Final Results

18 March 2014

JAPAN RESIDENTIAL INVESTMENT COMPANY LIMITED

(the "Company")

Consolidated Financial Statements for the Year Ended 30 November 2013

Japan Residential Investment Company Limited (AIM: JRIC) is a closed-ended Guernsey registered company established to make and hold investments in residential property in Japan. The Company, its subsidiaries and entities in which it has a beneficial interest are referred to collectively as the "Fund". The Company presents its audited consolidated annual financial results for the year ended 30 November 2013.

HIGHLIGHTS

· Portfolio value increased 3.0% during the financial year on a like-for-like basis, up from a 2.6% gain in the prior year.

· Unrealised valuation gains on investment property totalled £6.6 million (5.3% of NAV) for the year ended 30 November 2013.

· Realised gains on property disposals totalled £2.1 million following the sale of four non-core assets at an average 24.5% premium to appraised value.

· Profit for the year increased to £15.1 million, up 2.5% year-on-year.

· The Yen declined 27.0% against Sterling between the prior and the current year end.

· Underlying profit1 for the year totalled £6.0 million, down from £7.5 million in the prior year, primarily due to Yen weakness.

· Average occupancy increased to 95.6% for the financial year, up from 95.2% in the prior year.

· Cumulative distributions of 3.6p per share in respect of the year ended 30 November 2013.

· NAV per share was 58.7p at 30 November 2013, down 11.0p, due primarily to net foreign exchange losses. In Yen terms, NAV per share increased 7.0% over the year.

· Share price ended the year at a premium of 11.2% to NAV, versus a discount of 15.4% at the prior year end.

FINANCIAL SUMMARY

1. Profit excluding gains/(losses) from fair value adjustments, foreign exchange and other capital and one-off items (see note 8). The Fund uses underlying profit in its internal financial reporting and provides this analysis as additional information.

2. Total debt less cash and restricted reserves as a proportion of total assets less cash and restricted reserves.

The values of assets and liabilities are converted from Yen to Sterling at the year end exchange rate. Items in the Statement of Comprehensive Income are converted at the average exchange rate for the year.

Enquiries:

CHAIRMAN'S STATEMENT

I am pleased to present the Company's Annual Report and Consolidated Financial Statements for the year ended 30 November 2013 (the "financial statements"). The Company was established to provide stable income and capital growth through residential property investment in the major Japanese markets. In July 2013, the continuation resolution passed with overwhelming shareholder support, providing the Company with a renewed mandate for growth to achieve greater economy of scale, enhance efficiency and improve liquidity in the underlying shares.

September 2013 marked the successful refinancing of 52% of the Fund's outstanding debt on substantially improved terms. This extended the weighted average debt maturity to over four years while the average interest rate on outstanding debt nearly halved to 0.97% per annum. Our ability to achieve these terms is a testament to the vitality of the Japanese credit markets, the quality of the underlying property portfolio, and the Fund's seven year track record of prudent investment management.

The Fund initiated a capital rotation strategy in 2013, whereby the proceeds from non-core asset sales are used to purchase properties with enhanced operating efficiency and greater prospects for capital growth. Four smaller assets were sold between April and October at substantial premiums to appraised value while one larger asset was purchased at a moderate discount to appraised value. Capital rotation contributed significantly to profits in the financial year while improving overall portfolio quality.

In October 2013, the Company raised £15.4 million of new equity capital to fund acquisitions. This funding, combined with proceeds from recent asset sales and debt refinancing, enabled the Company to allocate ¥11.0 billion (£65.6 million) to new property acquisitions in Q1 2014.

The Board is pleased to welcome Jefferies Hoare Govett ("Jefferies") to the Company's advisory team. Jefferies was appointed joint corporate broker in January 2014, to work alongside Liberum Capital in support of the Fund's promotion, market making, and corporate advisory functions. In line with the Fund's growth strategy, the Board is seeking to enhance the Fund's international profile as a means to further broaden its investor base.

The fiscal year 2013 was marked by a substantial decline in the Yen against the Sterling - the Company's presentation currency - precipitated by the Bank of Japan's ambitious quantitative easing strategy. The average Yen/Sterling exchange rate during the year ended November 2013, which is used to translate income statement items, was down 19.5% from the corresponding rate used in the prior year. For assets and liabilities, the Yen was down 27.0% versus Sterling year on year ('YoY') as at 30 November 2013. While weakness in the Yen has impacted Sterling-based performance, Japanese monetary policy has led to substantial increases in liquidity, which has enabled the Fund to reduce its weighted average interest costs by more than half to the current rate of 0.88% per annum. It is also encouraging a movement in investor allocation out of cash and bonds into risk assets and has supported the Fund's exit from four non-core assets at an average 24.5% premium to appraised value, contributing materially to profit for the year.

Since establishment, regulatory and tax regimes in which the Fund operates have continued to evolve. This includes changes to the Netherlands-Japan tax treaty and the introduction of the Alternative Investment Fund Managers Directive ("AIFMD") and the Foreign Account Tax Compliance Act ("FATCA"). Regarding these and similar issues, the Board conducts periodic reviews of the Fund position with the aim of maintaining regulatory compliance and a robust operating structure

Results

Profit for the year increased to £15.1 million (2.5% YoY) or 7.9p per share for the financial year ended 30 November 2013. Profit was supported by £6.6 million in unrealised valuation gains on investment property. The sale of non-core investment properties generated an additional £2.1 million in realised gains for the year. Operating efficiency improved due to lower leasing expenses and negotiated reductions in property and facility management fees, with property operating expenses falling to 22.6% of gross rental income, down from 23.0% in the prior year. Net rental income declined £2.4 million (15.5%) due to Yen weakness. Administrative and other expenses were higher during the year, due mainly to one-off continuation-related expenses.

Underlying profit totalled £6.0 million for the year, representing a 19.4% decline YoY due primarily to Yen weakness. In Yen terms, underlying profit declined 3.7% as a result of higher taxation charges due to increased profits at the Japanese holding company level, as well as the write-down of financing costs capitalised following early debt refinancing.

NAV per share was 58.7p (¥98.5) at 30 November 2013, down 11.0p from the prior year. NAV increases of 4.7p from gains in valuation and sale of investment property and 3.2p from underlying profit were more than offset by 3.6p in dividend payments and a 15.3p net foreign exchange loss. In Yen terms, NAV per share increased 7.0% over the year.

The share price ended the year at a premium of 11.2% to NAV, versus a discount of 15.4% at the prior year end. At the date of this report, the share price is 59.8p, which represents a premium of approximately 3.9%.

