Annual Report • Jan 27, 2023
Annual Report
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CC JAPAN INCOME & GROWTH TRUST PLC ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 OCTOBER 2022 CC Japan Income & Growth Trust plc 1 CONTENTS Page STRATEGIC REPORT INVESTMENT OBJECTIVE, FINANCIAL INFORMATION AND PERFORMANCE SUMMARY 2 CHAIRMAN’S STATEMENT 5 INVESTMENT MANAGER’S REPORT 8 TOP TEN HOLDINGS 10 INVESTMENT POLICY, RESULTS AND OTHER INFORMATION 11 RISK AND RISK MANAGEMENT 14 APPROACH TO ENVIRONMENTAL, SOCIAL AND GOVERNANCE (“ESG”) 19 STAKEHOLDER ENGAGEMENT 22 HOLDINGS IN PORTFOLIO 29 TOP TEN SECTORS 31 7237(1&2175$&76)25b'Ζ))(5(1&( GOVERNANCE DIRECTORS’ REPORT 32 CORPORATE GOVERNANCE 37 DIRECTORS’ REMUNERATION IMPLEMENTATION REPORT 43 REPORT OF THE AUDIT AND RISK COMMITTEE 48 STATEMENT OF DIRECTORS’ RESPONSIBILITIES 51 INDEPENDENT AUDITOR’S REPORT 52 FINANCIAL STATEMENTS INCOME STATEMENT 60 STATEMENT OF FINANCIAL POSITION 61 STATEMENT OF CHANGES IN EQUITY 62 STATEMENT OF CASH FLOWS 63 NOTES TO THE ACCOUNTS 64 Page OTHER INFORMATION GLOSSARY AND ALTERNATIVE PERFORMANCE MEASURES 81 THE SECURITIES FINANCING TRANSACTIONS REGULATION (UNAUDITED) 86 COMPANY INFORMATION 88 NOTICE OF ANNUAL GENERAL MEETING 89 NOTES TO NOTICE OF ANNUAL GENERAL MEETING 91 FORM OF PROXY 95 2 CC Japan Income & Growth Trust plc2 CC Japan Income & Growth Trust plc INVESTMENT OBJECTIVE, FINANCIAL INFORMATION AND PERFORMANCE SUMMARY INVESTMENT OBJECTIVE The investment objective of the CC Japan Income & Growth Trust Plc (the “Company”) is to provide Shareholders with dividend income combined with capital growth, mainly through investment in equities listed or quoted in Japan. FINANCIAL INFORMATION As at 31 October 2022 As at 31 October 2021 Net assets (millions) £203.6 £222.9 Net asset value (“NAV”) per Ordinary Share ("Share") 1 151.1p 165.4p Share price 138.8p 154.0p Share price discount to NAV 2 8.1% 6.9% Transferable Subscription Share price 0.53p 3.50p Ongoing charges 2 1.06% 1.05% Gearing (net) 2 20.9% 21.1% 1 Measured on a cum income basis. 7KLVLVDQ$OWHUQDWLYH3HUIRUPDQFH0HDVXUHȆ$30ȇ'HȴQLWLRQVRI$30VXVHGLQWKLVUHSRUWWRJHWKHUZLWKKRZWKHVHPHDVXUHVKDYHEHHQFDOFXODWHG are disclosed on pages 81 and 85 of this report. PERFORMANCE SUMMARY For the year to 31 October 2022 % change 1 For the year to 31 October 2021 % change 1 NAV ex-income total return per Share 2 -6.3% +25.1% NAV cum-income total return per Share 2 -5.9% +24.3% Share price total return 2 -7.1% +32.7% Tokyo Stock Exchange Price Index ("TOPIX") total return -9.5% +11.9% Revenue return per Share (Undiluted) 5.14p 4.75p Dividends per share: First interim dividend 1.40p 1.40p Second interim dividend 3.50p 3.35p Total dividends per Share for the year 4.90p 4.75p 1 Total returns are stated in GBP sterling, including dividend reinvested. 2 These are APMs. 6RXUFH&RXSODQG&DUGL$VVHW0DQDJHPHQW//3Ȃ7KH&RPSDQ\ȇV)DFWVKHHW2FWREHU CC Japan Income & Growth Trust plc 3 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION PERFORMANCE SUMMARY Launch to Oct 2016 Year to Oct 2017 Year to Oct 2018 Year to Oct 2019 Year to Oct 2020 Year to Oct 2021 Year to Oct 2022 Share price (p) 122.40 152.00 153.00 150.00 119.50 154.00 138.75 Share price total return (%) +23.5 +27.2 +2.8 +0.7 -17.3 +32.7 -7.1 NAV per Share (p) 123.90 146.00 148.60 158.90 136.80 165.40 151.09 NAV (cum-income) total return per Share (%) +24.9 +20.7 +4.1 +9.9 -11.1 +24.3 -5.9 TOPIX Index total return in GBP sterling (%) +32.7 +10.1 -0.4 +7.2 +0.3 +11.9 -9.5 Revenue return per Share (Undiluted) (p) 3.60 4.06 4.55 5.26 5.04 4.75 5.14 Dividends per Share (p) 3.00 3.45 3.75 4.50 4.60 4.75 4.90 * Period from the Company’s launch on 15 December 2015 to 31 October 2016. ** Includes second interim dividend of 3.50p for the year ended 31 October 2022. Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Topix returns (in GBP) NAV cum income returns Dividend reinvested Share Price returns Dec-21 Mar-22 Jun-22 Sep-22 90.0 100.0 110.0 120.0 130.0 140.0 150.0 160.0 170.0 180.0 190.0 200.0 210.0 TOTAL NAV AND SHARE PRICE RETURN SINCE INCEPTION 4 CC Japan Income & Growth Trust plc4 CC Japan Income & Growth Trust plc 0.00p 0.50p 1.00p 1.50p 2.00p 2.50p 3.00p 3.50p 4.00p 4.50p 5.00p 5.50p 2016 2017 2018 2019 2020 2022 1st Interim 2nd Interim/Final Total 1.00p 2.00p 3.00p 1.15p 2.30p 3.45p 1.25p 2.50p 3.75p 1.40p 3.10p 4.50p 1.40p 3.20p 4.60p 1.40p 3.35p 4.75p 1.40p 3.50p 4.90p 2021 DIVIDEND PERFORMANCE -20.0% -10.0% 0.0% 10.0% 20.0% 30.0% YE Oct 2018 YE Oct 2019 YE Oct 2020 YE Oct 2021 YE Oct 2022 5 Years to Oct 2022 (cumulative) Topix Index Total Return NAV (cum-inc) Total Return -0.6% 4.3% 7.1% 9.6% 0.3% -11.1% 11.9% 24.2% 8.1% 18.9% -9.5% -5.9% COMPARISON OF NAV TOTAL RETURN PERFORMANCE OF THE COMPANY TO TOPIX TOTAL RETURN FOR 5 YEARS INVESTMENT OBJECTIVE, FINANCIAL INFORMATION AND PERFORMANCE SUMMARY continued CC Japan Income & Growth Trust plc 5 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION CHAIRMAN’S STATEMENT Performance During the year to 31 October 2022, in sterling terms, the Net Asset Value of the Company (“NAV”) declined by 5.9% as measured by total return including income. The Ordinary Share price, again measured by total return fell by 7.1%. This is disappointing, particularly after the strong set of results in the year to 31 October 2021, where NAV increased by 24.3% and the share price rose 32.7%. However, I can report that in the last year, we outperformed the TOPIX Total Return Index which fell 9.5% in sterling terms during the period. Our long-term track record and relative performance against the AIC Japan investment trust peer group remains robust and underscores the validity of our investment mandate which seeks dividend income combined with capital growth. Since launch in December XQWLOWKHUHFHQWȴQDQFLDO\HDUHQGWKH&RPSDQ\ȇV NAV total return, including dividend distributions, recorded an 82.8% increase, considerably outperforming the sterling adjusted TOPIX total return index, which rose 58.0%. Over the same period, the share price has risen 65.7% again measured by total return in sterling, including an aggregate distribution of 25.45p per Ordinary Share of dividends paid to Shareholders. ΖWKDVEHHQDQRWKHUGLɝFXOW\HDUJLYHQWKHFKDOOHQJHV presented by Russia’s invasion of Ukraine, while Japan continued to be impacted by successive waves of Covid-19 infections and a cautious policy towards reopening the economy and its borders. As the world’s Central Banks led by the US Federal Reserve have increased interest rates and pursued a more hawkish PRQHWDU\SROLF\WRFRPEDWLQȵDWLRQWKH%DQNRI-DSDQ (“BOJ”) has been an exception in continuing to provide liquidity to the markets and and remains wedded to Yield Curve Control. This drove the Japanese Yen down at one time trading below Y150 to the US$. Our Investment Manager, Richard Aston, has handled the market volatility with great discipline by retaining focus within the scope of the investment mandate which seeks total return. Richard has looked through market YRODWLOLW\UHWDLQLQJFRQȴGHQFHLQSRUWIROLRKROGLQJVZLWK VROLGSURVSHFWVZKLOHFRQWLQXLQJWRȴQGFRPSDQLHV ZKLFKKDYHJURZWKWUDMHFWRULHVLPSURYLQJFDVKȵRZ and dividends;VRPHRIZKLFKKDYHDOUHDG\EHQHȴWWHG from the prospect of a full reopening of the domestic Japanese economy. Over a 12-month and 5-year view, our investment performance is a leader in the AIC Japanese investment trust peer group as Richard’s FRQȴGHQFHin the intrinsic value of portfolio holdings has been rewarded. However, our premium share price rating has not recovered with the NAV closing the year at an 8.1% discount compared to a 6.9% discount at the previous year end. At the time of writing the discount stands at 8.3%. Growing the Company The Ordinary Share price discount means that until we can restore our premium to NAV, we are not able to issue any new shares. Furthermore, world events and their impact on markets have conspired against any real rerating of the Ordinary Shares which might have allowed for the successful exercise of the Transferable Subscription Shares (“TSS”) issued as a 1 for 5 free bonus to Ordinary Shareholders in February 2021. Unless we see a Lester Piggott type late run in NAV performance, the TSS will expire worthless on the last business day of February 2023. This is also the last quarterly exercise date. At the time of writing, the NAV per Ordinary Share has nudged above the Subscription Price set at £1.61, hence “in the money” whereas the Ordinary Share trails below that price, still “out of the money”. So, there is a small possibility of successful exercise of these entitlements at the last opportunity. The TSS scheme was designed by the Board potentially to raise a further £40 million as a “Covid-19 recovery” warrant which if successfully executed would not only have increased our size and spread costs but DOVRRHUHGVLJQLȴFDQWOHYHUDJHLQWRWKH2UGLQDU\ Shares so that TSS holders could make some money as recompense from the depressed valuations during Covid-19. Although the TSS entitlements were allocated as a free bonus and the scheme cost less than 0.34p per Ordinary Share at the time of issue, I would like to apologise for the administrative inconvenience this has caused not least in TSS holders receiving quarterly exercise notices, (a regulatory requirement of the custodian, but not the Company) when it was uneconomic to do so. The Scheme had the best of intentions and if validated by better markets would have been a good way to grow the Company. The Board has invested in various marketing LQLWLDWLYHVWRUDLVHWKHSURȴOHRIWKH&RPSDQ\E\ZD\ of webinars hosted by third parties and continue to update our website, which you can visit at:- https:// ccjapanincomeandgrowthtrust.com/ Besides regular meetings with wealth managers and major Shareholders, we continue to focus on improving content together with web and media distribution to UDLVHDZDUHQHVVRIRXUGLHUHQWLDWHGPDQGDWHZKLFK represents a great opportunity for investors to capture total return from Japan with appreciable and stable growth in portfolio income streams. Income and Dividends It is pleasing to see Japanese companies continuing to pursue enlightened distribution policies driven not only through governance reforms but also by cash rich Japanese corporate balance sheets. Furthermore, GHVSLWHGLɝFXOWWUDGLQJFRQGLWLRQV-DSDQHVH 6 CC Japan Income & Growth Trust plc management teams have tended to commit to their dividend projections, and in some cases surprised on the upside by exceeding expectations. For the year to 31 October 2022, the revenue return per Ordinary Share increased by 8.2% to 5.14p per Ordinary Share. The result demonstrates the underlying trend of Japanese dividend growth despite the vicissitudes of currency volatility where the Yen to Sterling cross UDWHKDVEHHQXQGHUSUHVVXUH7KH\HQKDVȵXFWXDWHG between Y149 = £1 to Y172 = £1 during the year with an average exchange rate of Y159. Our clearly stated policy is not to hedge our yen exposure. We translate dividend income into sterling on receipt. Thus, revenue is potentially at risk from a strengthening of sterling although conversely, a weaker yen tends to stimulate Japanese corporate earnings. The Board has declared a second interim dividend of 3.50p per Ordinary Share (an increase of 4.5% over last years second interim dividend) making a full year distribution of 4.90p per Ordinary Share and representing a 3.2% improvement over last year. This will be paid on 3 March 2023 to those shareholders on the register as at 3 February 2023 with an ex-date RIb)HEUXDU\:HDUHPDLQWDLQLQJRXUSROLF\RI paying a second interim dividend in substitution for a ȴQDOGLYLGHQG While the Board is committed to growing the dividend, it considers it prudent to continue to build the revenue reserve in uncertain times, which will stand at 2.20p per Ordinary Share after the payment of the second interim dividend. Shareholders should also be reminded that the Company has a Special reserve of £64.6 million available for distribution in circumstances where there is an unforeseen revenue shortfall. This is the seventh year of dividend increase for the Company with the annual dividend increasing by 63% since launch in December 2015. We currently pay a 3% dividend yield from Japanese equities out of covered income. Investors looking for equity income can continue to look to Japan. Board Succession & Composition The Board has a succession plan in place whereby, subject to re-election by Shareholders at this year’s Annual General Meeting (“AGM”), I intend to step down as Chairman at the AGM in March 2024 having served since launch in 2015. It is also the intention that Mr. Peter Wolton, Senior Independent Director, also one of the original members of the Board at launch, will retire before the end of 2023. A Search Consultant will be appointed during 2023 to identify a new candidate for the Board with complementary skills. I should point out that the Board composition meets the recommendations of the AIC code and Hampton Alexander review as far as gender and ethnic diversity representation is concerned. Our diversity policy can be found on pages 39 and 40 of the Annual Report. Change of Auditor Ernst & Young LLP ( “EY”) have served as the Company’s Auditors since launch but in line with the requirement to conduct a tender at least every 10 years and in view of the projected increase in audit fees, the Audit and Risk Committee held a tender process to look for a more competitive solution. Consequently, Johnston Carmichael will be appointed as the Company’s new Auditors, subject to Shareholder approval at the IRUWKFRPLQJ$07KH%RDUGLVFRQȴGHQWWKDW-RKQVWRQ Carmichael will provide a high level of service at a reduced cost. We would like to thank EY for their service as Auditor of the Company for the past seven years. Further details can be found in the Report of the Audit and Risk Committee. Annual General Meeting (“AGM”) In line with the requirements of the Companies Act 2006, the Company will hold an AGM of Shareholders to consider the resolutions laid out in the Notice of Meeting on pages 89 and 90. The Board encourages Shareholders to attend and participate in the Company’s IRUWKFRPLQJ$0RQ0DUFKDWWKHRɝFHVRI Stephenson Harwood LLP, 1 Finsbury Circus, London EC2M 7SH. Our Investment Manager, Richard Aston, will provide an update on the portfolio and take questions after the formal business of the meeting. The Board will also be available to meet shareholders and discuss the Company. I do hope that you will join us. We recognise it is not possible for everyone to attend the AGM and I would remind Shareholders that any questions relating to the business of the AGM, can be sent by email to [email protected]. To the extent that it is appropriate to do so, the Company will respond to any questions received in a Q&A which will be posted on the Company’s website. If Shareholders are unable to attend the meeting in person, they are strongly encouraged to vote by proxy and to appoint the “Chairman of the AGM” as their proxy. Details of how to vote, either electronically, by proxy form or through CREST, can be found in the Notes to the Notice of AGM on pages 91 to 93. The lodging of a form of proxy (or an appointment of a proxy through CREST) will not however prevent a shareholder from attending the AGM and voting in person if they so wish. Outlook 7KHORQJSHULRGRIGLVLQȵDWLRQDQGIUHHPRQH\LVRYHU Collective Central Bank policy led by the US Federal 5HVHUYHLVȴUPO\DLPHGDWUHGXFLQJLQȵDWLRQDWDWLPH when the pricing power of labour in the USA and Europe CHAIRMAN’S STATEMENT continued CC Japan Income & Growth Trust plc 7 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION is in the ascendant. As interest rates rise on the back of a collapse in monetary aggregates in the USA, it looks as if the risks of global recession are rising. With the high levels of debt embedded in the world economy, tightening policy beyond a certain point could also potentially expose credit problems. Global market sentiment will, as ever, be driven by the perception of policy direction emanating from the US Federal Reserve. -DSDQWRRLVIDFLQJVLPLODULQȵDWLRQDU\SUHVVXUHV although these are largely due to the war and hence exogenous. As elsewhere, the labour market is tight, UHȵHFWLQJDQDJHLQJGHPRJUDSKLFDQGVKULQNLQJ workforce. Both the BOJ and Government are keen to encourage wage growth which has been static for so long. Indeed, Prime Minister Kishida has urged employers to increase wages by more than 3% as part of his “new economic capitalism” plans with Consumer 3ULFHΖQȵDWLRQ&3ΖUXQQLQJDWLWVKLJKHVWIRU\HDUV $IWHUDORQJSHULRGRIGHȵDWLRQVRPHLQȵDWLRQZLOOEH JRRGIRU-DSDQ$Q\LQFUHDVHLQZDJHVVKRXOGEHQHȴW domestic consumption. Just before Christmas, the BOJ announced a relaxation of the bands for controlling the yield on the 10-year bond. 7KLVLVVHHQDVDȴUVWVWHSWRQRUPDOLVLQJPRQHWDU\ policy and has sparked a sharp rally in the yen. However, the BOJ has had to absorb massive liquidation of Japanese Government Bonds (JGBs) by stepping in to buy bonds to defend the new yield level. Hence, rather than tightening monetary policy, the BOJ are now forced to expand their balance sheet and appear chained to loose monetary policy. We can expect interest rates and the Yield Curve Control Band to rise further in the months ahead and the market will be looking closely for pointers as to further policy direction, particularly with the appointment of a new BOJ Governor in April 2023. A weak yen has deterred foreign buying of Japanese securities, and a rebound in its value could help stimulate foreign interest which has always provided a catalyst for buying the stock market. Equally, it should be noted that TOPIX index companies now produce an LQFRPHGLYLGHQG\LHOGKLJKHUWKDQLQȵDWLRQZKLFKcould tempt domestic savers earning no interest on deposits. Moreover, the Government has announced measures WRWU\DQGPRELOLVHVDYLQJVE\RHULQJLQFHQWLYHVIRU people to invest. Although Japan’s domestic economy is steadily reopening for business, it is frustrating to see that yet another Covid-19 wave in China may further delay a recovery in tourist visitor arrivals. Nevertheless, the overall economic outlook appears favourable. The wild card remains geopolitics and the stability of the region. GDP forecasts show higher expectations for Japanese growth compared to other developed economies ZKLOHWKHUHLVJURZLQJFRQȴGHQFHLQEHWWHUFRUSRUDWH earnings guidance. Continuing commitment to corporate governance reforms should also underpin rising dividend distributions. Our focus on income will continue to be an important SDUWRIRXUWRWDOUHWXUQZKLFKFOHDUO\GLHUHQWLDWHVRXU mandate from most other funds investing in Japan. 5LFKDUG$VWRQDQGKLVFROOHDJXHVDUHȴQGLQJQRVKRUWDJH of investment opportunities. Harry Wells Chairman 23 January 2023 8 CC Japan Income & Growth Trust plc Performance Review The investment landscape has become increasingly complex over the last twelve months with a number of developments challenging the relatively favourable conditions for investors in a variety of assets in recent \HDUV7KLVKDVUHVXOWHGDQGVLPSOLȴHGE\PDQ\DVDQ outperformance of ‘value’ over ‘growth’ across equity markets with Japan being no exception. The rapid HPHUJHQFHRILQȵDWLRQDU\WUHQGVDURXQGWKHZRUOG at levels not seen for decades, and the subsequent attempts by Central Banks worldwide to regain FRQWUROE\UDLVLQJLQWHUHVWUDWHVKDVEHHQDVLJQLȴFDQW contributory factor to this change of market direction. Additionally, political tensions have added to the elevated levels of risk. Sentiment has been severely impacted by the ongoing war in the Ukraine. The UDPLȴFDWLRQVKDYHSOD\HGRXWLQDQXPEHURIZD\V with Russia’s increasing international isolation, rising energy prices and credit concerns amongst the factors most relevant to Japanese companies. The direct trade between Japan and Russia is limited to less than 1% of Japan’s international total and for most companies any direct country exposure is a very small component of their overall revenues. Furthermore, as one of the main drivers for global growth in recent years, the performance of the Chinese economy has had an important bearing on international trends. A combination of political discord with the USA, concerns about the real estate market and a tough stance on managing Covid-19 outbreak has resulted in a dramatic slowdown in the country’s immediate prospects and international trade. In recent years, global ‘risk on’ investor sentiment has been accompanied by a strengthening of the Yen. Fundamental factors that may have contributed to WKLVQRWDEO\GLHUHQWWUHQGDUHWKHLPSDFWRIKLJKHU oil prices of the foreign exchange market (given that Japan is an importer of energy raw materials) and 2) FRQȴUPDWLRQYHUEDOO\DQGYLDPDUNHWLQWHUYHQWLRQ that the Bank of Japan intends to continue with an accommodative monetary policy for the time being despite central banks in other regions indicating a withdrawal of components of their respective easy monetary programmes. Despite these many uncertainties and challenges to the perceived orthodoxy of recent years, portfolio attribution has been positive and continued its post- pandemic recovery. It has been especially pleasing to see the strong share price performance of long- standing holdings in Mitsubishi UFJ Financial Group, Tokio Marine Holdings and Sumitomo Mitsui Financial URXSȴQDQFLDOVVHFWRUΖWRFKX&RUS0LWVXELVKL&RUS (wholesale sector), Nippon Telegraph & Telephone (telecommunications sector) and more recently Nippon Parking Development (service sector). These are all companies that faced considerable and unexpected operational challenges during the pandemic but have remained committed to their shareholder return policies throughout with increases in annual dividends and opportunistic share buyback programmes underpinning WKHFRQȴGHQFHLQWKHLUEXVLQHVVIXWXUH It is this ability to compound returns through a business cycle which we believe to be the most relevant and GLHUHQWLDWLQJIDFWRURI-DSDQHVHHTXLWLHVIRUIRUHLJQ investors. It is extremely encouraging to see these attributes ultimately rewarded for those willing to be patient. The weakest performers for the year include a number of companies whose contribution had been notably SRVLWLYHLQWKHȴUVWKDOIDQGUHȵHFWVDVLJQLȴFDQW downturn in expectations for technology companies in SDUWLFXODUDVIHDUVRIDJOREDOUHFHVVLRQKDYHLQWHQVLȴHG Shin-Etsu Chemical, Murata and Tokyo Electron have all H[HPSOLȴHGWKHFKDUDFWHULVWLFZHLGHQWLI\DVLPSRUWDQW for long term performance and as recently as their FY21 results raised dividends to a level higher than originally expected. These companies are all industry leaders with strong balance sheets and clear shareholder return SROLFLHVZKLFKZHEHOLHYHMXVWLȴHVWDNLQJDORQJWHUP investment perspective and weathering any short-term adjustments. We are somewhat disappointed in the recent share price performance of Carta Holdings, the online advertiser, which had been a strong performer since initial inclusion in the portfolio. The company has embarked on an investment phase which has been detrimental to earnings in the near term on the basis of higher H[SHFWDWLRQVIRUQHZO\LGHQWLȴHGSURMHFWV7KHUHLVQR immediate risk to the shareholder return objective which LVEDVHGRQDVWDEOHGLVWULEXWLRQUHȵHFWLQJWKHVWUHQJWK of the company’s balance sheet. However, we will be mindful that this investment must enhance the value of the Company over the medium term. Portfolio Positioning We believe that the current economic realities increase the importance of bottom-up analysis in investment decision-making as many companies now face a YHU\GLHUHQWRSHUDWLQJHQYLURQPHQWIURPDQ\WKLQJ experienced in recent years. Rising raw material prices and higher energy costs, tighter monetary conditions, stricter environmental regulation, digitalisation and changing customer behaviour are amongst the prevailing trends that create varying challenges and opportunities for individual companies. We remain steadfast in the belief of the investment principles that underpin the strategy as established when the Company was launched. Namely, consistent returns via dividends and share buybacks are a key component of total shareholder return that investors in Japan should now consider. We are consequently encouraged by the increased recognition for companies INVESTMENT MANAGER’S REPORT CC Japan Income & Growth Trust plc 9 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION able to compound these returns over time. Furthermore, we believe that through initiatives such as the Japanese Corporate Governance Code and consistent shareholder engagement, there is much wider acknowledgement of its importance amongst company management. As a FRQVHTXHQFHWKHQXPEHURIFRPSDQLHVVHHNLQJWRRHU these attractive characteristics continues to increase and the portfolio has continued to evolve throughout the year seeking to take advantage of this expanding investment universe. New holdings have been established in Zozo, Intage and %HQHȴW2QHVPDOOHUGRPHVWLFDOO\IRFXVHGFRPSDQLHV with leading market positions which operate in areas ZHEHOLHYHRHUJRRGJURZWKSRWHQWLDOΖPSRUWDQWO\ this is accompanied by a greater recognition by management of the role of stable shareholders, which has led, in our view, to better corporate governance and friendlier shareholder return policies. Zozo operates -DSDQȇVODUJHVWRQOLQHIDVKLRQZHEVLWHVDQGLVEHQHȴWLQJ from the low market penetration of e-commerce in -DSDQ7KHFRPSDQ\KDVVXHUHGLQWKHSDVWIURPWKH erratic corporate governance of its founder, but his departure has seen a more consistent approach to both operational and shareholder management consistent with our own expectations. Intage provides marketing research services for a diverse range of clients and sees future opportunities in data analytics and international expansion. Coincidently, it is seeking to LPSURYHLWVVKDUHKROGHUUHODWLRQVDQGFDSLWDOHɝFLHQF\ through an uplift in annual dividend distribution and VKDUHEX\EDFNV%HQHȴW2QHSURYLGHVDQXPEHURI outsourced services such as childcare, healthcare and leisure activities to a range of corporate clients. The company targets a high level of annual distribution to its VKDUHKROGHUVEDVHGRQWKHVWUHQJWKRILWVFDVKȵRZDQG balance sheet strength. )RUWKHȴUVWWLPHLQDQXPEHURI\HDUVZHSDUWLFLSDWHG LQDQΖQLWLDO3XEOLF2HULQJ6RFLRQH[WZDVIRXQGHGLQ 2015 as a result of a merger between the SoC (System- on-Chip) divisions of Fujitsu and Panasonic, and an investment received from the Development Bank of Japan. It is a fabless SoC solution provider, meaning they design their own chips but contract out their production, covering both software development as well as semiconductor logic/physical design. In stark contrast to many companies listed in recent years, the company is debt free, has valuations that were attractive relative to its growth prospects besides a clear intention to pay dividends to its shareholders from the start. The rising interest rate environment and falling valuations elsewhere in the market have lowered the attraction of Real Estate Investment Trusts and the overall weighting in these specialist investment vehicles has fallen, with the disposal of holdings in Japan GLP REIT and Star Asia REIT. We also exited holdings in Japan Exchange Group (operator of the Tokyo and Osaka Stock Exchanges), Exeo (telecommunications infrastructure) and Hikari Tsushin (small company business services) as greater risks have emerged to their business prospects and ultimately their ability to maintain a shareholder UHWXUQSURȴOHFRQVLVWHQWZLWKSUHYLRXVH[SHFWDWLRQV Outlook The global economic backdrop appears increasingly challenging with the recent debate over the VXVWDLQDELOLW\RILQȵDWLRQDU\WUHQGVDQGSURVSHFWRID new era of rising interest rates shifting notably to rapidly falling expectations for economic growth and the risk of global recession. Japan, on a relative basis, is set WRRHU many interesting opportunities given that its economic cycle is no longer in sync with other major economies, primarily as a consequence of its delayed domestic recovery following the Covid-19 pandemic. There are reasons to be optimistic about the expected economic rebound in Japan in 2023 given the experience of other economies as consumer behaviour returned to normal. The recent Yen weakness that has accompanied these developments only adds to the attraction of Japanese equities over the medium term. The investment strategy employed by the Company is not dependent on any economic outcome nor correlated with a particular investment style - it is one that seeks to capture a total and compounding shareholder return over time regardless of short-term economic variations. This seems a particularly relevant consideration for investors in these more uncertain times and we believe WKDW-DSDQHVHHTXLWHVQRZRHUDGLHUHQWLDWHGDQG compelling opportunity in this regard. A combination of strong balance sheets, healthy dividend cover and, most importantly, changing attitudes have created a new investment landscape. 7KHEHQHȴWKDVEHHQ demonstrated clearly over the past three years with companies in Japan RHULQJUREXVWOHYHOVRIGLVWULEXWLRQ to shareholders despite the sluggish trends in the domestic and global economies. As a result, dividends and share buybacks are set to HVWDEOLVKQHZUHFRUGVGXULQJWKHFXUUHQWȴVFDO\HDU, with minimal strain on balance sheets and dividend cover ratios. A further revision to the Japanese Corporate Governance Code in June 2022 and the restructuring of the main Tokyo Stock Exchange indices in April 2022 were consistent with the previously established REMHFWLYHVRILPSURYLQJFDSLWDOHɝFLHQF\ and corporate governance which have underpinned the favourable progression of shareholder returns. We believe that the EHQHȴWVRI3ULPH0LQLVWHU.LVKLGDȇVJRDORIGRXEOLQJ asset-based income places further pressures on companies to continue the trajectory of improvement and that shareholders in Japanese companies will consequently continue to reap the rewards. Richard Aston &RXSODQG&DUGL$VVHW0DQDJHPHQW//3 23 January 2023 10 CC Japan Income & Growth Trust plc10 CC Japan Income & Growth Trust plc TOP TEN HOLDINGS 6XPLWRPR0LWVXL)LQDQFLDOURXSɅ5.3% Sumitomo Mitsui Financial Group was established through the merger of Sumitomo Bank and Sakura bank LQΖWLVRQHRI-DSDQȇVOHDGLQJȴQDQFLDOJURXSV RHULQJVHUYLFHVVXFKDVFRPPHUFLDOEDQNLQJOHDVLQJ VHFXULWLHVFRQVXPHUȴQDQFHDQGDVVHWPDQDJHPHQW The company targets continued growth in shareholder value by promoting disciplined investment and alliances, VRXQGȴQDQFHVDQGSURJUHVVLYHVKDUHKROGHUUHWXUQV 1LSSRQ7HOHJUDSK7HOHSKRQHɅ5.0% NTT provides a broad range of telecommunication and business services in Japan and increasingly overseas. As ZHOODVEHQHȴWLQJIURPWKHIRFXVRQGDWDVHUYLFHVDQG IT infrastructure, the company is also seeking synergies from the consolidation of mobile telephone subsidiary NTT DoCoMo and cost cutting initiatives that enhance the earnings growth and potential for further returns to shareholders. 0LWVXELVKL8)-)LQDQFLDOURXSɅ4.8% Mitsubishi UFJ Financial Group was established in 2005 through the merger of Mitsubishi Tokyo Financial Group and UFJ Holdings. It is now one of Japan’s leading ȴQDQFLDOVHUYLFHVJURXSVZLWKHVWDEOLVKHGRSHUDWLRQV around the world, most prominently in Asia and North America. This includes an alliance and 20% stake in Morgan Stanley entered into in 2008. The company continues to promote a balanced capital management policy maintaining a strong capital base, appropriate allocations to strategic growth opportunities and enhancing shareholder returns. 'Ζ3&RUSRUDWLRQɅ4.2% DIP Corporation operates a number of domestic job listing websites, establishing a strong reputation amongst part-time workers, the section of the Japanese labour market which has seen the majority of growth in recent years. DIP has been successfully rolling out digital EXVLQHVVWRROVDLPHGDWHQKDQFLQJODERXUHɝFLHQFLHVDW its clients and seeks to become a ‘labour force solution company’. 