TIDMJRIC
RNS Number : 3126I
Japan Residential Inv. Co. Ltd
24 July 2012
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 GBP262,000 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.
Financial Summary
--------------------------------------------------
For the 6 months ended 31 May 2012 2011
-------------------------------------------------- -------- --------
GBP'000 GBP'000
-------------------------------------------------- -------- --------
Gross rental income 9,890 9,439
Unrealised valuation gain on investment property 262 138
Profit for the period 4,145 4,176
Earnings per share 2.2p 2.2p
Underlying profit(2) 3,823 3,962
Underlying profit per share 2.0p 2.1p
Distributions relating to the period 3,375 2,813
Distributions per share 1.8p 1.5p
-------------------------------------------------- -------- --------
As at 31 May 2012 2011
-------------------------------------------------- -------- --------
GBP'000 GBP'000
-------------------------------------------------- -------- --------
Investment property 257,903 231,728
Total debt 134,295 121,731
Gearing(1) 43.30% 43.80%
Net Asset Value (NAV) 135,639 120,772
NAV per share 72.3p 64.4p
Share price 54.0p 46.5p
-------------------------------------------------- -------- --------
Sterling denominated values of assets and liabilities as at 31
May 2012 are based on an exchange rate of Yen120.642/GBP1. Items in
the Statement of Comprehensive Income are converted at the average
exchange rate for the period of Yen125.410/GBP1.
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:
KK Halifax Management Limited
Manager Edward Barrow +65 6593 8904
KK Halifax Asset Management +81 (0)3 5563
Investment Adviser Alec Menikoff 8771
Smith & Williamson Corporate
Finance Limited Azhic Basirov +44 (0)20 7131
Nominated Adviser David Jones 4000
Fairfax I.S. PLC John Korwin-Szymanowski +44 (0)20 7598
Joint Broker James King 5368
Westhouse Securities Limited Alastair Moreton +44 (0)20 7601
Joint Broker Hannah Young 6100
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 GBP9.9 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 GBP6.0 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
GBP262,000 as values continued on a modest upward trend.
Profit for the period before tax was GBP4.4 million, up 4.4%
over the same period one year prior. The taxation charge increased
to GBP238,000 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 GBP4.1 million, or
2.2p per share. Underlying profit - profit excluding gains from
fair value adjustments, foreign exchange and other capital items -
was GBP3.8 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 GBP134.3 million against
investment property totaling GBP257.9 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 Yen1,205 million (GBP10.0 million) in June
2012 to finance the purchase of a central Tokyo property with an
appraised value of Yen1,030 million (GBP8.5 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 Yen32,144 million
(GBP266.4 million), with debt principal outstanding, excluding
capitalised finance costs, totalling Yen17,635 million (GBP146.2
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 Yen70
trillion (GBP580 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 Yen37 million
(GBP262,000) to Yen31,114 million (GBP257.9 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
Yen954.7 million (GBP7.9 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.
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 2012
31 May 2012 31 May 2011
Unaudited Unaudited
Notes GBP'000 GBP'000
Gross rental income 9,890 9,439
Property operating expenses (2,212) (2,031)
------------ ------------
Net rental income 7,678 7,408
Unrealised valuation gain on investment
property 7 262 138
Management and investment advisory
fees (822) (779)
Administrative and other expenses (1,130) (1,131)
Net operating profit before net financing
costs 5,988 5,636
Interest income 4 3
Interest and financing costs on bonds
and loans payable (1,669) (1,517)
Net foreign exchange gain 26 96
Loss on fair value adjustments on interest
rate cap contracts - (4)
Gain/(loss) on fair value adjustments
on interest rate swap contracts 34 (16)
------------ ------------
Net financing costs (1,605) (1,438)
Profit for the period before tax 4,383 4,198
Taxation charge 8 (238) (22)
Profit for the period 4,145 4,176
============ ============
Earnings per share - basic and diluted 6 2.2p 2.2p
============ ============
Other comprehensive income
Exchange differences on translation
of foreign operations 1,336 (2,756)
Total comprehensive income for the
period 5,481 1,420
============ ============
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
31 May 30 November 31 May
