AEON REIT Investment : Financial Report for the Fiscal Period Ended July 31, 2021

This is an English translation of summarized financial results prepared for reference purposes only. Should there be any inconsistency between the translation and the official Japanese text, the latter shall prevail.

September 14, 2021

Financial Report for the Fiscal Period Ended July 31, 2021

(February 1, 2021 - July 31, 2021)

AEON REIT Investment Corporation

Listing:	Tokyo Stock Exchange
Securities code:	3292
URL:	https://www.aeon-jreit.co.jp/en/index.html
Representative:	Nobuaki Seki, Executive Director

Asset management company: AEON Reit Management Co., Ltd.
Representative:	Nobuaki Seki, Representative Director and President
Contact:	Tomohiro Itosaka, Managing Director in charge of Finance and Administration
Phone:	[phone]

Scheduled date to file securities report:

October 26, 2021

Scheduled date to commence distribution payments:

October 20, 2021

Preparation of supplementary material on financial report: Yes

Holding of financial report presentation meeting:

Yes (for institutional investors and analysts)

(Amounts truncated to the nearest million yen)

1. Summary of financial results for the fiscal period ended July 31, 2021

(February 1, 2021 - July 31, 2021)

(1) Operating results

(Percentages show changes from the previous period)

Operating revenue

Operating income

Ordinary income

Net income

Fiscal period ended

Millions of yen

%

Millions of yen

%

Millions of yen

%

Millions of yen

%

July 31, 2021

17,696

(0.0)

6,749

(0.8)

5,988

0.4

5,869

(1.6)

January 31, 2021

17,701

0.7

6,802

0.3

5,965

0.2

5,965

0.2

Net income

Return on equity

Ordinary income

Ordinary income

per unit

(ROE)

to total assets

to operating revenue

Fiscal period ended

Yen

%

%

%

July 31, 2021

3,133

2.8

1.6

33.8

January 31, 2021

3,184

2.8

1.5

33.7

(2) Distributions

Distribution per

Total cash

distributions

Total cash

unit (excluding

Distribution in

Cash

(excluding

distributions in

distributions in

excess of retained

Payout ratio

distributions to

distributions in

excess of retained

excess of retained

excess of retained

earnings per unit

earnings

net assets

earnings)

earnings)

Fiscal period ended

Yen

Millions of yen

Yen

Millions of yen

%

%

July 31, 2021

3,200

5,994

‒

‒

102.1

2.8

January 31, 2021

3,184

5,964

‒

‒

100.0

2.8

(Note) Distribution per unit for the fiscal period ended July 31, 2021 is calculated by dividing the amount, which is obtained by adding the amount of provision of distribution reserve of ¥124 million from unappropriated retained earnings of ¥5,870 million, by the total number of investment units issued and outstanding.

							AEON REIT Investment Corporation (3292)
					Financial	Report for the Fiscal Period	Ended July 31, 2021
(3)	Financial position
			Total assets		Net assets		Equity ratio		Net assets per unit
	As of	Millions of yen		Millions of yen		%		Yen
		July 31, 2021	385,982		210,913		54.6		112,588
		January 31, 2021	386,530		211,008		54.6		112,638
(Reference) Equity As of July 31, 2021: ¥210,913 million	As of January 31, 2021: ¥211,008 million
(4)	Cash flows
			Net cash provided by		Net cash provided by		Net cash provided by		Cash and cash
			(used in) operating		(used in) investing		(used in) financing		equivalents
			activities		activities		activities		at end of period
	Fiscal period ended	Millions of yen		Millions of yen		Millions of yen		Millions of yen
		July 31, 2021	10,691		(2,473)		(5,962)		26,668
		January 31, 2021	11,049		(6,087)		(6,074)		24,412

2. Forecasts of performance for the fiscal periods ending January 31, 2022 (August 1, 2021 - January 31, 2022) and July 31, 2022 (February 1, 2022 - July 31, 2022)

(Percentages show changes from the previous period)

Distributions

per unit

Distributions

Operating

Operating

Ordinary

Net income

(excluding

in excess of

distributions

retained

revenue

income

income

in excess of

earnings per

retained

unit

earnings)