6RPSR+ROGLQJVɅ4.1% 6RPSR+ROGLQJVLVDȴQDQFLDOKROGLQJFRPSDQ\ZKLFK operates a leading domestic property and casualty insurance business as well as life insurance and healthcare operations in Japan. It has also established an international presence to increase scale and GLYHUVLȴFDWLRQDORQJVLGHLQLWLDWLYHVWRLPSURYHFRUSRUDWH DQGFDSLWDOHɝFLHQF\DQGLPSURYHVKDUHKROGHUUHWXUQV ΖWRFKX&RUSɅ3.6% Itochu Corp is one of Japan’s leading trading companies involved in a broad range of business domains from upstream raw materials to downstream retail. In recent years Itochu has successfully introduced a business investment strategy based on high levels of capital HɝFLHQF\DQGDSSURSULDWHFDVKDOORFDWLRQLQFOXGLQJ increasing returns to shareholders in the form of dividend and share buybacks. 6RIWEDQN&RUSɅ3.5% Softbank Corp provides telecommunication and associated network services in Japan and is a subsidiary of the Softbank Group. The company continues to demonstrate strong growth in its business services segment and from its “beyond carrier” strategy which includes ecommerce leader Yahoo Japan, online fashion retailer Zozo, social network Line and electronic payment service PayPay. 6%Ζ+ROGLQJVɅ3.4% 6%Ζ+ROGLQJVLVDKROGLQJFRPSDQ\WKDWRHUVLQQRYDWLYH ȴQDQFLDOVHUYLFHVLQDUHDVVXFKDVVHFXULWLHVEURNLQJ banking, insurance and asset management. As a group LWIRFXVHVVSHFLȴFDOO\RQRUJDQLFJURZWKLQHDFKRILWV businesses whilst maintaining a high return on equity (RoE) to generate value for shareholders. 7RNLR0DULQH+ROGLQJVɅ3.0% 7RNLR0DULQH+ROGLQJVLVDȴQDQFLDOKROGLQJFRPSDQ\ which operates a leading domestic property and casualty insurance business as well as life insurance and RWKHUVHUYLFHVΖWKDVDVLJQLȴFDQWLQWHUQDWLRQDOSUHVHQFH RHULQJVSHFLDOLVWLQVXUDQFHSURGXFWVLQFRXQWULHVVXFK as the United States, Brazil, Singapore and the United Kingdom. Management has emphasised the importance of dividends in their capital management policies. +LWDFKL/WGɅ3.0% Hitachi Ltd is a globally recognised manufacturer of industrial equipment and developer of software covering a broad range of industries including Information Technology, Energy, Automotive, Transportation and Consumer Electronics. After restructuring the business operations, management has emphasised capital HɝFLHQF\DQGLPSURYLQJVKDUHKROGHUUHWXUQV CC Japan Income & Growth Trust plc 11 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER 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 GLHUHQFHRUHTXLW\VZDSVIRUJHDULQJDQGHɝFLHQW 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. 7KH&RPSDQ\ZLOOKDYHWKHȵH[LELOLW\WRLQYHVWXSWR 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 RQO\FRQWUDFWVIRUGLHUHQFHRUHTXLW\VZDSVWKDWKDYH WKHHHFWRIJHDULQJWKH&RPSDQ\ȇVSRUWIROLRWRVHHN to enhance performance. The aggregate of borrowings DQGORQJRQO\FRQWUDFWVIRUGLHUHQFHDQGHTXLW\VZDS 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 7KH&RPSDQ\ȇVUHYHQXHUHWXUQDIWHUWD[IRUWKHȴQDQFLDO year amounted to £6,930,000 (2021: £6,404,000). In August 2022, the Company paid an interim dividend of 1.40p (2021: 1.40p) per Ordinary Share. On 20 January 2023, the Directors declared a second interim dividend for the year ended 31 October 2022 of 3.50p (2021:b3.35p) per Ordinary Share, which will be paid on 3 March 2023 to Shareholders on the register at 3 February 2023. Therefore, the total dividend in respect RIWKHȴQDQFLDO\HDUWR2FWREHUZLOOEH4.90p (2021: 4.75p) per Ordinary Share. The Company made a capital loss after tax of £19,818,000 (2021: capital gain of £38,673,000). The total return, including income, after tax for the year was a loss of £12,888,000 (2021: gain of £45,077,000). The Company’s Purpose, Values and Culture The primary focus of the Company is to generate total returns for Shareholders by investing in equities quoted on the recognised exchanges in Japan. The Investment 0DQDJHULGHQWLȴHVFRPSDQLHVZKLFKDUHXQGHUYDOXHG have strong balance sheets, strong business franchises, and favourable attitudes to shareholder returns in the form of sustainable and growing dividends and share buyback policies. The Company aims to meet the needs of investors through the Investment Manager’s dual mandate of generating income and capital growth. The Company has been investing in Japanese equities since launch in 2015. Whilst the Company does not have a benchmark, the Board measures performance against the TOPIX Total Return Index and High Yield Indices. To achieve this, the Board of Directors has engaged &RXSODQG&DUGL$VVHW0DQDJHPHQW//3ZKRKDYHWKH appropriate capability, resources and controls in place to actively manage the Company’s assets in order to meet its investment objective. The Investment Manager has DZHOOGHȴQHGLQYHVWPHQWVWUDWHJ\DQGSURFHVVZKLFK is regularly and rigorously monitored and reviewed by the Board. As the Company has no employees and acts through its service providers, its culture is represented by the values and behaviour of the Board and third parties to which it delegates. To ensure that the Company’s purpose, values, strategy and culture are aligned, the Board comprises independent non-executive Directors from a diverse background, who together bring a wide range of knowledge, skills and experience. The Board members FRQWULEXWHWRDWUDQVSDUHQWFXOWXUHHQVXULQJHHFWLYH oversight, critical support and challenge to the Investment Manager, and all other third-party suppliers. For more information, please refer to the Company’s section 172 statement on pages 22 to 28. 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 Ȋ1$9ȋWRWDOUHWXUQȴJXUHVWREHWKHEHVWLQGLFDWRURI performance over time and this therefore is the main indicator of performance used by the Board. The NAV cum-income total return for the year to 31 October 2022 INVESTMENT POLICY, RESULTS AND OTHER INFORMATION 12 CC Japan Income & Growth Trust plc fell by 5.9% (2021: +24.3%) but the NAV total return from the Company’s inception in December 2015 to 31 October 2022 increased by 18.9%. The Chairman’s Statement on pages 5 to 7 incorporates a review of the highlights during the year. The Investment Manager’s Report on pages 8 and 9 gives details on investments made during the year and how performance has been achieved. (ii) Revenue return per Share and dividends he Company’s revenue return per Ordinary Share, based on the weighted average number of shares in issue during the year, was 5.14p (2021: 4.75p). The Company’s proposed total dividend payable in respect of the year ended 31 October 2022, including an interim dividend of 1.40p per Ordinary Share paid on 5 August 2022 and a second interim dividend of 3.50p payable on 3 March 2023 is 4.90p (2021: 4.75p) 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 8.1% discount to the NAV as at 31 October 2022 (2021: 6.9% discount). This is addressed in the Chairman’s Statement on SDJHb5. (iv) Control of the level of ongoing charges The Board monitors the Company’s operating costs FDUHIXOO\URZLQJWKHVL]HRIWKH&RPSDQ\RHUV PDQ\EHQHȴWVDVQRWDOORIWKH&RPSDQ\ȇVRSHUDWLQJ costs increase in line with the Company’s assets under management. Based on the Company’s average net assets for the year ended 31 October 2022, the &RPSDQ\ȇVRQJRLQJFKDUJHVȴJXUHFDOFXODWHGLQ accordance with the AIC methodology was 1.06% (2021: 1.05%). Other information Modern slavery disclosure The Company aims to act to the highest standards and is committed to integrating responsible business practices throughout its operations. The prevention of modern slavery is an important part of good corporate governance. As an investment trust, the Company does not RHUJRRGVRUVHUYLFHVWRFRQVXPHUVDQGGHDOV predominantly with professional advisers and service SURYLGHUVLQWKHȴQDQFLDOVHUYLFHVLQGXVWU\$VVXFKWKH Board considers that the Company is out of scope of the Modern Slavery Act 2015. Greenhouse Gas Emissions and Streamlined Energy and Carbon Reporting (“SECR”) The Company has no employees, physical assets, property or operations of its own, does not provide goods or services and does not have its own customers. It follows that the Company has little to no direct environmental impact. In consequence, the Company has limited greenhouse gas emissions to report from its operations, nor does it have responsibility for any other sources of emissions under the Companies Act 2006 (Strategic Report and Directors’ Reports) Regulations 2013. As the Company has no material operations and therefore has little energy use, it falls below the threshold to produce an energy and carbon report. The Company’s ESG policy is contained on pages 19 to 21. Employees The Company has no employees. As at 31 October 2022, WKH&RPSDQ\KDGȴYH'LUHFWRUVFRPSULVLQJWKUHHPDOHV (60%) and two females (40%). On 1 February 2022, June Aitken and Craig Cleland joined the Board, bringing with them a wealth of experience and skills. Biographical details can be found on pages 37 and 38. As part of the recruitment process, the Board was mindful of the Company’s policy on diversity which is contained in the Corporate Governance statement (see pages 39 and 40). Anti-bribery, Corruption and Tax Evasion 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, corruption or tax evasion; and has adopted the same standard of zero tolerance. Viability Statement The Directors have assessed the viability of the Company for the period until 31 October 2027 (the “’Period’’) taking into account the long-term nature of the Company’s investment strategy and the principal risks and emerging risks outlined on pages 14 to 18. 7KH%RDUGKDVFKRVHQDȴYH\HDUSHULRGWRDVVHVVWKH Company’s viability because of the expected long-term nature of equity investment, the Investment Manager’s holding period and the fact that the investment objective LVXQOLNHO\WRFKDQJHVLJQLȴFDQWO\RYHUWKLVSHULRG%DVHG on this assessment, the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the Period. In their assessment of the prospects of the Company, the Directors have considered each of the principal and emerging risks and uncertainties set out on pages 14 to 18 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 INVESTMENT POLICY, RESULTS AND OTHER INFORMATION continued CC Japan Income & Growth Trust plc 13 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION the Company’s funding requirements. Portfolio activity and market developments are discussed at quarterly Board meetings. The internal control framework of the Company is subject to a formal review on at least an annual basis. The Directors do not expect there to be any material increase in the annual ongoing charges of the Company over the Period. The Company’s income from investments and cash realisable from the sale of its investments provide substantial cover to the Company’s operating expenses, and any other costs likely to be faced by the Company over the period of their assessment. The Chairman’s Statement and Investment Manager’s Report present a positive long-term investment case for Japanese equities, which also underpins the Company’s viability for the Period. The continuation of the Company is subject to approval by Shareholders every three years with the next continuation vote due to be held at the AGM in 2025. This assessment takes into account the impact that KLJKHUOHYHOVRIJOREDOLQȵDWLRQDUHKDYLQJRQSRUWIROLR companies and the investment environment as discussed in the Chairman’s Statement on page 5, the Investment Manager’s Report on page 8 and in the Principal and Emerging Risks section on page 17. Outlook The outlook for the Company is discussed in the Chairman’s Statement on pages 6 and 7. Strategic Report The Strategic Report set out on pages 2 to 31 of this Annual Report was approved by the Board of Directors on 23 January 2023. 14 CC Japan Income & Growth Trust plc Principal and emerging risks and uncertainties The Board is responsible for the management of risks faced by the Company and delegates this role to the Audit and Risk Committee (the “Committee”). The Committee carries out, at least annually, a robust assessment of principal and emerging risks and uncertainties and monitors the risks on an ongoing basis. The Committee has a dynamic risk management register in place to help identify key risks in the business DQGRYHUVHHWKHHHFWLYHQHVVRILQWHUQDOFRQWUROVDQG processes. The risk management register and associated risk KHDWPDSSURYLGHDYLVXDOUHȵHFWLRQRIWKH&RPSDQ\ȇV LGHQWLȴHGSULQFLSDODQGHPHUJLQJULVNV7KHVHIDOOLQWR WKUHHFDWHJRULHVVWUDWHJLFDQGEXVLQHVVULVNȴQDQFLDO and operational risk, and regulatory and compliance risk. The Committee considers both the impact and the probability of each risk occurring and ensures appropriate controls are in place to reduce risk to an acceptable level. During the year under review the Committee was particularly concerned with the increase in geopolitical risk following the outbreak of war in the Ukraine. The subsequent rise in global energy prices, LQȵDWLRQDQGULVLQJLQWHUHVWUDWHVZRUOGZLGHKDYHOHGWR a more uncertain investment environment. The increase in exchange rate volatility has had a particular impact on the values of Japanese portfolio holdings and the dividend income received. The Japanese (and Asian) economies have also taken longer to recover from the Covid-19 pandemic than those in Europe and America. The Committee continues to review the processes in place to mitigate risk; and to ensure that these are appropriate and proportionate in the current market environment. The Company’s ability to operate as a going concern can be found on page 35 and the Company’s longer-term viability can be found on pages 12 and 13. The principal and emerging risks, together with a summary of the processes and internal controls used to manage and mitigate risks where possible are outlined on the following pages. RISK AND RISK MANAGEMENT CC Japan Income & Growth Trust plc 15 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION CC Japan Income & Growth Trust plc 15 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION Principal Risks Mitigation Movement During the Year Poor investment performance The Company’s investment performance depends on the Investment Manager’s ability to identify successful investments in accordance with the Company’s investment policy. The Investment Manager has a ZHOOGHȴQHGLQYHVWPHQWVWUDWHJ\ and process which is regularly and rigorously reviewed by the Board. The Board monitors the Company’s investment performance against its peer group over a range of periods. Whilst the Company does not have a benchmark, the Board measures performance for reference purposes against the TOPIX and High Yield Indices. At each meeting, the Board discusses the Japanese investment environment. The Investment Manager reports on the composition of the portfolio, any recent sales and purchases, and expectations of dividend income. The Company’s investment policy states that no single holding will represent more than 10 per cent. of the Company’s Gross Assets at the time of investment and the portfolio 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. An investment management FRQWUDFWLVLQSODFHZKLFKGHȴQHV the duties and responsibilities of the Investment Manager. Safeguards include the provision to terminate the Management Agreement with 6 months’ notice and in line with AIC guidance, the Investment Manager’s appointment is considered on an annual basis. 16 CC Japan Income & Growth Trust plc16 CC Japan Income & Growth Trust plc Principal Risks Mitigation Movement During the Year Currency Risk The Company’s investments are denominated in Japanese Yen. Changes in the Yen / Sterling exchange rate may impact returns and lead to a devaluation of the Company’s assets when translated into sterling. Income is received from investee companies in Yen. Exchange UDWHȵXFWXDWLRQVFRXOGLPSDFW distributable income available for dividends. The currency risk is explained to shareholders in the prospectus and the annual and interim reports. The Board regularly reviews the level of foreign currency exposure and monitors forecast revenues. The revenue forecast presented to the board includes a Yen sensitivity analysis. The Company’s policy is not to hedge against any foreign currency movements. Income received from investee companies is translated into sterling on receipt. The Company has built up a revenue reserve and the Board regularly reviews the net income available for distribution using the Investment Manager’s sensitivity analysis of revenue estimates. The Company also has a Special reserve available for distribution in the event of unforeseen revenue shortfall. Currency risk increased in the year under review as the Yen continued to fall against the dollar and sterling. This impacts the sterling value of revenues received and presents both opportunities and threats to the portfolio. 6KDUHSULFHGRHVQRWUHȵHFW underlying net asset value (“NAV”) The market value of the Company’s VKDUHVFDQȵXFWXDWHDQGPD\QRW DOZD\VUHȵHFWWKHLUXQGHUO\LQJ value. Returns achieved are reliant primarily upon the performance of the Company’s portfolio and the Company may experience ȵXFWXDWLRQVLQLWVRSHUDWLQJUHVXOWV due to a number of factors. Such variability may lead to volatility in the trading price of the Company’s shares, in excess of levels acceptable to the Board or shareholders. The Board closely monitors the Company’s share price relative to NAV and the Company’s discount / premium relative to their peer group, and recognises the importance that investors attach to the ordinary VKDUHVQRWWUDGLQJDWDVLJQLȴFDQW discount or premium to the prevailing NAV. Should the shares trade at a VLJQLȴFDQWGLVFRXQWWRWKHSUHYDLOLQJ NAV, the Board will consider whether the Company should purchase its own ordinary shares, pursuant to the general authority renewed at each AGM. Conversely, the Board will issue new Ordinary Shares should the shares trade at a premium to their prevailing NAV, pursuant to the general authority renewed at each AGM. Extensive marketing is carried out by the Company’s Investment Manager, Broker and a specialist PR company. An investment research consultant is engaged to provide independent research for retail shareholders. The share price continued to trade at a discount during the year under review despite improving performance. In the uncertain market environment, the discount is in line with the peer group. RISK AND RISK MANAGEMENT continued CC Japan Income & Growth Trust plc 17 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION CC Japan Income & Growth Trust plc 17 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION Principal Risks Mitigation Movement During the Year Market Risk Changes in the investment, economic or political conditions in Japan, and/or in the countries in which the Company’s investee companies operate could VXEVWDQWLDOO\DQGDGYHUVHO\DHFW the Company’s prospects. In addition to changing economic factors such as interest rates, employment, industry conditions and competition, unpredictable factors such as natural disasters, earthquakes and diplomatic events may impact market risk. Geopolitical instability in the region may threaten global economic growth and, consequently, companies in the portfolio. The Directors acknowledge that market risk is inherent in the investment process. The Company PDLQWDLQVDGLYHUVLȴHGSRUWIROLR of quoted investments. The Board has imposed guidelines within its investment policy to limit exposure to individual holdings and limits the level of gearing. Further information RQȴQDQFLDOLQVWUXPHQWVDQGULVNFDQ be found in note 16 to the Financial Statements beginning on page 73. In addition to regular market updates from the Investment Manager and reports at Board meetings, the Board convenes more often during periods of extreme volatility. Japan (and Asia) have taken longer to emerge from the Covid-19 restrictions than European and American markets. However, the Board is encouraged by the scope for recovery as Japan emerges from the pandemic. The invasion of Ukraine, the consequent escalation in energy prices, rising interest rates, global LQȵDWLRQDQGULVLQJJHRSROLWLFDO tensions in Asia, have all led to a more uncertain environment for equity investments. The Manager’s emphasis on companies which can pay sustainable dividends has helped alleviate the impact. Excess leverage The Company may use borrowings to seek to enhance investment returns. While this has the potential to enhance investment returns in rising markets, in falling markets the impact could be detrimental to performance. An ability to gear is a unique advantage of closed-end companies and structural gearing is a clearly stipulated component of the Company’s investment policy. This is highlighted in shareholder communications. Gearing is monitored and strict restrictions on borrowings are imposed: gearing continues to operate within a limit of 25% of NAV at the time of investment. 18 CC Japan Income & Growth Trust plc18 CC Japan Income & Growth Trust plc RISK AND RISK MANAGEMENT continued Principal Risks Mitigation Movement During the Year Underperforming key service providers The Company’s service providers including the Investment Manager, Depositary, the Custodian and the Administrator could fail to provide accurate timely information to the Board. External events, such as cyber- crime, natural disasters or pandemics may lead to business interruption and mean service providers are unable to meet their contractual obligations. The Board has appointed an experienced independent professional Investment Manager, Depositary, Custodian and Administrator. All key service providers produce annual internal control reports for review by the Audit and Risk Committee. These reviews include consideration of their business continuity plans and the associated cyber security risks. Service providers report on cyber risk mitigation and management at least annually, which includes FRQȴUPDWLRQRIEXVLQHVVFRQWLQXLW\ capability in the event of a cyber- attack. Penetration testing is carried out by the Investment Manager and key service providers at least annually. Emerging risk ESG and Climate Change Potential reputational damage from non-compliance with regulations or incorrect disclosures. Climate change leads to additional costs and risks for portfolio companies. 7KH&RPSDQ\FRXOGVXHUDVD result of increased investor demand for products which promote ESG investments. The Company’s ESG Policy, which is updated annually is published on the Company’s website and the AIC website. The Company’s approach to ESG, including the ESG factors that are considered in the investment process, such as climate change, where they are relevant and have a material impact on stock performance, is included in the Annual Report on pages 19 to 21. It also includes examples of responsible engagement. &RXSODQG&DUGL$VVHW0DQDJHPHQW LLP (the Investment Manager) is a signatory to the Principles of Responsible Investment Initiative (“PRI”) and reports annually according to the PRI reporting framework. The Investment Manager also complies with the obligations of both the UK Stewardship Code and the Japan Stewardship Code. Investment trusts are currently exempt from the Task Force on Climate-Related Financial Disclosures (“TCFD”) disclosure, but the Board will continue to monitor the situation. Shareholders expect relevant ESG factors and sustainability to be taken into account in investment decisions. Climate change is impacting operating conditions of portfolio companies and their reporting obligations. CC Japan Income & Growth Trust plc 19 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION CC Japan Income & Growth Trust plc 19 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION APPROACH TO ENVIRONMENTAL, SOCIAL AND GOVERNANCE (“ESG”) The Board believes that ESG related issues can DHFWERWKWKHSHUIRUPDQFHDQGVXVWDLQDELOLW\RI an investment portfolio and that ESG factors can be potential indicators of management quality and operational performance. Companies with strong, VXVWDLQDEOHSURȴOHVZLOOLWEHOLHYHVKDYHJUHDWHU potential to grow and survive in all market conditions. The Investment Manager is responsible for engagement RQ(6PDWWHUVDQGKDVDVWUXFWXUHG\HWȵH[LEOH approach to incorporating ESG into the investment process. Its fundamental, hands-on research approach allows it to integrate seamlessly its responsible investing HRUWVDORQJVLGHWKH&RPSDQ\ȇVLQYHVWPHQWVWUDWHJ\ LQDQHHFWLYHPDQQHUZKLFKWKH%RDUGEHOLHYHVZLOO achieve the best long-term results for the Company’s investors. ESG Research The Investment Manager considers whether ESG factors are relevant and where they may have a material impact on stock performance. The factors considered by the Investment Manager vary by the industry and company under review and may include the following: Ȃ Environmental: Pollution, site management/ consideration, greenhouse gas emissions, climate change, habitat protection, recycling, water Ȃ Social: Human/employee rights, working conditions, KHDOWKDQGVDIHW\ȴUPHPSOR\HHUHODWLRQVFKLOG IRUFHGODERXUFRQȵLFW]RQHV Ȃ Governance: Board composition, independence, transparency, compensation and accountability, shareholder rights and relations, cyber security, protection of personal data, corruption. The ESG factors are integrated into the Investment Manager’s bottom-up investment process and these LVVXHVDUHFRQVLGHUHGDORQJVLGHȴQDQFLDODQGVWUDWHJLF issues during assessment and engagement with companies. The ESG risks are qualitative factors rather WKDQTXDQWLWDWLYHLQSXWVLQDȴQDQFLDOPRGHO The investment team conducts its own research which is complemented by data and research of third parties. CCAM has engaged a third party ESG and climate data provider, who provides ESG related metrics and analysis. These reports are reviewed by the investment team where available and assist them in identifying potential areas for engagement with companies as it relates to ESG factors. Third party reporting includes Corporate ESG assessments, Climate Impact Reporting, Norms Based Research, and EU Regulatory Reporting. The Investment Manager has a policy that prohibits investment in a list of companies that manufacture FRQWURYHUVLDOZHDSRQVEXWGRHVQRWVSHFLȴFDOO\H[FOXGH investment in industries or individual companies on standardised ESG factors. Engagement and Stewardship A key component of the ESG process is engagement. The ΖQYHVWPHQW0DQDJHUGHGLFDWHVDVLJQLȴFDQWDPRXQWRI time and resource focusing on the ESG characteristics of the companies in which the Investment Manager invests, and monitoring is carried out through investment reviews. The strategy of the portfolio has an explicit focus on improving relationships between corporate managers and shareholders in Japan. Consequently, corporate governance is a key point of discussion in every meeting held with company management. The goal in each case is to help the senior representatives of the company develop not only an understanding of the role and requirements of long-term shareholders but also the realisation that their actions must be consistent with mutually determined objectives. 7KHWHDPDW&RXSODQG&DUGL$VVHW0DQDJHPHQW//3 (“CCAM”) conducts over 300 meetings and calls a year ZLWKWKHPDQDJHPHQWRIPDQ\GLHUHQWFRPSDQLHV Engagement serves three main purposes as it relates to ESG: 1. Due DiligenceȂHQJDJLQJZLWKFRPSDQLHVFRQGXFWLQJ due diligence, and understanding potential risks and opportunities relating to the investment. 2. EducationȂWKURXJKHQJDJHPHQWZLWKFRPSDQLHV sharing best practices and providing insights into the ESG practices of peers (e.g., disclosures, targets, and benchmarking). 3. ActionȂHQJDJLQJZLWKFRPSDQLHVWRHQFRXUDJH disclosures and target setting. Although the Investment Manager does not seek to agitate management through aggressive behaviour with public disclosures or proposals, it does and will vote on resolutions which it believes are consistent with the future growth and development of the company. Conversely, it will vote against those that do not and would be prepared to sell the shareholding if this were deemed to be the most appropriate course of action. Japan Stewardship Code: The Investment Manager’s commitment to the Japan Stewardship Code is set out on its website: KWWSVZZZFRXSODQGFDUGLFRPMDSDQVWHZDUGVKLSFRGH UK Stewardship Code: The Investment Manager is a signatory to the UK Stewardship Code and its statement of compliance with the Code can be found on its website: KWWSVZZZFRXSODQGFDUGLFRPVWHZDUGVKLSFRGH 20 CC Japan Income & Growth Trust plc APPROACH TO ENVIRONMENTAL, SOCIAL AND GOVERNANCE (“ESG”) continued Principles of Responsible Investment (“PRI”): CCAM became a signatory to the UN-supported Principles for Responsible Investment (“PRI”) on 6 December 2018. The PRI is fast becoming a global standard for investment managers’ ESG alignment. As a signatory to the Principles, the Investment Manager publicly commits to adopt and implement them, where consistent with LWVȴGXFLDU\UHVSRQVLELOLWLHV7KH3ULQFLSOHVFDQEHIRXQG here: https://www.unpri.org/pri/what-are-the-principles-for-responsible-investment. The Investment Manager also commits to evaluate the HHFWLYHQHVVDQGLPSURYHWKHFRQWHQWRIWKH3ULQFLSOHV over time. It believes this will improve its ability to meet FRPPLWPHQWVWREHQHȴFLDULHVDVZHOODVEHWWHUDOLJQ its investment activities with the broader interests of society. CCAM reports annually to the PRI on the ȴUPȇVUHVSRQVLEOHLQYHVWPHQWLQLWLDWLYHVDFWLYLWLHVDQG achievements and seeks to meet the standards expected by the PRI in doing so. Company 1 – Online fashion retailer 'XULQJWKH\HDUZHLQYHVWHGLQWKLVFRPSDQ\IRUWKHȴUVWWLPH7KHFRPSDQ\ȇVIRXQGHU was a charismatic individual whose leadership of the company did not meet our standards of corporate governance. His departure in September 2019 has, in our opinion, resulted in business initiatives and corporate governance more appropriate for a listed FRPSDQ\7KHVKDUHKROGHUUHWXUQSROLF\QRZUHȵHFWVEHWWHUWKHUHTXLUHPHQWVRIPLQRULW\ shareholders and is consistent with the expectations we have consistently emphasised LQRXUPHHWLQJVZLWKPDQDJHPHQW6LQFHLQYHVWLQJZHKDYHDOVRVRXJKWFODULȴFDWLRQ on employment practices at the company’s warehouses given the issues and criticisms of some of its peers. We consider poor labour practices as a key business risk which PD\KDYHDGLUHFWȴQDQFLDOLPSDFWRQWKHLQYHVWPHQWRSSRUWXQLW\ΖQUHVSRQVHWRRXU TXHULHVWKHFRPSDQ\KDVVWDWHGWKDWWKHUHKDYHEHHQQRLVVXHVLGHQWLȴHGGXULQJUHJXODU inspections. We have regular dialogue with the management and will continue to seek FRQȴUPDWLRQ &RPSDQ\Ȃ'LYHUVLȴHGȴQDQFLDOVHUYLFHVFRPSDQ\ 7KLVFRPSDQ\LVDGLYHUVLȴHGȴQDQFLDOKROGLQJFRPSDQ\ZKLFKKDVH[SHULHQFHGVWHDG\ improvement in its ESG ratings from third party providers by setting goals relating to board composition, diversity, GHG emissions as well as investment in global renewable energy sources and technology as a business service. However, it is also a leading LQYHVWRULQDFRQVRUWLXPVHHNLQJWRGHYHORSWKHȴUVWLQWHJUDWHGUHVRUWLQFOXGLQJ FDVLQRVLQ-DSDQ:HKDYHUHȵHFWHGRXUYLHZVRQWKHVRFLHWDOULVNVRIJDPEOLQJWRWKH management and will continue to seek assurances that initiatives will be undertaken to ensure that these will be minimised. EXAMPLES OF ENGAGEMENT CC Japan Income & Growth Trust plc 21 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION CC Japan Income & Growth Trust plc 21 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION Company 3 – Industrial Product Manufacturer Following criticisms of the management by a large activist shareholder, we conducted a direct conference call with top executives as well as the independent Director to seek FODULȴFDWLRQRQWKHLVVXHVUDLVHG$OOHJDWLRQVLQFOXGHGWKHDFTXLVLWLRQRISURSHUWLHVIRU WKHEHQHȴWRIWKHIRXQGLQJIDPLO\DQGWKHXVHRIFRPSDQ\UHVRXUFHVIRUSHUVRQDOEHQHȴW which had happened some time ago. Whilst a detailed explanation was provided to justify these transactions, which may have been acceptable based on corporate governance standards at the time, we were disappointed in the subsequent responses we received and also the attempts by the company to avoid some of the shareholder proposals at the AGM. We believe that it is crucial that the board upholds the highest standards of corporate governance and is responsive to the requirements of shareholders. Anything less can be considered as an investment risk. As a result of this engagement, we sold our shareholding. 