Half Yearly Report

RNS Number : 3694R

Japan Residential Inv. Co. Ltd

20 August 2010

 

JAPAN RESIDENTIAL INVESTMENT COMPANY LIMITED ("THE COMPANY")

 

Consolidated Financial Statements for the Six Months Ended 31 May 2010

 

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 presents its unaudited consolidated financial results for the six months ended 31 May 2010.

 

Highlights

 

·; Distribution of 1p per share payable on 30 September 2010

 

·; Underlying profit* increased to £2.98 million from £2.53 million over the same period one year prior

 

·; Loss for the period decreased to £9.7 million from £10.5 million over the same period one year prior

 

·; Fund property values declined 5.0% during the six month period on a like-for-like basis (a decline of 10.5% during the 12 months ended 31 May 2010)

 

·; Portfolio occupancy was 91.2% for the six months ending 31 May 2010 versus 92.4% during the same period one year prior

 

·; Gearing, calculated as net debt (borrowings less cash balances and lender restricted reserves) divided by total assets was 56.6%

 

·; NAV was 90.6p per share as at 31 May 2010

 

·; Post reporting date, the Fund raised £35 million by issuing 87.5 million new shares at 40p per share. The proceeds, £34.1 million net of expenses, will be used to reduce debt

 

 

Results

 

	Six months ended 31 May
	2010	2009
	£'000	£'000
Underlying profit*	2,982	2,531
Profit on disposal of investment property	49	-
Net loss from fair value adjustments on investment property	(11,977)	(12,744)
Net foreign exchange losses	(23)	(107)
Profit/(loss) on fair value adjustments on interest rate cap contracts	1	(60)
Loss on fair value adjustments on interest rate swap contracts	(196)	-
Write-off capitalised financing cost due to refinancing	(456)	-
Loss for the period before tax	(9,620)	(10,380)
Tax charge	(86)	(102)
Loss for the period	(9,706)	(10,482)
	pence	pence
Underlying earnings per share	2.98	2.53
Loss per share	(9.71)	(10.48)
	31 May 2010	30 November 2009
	pence	pence
Net asset value per share	90.6	93.0
	£'000	£'000
Total equity	90,644	93,010
Net Debt	148,775	141,361

 

£ denominated values are based on the exchange rate of ¥131.644/£1 for assets held as at the reporting date. Amounts after the reporting date are converted at ¥133.327/£1 being the exchange rate as at 17 August 2010.

 

* "Underlying profit" is profit excluding losses from fair value adjustments, foreign exchange and other capital items.

 

For further information on the Company, please refer to the website, www.jricl.com, or contact:

 

K.K. Halifax Asset Management	Alec Menikoff	+81 (0)3 5563 8771
Smith & Williamson Corporate Finance Limited - Nominated Adviser	Azhic Basirov David Jones	+44 (0)20 7131 4000
Fairfax I.S. PLC - Broker	John Korwin-Szymanowski Gillian McCarthy	+44 (0)20 7598 5368

 

Chairman's Statement

 

I am pleased to present the interim report and unaudited condensed consolidated financial statements for the period ended 31 May 2010. The Fund was established to provide investors with income and capital growth. The Fund's stable operating performance continues to contrast with sustained declines in asset values. However, there are positive signs in both the underlying portfolio and broader market that valuations are beginning to stabilise. During the period, 37% of outstanding debt was refinanced with extended maturities. In June, the Fund successfully issued new equity to shareholders raising £34.1 million net of expenses, which will be utilised to reduce LTVs at the asset level to approximately 50%. This places the Fund on a sound financial footing reducing net debt/total assets to approximately 38.4%. The Investment Adviser is currently working to reduce debt at the asset level to enable the investment plans for individual properties to reach maturity.

 

Results

Consolidated net loss for the six months ended 31 May 2010 was £9.7 million resulting from a 5% decline in fair value adjustments on investment property during the period, excluding foreign exchange translation effects. Underlying profit before tax, which excludes non-trading items such as unrealised movements on the revaluation of investments and derivatives, foreign exchange and other capital items increased to £3.0 million from £2.5 million in the same period one year prior. This is the result of lower Administration and other expenses which fell to £1.8 million for the six months ended 31 May 2010, from £2.5 million for the same period one year prior, mainly due to the reduction of administrative and advisory fees.

