RNS Number:6854L
Prospect Japan Fund Ld
28 April 2005
THE PROSPECT JAPAN FUND LIMITED
PRELIMINARY PROFIT ANNOUNCEMENT
For the year ended
31st December, 2004
THE PROSPECT JAPAN FUND LIMITED
--------------------------------------------------------------------------------
PRELIMINARY PROFIT ANNOUNCEMENT
for the year ended 31 December, 2004
Market Performance, US$ NAV
CY2004 Since inception
(12/30/2004) (12/20/1994)
PROSPECT JAPAN FUND 29.22% 72.20%
TOPIX 13.58%* -27.16%
TOPIX SMALL 26.14%* -40.16%
The above performance of the Prospect Japan Fund is net of fees and expenses and
includes reinvestment of dividends and capital gains. Topix is the capital
ization-weighted index of all companies listed on the First Section of the Tokyo
Stock Exchange. Topix Small is the capitalization-weighted index designed to
measure the stocks not included in the Topix 500 Index that are listed on the
First Section of the Tokyo Stock Exchange. Topix Small Index reflects the
performance of smaller companies, which is consistent with the companies in
which the Prospect Japan Fund invests.
* Topix and Topix Small figures are calculated by Bloomberg, and do not include
reinvestment of dividends and capital gains; an estimate of an additional 1%
return would be considered reasonable, had the figures included reinvestment of
dividends and capital gains..
* Prospect Japan Fund had an outstanding year, up 29.22%, outperforming
the TOPIX and TOPIX SMALL Indices for Calendar Year 2004 as well as since
the Fund's inception
Prospect focuses on results and profits that are being delivered, rather than
those that analysts and corporate management may dream about. We are pleased to
see that Tokyo land prices for the year to Sept 2004 reported by the Japan Real
Estate Institute on 9 Dec were up for the first time since 1990. Prospect has
been talking to investors for three years about the reversal in fortunes that is
happening, and it has finally been publicly reported in the official statistics.
Given the tepid progress toward recovery in other parts of Japan, we do not
foresee any risk of a premature choking of this breath of hope. Interest rates
will remain low and monetary policy will remain loose into 2006 at least. Demand
from the Tokyo and other urban demographic forces will widen the gap between
strength and weakness within the Japanese economy.
Strong Urban-led Recovery
Prospect enters 2005 with a strong view on urban-led recovery. We discussed in
previous newsletters how the J-REIT market is successfully performing the
function that its architects may have planned for. The yield curve in Japan
slopes upward from zero to an extra-ordinary spread against yields in the urban
property sector.
The government bond market was until 2002 the only large liquid exchange-traded
asset that delivered a yield worth considering but now high-quality assets can
be bought by institutions at yields of 300-400bps above short rates. The first
J-REITs were listed in 2002 with give-away yields of 6% in yen, but now are down
to a level that encourages construction of quality assets for direct sale into
securitized portfolios.
The key point is we believe that these are not the unwanted assets put up in the
1980's in poor locations, but high quality assets that have true commercial
logic. Moreover, the strengthening of the yen is causing some investors to look
for alternatives to US treasuries, a previous favorite source of yield.
Reading this comment on urban demand, it will not surprise our investors that
Tokyo condominium developer Arnest One and urban clothing retailer Point were
the top contributors to the Fund's performance in 2004. On the other hand, some
of our other urban service companies such as restauranteur Kappa Create showed
poor performance during the year.
Outlook for 2005
In late 2004 it appears that the broad stock market ignored the performance of
J-REITs and the implied improved outlook for urban property. We believe that
asset prices such as those of urban developers, service providers and related
consumer stocks were passed by. This leads us to increase our exposure to these
areas and position for a better environment in the first part of 2005.
THE PROSPECT JAPAN FUND LIMITED
--------------------------------------------------------------------------------
PRELIMINARY PROFIT ANNOUNCEMENT
for the year ended 31 December, 2004
Deficit per Share
The revenue deficit per Ordinary Share has been calculated based on the weighted
average number of Ordinary Shares of 107,928,226 and a net revenue deficit of
US$1,694,574 (2003; on 109,441,650 Ordinary Shares and a net revenue deficit of
US$552,022). The capital return per Ordinary Share has been calculated based on
weighted average number of Ordinary Shares of 107,928,226 and a net capital
return of US$42,811,140 (2003; on 109,441,650 Ordinary Shares and a net capital
return of US$47,806,130). At 9 June 2004, the Company's shares were split on a
10 for 1 basis. The calculation of the weighted average number of shares and
issues has taken account of this share split. Comparative return figures have
been restated on this basis. In addition, the comparative Net Asset Value per
Ordinary share has been restated for the effect of the share split.
Dividend
No dividend has been declared for the year.
Taxation Status
The States of Guernsey Income Tax Authority has granted the Company exemption
from Guernsey Income Tax.
