TIDMPJF 
 
THE PROSPECT JAPAN FUND LIMITED 
 
ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS 
 
The financial information set out in this announcement does not constitute the 
Company's statutory accounts for the year ended 31 December, 2016. All figures 
are based on the Audited Financial Statements for the year ended 
31 December, 2016, approved by the Board of Directors on 21 March, 2017. 
 
CHAIRMAN'S REPORT 
 
for the year ended 31 December, 2016 
 
Your Company has had a disappointing year with a decline in published NAV of 
9.49% compared with MSCI Japan Small Cap Index's increase of 8.22%. 
Furthermore, the share price has fallen from $1.05 to $0.89 with an increased 
discount to published NAV of 27% (2015: 23%). 
 
Following the change of investment policy approved by the shareholders in 2014, 
the Manager has moved towards an even more concentrated portfolio of 
investments than in 2015. There is now a strong weighting towards regional 
banks, two of which make up slightly more than 50% by value of the portfolio. 
As of now the portfolio is comprised of less than 10 investments including the 
investment in Prospect Co. This strategy together with direct engagement with 
investee company management is expected to bring rewards in due course. 
 
As announced on 10 January, 2017, the Independent Directors of the Company are 
in preliminary discussions regarding a possible offer from Prospect, Co. Ltd 
("Prospect"), a Japanese company listed on the Tokyo Stock Exchange and the 
parent company of the Company's Manager and Investment Advisor, for the entire 
issued and to be issued share capital of the Company. The possible offer is 
under consideration, discussion and evaluation by both parties is a securities 
exchange offer at a ratio of 2.5 Ordinary Prospect Shares in exchange for each 
share held in the Company. Further details of the possible offer and the 
strategic rationale for the proposed combination are available on the Company's 
website: www.prospectjapan.com. 
 
The Board will assess any offer in relation to the takeover of the Company in 
light of our objectives, which are to maximise share value, minimise or 
eliminate discount to NAV and improve the liquidity of our shares. 
 
John Hawkins 
 
Chairman 
 
21 March, 2017 
 
INVESTMENT ADVISOR'S REPORT 
 
For the year ended 31 December, 2016 
 
 
Market Performance (%), US$ NAV 
 
                                                                            1 
Year                                    3 
Year                                      5 Year 
 
Prospect Japan Fund                          (2.59)/(9.49)* 
                        (3.88)                                45.88 
 
MSCI Japan Small Cap Index                                  8.22 
                        24.79                                          64.67 
 
The Prospect Japan Fund Limited inception date is 20 December 1994. The above 
performance of the Fund is net of fees and expenses and includes reinvestment 
of dividends and capital gains. (Source: Prospect Asset Management, Inc.) 
Although the Company is not managed to a benchmark, it measures its performance 
against the MSCI Japan Small Cap Index (Total Return) for comparison purposes 
only. The MSCI Developed Markets Small Cap Indices offer an exhaustive 
representation of this size segment by targeting companies that are in the 
Investable Market Index but not in the Standard Index in a particular developed 
market. The indices include Value and Growth style indices and industry indices 
based on the Global Industry Classification Standard (GICS®). (Source: 
Bloomberg) 
 
*Refers to performance based on published NAV. Further information can be found 
in Note 17. 
 
Investment Manager's Summary 
 
The Prospect Japan Fund Limited's (the "Company") published NAV performance 
decreased 9.49% in 2016 (2015: increase 19.13%) (the performance based on 
valuations produced in accordance with International Financial Reporting 
Standards ("IFRS") decreased by 2.59% see the "Results and Dividend" section of 
the Directors' Report for further information), underperforming the MSCI Japan 
Small Cap Index's 8.22% total return. The broader Japanese market performed 
weakly for much of the year with Japanese equity markets experiencing the worst 
start to a year on record, with six consecutive days of trading losses 
reversing most of the gains seen in the year to 31 December 2015. The Nikkei 
225 index reached lows last seen in 2013 before rallying with the weaker yen 
following US elections in November. 
 
Global equities entered 2016 with a risk-off period, dragged down by massive 
selling in China. Key oil gauges dropped to 12-year lows amidst an ongoing 
supply glut, and the cloud of the Chinese economic slowdown drove yen strength. 
Toward the end of H1, global currency and equity markets were shaken when the 
United Kingdom referendum on European Union membership ended with an unexpected 
victory for "Leave". The unexpected outcome of the US presidential election 
shook global politics and markets, with acute effects on Japanese bond yields 
and currency momentum. 
 
The yen weakened significantly following the US election results on 
expectations of inflationary fiscal policy in the US leading to a faster 
normalization of Fed policy. The yen saw the largest monthly decline versus the 
dollar since 1995 following the election, with the dollar reaching JPY 116.64 
at year end. The equity market rallied with the weaker yen, entering a bull 
market from June lows. 
 
While the details of a Trump administration's policy outlook remain clouded, 
some of the key issues regarding the Japanese economy include a potentially 
stronger dollar, US abandonment of the Trans-Pacific Partnership ("TPP") and 
closer attention paid to the China-backed Regional Comprehensive Economic 
Partnership ("RCEP"), a 16-nation initiative of Asian nations that excludes 
North and South American countries, much as TPP excluded China. 
 
Domestically, markets were dominated by turbulent changes to the monetary and 
fiscal policy dimensions of "Abenomics". The Bank of Japan ("BoJ") surprised 
the market by adopting a negative interest rate policy in late January. 
"Quantitative & Qualitative Monetary Easing with a Negative Interest Rate" 
aimed to mirror the multi-tier system in place at the Swiss National Bank, in 
which the negative rate is applied to a portion of a financial institution's 
current account balance. 
 
The reaction in the market was swift, with the yen gaining strongly, bond 
yields falling to record levels, and shares of financials falling 
precipitously. 
 
Quantitative & Qualitative Monetary Easing ("QQE") with a Negative Interest 
Rate 
 
Tier                       Description                     Interest Rate Applied 
 
Basic Balance              Existing balances with                          +0.1% 
                           Bank of Japan 
 
Macro Add-on Balance       Required reserves and                            0.0% 
                           reserves related to BoJ 
                           lending support programs 
 
Policy-Rate Balance        Reserves in excess of                           -0.1% 
                           above tiers 
 
By September, faced with concerns regarding the limitations of monetary easing 
with increasingly evident side effects on financial sector profits and limited 
success in achieving its 2% inflation target, the BoJ adopted a new "QQE with 
Yield Curve Control" framework following a comprehensive policy assessment. The 
BoJ left its controversial negative interest rate policy intact, while shifting 
the target of policy to the yield curve, and away from fixed increases to the 
monetary base. Other adjustments included the elimination of the JPY 80 
trillion annual increase in monetary base, allowing the BoJ to be flexible in 
its purchases depending on needed adjustments to the yield curve. The central 
bank's stated intention is to buy JGBs in line with the current pace, but 
eliminated the target for average maturity on JGB purchases. 
 
The BoJ also announced an "inflation-overshooting commitment", stating that 
extraordinary policy will continue until inflation is stable above the 2% 
target. The ETF purchase target remained stable at 5.7 trillion, though 2.7 
trillion was allotted for ETFs that track the broader TOPIX index. 
 
On the fiscal side, Prime Minster Shinzo Abe again elected to delay the 
scheduled increase in the consumption tax rate (from 8% to 10%) until October 
2019, helping to secure a landslide victory in the summer upper house 
elections, winning a two-thirds super majority for the ruling coalition. The 
administration subsequently announced a JPY 28.1 trillion economic stimulus 
package, including JPY 7.5 trillion in net new spending. 
 
The Company's holdings, with strong weightings towards Banks (53.9%) and Real 
Estate (5.3%), are direct beneficiaries of the continued support for fiscal and 
monetary stimulus by the Abe administration and BoJ, with real estate prices 
supported by the expectation of stable near- to mid-term low government bond 
yields via BoJ yield control operations. 
 
The recovery in the Tokyo office market continues, with Miki Shoji reporting 
that the average office vacancy in Tokyo's Central Business District (CBD) has 
fallen 42 basis points year-on-year in 2016. Average rents rose 4.79% 
year-on-year in 2016, improved from the 4.36% improvement in 2015, and 19.0% 
below the 2008 highs. 
 
During the year, the Company received shareholder approval of the Exercise 
Agreement, which allowed for the purchase of 1,440 stock acquisition rights 
("SARs") for Prospect Co. (3528). These cost JPY 288 million. As of 2016 year 
end, the Company had converted 90 of these SARs into 9 million shares, leaving 
the Company with 1,350 SARs at a cost of JPY 270 million which is equal to an 
additional 135 million shares. 
 
OUTPERFORMANCE 
 
The largest positive contributors to 2016 performance came from holdings in 
Fukushima Bank (8562) and Daiwa Motor Transportation (9082). Fukushima Bank, a 
regional bank in Fukushima prefecture, fell sharply in February along with 
other financial shares due to the implementation of the BoJ's negative interest 
rate policy, but rallied strongly over the following months after technical 
adjustments by the BoJ that increased the proportion of current account funds 
that will be considered part of the "macro add-on balance" not subject to the 
negative policy rate, and into year-end after introduction of the central 
bank's yield control policy framework. Fukushima Bank, the third largest bank 
in the Fukushima prefecture, could benefit from the ongoing consolidation trend 
in the sector. 
 
The Company raised its holding in Fukushima Bank (8562) during the year from 
4.4% of assets to 23.7%. The bank is similar in size and valuation to Daito 
Bank (8563), with no large institutional shareholders and is seen as a 
potential beneficiary of ongoing regional bank consolidation. Fukushima 
prefecture is particularly attractive, considering the positive impact of 
recovery efforts and victim compensation. Residential land price increases led 
the nation in 2015, and employment growth has been stronger than the national 
average. Fukushima prefecture manufactured goods output growth strongly 
outpaced the national rate over the last few years, nearly regaining the share 
of total national output seen in 2010, despite a nearly 6% population decline. 
 
Strategic investments bore fruit during the year, with Daiwa Motor 
Transportation (9082), a provider of taxi and chartered limousine services, 
buying back 1.24 million shares from the Company at the 15 June closing price 
of JPY 553 per share. 
 
In March 2016, the Tokyo High Court announced its decision on the appeal 
involving the Toho (9602) tender offer bid of Toho Real Estate (8833). The High 
Court ruled that the tender offer price amounted to fair value and has 
therefore eliminated the award of JPY 100 per share decided by The Tokyo 
District Court. The Company summarily submitted an appeal of the High court 
decision to the Supreme Court, which accepted the request for appeal in June 
2016. 
 
In October 2016, the Niigata District Court announced its decision to uphold 
the fairness of the JPY 245 per share squeeze out price of Yukiguni Maitake 
(1378), a manufacturer and seller of fresh mushrooms and bean sprouts, by Bain 
Capital. The Company has submitted an appeal to the District Court decision. 
 
UNDERPERFORMANCE 
 
Holdings resulting in outsized contribution to negative performance during the 
period include Daito Bank (8563) and Shaklee Global Group (8205). Daito Bank, a 
regional bank based in Fukushima prefecture, underperformed during the year, 
after massive outperformance of the overall bank sector in 2015. The bank fell 
sharply in February along with other financial shares due to the implementation 
of the BoJ's negative interest rate policy and subsequent downward pressure on 
loan interest and investment revenue. Daito Bank, the second largest bank in 
the Fukushima prefecture, could benefit from the ongoing consolidation trend in 
the sector. 
 
Shaklee Global Group, a seller of nutrition and personal care products, fell 
during the year due to sluggish revenue and profits from Asian operations and 
an adverse foreign exchange environment for much of the year, that saw a 
strengthening Japanese yen erode profitability from overseas sales that account 
for 85% of total revenue. Company shares retreated sharply following the 
November US election, despite the advantageous yen weakening, as US policy 
towards China became uncertain. China accounts for nearly 40% of total sales 
 
Principal Risks and Uncertainties 
 
Japan remains vulnerable to slowdown in the global economy and geopolitical 
turmoil, particularly in major trading partners, as well as by volatile swings 
in currency exchange rates and interest environment due to domestic and 
overseas monetary policy. 
 
While the Abe administration and BoJ remain poised to provide additional 
stimulus as needed, inflation expectations remain muted, and CPI turned 
negative with the largest monthly decline since 2013 recorded during the year. 
Although the delay of the consumption tax increase is positive, the Abe 
administration's successful rollout of stimulus spending and regulatory reform 
remain necessary catalysts for long-term economic growth. Fundamentals on the 
corporate level remain strong, and while tangible effects of corporate 
governance reforms, beyond an increased pace of share buy-backs, are 
negligible, a widespread and ingrained refocusing on investor return should be 
a long-term positive. 
 
The Prospect Japan Fund Limited Holdings 
 
31 December 2016 
 
Symbol   Security                           % of Total Assets 
 
8562     FUKUSHIMA BANK LTD/THE                          23.7 
 
8563     DAITO BANK LTD/THE                              23.5 
 
3528     PROSPECT CO LTD                                 11.3 
 
9313     MARUHACHI WAREHOUSE CO LTD                       8.6 
 
8205     SHAKLEE GLOBAL GROUP INC                         7.1 
 
1921     TOMOE CORP                                       3.2 
 
The Prospect Japan Fund Limited Sector Weighting 
 
31 December 2016 
 
Banks                       50.5 
 
Real Estate                 11.3 
 
Storage/Warehousing          8.6 
 
Retail                       7.1 
 
Engineering &                3.2 
Construction 
 
REITs                        0.0 
 
Total**                     80.7 
 
No of Positions                9 
 
Prospect Asset Management, Inc. 
 
21 March, 2017 
 
 
PORTFOLIO OF INVESTMENTS 
 
as at 31 December, 2016 
 
   Number of                                          Fair Value     Percentage of 
 
  Securities    Investments                              in U.S.         Net Asset 
                                                         Dollars             Value 
 
                Listed investments 
 
                Banks 
 
  20,225,000    The Daito Bank                        28,681,816             23.52 
 
  35,256,000    Fukushima Bank Ltd                    28,914,409             23.72 
 
     230,000    Nagano Bank                            3,969,074              3.26 
 
                                                      61,565,299             50.50 
 
                Engineering and Construction 
 
   1,259,700    Tomoe Corp                             3,841,894              3.15 
 
                                                       3,841,894              3.15 
 
                Real Estate 
 
   6,706,000    Prospect Co Ltd                        3,781,094              3.10 
 
                                                       3,781,094              3.10 
 
                Retail 
 
   1,095,000    Shaklee Global Group Inc               8,681,047              7.12 
 
                                                       8,681,047              7.12 
 
                REITs 
 
   7,898,895    Prospect Epicure J-REIT Value                  -                 - 
                Fund*# 
 
                                                               -                 - 
 
                Storage/warehousing 
 
   1,415,100    Maruhachi Warehouse Co Ltd            10,517,594              8.63 
 
                                                      10,517,594              8.63 
 
                Total listed investments              88,386,928             72.50 
 
                Real Estate 
 
       1,350    Prospect Co Ltd Stock Acquisition      9,990,744              8.20 
                Rights* 
 
                                                       9,990,744              8.20 
 
                Total unlisted investments             9,990,744              8.20 
 
                Total investments                     98,377,672             80.70 
 
                Net current assets                    23,545,788             19.30 
 
                NET ASSETS                           121,923,460            100.00 
 
 
# Currently in liquidation. 
 
* Prospect Co Ltd is classed as a related party as it is the parent company of 
the Company's manager, PAM(CI). 
 
STRATEGIC REPORT 
 
The Board has prepared this report on a voluntary basis in accordance with the 
UK regulations governing the Directors' duty to prepare a strategic report. 
 
Company Structure 
 
The Company carries on business, and is registered, as a Guernsey-based 
closed-ended investment company. The Company is listed on the London Stock 
Exchange. 
 
