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JAPAN RETAIL FUND INVESTMENT CORPORATION SUMMARY OF FINANCIAL RESULTS FOR THE SIX MONTHS ENDED AUGUST 31, 2016October 13, 2016
Name of issuer: Japan Retail Fund Investment Corporation ("JRF")
Stock exchange listing: Tokyo Stock Exchange
Securities code:
8953
Website: ht t p://www.jrf-reit .com
Representative of JRF: Shuichi Namba, Executive Director
Name of asset manager: Mitsubishi Corp.-UBS Realty Inc.
Representative of the asset manager: Toru Tsuji, President & CEO & Representative Director
Contact: Keita Araki, Executive Officer, Head of Retail Division Tel: (03)5293-7081
Scheduled date for filing of securities report: Scheduled date for distributions payment:
November 28, 2016
November 18, 2016
Supplementary materials for financial results: Otherwise prepared
Analyst meeting: Scheduled
(Amounts of less than one million y en are rounded down)
- Financial results for the six months ended August 31, 2016 (March 1, 2016 to August 31, 2016)
Operating results (Percentages show period-on-period changes)
Operating revenues
Operating income
Ordinary income
Net income
For the six months ended August 31, 2016
February 29, 2016
Millions of y en %
37,078 15.8
32,017 3.4
Millions of y en %
13,841 1.1
13,684 6.8
Millions of y en %
11,396 2.2
11,154 9.2
Millions of y en %
10,820 -0.8
10,912 1.7
Net income per unit
Return on net assets
Ratio of ordinary income to total assets
Ratio ofordinary income to operating revenues
For the six months ended August 31, 2016
February 29, 2016
Yen
4,239
4,285
%
2.6
2.7
%
1.4
1.3
%
30.7
34.8
Distributions
Distributions
(excluding distributions in excess of profit)
Distributions
in excess of profit
Payout ratio
Ratio of distributions to net assets
Per unit
Total
Per unit
Total
For the six months ended
Yen
Millions of y en
10,846
10,719
Yen
Millions of y en
0
0
%
%
August 31, 2016
4,250
0
100.3
2.6
February 29, 2016
4,200
0
98.2
2.6
Note 1: Total distributions for the six months ended August 31, 2016 includes reversal of reserve for reduction entry of property amounting to ¥25 million and differs from net income. Note 2: Pay out ratio for the six months ended February 29, 2016 is calculated by following formula because new investment units were issued.
Pay out ratio = Total of distributions ÷ Net income × 100
Financial position
Total assets
Net assets
Ratio of net assets to total assets
Net asset value per unit
As of
Millions of y en
Millions of y en
%
Yen
August 31, 2016
858,390
415,274
48.4
162,712
February 29, 2016
829,239
414,705
50.0
162,489
Cash flows
Net cash provided by (used in)
Cash and cash equivalents at end ofperiod
Operating activities
Investing activities
Financing activities
For the six months ended August 31, 2016
February 29, 2016
Millions of y en
16,214
16,402
Millions of y en
(3,271)
(14,254)
Millions of y en
20,079
(16,921)
Millions of y en
47,488
14,466
-
Outlook for the six months ending February 28, 2017 (September 1, 2016 to February 28, 2017) and August 31, 2017 (March 1, 2017 to August 31, 2017)
(Percentages show period-on-period changes)
Operating revenues
Operating income
Ordinary income
Net income
For the six months ending
Millions of y en %
Millions of y en %
Millions of y en %
Millions of y en %
February 28, 2017
31,631 -14.7
13,710 -0.9
11,390 -0.1
11,389 5.3
August 31, 2017
30,069 -4.9
13,051 -4.8
10,780 -5.4
10,779 -5.4
Net income per unit
Dist ribut ions per unit
(excluding distributions in excess of profit)
Dist ribut ions
in excess of profit per unit
For the six months ending
Yen
Yen
Yen
February 28, 2017
4,462
4,250
0
August 31, 2017
4,223
4,250
0
Note: Total distributions for the six months ending February 28, 2017 is calculated by subtracting appropriation of reserve for dividends (or retained earnings for temporary difference
adjustment) amounting to ¥543 million from net income for the period. Total distributions for the six months ending August 31, 2017 include reversal of reserve for reduction entry of property amounting to ¥30 million and reserve for dividends (or retained earnings for temporary difference adjustment) amounting to ¥36 m illion.