Borrowings

At year end, the Fund held investment property valued at £203.5 million. Bonds and loans payable totalled £120.0 million with a weighted average interest cost of 0.97% per annum. Gearing was 37.1%, calculated as total debt less cash and restricted reserves as a proportion of total assets less cash and restricted reserves. Interest coverage was 3.3x (underlying profit before interest and tax divided by interest expense). Of the total debt outstanding, 34.3% was at fixed rates and 65.7% was floating. The weighted average maturity of debt outstanding was 4.1 years.

Post year end

The Fund has moved rapidly to allocate its available capital, including proceeds from the October 2013 capital raising and from asset sales and debt refinancings. By 5 March 2014, the Fund had completed the acquisition of eight additional residential properties located predominantly in Tokyo, with a total purchase price of ¥8.9 billion (£53.1 million), excluding tax and other acquisition costs. The prospective net operating income yield of these properties is 5.2%.

On 5 March 2014, the Fund obtained a loan in the amount of ¥5.5 billion (£32.8 million) from Resona Bank, Ltd. This seven year debt has a floating interest rate of 0.56% which is capped at 0.75% and has a loan to value ('LTV') ratio of 61.5%.

With this most recent debt transaction, total Fund debt was ¥25.9 billion (£154.5 million) against assets valued at ¥43.1 billion (£257.0 million) for an LTV ratio of 60.1%. Gearing was approximately 50.9%. The weighted average interest rate on outstanding debt was 0.88%.

The Fund is scheduled to close on a ninth additional property on or around 27 March 2014. This Tokyo asset has a purchase price excluding acquisition costs of ¥2.0 billion (£11.9 million) and a prospective net operating yield of 5.4%. These acquisitions represent the full allocation of net proceeds from the October 2013 capital raising.

Distributions

The Directors are pleased to announce a further interim distribution of 1.8p per share to be paid on 25 April 2014 to shareholders on the register on 28 March 2014. This brings the amount paid and payable in respect of the 12 months ending 30 November 2013 to 3.6p per share. This amount is 83.7% covered by underlying profit, with the shortfall being covered by cash reserves.

Underlying profit is expected to be augmented in the near term due to the lower interest costs achieved in the later part of 2013 and by the ¥11.0 billion (£65.6 million) in new purchase commitments completed in Q1 2014, which will enable the Company to return to a fully covered dividend assuming current foreign exchange rates are maintained. In accordance with the Company's objective of achieving both steady income and capital growth, the Board intends to maintain a prudent and sustainable distribution policy.

In accordance with policy established on Admission of the Company to trading on AIM, the Directors do not intend to implement a policy of hedging the Yen against Sterling, the Company's presentation currency. Accordingly, shareholders should appreciate that the Company is essentially a Yen investment and that the net asset value in Sterling and the amount of income available for distribution in Sterling are directly affected by movements of Sterling against the Yen.

Outlook

The Company remains focused on achieving its dual mandate of stable income and capital growth. We are encouraged by progress on both fronts. The successful capital raising in October 2013 has enabled it to achieve additional scale and efficiency through acquisitions. The Board believes that these recent purchases - in light of the income-accretive characteristics of the value proposition they represent - will provide a compelling risk-adjusted return on investment capital.

The Fund's investment decisions are driven by real estate fundamentals. Tenant demand continues to strengthen while rising land prices and construction costs are raising the barriers to new supply. Well-positioned multi-family residential properties in the major cities continue to offer an attractive cash stream net of expenses as well as a wide spread over the cost of financing. We are confident that the outward appeal of this Company to investors is fully justified by the growth prospects of underlying property values and the steady net income generated by the portfolio.

Raymond Apsey

Chairman

17 March 2014

REPORT OF THE MANAGER AND THE INVESTMENT ADVISER

Market

In 2013 Japan began a policy of aggressive fiscal and monetary stimulus combined with structural reform to spur economic growth. Capital markets responded enthusiastically with the Nikkei stock index rising 57% by year end. The broader Japanese economy has also been showing signs of improvement. November employment figures showed that the ratio of jobs to the number of job seekers rose to 1.0 for the first time in six years. Japan's core consumer price index increased 1.3% YoY in December 2013, the seventh consecutive month of positive inflation. GDP growth was 1.6% in 2013.

Listed Japanese Real Estate Investment Trusts ('JREITs') raised a record ¥1,144 billion (£6.8 billion) in 2013, versus ¥496 billion (£3.0 billion) in 2012. On the back of strong purchase demand from retail investors, investment trusts and banks, JREITs currently trade at a 34% premium to NAV and a 3.4% dividend yield. Investment property transaction volume in the three quarters ending Q3 2013 was up 2.4 times over the same period in the prior year, supported to a large extent by JREIT acquisitions. Private funds, both foreign and domestic, are also increasingly active in the market.

Residential land price trends are improving in the major cities. From July 2013, residential land values were up 0.5% in Tokyo and 1.8% in Nagoya, while the rate of decline in Osaka narrowed to 0.2% versus 1.0% one year prior. Construction costs are also rising as the weaker Yen translates to higher costs for imported materials and the labour market tightens following increased demand.

The condominium market in Tokyo continues to improve with strong buyer uptake. November 2013 inventories were at their lowest levels in 20 years. Buyer demand is pushing up prices of both new and used condominiums in anticipation of rising prices, higher interest rates and the scheduled hike in consumption tax. The average new condominium price rose 17.6% YoY to ¥742,000 (£4,425) per square metre in metropolitan Tokyo. Used condominium prices rose 5.1% for the year ending December 2013. This compares with a decline of 2.4% over the same period one year prior.

New lending to the Japanese real estate sector increased 20.8% YoY as of Q4 2013. The debt market for real estate investors remains highly borrower-friendly as deposit-rich lenders work to increase their loan book and diversify away from Japanese Government Bonds. Improved terms include higher leverage and longer maturities, as well as lower spreads and upfront charges. Standard non-recourse debt terms are 65% loan-to-value, five year tenor, and interest costs of sub 1% on a floating rate basis.

Portfolio

The Fund's portfolio was independently valued at ¥34.1 billion (£203.5 million) as at 30 November 2013, versus ¥32.9 billion (£249.4 million) at the prior year end. In Yen terms, this represents an increase of ¥1.2 billion (£7.1 million) over the portfolio valuation one year prior. In addition to valuation gains on properties held, portfolio value reflects the net effect of capital rotation during the year.

On a like-for-like basis, the rate of property value growth increased to 3.0% during the financial year, compared with a 2.6% increase in the prior year. A scarcity of assets and lower yields in Tokyo are pushing investment toward regional markets. While the portfolio registered valuation gains in each of its major regional categories, the largest gains in percentage terms were in Osaka (3.5%) followed by Tokyo (3.2%), Nagoya (2.8%), and Other (2.1%).

