TIDMPJF
RNS Number : 1532Y
Prospect Japan Fund Ld
27 August 2009
THE PROSPECT JAPAN FUND LIMITED
INTERIM REPORT & UNAUDITED FINANCIAL STATEMENTS
CHAIRMAN'S REPORT
for the period from 1 January, 2009 to 30 June, 2009
The year opened at a time when global markets were reacting with great concern
to the economic downturn, the heavy decline in asset prices and the
international banking crisis. Japan was not an exception to this, despite being
the world's second largest economy, with a high savings rate, but declining
consumption.
Although the period under review has continued to be extremely difficult for
investment advisors, it has nevertheless seen an improved sentiment both
globally and in Japan. The net asset value ('NAV') per share of the Company rose
from US$0.56 per share to US$0.70 per share, an increase of approximately 25%
for the period, a performance which compares very favourably to its peers. The
Topix Small Index rose by 4.14%.
The Interim Management Report covers the review of the market background and
outlook in greater detail.
The valuation of the Japanese market continues to be attractive in terms of
earnings and we share our Advisor's views on the prospects for Japan. However we
remain cautious on the global environment, which shows some positive signs and a
relatively fragile, but improving international banking backdrop.
John Hawkins
Chairman
26 August, 2009
INTERIM MANAGEMENT REPORT
for the period from 1 January, 2009 to 30 June, 2009
+---------------+--+------------------+--+----------+--+------------+---+----------+
| Market Performance (%), US$ NAV | | | | | | |
+-------------------------------------+--+----------+--+------------+---+----------+
| | | YTD 2009 | | 1 Year | | 3 Year | | 5 Year |
+---------------+--+------------------+--+----------+--+------------+---+----------+
| | | 30.06.09 | | | | | | |
+---------------+--+------------------+--+----------+--+------------+---+----------+
| Prospect Japan | 25.00% | | (47.37%) | | (67.14%) | | (62.16%) |
| Fund | | | | | | | |
+------------------+------------------+--+----------+--+------------+---+----------+
| | | | | | | | | |
+---------------+--+------------------+--+----------+--+------------+---+----------+
| Topix Small | | 4.14% | | (7.81%) | | (23.51%) | | 1.34% |
+---------------+--+------------------+--+----------+--+------------+---+----------+
Prospect Japan Fund inception date is 20 December, 1994. 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. As of August 2003, the benchmark of the Prospect Japan Fund changed
from TSE2 to Topix Small since its characteristics with respect to average
market capitalization more closely resemble the investment strategy pursued by
the portfolio. Above performance of the Company is net of fees and expenses and
includes reinvestment of dividends and capital gains. Source: Prospect Asset
Management, Inc. Source: Bloomberg.
Review
The Prospect Japan Fund Limited (the "Company") had a robust half year to 30
June, 2009, up 25.0%. Strength in the Japanese REIT and real estate sectors
boosted performance. The first quarter started out weak on the back of mounting
bankruptcies among real estate developers; however government stimulus
initiatives aimed at providing support to the real estate and J-REIT market
proved to be the much needed catalyst to the battered sectors. Small cap
J-REIT's have outperformed due to diminishing risk of bankruptcies evidenced by
major real estate companies stepping up to offer sponsorship of various
distressed J-REIT's.
The Company's performance (+25.0%) outpaced the Topix Small Index (+4.1%) due to
large exposure to the J-REIT (36.7% of the Company) and real estate sector
(14.3% of the Company). The TSE REIT Index gained 4.9% for the first half of
2009 while the Topix Real Estate Index was up 9.6%. Large gains were achieved in
second tier J-REIT's that were trading at significant discounts to book value
and were bid up due to government initiatives to provide support to the industry
as well as the realization that J-REIT Mergers and Acquisitions (M&A) are now
possible.
Japanese Government moves to support the JREIT industry
After initial promises of working capital assistance to J-REITs in December
2008, the government has taken several concrete steps during H1 2009 aimed at
supporting the sector. These measures include efforts to stimulate lending, ease
M&A hurdles and possible direct purchase of J-REIT units and/or portfolio
property.
H1 2009 Support Measures
1) Eligibility of J-REIT units as part of a plan to buy shares held by banks by
the Bank's Shareholdings Purchase Corporation.
2) Expand Development Bank of Japan (DBJ) lending support to J-REITs to acquire
property.
3) In an effort to increase transparency, the Financial Services Agency (FSA)
has amended its guidelines to require J-REITs to disclose forward commitment
obligations, and the calculation method and value of money transfers expected to
result from any proposed merger.
4) Negative goodwill generated through J-REIT mergers will not be counted in the
assessment of the 90% dividend payout condition for qualifying as a J-REIT
status.
5) Announcement of a proposed Private-Public support fund of JPY300 - JPY500
billion yen that would provide lending to and acquire property from J-REITs.
6) Ministry of Land, Infrastructure, Transportation and Tourism (MLIT) has
established a working group charged to address expanding financing alternatives
for J-REIT's. Thus far proposed: (1) rights issuance, (2) convertible bonds, (3)
preference shares issuance, (4) share buybacks, and (5) dividends in shares.
Credit conditions continue to be tight, with interest rates increases for
J-REITs lacking strong sponsor support. Focus has now shifted towards the next
round of J-REIT corporate bond maturities, scheduled to begin in Q3 2009. Given
lender reticence towards extending new loans, the ability of issuers to address
these bonds is a concern. The first scheduled corporate bond maturity will be in
September with 8962 Nippon Residential Investment (JPY6.0 billion).
The government continued looking for ways to reduce refinancing stress on the
J-REIT market, announcing the planned establishment of a Private-Public fund to
aid in refinancing, particularly of corporate bonds. Plans call for the fund to
be open by September, managed by a Development Bank of Japan/Nomura Holdings
joint venture.
Sponsor Changes
Joint REIT Investment
On 29 May, 2009, Joint REIT (8973) sponsor company Joint Corp. filed for
bankruptcy protection. Joint REIT, which focuses on residential and commercial
property, is now the third JREIT forced to seek new sponsorship along with
Nippon Residential Investment (8962) and Nippon Commercial Investment (3229).
DA Office Investment
On 19 June, 2009, DA Office Investment (8976) announced it would be changing
sponsor companies from struggling DaVinci Holdings to Daiwa Securities. Daiwa
Securities was also issued Y10 billion of new units, giving it a 13% stake in
the J-REIT, along with 100% ownership of the management company. Market reaction
was overwhelmingly positive, boosting the unit prices over 40% over the next two
weeks.
New City Residence
On 7 April, 2009 New City Residence (NCR) announced the selection of Lone Star
Real Estate as its new sponsor. Reports cite the total bid amount as JPY120
billion, representing a CAP rate of 7.5%. NCR plans to issue 400,000 new units
at JPY15,000 per unit to Lone Star group company KF Capital (Total of JPY6
billion). There are also plans for a takeover bid at JPY35,000 per unit, a 146%
premium to the last traded price.
Subsequent to 30 June 2009
The process has been delayed, by a rejection of Lone Star's bid by NCR creditors
in favour of Daiwa House's offer to acquire the failed JREIT and merge it with
BLife Investment. A second creditors meeting is scheduled for 9 September.
Key Events
7 January - New City Residential restructuring announcement is postponed to 7
April.
22 January - Bank of Japan announces acceptance of J-REIT bonds as collateral
10 March - Pacific Holdings files for bankruptcy protection
14 March - Report that Banks Shareholding Purchase Corp program to include
J-REIT shares
7 April - Lone Star announced as new sponsor for New City Residential
9 April - Japan's ruling Liberal Democratic Party (LDP) approves Y15.4 trillion
stimulus package
29 May - Joint REIT sponsor, Joint Corp. files for bankruptcy protection
18 June - Daiwa Securities announced as new sponsor for DA Office
A total of 18 listed companies filed for bankruptcy protection in the first half
of the year, with 10 of those filings coming from the real estate industry.
Azel, a major holding in the fund, was one of the companies to go bankrupt. This
follows the 34 listed companies that filed for bankruptcy in calendar year 2008,
which is the largest number of bankruptcies this decade since 28 listed
companies filed for bankruptcy in 2002. Real estate developers have also
rebounded as investors feel the worst is over since developers have lowered
prices and dramatically written-down inventory values in order to reduce
inventory.
Unemployment
The unemployment rate increased to 5.4% in June from 5.2% in May. During the
last economic downturn in 2002, unemployment reached 5.5%. Household spending
increased by 0.2% in June, lower than May spending growth, and below survey
estimates of 0.5% growth. Part of the increase may be attributed to government
stimulus measures - providing residents with JPY12,000 in cash.
Politics
On 10 April, Prime Minister Aso announced a new stimulus package that called for
record spending of JPY15.4 trillion, or 3 percent of the country's gross
domestic product. The Prime Minister has not been able to escape his poor
approval ratings which will not help him and the ruling Liberal Democratic Party
in mandatory elections in August 2009. There is a strong chance that the
forthcoming general election will usher a change in leadership, replacing the
long standing Liberal Democratic Party (LDP) with the Democratic Party of Japan
(DPJ). The LDP have suffered from a lack of identity as the average stint of the
last three Prime Minister's has been about one year since former Prime Minister
Koizumi left office. The DPJ has pledged not to raise the consumption tax in the
first four years in office if elected. Some other changes that the DPJ would
bring are reform minded government as well as foreign policy that favours not
only the US but China too.
