Small cap trust brings in divvy to attract investors

The JPM Morgan Japanese Smaller Companies trust is introducing a dividend for the first time in a bid to attract new investors.

The JPM Morgan Japanese Smaller Companies trust is introducing a dividend for the first time in a bid to attract new investors.

The board has proposed a 4 per cent payout, which it hopes will help to narrow the trust’s persistent discount – currently 10 per cent. The trust has previously tried to tackle its discount with share buybacks.

In a statement to shareholders, chairman of the trust Alan Clifton said the board was still supportive of the trust’s strategy of achieving long-term capital growth by investing in small and mid-cap companies in the region.

But, he added, the board is not satisfied with the recent discount levels the trust has reached and has been actively considering how to tackle this. It said that, while buybacks may be good in the short term, it would be better to take an approach which would increase demand for the shares.

Clifton added: ‘We are aware that a growing number of investors seek investment opportunities that provide a reliable level of income alongside capital growth.’ He said securing the support of these investors is ‘indispensable’ in addressing the imbalance in supply and demand for shares.

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The Board is proposing a quarterly dividend of 1 per cent of the NAV, paid in March, June, September and December, equivalent to 4 per cent a year. It will be paid from a combination of the revenue and capital reserves. Investors will vote on the proposals at the AGM on 31 July.

The £250 million trust is in the bottom quartile of its peer group over the past year, with a return of 20.6 per cent compared to an average in the Japanese Smaller Companies sector of 25.6 per cent. Over three and five years it is in the second quartile. Managed by Nicholas Weindling for more than a decade, it has 7 per cent gearing.

Darius McDermott, managing director at Fund Calibre, says: ‘Historically Japan has not really been a market for income-seekers – but there has been a real drive, as corporate governance improves, for companies to pay dividends.

‘Will this help attract new investors? It could certainly open the trust up to income-seekers and narrow the discount as a result, but only time will tell.’


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