The unleveraged net yield of the portfolio (appraised net operating income over value) ended at 5.6% as at 30 November 2013, down from 5.8% at the prior year end.

The Company generated £2.1 million in gains on disposal of investment properties as four smaller assets were sold during the year at an average 24.5% premium to appraisal value. These assets were replaced with G-FLAT, a single 47-unit Tokyo residential asset purchased for ¥1.5 billion (£8.7 million), excluding tax and other acquisition costs. The Property is three minutes walking distance from Senzoku Station on the Tokyu Meguro Line, providing convenient access to Tokyo's financial district as well as the popular Jiyugaoka and Meguro shopping and leisure districts.

Operating performance was strong throughout the year as average occupancy reached 95.6%, up 0.4% over the prior year. The number of Fund units experiencing price increases is increasing YoY. The rate of decline in rents is falling and annual declines in rents moderated to 0.3% in 2013, down from 0.7% in the prior year.

The Investment Adviser achieved substantial reductions in leasing, property management, and building maintenance fees through cost control and negotiation of vendor service terms. As a result, property operating expenses fell to 22.6% of gross rental income, down from 23.0% one year prior.

The Investment Adviser continues to support net rental income growth through active lease management, leasing show rooms, and the maintenance of a highly responsive stance to movements in the lease market.

Summary Portfolio Characteristics (as at 30 November 2013)

Regional Allocation: Asset locations are well diversified in and around the major Japanese population centres. Of all Fund properties, 86.7% by value are located in the three largest regional markets as at 30 November 2013: Tokyo 48.0%, Osaka 25.4% and Nagoya 13.3%. The remaining 13.3% of properties are located in or within commuting distance of a "key city" with a population over 1 million or in a prefectural capital city.

Asset Diversification: The Fund is well diversified with the 10 largest assets comprising less than half of total portfolio value. The largest single asset represents 10.8% of portfolio value. Portfolio diversification and liquidity is reflected in the small average property value of ¥696 million (£4.2 million).

Asset Quality: Due to a variety of characteristics including quality of construction, design, amenities and surrounding environment, portfolio assets are expected to remain competitive in the marketplace for the foreseeable future. All properties are held as fee simple ownership and have reinforced concrete structures. The majority of units are Single Type (studio or one bedroom) targeting the growing young, single demographic.

Tenant Risk: The portfolio offers very broad tenant diversification with 2,214 rentable units, and the largest exposure from a single tenant represents a mere 0.4% of the total rentable area. Due to overall tenant quality and third party guarantees on the majority of leases, uncollectable rent was limited to less than 0.1% of gross rental income.

Affordability: Units are concentrated in mid-level rent markets offering broad tenant affordability and appeal. Average monthly rent on residential units was ¥92,100 (£549) as at 30 November 2013. 88.5% of the unit rents are priced below ¥150,000 (£895) per month.

Building Age: The weighted average property age of the portfolio is 7.6 years at the year end. The modern design and amenities make the properties competitive in the lease market and new properties enjoy lower repair and maintenance costs. No building was built prior to 1981 when the last major update in seismic architectural standards came into effect.

Access: All properties are located within walking distance (most within 10 minutes) of a train or subway station.

Post year end

Post year end, the Fund has purchased eight residential apartment buildings (the "Portfolio"), with a total purchase price of ¥8.9 billion (£53.1 million), excluding tax and other acquisition expenses. The Portfolio consists of 438 rentable units and 14,928 square meters of leasable area. The weighted average age of the properties is 10.2 years. The properties are well located, offering excellent mass transit access due to their close proximity to subway, train or bus lines. The Portfolio has been independently valued at ¥8.9 billion (£53.1 million) and has an estimated prospective net operating yield of 5.2%.

On 5 March 2014, the Fund arranged an additional loan from Resona Bank, Ltd. in the amount of ¥5.5 billion (£32.8 million). This debt was collateralised by the eight recently-acquired properties valued at ¥8.9 billion (£53.1 million) for an LTV ratio of 61.5%. The debt has a floating interest rate of 0.56% which is capped at 0.75%. Following this latest financing transaction, Fund debt totalled ¥25.9 billion (£154.5 million) against assets valued at ¥43.1 billion (£257.0 million) for an LTV ratio of 60.1%. Gearing was approximately 50.9%, calculated as total debt less cash and restricted reserves as a proportion of total assets less cash and restricted reserves. The weighted average interest rate on outstanding debt was 0.88%. Of the total debt outstanding, 27.0% was at fixed rates, 21.2% was floating with a cap, and 51.8% was floating. The weighted average maturity on loans outstanding was 4.5 years.

Purchase of a ninth asset priced at ¥2.0 billion (£11.9 million) is scheduled to close on or around 27 March 2014. This asset has been independently valued at ¥2.1 billion (£12.5 million) and has a prospective net operating yield of 5.4%.

In terms of regional allocation, the above-mentioned new acquisitions (both purchased and committed post year end) are weighted by value to Tokyo Central 5 Wards (15%), Tokyo 23 Wards (72%), Greater Tokyo (6%), and Other (7%). With the acquisition of the these assets, the Fund allocation to the Tokyo market will increase from 48% at 30 November 2013 to 59% based on the most recent independent property appraisals.

Strategy

We aim to maximise investment returns in combination with careful risk management, a strategy that encompasses the active management of assets for income and capital growth. We are constantly probing the boundaries of achievable rent terms and conditions and working to reduce operating costs and minimise capital expenditure. As we have seen, small savings across a large portfolio can make a meaningful contribution to performance and these benefits compound over time.

We initiated a capital rotation strategy in response to shifting market conditions with the aim of realising gains when appropriate while enhancing portfolio quality and prospects for growth. Progress in this respect reflects a concerted commitment to ensure that equity capital is deployed to maximum effect.

The Fund debt profile is much improved following the Autumn 2013 refinancings, as evidenced by lower debt cost and extended maturities. We intend to further improve on financing terms and mitigate risks whenever possible including increasing the average time to maturity and maintaining substantial portions of hedged versus unhedged interest rate debt. Our recent arrangement of seven year term debt capped at 0.75% demonstrates our progress toward this goal. Pursuing relationships with additional sources of debt capital is another priority.

Outlook

To date, equity capital markets have been the primary beneficiary of the highly stimulative Japanese fiscal and monetary policies. Still, equity capital flows are pushing more funding to real property, resulting in increased demand and supporting upward revision of prices. Inflation is leading a broad range of investors from retail to institutional, to seek higher exposure to risk assets including real estate. The impact on property markets is evidenced by increased transaction volume, falling investment property yields and rising prices across the residential property spectrum from single unit condominiums to multi-family apartment blocks.