 

Gross rental income decreased 4.1% to £8.8 million for the period versus one year prior reflecting a lower occupancy rate and an asset sale in September 2009. (Excluding the asset sale, Gross rental income was down 2.4%). Property operating expense rose to £2.2 million from £1.9 million, a 12.7% increase over the same period one year prior as increased tenant turnover generated higher leasing and unit restoration costs. The combination of lower Gross rental income and higher Property operating expenses resulted in Net rental income of £6.7 million, a decline of 8.5% versus the same period one year prior.

 

Loss per share was 9.71p for the six months ended 31 May 2010 versus 10.48p in the same period one year prior.

 

Net asset value per share decreased 2.4p during the period to 90.6p as at 31 May 2010. This movement is attributable to a 9.71p net loss for the period which was partially offset by a foreign exchange translation gain of 7.3p.

 

Outlook

Residential property yields have stabilised in most markets in Japan. The Fund's recent asset sales demonstrate a degree of liquidity for smaller assets. The successful refinancing of debt totalling ¥7.1 billion (£53.7 million) during the period on satisfactory terms is evidence of an improvement in the credit markets. Discussions of refinancing and restructuring of the remaining Fund debt are ongoing. The Investment Adviser remains focused on optimising portfolio revenues as well as activities aimed at reducing leverage to prudent levels. We anticipate that the reduced gearing and improved financial position combined with continued stable operating performance will allow the Fund to effect a sustainable distribution policy.

 

Distributions

The Board has approved an interim distribution in respect of the first six months of the financial year to 31 May 2010. The interim distribution of 1.0 pence per share will be paid on 30 September 2010 to shareholders on the register on 3 September 2010. This distribution is fully covered by underlying profit during the period. The Board will seek to continue a prudent distribution policy to the extent that the Fund's gearing, profitability, and cash flow allow.

 

 

Raymond Apsey

Chairman

19 August 2010

 

Report of the Manager and the Investment Adviser

 

Market

With improvements in exports, industrial production, and personal spending, the Japanese economy appears to have stabilised and the consensus forecasts GDP to grow 1.9% in 2010. Persistent deflation and fiscal problems on the European continent, however, remain a source of concern as does the impact of the rising yen on corporate profit.

 

Residential land values in Tokyo appear to have stabilised and the rate of decline in other major Japanese markets is slowing. Property yield trends have flattened in Tokyo, Osaka, and Nagoya. On the consumer side, the supply of new, for-sale condominiums is near a 5-year low and this has helped to support a moderate upward trend in prices over the past 12 months. Amidst declining rents and occupancy rates in the commercial property sector, institutional investors are increasingly seeking residential properties for purchase due to the relative stability of operating income. However, this interest remains limited to the Tokyo market where financing is more readily available.

 

Financing availability has improved as lenders seek new business to boost their operating performance. Interest rate spreads have come down slightly and banks are willing to discuss higher levels of gearing. However, lenders continue to rely on conservative underwriting assumptions and their appetite for exposure to property located outside of Tokyo remains limited.

 

Borrowings

Refinancing of Mizuho Trust and Mizuho Corporate Bank debt with extended maturities as well as the partial pay down of 2011 and 2012 debt resulted in a reduction of outstanding debt by ¥2.9 billion (£21.8 million) to ¥22.2 billion (£168.5 million) during the period. With investment properties valued at ¥31.8 billion (£241.8 million), portfolio LTV was 69.7% as at 31 May 2010. Gearing, calculated as net debt (borrowings less cash balances and lender restricted reserves) divided by total assets was 56.6%.

 

As at the end of May 2010, the blended interest rate was 2.00%, and the average remaining tenor was 26 months. Of the total debt, 51% is fixed rate, 45% floating rate with a cap and 4% floating rate with no cap. The Investment Adviser is in discussion with lenders for the refinancing of ¥5.1 billion (£38.3 million) of debt maturing in 2011 as well as the partial pay down of the ¥10.0 billion (£75 million) of debt that matures in 2012.

