A long-time holding in the Fat Prophets portfolio was Cox Insurance (COX). Back in October 2003 (FAT5), we believed the group's decision to exit the commercial insurance industry would create a more profitable and stable retail based business. By combining Cox's underwriting capabilities with an expanded distribution network, customer base, and product offering, market segments with the greatest growth potential could be targeted to generate consistent earnings despite competing in a highly competitive and crowded market. Not surprisingly these characteristics put the insurer in the spotlight as a likely takeover candidate, which by mid-March was replaced with an offer from a consortium lead by former Cox chief executive Neil Utley. The cash bid was subsequently unanimously recommended by management and we advised Members with a holding to take profits once the deal became unconditional. On 24 June 2005, all conditions were met and the offer became unconditional.

Just before the year ended, we reduced exposure our exposure in Japan by selling half of the Martin Currie Japan Trust (MCJ). Despite our well established bullishness on the Japanese market, several factors led to this particular recommendation. First, management underperformance resulted in the Trust being restructured into a unit trust (i.e. the Japan Fund). Maintaining a position was a vote of confidence that this performance would improve. Second, with the shares trading at a four and a half year high, we believed consolidation or a correction was likely. Accordingly, despite our view that Japan was on a sustainable road to full recovery, we believed it was an opportunistic time for Members to book some solid gains.