The Company's investment rationale is built upon solid fundamentals. We actively manage a portfolio of quality residential property in major urban markets with in place net cash flows that currently represent a yield of 5.5% against investment property value. With conservative gearing at sub-1% interest rates, our ability to make income-accretive acquisitions while adding scale and enhancing liquidity underscores the attractiveness of the current market opportunity.

KK Halifax Management Limited KK Halifax Asset Management

Manager Investment Adviser

Consolidated Statement of Comprehensive Income

For the year ended 30 November 2013

All items in the above statement are derived from continuing operations.

The profit is attributable to the shareholders of the Company. There are no minority interests.

The accompanying notes form an integral part of these financial statements.

Consolidated Statement of Financial Position

As at 30 November 2013

Consolidated Statement of Changes in Equity

For the year ended 30 November 2013

Consolidated Statement of Cash Flows

For the year ended 30 November 2013

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 NOVEMBER 2013

1. General information

The Fund, which comprises the Company, its subsidiaries and the special purpose entities in which it has a beneficial interest, as defined in note 2, has been established to make and hold investments in residential property in Japan.

The Company is incorporated and domiciled in Guernsey. The Company is quoted on the AIM market of the London Stock Exchange.

These financial statements were approved for issue by the Board of Directors on 17 March 2014.

2. Summary of significant accounting policies

The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been applied consistently from incorporation.

Basis of preparation

These financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS"), which comprise standards approved by the International Accounting Standards Board ("IASB") and interpretations approved by the International Financial Reporting Standards Interpretation Committee that remain in effect and The Companies (Guernsey) Law, 2008.

The financial statements have been prepared in Sterling, which is the presentation currency of the Fund, and under the historical cost convention, except for investment property and certain financial instruments which are carried at fair value.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise itsjudgement in the process of applying the Fund's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 4.

Going concern

On 19 July 2013, the shareholders of the Company voted in favour of a resolution releasing the Directors from the obligation to hold an extraordinary general meeting to wind up the Company. As a result the life of the Company is now indefinite, subject to a continuation vote to be held in 2018 and subsequently in every fifth calendar year thereafter.

The Directors have a reasonable expectation that the Fund has adequate resources to continue in operational existence for at least twelve months from the date of approval of this document. The Fund has high levels of liquidity and has, during the year, refinanced all of its short-term debt such that it now has no further debt maturing until January 2017.

Accordingly, the Directors are satisfied that it is appropriate to adopt the going concern basis in preparing the financial statements.

Changes in accounting policies

The accounting policies adopted are consistent with those of the previous financial year. The adoption of new standards and interpretations has not led to any changes in the Fund's accounting policies.

The Board has adopted a policy of applying new standards and interpretations when they become effective.

The following standards are effective for the current year and have been applied in these financial statements:

· IAS 1 (amended), 'Presentation of Financial Statements' (effective for periods commencing on or after 1 July 2012); and

· IAS 12 (amended), 'Income Taxes' (effective for periods commencing on or after 1 January 2012).

At the date of authorisation of these financial statements, the following standards and interpretations, considered relevant by the Board, which have not been applied, were in issue but not yet effective:

· IAS 27, 'Consolidated and Separate Financial Statements', to be reissued as IAS 27 (amended 2011), 'Separate Financial Statements' (effective for periods commencing on or after 1 January 2013);

· IAS 28, 'Investments in Associates', to be reissued as IAS 28 (amended 2011), 'Investments in Associates and Joint Ventures' (effective for periods commencing on or after 1 January 2013);

· IAS 32 (amended), 'Financial Instruments: Presentation' (effective for periods commencing on or after 1 January 2014);

· IAS 36 (amended), 'Impairment of Assets' (effective for periods commencing on or after 1 January 2014);

· IAS 39 (amended), 'Financial Instruments: Recognition and Measurement' (effective for periods commencing on or after 1 January 2014);

· IFRS 7 (amended), 'Financial Instruments: Disclosures' (various amendments effective for periods commencing on or after 1 January 2013 and 1 January 2015);

· IFRS 9 'Financial Instruments - Classification and Measurement' (no effective date yet determined);

· IFRS 10 'Consolidated Financial Statements' (effective for periods commencing on or after 1 January 2013);

· IFRS 11, 'Joint Arrangements' (effective for periods commencing on or after 1 January 2013);

· IFRS 12, 'Disclosure of Interests in Other Entities' (effective for periods commencing on or after 1 January 2013); and

· IFRS 13, 'Fair Value Measurement' (effective for periods commencing on or after 1 January 2013).

In addition, the IASB completed its Annual Improvements 2009-2011 Cycle in May 2012. This amended a number of existing standards and interpretations effective for accounting periods commencing on or after 1 January 2013.

The principal effects of these standards are as follows:-

· IFRS 9 will introduce new requirements for classifying and measuring financial assets;

· IFRS 10 will introduce alternative options for the consolidation of subsidiary entities; and

· IFRS 13 will introduce a new framework for measuring fair value and will extend the disclosure requirements for assets and liabilities other than financial instruments.

The Directors are currently assessing the impact that the adoption of these standards and interpretations will have on the financial statements of the Fund in future periods.

Consolidation

The consolidated financial statements incorporate the financial statements of the Company, its subsidiaries and those special purpose entities in which it has a beneficial interest ('SPEs'), which meet the requirements of SIC-12 Consolidation - Special Purpose Entities to be treated as subsidiaries. The Company, through its subsidiaries, is party to Tokumei Kumiai Agreements with the SPEs through which certain investment property is held and has no voting powers at meetings of these SPEs.

Subsidiaries are fully consolidated from the date on which control is transferred to the Fund. They are de-consolidated from the date on which control ceases.

All the Fund companies have 30 November as their year end. Consolidated financial statements are prepared using uniform accounting policies for like transactions. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Fund.

Intercompany transactions, balances and unrealised gains on transactions between Fund companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

Foreign currency translation

(a) Functional and presentation currencies

Items included in the financial statements of each of the Fund's entities, included in the financial statements, are measured using the Japanese Yen which is the currency of the primary economic environment in which each entity operates (the "functional currency"). This is the currency in which income is generated and investment property is purchased. The financial statements are presented in Sterling. The Directors have chosen Sterling as the presentation currency as this is the currency in which shares were issued and dividends are paid. Sterling denominated values of assets and liabilities as at 30 November 2013 are based on an exchange rate of ¥167.673/£1 (30 November 2012: 132.063/£1). Items in the Consolidated Statement of Comprehensive Income are converted at the average exchange rate for the year of ¥149.780/£1 (30 November 2012: 125.360/£1).

