermaid House, 2 Puddle Dock, London, EC4V 3DB. |
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2. ACCOUNTING POLICIES |
The interim financial statements have been prepared in accordance with FRS 104 Interim Financial Reporting and the Statement of Recommended Practice "Financial Statements of Investment Trust Companies and Venture Capital Trusts" issued by the Association of Investment Companies in November 2014. |
This Half-yearly Financial Report is unaudited and does not include all of the information required for full annual financial statements. The Half-yearly Financial Report should be read in conjunction with the Annual Report and Accounts of the Company for the year ended 31 October 2017. The Annual Report and Accounts for the year ended 31 October 2017 were prepared in accordance with FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland ("FRS 102") and received an unqualified audit report. The financial information for the year ended 31 October 2017 in this Half-yearly Financial Report has been extracted from the audited Annual Report and Accounts for that year end. The accounting policies in this Half-yearly Financial Report are consistent with those applied in the Annual Report for the year ended 31 October 2017. |
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 interim financial statements have been presented in GBP sterling (£). |
3. INCOME |
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| Six months to 30 April 2018 | Six months to 30 April 2017 | Year ended 31 October 2017 |
| £'000 | £'000 | £'000 |
Income from investments: |
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Overseas dividends | 2,975 | 2,151 | 4,361 |
Total | 2,975 | 2,151 | 4,361 |
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Overseas dividend income is converted into GBP sterling on receipt. |
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4. INVESTMENT MANAGEMENT FEE |
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| Six months to 30 April 2018 | Six months to 30 April 2017 | Year ended 31 October 2017 |
| £'000 | £'000 | £'000 |
Basic fee: |
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20% charged to revenue | 115 | 74 | 162 |
80% charged to capital | 461 | 296 | 647 |
Total | 576 | 370 | 809 |
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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 |
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| Six months to 30 April 2018 | Six months to 30 April 2017 | Year ended 31 October 2017 |
| £'000 | £'000 | £'000 |
Administration and other expenses | 224 | 126 | 278 |
Auditor's remuneration - audit services | 14 | 20 | 34 |
- non-audit | - | 5 | - |
Directors' fees | 57 | 48 | 105 |
Total | 295 | 199 | 417 |
6. FINANCE COSTS |
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| Six months to 30 April 2018 | Six months to 30 April 2017 | Year ended 31 October 2017 |
| £'000 | £'000 | £'000 |
Interest paid | 6 | 8 | 25 |
CFD finance cost and structuring fee - 20% charged to income | 30 | 10 | 20 |
Structure fees - 20% charged to income | - | - | 2 |
| 36 | 18 | 47 |
CFD finance cost and structuring fee - 80% charged to capital | 121 | 42 | 77 |
Structure fees - 80% charged to capital | - | - | 7 |
| 121 | 42 | 84 |
Total | 157 | 60 | 131 |
7. TAXATION |
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| Six months to 30 April 2018 | Six months to 30 April 2017 | Year ended 31 October 2017 | ||||||
| Revenue | Capital | Total | Revenue | Capital | Total | Revenue | Capital | Total |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
Analysis of tax charge in the period: |
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Corporation tax | - | - | - | - | - | - | - | - | - |
Overseas withholding tax | 298 | - | 298 | 205 | - | 205 | 371 | - | 371 |
Total tax charge | 298 | - | 298 | 205 | - | 205 | 371 | - | 371 |
8. INVESTMENTS |
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| As at 30 April 2018 | As at 30 April 2017 | As at 31 October 2017 |
| £'000 | £'000 | £'000 |
Investments listed on a recognised overseas investment exchange | 177,532 | 101,663 | 129,211 |
Valuation at the end of the period | 177,532 | 101,663 | 129,211 |
9. DEBTORS |
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| As at 30 April 2018 | As at 30 April 2017 | As at 31 October 2017 |
| £'000 | £'000 | £'000 |
Amounts due in respect of CFDs | 1,252 | 1,961 | 4,931 |
Accrued income | 1,870 | 1,181 | 1,415 |
Sales for settlement | 232 | - | - |
Other Debtors | 5 | - | - |
Prepayments | 90 | 9 | 12 |
Total | 3,449 | 3,151 | 6,358 |
10. CREDITORS |
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| As at 30 April 2018 | As at 30 April 2017 | As at 31 October 2017 |
