TIDMPJF
RNS Number : 9462M
Prospect Japan Fund Ld
24 August 2011
THE PROSPECT JAPAN FUND LIMITED
INTERIM RESULTS ANNOUNCEMENT
The financial information set out in this announcement does not
constitute the Company's statutory financial statements for the
period ended 30 June 2011. All figures are based on the 30 June
2011 unaudited financial statements, approved by the Board of
Directors on 22 August 2011.
The Company's statutory financial statements will shortly be
available for inspection at the UK Listing Authority's Document
Viewing Facility, which is located at:
Financial Services Authority
25 The North Colonnade
Canary Wharf
London E14 5HS
CHAIRMAN'S REPORT
for the period from 1 January, 2011 to 30 June, 2011
The year commenced very positively with Japan experiencing
generally improving overall trends together with companies
reporting good performance and progress. This all changed when a
massive earthquake hit Japan on 11 March, which proved to be the
largest ever to hit Japan, but which was followed by an immense
Tsunami bringing with it huge devastation, loss of life and
resulting serious problems to the Fukushima nuclear power
plant.
The recovery of the economy following the earthquake continues
positively, ahead of expectations. A second supplementary budget of
Yen 2 trillion was approved by the Cabinet in order to assist with
the rebuilding post the earthquake, which is reflective of the
spirit and determination of the Japanese to succeed and assist with
the recovery and get the economy moving forward.
Stock market valuations remain inexpensive and good value.
Although reduced, the real estate exposure in the portfolio remains
strong but balanced between real estate, REITs and warehousing. The
Investment Advisor will expand in more detail with regard to this
and the other sectors of investment in his report.
The Net Asset Value ("NAV") per share of The Prospect Japan Fund
Limited ("the Company") rose from US$0.8919 per share at 1 January
2011, the beginning of the period, to US$0.9237 per share at 30
June 2011, an increase of 3.4% . The Topix Small Index rose by 2.4%
over the same period.
In accordance with the Company's Articles of Incorporation a
Resolution to wind up the Company was required to be put to the
Shareholders at the end of the first 12 years of its life and every
3 years thereafter. At the Annual General Meeting held today the
Board was pleased to note that Shareholders re-affirmed their
support for the continuation of the Company by voting against that
Resolution. As a result of the rejection, by the Shareholders, of
the Resolution to wind up the Company, the Company continues as a
going concern.
Mr David FitzWilliam-Lay retires from the Board today after 16
years serving as the first Chairman of the Company and subsequently
as a Director. The Board thanks David for his valuable contribution
to the Company throughout his tenure and wish him well for his
retirement.
Whilst Japan continues to progress, events outside of the
Country remain uncertain, with the Greek and European debt
situation further compounded by the American budget deficit, all of
which have affected the market recovery. Uncertainties remain
within the global stage, but valuations remain attractive in Japan
and we continue to support and believe that your Investment Advisor
will add value and seek opportunities to further enhance the
portfolio.
John Hawkins
Chairman
22 August, 2011
INTERIM MANAGEMENT REPORT
for the period from 1 January, 2011 to 30 June, 2011
Market Performance (%), US$ NAV
YTD 01.01.11 1 Year 3 Year 5 Year
to 30.06.11
PROSPECT JAPAN FUND 3.4% 13.6% (30.8)% (56.8)%
Topix Small 2.4% 16.1% 9.1% (9.5)%
Prospect Japan Fund inception date is 20 December 1994. Topix
Small is 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 Fund is net of
fees and expenses and includes reinvestment of dividends and
capital gains. Source: Prospect Asset Management, Inc. Topix Small
Index performance includes the reinvestment of dividends. Source:
Bloomberg.
Investment Manager's Summary
The first half of the year was marked by the massive 9.0
Tohoku-Pacific Earthquake/Tsunami centred off of Sendai, about 300
kilometres northeast of Tokyo. The markets were heavily impacted by
the dramatic events that resulted in a widespread loss of life,
devastation and nuclear emergency. The market rebounded in the
following two weeks after the natural disaster; however the Topix
Small index ended the month of June 9% below the 2011 high set on
21 February.
Calls to companies in the portfolio confirmed that there was no
major damage or loss of life. There were supply chain
interruptions, delays in production and business disruptions due to
rolling blackouts that went into effect from 14 March 2011.