Role and Composition of the Board 
 
The Board is the Company's governing body; it sets the Company's strategy and 
is collectively responsible to shareholders for its long term success. The 
Board is responsible for appointing and subsequently monitoring the activities 
of the Manager and other service providers to ensure that the investment 
objectives of the Company continue to be met. The Board also ensures that the 
Manager adheres to the investment restrictions set by the Board and acts within 
the parameters set by it in respect of any gearing. It also identifies, 
monitors and manages the key risks facing the Company. 
 
The Board 
 
The Board comprises three non-executive directors. All members of the Board 
other than Rupert Evans are independent of the Manager. None of the Directors 
has a contract of service with the Company. 
 
The Chairman of the Board is John Hawkins. Biographies for Mr Hawkins and all 
other Directors can be found in the General Information section. In considering 
the independence of the Chairman, the Board has taken note of the provisions of 
the AIC Code relating to independence and has determined that Mr Hawkins is an 
Independent Director. As the Chairman is an Independent Director, no 
appointment of a senior Independent Director has been made. The Company has no 
employees and therefore there is no requirement for a chief executive. 
 
The Board meets on at least four occasions each year, at which time the 
Directors review the investment management of the Company's assets and all 
other significant matters so as to ensure that the Directors maintain overall 
control and supervision of the Company's affairs. The Board is responsible for 
the appointment and monitoring of all service providers to the Company. 
 
Dialogue with Shareholders 
 
The Investment Advisor and the Financial Advisor and Broker maintain a regular 
dialogue with institutional shareholders, feedback from which is reported to 
the Board. In addition, Board members and representatives of the Manager are 
available to answer shareholders' questions at the Annual General Meeting. The 
Company Secretary is available to deal with general shareholders' queries at 
any time during the year. 
 
Investment Management 
 
The Company's investment portfolio is managed by Prospect Asset Management 
(Channel Islands) Limited ("PAMCI", or the "Manager") whose parent company is 
Prospect Co., Ltd (Kabushiki Kaisha Prospect ("KKP"), a Japanese Company). The 
Manager implements the investment strategy, managing the Company's assets in 
line with appropriate restrictions placed on it by the Board, including limits 
on the type and relative size of holdings which may be held in the portfolio 
and on the use of gearing, hedging, cash, derivatives and other financial 
instruments. In the opinion of the Board, the continuing appointment of the 
Manager on the terms agreed is in the best interests of the Shareholders as a 
result of its performance and results. 
 
Please refer to Note 4 for details of the management agreement between the 
Manager and the Company. 
 
Investment Objective 
 
The Company's investment objective is to achieve long-term capital growth from 
a portfolio of securities primarily of smaller Japanese companies listed or 
traded on Japanese Stock Markets. The aim will be to achieve a long-term 
capital return on the Company's portfolio and dividend income will be a 
secondary consideration in making investment decisions. Although the Company is 
not managed to a benchmark, it measures its performance against the MSCI Japan 
Small Cap Index (Total Return) for comparison purposes only. 
 
Investment Strategy 
 
The Board has delegated management of the Company's portfolio to the Investment 
Advisor. The Investment Advisor manages the portfolio with the aim of helping 
the Company to achieve its investment objective. Details of the Investment 
Advisor's strategy, and other factors that have affected performance during the 
year, are set out in the Investment Advisor's Report. 
 
Investment Policy 
 
The Company's investment policy is that it will invest mainly in shares, but 
may also invest in equity related instruments such as convertible bonds or 
warrants issued by smaller Japanese companies and debt instruments. 
 
It is the intention of the Directors that investments in unlisted securities 
which are not registered for trading on or quoted on any of the Japanese Stock 
Markets should only be made where either a listing or an alternative form of 
realising the investment can be expected within a reasonable period of time. 
Within these parameters, the assets of the Company may be used to provide 
venture or start-up capital (but no investment will carry unlimited liability). 
The balance of the assets of the Company not invested in securities will 
normally be invested in short-term debt securities and money market instruments 
or placed on deposit. 
 
The assets of the Company will be denominated principally in Japanese yen. It 
is not the present intention of the Directors to hedge the currency exposure of 
the Company, but the Directors reserve the right to do so in the future if they 
consider this to be desirable. 
 
It is intended that the principal investment objective and policies of the 
Company as set out above will remain in force until determined by the Directors 
and any material change in the policies will only be made with shareholder 
approval. 
 
Gearing 
 
The Company may use gearing from time to time amounting to not more than 20% of 
the Company's net asset value. Although the Company does not have a borrowing 
facility at the present time, it has utilised modest levels of gearing in the 
past and the use of gearing within this limit in the future will be subject to 
prior approval of the Board. 
 
Investment Philosophy and Process 
 
The Company invests in companies with undervalued assets where it believes it 
can be a catalyst for positive change. The Company engages with management to 
enact this change for the benefit of all shareholders. The Company believes the 
current government's desire to consolidate certain industries and to improve 
corporate governance, offer support to this engaged shareholder strategy. 
 
The Company's research and execution expertise enables the Company to identify 
and act upon the best opportunities. 
 
Investment Restrictions and Spread of Investment Risk 
 
It is the intention to observe the investment restrictions necessary to 
maintain a listing for the Company as an investment company on the London Stock 
Exchange and for the Company to be able to obtain certification as a reporting 
fund if subject to the applicable United Kingdom taxation legislation (and 
subject to other conditions of that legislation). For these purposes and for 
other policy considerations, the Company will not: 
 
(a) invest in securities carrying unlimited liability; or 
 
(b) deal short in securities; or 
 
(c) take legal or management control of investments in its portfolio; or 
 
(d) invest in any commodities, land or interests in land; or 
 
(e) invest or lend more than 25% of its assets at the time the investment is 
made 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 
 
(f) invest more than 10% of its assets at the time the investment is made in 
closed-end investment funds which are listed on the Official List maintained by 
the Financial Conduct Authority (except to the extent that those investment 
funds have stated investment policies to invest no more than 15% of their total 
assets in other investment funds which are listed on the Official List) and the 
Company will not invest more than 15% of its assets at the time the investment 
is made in such funds; or 
 
(g) invest in more than 5% of its assets at the time the investment is made in 
units of unit trusts or shares or other forms of participation in managed 
open-ended investment vehicles; or 
 
(h) commit its assets in the purchase of foreign exchange contracts or 
financial futures contracts or 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; or 
 
(i) enter into borrowings in excess of 20% of net assets at the time the 
borrowings are drawn down. 
 
Performance 
 
An outline of performance, market background, investment activity and portfolio 
strategy during the year under review, as well as outlook, is provided in the 
Investment Advisor's Report. 
 
Key performance indicators ("KPI's") 
 
At each quarterly Board meeting, the Board considers a number of performance 
measures to assess the Company's success in achieving its objectives. Below are 
the main KPI's which have been identified by the Board for determining the 
progress of the Company: 
 
·      Net asset value; 
 
·      Share price; 
 
·      Discount/premium of share price to NAV; and 
 
·      Ongoing charges, which are set out in the Directors' Report. 
 
A record of these measures is disclosed in the General Information section. 
 
Principal Risks and Uncertainties 
 
The Board is responsible for the Company's system of internal controls and for 
reviewing its effectiveness. The Board is satisfied that by using the Company's 
risk matrix in establishing the Company's system of internal controls, while 
monitoring the Company's investment objective and policy, that the Board has 
carried out a robust assessment of the principal risks and uncertainties facing 
the Company. The principal risks and uncertainties which have been identified 
and the steps which are taken by the Board to mitigate them are as follows: 
 
(i)            Investment objective and strategy 
 
The Company's strategy may not be successful in achieving its investment 
objective if the Investment Advisor fails to comply with the Company's 
investment policy. The Board reviews reports from the Investment Advisor at the 
quarterly Board Meetings, with a focus on adherence to the investment policy. 
The Administrator is responsible for ensuring that all transactions are in 
accordance with the investment restrictions. 
 
(ii)           Investment risk 
 
To achieve the objective of delivering long-term performance, the 
Company invests in Japanese growth as well as cyclical companies with strong 
management teams that possess a clear vision and focus on profitability and 
shareholders' interests. The investment process is driven by proprietary 
fundamental research identifying companies with below average valuations and 
above average earnings growth and return on equity. 
 
The Company also invests in companies that have undervalued assets where it 
identifies a realistic catalyst for positive change. This represents an 
enhancement of the overall investment process reflecting what the Manager 
believes are exciting new opportunities in the Japanese equity market. The 
Manager believes that these types of companies compliment the Company's overall 
stock picking expertise, enabling the Company to identify the best 
opportunities for long term capital appreciation in Japan caused by ongoing 
consolidation. 
 
Risk management is an integral part of the investment management process. Core 
to the process is that risks taken are not incidental but are fully understood 
and accounted for. In-depth proprietary fundamental research provides the 
Manager with a deep understanding of each stock in the Company's portfolio and 
the associated risks. The Board considers the risks facing the Company on an 
on-going basis. All Board meetings are also attended by the Manager, either in 
person or by telephone, where reports on portfolio performance and strategy are 
provided. 
 
Portfolio performance will be dependent on the performance of Japanese equities 
and such stocks will be influenced by the general health of the country. 
 
(iii)          Financial risks 
 
The financial risks, including market, credit and liquidity risk faced by the 
Company are set out in Note 13 of the Financial Statements. These risks and the 
controls in place to reduce the risks are reviewed at the quarterly Board 
Meetings. 
 
(iv)          Foreign exchange risk 
 
The movement of exchange rates may have an unfavourable or favourable impact on 
returns as the majority of the Company's assets are denominated in Yen, rather 
than US Dollar, the reporting currency of the Company. Although not currently 
undertaken, the Directors reserve the right to hedge the Company's currency 
exposure. 
 
(v)           Ordinary shares 
 
The market value of the shares in the Company may not reflect the underlying 
Net Asset Value and may trade at a discount to it. The Board actively monitors 
the discount of the Company and, where appropriate, may implement share 
buybacks to help reduce the discount and/or discount volatility. 
 
(vi)          Borrowing 
 
The Investment Policy restricts the Company from entering into borrowings in 
excess of 20% of net assets at the time the borrowings are drawn down. Whilst 
such borrowings may enhance the return on the shares where the underlying 
Company performance is positive, the opposite is also true and any borrowing 
will enhance the negative performance of the Company. 
 
(vii)         Third party service providers 
 
The Company has no employees and the Board comprises three non-executive 
directors. The Company is reliant on the Manager, the Investment Advisor and 
the Secretary, Registrar and Administrator to perform its executive function. 
The most significant of these third party service providers is the Manager to 
whom the management of the Company's investments has been delegated. Failure by 
any of these third party service providers to perform the services in 
accordance with the terms of the relevant service contracts represents a risk 
to the operations of the Company and the performance of the Company. 
 
Termination of the Investment Management Contract by the Manager or loss of key 
staff by the Manager could materially affect the ability of the Company to 
operate and detract from the performance of the Company until a suitable 
replacement could be found. 
 
The Board has segregated the duties of investment management, accounting and 
custody. Each of the contracts with third party service providers has been 
entered into after full and proper consideration of the quality and cost of the 
services provided and the control systems in place. The Board reviews the 
performance of the Investment Advisor and the Manager on a regular basis. 
 
The Directors seek to mitigate and manage these risks through continual review, 
policy-setting and enforcement of contractual obligations and will update the 
risk assessment matrix to reflect any changes in the control environment. 
Further details on the Company's internal controls are given in the Directors' 
Report. 
 
Viability Statement 
 
In accordance with provision C.2.2 of the UK Corporate Governance Code, 
published by the Financial Reporting Council in September 2014 (the "Code"), 
the Directors have assessed the prospects of the Company over the three year 
period to 31 December, 2019. The Company is required to put a discontinuation 
vote to shareholders every three years, the next one occurring in 2017. On 10 
January, 2017 the Company announced a possible offer from Prospect, Co. Limited 
("Prospect") for the entire issued and to be issued share capital of the 
Company. Currently, there is no way of knowing the intentions of Prospect or if 
any proposal would be accepted by the Shareholders. Therefore, assuming that 
the discontinuation vote is not passed and there is no offer, the Directors 
consider that three years is an appropriate period of assessment of the 
viability of the Company for the purpose of giving assurance to shareholders. 
 
In its assessment of the viability of the Company, the Directors have 
considered each of the Company's principal risks and uncertainties detailed in 
the Strategic Report and in particular the impact of a significant fall in 
regional equity markets on the value of the Company's investment portfolio. The 
Directors consider that a 30% fall in the value in the Company's portfolio 
would be significant but would have little impact on the Company's ability to 
continue in operation over the next three years. In reaching this conclusion, 
the Directors considered the Company's income and expenditure projections, the 
fact that the Company has no gearing and that the Company's investments 
comprise readily realisable securities which can be expected to be sold to meet 
funding requirements if necessary, assuming market liquidity continues. 
 
Based on the Company's processes for monitoring operating costs (cash burn vs. 
available resources), share price discount, the Manager's compliance with the 
investment objective, asset allocation, the portfolio risk profile, 
counterparty exposure, liquidity risk and financial controls, the Directors 
have concluded that there is a reasonable expectation that the Company will be 
able to continue in operation and meet its liabilities as they fall due over 
the three year period to 31 December, 2019. 
 
Future Developments 
 
The future performance of the Company depends upon the success of the Company's 
investment strategy in the light of economic factors and market developments. 
Further comments on the outlook for the Company for the next twelve months are 
set out in both the Chairman's Statement and in the Investment Advisor's 
Report. 
 
John Hawkins 
 
Chairman 
 
Richard Battey 
 
Director 
 
21 March, 2017 
 
DIRECTORS' REPORT 
 
The Directors present their Annual Report and the Audited Financial Statements 
of The Prospect Japan Fund Limited (the "Company") for the year ended 31 
December, 2016. 
 
The Company's Business 
 
The Company was registered under the laws of Guernsey on 18 November, 1994 as a 
Limited Company with a premium listing on the London Stock Exchange. It is a 
close-ended investment company established to achieve long-term capital growth 
from an actively managed portfolio of securities primarily of smaller Japanese 
companies listed or traded on Japanese Stock Markets. The Company is a FATCA 
compliant organisation with FATCA entity classification FFI and GIIN 
L0Q9R3.99999.SL.831. 
 
Results and Dividend 
 
The results for the year are set out in the Statement of Comprehensive Income. 
 
Whilst over the last three year period the Company's return was (3.88)% (2015: 
35.64%) compared with 24.79% (2015: 46.38%) for the MSCI Japan Small Cap Index, 
the last year's performance based on valuations produced in accordance with 
International Financial Reporting Standards ("IFRS") was (2.59)% (2015: (3.19) 
%) compared with MSCI Japan Small Cap Index performance of 8.22% (2015: 15.74%) 
((9.49)% (2015: 19.13%) based on published NAV). For further details of the 
differences between published NAV and IFRS adjusted NAV please see Note 17. 
 
The Directors do not recommend the payment of a dividend for the year (2015: 
Nil). 
 
Performance 
 
The Board considers that Prospect Asset Management (Channel Islands) Limited, 
the Manager to the Company, is managing the Company's investments in a manner 
that is most likely to achieve the objective of long term capital appreciation 
for its shareholders. 
 
Statement of Directors' Responsibilities and Declarations 
 
The Directors are responsible for preparing the Annual Report and Financial 
Statements in accordance with applicable Guernsey Law and International 
Financial Reporting Standards ("IFRS") as adopted by the European Union. The 
Directors are required to prepare Financial Statements for each financial year 
which give a true and fair view of the state of the affairs of the Company and 
of the total return of the Company for that year and in accordance with the 
applicable laws. The Directors are also responsible for ensuring that the 
Company complies with the provisions of the Listing Rules and the Disclosure 
Rules and Transparency Rules of the UK Listing Authority. With regard to 
corporate governance the Company is required to disclose how it has applied the 
principles and complied with the provisions of the Corporate Governance code 
applicable to the Company. In preparing those Financial Statements the 
Directors are required to: 
 
- select suitable accounting policies and then apply them consistently; 
 
- make judgements and estimates that are reasonable; 
 
- state whether applicable accounting standards have been followed, subject to 
any material departures disclosed and explained in the Financial Statements; 
and 
 
- prepare the Financial Statements on a going concern basis unless it is 
inappropriate to presume that the company will continue in business. 
 