2012 2011 2011
Unaudited Audited Unaudited
Notes GBP'000 GBP'000 GBP'000
Non-current assets
Investment property 7 257,903 254,964 231,728
Security deposits held 375 550 522
258,278 255,514 232,250
---------- ------------ ----------
Current assets
Trade and other receivables 1,113 1,196 1,053
Restricted lender reserves 7,503 6,657 5,939
Cash and cash equivalents 7,878 9,191 7,585
---------- ------------ ----------
16,494 17,044 14,577
Total assets 274,772 272,558 246,827
---------- ------------ ----------
Non-current liabilities
Security deposits payable to
tenants 616 879 856
Bonds and loans payable 9 133,549 75,779 68,956
Interest rate swap contracts 185 219 241
Deferred tax liability 8 592 583 335
---------- ------------ ----------
134,942 77,460 70,388
---------- ------------ ----------
Current liabilities
Security deposits payable to
tenants 379 165 173
Bonds and loans payable 9 746 58,114 52,775
Trade and other payables 3,066 3,286 2,719
---------- ------------ ----------
4,191 61,565 55,667
Total liabilities 139,133 139,025 126,055
---------- ------------ ----------
Net assets 135,639 133,533 120,772
========== ============ ==========
Equity
Share capital 18,750 18,750 18,750
Special reserve 93,145 96,520 99,894
Distributions proposed from
special reserve 3,375 3,375 2,813
Foreign exchange translation
reserve 62,736 61,400 49,213
Accumulated loss (42,367) (46,512) (49,898)
Total equity 135,639 133,533 120,772
========== ============ ==========
Net asset value per share 72.3p 71.2p 64.4p
========== ============ ==========
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
For the six months ended 31 May 2012 (unaudited)
Distributions Foreign
proposed exchange
Share Special from special translation Accumulated
capital reserve reserve reserve loss Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 December
2011 18,750 96,520 3,375 61,400 (46,512) 133,533
Profit for the
period - - - - 4,145 4,145
Distributions
paid - - (3,375) - - (3,375)
Distributions
proposed - (3,375) 3,375 - - -
Currency translation
differences - - - 1,336 - 1,336
At 31 May 2012 18,750 93,145 3,375 62,736 (42,367) 135,639
========= ========= ============== ============= ============ ========
For the six months ended 31 May 2011 (unaudited)
Distributions Foreign
proposed exchange
Share Special from special translation Accumulated
capital reserve reserve reserve loss Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 December
2010 18,750 102,707 2,813 51,969 (54,074) 122,165
Profit for the
period - - - - 4,176 4,176
Distributions
paid - - (2,813) - - (2,813)
Distributions
proposed - (2,813) 2,813 - - -
Currency translation
differences - - - (2,756) - (2,756)
At 31 May 2011 18,750 99,894 2,813 49,213 (49,898) 120,772
========= ========= ============== ============= ============ ========
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
31 May 31 May
2012 2011
Unaudited Unaudited
Notes GBP'000 GBP'000
Cash flows from operating activities
Profit for the period before tax 4,383 4,198
Adjustments for:
Unrealised valuation gain on investment
property 7 (262) (138)
Interest income (4) (3)
Interest and financing costs on bonds and
loans payable 1,669 1,517
Loss on fair value adjustments on interest
rate cap contracts - 4
(Gain)/loss on fair value adjustments on
interest rate swap contracts (34) 16
Operating profit before changes in working
capital 5,752 5,594
Decrease in receivables 258 37
(Increase)/decrease in restricted lender
reserves (846) 523
Decrease in trade and other payables and
security deposits payable to tenants (259) (640)
Withholding tax paid 8 (235) (59)
Net cash inflow from operating activities 4,670 5,455
---------- ----------
Cash flows used in investing activities
Capital expenditure 7 (33) (13)
Net cash outflow used in investing activities (33) (13)
---------- ----------
Cash flows used in financing activities
Proceeds from refinanced loans 55,817 -
Repayment of bonds and loans payable (56,176) (4,141)
Distributions paid from special reserve (3,375) (2,813)
Interest received 4 3
Interest and financing costs on bonds and
loans payable (2,263) (1,166)
Net cash outflow used in financing activities (5,993) (8,117)
---------- ----------
Net decrease in cash and cash equivalents (1,356) (2,675)
Cash and cash equivalents at beginning of
period 9,191 10,611
---------- ----------
7,835 7,936
Effect of exchange rate fluctuations on
cash and cash equivalents 43 (351)
Cash and cash equivalents at end of the
period 7,878 7,585
========== ==========
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 GBP72,750 (2011: GBP65,875) of which GBP36,375
(2011: GBP36,375) 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 GBP25,000 (2011:
