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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Prospect Japan | LSE:PJF | London | Ordinary Share | GB00B011QL44 | ORD US$0.001 |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 1.305 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
0 | 0 | N/A | 0 |
THE PROSPECT JAPAN FUND LIMITED INTERIM RESULTS ANNOUNCEMENT The financial information set out in this announcement does not constitute the Company's statutory financial statements for the period ended 30 June 2014. All figures are based on the 30 June 2014 unaudited condensed financial statements, approved by the Board of Directors on27 August 2014. The Company's statutory financial statements will shortly be available for inspection at the UK Listing Authority's Document Viewing Facility, which is located at: Financial Services Authority 25 The North Colonnade Canary Wharf London E14 5HS CHAIRMAN'SREPORT for the period from 1 January, 2014 to 30 June, 2014 The fund performed relatively strongly in the six months to the 30 June 2014 and rose 7.8% compared to MSCI Japan Small Cap Index which rose 6.3%. Prime Minister Abe's economic reform policy (the "three arrows" of Abenomics) is well under way. The Bank of Japan remains committed to attaining the target of 2% annual inflationat the earliest possible time. The CPI has picked up, and stripping out the impact of the consumption tax increase, is now above 1% per annum, although this has been helped by the weakness of the yen. Fiscal policy was stimulated, in part to rebuild post the Tohoku earthquake. The consumption tax was raised from 5% to 8% on 1 April 2014. There was significant spending ahead of the rise, but an inevitable fall back in the second quarter. There has been much slower progress on the third arrow of "growth strategies". Negotiations are continuing on the Trans Pacific Partnership ("TPP"). Corporation tax was reduced and cuts to below 30% are being positively reviewed. The reopening of nuclear power stations has yet to occur and as a result Japan is running a trade deficit. Domestic investors are being encouraged to invest in equities. For individuals Nippon Individual Savings Accounts ("NISA"s) were introduced on 1 January. These provided tax incentives for individuals investing up to ¥1m annually into equities and investment trusts. The Government Pension Investment Fund, the largest pension fund in the world, and similar funds, recommended a higher weighting in domestic equities and a much reduced position in bonds, in anticipation of inflation reaching 2%. It is worth remembering that Japanese individuals, companies and pension funds remain significantly underweight their own equity market. The corporate sector remains buoyant as evident by earnings per share for the fiscal year just ended reaching a record. Nomura are forecasting a further 10% growth for the fiscal year ended March 2014. With this increased confidence dividends are rising and there has been a pick up in share buybacks. The property market continues its recovery with price rises occurring in the major cities which will help asset values. Risks and uncertainties remain. In particular it is too early to judge whether Abenomics will succeed and relations with China have at times been strained. In accordance with the Company's Articles of Incorporation a Special Resolution to wind up the Company is required to be put to the Shareholders at the end of the first 12 years of the Company's life and every 3 years thereafter. The last such vote was at the AGM on 27 August of this year when the resolution was not passed. Due to this and the Company's ability to meet its obligations as they fall due over the next year the Board has decided that it remains appropriate for these unaudited condensed financial statements to be prepared on a going concern basis. The Directors have reviewed the prospects for your Company with the Investment Advisorand believe that the outlook for Japan will continue to offer an encouraging environment for shareholders. Christopher Sherwellretires as a Director on 27 August. The Board and I would like to take this opportunity to thank him for his substantial contribution over ten years since his appointment in 2004. John Hawkins Chairman 27 August, 2014 INVESTMENT ADVISOR'S REPORT for the period from 1 January, 2014 to 30 June, 2014 Market Performance (%), US$ NAV YTD 01.01.14 to 30.06.14 1 Year 3 Year 5 Year THE PROSPECT JAPAN FUND LIMITED 7.8 19.0 50.0 97.1 MSCI Japan Small Cap Index 6.3 18.5 33.5 59.7 The Prospect Japan Fund Limited inception date is 20 December 1994. Above performance of the Fund is net of fees and expenses and includes reinvestment of dividends and capital gains.(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) The Fund performed strongly during H1 2014, gaining 7.8% during the period ending 30 June 2014 vs the MSCI Japan Small Cap Index's 6.3% total return. The broader Japan market performed poorly during most of the half, leading major world market declines as the impact of domestic issues such as a higher import bill, disappointing export numbers and an impending consumption tax hike, were compounded by external shocks from emerging market volatility and the Russian incursion into Crimea. The market rebounded in May and June, as the market reaction to April's consumption tax increase has been muted, and corporate profits were strong. News was positive for corporate profits for fiscal year 2014, with Japanese companies boosting dividends by an aggregate 20% to an all-time high, following 56% year-on-year rise in average net profits. The Abe administration committed to corporate