Half Yearly Report - Replacement

22 August 2011

This announcement replaces the announcement made on 18 August 2011 (RNS: 5675M) following an amendment to the Chairman's statement. The sentence "As of the time of this writing, the discount has narrowed further as a result of a 7% increase in the Yen/Sterling exchange rate" has been replaced with "As of the time of this writing, NAV expressed in Sterling has improved following a 6% increase in the Yen/Sterling exchange rate." Everything else remains the same.

Japan Residential Investment Company Limited ("the Company")

Consolidated Financial Statements for the Six Months Ended 31 May 2011

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 2011.

Highlights

·; Profit of £4.2 million for the period, versus loss of £9.7 million for the same period one year prior.

·; Asset values improved with £138,000 unrealised valuation gain for the period, versus £12.0 million loss during the same period one year prior.

·; Portfolio occupancy 95.5% for the six months ended 31 May 2011, up from 91.2% during the same period one year prior.

·; Net debt to asset ratio1 of 47% at period end, down from 62% one year prior.

·; Underlying profit2 increased to £4.0 million, up 37% from the same period one year prior.

·; Distribution of 1.5p per share in respect of the six months ended 31 May 2011.

Sterling denominated values of assets and liabilities as at 31 May 2011 are based on an exchange rate of ¥134.0880/£1. Items in the Statement of Comprehensive Income are converted at the average exchange rate for the period of ¥132.3092/£1.

Notes:

1) Total debt less cash and restrictive reserves as a proportion of investment property.

2) Profit excluding losses from fair value adjustments, foreign exchange and other capital items. The Fund uses underlying profit in its internal financial reporting and provides this analysis as additional information (see Note 3).

3) The Fund raised £34.1 million net of expenses through the issue of 87.5 million shares at a price of 40p per share on 22 June 2010

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

Chairman's Statement

The Board of Directors extends its heartfelt sympathies to all those who have suffered as a result of the earthquake and tsunami that struck north east Japan on 11 March. I am thankful to be able to confirm that there have been no reported injuries at any Fund properties as a result of the earthquake and no significant physical damage to the portfolio has been observed.

Portfolio occupancy remains strong, averaging 95.5% for the six months ending 31 May 2011, an increase of 4.3% over the same period one year prior. The continued strong operating performance is a testament to the resilience of the residential property sector and the merits of a diversified portfolio focused on newer properties in good locations of major urban markets.

Results

The Fund recorded a profit of £4.2 million for the six months ending 31 May 2011, a period marked by an end to the downward trend in property value that began in Autumn 2008. The modest gain of £138,000 on investment property in the first half stands in sharp contrast to the loss of £12.0 million over the same period one year prior. Despite the sale of two assets in 2010, net rental income rose 10.9% to £7.4 million for the six month period, driven by increases in tenant occupancy, reduced leasing expenses and a stronger yen.

Lower financing costs resulted from the successful execution of the debt reduction plan established in conjunction with last year's capital raising and contributed substantially to profits in the first half of 2011. Interest and debt financing costs declined to £1.5 million from £2.4 million in the same period one year prior. Underlying profit - profit excluding losses from fair value adjustments, foreign exchange and other capital items - was £4.0 million, up 37% from the same period one year prior.

Net Asset Value ('NAV') as at 31 May 2011 was £120.8 million or 64.4p per share, a decrease of £1.4 million or 0.8p per share since 30 November 2010. Reductions in NAV from distributions in the amount of £2.8 million as well as net currency translation and foreign exchange movements of £2.7 million were largely offset by underlying profit of £4.0 million and a net gain on fair value adjustments of £118,000.

The Fund share price discount to NAV, approximately 41% immediately following the June 2010 capital raising, has narrowed to 28% as at 31 May 2011. As of the time of this writing, NAV expressed in Sterling has improved following a 6% increase in the Yen/Sterling exchange rate.

Borrowings

The Fund held debt totalling £121.7 million against Investment property totalling £231.7 million, for a loan-to-value ('LTV') ratio of 53% as at 31 May 2011. Gearing was 47%, calculated as total debt less cash and restricted reserves as a proportion of Investment property. The weighted average interest cost was 1.9%.

The next refinancing event is ¥7.0 billion (£52.1 million) of debt maturing in May 2012. This debt has an LTV of 61% and is collateralisedby a portfolio of predominantly Tokyo assets. Based on improvements in the credit markets and discussions with lenders, the Investment Adviser is confident of the Fund's ability to secure replacement financing for this portfolio in 2012.

