AEON REIT Investment : 22nd Fiscal Period(Ended Jan. 2024) Semi-Annual Report

AEON REIT Investment Corporation

https://www.aeon-jreit.co.jp/en/index.html

22nd

Period

Semi-Annual Report

For the fiscal period ended January 31, 2024

AEON REIT invests primarily in retail and related properties* that form the backbone of local communities.

Retail and related properties are an integral part of the communities in which they are located. We believe that these properties and facilities in which we invest form the backbone of local communities and their retail business infrastructure.

We also aim to ensure stable income and achieve steady portfolio growth over the medium-to-long term by investing in retail and related properties that contribute to the betterment of individual lives and local communities.

*Refers to retail facilities, logistics facilities and related facilities. Retail facilities refers to facilities containing retail businesses and other merchandising businesses, entertainment and amusement facilities and other facilities that attract customers (including parking lots and equipment and systems for logistics). Logistics facilities refers to warehouses and other storage facilities for distribution and transport of merchandise and other goods.

AEON Ueda Shopping Center

Contents

AEON REIT Characteristics	2	Financial Section (Audited)
Special Feature: 10th Anniversary of Listing	4	Balance Sheets	54
Financial Highlights	7	Statements of Income	56
To Our Unitholders	8	Statements of Changes in Net Assets	57
Environmental Certification and Assessment	11	Statements of Cash Distributions	58
Financial Strategy / Risk Management	12	Statements of Cash Flows	59
Growth Strategy	14	Additional Information	60
AEON REIT's Portfolio	17	Notes to Financial Statements	61
Strong Fundamentals	18	Supplemental Schedules	84
Effective and Effiicient Financial Management....	18	Independent Auditor's Report	97
HighlyTransparent Management Structure	20	Structure and Formation of Investment	100
Investment Policy / Distribution Policy	24	Corporation / Profiile of the Asset Manager
	101
Management's Discussion and Analysis	40	Investor Information

1

AEON REIT Characteristics

We invest primarily in the retail properties of the AEON Group.

Investment Focused on Large-Scale Retail Properties

We invest primarily in retail properties that are an integral part of the communities in which they are located. In this asset class, we are structuring a portfolio of large-scale retail properties that we expect to generate stable cash flow over the medium-to-long term.

			Investment Percentage*
		Type	Domestic Real Estate	Overseas Real Estate
			85% or more	15% or less
	Large-scale	Super regional shopping centers (SRSC)
	retail	Regional shopping centers (RSC)	80% or more
Retail	properties
Community shopping centers (CSC)
properties,
Other retail	Neighborhood shopping centers (NSC)
etc.	20% or less
	properties	Supermarkets (SM)
		Logistics facilities	10% or less

*Investment percentage is calculated on an acquisition price basis.

Share of large-scale

retail properties in our portfolio

Currently

93.4%

(As of January 31, 2024)

Collaboration with the AEON Group for Stability and Growth

We maintain stability with long-term sources of earnings by investing in retail properties operated by the AEON Group, a leading retailer and developer of large-scale retail properties throughout Japan. We also leverage the AEON Group's retail property expertise to generate growth.

Stable Finances

Group

Consolidated operating

revenue

¥9.1 trillion

AEON Group employees

Approx. 570,000 (As of February 28, 2023)

Our conservative financial management is based on clear financial policies for target LTV and other matters. As a result, we have strong, stable relationships with financial institutions, primarily megabanks. We have also received a long-term issuer rating of AA from Japan Credit Rating Agency, Ltd.

Highly Transparent Management

Japan Credit Rating

Agency, Ltd.

long-term issuer rating

AA

(Stable)

For asset acquisitions from the AEON Group or any other related-party transaction, the decision-making process includes a mechanism to incorporate the opinions of independent third parties having no relationship with the Aeon Group. This creates highly transparent management that ensures win-win relationships with both unitholders and the AEON Group. Please refer to page 20 for details.