Fiscal period ending

Millions

%

Millions

%

Millions

%

Millions

%

Yen

Yen

of yen

of yen

of yen

of yen

January 31, 2022

19,890

12.4

7,665

13.6

6,715

12.1

6,635

13.0

3,315

‒

July 31, 2022

19,918

0.1

7,561

(1.4)

6,621

(1.4)

6,621

(0.2)

3,270

‒

(Reference)

Forecasted net income per unit (Forecasted net income / Forecasted total number of investment units issued and outstanding)

For the fiscal period ending January 31, 2022:

¥3,245

For the fiscal period ending July 31, 2022:

¥3,238

(Note)

Distribution per unit for the fiscal periods ending January 2022 and July 2022 is calculated on the assumption that part of the

provision of distribution reserve (¥149 million and ¥69 million, respectively) will be reversed and distributed.

*Other

(1) Changes in accounting policies, changes in accounting estimates, and retrospective restatement

1. Changes in accounting policies due to revisions to accounting standards and other regulations: None

b.	Changes in accounting policies due to reasons other than a. above:	None
c.	Changes in accounting estimates:	None
d.	Retrospective restatement:	None

1. Total number of investment units issued and outstanding
   a. Total number of investment units issued and outstanding at end of period (including treasury investment units)

As of July 31, 2021	1,873,317 units
As of January 31, 2021	1,873,317 units

1. Number of treasury investment units at end of period

As of July 31, 2021	0 units
As of January 31, 2021	0 units

(Note) Please refer to "Per Unit Information" on page 31 for the number of investment units used as the basis for calculating net income per unit.

* Status of audit procedures

This financial report is not subject to audit procedures by public accountants or audit corporations.

* Special notes

Forward-looking statements presented in this financial report, including forecasts of performance, are based on information currently available to AEON REIT and on certain assumptions AEON REIT deems to be reasonable. As such, actual operating and other results may differ materially from these forecasts as a consequence of numerous factors. Furthermore, these forecasts shall not be construed as a guarantee of the distribution amount. Please refer to "Assumptions for Forecasts of Performance for the Fiscal Periods Ending January 2022 (August 1, 2021 - January 31, 2022) and July 2022 (February 1, 2022 - July 31, 2022)" on pages 8 and 9 for information on assumptions for the forecasts of operating results.

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AEON REIT Investment Corporation (3292)

Financial Report for the Fiscal Period Ended July 31, 2021

1. Status of Asset Management

1. Status of Asset Management

1. Summary of results for the current fiscal period

(A) Overview of AEON REIT

AEON REIT Investment Corporation (hereinafter, "AEON REIT") invests primarily in retail and related properties which, as an integral part of the communities in which they are located, form the backbone of communities and their retail business infrastructure. Through said investment, we aim to ensure stable earnings over the medium to long term and achieve steady portfolio growth.

AEON REIT was established on November 30, 2012, in accordance with the Act on Investment Trusts and Investment Corporations (Act No. 198 of 1951, as amended; hereinafter, the "Investment Trusts Act"), with AEON Reit Management Co., Ltd. (hereinafter, the "Asset Manager") serving as the organizer. AEON REIT was listed on the Real Estate Investment Trust Securities Market (J-REIT market) of the Tokyo Stock Exchange (securities code: 3292) on November 22, 2013. In the fiscal period under review (17th fiscal period), AEON REIT additionally acquired part of the land of AEON MALL Nogata (acquisition price: ¥1,300 million) in February 2021 by utilizing cash on hand, and disposed part of the site of AEON MALL Yamatokoriyama in March 2021 (sale price: ¥53 million).

The real estate held by AEON REIT as of July 31, 2021, totaled 43 properties in Japan and overseas, including AEON MALL SEREMBAN 2 it owns through an overseas real estate holding corporation established in Malaysia (hereinafter, the "Overseas SPC"), with a total acquisition price of ¥396,788 million. Total leasable area is 3,658,461.85 m2 and the occupancy rate of the entire portfolio is 100.0% as of the same date.