(b) Foreign currency transactions

Foreign currency transactions are translated into the functional currency using exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation into the functional currency at the year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Consolidated Statement of Comprehensive Income as net foreign exchange gains/losses.

(c) Fund companies

The results and financial positions of all the Fund's entities included in the financial statements that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

(i) Assets and liabilities are translated at the closing rate at the year end date;

(ii) Income and expenses are translated at average exchange rates for the year; and

(iii) All resulting currency translation differences are recognised in other comprehensive income.

Revenue recognition

Revenue includes rental income, service charges and management charges from investment property. Rental income from operating leases, including non-refundable lease premiums, is recognised as income on a straight-line basis over the lease term. Service and management charges are recognised in the accounting period in which the services are rendered.

Interest income

Interest income is accrued on a time basis, by reference to the principal outstanding and the effective interest rate applicable.

Investment property

Property that is held for long-term rental yields or for capital appreciation or both is classified as investment property. Investment property is measured initially at its cost, including related transaction costs.

After initial recognition, investment property is measured at fair value. The fair values determined by independent valuers are based on the income capitalisation basis and consideration has been given to assumptions that are mainly based on market conditions existing at the year end date. The fair value is the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arm's length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion. Changes in fair values are recognised in the Consolidated Statement of Comprehensive Income.

Subsequent expenditure incurred in relation to an investment property is capitalised only if probable future economic benefits will flow to the Fund as a result. Other expenditure on investment property is recognised in the Consolidated Statement of Comprehensive Income.

Investment property is derecognised when it has been disposed of. Any gains or losses on disposal of an investment property are recognised in the Consolidated Statement of Comprehensive Income in the period of disposal. A disposal is recognised when the risks and rewards associated with the investment property are transferred to a third party.

Taxation

Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities, based on tax rates and laws that are enacted or substantively enacted by the year end date.

Deferred income tax is recognised on all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements except for deferred income tax assets which are recognised only to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, carried forward tax credit or tax losses can be utilised.

Deferred income tax assets and liabilities are measured on an undiscounted basis at the tax rates that are expected to apply when the related asset is realised or liability is settled, based on tax rates and laws enacted or substantively enacted at the year end date.

Income tax is recognised in other comprehensive income if it relates to items that are themselves recognised in other comprehensive income. Otherwise income tax is recognised in profit or loss for the year.

Expenses

All expenses are accounted for on an accruals basis and are included in the Consolidated Statement of Comprehensive Income, except property acquisition expenses, expenses incidental to the disposal of investment property, company share issue costs and borrowing costs which are discussed in the relevant separate accounting policies.

Leases

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Properties leased out under operating leases are included in investment property in the Consolidated Statement of Financial Position.

Trade and other receivables and payables

Trade and other receivables and payables do not carry interest and are short-term in nature. They are accordingly stated at their nominal value as reduced by appropriate allowances for estimated irrecoverable amounts in the case of receivables.

Cash and cash equivalents

Cash and cash equivalents comprises bank balances and short term deposits with an original maturity of three months or less.

Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares are shown in equity as a deduction from the proceeds.

Bonds and loans payable

Bonds payable are recognised initially at fair value less directly attributable transaction costs. Subsequent to initial recognition, bonds payable are stated at amortised cost with any difference between cost and redemption value being recognised in the Consolidated Statement of Comprehensive Income within interest expenses over the period of the borrowings on an effective interest basis.

Borrowing costs

Borrowing costs are recognised in the Consolidated Statement of Comprehensive Income using the effective interest method.

Distributions

A distribution is recognised as a liability in the Fund's financial statements in the period in which it becomes an obligation of the Company.

Provisions

A provision is recognised when the Fund has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the amount of the obligation can be made.

Interest rate derivatives

The Fund's activities expose it to the financial risks of changes in interest rates. The Fund has utilised interest rate swap contracts to help manage these risks, and not for speculative purposes. Interest rate derivatives are recognised initially at fair value. Outstanding contracts are measured at their fair value, which is a price supplied by market participants, and are included in the financial statements as non-current assets if expiry is more than twelve months after the year end date. Remeasurement of the interest rate derivatives exposes the Fund to market price risk and fair value risk. Gains or losses arising on remeasurement to fair value are taken to the Consolidated Statement of Comprehensive Income. Interest rate derivatives are derecognised when they have been disposed of or when the contracts expire. Any gains or losses on disposal or expiry of an interest rate derivative are recognised in the Consolidated Statement of Comprehensive Income in the period of disposal or expiry. At the year end date the Fund had no outstanding interest rate swap contracts.

3. Segment reporting

The Board of Directors is of the opinion that the Fund is engaged in a single segment of business, being residential investment property, in one geographical area, Japan, and that segment reporting is therefore not applicable. The Board considers that it is the Fund's Chief Operating Decision Maker.

The Fund receives no revenues from external customers, nor holds any non-current assets, in any geographical area other than Japan.

4. Critical accounting estimates and judgements

Estimates and judgements used in preparing the financial statements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant effect on the carrying amounts of assets and liabilities are discussed below.

(a) Investment property

The fair values of investment property are determined annually by independent qualified valuers using the income capitalisation basis and the discounted cash flow method.

In determining the fair values, consideration has been given to assumptions that are mainly based on market conditions existing at the year end date and appropriate capitalisation rates. These estimates are regularly compared to actual market data and actual transactions entered into by the Fund. In the event of a sale, the Fund might not realise the valuation price.

(b) Income taxes

The Fund is subject to income taxes in different jurisdictions. Significant judgement is required in determining the Fund's provision for income taxes and deferred taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain. Tax provisions are determined based on the Fund's structure and tax legislation existing at the year end date. If a change in either one of these would result in significantly different amounts than those initially recorded, then any such change will impact the tax provisions in the period in which the change occurs. In recognising deferred taxes on revaluations of investment property, consideration has been given to their recoverability during the lifetime of the Fund based on current market data, historical experience and other factors.

5. Financial risk management objectives and policies

The Fund's activities expose it to a variety of financial risks in relation to the financial instruments it uses: liquidity risk, credit risk and market risk (including currency risk and cash flow interest rate risk). The financial risks relate to the following financial instruments: security deposits held, trade and other receivables, cash and cash equivalents, trade and other payables, restricted lender reserves, security deposits payable to tenants, bonds and loans payable and interest rate swap contracts.

The Fund's financial assets are categorised as either receivables or fair value through profit or loss in accordance with IFRS 7. Cash and cash equivalents, security deposits held, trade and other receivables and restricted lender reserves are categorised as loans and receivables.