 

Portfolio

The Fund held 52 properties valued at ¥31.8 billion (£241.8 million) as at 31 May 2010, down from 53 properties valued at ¥33.8 billion (£236.5 million) at fiscal year end (see note 4). The decline reflects the May-end sale of Cradle Shitennoji for ¥319 million (£2.3 million) as well as a 5.0% fall in asset values during the period for properties held as at the period end. The rate of decline in property values appears to be slowing, as values fell 1.7% in Q2 2010 versus a decline of 3.4% in Q1. Property values declined 10.5% Y-o-Y on a like-for-like basis and are currently 18.7% below initial purchase price. The portfolio has an unleveraged yield of 6.1% (appraised Net Operating Income over value).

 

Operating performance has been stable. Average occupancy was 91.2% for the six months ending 31 May 2010 versus 92.4% during the same period one year prior. Portfolio occupancy has been gradually trending upward from a low of 89.8% in January to 92.2% in July. Nevertheless, more substantial improvement in portfolio occupancy has been hindered by higher than anticipated tenant turnover rates due to job losses and moves aimed at cost reduction. Declines in rental rates have been moderate, at 1.1% Y-o-Y as at the end of May. Further adjustments in rents and leasing conditions are expected, in order to improve tenant retention, increase occupancy and thereby lower property leasing and unit restoration costs.

 

The portfolio remains concentrated in the large metropolitan areas with the following regional allocation: Tokyo (44%), Osaka (28%), Nagoya (14%) and other (14%) as at 31 May 2010. The average age of portfolio properties was 4.6 years.

 

Post Balance Sheet

The Fund raised £35 million, £34.1 million net of expenses, through the issue of 87.5 million shares at a price of 40p on 22 June 2010. Substantially all of the net proceeds from the issue were exchanged into yen at the rate of ¥134.020/£. The net proceeds of the issue will be used to pay down the Fund's debt to lower levels. Accordingly, the Investment Adviser is actively engaged with lenders to reduce debt at the asset level, utilising the proceeds of capital raising and through the orderly sale of non-core assets. Adjusting the 31 May 2010 NAV for the capital raising the NAV was approximately 65.92p per share after the new shares were issued and based on the exchange rate at 17 August 2010 of ¥133.327/£1.

 

The Fund sold a property in Osaka, Celeb the Dream Miyakojima Uchindai, on 8 June 2010 for ¥209 million (£1.5 million). The price paid represents an initial net yield of 5.6% and was broadly in-line with the carrying value. At the time of the sale, the carrying value of the property was ¥186 million (£1.4 million).

 

Outlook

Conditions in the Japanese property markets have improved over those prevailing a year ago. The asset value declines that followed the credit crisis have placed valuations on a more stable footing. As a result, real estate collateralised debt is more appealing to lenders which have begun to loosen credit. Investors remain focused on the Tokyo market and cautious as a result of the adverse macro-economy. Against a backdrop of economic turbulence, demand for moderately priced rental apartment units in the major cities in Japan remains relatively stable. The Investment Adviser is confident in its ability to maintain occupancy and generate substantial levels of operating income.

 

 

KK Halifax Management Limited	KK Halifax Asset Management
Manager	Investment Adviser

 

Condensed Interim Consolidated Statement of Comprehensive Income

For the six months ended 31 May 2010

 