22 CC Japan Income & Growth Trust plc22 CC Japan Income & Growth Trust plc This section of the Annual Report covers the Board’s considerations and activities in discharging their duties under VRIWKH&RPSDQLHV$FWLQSURPRWLQJWKHVXFFHVVRIWKH&RPSDQ\IRUWKHEHQHȴWRILWVPHPEHUVDVDZKROH This statement includes consideration of the likely consequences of the decisions of the Board in the longer term, how the Board has taken wider stakeholders’ needs into account and the impact of the Company’s operations on the environment. The Board, together with the Investment Manager, sets an overall investment strategy and reviews this on an ongoing basis. In order to ensure good governance of the Company, the Board has set various limits on the investments in the portfolio, including the size of individual holdings, investments in exchange traded funds, and the level of gearing. These limits and guidelines are regularly monitored. The Board is ultimately responsible for all stakeholder engagement. As an externally managed investment company, WKH&RPSDQ\GRHVQRWKDYHDQ\HPSOR\HHVUDWKHULWHPSOR\VH[WHUQDOVXSSOLHUVWRIXOȴODUDQJHRIIXQFWLRQVLQFOXGLQJ investment management, secretarial, administration, public relations (PR), corporate broking, depositary and banking VHUYLFHVHWF$OOWKHVHVHUYLFHSURYLGHUVZKRDUHVWDNHKROGHUVLQWKH&RPSDQ\WKHPVHOYHVKHOSWKH%RDUGWRIXOȴOLWV responsibility to engage with the Shareholders and other stakeholders. 7KH%RDUGKDVLGHQWLȴHGWKHPDMRUVWDNHKROGHUVLQWKH&RPSDQ\ȇVEXVLQHVV2QDQRQJRLQJEDVLVWKH%RDUGPRQLWRUV both potential and actual impacts of the decisions it makes in respect of the Company upon those major stakeholders LGHQWLȴHG STAKEHOLDER ENGAGEMENT CC Japan Income & Growth Trust plc 23 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION CC Japan Income & Growth Trust plc 23 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION Key stakeholders Why it is important to engage Engagement and Key Board Decisions Shareholders The Board maintains an open dialogue between Shareholders, the Investment Manager and other service providers. The Investment Manager along with the Company’s corporate broker regularly meets with the Company’s Shareholders to provide Company updates and to foster regular dialogue. Feedback from meetings between the Investment Manager and Shareholders is communicated to the Board. 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. A fundamental consideration of the Board is whether the investment objective of the Company is continuing to meet shareholder expectations. The Board places great importance on communication with all its shareholders and maintaining an open dialogue with them. The principal forum for this is the Company’s Annual General Meeting (“AGM”), where Shareholders have the opportunity to meet with the Board and the Investment Manager to raise any questions and concerns. The Board regularly monitors the VKDUHKROGHUSURȴOHRIWKH&RPSDQ\ It aims to provide Shareholders with a full understanding of the Company’s activities and performance, and it reports formally to Shareholders twice a year by way of the Annual and Interim Reports. This information is supplemented by the Company’s daily publication of the NAV per Share, routine ad hoc regulatory announcements, monthly factsheets and other information placed on the manager’s website, including pre- investment information, a key information document (‘KID’), portfolio disclosures, terms of reference and the Company’s share price. The Board has appointed a professional PR company, Cornerstone, and an independent research consultancy, Kepler, to ensure that information and news about the Company is regularly available for existing and potential Shareholders. The Chairman and Directors are available to meet with Shareholders with or without either Brokers or the Investment Manager present. During the year the Company’s Broker and Investment Manager held regular discussions with larger Shareholders. Feedback from shareholder engagement is reported to the Board. Shareholders wishing to contact the Chairman, or any other member of the Board may do so at any time by writing to the Company Secretary (ukfundcosec@sannegroup. com). 24 CC Japan Income & Growth Trust plc24 CC Japan Income & Growth Trust plc Key stakeholders Why it is important to engage Engagement and Key Board Decisions Shareholders continued Additionally, the Investment Manager along with the Company’s corporate broker regularly meets with the Company’s shareholders to provide Company updates and to foster regular dialogue. Feedback from meetings between the Investment Manager and Shareholders is communicated with the Board. The Company’s strategy is validated on a triennial basis, with the last vote in March 2022, with 99.97% of shareholders voting for the continuation of the Company. The next continuation vote will be proposed at the AGM in 2025. The Board has declared a total dividend for the 2022 year of 4.90p per Ordinary Share, an increase of 3.16% on last year’s full year distribution of 4.75p per Ordinary Share, paid out of income received. The dividend has risen every year since inception. STAKEHOLDER ENGAGEMENT continued CC Japan Income & Growth Trust plc 25 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION CC Japan Income & Growth Trust plc 25 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION Key stakeholders Why it is important to engage Engagement and Key Board Decisions Investment Manager CCAM is the Company’s appointed Investment Manager. The Investment Manager is responsible for the management of the Company’s portfolio in accordance with the Company’s investment policy and the terms of the Investment Management Agreement. The Investment Manager has also been appointed as the Company’s AIFM in accordance with the Alternative Investment Fund Managers Directive (“AIFMD”), for the purpose of providing portfolio management and risk management services to the Company. The Board monitors the Company’s investment performance in relation to its objectives and investment policy and strategy. The Board regularly assesses the experience and resources of the Investment Management team and the commitment of the Investment Manager to promote the Company, foster Shareholder relations and to ensure that the Company’s objective of providing dividend income combined with capital growth for its investors is met. An open and active relationship is maintained with the Investment Manager, at Board meetings, and at additional meetings which are held when needed. Richard Aston has managed the investment portfolio since launch in December 2015. During the volatile market environment caused by the Ukraine war, increasing HQHUJ\SULFHVDQGULVLQJJOREDOLQȵDWLRQ the Board held a number of additional ad hoc meetings with the Investment Manager. During the year under review the Board has also received regular reports from the marketing team at CCAM who are responsible for marketing the Company. The Management Engagement Committee met during the year and unanimously endorsed the continued appointment of the Company’s Investment Manager. 26 CC Japan Income & Growth Trust plc26 CC Japan Income & Growth Trust plc Key stakeholders Why it is important to engage Engagement and Key Board Decisions Service Providers As an externally managed investment trust, the Company conducts all its business through its key service providers. Before the engagement of a service provider, the Board ensures that the Company’s business outlook as well as its values are similar to those of the service provider. The Board has strong working relationships with the Investment Manager, Broker, Company Secretary, Administrator and Depositary. The Board receives internal control reports from the service providers and the Investment Manager. The continuance, or otherwise, of the engagement of the service providers are reviewed by the Board on an annual basis to ensure that the Company continues to receive high quality service at a competitive cost. In maintaining the Company’s reputation and high standards of business conduct, the board is provided with regular reports from the Company’s Broker and Company Secretary. These alert the Board to recent changes in regulation and market practice, as well as any likely reputational WKUHDWVZKLFKLQWXUQLQȵXHQFHWKH board’s decision-making process. The board also seeks annual assurance from its service providers as regards governance, including whistleblowing, prevention of tax evasion and anti-bribery policy and procedures. During the year under review, the Fund Services Division of PraxisIFM, the Company’s Company Secretary was acquired by Sanne Group plc, which was subsequently acquired by Apex Group. The Board have worked closely with the Company Secretary to ensure continuity of relationships, a smooth transition and no interruption to the service. STAKEHOLDER ENGAGEMENT continued CC Japan Income & Growth Trust plc 27 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION CC Japan Income & Growth Trust plc 27 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION Key stakeholders Why it is important to engage Engagement and Key Board Decisions Wider community and environment The Company and its appointed professional suppliers keep abreast of WKHUXOHVDQGUHJXODWLRQVDHFWLQJWKH investment company sector. The Investment Manager, CCAM, as steward of the Company’s assets, engages with investee companies to ensure high standards of governance. The investment strategy of the Company is predicated upon the improving standards of Shareholder governance in Japan and the commitment of investee companies to act in the interests of all stakeholders. The Company Secretary and AIFM regularly report to the Board any changes in the regulatory environment. As an Association of Investment Companies (“AIC”) member, the Board draws on their resources including the detailing of regulatory changes. The Company has articulated its policy on ESG factors involved in the investment decision making and evidence of constructive engagement with investee companies. See pages 19 to 21. The Company has given shareholders the option to receive electronic copies of annual reports and other information. The ESG policy is available on both the Company’s website and the AIC’s website. The Investment Manager is committed to being a responsible investor and applies, and is a signatory to, the United Nations Principles for Responsible Investment (PRI), which demonstrates its extensive HRUWVLQWHUPVRI(6LQWHJUDWLRQDFWLYH ownership, investor collaboration and transparency. Following the introduction of the UK Stewardship Code 2020 by the Financial Reporting Council (FRC), the Manager refreshed the explanation of its approach to the stewardship of its clients’ assets. This included the presentation of the Investment Manager’s Stewardship Approach and Policy. In 2022, the Investment Manager’s report on the Stewardship activities it undertook was submitted to the FRC (Stewardship Code Report). During the year, the FRC FRQȴUPHGWKDWWKH0DQDJHUKDGPHW the expected standard of reporting and it was listed as a signatory to the UK Stewardship Code 2020. The Investment Manager is also committed to the Principles of Japan’s Stewardship Code. Further information on CCAM’s approach to the principles and guidance of the 2020 Japan Stewardship Code can be found on their website: ZZZFRXSODQGFDUGLFRPMDSDQVWHZDUGVKLSFRGH 28 CC Japan Income & Growth Trust plc28 CC Japan Income & Growth Trust plc Key stakeholders Why it is important to engage Engagement and Key Board Decisions Wider community and environment continued The Board regularly reviews the governance engagement reports setting out the reasons why the Investment Manager has voted against investee company management recommendations or against the recommendations of third- party proxy advisors. The Directors are cognisant of their duties laid out under Section 172 of the Companies Act 2006 to make decisions taking into account the long-term consequences of all the Company’s key stakeholders and UHȵHFWWKH%RDUGȇVEHOLHIWKDWWKHORQJWHUPVXVWDLQDEOH success of the Company is linked directly to its key stakeholders. For and on behalf of the Board Harry Wells Chairman of the Board 23 January 2023 STAKEHOLDER ENGAGEMENT continued CC Japan Income & Growth Trust plc 29 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION CC Japan Income & Growth Trust plc 29 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION HOLDINGS IN PORTFOLIO AS AT 31 OCTOBER 2022 Company Sector Market value £’000 % of net assets Sumitomo Mitsui Financial Group Banks 10,702 5.3 Nippon Telegraph & Telephone Information & Communications 10,139 5.0 Mitsubishi UFJ Financial Group Banks 9,771 4.8 DIP Corporation Services 8,497 4.2 Sompo Holdings Insurance 8,294 4.1 Itochu Corp Wholesale 7,390 3.6 Softbank Corp Information & Communications 7,173 3.5 SBI Holdings Securities & Commodities 6,883 3.4 Tokio Marine Holdings Insurance 6,106 3.0 Hitachi Ltd Electrical Appliances 6,105 3.0 Noevir Chemicals 6,080 3.0 Toyota Transport Equipment 5,989 2.9 Shin-Etsu Chemical Chemicals 5,878 2.9 Asahi Holdings Nonferrous Metals 5,796 2.8 Socionext Electrical Appliances 5,519 2.7 Denso Transport Equipment 5,160 2.6 Carta Holdings Information & Communications 5,001 2.5 Nippon Gas Retail Trade 4,847 2.4 Nitto Denko Chemicals 4,774 2.3 Mitsubishi Wholesale 4,697 2.3 Tokyo Electron Electrical Appliances 4,602 2.3 Kyocera Electrical Appliances 4,334 2.1 Nippon Parking Real Estate 4,327 2.1 Intage Holdings Information & Communications 3,914 1.9 Open House Real Estate 3,854 1.9 Orix Other Financing Business 3,821 1.9 Tokyo Ohka Kogyo Chemicals 3,730 1.8 Technopro Holdings Services 3,601 1.8 Nintendo Other Products 3,537 1.7 Shoei Securities & Commodities 3,354 1.6 TRE Holdings Services 3,272 1.6 Kao Chemicals 3,259 1.6 GMO Internet Information & Communications 2,992 1.5 Murata Manufacturing Company Electrical Appliances 2,971 1.5 30 CC Japan Income & Growth Trust plc30 CC Japan Income & Growth Trust plc Company Sector Market value £’000 % of net assets SB Technology Information & Communications 2,963 1.5 Zozo Retail Trade 2,947 1.4 %HQHȴW2QH Services 2,405 1.2 Industrial & Infrastructure Real Estate 2,286 1.1 Aoyama Zaisan Networks Real Estate 1,811 0.9 Fujitec Machinery 861 0.4 Total holdings 199,642 98.1 Other net assets 3,940 1.9 Net asset value 203,582 100.0 HOLDINGS IN PORTFOLIO continued CC Japan Income & Growth Trust plc 31 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION CC Japan Income & Growth Trust plc 31 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION Sector % of net assets Information & Communications 15.9 Chemicals 11.6 Electrical Appliances 11.6 Banks 10.1 Services 8.8 Insurance 7.1 Real Estate 6.0 Wholesale 5.9 Transport Equipment 5.5 Securities & commodities 5.1 Other Sectors 10.5 Other net assets 1.9 Total 100.0 * Other Sectors comprise of 5 sectors, which individually, is less than 5.1% each of the net assets. TOP TEN CONTRACTS FOR DIFFERENCE (“CFDs”) AS AT 31 OCTOBER 2022 Company Sector Absolute value £’000 Absolute value as a % of net assets Market value £’000 Sumitomo Mitsui Financial Group Banks 2,140 1.1 123 Nippon Telegraph & Telephone Information & Communications 2,028 1.0 473 Mitsubishi UFJ Financial Group Banks 1,954 1.0 97 DIP Corporation Services 1,699 0.8 11 Sompo Holdings Insurance 1,659 0.8 326 Itochu Corp Wholesale 1,478 0.7 197 Softbank Corp Information & Communications 1,434 0.7 (32) SBI Holdings Securities & Commodities 1,377 0.7 (162) Tokio Marine Holdings Insurance 1,221 0.6 274 Hitachi Ltd Electrical Appliances 1,221 0.6 (9) Top Ten 16,211 8.0 1,298 Other 23,715 11.6 (1,398) Total 39,926 19.6 (100) TOP TEN SECTORS AS AT 31 OCTOBER 2022 32 CC Japan Income & Growth Trust plc32 CC Japan Income & Growth Trust plc The Directors present their report and accounts for the year ended 31 October 2022. Strategic report The Directors’ Report should be read in conjunction with the Strategic Report on pages 2 to 31. Corporate governance The Corporate Governance Statement on pages 37 to 42 forms part of this report. Legal and taxation status The Company is an investment company within the meaning of Section 833 of the Companies Act 2006. The &RPSDQ\FRQGXFWVLWVDDLUVWRPHHWWKHUHTXLUHPHQWV for approval as an investment trust under section 1158 of the Corporation Tax Act 2010. In the opinion of the Directors, the Company has met the conditions and requirements for approval as an investment trust for the year ended 31 October 2022 and intends to continue to do so. Management CCAM has been appointed as the Company’s Investment Manager and Alternative Investment Fund Manager (the “Investment Manager” or the “AIFM”). CCAM is authorised and regulated by the Financial Conduct Authority. The Investment Management Agreement is subject to not less than six months’ written notice. There is no compensation payable on termination of the agreement. The Investment Manager is entitled to remuneration each month at a rate equivalent to one twelfth of 0.75% of the Net Asset Value of the Company. In accordance with the Directors’ policy on the allocation of expenses between revenue and capital, 80% of the management fee is charged to capital and the remaining 20% to revenue. The Board reviews this policy on a periodic basis and FRQȴUPVWKLVDOORFDWLRQUHPDLQVFRQVLVWHQWZLWKWKHLU expectations of future returns from the portfolio. Management engagement The Board carefully reviewed the Investment Manager’s DSSRLQWPHQWGXULQJWKH\HDU7KH'LUHFWRUVDUHVDWLVȴHG that the Investment Manager has the suitable skills and experience to manage the Company’s investments and believes that the continuing appointment of the Investment Manager is in the interests of Shareholders as a whole. Since inception, the Company has met its objectives set out in the prospectus in relation to the annual dividend, which has risen every year since inception. Alternative Investment Fund Managers Directive (“AIFMD”) In accordance with the AIFMD, the Company has appointed CCAM as its Alternative Investment Fund Manager (“AIFM”). The AIFM must ensure that an annual report containing certain information on the Company is PDGHDYDLODEOHWRLQYHVWRUVIRUHDFKȴQDQFLDO\HDU7KH FCA Investment Funds Sourcebook (the “Sourcebook”) details the requirements of the annual report. All the information required by those rules is included in this Annual Report or will be made available on the AIFM’s website: (www.ccjapanincomeandgrowthtrust.com/ccji-documents/report-accounts). The AIFM is required to make certain disclosures on its remuneration in respect of the AIFM’s relevant reporting period which is the year ended 31 December 2021. These disclosures are available on the AIFM’s website ZZZFRXSODQGFDUGLFRPDLIPUHPXQHUDWLRQGLVFORVXUH or are available on request from the AIFM. Leverage (under AIFMD) The AIFM is required to set leverage limits as a percentage of net assets for the Company utilising methods prescribed under AIFMD. These methods are known as the gross method and the commitment method. Under both methods the AIFM has set current maximum limits of leverage for the Company of 200%. A leverage percentage of 100% equates to nil leverage. The Company’s leverage under each of these methods at its year end is shown below: Gross method Commitment method Maximum leverage limit 200% 200% Actual leverage at 31 October 2022 119% 118% Dividend policy The Company intends to pay dividends on a semi-annual basis, with dividends normally declared in January/ February and June and paid in March and July/August in each year, and to grow the dividend over time. The semi-annual dividends will not necessarily be of equal amounts. In accordance with regulation 19 of the Investment Trust (Approved Company) (Tax) Regulations 2011, the Company will not (except to the extent permitted by those regulations) retain more than 15% of its income (as calculated for UK tax purposes) in respect of an accounting year. In order to increase the distributable reserves available to facilitate the payment of future dividends, the amount DIRECTORS’ REPORT CC Japan Income & Growth Trust plc 33 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION CC Japan Income & Growth Trust plc 33 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION standing to the credit of the share premium account of the Company immediately following completion of WKHȴUVWLVVXHRI2UGLQDU\6KDUHVRQ'HFHPEHU was cancelled and transferred to a special distributable reserve. The Company may, at the discretion of the Board, pay all or part of any future dividends out of this special distributable reserve, taking into account the Company’s investment objective. Dividends will normally be funded through distributions from portfolio companies including dividends and other distributions, taking account of share buybacks by portfolio companies. The Company declared an interim dividend of 1.40p per 2UGLQDU\6KDUHLQ-XQHZKLFKZDVSDLGRQb$XJXVW 2022. On 20 January 2023, the Company declared a second interim dividend in respect of the year ended b2FWREHURI3.50p per Ordinary Share, which, will be paid on 3 March 2023, to Shareholders on the register at 3 February 2023. General authority to issue shares A general authority to issue up to 13,473,061 Ordinary Shares and to disapply pre-emption rights when issuing those shares was granted at the Company’s last Annual General Meeting. This authority will expire at the time of the Annual General Meeting to be held in March 2023. During the year ended 31 October 2022, the Company did not utilise its authority to issue shares. However, the Board recommends that the Company is granted a new authority to issue up to a maximum of 13,473,061 Ordinary Shares (representing approximately 10% of the shares in issue at the date of this document) and to disapply pre-emption rights when issuing those 2UGLQDU\6KDUHV5HVROXWLRQVWRWKLVHHFWZLOOEHSXWWR Shareholders at the Annual General Meeting. Any Ordinary Share issues will be issued at a premium to (cum income) Net Asset Value. Treasury shares The Companies Act allows companies to hold shares acquired by way of market purchases to be held as treasury shares, rather than having to cancel them. This would give the Company the ability to re-issue Ordinary 6KDUHVTXLFNO\DQGFRVWHHFWLYHO\WKHUHE\LPSURYLQJ liquidity and providing the Company with additional ȵH[LELOLW\LQWKHPDQDJHPHQWRILWVFDSLWDOEDVH1R Ordinary Shares will be sold from treasury at a price less than the (cum income) Net Asset Value per existing Ordinary Share at the time of their sale unless they are ȴUVWRHUHGSURUDWDWRH[LVWLQJ6KDUHKROGHUV No Ordinary Shares were bought back during the year ended 31 October 2022 and no Ordinary Shares are currently held in treasury. Discount management The Directors recognise the importance to existing Shareholders of the Ordinary Shares not trading at a VLJQLȴFDQWGLVFRXQWWRWKHLUSUHYDLOLQJ1$97RWKHH[WHQW WKDWWKH2UGLQDU\6KDUHVWUDGHDWDVLJQLȴFDQWGLVFRXQW to their prevailing NAV, the Board will consider whether, in the light of the prevailing circumstances, the Company should purchase its own Ordinary Shares, whether pursuant to the general authority referred to below or SXUVXDQWWRWHQGHURHUVPDGHRQDSSURSULDWHWHUPV There is, however, no guarantee or assurance that any discount control mechanisms proposed by the Board will reduce any discount. The Directors currently have the authority to make market purchases of up to 20,196,118 Ordinary Shares. The maximum price (exclusive of expenses) which may be paid for an Ordinary Share must not be more than the higher of: (i) 5 per cent. above the average of the PLGPDUNHWYDOXHVRIWKH2UGLQDU\6KDUHVIRUWKHȴYH Business Days before the purchase is made: or (ii) the higher of the price of the last independent trade and the highest current independent bid for the Ordinary Shares. Ordinary Shares will be repurchased only at prices below the prevailing NAV per Ordinary Share, ZKLFKVKRXOGKDYHWKHHHFWRILQFUHDVLQJWKH1$9SHU Ordinary Share for remaining shareholders. It is intended that a renewal of the authority to make market purchases will be sought from Shareholders at each Annual General Meeting of the Company and such a resolution will put forward at the forthcoming Annual General Meeting. Purchases of Ordinary Shares will be made within guidelines to be established from time to time by the Board. Any purchase of Ordinary Shares would be made only out of the available cash resources of the Company and when shares are trading at a price that is below the then prevailing NAV per Ordinary shares. Ordinary Shares purchased by the Company may be held in treasury or cancelled. Purchases of Ordinary Shares may be made only in accordance with the Companies Act, the Listing Rules and the Disclosure Guidance and Transparency Rules. Life of the Company 7KH&RPSDQ\KDVQRȴ[HGOLIHEXWSXUVXDQWWRWKH Articles, an ordinary resolution for the continuation of the Company will be proposed at the Annual General Meeting every three years. The last vote was in March 2022, with 99.97% of shareholders voting for the continuation of the Company. The next continuation vote will be proposed at the AGM to be held in 2025. Upon any such resolution not being passed, within 90 GD\VSURSRVDOVZLOOEHSXWIRUZDUGWRWKHHHFWWKDWWKH Company be wound up, liquidated, reconstructed or unitised. 34 CC Japan Income & Growth Trust plc34 CC Japan Income & Growth Trust plc Market information The Company’s share capital is admitted to the premium OLVWLQJVHJPHQWRIWKH2ɝFLDO/LVWRIWKH)LQDQFLDO Conduct Authority and admitted to trading on the London Stock Exchange. The NAV per share is calculated in sterling for each business day that the London Stock Exchange is open for business. The daily NAV per share is published through a regulatory information service. Bank overdraft facility The Company has a bank overdraft facility with The Northern Trust Company. Under the terms of the facility a maximum of £12 million, or the equivalent in Japanese Yen, can be drawn down. As at the year end, the equivalent of £1,903,000 (2021: £2,936,000) of the overdraft facility has been utilised on the Japanese yen bank account. Derivatives The Company may utilise long only contracts for GLHUHQFHRUHTXLW\VZDSVIRUJHDULQJDQGHɝFLHQW portfolio management purposes. Where the Company uses such instruments, it takes a credit risk with regard to the parties with whom it trades and may also bear the risk of settlement default. As at 31 October 2022, the Company held contracts for GLHUHQFHZLWKDQDEVROXWHH[SRVXUHRIe (2021: £44,055,000). Financial instruments 7KHȴQDQFLDOLQVWUXPHQWVRIWKH&RPSDQ\JHQHUDWH liquidity risk, credit risk and market risk. An explanation of these risks and how they are managed; and the policy DQGSUDFWLFHZLWKUHJDUGWRȴQDQFLDOLQVWUXPHQWVDUH FRQWDLQHGLQQRWHRIWKHȴQDQFLDOVWDWHPHQWV Depositary and custodian 7KHGHSRVLWDU\RIWKH&RPSDQ\KDVFKDQJHGZLWKHHFW from 27 November 2021. The depositary is the entity we are required by regulation to appoint to carry out certain services in relation to the Company, namely, safekeeping of the assets, cash monitoring and regulatory oversight. The depositary of the Company was Northern Trust Global Services SE, UK branch (“NTGS-UK”). NTGS-UK is the UK branch of Northern Trust Global Services SE, which is a bank established in Luxembourg, and was permitted to provide trustee and depositary services into the UK by virtue of having extra permissions in the UK. As a consequence of the UK’s decision to leave the (XURSHDQ8QLRQKRZHYHUWKH8.ȴQDQFLDOVHUYLFHV regulator which regulates NTGS-UK, the Financial Conduct Authority (“FCA”), has provided that UK branches of EU banks are no longer able to provide trustee and depositary services into the UK and those services have to be provided from a UK incorporated FRPSDQ\7KH)&$KDVSURYLGHGDJUDFHSHULRGIRUȴUPV to implement the new rules which came into force on 1 January 2021. In order to comply with the new rules, Northern Trust has established Northern Trust Investor Services Limited (“NTISL”) to be the new trustee and depositary. NTISL is a company established in England and Wales and is authorised by the FCA to be a trustee and depositary. NTISL provides the same services as NTGS-UK, with the same processes and procedures in place. The change of depositary took place on 27 November 2021. Company Secretary and administrator Apex Listed Companies Services (UK) Limited provide company secretarial and administration services to the Company, including calculation of its daily Net Asset Value. Sanne Group acquired the PraxisIFM Funds Business in December 2021 and Sanne Group was subsequently acquired by the Apex Group in August 2022. However, the personnel servicing the Company’s business remain largely unchanged including the continuing appointment of the Company Secretary. Capital structure and voting rights $WWKHȴQDQFLDO\HDUHQGWKH&RPSDQ\ȇVLVVXHGVKDUH capital comprised 134,730,610 Ordinary Shares of 1p nominal value. Each Ordinary Share held entitles the holder to one vote. All shares carry equal voting rights and there are no restrictions on those voting rights. Voting deadlines are stated in the Notice of Annual General Meeting and Form of Proxy and are in accordance with the Companies Act 2006. There are no restrictions on the transfer of Ordinary Shares, nor are there any limitations or special rights associated with the Ordinary Shares. A General Meeting was held on 15 February 2021 to approve the 1 for 5 Bonus Issue of the TSS. Following admission of the TSS on 18 February 2021 there were 26,946,122 TSS in issue. TSS holders are not entitled to attend or vote at meetings of Shareholders. DIRECTORS’ REPORT continued CC Japan Income & Growth Trust plc 35 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION CC Japan Income & Growth Trust plc 35 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION 6LJQLȴFDQW6KDUHKROGHUV As at 31 October 2022, the Directors have been formally QRWLȴHGRIWKHIROORZLQJVKDUHKROGLQJVFRPSULVLQJ or more of the issued share capital of the Company in accordance with DTR 5 (The Disclosure and Guidance Transparency Directive): 6LJQLȴFDQW6KDUHKROGHUV Holding % 1607 Capital Partners LLC 25,319,623 18.79 Rathbone Investment Management Ltd 13,404,704 9.95 City of London Investment Management Company Limited 6,589,431 4.89 Close Asset Management Limited 6,778,757 5.03 WM Thomson 6,454,660 4.79 Charles Stanley Group PLC 5,689,763 4.22 J M Finn Nominees Limited 5,455,300 4.05 Brooks Macdonald Asset Management Limited 4,725,154 3.51 6LQFHWKH\HDUHQGWKH&RPSDQ\KDVEHHQQRWLȴHGRI one change to the above shareholdings, being 1607 Capital Partners LLC, who have sold 2,429,241 Ordinary Shares, resulting in a holding of 16.99% of the issued share capital of the Company. Settlement of ordinary share transactions Settlement of Ordinary Share transactions in the Company are settled by the CREST share settlement system. Political donations The Company does not make political donations. Notice of general meetings For the Annual General Meeting at least twenty-one days’ notice shall be given to all the members and to the auditors. All other general meetings shall also be convened by not less than twenty-one days’ notice to all those members and to the auditors. A special resolution will be proposed at the Annual General Meeting to renew the authority to reduce the period of notice for General Meetings to fourteen days. Reduced notice will be used only under exceptional circumstances. Going concern The Directors have adopted the going concern basis in preparing the accounts. The following is a summary of the Directors’ assessment of the going concern status of the Company, which should be read in conjunction with the Viability Statement on pages 12 and 13. The Company’s ability to continue as a going concern for the period assessed by the Directors, being the period to 31 January 2024 which is at least 12 months from the GDWHWKHȴQDQFLDOVWDWHPHQWVZHUHDXWKRULVHGIRULVVXH This assessment took account of the war in Ukraine and the ongoing impact of the Covid-19 pandemic. These uncertainties have created supply chain disruption and H[DFHUEDWHGLQȵDWLRQDU\SUHVVXUHVZRUOGZLGH7KH Company’s principal risks are market-related and the current extreme market conditions have demonstrated the resilience of the Company and its investment objective and policy. An explanation of the market, liquidity and credit risks and how they are managed is contained in note 16WRWKHȴQDQFLDOVWDWHPHQWV In reaching this conclusion, the Directors have also considered the liquidity of the Company’s portfolio of investments as well as its cash position, income, DQGH[SHQVHȵRZV7KH&RPSDQ\ȇVQHWDVVHWVDVDW October 2022 were £203.6 million (2021: £222.9 million). As at 31 October 2022, the Company held £199.6 million in quoted investments (2021: £220.3 million) and had cash of £1.4 million (2021: £0.05 million overdraft). The WRWDOH[SHQVHVH[FOXGLQJȴQDQFHFRVWVDQGWD[DWLRQ for the year ended 31 October 2022 were £2.3 million (2021: £2.2 million), which represented approximately 1.06% (2021: 1.05%) of average net assets during the year. At the date of approval of this report, based on the aggregate of investments and cash held, the Company has substantial operating expenses cover. The Directors have fully considered and assessed the Company’s portfolio of investments. A prolonged and deep market decline could lead to falling values to the LQYHVWPHQWVRULQWHUUXSWLRQVWRFDVKȵRZ+RZHYHUWKH &RPSDQ\FXUUHQWO\KDVPRUHWKDQVXɝFLHQWOLTXLGLW\ available to meet future obligations. In accordance with the Company’s Articles of Association, shareholders have the right to vote on the continuation of the Company as an investment trust HYHU\WKUHH\HDUVDQGDUHVROXWLRQWRWKDWHHFWZDVODVW approved at the AGM on 22 March 2022. Appointment and replacement of Directors The rules governing the appointment and replacement of Directors are contained in the Company’s Articles of Association which requires that Board members retire at every third AGM after appointment. However, the Board has agreed that all Directors will be subject to annual re-election. 