Business operations are primarily back to normal. Rolling blackouts
have been averted because of energy conservation efforts from
corporations and the general public. Although some of the companies
in the Fund posted extra-ordinary losses related to the
earthquake/tsunami, only two companies had losses that accounted
for slightly more than 2% of total sales. Extra-ordinary losses
related to the earthquake and tsunami caused Yen3.5 trillion worth
of losses for Tokyo Stock Exchange listed companies (1,124
companies excluding financials).
Funding for clean-up and reconstruction of Tohoku is a hot
topic. On 2 May 2011, Japan's parliament passed a Yen4 trillion
(USD 49 billion) budget for rebuilding. A subsequent supplementary
budget for Yen2 trillion was announced in early June. Further
measures will need to be passed as reconstruction estimates have
been as high as Yen25 trillion.
Construction orders are increasing due to the heavy demand for
reconstruction, following the destruction on 11 March 2011. The
value of construction orders (for the 50 largest construction
companies) increased 25.5% year-on-year, according to the Ministry
of Land, Infrastructure, Transport and Tourism. The May increase
was preceded by an increase of 31.4% in April and an 11% decline in
March.
Japan's economic recovery suffered a set-back after the 11 March
2011 natural disaster. The Toyo Keizai expects aggregate fiscal
year March 2012 sales to increase 2.8% year-on-year, and recurring
profits to decline 7% for First Section Tokyo Stock Exchange
companies (excluding financials). We are more encouraged by the
estimates for fiscal year March 2013; forecasts for sales growth of
5.1% and recurring profit growth of 22.3%.
A motion of no-confidence was proposed against the Cabinet by
the opposition on 1 June 2011. The motion was rejected following
behind the scenes manoeuvring in which Prime Minister Kan agreed to
step down in the future. No announcement has been made as to the
timing of Kan's departure.
Fund Performance - positive
Azel Corporation provided the largest gains for the Company.
During the period the court decided on a final payment to creditors
for the bankrupt condominium developer, which provided a return
that exceeded previous expectations.
Tomoe Corporation (1921) constructs steel structures and school
related facilities, long-span projects, bridges, electric pylons
and gymnasiums. Tomoe was cited in the 'Kabushiki Shimbun' - a
financial newspaper - as a reconstruction beneficiary.
Tomoe announced a downward revision to March 2011 figures, after
taking a write-down of Yen760 million on a work in progress
project. Company guidance for fiscal year March 2012 is weak since
Tomoe has yet to receive any specific reconstruction orders.
Fintech Global (8789), a financial services company, bought back
a convertible bond which was used as short-term bridge financing.
The implied return on the investment for the Fund was an annualized
17%.
Fund Performance - weakness
Next Corporation (2120), a real estate information services
company, revised their pricing plan in which real estate agents pay
to place real estate listings on the Next site. Next expected
monthly sales volatility as real estate agents adjusted to the new
pricing plan, however sales did not meet internal forecasts and the
company announced a downward revision to sales and profits. Monthly
sales trends started to pick up in April, reversing a downward
trend.
Oenon Holdings (2533), a producer of Japanese alcohol,
experienced selling pressure due to liquidity constraints and lack
of interest in the sector. The defensive nature of this stock
normally helps it outperform in times of uncertainty. Although
there was no specific bad news, the expected supply chain
production interruptions due to power shortages helped contribute
to the selling pressure. First quarter results announced on 11
March showed sales down 1% and an improvement in operating profits
due to improving profitability in the bio-ethanol division.
Invincible Investments (8963), a J-REIT investing in residential
and office buildings, suffered from severe interest rate hikes for
their financing and large losses on the sale of properties to repay
debt, which resulted in a sharp reduction in dividends per unit. A
change of sponsor was announced on 15 July 2011, along with a third
party allotment to pay down debt and an extended debt duration.