1. Operating environment and performance

1. Operating environment

In the fiscal period under review, the Japanese economy saw the real GDP growth rate (first preliminary estimates) for April through June 2021 rise only slightly, by 0.3% quarter on quarter, under the continued impact of the novel coronavirus infection (COVID-19). Although private-sector demand including capital investments and housing investments drove the real GDP growth, exports increased because of soaring crude oil prices and negatively contributed to the growth.

The real estate investment market remained on a strong note against the backdrop of continued monetary easing. In light of the situation in which the impact of COVID-19 has caused changes in expected yields by asset type and by area, it should become ever more important going forward to discern the profitability of individual properties and timeliness of transactions.

In the J-REIT market, overseas investors continued to be net buyers due to such factors as expanded vaccination, expectations for economic resumption and receding concerns about the U.S. moving up tapering of quantitative easing. At the end of the 17th fiscal period, the Tokyo Stock Exchange (TSE) REIT Index recovered to the highest level in approximately a year and a half, standing at 2,160.33 points (based on closing price).

(b) Performance

Under the conditions with continued impact of COVID-19, AEON REIT and the Asset Manager steadily promoted external growth by conducting asset acquisition through the use of cash on hand, as they did in the previous fiscal period. AEON REIT additionally acquired part of the land of AEON MALL Nogata (acquisition price: ¥1,300 million) in February 2021, while disposed part of the site of AEON MALL Yamatokoriyama (sale price: ¥53 million) in March 2021. With these transactions, AEON REIT expanded its portfolio size from ¥395.5 billion at the end of the previous fiscal period to ¥396.7 billion at the end of the 17th fiscal period.

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AEON REIT Investment Corporation (3292)

Financial Report for the Fiscal Period Ended July 31, 2021

With regard to internal growth, AEON REIT conducted work at AEON MALL Shinrifu North Wing (Note) to change the material of smoke barriers used to suppress smoke diffusion in the case of a fire from glass to incombustible film. Work was also conducted to newly install storage units for raw garbage at AEON MALL Suzuka and replace the signboard light of the multi-storey parking lot at AEON MALL Kyoto Gojo with LED lamps. These endeavors helped these properties achieve upward revision of rents. As such, AEON REIT is promoting investments aimed at maintaining and enhancing the functions of its properties.

(Note) The property was renamed from AEON MALL Rifu to AEON MALL Shinrifu North Wing in July 2021. The same shall apply hereafter.

(C) Financing

As of July 31, 2021, AEON REIT had a balance of interest-bearing debt totaling ¥159,800 million, remaining unchanged from January 31, 2021, with the LTV ratio (the ratio of the balance of interest-bearing debt plus tenant leasehold and security deposits and tenant leasehold and security deposits in trust to total assets held by AEON REIT) standing at 44.9%.

The ratio of long-terminterest-bearing debt (the ratio of long-terminterest-bearing debt (including the current portion of long-term loans payable) to total interest-bearing debt) was 100.0% as of July 31, 2021. The ratio of fixed-rate debt (the ratio of interest-bearing debt with fixed interest payment (including interest- bearing debt with interest fixed through swaps) to total interest-bearing debt) was 100.0% as of the same date. Together with the abovementioned LTV, these figures indicate that AEON REIT has maintained a sound and conservative financial structure. AEON REIT works to diversify the repayment dates and extend maturities of interest-bearing debt with an aim to further reinforce its financial base.

As of July 31, 2021, AEON REIT had the following credit rating.

Credit rating agency	Rating type	Credit rating	Outlook
Japan Credit Rating Agency, Ltd. (JCR)	Long-term	AA-	Stable
issuer rating

(D) Initiatives on sustainability

AEON REIT is making endeavors for Environment, Social, and Governance (ESG) awareness. It works to reduce environmental burden and coordinate and cooperate with its stakeholders in pursuit of realizing a sustainable society as its corporate social responsibility.