		For the six months ended
		31 May 2010		31 May 2009
		Unaudited		Unaudited
	Notes	£'000		£'000
Gross rental income		8,837		9,216
Property operating expenses		(2,157)		(1,914)
Net rental income		6,680		7,302
Gain on disposal of investment property		49		-
Net loss from fair value adjustments on investment property	4	(11,977)		(12,744)
Administrative and other expenses		(1,776)		(2,479)
Net operating loss before net financing costs		(7,024)		(7,921)
Interest income		4		18
Interest expense on bonds and loans payable		(2,382)		(2,310
Net foreign exchange losses		(23)		(107)
Gain/(loss) on fair value adjustments on interest rate cap contracts		1		(60)
Loss on fair value adjustments on interest rate swap contracts		(196)		-
Net financing costs		(2,596)		(2,459)
Loss for the period before tax		(9,620)		(10,380)
Taxation charge		(86)		(102)
Loss for the period		(9,706)		(10,482)
Other comprehensive income
Currency translation gains/(losses)		7,340		(4,977)
Total comprehensive loss for the period		(2,366)		(15,459)
Loss per share - Basic and diluted	3	9.71p		(10.48p)

 

All items in the above statement are derived from continuing operations. The loss and other comprehensive income is attributable to shareholders of the Company. There are no minority interests.

Condensed Interim Consolidated Statement of Financial Position

As at 31 May 2010

 

		31 May 2010	30 November 2009	31 May 2009
	Notes	£'000	£'000	£'000
Assets		Unaudited	Audited	Unaudited
Non-current assets
Investment property	4	241,781	236,493	236,155
Interest rate cap contracts		2	1	17
		241,783	236,494	236,172
Current assets
Trade and other receivables		2,806	2,828	2,593
Restricted lender reserves		5,800	6,440	5,477
Cash at bank	6	12,435	26,364	20,282
		21,041	35,632	28,352
Total assets		262,824	272,126	264,524
Liabilities
Non-current liabilities
Security deposits from tenants		1,172	1,171	1,205
Bonds and loans payable	7	138,024	151,898	140,832
Deferred tax liability	5	334	293	271
Interest rate swap contracts		211	-	-
		139,741	153,362	142,308
Current liabilities
Bonds and loans payable	7	28,986	22,267	20,904
Trade and other payables		3,453	3,487	3,112
		32,439	25,754	24,016
Total liabilities		172,180	179,116	166,324
Net assets		90,644	93,010	98,200
Equity
Share capital		10,000	10,000	10,000
Special reserve		82,067	82,067	82,067
Foreign exchange translation reserve		50,641	43,301	36,272
Accumulated loss		(52,0640	(42,358)	(30,139)
Total equity		90,644	93,010	98,200
Net asset value per share		90.6p	93.0p	98.2p

 

Condensed Interim Consolidated Statement of Changes in Equity

For the six months ended 31 May 2010

 

			Distributions	Foreign
			proposed	exchange
	Share	Special	from Special	translation	Accumulated
	capital	reserve	reserve	reserve	loss	Total
	£'000	£'000	£'000	£'000	£'000	£'000
At 1 December 2009	10,000	82,067	-	43,301	(42,358)	93,010
Loss for the period	-	-	-	-	(9,706)	(9.706)
Other comprehensive income
Currency translation differences	-	-	-	7,340	-	7,340
Total comprehensive income for the period
	-	-	-	7,340	(9,706)	(2,366)
At 31 May 2010	10,000	82,067	-	50,641	(52,064)	90,644

 

 

			Distributions	Foreign
			proposed	exchange
	Share	Special	from Special	translation	Accumulated
	capital	reserve	reserve	reserve	loss	Total
	£'000	£'000	£'000	£'000	£'000	£'000
At 1 December 2008	10,000	82,067	1,500	41,249	(19,657)	115,159
Loss for the period	-	-	-	-	(10,482)	(10,482)
Other comprehensive income
Currency translation differences	-	-	-	(4,977)	-	(4,977)
Total comprehensive income for the period
	-	-	-	(4,977)	(10,482)	(15,459)
Distributions proposed and subsequently paid on 31 December 2008	-	-	(1,500)	-	-	(1,500)
At 31 May 2009	10,000	82,067	-	36,272	(30,139)	98,200

 

Condensed Interim Consolidated Statement of Cash Flows

For the six months ended 31 May 2010

 