The Directors are responsible for keeping proper accounting records which 
disclose with reasonable accuracy at any time the financial position and 
performance of the Company and to enable them to ensure that the Financial 
Statements have been properly prepared in accordance with The Companies 
(Guernsey) Law and IFRS. They are also responsible for safeguarding the assets 
of the Company and hence for taking reasonable steps for the prevention and 
detection of fraud, error and non-compliance with law or regulations. 
 
The Directors confirm that they have complied with the above requirements in 
preparing the Financial Statements. 
 
The Directors confirm that to the best of their knowledge 
 
(a) The Annual Financial Statements have been prepared in accordance with IFRS 
as adopted by the European Union and give a true and fair view of the financial 
position and performance of the Company as at and for the year ended 31 
December, 2016. 
 
(b) The Chairman's, Investment Advisor's, Strategic and Directors' Reports 
include a fair review of the development and performance of the Company 
business and the position of the Company together with a description of the 
principal risks and uncertainties facing the Company. 
 
Directors' Statement 
 
So far as each of the Directors is aware, there is no relevant audit 
information of which the Company's auditor is unaware, and each Director has 
taken all the steps he ought to have taken as a Director to make himself aware 
of any relevant audit information and to establish that the Company's auditor 
is aware of that information. In the opinion of the Board, the Annual Report 
and Financial Statements taken as a whole, are fair, balanced and 
understandable and provide the information necessary to assess the Company's 
performance, business model and strategy. 
 
Ongoing Charges 
 
Ongoing charges are the recurring expenses incurred by the Company excluding 
one-off expenses. Ongoing charges for the years ended 31 December, 2016 and 31 
December, 2015 have been prepared in accordance with the AIC's recommended 
methodology. The ongoing charges for the year ended 31 December, 2016 was 2.09% 
(31 December, 2015: 2.20%). No performance fees were charged during the year. 
 
Corporate Governance 
 
The Board is committed to high standards of corporate governance and has 
implemented a framework for corporate governance which it considers to be 
appropriate for an investment company in order to comply with the principles of 
the UK Corporate Governance Code (September 2014) (the "Code") issued by the 
Financial Reporting Council ("FRC"). The Company is also required to comply 
with the Code of Corporate Governance (the "GFSC Code") issued by the Guernsey 
Financial Services Commission. 
 
The FRC issued a revised Code in 2014, for reporting periods beginning on or 
after 1 October, 2014. The AIC updated the AIC Code of Corporate Governance 
(the "AIC Code") (including the Guernsey edition) and its Guide to Corporate 
Governance (the "AIC Guide") to reflect the relevant changes to the FRC 
document in February 2015. The Board adopted the revised code during 2015. 
 
The UK Listing Authority requires all UK premium listed companies to disclose 
how they have complied with the provisions of the UK Code. This Corporate 
Governance Statement, together with the Going Concern Statement, Viability 
Statement and the Statement of Directors' Responsibilities set out in the 
Directors' Report, indicates how the Company has complied with the principles 
of good governance of the UK Code and its requirements on Internal Control. 
 
The Company is a member of the Association of Investment Companies (the "AIC") 
and by complying with the AIC Code is deemed to comply with both the UK Code 
and the GFSC Code. 
 
The Board has considered the principles and recommendations of the AIC Code, by 
reference to the guidance notes provided by the AIC Guide, and consider that 
reporting against these will provide appropriate information to shareholders. 
To ensure ongoing compliance with these principles the Board reviews a report 
from the Corporate Secretary at each quarterly meeting, identifying how the 
Company is in compliance and identifying any changes that might be necessary. 
 
The AIC Code and the AIC Guide are available on the AIC's website, 
www.theaic.co.uk. The UK Code is available in the Financial Reporting Council's 
website, www.frc.org.uk. 
 
Throughout the year ended 31 December, 2016, the Company has complied with the 
recommendations of the AIC Code and thus the relevant provisions of the UK 
Code, except as set out below. 
 
The UK Code includes provisions relating to: 
 
*       the role of the Chief Executive 
 
*       Executive Directors' remuneration 
 
*       the need for an internal audit function 
 
For the reasons set out in the AIC Guide, and as explained in the UK Code, the 
Board considers these provisions are not relevant to the position of the 
Company as it is an externally managed investment company. The Company has 
therefore not reported further in respect of these provisions. The Directors 
are all non-executive and the Company does not have employees, hence no Chief 
Executive is required for the Company. The Board is satisfied that any relevant 
issues can be properly considered by the Board. 
 
Details of compliance with the AIC Code are noted below and in the succeeding 
sections. There have been no other instances of non-compliance, other than 
those noted above. 
 
Directors Attendance at Meetings 
 
The number and attendance at the formal Board, Audit Committee and Management 
Engagement Committee meetings during the year was as follows; 
 
                  Board Meetings   Management Engagement   Audit Committee 
                                    Committee Meetings         Meetings 
 
                 Held   Attended   Held     Attended     Held     Attended 
 
Rupert Evans       4        4       N/A        N/A        N/A       N/A 
 
John Hawkins       4        4        1          1          2         2 
 
Richard Battey     4        4        1          1          2         2 
 
Re-election 
 
In accordance with the Company's Articles of Association, all newly appointed 
Directors stand for election by the shareholders at the next Annual General 
Meeting ("AGM") following their appointment. The Directors retire by rotation 
and offer themselves for re-election every three years. Directors who have 
served on the Board for more than nine years are subject to annual re-election. 
Mr Rupert Evans is considered a non-independent Director due to being a 
Director of the Manager. Non-independent Directors are subject to annual 
re-election. At the AGM on 18 August, 2016, Rupert Evans and John Hawkins 
retired as Directors, and being eligible, Rupert Evans and John Hawkins offered 
themselves for re-election. Rupert Evans and John Hawkins were re-elected as 
Directors of the Company. 
 
The Chairman has served on the Board for over nine years and under the AIC Code 
may not be considered to be independent of the Company. The Board however, 
takes the view that the length of tenure does not necessarily determine the 
independence of the Board and experience can add significantly to the Board's 
strength. It has therefore determined that in performing his role as Director, 
the Chairman remains wholly independent. 
 
Board Performance 
 
The AIC Code requires external evaluation of Board performance every three 
years. The last instance of which was in April 2016. 
 
The Board, Audit Committee, Management Engagement Committee and Nominations 
Committee undertake an evaluation of their own performance and that of 
individual Directors on an annual basis. In order to review their 
effectiveness, the Board and its Committees carry out a process of formal 
self-appraisal. The Board and Committees consider how they function as a whole 
and also review the individual performance of its members. This process is 
conducted by the respective Chairman reviewing each member's performance, 
contribution and commitment to the Company. Each Board member provides proof of 
ongoing training and maintenance of continuing professional development 
requirements. 
 
The Board considers it has a breadth of experience relevant to the Company, and 
the Directors believe that any changes to the Board's composition can be 
managed without undue disruption. An induction programme has been prepared for 
any future Director appointments. 
 
Supply of Information 
 
The quarterly board meetings are the principal source of regular information 
for the Board enabling it to determine policy and to monitor performance and 
compliance. The Manager attends each Board meeting either in person or by 
telephone thus enabling the Board to fully discuss and review the Company's 
operation and performance. Each Director has direct access to the Company 
Secretary, and may, at the expense of the Company, seek independent 
professional advice on any matter that concerns them in the furtherance of 
their duties. 
Committees of the Board 
 
The Board has established Nomination, Audit and Management and Engagement 
Committees and approved their Terms of Reference, copies of which can be 
obtained from the Administrator. 
 
Nomination Committee 
 
The Board as a whole fulfils the function of a Nomination Committee. Whilst the 
independent Directors take the lead in the appointment of new Directors, any 
proposal for a new Director will be discussed and approved by the entire Board 
during quarterly Board meetings. 
 
The Board has also given careful consideration to the recommendations of the 
Davies Report on "Women on Boards". As recommended in the Davies Report, the 
Board has reviewed its composition and believes that the current appointments 
provide an appropriate range of skills, experience and diversity. The Board 
will take into account the recommendations of the Davies Report as part of its 
succession planning over future years. 
 
Audit Committee 
 
An audit committee has been appointed comprising the Independent Directors. The 
Audit Committee operates within clearly defined terms of reference which have 
been approved by the Board and provides a forum through which the Company's 
external Auditors report to the Board. The Board is satisfied that the Audit 
Committee contains members with sufficient recent and relevant financial 
reporting experience. 
 
The Audit Committee has considered the requirement for an annual internal audit 
of the Company. On the basis that the Company is an investment company with no 
employees, the Audit Committee believes that an internal audit function is not 
necessary for the Company. 
 
The table above sets out the number of Audit Committee Meetings held during the 
year ended 31 December, 2016 and the number of such meetings attended by each 
Committee member. 
 
The Audit Committee's responsibilities and activities are presented in the 
Audit Committee Report. 
 
Management and Engagement Committee 
 
The Management and Engagement Committee comprises the Independent Directors. 
The Management and Engagement Committee operates within clearly defined terms 
of reference which have been approved by the Board. 
 
The purpose of this Committee is to review the performance of the Investment 
Advisor, Manager and the third party service providers to the Company. As the 
Board has evaluated their performance during the course of their regular 
meetings and found it satisfactory, the Board conclude that the continuing 
appointment of the parties on the terms agreed would be in the best interests 
of the Company's shareholders as a whole. At the date of this report the Board 
continues to be of the same opinion. 
 
The table above sets out the number of Management Engagement Meetings held 
during the year ended 31 December, 2016 and the number of such meetings 
attended by each Committee member. 
 
Directors' Remuneration 
 
The level of Directors' fees is determined by the whole Board on an annual 
basis and therefore a separate Remuneration Committee has not been appointed. 
When considering the level of Directors' remuneration the Board considers the 
industry standard and the level of work that is undertaken. 
 
During the year ended 31 December, 2016, the Directors were entitled to receive 
an annual fee of GBP25,000 (2015: GBP25,000), the Chairman of the Audit Committee GBP 
27,500 (2015: GBP27,500) and the Chairman of the Board GBP30,000 (2015: GBP30,000). 
 
Going Concern 
 
In accordance with the Company's Articles, the Board is required every three 
years to include in the business to be considered by shareholders at the Annual 
General Meeting a Special Resolution that the Company should be wound up. The 
last such resolution was tabled at the eighteenth Annual General Meeting held 
in 2014. The Shareholders voted against the resolution, and in favour of the 
continuation of the Company. As announced on 10 January 2017 (the "Possible 
Offer Announcement"), the independent directors of the Company are in 
preliminary discussions regarding a possible offer from Prospect Co., Ltd 
("Prospect") for the entire issued and to be issued share capital of the 
Company. The possible offer is under consideration, discussion and evaluation 
by both parties. The Possible Offer Announcement does not amount to a firm 
intention to make an offer under Rule 2.7 of The City Code on Takeovers and 
Mergers, and as stated in the Possible Offer Announcement there can be no 
certainty that an offer for the Company will ultimately be made.  If such a 
transaction: (i) was to be announced in accordance with Rule 2.7 of The City 
Code on Takeovers and Mergers; and (ii) was to be completed prior to the 2017 
AGM, no AGM would be held and no discontinuation vote would take place.  Whilst 
acknowledging the uncertainty of the possible offer, and the upcoming vote for 
discontinuation, the fact that neither the Board nor the Investment Advisor 
have received any indication that the Shareholders are no longer in favour of 
the investment policy and that the assets of the Company consist mainly of 
securities that are readily realisable, leads the Directors to believe that the 
discontinuation vote will not be passed and that the Company has adequate 
financial resources to meet its liabilities as they fall due for at least 
twelve months from the date of this report, and that it is therefore 
appropriate for the Financial Statements to be prepared on a going concern 
basis. Factors regarding the going concern basis are also discussed in Note 1 
of the Financial Statements." 
 
Internal Control 
 
The Board is ultimately responsible for establishing and maintaining the 
Company's system of internal financial and operating control and for 
maintaining and reviewing its effectiveness. The Company's risk matrix 
continues to be the core element of the Company's risk management process in 
establishing the Company's system of internal financial and reporting control. 
The risk matrix is prepared and maintained by the Board which initially 
identifies the risks facing the Company and then collectively assesses the 
likelihood of each risk, the impact of those risks and the strength of the 
controls operating over each risk. The system of internal financial and 
operating control is designed to manage rather than to eliminate the risk of 
failure to achieve business objectives and by their nature can only provide 
reasonable and not absolute assurance against misstatement and loss. 
 
These controls aim to ensure that assets of the Company are safeguarded, proper 
accounting records are maintained and the financial information for publication 
is reliable. The Board confirms that there is an ongoing process for 
identifying, evaluating and managing the significant risks faced by the 
Company. 
 
This process has been in place for the year under review and up to the date of 
approval of this Annual Report and Audited Financial Statements and is reviewed 
by the Board and is in accordance with the AIC Code and Internal Controls: 
Revised Guidance for Directors on the Combined Code. 
 
The AIC Code requires Directors to conduct at least annually a review of the 
Company's system of internal financial and operating control, covering all 
controls, including financial, operational, compliance and risk management. The 
Board has evaluated the systems of internal controls of the Company. In 
particular, it has prepared a process for identifying and evaluating the 
significant risks affecting the Company and the policies by which these risks 
are managed. 
 
The Board has delegated the day to day responsibilities for the management of 
the Company's investment portfolio, the provision of depositary services and 
administration, registrar and corporate secretarial functions including the 
independent calculation of the Company's NAV and the production of the Annual 
Report and Financial Statements which are independently audited. 
 
Formal contractual agreements have been put in place between the Company and 
providers of these services. Even though the Board has delegated responsibility 
for these functions, it retains accountability for these functions and is 
responsible for the systems of internal control. At each quarterly Board 
meeting, compliance reports are provided by the Administrator, Company 
Secretary and Portfolio Manager. The Board also receives confirmation from the 
Administrator of its accreditation under its Service Organisation Controls 1 
report. 
 
The Company's risk exposure and the effectiveness of its risk management and 
internal control systems are reviewed by the Audit Committee at its quarterly 
meetings and annually by the Board. 
 
The Board believes that the Company has adequate and effective systems in place 
to identify, mitigate and manage the risks to which it is exposed. 
 
Directors' and Other Interests 
 
No Directors holding office at 31 December, 2016, or their associates, had any 
beneficial interest in the Company's Shares (2015: None). There has been no 
change in this position between the end of the year and the date of this 
report. 
 
Rupert Evans is a Director of the Manager and a former partner in the firm of 
the Guernsey legal advisors, Mourant Ozannes. John Hawkins and Richard Battey 
are Directors of a range of funds. 
 
Substantial Shareholdings 
 
The following table shows the interests in the share capital of the Company 
exceeding 5% of the issued share capital of which the Company has been 
notified. 
 
TOP HOLDINGS              As at 31 December, 2016     As at 21 March, 2017 
 
                         Number of  Percentage of  Number of   Percentage of 
                           shares    issued share    shares    issued share 
                                       capital                    capital 
 
Lazard Asset Management  22,041,625     23.87%     23,324,778     25.26% 
 
1607 Capital Partners    19,863,439     21.51%     18,122,488     19.62% 
 
CG Asset Management      14,247,936     15.43%     12,247,936     13.26% 
 
Weiss Asset Management   2,870,506      3.11%      8,920,506       9.66% 
 
There have been no other notifications of significant changes to the 
substantial shareholdings at 21 March, 2017. 
 
The percentage of ordinary shares shown above represents the ownership of 
voting rights at the year end, before weighting for votes in Directors. 
 
It is the responsibility of the shareholders to notify the Company of any 
change to their shareholdings when it reaches 5% of shares in issue and any 
change which moves up or down through any whole percentage figures above 5%. 
 