The Fund's financial liabilities are categorised as either other liabilities or fair value through profit or loss in accordance with IFRS 7. Security deposits payable to tenants, bonds and loans payable and trade and other payables are categorised as other liabilities.

Liquidity risk is the risk that arises when the maturities of assets and liabilities do not match. An unmatched position potentially enhances profitability, but can also increase the risk of losses. The Fund monitors its risk exposure to shortage of funds using detailed cash flow reporting. This tool considers the maturity of both its cash resources and projected cash flows. Cash balances are placed with financial institutions on a short term basis reflecting the Fund's desire to maintain high levels of liquidity to enable timely completion of investment transactions and the payment of dividends.

(a) Liquidity risk

The tables below summarise the maturity profile of the Fund's financial liabilities at 30 November based on contractual undiscounted payments:

(b) Credit risk

Credit risk arises when a failure by counterparties to discharge their obligations could reduce the amount of future cash inflows from financial assets on hand at the year end date.

In the event of a default by a tenant, the Fund will suffer a rental shortfall and incur additional costs, including legal expenses in maintaining, insuring and re-letting the property. To mitigate tenant default risk, the Fund obtains third party rental guarantees for the vast majority of leases. Screening procedures are in place to qualify tenants and tenant deposits are obtained where appropriate. The Fund also utilises property managers to monitor the tenants in order to anticipate, and minimise the impact of, defaults by tenants in occupation. The large number of tenants and the existence of lease guarantees effectively mitigate exposure to tenant defaults. The theoretical impact of potential defaults by the master lessee at the year end date was £498,000 (2012: £793,000). The master lessee is a third party contractor that sub-leases the property to end tenants, maintaining deposits and collecting rent incomes from tenants.

With respect to credit risk arising from other financial assets of the Fund, which comprise cash at bank, restricted lender reserves and trade and other receivables, the Fund's exposure to credit risk arises from default of the counterparty with a maximum exposure equal to the carrying value of these instruments. The Directors believe that the financial institutions that hold these financial assets are financially sound and, accordingly, minimal credit risk exists to these financial assets. Trade and other receivables are neither concentrated nor impaired, with security deposits held by the Fund for rent receivables.

At the year end date, the Fund held its cash balances and restricted lender reserves at banks with a minimum long term credit rating of 'A' from one of the major internationally recognised credit rating agencies. The Fund monitors the placement of cash balances on an on-going basis. At the year end date, the Fund had allocated its cash and cash equivalents amongst various financial institutions and the majority of funds were kept at the following: 46.4% with Royal Bank of Scotland International with a credit rating of A and 37.7% with HSBC with a credit rating of AA- (2012: 28.2% with Royal Bank of Scotland International, credit rating A; 18.6% with HSBC, credit rating AA-; 18.2% with Bank of Tokyo-Mitsubishi UFJ, credit rating A+; 13.8% with Resona Bank, credit rating A).

(c) Interest rate risk

Interest rate risk is the risk that the value of financial instruments will fluctuate due to changes in market interest rates. Financial instruments with floating rates expose the Fund to cash flow interest rate risk. Financial instruments with a fixed interest rate expose the Fund to fair value interest rate risk. The Fund monitors its exposure to interest rate risk on an on-going basis.

At the year end date 34.3% (2012: 50.2%) of the Fund's bonds and loans payable was fixed rate, 65.7% (2012: 25.2%) was floating rate and 0.0% (2012: 24.6%) was fixed with a swap. Cash balances and restricted lender reserves are at floating rates.

The effect of a 10 basis point increase/decrease in the Yen interest rate, with all other variables held constant, would be a decrease/increase of £80,000 in total comprehensive income (2012: £35,000), based on the position at the year end date. This calculation takes into account the effect of the movement in interest rates on interest payments (and, at the prior year end, on the fair valuation of the interest rate swap).

(d) Fair values

The fair values of the Fund's financial assets and liabilities and their carrying amounts at the year end date are not materially different. The fair value of bonds and loans payable is £120 million (2012: £132 million), compared to their carrying amount of £120 million (2012: £132 million). Market interest rates prevailing at the year end date were applied to the discounted cash flow method to determine the fair value of the bonds and loans.

Fair value hierarchy

The following table analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:

· Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities

· Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices)

· Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs)

(e) Currency risk

Currency risk is the risk that the value of financial assets and liabilities will fluctuate due to changes in foreign exchange rates. Currency risk for the Fund arises when future commercial transactions and recognised financial assets and liabilities are denominated in a currency other than Yen, the Fund entities' functional currency. Predominantly all Fund revenues earned, most expenses incurred, and the substantial majority of assets and liabilities are denominated in Yen. The Fund has a small exposure to foreign exchange risk arising from various currency exposures, primarily with respect to the Euro and Sterling. The Fund reports its results in Sterling and its shares are quoted in Sterling. Furthermore, any dividends declared are paid in Sterling.

In accordance with policy established on Admission of the Company to trading on AIM, the Directors have not implemented a currency hedging policy and currently have no intention do so. Accordingly, the net asset value and the amount of income available for distribution will be affected by movements in Yen against Sterling. As a consequence of the above factors, foreign currency movements between Yen and Sterling will impact returns to investors.

The Fund's assets and liabilities were 96.7% (2012: 97.4%) Yen-denominated at the year end date and hence the Directors do not consider the operating currency risk to be material.

(f) Capital management

The Fund's objectives when managing capital are to safeguard the Fund's ability to provide returns for shareholders and to maintain an optimal capital structure to minimise the cost of capital.

The Fund actively monitors capital on the basis of the gearing ratio. Fund gearing, calculated as net debt (borrowing less cash and cash equivalents and restricted reserves) divided by total assets less cash and restricted reserves, was 37.1% as at 30 November 2013 (2012: 45.9%). The debt to equity ratio calculated as net debt (borrowings less cash and cash equivalents and restricted lender reserves) divided by total equity was 0.61x (2012: 0.88x). The Articles of Incorporation place no limit to the amount of borrowings the Fund may incur but restrict the Fund to borrowing up to a maximum of 85% of the value of each investment. Historically, on Admission, the Fund targeted an LTV ratio of 70%, however in the current environment a more conservative policy has been adopted. The current LTV ratio is 59.8% (2012: 53.5%). The Fund is not subject to externally imposed capital requirements.