tax reform during the half, calling for a reduction in rates to the 20% to 29% range, with incremental cuts starting as soon as Fiscal Year 2016. The fall in tax rates would be compensated for by widening the tax base. Thus far into 2014, the Bank of Japan has refrained from adding to the easing that revitalized the market last year, and the question of Bank of Japan's expansion timing has come out of focus given signs of market resilience following the April consumption tax increase. The bank has left inflation forecasts unchanged, suggesting the likelihood of changes to its stimulus package is unlikely in the near term. The expected Government Pension Investment Fund's ("GPIF") rebalancing of its investments remains a potential positive catalyst, with expectations being for a shift out of JGBs (currently 60% of assets) and into riskier assets, including foreign bonds, will spark a weakening of the Yen and added stimulus for Japanese corporates. Median estimates are for the Yen to depreciate to ¥107 to the dollar by year's end. The GPIF's move into equities, in combination with other pension fund reallocation, Bank of Japan's Exchange Traded Fund ("ETF") purchases, and tax-free Nippon Individual Savings Accounts' ("NISA") buying, could add as much as ¥16 trillion in domestic demandfor equities. Fund holdings, weighted towards Retail (13.5%) and Real Estate (12.4%), are direct beneficiaries of the continued support for fiscal and monetary stimulus by the Abe administration and Bank of Japan. Support for domestic consumption can be seen through additional central government spending and promotion of wage growth. Real Estate prices are supported by expectation of stable near- to mid-term low government bond yields via Bankof Japan purchases. Holdings providing outsized contribution to positive performance during the period included Shaklee Global Group (8205), a seller of nutrition and personal care products and Katakura Industries (3001), a shopping mall operator engaged in the manufacture and sale of textiles, pharmaceuticals and auto parts. Shaklee Global Group shares rallied after reporting triple-digit full year profit growth, beating upwardly revised forecastsand adding 4.97 percentage points to Fund performance. Katakura Industries outperformed following its full year results announcement. The company reported that the redevelopment of a large commercial facility near Tokyo proceeds on schedule, with the unrealized gains on the company's rental assets rising 12.1% year-on-year to ¥87.1 billionlowering the company's adjusted price to book ratio to 0.32x vs a stated 0.82x. Katakura contributed 1.29 percentage points of Fund performance. Weakness came from Akatsuki Financial Group (8737), a commodity futures trader, and Tomoe Corp (1921), a steel frame construction company. Akatsuki Financial Group declined from six-year highs at the end of 2013, along with the broader securities and commodities traders market(-0.76 percentage points Fund contribution). Tomoe Corp, fell in line with the real estate index, following strong outperformance during 2013(-0.49 percentage points Fund contribution). J-REITs gained 11.4% in USD during the first half of 2014, strongly outperforming the Nikkei 225's 2.6% decline, on attractive dividend yields, lower debt financing rates, and recovering office occupancy and rents. The Bank of Japan purchased a total of ¥10.2 billion in J-REIT units during the half, 34% of the ¥30 billion target for direct purchases in 2014. The total amount of units purchased to date now stands at ¥151.2 billion. To date, 2014 has seen three J-REIT Initial Public Offering ("IPO") announcements, along with 15 public issuances of new investment units, raising over ¥412 billion. J-REITs have announced over ¥827 billion in property acquisitions to date during the year, along with ¥40 billion in sales. Post-period, Fund holding Kenedix Residential REIT (3278) issued new units valued at ¥8.6 billion. The proceeds were used to acquire ¥14 billion in new property, resulting in a forecast 4.7% period-on-period increase in dividend yield. The cost of debt continues to fall for J-REITs, supporting dividend growth. J-REITs have issued ¥80 billion in new bonds during the half, with an average maturity of 7.5 years at 0.774% interest rate. Principal Risks and Uncertainties Japan remains vulnerable to slowdown in the global economy and geopolitical turmoil, particularly in major trading partners. While the Bank of Japan remains poised to provide additional stimulus as needed, with inflation having taken firm root, the Abe administration's successful rollout of regulatory and tax reform remains a necessary catalyst for long-term economic growth. Fundamentals on the corporate level remain strong, and domestic demand is poised to support the market in 2H 2014. The Prospect Japan Fund Limited Top 10 Holdings 30 June, 2014 Symbol Security % of total assets 8205 SHAKLEE GLOBAL GROUP INC 13.2 2178 TRI-STAGE INC 8.8 3001 KATAKURA INDUSTRIES CO LTD 8.3 1921 TOMOE CORP 7.2 7404 SHOWA AIRCRAFT INDUSTRY CO LTD 5.8 8737 AKATSUKI FINANCIAL GROUP INC 5.2 gktaihei GODO KAISHA TAIHEIYO JISHO #1 BOND 5.0 8563 DAITO BANK LTD/THE 4.8 9324 YASUDA LOGISTICS CORPORATION 4.6 9308 INUI WAREHOUSE CO LTD 2.3 The Prospect Japan Fund Limited Sector Weighting 30 June, 2014 Security % of total assets Retail 13.5 Real Estate 12.4 Diversified Financial Services 11.5 Advertising 8.8 Storage/Warehousing 8.5 Engineering & Construction 7.2 Machinery-Diversified 6.2 Banks 4.8 Transportation 2.7 Building Materials 1.4 Distribution/Wholesale 0.8 Percentage weightings are Prospect Asset Management, Inc.'s internal calculations and have not been reconciled by the administrator. Results of calculations as presented may not be exact due to rounding and precision of stored values. Prospect Asset Management, Inc. 27 August, 2014 The Prospect Japan Fund Limited is a closed-end investment company incorporated in Guernsey, and listed on the London Stock Exchange. 