36 CC Japan Income & Growth Trust plc36 CC Japan Income & Growth Trust plc If a Board member does not put themselves forward for re-election at the Annual General Meeting, or the resolution to re-elect them to the Board fails, they will step down. Furthermore, the Board may determine that a Board member may decide to step down at any time. No Board member is subject to compensation for loss of RɝFH Articles of Association Any amendment of the Company’s Articles of Association requires shareholder approval. Directors’ indemnities Details on the Directors’ indemnities in place are provided in the Directors’ Remuneration Implementation Report. Auditor information Each of the Directors at the date of the approval of this UHSRUWFRQȴUPVWKDW (i) so far as the Director is aware, there is no relevant audit information of which the Company’s auditor is unaware; and (ii) the Director has taken all steps that they ought to have taken as Director to make themself aware of any relevant information and to establish that the Company’s auditor is aware of that information. 7KLVFRQȴUPDWLRQLVJLYHQDQGVKRXOGEHLQWHUSUHWHG in accordance with the provisions of Section 418 of the Companies Act 2006. In accordance with Section 489 of the Companies Act 2006, a resolution to re-appoint Ernst & Young LLP as the Company’s auditor will be put forward at the forthcoming Annual General Meeting. Future trends 'HWDLOVRIWKHPDLQWUHQGVDQGIDFWRUVOLNHO\WRDHFW the future development, performance and position of the Company’s business can be found in the Investment Manager’s Report section of this Strategic Report on pages 8 and 9)XUWKHUGHWDLOVDVWRWKHULVNVDHFWLQJ the Company are set out in the ‘Principal and Emerging Risks and Uncertainties’ on pages 14 to 18. Annual General Meeting The Company’s forthcoming AGM will be held at 12 p.m. on 1 March 2023. The Notice of the AGM can be found on pages 89 and 90 of this Annual Report and downloaded from the website. By order of the Board Ciara McKillop For and on behalf of Apex Listed Companies Services (UK) Limited Company Secretary 23 January 2023 DIRECTORS’ REPORT continued CC Japan Income & Growth Trust plc 37 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION CC Japan Income & Growth Trust plc 37 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION Introduction The Listing Rules and the Disclosure Guidance and Transparency Rules of the UK Listing Authority (“Listing Rules”) require listed companies to disclose how they have applied the principles and complied with the provisions of The UK Corporate Governance Code 2018 (the “UK Code”), as issued by the Financial Reporting Council (“FRC”). The UK Code can be viewed on the FRC’s website. The Board of the Company has considered the Principles and Provisions of the 2019 Association of Investment Companies Code of Corporate Governance (the “AIC Code”). The AIC Code addresses the Principles and Provisions set out in the UK Code, as well as setting RXWDGGLWLRQDO3URYLVLRQVRQLVVXHVWKDWDUHRIVSHFLȴF relevance to the Company, as an investment trust. The AIC Code is available on the AIC website (www.theaic.co.uk). It includes an explanation of how the AIC Code adapts the Principles and Provisions set out in the UK Code to make them relevant for investment companies. The Board considers that reporting against the Principles and Provisions of the AIC Code, which has been endorsed by the FRC, provides more relevant information to shareholders. AIC members who report against the AIC Code fully meet their obligations under the UK Code and the related disclosure requirements contained in the Listing Rules. 'XULQJWKHȴQDQFLDO\HDUHQGHG2FWREHUWKH Company has complied with the recommendations of the AIC Code and the relevant provisions of The UK Corporate Governance Code, except as set out below. The UK Corporate Governance Code includes provisions relating to: (i) the role of the chief executive; (ii) executive Directors’ remuneration; and (iii) the need for an internal audit function. The Board considers that these provisions are not relevant to this externally managed investment company. The Company has no employees and the day- to-day management and administrative functions are outsourced to third parties. The Board of Directors $VDW2FWREHUWKH&RPSDQ\KDGȴYHQRQ executive Directors including the Chairman, comprising three male (60%) and two female (40%) directors. On 1 February 2022, June Aitken and Craig Cleland joined the Board, bringing with them a wealth of experience and skills. Biographical details can be found on pages 37 and 38. As part of the recruitment process, the Board was mindful of the Company’s policy on diversity which is contained in the Corporate Governance statement (see pages 39 and 40). John Scott who had served as a Non-Executive Director since the launch of the Company in December 2015, retired from the Board during the year, at the Company’s AGM on 22 March 2022. Peter Wolton is the Senior Independent Director and Kate Cornish-Bowden is the Audit and Risk Committee Chair. All Directors, including the Chairman, Harry Wells are regarded as independent of the Company’s Investment Manager. The Board believes that during the year ended b2FWREHULWVFRPSRVLWLRQZDVDSSURSULDWHIRUDQ investment company of the Company’s nature, meeting both gender and ethnic diversity guidelines. Further information can be found on page 40. $OORIWKH'LUHFWRUVDUHDEOHWRDOORFDWHVXɝFLHQWWLPH to the Company to discharge their responsibilities HHFWLYHO\ The Directors have a broad range of relevant experience to meet the Company’s requirements and their biographies are given below: Harry Wells (Chairman) Harry has over 45 years’ experience of investment markets, primarily as an institutional stockbroker VSHFLDOLVLQJLQWKH$VLD3DFLȴFUHJLRQEDVHGLQ/RQGRQ and Hong Kong, latterly as a Managing Director of Salomon Smith Barney. Harry has extensive investment trust experience previously serving as a non-executive Director and Chairman of both Martin Currie Asia Unconstrained Investment Trust PLC and The Establishment Investment Trust PLC. Harry holds an MA degree in Land Economy from Cambridge University and is a Fellow of the Chartered Institute for Securities and Investment and a Member of the Royal Institution of Chartered Surveyors. Kate Cornish-Bowden (Director and Chair of the Audit and Risk Committee) Kate worked for Morgan Stanley Investment Management for 12 years, where she was a Managing Director and head of Morgan Stanley Investment Management’s Global Core Equity business. Prior to joining Morgan Stanley, Kate worked for M&G Investment Management as a research analyst. Kate is a non-executive Director and Chair of International Biotechnology Trust plc, non-executive Director and Senior Independent Director of Schroder Oriental Income Fund Limited and a non- executive Director of Finsbury Growth & Income Trust plc. Kate was formerly CORPORATE GOVERNANCE 38 CC Japan Income & Growth Trust plc38 CC Japan Income & Growth Trust plc the Chair of the Audit Committee of Calculus VCT plc. Kate is an Associate of the Institute of Investment Management and Research (formerly AIMR, now Chartered Financial Analyst Institute)’ holds a Master’s in Business Administration (MBA), and has completed the Financial Times Non-Executive Director Diploma. She is also a Mentor for The Prince’s Trust. Peter Wolton (Senior Independent Director) Peter has wide experience of Japan and the investment trust sector. He was resident in Tokyo from 1994 to 1998 where he was responsible for Schroders’ asset management activities and, from 1996, Schroders’ Country Head. He is a former Director of Dunedin Income Growth Investment Trust plc, TR Property Investment Trust plc and Schroder Japan Growth Fund plc. He commenced his career with Savills, qualifying as a Chartered Surveyor in 1980. From 1983 until 2001 he worked for Schroders, specialising in the management of UK equity portfolios for pension funds and charities until 1993 when he was transferred to Japan. From 1998 to 2001 he headed Schroders’ global retail businesses DQGIURPWRZDV&KLHI([HFXWLYH2ɝFHURI the Investment Management Group of Baring Asset Management. Peter has degrees in Land Economy from Cambridge University and Contextual Theology from Middlesex University. June Aitken (Director) June has over 30 years of experience in Asian and emerging equity markets, and held numerous senior roles at HSBC Bank plc, London and at UBS AG. June is a non-executive director of JP Morgan Asia Growth and Income plc, Greengage Global Holding, BBGI Global Infrastructure S.A., and Schroder Income Growth Fund plc. She is also Chair of PEAL Capital Partners UK Limited. June was previously on the board of HSBC Bank Japan, $TXDULXV)XQGDQ$VLDQȴ[HGLQFRPHIXQG$XVWUDOLDQ Securities Exchange listed Emerging Markets Masters Fund and the Asian Masters Fund Limited, Erudine +ROGLQJV/WGDȴQDQFLDOVRIWZDUHFRQVXOWDQF\ȴUP and the Shepherds Bush Housing Group. She was a founding partner and investor of Osmosis Investment Management LLP. June holds a degree in Politics, Philosophy and Economics from Oxford University and is a member of the Chartered Banker Institute. Craig Cleland (Director) Craig has over 35 years of investment trust and fund management experience. Since 2013, he has been Head of Corporate Development: Investment Trusts (on a part-time basis) at CQS (UK) LLP, a multi-asset asset PDQDJHPHQWȴUPLQ/RQGRQEXVLQHVVZLWKDIRFXVRQ credit markets. He is also a Non-Executive Director of Invesco Select Trust plc and BlackRock Latin American Investment Trust. Craig also served as a member of the AIC Technical Committee for 10 years and is an Associate of the Institute of Bankers in Scotland. Craig was a Managing Director at JPMorgan Asset Management (UK) Limited as a Client Director of their investment trust business. He was also Director and Senior Company Secretary at Fleming Investment Trust Management, transferring to JPMorgan Chase after the acquisition of Robert Fleming Holdings Limited. Responsibilities of the Chairman, the Board, and its Committees The Chairman leads the Board and is responsible for LWVRYHUDOOHHFWLYHQHVVLQGLUHFWLQJWKHDDLUVRIWKH Company. The Company has adopted a document setting out the responsibilities of the Chairman. Tenure, Independence and Succession Generally, Directors are initially appointed by the Board, until the following AGM when, as required by the Company’s Articles of Association, they will stand for election by Shareholders. All Directors will stand for annual re-election on a voluntary basis. 7KH%RDUGUHFRJQLVHVWKHEHQHȴWVWRWKH&RPSDQ\ of having longer serving Directors together with progressive refreshment of the Board. The Board does not believe that length of service in itself necessarily GLVTXDOLȴHVD'LUHFWRUIURPDFWLQJLQGHSHQGHQWO\ However, the Board will take into account the requirements of the AIC Code when making a recommendation for a Director’s reappointment. Accordingly, the Board may decide to recommend a director with more than nine years’ service for re- election at the Company’s AGM. In order to ensure continuity, the Board has adopted corporate governance best practice and has a succession plan in place that allows for gradual refreshment. No Director of the Company has served for nine years or more and all Directors remain independent of the Company’s Investment Manager. However, the Board is mindful that two of the Board members would reach their ninth anniversary simultaneously on 10 November 2024. Following the decision of John Scott to retire at the March 2022 AGM, and in accordance with the succession plan, the Board began a recruitment process and engaged the services of recruitment specialists, Cornforth Consulting. Cornforth Consulting is independent of both the Company and individual directors. Following an extensive search and thorough interview and selection process, the Nomination Committee recommended June Aitken and Craig Cleland to the Board. The Board subsequently appointed June $LWNHQDQG&UDLJ&OHODQGZLWKHHFWIURP)HEUXDU\ 2022. CORPORATE GOVERNANCE continued CC Japan Income & Growth Trust plc 39 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION CC Japan Income & Growth Trust plc 39 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION Subject to re-election by Shareholders at this year’s AGM and in accordance with the Company’s succession plan, the Chairman will retire at the AGM in March 2024, having served since launch. It is also the intention that Peter Wolton, Senior Independent Director, also appointed at launch, will retire before the end of 2023. The Board intends to initiate a recruitment process DVSDUWRILWVRQJRLQJVXFFHVVLRQHRUWDQGDVHDUFK consultant will be appointed during 2023 to identify a new candidate for the Board with complementary skills. During the selection process, the Board will consider the EHQHȴWVRIGLYHUVLW\LQFOXGLQJJHQGHUDQGHWKQLFLW\7KDW said, the Board’s position is to appoint candidates based on merit and appropriate experience. Induction and Training and Performance Appraisal On appointment, each Director receives a complete induction programme including the opportunity to meet with the Investment manager and other service providers. The Directors receive other relevant training as necessary. $SROLF\RILQVXUDQFHDJDLQVW'LUHFWRUVȇDQG2ɝFHUVȇ liabilities is maintained by the Company. A procedure has been adopted for Directors, in the furtherance of their duties, to take independent professional advice at the expense of the Company. Copies of the Directors’ appointment letters are available on request from the Company Secretary. Board committees Audit and Risk Committee A report on pages 48 to 50 provides details of the role and composition of the Audit and Risk Committee together with a description of the work of the Audit Committee in discharging its responsibilities. Management Engagement Committee The Company has a Management Engagement Committee which is chaired by the Chairman of the Company, Harry Wells, and consists of all the Directors. The Management Engagement Committee’s principal duties are to consider the terms of appointment of the Investment Manager and to review annually the appointment and the terms of the Investment Management Agreement. The Management Engagement Committee also reviews the continued appointment and performance of the Company’s other service providers. Nomination Committee The Company also has a Nomination Committee which is chaired by the Chairman of the Company, Harry Wells. The Nomination Committee is responsible for identifying DQGSURSRVLQJFDQGLGDWHVIRUWKHRɝFHRI'LUHFWRU of the Company. The Nomination Committee also considers and reviews the fees payable to the Directors and makes recommendations regarding such fees to the Board. The terms of reference for these committees can be found on the Company’s website: https://www.ccjapanincomeandgrowthtrust.com/ccji- documents/prospectus-terms-of-reference-disclosures Board diversity The Company’s policy is that the Board should have an appropriate level of diversity in the boardroom, taking into account relevant skills, experience, gender, social and ethnic backgrounds, cognitive and personal strengths. Brief biographies of the Directors are shown on pages 37 and 38. The policy is to ensure that the Company’s Directors bring a wide range of knowledge, experience skills, backgrounds and perspectives to the Board. There will be no discrimination on the grounds of gender, religion, race, ethnicity, sexual orientation, age or physical ability. The overriding aim of the policy is to ensure that the Board is composed of the best FRPELQDWLRQRISHRSOHIRUHQVXULQJHHFWLYHRYHUVLJKW of the Company and constructive support and challenge to the Investment Manager. Consideration is given to the recommendations of the AIC Code and the Board supports the recommendations of the Hampton Alexander Review. The Board appraises its collective set of cognitive and personal strengths, independence and diversity on an annual basis, and especially during the recruitment process, so as to ensure it is aligned with the Company’s strategic priorities. The performance appraisal process is described below. The Board believes its composition is appropriate for the Company’s circumstances. However, in line with the Board’s succession planning and tenure policy, or should strategic priorities change, the Board will review and, if required, adjust its composition. As at date of this Report, the Board comprises two female and three male Board members. The Board will take account of the targets set out in the FCA’s Listing Rules, which are set out below. The Board voluntarily discloses the following information in relation to its diversity. As an externally managed investment FRPSDQ\WKH%RDUGHPSOR\VQRH[HFXWLYHVWDDQG WKHUHIRUHGRHVQRWKDYHDFKLHIH[HFXWLYHRɝFHU&(2 RUDFKLHIȴQDQFLDORɝFHU&)2ȂERWKRIZKLFKDUH deemed senior board positions by the FCA. However, the Board considers the Chair of the Audit Committee to be a senior board position and the following disclosure is made on this basis. Other senior board positions recognised by the FCA are Chair of the Board and Senior Independent Director (SID). In addition, the Board has resolved that the Company’s year end date be the most appropriate date for disclosure purposes. The following information has been provided by each Director. There have been no changes since 31 October 2022. 40 CC Japan Income & Growth Trust plc40 CC Japan Income & Growth Trust plc Board as at 31 October 2022 Number of Board members Percentage of the Board Number of senior positions on the Board Men 3 60% 2 Women 2 40% 1 Prefer not to say ȂȂȂ Number of Board members Percentage of the Board Number of senior positions on the Board White British or Other White (including minority-white groups) 4 80% 3 Asian/Asian British 1 20% Ȃ Prefer not to say ȂȂȂ Meeting attendance The number of formal meetings of the Board and Committees held during the year ended 31 October 2022 are as follows, together with individual Directors’ attendance at those meetings. Quarterly Board Audit and Risk Committee Management Engagement Committee Nomination Committee Number of meetings held 4 2 1 1 Harry Wells 4 2 1 1 Kate Cornish-Bowden 4 2 1 1 John Scott 1 1 ȂȂ Peter Wolton 4 2 1 1 June Aitken 4 1 1 1 Craig Cleland 4 1 1 1 * John Scott attended all meetings before his retirement from the Board on 22 March 2022. ** Craig Cleland and June Aitken were appointed following the February 2022 Audit and Risk Committee meeting and have attended all meetings since their appointment. There were several other ad hoc Board and Committee meetings to deal with administrative matters, board selection, market updates and approve documentation. Performance appraisal A performance review of the Investment Manager was undertaken using a programme of open and closed ended questions from each of the Board members which were reviewed by the Chairman of the Management Engagement Committee and discussed with the Board. The results were considered, and the Board concluded that the continued appointment of the Investment Manager was in the best interests of the Company’s shareholders. The Committee separately considered each of its other service providers and concluded that their continued appointment was in the best interests of the Company’s shareholders. However, as outlined in the Chairman’s statement and the Report of the Audit and Risk Committee and following a competitive tender process, CORPORATE GOVERNANCE continued CC Japan Income & Growth Trust plc 41 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION CC Japan Income & Growth Trust plc 41 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION the Board has agreed to appoint Johnston Carmichael as the Company’s new Auditors for the year ending 31 October 2023, subject to Shareholder approval at the forthcoming AGM. A formal annual performance appraisal process is performed on the Board, the committees and the individual Directors. A programme consisting of open and closed ended questions was used as the basis for this appraisal. The results were reviewed by the Chairman of the Nomination Committee and discussed with the Board. A separate appraisal of the Chairman has been carried out by the other members of the Board and the results reported back by the Senior Independent Director to the Chairman. The results of the performance evaluation were positive and demonstrated that the Board, Chairman, Committee Chairs and individual Directors showed the necessary commitment and have the requisite experience for the IXOȴOPHQWRIWKHLUGXWLHV &RQȵLFWVRIΖQWHUHVW As required by law, a Director must avoid a situation ZKHUHKHRUVKHKDVDQLQWHUHVWWKDWFRQȵLFWVZLWK the Company’s interests. The Company’s Articles of Association provide the Directors authority to authorise SRWHQWLDOFRQȵLFWVRILQWHUHVW7KH'LUHFWRUVDUHDEOHWR impose limits or conditions when giving authorisation if they think this is appropriate. The procedure observed E\WKH%RDUGLQFRQVLGHULQJGHDOLQJZLWKFRQȵLFWHG matters is as follows: ȏ $Q\%RDUGPHPEHUVRFRQȵLFWHGPXVWUHFXVH themself from the discussion involving the relevant FRQȵLFW • Only Directors who have no interest in the matter being considered are able to debate the matter and take the relevant decision; and • In taking the decision the Directors must act in a way they consider, in good faith, will be most likely to promote the Company’s success. 7KH'LUHFWRUVKDYHGHFODUHGDQ\SRWHQWLDOFRQȵLFWV of interest to the Company. These are entered into WKH&RPSDQ\ȇVUHJLVWHURISRWHQWLDOFRQȵLFWVZKLFK is reviewed regularly by the Board. The Directors are obliged to advise the Company Secretary as soon as they EHFRPHDZDUHRIDQ\SRWHQWLDOFRQȵLFWVRILQWHUHVW Internal control The AIC Code requires the Board to review the HHFWLYHQHVVRIWKH&RPSDQ\ȇVV\VWHPRILQWHUQDO controls. The Board recognises its ultimate responsibility for the Company’s system of internal controls and for PRQLWRULQJLWVHHFWLYHQHVV7KHV\VWHPRILQWHUQDO controls is designed to manage rather than eliminate the risk of failure to achieve business objectives. It can provide only reasonable assurance against material misstatement or loss. The Board has undertaken a review of the aspects covered by the guidance and has LGHQWLȴHGULVNPDQDJHPHQWFRQWUROVLQWKHNH\DUHDVRI VWUDWHJLFDQGEXVLQHVVULVNȴQDQFLDOULVNRSHUDWLRQDO risk, and regulatory and compliance risk. The Board believes that the existing arrangements, set out below, represent an appropriate framework to meet the internal control requirements. The Directors have kept XQGHUUHYLHZWKHHHFWLYHQHVVRIWKHLQWHUQDOFRQWURO system throughout the year and up to the date of this report. The system in place accords with The FRC’s 2014 ‘Guidance on Risk Management, Internal Control and Related Financial and Business Reporting’. Financial aspects of internal control 7KH'LUHFWRUVDUHUHVSRQVLEOHIRUWKHLQWHUQDOȴQDQFLDO control systems of the Company and for reviewing their HHFWLYHQHVV7KHVHDLPWRHQVXUHWKHPDLQWHQDQFHRI SURSHUDFFRXQWLQJUHFRUGVWKHUHOLDELOLW\RIWKHȴQDQFLDO information upon which business decisions are made and which is used for publication and that the assets of the Company are safeguarded. As stated above, the Board has contractually delegated to external agencies the services that the Company requires, but it is fully informed of the internal control framework established by the Investment Manager, the Administrator and the Company’s Custodian to provide reasonable assurance RQWKHHHFWLYHQHVVRILQWHUQDOȴQDQFLDOFRQWUROV The key procedures include a review of the Company’s management accounts and the Net Asset Value and the monitoring of performance of the key service providers at the quarterly Board meetings. The Directors also employ independent auditors to perform an external audit. The administrative function is segregated from that of securities and cash custody, and from the investment management function. Appropriate insurance is in place and renewed annually. The Company’s key service providers report periodically to the Board on their procedures to mitigate cyber security risks. In addition, procedures have been put in place for the authorisation of all expense payments. The Statement of Directors’ Responsibilities in respect of the accounts is on page 51 and a Statement of Going Concern is on page 35. The Report of the Independent Auditor is on pages 52 to 59. Other aspects of internal control The Board holds quarterly meetings, and additional meetings as required. Between these meetings there is regular contact with the Investment Manager, the Company Secretary and the Administrator. The Board has agreed policies with the Investment Manager on key operational issues. The Investment Manager reports in writing to the Board on operational and compliance issues. The Investment Manager reports 42 CC Japan Income & Growth Trust plc42 CC Japan Income & Growth Trust plc direct to the Audit and Risk Committee concerning the internal controls applicable to the Investment Manager’s GHDOLQJLQYHVWPHQWDQGJHQHUDORɝFHSURFHGXUHV The Board reviews detailed management accounts from the Administrator, including holdings in the portfolio, WUDQVDFWLRQVDQGRWKHUDVSHFWVRIWKHȴQDQFLDOSRVLWLRQ of the Company. The Depositary provides oversight reports detailing performance against key performance indicators for the quarterly Board meetings. Additional ad hoc reports are received as required and Directors have access at all times to the advice and services of the Company Secretary, ensuring that Board procedures are followed and that the Board complies with applicable rules and regulations. Regular contact with the Investment Manager and the other key service providers enables the Board to monitor the Company’s progress towards its objectives and encompasses an analysis of the risks involved. The HHFWLYHQHVVRIWKH&RPSDQ\ȇVULVNPDQDJHPHQWDQG internal controls systems is monitored and a formal review, utilising a detailed risk assessment programme has been completed. This included consideration of the Administrator’s, the Investment Manager’s, the Depositary’s and the Registrar’s internal controls report. 7KHUHDUHQRVLJQLȴFDQWȴQGLQJVWRUHSRUWIURPWKH review. Principal and emerging risks 7KH'LUHFWRUVFRQȴUPWKDWWKH\KDYHFDUULHGRXWD robust assessment of the emerging and principal risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity. The principal risks and how they are being managed is set out in the Strategic Report. Shareholder relations The Notice of AGM sets out the business of the AGM and any item not of an entirely routine nature is explained in the Directors’ Report. Separate resolutions are proposed for each substantive issue. The Investment Manager has DSURJUDPPHRIPHHWLQJVZLWKVLJQLȴFDQW6KDUHKROGHUV DQGUHSRUWVEDFNWRWKH%RDUGRQLWVȴQGLQJV7KH Chairman and the Board welcome direct feedback from Shareholders. Exercise of voting powers and stewardship code The Company and the Investment Manager support the UK Stewardship Code issued by the Financial Reporting Council. The Investment Manager is a signatory to the UK Stewardship code 2020 and has published its proxy voting policy and statement of commitment to the principles of best practice of the Stewardship Code on its website at KWWSVZZZFRXSODQGFDUGLFRPVWHZDUGVKLSFRGH. It is also a signatory to the Japan Stewardship Code and has published its statement of commitment to its principles on its website at ZZZFRXSODQGFDUGLFRPMDSDQVWHZDUGVKLSFRGH . CORPORATE GOVERNANCE continued CC Japan Income & Growth Trust plc 43 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION CC Japan Income & Growth Trust plc 43 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION DIRECTORS’ REMUNERATION IMPLEMENTATION REPORT This report has been prepared in accordance with Schedule 8 of the Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013. An ordinary resolution for the approval of this report will be put forward at the forthcoming Annual General Meeting. An Ordinary Resolution will be proposed at the forthcoming Annual General Meeting (“AGM”) to be held on 1 March 2023 to re-approve the Remuneration Policy. The Board is required to put the Remuneration Policy to its Shareholders, as a binding vote, at least at every third AGM. The provisions set out in this policy apply until they are next put forward for Shareholder approval. In the event of any proposed variation to the policy, Shareholder approval will be sought for the proposed new policy prior to its implementation. It is the Board’s intention that the proposed Remuneration Policy continue for three years following the forthcoming AGM WRWKHȴQDQFLDO\HDUHQGLQJ2FWREHU7KHEHORZ stated Remuneration Policy remains unchanged from the Remuneration Policy last placed before shareholders at the Company’s AGM held in 2020. The Directors’ Remuneration Implementation Report is put forward for approval by Shareholders on an annual basis. The result of the Shareholder resolution on the Implementation Report is non-binding on the Company, although it gives Shareholders an opportunity to express their views, which will be taken into account by the Board. An ordinary resolution to approve this Directors’ Remuneration Implementation Report will be put forward for approval at the Company’s Annual General Meeting to be held on 1 March 2023. The law requires the Company’s auditor to audit certain of the disclosures provided. Where disclosures are audited they are indicated as such. The auditor’s opinion is on page 52. Remuneration policy Current and future policy Component Position Purpose of reward Operation Annual fee Chairman of the Board For services as Chairman of a plc Determined by the Board Annual fee Other Directors For services as non- executive Directors of a plc Determined by the Board Annual fee Audit and Risk Committee Chair For additional responsibility and time commitment Determined by the Board Annual fee Senior Independent Director For additional responsibility and time commitment Determined by the Board Expenses All Directors Reimbursement of expenses incurred in the performance of duties Submission of appropriate supporting documentation In accordance with article 103 of the Company’s Articles of Association, Directors fees must not exceed £500,000, unless otherwise determined by Ordinary resolution at a General Meeting of the Company. The Board currently has no intention of seeking Shareholder authority to increase this limit. Any new Director would be remunerated in line with other Board members, or, in the case of a replacement Chairman, Senior Independent Director or Audit and Risk Chair, they would be remunerated at the same level as the departing Board member. Remuneration Implementation 7KH&RPSDQ\FXUUHQWO\KDVȴYHQRQH[HFXWLYH'LUHFWRUV The Board has not established a separate Remuneration Committee. Board fees are considered annually by the Board as a whole through the Nomination Committee. The Board sets its fees by reference to other investment trusts of a similar nature to that of the Company, to 53ΖDQG&3ΖDQGRWKHULQȵDWLRQDU\PHDVXUHVWKHWLPH commitment of the Board and the size and the impact to the Company’s ongoing charges following a rise in fees. Board fees are not considered against any performance measure. No remuneration consultants were appointed during the ȴQDQFLDO\HDUWR2FWREHU 'LUHFWRUVȇIHHVZLWKHHFWIURP1RYHPEHUZHUH payable at the rate of £39,000 for the Chairman of the Company; £31,330 for the Chair of the Audit and Risk Committee; £27,040 for the Senior Independent Director and £26,000 per annum for the other Board members. 