As a result, the endeavors were recognized by external institutions. In July 2021, AEON REIT newly obtained DBJ Green Building Certification for AEON MALL Shimotsuma and AEON MALL Kushiro- Showa. As of the end of the 17th fiscal period (July 31, 2021), AEON REIT has obtained the DBJ Green Building Certification for 24 properties, BELS certification for 1 property, and CASBEE Certification for Buildings for 4 properties.

On top of these, the Asset Manager was certified by the CERTIFIED 2021 Health & Productivity Management Outstanding Organizations Recognition Program (for SMEs) in March 2021, marking the second consecutive year with the certification. Both AEON REIT and the Asset Manager will continue to take initiatives on ESG issues in a proactive manner.

1. Results and cash distribution

As a result of the above operations, AEON REIT posted operating revenue of ¥17,696 million, operating income of ¥6,749 million, ordinary income of ¥5,988 million, and net income of ¥5,869 million for the 17th fiscal period ended July 31, 2021. Note that AEON REIT recorded ¥503 million in total, which was spent on work related to damage caused by an earthquake that broke out on February 13, 2021, with the epicenter off

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AEON REIT Investment Corporation (3292)

Financial Report for the Fiscal Period Ended July 31, 2021

the coast of Fukushima Prefecture and earthquakes that occurred on March 20, 2021 and May 1, 2021, with epicenters off the coast of Miyagi Prefecture, as extraordinary losses and recorded ¥385 million in total in insurance income for said damage as extraordinary income.

As for cash distribution for the 17th fiscal period, distribution per unit came to ¥3,200 by combining ¥5,870 million in unappropriated retained earnings and ¥124 million reversed from distribution reserve (the amount obtained by adding ¥118 million, which is calculated by subtracting the extraordinary income comprising insurance income for said disasters from the extraordinary losses comprising loss on disaster and provision for loss on disaster, and ¥69 million, which is a temporary decrease in rental income due to temporary suspension of operations at AEON MALL Shinrifu North Wing for renovation work, and deducting ¥63 million which is an increase in net income through asset management).

Furthermore, AEON REIT shall not distribute cash in excess of earnings as stipulated in Article 35-2 of its Articles of Incorporation.

1. Outlook for the next fiscal period

1. Outlook for overall performance

In Japan, with vaccination coverage increasing, moderate economic recovery is expected to take place going forward. Attention must be paid, however, to major changes that may occur in the external environment in that the number of infected people continues to increase as of the end of August 2021, partly due to the ongoing spread of the Delta variant (a COVID-19 variant).

In Malaysia, the real GDP for the second quarter of 2021 rose 16.1% year on year. This is mainly due to expansion of domestic demand and repercussions from the year-earlier quarter, when the government- imposed movement control order to contain COVID-19 led to negative impact. With the number of infected people in the country on an increasing trend since April 2021 and continuing to increase as of the end of August, the situation calls for attention to the future, as the movement control order and lockdown measures are underway.

AEON REIT will take measures to prevent infection at the properties it owns and endeavor to maintain and operate them as venues for continuously providing food, medicine, and daily goods required by consumers so that they can carry out their mission as community infrastructure assets. Looking ahead, AEON REIT will continue responding meticulously, taking into account changes in the environment, including diversifying lifestyles and needs of consumers.

1. Future investment policy

1. Basic policy

AEON REIT aims to secure stable income as well as maintain and enhance asset value over the medium to long term by endeavoring to sustain and improve rent revenue, conduct adequate management and repairs and maintenance measures, and optimize and streamline management costs.

(b) Investment policy and growth strategy

The AEON Group has the comprehensive strength to consistently develop and operate large-scale retail properties and other retail properties of various types. In implementing its growth strategy, AEON REIT seeks for growth of its portfolio over the medium to long term by fully utilizing the comprehensive strengths of the AEON Group.

AEON REIT believes that it can expand its portfolio size, improve the stability of investments, and enhance its financing capabilities by acquiring retail and related properties developed by the AEON Group from the Group, based on the Sponsor Support Agreements, Pipeline Support Agreements and Memorandum of Understanding on Investments in Properties in Malaysia.

Moreover, by improving financing capabilities, it works to acquire more properties, thereby expanding its

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