Forward Outlook
The Investment Advisor maintains its opinion that external impetus is needed for
continued re-rating of J-REIT valuations. The performance during the first half
support this stance, as sponsor issues and renewed pledges of government support
resulted in the strong performance of the sector. The market again showed its
preference for strong domestic sponsors with strong credit ratings, as the
entire sector was lifted on the news of Daiwa Securities taking sponsorship of
DA Office Investment (8976). The Advisor expects to see these domestic players
leading the way in sponsor changes and M&A activity. The speed and manner in
which the government clears the way for industry consolidation will also be
vital to continued market confidence. The failure of NCR had a sweeping negative
impact on the sector, but the silver lining may be the awakening of the Japanese
government to structural problems in the J-REIT market, and the reforms put in
place to correct them.
There has been a string of recent positive developments for the J-REIT sector,
including the success of New City Residence and DA Office in finding new
sponsors, various government support measures and successful refinancing
activities.
Going forward, the successful implementation of the government's Public-Private
fund and the ability of J-REIT's with weak sponsors to access financing through
it will be vital to the continued recovery of the sector. Of particular concern
is J-REIT's ability to refinance corporate bonds, with the first scheduled
maturity for a (8962) Nippon Residential JPY6 billion bond on 11 September 2009.
The upcoming Public-Private fund is intended to address bond refinancing, but as
requirements for participation remain undecided, there is a very real risk that
the J-REITs that need assistance the most may be excluded.
Prospect Asset Management, Inc.
31 July, 2009
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| PORTFOLIO OF INVESTMENTS | | | | |
+---------------------------------------------------+----+-------------+-----+------------+
| as at 30 | | | | | | |
| June, 2009 | | | | | | |
+-----------------+--+------------------------------+----+-------------+-----+------------+
| | | | | | | | |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | | | | | |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | Number of | | Investments | | Fair Value | | Percentage |
| | | | | | | | of |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | Securities | | | | in U.S. | | Net Asset |
| | | | | | Dollars | | Value |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | Listed investments | | | | |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | | | | | |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | Commercial services | | | | |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | 3,008,000 | | Ask Planning Centre | | 4,123,566 | | 5.87 |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | | | | | |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | | | | | |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | | | 4,123,566 | | 5.87 |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | | | | | |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | | | | | |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | Convertible bonds | | | | |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | 830,000,000 | | Kenedix Inc 0% 15/12/11 | | 6,166,806 | | 8.77 |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | | | | | |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | | | | | |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | | | 6,166,806 | | 8.77 |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | | | | | |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | | | | | |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | Investment companies | | | | |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | 5,899,000 | | Gro-Bels Co Ltd | | 1,851,925 | | 2.63 |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | | | | | |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | | | | | |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | | | 1,851,925 | | 2.63 |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | | | | | |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | | | | | |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | Real Estate | | | | |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | 1,068,600 | | Shin-Nihon Tatemon | | 916,965 | | 1.30 |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | 212,000 | | Tokyo Tatemono Co Ltd | | 1,193,554 | | 1.70 |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | 216,500 | | Touei Housing | | 1,332,168 | | 1.89 |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | 1,145,900 | | Yasuragi Co | | 2,026,550 | | 2.88 |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | | | | | |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | | | | | |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | | | 5,469,237 | | 7.77 |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | | | | | |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | | | | | |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | REITs | | | | |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | 707 | | DA Office Investment Corp | | 1,960,601 | | 2.79 |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | 2,505 | | FC Residential Investment | | 5,465,598 | | 7.77 |
| | | | REIT | | | | |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | 4,980 | | Japan Single-Residence REIT | | 7,155,232 | | 10.18 |
| | | | Inc# | | | | |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | 7,898,895 | | Prospect Epicure JREIT Value | | 856,603 | | 1.22 |
| | | | Fund* | | | | |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | 5,331 | | Prospect Residential Investment | 8,016,583 | | 11.40 |
| | | | REIT**# | | | |
+--+--------------+--+-----------------------------------+-------------+-----+------------+
| | 2,167 | | TGR Investment Inc | | 2,879,960 | | 4.10 |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | | | | | |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | | | | | |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | | | 26,334,577 | | 37.46 |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | | | | | |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | | | | | |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | Retail | | | | |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | 384,610 | | Growell Holdings | | 5,646,796 | | 8.04 |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | 686,400 | | Joyfull Co Ltd | | 4,101,448 | | 5.83 |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | | | | | |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | | | | | |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | | | 9,748,244 | | 13.87 |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | | | | | |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | | | | | |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | Storage/warehousing | | | | |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | 1,009,000 | | Shibusawa Warehouse Co | | 3,927,878 | | 5.59 |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | | | | | |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | | | | | |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | | | 3,927,878 | | 5.59 |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | | | | | |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | | | | | |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | Total listed investments | | 57,622,233 | | 81.96 |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | | | | | |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | Unlisted investments | | | | |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | | | | | |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | Convertible bonds | | | | |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | 645,000,000 | | Yasuragi Co Ltd 0% | | 4,387,296 | | 6.24 |
| | | | 02/11/2011 | | | | |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | 940,000,000 | | Azel Corp 4% 01/12/12 | | 98,369 | | 0.14 |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | | | | | |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | | | | | |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | | | 4,485,665 | | 6.38 |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | | | | | |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | | | | | |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | Total unlisted investments | | 4,485,665 | | 6.38 |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | | | | | |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | Total investments | | 62,107,898 | | 88.34 |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | | | | | |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | Net current assets | | 8,193,792 | | 11.66 |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | | | | | |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | | | | | |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | NET ASSETS | | 70,301,690 | | 100.00 |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
| | | | | | | | |
+--+--------------+--+------------------------------+----+-------------+-----+------------+
* Prospect Epicure JREIT Value Fund is classed as a related party as the fund
shares the same Investment Advisor as the Company.
** Prospect Residential Investment REIT is classed as a related party as the
fund and the Company's investment Advisors are wholly owned subsidiaries of
Prospect Company Limited, the parent company, incorporated in Japan.
# Investments in excess of 10% of Net Asset Value were due to market conditions.
The investments had strong performances during the period and therefore have
passively breached the 10% limit of one issuer investment restriction.
RESPONSIBILITY STATEMENT
For the period 1 January 2009 to 30 June, 2009
Responsibility statement of the Directors in respect of the Interim Management
Report
We confirm that to the best of our knowledge that:
? this set of
Condensed Interim Financial Statements have been prepared in accordance with IAS
34 Interim Financial Reporting;
? the Interim Management Report and Notes
to the Condensed Interim Financial Statements provide a fair review of the
information required by:
(a) DTR 4.2.7R of the Disclosure and
Transparency Rules, being an indication of important events that have occurred
during the first six months of the financial year and their impact on the
condensed set of financial statements; and a description of the principal risks
and uncertainties for the remaining six months of the year; and
(b) DTR
4.2.8R of the Disclosure and Transparency Rules, being related party
transactions that have taken place in the first six months of the current
financial year and that have materially affected the financial position or
performance of the entity during that period; and any changes in the related
party transactions described in the last annual report that could do
so.
Chris Sherwell
John Hawkins
26 August, 2009
INTERIM REVIEW REPORT
TO THE MEMBERS OF PROSPEC T JAPAN FUND LIMITED
Introduction
We have been engaged by the Company to review the condensed set of Financial
Statements in the half-yearly financial report for the six months ended 30 June
2009 which comprises the Unaudited Statement of Comprehensive Income, the
Unaudited Statement of Changes in Equity, the Statement of Financial Position,
the Unaudited Statement of Cash Flows and related notes 1 to 12. We have read
the other information contained in the half yearly Financial Report and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of financial
statements.
This report is made solely to the company in accordance with guidance contained
in ISRE 2410 (UK and Ireland) "Review of Interim Financial Information Performed
by the Independent Auditor of the Entity" issued by the Auditing Practices
Board. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company, for our work, for this report,
or for the conclusions we have formed.
Directors' Responsibilities
The Interim Financial Report is the responsibility of, and has been approved by,
the Directors. The Directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure and Transparency Rules of the
United Kingdom's Financial Services Authority.
As disclosed in note 1, the Annual Financial Statements of the Company are
prepared in accordance with International Financial Reporting Standards as
adopted by the European Union. The condensed set of Financial Statements
included in this half-yearly financial report has been prepared in accordance
with International Accounting Standard 34, "Interim Financial Reporting", as
adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of Financial Statements in the half-yearly financial report based on our
review.
Scope of Review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly, we
do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe
that the condensed set of Financial Statements in the half-yearly financial
report for the six months ended 30 June, 2009 is not prepared, in all material
respects, in accordance with International Accounting Standard 34 as adopted by
the European Union and the Disclosure and Transparency Rules of the United
Kingdom's Financial Services Authority.