		For the six months ended
		31 May 2010	31 May 2009
	Notes	£'000	£'000
		Unaudited	Unaudited
Cash flows from operating activities
Loss for the period before tax		(9,620)	(10,380)
Adjustments for:
Net loss from fair value adjustments on investment property	4	11,977	12,744
Gain on disposal of investment property		(49)	-
Interest income		(4)	(18)
Interest expense on bonds and loans payable		2,382	2,310
Loss on fair value adjustments on interest rate cap contracts		(1)	60
Loss on fair value adjustments on interest rate swap contracts		196	-
Operating profit before changes in working capital		4,881	4,716
Decrease in receivables		536	1,307
Decrease in payables, provisions and security deposits from tenants		(663)	(472)
Decrease in restricted lender reserves		1,115	1,265
Withholding tax paid		(71)	-
Net cash inflow from operating activities		5,798	6,816
Cash flows from investing activities
Proceeds from disposal of investment property		2,252	-
Interest income		4	18
Capital expenditure	4	(6)	-
Net cash inflow from investing activities		2,250	18
Cash flows used in financing activities
Proceeds from bonds and loans received		48,892	-
Redemption of bonds payable		(69,882)	(709)
Distributions paid from special reserve		-	(1,500)
Interest paid		(2,136)	(2,332)
Net cash outflow from financing activities		(23,126)	(4,541)
Net (decrease)/increase in cash at bank		(15,078)	2,293
Cash at bank at beginning of period		26,364	19,161
		11,286	21,454
Effect of exchange rate fluctuations on cash at bank		1,149	(1,172)
Cash at bank at end of the period	6	12,435	20,282

 

Notes to the Condensed Interim Consolidated Financial Statements

For the six months ended 31 May 2010

 

1. Basis of accounting

 

Basis of preparation

The condensed interim financial statements have been prepared in accordance with International Accounting Standard (IAS) 34 "Interim Financial Reporting", as adopted by the European Union.

 

The condensed interim financial statements do not include all the information and disclosures required in annual financial statements, and should be read in conjunction with the Fund's annual financial statements for the year ended 30 November 2009.

 

The Financial Statements have been prepared on the going concern basis which the Directors of the Company believe to be appropriate for the following reasons:

 

On 22 June 2010 the Company issued 87.5 million shares, the offer price of the shares was 40p each and the proceeds for the issue of shares amounted to £34.1 million net of expenses. Net proceeds will be used to reduce debt.

 

All debt is non-recourse to the Fund and to assets outside the relevant SPE.

 

As of the reporting date, there were no LTV covenant breaches. Valuations indicate that certain debt exceeds (or is close to exceeding) the maximum LTV per lender covenants. However the Fund has sufficient cash reserves to cure potential LTV covenant breaches.

 

Detailed cash flow models are maintained and regularly reviewed to ensure that the Fund can continue to meet its liabilities as they fall due, including interest payments on debt facilities.

 

Significant accounting policies

Except as described below, the accounting policies applied by the Fund in these condensed interim consolidated financial statements are the same as those applied by the Fund in its consolidated financial statements as at and for the year ended 30 November 2009.

 

The preparation of the condensed financial statements requires the Directors to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the date of the condensed financial statements. If in the future such estimates and assumptions, which are based on the Directors' best judgement at the date of the condensed financial statements, deviate from actual circumstances, the original estimates and assumptions will be modified as appropriate in the period in which the circumstances change.

 

Significant judgements and estimates

In preparing these condensed financial statements, the significant judgements made by management in applying the Fund's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended 30 November 2009.

 

New accounting policies effective and adopted

Presentation of financial statements

IAS 1 (revised), 'Presentation of Financial Statements' (effective from 1 January 2009). The standard separates owner and non-owner changes in equity. The statement of changes in equity only includes details of transactions with owners, with non-owner changes in equity presented as a single line. In addition, companies have an option to continue presenting a 'traditional' income statement complemented by a second statement, the statement of comprehensive income (SOCI), or to present a single statement, also named 'statement of comprehensive income', that includes both elements. The Fund has taken the option of presenting a single statement, the statement of comprehensive income.

 

Comparative information has been re-presented so that it also is in conformity with the revised standard. Since the change in accounting policy only impacts presentation aspects, there is no impact on earnings per share.