J-REIT Highlights
While taking a horrible toll in human life and causing untold
cost to the Japanese economy, the devastating Great Tohoku-Pacific
Earthquake had little impact on the J-REIT portfolios. J-REIT
properties in the affected areas constitute less than 2% of their
total assets, and there have only been reports of minor damage to
those properties.
The Bank of Japan announced an increase to its asset purchase
program from Yen5 trillion to Yen10 trillion on 14 March. This
program is aimed at reducing risk premiums and increasing investor
confidence through acquisition of exchange traded funds, J-REITs,
Japanese Government Bonds and Corporate Bonds. Through June, the
Bank of Japan has completed Yen6 trillion of asset purchases.
J-REIT purchases to date have totalled Yen20 billion, compared to
the maximum purchase limit of Yen100 billion.
Principal Risks and Uncertainties
Outlook for the rest of the year has improved compared to
sentiment immediately following the earthquake/tsunami. Despite
unrest in Northern Africa and the Middle East, the risk of
insolvency in some European countries and a global slowdown, Japan
still runs trade surpluses with not only the U.S. and Europe, but
also China.
Valuations are extremely cheap, and we see a combination of
share buyback and mergers taking shape. According to data as of 31
March 2011, Topix companies (excluding financials) have amassed a
cash pile of Yen76.6 trillion (USD 90 billion), the highest level
since 2000, up 5.6% year-on-year. A Nikkei article reported that 26
of the largest companies in Japan are planning to spend Yen5
trillion on mergers and acquisitions. (Nikkei: 6 July, 2011)
The strength of the Yen continues to puzzle corporate Japan and
government officials. In an effort to weaken the currency, the
Ministry of Finance announced the sale of Yen692.5 billion in
March, as the Yen had reached a post-war high. The intervention had
limited success, as the Yen fell to Yen85 to the US dollar on 6
April, but rose back to Yen80.4 by the end of June. The Fund is
positioned for domestic demand, and not dependent on the
fluctuating foreign exchange rate.
Prospect Asset Management, Inc
22 August, 2011
PORTFOLIO OF INVESTMENTS
as at 30 June, 2011
Number Percentage
of Fair Value of
in U.S. Net Asset
Securities Investments Dollars Value
Listed investments
Advertising
620,900 Tri-stage Inc 9,341,486 10.26
9,341,486 10.26
Apparel
Katakura Industries
325,100 Co Ltd 3,423,807 3.76
3,423,807 3.76
Beverages
4,060,000 Oenon Holdings Inc 9,086,727 9.98
9,086,727 9.98
Engineering and Construction
2,555,900 Tomoe Corp 10,042,454 11.03
10,042,454 11.03
Health Care
30,400 Ain Pharmaciez Inc 1,241,703 1.36
1,241,703 1.36
Internet
2,656 Next Co Ltd 1,737,092 1.91
1,737,092 1.91
Investment companies
5,874,000 Gro-Bels Co Ltd(+) 2,264,147 2.49
2,264,147 2.49
Machinery
258,300 Zuiko Corporation 3,918,259 4.30
3,918,259 4.30
Real Estate
173,000 Iida Home Max Co Ltd 1,505,751 1.65
1,892 Logicom Inc 824,552 0.91
3,896 Urbanet Corp 1,172,312 1.29
1,656,600 Yasuragi Co(++) 7,374,110 8.10
10,876,725 11.95
REITs
Invincible Investment
52,452 Corp 7,408,825 8.14
Prospect Epicure J-REIT
7,898,895 Value Fund* - -
7,408,825 8.14
Retail
357,100 Growell Holdings 9,279,938 10.20
309,000 Sekichu Co Ltd 1,448,468 1.59
Shaklee Global Group
542,000 Inc 2,587,852 2.85
2,818 Toridoll Corp 3,836,755 4.22
17,153,013 18.86
Storage/warehousing
Shibusawa Warehouse
2,873,000 Co 9,145,016 10.05
9,145,016 10.05
Total listed investments 85,639,254 94.09
----------- -----------
Unlisted investments
Corporate bond
315,700,000 Takefuji Corp 129,538 0.14
129,538 0.14
Total unlisted investments 129,538 0.14
----------- -----------
Total investments 85,768,792 94.23
----------- -----------
Net current assets 5,249,830 5.77
NET ASSETS 91,018,622 100.00
----------- -----------
(+) Mr. Curtis Freeze, Director of Prospect Asset Management
(Channel Islands) Limited, the Manager of The Prospect Japan Fund
Limited is President of Gro-Bels Co Ltd.
