Prospect Japan has published interim figures covering the first half of 2015. We are having trouble understanding the statement – the text says “The Prospect Japan Fund (the “Company”) underperformed the MSCI Japan Small Cap Index (Total Return) by 26.7% in the six months to 30 June, 2015 (falling by 12.3% against a total return of 14.4% for the index). This large underperformance was due to the fact that the NAV had been uplifted by $23.9 million to the published NAV at year end by an IFRS adjustment to the fair value of two unlisted investments. The actual underperformance based on published NAV excluding IFRS adjustments was still a disappointing 7.1%.” What doesn’t make sense is to blame the IFRS adjustments for part of the underperformance since the value of those two unlisted investments would have been in both the opening and closing figures – we think what they might be trying to say is that the value of the unlisted investments fell significantly over the period.
Prospect Co. Ltd (3528) and Daito Bank (8563) are said to be the biggest positive contributors to the fund’s performance over the period. Prospect Co. Ltd saw strong share performance following the Yen3.0 billion convertible bond issuance to the Company in Nov 2014 and an announcement of a TOB for control of Yutaka Shoji (8747), a commodity futures trader. The Company held the Prospect Co. convertible bonds, which had a par value of Yen60 per share. The conversion of the bond and subsequent sale of the shares was the top contributor to H1 performance. Daito Bank, a regional bank in Fukushima prefecture, rose to eight-year highs, following full year results well ahead of company forecasts. Outstanding loans increased 1.4% to Yen472.7 billion. Dividends were increased by 25.0%.
They say weakness came from Shaklee Global Group (8205), a seller of nutrition and personal care products but, as the underperformance was so marked, we wonder whether there weren’t other disappointing investments in the portfolio.
PJF : Prospect Japan struggles in H1 2015