Ernst & Young LLP
27 August, 2009
Notes:
The maintenance and integrity of the Prospect Japan Fund Limited website is the
responsibility of the Directors; the work carried out by the auditors does not
involve consideration of these matters and accordingly the auditors accept no
responsibility for any changes that may have occurred to the financial
information since it was initially presented on the website.
Legislation in Guernsey governing the preparation and dissemination of financial
information may differ from legislation in other jurisdictions.
+-------+----------------------+------------+--+-------------+--+-------------+--+-------------+--------------+--------------+
| | UNAUDITED STATEMENT OF COMPREHENSIVE INCOME | | |
+-------+--------------------------------------------------------------------------------------+--------------+--------------+
| | for the period from 1 January, | | | | | | | |
| | 2009 to 30 June, 2009 | | | | | | | |
+-------+--------------------------------------+-------------+--+-------------+--+-------------+--------------+--------------+
| | | | | | | | | | | |
+-------+----------------------+------------+--+-------------+--+-------------+--+-------------+--------------+--------------+
| | | Revenue | | Capital | | Total | | Revenue | Capital | Total |
| | | | | | | | | | | |
+-------+----------------------+------------+--+-------------+--+-------------+--+-------------+--------------+--------------+
| | | 01.01.2009 | | 01.01.2009 | | 01.01.2009 | | 01.01.2008 | 01.01.2008 | 01.01.2008 |
| | | to | | to | | to | | to | to | to |
+-------+----------------------+------------+--+-------------+--+-------------+--+-------------+--------------+--------------+
| | | 30.06.2009 | | 30.06.2009 | | 30.06.2009 | | 30.06.2008 | 30.06.2008 | 30.06.2008 |
| | | | | | | | | | | |
+-------+----------------------+------------+--+-------------+--+-------------+--+-------------+--------------+--------------+
| Notes | | In U.S. | | In U.S. | | In U.S. | | In U.S. | In U.S. | In U.S. |
| | | Dollars | | Dollars | | Dollars | | Dollars | Dollars | Dollars |
+-------+----------------------+------------+--+-------------+--+-------------+--+-------------+--------------+--------------+
| | | | | | | | | | | |
+-------+----------------------+------------+--+-------------+--+-------------+--+-------------+--------------+--------------+
| | Investment income | 1,078,460 | | - | | 1,078,460 | | 3,567,580 | - | 3,567,580 |
+-------+----------------------+------------+--+-------------+--+-------------+--+-------------+--------------+--------------+
| | Interest income | - | | - | | - | | 11,972 | - | 11,972 |
+-------+----------------------+------------+--+-------------+--+-------------+--+-------------+--------------+--------------+
| | Foreign exchange | 23,909 | | (22,975) | | 23,909 | | - | 545,957 | 545,957 |
| | movements | | | | | | | | | |
+-------+----------------------+------------+--+-------------+--+-------------+--+-------------+--------------+--------------+
| | Gain/(loss) on | | | | | | | | | |
| | financial assets at | | | | | | | | | |
+-------+----------------------+------------+--+-------------+--+-------------+--+-------------+--------------+--------------+
| | fair value through | - | | 13,503,613 | | 13,503,613 | | - | (48,230,999) | (48,230,999) |
| | profit or loss | | | | | | | | | |
+-------+----------------------+------------+--+-------------+--+-------------+--+-------------+--------------+--------------+
| | | | | | | | | | | |
+-------+----------------------+------------+--+-------------+--+-------------+--+-------------+--------------+--------------+
| | | | | | | | | | | |
+-------+----------------------+------------+--+-------------+--+-------------+--+-------------+--------------+--------------+
| | Total | 1,102,369 | | 13,480,638 | | 14,583,007 | | 3,579,552 | (47,685,042) | (44,105,490) |
| | Income/(Deficit) | | | | | | | | | |
+-------+----------------------+------------+--+-------------+--+-------------+--+-------------+--------------+--------------+
| | | | | | | | | | | |
+-------+----------------------+------------+--+-------------+--+-------------+--+-------------+--------------+--------------+
| | | | | | | | | | | |
+-------+----------------------+------------+--+-------------+--+-------------+--+-------------+--------------+--------------+
| 4 | Management fee | (396,227) | | - | | (396,227) | | (1,185,679) | - | (1,185,679) |
+-------+----------------------+------------+--+-------------+--+-------------+--+-------------+--------------+--------------+
| 5 | Other expenses | (264,695) | | - | | (264,695) | | (531,456) | - | (531,456) |
+-------+----------------------+------------+--+-------------+--+-------------+--+-------------+--------------+--------------+
| | Transaction costs | - | | (25,794) | | (25,794) | | - | (282,753) | (282,753) |
+-------+----------------------+------------+--+-------------+--+-------------+--+-------------+--------------+--------------+
| | Loan interest | - | | - | | - | | (434,795) | - | (434,795) |
+-------+----------------------+------------+--+-------------+--+-------------+--+-------------+--------------+--------------+
| | | | | | | | | | | |
+-------+----------------------+------------+--+-------------+--+-------------+--+-------------+--------------+--------------+
| | | | | | | | | | | |
+-------+----------------------+------------+--+-------------+--+-------------+--+-------------+--------------+--------------+
| | Total Expenses | (660,922) | | (25,794) | | (686,716) | | (2,151,930) | (282,753) | (2,434,683) |
+-------+----------------------+------------+--+-------------+--+-------------+--+-------------+--------------+--------------+
| | | | | | | | | | | |
+-------+----------------------+------------+--+-------------+--+-------------+--+-------------+--------------+--------------+
| | | | | | | | | | | |
+-------+----------------------+------------+--+-------------+--+-------------+--+-------------+--------------+--------------+
| | Gain/(loss) for the | 441,447 | | 13,454,844 | | 13,896,291 | | 1,427,622 | (47,967,795) | (46,540,173) |
| | period before tax | | | | | | | | | |
+-------+----------------------+------------+--+-------------+--+-------------+--+-------------+--------------+--------------+
| | | | | | | | | | | |
+-------+----------------------+------------+--+-------------+--+-------------+--+-------------+--------------+--------------+
| 3 | Withholding tax | (74,543) | | - | | (74,543) | | (247,727) | - | (247,727) |
+-------+----------------------+------------+--+-------------+--+-------------+--+-------------+--------------+--------------+
| | | | | | | | | | | |
+-------+----------------------+------------+--+-------------+--+-------------+--+-------------+--------------+--------------+
| | | | | | | | | | | |
+-------+----------------------+------------+--+-------------+--+-------------+--+-------------+--------------+--------------+
| | Gain/(loss) for the | 366,904 | | 13,454,844 | | 13,821,748 | | 1,179,895 | (47,967,795) | (46,787,900) |
| | period after tax | | | | | | | | | |
+-------+----------------------+------------+--+-------------+--+-------------+--+-------------+--------------+--------------+
| | | | | | | | | | | |
+-------+----------------------+------------+--+-------------+--+-------------+--+-------------+--------------+--------------+
| | | | | | | | | | | |
+-------+----------------------+------------+--+-------------+--+-------------+--+-------------+--------------+--------------+
| | Total comprehensive | | | | | | | | | |
| | income/ | | | | | | | | | |
+-------+----------------------+------------+--+-------------+--+-------------+--+-------------+--------------+--------------+
| | (expense) for the | 366,904 | | 13,454,844 | | 13,821,748 | | 1,179,895 | (47,967,795) | (46,787,900) |
| | period | | | | | | | | | |
+-------+----------------------+------------+--+-------------+--+-------------+--+-------------+--------------+--------------+
| | | | | | | | | | | |
+-------+----------------------+------------+--+-------------+--+-------------+--+-------------+--------------+--------------+
| | | | | | | | | | | |
+-------+----------------------+------------+--+-------------+--+-------------+--+-------------+--------------+--------------+
| 2 | Gain/(loss) per | | | | | | | | | |
| | Ordinary Share - | | | | | | | | | |
+-------+----------------------+------------+--+-------------+--+-------------+--+-------------+--------------+--------------+
| | Basic & Diluted | | | | | 0.137 | | | | (0.465) |
+-------+----------------------+------------+--+-------------+--+-------------+--+-------------+--------------+--------------+
| | | | | | | | | | | |
+-------+----------------------+------------+--+-------------+--+-------------+--+-------------+--------------+--------------+
| | | | | | | | | | | |
+-------+----------------------+------------+--+-------------+--+-------------+--+-------------+--------------+--------------+
| | | | | | | | | | | |
+-------+----------------------+------------+--+-------------+--+-------------+--+-------------+--------------+--------------+
| The above results relate to continuing operations of the Company. |
| The total column of this statement represents the Company's Statement of Comprehensive Income, |
| prepared in accordance with IFRS. The supplementary revenue and capital columns are both prepared |
| under guidance published by The Association of Investment Companies. |
+-------+----------------------+------------+--+-------------+--+-------------+--+-------------+--------------+--------------+
+----+-----------+------+----------+------------+-------------+--------------+--------------+--+--------------+--+-------------+--------------+
| | UNAUDITED STATEMENT OF CHANGES IN EQUITY | | | | | | | |