(++) Mr. Curtis Freeze, Director of Prospect Asset Management
(Channel Islands) Limited, the Manager of The Prospect Japan Fund
Limited is a Director of Yasuragi Co.
* Prospect Epicure JREIT Value Fund is classed as a related
party as the fund shares the same Investment Advisor as the
Company.
RESPONSIBILITY STATEMENT
for the period from 1 January, 2011 to 30 June, 2011
We confirm that to the best of our knowledge:
(a) the Interim Condensed Financial Statements have been
prepared in accordance with IAS 34 - Interim Financial
Reporting;
(b) the Chairman's Report, Interim Management Report and Notes
to the Condensed Financial Statements include:
-- a fair review of the information required by DTR 4.2.7R
(indication of important events during the first six months and
description of principal risks and uncertainties for the remaining
six months of the year); and
-- a fair review of the information required by DTR 4.2.8R
(disclosure of related parties' transactions and changes
therein).
By order of the Board,
John Hawkins Richard Battey
22 August, 2011
INDEPENDENT INTERIM REVIEW REPORT TO THE PROSPECT JAPAN FUND
LIMITED
Introduction
We have been engaged by the Company to review the Condensed
Financial Statements in the half-yearly Financial Report for the
six months ended 30 June, 2011 which comprise the Statement of
Comprehensive Income, the Statement of Changes in Equity, the
Statement of Financial Position, the Statement of Cash Flows and
the related notes 1 to 11. 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 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 half-yearly 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
Financial Statements included in this half-yearly Financial Report
have 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 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 Financial Statements in the
half-yearly Financial Report for the six months ended 30 June, 2011
are 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
22 August, 2011
STATEMENT OF COMPREHENSIVE INCOME (Unaudited)
for the period from 1 January, 2011 to 30 June, 2011
Revenue Capital Total Revenue Capital Total
01.01.2011 01.01.2011 01.01.2011 01.01.2010 01.01.2010 01.01.2010
to to to to to to
30.06.2011 30.06.2011 30.06.2011 30.06.2010 30.06.2010 30.06.2010
In U.S. In U.S. In U.S. In U.S. In U.S. In U.S.
Notes Dollars Dollars Dollars Dollars Dollars Dollars
Investment
income 1,148,357 - 1,148,357 957,708 - 957,708
Interest
income - - - 1,071,421 - 1,071,421
Foreign
exchange
movements (273,398) 127,143 (146,255) 567,145 93,830 660,975
Gain on
financial
assets
at fair value
through
profit or
loss - 2,984,715 2,984,715 - 3,658,195 3,658,195
Total income 874,959 3,111,858 3,986,817 2,596,274 3,752,025 6,348,299
Management
4 fee (658,437) - (658,437) (580,819) - (580,819)
Other
5 expenses (310,042) - (310,042) (297,585) - (297,585)
Transaction
costs - (126,270) (126,270) - (173,361) (173,361)
Total
expenses (968,479) (126,270) (1,094,749) (878,404) (173,361) (1,051,765)
Gain/(loss)
for the
period before
tax (93,520) 2,985,588 2,892,068 1,717,870 3,578,664 5,296,534
Withholding
3 tax (80,385) - (80,385) (67,043) - (67,043)
Gain/(loss)
for the
period after
tax (173,905) 2,985,588 2,811,683 1,650,827 3,578,664 5,229,491
Total
comprehensive
income/
(expense) for
the period (173,905) 2,985,588 2,811,683 1,650,827 3,578,664 5,229,491
Gain per
Ordinary
2 Share -
Basic &
Diluted 0.028 0.052
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.
All items in the above statement derive from continuing
operations.
STATEMENT OF CHANGES IN EQUITY (Unaudited)
for the period from 1 January, 2011 to 30 June, 2011
Capital
Share Capital Capital Capital Reserve/
Capital Redemption Redemption Revenue Reserve/ Reserve/ Exchange
Account Reserve Reserve Reserve Realised Unrealised Differences Total
In U.S. In U.S. In U.S. In U.S. In U.S. In U.S. In U.S. In U.S.