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. Past performance is no indication of future results. PORTFOLIO OF INVESTMENTS as at 30 June, 2014 Number of Fair Value Percentage of Securities Investments in U.S. Dollars Net Asset Value Listed investments Advertising 933,400 Tri-stage Inc 11,296,363 8.78 11,296,363 8.78 Banks 5,114,000 The Daito Bank 6,204,291 4.82 6,204,291 4.82 Building Materials 116,400 Endo Lighting Corp 1,750,851 1.36 1,750,851 1.36 Distribution/Wholesale 130,500 Kamei Corp 998,846 0.78 998,846 0.78 Diversified Financial Services 1,168,260 Akatsuki Financial Group 6,671,821 5.19 519,000 Yutaka Shoji Co Ltd 1,571,564 1.22 8,243,385 6.41 Engineering and Construction 2,201,300 Tomoe Corp 9,314,570 7.25 . 9,314,570 7.25 Machinery 55,000 Nikki Co Ltd 171,968 0.13 676,600 Showa Aircraft Industry Co Ltd 7,407,664 5.76 495,000 Tokyo Kikai Seisakusho Ltd 415,002 0.33 7,994,634 6.22 Real Estate 5,395,142 Gro-Bels Co Ltd + 2,926,793 2.28 829,700 Katakura Industries Co Ltd 10,663,304 8.29 428,100 Keihanshin Building Co Ltd 2,313,940 1.80 15,904,037 12.37 Retail 72,000 Sekichu Co Ltd 344,430 0.27 348,000 Shaklee Global Group Inc 17,025,005 13.24 17,369,435 13.51 Storage/warehousing 315,500 Inui Warehouse Co Ltd 2,962,529 2.30 726,000 Maruhachi Warehouse Co Ltd 2,055,156 1.60 559,395 Yasuda Logistics 5,881,689 4.56 10,899,374 8.46 Transportation 744,000 Daiwa Motor Transportation Co Ltd 2,707,855 2.10 20,000 Hokkaido Chuo Bus Co Ltd 61,153 0.05 218,800 Inui Steamship Co Ltd 718,652 0.56 3,487,660 2.71 Total listed investments 93,463,444 72.68 Unlisted investments Corporate bond 5,150,000 Godo Kaisha Taiheiyo Jisho 6,414,115 4.98 315,700,000 Takefuji Corp 151,481 0.12 6,565,596 5.10 Total unlisted investments 6,565,596 5.10 Total investments 100,029,040 77.77 Net current assets 28,585,126 22.23 NET ASSETS 100.00 128,614,166 + Mr. Curtis Freeze, Director of Prospect Asset Management (Channel Islands) Limited ("PAM(CI)"), the Manager of The Prospect Japan Fund Limited, is President of Gro-Bels Co Ltd ("Gro-Bels").Gro-Bels owns the entire share capital ofPAM(CI) and Prospect Asset ManagementInc ("PAMI"), the Investment Advisor of The Prospect Japan Fund Limited. RESPONSIBILITY STATEMENT for the period from 1 January, 2014 to 30 June, 2014 We confirm that to the best of our knowledge: (a) the InterimUnaudited Condensed Financial Statements have been prepared in accordance with IAS 34 - Interim Financial Reporting as adopted in the European Union; (b) the Chairman's Report, Investment Advisor's Report and Notes to the Unaudited CondensedFinancial Statements include: - a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and - a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein). By order of the Board, Director Director 27 August, 2014 INDEPENDENT INTERIM REVIEW REPORT TO THE PROSPECT JAPAN FUND LIMITED Introduction We have been engaged by the Company to review the UnauditedCondensed Financial Statements in the half-yearly Financial Report for the six months ended 30 June, 2014 which comprise the Unaudited CondensedStatement of Comprehensive Income, the Unaudited CondensedStatement of Financial Position, the Unaudited Condensed Statement of Changes in Equity, the Unaudited CondensedStatement of Cash Flows and the related notes 1 to 15. We have read the other information contained in the half-yearly Financial Report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the Unaudited Condensed Financial Statements. This report is made solely to the Company in accordance with guidance contained in ISRE 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed. Directors' Responsibilities The half-yearly Financial Report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly Financial Report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority. As disclosed in note 1, the Annual Financial Statements of the Company are prepared in accordance with International Financial Reporting Standards as adopted by the European Union. TheUnauditedCondensed Financial Statements included in this half-yearly Financial Report have been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union. Our Responsibility Our responsibility is to express to the Company a conclusion on the UnauditedCondensed Financial Statements in the half-yearly Financial Report based on our review. Scope of Review We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of Interim Financial Information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the UnauditedCondensed Financial Statements in the half-yearly Financial Report for the six months ended 30 June, 2014 are not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority. Ernst & Young LLP 27 August, 2014 The Financial Statements are published on websites maintained by the Investment Advisor. The maintenance and integrity of these websites are the responsibility of the Investment Advisor; 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 website. Legislation in Guernsey governing the preparation and dissemination of Financial Statements may differ from legislation in other jurisdictions. UNAUDITED CONDENSED STATEMENT OF COMPREHENSIVE INCOME for the period from 1 January, 2014 to 30 June, 2014 Revenue Capital Total Revenue Capital Total 01.01.2014 to 01.01.2014 to 01.01.2014 to 01.01.2013 