(g) Earthquakes and other uninsured risks

The Fund has insurance on a property-by-property basis to cover anticipated risks such as fire, accident and liabilities to third parties. There are certain types of losses that are uninsurable or not generally insured against because it is not economically feasible to insure against such losses. Examples of losses that are generally not insured against include war or acts of terrorism and certain natural phenomena such as tsunami or volcanic eruption. Japan has a relatively high risk of magnitude and frequency of earthquakes. The Fund currently has no earthquake insurance in place. In determining whether to take out earthquake insurance to cover a property, the Investment Adviser will consider the potential impact of an earthquake on a particular property as against the insurability and insurance premiums in respect of that property. The main consideration for the Investment Adviser will be the probable maximum loss ("PML") for the property, which means estimating the amount of expenses required to be recovered from physical damage generated by a hypothetical major earthquake (earthquakes that have the probability of occurring once every 475 years) during an assumed 50 year service life of a building. The Investment Adviser will generally consider earthquake insurance when the PML for a property is in excess of 15 per cent. There is, however, no guarantee that earthquake insurance will be maintained in relation to the Fund's investments, or that the level of cover will be sufficient to cover all losses.

6. Significant agreements

The Fund has entered into the following significant agreements:

(a) The Company has entered into an agreement with KK Halifax Management Limited ("KKHML") whereby KKHML provides management services for a fee of £50,000 per annum.

(b) The Japan-domiciled firms of which the Company is the beneficiary have entered into agreements with KK Halifax Asset Management ("KKHAM") whereby KKHAM provides investment advisory services for a management fee of 0.5% of Gross Assets under management calculated and paid quarterly, which is subject to a minimum fee of ¥200 million (£1,335,000) per annum. KKHAM is also entitled to a performance fee equivalent to 20% of the performance of the investments in excess of 10% per annum, which will be calculated on the basis of the average annual return on a three year rolling basis. No performance fee was paid during the year (2012: £Nil).

7. Related party transactions

Transactions between the Company and its subsidiaries which are related parties have been eliminated on consolidation and are not disclosed in this note.

Directors' fees have been disclosed in the Directors' Report. Outstanding fees of £36,375 (2012: £36,375) were payable to Directors at the year end date. There are no key personnel working on behalf of the Fund other than the Directors, the Manager and the Investment Adviser.

The Fund pays fees to KKHML for its management services. The total charge to the Statement of Comprehensive Income during the year was £50,000 (2012: £50,000), of which £12,500 (2012: £12,500) was outstanding at the year end date.

The Japan-domiciled firms of which the Company is the beneficiary pay fees to KKHAM for its investment advisory services. The total charge to the Statement of Comprehensive Income during the year was £1,335,000 (2012: £1,595,000) of which £Nil (2012: £Nil) was outstanding at the year end date. A reimbursement of office rent paid to Colliers International ('CI'), a sister company of KKHAM, on behalf of various Fund SPEs, of £9,000 (2012: £10,000) and a financial advisory fee of £65,000 (2012: £160,000) were paid to KKHAM by the Japan-domiciled firms of which the Company is the ultimate beneficiary.

The Japan-domiciled firms of which the Company is the beneficiary pay fees to CI for its accounting and administrative services. The total charge to the Consolidated Statement of Comprehensive Income during the year was £449,000 (2012: £464,000) of which £Nil (2012: £Nil) was outstanding at the year end date.

8. Underlying profit

Underlying profit excludes gains/(losses) from fair value adjustments, foreign exchange and other capital and one-off items. The Fund uses underlying profit in its internal financial reporting and provides this analysis as additional information.

9. Gross rental income

The Fund leases out its investment property under operating leases. All operating leases are for original terms of two years or more. Service and management charges include common area maintenance fee income, non-refundable deposits received and other income.

The future aggregate minimum rentals receivable under operating leases as at the year end date are as follows:

10. Property operating expenses

All property operating expenses relate to investment property that generates rental income.

11. Administrative and other expenses

Auditors' remuneration relates entirely to the provision of audit services. In addition, the following fees were earned by the auditors:

12. Taxation charge

The Company is exempt from Guernsey taxation on income derived outside Guernsey and bank interest earned inside Guernsey under the Income Tax (Exempt Bodies) (Guernsey) Ordinance, 1989, as amended. A fixed annual fee of £600 is payable to the States of Guernsey in respect of this exemption. No charge to Guernsey taxation will arise on capital gains.

The Fund's SPEs (see note 29) are subject to Japanese withholding tax on profit distributions and interest payments originating from Japan. Deferred taxes have been provided on the undistributed profits of the Japanese entities and interest receivable by the subsidiaries at the expected tax rate on the future payments by the Japanese entities.

The fair value adjustments of the investment property result in a temporary difference between the carrying value of the property and its tax basis. Deferred taxes on these differences are based on the expected tax rate on the future distributions made on disposal of the investment property.

The Fund is liable to Japanese taxation arising on activities of its Japanese operations. The Fund is liable to Dutch tax arising on the activities of its Dutch operations.

The charge for the year can be reconciled to the profit per the Consolidated Statement of Comprehensive Income as follows:

The applicable country rate above is a blended rate of those applicable in different jurisdictions, weighted by the profits and losses arising therein. No deferred tax assets have been recognised in respect of losses due to the unpredictability of future taxable profits.

13. Earnings per share - basic and diluted

The Fund does not have any share options, warrants or other potentially dilutive instruments currently in issue.

14. Investment property

The total cost (purchase price plus acquisition costs) of the investment property held at the year end date was £248.8 million (¥41.7 billion) (2012: £316.4 million (¥41.8 billion)).

Investment property consists of residential properties that are leased to third parties under operating leases. The fair value of the Fund's investment property at 30 November 2013 has been calculated on the basis of valuations carried out at that date by the following independent professionally qualified valuers with relevant recent experience:

The valuation basis has been fair market value as defined by Japanese Real Estate Appraisal Standards calculated using the income capitalisation approach. This approach consists of both the direct capitalisation method which applies a market capitalisation rate to net operating income ("NOI") and the discounted cash flow method which applies a discount rate to both NOI and a forecast terminal property value. NOI is calculated with reference to in place lease contracts as well as monthly reports of actual property income and expenses.

All of the Fund's investment property is pledged as security for bonds and loans payable (see note 20). Income generated by the pledged investment property is distributable subject to the Fund meeting its interest obligations on the bonds and loans payable. The bonds and loans payable include covenants that require LTV ratios to be maintained at or below 80% and minimum stressed debt service coverage ratio ('DSCR') tests of 1.2x free cash flow at the date of this report. All debt is compliant with lender LTV and DSCR requirements. The Board monitors compliance with these requirements on a regular basis.

Any changes in market conditions will directly affect the profit or loss reported through the Consolidated Statement of Comprehensive Income. A 5% increase in the value of the investment property as at 30 November 2013 would have increased total comprehensive income for the year by £10.2 million (2012: £12.5 million). A decrease of 5% would have had an equal but opposite effect. It is expected that increases or decreases would be primarily the result of changes in capitalisation rates, the primary variables in the fair value calculations.