Dollars Dollars Dollars Dollars Dollars Dollars Dollars Dollars
Balances at
1 January,
2011 99,634 315,875 92,027,074 (11,008,026) 27,619,116 (23,128,033) 2,940,085 88,865,725
Total comprehensive
income/(expense)
for the period
(Loss)/gain
for the period
after tax - - - (173,905) (4,961,680) 7,820,125 127,143 2,811,683
Capital
activities
Repurchase
of shares* (868) 868 (658,786) - - - - (658,786)
Total capital
activities (868) 868 (658,786) - - - - (658,786)
Balances at
30 June, 2011 98,766 316,743 91,368,288 (11,181,931) 22,657,436 (15,307,908) 3,067,228 91,018,622
======== =========== =========== ============= ============ ============= ============ =============
for the period from 1 January, 2010 to 30
June, 2010
Capital
Share Capital Capital Capital Reserve/
Capital Redemption Redemption Revenue Reserve/ Reserve/ Exchange
Account Reserve Reserve Reserve Realised Unrealised Differences Total
In U.S. In U.S. In U.S. In U.S. In U.S. In U.S. In U.S. In U.S.
Dollars Dollars Dollars Dollars Dollars Dollars Dollars Dollars
Balances at
1 January,
2010 100,030 315,479 92,299,301 (11,213,972) 42,638,373 (50,287,542) 2,306,189 76,157,858
Total comprehensive
income/(expense)
for the period
Gain/(loss)
for the period
after tax - - - 1,650,827 (6,971,326) 10,456,160 93,830 5,229,491
Balances at
30 June, 2010 100,030 315,479 92,299,301 (9,563,145) 35,667,047 (39,831,382) 2,400,019 81,387,349
======== =========== =========== ============= ============ ============= ============ =============
* For details of the Company's share buy back programme, refer
to note 7.
STATEMENT OF FINANCIAL POSITION (Unaudited)
as at 30 June, 2011
30.06.2011 31.12.2010 30.06.2010
In U.S. In U.S. In U.S.
Notes Dollars Dollars Dollars
(Unaudited) (Audited) (Unaudited)
Non-current assets
Financial assets at fair
value through profit or
6 loss 85,768,792 87,202,122 74,261,331
Current assets
Due from brokers 843,901 206,780 -
------------ ------------ -------------
Dividends and interest
receivable 226,359 689,847 272,746
Other receivables 42,061 - 40,231
Cash and cash equivalents 4,974,786 1,587,728 7,348,538
Total current assets 6,087,107 2,484,355 7,661,515
------------ ------------ -------------
Current liabilities
Due to brokers 375,219 566,468 313,348
Other creditors 222,495 254,284 222,149
Share buybacks payable 239,563 - -
Net current assets 5,249,830 1,663,603 7,126,018
Net assets 91,018,622 88,865,725 81,387,349
Equity
7 Share capital account 98,766 99,634 100,030
7 Redemption reserve 91,368,288 92,027,074 92,299,301
7 Capital redemption reserve 316,743 315,875 315,479
Other reserves (765,175) (3,576,858) (11,327,461)
Total equity 91,018,622 88,865,725 81,387,349
Ordinary Shares in issue 98,766,852 99,634,852 100,030,520
Net Asset Value per
2 Ordinary Share 0.92 0.89 0.81
The Financial Statements were approved by the Board of Directors
on 22 August, 2011 and signed on its behalf by:
John Hawkins Richard Battey
STATEMENT OF CASH FLOWS (Unaudited)
for the period from 1 January, 2011 to 30 June, 2011
01.01.2011 01.01.2010
to to
30.06.2011 30.06.2010
In U.S. In U.S.