+----+--------------------------------------------------------+--------------+--------------+--+--------------+--+-------------+--------------+
| | for the period from 1 January, 2009 | | | | | | | | |
| | to 30 June, 2009 | | | | | | | | |
+----+------------------------------------------+-------------+--------------+--------------+--+--------------+--+-------------+--------------+
| | | | | | | | | | | | | |
+----+-----------+------+----------+------------+-------------+--------------+--------------+--+--------------+--+-------------+--------------+
| | | | | Capital | | | Capital | | Capital | | Capital | |
| | | | | | | | | | | | Reserve/ | |
+----+-----------+------+----------+------------+-------------+--------------+--------------+--+--------------+--+-------------+--------------+
| | | | | Redemption | Redemption | Revenue | Reserve/ | | Reserve/ | | Exchange | |
| | | | | | | | | | | | | |
+----+-----------+------+----------+------------+-------------+--------------+--------------+--+--------------+--+-------------+--------------+
| | | | Share | Reserve | Reserve | Reserve | Realised | | Unrealised | | Differences | Total |
| | | | capital | | | | | | | | | |
+----+-----------+------+----------+------------+-------------+--------------+--------------+--+--------------+--+-------------+--------------+
| | | | | | | | (as | | (as | | | |
| | | | | | | | restated) | | restated) | | | |
+----+-----------+------+----------+------------+-------------+--------------+--------------+--+--------------+--+-------------+--------------+
| | | | In U.S. | In U.S. | In U.S. | In U.S. | In U.S. | | In U.S. | | In | In U.S. |
| | | | Dollars | Dollars | Dollars | Dollars | Dollars | | Dollars | | U.S. | Dollars |
| | | | | | | | | | | | Dollars | |
+----+-----------+------+----------+------------+-------------+--------------+--------------+--+--------------+--+-------------+--------------+
| | Balances at 1 | 100,615 | 314,894 | 92,616,639 | (12,138,471) | 61,155,877 | *| (86,645,000) | *| 1,075,388 | 56,479,942 |
| | January, 2009 | | | | | | | | | | |
+----+------------------+----------+------------+-------------+--------------+--------------+--+--------------+--+-------------+--------------+
| | | | | | | | | | | | | |
+----+-----------+------+----------+------------+-------------+--------------+--------------+--+--------------+--+-------------+--------------+
| | Total | | | | | | | | | | |
| | comprehensive | | | | | | | | | | |
| | income/(expense) | | | | | | | | | | |
+----+------------------+----------+------------+-------------+--------------+--------------+--+--------------+--+-------------+--------------+
| | for the period | | | | | | | | | | |
+----+------------------+----------+------------+-------------+--------------+--------------+--+--------------+--+-------------+--------------+
| | Gain/(loss) for | - | - | - | 366,904 | (13,948,591) | | 27,426,410 | | (22,975) | 13,821,748 |
| | the period | | | | | | | | | | |
| | after tax | | | | | | | | | | |
+----+------------------+----------+------------+-------------+--------------+--------------+--+--------------+--+-------------+--------------+
| | | | | | | | | | | | | |
+----+-----------+------+----------+------------+-------------+--------------+--------------+--+--------------+--+-------------+--------------+
| | | | | | | | | | | | | |
+----+-----------+------+----------+------------+-------------+--------------+--------------+--+--------------+--+-------------+--------------+
| | Balances at 30 | 100,615 | 314,894 | 92,616,639 | (11,771,567) | 47,207,286 | | (59,218,590) | | 1,052,413 | 70,301,690 |
| | June, 2009 | | | | | | | | | | |
+----+------------------+----------+------------+-------------+--------------+--------------+--+--------------+--+-------------+--------------+
| | | | | | | | | | | | | |
+----+-----------+------+----------+------------+-------------+--------------+--------------+--+--------------+--+-------------+--------------+
| | for the period from 1 January, 2008 | | | | | | | | |
| | to 30 June, 2008 | | | | | | | | |
+----+------------------------------------------+-------------+--------------+--------------+--+--------------+--+-------------+--------------+
| | | | | | | | | | | | | |
+----+-----------+------+----------+------------+-------------+--------------+--------------+--+--------------+--+-------------+--------------+
| | | | | | | | | | | | | |
+----+-----------+------+----------+------------+-------------+--------------+--------------+--+--------------+--+-------------+--------------+
| | | | | Capital | | | Capital | | Capital | | Capital | |
| | | | | | | | | | | | Reserve/ | |
+----+-----------+------+----------+------------+-------------+--------------+--------------+--+--------------+--+-------------+--------------+
| | | | | Redemption | Redemption | Revenue | Reserve/ | | Reserve/ | | Exchange | |
| | | | | | | | | | | | | |
+----+-----------+------+----------+------------+-------------+--------------+--------------+--+--------------+--+-------------+--------------+
| | | | Share | Reserve | Reserve | Reserve | Realised | | Unrealised | | Differences | Total |
| | | | capital | | | | | | | | | |
+----+-----------+------+----------+------------+-------------+--------------+--------------+--+--------------+--+-------------+--------------+
| | | | | | | | (as | | (as | | | |
| | | | | | | | restated) | | restated) | | | |
+----+-----------+------+----------+------------+-------------+--------------+--------------+--+--------------+--+-------------+--------------+
| | | | In U.S. | In U.S. | In U.S. | In U.S. | In U.S. | | In U.S. | | In | In U.S. |
| | | | Dollars | Dollars | Dollars | Dollars | Dollars | | Dollars | | U.S. | Dollars |
| | | | | | | | | | | | Dollars | |
+----+-----------+------+----------+------------+-------------+--------------+--------------+--+--------------+--+-------------+--------------+
| | Balances at 1 | 101,070 | 314,439 | 93,320,845 | (14,849,145) | 158,629,735 | *| (56,248,118) | *| 45,023 | 181,313,849 |
| | January, 2008 | | | | | | | | | | |
+----+------------------+----------+------------+-------------+--------------+--------------+--+--------------+--+-------------+--------------+
| | | | | | | | | | | | | |
+----+-----------+------+----------+------------+-------------+--------------+--------------+--+--------------+--+-------------+--------------+
| | Total | | | | | | | | | | |
| | comprehensive | | | | | | | | | | |
| | income/(expense) | | | | | | | | | | |
+----+------------------+----------+------------+-------------+--------------+--------------+--+--------------+--+-------------+--------------+
| | for the period | | | | | | | | | | |
+----+------------------+----------+------------+-------------+--------------+--------------+--+--------------+--+-------------+--------------+
| | Gain/(loss) for | - | - | - | 1,179,895 | (35,067,218) | | (13,446,534) | | 545,957 | (46,787,900) |
| | the period | | | | | | | | | | |
| | after tax | | | | | | | | | | |
+----+------------------+----------+------------+-------------+--------------+--------------+--+--------------+--+-------------+--------------+
| | | | | | | | | | | | | |
+----+-----------+------+----------+------------+-------------+--------------+--------------+--+--------------+--+-------------+--------------+
| | Capital | | | | | | | | | | |
| | activities | | | | | | | | | | |
+----+------------------+----------+------------+-------------+--------------+--------------+--+--------------+--+-------------+--------------+
| | Repurchase of | (455) | 455 | (704,206) | - | - | | - | | - | (704,206) |
| | shares | | | | | | | | | | |
+----+------------------+----------+------------+-------------+--------------+--------------+--+--------------+--+-------------+--------------+
| | | | | | | | | | | | | |
+----+-----------+------+----------+------------+-------------+--------------+--------------+--+--------------+--+-------------+--------------+
| | | | | | | | | | | | | |
+----+-----------+------+----------+------------+-------------+--------------+--------------+--+--------------+--+-------------+--------------+
| | Total capital | (455) | 455 | (704,206) | - | - | | - | | - | (704,206) |
| | activities | | | | | | | | | | |
+----+------------------+----------+------------+-------------+--------------+--------------+--+--------------+--+-------------+--------------+
| | | | | | | | | | | | | |
+----+-----------+------+----------+------------+-------------+--------------+--------------+--+--------------+--+-------------+--------------+
| | | | | | | | | | | | | |
+----+-----------+------+----------+------------+-------------+--------------+--------------+--+--------------+--+-------------+--------------+
| | Balances at 30 | 100,615 | 314,894 | 92,616,639 | (13,669,250) | 123,562,517 | | (69,694,652) | | 590,980 | 133,821,743 |
| | June, 2008 | | | | | | | | | | |
+----+------------------+----------+------------+-------------+--------------+--------------+--+--------------+--+-------------+--------------+
| | | | | | | | | | | | | |
+----+-----------+------+----------+------------+-------------+--------------+--------------+--+--------------+--+-------------+--------------+
| | * Restated. Refer to Note | | | | | | | | | |
| | 6. | | | | | | | | | |
+----+-----------+------+----------+------------+-------------+--------------+--------------+--+--------------+--+-------------+--------------+
+-------+--------------------------------------------+--+--------------+--+--------------+--+--------------+
| | STATEMENT OF FINANCIAL POSITION | | | | | | |
+-------+--------------------------------------------+--+--------------+--+--------------+--+--------------+
| | As at 30 June 2009 | | | | | | |
+-------+--------------------------------------------+--+--------------+--+--------------+--+--------------+
| | | | 30.06.2009 | | 31.12.2008 | | 30.06.2008 |
| | | | | | | | |