to 01.01.2013 to 01.01.2013 to 30.06.2014 30.06.2014 30.06.2014 30.06.2013 30.06.2013 30.06.2013 In U.S. In U.S. In U.S. In U.S. In U.S. In U.S. Notes Dollars Dollars Dollars Dollars Dollars Dollars Investment income 788,822 - 788,822 811,857 - 811,857 Interest income - - - 202,563 - 202,563 Foreign exchange movements 1,779,240 (721,417) 1,057,823 488,409 (3,116,826) (2,628,417) Gain on financial assets at fair value through profit or loss - 8,604,693 8,604,693 - 17,755,376 17,755,376 Total income 2,568,062 7,883,276 10,451,338 1,502,829 14,638,550 16,141,379 4 Management fee (952,064) - (952,064) (794,383) - (794,383) 5 Other expenses (524,933) - (524,933) (351,027) - (351,027) Transaction costs - (286,989) (286,989) - (719,620) (719,620) Total expenses (1,476,997) (286,989) (1,763,986) (1,145,410) (719,620) (1,865,030) Gain for the period before tax 1,091,065 7,596,287 8,687,352 357,419 13,918,930 14,276,349 3 Withholding tax (179,336) - (179,336) (75,030) - (75,030) Gain for the period after tax 911,729 7,596,287 8,508,016 282,389 13,918,930 14,201,319 Total comprehensive income for the period 911,729 7,596,287 8,508,016 282,389 13,918,930 14,201,319 2 Gain per Ordinary Share - Basic & Diluted 0.010 0.081 0.090 0.003 0.146 0.149 The `Total' column of this statement represents the Company's Unaudited Condensed Statement of Comprehensive Income, prepared in accordance with IFRS. The supplementary `Revenue' and `Capital' columns are both prepared under guidance published by the Association of Investment Companies. All items in the above statement derive from continuing operations. UNAUDITED CONDENSED STATEMENT OF FINANCIAL POSITION as at 30 June, 2014 30.06.2014 31.12.2013 30.06.2013 Notes In U.S. Dollars In U.S. Dollars In U.S. Dollars (Unaudited) (Audited) (Unaudited) Non-current assets Financial assets at fair value through 6 profit or loss 100,029,040 99,187,758 106,078,142 Current assets 8 Receivables 435,054 3,162,181 232,186 Cash and cash equivalents 34,507,330 21,309,724 9,147,417 Total current assets 34,942,384 24,471,905 9,379,603 Current liabilities 9 Payables 6,357,258 2,047,594 5,696,537 Net current assets 28,585,126 22,424,311 3,683,066 Net assets 128,614,166 121,612,069 109,761,208 Equity 10 Share capital account 93,483 94,878 95,023 10 Redemption reserve 86,691,284 88,197,203 88,341,819 10 Capital redemption reserve 322,026 320,631 320,486 Other reserves 41,507,373 32,999,357 21,003,880 Total equity 128,614,166 121,612,069 109,761,208 Ordinary Shares in issue 93,483,602 94,878,602 95,023,602 2 Net Asset Value per Ordinary Share 1.38 1.28 1.16 The Unaudited Condensed Financial Statements were approved by the Board of Directors on 27 August, 2014 and signed on its behalf by: Director Director UNAUDITED CONDENSED STATEMENT OF CHANGES IN EQUITY for the period from 1 January, 2014 to 30 June, 2014 Capital Capital Capital Capital Reserve/ Share Capital Redemption Redemption Revenue Reserve/ Reserve/ Exchange Account Reserve Reserve Reserve Realised Unrealised Differences Total In U.S. In U.S. In U.S. In U.S. In U.S. In U.S. In U.S. In U.S. Dollars Dollars Dollars Dollars Dollars Dollars Dollars Dollars Balances at 1 January, 2014 94,878 320,631 88,197,203 (14,106,096) 49,738,831 (2,389,140) (244,238) 121,612,069 Total comprehensive income/(expense) for the period Gain/(loss) for the period after tax - - - 911,729 6,341,679 1,976,025 (721,417) 8,508,016 Capital activities Repurchase of shares (1,395) 1,395 (1,505,919) - - - - (1,505,919) Balances at 30 June, 2014 93,483 322,026 86,691,284 (13,194,367) 56,080,510 (413,115) (965,655) 128,614,166 for the period from 1 January, 2013 to 30 June, 2013 Capital Capital Capital Capital Reserve/ Share Capital Redemption Redemption Revenue Reserve/ Reserve/ Exchange Account Reserve Reserve Reserve Realised Unrealised Differences Total In U.S. In U.S. In U.S. In U.S. In U.S. In U.S. In U.S. In U.S. Dollars Dollars Dollars Dollars Dollars Dollars Dollars Dollars Balances at 1 January, 2013 95,278 320,231 88,581,476 (12,292,130) 26,903,132 (11,862,827) 4,054,386 95,799,546 Total comprehensive income/(expense) for the period Gain/(loss) for the period after tax - - - 282,389 7,276,651 9,759,105 (3,116,826) 14,201,319 Capital activities Repurchase of shares (255) 255 (239,657) - - - - (239,657) Balances at 30 June, 2013 95,023 320,486 88,341,819 (12,009,741) 34,179,783 (2,103,722) 937,560 109,761,208 UNAUDITED CONDENSED STATEMENT OFCASH FLOWS for the period from 1 January, 2014 to 30 June, 2014 01.01.2014 to 01.01.2013 to 30.06.2014 30.06.2013 Notes In U.S. Dollars In U.S. Dollars Cash flows from operating activities 11 Net cash inflow/(outflow) from operating activities 1,527,763 (2,934,778) Cash flows from investing activities Purchase of investments (52,746,406) (158,676,772) Sale of investments 64,104,483 153,359,433 Net cash inflow/(outflow) from investing activities 11,358,077 (5,317,339) Net cash inflow/(outflow) before financing activities 12,885,840 (8,252,117) Cash flows from financing activities Repurchase of shares (1,505,919) (239,657) Net cash outflow from financing activities (1,505,919) (239,657) Increase/(decrease) in cash and cash equivalents 11,379,921 (8,491,774) Reconciliation of net cash flow to movement in net funds Net cash inflow/(outflow) 11,379,921 (8,491,774) Effects of foreign exchange rate changes 1,817,685 693,706 Cash and cash equivalents at beginning of the period 21,309,724 16,945,485 Cash and cash equivalents at end of the period 34,507,330 9,147,417 NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS Note 1 Principal Accounting Policies The Unaudited Condensed Interim Financial Statements