GBP25,000), of which GBP12,500 (30 November 2011: GBP12,500) 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
GBP797,384 (2011: GBP754,291) of which GBPNil (30 November 2011:
GBPNil) was outstanding at the end of the period. A reimbursement
of office rent paid in the amount of GBP5,201 (2011: GBP5,000) and
a financial advisory fee of GBP79,738 (2011: GBPNil) 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 GBP227,800
(2011: GBP225,647) of which GBPNil (30 November 2011: GBPNil) 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
31 May
31 May 2012 2011
Unaudited Unaudited
GBP'000 GBP'000
Gross rental income 9,890 9,439
Property operating expenses (2,212) (2,031)
------------------ -----------------
Net rental income 7,678 7,408
Management and investment advisory fees (822) (779)
Administrative and other expenses (1,130) (1,131)
Underlying profit before net financing costs 5,726 5,498
Interest income 4 3
Interest and financing costs on bonds and loans
payable (1,669) (1,517)
------------------ -----------------
Net financing costs (1,665) (1,514)
Taxation (see note 8) (238) (22)
Underlying profit 3,823 3,962
================== =================
5. Earnings per share
The earnings per share is based on the following 31 May 2012 31 May 2011
data: Unaudited Unaudited
GBP'000 GBP'000
Profit attributable to the shareholders of the
Fund 4,145 4,176
============== ==============
Weighted average number of ordinary shares for
the purpose of earnings per share 187,500,000 187,500,000
============== ==============
The Fund does not have any share options, warrants or other
potentially dilutive instruments currently in issue.
6. Investment property
31 May 30 November 31 May
2012 2011 2011
Unaudited Audited Unaudited
GBP'000 GBP'000 GBP'000
At beginning of period/year 254,964 236,738 236,738
Capital expenditure 33 40 13
254,997 236,778 236,751
Unrealised valuation gains on investment
property 262 154 138
Currency translation differences 2,644 18,032 (5,161)
At end of period/year 257,903 254,964 231,728
================= ================== ==============
The total cost of the investment property held at the period end
date was GBP338.1 million (Yen40.8 billion) (30 November 2011:
GBP334.7 million (Yen40.8 billion)).
The Fund has pledged approximately GBP249.9 million (30 November
2011: GBP246.8 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
31 May 30 November 31 May
2012 2011 2011
Unaudited Audited Unaudited
GBP'000 GBP'000 GBP'000
At beginning of period/year 583 379 379
Charged to the Statement of Comprehensive
Income
on undistributed income and interest
payable 238 226 22
Utilised on income distributed during
the period/year (235) (60) (59)
Currency translation differences 6 38 (7)
At end of period/year 592 583 335
================= ================== ==============
The deferred tax charge for the period ended 31 May 2011 was
reduced by the write back of GBP113,000 in respect of deferred tax
over-accrued at the end of the 2010 financial year.
8. Bonds and loans payable
Balance outstanding
31 May 31 May 30 Nov 31 May
2012 2012 2011 2011
Final Interest Unaudited Unaudited Audited Unaudited
repayment rate Yen'000,000 GBP'000 GBP'000 GBP'000
Current
Floating rate interest
with cap at 4%
DB Trust Company Limited
Japan May 2012 1.21% - - 47,896 43,495
ORIX Corporation May 2012 3.26% - - 9,480 8,609
Floating rate interest
with no cap
March
Mizuho Bank 2013 1.84% 90 746 738 671
90 746 58,114 52,775
Non-current
Floating rate interest
with no cap
Mizuho Bank Sept 2014 1.84% 3,006 24,914 24,906 22,865
Mizuho Corporate Bank Dec 2013 1.94% 109 901 888 804
Fixed rate interest
Mizuho Trust & Banking
Corporation Jan 2014 2.25% 1,837 15,230 15,042 13,651
Resona Bank Jan 2017 1.58% 6,884 57,060 - -
Floating rate interest
with swap into fixed rate
Mizuho Corporate Bank Dec 2013 2.35% 4,276 35,444 34,943 31,636
------------ ----------- --------- -----------
16,112 133,549 75,779 68,956
Total debt 16,202 134,295 133,893 121,731
============ =========== ========= ===========
The bonds and loans payable are secured by certain investment
properties with a fair market value of Yen30.1 billion (GBP249.9
million) (30 November 2011: Yen30.1 billion (GBP246.8 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 Yen954.7 million (GBP7.9 million).
Yen1,205 million (GBP10.0 million) was borrowed against four
collateral properties. This amount was sufficient to cover costs
related to the property acquisition and financing, while leaving a
Yen160 million cash balance as a reserve against Mizuho Bank debt
amortisation.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR BKNDQOBKDBOB
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