 

Determination and presentation of operating segments

IFRS 8,'Operating segments' (effective from 1 January 2009) The standard requires a 'management approach', under which segment information is presented on the same basis as that used for internal reporting purposes.

 

The Board has considered the requirements of IFRS 8. The Board, as a whole, has been determined as constituting the chief operating decision maker of the Fund. The key measure of performance used by the Board in the capacity of 'chief operating decision maker', is to assess the Company's performance and to allocate resources based on the total return of each individual investment within the Fund's portfolio, as opposed to geographic regions or nature of property. As a result, the Board is of the view that the Fund is engaged in a single segment of business, being investment in residential property in Japan, and therefore, no reconciliation is required between the measure of profit or loss used by the Board and that contained in the condensed interim consolidated financial statements.

 

Additional disclosures requirements on financial instruments

The Fund has adopted IFRS 7 (amendment) 'Financial instruments: Disclosures' as of 1 January 2009. The amendment requires enhanced disclosures about fair value measurement and liquidity risk. In particular, the amendment requires disclosure of fair value measurements by level of a fair value measurement hierarchy. The adoption of the amendment results in additional disclosures but does not have an impact on the Group's financial position or performance.

 

2. 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.

 

The Directors of the Company received fees for their services. The total charge to the statement of comprehensive income during the period was £59,000 (2009: £59,000) of which £29,500 (2009: Nil) was outstanding at the end of the period.

 

The Fund pays fees to KK Halifax Management Limited ('KKHML') for its management services. The total charge to the statement of comprehensive income during the period was £25,000 (2009: £25,000) of which £12,500 (2009: £12,000) was outstanding at the end of the period. Paul Hammerstad, a Director of the Company, is also a director of KKHML.

 

The Japan-domiciled firms in which the Company is the ultimate beneficiary pay fees to KK Halifax Asset Management ('KKHAM') for its investment advisory services. The total charge to the statement of comprehensive income during the period was £577,712 (2009: £772,031) of which no amount (2009: £10,005) was outstanding at the period end. Paul Hammerstad, a Director of the Company, is also a director of KKHAM.

 

3.	Loss per share - basic and diluted	31/05/2010	31/05/2009
		Unaudited	Unaudited
The calculation of the loss per share is based on the following data:		£	£
Loss attributable to the shareholders of the Company		(9,706,000)	(10,482,000)
Weighted average number of Ordinary Shares for the purpose of basic and diluted earnings per share		100,000,000	100,000,000

 

The Fund did not have any dilutive potential shares as at 31 May 2010. The issue of new Ordinary Shares on 22 June 2010, had not been formally contemplated at the date of these statements.

 

4.	Investment property	31/05/2010	30/11/2009	31/05/2009
		Unaudited	Audited	Unaudited
		£'000	£'000	£'000
At beginning of period/year		236,493	261,707	261,707
Property duties paid on property acquisitions in prior year		-	264	-
Capital expenditure		6	22	-
Disposal of properties		(2,203)	(3,577)	-
		(2,197)	(3,291)	-
Net loss from fair value adjustments on investment property		(11,977)	(26,736)	(12,744)
Effect of exchange rate fluctuations on investment property		19,462	4,813	(12,808)
At end of period/year		241,781	236,493	236,155

 

The total cost of the Investment properties held at the reporting date was £312.7 million (¥41.2 billion) (2009: £291.5 million (¥41.7 billion)).

 

The Fund has pledged approximately £230.4 million (2009: £218.9 million) of its investment property as security for bonds and loans payable (Note 7). Income generated by the pledged investment properties is distributable subject to the Fund meeting its interest obligations on the bonds and loans payable. The bonds and loans payable also include covenants that require maintenance of loan to value ('LTV') ratios ranging between 80% and 85% and "stressed" debt service coverage ratio tests of between 1.2x and 2.0x at the date of this Interim Report.

