JPMorgan Japan Smaller Companies Trust (JPS) looks to deliver capital growth through investment in small and mid-cap Japanese companies, excluding the largest 200 Japanese companies by market capitalisation. The investment managers, Eiji Saito, Naohiro Ozawa and Michiko Sakai, seek to identify the best growth opportunities in high-quality companies within the Japanese market.
Since April 2018, it has been a policy of the trust’s board to distribute dividends totalling 1% of NAV (as measured at the end of the quarter) on a quarterly basis. This was instituted to broaden the trust’s appeal to investors seeking yield, with the view that this will ultimately help the share price trade closer to NAV.
Importantly, this change does not impact the investment strategy of the trust, which has historically delivered outperformance of the benchmark. This strategy follows the stock-analysis framework of the wider JPMorgan Japanese equity team, a well-resourced and deep pool of analysts and portfolio managers based in Japan.
With a wide pool of under-researched stocks amongst the roughly 4,000 listed companies in Japan, the managers believe this level of resource gives them an advantage in identifying market pricing inefficiencies. The process seeks the best growth opportunities available in the Japanese small-cap market, places emphasis on understanding management strategy and the operational environment of the underlying business, and incorporates certain thematic considerations around the Japanese economy and market.
As at 30/01/2020, JPS’s shares traded on a discount to NAV of c. 6.0%; as a result of the new dividend policy, they yield c. 4.3%.