- Others
Changes in accounting policies and accounting estimates or restatements Changes in accounting policies due to accounting standards revision: None Changes in accounting policies due to other reasons: None
Changes in accounting estimates: None Restatements: None
Number of unit s issued
-
Summary of related corporations of JRF
There have not been any significant changes to the "structure of the investment corporation" in the most recent financial report (submitted on May 30, 2016), and hence, description of these matters is omitted.
- Management policy and results of operation
Management policies
"Part 1 Fund Information, Item 1. Status of the Fund, 2 Investment Policies, (1) Investment Policies, b.
Investment Stance" set out in the financial report submitted on May 30, 2016 was amended as of August 29, 2016 as follows.
Unless otherwise specifically noted, terms in this document have the same meaning as in those defined in the financial report dated May 30, 2016. The underlined parts indicate changes.
Portfolio management policies
(omit)
JRF will establish optimum portfolios which are expected to provide stable cash flows on a medium-to-long term in accordance with the basic investment policy of the Investment Corporation, so that stable earnings can be ensured on a medium to long-term basis, with the steady growth of assets under management. In order to establish such optimum portfolios, The Investment Corporation will seek to reduce disaster risks caused by earthquakes etc. and vacancy risks caused by tenants moving out, through carefully selected investments in business types and categories of various retail facilities that match trends such as consumer trends as well as through diversified investments in terms of region and lessees' attribute.
The Investment Corporation will make efforts to ascertain changes in the macroeconomic conditions, social trends, real estate market and retail industry trends, and establish optimum portfolios corresponding to such environmental changes in accordance with the basic policies.
Diversification by business type and business category of retail facilities
The Investment Corporation has set four classes of investment targets in consideration of various factors such as locational characteristics of the retail facilities, target trading areas and size of the retail facilities: "A. Large-scaled retail facilities which is within the largest class in the region (e.g. large-sized shopping malls and medium to large-sized shopping centers)"; "B. Retail facilities neighboring highly populated areas (e.g. neighborhood shopping centers, roadside shops and supermarkets)"; "C. Well-located retail facilities which are located adjacent to major railway stations (e.g. buildings with specialty store tenants, department stores and service industry-related facilities)"; and "D. Retail facilities in prime locations (e.g. specialty stores and brand stores)". The Investment Corporation aims to build up well-balanced portfolios in the medium- to long-term, without relying excessively on specific investment target.
The ratio of each investment property's price shall be 20% or less of the portfolio's total amount of assets.
"Urban areas of three metropolitan cities" means Tokyo area (meaning Tokyo Metropolis, Kanagawa prefecture, Saitama prefecture and Chiba prefecture), Nagoya area (meaning Aichi prefecture) and Osaka Area (meaning Osaka prefecture, Kyoto prefecture, Hyogo prefecture and Nara prefecture). The same shall apply hereinafter.
Geographic diversification
In principle, investments are diversified mainly into urban areas of three metropolitan cities and ordinance-designated cities. The Investment Corporation will also invest in other areas, taking competitiveness of the respective investment properties and other various factors into consideration.
Tenants' attributes
Focus will be placed on the remaining lease term of lease contracts with each lessee and credit risk of these lessees. The remaining lease term of lease contracts is reviewed on a regular basis by taking into consideration the economic environment, and each lessee's sales and other factors. The Investment Corporation will also be on the alert for the probability of fulfillment of obligations at all times, and conduct credit checks whenever necessary.
Investment in overseas real estate
When investing in overseas real estate, the Investment Corporation will conduct a comprehensive examination in light of the economic growth and population trend in the relevant country and area, and its legal, taxation, accounting and political systems and cultural affinity. In addition, the Asset Manager will make investment decision carefully also in consideration of country risk, operational risk and exchange risk.