44 CC Japan Income & Growth Trust plc44 CC Japan Income & Growth Trust plc Following the year end, a review was undertaken and after careful consideration the Board approved that, ZLWKHHFWIURP1RYHPEHUDQLQFUHDVHLQ annual Directors’ fees was warranted to £40,500 for the Chairman of the Company; £32,500 for the Chair of the Audit and Risk Committee; £28,000 for the Senior Independent Director and £27,000 per annum for the other Board members. The Board believes that the level of increase and UHVXOWLQJIHHVDSSURSULDWHO\UHȵHFWVSUHYDLOLQJPDUNHW rates for an investment trust of the Company’s complexity and size, the increasing level of regulation and resultant time spent by the Directors on matters, and it will also enable the Company to continue to attract appropriately experienced Directors in the future. Due to the size and nature of the Company, it was not deemed necessary to use a remuneration consultant although the Nomination Committee did take into consideration views from external search consultants on the level of the Company’s fees against prevailing market rates and took these into account in its deliberations. 7KH'LUHFWRUVȇIHHVDQGWD[DEOHEHQHȴWVDUHVKRZQLQWKH table on page 45. Directors’ service contracts The Directors do not have service contracts with the Company. The Directors are not entitled to FRPSHQVDWLRQRQORVVRIRɝFHDQGQRSD\PHQWZDV PDGHWRSDVWGLUHFWRUVIRUORVVRIRɝFH7KH'LUHFWRUV have appointment letters which do not provide for any VSHFLȴFWHUPΖQDFFRUGDQFHZLWKEHVWSUDFWLFHWKH%RDUG put themselves forward for annual re-election. There are no restrictions on transfers of the Company’s shares held by the Directors, or any special rights attached to such shares. The Directors’ letters of appointment can EHLQVSHFWHGDWWKH&RPSDQ\ȇVUHJLVWHUHGRɝFH Directors’ indemnities Subject to the provisions of the Companies Act 2006, the Company may indemnify any person who is a Director, VHFUHWDU\RURWKHURɝFHURWKHUWKDQDQDXGLWRURIWKH Company, against (a) any liability whether in connection with any negligence, default, breach of duty or breach of trust by them in relation to the Company or any associated company or (b) any other liability incurred by or attaching to him in the actual or purported execution and/or discharge of his duties and/or the exercise or purported exercise of his powers and/or otherwise in relation to or in connection with his duties, powers or RɝFHDQGSXUFKDVHDQGPDLQWDLQLQVXUDQFHIRUDQ\ SHUVRQZKRLVD'LUHFWRUVHFUHWDU\RURWKHURɝFHU (other than an auditor) of the Company in relation to anything done or omitted to be done or alleged to have been done or omitted to be done as Director, secretary RURɝFHU $SROLF\RILQVXUDQFHDJDLQVW'LUHFWRUVȇDQG2ɝFHUVȇ liabilities is maintained by the Company. Director search and selection fees Following the decision of John Scott to retire at the March 2022 AGM and in accordance with the succession plan, the Board began a recruitment process and engaged the services of recruitment specialists, Cornforth Consulting. Cornforth Consulting is independent of both the Company and individual directors. Following an extensive search and thorough interview and selection process, the Nomination Committee recommended June Aitken and Craig Cleland to the Board. The Board subsequently appointed June $LWNHQDQG&UDLJ&OHODQGZLWKHHFWIURP)HEUXDU\ 2022. Director search and selection fees of £16,000 plus expenses were incurred during the year. DIRECTORS’ REMUNERATION IMPLEMENTATION REPORT continued CC Japan Income & Growth Trust plc 45 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION CC Japan Income & Growth Trust plc 45 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION Performance The following chart shows the performance of the Company’s share price by comparison to the TOPIX Index, on a total return basis. The Board deems the TOPIX Index to be the most appropriate comparator for this report. 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0 100.0 Oct-15 Oct-16 Oct-17 Oct-18 Oct-19 Oct-20 Oct-22 CCJI Share Price Topix Index Total Return (%) Oct-21 'LUHFWRUVȇHPROXPHQWVIRUWKH\HDUHQGHGb2FWREHUDXGLWHG The Directors who served during the year ended 31 October 2022 received the following remuneration for qualifying services. )HHVDQGWD[DEOHEHQHȴWV Fees Year ended b2FWREHU 2022 £ Taxable EHQHȴWV Total Fees Year ended b2FWREHU 2021 £ Harry Wells 39,000 Ȃ 39,000 37,500 Kate Cornish-Bowden 31,330 Ȃ 31,330 30,100 John Scott 10,267 Ȃ 10,267 25,000 Peter Wolton 27,040 Ȃ 27,040 26,000 June Aitken 19,250 Ȃ 19,250 Ȃ Craig Cleland 19,250 Ȃ 19,250 Ȃ Mark Smith ȂȂȂ6,300 Total 146,137 – 146,137 124,900 * John Scott retired at the AGM in March 2022 and Mark Smith retired at the AGM in March 2021. ** Craig Cleland and June Aitken were appointed on 1 February 2022. In addition to the above, the Company paid £3,000 (2021: £nil) in expenses to the Directors. None of the above IHHVZDVSDLGWRWKLUGSDUWLHV7KHUHZHUHQRWD[DEOHEHQHȴWVFODLPHGGXULQJWKH\HDUVHQGHG2FWREHURU b2FWREHU 46 CC Japan Income & Growth Trust plc46 CC Japan Income & Growth Trust plc % change 2019 to 2020 % change 2020 to 2021 % change 2021 to 2022 Harry Wells 2.0 Nil 4.0 Kate Cornish-Bowden 15.5 6.4 4.1 John Scott (9.2) (6.7) (58.9) Peter Wolton 2.0 Nil 4.0 June Aitken N/A N/A N/A Craig Cleland N/A N/A N/A Mark Smith 2.0 (74.8) N/A * John Scott retired at the AGM in March 2022 and Mark Smith retired at the AGM in March 2021. ** Craig Cleland and June Aitken were appointed on 1 February 2022. A non-binding ordinary resolution to approve the Directors’ Remuneration Implementation Report contained in the Annual Report for the year ended 31 October 2021 was put forward at the Annual General Meeting held on 22 March 2022. The resolution was passed with proxies representing 99.94% of the shares voted being in favour of the resolution. The Directors’ Remuneration Policy was last put forward at the Annual General Meeting held on 10 March 2020. The resolution was passed with proxies representing 99.97% of the shares voted being in favour of the resolution. The Directors’ Remuneration Policy will next be put forward for approval at the Annual General Meeting to be held in March 2023. The Board takes an active role in shareholder engagement and particularly voting outcomes. Shareholders have the opportunity to express their views and ask questions in respect of the Remuneration Policy and Remuneration Implementation Report at the Annual General Meeting. Relative importance of spend on pay The following table sets out the total level of Directors’ remuneration compared to management fees and other expenses incurred by the Company and the distributions to Shareholders by way of dividends. Year to 31 October 2022 £’000 Year to 31 October 2021 £’000 Directors’ fees 146 125 Management fees and other expenses 2,297 2,225 Dividends paid and payable to Shareholders 6,602 6,399 The information in the table above is required by the regulations with the exception of management fees and other expenses which have been included to show the total operating expenses of the Company. DIRECTORS’ REMUNERATION IMPLEMENTATION REPORT continued CC Japan Income & Growth Trust plc 47 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION CC Japan Income & Growth Trust plc 47 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION Directors’ holdings (Audited) The interests of the Directors in the Ordinary Shares of the Company as at 31 October 2022 and at 31 October 2021 were as IROORZV$OOVKDUHKROGLQJVDUHEHQHȴFLDOO\RZQHG Ordinary Shares as at b2FWREHU 2022 Transferable Subscription Shares as at 31 October 2022 Ordinary Shares as at b2FWREHU 2021 Transferable Subscription Shares as at b2FWREHU 2021 Harry Wells 40,000 58,000 40,000 58,000 Kate Cornish-Bowden 40,000 20,000 40,000 8,000 Peter Wolton 67,250 13,449 67,250 13,449 Craig Cleland 40,000 ȂȂȂ June Aitken 40,372 ȂȂȂ * On 18 February 2021 Transferable Subscription Shares were issued on a 1 for 5 basis to all Shareholders. ** Craig Cleland and June Aitken were appointed on 1 February 2022. 'LUHFWRUVDUHQRWVSHFLȴFDOO\UHTXLUHGWRRZQVKDUHVLQWKH&RPSDQ\ Statement On behalf of the Board and in accordance with Part 2 of Schedule 8 of the Large and Medium-sized Companies and URXSV$FFRXQWVDQG5HSRUWV$PHQGPHQW5HJXODWLRQVΖFRQȴUPWKDWWKHDERYH5HSRUWRQ5HPXQHUDWLRQ Policy and Remuneration Implementation summarises, as applicable, for the year to 31 October 2022: (a) the major decisions on Directors’ remuneration; (b) any substantial changes relating to Directors’ remuneration made during the year; and (c) the context in which the changes occurred and decisions have been taken. Harry Wells Chairman 23 January 2023 48 CC Japan Income & Growth Trust plc48 CC Japan Income & Growth Trust plc The AIC Code recommends that boards should establish audit committees consisting of at least three, or in the case of smaller companies, two independent non- executive directors. The Board is required to satisfy itself that at least one member of the Audit and Risk &RPPLWWHHKDVUHFHQWDQGUHOHYDQWȴQDQFLDOH[SHULHQFH The main role and responsibilities of the Audit and Risk Committee should be set out in written terms of reference covering certain matters described in the Code. The Company complies with the AIC Code. Role of the Audit and Risk Committee The Audit and Risk Committee meets formally at least three times a year for the purpose, amongst other things, of considering the appointment, independence and objectivity, and remuneration of the auditor and to UHYLHZWKHDQQXDOUHSRUWDQGKDOI\HDUO\ȴQDQFLDOUHSRUW The Committee also reviews the Company’s internal ȴQDQFLDOFRQWUROVVHUYLFHSURYLGHUVȇLQWHUQDOFRQWUROV and considers risk management systems. Where non-audit services are provided by the auditor, full FRQVLGHUDWLRQRIWKHȴQDQFLDODQGRWKHULPSOLFDWLRQVRQ the independence of the auditor arising from any such engagement are considered before proceeding. Composition All the Directors of the Board are members of the Audit and Risk Committee, and each committee member KDVUHFHQWDQGUHOHYDQWȴQDQFLDOH[SHULHQFH)ROORZLQJ the retirement of John Scott at the AGM in 2022, the Committee welcomed the newly appointed directors, June Aitken and Craig Cleland. Both have extensive audit committee experience in the investment trust sector. The UK Code recommends that the Chair of the Board should not be a member of the Audit and Risk Committee. However, as permitted by the AIC Code, the Directors believe that membership of the Audit and Risk Committee of the independent Chair of the Board, Harry Wells is appropriate, and welcome his contribution. The Audit and Risk Committee has formal written terms of reference and copies of these are available on the Company’s website or on request to the Company Secretary. The Committee has considered the need for an internal audit function. Given that the Company has no employees and outsources all its operating activities to external providers, the Committee considers that an internal audit function is not needed. The Committee keeps the need for an internal audit function under annual review. Performance Evaluation The Audit and Risk Committee are subject to an annual UHYLHZRILWVHHFWLYHQHVV)XUWKHUGHWDLOVRIWKH evaluation of the Committee can be found on page 39. Internal controls and risk management The Directors have a dynamic risk management register in place to help identify key risks and ensure there are measures in place to manage and mitigate ULVNDQGRYHUVHHWKHHHFWLYHQHVVRILQWHUQDOFRQWUROV and processes. The risk management register and DVVRFLDWHGULVNKHDWPDSSURYLGHDYLVXDOUHȵHFWLRQRI WKH&RPSDQ\ȇVLGHQWLȴHGSULQFLSDODQGHPHUJLQJULVNV These fall into four categories: strategic and business ULVNȴQDQFLDOULVNRSHUDWLRQDOULVNDQGUHJXODWRU\ and compliance risk. The Audit and Risk Committee carries out, at least annually, a robust assessment of the principal and emerging risks and uncertainties and monitors the risks on an ongoing basis. The Board has overall responsibility for the Company’s risk management and systems of internal controls and IRUUHYLHZLQJWKHLUHHFWLYHQHVVΖQFRPPRQZLWKPRVW investment trusts, investment management, accounting, company secretarial, registrar and depositary services KDYHEHHQGHOHJDWHGWRWKLUGSDUWLHV7KHHHFWLYHQHVV of the internal controls is assessed on a continuing basis and the Committee receives regular reports. Meetings There have been two Audit and Risk Committee meetings in the year ended 31 October 2022. Meeting attendance is shown on page 40 of this Annual Report. )LQDQFLDOVWDWHPHQWVDQGVLJQLȴFDQWDFFRXQWLQJ matters considered during the year 7KH&RPPLWWHHFRQVLGHUHGWKHIROORZLQJVLJQLȴFDQW DFFRXQWLQJLVVXHVLQUHODWLRQWRWKH&RPSDQ\ȇVȴQDQFLDO statements for the year ended 31 October 2022. Valuation and existence of investments The Company holds its assets in quoted investments, CFDs and cash. The valuation and existence of these investments is currently the most material matter in WKHSURGXFWLRQRIWKHȴQDQFLDOVWDWHPHQWVΖQYHVWPHQWV are valued using independent pricing sources and the holding quantities at the year end were agreed with the Depositary’s records. The Committee reviewed the Administrator’s procedures in place for ensuring accurate valuation and existence of investments. The &RPPLWWHHDOVRUHFHLYHVDQGUHYLHZVDQ\VLJQLȴFDQW pricing or custody reconciliation exceptions and reports from the Depositary. Recognition of income Income may not be accrued in the correct period and/ or incorrectly allocated to revenue or capital. The Committee reviewed the Administrator’s procedures for recognition of income and reviewed the treatment of any special dividends receivable in the year. The Committee also reviewed the Administrator’s forecast of revenue against actual revenue received at each Committee meeting. REPORT OF THE AUDIT AND RISK COMMITTEE CC Japan Income & Growth Trust plc 49 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION CC Japan Income & Growth Trust plc 49 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION Covid-19 and geo-politics Although much of the world has returned to business as usual following the Covid-19 pandemic, Japan and China KDYHFRQWLQXHGWRVXHUIURPLQWHUPLWWHQWORFNGRZQV GXULQJWKHȴQDQFLDO\HDUFUHDWLQJIXUWKHUXQFHUWDLQW\ and volatility in 2022. At the time of writing the Japanese economy is gradually reopening, but business and tourism have not yet returned to pre pandemic levels. The Russian invasion of Ukraine at the beginning of the year, and the subsequent hike in global energy prices has further shaken a fragile investment environment. Rising global interest rates and a strengthening US 'ROODUYHUVXVWKH-DSDQHVH<HQKDYHKDGDVLJQLȴFDQW impact on Japan. During the year, the Board has paid particular attention to the sensitivity of income received from investee companies to volatility in the Sterling/ Japanese yen foreign exchange rate. Committee members have also sought reassurance that external providers were not in breach of sanctions implemented against Russia following the invasion of Ukraine. Calculation of management fees Incorrect amounts may be paid to the Investment 0DQDJHUDQGUHFRJQLVHGLQWKHȴQDQFLDOVWDWHPHQWVLI the fees are not calculated correctly. The Committee reviewed the Administrator’s procedures in place for the calculation of management fees. A member of the Committee approves management fee invoices prior to payment. European Single Electronic Format (“ESEF”) The ESEF regulations which require the Company to SXEOLVKWKHLUDQQXDOȴQDQFLDOVWDWHPHQWVLQDFRPPRQ electronic format apply to the Company for this accounting year ending 31 October 2022. S1158 of the Corporation Tax Act 2010 The Committee considers the reports produced by the 0DQDJHUFRQȴUPLQJFRPSOLDQFHZLWKWKHLQYHVWPHQW trust qualifying rules. Going concern and viability statements +DYLQJUHYLHZHGWKH&RPSDQ\ȇVȴQDQFLDOSRVLWLRQ liabilities, principal/emerging risks and uncertainties, the Committee recommended to the Directors that it was DSSURSULDWHIRUWKH'LUHFWRUVWRSUHSDUHWKHȴQDQFLDO statements on the going concern basis. The viability and going concern statements can be found on pages 12 and 35. (HFWLYHQHVVRIH[WHUQDODXGLW The Audit and Risk Committee is responsible for UHYLHZLQJWKHHHFWLYHQHVVRIWKHH[WHUQDODXGLWSURFHVV The Committee received a presentation of the audit plan from the auditor prior to the commencement of the 2022 audit, and a presentation of the results of the audit following completion of the main audit testing. The Committee performed a review of the external auditor following the presentation of the results of the audit. The review included a discussion of the audit process DQGWKHDELOLW\RIWKHH[WHUQDODXGLWRUWRIXOȴOLWVUROH I spoke to Caroline Mercer and her team during the year to discuss feedback from the external audit and am SOHDVHGWRUHSRUWWKDWQRVLJQLȴFDQWLVVXHVDURVHGXULQJ WKHSURFHVV7KH&RPPLWWHHLVVDWLVȴHGWKDW(UQVW <RXQJ//3KDVSURYLGHGHHFWLYHLQGHSHQGHQWFKDOOHQJH in carrying out its responsibilities. Provision of non-audit services The Committee has reviewed the FRC’s Guidance on Audit Committees and has formulated a policy on the provision of non-audit services by the Company’s auditor. The Committee has determined that the Company’s appointed auditor will not be considered for the provision of certain non-audit services, such as DFFRXQWLQJDQGSUHSDUDWLRQRIWKHȴQDQFLDOVWDWHPHQWV internal audit and custody. The auditor may, if required, provide other non-audit services although it did not do so during the year. However, the auditor’s eligibility to provide non audit services will be judged on a case-by- case basis. Audit fees The audit fees (excluding VAT) incurred during the year amounted to £49,500 (2021: £45,000). These fees represent an increase over the prior year. The Committee reviewed the audit fees being paid by similar comparative companies and concluded that the increase is in line with audit fee rises experienced across WKHLQYHVWPHQWWUXVWVHFWRU$XGLWȴUPVJHQHUDOO\KDYH increased the fees that they charge to investment trusts LQRUGHUWRUHȵHFWWKHLQFUHDVHGOHYHORIZRUNWKDWWKH\ have been required to perform, in the context of more rigorous levels of audit scrutiny and regulation. Audit tenure Ernst & Young LLP was selected as the Company’s Auditor at the time of the Company’s launch following a competitive process and review of the Auditor’s credentials and have provided this service for six \HDUVZLWK0DWWKHZ3ULFHDV$XGLW3DUWQHUIRUWKHȴUVW ȴYH\Hars. In accordance with auditor rotation best practice, Matthew Price was replaced as Audit Partner by Caroline Mercer for the audit for the year ended 31 October 2021. The appointment of the auditor is reviewed annually by the Committee and is subject to approval by 6KDUHKROGHUV)ROORZLQJVLJQLȴFDQWULVHVLQDXGLWIHHV across the industry, the Committee considered it prudent to conduct a tender of audit services during the year7KH&RPPLWWHHLQYLWHGSURSRVDOVIURPȴYH auditors with investment trust experience, and met to interview three of these, including the incumbent. 50 CC Japan Income & Growth Trust plc50 CC Japan Income & Growth Trust plc After carefully considering the resources, experience and fees proposed by the audit companies taking part in the tender process, the Committee recommended that Johnston Carmichael be appointed as the Company’s Auditor for the year ending 31 October 2023. Shareholders will therefore be asked to approve the appointment of Johnston Carmichael as the Company’s auditor at the AGM in March 2023. Auditor independence The Committee considered the independence of the auditor and the objectivity of the audit process and LVVDWLVȴHGWKDW(UQVW<RXQJ//3KDVIXOȴOOHGLWV obligations to shareholders and as independent auditor to the Company for the year. Conclusion with respect to the Annual Report DQGȴQDQFLDOVWDWHPHQWV Following a thorough process of review, the Committee has concluded that the Annual Report for the year ended 31 October 2022, taken as a whole, is fair, balanced and understandable and provides the information necessary for Shareholders to assess the Company’s business model, strategy and performance. The Committee has reported its conclusions to the Board of Directors. Kate Cornish-Bowden Audit and Risk Committee Chairman 23 January 2023 REPORT OF THE AUDIT AND RISK COMMITTEE continued CC Japan Income & Growth Trust plc 51 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION CC Japan Income & Growth Trust plc 51 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION The Directors are responsible for preparing the Annual 5HSRUWDQGWKHȴQDQFLDOVWDWHPHQWVLQDFFRUGDQFHZLWK applicable laws and regulations. &RPSDQ\ODZUHTXLUHVWKH'LUHFWRUVWRSUHSDUHȴQDQFLDO VWDWHPHQWVIRUHDFKȴQDQFLDO\HDU8QGHUWKDWODZ WKH'LUHFWRUVKDYHHOHFWHGWRSUHSDUHWKHȴQDQFLDO statements in accordance with United Kingdom Generally Accepted Accounting Practice, including FRS 102, which is The Financial Reporting Standard applicable to the UK and Republic of Ireland and applicable law. Under company law, the Directors must QRWDSSURYHWKHȴQDQFLDOVWDWHPHQWVXQOHVVWKH\DUH VDWLVȴHGWKDWWKH\JLYHDWUXHDQGIDLUYLHZRIWKHVWDWH RIWKH&RPSDQ\ȇVDDLUVDVDWWKHHQGRIWKH\HDUDQGRI WKHQHWUHWXUQIRUWKH\HDUΖQSUHSDULQJWKHVHȴQDQFLDO 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 GLVFORVHGDQGH[SODLQHGLQWKHȴQDQFLDOVWDWHPHQWV and ȏ SUHSDUHWKHȴQDQFLDOVWDWHPHQWVRQDJRLQJFRQFHUQ basis unless it is inappropriate to presume that the Company will continue in business. The Directors are responsible for keeping adequate DFFRXQWLQJUHFRUGVWKDWDUHVXɝFLHQWWRVKRZDQG explain the Company’s transactions and which disclose ZLWKUHDVRQDEOHDFFXUDF\DWDQ\WLPHWKHȴQDQFLDO position of the Company and enable them to ensure that WKHȴQDQFLDOVWDWHPHQWVFRPSO\ZLWKWKH&RPSDQLHV$FW 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 WKHȴQDQFLDOVWDWHPHQWVVLQFHEHLQJLQLWLDOO\SUHVHQWHG on the website. Legislation in the United Kingdom governing the preparation and dissemination of ȴQDQFLDOVWDWHPHQWVPD\GLHUIURPOHJLVODWLRQLQRWKHU jurisdictions. 'LUHFWRUVȇFRQȴUPDWLRQVWDWHPHQW 7KH'LUHFWRUVHDFKFRQȴUPWRWKHEHVWRIWKHLU knowledge that: D WKHȴQDQFLDOVWDWHPHQWVSUHSDUHGLQDFFRUGDQFH with applicable accounting standards, give a true and IDLUYLHZRIWKHDVVHWVOLDELOLWLHVȴQDQFLDOSRVLWLRQ DQGSURȴWRIWKH&RPSDQ\DQG (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 ȴQDQFLDOVWDWHPHQWVWDNHQDVDZKROHLVIDLUEDODQFHG 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 Chairman 23 January 2023 STATEMENT OF DIRECTORS’ RESPONSIBILITIES 52 CC Japan Income & Growth Trust plc52 CC Japan Income & Growth Trust plc Opinion :HKDYHDXGLWHGWKHȴQDQFLDOVWDWHPHQWVRI&&-DSDQ Income & Growth Trust plc (“the Company”) for the year ended 31 October 2022 which comprise the Income Statement, the Statement of Financial Position, the Statement of Changes in Equity, the Statement of Cash Flows and the related notes 1 to 18, including a VXPPDU\RIVLJQLȴFDQWDFFRXQWLQJSROLFLHV7KHȴQDQFLDO reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards including FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (United Kingdom Generally Accepted Accounting Practice). ΖQRXURSLQLRQWKHȴQDQFLDOVWDWHPHQWV • JLYHDWUXHDQGIDLUYLHZRIWKH&RPSDQ\ȇVDDLUVDV at 31 October 2022 and of its loss for the year then ended; • have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and • have been prepared in accordance with the requirements of the Companies Act 2006. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the DXGLWRIWKHȴQDQFLDOVWDWHPHQWVVHFWLRQRIRXUUHSRUW We believe that the audit evidence we have obtained LVVXɝFLHQWDQGDSSURSULDWHWRSURYLGHDEDVLVIRURXU opinion. Independence We are independent of the Company in accordance with the ethical requirements that are relevant to our audit RIWKHȴQDQFLDOVWDWHPHQWVLQWKH8.LQFOXGLQJWKH)5&ȇV Ethical Standard as applied to public interest entities, DQGZHKDYHIXOȴOOHGRXURWKHUHWKLFDOUHVSRQVLELOLWLHVLQ accordance with these requirements. The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the company and we remain independent of the Company in conducting the audit. Conclusions relating to going concern ΖQDXGLWLQJWKHȴQDQFLDOVWDWHPHQWVZHKDYHFRQFOXGHG that the directors’ use of the going concern basis of DFFRXQWLQJLQWKHSUHSDUDWLRQRIWKHȴQDQFLDOVWDWHPHQWV is appropriate. Our evaluation of the directors’ assessment of the Company’s ability to continue to adopt the going concern basis of accounting included: • &RQȴUPDWLRQRIRXUXQGHUVWDQGLQJRIWKH&RPSDQ\ȇV going concern assessment process by engaging with the Directors and the Company Secretary to determine if all key factors were considered in their assessment. • Inspection of the Directors’ assessment of going concern, including the revenue forecast, for the period to 31 January 2024 which is at least 12 months IURPWKHGDWHWKHVHȴQDQFLDOVWDWHPHQWVZHUH authorised for issue. In preparing the forecast, the Company has concluded that it is able to continue to meet its ongoing costs as they fall due. • Review of the factors and assumptions, including the impact of the current economic environment and RWKHUVLJQLȴFDQWHYHQWVWKDWFRXOGJLYHULVHWRWKH market volatility, as applied to the revenue forecast and the liquidity assessment of the investments. We considered the appropriateness of the methods used to be able to make an assessment for the Company. • Consideration of the mitigating factors included in the revenue forecast that are within the control of the Company. We reviewed the Company’s assessment of the liquidity of investments held and evaluated the Company’s ability to sell those investments to cover the working capital UHTXLUHPHQWVVKRXOGUHYHQXHGHFOLQHVLJQLȴFDQWO\ • Review of the Company’s going concern disclosures included in the annual report in order to assess that the disclosures were appropriate and in conformity with the reporting standards. Based on the work we have performed, we have not LGHQWLȴHGDQ\PDWHULDOXQFHUWDLQWLHVUHODWLQJWRHYHQWV or conditions that, individually or collectively, may cast VLJQLȴFDQWGRXEWRQWKH&RPSDQ\ȇVDELOLW\WRFRQWLQXHDV a going concern for the period to 31 January 2024. In relation to the Company’s reporting on how they have applied the UK Corporate Governance Code, we have nothing material to add or draw attention to in relation WRWKHGLUHFWRUVȇVWDWHPHQWLQWKHȴQDQFLDOVWDWHPHQWV about whether the directors considered it appropriate to adopt the going concern basis of accounting. INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF &&b-$3$1Ζ1&20(52:7+758673/& CC Japan Income & Growth Trust plc 53 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION CC Japan Income & Growth Trust plc 53 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Company’s ability to continue as a going concern. Overview of our audit approach Key audit matters • Risk of incomplete or inaccurate revenue recognition, including WKHFODVVLȴFDWLRQRIVSHFLDO dividends as revenue or capital items in the Income Statement • Risk of incorrect valuation or ownership of the investment portfolio Materiality • Overall materiality of £2.04m (2021: £2.23m) which represents 1% (2021: 1%) of shareholders’ funds. An overview of the scope of our audit Tailoring the scope Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope for the Company. 7KLVHQDEOHVXVWRIRUPDQRSLQLRQRQWKHȴQDQFLDO VWDWHPHQWV:HWDNHLQWRDFFRXQWVL]HULVNSURȴOH WKHRUJDQLVDWLRQRIWKH&RPSDQ\DQGHHFWLYHQHVVRI controls, including controls and changes in the business environment when assessing the level of work to be performed. Climate change There has been increasing interest from stakeholders as to how climate change will impact companies. The Company has determined that the impact of climate FKDQJHFRXOGDHFWWKH&RPSDQ\ȇVLQYHVWPHQWVDQG their valuations. This is explained in the emerging risks section on page 18 which forms part of the Ȋ2WKHUΖQIRUPDWLRQȋUDWKHUWKDQWKHDXGLWHGȴQDQFLDO statements. Our procedures on these disclosures therefore consisted solely of considering whether they DUHPDWHULDOO\LQFRQVLVWHQWZLWKWKHȴQDQFLDOVWDWHPHQWV or our knowledge obtained in the course of the audit or otherwise appear to be materially misstated. 2XUDXGLWHRUWLQFRQVLGHULQJFOLPDWHFKDQJHZDV focused on the adequacy of the Company’s disclosures LQWKHȴQDQFLDOVWDWHPHQWVDVVHWRXWLQQRWHDDQG conclusion that there was no material impact of climate change on the valuation of investments. We also challenged the Directors’ considerations of climate change in their assessment of viability and associated disclosures. Key audit matters Key audit matters are those matters that, in our professional judgementZHUHRIPRVWVLJQLȴFDQFHLQ RXUDXGLWRIWKHȴQDQFLDOVWDWHPHQWVRIWKHFXUUHQW SHULRGDQGLQFOXGHWKHPRVWVLJQLȴFDQWDVVHVVHGULVNV of material misstatement (whether or not due to fraud) WKDWZHLGHQWLȴHG7KHVHPDWWHUVLQFOXGHGWKRVHZKLFK KDGWKHJUHDWHVWHHFWRQWKHRYHUDOODXGLWVWUDWHJ\WKH allocation of resources in the audit; and directing the HRUWVRIWKHHQJDJHPHQWWHDP7KHVHPDWWHUVZHUH DGGUHVVHGLQWKHFRQWH[WRIRXUDXGLWRIWKHȴQDQFLDO statements as a whole, and in our opinion thereon, and we do not provide a separate opinion on these matters. 