Other Shareholder Information
The prices of Ordinary Shares and the latest NAV are published daily in the
Financial Times. Prices (in Sterling terms) of the Ordinary Shares appear within
the section of the London Share Service entitled "Investment Companies". The NAV
(in dollar terms) appears within the section of the Financial Times Managed
Funds Service under Prospect Asset Management (Channel Islands) Limited.
The Preliminary Profits Announcement does not constitute statutory accounts but
is prepared on the same basis as set out in the Annual Report and Audited
Financial Statements for the year ended 31 December, 2003 which were approved
and signed by the Board of Directors on 5th April, 2004.
THE PROSPECT JAPAN FUND LIMITED
---------------------------------------------------------------------------------------------------------------------
STATEMENT OF TOTAL RETURN
for the year ended 31 December, 2004
Revenue Capital Total Revenue Capital Total
2004 2004 2004 2003 2003 2003
In U.S. In U.S. In U.S. In U.S. In U.S. In U.S.
Dollars Dollars Dollars Dollars Dollars Dollars
Gains on - 42,620,360 42,620,360 - 47,400,866 47,400,866
investments
Other gains - 190,780 190,780 - 405,264 405,264
Investment
income:
Dividends 1,975,903 - 1,975,903 1,934,878 - 1,934,878
Interest 64,455 - 64,455 17,328 - 17,328
-------- --------- --------- -------- --------- ---------
2,040,358 42,811,140 44,851,498 1,952,206 47,806,130 49,758,336
Management (2,682,660) - (2,682,660) (1,690,831) - (1,690,831)
fee
Other (924,273) - (924,273) (615,851) - (615,851)
expenses
--------- --------- --------- --------- --------- ---------
(Deficit) /
return on
ordinary
activities (1,566,575) 42,811,140 41,244,565 (354,476) 47,806,130 47,451,654
before tax
--------- --------- --------- --------- --------- ---------
Withholding (127,999) - (127,999) (197,546) - (197,546)
tax
--------- --------- --------- --------- --------- ---------
(Deficit) /
return on
ordinary
activities (1,694,574) 42,811,140 41,116,566 (552,022) 47,806,130 47,254,108
for the
period
========= ========= ========= ========= ========= =========
(Deficit) /
return per
Ordinary (0.016) 0.397 0.381 (0.005) 0.437 0.432
Share
========= ========= ========= ========= ========= =========
The above results relate to continuing operations of the Company.
THE PROSPECT JAPAN FUND LIMITED
--------------------------------------------------------------------------------
BALANCE SHEET
as at 31 December, 2004
2004 2003
In U.S. In U.S.
Dollars Dollars
Investments 172,510,268 134,552,497
Current assets
--------- ---------
Debtors 829,238 303,003
Bank deposits 9,824,151 9,319,363
--------- ---------
10,653,389 9,622,366
Liabilities falling due within
one year
Creditors 1,016,712 444,892
--------- ---------
Net current assets 9,636,677 9,177,474
--------- ---------
182,146,945 143,729,971
========= =========
Represented by:
SHARE CAPITAL AND RESERVES
Share capital 107,063 109,013
Redemption reserve 104,906,086 107,605,678
Capital redemption reserve 308,446 306,496
Other reserves 76,825,350 35,708,784
--------- ---------
Shareholders' funds attributable 182,146,945 143,729,971
to equity interests
========= =========
Ordinary Shares in issue 107,063,020 10,901,302 *
========= =========
Net Asset Value per Ordinary 1.70 13.18
Share
========= =========
Restated Net Asset Value per 1.70 1.32
Ordinary Share
========= =========
THE PROSPECT JAPAN FUND LIMITED
-------------------------------------------------------------------------------------
CASH FLOW STATEMENT
for the year ended 31 December, 2004
2004 2003
In U.S. In U.S.
Dollars Dollars
Operating activities
Revenue deficit on ordinary activities (1,694,574) (552,022)
for the year
Increase in dividends receivable and (43,615) (71,684)
other debtors
(Decrease)/increase in other creditors (106,829) 283,278
--------- ---------
Net cash outflow from operating (1,845,018) (340,428)
activities
--------- ---------
Financial investment
Purchase of investments (69,800,699) (35,537,823)
Sale of investments 74,659,317 42,936,791
---------- ----------
Net cash inflow from financial 4,858,618 7,398,968
investment
---------- ----------
Net cash inflow before financing 3,013,600 7,058,540
Financing
Repurchase of shares (2,699,592) (1,009,400)
---------- ----------
Net cash outflow from financing (2,699,592) (1,009,400)
---------- ----------
Increase in cash 314,008 6,049,140
========== ==========
Reconciliation of net cash inflow to
movement
in net funds
Net cash inflow 314,008 6,049,140
Effects of foreign exchange rate 190,780 405,264
changes
Net funds at beginning of year 9,319,363 2,864,959
---------- ----------
Net funds at end of year 9,824,151 9,319,363
========== ==========
This information is provided by RNS
The company news service from the London Stock Exchange
END
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