Japan Smaller Capitalization Fund, Inc. Announces Initiatives to Enhance Shareholder Value
- Implementation of 10% annual rate Level Distribution Plan providing monthly distributions to shareholders
- Conditional Tender Offer of 10% of outstanding shares if discount persists, showing commitment to shareholder value
- Positive investment outlook with Japanese market growth rates comparable to US in most sectors
- Upward trend in Return on Equity (ROE) supported by improving profit margins and revenue growth
- Potential for further ROE improvement through ongoing corporate reforms
- Short-term increase in Fund's expense ratio due to financial adviser fees
- Distributions may include return of shareholder capital, not just earnings
- No guarantee that initiatives will successfully reduce the trading discount
- Fund reserves right to terminate or modify the plan without prior notice
Insights
JOF announces shareholder-friendly initiatives: 10% distribution plan and conditional tender offer to address persistent discount to NAV.
The Japan Smaller Capitalization Fund (JOF) has taken decisive steps to address its persistent trading discount with two key shareholder-friendly initiatives. First, the Fund is implementing a 10% annual Level Distribution Plan (LDP), with monthly distributions of
The second initiative is a conditional tender offer (CTO) that will be triggered if the Fund's shares trade at an average daily discount of
These actions represent classic discount-narrowing strategies employed in the closed-end fund space. The LDP transforms more of the total return into direct distributions rather than retained capital appreciation, which many income-focused investors prefer. Meanwhile, the conditional tender offer creates a potential price floor and provides an automatic relief valve if the discount persists.
While these initiatives may benefit shareholders through potential discount narrowing and increased yield, investors should note that distributions might include return of capital if investment income and realized gains are insufficient to cover the
The Japanese market context is important here - with NAM highlighting improving ROE trends, driven by better profit margins and ongoing corporate reforms. The firm believes the Japanese small-cap space remains inefficient and ripe for active management due to limited analyst coverage, potentially supporting the Fund's ability to sustain the aggressive distribution policy through investment returns rather than capital erosion.
NEW YORK, June 06, 2025 (GLOBE NEWSWIRE) -- Japan Smaller Capitalization Fund, Inc. (the “Fund”) (NYSE: JOF) today announced that its Board of Directors (the “Board”) has approved two initiatives aimed at addressing the Fund’s trading discount. These initiatives include a level distribution plan and a conditional tender offer. The Board believes these actions reflect the Fund’s ongoing commitment to enhancing shareholder value, delivering competitive performance, and providing consistent distributions to long-term shareholders.
The plan (the “Plan”) includes (i) implementation of a Level Distribution Plan (the “LDP”) to pay monthly distributions at a
Level Distribution Plan
The Board has approved a Level Distribution Plan under which the Fund will pay monthly distributions at an annualized rate of
The Fund’s distribution details are as follows:
| Record Date | Ex-Dividend Date | Payment Date | Distribution Amount | ||||
| July 15, 2025 | July 15, 2025 | July 31, 2025 | $ | 0.0887 | |||
| August 15, 2025 | August 15, 2025 | August 29, 2025 | $ | 0.0887 | |||
| September 15, 2025 | September 15, 2025 | September 30, 2025 | $ | 0.0887 | |||
The LDP is intended to provide shareholders with a constant, though not guaranteed, fixed rate of distribution each month. In approving the LDP, the Board considered, among other factors, the potential impact of the LDP as a tool to narrow the discount to NAV at which the Fund’s shares have historically traded, the Fund’s ability to sustain the LDP, and the possibility that making regular distributions could enhance liquidity for common shareholders and potentially attract new investors.
Distributions will be made primarily in cash but under the Fund’s dividend-reinvestment plan, distributions will be made in Fund shares unless a shareholder has elected to receive cash. Shares held with a broker-dealer will receive distributions in cash.
Under the LDP, distributions may be derived from any combination of: (i) net investment income, (ii) realized capital gains, and/or (iii) a return of shareholder capital. The actual composition for each fiscal year will be reported to shareholders on Form 1099-DIV after year-end. Estimates provided in any monthly notice or in this press release are not intended for tax-reporting purposes and should not be relied upon as such.
The Fund cannot predict what effect, if any, the LDP will have on the market price of its shares, or whether such market price will trade at a narrower or wider discount to NAV compared to levels prior to the Plan’s adoption.
Conditional Tender Offer
In addition to the LDP, the Board approved a Conditional Tender Offer. The Fund will launch a tender offer for
In approving the CTO, the Board considered, among other factors, that a rules-based approach gives shareholders clear, time-bounded relief if the discount persists, the complementary nature of the CTO with the LDP, the reinforcement of the Fund’s commitment to shareholder-friendly capital management, and the offer of meaningful liquidity to shareholders. There can be no guarantee that these benefits will occur or that any improvement will continue.
The Board may terminate or modify the parameters of the Plan at any time without prior notice to the Fund’s shareholders if circumstances warrant. The amendment or termination of the Plan could have an adverse effect on the market price of the Fund’s common shares.
To assist the Board in its evaluation of the LDP, the CTO, and other potential corporate actions, the Fund engaged an unaffiliated financial adviser with significant closed-end fund expertise. The professional fees associated with this limited-duration engagement will be borne by the Fund and are expected to result in a short-term increase in the Fund’s expense ratio.
Investment Outlook
While overall earnings growth is expected to be higher in the United States, the Japanese market is expected to have growth rates comparable to the United States in most sectors besides the Industrials sector. Nomura Asset Management Co., Ltd. (“NAM”) believes Return on Equity (“ROE”) is on an upward trend in Japan, supported by improvements in profit margins and revenue growth. NAM expects share buybacks and dividend increases will continue to raise the financial leverage. With ongoing corporate reforms, there is a potential for ROE to rise further. Japan remains one of the most attractive markets for individual stock selection due to a lack of coverage.
Continued Focus on Long-Term Value
Today’s announcement represents the Fund’s objective to deliver competitive performance and stable distributions to shareholders. The Board and Nomura Asset Management U.S.A. Inc. (“NAM-U.S.A.”) remain committed to delivering long-term value creation and addressing the interests of our shareholders.
About the Fund
The Fund invests primarily in the securities of smaller capitalization companies in Japan and is designed for investors seeking long-term capital appreciation. The Manager of the Fund is NAM-U.S.A., which is based in New York. NAM-U.S.A. is a subsidiary of NAM, which is one of the largest investment advisory companies in Japan in terms of assets under management and serves as the investment adviser to the Fund.
Forward Looking Statements
Certain information discussed in this press release may constitute forward-looking statements within the meaning of U.S. federal securities laws. Although the Fund and NAM-U.S.A. believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, the Fund and NAM-U.S.A. can give no assurance that their expectations will be achieved. Forward-looking information is subject to certain risks, trends, and uncertainties that could cause actual results to differ materially from those projected.
| Contact: | Maria Premole | |
| 1-800-833-0018 | ||
| JOFInvestorRelations@nomura-asset.com |
FAQ
What is JOF's new distribution policy announced for 2025?
What are the terms of JOF's Conditional Tender Offer announced in 2025?
When will JOF's new monthly distributions begin in 2025?
How will JOF's distributions be funded under the new plan?
What is the investment outlook for JOF's Japanese market focus?