16. Interest rate derivatives

The Fund has utilised derivative financial instruments, in the form of interest rate swap contracts, to hedge its exposure to interest rate risk.

An interest rate swap contract was taken out on 29 March 2010 in order to hedge floating rate interest payments on ¥4.3 billion (£32.8 million) of the loan payable to Mizuho Corporate Bank. Under the terms of the contract the Fund paid interest quarterly at a fixed rate of 2.349%. The contract was terminated upon the repayment of the loan by the Fund on 28 August 2013.

17. Trade and other receivables

All amounts are receivable within 90 days. A total of £64,000 (2012: £74,000) has been outstanding for more than 90 days, against which a provision of £15,000 (2012: £16,000) has been made for impairment in respect of amounts not expected to be recovered.

18. Restricted lender reserves

Restricted lender reserves, which belong to the Fund, comprise bank deposits that are held as reserves in lender-controlled accounts against future expenses and liabilities including interest, taxes, capital expenditure, insurance and tenants' deposits. The restricted lender reserves are governed by lender agreements that stipulate the terms under which the Fund may withdraw funds.

19. Cash and cash equivalents

20. Bonds and loans payable

The bonds and loans payable are secured by investment property with a fair market value of ¥34.1 billion (£203.5 million) (2012: ¥32.9 billion (£249.4 million)) at the year end date.

All floating interest rates are reset every three months based on the prevailing base rate (3 months TIBOR) at the time.

During the year, the Fund made the following changes to its portfolio:

· In August 2013, refinanced ¥5.9 billion (£35.2 million) of debt outstanding to Mizuho Corporate Bank and Mizuho Trust & Banking Corporation, scheduled to mature in December 2013 and January 2014 respectively, with new loans from Mizuho Bank. The new debt matures in August 2018;

· In September 2013, secured a further ¥5.3 billion (£31.6 million) of debt refinancing from Mizuho Bank, in conjunction with which the Fund repaid the remaining ¥3.1 billion (£18.2 million) of debt outstanding to Mizuho Bank that was due to mature in September 2014. The new debt matures in September 2018.

Total debt is stated net of unamortised financing costs. Gross debt is ¥20.4 billion (£121.6 million) (2012: ¥17.6 billion (£133.4 million)).

21. Deferred tax assets and liabilities

Deferred income tax assets are recognised for tax loss carry-forwards to the extent that the realisation of the related tax benefit through future taxable profits is probable.

The Fund did not recognise deferred income tax assets of ¥5.2 million (£31,000) (2012: ¥19.5 million (£148,000)) in respect of losses amounting to ¥13.7 million (£82,000) (2012: ¥46.5 million (£352,000)) that can be carried forward against future taxable income.

Losses amounting to ¥7.1 million (£42,000) and ¥6.6 million (£40,000) expire in 2018 and 2019 respectively (2012: ¥10.9 million (£82,000), ¥29.0 million (£220,000) and ¥6.6 million (£50,000) expire in 2017, 2018 and 2019 respectively).

22. Trade and other payables

23. Share capital

On 24 October 2013, the Company issued 24,444,224 ordinary shares at a price of 63p per share, raising a total of £15,109,726 after expenses.

The total authorised number of ordinary shares is 250 million, each with a par value of 10p. Ordinary shares carry no right to fixed income but are entitled to dividends as declared from time to time. Each ordinary share is entitled to one vote at meetings of the Company.

24. Share premium

On 12 January 2007, the Royal Court of Guernsey confirmed the reduction of the share capital of the Company by way of cancellation of the Company's share premium account, which under Guernsey company law at the time was an undistributable reserve. An amount of £85,067,000 was transferred to the special reserve, which is distributable. With effect from 1 July 2008, Guernsey company law no longer makes any distinction between distributable and non-distributable reserves, requiring instead that a company pass a solvency test in order to be able to make distributions to shareholders.

On 24 October 2013, an amount of £12,665,304 was credited to share premium as a result of the issue of 24,444,224 ordinary shares at a price of 63p per share (see note 23). This amount was immediately transferred to the special reserve (see note 25).

25. Special reserve

The special reserve is a distributable reserve to be used for all purposes permitted under Guernsey company law, including the buy back of shares and the payment of dividends.

26. Distributions paid from special reserve

27. Commitments

The Fund did not have any capital commitments at the year end date (2012: Nil).

28. Contingent liabilities

The Fund did not have any contingent liabilities at the year end date (2012: Nil).

29. Fund entities

The Fund consists of the Company and the following entities:

30. Post year end events

On 25 December 2013, the Fund acquired East Village Sannomiya, an apartment complex in Kobe City, at a purchase price, excluding acquisition costs, of ¥796 million (£4.7 million).

On 20 January 2014, the Company appointed Jefferies Hoare Govett as joint corporate broker to work alongside the Company's existing broker Liberum Capital.

On 30 January 2014, the Fund acquired Regalia Toritsudai Residence, an apartment building in Tokyo, at a purchase price, excluding acquisition costs, of ¥702 million (£4.2 million).

On 28 February 2014, the Fund entered into a purchase agreement for an ownership interest in Grace Court Shimura Sanchome, an apartment building in Tokyo, at a purchase price of ¥2.0 billion (£12.0 million), excluding tax and other acquisition costs. This acquisition is scheduled to close on or around 27 March 2014.

On 5 March 2014, the Fund acquired six residential apartment buildings in Tokyo for a total purchase price of ¥7.4 billion (£44.3 million), excluding tax and other acquisition expenses, as follows:

High Leaf Shibadaimon (¥1.7 billion (£10.0 million))

Reunir Honkomagome (¥1.5 billion (£8.9 million))

Habitation Claire (¥1.4 billion (£8.6 million))

Unifort Meguro Nakamachi (¥1.4 billion (£8.1 million))

High Leaf Ueno (¥810 million (£4.8 million))

Liesse Chiba Shinjuku (¥650 million (£3.9 million))

In conjunction with this acquisition, the Fund obtained debt financing in the form of a loan from Resona Bank, Ltd in the amount of ¥5.5 billion (£32.8 million). The seven year loan has a floating interest rate of 0.56% per annum (calculated as a 0.35% premium over three month Yen TIBOR) which has been capped at 0.75%. The loan is collateralised by the six properties as well as two other recently acquired assets, East Village Sannomiya and Regalia Toritsudai Residence, for an LTV ratio of 61.5%.

There were no other significant post year end events which require disclosure in these financial statements.