Share buybacks 
 
As approved at the AGM on 18 August, 2016, the Company may purchase, subject to 
various terms as set out in the Articles, a maximum of 13,843,655 Ordinary 
Shares under the Company's discount control mechanism. During the year to 31 
December, 2016, the Company purchased 100,000 shares (2015: nil shares) as 
detailed in Note 9 of the Financial Statements. 
 
Auditors 
 
The Auditors, Ernst & Young LLP have indicated their willingness to continue in 
office and offer themselves for re-appointment at the forthcoming AGM. 
 
John Hawkins 
 
Chairman 
 
Richard Battey 
 
Director 
 
21 March, 2016 
 
DISCLOSURE OF DIRECTORSHIPS IN PUBLIC COMPANIES LISTED ON RECOGNISED STOCK 
EXCHANGES 
 
for the year ended 31 December, 2016 
 
The following summarises the Directors' directorships in other public companies 
 
Directorships                               Stock Exchange 
 
Company Name 
 
Richard Battey 
 
AcenciA Debt Strategies Limited             London 
 
Juridica Investments Limited                London 
 
Princess Private Equity Holding Limited     London 
 
Better Capital PCC Limited                  London 
 
NB Global Floating Rate Income Fund Limited London 
 
Pershing Square Holdings Limited            Euronext 
 
Rupert Evans 
 
El Oro Limited                              Channel Islands 
 
Oryx International Growth Fund Limited      London 
 
The Red Fort Partnership Limited            Channel Islands 
 
Stonehage Fleming Global Property Fund PCC  Channel Islands 
Limited 
 
FF&P Ventures Funds PCC Limited             Channel Islands 
 
Master Capital Fund Limited                 Irish 
 
John Hawkins 
 
Aberdeen Greater China Fund, Inc            New York 
 
Aberdeen Emerging Markets Investment        London 
Company Limited 
 
AUDIT COMMITTEE REPORT 
 
We present the Audit Committee (the "Committee") Report for 2016, setting out 
the Committee's structure and composition, principal duties and key activities 
during the year. As in previous years, the Committee has reviewed the Company's 
financial reporting, the independence and effectiveness of the independent 
auditor and the internal control and risk management systems of service 
providers. 
 
A member of the Committee will continue to be available at each AGM to respond 
to any shareholder questions on the activities of the Committee. 
 
Role and responsibilities 
 
The function of the Audit Committee is to ensure that the Company maintains the 
highest standards of integrity of its financial reporting and internal control. 
 
The responsibilities of the Committee are: 
 
·      To review and make recommendations on the appointment of the Company's 
Auditors, the scope of the audit, the audit fee, their independence and 
objectivity and any questions of the resignation or dismissal of the Auditors; 
 
·      To discuss with the Auditors the nature and scope of the audit and to 
keep under review such scope and its cost-effectiveness; 
 
·      To receive and review a Report from the Company's Auditors and to 
discuss any matters arising from the audit and recommendations made by them; 
 
·      To review the Company's half-year and Annual Report and Financial 
Statements and any other financial information published by the Company, in 
each case before issue or publication, prior to submission to the Board, having 
particular regard to: 
 
*     the accounting policies and whether they continue to be appropriate for 
the business; 
 
*    any changes in accounting policies or practices and whether they are 
appropriate for the business; 
 
*    any important areas where judgement must be exercised e.g. valuation of 
unquoted investments; 
 
*    any significant adjustments arising from the audit; 
 
*    the going concern assumption; and 
 
*    other legal, UK Listing Authority or recognised investment exchange 
requirements. 
 
·      To advise the Board on whether the Annual Report and Financial 
Statements, taken as a whole, are fair, balanced and understandable and provide 
the information necessary for shareholders to assess the Company's performance, 
business model and strategy. 
 
·      To ensure that the internal control systems of the service providers are 
adequate. To receive reports from the Company's service providers covering 
internal control systems, internal audit functions and procedures supported 
either by SSAE 16, ISAE 3402 or AAF Reports. In light of the above, to review 
the Company's statement on internal controls prior to endorsement by the Board; 
 
·      To monitor the Company's procedures for ensuring compliance with 
statutory, regulatory and other financial reporting requirements i.e. the 
Guernsey Financial Services Commission and the London Stock Exchange (which 
includes the UK Listing Authority); 
 
·      To review significant transactions outside the Company's normal business 
(e.g. Company share buy backs); and 
 
·      To consider any other topics referred to it by the Board. 
 
The Audit Committee's full terms of reference can be obtained by contacting the 
Administrator. 
 
Membership 
 
The members of the Committee are Richard Battey (Chairman) and John Hawkins. 
Full biographical details of each member can be found in the General 
Information section. All members attended the formal Audit Committee meetings 
held during the year. In addition a number of ad hoc meetings were held with 
the Auditors to discuss financial reporting matters. 
 
Significant issues related to the financial statements 
 
The Committee's review of the interim and annual financial statements focused 
on the following areas: 
 
·      The Committee has concentrated on the investment issues of existence and 
title in respect of the Company's portfolio holdings as a whole. 89.8% by value 
of the investments are quoted investments and are held in a designated account 
at the Custodian. 
 
·      The valuation of its unlisted holdings which are dealt with in more 
detail below. 
 
·      Going Concern - In accordance with the Company's Articles, the Board is 
required every three years to include in the business to be considered by 
shareholders at the Annual General Meeting a Special Resolution that the 
Company should be wound up. The last such resolution was tabled at the 
eighteenth Annual General Meeting held in 2014. The Shareholders voted against 
the resolution, and in favour of the continuation of the Company. As announced 
on 10 January 2017 (the "Possible Offer Announcement"), the independent 
directors of the Company are in preliminary discussions regarding a possible 
offer from Prospect Co., Ltd ("Prospect") for the entire issued and to be 
issued share capital of the Company. The possible offer is under consideration, 
discussion and evaluation by both parties. The Possible Offer Announcement does 
not amount to a firm intention to make an offer under Rule 2.7 of The City Code 
on Takeovers and Mergers, and as stated in the Possible Offer Announcement 
there can be no certainty that an offer for the Company will ultimately be 
made.  If such a transaction: (i) was to be announced in accordance with Rule 
2.7 of The City Code on Takeovers and Mergers; and (ii) was to be completed 
prior to the 2017 AGM, no AGM would be held and no discontinuation vote would 
take place.  Whilst acknowledging the uncertainty of the possible offer, and 
the upcoming vote for discontinuation, the fact that neither the Board nor the 
Investment Advisor have received any indication that the Shareholders are no 
longer in favour of the investment policy and that the assets of the Company 
consist mainly of securities that are readily realisable, leads the Directors 
to believe that the discontinuation vote will not be passed and that the 
Company has adequate financial resources to meet its liabilities as they fall 
due for at least twelve months from the date of this report, and that it is 
therefore appropriate for the Financial Statements to be prepared on a going 
concern basis. Factors regarding the going concern basis are also discussed in 
Note 1 of the Financial Statements. 
 
Key activities and significant risks 
 
Going concern as described above. 
 
The investment manager has built a concentrated portfolio of small and medium 
sized enterprises and the Committee appreciates that there are significant 
risks inherent in that investment policy compared with a wider spread in larger 
quoted companies. There is also a material exposure to regional banks at the 
year-end giving a 50.5% of NAV direct exposure (2015: 28.66%). 
 
The Company holds one unlisted investment. Following advice from the Investment 
Manager and per requirements under IFRS, the Committee considers the valuation 
of this investment in detail. For further details on the Investment policies 
and the valuation of unlisted investments, please see Note 14 of the Financial 
Statements. 
 
The Manager and Administrator confirmed to the Committee that they were not 
aware of any material misstatements including matters relating to presentation. 
The Committee advised the Board that this Annual Report and Financial 
Statements, taken as a whole, is fair, balanced and understandable. 
 
Following a review of the presentations and reports from the Administrator and 
after consulting where necessary with the external Auditor, the Committee is 
satisfied that the Financial Statements appropriately address the critical 
judgements and key estimates (both in respect to the amounts reported and the 
disclosures). The Committee is also satisfied that the significant assumptions 
used for determining the value of assets have been appropriately scrutinised, 
challenged and are sufficiently robust. Further details on the significant 
assumptions used for determining the value of assets can be found in Note 14 of 
the Financial Statements. 
 
Risk Management 
 
After consultation with the Manager and external Auditor, the Audit Committee 
continues to consider the risks faced by the Company and its service providers 
and the process for managing them. 
 
Risk management procedures for the Company, as set out in the Company's risk 
assessment matrix, were reviewed and approved by the Audit Committee at each 
Quarterly Board Meeting. 
 
The Committee reviews and examines externally prepared assessments of the 
control environment in place at the Manager and the Administrator, with the 
Manager and Administrator providing a SOC1 report covering internal control 
systems and procedures supported either by SSAE 16, ISAE 3402 or AAF Reports, 
on an annual basis and a bi-annual basis respectively. No significant failings 
or weaknesses were identified in these reports by the Committee. There were no 
changes in risk management or internal control systems during the year. 
 
The Committee has considered the requirement for an annual internal audit of 
the Company. On the basis that the Company is an investment company with no 
employees, the Audit Committee believes that an internal audit function is not 
necessary for the Company. 
 
External Audit 
 
Independence, Objectivity and Fees 
 
The independence and objectivity of the independent auditor is regularly 
reviewed by the Audit Committee which also reviews the terms under which the 
independent auditor is appointed to perform non-audit services. The Audit 
Committee has established pre-approval policies and procedures for the 
engagement of the independent auditor to provide audit and non-audit services. 
 
These are that the independent auditors may not provide a service which: 
 
·      places them in a position to audit their own work; 
 
·      creates a mutuality of interest; 
 
·      results in the independent auditor developing close relationships with 
service providers of the Company; 
 
·      results in the independent auditor functioning as a manager or employee 
of the Company; or 
 
·      puts the independent auditor in the role of advocate of the Company. 
 
The Audit Committee considered reports from the independent auditor on their 
procedures to identify and mitigate any threats to independence and concluded 
that the procedures were sufficient to identify any threats to independence. 
 
The following table summarises the remuneration paid to Ernst & Young LLP for 
audit and non-audit services provided to the Company during the years ended 31 
December, 2016 and 31 December, 2015: 
 
                                                         01.01.2016      01.01.2015 
 
                                                                 to              to 
                                                         31.12.2016      31.12.2015 
 
Ernst & Young LLP                                      in GB Pounds    in GB Pounds 
 
Annual audit                                                 37,400          41,550 
 
Auditor's interim review                                     19,300          14,000 
 
                                                             56,700          55,550 
 
In line with the policies and procedures above, the Audit Committee does not 
consider that the provision of these non-audit services to be a threat to the 
objectivity and independence of the independent auditor. 
 
Ernst & Young LLP has been the Company's independent auditor since 28 June, 
2001. The Audit Committee has examined the scope and results of the external 
audit, its cost effectiveness and the independence and objectivity of the 
independent auditor, with particular regard to non-audit fees, and considers 
Ernst & Young LLP, as independent auditor, to be independent of the Company. 
 
Performance and effectiveness 
 
During the year, when considering the effectiveness of the independent auditor, 
the Audit Committee has taken into account the following factors: 
 
·      the audit plan presented to them; 
 
·      the audit findings report including variations from the original plan; 
 
·      changes in audit personnel; 
 
·      the independent auditor's own internal procedures to identify threats to 
independence; and 
 
·      feedback from both the Manager and Administrator. 
 
The Audit Committee reviewed the audit plan and the audit findings report of 
the independent auditor and concluded that the audit plan sufficiently 
identified audit risks and that the audit findings report indicated that the 
audit risks were sufficiently addressed and that there were no significant 
variations from the audit plan. 
 
Reappointment 
 
Consequent to the review discussed above, the Audit Committee has recommended 
to the Board that a resolution be put to the 2016 AGM for the reappointment of 
Ernst & Young LLP as independent auditor. The Board has accepted this 
recommendation. 
 
Fraud, Bribery and Corruption 
 
The Audit Committee continues to monitor the fraud, bribery and corruption 
policies of the Company. The Board receives a confirmation from all service 
providers that there have been no instances of fraud or bribery. 
 
As the Company has no employees, the Committee does not consider that a 
whistle-blowing policy is required. However, the Directors have satisfied 
themselves that the Company's service providers have appropriate 
whistle-blowing policies and procedures and seek regular confirmation from the 
service providers that nothing has arisen under those policies and procedures 
which should be brought to the attention of the Board. 
 
Richard Battey 
 
Chairman, Audit Committee 
 
21 March, 2017 
 
INDEPENT AUDITOR'S REPORT 
 
TO THE MEMBERS OF THE PROSPECT JAPAN FUND LIMITED 
 
Our opinion on the financial statements 
 
In our opinion: 
 
  *          The Prospect Japan Fund Limited's (the "Company") financial 
    statements (the "financial statements") give a true and fair view of the 
    state of the Company's affairs as at 31 December 2016 and of its loss for 
    the year then ended; 
  *          the financial statements have been properly prepared in accordance 
    with International Financial Reporting Standards as adopted by the European 
    Union ("IFRSs"); 
  *          the financial statements have been prepared in accordance with the 
    requirements of the Companies (Guernsey) Law 2008. 
 
What we have audited 
 
The Prospect Japan Fund Limited's financial statements comprise: 
 
       -  Statement of comprehensive income for the year ended 31 December 
2016; 
 
       -  Statement of financial position as at 31 December 2016; 
 
       -  Statement of changes in equity for the year ended 31 December 
2016; 
 
       -  Statement of cash flows for the year ended 31 December 2016; and 
 
       -  Related notes 1 to 18 to the financial statements 
 
The financial reporting framework that has been applied in their preparation is 
applicable law and IFRS. 
 
Overview of our audit approach 
 
Risk of       -           Valuation of unquoted investments 
material 
misstatement 
 
Audit scope   -           We performed an audit of the complete financial 
              statements of the Company for the year ended 31 December 2016. 
 
Materiality   -           Overall materiality of US$1.22 million which 
              represents 1% of total equity. 
 
Our assessment of risk of material misstatement 
 
We identified the risk of material misstatement described below as that which 
had the greatest effect on our overall audit strategy, the allocation of 
resources in the audit and the direction of the efforts of the audit team. In 
addressing this risk, we have performed the procedures below which were 
designed in the context of the financial statements as a whole and, 
consequently, we do not express any opinion on this individual area. 
 
Risk                     Our response to the risk  What we concluded to the 
                                                   Audit Committee 
 
Valuation of unquoted    -           We documented During the audit process, 
investments              our understanding of the  we discussed with the 
(US$9,990,744 PY         processes, policies and   Audit Committee that 
comparative              methodologies used by     there was insufficient 
US$2,518,957)            management for valuing    evidence to support the 
Refer to the Audit       investments held by the   initial valuation 
Committee Report;        Company and performed     estimate of the SARs 
Accounting policies in   walkthrough tests to      based on the fact that 
Note 1; and Note 14 of   confirm our understanding the model applied had not 
the Financial Statements of the systems and        taken into consideration 
Unquoted investments     controls implemented.     the dilution impact of 
relates to the Company's -           We agreed the the future exercise of 
holding in Stock         valuation per the         the SARs. Management 
Acquisition Rights       financial statements to   revised the model 
("SARs") issued by       the model used by         resulting in an 
Prospect Co. Ltd. The    management, agreed all    adjustment to the SARs 
Prospect Co. Ltd SARs    inputs to the model to    valuation to the current 
were valued using the    independent sources and   carrying amount of US$10 
Black-Scholes-Merton     evaluating whether all    million which we 
model.                   key terms of the SARs had concluded was not 
The valuation is highly  been considered in the    materially misstated. 
subjective with a high   application of the model; 
level of judgement and   -           We engaged 
estimation linked to the our internal valuation 
determination of the     experts to 
values with limited      o          assist us to 
market information       determine whether the 
available. Therefore     methodologies used to 
there is a risk of an    value investments were 
inappropriate valuation  consistent with methods 
model being applied,     ordinarily applied by 
together with the risk   market participants for 
of inappropriate inputs  these types of 
to the model/calculation investments; and 
being selected.          o          use their 
                         knowledge of the market 
                         to assess and corroborate 
                         management's market 
                         related judgements and 
                         valuation inputs 
                         (including risk free 
                         interest rates, 
                         volatility rate, dividend 
                         yield, dilution impact 
                         and restrictions on 
                         exercising the SARs) by 
                         reference to our 
                         specialists' knowledge of 
                         comparable transactions, 
                         and independently 
                         compiled databases/ 
                         indices. 
 
