Interim Results

24 July 2012

Japan Residential Investment Company Limited ("the Company")

Consolidated Financial Statements for the Six Months Ended 31 May 2012

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 2012.

Highlights

·; Net asset value per share increased to 72.3p, up 12% from one year prior.

·; Asset values improved with £262,000 unrealised valuation gain for the period, the third consecutive six month period of positive growth.

·; Average portfolio occupancy for the period was 95.2%. Occupancy was 95.0% at the end of June 2012, up 1% from one year prior.

·; Gearing of 43.3% at period end, down from 43.8% one year prior.

·; Earnings per share stable at 2.2p for the six months ended 31 May 2012.

·; Distribution of 1.8p per share in respect of the six months ended 31 May 2012, up 20% from the same period one year prior.

Sterling denominated values of assets and liabilities as at 31 May 2012 are based on an exchange rate of ¥120.642/£1. Items in the Statement of Comprehensive Income are converted at the average exchange rate for the period of ¥125.410/£1.

Notes:

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

2. Profit excluding gains/(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 5).

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

Chairmans Statement

I am pleased to present the Interim Report and Unaudited Condensed Interim Consolidated Financial Statements for the six months ended 31 May 2012 (the 'Financial Statements'). Consistently high occupancy within the portfolio of 51 properties (2,200 rentable units) remains a source of stable income. Portfolio values have risen (albeit modestly) for three consecutive six month periods. In a volatile and uncertain macro-economic environment, the Fund is an attractive alternative for investors seeking stable dividends and asset diversification.

Results

Gross rental income for the six months ended 31 May 2012 increased to £9.9 million, up 4.8% over the same period one year prior as the stronger yen more than compensated for slightly lower occupancy performance. Average occupancy for the period was 95.2%. Net operating profit before net financing costs was £6.0 million, up 6.2% from the same period one year prior. Higher repair expenses were offset partially by a combination of lower administrative expenses and higher unrealised gains on investment property of £262,000 as values continued on a modest upward trend.

Profit for the period before tax was £4.4 million, up 4.4% over the same period one year prior. The taxation charge increased to £238,000 following reduced tax loss carry forward as cumulative profits at the portfolio level continue to increase. As a result, profit for the period was down 0.7% to £4.1 million, or 2.2p per share. Underlying profit - profit excluding gains from fair value adjustments, foreign exchange and other capital items - was £3.8 million or 2.0p per share for the six months ended 31 May 2012.

Net asset value per share increased 1.1p to 72.3p during the six months ended 31 May 2012. Contributions from underlying profit in the amount of 2.0p, a net foreign exchange gain of 0.7p, and a net gain on fair value adjustments of 0.2p were partially offset by distributions paid in the amount of 1.8p.

The share price of 54.5p at the date of this report represents a discount of approximately 24.8% to NAV. This is a modest improvement over the discount of 27.8% as at 31 May 2011.

Borrowings

The Fund carried debt totalling £134.3 million against investment property totaling £257.9 million, for a total loan-to-value ('LTV') ratio of 52.1% as at 31 May 2012. Gearing was 43.3%, calculated as total debt less cash and restricted reserves as a proportion of total assets. The weighted average interest cost was 1.91%.

The Fund borrowed ¥1,205 million (£10.0 million) in June 2012 to finance the purchase of a central Tokyo property with an appraised value of ¥1,030 million (£8.5 million) (see note 11). The five year term loan from Resona Bank has an LTV of 60.3% and carries a floating interest rate of 1.04%.

Post-acquisition, as at 30 June 2012, the Fund held 52 investment properties with a total value of ¥32,144 million (£266.4 million), with debt principal outstanding, excluding capitalised finance costs, totalling ¥17,635 million (£146.2 million) for an LTV of 54.9%. Gearing was 45.5%. The Fund weighted average debt maturity was 3.1 years. The weighted average interest cost was 1.85%. Interest coverage was 3.5x (EBIT/Interest expense). Of the total debt outstanding, interest rates on 50.2% are fixed, 24.5% are fixed with a swap and 25.3% are floating.

Distributions

The Board has approved an interim distribution of 1.8p per share in respect of the first 6 months of the financial year to 31 May 2012. This amount is fully covered by underlying profit of 2.0p per share during the period. The interim distribution will be paid on 14 September 2012 to shareholders on the register on 17 August 2012. At the time of writing the 2012 first interim distribution represents an annualised yield of 6.6% over the current share price of 54.5p. This yield level is especially attractive in light of 10 year Japanese government bonds currently yielding 0.73%. The Board intends to continue a prudent and sustainable distribution policy in accordance with Fund objectives of achieving stable income and capital growth.

