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Premium-rated Japan income trust looks to raise £100m

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Premium-rated Japan income trust looks to raise £100m

CC Japan Income & Growth (CCJI) hopes to exploit investor interest in Japan with a big share issue to professional and private investors.

In a move exploiting strong investor interest in Japan and its own premium rating, the investment trust, run by Richard Aston of Coupland Cardiff in London, is looking to raise up to £100 million in a placing to existing shareholders, a subscription offer to new investors and an intermediaries offer to stock brokers.

The two-year-old trust raised £66.5 million at its launch in December 2015, falling short of its £200 million target. Since then, however, demand for the sector’s only explicit income fund has allowed it to catch up with its share price trading almost continuously above net asset value (NAV).

This enabled the board to issue over 22 million new shares, which coupled with the portfolio’s 63.5% total investment return - ahead of the 53% from Japan’s Topix index - has seen CCJI blossom with its market value swelling to £150 million.

Having gained shareholder approval before Christmas, the trust plans to issue 100 million new shares at a price of 2% above the prevailing NAV on the day the placing closes on 24 January. Corporate broker Peel Hunt is handling the issue.

Having advanced 38% last year, the shares currently stand at a 5.5% premium to NAV, according to Morningstar, putting it on a rating just below sector leader Baillie Gifford Japan (BGFD), which stands on a 7% premium. The three other trusts in the sector trade on discounts below NAV.

CCJI yields 2.1%, the highest in its five-strong sector, according to Association of Investment Companies data.

In a statement to the stock exchange, the company said: ‘The investment manager has identified a strong pipeline of investment opportunities in Japan, with the potential for further investment in both existing portfolio companies and in stocks that are not currently held by the company.’

Its board reiterated a desire to continue to grow the company, saying that would spread its costs across a larger investor base and reduce ongoing charges for each shareholder. It is currently the most expensive trust in the AIC Japan sector with annual ongoing charges of 1.28%, compared to the average 0.87%. Of this, 0.75% is paid to Coupland Cardiff.

It is also the mostly highly geared with debt of 22% of net assets, compared to the 13% sector average.

‘The directors believe that an increase in the size of the company via the share issuance would improve liquidity and enhance the marketability of the company, resulting in a broader investor base which should enable the company to grow,’ it added.

CCJI invests in a portfolio of 30 to 40 stocks. Aston focuses on undervalued companies with strong balance sheets and franchises. He favours companies that have positive attitudes towards making shareholder returns via dividends and share buybacks. Its largest holding at the end of November was Tokyo Electron at 5.4% of assets, according to Morningstar.

Aston also manages the larger Dublin-based CC Japan Income & Growth open-ended investment company. It has assets of $867 million (£640 million).

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