Notes Dollars Dollars
Cash flows from operating activities
Net cash inflow from operating
8 activities 345,491 718,249
Cash flows from investing activities
Purchase of investments (32,423,786) (48,221,715)
Sale of investments 35,887,191 41,012,688
Net cash inflow/(outflow) from
investing activities 3,463,405 (7,209,027)
Net cash inflow/(outflow) before
financing activities 3,808,896 (6,490,778)
Cash flows from financing activities
Repurchase of shares (419,223) -
Net cash flow from financing activities (419,223) -
Increase/(decrease) in cash and
cash equivalents 3,389,673 (6,490,778)
Reconciliation of net cash flow
to
movement in net funds
Net cash inflow/(outflow) 3,389,673 (6,490,778)
Effects of foreign exchange rate
changes (2,615) 580,160
Cash and cash equivalents at beginning
of period 1,587,728 13,259,156
Cash and cash equivalents at end
of period 4,974,786 7,348,538
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
Note 1 Principal Accounting Policies
Basis of Accounting
The Interim Condensed Financial Statements for the six months
ended 30 June, 2011 have been prepared in accordance with IAS 34
"Interim Financial Reporting" as adopted by the European Union, the
Listing Rules of the London Stock Exchange ("LSE") and applicable
legal and regulatory requirements of the Companies (Guernsey) Law,
2008. The accounting policies, presentation and methods of
computation followed in this Interim Condensed set of Financial
Statements are consistent with those of the latest Annual Audited
Financial Statements for the year ended 31 December, 2010 which
were prepared in accordance with International Financial Reporting
Standards as adopted by the European Union.
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 for the year ended
31 December, 2010.
The preparation of the Interim Condensed Financial Statements
requires management to make estimates and assumptions that affect
the reported amounts of revenues, expenses, assets and liabilities
at the date of the Interim Condensed Financial Statements. The
estimates and associated assumptions are based on historical
experience and various other factors that are believed to be
reasonable under the circumstances, the results of which form the
basis of making the judgements about carrying values of assets and
liabilities that are not readily apparent from other sources.
Actual results may differ from those estimates.
Presentation of information
The Interim Condensed Financial Statements have been prepared on
a going concern basis under the historical cost convention adjusted
to take account of the revaluation of the Company's investments at
fair value.
In order to better reflect the activities of an investment
company and in accordance with the guidance issued by the
Association of Investment Companies, supplementary information
which analyses the Statement of Comprehensive Income between items
of a capital and revenue nature has been presented
within the Statement of Comprehensive Income.
Going Concern
As required by the Company's Articles of Incorporation, at the
Annual General Meeting on 22 August 2011, the Board included in the
business to be considered by Shareholders a Special Resolution that
the Company should be wound up. The Company's shareholders voted
against this resolution.
The Directors believe that given the nature of the Company and
its investments and as the resolution as described above was not
passed, it is appropriate to continue to adopt the going concern
basis in preparing these Financial Statements and after due
consideration, the Directors consider that the Company has adequate
financial resources to continue for the foreseeable future.
Note 2 Gain/(loss) per Ordinary Share - Basic & Diluted and
Net Asset Value per Ordinary Share - Basic & Diluted
The gain per Ordinary Share - Basic and Diluted has been
calculated based on the weighted average number of Ordinary Shares
of 99,438,864 and a net gain of US$2,811,683 (31 December, 2010: on
99,851,377 Ordinary Shares and a net gain of US$12,980,094; 30
June, 2010: on 100,030,520 Ordinary Shares and a net gain of
US$5,229,491).
There were no dilutive elements to shares issued or repurchased
during the period.
The Net Asset Value per Ordinary Share - Basic and Diluted has
been calculated based on the number of shares in existence at the
period end date 98,766,852 (31 December, 2010: 99,634,852; 30 June,
2010: 100,030,520) and shareholders' funds attributable to equity
interests of US$91,018,622 (31 December, 2010: US$88,865,725; 30
June, 2010: US$81,387,349). The Company announces its Net Asset
Value per Share to the London Stock Exchange ("LSE") at each weekly
and month end valuation point.
Below is the Net Asset Value per Ordinary Share announced to the
LSE and as presented in these Interim Condensed Financial
Statements.
30.06.2011 31.12.2010 30.06.2010
In U.S. In U.S.