+-------+--------------------------------------------+--+--------------+--+--------------+--+--------------+
|Notes | | | In U.S. | | In U.S. | | In U.S. |
| | | | Dollars | | Dollars | | Dollars |
+-------+--------------------------------------------+--+--------------+--+--------------+--+--------------+
| | | | (Unaudited) | | (Audited) | | (Unaudited) |
| | | | | | | | |
+-------+--------------------------------------------+--+--------------+--+--------------+--+--------------+
| | Non-current assets | | | | | | |
+-------+--------------------------------------------+--+--------------+--+--------------+--+--------------+
| 6 | Financial assets designated at fair value | | 62,107,898 | | 55,126,667 | | 145,836,993 |
| | through profit or loss | | | | | | |
+-------+--------------------------------------------+--+--------------+--+--------------+--+--------------+
| | | | | | | | |
+-------+--------------------------------------------+--+--------------+--+--------------+--+--------------+
| | Current assets | | | | | | |
+-------+--------------------------------------------+--+--------------+--+--------------+--+--------------+
| | Due from brokers | | 2,438,184 | | - | | 1,428,756 |
+-------+--------------------------------------------+--+--------------+--+--------------+--+--------------+
| | Dividends receivable | | 496,826 | | 1,653,787 | | 1,245,912 |
+-------+--------------------------------------------+--+--------------+--+--------------+--+--------------+
| | Other receivables | | 56,221 | | 12,773 | | 93,467 |
+-------+--------------------------------------------+--+--------------+--+--------------+--+--------------+
| | Cash and cash equivalents | | 5,480,459 | | 168,075 | | 1,879,068 |
+-------+--------------------------------------------+--+--------------+--+--------------+--+--------------+
| | | | | | | | |
+-------+--------------------------------------------+--+--------------+--+--------------+--+--------------+
| | | | | | | | |
+-------+--------------------------------------------+--+--------------+--+--------------+--+--------------+
| | Total current assets | | 8,471,690 | | 1,834,635 | | 4,647,203 |
+-------+--------------------------------------------+--+--------------+--+--------------+--+--------------+
| | Current liabilities | | | | | | |
+-------+--------------------------------------------+--+--------------+--+--------------+--+--------------+
| 7 | Short term borrowings | | - | | - | | 15,309,646 |
+-------+--------------------------------------------+--+--------------+--+--------------+--+--------------+
| | Due to brokers | | - | | 156,209 | | 838,294 |
+-------+--------------------------------------------+--+--------------+--+--------------+--+--------------+
| | Other creditors | | 277,898 | | 325,151 | | 514,513 |
+-------+--------------------------------------------+--+--------------+--+--------------+--+--------------+
| | | | | | | | |
+-------+--------------------------------------------+--+--------------+--+--------------+--+--------------+
| | | | | | | | |
+-------+--------------------------------------------+--+--------------+--+--------------+--+--------------+
| | Net current assets/(liabilities) | | 8,193,792 | | 1,353,275 | | (12,015,250) |
+-------+--------------------------------------------+--+--------------+--+--------------+--+--------------+
| | | | | | | | |
+-------+--------------------------------------------+--+--------------+--+--------------+--+--------------+
| | | | | | | | |
+-------+--------------------------------------------+--+--------------+--+--------------+--+--------------+
| | Total assets less current liabilities | | 70,301,690 | | 56,479,942 | | 133,821,743 |
+-------+--------------------------------------------+--+--------------+--+--------------+--+--------------+
| | | | | | | | |
+-------+--------------------------------------------+--+--------------+--+--------------+--+--------------+
| | | | | | | | |
+-------+--------------------------------------------+--+--------------+--+--------------+--+--------------+
| | Equity | | | | | | |
+-------+--------------------------------------------+--+--------------+--+--------------+--+--------------+
| 8 | Share capital | | 100,615 | | 100,615 | | 100,615 |
+-------+--------------------------------------------+--+--------------+--+--------------+--+--------------+
| 8 | Redemption reserve | | 92,616,639 | | 92,616,639 | | 92,616,639 |
+-------+--------------------------------------------+--+--------------+--+--------------+--+--------------+
| 8 | Capital redemption reserve | | 314,894 | | 314,894 | | 314,894 |
+-------+--------------------------------------------+--+--------------+--+--------------+--+--------------+
| | Other reserves | | (22,730,458) | | (36,552,206) | | 40,789,595 |
+-------+--------------------------------------------+--+--------------+--+--------------+--+--------------+
| | | | | | | | |
+-------+--------------------------------------------+--+--------------+--+--------------+--+--------------+
| | | | | | | | |
+-------+--------------------------------------------+--+--------------+--+--------------+--+--------------+
| | Total equity | | 70,301,690 | | 56,479,942 | | 133,821,743 |
+-------+--------------------------------------------+--+--------------+--+--------------+--+--------------+
| | | | | | | | |
+-------+--------------------------------------------+--+--------------+--+--------------+--+--------------+
| | | | | | | | |
+-------+--------------------------------------------+--+--------------+--+--------------+--+--------------+
| | Ordinary Shares in issue | | 100,615,520 | | 100,615,520 | | 100,615,520 |
+-------+--------------------------------------------+--+--------------+--+--------------+--+--------------+
| | | | | | | | |
+-------+--------------------------------------------+--+--------------+--+--------------+--+--------------+
| | | | | | | | |
+-------+--------------------------------------------+--+--------------+--+--------------+--+--------------+
| 2 | Net Asset Value per Ordinary Share | | 0.70 | | 0.56 | | 1.33 |
+-------+--------------------------------------------+--+--------------+--+--------------+--+--------------+
| | | | | | | | |
+-------+--------------------------------------------+--+--------------+--+--------------+--+--------------+
| | | | | | | | |
+-------+--------------------------------------------+--+--------------+--+--------------+--+--------------+
| | | | | | | | |
+-------+--------------------------------------------+--+--------------+--+--------------+--+--------------+
| The Financial Statements were approved by the Board of Directors on 26 August, 2009 and |
| signed on its behalf by: |
+----------------------------------------------------------------------------------------------------------+
| |
+----------------------------------------------------------------------------------------------------------+
| Chris Sherwell |
+----------------------------------------------------------------------------------------------------------+
| |
+----------------------------------------------------------------------------------------------------------+
| John Hawkins |
+-------+--------------------------------------------+--+--------------+--+--------------+--+--------------+
+-------+------------------------------------------------+--+-------------+----+--------------+
| | UNAUDITED STATEMENT OF CASH FLOWS | | |
+-------+-----------------------------------------------------------------+----+--------------+
| | for the period from 1 January, 2009 to 30 | | | | |
| | June, 2009 | | | | |
+-------+------------------------------------------------+--+-------------+----+--------------+
| | | | | | |
+-------+------------------------------------------------+--+-------------+----+--------------+
| | | | 01.01.2009 | | 01.01.2008 |
| | | | to | | to |
+-------+------------------------------------------------+--+-------------+----+--------------+
| | | | 30.06.2009 | | 30.06.2008 |
| | | | | | |
+-------+------------------------------------------------+--+-------------+----+--------------+
|Notes | | | In U.S. | | In U.S. |
| | | | Dollars | | Dollars |
+-------+------------------------------------------------+--+-------------+----+--------------+
| | | | | | |
+-------+------------------------------------------------+--+-------------+----+--------------+
| | Cash flows from operating activities | | | | |
+-------+------------------------------------------------+--+-------------+----+--------------+
| 9 | Net cash inflow from operating activities | | 1,304,096 | | 215,797 |
+-------+------------------------------------------------+--+-------------+----+--------------+
| | | | | | |
+-------+------------------------------------------------+--+-------------+----+--------------+
| | | | | | |
+-------+------------------------------------------------+--+-------------+----+--------------+
| | Cash flows from investing activities | | | | |
+-------+------------------------------------------------+--+-------------+----+--------------+
| | Purchase of investments | | (6,546,439) | | (48,991,267) |
+-------+------------------------------------------------+--+-------------+----+--------------+
| | | | | | |
+-------+------------------------------------------------+--+-------------+----+--------------+
| | Sale of investments | | 10,474,428 | | 50,381,637 |
+-------+------------------------------------------------+--+-------------+----+--------------+
| | | | | | |
+-------+------------------------------------------------+--+-------------+----+--------------+
| | | | | | |
+-------+------------------------------------------------+--+-------------+----+--------------+
| | Net cash inflow from financing activities | | 3,927,989 | | 1,390,370 |
+-------+------------------------------------------------+--+-------------+----+--------------+
| | | | | | |
+-------+------------------------------------------------+--+-------------+----+--------------+