Investment and disposition policies
(omit)
Asset management is conducted from the medium-to-long-term perspective, and the enhancement of asset values and sustainable improvement of competitive advantages are pursued by means of planned renovation work and invitation of new tenants. In addition, revenue expansion (i.e. increased rents, improved occupancy ratios, etc.) and cost reduction (i.e. reduction of outsourcing fees and utility expenses, etc.) are pursued.
When asset management is conducted, long lease terms are basically offered, and ensuring stable earnings is primarily pursued, with the selection of property management companies which comport with characteristics of each property, adopting the principle of competition. In addition, in accordance with characteristics of each property, lease terms are flexible, and asset management is conducted in a manner that can reflect the trends of the next age and the latest consumer needs whenever contracts with new tenants are made.
The disposition of individual real properties under management is determined in a comprehensive manner in consideration of future revenue forecasts, changes in asset values, forecasts of such changes, future prospects and stability of location areas, degraded real properties, risk of deterioration, cost estimation of such deterioration, portfolio structure, and other factors.
Financial policy
The Investment Corporation may obtain borrowings or issue corporate bonds for the purposes of acquisition and repair of properties, repayment of security and guarantee deposits, payment of distributions, and payment of expenses incurred or repayment of debts of the Investment Corporation, etc. (including the fulfillment of obligations related to borrowings and corporate bonds). The amount of 1 trillion yen is the maximum amount of borrowings and corporate bonds respectively, with the combined amount not exceeding 1 trillion yen. The Investment Corporation obtains borrowings only from qualified institutional investors as stipulated in Article 2, Paragraph 3, Item 1 of the Financial Instruments and Exchange Act (limited to institutional investors specified by Article 67-15, Paragraph 1, item 1, b (2) of the Special Taxation Measures Law (Law No. 26 of 1957, as amended)).
The Investment Corporation may pledge assets under management in connection with borrowings and corporate bond issuance.
The Investment Corporation sets 45% to 55% as current target range (hereinafter the "debt ratio") of the combined amount of outstanding balances of borrowings and corporate bonds and security and guarantee deposits that it receives (and trust assets in trust of beneficial rights that the Investment Corporation owns) against the total asset amount, taking into comprehensive consideration the prevailing trends in capital markets.
In addition to the above, the Investment Corporation has the following borrowing policy.
Various borrowing terms and conditions such as fixed-rate borrowing debt ratios, borrowing periods, and presence or absence of collateral setting are negotiated with multiple qualified institutional investors (i.e., potential lenders) and determined after completion of comparison of these terms and conditions, so that low financing costs can be obtained, and effects of changes in financial climate can be alleviated at the time of refinancing in the future. However, financing costs may change due to unexpected changes in economic conditions such as the cases where premature repayment fees are determined depending on interest rates valid at the time of repayment.
The Investment Corporation may make a contract of setting borrowing limit in advance or tentative borrowing, such as a maximum credit line agreement and commitment line agreement, for the purpose of rapidly procuring funds necessary to minimize the risk related to refinancing in the future, acquire additional specified assets in the future, and repay security and guarantee deposits.
To reduce price fluctuation risks and interest rate fluctuation risks of assets under management, the Investment Corporation may deal with interest rate futures, interest rate options transactions, interest rate
Number of units issued at end of period (including treasury unit s):
As of August 31, 2016
As of February 29, 2016
2,552,198 units
2,552,198 units
Number of treasury unit s at end of period: As of August 31, 2016
As of February 29, 2016
0 units
0 units
Note: For the number of unit as a basis of calculation of net income per unit, please refer to per unit information on page 28.
Forward-looking Statements and Other NotesForward-looking statements in this presentation are based on the information currently available and certain assumptions we believe reasonable. Actual results may differ materially from the forward-looking statements in this presentation due to various factors. Furthermore, those statements do not guarantee the amount of future distributions.
For further information and assumptions regarding the forward-looking statements, please refer to "2. Management policy and results of operation, (2) State of operation, B. Outlook of next period" on page 11-13.
Japan Retail Fund Investment Corporation published this content on 13 October 2016 and is solely responsible for the information contained herein.
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