for the six months ended 30 June, 2014 have been prepared in accordance with IAS 34 "Interim Financial Reporting" as adopted by the European Union, the Listing Rules of the London Stock Exchange ("LSE") and applicable legal and regulatory requirements of the Companies (Guernsey) Law, 2008. The UnauditedCondensed InterimFinancial Statements do not include all the information and disclosures required in the Annual Financial Statements and should be read in conjunction with the Company's Annual Report and Audited Financial Statements for the year ended 31 December, 2013. The accounting policies and methods of computation followed in this Interim Unaudited Condensed set of Financial Statements are consistent with those of the latest Annual Audited Financial Statements for the year ended 31 December, 2013 which were prepared in accordance with International Financial Reporting Standards as adopted by the European Union, except for the adoption of the new standards and interpretations effective as of 1 January, 2014 as listed below, which had no impact on the financial position or performance of the Company. IAS 32 - Financial Instruments: Presentation - (effective 1 January, 2014) IFRS 10 - Consolidated Financial Statements - (effective 1 January, 2014) IFRS 12 - Disclosure of Interests in Other Entities - (effective 1 January, 2014) IAS 27 - Separate Financial Statements - (effective 1 January, 2014) IAS 36 - Impairment of Assets- (effective 1 January, 2014) IAS 39 - Financial Instruments: Recognition and Measurement- (effective 1 January, 2014) The preparation of the InterimUnauditedCondensedFinancial Statements requires management to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities at the date of the Interim UnauditedCondensed Financial Statements. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from those estimates. IFRS 10 (Amendments) includes an exception from consolidation for entities which meet the definition of aninvestment entity, and requires such entities to recognise all investments at fair value through profit or loss.The Company meets the definition of an investment entity but does not control any entities as defined underIFRS 10. Presentation of information The InterimUnauditedCondensed Financial Statements have been prepared on a going concern basis under the historical cost convention adjusted to take account of the revaluation of the Company's investments at fair value. In order to better reflect the activities of an investment Company and in accordance with the guidance issued by the Association of Investment Companies, supplementary information which analyses the Statement of Comprehensive Income between items of a capital and revenue nature has been presentedwithin the Statement of Comprehensive Income. Going Concern The Directors believe that it is appropriate to continue to adopt the going concern basis in preparing the FinancialStatements because the assets of the Company consist mainly of securities that are readily realisable and, whilstthe liquidity of these needs to be managed, the Company has adequate financial resources to meet its liabilitiesas they fall due. In accordance with the Company's Articles, the Board is required every three years to include in the businessto be considered by shareholders at the Annual General Meeting a Special Resolution that the Company shouldbe wound up. This resolution requires 75% of votes in favour for it to be passed. The last such resolution was at the Annual General Meeting held on 27 August of this year when the resolution was not passed. The next such resolution will be tabled at the Annual General Meeting to be held in 2017. Note 2 Gain/(loss) per Ordinary Share - Basic & Diluted and Net Asset Value per Ordinary Share - Basic & Diluted The gain per Ordinary Share - Basic and Diluted has been calculated based on the weighted average number of Ordinary Shares of 94,284,810and a net gain of US$8,508,016(31 December, 2013: 95,073,601 Ordinary Shares and a net gain of US$26,196,796; 30 June, 2013:95,226,926 Ordinary Shares and a net gain of US$14,201,319). There were no dilutive elements to shares issued or repurchased during the period. The Net Asset Value per Ordinary Share - Basic and Diluted has been calculated based on the number of shares in existence at the period end date of93,483,602(31 December, 2013:94,878,602; 30 June, 2013: 95,023,602) and shareholders' funds attributable to equity interests of US$128,614,166(31 December, 2013: US$121,612,069; 30 June, 2013: US$109,761,208). The Company announces its Net Asset Value per Share to the London Stock Exchange ("LSE") at each weekly and month end valuation point. Below is the Net Asset Value per Ordinary Share announced to the LSE and as presented in these Interim Condensed Financial Statements. 30.06.2014 31.12.2013 30.06.2013 In U.S. Dollars In U.S. Dollars In U.S. Dollars Net Asset Value per Ordinary Share - Basic and Diluted 1.38 1.28 1.16 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 £600. 