CC Japan Income & Growth (CCJI ) has extended its solid run of performance and revamped its fees ahead of its oncoming continuation vote.

Final results to the end of October confirmed another strong year for the £253m Japanese equity portfolio, with a net asset value (NAV) return of 16.1%. Although the fund does not have an official benchmark, it outperformed the Topix which rose 13.4% over the 12-month period. 

It is hoped this strong performance run will secure the fund’s future when shareholders are asked to decide at a continuation vote in March – a vote that is held every three years.

Given the long-term performance of the trust – which has grown its NAV 35.6% over three years versus a 22.4% rise by the Topix – the board said it has ‘no hesitation in recommending to shareholders that they vote in favour of the company continuing’.

In a bid to further encourage shareholders to vote in favour of the trust’s continuation, the fee structure for investment manager Chikara Investments, formerly known as Coupland Cardiff, was revamped in November. 

The fee is now calculated on a tiered basis of 0.75% per annum on the first £300m of net assets and 0.6% on assets above this. This replaces the 0.75% flat fee arrangement on all assets that had been in place. As the trust’s net assets are still under £300m, there has been no change yet for investors.

Banks and retailers deliver

The biggest change over the past year for investors in Japan is the end to decades of deflation and a normalisation of interest rates, which were raised for the first time in 17 years in 2024 and again last Friday to around 0.5%.

Higher interest rates have been positive for banks Sumitomo Mitsui Financial Group and Mitsubishi UFJ Financial Group, as well as insurance firms Sompo Holdings and Tokio Marine.

The biggest winners during the 12-month period were online fashion retailer Zozo and Hitachi. The former has delivered sustainable cashflow that will allow it to enhance shareholder returns, while the latter has undergone a major operational restructuring, rendering it ‘almost unrecognisable’ from the company it was 20 years ago, manager Richard Aston explained.

The ongoing ‘renaissance’ in Japanese stocks has created investment opportunities for Aston, who added three companies to the portfolio.

These include venture capital firm Jafco, which is benefiting from an increase in corporate restructuring. Japan Securities Finance, which provides services to financial institutions, was added alongside Dexerials, which makes materials used in display screens.

Aston funded the new positions by selling Nippon Telegraph & Telephone and Orix, the financial services group. The former suffered from ‘a sluggish earnings outlook’ while the latter was a valuation decision as the share price rose.

The fund has benefited from strong stock market performance in Japan, as well as ongoing corporate governance reform that has seen companies return more cash to shareholders from their famously cash-heavy balance sheets.

This has seen Japan move from the periphery for both foreign and domestic investors. Aston said the more attractive investment landscape has encouraged heavy participation from international private equity investors seeking the cheap valuations on offer.

Domestic investors, meanwhile, have been attracted by the revamp of the tax-exempt Nippon individual savings account (NISA).

‘Our optimism in the outlook is increased by the fact that the investment opportunity created by corporate developments now coincides with signs of improving domestic economic fundamentals, and the potentially significant positive benefits to Japan of the global geopolitical realignment,’ said Aston.

Over the past three years, CC Japan Income & Growth’s share price is up 32.2% versus 11.6% by the average trust in the AIC’s Japan sector. It currently trades at a 9.8% discount to NAV.