 
The scope of our audit 
 
Tailoring the scope 
 
Our assessment of audit risk, our evaluation of materiality and our allocation 
of performance materiality determine our audit scope which enable us to form an 
opinion on the financial statements under International Standards on Auditing 
(UK and Ireland). 
 
Our application of materiality 
 
We apply the concept of materiality in planning and performing the audit, in 
evaluating the effect of identified misstatements on the audit and in forming 
our audit opinion. 
 
Materiality 
 
This is the magnitude of an omission or misstatement that, individually or in 
the aggregate, could reasonably be expected to influence the economic decisions 
of the users of the financial statements.  Materiality provides a basis for 
determining the nature and extent of our audit procedures. 
 
We determined materiality for the Company to be US$1.22 million (2015: US$1.25 
million), which is 1% (2015: 1%) of total equity. This provided a basis for 
determining the nature, timing and extent of risk assessment procedures, 
identifying and assessing the risk of material misstatement and determining the 
nature, timing and extent of further audit procedures. 
 
It was considered inappropriate to determine materiality based on Company 
profit before tax as the primary focus of the Company is the overall 
performance of investments held which includes a significant asset revaluation 
component. In addition, profit is not a key metric reported upon by the 
Company, with the ability to make dividend payments not limited by the 
profitability of the Company in any particular period. 
 
We believe that total equity provides us with an appropriate basis for audit 
materiality as net asset value is a key published performance measure and is a 
key metric used by management in assessing and reporting on the overall 
performance of the Company. 
 
During the course of our audit, we reassessed initial materiality and noted no 
factors leading us to amend materiality levels from those originally determined 
at the audit planning stage. 
 
Performance materiality 
 
This refers to the application of materiality at the individual account or 
balance level.   It is set at an amount to reduce to an appropriately low level 
the probability that the aggregate of uncorrected and undetected misstatements 
exceeds materiality. 
 
On the basis of our risk assessments, together with our assessment of the 
Company's overall control environment, our judgement was that performance 
materiality was 75% (2015: 75%) of our planning materiality, namely US$914k 
(2015: US$940k). We have set performance materiality at this percentage due to 
investment strategy remaining consistent with our previous experience and 
limited identification of audit findings in previous periods. 
 
 Reporting threshold 
 
An amount below which identified misstatements are considered as being clearly 
trivial. 
 
We agreed with the Audit Committee that we would report to them all uncorrected 
audit differences in excess of US$61k (2015: US$63k), which is set at 5% of 
planning materiality, as well as differences below that threshold that, in our 
view, warranted reporting on qualitative grounds. 
 
We evaluate any uncorrected misstatements against both the quantitative 
measures of materiality discussed above and in light of other relevant 
qualitative considerations in forming our opinion. 
 
 Scope of the audit of the financial statements 
 
An audit involves obtaining evidence about the amounts and disclosures in the 
financial statements sufficient to give reasonable assurance that the financial 
statements are free from material misstatement, whether caused by fraud or 
error. This includes an assessment of: whether the accounting policies are 
appropriate to the Company's circumstances and have been consistently applied 
and adequately disclosed; the reasonableness of significant accounting 
estimates made by the directors; and the overall presentation of the financial 
statements. In addition, we read all the financial and non-financial 
information in the annual report to identify material inconsistencies with the 
audited financial statements and to identify any information that is apparently 
materially incorrect based on, or materially inconsistent with, the knowledge 
acquired by us in the course of performing the audit. If we become aware of any 
apparent material misstatements or inconsistencies we consider the implications 
for our report. 
 
 Respective responsibilities of directors and auditor 
 
As explained more fully in the Directors' Responsibilities Statement set out on 
pages 14 and 15, the directors are responsible for the preparation of the 
financial statements and for being satisfied that they give a true and fair 
view. Our responsibility is to audit and express an opinion on the financial 
statements in accordance with applicable law and International Standards on 
Auditing (UK and Ireland). Those standards require us to comply with the 
Auditing Practices Board's Ethical Standards for Auditors. 
 
This report is made solely to the Company's members, as a body, in accordance 
with Section 262 of the Companies (Guernsey) Law 2008. Our audit work has been 
undertaken so that we might state to the Company's members those matters we are 
required to state to them in an auditor's report and for no other purpose. To 
the fullest extent permitted by law, we do not accept or assume responsibility 
to anyone other than the Company and the Company's members as a body, for our 
audit work, for this report, or for the opinions we have formed. 
 
Matters on which we are required to report by exception 
 
ISAs (UK and        We are required to report to you if, in our    We have no 
Ireland) reporting  opinion, financial and non-financial           exceptions 
                    information in the annual report is:           to report. 
                    -           materially inconsistent with the 
                    information in the audited financial 
                    statements; or 
                    -           apparently materially incorrect 
                    based on, or materially inconsistent with, our 
                    knowledge of the Company acquired in the 
                    course of performing our audit; or 
                    -           otherwise misleading. 
                    In particular, we are required to report 
                    whether we have identified any inconsistencies 
                    between our knowledge acquired in the course 
                    of performing the audit and the directors' 
                    statement that they consider the annual report 
                    and accounts taken as a whole is fair, 
                    balanced and understandable and provides the 
                    information necessary for shareholders to 
                    assess the entity's performance, business 
                    model and strategy; and whether the annual 
                    report appropriately addresses those matters 
                    that we communicated to the audit committee 
                    that we consider should have been disclosed. 
 
Companies           We are required to report to you if, in our    We have no 
(Guernsey) Law 2008 opinion:                                       exceptions 
reporting           -           proper accounting records have not to report. 
                    been kept; or 
                    -           the financial statements are not 
                    in agreement with the accounting records; or 
                    -           we have not received all the 
                    information and explanations we require for 
                    our audit. 
 
Listing Rules       We are required to review:                     We have no 
review requirements -           The directors' statement in        exceptions 
                    relation to going concern set out in the       to report. 
                    Directors' Report and longer-term viability, 
                    set out on in the Strategic Report 
                    respectively; and 
                    -           the part of the Corporate 
                    Governance Statement relating to the Company's 
                    compliance with the provisions of the UK 
                    Corporate Governance Code specified for our 
                    review. 
 
 
 
ISAs (UK and        We are required to give a statement as to      We have 
Ireland) reporting  whether we have anything material to add or to nothing 
                    draw attention to in relation to:              material 
                    -           the directors' confirmation in the to add or 
                    annual report that they have carried out a     to draw 
                    robust assessment of the principal risks       attention 
                    facing the entity, including those that would  to other 
                    threaten its business model, future            than as 
                    performance, solvency or liquidity;            explained 
                    -           the disclosures in the annual      in the 
                    report that describe those risks and explain   "Emphasis 
                    how they are being managed or mitigated;       of matter" 
                    -           the directors' statement in the    paragraph 
                    financial statements about whether they        above. 
                    considered it appropriate to adopt the going 
                    concern basis of accounting in preparing them, 
                    and their identification of any material 
                    uncertainties to the entity's ability to 
                    continue to do so over a period of at least 
                    twelve months from the date of approval of the 
                    financial statements; and 
                    -           the directors' explanation in the 
                    annual report as to how they have assessed the 
                    prospects of the entity, over what period they 
                    have done so and why they consider that period 
                    to be appropriate, and their statement as to 
                    whether they have a reasonable expectation 
                    that the entity will be able to continue in 
                    operation and meet its liabilities as they 
                    fall due over the period of their assessment, 
                    including any related disclosures drawing 
                    attention to any necessary qualifications or 
                    assumptions. 
 
Christopher James Matthews, FCA 
 
for and on behalf of Ernst & Young LLP 
 
Guernsey, Channel Islands 
 
21 March 2017 
 
Notes: 
 
1.         The maintenance and integrity of the Company's web site 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 
statements since they were initially presented on the web site. 
 
2.         Legislation in the Guernsey governing the preparation and 
dissemination of group financial statements may differ from legislation in 
other jurisdictions. 
 
STATEMENT OF COMPREHENSIVE INCOME 
 
for the year ended 31 December, 2016 
 
                                Revenue       Capital          Total        Revenue        Capital          Total 
 
                             01.01.2016    01.01.2016     01.01.2016     01.01.2015     01.01.2015     01.01.2015 
                                     to            to             to             to             to             to 
 
                             31.12.2016    31.12.2016     31.12.2016     31.12.2015     31.12.2015     31.12.2015 
 
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         2,067,155             -      2,067,155      1,334,322              -      1,334,322 
 
    Interest income                   -             -              -        108,112              -        108,112 
 
    Foreign exchange                  -     1,044,768      1,044,768        471,537              -        471,537 
    movements 
 
    Loss on financial 
    assets 
 
    at fair value through             -     (828,874)      (828,874)              -    (2,189,023)    (2,189,023) 
    profit or loss 
 
    Total income              2,067,155       215,894      2,283,049      1,913,971    (2,189,023)      (275,052) 
 
 4  Management fee          (1,856,441)             -    (1,856,441)    (1,744,965)              -    (1,744,965) 
 
 5  Other expenses          (1,087,394)             -    (1,087,394)    (1,128,764)              -    (1,128,764) 
 
    Foreign exchange        (2,024,456)             -    (2,024,456)              -      (247,561)      (247,561) 
    movements 
 
    Transaction costs                 -     (260,045)      (260,045)              -      (230,445)      (230,445) 
 
    Bank interest              (13,951)             -       (13,951)              -              -              - 
 
    Total expenses          (4,982,242)     (260,045)    (5,242,287)    (2,873,729)      (478,006)    (3,351,735) 
 
    Loss for the year       (2,915,087)      (44,151)    (2,959,238)      (959,758)    (2,667,029)    (3,626,787) 
    before tax 
 
 3  Withholding tax           (316,585)             -      (316,585)      (499,671)              -      (499,671) 
 
    Loss for the year after (3,231,672)      (44,151)    (3,275,823)    (1,459,429)    (2,667,029)    (4,126,458) 
    tax 
 
    Loss for the year       (3,231,672)      (44,151)    (3,275,823)    (1,459,429)    (2,667,029)    (4,126,458) 
 
 2  Loss per Ordinary Share 
    - 
 
    Basic & Diluted (in          (3.50)        (0.05)         (3.55)         (1.58)         (2.88)         (4.46) 
    cents) 
 
 
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. There was no comprehensive income 
other than the loss for the year. 
 
All items in the above statement derive from continuing operations. 
 
The notes form an integral part of the Financial Statements. 
 
STATEMENT OF FINANCIAL POSITION 
 
as at 31 December, 2016 
 
                                                          31.12.2016     31.12.2015 
 
Notes                                                        In U.S.        In U.S. 
                                                             Dollars        Dollars 
 
      Non-current assets 
 
  6   Financial assets at fair value through profit       98,377,672    106,417,543 
      or loss 
 
      Current assets 
 
  7   Receivables                                          1,189,423        399,051 
 
      Cash and cash equivalents                           22,688,931     19,009,538 
 
      Total current assets                                23,878,354     19,408,589 
 
      Current liabilities 
 
  8   Payables                                               332,566        529,153 
 
      Net current assets                                  23,545,788     18,879,436 
 
      Net assets                                         121,923,460    125,296,979 
 
      Equity 
 
  9   Stated capital                                          92,352         92,452 
 
  9   Redemption reserve                                  85,435,381     85,533,077 
 
  9   Capital redemption reserve                             323,157        323,057 
 
      Other reserves                                      36,072,570     39,348,393 
 
      Total equity                                       121,923,460    125,296,979 
 
      Ordinary Shares in issue                            92,352,602     92,452,602 
 
  2   Net Asset Value per Ordinary Share (in cents)           132.02         135.53 
 
 
The Financial Statements were approved by the Board of Directors on 21 March, 
2017 and signed on its behalf by: 
 
John Hawkins 
 
Richard Battey 
 
Chairman 
Director 
 
The notes form an integral part of the Financial Statements. 
 
STATEMENT OF CHANGES IN EQUITY 
 
for the year ended 31 December, 2016 
 
                   Share       Capital                                      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       92,452       323,057    85,533,077    (16,365,019)     67,395,805     (6,825,610)    (4,856,783)     125,296,979 
1 January, 
2016 
 
Total comprehensive income/(expense) 
for the year 
 
(Loss)/gain            -             -             -     (3,231,672)    (2,480,866)       1,391,947      1,044,768     (3,275,823) 
for the year 
after tax 
 
Capital 
activities 
 
Repurchase         (100)           100      (97,696)               -              -               -              -        (97,696) 
of shares 
 
Balances at       92,352       323,157    85,435,381    (19,596,691)     64,914,939     (5,433,663)    (3,812,015)     121,923,460 
31 December, 
2016 
 
                   Share       Capital                                      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       92,452       323,057    85,533,077    (14,905,590)     53,873,130       9,116,533    (4,609,222)      129,423,437 
1 January, 
2015 
 
Total comprehensive income/(expense) 
for the year 
 
(Loss)/gain for        -             -             -     (1,459,429)     13,522,675    (15,942,143)      (247,561)      (4,126,458) 
the year after 
tax 
 
Capital 
activities 
 
Repurchase of          -             -             -               -              -               -              -                - 
shares 
 
Balances at       92,452       323,057    85,533,077    (16,365,019)     67,395,805     (6,825,610)    (4,856,783)      125,296,979 
31 December, 
2015 
 
 
The notes form an integral part of the Financial Statements. 
 
STATEMENT OF CASH FLOWS 
 
for the year ended 31 December, 2016 
 
                                                    01.01.2016        01.01.2015 
                                                            to                to 
 
                                                    31.12.2016        31.12.2015 
 
Notes                                                  In U.S.           In U.S. 
                                                       Dollars           Dollars 
 
      Cash flows from operating activities 
 
 10   Net cash outflow from operating              (5,347,772)       (2,998,658) 
      activities 
 
      Interest received                                      -           108,112 
 
      Interest paid                                   (13,951)                 - 
 
      Dividends received                             2,098,471         1,334,322 
 
      Net cash outflow from operating              (3,263,252)       (1,556,224) 
      activities 
 
      Cash flows from investing activities 
 
      Purchase of investments                     (68,253,522)      (70,769,961) 
 
      Sale of investments                           74,249,095        86,178,648 
 
      Net cash inflow from investing                 5,995,573        15,408,687 
      activities 
 
      Net cash inflow before financing               2,732,321        13,852,463 
      activities 
 
      Cash flows from financing activities 
 
  9   Repurchase of shares                            (97,696)                 - 
 
      Net cash outflow from financing                 (97,696)                 - 
      activities 
 
      Increase in cash and cash equivalents          2,634,625        13,852,463 
 
      Reconciliation of net cash flow to 
 
      movement in net funds 
 
      Net cash inflow                                2,634,625        13,852,463 
 
      Effects of foreign exchange rate changes       1,044,768         (247,561) 
 
      Cash and cash equivalents at beginning        19,009,538         5,404,636 
      of the year 
 
      Cash and cash equivalents at end of the       22,688,931        19,009,538 
      year 
 
 
The notes form an integral part of the Financial Statements. 
 