Outlook

Reconstruction spending and export growth in the second half should mitigate the expected economic contraction in 2011. Economists forecast that Japan will return to positive GDP growth in 2012. Asset values have stabilised as indicated by the modest valuation gain on investment property during this period. Our diversified portfolio focusing on major metropolitan areas continues to generate stable, resilient cash flows. The real estate fundamentals which have supported strong Fund operating performance remain in place. With moderate gearing and significant cash reserves, the Board intends to maintain a prudent distribution policy. The Board continues to focus on enhancing Fund performance and increasing the Fund's profile in the marketplace. We are optimistic that these efforts will support a continuing trend towards narrowing the discount and achieving our stated goals of stable income and capital appreciation.

Distributions

The Board has approved an interim distribution of 1.5p in respect of the first six months of the financial year to 31 May 2011, an amount which represents 71% of underlying profit during the period. The interim distribution will be paid on 23 September 2011 to shareholders on the register on 26 August 2011.

Raymond Apsey

Chairman

17 August 2011

Report of the Manager and the Investment Adviser

The first half saw property values rise for the first time since Autumn 2008. During the period, underlying profit increased due to improved occupancy, lower operating expenses and reduced interest charges.

Market

The Japanese economy is showing signs of recovery following the March earthquake and tsunami that devastated Japan's north east coastal communities and severely damaged infrastructure. Analysts suggest that a pickup in the second half from reconstruction demand, combined with an easing of supply chain and power disruptions, should limit the economic contraction to -0.5% for the calendar year. Japan posted a surprise trade surplus in June supported by an export recovery in the automotive sector. The economy is expected to bounce back in 2012 with 2.5% growth.

Economic uncertainty and ongoing efforts to achieve cold shutdown at the Fukushima nuclear power plants have caused some investors to take a "wait-and-see" approach. However, investors in Japanese property remain active, driven by asset allocation requirements, moderate pricing relative to historical and international comparables and a spread between property yields and financing costs that is the highest among developed economies.

Competition for quality investment properties is resulting in upward pressure on pricing, and pushing some investors to look outside Tokyo for opportunities. The office market remains soft with low rents and high rates of vacancy. Meanwhile, the stable rent and occupancy of the residential sector continues to attract strong investor interest.

Debt availability continues to improve. Competition among lenders is providing borrowers with greater negotiating leverage. As a result, interest rate spreads and upfront financing costs are trending down.

Portfolio

The Fund saw a modest uplift in portfolio value during the period, rising ¥20 million (£138,000) on a like-for-like basis to ¥31.1 billion (£231.7 million) as at the end of May 2011. This marked the first increase in property values since Autumn 2008. Of the 51 properties held in the Fund, 21 increased in value, 16 declined, and 14 experienced no change from fiscal year end valuations. Portfolio value in Yen terms declined 1.8% year-on-year, and is down 20% from initial purchase price on a like-for-like basis. The unleveraged net yield of the portfolio (appraised net operating income over value) was 6.0% as at 31 May 2011.

Portfolio operating performance has been strong. Lower tenant turnover and higher occupancy rates helped to offset modest declines in rents. Occupancy improved in the first half to 95.5%, up from 91.2% in the same period one year prior. Portfolio occupancy was 94.6% at the end of July 2011.

Substantial reductions in property operating expenses were achieved as a result of lower leasing expenses and negotiated reductions in property management and building management fees. This helped drive Property operating expenses as a proportion of Gross rental income to 21.5% for the period, down from 24.4% for the same period one year prior.

The portfolio remains concentrated in large metropolitan areas: Tokyo (44.5%), Osaka (27.2%), Nagoya (14.3%) and other (14.0%) as at 31 May 2011. The average age of the portfolio was 5.6 years.

Outlook

Japan is demonstrating its ability to overcome supply chain disruptions and power shortages while working to achieve a cold shutdown of the Fukushima nuclear power plants. Outside of areas damaged by the tsunami or within the Fukushima exclusion zones, the earthquake has not changed real estate market fundamentals in a material way. We do anticipate a renewed emphasis on building age to the detriment of residential properties built prior to 1981, when major revisions in seismic building standards came into effect. Since the JRIC portfolio consists of newer buildings, all of which were built post 1981, we do not expect this trend to have a negative impact on the Fund.

