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Jupiter rises in Japan

One of the fund management groups I really admire is Jupiter. It has been successful in nearly every area, except Japan.

But now it has bridged this gap with its Japan income trust, which aims to take advantage of hugely increasing dividends from some Japanese firms.

Jupiter has hired Simon Somerville from Cazenove to run the fund. He has an outstanding record in the Far East. While he was managing Cazenove’s Japanese fund from July 1995 to November 2002, he beat the Topix index by over 40 per cent, which is no mean feat.

The aim of Japan income fund is to outperform the Topix index while producing a yield that is 30 per cent in excess of the benchmark. Japanese shares do yield rather little but an initial income of 2 per cent a year is realistic. Furthermore, with dividends having risen by 26 per cent in the third quarter of 2005 and estimated to rise by 36 per cent by the third quarter of 2006, the potential for increasing income and growth is clear. Somerville aims to seek out companies with above-average growth prospects, cheap valuations and the ability and willingness to pay above-average dividends. He makes direct contact with over 400 companies a year and invests in firms with good management and a focus on profitability, growth and good corporate governance. Firms must also show they have the interests of shareholders at heart.

The outlook for the Japanese market as a whole is good and the market is cheap compared with the US. The domestic economy is recovering and profits and margins are at record levels. Furthermore, the Topix index is still over 50 per cent off its record high.

I believe this fund has great potential and should be considered by all advisers whose clients are looking for a Japanese fund.

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