The fund returned +1.1% in January ahead of the broader Japanese markets that rallied +0.4%. This brings 1 year rolling returns to +16% and since inception performance to +114%.

Zennor was founded to exploit the opportunity arising from the revolution in corporate governance in Japan. In January, we were highly engaged with our holding Fuji Media Holdings (4676) where a scandal, a failed cover-up and numerous governance failures saw us, and other engaged investors, writing to the company and speaking to the media to highlight this serious cultural and governance issue. Subsequently, the senior leadership team resigned, an independent review was commissioned, and the company is now enhancing alignment with Japan Exchange Group (JPX) governance best practice. Fuji Media has not pursued management conscious of the cost of capital and the previous management team’s operational track record was poor – governance has also clearly failed in a very public way. The company is being compelled by a customer boycott, strong public criticism from the government and shareholders to change. Despite the very adverse news flow and loss of revenue, this change in management posture saw the shares rally +28%. Despite this move, the shares still trade at only 0.5x adjusted NAV. We see significant further potential as the company continues down the governance reform path. 

TSI Holdings (3608) which has embraced governance reform announced the sale of its head office for a ¥24bn gain and a large (20%) buyback and several years of special dividends alongside additional operational reform. The shares rallied +25%. After month end, our holding Kyocera (6971) announced a plan to sell its equity positions more actively and committed to a much higher pace of capital return. Their valuation against net financial assets is very low, and the scope for them to focus their business more tightly on areas of competitiveness is obvious. Management has faced falling support so has to take action to garner shareholder support.