Interim Management Statement
October 09 2009 - 12:05PM
UK Regulatory
TIDMPJF
RNS Number : 5744A
Prospect Japan Fund Ld
09 October 2009
Prospect Japan Fund Interim Management Statement
For the period 1 July 2009 to 30 September 2009
+----------+----------+--------+----------+--------+
| NAV Performance (USD) % |
+--------------------------------------------------+
| | | YTD | 1 Year | 5 |
| | | | | Year |
+----------+----------+--------+----------+--------+
| Fund | | 30.36 | -9.88 |-54.38 |
+----------+----------+--------+----------+--------+
| Topix | | 11.96 | 18.79 | 18.78 |
| Small | | | | |
+----------+----------+--------+----------+--------+
+---------------+---------+
| Bloomberg | PJF LN |
+---------------+---------+
| Yen / USD | 89.78 |
+---------------+---------+
| NAV (USD) | 0.73 |
+---------------+---------+
| Price (USD) | 0.60 |
+---------------+---------+
| Premium/ |-18.56% |
| Discount % | |
+---------------+---------+
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 performance is the total return including the
reinvestment of dividends into the Index denominated in USD. 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 )
Investment Manager's Summary
The Fund is up 30.36% year-to-date. Positive developments in mergers and
acquisition in the JREIT sector generated the bulk of the performance.
Government efforts to provide a safety net for REIT and real estate developers
have helped both sectors rebound. Catalysts include further M&A activity
amongst JREITs and consolidation among our other holdings will drive future
earnings growth.
JREIT
With the establishment of the Public-Private JREIT stabilization fund, much of
the concern regarding JREIT refinancing risk has abated. However, this was
mostly priced in, and 3Q performance of the fund's JREIT holdings showed an 18%
(yen basis) decline versus a 1.5% gain for the TSE REIT index. Year-to-date
performance was still a strong 52.2%. Though some refinancing anxiety lingers,
attention is now turning towards planned and potential consolidation candidates,
underlying portfolio performance and future growth prospects through equity
issuances.
The Ministry of Land, Infrastructure, Transport and Tourism (MLIT) held the
final round of meetings by the working group for establishing and operating the
public-private fund on August 27th, in which the details were finalized
including the inception date of the fund. The fund started operation on
September 5th and has so far received about Y30bn equity investment (as of
August 21st). Loans from the fund may be used primarily for refinancing of
outstanding corporate bonds, and in some cases for refinancing of existing loans
and money required for mergers between JREITs.
JREIT consolidation continued with the announcement that Daiwa House Industry
will take control of New City Residence, a bid that creditors pushed for, and
which ultimately beat out an early rehabilitation bid from Loan Star Funds to
support. A merger of BLife and New City Residence could occur as early as April
2010. In other news Advance Residence and Nippon Residential refined merger
terms in which both REITs will delist in February 2010 and combine in a new
listing on March 1, 2010.
The Democratic Party of Japan won the lower house elections on August 31st in a
landslide victory ousting the Liberal Party of Japan. The new government will
steer away from public works projects and focus on the redistribution of wealth
from the government to the people. A Nikkei poll shows that the new Prime
Minister has the second highest approval rating for an incoming prime minister
at 75% (compared to Koizumi's 80%). The finance minister is showing no signs of
concern for a strong yen, which is helping to extend the currency's strength
towards the 88Yen/US$ level.
In economic news the unemployment rate reached an all time high of 5.7% in July,
and the jobs-to-applicants ratio dropped to 0.42, also a historic low. In
August, the unemployment rate improved to 5.5%. It is hard to imagine an
immediate reversal of deflationary pressures as Japanese companies cut summer
bonuses by a record 16.6%. Summer bonuses represent approximately 10% of a
workers annual income. Retail sales at department stores remain weak, and our
retail focus continues to focus on strong specialty retailers able to grow
internally and externally via consolidation.
Investment Outlook
The Investment Advisor is of the opinion that the general out performance of
small-cap JREITs based on established government support measures and the
initiation of sector consolidation has largely run its course. Going forward, we
believe the market will focus on the announcement and realization of sector
consolidation through sponsor changes, M&A activity, and potential for portfolio
growth predicated on the ability to raise equity capital. Similar to the JRET
sector, the Investment Advisor sees further consolidation opportunities in the
retail, real estate and service industries in Japan providing ample investment
opportunities.
+---------+---------------------------------------------+---------+
| | Prospect Japan Fund Top 10 Holdings | |
+---------+---------------------------------------------+---------+
| | 30-Sept-09 | % |
+---------+---------------------------------------------+---------+
| 8919 | Yasuragi Co., Ltd. | 12.6 |
+---------+---------------------------------------------+---------+
| 8975 | FC Residential Investment Corp. | 10.4 |
+---------+---------------------------------------------+---------+
| 9304 | Shibusawa Warehouse Co. Ltd. | 9.2 |
+---------+---------------------------------------------+---------+
| | Takefuji Euro Yen CB 1.5% 6/18/2018 | 9.1 |
+---------+---------------------------------------------+---------+
| 8969 | Prospect Residential Investment Corp. | 7.5 |
+---------+---------------------------------------------+---------+
| 8970 | Japan Single Residence REIT Inc. | 7.5 |
+---------+---------------------------------------------+---------+
| 3141 | Growell Holdings Co Ltd | 4.8 |
+---------+---------------------------------------------+---------+
| 9942 | Joyfull Co., Ltd. | 4.1 |
+---------+---------------------------------------------+---------+
| | Fintech Global Euro Yen CB 02/08/2012 | 3.7 |
+---------+---------------------------------------------+---------+
| 8963 | TGR Investment Inc. | 3.1 |
+---------+---------------------------------------------+---------+
| | | |
+---------+---------------------------------------------+---------+
| | | |
+---------+---------------------------------------------+---------+
| | Sector Weightings | |
+---------+---------------------------------------------+---------+
| | 30-Sept-09 | % |
+---------+---------------------------------------------+---------+
| | Retail | 11.0 |
+---------+---------------------------------------------+---------+
| | Storage/Warehousing | 9.2 |
+---------+---------------------------------------------+---------+
| | Real Estate | 12.8 |
+---------+---------------------------------------------+---------+
| | REITs | 30.8 |
+---------+---------------------------------------------+---------+
| | Engineering & Construction | 2.6 |
+---------+---------------------------------------------+---------+
| | Investment Companies | 1.9 |
+---------+---------------------------------------------+---------+
| | Diversified Financial Services | 12.8 |
+---------+---------------------------------------------+---------+
| | | |
+---------+---------------------------------------------+---------+
| | | |
+---------+---------------------------------------------+---------+
| | Total | 81.1 |
+---------+---------------------------------------------+---------+
| | No of Positions | 16.0 |
+---------+---------------------------------------------+---------+
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.
The board is not aware of any significant events or transactions which have
occurred since 30 September 2009 and the date of this report which would have a
material impact on the financial position of the company.
Enquiries:
Prospect Asset Management, Inc.
Contact:
Hamilton Smith
Phone: +1-808-396-7077
Northern Trust International Fund Administration Services (Guernsey) Limited
Contact:
Andrew Maiden
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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