Dollars In U.S. Dollars Dollars
Net Asset Value per Ordinary
Share - Basic and Diluted 0.92 0.89 0.81
Note 3 Taxation
The Company is exempt from taxation in Guernsey under the terms
of The Income Tax (Exempt Bodies) (Guernsey) Ordinance, 1989. Its
liability is an annual fee of GBP600.
The amount disclosed as withholding tax in the Statement of
Comprehensive Income relates solely to withholding tax suffered at
source, on income in the investing country, Japan.
Note 4 Management Fees
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$658,437 (30 June, 2010: US$580,819) of which
US$112,651 (30 June, 2010: US$110,557) is due and payable at the
period end. The Management Agreement dated 1 December, 1994 remains
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 5 Other Expenses
01.01.2011 01.01.2010
to to
30.06.2011 30.06.2010
In U.S. In U.S.
Dollars Dollars
Administration and secretarial
fees* 109,740 96,803
Custodian's fees and
charges** 34,354 27,513
General expenses 85,575 93,062
Directors' remuneration 63,452 60,413
Auditors'
fees 16,921 19,794
310,042 297,585
*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$109,740 (30 June, 2010: US$96,803) of which
US$18,775 (30 June, 2010: US$18,426) is due and payable at the
period end.
**The custodian's fees and charges are payable to Northern Trust
(Guernsey) Limited monthly in arrears and are 0.08% of the value of
the Portfolio of the Company, and are calculated as of the last
business day of each month. Total custodian's fees and charges for
the period amounted to US$34,354 (30 June, 2010: US$27,446) of
which US$5,631 (30 June, 2010: US$5,371) is due and payable at the
period end.
Note 6 Financial Assets at Fair Value through Profit and
Loss
01.01.2011 01.01.2010 01.01.2010
to to to
30.06.2011 31.12.2010 30.06.2010
In U.S. In U.S. In U.S.
Dollars Dollars Dollars
Opening book cost 110,330,155 111,584,984 111,584,984
Purchases at cost 32,162,257 96,651,544 48,409,388
Proceeds on sale (36,580,302) (83,052,915) (39,637,435)
Realised loss on sale (4,835,410) (14,853,458) (6,264,224)
Closing book cost 101,076,700 110,330,155 114,092,713
Unrealised loss (15,307,908) (23,128,033) (39,831,382)
Fair value 85,768,792 87,202,122 74,261,331
Note 7 Share Capital, Redemption Reserve & Capital
Redemption Reserve
Capital
Redemption Redemption
Share
Ordinary Shares Capital Reserve Reserve
In U.S. In U.S. In U.S.
Number of shares Dollars Dollars Dollars
Balance at 1 January,
99,634,852 2011 99,634 92,027,074 315,875
Shares repurchased
and
cancelled during
(868,000) the period (868) (658,786) 868
Balance at 30
98,766,852 June, 2011 98,766 91,368,288 316,743
The Redemption Reserve account is a distributable reserve
account which can be used for among other things the payment of
dividends, if any.
The Capital Redemption Reserve is used to cancel the nominal
shares of the Company when they are redeemed or there is a share
buy back.
Ordinary Shares carry the right to vote at general meetings of
the Company and to receive dividends and, in a winding-up will
participate in any surplus assets remaining after settlement of any
outstanding liabilities of the Company.
During the period, as approved at the AGM on 27 August, 2010,
the Company could purchase a maximum of 6,391,950 Ordinary Shares,
equivalent to 5.80% of the issued share capital of the Company as
at the date of the AGM. During the period, 868,000 shares with a
value of US$658,786 were purchased and cancelled by the Company of
which US$239,563 remained payable at the period end.
At the AGM on 22 August, 2011, it was approved that the Company
may now purchase a maximum of 5,724,519 Ordinary Shares, equivalent
to 5.80% of the issued share capital of the Company as at the date
of the AGM.
Note 8 Reconciliation of Deficit on Ordinary Activities to Net
Cash Inflow from Operating Activities
30.06.2011 30.06.2010
In U.S. In U.S.