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, 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 period amounted to US$952,064(30 June, 2013: US$794,383) of which US$165,307 (30 June, 2013: US$125,374) is due and payable at the period end. The Management Agreement dated 1 December, 1994remains 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 01.01.2014 to 01.01.2013 to 30.06.2014 30.06.2013 In U.S. Dollars In U.S. Dollars Administration and secretarial fees* 158,677 132,397 Custodian's fees and charges** 64,992 65,096 General expenses 188,043 60,717 Directors' remuneration 77,183 65,120 Auditors' fees 17,720 17,863 Non-audit fees 18,318 9,834 524,933 351,027 *The administration and secretarial fees are payable to Northern Trust International Fund Administration Services (Guernsey) Limited monthly in arrears ata rateof 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$158,667(30 June, 2013: US$132,397) of which US$27,551(30 June, 2013: US$20,896) is due and payable at the period end. **The custodian's fees and charges are payable to Northern Trust (Guernsey) Limited monthly in arrears ata rate of 0.08% of the value of theportfolio of the Company as at the last business day of the month. Total custodian's fees and charges for the year amounted to US$64,992 (30 June, 2013: US$65,096) of which US$6,700(30 June, 2013: US$5,814) is due and payable at the period end. Note 6 Financial Assets at Fair Value through Profit orLoss 01.01.2014 to 01.01.2013 to 01.01.2013 to 30.06.2014 31.12.2013 30.06.2013 In U.S. Dollars In U.S. Dollars In U.S. Dollars Opening book cost 101,576,898 89,404,049 89,404,049 Purchases at cost 56,929,895 241,863,287 163,591,704 Proceeds on sale (64,693,306) (253,604,885) (152,810,159) Realised gain on sale 6,628,668 23,914,447 7,996,270 Closing book cost 100,442,155 101,576,898 108,181,864 Unrealised loss (413,115) (2,389,140) (2,103,722) Fair value 100,029,040 99,187,758 106,078,142 Note 7 Fair Value Hierarchy Financial assets at fair value through profit or loss are carried at fair value. The valuation techniques for valuingunlisted corporate bonds are described below. Other assets and liabilities are carried at amortised cost whichapproximate fair value. IFRS 13 requires the Company to classify fair value measurements using a fair value hierarchy that reflects thesignificance 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 orderlytransaction 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 measurementas 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 period ended 30 June 2014. Quoted prices Significant Significant in active observable unobservable markets inputs inputs Level 1 Level 2 Level 3 Total In US In US In US In US Dollars Dollars Dollars Dollars Financial assets at fair value through profit or loss: -Equity Securities 93,463,444 - - 93,463,444 -Debt Securities Corporate bonds - - 6,565,596 6,565,596 Total as at 30 June, 2014 93,463,444 - 6,565,596 100,029,040 The following table analyses within the fair value hierarchy the Company's financial assets and liabilities (by class) measured at fair value for the period ended 30 June 2013. Level 1 Level 2 Level 3 Total In US In US In US In US Dollars Dollars Dollars Dollars Financial assets at fair value through profit and loss: -Equity Securities 84,074,716 - - 84,074,716 -Debt Securities Corporate bonds - - 15,113,042 15,113,042 Total as at 31 December, 2013 84,074,716 - 15,113,042 99,187,758 The following table presents the movement in level 3 instruments for the period ended 30June,2014 by class of financial instrument. Debt Securities Total In US Dollars In US Dollars Opening balance 15,113,042 15,113,042 Sales (2,925,117) (2,925,117) Conversion of unlisted bond to listed security during the period (6,241,755) - Realised losses during the period (494,679) (494,679) Unrealised gains during the period 1,114,105 1,114,105 Closing balance 6,565,596 12,807,351 Net unrealised gain for the period included in the Statement of Comprehensive Income for level 3 Investments held at 30 June, 2014 1,114,105 1,114,105 During the period, the holding in Gro-Bels Co Ltd was converted from an unlisted bond into listed shares. The following table presents the movement in level 3 instruments for the period ended 31 December, 2013 by class of financial instrument. Debt Securities Total In US In US Dollars Dollars Opening balance 7,067,416 7,067,416 Purchases 20,324,858 20,324,858 Sales (11,245,782) (11,245,782) Realised losses during the year (1,297,697) (1,297,697) Unrealised gains during the year 264,247 264,247 Closing balance 15,113,042 15,113,042 Net unrealised gain for the year included in the Statement of Comprehensive Income for level 3 Investments held at 31 December, 2013 624,230 624,230 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 the Directors estimate of 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 described below. The Company holds a bond in TaiheyoJisho (GK) a Japanese partnership set up to invest in real estate ventures at a fixed interest rate of 10%. TaiheyoJisho currently invests in SCD ML II, LLC, which is developing a project on the island of Hawaii. The assessed value of the land was over $7 million at the time of the bond issuance, there is also a title insurance policy issued for $5 million. Projections show that equity in the project, after liabilities and interest payments which include the bond, to be almost $12 million which is in line with expectations. Projections are carried out based on weekly performance reports of the construction project and regular review of the financial statements. The bond was issued to fund the development project which is developing as expected. The Company bought the entire issuance of the bond which it still holds and there have been no further issues, therefore a secondary market does not exist. The issuer does not have a credit rating to monitor and the credit rating of the insurer remains unchanged. Based on the above and the means by which management monitors the valuation of the investments, there is little likelihood of a change in the fair value of the bonds. Note 8 Receivables 30.06.2014 31.12.2013 In U.S. Dollars In U.S. Dollars Amounts due from brokers 435,054 - Dividends receivable - 319,454 Other receivables* - 2,842,727 