| £'000 | £'000 | £'000 |
Amounts falling due within one year: |
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Purchases for future settlement | - | - | 3,812 |
Amounts payable in respect of CFDs | 1,491 | 950 | 662 |
Collateral held in respect of CFD | - | 1,132 | - |
Accrued expenses | 201 | 172 | 158 |
Bank overdraft | - | 258 | - |
Total | 1,692 | 2,512 | 4,632 |
11. SHARE CAPITAL |
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Share capital represents the nominal value of shares that have been issued. The share premium includes any premiums received on issue of share capital. Any transaction costs associated with the issuing of shares are deducted from share premium. | ||||||
| As at 30 April 2018 | As at 30 April 2018 | As at 30 April 2017 | As at 30 April 2017 | As at 31 October 2017 | As at 31 October 2017 |
| No of shares | £'000 | No of shares | £'000 | No of shares | £'000 |
Allotted, issued & fully paid: |
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Ordinary Shares of 1p |
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Opening balance | 89,168,162 | 892 | 79,160,162 | 792 | 79,160,162 | 792 |
Ordinary Shares of 1p issued | 27,179,948 | 271 | 3,446,500 | 34 | 10,008,000 | 100 |
Closing balance | 116,348,110 | 1,163 | 82,606,662 | 826 | 89,168,162 | 892 |
Since the period end, the Company has issued a further 6,578,465 Ordinary Shares, with 122,926,575 Ordinary Shares in
issue as at 22 June 2018.
12. FINANCIAL COMMITMENTS |
At 30 April 2018 there were no commitments in respect of unpaid calls and underwritings (30 April 2017: nil and 31 October 2017: nil). |
13. RETURN PER ORDINARY SHARE |
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Total return per Ordinary Share is based on the return on ordinary activities, including income, for the period after taxation of £10,488,000 (30 April 2017: £3,788,000 and 31 October 2017: £21,173,000). | |||||||||
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Based on the weighted average number of Ordinary Shares in issue for the period to 30 April 2018 of 101,131,016 (30 April 2017: 80,276,560 and 31 October 2017: 82,937,053), the returns per share were as follows: | |||||||||
| As at 30 April 2018 | As at 30 April 2017 | As at 31 October 2017 | ||||||
| Revenue | Capital | Total | Revenue | Capital | Total | Revenue | Capital | Total |
Return per Ordinary Share | 2.21p | 8.16p | 10.37p | 2.06p | (0.24)p | 1.82p | 4.06p | 21.47p | 25.53p |
14. NET ASSET VALUE PER SHARE |
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Total shareholders' funds and the net asset value ("NAV") per share attributable to the Ordinary Shareholders at the period end were as follows:
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| As at 30 April 2018 | As at 30 April 2017 | As at 31 October 2017 | |||
| £'000 | £'000 | £'000 | |||
Ordinary Shares in issue | 116,348,110 | 82,606,662 | 89,168,162 | |||
NAV per Ordinary Share | 156.12p | 123.84p | 145.95p | |||
15. RELATED PARTY TRANSACTIONS |
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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 30 April 2018 were £108,013 (30 April 2017: £65,630 and 31 October 2017: £78,884). | |||||||
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Directors' fees and shareholdings | |||||||
Directors' fees are payable at the rate of £24,000 per annum for each Director other than the Chairman, who is entitled to receive £36,000. The Chairman of the Audit Committee is also entitled to an additional fee of £5,000 per annum and the Senior Independent Director is entitled to an additional fee of £1,000. | |||||||
The Directors had the following shareholdings in the Company, all of which were beneficially owned: | |||||||
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| As at 30 April 2018 | As at 30 April 2017 | As at 31 October 2017 | ||||
Harry Wells | 40,000 | 30,000 | 30,000 | ||||
John Scott | 32,500 | 32,500 | 32,500 | ||||
Mark Smith | 10,000 | 10,000 | 10,000 | ||||
Peter Wolton | 60,000 | 35,000 | 35,000 | ||||
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16. INTERIM DIVIDEND |
During the six months ended 30 April 2018, the Company paid a dividend of 2.3p per Ordinary Share in respect of the year ended 31 October 2017. |
These interim financial statements have been prepared in accordance with the requirements of section 838 of the Companies Act 2006 and constitute the Company's interim accounts for the purpose of justifying the payment of an interim dividend for the year ending 31 October 2018. |