54 CC Japan Income & Growth Trust plc54 CC Japan Income & Growth Trust plc Risk Our response to the risk Key observations communicated to the Audit and Risk Committee Incomplete or inaccurate revenue recognition, including the FODVVLȴFDWLRQRIVSHFLDOGLYLGHQGV as revenue or capital items in the Income Statement (refer to the Audit and Risk Committee Report set out on page 48 and the accounting policy set out on page 65). The total revenue for the year ended 31bOctober 2022 was £8.88 million (2021: £8.24 million), consisting primarily of overseas dividends and LQFRPHIURPFRQWUDFWVIRUGLHUHQFH (CFDs). The Company received four special dividends amounting to £0.03 million (2021: £0.25m), all of which were FODVVLȴHGDVUHYHQXHe PLOOLRQFODVVLȴHGDVUHYHQXH There is a risk of incomplete or inaccurate recognition of revenue through the failure to recognise proper income entitlements or to apply the appropriate accounting treatment. In addition to the above, the Directors are required to exercise judgement in determining whether income receivable in the form of VSHFLDOGLYLGHQGVVKRXOGEHFODVVLȴHG as ‘revenue’ or ‘capital’ in the Income Statement. We have performed the following procedures: We obtained an understanding of the processes and controls surrounding UHYHQXHUHFRJQLWLRQDQGFODVVLȴFDWLRQ of special dividends by performing walkthrough procedures. For all dividends received we recalculated the dividend income by multiplying the investment holdings at the ex-dividend date, traced from the accounting records, by the dividend per share, which was agreed to an independent data vendor. For a sample of dividends received, we agreed amounts to bank statements and agreed the exchange rates to an external source. For all income received from CFDs, we agree the amount recorded in the income report to the corresponding dividend announcement made by the underlying investee company, recalculated the amount received by multiplying the notional holdings at the XD date by the dividend rate per share as agreed to an external source. We also agreed the exchange rates used to an external source and agreed a sample of the income received to bank statements. For all accrued dividends, we reviewed the investee Company announcements to assess whether the dividend entitlements arose prior to 31 October 2022. We agreed the dividend rate to corresponding announcements made by the investee company, recalculated the dividend amount receivable by multiplying the investment holdings at the ex-dividend date, traced from the accounting records, and FRQȴUPHGWKLVZDVFRQVLVWHQWZLWK cash received as shown on post year end bank statements, where paid. The results of our procedures LGHQWLȴHGQRPDWHULDOPLVVWDWHPHQWV in relation to the risk of incomplete or inaccurate revenue recognition, LQFOXGLQJLQFRUUHFWFODVVLȴFDWLRQ of special dividends as revenue or capital in the Income Statement. INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF &&b-$3$1Ζ1&20(52:7+758673/&continued CC Japan Income & Growth Trust plc 55 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION CC Japan Income & Growth Trust plc 55 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION Risk Our response to the risk Key observations communicated to the Audit and Risk Committee To test completeness of recorded income, including from CFDs, we YHULȴHGWKDWGLYLGHQGVKDGEHHQ recorded for each investee company held during the year with reference to investee company announcements obtained from an independent data vendor. For all investments held during the year, we compared the type of dividends paid with reference to an external data source to identify those ZKLFKZHUHȆVSHFLDOȇ:HFRQȴUPHG four special dividends, amounting to £0.03 million, were received during the year. Individually none of the special dividends received were above our testing threshold. We have tested one special dividend, amounting to £0.002m, by assessing WKHDSSURSULDWHQHVVRIFODVVLȴFDWLRQ as revenue or capital by reviewing the underlying rationale of the distribution. 56 CC Japan Income & Growth Trust plc56 CC Japan Income & Growth Trust plc Risk Our response to the risk Key observations communicated to the Audit and Risk Committee Incorrect valuation or ownership of the investment portfolio (refer to the Audit and Risk Committee Report set out on page 48 and the accounting policy set out on page 65). The valuation of the portfolio on 31bOctober 2022 was £199.64 million (2020: £220.27 million) consisting of listed investments. The Company also holds long CFD positions. These have been recognised separately in the Statement of Financial Position as amounts due in respect of CFDs and amounts payable in respect of CFDs. The amount due in respect of CFDs as at 31 October 2022 was £2.68 million (2021: £0.44 million) and the amount payable was £2.78 million (2021: £0.74 million). The valuation of the investments held by the Company in the investment portfolio is the key driver of the Company’s net asset value and total return. Incorrect investment pricing, or a failure to maintain proper legal title of the investments held by the &RPSDQ\FRXOGKDYHDVLJQLȴFDQW impact on the portfolio valuation and the return generated for shareholders. The fair value of listed investments is determined using quoted market bid prices at close of business on the reporting date. CFDs are held at fair value with reference to the underlying market value of the corresponding security. We performed the following procedures: We obtained an understanding of the processes and controls surrounding the existence and pricing of listed securities and CFDs by performing walkthrough procedures. For all listed investments in the portfolio, we compared the market prices and exchange rates applied to an independent pricing vendor and recalculated the investment valuations as at the year end. For all CFD investments we compared the market prices of the underlying company and exchange rates to an independent pricing vendor and recalculated the fair value at the year end. We inspected the stale price reporting produced by the Administrator to identify prices that have not changed around the year HQGDQGYHULȴHGZKHWKHUWKHOLVWHG price is a fair value. No stale prices ZHUHLGHQWLȴHG We agreed the Company’s investments to independent FRQȴUPDWLRQVUHFHLYHGGLUHFWO\ from the Company’s Depositary for all listed investments and from the broker for all CFDs as at 31 October 2022. The results of our procedures LGHQWLȴHGQRPDWHULDOPLVVWDWHPHQW in relation to the risk of incorrect valuation or ownership of the investment portfolio. Our application of materiality We apply the concept of materiality in planning and SHUIRUPLQJWKHDXGLWLQHYDOXDWLQJWKHHHFWRI LGHQWLȴHGPLVVWDWHPHQWVRQWKHDXGLWDQGLQIRUPLQJ our audit opinion. Materiality The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be H[SHFWHGWRLQȵXHQFHWKHHFRQRPLFGHFLVLRQVRIWKHXVHUV RIWKHȴQDQFLDOVWDWHPHQWV0DWHULDOLW\SURYLGHVDEDVLVIRU determining the nature and extent of our audit procedures. We determined materiality for the Company to be £2.04 million (2021: £2.23 million), which is 1% (2021: 1%) of shareholders’ funds. We believe that shareholders’ funds provides us with materiality aligned to the key measure of the Company’s performance. Performance materiality The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality. On the basis of our risk assessments, together with our assessment of the Company’s overall control environment, our judgement was that performance materiality was 75% (2021: 75%) of our planning materiality, namely £1.53m (2021: £1.67m). We have set performance materiality at this percentage due to our INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF &&b-$3$1Ζ1&20(52:7+758673/&continued CC Japan Income & Growth Trust plc 57 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION CC Japan Income & Growth Trust plc 57 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION past experience of the audit that indicates that a lower risk of misstatements, both corrected and uncorrected. Given the importance of the distinction between revenue and capital for investment trusts, we have also applied a separate testing threshold for the revenue column of the Income Statement of £0.39m (2021: £0.36m), being 5% of the revenue return on ordinary activities before taxation. Reporting threshold $QDPRXQWEHORZZKLFKLGHQWLȴHGPLVVWDWHPHQWVDUH considered as being clearly trivial. We agreed with the Audit and Risk Committee that we ZRXOGUHSRUWWRWKHPDOOXQFRUUHFWHGDXGLWGLHUHQFHV in excess of £0.10m (2021: £0.11m), which is set at 5% RISODQQLQJPDWHULDOLW\DVZHOODVGLHUHQFHVEHORZ that threshold that, in our view, warranted reporting on qualitative grounds. We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light of other relevant qualitative considerations in forming our opinion. Other information The other information comprises the information LQFOXGHGLQWKHDQQXDOUHSRUWRWKHUWKDQWKHȴQDQFLDO statements and our auditor’s report thereon. The directors are responsible for the other information contained within the annual report. 2XURSLQLRQRQWKHȴQDQFLDOVWDWHPHQWVGRHVQRW cover the other information and, except to the extent otherwise explicitly stated in this report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is PDWHULDOO\LQFRQVLVWHQWZLWKWKHȴQDQFLDOVWDWHPHQWV or our knowledge obtained in the course of the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the ȴQDQFLDOVWDWHPHQWVWKHPVHOYHVΖIEDVHGRQWKHZRUN we have performed, we conclude that there is a material misstatement of the other information, we are required to report that fact. We have nothing to report in this regard. Opinions on other matters prescribed by the Companies Act 2006 In our opinion the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006. In our opinion, based on the work undertaken in the course of the audit: • the information given in the strategic report and the GLUHFWRUVȇUHSRUWIRUWKHȴQDQFLDO\HDUIRUZKLFKWKH ȴQDQFLDOVWDWHPHQWVDUHSUHSDUHGLVFRQVLVWHQWZLWK WKHȴQDQFLDOVWDWHPHQWVDQG • the strategic report and directors’ reports have been prepared in accordance with applicable legal requirements. Matters on which we are required to report by exception In the light of the knowledge and understanding of the Company and its environment obtained in the course of WKHDXGLWZHKDYHQRWLGHQWLȴHGPDWHULDOPLVVWDWHPHQWV in the strategic report or directors’ report. We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion: • adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or • WKHȴQDQFLDOVWDWHPHQWVDQGWKHSDUWRIWKH'LUHFWRUVȇ Remuneration Report to be audited are not in agreement with the accounting records and returns; or • certain disclosures of directors’ remuneration VSHFLȴHGE\ODZDUHQRWPDGHRU • we have not received all the information and explanations we require for our audit. Corporate Governance Statement We have reviewed the directors’ statement in relation to going concern, longer-term viability and that part of the Corporate Governance Statement relating to the Company’s compliance with the provisions of the UK &RUSRUDWHRYHUQDQFH&RGHVSHFLȴHGIRURXUUHYLHZE\ the Listing Rules. Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement is materially FRQVLVWHQWZLWKWKHȴQDQFLDOVWDWHPHQWVRURXU knowledge obtained during the audit: 58 CC Japan Income & Growth Trust plc58 CC Japan Income & Growth Trust plc • Directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any material uncertainties LGHQWLȴHGVHWRXWRQSDJH35; • Directors’ explanation as to its assessment of the Company’s prospects, the period this assessment covers and why the period is appropriate set out on pages 12 and 13; • Director’s statement on whether it has a reasonable expectation that the Company will be able to continue in operation and meets its liabilities set out on pages 12 and 13; • Directors’ statement on fair, balanced and understandable set out on page 51; • %RDUGȇVFRQȴUPDWLRQWKDWLWKDVFDUULHGRXWDUREXVW assessment of the emerging and principal risks set out on page 14; • The section of the annual report that describes the UHYLHZRIHHFWLYHQHVVRIULVNPDQDJHPHQWDQG internal control systems set out on page 41; and • The section describing the work of the audit and risk committee set out on page 48. Responsibilities of Directors As explained more fully in the directors’ responsibilities statement set out on page 51, the directors are UHVSRQVLEOHIRUWKHSUHSDUDWLRQRIWKHȴQDQFLDO VWDWHPHQWVDQGIRUEHLQJVDWLVȴHGWKDWWKH\JLYHD true and fair view, and for such internal control as the directors determine is necessary to enable the SUHSDUDWLRQRIȴQDQFLDOVWDWHPHQWVWKDWDUHIUHHIURP material misstatement, whether due to fraud or error. ΖQSUHSDULQJWKHȴQDQFLDOVWDWHPHQWVWKHGLUHFWRUV are responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the ȴQDQFLDOVWDWHPHQWV Our objectives are to obtain reasonable assurance DERXWZKHWKHUWKHȴQDQFLDOVWDWHPHQWVDVDZKROH are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, WKH\FRXOGUHDVRQDEO\EHH[SHFWHGWRLQȵXHQFHWKH economic decisions of users taken on the basis of these ȴQDQFLDOVWDWHPHQWV Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud Irregularities, including fraud, are instances of non- compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect irregularities, including fraud. The risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below. However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the Company and management. • We obtained an understanding of the legal and regulatory frameworks that are applicable to the &RPSDQ\DQGGHWHUPLQHGWKDWWKHPRVWVLJQLȴFDQW are FRS 102, the Companies Act 2006, the Listing Rules, UK Corporate Governance code, the Association of Investment Companies’ Code and Statement of Recommended Practice, Section 1158 of the Corporation Tax Act 2010 and The Companies (Miscellaneous Reporting) Regulations 2018. • We understood how the Company is complying with those frameworks through discussions with the Audit and Risk Committee and Company Secretary, and review of Board minutes and the Company’s documented policies and procedures. • We assessed the susceptibility of the Company’s ȴQDQFLDOVWDWHPHQWVWRPDWHULDOPLVVWDWHPHQW including how fraud might occur by considering the NH\ULVNVLPSDFWLQJWKHȴQDQFLDOVWDWHPHQWV:H LGHQWLȴHGDIUDXGULVNZLWKUHVSHFWWRLQFRPSOHWHRU inaccurate revenue recognition through incorrect FODVVLȴFDWLRQRIVSHFLDOGLYLGHQGVDVUHYHQXHRU capital. Further discussion of our approach is set out in the key audit matter above. • Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations. Our procedures involved review of the Company Secretary’s reporting to the Directors with respect to the application of the documented policies and procedures and review of WKHȴQDQFLDOVWDWHPHQWVWRHQVXUHFRPSOLDQFHZLWK the reporting requirements of the Company. INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF &&b-$3$1Ζ1&20(52:7+758673/&continued CC Japan Income & Growth Trust plc 59 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION CC Japan Income & Growth Trust plc 59 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION A further description of our responsibilities for the DXGLWRIWKHȴQDQFLDOVWDWHPHQWVLVORFDWHGRQ the Financial Reporting Council’s website at https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. Other matters we are required to address Following the recommendation from the Audit and Risk Committee, we were appointed by the Company on 0D\WRDXGLWWKHȴQDQFLDOVWDWHPHQWVIRUWKH \HDUHQGLQJ2FWREHUDQGVXEVHTXHQWȴQDQFLDO periods. The period of total uninterrupted engagement including previous renewals and reappointments is seven years, covering the years ending 31 October 2016 to 31bOctober 2022. The audit opinion is consistent with the additional report to the audit and risk committee. Use of our report This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Caroline Mercer (Senior statutory auditor) for and on behalf of Ernst & Young LLP, Statutory Auditor Edinburgh 23 January 2023 60 CC Japan Income & Growth Trust plc60 CC Japan Income & Growth Trust plc Year ended 31 October 2022 Year ended 31 October 2021 Note Revenue £’000 Capital £’000 Total £’000 Revenue £’000 Capital £’000 Total £’000 (Losses)/gains on investments 3 – (18,118) (18,118) – 39,373 39,373 Currency (losses)/gains – (209) (209) – 734 734 Income 4 8,878 – 8,878 8,241 – 8,241 Investment management fee 5 (327) (1,306) (1,633) (318) (1,273) (1,591) Other expenses 6 (664) – (664) (634) – (634) 5HWXUQRQRUGLQDU\DFWLYLWLHVEHIRUHȴQDQFH costs and taxation 7,887 (19,633) (11,746) 7,289 38,834 46,123 Finance costs 7 (69) (185) (254) (61) (161) (222) Return on ordinary activities before taxation 7,818 (19,818) (12,000) 7,228 38,673 45,901 Taxation 8 (888) – (888) (824) – (824) Return on ordinary activities after taxation 6,930 (19,818) (12,888) 6,404 38,673 45,077 Return per Ordinary Share - undiluted 13 5.14p (14.71)p (9.57)p 4.75p 28.70p 33.45p Return per Ordinary Share - diluted 13 4.29p (12.26)p (7.97)p 3.96p 23.92p 27.88p 7KHWRWDOFROXPQRIWKHΖQFRPH6WDWHPHQWLVWKHSURȴWDQGORVVDFFRXQWRIWKH&RPSDQ\$OOUHYHQXHDQGFDSLWDOLWHPV in the above statement derive from continuing operations. %RWKWKHVXSSOHPHQWDU\UHYHQXHDQGFDSLWDOFROXPQVDUHERWKSUHSDUHGXQGHUJXLGDQFHIURPWKH$VVRFLDWLRQRI 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 Company’s “Ordinary Shares – diluted” is due to the issuance of 26,946,122 Subscription Shares issued on 18 February 2021. The notes on pages 64 to 80IRUPSDUWRIWKHVHȴQDQFLDOVWDWHPHQWV INCOME STATEMENT FOR THE YEAR ENDED 31 OCTOBER 2022 CC Japan Income & Growth Trust plc 61 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION CC Japan Income & Growth Trust plc 61 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION Note 31 October 2022 £’000 31 October 2021 £’000 Fixed assets ΖQYHVWPHQWVDWIDLUYDOXHWKURXJKSURȴWRUORVV 3 199,642 220,271 Current assets Cash and cash equivalents 1,413 – &DVKFROODWHUDOLQUHVSHFWRI&RQWUDFWVIRU'LHUHQFHȊ&)'Vȋ 433 – $PRXQWVGXHLQUHVSHFWRI&)'V 2,680 443 Other debtors 10 4,434 3,264 8,960 3,707 Creditors: amounts falling due within one year Cash and cash equivalents-Bank overdraft – (48) Cash collateral in respect of CFDs – (18) $PRXQWVSD\DEOHLQUHVSHFWRI&)'V (2,780) (738) Other creditors 11 (2,240) (304) (5,020) (1,108) Net current assets 3,940 2,599 Total assets less current liabilities 203,582 222,870 Net assets 203,582 222,870 Capital and reserves Share capital 12 1,348 1,348 Share premium 98,067 98,067 Special reserve 64,671 64,671 Capital reserve -Revaluation gains on non-derivative investments held at year end 3 5,841 26,628 -Other capital reserves 26,182 25,213 Revenue reserve 7,473 6,943 Total Shareholders’ funds 203,582 222,870 NAV per share – Ordinary Shares - undiluted (pence) 14 151.10p 165.42p NAV per share – Ordinary Shares - diluted (pence) 14 152.75p 164.68p $SSURYHGE\WKH%RDUGRI'LUHFWRUVDQGDXWKRULVHGIRULVVXHRQ23 January 2023 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 on pages 64 to 80IRUPSDUWRIWKHVHȴQDQFLDOVWDWHPHQWV STATEMENT OF FINANCIAL POSITION AS AT 31 OCTOBER 2022 62 CC Japan Income & Growth Trust plc62 CC Japan Income & Growth Trust plc For the year ended 31 October 2022 Note Share capital £’000 Share premium £’000 Special reserve £’000 Capital reserve £’000 Revenue reserve £’000 Total £’000 Balance at 1 November 2021 1,348 98,067 64,671 51,841 6,943 222,870 Return on ordinary activities after taxation – – – (19,818) 6,930 (12,888) Dividends paid 9 – – – – (6,400) (6,400) Balance at 31 October 2022 1,348 98,067 64,671 32,023 7,473 203,582 For the year ended 31 October 2021 Note Share capital £’000 Share premium £’000 Special reserve £’000 Capital reserve £’000 Revenue reserve £’000 Total £’000 Balance at 1 November 2020 1,348 98,437 64,671 13,168 6,736 184,360 Return on ordinary activities after taxation – – – 38,673 6,404 45,077 Dividends paid 9 – – – – (6,197) (6,197) Subscription Shares issue costs – (370) – – – (370) Balance at 31 October 2021 1,348 98,067 64,671 51,841 6,943 222,870 The Company’s distributable reserves consist of the Special reserve, Revenue reserve and Capital reserve attributable WRUHDOLVHGSURȴWV The notes on pages 64 to 80IRUPSDUWRIWKHVHȴQDQFLDOVWDWHPHQWV STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 OCTOBER 2022 CC Japan Income & Growth Trust plc 63 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION CC Japan Income & Growth Trust plc 63 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION Year ended b2FWREHU 2022 £’000 Year ended b2FWREHU 2021 £’000 2SHUDWLQJDFWLYLWLHVFDVKȵRZV 5HWXUQRQRUGLQDU\DFWLYLWLHVEHIRUHȴQDQFHFRVWVDQGWD[DWLRQ (11,746) 46,123 Adjustment for: Losses/(gains) on investments 18,106 (28,306) Movement in CFD transactions (646) (1,601) Increase in other debtors (6) (293) Increase in other creditors 389 Tax withheld on overseas income (888) (824) 1HWFDVKȵRZIURPRSHUDWLQJDFWLYLWLHV 4,823 15,188 ΖQYHVWLQJDFWLYLWLHVFDVKȵRZV Purchases of investments (43,572) (100,687) Proceeds from sales of investments 46,864 89,778 1HWFDVKȵRZIURPXVHGLQLQYHVWLQJDFWLYLWLHV 3,292 (10,909) )LQDQFLQJDFWLYLWLHVFDVKȵRZV Subscription Share issue costs paid – (370) Equity dividends paid (6,400) (6,197) Finance costs paid (254) (223) 1HWFDVKXVHGLQȴQDQFLQJDFWLYLWLHV (6,654) (6,790) ΖQFUHDVHGHFUHDVHLQFDVKDQGFDVKHTXLYDOHQWV 1,461 (2,511) Cash and cash equivalents at the beginning of the year (48) 2,463 &DVKDQGFDVKHTXLYDOHQWVDWWKHHQGRIWKH\HDU 1,413 (48) &DVKLQȵRZIURPGLYLGHQGVZDVee The notes on pages 64 to 80IRUPSDUWRIWKHVHȴQDQFLDOVWDWHPHQWV STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 OCTOBER 2022 64 CC Japan Income & Growth Trust plc64 CC Japan Income & Growth Trust plc 1. GENERAL INFORMATION CC Japan Income & Growth Trust plc (the “Company”) was incorporated in England and Wales on 28 October 2015 with registered number 9845783, as a closed-ended investment company. The Company commenced its operations on 15 December 2015. The Company carries on business as an investment trust within the meaning of &KDSWHURI3DUWRIWKH&RUSRUDWLRQ7D[$FW 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. 7KH&RPSDQ\ȇVVKDUHVZHUHDGPLWWHGWRWKH2ɝFLDO/LVWRIWKH)LQDQFLDO&RQGXFW$XWKRULW\ZLWKDSUHPLXP listing on 15 December 2015. On the same day, trading of the Ordinary Shares commenced on the London Stock Exchange. In 2021, the Company’s 26,946,122 TSS were admitted to the London Stock Exchange with the ticker CCJS. 7KH&RPSDQ\ȇVUHJLVWHUHGRɝFHLVWK)ORRU/RQGRQ:DOO/RQGRQ(&<$6 2. ACCOUNTING POLICIES The principal accounting policies followed by the Company are set out below: (a) Basis of accounting 7KHȴQDQFLDOVWDWHPHQWVKDYHEHHQSUHSDUHGLQDFFRUGDQFHZLWK)56ȊWKH)LQDQFLDO5HSRUWLQJ6WDQGDUG applicable in the UK and Republic of Ireland”) issued by the Financial Reporting Council, with the Statement of Recommended Practice “Financial Statements of Investment Trust Companies and Venture Capital Trusts” issued E\WKH$VVRFLDWLRQRIΖQYHVWPHQW&RPSDQLHVLQ$SULODQGWKH&RPSDQLHV$FW7KHȴQDQFLDOVWDWHPHQWV KDYHEHHQSUHSDUHGRQWKHKLVWRULFDOFRVWEDVLVH[FHSWIRUWKHPRGLȴFDWLRQWRDIDLUYDOXHEDVLVIRUFHUWDLQȴQDQFLDO LQVWUXPHQWVDVVSHFLȴHGLQWKHDFFRXQWLQJSROLFLHVEHORZ They have also been prepared on the assumption that approval as an investment trust will continue to be granted. $VUHTXLUHGE\LWV$UWLFOHVRI$VVRFLDWLRQWKH&RPSDQ\ȇVFRQWLQXDWLRQYRWHZDVSDVVHGDWWKH$0LQDQGZLOO QH[WSXWIRUZDUGDYRWHIRULWVFRQWLQXDWLRQDWWKH$0LQ 7KHȴQDQFLDOVWDWHPHQWVKDYHEHHQSUHSDUHGRQDJRLQJFRQFHUQEDVLVΖQIRUPLQJWKLVRSLQLRQWKH'LUHFWRUV have considered any potential impact of the war in Ukraine and the ongoing impact of the Covid-19 pandemic on the going concern and viability of the Company. In making their assessment, the Directors have reviewed income and expense projections and the liquidity of the investment portfolio, and considered the mitigation measures which key service providers, including the Investment Manager, continue to have in place to maintain operational resilience. The Company’s ability to continue as a going concern for the period assessed by the Directors, being the period to 31 January 2024 ZKLFKLVDWOHDVWPRQWKVIURPWKHGDWHWKHȴQDQFLDOVWDWHPHQWVZHUHDXWKRULVHGIRULVVXH 7KHȴQDQFLDOVWDWHPHQWVKDYHEHHQSUHVHQWHGLQ%3VWHUOLQJeZKLFKLVDOVRWKHIXQFWLRQDOFXUUHQF\DVWKLVLV 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. ΖQSUHSDULQJWKHVHȴQDQFLDOVWDWHPHQWVWKH'LUHFWRUVKDYHFRQVLGHUHGWKHLPSDFWRI(6DQGFOLPDWHFKDQJHULVNDV an emerging risk as set out on page 18 and have concluded that while climate change impacts operating conditions of portfolio companies and increases obligations, it does not have a material impact on the value of the Company’s investments. In line with FRS 102, investments are valued at fair value, which for the Company are quoted bid SULFHVIRULQYHVWPHQWVLQDFWLYHPDUNHWVDW2FWREHUDQGWKHUHIRUHUHȵHFWPDUNHWSDUWLFLSDQWVȇYLHZRI climate change risk. NOTES TO THE ACCOUNTS CC Japan Income & Growth Trust plc 65 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION CC Japan Income & Growth Trust plc 65 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION (b) Investments $VWKH&RPSDQ\ȇVEXVLQHVVLVLQYHVWLQJLQȴQDQFLDODVVHWVZLWKDYLHZWRSURȴWLQJIURPWKHLUWRWDOUHWXUQLQWKHIRUP RILQFUHDVHVLQIDLUYDOXHȴQDQFLDODVVHWVDUHKHOGDWIDLUYDOXHWKURXJKSURȴWRUORVVLQDFFRUGDQFHZLWK)56 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. 8SRQLQLWLDOUHFRJQLWLRQLQYHVWPHQWVDUHFODVVLȴHGE\WKH&RPSDQ\DVȊDWIDLUYDOXHWKURXJKSURȴWRUORVVȋ7KH\ are recognised on the date they are traded and are measured initially at fair value, which is taken to be their transaction price, excluding expenses incidental to purchases which are expensed to capital on acquisition. Subsequently investments are revalued at fair value which is the bid market price for listed investments over the time until they are sold, any unrealised gains/losses are included in the fair value of the investments. &KDQJHVLQWKHIDLUYDOXHRILQYHVWPHQWVKHOGDWIDLUYDOXHWKURXJKSURȴWRUORVVDQGJDLQVRUORVVHVRQGLVSRVDODUH included in the capital column of the income statement within “gains on investments held at fair value”. (c) Derivatives 'HULYDWLYHVFRPSULVH&RQWUDFWVIRU'LHUHQFHȊ&)'ȋZKLFKDUHPHDVXUHGDWIDLUYDOXHDQGYDOXHGE\UHIHUHQFHWR the underlying market value of the corresponding security. CFDs are held for investment purposes. 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. The CFD balance is made up of transactions in relation to the underlying equity held by the Company, with the risks embedded in the CFDs disclosed in Note 16. (d) Foreign currency Transactions denominated in foreign currencies including dividends are translated into sterling at actual exchange UDWHVDVDWWKHGDWHRIWKHWUDQVDFWLRQ$VVHWVDQGOLDELOLWLHVGHQRPLQDWHGLQIRUHLJQFXUUHQFLHVDWWKH\HDUHQGDUH reported at the rates of exchange prevailing at the year end. Foreign exchange movements on investments and GHULYDWLYHVDUHLQFOXGHGLQWKHΖQFRPH6WDWHPHQWZLWKLQJDLQVRQLQYHVWPHQWV$Q\RWKHUJDLQRUORVVLVLQFOXGHGDV an exchange gain or loss to capital or revenue in the Income Statement as appropriate. (e) Income Investment income has been accounted for on an ex-dividend basis or when the Company’s right to the income is established. Special dividends are credited to capital or revenue in the Income Statement, according to the circumstances surrounding the payment of the dividend. Overseas dividends are included gross of withholding tax recoverable. Interest receivable on deposits is accounted for on an accrual basis. (f) Dividend payable Interim dividends are recognised when the Company pays the dividend. Final dividends are recognised in the period in which they are approved by the shareholders. This year, as was also the case last year, a second interim GLYLGHQGLVEHLQJSDLGLQVXEVWLWXWLRQIRUWKHȴQDOGLYLGHQG (g) Expenses $OOH[SHQVHVDUHDFFRXQWHGIRURQDQDFFUXDOVEDVLVDQGDUHFKDUJHGDVIROORZV • the basic investment management fee is charged 20% to revenue and 80% to capital; ȏ &)'ȴQDQFHFRVWVDUHFKDUJHGWRUHYHQXHDQGWRFDSLWDO • investment transactions costs are allocated to capital; and • other expenses are charged wholly to revenue. 66 CC Japan Income & Growth Trust plc66 CC Japan Income & Growth Trust plc 2. ACCOUNTING POLICIES continued (h) Taxation The tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is EDVHGRQWKHWD[DEOHSURȴWIRUWKH\HDU7D[DEOHSURȴWGLHUVIURPQHWSURȴWDVUHSRUWHGLQWKHLQFRPHVWDWHPHQW 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 UDWHVWKDWZHUHDSSOLFDEOHDWWKHȴQDQFLDOUHSRUWLQJGDWH Where expenses are allocated between capital and revenue any tax relief in respect of the expenses is allocated EHWZHHQFDSLWDODQGUHYHQXHUHWXUQVRQWKHPDUJLQDOEDVLVXVLQJWKH&RPSDQ\ȇVHHFWLYHUDWHRIFRUSRUDWLRQ taxation for the relevant accounting period. 'HIHUUHGWD[DWLRQLVUHFRJQLVHGLQUHVSHFWRIDOOWLPLQJGLHUHQFHVWKDWKDYHRULJLQDWHGEXWQRWUHYHUVHGDWWKH ȴQDQFLDOUHSRUWLQJGDWHZKHUHWUDQVDFWLRQVRUHYHQWVWKDWUHVXOWLQDQREOLJDWLRQWRSD\PRUHWD[LQWKHIXWXUHRU ULJKWWRSD\OHVVWD[LQWKHIXWXUHKDYHRFFXUUHGDWWKHȴQDQFLDOUHSRUWLQJGDWH7KLVLVVXEMHFWWRGHIHUUHGWD[DVVHWV RQO\EHLQJUHFRJQLVHGLILWLVFRQVLGHUHGPRUHOLNHO\WKDQQRWWKDWWKHUHZLOOEHVXLWDEOHSURȴWVIURPZKLFKWKH IXWXUHUHYHUVDORIWKHWLPLQJGLHUHQFHVFDQEHGHGXFWHG'HIHUUHGWD[DVVHWVDQGOLDELOLWLHVDUHPHDVXUHGDWWKH rates applicable to the legal jurisdictions in which they arise. (i) Other receivables and other payables Other receivables and other payables do not carry any interest and are short term in nature and are accordingly stated at their nominal value. (j) Segmental reporting The Directors are of the opinion that the Company is engaged in a single segment of business being that of an investment trust, as disclosed in note 1. (k) Accounting estimates, judgements and assumptions 7KHSUHSDUDWLRQRIȴQDQFLDOVWDWHPHQWVUHTXLUHVWKH'LUHFWRUVWRPDNHHVWLPDWHVDQGDVVXPSWLRQVWKDWDHFWWKH UHSRUWHGDPRXQWVRIDVVHWVDQGOLDELOLWLHVDWWKHGDWHRIWKHȴQDQFLDOVWDWHPHQWV$OWKRXJKWKHVHHVWLPDWHVDUH based on management’s best knowledge of current facts, circumstances and, to some extent, future events and DFWLRQVWKH&RPSDQ\ȇVDFWXDOUHVXOWVPD\XOWLPDWHO\GLHUIURPWKRVHHVWLPDWHVSRVVLEO\VLJQLȴFDQWO\ 7KHUHKDYHQRWEHHQDQ\LQVWDQFHVUHTXLULQJDQ\VLJQLȴFDQWHVWLPDWHVRUMXGJHPHQWVLQWKH\HDU O &DVKDQGFDVKHTXLYDOHQWV Cash comprises cash and demand deposits. Cash equivalents, include bank overdrafts, and short-term, highly OLTXLGLQYHVWPHQWVWKDWDUHUHDGLO\FRQYHUWLEOHWRNQRZQDPRXQWVRIFDVKDUHVXEMHFWWRLQVLJQLȴFDQWULVNV of changes in value, and are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes. NOTES TO THE ACCOUNTS continued CC Japan Income & Growth Trust plc 67 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION CC Japan Income & Growth Trust plc 67 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION 3. INVESTMENTS (a) Summary of valuation $VDW 31 October 2022 £’000 $VDW 31 October 2021 £’000 Investments listed on a recognised overseas investment exchange 199,642 220,271 199,642 220,271 (b) Movements During the year ended 31 October 2022 2022 £’000 2021 £’000 Book cost at the beginning of the year 193,643 166,181 Revaluation gains on non-derivative investments held at beginning of the year 26,628 14,746 Valuation at beginning of the year 220,271 180,927 Purchases at cost 45,505 100,687 Sales: – proceeds (48,028) (89,649) – gains on investment holdings sold during the year 2,681 16,424 Movements in revaluation (losses)/gains on investment held at year end (20,787) 11,882 Valuation at end of the year 199,642 220,271 Book cost at end of the year 193,801 193,643 Revaluation gains on non-derivative investment held at year end 5,841 26,628 Valuation at end of the year 199,642 220,271 Transaction costs on investment purchases for the year ended 31 October 2022 amounted to £17,000 (2021: £46,000) and on investment sales for the year amounted to £19,000 (2021: £39,000). The Company received £48,028,000 (2021: £89,649,000) from investments sold during the year. The book cost of these investments when they were purchased was £45,347,000 (2021: £73,225,000). These investments have been revalued over time and until they were sold any unrealised gains/losses were included in the fair value of the investments. F/RVVHVJDLQVRQLQYHVWPHQWV Year ended 31 October 2022 £’000 Year ended 31 October 2021 £’000 Gains on non-derivative investment holdings sold during the year 2,681 16,424 Movements in revaluation (losses)/gains on investment held at year end (20,787) 11,882 Other capital losses (23) (27) 7RWDOORVVHVJDLQVRQQRQGHULYDWLYHLQYHVWPHQWVKHOGDWIDLUYDOXH (18,129) 28,279 Realised (losses)/gains on CFD assets and liabilities (184) 9,434 Unrealised gains on CFD assets and liabilities 195 1,660 7RWDOORVVHVJDLQVRQLQYHVWPHQWVKHOGDWIDLUYDOXH (18,118) 39,373 68 CC Japan Income & Growth Trust plc68 CC Japan Income & Growth Trust plc 4. INCOME Year ended 31 October 2022 £’000 Year ended 31 October 2021 £’000 Income from investments: Overseas dividends 8,878 8,241 Total 8,878 8,241 Overseas dividend income is translated into sterling on receipt. 