| | | | | | |
+-------+------------------------------------------------+--+-------------+----+--------------+
| | Net cash inflow before financing | | 5,232,085 | | 1,606,167 |
+-------+------------------------------------------------+--+-------------+----+--------------+
| | | | | | |
+-------+------------------------------------------------+--+-------------+----+--------------+
| | Cash flows from financing activities | | | | |
+-------+------------------------------------------------+--+-------------+----+--------------+
| 8 | Repurchase of shares | | - | | (704,206) |
+-------+------------------------------------------------+--+-------------+----+--------------+
| 7 | Repayment of short term borrowings | | - | | (8,000,000) |
+-------+------------------------------------------------+--+-------------+----+--------------+
| | | | | | |
+-------+------------------------------------------------+--+-------------+----+--------------+
| | | | | | |
+-------+------------------------------------------------+--+-------------+----+--------------+
| | Net cash outflow from financing activities | | - | | (8,704,206) |
+-------+------------------------------------------------+--+-------------+----+--------------+
| | | | | | |
+-------+------------------------------------------------+--+-------------+----+--------------+
| | | | | | |
+-------+------------------------------------------------+--+-------------+----+--------------+
| | Increase/(decrease) in cash and cash | | 5,232,085 | | (7,098,039) |
| | equivalents | | | | |
+-------+------------------------------------------------+--+-------------+----+--------------+
| | | | | | |
+-------+------------------------------------------------+--+-------------+----+--------------+
| | | | | | |
+-------+------------------------------------------------+--+-------------+----+--------------+
| | Reconciliation of net cash flow to | | | | |
+-------+------------------------------------------------+--+-------------+----+--------------+
| | movement in net funds | | | | |
+-------+------------------------------------------------+--+-------------+----+--------------+
| | | | | | |
+-------+------------------------------------------------+--+-------------+----+--------------+
| | Net cash inflow/(outflow) | | 5,232,085 | | (7,098,039) |
+-------+------------------------------------------------+--+-------------+----+--------------+
| | | | | | |
+-------+------------------------------------------------+--+-------------+----+--------------+
| | Effects of foreign exchange rate changes | | 80,299 | | 545,957 |
+-------+------------------------------------------------+--+-------------+----+--------------+
| | | | | | |
+-------+------------------------------------------------+--+-------------+----+--------------+
| | Cash and cash equivalents at beginning of | | 168,075 | | 8,431,150 |
| | period | | | | |
+-------+------------------------------------------------+--+-------------+----+--------------+
| | | | | | |
+-------+------------------------------------------------+--+-------------+----+--------------+
| | | | | | |
+-------+------------------------------------------------+--+-------------+----+--------------+
| | Cash and cash equivalents at end of period | | 5,480,459 | | 1,879,068 |
+-------+------------------------------------------------+--+-------------+----+--------------+
| | | | | | |
+-------+------------------------------------------------+--+-------------+----+--------------+
| | | | | | |
+-------+------------------------------------------------+--+-------------+----+--------------+
NOTES AND ACCOUNTING POLICIES
NOTE 1 Principal Accounting Policies
Basis of Accounting
The Interim Condensed Financial Statements for the six months ended 30 June 2009
have been prepared in accordance with IAS 34 Interim Financial Reporting.
The Interim Condensed Financial Statements do not include all the information
and disclosures required in the annual financial statements, and should be read
in conjunction with the Company's Annual Report and Audited Financial Statements
as at 31 December, 2008.
The preparation of the Interim Condensed Financial Statements requires
management to make estimates and assumptions that affect the reported amounts of
revenues, expenses, assets, liabilities at the date of the Interim Condensed
Financial Statements. If in the future such estimates and assumptions, which are
based on management's best judgement at the date of the Interim Financial
Statements, deviate from the actual circumstances, the original estimates and
assumptions will be modified as appropriate in the period in which the
circumstances change.
Change in accounting policies
In the current financial period, the Company has adopted International Financial
Reporting Standard 8 'Operating Segments' (IFRS 8) and International Accounting
Standard 1 (Amended) - Presentation of Financial Information (IAS 1) which
became effective as of 1 January 2009.
IFRS 8 requires a 'management approach', under which segment information is
presented on the same basis as that used for internal reporting purposes.
The Board has considered the requirements of IFRS 8 'Operating Segments', and is
of the view that the Company is engaged in a single operating segment of
business, being investment in Japanese securities. The Board, as a whole, has
been determined as constituting the chief operating decision maker of the
Company. The key measure of performance used by the Board to assess the
Company's performance is the total return on the Company based on the Net Asset
Value per share, as calculated under IFRS. Therefore no reconciliation is
required between the measure of profit or loss used by the Board and that
contained in the Interim Condensed Financial Statements.
IAS 1 requires the Company to present all non-owner changes in equity
(comprehensive income) in one statement of comprehensive income. This
presentation has been applied in these Condensed Interim Financial Statements as
of and for the six months period ended on 30 June 2009.
Comparative information has been re-presented so that it also is in conformity
with the revised standard. Since the change in accounting policy only impacts
presentation aspects there is no impact on the Net Asset Value of the Company.
New Accounting Standards
IFRS 7 - Financial Instruments: Disclosures
Amendments to IFRS 7 were issued by the IASB in March 2009 and become effective
for annual periods beginning on or after 1 January 2009 with early application
permitted. The amendment to IFRS 7 requires fair value measurements to be
disclosed by the source of inputs, using a three-level hierarchy:
- Quoted prices (unadjusted) in active markets for identical assets or
liabilities (Level 1)
- Inputs other than quoted prices included in Level 1 that are observable for
the asset or liability, either directly (as prices) or indirectly (derived from
prices) (Level 2)
- Inputs for the asset or liability that are not based on observable market data
(unobservable inputs) (Level 3).
In addition the amendment revises the specified minimum liquidity risk
disclosures including amongst others: the contractual maturity of non derivative
and derivative financial liabilities, and a description of how this is managed.
Other standards, interpretations and amendments published are not expected to
have a significant impact on the accounts and have not been disclosed.
NOTE 2 Return/(Deficit) per Ordinary Share - Basic & Diluted and Net Asset Value
per Ordinary Share - Basic & Diluted
The return/(deficit) per Ordinary Share - Basic and Diluted has been calculated
based on the weighted average number of Ordinary Shares of 100,615,520 and a net
return of US$13,821,748 (2008: on 100,704,861 Ordinary Shares and a net deficit
of US$46,787,900).
There were no dilutive elements to shares issued or repurchased during the year.
The Net Asset Value per Ordinary Share - Basic and Diluted has been calculated
based on the number of shares in existence at the Statement of Financial
Position date 100,615,520 (2008: 100,615,520) and shareholders' funds
attributable to equity interests of US$70,301,690 (2008: US$56,479,942).
+------------------------------+------------+----------+-------------+--+-------------+
| | | | 30.06.2009 | | 31.12.2008 |
+------------------------------+------------+----------+-------------+--+-------------+
| | | | In U.S. | | In U.S. |
| | | | Dollars | | Dollars |
+------------------------------+------------+----------+-------------+--+-------------+
| Net Asset Value per Ordinary Share - | | 0.70 | | 0.56 |
| Basic and Diluted | | | | |
+-------------------------------------------+----------+-------------+--+-------------+
| | | | | | |
+------------------------------+------------+----------+-------------+--+-------------+
NOTE 3 Taxation
The Company has been granted Exempt Status under the terms of The Income Tax
(Exempt Bodies) (Guernsey) Ordinance, 1989 to income tax in Guernsey. Its
liability is an annual fee of GBP600.
The amount disclosed as taxation in the Statement of Comprehensive Income
relates solely to withholding tax suffered at source, on income in the investing
country, Japan.
NOTE 4 Management Fee
The management fee is payable to the Manager, Prospect Asset Management (Channel
Islands) Limited, monthly in arrears at a rate of 1.5% per annum of the Net
Asset Value, which is calculated as of the last business day of each month.
Total management fees for the period amounted to US$396,227 (2008: US$1,185,679)
of which US$92,618 (2008: US$76,605) is due and payable at the period end. The
Management Agreement dated 1 December, 1994 shall remain in force until
determined by the Company or by the Manager giving the other party not less than
three months' notice in writing, subject to additional provisions included in
the agreement regarding a breach by either party.