Outlook

Though not immune from global economic turmoil, Japan benefits from access to diversified export markets, the largest of which are the various fast growing economies of Asia. Japan is the largest real estate market in Asia and the second largest in the world. Japanese credit markets remain outwardly robust and the Investment Adviser has continually demonstrated its ability to obtain the levels of debt financing required at attractive terms. The value proposition of Japanese residential property - in terms of historical prices, affordability, or the yield spread over financing costs - is compelling. In this context, the share price discount, though lower than at fiscal year-end, remains excessive. The Board fully expects this discount to continue to narrow. As the Fund approaches its seven year anniversary and the pending continuation vote, the Board, together with the Manager and other advisers, is considering all avenues available to achieve the Fund's objectives and to maximise shareholder value.

Raymond Apsey

Chairman

23 July 2012

Report of the Manager and the Investment Adviser

Market

Growth in the Japanese economy has improved, reflecting a better export environment and reconstruction spending related to the Tohoku earthquake/tsunami disaster. Real GDP growth of 2.5% is forecast for 2012, and the deflationary trend is expected to reverse this year with 0.4% CPI growth forecast. The Bank of Japan has increased its focus on monetary easing through a now ¥70 trillion (£580 billion) asset purchase program and a 1.0% inflation goal.

Investors are currently favouring the logistics and residential property sectors for stable income as vacancy in the office sector continues to rise. Sales of new condominiums are strong, supported by limited new supply and record low mortgage rates. 35 year mortgages are currently available at 2.01% fixed interest rates.

Credit markets have improved as lenders compete aggressively over a limited number of property transactions. Five year debt financing at up to 70% LTV is readily available at competitive spreads. Although urban residential land values continue to fall, the rate of decline is slowing. In the six large cities, residential land values as of March 2012 fell 0.4% year-on-year versus a decline of 1.3% in the prior year.

Low amounts of new supply and investor demand are placing upward pressure on pricing. Scarcity of quality property for sale in Tokyo is leading to increased investor demand in regional markets. Residential property yields, which peaked in 2009, continue to decline. Currently, residential properties typically trade at yields of 5.5% in Tokyo and 6.5% in Osaka.

Portfolio

The Fund portfolio value increased by a modest ¥37 million (£262,000) to ¥31,114 million (£257.9 million) during the six months ended May 2012. This marked the third consecutive six month period with positive growth in portfolio value. Of the 51 properties held by the Fund, 19 increased in value, 23 declined and 9 experienced no change from the 2011 fiscal year end valuations. The unleveraged net yield of the portfolio (appraised net operating income over value) was 5.9% as at 31 May 2012, down from 6.0% at the same time one year prior.

Portfolio operating performance remained strong. Portfolio occupancy averaged 95.2% for the six months ended 31 May 2012, down 0.3% against the same period one year prior. Portfolio occupancy rate was 95.0% at the end of June 2012, up 1.0% from the same time one year prior. Occupancy is supported by improved conditions in the regional markets as local economies recover from March 2011 earthquake/tsunami-related disruptions. We expect rental income from these markets to improve due to increased tenant demand and scarce supply of newer properties.

The portfolio remains concentrated in large metropolitan areas: Tokyo (44.7%), Osaka (27.3%), Nagoya (14.1%) and other (13.9%) as at 31 May 2012. The average age of the portfolio was 6.6 years.

Strategy

The Fund's financial position sheet is substantially improved following successful deleveraging initiatives and the refinancing of debt with extended maturities. This, combined with improved credit markets and the stabilisation of portfolio value, enables the Fund to focus on the opportunistic rotation of investment capital and the enhancement of portfolio quality and income through new acquisitions.

The Fund made its first acquisition post credit crisis in June with the purchase of Lilienberg Mejiro in a popular residential area in the Tokyo Central 5 Wards. The property was acquired for ¥954.7 million (£7.9 million) in an off-market transaction at a 7.3% discount to appraised value, thereby allowing the Fund to absorb transaction costs (including, inter alia, taxes, broker commission and trust fees) with no dilution of net asset value per share. The property, which has an estimated prospective net operating yield of 5.6%, was financed with a five year loan carrying a floating interest rate of 1.04%.

Outlook

The Japanese residential property market experienced a decade-long correction beginning in 1990. The credit crisis of 2008 curtailed a nascent recovery and pushed asset values back down to (but not below) their post 1990 lows. With prices already near 20 year lows, the next economic shock brought about by the March 2011 earthquake/tsunami did not have a material impact on property values. While persistent economic uncertainty, mainly resulting from the Eurozone crisis, continues to weigh on Japanese property markets, most market participants believe that any downside risk to property values is limited.

Despite the challenges of a strong yen and greying population, Japan continues to benefit from its globally competitive manufacturing base, advanced infrastructure and consistently high current account surplus. New monetary policy measures by the Bank of Japan, specifically the 1% per annum inflation target, are expected to help end the deflationary cycle and to have a direct positive impact on the property sector.