5. INVESTMENT MANAGEMENT FEE Year ended 31 October 2022 £’000 Year ended 31 October 2021 £’000 Basic fee: 20% charged to revenue 327 318 80% charged to capital 1,306 1,273 Total 1,633 1,591 7KH&RPSDQ\ȇVΖQYHVWPHQW0DQDJHULV&RXSODQG&DUGL$VVHW0DQDJHPHQW//37KHΖQYHVWPHQW0DQDJHULVHQWLWOHGWR UHFHLYHDPDQDJHPHQWIHHSD\DEOHPRQWKO\LQDUUHDUVDQGLVDWWKHUDWHRIRQHWZHOIWKRIRI1HW$VVHW9DOXHSHU calendar month. There is no performance fee payable to the Investment Manager. 6. OTHER EXPENSES Year ended 31 October 2022 £’000 Year ended 31 October 2021 £’000 Secretarial services 48 48 $GPLQLVWUDWLRQDQGRWKHUH[SHQVHV 420 416 $XGLWRUȇVUHPXQHUDWLRQȂVWDWXWRU\DXGLWVHUYLFHV 50 45 Directors’ fees 146 125 Other expenses – Revenue 664 634 NOTES TO THE ACCOUNTS continued CC Japan Income & Growth Trust plc 69 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION CC Japan Income & Growth Trust plc 69 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION 7. FINANCE COSTS Year ended 31 October 2022 £’000 Year ended 31 October 2021 £’000 Interest paid – 100% charged to revenue 23 21 &)'ȴQDQFHFRVWDQGVWUXFWXULQJIHHȂFKDUJHGWRUHYHQXH 45 39 Structuring fees – 20% charged to revenue 1 1 69 61 &)'ȴQDQFHFRVWDQGVWUXFWXULQJIHHȂFKDUJHGWRFDSLWDO 181 157 Structuring fees – 80% charged to capital 4 4 185 161 7RWDOȴQDQFHFRVWV 254 222 8. TAXATION Year ended 31 October 2022 Year ended 31 October 2021 Revenue £’000 Capital £’000 Total £’000 Revenue £’000 Capital £’000 Total £’000 (a) Analysis of tax charge in the year: Overseas withholding tax 888 – 888 824 – 824 Total tax charge for the year (see note 8 (b)) 888 – 888 824 – 824 E)DFWRUVDHFWLQJWKHWD[FKDUJHIRUWKH\HDU 7KHHHFWLYH8.FRUSRUDWLRQWD[UDWHIRUWKH\HDULV7KHWD[FKDUJHIRUWKH&RPSDQ\GLHUV from the charge resulting from applying the standard rate of UK corporation tax for an investment trust company. The GLHUHQFHVDUHH[SODLQHGEHORZ Year ended 31 October 2022 Year ended 31 October 2021 Revenue £’000 Capital £’000 Total £’000 Revenue £’000 Capital £’000 Total £’000 Total return before taxation 7,818 (19,818) (12,000) 7,228 38,673 45,901 (HFWLYH8.FRUSRUDWLRQWD[DW 1,485 (3,765) (2,280) 1,373 7,348 8,721 (HFWVRI 2YHUVHDVZLWKKROGLQJWD[VXHUHG 888 – 888 824 – 824 Non-taxable overseas dividends (1,687) – (1,687) (1,566) – (1,566) Capital losses/(gains) not subject to tax – 3,482 3,482 – (7,620) (7,620) Finance costs not tax deductible 13 35 48 12 31 43 Movement in unutilised management expenses 189 248 437 181 241 422 Total tax charge for the year 888 – 888 824 – 824 The Company has an unrecognised deferred tax asset of £1,218,000 (2021: £904,000) based on the long-term prospective corporation tax rate of 25% (2021: 25%). This asset has accumulated because deductible expenses exceeded taxable income for the year ended 31 October 2022. No asset has been recognised in the accounts because, given the composition of the Company’s portfolio, it is unlikely that this asset will be utilised in the foreseeable future. The Company has not provided for deferred tax on any tax losses. 70 CC Japan Income & Growth Trust plc70 CC Japan Income & Growth Trust plc 9. DIVIDEND L'LYLGHQGVSDLGGXULQJWKHȴQDQFLDO\HDU Year ended 31 October 2022 £’000 Year ended 31 October 2021 £’000 Second Interim - year ended 31 October 2021 3.35p (2020: 3.20p) 4,514 4,311 Interim dividend - year ended 31 October 2022 1.40p (2021: 1.40p) 1,886 1,886 Total 6,400 6,197 LL7KHGLYLGHQGUHODWLQJWRWKH\HDUHQGHG2FWREHUZKLFKLVWKHEDVLVRQZKLFKWKHUHTXLUHPHQWVRI Section 1159 of the Corporation Tax Act 2010 are considered is detailed below: Year ended 31 October 2022 Year ended 31 October 2021 Pence per Ordinary Share £’000 Pence per Ordinary Share £’000 Interim dividend 1.40p 1,886 1.40p 1,886 6HFRQGLQWHULPGLYLGHQG 3.50p 4,716 3.35p 4,513 4.90p 6,602 4.75p 6,399 1RWLQFOXGHGDVDOLDELOLW\LQWKH\HDUHQGHG2FWREHUDFFRXQWV 7KH'LUHFWRUVKDYHGHFODUHGDVHFRQGLQWHULPGLYLGHQGIRUWKHȴQDQFLDO\HDUHQGHG2FWREHURI3.50 per Ordinary Share. The dividend will be paid on 3 March 2023 to Shareholders on the register at the close of business on 3 February 2023. 10. OTHER DEBTORS $VDW 31 October 2022 £’000 $VDW 31 October 2021 £’000 $FFUXHGLQFRPH 3,146 3,194 Sales for settlement 1,184 20 9$7UHFHLYDEOH 62 19 Prepayments and other receivables 42 31 Total 4,434 3,264 11. OTHER CREDITORS $VDW 31 October 2022 £’000 $VDW 31 October 2021 £’000 Amounts falling due within one year: Purchases for future settlement 1,933 – $FFUXHGȴQDQFHFRVWV 77 $FFUXHGH[SHQVHV 300 297 Total 2,240 304 NOTES TO THE ACCOUNTS continued CC Japan Income & Growth Trust plc 71 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION CC Japan Income & Growth Trust plc 71 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION 12. SHARE CAPITAL Share capital represents the nominal value of shares that have been issued. The share premium includes any SUHPLXPVUHFHLYHGRQLVVXHRIVKDUHFDSLWDO$Q\WUDQVDFWLRQFRVWVDVVRFLDWHGZLWKWKHLVVXLQJRIVKDUHVDUHGHGXFWHG from share premium. $VDW2FWREHU $VDW2FWREHU No. of shares £’000 No. of shares £’000 Allotted, issued & fully paid: Ordinary Shares of 1p Opening balance 134,730,610 1,348 134,730,610 1,348 Closing balance 134,730,610 1,348 134,730,610 1,348 Since the year end, the Company has issued no Ordinary Shares, with 134,730,610 Ordinary Shares in issue as at 23 January 2023. Transferable Subscription Shares On at the year end and the date of this report, the Company had 26,946,122 TSS in issue at a Subscription Price of £1.61. The TSS were issued as a free bonus to Shareholders on the basis of 1 Subscription Share for every 5 Ordinary Shares owned. The TSS have a limited life but can be exercised by paying the Subscription Price of £1.61 for new 2UGLQDU\6KDUHVRQDTXDUWHUO\EDVLVRQWKHODVWEXVLQHVVGD\RI0D\$XJXVW1RYHPEHUDQG)HEUXDU\XSXQWLOWKHODVW EXVLQHVVGD\RI)HEUXDU\ZKHUHXSRQWKH\H[SLUH$VRI2FWREHUQRQHRIWKH766KDYHEHHQH[HUFLVHG 13. RETURN PER ORDINARY SHARE Total return per Ordinary Share is based on the return on ordinary activities, including income, a loss for the year after WD[DWLRQRIeSURȴWRIeDQGWKHZHLJKWHGDYHUDJHQXPEHURI2UGLQDU\6KDUHVXQGLOXWHG in issue for the year to 31 October 2022 of 134,730,610 (2021: 134,730,610); Ordinary Shares-diluted in issue for the year to 31 October 2022 of 161,676,732 (2021: 134,730,610). The Company’s Ordinary Shares-diluted is due to the 26,946,122 Subscription Shares in issue for the year to 31 October 2022. The returns per Ordinary Share were as follows: $VDW2FWREHU $VDW2FWREHU Revenue Capital Total Revenue Capital Total Return per Ordinary Share – undiluted 5.14p (14.71)p (9.57)p 4.75p 28.70p 33.45p Return per Ordinary 6KDUHȂGLOXWHG 4.29p (12.26)p (7.97)p 3.96p 23.92p 27.88p 'LOXWHGDVVXPHVWKDWDOOWKH766LQLVVXHDUHIXOO\VXEVFULEHGIRUDWWKHSULFHRIeSSHU766 72 CC Japan Income & Growth Trust plc72 CC Japan Income & Growth Trust plc 14. NET ASSET VALUE PER SHARE 7RWDO6KDUHKROGHUVȇIXQGVDQGWKHQHWDVVHWYDOXHȊ1$9ȋSHUVKDUHDWWULEXWDEOHWRWKH2UGLQDU\6KDUHKROGHUVDWWKH \HDUHQGFDOFXODWHGLQDFFRUGDQFHZLWKWKH$UWLFOHVRI$VVRFLDWLRQZHUHDVIROORZV NAV per Ordinary Share – undiluted $VDW 31 October 2022 $VDW 31 October 2021 1HW$VVHW9DOXHeȇ 203,582 222,870 Ordinary Shares in issue 134,730,610 134,730,610 NAV per Ordinary Share – undiluted 151.10p 165.42p NAV per Ordinary Share – diluted $VDW 31 October 2022 $VDW 31 October 2021 Subscription shares issue 26,946,122 26,946,122 Proceeds from exercise of TSS (£’000) 43,383 43,400 $GMXVWHG1HW$VVHW9DOXHIRUH[HUFLVHRI766eȇ 246,954 266,270 Ordinary Shares – post exercise of TSS 161,676,732 161,676,732 NAV per Ordinary Share – diluted 152.75p 164.68p $VDWWKH\HDUHQGWKHUHZDVQRGLOXWLRQHHFWRQWKH1$9SHUVKDUH 15. RELATED PARTY TRANSACTIONS Transactions with the Investment Manager and the Alternative Investment Fund Investment Manager (“AIFM”) 7KH&RPSDQ\SURYLGHVDGGLWLRQDOLQIRUPDWLRQFRQFHUQLQJLWVUHODWLRQVKLSZLWKWKHΖQYHVWPHQW0DQDJHUDQG$Ζ)0 &RXSODQG&DUGL$VVHW0DQDJHPHQW//37KHIHHVIRUWKHSHULRGDUHGLVFORVHGLQQRWHDQGDPRXQWVRXWVWDQGLQJDW the year ended 31 October 2022 were £134,000 (2021: £141,000). Research purchasing agreement MiFID II treats investment research provided by brokers and independent research providers as a form of “inducement” to investment managers and requires research to be paid separately from execution costs. In the past, the costs of broker research were primarily borne by the Company as part of execution costs through dealing FRPPLVVLRQVSDLGWREURNHUV:LWKHHFWIURP-DQXDU\WKLVSUDFWLFHKDVFKDQJHGDVEURNHUVVXEMHFWWR0L)Ζ' II are now required to price, and charge for, research separately from execution costs. Equally, the rules require the Investment Manager, as an investment Manager, to ensure that the research costs borne by the Company are paid IRUWKURXJKDGHVLJQDWHG5HVHDUFK3D\PHQW$FFRXQWȊ53$ȋIXQGHGE\GLUHFWUHVHDUFKFKDUJHVWRWKHΖQYHVWPHQW Manager’s clients; including the Company. The research charge for the year 1 January 2022 to 31 December 2022, as agreed between the Investment Manager and the Company, was £34,000 (31 December 2021: £28,000). The research charge for the year 1 January 2023 to 31 December 2023, as budgeted by the Investment Manager, is £28,000. Directors’ fees and shareholdings The Directors’ fees and shareholdings are disclosed in the Directors’ Remuneration Implementation Report on pages 43 to 47LQWKLV$QQXDO5HSRUW NOTES TO THE ACCOUNTS continued CC Japan Income & Growth Trust plc 73 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION CC Japan Income & Growth Trust plc 73 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION 16. FINANCIAL INSTRUMENTS AND CAPITAL DISCLOSURES Risk Management Policies and Procedures $VDQLQYHVWPHQWWUXVWWKH&RPSDQ\LQYHVWVLQHTXLWLHVDQGHTXLW\UHODWHGGHULYDWLYHVIRUWKHORQJWHUPVRDVWRVHFXUH its investment objective stated on page 2. In pursuing its investment objective, the Company is exposed to a variety RIULVNVWKDWFRXOGUHVXOWLQHLWKHUDUHGXFWLRQLQWKH&RPSDQ\ȇVQHWDVVHWVRUDUHGXFWLRQRIWKHSURȴWVDYDLODEOHIRU 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 out 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 Overview Economic conditions &KDQJHVLQHFRQRPLFFRQGLWLRQVLQ-DSDQIRUH[DPSOHLQWHUHVWUDWHVDQGUDWHVRILQȵDWLRQLQGXVWU\FRQGLWLRQV competition, political and diplomatic events and other factors) and in the countries in which the Company’s investee FRPSDQLHVRSHUDWHFRXOGVXEVWDQWLDOO\DQGDGYHUVHO\DHFWWKH&RPSDQ\ȇVSURVSHFWV7KH&RPSDQ\LVVXEMHFWWR FRQFHQWUDWLRQULVNDVLWRQO\LQYHVWVLQ-DSDQHVHFRPSDQLHVEXWKDVGLYHUVLȴHGLQYHVWPHQWVDFURVVWKHGLHUHQWVHFWRUV in the Japanese market. 6HFWRUDOGLYHUVLȴFDWLRQ 7KH&RPSDQ\KDVQROLPLWVRQWKHDPRXQWLWPD\LQYHVWLQDQ\VHFWRU7KLVPD\OHDGWRWKH&RPSDQ\KDYLQJVLJQLȴFDQW 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 LQYHVWPHQWVDQGFRQVHTXHQWO\LWV1$9DQGPD\PDWHULDOO\DQGDGYHUVHO\DHFWWKHSHUIRUPDQFHRIWKH&RPSDQ\DQG returns to Shareholders. Unquoted companies The Company may invest in unquoted companies from time to time. Such investments, by their nature, involve a higher degree of valuation and performance uncertainties and liquidity risks than investments in listed and quoted VHFXULWLHVDQGWKH\PD\EHPRUHGLɝFXOWWRUHDOLVH+RZHYHUWKH&RPSDQ\GRHVQRWFXUUHQWO\KROGDQGKDVQHYHUKHOG any unquoted securities. Management of market risk 7KH&RPSDQ\LVLQYHVWHGLQDGLYHUVLȴHGSRUWIROLRRILQYHVWPHQWV7KH&RPSDQ\ȇVLQYHVWPHQWSROLF\VWDWHVWKDWQR VLQJOHKROGLQJLQFOXGLQJDQ\GHULYDWLYHLQVWUXPHQWZLOOUHSUHVHQWPRUHWKDQRIWKH&RPSDQ\ȇVURVV$VVHWVDW the time of investment and, when fully invested, the portfolio is expected to have between 30 to 40 holdings although WKHUHLVQRJXDUDQWHHWKDWWKLVZLOOEHWKHFDVHDQGLWPD\FRQWDLQDOHVVHURUJUHDWHUQXPEHURIKROGLQJVDWDQ\WLPH$ PD[LPXPRIRIWKH&RPSDQ\ȇVURVV$VVHWVDWWKHWLPHRILQYHVWPHQWPD\EHLQYHVWHGLQXQTXRWHGRUXQWUDGHG companies at time of investment. 7KHΖQYHVWPHQW0DQDJHUȇVDSSURDFKZLOOLQPRVWFDVHVDFKLHYHGLYHUVLȴFDWLRQDFURVVDQXPEHURIVHFWRUVDVVKRZQLQ WKH+ROGLQJVLQ3RUWIROLRRQpages 29 and 30. (b) Currency risk The majority of the Company’s assets will be denominated in a currency other than sterling (predominantly in yen) and changes in the exchange rate between sterling and yen may lead to a depreciation of the value of the Company’s assets as expressed in sterling and may reduce the returns to the Company from its investments and, therefore, negatively impact the level of dividends paid to shareholders. 74 CC Japan Income & Growth Trust plc74 CC Japan Income & Growth Trust plc 16. FINANCIAL INSTRUMENTS AND CAPITAL DISCLOSURES continued Management of currency risk The Investment Manager monitors the currency risk of the Company’s portfolio on a regular basis. Foreign currency exposure is regularly reported to the Board by the Investment Manager. The Company does not currently intend to enter into any arrangements to hedge its underlying currency exposure to investment denominated in yen, although the Investment Manager and the Board will keep this approach under regular review. Foreign currency exposures $QDQDO\VLVRIWKH&RPSDQ\ȇVDVVHWVDQGOLDELOLWLHVGHQRPLQDWHGLQ\HQDUHDVIROORZV $VDW 31 October 2022 £’000 $VDW 31 October 2021 £’000 Equity Investments: Yen 199,642 220,271 Receivables (due from brokers, dividends, and other income receivable) 4,330 3,214 CFD: yen (fair value of open positions) (100) (295) Cash and cash equivalent: yen (1,927) (3,360) Total 201,945 219,830 Foreign currency sensitivity If the Japanese Yen had appreciated or depreciated by 10% as at 31 October 2022 (2021: 10%) then the returns of the company as at that date would have increased or decreased as shown below: Increase in Fair Value $VDW 31 October 2022 £’000 Decrease in Fair Value $VDW 31 October 2022 £’000 Increase in Fair Value $VDW 31 October 2021 £’000 Decrease in Fair Value $VDW 31 October 2021 £’000 Impact on capital return – increase/(decrease) 20,195 (20,195) 21,983 (21,983) Return after taxation – increase/(decrease) 20,195 (20,195) 21,983 (21,983) :LWKLQWKHIRUHLJQFXUUHQF\H[SRVXUHVWDEOHWKH2FWREHUȴJXUHIRU&)'VZDVSUHYLRXVO\UHSRUWHGDV £44,055,000 which represented the CFDs absolute exposure, rather than the fair value of open positions. The corresponding foreign currency sensitivity was previously reported as +/- £26,418,000. (c) Leverage risk Derivative instruments 7KH&RPSDQ\PD\XWLOLVHORQJRQO\&)'VRUHTXLW\VZDSVIRUJHDULQJDQGHɝFLHQWSRUWIROLRPDQDJHPHQWSXUSRVHV /HYHUDJHPD\EHJHQHUDWHGWKURXJKWKHXVHRI&)'VRUHTXLW\VZDSV6XFKȴQDQFLDOLQVWUXPHQWVLQKHUHQWO\FRQWDLQ much greater leverage than a non-margined purchase of the underlying security or instrument. This is due to the fact that, generally, only a very small portion (and in some cases none) of the value of the underlying security or instrument LVUHTXLUHGWREHSDLGLQRUGHUWRPDNHVXFKOHYHUDJHGLQYHVWPHQWV$VDUHVXOWRIDQ\OHYHUDJHHPSOR\HGE\WKH &RPSDQ\VPDOOFKDQJHVLQWKHYDOXHRIWKHXQGHUO\LQJDVVHWVPD\FDXVHDUHODWLYHO\ODUJHFKDQJHLQWKH1HW$VVHW 9DOXHRIWKH&RPSDQ\0DQ\VXFKȴQDQFLDOLQVWUXPHQWVDUHVXEMHFWWRYDULDWLRQRURWKHULQWHULPPDUJLQUHTXLUHPHQWV which may force premature liquidation of investment positions. Borrowing risks The Company may use borrowings to seek to enhance investment returns. While the use of borrowings can enhance the total return on the Ordinary Shares where the return on the Company’s underlying assets is rising and exceeds the FRVWRIERUURZLQJLWZLOOKDYHWKHRSSRVLWHHHFWZKHUHWKHUHWXUQRQWKH&RPSDQ\ȇVXQGHUO\LQJDVVHWVLVULVLQJDWD NOTES TO THE ACCOUNTS continued CC Japan Income & Growth Trust plc 75 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION CC Japan Income & Growth Trust plc 75 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION ORZHUUDWHWKDQWKHFRVWRIERUURZLQJRUIDOOLQJIXUWKHUUHGXFLQJWKHWRWDOUHWXUQRQWKH2UGLQDU\6KDUHV$VDUHVXOW WKHXVHRIERUURZLQJVE\WKH&RPSDQ\PD\LQFUHDVHWKHYRODWLOLW\RIWKH1HW$VVHW9DOXHSHU2UGLQDU\6KDUH7KH Company had no borrowings at the year end. $Q\UHGXFWLRQLQWKHYDOXHRIWKH&RPSDQ\ȇVLQYHVWPHQWVPD\OHDGWRDFRUUHVSRQGLQJO\JUHDWHUSHUFHQWDJHUHGXFWLRQ LQLWV1HW$VVHW9DOXHZKLFKLVOLNHO\WRDGYHUVHO\DHFWWKHSULFHRIDQ2UGLQDU\6KDUH$Q\UHGXFWLRQLQWKHQXPEHU of Ordinary Shares in issue (for example, as a result of buy backs) will, in the absence of a corresponding reduction in borrowings, result in an increase in the Company’s level of gearing. To the extent that a fall in the value of the Company’s investments causes gearing to rise to a level that is not consistent with the Company’s gearing policy or borrowing limits, the Company may have to sell investments in order WRUHGXFHERUURZLQJVZKLFKPD\JLYHULVHWRDVLJQLȴFDQWORVVRIYDOXHFRPSDUHGWRWKHERRNYDOXHRIWKHLQYHVWPHQWV as well as a reduction in income from investments. Management of leverage risk 7KHDJJUHJDWHRIERUURZLQJVDQGORQJRQO\&)'DQGHTXLW\VZDSH[SRVXUHZLOOQRWH[FHHGRI1HW$VVHW9DOXHDW the time of drawdown of the relevant borrowings or entering into the relevant transaction, as appropriate, although WKH&RPSDQ\ȇVQRUPDOSROLF\ZLOOEHWRXWLOLVHDQGPDLQWDLQJHDULQJWRDORZHUOLPLWRIRI1HW$VVHW9DOXHDWWKH time of drawdown of the relevant borrowings or entering into the relevant transaction, as appropriate. It is expected that any borrowings entered into will principally be denominated in Yen. 7KH&RPSDQ\ȇVOHYHORIJHDULQJDVDW2FWREHULVGLVFORVHGLQWKH$OWHUQDWLYH3HUIRUPDQFH0HDVXUHVVHFWLRQRQ page 82RIWKLV$QQXDO5HSRUW (d) Interest rate risk 7KH&RPSDQ\LVH[SRVHGWRLQWHUHVWUDWHULVNVSHFLȴFDOO\WKURXJKLWVFDVKKROGLQJVDQGRQSRVLWLRQVZLWKLQWKH&)' SRUWIROLRΖQWHUHVWUDWHPRYHPHQWVPD\DHFWWKHOHYHORILQFRPHUHFHLYDEOHIURPDQ\FDVKDWEDQNDQGRQGHSRVLWV 7KHHHFWRILQWHUHVWUDWHFKDQJHVRQWKHHDUQLQJVRIWKHFRPSDQLHVKHOGZLWKLQWKHSRUWIROLRPD\KDYHDVLJQLȴFDQW impact on the valuation of the Company’s investments. Movements in interest rates will also have an impact on the YDOXDWLRQRIWKH&)'GHULYDWLYHFRQWUDFWVΖQWHUHVWUHFHLYDEOHRQFDVKEDODQFHVRUSDLGRQRYHUGUDIWVLVDWȴ[HGUDWH Management of interest rate risk 7KHSRVVLEOHHHFWVRQ)DLU9DOXHDQGFDVKȵRZVWKDWFRXOGDULVHDVDUHVXOWRIFKDQJHVLQLQWHUHVWUDWHVDUHWDNHQ into account when making investment decisions. Derivative contracts are not used to hedge against the exposure to interest rate risk. ΖQWHUHVWLQFRPHHDUQHGRQGHSRVLWVDQGSDLGRQRYHUGUDIWE\WKH&RPSDQ\LVSULPDULO\GHULYHGIURPȴ[HGLQWHUHVW rates, as such do not have a material exposure to interest rate risk. 7KHEDQNRYHUGUDIWLVDQLQWHJUDOSDUWRIFDVKPDQDJHPHQWDQGWKH&RPSDQ\KDVDOHJDOULJKWRIRVHWDQGKDVWKH intention to settle this at net. Interest rate exposure 7KHH[SRVXUHDW2FWREHURIȴQDQFLDODVVHWVDQGOLDELOLWLHVWRLQWHUHVWUDWHULVNLVVKRZQE\UHIHUHQFHWRȵRDWLQJ interest rates – when the interest rate is due to be reset. Due to the current low interest rate environment in Japan, no sensitivity analysis is shown as the total impact will not be material. $VDW 31 October 2022 due within one year £’000 $VDW 31 October 2021 due within one year £’000 ([SRVXUHWRȵRDWLQJLQWHUHVWUDWHV&)'GHULYDWLYHFRQWUDFWȂDEVROXWHH[SRVXUH 39,926 44,055 Collateral paid in respect of CFDs 433 – 76 CC Japan Income & Growth Trust plc76 CC Japan Income & Growth Trust plc 16. FINANCIAL INSTRUMENTS AND CAPITAL DISCLOSURES continued (e) Credit risk Credit risk is the possibility of a loss to the Company due to the failure of the counterparty to a transaction discharging its obligations under that transaction. Cash and other assets held by the Depositary The cash and other assets held by the Depositary, or its sub-custodians are subject to counterparty credit risk as the Company’s access to its cash could be delayed should the counterparties become insolvent or bankrupt. Derivative instruments The Company’s holdings in CFD contracts present counterparty credit risks, with the risk of the counter party (Morgan Stanley & Co International plc) defaulting. Management of credit risk Cash and other assets held by the Depositary Cash and other assets that are required to be held in custody will be held by the depositary or its sub-custodians. Cash and other assets may not be treated as segregated assets and will therefore not be segregated from any custodian’s own assets in the event of the insolvency of a custodian. Cash held with any custodian will not be treated as client PRQH\VXEMHFWWRWKHUXOHVRIWKH)LQDQFLDO&RQGXFW$XWKRULW\Ȇ)&$ȇDQGPD\EHXVHGE\DFXVWRGLDQLQWKHFRXUVH of its own business. The Company will therefore be subject to the creditworthiness of its custodians. In the event of the insolvency of a custodian, the Company will rank as a general creditor in relation thereto and may not be able to recover such cash in full, or at all. The Company has appointed Northern Trust Investor Services Limited as its depositary. The credit rating of Northern Trust was reviewed at time of appointment and will be reviewed on a regular EDVLVE\WKHΖQYHVWPHQW0DQDJHUDQGRUWKH%RDUG7KH)LWFKȇVFUHGLWUDWLQJRI1RUWKHUQ7UXVWLV$$ 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 LWWUDGHVDQGPD\DOVREHDUWKHULVNRIVHWWOHPHQWGHIDXOW7KHVHULVNVPD\GLHUPDWHULDOO\IURPWKRVHHQWDLOHGLQ 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 HQWHUHGLQWRGLUHFWO\EHWZHHQFRXQWHUSDUWLHVJHQHUDOO\GRQRWEHQHȴWIURPVXFKSURWHFWLRQVDQGH[SRVHWKHSDUWLHVWR the risk of counterparty default. CFD contracts generally require variation margins and the counterparty credit risk is monitored by the Investment Manager. The Investment Manager monitors the Company’s exposure to its counterparties on a regular basis and the position is reviewed by the Directors at Board meetings. Investment transactions are carried out with a number of brokers, whose credit-standing is reviewed periodically by the Investment Manager, and limits are set on the amount that may be due from any one broker. In summary, the exposure to credit risk as at 31 October 2022 was as follows: $VDW 31 October 2022 3 months or less £’000 $VDW 31 October 2021 3 months or less £’000 Cash at bank 1,413 – $PRXQWVGXHLQUHVSHFWRI&)'V 2,680 443 Collateral paid in respect of CFDs 433 – Debtors 4,434 3,264 Total 8,960 3,707 None of the above assets or liabilities were impaired or past due but not impaired. NOTES TO THE ACCOUNTS continued CC Japan Income & Growth Trust plc 77 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION CC Japan Income & Growth Trust plc 77 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION (f) Other Price Risk 2WKHUSULFHULVNLVWKHULVNWKDWWKHIDLUYDOXHRUIXWXUHFDVKȵRZVRIDȴQDQFLDOLQVWUXPHQWZLOOȵXFWXDWHEHFDXVHRI changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes DUHFDXVHGE\IDFWRUVVSHFLȴFWRWKHLQGLYLGXDOȴQDQFLDOLQVWUXPHQWRULWVLVVXHURUIDFWRUVDHFWLQJVLPLODUȴQDQFLDO instruments traded in the market. The Company is exposed to market price risk arising from its equity investments and its exposure to the positions within the CFD portfolio. The movements in the prices of these investments result in movements in the performance of the Company. The Company’s exposure to other changes in market prices at 31 October 2022 on its equity investments was £199,631,000 (2021: £220,271,000). In addition, the Company’s gross market exposure to these price changes through its CFD portfolio was £39,926,000 through long positions (2021: £44,055,000). The Company uses CFDs, as part of its investment policy. These instruments can be highly volatile and potentially expose investors to a higher risk of loss. The low initial margin deposits normally required to establish a position in VXFKLQVWUXPHQWVSHUPLWDKLJKGHJUHHRIOHYHUDJH$VDUHVXOWDUHODWLYHO\VPDOOPRYHPHQWLQWKHSULFHRIDFRQWUDFW PD\UHVXOWLQDSURȴWRUORVVZKLFKLVKLJKLQSURSRUWLRQWRWKHYDOXHRIWKHQHWH[SRVXUHVLQWKHXQGHUO\LQJ&)' SRVLWLRQVΖQDGGLWLRQGDLO\OLPLWVRQSULFHȵXFWXDWLRQVDQGVSHFXODWLYHSRVLWLRQOLPLWVRQH[FKDQJHVPD\SUHYHQW 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 WKHUHIRUHKDYHWKHVDPHYRODWLOLW\SURȴOHWRWKHXQGHUO\LQJVWRFNV Market exposures to derivative contracts are disclosed below. The Company’s exposure to CFDs is the aggregate of long CFD Positions. The gross and net market exposure is the same as the Company does not hold Short CFD Positions. Exposures are monitored daily by the Investment Manager. The Company’s Board also reviews exposures regularly. The gross underlying notional exposures within the CFD portfolio as at 31 October 2022 were: $VDW2FWREHU $VDW2FWREHU £’000 % of net assets £’000 % of net assets CFDs – (absolute exposure) 39,926 19.61% 44,055 19.77% CFDs – (net exposure) 39,926 19.61% 44,055 19.77% The Board of Directors manages the market price risks inherent in the investment portfolio by ensuring full and timely access to relevant information from the Investment Manager. The Board meets regularly and at each meeting reviews investment performance. The Board monitors the Investment Manager’s compliance with the Company’s objective. Concentration of exposure to other price risk $VHFWRUEUHDNGRZQRIWKHSRUWIROLRLVFRQWDLQHGLQWKH3RUWIROLRRQSDJH31. Other price risk sensitivity 7KHIROORZLQJWDEOHLOOXVWUDWHVWKHVHQVLWLYLW\RIWKHSURȴWDIWHUWD[DWLRQIRUWKHSHULRGWRDQLQFUHDVHRUGHFUHDVHRI 10% in the fair values of the Company’s equities and CFDs. This level of change is considered to be reasonably possible based on observation of current market conditions. The sensitivity analysis is based on the notional exposure of the Company’s equities investments and long CFDs. 78 CC Japan Income & Growth Trust plc78 CC Japan Income & Growth Trust plc 16. FINANCIAL INSTRUMENTS AND CAPITAL DISCLOSURES continued $VDW2FWREHU $VDW2FWREHU Increase in Fair Value £’000 Decrease in Fair Value £’000 Increase in Fair Value £’000 Decrease in Fair Value £’000 Impact on capital return – increase/(decrease) 23,967 (23,967) 26,462 (26,462) Return after taxation – increase/(decrease) 23,967 (23,967) 26,462 (26,462) J /LTXLGLW\5LVN The securities of small-to-medium-sized (by market capitalisation) companies may have a more limited secondary PDUNHWWKDQWKHVHFXULWLHVRIODUJHUFRPSDQLHV$FFRUGLQJO\LWPD\EHPRUHGLɝFXOWWRHHFWVDOHVRIVXFKVHFXULWLHV 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 risk The Company’s Investment Manager monitors the liquidity of the Company’s portfolio on a regular basis. Liquidity risk exposure 7KHXQGLVFRXQWHGJURVVFDVKRXWȵRZVRIWKHȴQDQFLDOOLDELOLWLHVDVDW2FWREHUEDVHGRQWKHHDUOLHVWGDWHRQ which payment can be required, were as follows: $VDW 31 October 2022 less than 3 months £’000 $VDW 31 October 2021 less than 3 months £’000 Bank overdraft –48 $PRXQWVSD\DEOHLQUHVSHFWRI&)'V 2,780 756 Other payables 2,240 304 Total 5,020 1,108 The Company is exposed to liquidity risks from the leverage employed through exposure to long only CFD positions. +RZHYHUWLPHO\VDOHRIWUDGLQJSRVLWLRQVFDQEHLPSDLUHGE\PDQ\IDFWRUVLQFOXGLQJGHFUHDVHGWUDGLQJYROXPHDQG LQFUHDVHGSULFHYRODWLOLW\$VDUHVXOWWKH&RPSDQ\FRXOGH[SHULHQFHGLɝFXOWLHVLQGLVSRVLQJRIDVVHWVWRVDWLVI\OLTXLGLW\ GHPDQGV/LTXLGLW\ULVNLVPLQLPLVHGE\KROGLQJVXɝFLHQWOLTXLGLQYHVWPHQWVZKLFKFDQEHUHDGLO\UHDOLVHGWRPHHW liquidity demands. The Company’s liquidity risk is managed on a daily basis by the Investment Manager in accordance with established policies and procedures in place. (h) Fair Value Measurements of Financial Assets and Financial Liabilities 7KHȴQDQFLDODVVHWVDQGOLDELOLWLHVDUHHLWKHUFDUULHGLQWKHEDODQFHVKHHWDWWKHLU)DLU9DOXHRUWKHEDODQFHVKHHW 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) on page 65. 7KHWDEOHEHORZVHWVRXW)DLU9DOXHPHDVXUHPHQWVXVLQJ)DLU9DOXH+LHUDUFK\ NOTES TO THE ACCOUNTS continued CC Japan Income & Growth Trust plc 79 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION CC Japan Income & Growth Trust plc 79 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION $VDW2FWREHU Level 1 £’000 Level 2 £’000 Level 3 £’000 Total £’000 $VVHWV Equity investments 199,642 – – 199,642 CFDs – Unrealised Fair Value gains – 2,680 – 2,680 Liabilities: CFDs – Unrealised Fair Value losses – (2,780) – (2,780) Total 199,642 (100) – 199,542 $VDW2FWREHU Level 1 £’000 Level 2 £’000 Level 3 £’000 Total £’000 $VVHWV Equity investments 220,271 – – 220,271 CFDs – Unrealised Fair Value gains – 443 – 443 Liabilities: CFDs – Unrealised Fair Value losses – (738) – (738) Total 220,271 (295) – 219,976 There were no transfers between levels during the year (2021: same). &DWHJRULVDWLRQZLWKLQWKHKLHUDUFK\KDVEHHQGHWHUPLQHGRQWKHEDVLVRIWKHORZHVWOHYHOLQSXWWKDWLVVLJQLȴFDQWWRWKH 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 were no Level 3 investments as at 31 October 2022 (2021: 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 -DSDQDQGE\XWLOLVLQJWKHOHYHUDJHHHFWRI&)' The key performance indicators are contained in the strategic report on pages 11 and 12. The Company is subject to several externally imposed capital requirements: Ȃ $VDSXEOLFFRPSDQ\WKH&RPSDQ\KDVWRKDYHDPLQLPXPVKDUHFDSLWDORIe Ȃ ΖQRUGHUWREHDEOHWRSD\GLYLGHQGVRXWRISURȴWVDYDLODEOHIRUGLVWULEXWLRQE\ZD\RIGLYLGHQGVWKH&RPSDQ\KDVWR be able to meet one of the two capital restriction tests imposed on investment companies by company law. The Company’s capital at 31 October 2022 comprises called up share capital and reserves totalling £203,582,000 (2021: £222,870,000). The Board regularly monitors and has complied with the capital requirements. 80 CC Japan Income & Growth Trust plc80 CC Japan Income & Growth Trust plc 17. DISTRIBUTABLE RESERVES The Company’s distributable reserves consist of the Special reserve, Revenue reserve and Capital reserve attributable WRUHDOLVHGSURȴWV$VDW2FWREHUWKHWRWDO&DSLWDOUHVHUYHGLVWULEXWDEOHLVeeWRWDO Capital reserve not distributable is £5,841,000 (2021: £26,628,000). 6SHFLDOUHVHUYH$VVWDWHGLQWKH&RPSDQ\ȇVSURVSHFWXVGDWHG1RYHPEHULQRUGHUWRLQFUHDVHWKHGLVWULEXWDEOH UHVHUYHVDYDLODEOHWRIDFLOLWDWHWKHȵH[LELOLW\DQGVRXUFHRIIXWXUHGLYLGHQGVWKH&RPSDQ\UHVROYHGWKDWFRQGLWLRQDO XSRQ)LUVW$GPLVVLRQWROLVWLQJRQWKH/RQGRQ6WRFN([FKDQJHDQGWKHDSSURYDORIWKH&RXUWWKHQHWDPRXQWVWDQGLQJ to the credit of the share premium account of the Company immediately following completion of the First Issue be cancelled and transferred to a special distributable reserve. Following approval by the Court, the cancellation became HHFWLYHRQ0DUFKDQGDQDPRXQWRIeZDVWUDQVIHUUHGWRWKHDERYH6SHFLDOUHVHUYHDWWKDWWLPH The Special reserve may be used to fund dividend payments. 