+------+------------------------------+--------+------------+--+------------+
| Note | Other Expenses | | 01.01.2009 | | 01.01.2008 |
| 5 | | | to | | to |
+------+------------------------------+--------+------------+--+------------+
| | | | 30.06.2009 | | 30.06.2008 |
| | | | | | |
+------+------------------------------+--------+------------+--+------------+
| | | | In U.S. | | In U.S. |
| | | | Dollars | | Dollars |
+------+------------------------------+--------+------------+--+------------+
| | General expenses | | 121,520 | | 143,931 |
+------+------------------------------+--------+------------+--+------------+
| | Administration and | | 66,038 | | 197,613 |
| | secretarial fees* | | | | |
+------+------------------------------+--------+------------+--+------------+
| | Directors' remuneration | | 42,778 | | 66,930 |
+------+------------------------------+--------+------------+--+------------+
| | Custodian's fees and | | 18,343 | | 105,808 |
| | charges** | | | | |
+------+------------------------------+--------+------------+--+------------+
| | Auditors' fees | | 16,016 | | 17,174 |
+------+------------------------------+--------+------------+--+------------+
| | | | | | |
+------+------------------------------+--------+------------+--+------------+
| | | | | | |
+------+------------------------------+--------+------------+--+------------+
| | | | 264,695 | | 531,456 |
+------+------------------------------+--------+------------+--+------------+
| | | | | | |
+------+------------------------------+--------+------------+--+------------+
| | | | | | |
+------+------------------------------+--------+------------+--+------------+
*The administration and secretarial fees are payable to Northern Trust
International Fund Administration Services (Guernsey) Limited, monthly in
arrears and is 0.25% of the Net Asset Value of the Company, which is calculated
as of the last business day of each month. Total administration and secretarial
fees for the period amounted to US$66,038 (2008: US$197,613) of which US$15,436
(2008: US$$12,768) is due and payable at the period end.
**The custodian's fees and charges payable to Northern Trust (Guernsey) Limited
monthly in arrears and is 0.08% of the market value of the assets of the
Company, which is calculated as of the last business day of each month. Total
custodian's fees and charges for the period amounted to US$18,343 (2008:
US$105,808) of which US$4,517 (2008: US$3,967) is due and payable at the period
end.
NOTE 6 Financial assets designated at fair value through profit or loss
+-------+-------------+--------+--------+--------------+--+--------------+--+--------------+--+
| | | | | 01.01.2009 | | 01.01.2008 | | 01.01.2008 | |
| | | | | to | | to | | to | |
+-------+-------------+--------+--------+--------------+--+--------------+--+--------------+--+
| | | | | 30.06.2009 | | 31.12.2008 | | 30.06.2008 | |
| | | | | | | | | | |
+-------+-------------+--------+--------+--------------+--+--------------+--+--------------+--+
| | | | | (as | | (as | | (as | |
| | | | | restated) | | restated) | | restated) | |
+-------+-------------+--------+--------+--------------+--+--------------+--+--------------+--+
| | | | | In U.S. | | In U.S. | | In U.S. | |
| | | | | Dollars | | Dollars | | Dollars | |
+-------+-------------+--------+--------+--------------+--+--------------+--+--------------+--+
| | Opening book cost | 141,771,667 | | 252,245,871 | *| 252,245,871 | *|
+-------+-------------------------------+--------------+--+--------------+--+--------------+--+
| | Purchases at cost | 6,390,230 | | 85,828,817 | | 49,750,432 | |
+-------+-------------------------------+--------------+--+--------------+--+--------------+--+
| | Proceeds on sale | (12,912,612) | | (99,153,730) | | (51,680,193) | |
+-------+-------------------------------+--------------+--+--------------+--+--------------+--+
| | Realised losses on sale | (13,922,797) | | (97,149,291) | | (34,784,465) | |
+-------+-------------------------------+--------------+--+--------------+--+--------------+--+
| | | | | | | | | | |
+-------+-------------+--------+--------+--------------+--+--------------+--+--------------+--+
| | | | | | | | | | |
+-------+-------------+--------+--------+--------------+--+--------------+--+--------------+--+
| | Closing book cost | 121,326,488 | | 141,771,667 | *| 215,531,645 | *|
+-------+-------------------------------+--------------+--+--------------+--+--------------+--+
| | | | | | | | | | |
+-------+-------------+--------+--------+--------------+--+--------------+--+--------------+--+
| | Unrealised losses | (59,218,590) | | (86,645,000) | *| (69,694,652) | *|
+-------+-------------------------------+--------------+--+--------------+--+--------------+--+
| | | | | | | | | | |
+-------+-------------+--------+--------+--------------+--+--------------+--+--------------+--+
| | | | | | | | | | |
+-------+-------------+--------+--------+--------------+--+--------------+--+--------------+--+
| | Fair value as at period/year | 62,107,898 | | 55,126,667 | | 145,836,993 | |
| | end | | | | | | |
+-------+-------------------------------+--------------+--+--------------+--+--------------+--+
| | | | | | | | | | |
+-------+-------------+--------+--------+--------------+--+--------------+--+--------------+--+
| | | | | | | | | | |
+-------+-------------+--------+--------+--------------+--+--------------+--+--------------+--+
* Prior period/year opening and closing book costs have been restated by
US$824,172 to reflect a prior year adjustment to the book cost of investments.
The unrealised gains/losses accounts have been adjusted accordingly.
NOTE 7 Short Term Borrowings
On 20 November, 2007 the Company entered into a drawdown loan agreement of up to
US$40,000,000 with Royal Bank of Scotland (RBS).
The loan could only be used for investment leverage purposes only and was to be
repaid on the latest of (i) the day falling 364 days from the date of the
drawing down of the loan, and (ii) any extension date agreed by the Company and
RBS.
At the beginning of the previous period the loan amount drawn down was
US$23,309,646. On 7 May, 2008 the Company repaid US$8,000,000 of the loan. On 12
August, 2008 Royal Bank of Scotland (RBS) requested immediate repayment of its
loan with the Company as an event of default under clause 21.11 (c) of the loan
agreement had occurred. This event of default required repayment of the loan if
the Net Asset Value per share was 25% or more less than the Net Asset Value per
share falling three months earlier. On 18 August, 2008 the total outstanding on
the loan including accrued interest of US$15,329,074 was repaid.
+--------------+--+----------------------+--+--+--+-----------+--+-------------+--+------------+
| NOTE 8 Share Capital, Share Premium, Redemption Reserve & Capital | | |
| Redemption Reserve | | |
+------------------------------------------------------------------------------+--+------------+
| | | | | | | | | | | |
+--------------+--+----------------------+--+--+--+-----------+--+-------------+--+------------+
| Authorised Share Capital | | | | | | | | 30.06.2009 |
+----------------------------------------+--+--+--+-----------+--+-------------+--+------------+
| Number of shares | | | | | | | | In U.S. |
| | | | | | | | | Dollars |
+----------------------------------------+--+--+--+-----------+--+-------------+--+------------+
| 150,000,000 | | | Ordinary Shares of US$0.001 each | | 150,000 |
+--------------+--+----------------------+-------------------------------------+--+------------+
| | | | | | | | | | | |
+--------------+--+----------------------+--+--+--+-----------+--+-------------+--+------------+
| | | | | | | | | | | |
+--------------+--+----------------------+--+--+--+-----------+--+-------------+--+------------+
| 60,000,000 | | | "C" Ordinary Shares of US$0.01 | | 600,000 |
| | | | each | | |
+--------------+--+----------------------+-------------------------------------+--+------------+
| | | | | | | | | | | |
+--------------+--+----------------------+--+--+--+-----------+--+-------------+--+------------+
| | | | | | | | | | | |
+--------------+--+----------------------+--+--+--+-----------+--+-------------+--+------------+
| | | | | | | | | | | |
+--------------+--+----------------------+--+--+--+-----------+--+-------------+--+------------+
| Issued and fully paid Shares | | | | | | | | |
+----------------------------------------+--+--+--+-----------+--+-------------+--+------------+
| | | | | | | | | | | Capital |
+--------------+--+----------------------+--+--+--+-----------+--+-------------+--+------------+
| | | | | | | | | Redemption | | Redemption |
| | | | | | | | | | | |
+--------------+--+----------------------+--+--+--+-----------+--+-------------+--+------------+
| Ordinary Shares | | | | Share | | Reserve | | Reserve |
| | | | | Capital | | | | |
+----------------------------------------+--+--+--+-----------+--+-------------+--+------------+
| Number of shares | | | | In U.S. | | In U.S. | | In U.S. |
| | | | | Dollars | | Dollars | | Dollars |
+----------------------------------------+--+--+--+-----------+--+-------------+--+------------+
| 100,615,520 | | Balance at 1 | | | | 101,615 | | 92,616,639 | | 314,439 |
| | | January, 2009 | | | | | | | | |
+--------------+--+----------------------+--+--+--+-----------+--+-------------+--+------------+
| | | Shares acquired and | | | | | | | | |
| | | cancelled | | | | | | | | |
+--------------+--+----------------------+--+--+--+-----------+--+-------------+--+------------+
| - | | during the period | | | | - | | - | | - |
+--------------+--+----------------------+--+--+--+-----------+--+-------------+--+------------+
| | | | | | | | | | | |
+--------------+--+----------------------+--+--+--+-----------+--+-------------+--+------------+
| | | | | | | | | | | |
+--------------+--+----------------------+--+--+--+-----------+--+-------------+--+------------+
| 100,615,520 | | Balance at 30 June, | | | | 100,615 | | 92,616,639 | | 314,894 |
| | | 2009 | | | | | | | | |
+--------------+--+----------------------+--+--+--+-----------+--+-------------+--+------------+
| | | | | | | | | | | |
+--------------+--+----------------------+--+--+--+-----------+--+-------------+--+------------+
| | | | | | | | | | | |
+--------------+--+----------------------+--+--+--+-----------+--+-------------+--+------------+
Ordinary Shares carry the right to vote at general meetings of the Company and
to receive dividends and, in a winding-up rank may participate in surplus assets
remaining after settlement of any outstanding liabilities of the Company.