435,054 3,162,181 *Other receivableswere amounts due from the custodian caused by duplicate trades. Note 9 Payables 30.06.2014 31.12.2013 In U.S. Dollars In U.S. Dollars Amounts due to brokers 6,065,168 1,748,459 Other creditors 292,090 299,135 6,357,258 2,047,594 Note 10 Share Capital, Redemption Reserve & Capital Redemption Reserve Authorised Share Capital 30.06.2014 31.12.2013 Number of shares In U.S. Dollars In U.S. Dollars 150,000,000 Ordinary Shares of US$0.001 each 150,000 150,000 60,000,000 "C" Ordinary Shares of US$0.01 each 600,000 600,000 As approved at the AGM on 21 June, 2013, the Company may purchase a maximum of 14,275,516 Ordinary Shares, equivalent to 14.99% of the Issued share capital of the Company as at the date of the AGM. During the period, shares were purchased and cancelled as follows:- Capital Redemption Redemption Ordinary Shares Share Capital Reserve Reserve Number of shares In U.S. Dollars In U.S. Dollars In U.S. Dollars 94,878,602 Balance at 1 January, 2014 94,878 88,197,203 320,631 Shares repurchased and (1,395,000) cancelled during the period (1,395) (1,505,919) 1,395 93,483,602 Balance at 30 June, 2014 93,483 86,691,284 322,026 For purchases following the year end, details are provided in note 15 of the Financial Statements. Capital Redemption Redemption Ordinary Shares Share Capital Reserve Reserve Number of shares In U.S. Dollars In U.S. Dollars In U.S. Dollars 95,278,602 Balance at 1 January, 2013 95,278 88,581,476 320,231 Shares repurchased and (400,000) cancelled during the year (400) (384,273) 400 94,878,602 Balance at 31 December, 2013 94,878 8,197,203 320,631 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 period. The Capital Redemption Reserve is used to cancel the shares of the Company when they are redeemed or there is a share buy back. Ordinary Shares carry the right to vote at general meetings of the Company and to receive dividends and, in a winding-up will participate in any surplus assets remaining after settlement of any outstanding liabilities of the Company. "C" Ordinary Shares do not carry the right to attend or to vote at general meetings of the Company or to receive dividends and, in a winding up will participate in any "C" Ordinary Share surplus assets remaining after the settlement of any outstanding liabilities of the Company. Note 11 Reconciliation of Return/(Deficit) on Ordinary Activities to Net Cash Inflow/(Outflow) from Operating Activities 30.06.2014 30.06.2013 In U.S. Dollars In U.S. Dollars Return on ordinary activities for the period 911,729 282,389 Decrease in dividends receivable and other receivables 3,162,181 620,832 Decrease in other creditors (7,045) (27,467) Foreign exchange loss (2,539,102) (3,810,532) Net cash inflow/(outflow) from operating activities 1,527,763 (2,934,778) 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 byPAM(CI)whose parent company is Prospect Co., Ltd (Kabushiki Kaisha Prospect ("KKP"), a Japanese Company) and the ultimate parent is Gro-Bels Co Ltd. ("Gro-Bels"). Mr Rupert Evans is a Director of the Manager. Directors' fees are disclosed in Note 5. The basic fee payable to Directors in 2014 is £20,000, the Chairman of the Audit Committee £22,500 and the Chairman of the Board £25,000 per annum. At 30 June, 2014 ChristopherSherwell held beneficial interests of 9,940 (2013: 9,940) Ordinary Shares in the Company. No other Directors holding office at 30 June 2014, 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 Freezeis a Director of PAM(CI), the Manager of The Prospect Japan Fund Limited, and is the President of Gro-Bels.Gro-Bels owns the entire issued share capital of KKP, the owner of PAMI, the Investment Advisor to The Prospect Japan Fund Limited and PAM(CI), the Manager of The Prospect Japan Fund Limited. Note 13 Segmental Reporting The Board is responsible for reviewing the Company's entire portfolio and considers the business to have a single operatingsegment. 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 14 Contingent asset The Company declined to tender its shares for Toho Real Estate, as the Company believed the true value to be considerably higher, and entered into an arbitration process. The results of arbitration are uncertain and placing a value of future receipts was challenging however the Boardestimatedthat the true value of Toho Real Estate to be 10 per cent.in excess of the tender offer price. As the tender offer price has now been received, this results in a contingent asset of $933,023 (31 December, 2013: $898,120), 10 per cent of the tender offer price of Toho Real Estate. The appreciation in value of thecontingent asset at the period end is due to movements in foreign exchange.The Board has taken into account the risks and uncertainties of the arbitration process, applied discounts for the fact that the holding was delisted and therefore no longer tradableand the time value of money in reaching the estimated uplift. Note 15 Subsequent Events These Unaudited Condensed Financial Statements were approved for issuance by the Board on 27 August 2014. Subsequent events have been evaluated until this date. 