18. SUBSEQUENT EVENTS There were no post balance sheet events other than those already disclosed in this report. NOTES TO THE ACCOUNTS continued CC Japan Income & Growth Trust plc 81 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION CC Japan Income & Growth Trust plc 81 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION GLOSSARY AND ALTERNATIVE PERFORMANCE MEASURES Administrator The Company’s administrator, the current such administrator being $SH[/LVWHG&RPSDQLHV6HUYLFHV8./LPLWHGIROORZLQJ6DQQHURXSȇV acquisition of the Funds division of PraxisIFM in December 2021 and $SH[URXSȇVVXEVHTXHQWDFTXLVLWLRQRI6DQQHLQ$XJXVW AIC $VVRFLDWLRQRIΖQYHVWPHQW&RPSDQLHV Alternative Investment Fund or “AIF” $QLQYHVWPHQWYHKLFOHXQGHU$Ζ)0'8QGHU$Ζ)0'VHHEHORZWKH &RPSDQ\LVFODVVLȴHGDVDQ$Ζ) Alternative Investment Fund Managers Directive or “AIFMD” The UK version of an European Union Directive which came into force on 22 July 2013 and which is part of UK law by virtue of the European Union :LWKGUDZDO$FWDVDPHQGHGE\7KH$OWHUQDWLYHΖQYHVWPHQW)XQG 0DQDJHUV$PHQGPHQWHWF(8([LW5HJXODWLRQV Alternative Performance Measure or “APM” $ȴQDQFLDOPHDVXUHRIKLVWRULFDORUIXWXUHȴQDQFLDOSHUIRUPDQFHȴQDQFLDO SRVLWLRQRUFDVKȵRZVRWKHUWKDQDȴQDQFLDOPHDVXUHGHȴQHGRU VSHFLȴHGLQWKHDSSOLFDEOHȴQDQFLDOUHSRUWLQJIUDPHZRUN Annual General Meeting or “AGM” $PHHWLQJKHOGRQFHD\HDUZKLFK6KDUHKROGHUVDUHHQWLWOHGWRDWWHQG and where they can vote on resolutions to be put forward at the meeting and ask Directors questions about the Company. Absolute exposure 7KHDEVROXWHGLHUHQFHEHWZHHQWKH&RPSDQ\ȇVORQJSRVLWLRQVDQGVKRUW positions. Bonus Issue The distribution of subscription shares to qualifying Shareholders. In this report pertinent to the issue to qualifying Shareholders of new Transferable Subscription Shares on the basis of one new Transferable 6XEVFULSWLRQ6KDUHIRUHYHU\ȴYHH[LVWLQJ2UGLQDU\6KDUHV Cum-dividend $GLYLGHQGWKDWKDVEHHQGHFODUHGEXWQRW\HWSDLGRXW &)'RU&RQWUDFWIRU'LHUHQFH $ȴQDQFLDOLQVWUXPHQWZKLFKSURYLGHVH[SRVXUHWRDQXQGHUO\LQJHTXLW\ ZLWKWKHSURYLGHUȴQDQFLQJWKHFRVWWRWKHEX\HUZLWKWKHEX\HUUHFHLYLQJ WKHGLHUHQFHRIDQ\JDLQRUSD\LQJIRUDQ\ORVV Custodian $QHQWLW\WKDWLVDSSRLQWHGWRKROGDQGVDIHJXDUGDFRPSDQ\ȇVDVVHWV Depositary &HUWDLQ$Ζ)VPXVWDSSRLQWGHSRVLWDULHVXQGHUWKHUHTXLUHPHQWVRI$Ζ)0' $GHSRVLWDU\ȇVGXWLHVLQFOXGHLQWHUDOLDVDIHNHHSLQJRIWKH&RPSDQ\ȇV DVVHWVDQGFDVKPRQLWRULQJ8QGHU$Ζ)0'WKHGHSRVLWDU\LVDSSRLQWHG under a strict liability regime. The Company’s Depositary is Northern 7UXVWΖQYHVWRU6HUYLFHV/LPLWHGZLWKHHFWIURP1RYHPEHU Diluted NAV per Ordinary Share 'LOXWHG1$9SHU2UGLQDU\6KDUHFDOFXODWHVD&RPSDQ\ȇV1$9LIDOO subscriptions shares were converted. Dividend Income receivable from an investment in shares. Discount (APM) The amount, expressed as a percentage, by which the share price is less WKDQWKH1$9SHU2UGLQDU\6KDUH 82 CC Japan Income & Growth Trust plc82 CC Japan Income & Growth Trust plc $VDW2FWREHU Page 1$9SHU2UGLQDU\6KDUHSHQFH a 2 151.1 Share price (pence) b 2 138.8 Discount (b÷a)-1 8.1% $VDW2FWREHU Page 1$9SHU2UGLQDU\6KDUHSHQFH a 2 165.4 Share price (pence) b 2 154.0 Discount (b÷a)-1 6.9% Ex-dividend date The date from which you are not entitled to receive a dividend which has been declared and is due to be paid to shareholders. Financial Conduct Authority or “FCA” 7KHLQGHSHQGHQWERG\WKDWUHJXODWHVWKHȴQDQFLDOVHUYLFHVLQGXVWU\LQWKH UK. Gearing (APM) $ZD\WRPDJQLI\LQFRPHDQGFDSLWDOUHWXUQVEXWZKLFKFDQDOVRPDJQLI\ losses. The Company may be geared through the CFDs and if utilised, the overdraft facility, with The Northern Trust Company. $VDW2FWREHU Page £’000 &)'QRWLRQDOPDUNHWYDOXH a n/a 39,926 1RQEDVHFDVKERUURZLQJV b n/a 2,652 1$9 c 203,582 Gearing (net) DEF 20.9% $VDW2FWREHU Page £’000 &)'QRWLRQDOPDUNHWYDOXH a n/a 44,055 1RQEDVHFDVKERUURZLQJV b n/a 2,914 1$9 c 222,870 Gearing (net) DEF 21.1% &)'SRVLWLRQVLQXQGHUO\LQJDVVHWYDOXH 1RQEDVHFDVKERUURZLQJVUHSUHVHQWVERUURZLQJVLQ<HQ Gross assets (APM) The Company’s total assets including any leverage amount. Index $EDVNHWRIVWRFNVZKLFKLVFRQVLGHUHGWRUHSOLFDWHDSDUWLFXODUVWRFN market or sector. Gross market exposure 7KH&RPSDQ\ȇVWRWDOH[SRVXUHLQYHVWPHQWYDOXHLQWKHȴQDQFLDOPDUNHW prices. GLOSSARY AND ALTERNATIVE PERFORMANCE MEASURES (“APM”) continued CC Japan Income & Growth Trust plc 83 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION CC Japan Income & Growth Trust plc 83 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION Gross underlying notional exposure The company’s total exposure value on the underlying asset of its derivatives. Investment company $FRPSDQ\IRUPHGWRLQYHVWLQDGLYHUVLȴHGSRUWIROLRRIDVVHWV Investment trust $FORVHGHQGLQYHVWPHQWFRPSDQ\ZKLFKLVEDVHGLQWKH8QLWHG.LQJGRP (“UK”) and which meets certain tax conditions which enables it to be exempt from UK corporation tax on its capital gains. This Company is an investment trust. Leverage (APM) 8QGHUWKH$OWHUQDWLYHΖQYHVWPHQW)XQG0DQDJHUV'LUHFWLYHȊ$Ζ)0'ȋ OHYHUDJHLVDQ\PHWKRGE\ZKLFKWKHH[SRVXUHRIDQ$OWHUQDWLYH ΖQYHVWPHQW)XQGȊ$Ζ)ȋLVLQFUHDVHGWKURXJKERUURZLQJRIFDVKRU securities or leverage embedded in derivative positions. 8QGHU$Ζ)0'OHYHUDJHLVEURDGO\VLPLODUWRJHDULQJEXWLVH[SUHVVHG 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 SRVLWLRQVDUHRVHWDJDLQVWHDFKRWKHU 8QGHUERWKPHWKRGVWKH$Ζ)0KDVVHWFXUUHQWPD[LPXPOLPLWVRI leverage for the Company of 200%. $VDW2FWREHU Gross £’000 Commitment £’000 Security market value a 199,642 199,642 CFD notional market value b 39,926 39,926 &DVKDQGFDVKHTXLYDOHQWV c 2,676 1,098 1$9 d 203,582 203,582 Leverage DEFG 119% 118% $VDW2FWREHU Gross £’000 Commitment £’000 Security market value a 220,271 220,271 CFD notional market value b 44,055 44,055 &DVKDQGFDVKHTXLYDOHQWV c 3,338 45 1$9 d 222,870 222,870 Leverage DEFG 120% 119% &DVKDQGFDVKHTXLYDOHQWVUHSUHVHQWJURVVRYHUGUDIWDQGQHWRYHUGUDIWZLWK1RUWKHUQ7UXVW. 0DUNHWOLTXLGLW\ The extent to which investments can be bought or sold at short notice. Net assets $QLQYHVWPHQWFRPSDQ\ȇVDVVHWVOHVVLWVOLDELOLWLHV 84 CC Japan Income & Growth Trust plc84 CC Japan Income & Growth Trust plc Net Asset Value (NAV) per Ordinary Share Net assets divided by the number of Ordinary Shares in issue (excluding any shares held in treasury). Net exposure 7KHGLHUHQFHEHWZHHQWKH&RPSDQ\ȇVORQJSRVLWLRQVDQGVKRUW positions. Ordinary Shares Ordinary shares of £0.01 each in the capital of the Company. Ongoing charges (APM) $PHDVXUHH[SUHVVHGDVDSHUFHQWDJHRIDYHUDJH1$9RIWKHUHJXODU recurring annual costs of running an investment company. Year end 31 October 2022 Page $YHUDJH1$9 a n/a 217,165,791 $QQXDOLVHGH[SHQVHV b 46 2,297,000 Ongoing charges (b÷a) 1.06% Year end 31 October 2021 Page $YHUDJH1$9 a n/a 211,514,855 $QQXDOLVHGH[SHQVHV b 46 2,225,000 Ongoing charges (b÷a) 1.05% Portfolio $FRPSRVLWLRQRIGLHUHQWLQYHVWPHQWKROGLQJVFRQVWUXFWHGDQGKHOGLQ order to deliver returns to Shareholders and to spread risk. Premium (APM) The amount, expressed as a percentage, by which the share price is more WKDQWKH1HW$VVHW9DOXHSHUVKDUH Share buyback $SXUFKDVHE\DFRPSDQ\RILWVRZQVKDUHV6KDUHVFDQHLWKHUEHERXJKW back for cancellation or held in treasury. Share price The price of a share as determined by buyers and sellers on the relevant stock exchange. Subscription Share Prices The price at which the Transferable Subscription Share Rights are exercised in accordance with the terms and conditions of the Transferable Subscription shares. Transferable Subscription Share Rights The right conferred by each Transferable Subscription Share to subscribe for one Ordinary Share as detailed in the prospectus. Transferable Subscription Shares The transferable subscription shares in the capital of the Company as a Bonus Issue. Treasury shares $FRPSDQ\ȇVRZQVKDUHVKHOGLQ7UHDVXU\DFFRXQWE\WKHFRPSDQ\EXW which are available to be resold in the market. Total return (APM) $PHDVXUHRISHUIRUPDQFHWKDWWDNHVLQWRDFFRXQWERWKLQFRPHDQG capital returns. GLOSSARY AND ALTERNATIVE PERFORMANCE MEASURES (“APM”) continued CC Japan Income & Growth Trust plc 85 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION CC Japan Income & Growth Trust plc 85 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION Year end 31 October 2022 Page Share price 1$9 Opening at 1 November 2021 (in pence) a 2 154.0 165.4 Closing at 31 October 2022 (in pence) b 2 138.8 151.1 Price movement (b÷a)-1 c n/a -9.9% -8.7% Dividend reinvestment d n/a 2.8% 2.8% Total return (c+d) -7.1% -5.9% Year end 31 October 2021 Page Share price Cum-income 1$9 Opening at 1 November 2020 (in pence) a 2 119.5 136.8 Closing at 31 October 2021 (in pence) b 2 154.0 165.4 Price movement (b÷a)-1 c n/a 28.9% 20.9% 'LYLGHQGUHLQYHVWPHQW d n/a 3.8% 3.4% Total return (c+d) 32.7% 24.3% 7KHGLYLGHQGUHLQYHVWPHQWLVFDOFXODWHGRQWKHDVVXPSWLRQWKDWGLYLGHQGVSDLGRXWE\WKH&RPSDQ\DUHUHLQYHVWHGLQWRWKHVKDUHV RIWKH&RPSDQ\DW1$9DWWKHH[GLYLGHQGGDWH Volatility $PHDVXUHRIKRZPXFKDVKDUHPRYHVXSDQGGRZQLQSULFHRYHUD period of time. 86 CC Japan Income & Growth Trust plc86 CC Japan Income & Growth Trust plc THE SECURITIES FINANCING TRANSACTIONS REGULATION (UNAUDITED) 7KH6HFXULWLHV)LQDQFLQJ7UDQVDFWLRQV5HJXODWLRQȊ6)75ȋFDPHLQWRHHFWRQ-DQXDU\$UWLFOHUHTXLUHV LQIRUPDWLRQWREHSURYLGHGDVWRWKHXVHRIVHFXULWLHVȴQDQFLQJWUDQVDFWLRQV6)7VDQGWRWDOUHWXUQVZDSV756 $6HFXULWLHV)LQDQFLQJ7UDQVDFWLRQȊ6)7ȋLVGHȴQHGDVSHU$UWLFOHRIWKH6)75DV • a repurchase transaction; • securities or commodities lending and securities or commodities borrowing; • a buy-sell back transaction or sell-buy back transaction; or • a margin lending transaction. $VDW2FWREHUWKH&RPSDQ\KHOGWKHIROORZLQJW\SHVRI6)7V1RQH1RQH $VDW2FWREHUWKH&RPSDQ\KHOGWKHIROORZLQJW\SHVRI7RWDO5HWXUQ6ZDSV&RQWUDFWVIRU'LHUHQFH Same) The amount of securities and commodities on loan as a proportion of total lendable assets (excluding cash and cash equivalents) was 0% as at 31 October 2022 (2021: 0%). GLOBAL DATA: 7\SHRI$VVHW $EVROXWH$PRXQW £’000 3URSRUWLRQRI$80 % Security lending 00 Repo 00 Total return swap (CFDs) 39,926 16.6% CONCENTRATION DATA: The largest collateral issuer across all SFTs and Total Return Swaps is as follows: Collateral Issuers Volume of the collateral securities and commodities £’000 1 JPY Cash Collateral 24 The top counterparties across all SFTs and Total Return Swaps is as follows: Counterparty Gross volume of outstanding trades £’000 1 Morgan Stanley & Co Intl Plc 40,026 1 Macquarie Bank Limited – CC Japan Income & Growth Trust plc 87 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION CC Japan Income & Growth Trust plc 87 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION AGGREGATE TRANSACTION DATA: Type of collateral Quality Currency Maturity tenor (collateral) Maturity tenor (SFTs/Total Return Swaps) Country of counterparty establishment (not collateral) Settlement and clearing Total Return Swap Morgan Stanley & Co Intl Plc Cash +LJK JPY <1 Day >1 yr UK Bilateral Macquarie Bank Limited Cash +LJK JPY <1 Day >1 yr $XVWUDOLD Bilateral REUSE OF COLLATERAL: The share of collateral that is reused is 0%, this is in comparison to the maximum of 0% as expressed in the prospectus. The cash collateral reinvestment returns to the company were 0. SAFEKEEPING – Collateral Received: Custodian Collateral assets safe-kept (£’000) Northern Trust Global Services Limited 24 SAFEKEEPING – Collateral Granted: The proportion of collateral held in segregated accounts, in pooled accounts or any other accounts is 0%. 5(7851&2676 7\SHRI$VVHW Cost £’000 $EVROXWH Returns £’000 % overall returns of Transaction Type Alternative Investment Fund: Total Return Swaps (227) (284) 100 Manager of the Alternative Investment Fund: 000 Third parties: 0 0 0 88 CC Japan Income & Growth Trust plc88 CC Japan Income & Growth Trust plc COMPANY INFORMATION DIRECTORS +DUU\:HOOV&KDLUPDQ .DWH&RUQLVK%RZGHQ$XGLW&KDLU Peter Wolton -XQH$LWNHQ Craig Cleland BROKER 3HHO+XQW//3 100 Liverpool Street London (&0$7 DEPOSITARY AND CUSTODIAN Northern Trust Investor Services Limited 50 Bank Street London E14 5NT REGISTRAR Link Group 10th Floor Central Square 29 Wellington Street Leeds LS1 4DL LEGAL ADVISER 6WHSKHQVRQ+DUZRRG//3 1 Finsbury Circus, London (&06+ INVESTMENT MANAGER &RXSODQG&DUGL$VVHW0DQDJHPHQW//3 31-32 St James’s Street London 6:$+' Website – ZZZFRXSODQGFDUGLFRP REGISTERED OFFICE 6th Floor, 125 London Wall London (&<$6 COMPANY SECRETARY AND ADMINISTRATOR $SH[/LVWHG&RPSDQLHV6HUYLFHV8./LPLWHG 6th Floor, 125 London Wall London (&<$6 Website – ZZZDSH[JURXSFRP AUDITOR Ernst & Young LLP 144 Morrison Street Edinburgh (+(; 5HJLVWHUHGLQ(QJODQGQR COMPANY SECURITY INFORMATION AND IDENTIFICATION CODES WEBSITE www.ccjapanincomeandgrowthtrust.com Ζ6Ζ1 %%<650+2UGLQDU\6KDUHV%%0%6XEVFULSWLRQ6KDUHV 6('2/ %<650+2UGLQDU\6KDUHV%0%6XEVFULSWLRQ6KDUHV BLOOMBERG TICKER CCJI LDN (Ordinary Shares) / CCJS LDN (Subscription Shares) /($/(17Ζ7<Ζ'(17Ζ)Ζ(5/(Ζ )=$10<Ζ25.. /2%$/Ζ17(50('Ζ$5<Ζ'(17Ζ)Ζ&$7Ζ21180%(5ΖΖ1 +(.+7ȂȂ6/Ȃ CC Japan Income & Growth Trust plc 89 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION CC Japan Income & Growth Trust plc 89 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION 1RWLFHLVKHUHE\JLYHQWKDWWKH$QQXDOHQHUDO0HHWLQJRI&&-DSDQΖQFRPHURZWK7UXVWSOFZLOOEHKHOGRQb0DUFK DWQRRQDWWKHRɝFHVRI6WHSKHQVRQ+DUZRRG//3DW)LQVEXU\&LUFXV/RQGRQ(&06+8QLWHG.LQJGRP for the following purposes: 7RFRQVLGHUDQGLIWKRXJKWȴWSDVVWKHIROORZLQJUHVROXWLRQVRIZKLFKUHVROXWLRQVWR12 will be proposed as ordinary resolutions and resolutions 13 to 15 will be proposed as special resolutions. Ordinary resolutions 7RUHFHLYHWKH&RPSDQ\ȇV$QQXDO5HSRUWDQG$FFRXQWVIRUWKH\HDUHQGHG2FWREHUZLWKWKHUHSRUWVRIWKH Directors and auditors thereon. 7RDSSURYHWKH'LUHFWRUVȇ5HPXQHUDWLRQΖPSOHPHQWDWLRQ5HSRUWLQFOXGHGLQWKH$QQXDO5HSRUWIRUWKH\HDUHQGHG 31 October 2022. 7RDSSURYHWKH'LUHFWRUVȇ5HPXQHUDWLRQ3ROLF\5HSRUWLQFOXGHGLQWKH$QQXDO5HSRUW 4. To re-elect Kate Cornish-Bowden as a Director of the Company. 7RUHHOHFW+DUU\:HOOVDVD'LUHFWRURIWKH&RPSDQ\ 6. To re-elect Peter Wolton as a Director of the Company. 7. To re-elect-XQH$LWNHQDVD'LUHFWRURIWKH&RPSDQ\ 8. To re-elect Craig Cleland as a Director of the Company. 9. To authorise the Directors to declare and pay dividends on a semi-annual basis. 10. 7RDSSRLQW-RKQVWRQ&DUPLFKDHO//3DVDXGLWRUVWRWKH&RPSDQ\WRKROGRɝFHIURPWKHFRQFOXVLRQRIWKLVPHHWLQJ 7RDXWKRULVHWKH'LUHFWRUVWRȴ[WKHUHPXQHUDWLRQRIWKHDXGLWRUVXQWLOWKHFRQFOXVLRQRIWKHQH[W$QQXDOHQHUDO Meeting of the Company. 12. That the Directors be and are hereby generally and unconditionally authorised (in substitution for all subsisting DXWKRULWLHVWRWKHH[WHQWXQXVHGWRH[HUFLVHDOOSRZHUVRIWKH&RPSDQ\WRDOORWUHOHYDQWVHFXULWLHVDVGHȴQHGLQ VHFWLRQRIWKH&RPSDQLHV$FWXSWRDQDJJUHJDWHQRPLQDODPRXQWHTXDOWRe3529Ζ'('7+$7 the Directors may not allot relevant securities of an aggregate nominal amount more than 10% of the nominal YDOXHRIWKHLVVXHG2UGLQDU\6KDUHFDSLWDOH[FOXGLQJ7UHDVXU\6KDUHVDWWKHGDWHRIWKH$QQXDOHQHUDO0HHWLQJ and that this authority shall expire (unless previously varied, revoked or renewed by the Company in general PHHWLQJDWWKHFRQFOXVLRQRIWKH$QQXDOHQHUDO0HHWLQJRIWKH&RPSDQ\WREHKHOGLQRULIHDUOLHURQWKH expiry of 15 months from the passing of this resolution (the “section 551 period”) but so that the Directors may, at DQ\WLPHSULRUWRWKHH[SLU\RIWKHVHFWLRQSHULRGPDNHDQRHURUDJUHHPHQWZKLFKZRXOGRUPLJKWUHTXLUH relevant securities to be allotted after the expiry of the section 551 period and the Directors may allot relevant VHFXULWLHVLQWKHSXUVXDQFHRIVXFKDQRHURUDJUHHPHQWDVLIWKHDXWKRULW\JUDQWHGE\WKLVUHVROXWLRQKDGQRW expired. Special resolutions 13. That, subject to the passing of resolution 12, in substitution for any existing power under section 570 of the &RPSDQLHV$FWEXWZLWKRXWSUHMXGLFHWRWKHH[HUFLVHRIDQ\VXFKSRZHUSULRUWRWKHGDWHKHUHRIWKH'LUHFWRUV EHDQGDUHKHUHE\HPSRZHUHGSXUVXDQWWRVHFWLRQRIWKDW$FWWRDOORWDQGPDNHRHUVRUDJUHHPHQWVWR DOORWHTXLW\VHFXULWLHVDVGHȴQHGLQVHFWLRQRIWKDW$FWDQGRUVHOOHTXLW\VHFXULWLHVKHOGDV7UHDVXU\VKDUHV SXUVXDQWWRVHFWLRQRIWKDW$FWLQHDFKFDVHIRUFDVKSXUVXDQWWRWKHDXWKRULW\DQGIRUWKHSHULRGRIWKH authority conferred by resolution 12, up to an aggregate nominal amount of £134,730.61 as if section 561(1) of that $FWGLGQRWDSSO\WRVXFKDOORWPHQWVXEMHFWWRDPD[LPXPRIRIWKHDJJUHJDWHQRPLQDOYDOXHRIWKHLVVXHG Ordinary Share capital at the date of this resolution). NOTICE OF ANNUAL GENERAL MEETING (“AGM”) 90 CC Japan Income & Growth Trust plc90 CC Japan Income & Growth Trust plc 14. That the Company be and is hereby generally and unconditionally authorised in accordance with section 701 of the &RPSDQLHV$FWȊWKH$FWȋWRPDNHPDUNHWSXUFKDVHVZLWKLQWKHPHDQLQJRIVHFWLRQRIWKH$FWRILWV Ordinary Shares of 1p each, provided that: (a) the maximum number of Ordinary Shares hereby authorised to be purchased shall be 20,196,118 (representing 14.99 per cent of the Company’s issued Ordinary Share capital (excluding shares held in Treasury) at the date of the notice of this meeting); (b) the minimum price (exclusive of any expenses) which may be paid for an Ordinary Share is 1p; (c) the maximum price (excluding expenses) which may be paid for an Ordinary Share is not more than the KLJKHURILSHUFHQWDERYHWKHDYHUDJHRIWKHPLGGOHPDUNHWTXRWDWLRQVIRUWKH2UGLQDU\6KDUHVIRUWKHȴYH business days immediately before the day on which it purchases that share and (ii) the higher of the price of the last independent trade and the highest current independent bid for the Ordinary Shares; G WKHDXWKRULW\KHUHE\FRQIHUUHGVKDOOH[SLUHDWWKHFRQFOXVLRQRIWKH$QQXDOHQHUDO0HHWLQJRIWKH&RPSDQ\ in 2024 or, if earlier, on the expiry of 15 months from the passing of this resolution, unless such authority is renewed prior to such time; and (e) the Company may make a contract to purchase Ordinary Shares under the authority hereby conferred prior to the expiry of such authority, which will or may be executed wholly or partly after the expiration of such authority and may make a purchase of Ordinary Shares pursuant to any such contract. 7KDWDJHQHUDOPHHWLQJRIWKH&RPSDQ\RWKHUWKDQDQ$QQXDOHQHUDO0HHWLQJPD\EHFDOOHGRQQRWOHVVWKDQ GD\VȇQRWLFHSURYLGHGWKDWWKLVDXWKRULW\VKDOOH[SLUHDWWKHFRQFOXVLRQRIWKH&RPSDQ\ȇVQH[W$QQXDOHQHUDO Meeting after the date of the passing of this resolution. 5HJLVWHUHG2ɝFH %\RUGHURIWKH%RDUG 6th Floor Ciara McKillop 125 London Wall For and on behalf of /RQGRQ(&<$6 $SH[/LVWHG&RPSDQLHV6HUYLFHV8./LPLWHG Company Secretary 23 January 2023 NOTICE OF ANNUAL GENERAL MEETING (“AGM”) continued CC Japan Income & Growth Trust plc 91 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION CC Japan Income & Growth Trust plc 91 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION Website address ΖQIRUPDWLRQUHJDUGLQJWKHPHHWLQJLQFOXGLQJWKHLQIRUPDWLRQUHTXLUHGE\VHFWLRQ$RIWKH&RPSDQLHV$FW is available from KWWSVFFMDSDQLQFRPHDQGJURZWKWUXVWFRP Entitlement to attend and vote 2. Only those holders of Ordinary Shares registered on the Company’s register of members at close of business on 27 February 2023 or, if this meeting is adjourned, at close of business on the day two days prior to the adjourned meeting, shall be entitled to vote at the meeting. Appointment of Proxies 3XUVXDQWWR6HFWLRQRIWKH&RPSDQLHV$FWDPHPEHUHQWLWOHGWRDWWHQGDQGYRWHDWWKHPHHWLQJPD\ DSSRLQWPRUHWKDQRQHSUR[\SURYLGHGWKDWHDFKSUR[\LVDSSRLQWHGWRH[HUFLVHWKHULJKWVDWWDFKHGWRGLHUHQW VKDUHVKHOGE\KLP$SUR[\QHHGQRWEHDPHPEHURIWKH&RPSDQ\ ΖI6KDUHKROGHUVDUHQRWDWWHQGLQJWKH$06KDUHKROGHUVDUHVWURQJO\XUJHGWRDSSRLQWWKH&KDLUPDQDVWKHLUSUR[\ to vote on their behalf. Section 324 does not apply to persons nominated to receive information rights pursuant to Section 146 of the &RPSDQLHV$FW3HUVRQVQRPLQDWHGWRUHFHLYHLQIRUPDWLRQULJKWVXQGHU6HFWLRQRIWKH&RPSDQLHV$FW 2006 have been sent this notice of meeting and are hereby informed, in accordance with Section 149(2) of the &RPSDQLHV$FWWKDWWKH\PD\KDYHWKHULJKWXQGHUDQDJUHHPHQWZLWKWKHUHJLVWHUHGPHPEHUE\ZKRP they are nominated to be appointed, or to have someone else appointed, as a proxy for this meeting. If they have such right or do not wish to exercise it, they may have a right under such an agreement to give instructions to the member as to the exercise of voting rights. Nominated persons should contact the registered member by whom they were nominated in respect of these arrangements. The statement of rights of Shareholders in relation to the appointment of proxies does not apply to nominated persons. Proxies’ rights to vote 4. On a vote on a show of hands, each proxy has one vote. If a proxy is appointed by more than one member and all such members have instructed the proxy to vote in the same way, the proxy will only be entitled, on a show of hands, to vote “for” or “against” as applicable. If a proxy is DSSRLQWHGE\PRUHWKDQRQHPHPEHUEXWVXFKPHPEHUVKDYHJLYHQGLHUHQWYRWLQJLQVWUXFWLRQVWKHSUR[\PD\ RQDVKRZRIKDQGVYRWHERWKȊIRUȋDQGȊDJDLQVWȋLQRUGHUWRUHȵHFWWKHGLHUHQWYRWLQJLQVWUXFWLRQV On a poll, all or any of the voting rights of the member may be exercised by one or more duly appointed proxies. +RZHYHUZKHUHDPHPEHUDSSRLQWVPRUHWKDQRQHSUR[\6HFWLRQRIWKH&RPSDQLHV$FWGRHVQRWDXWKRULVH the exercise by the proxies taken together of more extensive voting rights than could be exercised by the member in person. Voting on the Resolution will be conducted by way of a poll. $VVRRQDVSUDFWLFDEOHIROORZLQJWKHPHHWLQJWKHUHVXOWVRIWKHYRWLQJZLOOEHDQQRXQFHGYLDDUHJXODWRU\ information service and also placed on the Company’s website. Voting by corporate representatives 5. Corporate representatives are entitled to attend and vote on behalf of the corporate member in accordance with 6HFWLRQRIWKH&RPSDQLHV$FWSURYLGHGWKH\GRQRWGRVRLQUHODWLRQWRWKHVDPHVKDUHV NOTES TO NOTICE OF ANNUAL GENERAL MEETING 92 CC Japan Income & Growth Trust plc92 CC Japan Income & Growth Trust plc Receipt and termination of proxies 7KH)RUPRI3UR[\DQGDQ\SRZHURIDWWRUQH\RUDQRWDULDOO\FHUWLȴHGFRS\RURɝFHFRS\WKHUHRIXQGHUZKLFK LWLVH[HFXWHGPXVWEHUHFHLYHGE\/LQN$VVHW6HUYLFHVDWQRRQRQ)HEUXDU\LQUHVSHFWRIWKHPHHWLQJ $Q\)RUPVRI3UR[\UHFHLYHGEHIRUHVXFKWLPHZLOOEHGHHPHGWRKDYHEHHQUHFHLYHGDWVXFKWLPHΖQWKHFDVHRI DQDGMRXUQPHQWWKH)RUPRI3UR[\PXVWEHUHFHLYHGE\/LQN$VVHW6HUYLFHVQRODWHUWKDQKRXUVEHIRUHWKH rescheduled meeting. We strongly urge you to appoint the Chairman of the meeting as your proxy. For those Shareholders receiving hard copy reports, on FRPSOHWLQJWKH)RUPRI3UR[\VLJQLWDQGUHWXUQLWWR/LQN$VVHW 6HUYLFHVDWWKHDGGUHVVVKRZQRQWKH)RUPRI3UR[\LQWKHHQYHORSHSURYLGHG$VSRVWDJHKDVEHHQSUHSDLGQR stamp is required. $PHPEHUPD\WHUPLQDWHDSUR[\ȇVDXWKRULW\DWDQ\WLPHEHIRUHWKHFRPPHQFHPHQWRIWKH$07HUPLQDWLRQPXVW EHSURYLGHGLQZULWLQJDQGVXEPLWWHGWRWKH&RPSDQ\ȇV5HJLVWUDUΖQDFFRUGDQFHZLWKWKH&RPSDQ\ȇV$UWLFOHVRI $VVRFLDWLRQLQGHWHUPLQLQJWKHWLPHIRUGHOLYHU\RISUR[LHVQRDFFRXQWVKDOOEHWDNHQRIDQ\SDUWRIDGD\WKDWLVQRW a working day. $OWHUQDWLYHO\\RXPD\DSSRLQWDSUR[\RUSUR[LHVHOHFWURQLFDOO\E\YLVLWLQJ KWWSVZZZVLJQDOVKDUHVFRP. You will need to register using your investor code and follow the instructions on how to vote. Proxies submitted via www.signalshares.comIRUWKH$0PXVWEHWUDQVPLWWHGVRDVWREHUHFHLYHGE\WKH&RPSDQ\ȇV5HJLVWUDU/LQN Group, no later than 48 hours before the time appointed for the meeting (excluding weekends and public holidays) or any adjournment of the meeting. Proxies received after that date will not be valid. If you are an institutional investor you may be able to appoint a proxy electronically via the Proxymity platform, a process which has been agreed by the Company and approved by the Registrar. For further information regarding Proxymity, please go to www.proxymity.io. Your proxy must be lodged by 12.00 noon on 27 February 2023 in order to be considered valid. Before you can appoint a proxy via this process you will need to have agreed to Proxymity’s associated terms and conditions. It is important that you read these carefully as you will be bound by them and they will govern the electronic appointment of your proxy. Appointment of Proxy through CREST 7. CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so for the meeting to be held on the above date and any adjournment(s) thereof by using the procedures described in the CREST Manual. CREST Personal Members or other CREST sponsored members, and those CREST members who have appointed a voting service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf. In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST message (a “CREST Proxy Instruction”) must be properly authenticated in accordance with Euroclear UK & Ireland /LPLWHGȇVVSHFLȴFDWLRQVDQGPXVWFRQWDLQWKHLQIRUPDWLRQUHTXLUHGIRUVXFKLQVWUXFWLRQVDVGHVFULEHGLQWKH&5(67 Manual. The message, regardless of whether it constitutes the appointment of a proxy or an amendment to the instruction given to a previously appointed proxy, must, in order to be valid, be transmitted so as to be received E\WKH&RPSDQ\ȇVDJHQWΖ'5$E\WKHODWHVWWLPHVIRUUHFHLSWRISUR[\DSSRLQWPHQWVVSHFLȴHGLQWKHQRWLFHRI meeting. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied WRWKHPHVVDJHE\WKH&5(67$SSOLFDWLRQV+RVWIURPZKLFKWKH&RPSDQ\ȇVDJHQWLVDEOHWRUHWULHYHWKHPHVVDJH E\HQTXLU\WR&5(67LQWKHPDQQHUSUHVFULEHGE\&5(67$IWHUWKLVWLPHDQ\FKDQJHRILQVWUXFWLRQVWRDSUR[\ȇV appointee through CREST should be communicated to the appointee through other means. CREST members and, where applicable, their CREST sponsors or voting service providers should note that Euroclear UK & Ireland Limited does not make available special procedures in CREST for any particular messages. Normal system timings and limitations will therefore apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member or sponsored member or has appointed a voting service provider(s), to procure that his CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting service providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings. The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5) (a) of WKH8QFHUWLȴFDWHG6HFXULWLHV5HJXODWLRQV NOTES TO NOTICE OF ANNUAL GENERAL MEETING continued CC Japan Income & Growth Trust plc 93 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION CC Japan Income & Growth Trust plc 93 STRATEGIC REPORTGOVERNANCEFINANCIALSOTHER INFORMATION $OOPHVVDJHVUHODWLQJWRWKHDSSRLQWPHQWRIDSUR[\RUDQLQVWUXFWLRQWRDSUHYLRXVO\DSSRLQWHGSUR[\ZKLFKDUH WREHWUDQVPLWWHGWKURXJK&5(67PXVWEHORGJHGDWQRRQRQ)HEUXDU\LQUHVSHFWRIWKHPHHWLQJ$Q\ such messages received before such time will be deemed to have been received at such time. In the case of an DGMRXUQPHQWDOOPHVVDJHVPXVWEHORGJHGZLWK/LQN$VVHW6HUYLFHVQRODWHUWKDQKRXUVEHIRUHWKHUHVFKHGXOHG meeting. Nominated Persons ΖI\RXDUHDSHUVRQZKRKDVEHHQQRPLQDWHGXQGHUVHFWLRQRIWKH&RPSDQLHV$FWWRHQMR\LQIRUPDWLRQ rights: • You may have a right under an agreement between you and the member of the Company who has nominated you to have information rights (Relevant Member) to be appointed or to have someone else appointed as a proxy for the meeting. • If you either do not have such a right or if you have such a right but do not wish to exercise it, you may have a right under an agreement between you and the Relevant Member to give instructions to the Relevant Member as to the exercise of voting rights. • Your main point of contact in terms of your investment in the Company remains the Relevant Member (or, perhaps, your custodian or broker) and you should continue to contact them (and not the Company) regarding any changes or queries relating to your personal details and your interest in the Company (including any administrative matters). The only exception to this is where the Company expressly requests a response from you. If you are not a member of the Company but you have been nominated by a member of the Company to enjoy information rights, you do not have a right to appoint any proxies under the procedures set out in the notes to the form of proxy. Questions at the Meeting 8QGHUVHFWLRQ$RIWKH&RPSDQLHV$FWWKH&RPSDQ\PXVWDQVZHUDQ\TXHVWLRQ\RXDVNUHODWLQJWRWKH business being dealt with at the meeting unless: • answering the question would interfere unduly with the preparation for the meeting or involve the disclosure of FRQȴGHQWLDOLQIRUPDWLRQ • the answer has already been given on a website in the form of an answer to a question; or • it is undesirable in the interests of the Company or the good order of the meeting that the question be answered. If Shareholders would like to ask any questions prior to the meeting, Shareholders are invited to submit their questions to [email protected]. Please note all questions should be submitted by close of business on 27 February 2023. Issued Shares and total voting rights 10. The total number of shares in the Company in respect of which members are entitled to exercise voting rights is 134,730,610 Ordinary Shares of £0.01 each, of which 0 is held in treasury. The total number of voting rights in relation to the Ordinary Shares in the Company is 134,730,610. Communication 11. Except as provided above, members who have general queries about the meeting should use the following means of communication (no other methods of communication will be accepted): ȏFDOOLQJ/LQN$VVHW6HUYLFHVȇ6KDUHKROGHUKHOSOLQHOLQHVDUHRSHQIURPDPWRSP0RQGD\WR)ULGD\ excluding public holidays) +44 371 664 0300 (calls cost 12p per minute plus network extras); or ȏLQZULWLQJWR/LQN$VVHW6HUYLFHV<RXPD\QRWXVHDQ\HOHFWURQLFDGGUHVVSURYLGHGHLWKHULQWKLVQRWLFHRI meeting or in any related documents (including the Form of Proxy for this meeting) to communicate with the Company for any purposes other than those expressly stated. I/We ....................................................................................................................................................................................................... of ........................................................................................................................................................................................................... %/2&.&$3Ζ7$/63/($6( being (a) member(s) of CC Japan Income & Growth Trust plc appoint the Chairman of the meeting, or ............................... (see note 1) .......................................................................................................................................................................................... of ........................................................................................................................................................................................................... DVP\RXUSUR[\DQGRQDSROOWRYRWHIRUPHXVRQP\RXUEHKDOIDWWKH$QQXDOHQHUDO0HHWLQJRIWKH&RPSDQ\WR be held on 1 March 2023 at 12 noon and any adjournment thereof. 3OHDVHLQGLFDWHZLWKDQȆ;ȇLQWKHVSDFHVSURYLGHGKRZ\RXZLVK\RXUYRWHVWREHFDVWRQWKHUHVROXWLRQVVSHFLȴHG Resolution For Against Withheld Discretionary 1. 7RUHFHLYHDQGDGRSWWKH$QQXDO5HSRUWDQG$FFRXQWVIRUWKH year ended 31 October 2022 2. To approve the Directors’ remuneration implementation report 3. To approve the Directors’ remuneration policy report 4. To re-elect Kate Cornish-Bowden as a Director 5. 7RUHHOHFW+DUU\:HOOVDVD'LUHFWRU 6. To re-elect Peter Wolton as a Director 7. To re-elect-XQH$LWNHQDVD'LUHFWRURIWKH&RPSDQ\ 8. To re-elect Craig Cleland as a Director of the Company 9. To authorise the Directors to declare and pay dividends on a semi-annual basis 10. To appoint Johnston Carmichael LLP as auditors to the Company 11. 7RDXWKRULVHWKH'LUHFWRUVWRȴ[WKHUHPXQHUDWLRQRIWKH auditors 12. To give authority to allot new shares 13. To give authority to allot new shares free from pre-emption rights 14. To give authority for the Company to purchase its own shares 15. 7RDXWKRULVHFDOOLQJJHQHUDOPHHWLQJVRWKHUWKDQ$QQXDO General Meetings) on 14 clear days’ notice 6XEMHFWWRDQ\YRWLQJLQVWUXFWLRQVVRJLYHQWKHSUR[\ZLOOYRWHRUPD\DEVWDLQIURPYRWLQJRQDQ\UHVROXWLRQDVKHPD\WKLQNbȴW Signature ...................................................................................... Dated this .................. day of ........................................... 2023 NOTES 1. If any other proxy is preferred, strike out the words “Chairman of the Meeting” and add the name and address of the proxy you wish to appoint and initial the alteration. The proxy need not be a member. ΖIWKHDSSRLQWHULVDFRUSRUDWLRQWKLVIRUPPXVWEHFRPSOHWHGXQGHULWVFRPPRQVHDORUXQGHUWKHKDQGRIVRPHRɝFHURUDWWRUQH\GXO\DXWKRULVHG in writing. $YRWHZLWKKHOGLVQRWDYRWHLQODZDQGZLOOQRWEHFRXQWHGLQWKHFDOFXODWLRQRIWKHSURSRUWLRQRIWKHYRWHVIRURUDJDLQVWDUHVROXWLRQ 7KHVLJQDWXUHRIDQ\RQHRIMRLQWKROGHUVZLOOEHVXɝFLHQWEXWWKHQDPHVRIDOOWKHMRLQWKROGHUVVKRXOGEHVWDWHG 5. To appoint more than one proxy you may photocopy this form. Please indicate the proxy holder’s name and the number of shares in relation to which they are authorised to act as your proxy (which, in aggregate, should not exceed the number of shares held by you). Please also indicate if the SUR[\LQVWUXFWLRQLVRQHRIPXOWLSOHLQVWUXFWLRQVEHLQJJLYHQ$OOIRUPVPXVWEHVLJQHGDQGVKRXOGEHUHWXUQHGWRJHWKHULQWKHVDPHHQYHORSH 7REHYDOLGWKLVIRUPDQGWKHSRZHURIDWWRUQH\RURWKHUDXWKRULW\LIDQ\XQGHUZKLFKLWLVVLJQHGRUDQRWDULDOO\FHUWLȴHGFRS\RIVXFKSRZHUPXVW UHDFKWKHUHJLVWUDUVRIWKH&RPSDQ\/LQN$VVHW6HUYLFHVQRWOHVVWKDQIRUW\HLJKWKRXUVEHIRUHWKHWLPHDSSRLQWHGIRUKROGLQJWKH$QQXDOHQHUDO Meeting or adjournment as the case may be. 7. The completion of this form will not preclude a member from attending the Meeting and voting in person. $Q\DOWHUDWLRQRIWKLVIRUPPXVWEHLQLWLDOOHGIf receiving a hard copy report, your completed and signed proxy form should be posted, in the HQFORVHGUHSO\SDLGHQYHORSHWRWKH&RPSDQ\ȇV5HJLVWUDUV/LQN$VVHW6HUYLFHV3;6/LQNURXS&HQWUDO6TXDUH:HOOLQJWRQ6WUHHW/HHGV/6 4DL, so as to arrive before 12 noon on 27 February 2023. CC JAPAN INCOME & GROWTH TRUST PLC FORM OF PROXY CC Japan Income & Growth Trust plc 95
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