The Company may purchase, subject to various terms as set out in the Articles, a
maximum of 6,976,950 Ordinary Shares, equivalent to 6.33% of the Issued share
capital of the Company as at 30 June, 2009. During the period, there were no
shares purchased and cancelled.
On 1 July, 2009 the Company purchased and cancelled 125,000 Ordinary Shares at a
price of US$0.52 per Ordinary Share.
+----------+--+--------------------+--+------+--+-------+------------+--+------------+
| NOTE 9 Reconciliation of Surplus on Ordinary Activities to Net Cash Inflow from |
| Operating Activities |
+------------------------------------------------------------------------------------+
| | | | | | | | 30.06.2009 | | 30.06.2008 |
| | | | | | | | | | |
+----------+--+--------------------+--+------+--+-------+------------+--+------------+
| | | | | | | | In U.S. | | In U.S. |
| | | | | | | | Dollars | | Dollars |
+----------+--+--------------------+--+------+--+-------+------------+--+------------+
| Gain for the period after tax | | | | | 341,110 | | 897,142 |
+----------------------------------+--+------+--+-------+------------+--+------------+
| Decrease/(increase) in dividends receivable and other | 1,112,891 | | (575,496) |
| receivables | | | |
+-------------------------------------------------------+------------+--+------------+
| Decrease in other creditors | | | | | (46,631) | | (105,849) |
+----------------------------------+--+------+--+-------+------------+--+------------+
| Foreign exchange loss | | | | | (103,274) | | - |
+----------------------------------+--+------+--+-------+------------+--+------------+
| | | | | | | | | | |
+----------+--+--------------------+--+------+--+-------+------------+--+------------+
| | | | | | | | | | |
+----------+--+--------------------+--+------+--+-------+------------+--+------------+
| Net cash inflow from operating | | | | | 1,304,096 | | 215,797 |
| activities | | | | | | | |
+----------------------------------+--+------+--+-------+------------+--+------------+
| | | | | | | | | | |
+----------+--+--------------------+--+------+--+-------+------------+--+------------+
NOTE 10 Related Party Transactions
Parties are considered to be related if one party has the ability to control the
other party or exercise significant influence over the other party in making
financial or operational decisions.
The Directors are responsible for the determination of the investment policy of
the Company and have overall responsibility for the Company's activities.
Mr Rupert Evans is a Director of the Manager.
Directors' fees are disclosed in Note 5. The basic fee payable to Directors is
GBP15,000, the Chairman of the Audit Committee GBP17,500 and the Chairman of the
Board GBP20,000. John Hawkins is the Chairman of the Board and received a fee of
GBP22,500 up to 30 June, 2009. On 26 August, 2009 the Board appointed Chris
Sherwell as Chairman of the Audit Committee, replacing John Hawkins. With effect
from 1 July, 2009, Chris Sherwell will be paid GBP17,500 and John Hawkins will
be paid GBP20,000.
At 30 June, 2009 David FitzWilliam-Lay and Chris Sherwell have beneficial
interests of 30,742 and 9,940 Ordinary Shares respectively of the Company. No
other Directors holding office at 30 June, 2009, or their associates, had any
beneficial interest in the Company's Shares. There have been no changes in these
interests between the end of the period and up to the date of this report.
Prospect Residential Investment REIT is classed as a related party as the fund
and the Company's Investment Advisors are wholly owned subsidiaries of Prospect
Company Limited, the parent company, incorporated in Japan. The Company received
US$357,937 (2008: US$463,835) by way of a dividend during the year from Prospect
Residential Investment REIT.
Prospect Epicure JREIT Value Fund is classed as a related party as the fund
shares the same Investment Advisor as the Company. The Company did not receive
income (2008: Nil) during the year from Prospect Epicure JREIT Value Fund.
NOTE 11 Segmental Reporting
The Directors are of the opinion that the Company operates in single business
and geographical segments, being investment business in Japan.
NOTE 12 Subsequent Events
On 1 July, 2009 the Company purchased and cancelled 125,000 Ordinary Shares at a
price of US$0.52 per Ordinary Share
On 26 August, 2009 Chris Sherwell replaced John Hawkins as Chairman of the Audit
Committee.
GENERAL INFORMATION
General
The Company is a closed-ended investment company incorporated in Guernsey in
November 1994 and was launched in December 1994 with an initial asset value of
US$70 million. There are 100,615,520 Ordinary Shares in issue, the Company's
Ordinary Shares being listed on the London Stock Exchange.
The Ordinary Shares of the Company have not been registered under the United
States Securities Act of 1933 or the United States Investment Companies Act of
1940. Accordingly, none of the Ordinary Shares may be offered or sold directly
or indirectly in the United States or to any United States persons [as defined
in Regulation 'S' under the 1933 Act] other than in accordance with certain
exemptions. Investment in the Fund is suitable only for sophisticated investors
and should be regarded as long-term. Past performance is no indication of future
results.
Investment Objective
The Company was established to invest substantially all of its assets in
securities issued by smaller Japanese companies. The objective of the Company is
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.
Investment Restrictions
The following investment restrictions have been adopted:
(i) the Company may not invest in securities carrying unlimited liability; or
(ii) the Company may not deal short in securities; or
(iii) the Company may not take legal or management control in investments in its
portfolio; or
(iv) the Company may not invest in any commodities, land or interests in land;
or
(v) the Company may not invest or lend more than 10% of its assets in securities
of any one company or single issuer (other than obligations of the Japanese
Government or its agencies or of the US Government or its agencies); or
(vi) the Company may not invest more than 10% of its assets in non-corporate
investments or securities not listed or quoted on any recognised stock exchange,
for which purpose securities quoted on any of the Japanese Stock Markets will be
treated as securities quoted on a recognised stock exchange; or
(vii) the Company may not invest in any company where the investment would
result in the Company holding more than 10% of the issued share capital of that
company or of any class of that company's share capital, unless that company
constitutes a trading company (for the purposes of the relevant United Kingdom
legislation) in which case the Company may not make any investment that would
result in its holding 50% or more of the issued share capital of that company or
of any class of that company's share capital; or
(viii) the Company may not invest more than 5% of its assets in unit trusts,
shares or other forms of participation in managed open-ended investment
vehicles; or
(ix) the Company may not commit its assets in the purchase of foreign exchange
contracts, financial futures contracts, put or call options or in the purchase
of securities on margin other than in connection with or for the purpose of
hedging transactions effected on behalf of the Company.
Net Asset Value and Share Price Information
The prices of Ordinary Shares and the latest Net Asset Value 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 Net Asset Value (in Dollar terms) appears within the section of the
Financial Times Managed Funds Service under Prospect Asset Management (Channel
Islands) Limited.
Life of the Company
From inception the Directors have believed that Shareholders should be able to
review the progress of the Company so that a decision can be taken as to whether
Shareholders should have an opportunity of realising the Company's underlying
investments. Accordingly, at the Eleventh Annual General Meeting of the Company
held on 22 May 2008, the Board included in the business to be considered by
Shareholders a Special Resolution that the Company should be wound up. As the
resolution was not passed, the Board shall include a similar resolution in the
business to be considered at every third Annual General Meeting held.
Directors
Brief biographical details of the Directors are as follows:
John Hawkins is a fellow of the Institute of Chartered Accountants in England
and Wales. He was formerly Executive Vice President and a member of the
Corporate Office of The Bank of Bermuda Limited, with whom he spent many years
in Asia. He retired from the Bank of Bermuda in 2001 after 25 years with the
Group. He is a director of a range of funds which include hedge funds and equity
funds investing in Japan and Asia.
David FitzWilliam-Lay retired in 1993 after three and a half years as Chairman
of GT Management Plc, an international investment management company. Previously
he had been Chairman of its principal subsidiary companies (US, Japan and Hong
Kong) and Group CEO. He joined the GT Management Group in 1978. He was a member
of the Board of Governors of the National Association of Securities Dealers,
Washington DC between 1987 and 1990.
Rupert Evans is a Guernsey advocate and former partner in the firm of the
Guernsey legal advisors, Ozannes. He is now a consultant to Ozannes. He is a
non-executive director of the Manager and of a number of investment companies.
Mr Evans is resident in Guernsey.
Christopher Sherwell was Managing Director of Schroders (C.I.) Limited from 2000
to 2003, and was Investment Director with Schroders (C.I.) Limited from 1993 to
2000. Prior to joining Schroders (C.I.) Limited, Mr Sherwell was Far East
Regional Strategist with Smith New Court Securities, and from 1977 to 1990
worked as a journalist on the Financial Times, including seven years as a
foreign correspondent in the Far East and Australia from 1983 to 1990.
Taxation Status
The Company has obtained exemption from Guernsey Income Tax under The Income Tax
(Exempt Bodies) (Guernsey) Ordinance, 1989. There is no capital gains tax in
Guernsey.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR KGGZRVNFGLZM
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