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. At the 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. This resolution was not passed. On 27 August, 2014, Christopher Sherwellretired as a Director. A new Director will be appointed in due course. GENERAL INFORMATION General The Company is a closed-ended investment company incorporated in Guernsey in November 1994 and was launched in December 1994 with an initial asset value of US$70 million. There are 93,483,602Ordinary Shares in issue as at 30 June, 2014. The Company's Ordinary Shares are listed on the London Stock Exchange. The Ordinary Shares of the Company have not been registered under the United States Securities Act of 1933 or the United States Investment Companies Act of 1940. Accordingly, none of the Ordinary Shares may be offered or sold directly or indirectly in the United States or to any United States persons (as defined in Regulation `S' under the 1933 Act) other than in accordance with certain exemptions. Investment in the Company is suitable only for sophisticated investors and should be regarded as long-term. Past performance is no indication of future results. Investment Objective The following investment objective was approved on the 5 March, 2014: 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 Restrictions The following investment restrictions were approved on the 5March, 2014 and adopted by the Company: (i) the Company may not invest in securities carrying unlimited liability; or (ii) the Company may not deal short in securities; or (iii) the Company may not take legal or management control in investments in its portfolio; or (iv) the Company may not invest in any commodities, land or interests in land; or (v) the Company may not invest or lend more than 25 per cent 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 (vi) invest more than 10 per cent 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 state investment policies to invest no more than 15 per cent of their total assets in other investment funds which are listed on the Official List) and the Company will not invest more than 15 per cent of its assets at the time the investment is made in such funds; or (vii) the Company may not invest more than 5% of its assets at the time the investment is made in unit trusts, shares or other forms of participation in managed open-ended investment vehicles; or (viii) the Company may not commit its assets in the purchase of foreign exchange contracts, financial futures contracts, put or call options or in the purchase of securities on margin other than in connection with or for the purpose of hedging transactions effected on behalf of the Company; or (ix) enter into borrowings in excess of 20 per cent. of net assets at the time the borrowings are drawn down. Investment Objective Prior to 5 March, 2014, the Company's Investment Objective was as follows: The Company was established to invest substantially all of its assets in securities issued by smaller Japanese companies. The objective of the Company is to achieve long-term capital growth from an actively managed portfolio of securities primarily of smaller Japanese companies listed or traded on Japanese Stock Markets. Investment Restrictions The following investment restrictions were adopted by the Company prior to the 5March, 2014: (i) the Company may not invest in securities carrying unlimited liability; or (ii) the Company may not deal short in securities; or (iii) the Company may not take legal or management control in investments in its portfolio; or (iv) the Company may not invest in any commodities, land or interests in land; or (v) the Company may not invest or lend more than 10% of its assets in securities of any one company or single issuer (other than obligations of the Japanese Government or its agencies or of the US Government or its agencies); or (vi) the Company may not invest more than 10% of its assets in non-corporate investments or securities not listed or quoted on any recognised stock exchange, for which purpose securities quoted on any of the Japanese Stock Markets will be treated as securities quoted on a recognised stock exchange; or (vii) the Company may not invest more than 5% of its assets in unit trusts, shares or other forms of participation in managed open-ended investment vehicles; or (viii) the Company may not commit its assets in the purchase of foreign exchange contracts, financial futures contracts, put or call options or in the purchase of securities on margin other than in connection with or for the purpose of hedging transactions effected on behalf of the Company. NAV and Information The prices of Ordinary Shares and the latest NAV are published daily in the Financial Times. Prices (in Sterling terms) of the Ordinary Shares appear within the section of the London Share Service entitled "Investment Companies". 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 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 which was not passed. The boardwill 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. Directors Brief biographical details of the Directors are as follows: Rupert Evans, age 76, is a Guernsey advocate and former partner in the firm of the Guernsey legal advisors, MourantOzannes. He is now a consultant to MourantOzannes. 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 71, 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. Christopher Sherwell, age 66,was Managing Director of Schroders (C.I.) Limited from 2000 to 2003, and was Investment Director with Schroders (C.I.) Limited from 1993 to 2000. Prior to joining Schroders (C.I.) Limited, Mr Sherwell was Far East Regional Strategist with Smith New Court Securities, and from 1977 to 1990 worked as a journalist on the Financial Times, including seven years as a foreign correspondent in the Far East and Australia from 1983 to 1990.Mr Sherwell was appointed to the Board on 27 September, 2004and retiredon 27 August, 2014. Richard Battey, age62, 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 Battey was appointed to the Board on 10 February, 2010. 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.
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