Important information

Eastspring Investments - Japan Dynamic Fund is referred to as the ‘Fund’.
The Fund invests in equities and equity-related securities and is exposed to the risk of market price fluctuations.
The Fund invests in a single country, and may be subject to greater volatility compared to more diversified funds.
The Fund may incur substantial losses if it is unable to sell those investments with liquidity risks at opportune times or prices.
The Fund may invest in securities denominated in currencies other than the Fund’s base currency and may be exposed to currency and exchange rates risk.
The Fund may offer currency hedged share classes which involve currency hedging transactions that may, in extreme cases, adversely affect the Fund's net asset value.
The Fund may use financial derivatives instruments (FDIs) for hedging and efficient portfolio management purposes. Using FDIs may expose the Fund to market risk, management risk, credit risk, counterparty risk, liquidity risk, volatility risk, operational risk, leverage risk, valuation risk and over-thecounter transaction risk. The use of such instruments may be ineffective and the Fund may incur significant losses.
Investment involves risk. Investors should not rely solely on this document in making investment decision. Past performance information presented is not indicative of future performance.

Japan has always been a corporate, not an economic, revival story. The market’s recent rally indicates investors’ growing recognition of the positive changes from ongoing corporate reforms. The good news is that profit margins continue to improve and the long-term upward trajectory for earnings remains intact.

Yet the market still trades at very attractive valuations versus global peers which suggests more upside potential for patient investors. Furthermore, over the longer term, Japanese companies are at the gateway of Asia (ex-China), where they can both facilitate and partake in Asia’s growth story.

Reasons to invest in Japan

Corporate reforms are driving profits

Profitability has generally improved on a trend basis; even during the height of the pandemic in 2020, the operating profit margins only fell to the peak level of the previous cycle. This was achieved by Japanese companies managing their capacity and cost base well.

Source: Profit Margin % of sales from Refinitiv Datastream MOF. For illustration purposes only. The indices described are unmanaged and not available for direct investment. Latest data available as 30 June 2023. Current Profits of all Japanese Incorporated Enterprises Industries (Except Finance and Insurance) / Sales, in Japanese Yen.

Japan is cheap compared to global peers

Despite resilient earnings and improved companies’ fundamentals, the market did not re-rate and is still valued much lower than other major markets. Lower starting valuations are supportive of likely future outperformance for the market.

Source: Eastspring Investments, IBES MSCI Indices, Refinitiv Datastream, as at 30 June 2023. Past performance is not an indication of the future or likely performance. For illustration purposes only. The indices described are unmanaged and not available for direct investment. Indices used: MSCI Japan Index, MSCI Europe Index, MSCI AC Asia Pacific ex-Japan, MSCI EM Latin America Index, MSCI AC World Index, MSCI USA Index Projections, forecasts, opinions on the economy, securities markets or the economic trends of the markets are based upon Information and sources believed to be reliable at time of publication and subject to change without notice.

More Japanese companies are cash rich

Long-term restructuring efforts have included deleveraging of balance sheets, which has led to high levels of cash and offered many companies a level of flexibility in funding their ongoing operations.

Source: “Cash rich” companies based on Japan (Topix), US and Europe (MSCI indices) from Nomura, as at 30 June 2023. Companies ratio is the number of positive net cash companies divided by the number of index composite companies.

in rising opportunities in Japan

At Eastspring Investments, our focus remains on identifying the many mispriced Japanese companies with good quality income streams that are yet to be recognised by the market. We expect corporate reforms and structural changes have another five to ten years to play out. Investors who are keen to reap long-terms gains from this market may consider a strategic allocation to Japan equities in their portfolios for these reasons.

Eastspring Investments – Japan Dynamic Fund

A high conviction and unconstrained strategy A portfolio that is unconstrained by market cap or market’s thematic preferences, containing 30-50 of our best idea stocks that are undervalued according to their fundamentals.

Differentiated valuation approach Our value differentiator lies in our detailed analysis that looks for the longer drivers of a company’s sustainable earnings using a consistent valuation framework.

Choice of share classes The Fund is also available in USD hedged share classes. The hedged share classes offer investors returns that are correlated to the base currency (JPY) of the Fund.

Proven track record Highly experienced team with a track record of over 16 years of navigating Japan’s equity universe and delivering strong performance.

Source: Eastspring, as of 30 June 2023. The information provided herein are subject to change at the discretion of the Investment Manager without prior notice.

Eastspring Investments – Japan Smaller Companies Fund

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Investment approach

Our differentiated investment approach enables us to see things differently. This approach systematically identifies “high impact valuation outliers” and is durable over time and market cycles.