 

 

5. Deferred tax liabilities	31/05/2010	30/11/2009	31/05/2009
	Unaudited	Audited	Unaudited
	£'000	£'000	£'000
At beginning of period/year	293	190	190
Charged to profit on undistributed income and interest payable	86	223	102
Utilised on income distributed during the period	(71)	(126)	-
Exchange differences	26	6	(21)
At end of period/year	334	293	271

 

 

6.	Cash at bank	31/05/2010	30/11/2009	31/05/2009
		Unaudited	Audited	Unaudited
		£'000	£'000	£'000
Current account balances		12,435	26,364	20,282

 

7. Bonds and loans payable

 

				Principal outstanding
	Final repayment	Interest rate	31/05/2010	31/05/2010	30/11/2009	31/05/2009
			¥'000,000	£'000	£'000	£'000
Current			Unaudited	Unaudited	Audited	Unaudited
Variable rate interest with no cap
Mizuho Corporate Bank	October 2011	1.25%	174	1,321	-	-
Variable rate interest with cap at 4%
DB Trust	February 2010		-	-	292	542
ORIX Corporation	February 2010		-	-	58	106
Fixed rate interest
Mizuho Trust & Banking Corporation	February 2010		-	-	17,834	16,473
Mizuho Trust & Banking Corporation	February 2010		-	-	4,083	3,783
Tokyo Star Bank Limited	February 2011	3.03%	2,523	19,166	-	-
Tokyo Star Bank Limited	March 2011	3.00%	699	5,308	-	-
Tokyo Star Bank Limited	May 2011	3.37%	420	3,191	-	-
			3,816	28,986	22,267	20,904
Non current
Variable rate interest with no cap
Mizuho Corporate Bank	December 2010		-	-	42,308	39,091
Mizuho Corporate Bank	December 2013	1.25%	723	5,493	-	-
Variable rate interest with cap at 4%
DB Trust	May 2012	1.26%	8,318	63,187	58,087	53,988
ORIX Corporation	May 2012	3.31%	1,643	12,484	11,475	10,688
Fixed rate interest
Tokyo Star Bank Limited	February 2011		-	-	18,884	17,402
Tokyo Star Bank Limited	March 2011		-	-	4,878	4,535
Tokyo Star Bank Limited	April 2011		-	-	1,713	1,594
Tokyo Star Bank Limited	May 2011		-	-	3,957	3,680
Tokyo Star Bank Limited	June 2011	3.44%	1,135	8,617	8,179	7,606
Tokyo Star Bank Limited	July 2011	3.27%	317	2,411	2,417	2,248
Mizuho Corporate Bank	December 2013	1.60%	4,210	31,976	-	-
Mizuho Trust and Banking Corporation	January 2014	2.25%	1,824	13,856	-	-
			18,170	138,024	151,898	140,832
			21,986	167,010	174,165	161,736

 

The bonds and loans payable are secured by certain investment properties with a fair market value of ¥30,327 million (£230.4 million) (30 November 2009: ¥31,315 million (£218.9 million)) at the reporting date.

 

8. Commitments

 

The Fund did not have any capital commitments at the reporting date (2009: Nil).

 

9. Post balance sheet events

 

On 22 June 2010, the Company issued 87.5 million ordinary shares of 10p each and the shares were admitted to trading on AIM. As a consequence of the issue of the New Ordinary Shares, the Company's issued share capital now comprises 187.5 million Ordinary Shares. The offer price of the shares was 40p each and the proceeds for the issue of shares amounted to a £35.0 million gross, £34.1 million net of expenses. Substantially all of the proceeds from the capital raising were converted into yen on, 23 June 2010 at a rate of ¥134.020/£1. Adjusting the 31 May 2010 NAV for the capital raising the NAV was approximately 65.92p per share after the new shares were issued and based on the exchange rate at 17 August 2010 of ¥133.327/£1.

 

On 8 June 2010, the Fund sold one of the properties in the portfolio, Celeb the Dream Miyakojima Uchindai, which is located in Osaka. The property was sold for ¥209 million (£1.6 million) excluding taxes and sales costs. In conjunction with this sale, the Investment Adviser arranged for pay down of debt in the amount of ¥202 million (£1.5 million) to Mizuho Corporate Bank effective 30 July 2010.

 

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