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The Directors have declared an interim dividend for the year ending 31 October 2018 of 1.25p (2017: 1.15p) per Ordinary Share. The dividend will be paid on 31 July 2018, to Ordinary Shareholders on the register at the close of business on 6 July 2018. The Ordinary Shares will go ex-dividend on 5 July 2018 and the dividend will be funded from the Company's revenue reserves. |
17. STATUS OF THIS REPORT |
These interim financial statements are not the Company's statutory accounts for the purposes of section 434 of the Companies Act 2006. They are unaudited. The Half-yearly financial report will be made available to the public at the registered office of the Company. The report will also be available on the Company's website (www.ccjapanincomeandgrowthtrust.com). |
Alternative Performance Measures ('APMs')
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Discount |
| The amount, expressed as a percentage, by which the share price is less than the Net Asset Value per share.
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Gearing |
| A way to magnify income and capital returns, but which can also magnify losses. A bank loan is a common method of gearing.
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Index |
| A basket of stocks, which is considered to replicate a particular stock market or sector.
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Leverage |
| An alternative word for "Gearing".
Under AIFMD, leverage is any method by which the exposure of an AIF is increased through borrowing of cash or securities or leverage embedded in derivative positions.
Under AIFMD, leverage is broadly similar to gearing, but is expressed as a ratio between the assets (excluding borrowings) and the net assets (after taking account of borrowing). Under the gross method, exposure represents the sum of the Company's positions after deduction of cash balances, without taking account of any hedging or netting arrangements. Under the commitment method, exposure is calculated without the deduction of cash balances and after certain hedging and netting positions are offset against each other.
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Liquidity |
| The extent to which investments can be readily traded at short notice.
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Ongoing charges |
| A measure, expressed as a percentage of average net assets, of the regular, recurring annual costs of running an investment company.
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Premium
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| The amount, expressed as a percentage, by which the share price is more than the Net Asset Value per share.
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Total return
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| A measure of performance that takes into account both income and capital returns.
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Volatility |
| A measure of how much a share moves up and down in price over a period of time.
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DIRECTORS, INVESTMENT MANAGER AND ADVISERS
DIRECTORS | INVESTMENT MANAGER |
Harry Wells (Chairman) | Coupland Cardiff Asset Management LLP |
John Scott | 31-32 St James's Street |
Mark Smith | London |
Peter Wolton | SW1A 1HD |
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BROKER | REGISTERED OFFICE* |
Peel Hunt LLP | Mermaid House |
Moor House | 2 Puddle Dock |
120 London Wall | London |
London EC2Y 5ET | EC4V 3DB |
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DEPOSITARY AND CUSTODIAN | COMPANY SECRETARY AND ADMINISTRATOR |
Northern Trust Global Services Limited | PraxisIFM Fund Services (UK) Limited |
50 Bank Street | Mermaid House |
Canary Wharf | 2 Puddle Dock |
London | London |
E14 5NT | EC4V 3DB |
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REGISTRAR | AUDITORS |
Link Asset Services | Ernst & Young LLP |
The Registry | 25 Churchill Place |
34 Beckenham Road | Canary Wharf |
Beckenham | London |
Kent BR3 4TU | E14 5EY |
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LEGAL ADVISER |
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Stephenson Harwood LLP |
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1 Finsbury Circus |
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London |
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EC2M 7SH |
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* Registered in England and Wales no. 9845783 |
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Enquiries: |
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Anthony Lee / Ciara McKillop 020 7653 9690 PraxisIFM Fund Services (UK) Limited |
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END |
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