NOTES TO THE FINANCIAL STATEMENTS 
 
for the year ended 31 December, 2016 
 
Note 1    Principal Accounting Policies 
 
The following accounting policies have been applied consistently in dealing 
with items which are considered to be material in relation to the Company's 
Financial Statements: 
 
Basis of preparation 
 
The Financial Statements are prepared in accordance with International 
Financial Reporting Standards ("IFRS") adopted by the European Union, which 
comprise standards and interpretations approved by the International Accounting 
Standards Board (IASB) and are in compliance with The Companies (Guernsey) Law, 
2008. The Financial Statements have been prepared on a going concern basis 
under the historical cost convention, as modified by the revaluation of 
financial assets at fair value through profit or loss. 
 
Presentation of information 
 
Where presentational guidance set out in the Statement of Recommended Practice 
("SORP") for Investment Companies issued by the Association of Investment 
Companies ("AIC") in November 2014 is consistent with the requirements of IFRS, 
the Directors have sought to prepare the Financial Statements on a basis 
compliant with the SORP. Supplementary information which analyses the Statement 
of Comprehensive Income between items of a revenue and capital nature has been 
presented within the Statement of Comprehensive Income. 
 
Standards, amendments and interpretations effective during the year with 
relevance to the Company 
 
The following amendments were applicable for the first time this year but had 
no impact on the financial position or performance of the Company. 
 
- IFRS 10 (Amendments) - Consolidated Financial Statements (effective 1 
January, 2016) 
 
- IFRS 12 (Amendments) - Disclosure of Interests in Other Entities (effective 1 
January, 2016) 
 
- IAS 1 (Amendments) - Disclosure Initiative (effective 1 January, 2016) 
 
- IAS 7 (Amendments) - Statement of Cash Flows (effective 1 January, 2016) 
 
- IAS 27 (Amendments) - Separate Financial Statements (effective 1 January, 
2016) 
 
- IAS 28 (Amendments) - Investments in Associates and Joint Ventures (effective 
1 January, 2016) 
 
Investment Entities, Applying the Consolidation Exception 
 
Narrow-scope amendments to IFRS 10, IFRS 12 and IAS 28 introduce clarifications 
to the requirements when accounting for investment entities. The amendments 
also provide relief in particular circumstances, which will reduce the costs of 
applying the Standards. 
 
Standards, amendments and interpretations issued but not yet effective with 
relevance to the Company 
 
- IFRS 9 Financial Instruments - (effective 1 January, 2018) 
 
- IAS 34 - Interim Financial Reporting (Disclosure of information elsewhere in 
the interim accounts) (Annual improvements process) 
 
IFRS 9, Financial Instruments 
 
In July 2014, the IASB issued the final version of IFRS 9 Financial Instruments 
which reflects all phases of the financial instruments project and replaces IAS 
39 Financial Instruments: Recognition and Measurement and all previous versions 
of IFRS 9. The standard introduces new requirements for classification and 
measurement, impairment, and hedge accounting. IFRS 9 is effective for annual 
periods beginning on or after 1 January 2018, with early application permitted. 
Retrospective application is required, but comparative information is not 
compulsory. Early application of previous versions of IFRS 9 (2009, 2010 and 
2013) is permitted if the date of initial application is before 1 February, 
2015. The adoption of IFRS 9 will not have an effect on the classification and 
measurement of the Company's financial assets, or financial liabilities. 
 
The Company's financial instruments consist of equity instruments and 
derivatives. Due to the cash flow characteristics of such financial 
instruments, on application of IFRS 9, they will continue to be classified as 
fair value through the profit or loss. 
 
There are no other standards, amendments or interpretations that are not yet 
effective that would be expected to have a material impact on the Company. 
 
The Board anticipate that the adoption of these standards and interpretations 
in a future period, once they are effective, will not have a material impact on 
the Financial Statements of the Company. 
 
Assessment as investment entity 
 
Entities that meet the definition of an investment entity within IFRS 10 are 
required to measure their subsidiaries, at fair value through profit or loss 
rather than consolidate them. The criteria which define an investment entity 
are, as follows: 
 
-      An entity that obtains funds from one or more investors for the purpose 
of providing those investors with investment services; 
 
-      An entity that commits to its investors that its business purpose is to 
invest funds solely for returns from capital appreciation, investment income or 
both; and 
 
-      An entity that measures and evaluates the performance of substantially 
all of its investments on a fair value basis. 
 
The Company meets the criteria as follows: 
 
The Company provides investment management services and has a number of 
investors who pool their funds to gain access to these services and investment 
opportunities that they might not have had access to individually. The Company, 
being listed on the London Stock Exchange, obtains funding from a diverse group 
of external shareholders. The Company's objective is consistent with that of an 
investment entity. The Company has the intention to realise the constituents of 
each of its investment classes. 
 
The Company measures and evaluates the performance of substantially all of its 
investments on a fair value basis. The fair value method is used to represent 
the Company's performance in its communication to the market. In addition, the 
Company reports fair value information internally to Directors, who use fair 
value as a significant measurement attribute to evaluate the performance of its 
investments and to make investment decisions for mature investments. 
 
The Board has also concluded that the Company meets the additional 
characteristics of an investment entity, in that it has more than one 
investment; the investments are predominantly in the form of equities and 
similar securities; it has more than one investor and its investors are not 
related parties. 
 
Significant accounting judgements and estimates 
 
The preparation of the Financial Statements in conformity with IFRS requires 
management to make judgements, estimates and assumptions that affect the 
application of policies and the reported amounts of assets and liabilities, 
income and expense and disclosure of contingent assets. 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. 
 
Going concern 
 
In accordance with the Company's Articles, the Board is required every three 
years to include in the business to be considered by shareholders at the Annual 
General Meeting a Special Resolution that the Company should be wound up. The 
last such resolution was tabled at the eighteenth Annual General Meeting held 
in 2014. The Shareholders voted against the resolution, and in favour of the 
continuation of the Company. As announced on 10 January 2017 (the "Possible 
Offer Announcement"), the independent directors of the Company are in 
preliminary discussions regarding a possible offer from Prospect Co., Ltd 
("Prospect") for the entire issued and to be issued share capital of the 
Company. The possible offer is under consideration, discussion and evaluation 
by both parties. The Possible Offer Announcement does not amount to a firm 
intention to make an offer under Rule 2.7 of The City Code on Takeovers and 
Mergers, and as stated in the Possible Offer Announcement there can be no 
certainty that an offer for the Company will ultimately be made.  If such a 
transaction: (i) was to be announced in accordance with Rule 2.7 of The City 
Code on Takeovers and Mergers; and (ii) was to be completed prior to the 2017 
AGM, no AGM would be held and no discontinuation vote would take place.  Whilst 
acknowledging the uncertainty of the possible offer, and the upcoming vote for 
discontinuation, the fact that neither the Board nor the Investment Advisor 
have received any indication that the Shareholders are no longer in favour of 
the investment policy and that the assets of the Company consist mainly of 
securities that are readily realisable, leads the Directors to believe that the 
discontinuation vote will not be passed and that the Company has adequate 
financial resources to meet its liabilities as they fall due for at least 
twelve months from the date of this report, and that it is therefore 
appropriate for the Financial Statements to be prepared on a going concern 
basis. Factors regarding the going concern basis are also discussed in Note 1 
of the Financial Statements. 
 
Share Capital 
 
The Company holds a discontinuation vote every three years, however as there is 
only one class of share in issue they continue to be presented as equity in 
accordance with IAS 32 - "Financial Instruments: Disclosure and presentation". 
 
Fair value of securities not quoted in an active market 
 
In the process of applying the Company's accounting policies, management has 
made the following judgements, which have the most significant effect on the 
amounts recognised in the financial statements: 
 
The Company carries its investments at fair value, with changes in value being 
recognised in the Statement of Comprehensive Income. In cases of unlisted 
investments where prices of investments are not quoted in an active market, 
estimates are based on available traded prices, comparisons with the valuations 
of comparable instruments or by using valuation techniques, such as the Black 
Scholes model. 
 
The Investment Manager exercises judgement on the valuation of unlisted 
investments. Further details on the valuation techniques applied to level 3 
investments can be found in Note 14 of the Financial Statements. 
 
Financial instruments 
 
Financial assets and financial liabilities are recognised in the Company's 
Statement of Financial Position when the Company becomes a party to the 
contractual provisions of the instrument. Financial assets and liabilities, 
other than those shown at fair value through profit or loss, are measured at 
amortised cost using the effective interest rate method. 
 
Derivatives 
 
The Stock Acquisition Rights are treated as a derivative and as such are 
recognised at fair value on the date on which they are entered into and 
subsequently re-measured at their fair value. Fair value is determined by 
utilising appropriate valuation techniques, namely the Black-Scholes-Merton 
model. The gain or loss on re-measurement to fair value is recognised 
immediately through profit or loss in the Statement of Comprehensive Income 
within net gain/loss on financial assets at fair value through profit or loss 
in the period in which they arise. 
 
Financial assets at fair value through profit or loss ("investments") 
 
All "regular way" purchases and sales of investments are recognised on the 
trade date, that is the date on which the Company commits to purchase or sell 
the investment). "Regular way" purchases or sales are purchases or sales of 
financial assets that require delivery of assets within the time frame 
generally established by regulation or convention in the market place. 
 
All of the Company's investments are recorded at fair value through profit or 
loss at the time of acquisition. Investments are initially recognised at fair 
value, normally being the cost incurred in their acquisition. Any transaction 
costs are expensed in the Statement of Comprehensive Income. After initial 
recognition, investments are measured at fair value. Gains and losses arising 
from changes in fair value are presented in the Statement of Comprehensive 
Income in the period in which they arise. 
 
Investments are designated at fair value through profit or loss at inception 
because they are managed and their performance evaluated on a fair value basis 
and information thereon is evaluated by the management of the Company on a fair 
value basis. 
 
Other financial instruments 
 
For other financial instruments, including other receivables and other 
payables, the carrying amounts as shown in the Statement of Financial Position 
approximate to fair values due to the short term nature of these financial 
instruments. 
 
Fair value 
 
The Company's investments consist of equity and equity-related investments in 
smaller companies in Japan and unlisted stock acquisition right and corporate 
bonds. 
 
Listed investments held at the statement of financial position date are valued 
at bid prices quoted on the principal stock exchange on which the investments 
are traded. Gains and losses arising from changes in fair value are presented 
in the Statement of Comprehensive Income in the period in which they arise. 
 
Unlisted investments are valued at the Directors' estimate of their fair value 
in accordance with the requirements of IFRS 13 'Fair Value Measurement'. The 
Directors' estimates are based on available price data, comparisons with the 
valuations of comparable corporate bonds or by using appropriate valuation 
techniques, such as the Black Scholes Merton model. 
 
Derecognition of financial instruments 
 
A financial asset is derecognised when the Company has transferred 
substantially all the risks and rewards of the asset, or has neither 
transferred nor retained substantially all the risks and rewards of the asset, 
but has transferred control of the asset. 
 
                A financial liability is derecognised when the obligation under 
the liability is discharged or cancelled. 
 
Income 
 
Income arising on the investments is recognised when the right to receive it 
has been met and is recorded gross of withholding tax. Bank interest is 
accounted for on an accruals basis. 
 
Expenses 
 
Expenses are accounted for on an accruals basis. Expenses incurred on the 
acquisition of investments at fair value through profit or loss are charged to 
the Statement of Comprehensive Income in capital. All other expenses are 
charged to the Statement of Comprehensive Income in revenue. 
 
Cash and cash equivalents 
 
Cash and cash equivalents are defined as cash in hand, demand deposits and 
highly liquid investments readily convertible to known amounts of cash and 
subject to insignificant risk of change in value. Cash and cash equivalents at 
the year end constituted demand deposits. 
 
Capital reserves 
 
Gains and losses recorded on the realisation of investments and realised 
exchange differences of a capital nature are transferred to the realised 
capital reserve. Unrealised gains and losses recorded on the revaluation of 
investments held at a period end and unrealised exchange differences of a 
capital nature are transferred to the unrealised capital reserve. 
 
Foreign currencies 
 
(i)      Functional and presentation currency 
 
The Company's shares are denominated in United States dollars and accordingly 
the Board have determined that the Company's functional and presentation 
currency is United States dollars, despite the fact that the investments are in 
Japanese yen. 
 
(ii)     Foreign currency transactions 
 
Monetary assets and liabilities and investments at fair value through profit or 
loss are translated into United States dollars at the rate of exchange ruling 
at the Statement of Financial Position date. Investment transactions and income 
and expenditure items are translated at the rate of exchange ruling at the date 
of the transactions. Gains and losses on foreign exchange are included in the 
Statement of Comprehensive Income. 
 
Note 2    Loss per Ordinary Share - Basic and Diluted and Net Asset Value per 
Ordinary Share - Basic and Diluted 
 
The loss per Ordinary Share - Basic and Diluted has been calculated based on 
the weighted average number of Ordinary Shares of 92,392,220 and a net loss of 
US$3,275,823 (2015: 92,452,602 Ordinary Shares and a net loss of US$4,126,458). 
 
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 year end date of 92,352,602 
(2015: 92,452,602) and shareholders' funds attributable to equity interests of 
US$121,923,460 (2015: US$125,296,979). 
 
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 GBP1,200 (2015: GBP1,200). 
 
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) ("PAM(CI)"), 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 year amounted to US$1,856,441 (2015: 
US$1,744,965) of which US$140,667 (2015: US$155,954) is due and payable at the 
year 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 
 
                                                        01.01.2016     01.01.2015 
                                                                to             to 
 
                                                        31.12.2016     31.12.2015 
 
                                                           In U.S.        In U.S. 
                                                           Dollars        Dollars 
 
Administration and                                         309,407        290,827 
secretarial fees* 
 
Custodian's fees and charges*                              135,310        105,482 
* 
 
General                                                    252,593        548,964 
expenses 
 
Directors' remuneration                                    110,529        116,723 
 
Legal fees                                                 218,639              - 
 
Auditors'                                                   39,392         46,133 
fees 
 
Non-audit                                                   21,524         20,635 
fees 
 
Bank                                                        13,951              - 
interest 
 
                                                         1,101,345      1,128,764 
 
 
*The administration and secretarial fees are payable to Northern Trust 
International Fund Administration Services (Guernsey) Limited monthly in 
arrears at a rate of 0.25% of the Net Asset Value of the Company as at the last 
business day of the month. Total administration and secretarial fees for the 
year amounted to US$309,407 (2015: US$290,827) of which US$23,445 (2015: 
US$25,992) is due and payable at the year end. 
 
** The custodian's fees and charges are payable to Northern Trust (Guernsey) 
Limited monthly in arrears at a rate of 0.08% of the value of the portfolio of 
the Company as at the last business day of the month. Total custodian's fees 
and charges for the year amounted to US$135,310 (2015: US$105,482) of which 
US$9,307 (2015: US$10,384) is due and payable at the year end. 
 
Note 6    Financial Assets at Fair Value through Profit or Loss 
 
                                                            01.01.2016    01.01.2015 to 
                                                                    to 
 
                                                            31.12.2016       31.12.2015 
 
                                                               In U.S.          In U.S. 
                                                               Dollars          Dollars 
 
Opening book cost                                          113,243,153      114,885,517 
 
Purchases at                                                68,014,094      109,096,236 
cost 
 
Proceeds on                                               (75,225,091)    (124,491,720) 
sale 
 
Realised (loss)/gain on sale                               (2,220,821)       13,753,120 
 
Closing book cost                                          103,811,335      113,243,153 
 
Unrealised loss                                            (5,433,663)      (6,825,610) 
 
Fair value                                                  98,377,672      106,417,543 
 
 
Note 7    Receivables 
 
                                                               31.12.2016     31.12.2015 
 
                                                                  In U.S.        In U.S. 
                                                                  Dollars        Dollars 
 
Amounts due from brokers                                          977,551        151,847 
 
Dividends receivable                                              192,689        224,005 
 
Other                                                              19,183         23,199 
receivables 
 
                                                                1,189,423        399,051 
 
 
Note 8    Payables 
 
                                                           31.12.2016    31.12.2015 
 
                                                              In U.S.       In U.S. 
                                                              Dollars       Dollars 
 
Amounts due to brokers                                         42,943       172,618 
 
Other                                                         289,623       356,535 
creditors 
 
                                                              332,566       529,153 
 
 
Note 9    Share Capital, Redemption Reserve & Capital Redemption Reserve 
 
                                                         31.12.2016    31.12.2015 
 
Number of shares                                            In U.S.       In U.S. 
                                                            Dollars       Dollars 
 
       150,000,000       Ordinary Shares of US$0.001        150,000       150,000 
                         each 
 
        60,000,000       "C" Ordinary Shares of US$0.01     600,000       600,000 
                         each 
 
 
As approved at the AGM on 18 August, 2016, the Company may purchase a maximum 
of 13,843,655 Ordinary Shares, equivalent to 14.99% of the issued share capital 
of the Company as at the date of the AGM. 
 