Dollars Dollars
Return on ordinary activities
for the period (173,905) 1,650,827
Amortisation on convertible and corporate
bonds - (797,276)
Decrease in dividends receivable and
other receivables 421,427 350,385
Increase/(decrease)
in other creditors (31,789) 643
Foreign exchange loss 129,758 (486,330)
Net cash inflow from operating
activities 345,491 718,249
Note 9 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. The Company's investment portfolio is
managed by PAM(CI) Ltd whose parent company is Prospect Company
Limited.
Mr Rupert Evans is a Director of the Manager.
Directors' fees are disclosed in Note 5. The basic fee payable
to each Director is GBP15,000 per annum, the Chairman of the Audit
Committee GBP17,500 per annum and the Chairman of the Board
GBP20,000 per annum.
At 30 June, 2011 David FitzWilliam-Lay and Chris Sherwell held
beneficial interests of 128,061 and 9,940 Ordinary Shares
respectively in the Company. No other Directors holding office at
30 June, 2011, 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.
Mr. Curtis Freeze, Director of Prospect Asset Management
(Channel Islands) Limited, the Manager of The Prospect Japan Fund
Limited is President of Gro-Bels Co Ltd and a Director of Yasuragi
Co.
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 (2010: Nil) during the period from
Prospect Epicure JREIT Value Fund.
Note 10 Segmental Reporting
The Board is responsible for the Company's entire portfolio and
considers the business to have a single operating and geographical
segment. The Board's asset allocation decisions are based on a
single, integrated investment strategy, and the Company's
performance is evaluated on an overall basis.
The Company invests in a diversified portfolio of Japanese
investments. As required by IFRS 8, the total fair value of the
financial instruments held by the Company and the equivalent
percentages of the total value of the Company are reported in the
Portfolio of Investments.
Revenue earned is reported separately on the face of the
Statement of Comprehensive Income as investment income being
dividend income received from equities, and interest income being
interest earned from convertible and corporate bonds.
Note 11 Subsequent Events
These Financial Statements were approved for issuance by the
Board on 22 August, 2011. Subsequent events have been evaluated
until this date. No material events have occurred subsequent to the
period end and up to the signing date that would have a material
effect on these Financial Statements.
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 98,766,852 Ordinary
Shares in issue as at 30 June, 2011. 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 Company 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
(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.
NAV and Share Price Information
The prices of Ordinary Shares and the latest NAV are published
daily in the Financial Times. Prices (in Sterling terms) of the
Ordinary Shares appear within the section of the London Share
Service entitled "Investment Companies". The NAV (in Dollar terms)
appears within the section of the Financial Times Managed Funds
Service under Prospect Asset Management (Channel Islands)
Limited.
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 twelfth Annual General Meeting of the Company
held on 22 August, 2011, 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. The next such
resolution will be tabled at the Annual General Meeting to be held
in 2014.
Directors
Brief biographical details of the Directors are as follows:
David FitzWilliam-Lay, age 79, 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. Mr
FitzWilliam-Lay was appointed to the Board on 18 November, 1994 and
retired from the Board on 22 August, 2011.
Rupert Evans, age 72, is a Guernsey advocate and former partner
in the firm of the Guernsey legal advisors, Mourant Ozannes. He is
now a consultant to Mourant Ozannes. He is a non-executive director
of the Manager and of a number of investment companies. Mr Evans
was appointed to the Board on 18 November, 1994. Mr Evans is
resident in Guernsey
John Hawkins, age 68, 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. Mr Hawkins was appointed
to the Board on 4 April, 2004. Mr Hawkins is resident in
Guernsey.
Christopher Sherwell, age 63, 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. Mr Sherwell was appointed to the Board on 27
September, 2004. Mr Sherwell is resident in Guernsey.
Richard Battey, age 59, is a qualified chartered accountant. He
is a non-executive director of a number of investment companies and
funds. Mr Battey joined the Schroder Group in December 1977 and was
a director of Schroders (C.I.) Limited from April 1994 to December
2004, where he served as Finance Director and Chief Operating
Officer, and was a director of Schroder Group Guernsey companies
before retiring from his last Schroder directorship in December
2008. Mr Richard Battey was appointed as Chairman of the Audit
Committee on 10 February, 2010. Mr Battey is resident in
Guernsey.
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 GMGZRGDFGMZM
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