The Investment Adviser expects continued demand for quality residential housing in the major urban markets in which the Fund currently operates. We believe that the trends established prior to the earthquake - most notably falling cap rates, stabilising rent conditions and increasing investor demand - will reassert themselves in the coming months. The Fund is well positioned to benefit from asset reflation going forward while meeting its mandate for stable income distributions to investors.

Condensed Interim Consolidated Statement of Comprehensive Income

For the six months ended 31 May 2011

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

Earnings/(loss) per share is calculated on profit/(loss) for the period before other comprehensive income.

The total comprehensive income/(loss) is attributable to shareholders of the Company. There are no minority interests.

Condensed Interim Consolidated Statement of Financial Position

As at 31 May 2011

Condensed Interim Consolidated Statement of Changes in Equity

For the six months ended 31 May 2011

Condensed Interim Consolidated Statement of Cash Flows

For the six months ended 31 May 2011

Notes to the Condensed Interim Consolidated Financial Statements

For the six months ended 31 May 2011

1. Basis of accounting

Basis of Preparation

These condensed interim consolidated financial statements ('the financial statements') have been prepared in accordance with International Accounting Standard (IAS) 34 'Interim Financial reporting', as adopted by the European Union.

The 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 2010.

The financial statements have been prepared on the going concern basis, which the Directors of the Company believe to be appropriate.

Significant accounting policies

Except as described below, the accounting policies applied by the Fund in these interim financial statements are the same as those applied by the Fund in its annual financial statements as at and for the year ended 30 November 2010.

Significant judgements and estimates

The preparation of the 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 financial statements. If in the future such estimates and assumptions, which are based on the Directors' best judgement at the date of the financial statements, deviate from actual circumstances, the original estimates and assumptions will be modified as appropriate in the period in which the circumstances change.

In preparing the 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 financial statements as at and for the year ended 30 November 2010.

New accounting policies effective and adopted

There are no new standards effective for the current period which are relevant to the Group's operations.

In April 2009 and May 2010 respectively the IASB completed its second and third annual improvements projects. These projects amended a number of existing standards effective for accounting periods commencing between 1 July 2009 and 1 January 2011. None of the amendments effective for the current period has had a material impact on the Group.

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 £65,875 (2010: £59,000) of which £36,375 (2010: £29,500) 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 (2010: £25,000), of which £12,500 (30 November 2010: £12,500) was outstanding at the end of the period.

The Japan-domiciled firms in which the Company is the ultimate beneficiary pay fees to KK Halifax Asset Management Limited ('KKHAM') for its investment advisory services. The total charge to the Statement of Comprehensive Income during the period was £754,291 (2010: £577,712) of which £Nil (30 November 2010: £Nil) was outstanding at the end of the period.

The Japan-domiciled firms in which the Company is the ultimate beneficiary pay fees to Colliers International ('CI') for its accounting and administrative services. The total charge to the Statement of Comprehensive Income during the period was £225,647 (2010: £200,000) of which £Nil (30 November 2010: £Nil) was outstanding at the end of the period.

During the period Japan-domiciled firms in which the Company is the ultimate beneficiary reimbursed KKHAM for office rent paid by KKHAM to CI in the sum of £5,000 (2010: £3,000).

Paul Hammerstad, a Director of the Company until his resignation on 3 March 2011, is a director of KKHML, KKHAM and CI.

3. Underlying profit

4. Earnings/(loss) per share

The earnings/(loss) per share is based on the following data:

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

5. Investment property

The total cost of the investment property held at the period end date was £285.4 million (¥38.3 billion) (30 November 2010: £294.4 million (¥38.6 billion)).

The Fund has pledged approximately £224.3 million (30 November 2010: £229.1 million) of its investment property as security for bonds and loans payable (see 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 maximum loan to value ('LTV') ratios ranging between 73% and 80% and minimum stressed debt service coverage ratio tests of between 1.2x and 1.6x at the date of this Interim Report.

6. Deferred tax liabilities

The deferred tax charge for the period has been reduced by the write back of £113,000 in respect of deferred tax over-accrued at the end of the 2010 financial year.

7. Bonds and loans payable

The bonds and loans payable are secured by certain investment properties with a fair market value of ¥30.1 billion (£224.3 million) (30 November 2010: ¥30.1 billion (£229.1 million)) at the reporting date.

8. Commitments

The Fund did not have any capital commitments at the reporting date.