On 23 May, 2016, 100,000 shares were repurchased at a price of US$0.975. The 
Redemption Reserve was utilised to cancel these shares. 
 
                                                                               Capital 
 
                                                              Redemption    Redemption 
 
Ordinary Shares                                      Share       Reserve       Reserve 
                                                   Capital 
 
      Number of                                    In U.S.       In U.S.       In U.S. 
         shares                                    Dollars       Dollars       Dollars 
 
     92,452,602    Balance at 1 January,            92,452    85,533,077       323,057 
                   2016 
 
                   Shares repurchased 
                   and 
 
      (100,000)    cancelled during the              (100)      (97,696)           100 
                   year 
 
     92,352,602    Balance at 31 December,          92,352    85,435,381       323,157 
                   2016 
 
 
 
 
                                                                               Capital 
 
                                                              Redemption    Redemption 
 
Ordinary Shares                                     Share        Reserve       Reserve 
                                                  Capital 
 
Number of shares                                  In U.S.        In U.S.       In U.S. 
                                                  Dollars        Dollars       Dollars 
 
     92,452,602   Balance at 1 January,            92,452     85,533,077       323,057 
                  2015 
 
     92,452,602   Balance at 31 December,          92,452     85,533,077       323,057 
                  2015 
 
 
Other Reserves 
 
The Redemption Reserve account is a distributable reserve account which can be 
used for, among other things, the payment of dividends, if any. The Directors 
do not recommend the payment of a dividend for the year. 
 
The Capital Redemption Reserve is used to cancel the shares of the Company when 
they are redeemed or there is a share buyback. 
 
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. 
 
Note 10  Reconciliation of Deficit on Ordinary Activities to Net Cash Outflow 
from Operating Activities 
 
                                                          31.12.2016     31.12.2015 
 
                                                             In U.S.        In U.S. 
                                                             Dollars        Dollars 
 
Revenue loss on ordinary activities for the              (3,231,672)    (1,459,429) 
year 
 
Adjusted 
for: 
 
Interest received                                                  -      (108,112) 
 
Interest                                                      13,951              - 
paid 
 
Dividends received                                       (2,067,155)    (1,334,322) 
 
Decrease/(increase) in other                                   4,016      (103,925) 
receivables 
 
(Decrease)/increase in other                                (66,912)          7,130 
creditors 
 
Net cash outflow from operating                          (5,347,772)    (2,998,658) 
activities 
 
 
Note 11 Analysis of Financial Assets and Liabilities by Measurement Basis 
 
                                           Investments           Net 
                                                             current 
 
                                               at fair        assets          Total 
                                                 value 
 
                                               In U.S.       In U.S.        In U.S. 
                                               Dollars       Dollars        Dollars 
 
As at 31 December, 
2016 
 
Financial assets 
 
Investments at fair value through           98,377,672             -     98,377,672 
profit or loss 
 
Cash and cash                                        -    22,688,931     22,688,931 
equivalents 
 
Receivables                                          -     1,189,423      1,189,423 
 
                                            98,377,672    23,878,354    122,256,026 
 
Financial liabilities 
 
Payables                                             -       332,566        332,566 
 
                                                     -       332,566        332,566 
 
                                           Investments           Net 
                                                             current 
 
                                               at fair        assets          Total 
                                                 value 
 
                                               In U.S.       In U.S.        In U.S. 
                                               Dollars       Dollars        Dollars 
 
As at 31 December, 
2015 
 
Financial assets 
 
Investments at fair value through          106,417,543             -    106,417,543 
profit or loss 
 
Cash and cash                                        -    19,009,538     19,009,538 
equivalents 
 
Receivables                                          -       399,051        399,051 
 
                                           106,417,543    19,408,589    125,826,132 
 
Financial liabilities 
 
Payables                                             -       529,153        529,153 
 
                                                     -       529,153        529,153 
 
Note 12  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) (the "Manager") whose 
parent company is Prospect Co., Ltd (Kabushiki Kaisha Prospect ("KKP"), a 
Japanese Company). 
 
Mr Rupert Evans is a Director of the Manager. 
 
Directors' fees are disclosed in Note 5. The basic fee payable to Directors in 
2016 is GBP25,000 (US$30,890) (2015: GBP25,000 (US$36,848)), the Chairman of the 
Audit Committee GBP27,500 (US$33,979) (2015: GBP27,500 (US$40,532)) and the 
Chairman of the Board GBP30,000 (US$37,068) (2015: GBP30,000 (US$44,217)) per 
annum. At 31 December, 2016, US$25,484 (2015: US$30,399) of the fee remained 
payable. 
 
No Directors holding office at 31 December, 2016, 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 is a Director of PAM(CI), the Manager of The Prospect Japan 
Fund Limited, and is the President of Prospect Co. Ltd., the owner of PAMI, the 
Investment Advisor to The Prospect Japan Fund Limited and PAM(CI), the Manager 
of The Prospect Japan Fund Limited. 
 
Management fees are disclosed in Note 4. Fees due to the Investment Advisor are 
paid by PAM(CI) from these management fees. 
 
The Company holds both Equity shares and SARs in Prospect Co. Ltd. The value of 
the SARs is disclosed in Note 14 under Unlisted investments. 
 
Note 13  Financial Risk Management Objectives and Policies 
 
                Financial instruments 
 
In accordance with its investment objectives and policies, the Company holds 
financial instruments which at any one time may comprise the following: 
 
*    securities held in accordance with the investment objectives and policies 
 
*    cash and short-term debtors and creditors arising directly from operations 
 
*    borrowing used to finance investment activity 
 
*    derivative transactions including investment in warrants and forward 
currency contracts 
 
*    options or futures for hedging purposes 
 
The financial instruments held by the Company principally comprise equities 
listed on the stock market in Japan. The specific risks arising from the 
Company's exposure to these instruments, and the Manager/Investment Advisor's 
policies for managing these risks, which have been applied throughout the year, 
are summarised below. 
 
                Market price risk 
 
The Company's investment portfolio - particularly its equity investments - is 
exposed to market price fluctuations, which are monitored by the Manager/ 
Investment Advisor in pursuance of the investment objectives and policies. 
 
                Exceptional risks associated with investment in Japanese 
smaller companies may include: 
 
a)     greater price volatility, substantially less liquidity and significantly 
smaller market capitalisation, and 
 
                b)    more substantial government intervention in the economy, 
including restrictions on investing in companies or in industries deemed 
sensitive to relevant national interests. 
 
                Market price sensitivity analysis 
 
The sensitivity of the Company to market price risk can be approximated by 
measuring the impact that a movement in the MSCI Japan Small Cap Index would 
have on the percentage of funds invested. The MSCI Developed Markets Small Cap 
Indices offer an exhaustive representation of the size segment by targeting 
companies that are in the Investable Market Index but not in the Standard Index 
in a particular developed market. The indices include Value and Growth style 
indices and industry indices based on the Global Industry Classification 
Standard. The MSCI Japan Small Cap Index provides an indicator of the effect of 
market price risk on the Company's portfolio since its characteristics with 
respect to average market capitalisation more closely resemble the investment 
strategy pursued by the Company. However, the Company's investments do not 
reflect the full array of companies on the index. At 31 December, 2016, using a 
beta of 0.646 (2015: 0.485), a 1% positive/negative movement in the index would 
produce a positive/negative movement in the investments of the Company of 
US$635,520 (2015: US$516,125) for equity related securities. This relationship 
between the movement in the value of the assets of the Company and the Index is 
of a linear nature. 
 
A 1% increase/decrease in the value of the SARs would impact the NAV by 
US$99,907 (2015: US$23,914). 
 
Foreign currency risk 
 
The Company principally invests in securities denominated in Japanese yen 
rather than United States dollars, the functional currency of the Company. 
Therefore, the Statement of Financial Position may be affected by movements in 
the exchange rates of such currencies against the United States dollar. The 
Manager/Investment Advisor has the power to manage exposure to currency 
movements by using forward currency contracts. The Company was not party to any 
such instruments at the statement of financial position date in either the 
current or prior year. 
 
It is not the present intention of the Directors to hedge the currency exposure 
of the Company, but the Directors reserve the right to do so in the future if 
they consider this to be desirable. 
 
The treatment of currency transactions other than in United States dollars is 
set out in Note 1 to the Financial Statements under "Foreign Currencies". 
 
The Company's currency exposure is as follows: 
 
                                                        31.12.2016     31.12.2015 
 
                                                             In US          In US 
                                                           Dollars        Dollars 
 
Investments 
 
Japanese Yen (¥11,515,598,396; 2015:¥12,815,864,703)    98,377,672    106,417,543 
 
                                                        98,377,672    106,417,543 
 
Other (Liabilities)/ 
Assets 
 
US Dollars                                               (190,156)      (188,836) 
 
Sterling (GBP40,818; 2015:GBP74,287)                          (50,170)      (110,095) 
 
Japanese Yen (¥2,784,283,574; 2015:¥2,309,650,737)      23,786,114     19,178,367 
 
                                                        23,545,788     18,879,436 
 
 
The below details the Company's sensitivity to a 10% (31 December, 2015: 10%) 
change in foreign exchange rates against the US dollar. 
 
                                                             31.12.2016      31.12.2015 
 
                                                                  In US           In US 
                                                                Dollars         Dollars 
 
Impact on Statement of Comprehensive Income and Equity 
in response to a 
 
- 10% increase in the US dollar against                    (12,250,087)    (12,548,581) 
other currencies 
 
- 10% decrease in the US dollar against                      12,250,087      12,548,581 
other currencies 
 
Interest rate risk 
 
Interest receivable on bank deposits or payable on bank overdraft positions 
will be affected by fluctuations in interest rates, however the value of the 
underlying cash positions will not be affected. 
 
The direct effect of movements in interest rates are not material on cash and 
cash equivalents as the Company predominantly keeps its surplus cash in 
Japanese Yen on which it does not earn interest. 
 
If the risk-free rate of return increased/decreased by 0.5%, the impact on the 
net asset value and the profit and loss for the year would be an increase / 
decrease/ of US$113,445 (2015: US$95,686 with a 0.5% increase/decrease). 
 
Short term debtors and creditors 
 
Trade and other receivables and creditors do not carry interest and are short 
term in nature. They are stated at nominal value as reduced by appropriate 
allowances for irrecoverable amounts in the case of receivables. 
 
Liquidity risk 
 
Liquidity risk is the risk that the Company may encounter in realising assets 
or otherwise raising funds to meet financial commitments. 
 
The Company invests primarily in listed securities. The tables below analyse 
liquidity of the Company's securities based on trading volumes in the period 
after the statement of financial position date and maturity of other financial 
assets and liabilities. Although market values are low in comparison to the 
Company's shareholding for some securities, there is sufficient volume to 
demonstrate an active market. 
 
The Investment Manager considers expected cash flows from financial assets 
based on traded volumes in assessing and managing liquidity risk, in particular 
its cash resources and trade receivables. Cash flows from trade and other 
receivables are all contractually due within twelve months. Liquidity risk is 
not deemed to be significant. 
 
       As at 31 December, 2016 
 
                        Up to 1      1 week to 1    1-6 months         6-12       Greater          Total 
                           week            month                     months       than 12 
                                                                                   months 
 
                          In US    In US Dollars         In US        In US         In US          In US 
                        Dollars                        Dollars      Dollars       Dollars        Dollars 
 
Financial assets 
 
Financial assets at 
fair 
 
value through profit 10,838,996       22,519,263    40,356,666    4,523,359    20,139,388     98,377,672 
or loss 
 
Dividends receivable          -                -       192,689            -             -        192,689 
 
Other receivables             -                -        19,183            -             -         19,183 
 
Cash and cash        22,688,931                -             -            -             -     22,688,931 
equivalents 
 
Securities sold         977,551                -             -            -             -        977,551 
receivable 
 
Financial 
liabilities 
 
Amounts due to         (42,943)                -             -            -             -       (42,943) 
brokers 
 
Other creditors               -        (231,225)      (58,398)            -             -      (289,623) 
 
Total                34,462,535       22,288,038    40,510,140    4,523,359    20,139,388    121,923,460 
 
As at 31 December, 2015 
 
                        Up to 1      1 week to 1    1-6 months         6-12      Greater          Total 
                           week            month                     months      than 12 
                                                                                  months 
 
                          In US    In US Dollars         In US        In US        In US          In US 
                        Dollars                        Dollars      Dollars      Dollars        Dollars 
 
Financial assets 
 
Financial assets at 
fair 
 
value through profit 16,158,458       33,525,242    47,088,648    4,841,226    4,803,969    106,417,543 
or loss 
 
Dividends receivable          -                -       224,005            -            -        224,005 
 
Other receivables             -                -        23,199            -            -         23,199 
 
Cash and cash        19,009,538                -             -            -            -     19,009,538 
equivalents 
 
Securities sold         151,847                -             -            -            -        151,847 
receivable 
 
                                                                                                      - 
 
Financial                                                                                             - 
liabilities 
 
Amounts due to        (172,618)                -             -            -            -      (172,618) 
brokers 
 
Other creditors               -        (299,113)      (57,422)            -            -      (356,535) 
 
Total                35,147,225       33,226,129    47,278,430    4,841,226    4,803,969    125,296,979 
 
                Credit risk 
 
       Credit risk is the risk that an issuer or counterparty will be unable or 
unwilling to meet a commitment that it has entered into with the Company. The 
Company's principal sources of credit risk arise on amounts due from brokers 
for settlement of outstanding investment transactions, dividends and interest 
receivable, corporate bonds and cash and cash equivalents. 
 
The Company utilises 8 executing brokers setting allocation targets for each 
broker so as to not to place excessive concentration in any one counterparty. 
 
The Investment Advisor performs a quarterly review of executing brokers as part 
of its "Best Execution" analysis, which is part of the advisor's compliance 
program. The investment team reviews the quality of broker research, execution 
and service, and sets targets for each broker based on the brokers' overall 
performance. 
 
Currently all cash is placed with Northern Trust (Guernsey) Limited ("NTGL"). 
NTGL is also custodian of the majority of the Company's investments. NTGL is a 
wholly owned subsidiary of The Northern Trust Corporation ("TNTC"). TNTC is 
publicly traded and a constituent of the S&P 500. TNTC has a credit rating of 
A+. 
 
All transactions in listed securities are settled/paid upon delivery using 
approved brokers. The risk of default is considered minimal, as delivery of 
securities sold is only made once the broker has received payment. Payment is 
made on a purchase once the securities have been received by the broker. The 
trade will fail if either party fails to meet their obligation. 
 
When purchasing unlisted securities including over-the-counter bonds, the 
Investment Advisor prepares an evaluation on the company issuing these 
securities and monitors and reviews the Company's quality and performance over 
time. These unlisted investments are issued by the companies themselves and by 
their nature are either not rated or have a higher credit rating. 
 
It is the opinion of the Board of Directors that the carrying amounts of these 
financial assets, excluding equities, represent the maximum credit risk 
exposure as at the statement of financial position date. 
 