Introduction of Cumulative Investment Unit Purchase Program

On May 1, 2014, we introduced a program that enables directors and employees of AEON REIT and the Asset Manager to acquire AEON REIT's investment units using a cumulative investment program through securities firms.

The program will help to further raise awareness toward enhancing the value of AEON REIT's investment unit price and improving business performance to provide greater financial motivation in line with the interests of unitholders.

2

AEON REIT Investment Corporation

Initiatives on Sustainability

AEON REIT cares about Environmental, Social and Governance (ESG) issues in all aspects of its operations and cooperates with its stakeholders for such purposes.

Sustainability Policy

1. Environmental Initiatives

1. In order to achieve the realization of a low-carbon society, work to continuously improve energy effciency and reduce emis- sions of greenhouse gases through the use of renewal sources of energy.
2. Promote peaceful coexistence with the natural environment by paying consideration to the conservation of ecosystems, and through tree planting activities and other real estate management initiatives.
3. In order to achieve sustainable use of resources, work towards conservation and recycling of resources through the promotion of water saving and the 3Rs (Reduce, Reuse, Recycle) with regard to the use of resources.
4. Observe and conform to environmental-related laws and regulations, etc., and endeavor to prevent environmental pollution.

2. Cooperation with Stakeholders

1. By carrying out education and training with regard to environmental issues, endeavor to raise the environmental awareness of our corporate offcers and to pay care and attention to the diversity and work-life balance of our employees.
2. By utilizing the total, comprehensive power of the AEON Group, endeavor to provide comfortable work environments to the employees of end tenants/associates as well as those of other partner companies, and work to build a sound and healthy cooperative relationships.
3. In order to facilitate the advancement of ESG initiatives across the entire supply chain for our real estate operations, endeavor to implement a green procurement strategy.
4. Provide support for volunteer activities and places/opportunities for people from local communities to gather for educational and information exchanges, and endeavor to cooperate with communities as a hub for reconstruction efforts in times of disasters.
5. Proactively disclose information regarding ESG issues to investors and endeavor to communicate openly with them, and work continuously towards obtaining Green Building certifcation.

Establishment of Materiality (Key Issues)

AEON REIT has identifed 14 topics as its materiality (key issues) regarding sustainability issues, and selected 8 of them as priority themes.

We have set KPIs for priority themes, and we are working to promote measures to achieve them.

PriorityThemes

	Environment				Social				Governance
Opportunities in green buildings			Local community engagement and		Corporate governance
					sustainable development
Climate change			Safety and security of owned properties		Compliance and risk management
Biodiversity and land use			Human capital development

TCFD Qualitative Analysis Disclosure

In August 2022, we add a climate change page to our website, where we disclosed our qualitative analysis in line with the TCFD recommendations.

3

Special Feature: 10th Anniversary of Listing

AEON REIT Investment Corporation

AEON REIT Investment Corporation marked the Since we were first listed, we have invested in "community infrastructure assets" that support

Changes in Asset Size and Distribution

Distribution per unit (yen)			3,019	2,926	3,029	2,956
Assets acquired during	2,724	2,790
current period
2,461	2,473
Previously
acquired assets
(billion yen)

1,450

Kumamoto Earthquake

686	Due to earthquake damage, distributions in
	excess of earnings were made
	Starting from the following period,

earthquake insurance was purchased for the entire domestic portfolio

36

properties

40

properties

November 2013						31
Listed onTokyo					28
Stock Exchange					properties
						properties
				23
16		17		properties
properties		properties
158.3	158.3	158.9	158.9	194.3	194.3	249.2	268.5	330.6	355.1	355.3

Time of	2nd Period	3rd Period	4th Period	5th Period	6th Period	7th Period	8th Period	9th Period	10th Period	11th Period
listing	Results	Results	Results	Results	Results	Results	Results	Results	Results	Results
First Acquisition of Overseas Property by J-REIT		Promoting Diversification of Owned Assets

Acquired AEON Taman Universiti Shopping Centre, located in Malaysia

Acquired properties with a range of uses and sizes, including Daiei-Kawasaki Process Center, which is a logistics facility, and AEON Chigasaki-Chuo Shopping Center, which is a community retail facility

4

- History Since Listing

10th anniversary of its listing on November 22, 2023.

the lifestyles of people in various communities and achieved steady growth over the 10 years.