The credit crisis resulted in the failure of multiple developers, the evaporation of development financing and a shortage of new supply which is only beginning to be corrected. With fewer new property transactions to finance, lenders are choosing to roll over current loans, even at high LTVs, in order to preserve their loan books. Potential sellers are choosing to hold on to their assets in anticipation of valuation gains.

We believe the downward trend in property yields that began in 2010 will continue. The Fund's asset value declines began in 2008, accelerated in 2009, narrowed in 2010, and began to recover in 2011. In an environment with modest economic growth, low funding costs, and low/positive inflation, we expect that the current increases in asset values will accelerate in the near future as the portfolio begins to regain value lost in the aftermath of the credit crunch.

The Fund continues to be an attractive alternative for investors seeking diversification, steady income and significant potential for capital growth.

Condensed Interim Consolidated Statement of Comprehensive Income

For the six months ended 31 May 2012

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

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

The accompanying notes form an integral part of these Financial Statements.

Condensed Interim Consolidated Statement of Financial Position

As at 31 May 2012

The financial statements on pages 8 to 16 were approved by the Board on 23 July 2012 and signed on its behalf by:

Peter Atkinson - Director

The accompanying notes form an integral part of these Financial Statements.

Condensed Interim Consolidated Statement of Changes in Equity

For the six months ended 31 May 2012

The accompanying notes form an integral part of these Financial Statements.

Condensed Interim Consolidated Statement of Cash Flows

For the six months ended 31 May 2012

The accompanying notes form an integral part of these Financial Statements.

Notes to the Condensed InterimConsolidated Financial Statements

For the six months ended 31 May 2012

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'.

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 2011.

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 2011.

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 2011.

New accounting policies effective and adopted

The following new standard, which has had no material effect on the Group, has been applied for the first time in these Financial Statements:

IAS 24 (amended), "Related Party Disclosures" has revised the definition of related parties.

In May 2010 the IASB completed its third annual improvements project. This project amended a number of existing standards effective for accounting periods commencing on or after 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 £72,750 (2011: £65,875) of which £36,375 (2011: £36,375) was outstanding at the end of the period. There are no key personnel working on behalf of the Fund other than the Directors, Manager and Investment Adviser.

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 (2011: £25,000), of which £12,500 (30 November 2011: £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 £797,384 (2011: £754,291) of which £Nil (30 November 2011: £Nil) was outstanding at the end of the period. A reimbursement of office rent paid in the amount of £5,201 (2011: £5,000) and a financial advisory fee of £79,738 (2011: £Nil) were paid to KKHAM by the Japan-domiciled firms in which the Company is the ultimate beneficiary.

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 £227,800 (2011: £225,647) of which £Nil (30 November 2011: £Nil) was outstanding at the end of the period.

2. Segment reporting

The Board of Directors is of the opinion that the Fund is engaged in a single segment of business, being residential property, in one geographical area, Japan. The Board considers that it is the Fund's Chief Operating Decision Maker.

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

3. Financial risk management

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).

These Financial Statements do not include all financial risk management information and disclosures required in the Annual Financial Statements; they should be read in conjunction with the Fund's Annual Financial Statements as at 30 November 2011. There have been no changes in risk management policies since the year end.

4. Underlying profit

5. Earnings per share

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

6. Investment property

The total cost of the investment property held at the period end date was £338.1 million (¥40.8 billion) (30 November 2011: £334.7 million (¥40.8 billion)).

The Fund has pledged approximately £249.9 million (30 November 2011: £246.8 million) of its investment property as security for bonds and loans payable (see note 9). 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 ('DSCR') tests of between 1.2x and 1.6x at the date of this Interim Report. All debt is compliant with lender LTV and DSCR requirements. The Board monitors compliance with these requirements on a regular basis.

7. Deferred tax liabilities

The deferred tax charge for the period ended 31 May 2011 was reduced by the write back of £113,000 in respect of deferred tax over-accrued at the end of the 2010 financial year.

8. Bonds and loans payable

The bonds and loans payable are secured by certain investment properties with a fair market value of ¥30.1 billion (£249.9 million) (30 November 2011: ¥30.1 billion (£246.8 million)) at the period end date.

9. Commitments

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

10. Events after the reporting date

On 28 June 2012 the Fund completed the acquisition of Lilienberg Mejiro Ichiban Kan, a residential property located in Shinjuku Ward, Tokyo, at a price of ¥954.7 million (£7.9 million). ¥1,205 million (£10.0 million) was borrowed against four collateral properties. This amount was sufficient to cover costs related to the property acquisition and financing, while leaving a ¥160 million cash balance as a reserve against Mizuho Bank debt amortisation.