The Company's maximum credit exposure is limited to the carrying amount of 
unlisted investment and financial assets recognised as at the statement of 
financial position date including bank balances, Level 3 investments, illiquid 
investments and other receivables with a possible risk of no recovery: 
 
Maximum Credit Risk Exposure 
 
                                                          31.12.2016    31.12.2015 
 
                                                               In US         In US 
                                                             Dollars       Dollars 
 
Unlisted investments                                       9,990,744     2,518,957 
 
Cash and cash equivalents                                 22,688,931    19,009,538 
 
Receivables                                                1,189,423       399,051 
 
                                                          33,869,098    21,927,546 
 
                Capital management 
 
The Company is a close-ended investment company, and thus has a fixed capital. 
The Company's capital is represented by Ordinary Shares and each share carries 
one vote. Each share has an entitlement to dividends if declared. 
 
As approved at the AGM on 18 August, 2016, the Company may purchase a maximum 
of 13,843,655 Ordinary Shares, equivalent to 14.99% of the issued share capital 
of the Company as at the date of the AGM provided that; 
 
*               the minimum price to be paid (exclusive of expenses) is 
US$0.001; 
 
*               the maximum price to be paid (exclusive of expenses) is 105% of 
the average mid-market valuation for five days preceding the purchase; and 
 
*               if the shares are trading on the London Stock Exchange, at a 
discount to the lower of the undiluted or diluted Net Asset Value; 
 
The Company purchased 100,000 shares at a price of US$0.975 per share on the 23 
May 2016. Refer to Note 9. 
 
The Board also considers from time to time whether it may be appropriate to 
raise new capital by a further issue of shares. The raising of new capital 
would however be dependent on there being genuine market demand. 
 
The Company is not subject to externally imposed capital requirements. 
 
Note 14  Fair Value 
 
Financial assets at fair value through profit or loss are carried at fair 
value. The valuation techniques for valuing unlisted investments are described 
below. Other assets and liabilities are carried at cost which approximates fair 
value. 
 
IFRS 13 requires the Company to classify fair value measurements using a fair 
value hierarchy that reflects the significance of the inputs used in making the 
measurements. 
 
Fair value is the price that would be received to sell an asset or paid to 
transfer a liability in an orderly transaction between market participants at 
the measurement date. The fair value measurement is based on the presumption 
that the transaction to sell the asset or transfer the liability takes place 
either: 
 
(i)  in the principal market for the asset or liability, or 
 
                (ii) in the absence of a principal market, in the most 
advantageous market for the asset or liability 
 
The principal or the most advantageous market must be accessible by the 
Company. 
 
The fair value of an asset or a liability is measured using the assumptions 
that market participants would use when pricing the asset or liability, 
assuming that market participants act in their economic best interest. 
 
The Company uses valuation techniques that are appropriate in the circumstances 
and for which sufficient data is available to measure fair value, maximising 
the use of relevant observable inputs and minimising the use of unobservable 
inputs. 
 
All financial instruments for which fair value is recognised or disclosed are 
categorised within the fair value hierarchy, described as follows, based on the 
lowest level input that is significant to the fair value measurement as a 
whole: 
 
Level 1 - Quoted market prices (unadjusted) in an active market for identical 
assets or liabilities 
 
Level 2 - Valuation techniques for which the lowest level input that is 
significant to the fair value measurement is directly or indirectly observable 
 
Level 3 - Valuation techniques for which the lowest level input that is 
significant to the fair value measurement is unobservable 
 
For financial instruments that are recognised at fair value on a recurring 
basis, the Company determines whether transfers have occurred between levels in 
the hierarchy by re-assessing categorisation, based on the lowest level input 
that is significant to the fair value measurement as a whole, at the end of 
each reporting period. 
 
The following table analyses within the fair value hierarchy the Company's 
financial assets and liabilities (by class) measured at fair value for the year 
ended 31 December, 2016. 
 
                              Level 1       Level 2       Level 3         Total 
 
                                In US         In US         In US         In US 
                              Dollars       Dollars       Dollars       Dollars 
 
Assets 
 
Financial assets at fair 
value 
 
 through profit or 
loss: 
 
-Equity Securities         88,386,928             -             -    88,386,928 
 
-Derivative Instruments             -             -     9,990,744     9,990,744 
 
Total as at 31 December,   88,386,928             -     9,990,744    98,377,672 
2016 
 
The following table presents the movement in level 3 instruments for the year 
ended 31 December, 2016 by class of Financial Instrument. 
 
                                             Debt      Derivative 
 
                                       Securities      Securities           Total 
 
                                            In US           In US           In US 
                                          Dollars         Dollars         Dollars 
 
Opening balance                           127,526       2,391,431       2,518,957 
 
Purchases                                       -               -               - 
 
Sales                                   (127,526)       (294,005)       (421,531) 
 
Realised gains during the                 127,526         145,802         273,328 
year 
 
Unrealised gain during                  (127,526)       7,747,516       7,619,990 
the year 
 
Closing balance                                 -       9,990,744       9,990,744 
 
Net unrealised gain for the year                -       7,747,516       7,747,516 
included in the Statement of 
Comprehensive Income 
 
There were no transfers between levels for the year ended 31 December, 2016. 
 
The following table analyses, within the fair value hierarchy, the Company's 
financial assets and liabilities (by class) measured at fair value for the year 
ended 31 December, 2015 as required by IFRS 7. 
 
                                  Level 1        Level 2       Level 3          Total 
 
                                    In US          In US         In US          In US 
                                  Dollars        Dollars       Dollars        Dollars 
 
Assets 
 
Financial assets at fair 
value 
 
 through profit 
and loss: 
 
-Equity Securities            103,898,586              -             -    103,898,586 
 
-Derivative Instruments                 -              -     2,391,431      2,391,431 
 
-Debt Securities 
 
   Corporate bonds                      -              -       127,526        127,526 
 
Total assets as at 31         103,898,586              -     2,518,957    106,417,543 
December, 2015 
 
The following table presents the movement in level 3 instruments for the year 
ended 31 December, 2015 by class of Financial Instrument. 
 
                                                 Debt      Derivative 
 
                                           Securities      Securities          Total 
 
                                                In US           In US           In US 
                                              Dollars         Dollars         Dollars 
 
Opening balance                            56,008,526               -      56,008,526 
 
Purchases                                  18,641,413       2,371,249      21,012,662 
 
Sales                                    (52,378,965)               -    (52,378,965) 
 
Realised gains during the                   3,131,464               -       3,131,464 
year 
 
Unrealised losses during the year        (25,274,912)          20,182    (25,254,730) 
 
Closing balance                               127,526       2,391,431       2,518,957 
 
Net unrealised gain for the year              127,526          20,182         147,708 
included in the Statement of 
Comprehensive Income 
 
There were no transfers between levels for the year ended 31 December, 2015. 
 
Valuation techniques 
 
Listed investments 
 
Securities valued based on quoted market prices, in an active market for 
identical assets without any adjustments, are included within Level 1 of the 
hierarchy and are valued at bid price. 
 
Unlisted investments 
 
The Company invests in debt securities which are not quoted in an active 
market. Transactions in such investments do not occur on a regular basis. These 
positions are valued at their fair value in accordance with IFRS 13. 
 
Level 3 valuations are monitored closely by the Investment Advisor who reports 
to the Board of Directors on a quarterly basis. Valuations are based on the 
most appropriate method for each level 3 investment as at 31 December, 2016 as 
discussed below. 
 
As at 31 December, 2016, the Company holds stock acquisition rights ("SARs") in 
Prospect Co. Ltd. In accordance with IFRS 13, the Directors have undertaken 
their responsibility to approximate a fair value of this level 3 investment by 
way of utilising the Black-Scholes-Merton model. The model uses observable, 
non-observable and contractual inputs. The observable inputs are the underlying 
price of Prospect Co. Ltd (31 December, 2016: ¥66.5, 31 December, 2015: ¥51.5) 
and the risk free rate (31 December, 2016: 0.00%, 31 December, 2015: 0.00%). 
The significant unobservable inputs are the dividend yield, which is based on 
historic dividend payments (31 December, 2016:1.95%, 31 December, 2015: 1.95%) 
and the volatility rate used (31 December, 2016: 21.73%, 31 December, 2015: 
15.7%), which was the implied rate of volatility having removed the peaks 
created by the increase in dividend announced on 6 December, 2016 and adjusted 
for the potential restriction on the exercise of the SAR's following the 
announcement of a possible offer made by Prospect, Co. Ltd. 
 
The effects of movements of the significant unobservable inputs used in the 
fair value measurement of the unlisted investment categorised within Level 3 of 
the fair value hierarchy as at 31 December 2016 are shown below: 
 
                                        Effect on Fair Value 
 
    Unobservable       Sensitivity        In U.S. Dollars 
           input              used 
 
  Dividend yield     +0.05%/-0.05%     (25,883)         32,353 
 
      Volatility           +5%/-5%    1,294,138    (1,171,195) 
 
The contractual inputs are the shares received for each right exercised 
(100,000), the exercise date (21 December, 2015) the remaining exercise period 
(1 January 2016 to 20 December, 2020), the strike price of the SAR (¥54) and 
the number of SARs remaining (1,350). Using this model with the implied rate 
has resulted in an uplift of US$7,684,136 (31 December, 2015: US$490,243) from 
the year end valuation of the SARs. 
 
Note 15  Segmental Reporting 
 
                        The Board is responsible for reviewing the Company's 
entire portfolio and considers the business to have a single operating 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. 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 Statement. 
 
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 16 Contingent Asset 
 
The Company declined to tender its shares for Toho Real Estate, as the Company 
believed the true value to be considerably higher than that stated in the 
tender offer, and entered into an arbitration process. The Company has been 
involved in court proceedings with Toho Real Estate arising from the tender 
offer. In March 2015 the Company received notice from the court presiding over 
its petition that it had ruled in its favour. The court awarded the Company an 
aggregate amount of ¥121,600,000 (US$1.01 million). Although an improvement, 
this was still significantly discounted to the fair value of Toho Real Estate 
and as such, on 8 April, 2015 the Company filed an appeal against the ruling. 
On 30 March, 2016, the Company announced that the Tokyo High Court had ruled 
that the tender offer price for Toho Real Estate amounted to fair value and 
eliminated a previous award of ¥121,600,000 to the Company. The Company has 
filed an appeal to this ruling which has been accepted to be heard by the 
Supreme Court of Japan. 
 
With regard to Yukiguni Maitake, the Company feels that a tender offer was 
unfair and feels that the shares were artificially depressed due to poor 
management, which resulted in an accounting violation around the payment of 
dividends. The holding bank sold into the TOB and realised the collateral at 
what the Company believes to be an unfair price. Alix Partners Asia LLC and 
Nera Economic Consulting have been engaged to provide valuations. In October 
2016 the Company received notice from the court presiding over its petition 
that it had ruled the tender offer price for Yukiguni Maitake amounted to fair 
value. The company filed an appeal, which is currently being reviewed by the 
Tokyo High Court. Although at this point it would be difficult to put a per 
share value on it, the Company believes a premium closer to 40% vs. the 18.7% 
paid would be in line with the market. 
 
Note 17 Reconciliation of Published Valuation to Audited Financial Statements 
Prepared under IFRS 
 
                                                              31.12.2016     31.12.2015 
 
                                                                   In US          In US 
                                                                 Dollars        Dollars 
 
Net assets per Financial Statements                          121,923,460    125,296,979 
 
Writeback of prior year uplift on Toho Real                            -      1,009,715 
Estate (Note 16) 
 
Adjustment in value of financial assets at fair value 
through profit and loss: 
 
Prospect Co Ltd Stock Acquisition Rights                     (7,684,136)              - 
(Note 14) 
 
Net assets per published valuation                           114,239,324    126,306,694 
 
NAV per share per Financial Statements (in                        132.02         135.53 
cents) 
 
NAV per share per published valuation (in                         123.70         136.62 
cents) 
 
Note 18  Subsequent Events 
 
These Annual Report and Financial Statements were approved for issuance by the 
Board on 21 March, 2017. Subsequent events have been evaluated until this date. 
 
On 10 January, 2017, the Company announced that it was in preliminary 
discussions with Prospect, Co. Ltd ("Prospect") in respect of a possible offer 
by Prospect for the entire issued and to be issued share capital of the 
Company. 
 
Prospect was required on 7 February, 2017, to either announce a firm intention 
to make an offer for the Company or announce that it does not intend to make an 
offer. 
 
At the request of the Independent Directors of the Company, the Panel on 
Takeovers & Mergers (the "Panel") has consented to an extension of the relevant 
deadline, until 5:00 p.m. on 4 April, 2017 to enable the parties to conclude 
their ongoing discussions. By this time Prospect must either announce a firm 
intention to make an offer for the Company or announce that it does not intend 
to make an offer, in which case the announcement will be treated as a 
statement. This new deadline can be extended with the consent of the Panel. 
 
GENERAL INFORMATION 
 
General 
 
The Company is a close-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 92,352,602 Ordinary Shares in issue as at 31 
December, 2016. The Company's Ordinary Shares are listed on the Main Market of 
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. 
 
The Company is a FATCA compliant organisation with FATCA entity classification 
FFI and GIIN L0Q9R3.99999.SL.831. 
 
Alternative Performance Measures 
 
In accordance with ESMA Guidelines on Alternative Performance Measures ("APMs") 
APMs are included in the financial statements which require further 
clarification. An APM is defined as a financial measure of historical or future 
financial performance, financial position, or cash flows, other than a 
financial measure defined or specified in the applicable financial reporting 
framework. 
 
NAV to market price discount 
 
The Net Asset Value ("NAV") per share is the value of all the investment 
company's assets, less any liabilities it has, divided by the number of shares. 
However, because the Company's Ordinary Shares are traded on the London Stock 
Exchange's Main Market, the share price may be higher or lower than the NAV. 
The difference is known as a discount or premium. The Company's discount is 
calculated by expressing the difference between the period end dollar 
equivalent share price and the period end NAV per share as a percentage of the 
NAV per share. 
 
Market Performance 
 
Market Performance measures how the NAV per share has performed over a period 
of time compared to the MSCI Japan Small Cap Index. The Company quotes NAV per 
share performance as a percentage change from the start of the period, one-year 
and also three-year and five-year periods. The MSCI Japan Small Cap Index is 
designed to measure the performance of the small cap segment of the Japanese 
market. It has 901 constituents and represents 
14% of the free float-adjusted market capitalization of the Japan equity 
universe. It is also quoted as a percentage change from the start of the 
period, one-year and also three-year and five-year periods. 
 
Investment Objective 
 
The Company's investment objective is detailed in the Strategic Report. 
 
Investment Restrictions 
 
The Company's investment restrictions are detailed in the Strategic Report. 
 
NAV and Information 
 
The prices of Ordinary Shares and the latest NAV are published daily in the 
Financial Times. The price of the Ordinary Shares appears within the section of 
the London Share Service entitled "Investment Companies". 
 
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 eighteenth Annual General Meeting 
of the Company held on 27 August, 2014, the Board included in the business to 
be considered by Shareholders a special resolution that the Company should be 
wound up. The resolution was not passed. The board will 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 2017. 
 
Financial Highlights                                      31.12.2016      31.12.2015 
 
                                                               In US           In US 
                                                             Dollars         Dollars 
 
Total Net Assets                                         121,923,460     125,296,979 
 
IFRS NAV per share                                            132.02          135.53 
 
Share Price                                                    89.75          105.50 
 
Discount to NAV                                               32.02%          22.16% 
 
Directors 
 
Brief biographical details of the Directors are as follows: 
 
Rupert Evans, age 78, 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 is resident in Guernsey. Mr Evans was appointed 
to the Board on 18 November, 1994. 
 
John Hawkins, age 74, 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 the UK. 
 
Richard Battey, age 65, 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. 
 
 
 
END 
 

(END) Dow Jones Newswires

March 22, 2017 03:00 ET (07:00 GMT)

Prospect Japan (LSE:PJF)
Historical Stock Chart
From Jun 2024 to Jul 2024 Click Here for more Prospect Japan Charts.
Prospect Japan (LSE:PJF)
Historical Stock Chart
From Jul 2023 to Jul 2024 Click Here for more Prospect Japan Charts.