						3,315	3,274	3,283	3,350	3,350
3,066	3,047	3,074	3,178	3,184	3,200

COVID-19 pandemic

Amid a challenging environment, we maintained 100% rental revenue and achieved stable growth potential by leveraging our long-term,fxed-based master lease structure

						47			49
								properties
						properties
		41	42	43
		properties	properties
		properties
362.4	362.4	380.5	390.1	395.5	396.7	447.0	447.0	447.0	468.3	468.3

12th Period	13th Period	14th Period	15th Period	16th Period	17th Period	18th Period	19th Period	20th Period	21st Period	22nd Period
Results	Results	Results	Results	Results	Results	Results	Results	Results	Results	Results

External Growth Leveraging Group's Collective Capability

Based on an abundant pipeline that leverages the Group's collective capability, we acquired 4 properties for a total of 50.2 billion yen, bringing our asset size to over 400 billion yen

Balancing stability and

growth potential to

achieve steady growth of both distributions and asset size

Special Feature: 10th Anniversary of Listing

AEON REIT Investment Corporation

- History Since Listing
Compiled Data
Asset Size and No. of Properties
End of 2nd FP	End of 22nd FP
16 properties	49 properties
¥158.3 billion	¥468.3 billion

Unitholder Value

Distribution per unit

End of 2nd FP	End of 22nd FP
¥686	¥3,350
NAV per unit (Note 1)
End of 2nd FP	End of 22nd FP (Note 2)
¥110,456	¥152,786
Unrealized gain

Portfolio Value

Asset type diversification

4.2%6.6%

17.6%	6.0%

End of	End of
2nd FP	22nd FP
82.4%	83.2%

• Super regional shopping centers (SRSC)
• Regional shopping centers (RSC)

■ Community shopping centers (CSC)

■ Logistics facilities (L)

Regional diversification

End of 2nd FP	End of 22nd FP
+¥8.5 billion	+¥84.6 billion

Financial Indicators

	7.6%
16.0%
21.7%	End of	38.8%
2nd FP
4.6%	11.3%

1.3%	6.7%
11.1%
7.3%
	End of	35.6%
23.8%	22nd FP
	14.1%

Fundraising costs

End of 2nd FP	End of 22nd FP
0.92 %	0.86 %

Long-term issuer credit rating (JCR)

End of 2nd FP	End of 22nd FP
AA-	AA

■ Hokkaido and Tohoku	■ Kanto	■ Tokai, Hokuriku and Chubu
■ Kinki	■ Chugoku and Shikoku	■ Kyushu	■ Malaysia

External evaluation

Obtained highest rating for 4 consecutive years

GRESB Real Estate Assessment

Obtained five stars

Third-party certification acquisition rate

Acquisition rate of more than 80% during six years

since acquiring first certification in 2017

4★ or higher	3★ or higher
82.5 %	86.8 %

6

Financial Highlights

AEON REIT Investment Corporation

As of January 31, 2024

22nd FP		23rd FP		24th FP
	forecast distribution per unit		forecast distribution per unit
distribution per unit
	(including distribution in excess of earnings)		(including distribution in excess of earnings)

