Interim Management Statement

RNS Number : 4249U
Prospect Japan Fund Ld
14 May 2008

PROSPECT JAPAN FUND LIMITED
INTERIM MANAGEMENT STATEMENT (UNAUDITED)
For the period 1 January 2008 to 31 March 2008

The Company's Business
The Company was registered under the laws of Guernsey on 18 November, 1994 as a Limited Company listed on the London Stock Exchange. It
is a closed-ended investment company established to achieve long-term capital growth from an actively managed portfolio of securities
primarily of smaller Japanese companies listed or traded on Japanese Stock Markets.

NAV Performance (USD) %*
YTD 1 Year 5 Year
Fund -11.17 -34.02 95.33
Topix Small -2.37 -16.84 96.454

Bloomberg PJF LN
Yen / USD 99.37
NAV (USD) 1.59
Price (USD 1.42
Premium / Discount % -10.69%

Prospect Japan Fund inception date is 20 December 1994.
* Above performance of the Fund is net of fees and expenses and includes reinvestment of dividends and capital gains. Topix Small Cap
Index (TPXSM) performance cited above is the total return including the reinvestment of net dividends into the index denominated in US
Dollars (Source: Bloomberg). TPXSM is a capitalization - weighted index designed to measure the performance of the stocks listed on the
First Section of the Tokyo Stock Exchange, excluding the TOPIX 500 stocks and non-eligible stocks.

Summary
The fund fell 11.17% versus a total return decline in US dollars of 2.37% in Topix Small, representing the broader market for the 3 months
ended 31 March 2008.

Performance
Net selling of Japanese stocks by foreign investors totalled Y922.7bn for the week ending March 14. This amount surpasses the most
recent high of Y739bn from August 2007, and is the highest level since the market crash of October 1987. (Source: Tokyo Stock Exchange) This
data raises two points. One is the resiliency by which the market was able to absorb this selling pressure, largely due to what is believed
to have been domestic fund buying. The second is with foreigners accounting for some 70% of the market's daily turnover, who, going forward,
will be the marginal participant? In other words, who is going to sell this market that has not already done so? The lack of an obvious
answer leads us to believe, that the market is on the cusp of a trend reversal.

Although official land prices as of January rose for the second consecutive year, the pace of the expansion has been slowing since the
second half of 2007. (Source: Ministry of Land Infrastructure and Transport) The brunt of the slowdown seems to be centred on the condo
market, which is at the epicentre of tightening credit, slackening demand, and inventory oversupply. As household incomes stagnate, we
suspect that prices of condominium units will likely undergo a sustained period of correction.

According to research firm Total Brain Co., condominium prices in Tokyo's 23 wards rose by 30-40% between 2006 and 2008. Condo units
sold well until mid 2007 on the view these price rises would continue ad infinitum. After the US sub prime issue arose in the summer the
falling stock market discouraged consumers from buying condos. The percentage of real estate closings have been below the 70% boom/ bust
line in metropolitan Tokyo since August. Rising land prices and higher material costs have pushed condos to unattractive price levels.

The Nikkei (NKY) is trading on a forward P/E of 13.2x, a 36 year low. 60% of the first section firms are trading below book, levels not
seen since April 2003 when the Nikkei slipped below 7000 (Source: Morgan Stanley). Even with a decline in profits next year, many companies
will be reporting profits not far from this term's record levels. GE's property arm said it may buy as much as $10bn of Japanese real estate
this year. (Source: Nikkei)

Sector Weightings %
Commercial Services 5.30%
Diversified Financial Services 0.50%
Engineering & Construction 4.10%
Entertainment 0.80%
Investment Companies 3.90%
Real Estate 35.40%
REITs 24.80%
Retail 21.40%
Storage/Warehousing 11.70%
Total ** 107.90%

No of Positions 29

Percentage weightings are Prospect Asset Management's internal calculations and have not been reconciled by the administrator.
**Results of calculations as presented may not be exact due to rounding and precision of stored values.

Top Ten Holdings % of NAV
Shibusawa Warehouse Company Limited 11.66%
TOC Company Limited 10.88%
Prospect REIT Corp 9.71%
Welcia Kanto Company 7.27%
FC REIT Company 7.08%
Azel Corp 6.66%
Ask Planning Center Corp 5.37%
Joyfull Company Limited 5.27%
Shin-Nihon Tatemon Company Limited 4.69%
Touei Housing Corp 4.36%
Total 72.96%

Enquiries:

Prospect Asset Management, Inc. Contact: Ms Cheri Nakamura
Phone: + 808 395 6886
Northern Trust International Fund Administration Contact: Mr Andrew Maiden
Services (Guernsey) Limited Phone: +44 (0) 1481 745368

This information is provided by RNS
The company news service from the London Stock Exchange

END

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