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CC Japan Income & Growth hurt by income focus

CCJI

CC Japan Income & Growth (CCJI) has announced its annual results for the year ended 31 October 2020, which show that it was hurt by its focus on income. During the year, CCJI’s NAV total return fell by 11.1% in sterling terms, while the Tokyo Stock Exchange Price Index (Topix) was fractionally positive at +0.3%. The share price total return fell by 17.3% over the period. The chairman, Harry Wells, neatly summarises the situation as follows:

“Our mandate reflects an investment style that, while seeking total return, looks to identify value and yield opportunities and took a battering as markets fell off a cliff during February 2020. This was exacerbated by our structural gearing during the sell off. Adding insult to injury, the portfolio underperformed the immediate bounce as massive co-ordinated global government fiscal and central bank monetary stimulus favoured a rerating of a narrow range of growth stocks focussed on the virtual economy, technology, media and healthcare. These growth companies tend not to pay dividends and consequently fail to score on our Investment Manager’s radar. Poor relative and absolute performance saw our share price discount to NAV widen significantly during the year.”

He goes on to say that the Board is wary of buying back shares in this environment, which it thinks could be viewed as cosmetic signalling with little efficacy. Ultimately, CCJI’s board believes that investment performance and the growth and level of dividend income are paramount in driving the trust’s share price rating.

[QD comment: the timing of CCJI’s financial year end is somewhat unfortunate in that it fails to capture the vaccine rally seen from November, which would otherwise make its absolute returns look more appealing.]

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