¥3,350				¥3,335				¥3,335
			(as of March 18, 2024)			(as of March 18, 2024)
	21st Period Results	22nd Period Results	23rd Period Forecast	24th Period Forecast
	February 1, 2023 to	August 1, 2023 to	February 1, 2024 to	August 1, 2024 to
		July 31, 2023	January 31, 2024		July 31, 2024	January 31, 2025
		(Millions of yen)	(Millions of yen)	(Millions of yen)	(Millions of yen)
Operating Revenue	21,008	21,054	21,009	21,017
Net Income	7,047	6,990	6,705	6,894
Total Assets	452,485	454,258			-	-
Net Assets	247,392	247,267			-	-
Net Assets per Unit (Yen)	116,477	116,418			-	-
Distribution per Unit (Yen)	3,350	3,350	3,335	3,335
Distribution in excess of			-	-	61	90
retained earnings per unit (Yen)

Investment Properties

49 properties

Total Acquisition Price (Note 4)

¥468.3 billion

Appraisal Value (Note 2, 6)

¥500.1 billion

Occupancy Rate Based on

Master Lease Agreements 100

%

Average Building Age (Note 3)

18.5 years

Average Remaining Lease Term (Note 5)

12.8 years

Unrealized Gain or Loss (Note 2, 7)

(Appraisal Value minus Book Value)

+¥84.6 billion +¥3.6 billion

(from the previous period)

Notes: 1. NAV per unit = (Unitholders' capital, net + Unrealized gain) ÷ Total number of investment units issued and outstanding.

1. For AEON MALL Kahoku and AEON MALL Shinkomatsu, since the detailed survey on the impact of the 2024 Noto Peninsula Earthquake has not been completed as of January 31, 2024, and documents on repairs and maintenance necessary to determine the impact on price are unavailable, the "real estate appraisal value" represents the survey price that does not take into consideration such factors.
2. The weighted average fgures based on acquisition price, with January 31, 2024 set as the reference date, are indicated.
3. Total acquisition price indicates the amount (the purchase prices, etc. stated in the sales agreements, etc.) excluding miscellaneous costs (brokerage commissions, taxes and dues, etc.) that were required for the acquisition of the portfolio properties.
4. Average remaining lease term indicates the weighted average fgure using the acquisition price, based on the lease agreements for each property effective as of January 31, 2024.
5. The fgure uses the appraisal value indicated in the respective appraisal reports with January 31, 2024 as the appraisal date, or survey price indicated in the respective survey reports of properties.
6. Unrealized gain or loss = Appraisal value at end of each fscal period - book value at end of each fscal period. For AEON MALL SEREMBAN 2, however, the fair value is used for appraisal.
7. The calculation of each fgure (excluding 7. above) includes AEON MALL SEREMBAN 2, which AEON REIT owns through an overseas real estate holding corporation.

7

To Our Unitholders

N o b u a k i S e k i

Representative Director and President

AEON Reit Management Co., Ltd.

Introduction

We would like to express our deepest condolences to the bereaved families of those who lost their lives in the 2024 Noto Peninsula Earthquake. We also offer our heartfelt sympathy to everyone in the region who was impacted by the disaster.

Among the properties owned by AEON Investment Corporation, AEON Mall Kahoku and AEON Mall New Komatsu suffered damaged due to the earthquake, but except for certain sections, both properties resumed operation on January 4. We

hope that life will return to normal for everyone in the region as soon as possible.

On another note, during the current fscal period, AEON Investment Corporation marked the 10th anniversary of its listing.

We are sincerely grateful to all our unitholders and other stakeholders for their valuable understanding and support and will keep striving to be highly evaluated by them.

Q1	Can you give us an overview of the fiscal period ended January 2024
(August 1, 2023, to January 31, 2024)?

The asset management environment remained challenging due to factors such as entrenched

AEON Ueda Shopping Center

infation and further interest rate hikes, but we engaged in initiatives aimed at achieving the medium -term targets we announced in September 2022.

In terms of specifc details, one example is internal growth associated with the revitalization investment at AEON Ueda Shopping Center.

We acquired this property in October 2020 with the condition that work would be carried out to further enhance its future competitiveness.

After that, we carried out exterior wall painting and extensive store interior renovations. A portion

8