Japan Logistics Fund : Semi Annual Report for the six-month period ended July 31, 2021 (The 32nd Period)

Japan Logistics Fund Inc.

Semi Annual Report

For the six-month period ended July 31, 2021

December, 2021

Management Discussion and Analysis

Background of JLF

Japan Logistics Fund, Inc. (JLF) is Japan's first logistics REIT to invest in real estate that is primarily used for logistics facilities, founded with the aim of contributing to the Japanese economy by converging the flow of money (finance) with the flow of goods (logistics), which is the lifeblood of the economy. To that end, we leverage the history and experience of Mitsui & Co., Ltd., which as a general trading company has worked in logistics operations for long time globally.

Based on the Act on Investment Trusts and Investment Corporations of Japan (Act No. 198 of 1951; including revisions enforced thereafter) (AITIC), JLF was founded on February 22, 2005 by Mitsui & Co., Logistics Partners Ltd. (MLP) as the asset manager, and was listed on the REIT section of the Tokyo Stock Exchange on May 9 of the same year (security code: 8967).

Since JLF's initial public offering, we have applied a discerning eye for logistics sites, building specifications, tenant needs and other factors to investment decisions that are tied to real demand. In the process, we have built a portfolio that can be expected to deliver solid earnings over the mid- to long-term. As Japan's first logistics REIT entering a market of REITs invested mainly in office and residential assets, JLF became a pioneer and has since demonstrated to the market a track record of the logistics sector's ability to deliver solid cash distributions to its investors.

Basic Policy

As the pioneer of J-REIT to invest in real estate that is primarily used for logistics properties, we aspire to provide "stability" and "sustainable growth" of dividends in the mid-to-long-term by leveraging its unparalleled experience and expertise in logistics business and in financial markets. Logistics is a series of economic activities, such as transportation, storage, loading/unloading, packaging, labeling, sorting, or information integration, which connect manufacturers and consumers directly. We believe logistics is a vital function supporting the foundations of industry and people's life in Japan. As a consequence, demand for logistics properties is likely to be solid in the long term. These days, supply chain management which optimizes the entire logistics process is becoming widespread. It is imperative to construct logistics system that can be flexibly adjusted based on consumers' various needs. Therefore, logistics business providers now actively seek highly versatile logistics facilities in order to build elastic logistics systems. Furthermore, consolidation of logistics functions to improve efficiency, as well as separation of ownership and use of logistics facilities to reinforce balance sheets, are growing trends in the logistics business. Given the current environment, we see great investment opportunities in this area.

Investment Policy

Acquisition of new properties

Compared with other asset types, logistics properties tend to have less liquidity in the acquisition market. We believe, therefore, that collecting a broad range of information and making precise investment decisions based on the information gathered is the only way to achieve high quality property acquisitions. In order to avoid unnecessary price competition, we strive to gain early access to property information and promote negotiated transactions by leveraging our extensive networks of sponsors and the information sourcing channels of MLP. When acquiring properties, we make investment decisions focusing on the location and versatility of properties, which are essential factors in pursuing long-term stability in managing logistics properties. As a general rule, we avoid acquiring properties with unique structural features that suit only certain types of tenants in certain industries. Instead, we prefer properties with specifications that meet broad logistical demand. To minimize fluctuations in revenue arising from factors such as rent reduction request from tenants or unexpected tenants' departure, we acquire properties that will help

1

reduce the risk of over-concentration of tenants by avoiding excessive dependency on a single tenant or industry, and will help diversify lease period expirations.

Portfolio Management

In renewing existing lease contracts, we prefer the way to ensure generating solid revenue flow, such as urging the existing tenant to renew the lease with longer term. In case that a tenant decides to move out, we conduct leasing activities based on this policy so that leases are maintained without any discontinuity and that revenues are secured, by leveraging our sponsor network, intermediary companies well versed in logistics properties and tenant information, and the network of the asset manager.

We promote the improvement of the overall satisfaction level of tenants by maintaining close contact with them. Specifically, we respond to tenants' needs with respect to expanding rental space, making functional improvements in line with tenant and industry needs, and implementing renewal of the properties. We conduct repairs and renovations of properties by keeping related costs below a certain level. In addition, we strive to maintain an optimal level of maintenance management for the properties by selecting appropriate property management companies that can provide efficient management in line with the characteristics of each property, by improving the quality of the property management control at the asset manager, and by standardizing various procedures. Furthermore, we will make additional investments in properties with locational advantage in term of leasing and properties with OBR (Own Book Redevelopment) potential, taking into consideration tenant requests, the leasing needs of facilities, floor area ratios and other factors.

Financial strategy

We set the highest priority on stability and growth of dividends while maintaining relatively conservative LTV (Loan to Value) in financing. When pursuing debt financing, we diversify funding sources and repayment due dates. In addition, with regard to tenant leasehold and security deposits, we may use such deposits to partially fund property acquisitions for efficient cash management purpose.

Strategic and Financial Review of the six-month period July 31, 2021(The 32nd Period from February 1, 2021 to July 31, 2021)

During the period under review, the Japanese economy showed recovery momentum, despite the harsh circumstances that prevail inside and outside Japan due to the impact from COVID-19. Overseas, despite some variance by country or region, in general, economies are recovering. That should lead to a continued increase in exports and industrial production for the Japanese economy. Moreover, corporate earnings and sentiment are improving in general, and capital expenditures are recovering despite weakness in some industries. Meanwhile, there remains stagnation. The pandemic continues to weaken the labor and income environment. Also, there is strong downward pressure on personal consumption and services such as dining and lodging.

In the logistics leasing market, stay-at-home consumption is accelerating growth in the e-commerce market, and e-commerce players are actively expanding their footprint. Meanwhile, logistics companies are winning business from makers aiming to expand online sales and companies looking to reap greater logistics efficiencies, driving strong demand for logistics space. Strong demand for large-scale facilities has led to low vacancy rates despite the continued stream of new supply. Amid this environment, JLF's portfolio has maintained favorable operations, with an occupancy rate of 98.9% as of the end of the period under review. Moreover, portfolio management has focused on stability of long-term cash flows through a strategy of "ACTIVE Asset Management", which aims to achieve stability and sustainable growth in distributions per unit and NAV per unit. This period, the Chiba Kita Logistics Center renovations, which were pursued as part of the ACTIVE Asset Management strategy,

2

completed, and a lease agreement was executed at a substantial rent increase. In addition, tenant leasing was completed before the completion of construction at the Urayasu Logistics Center, where "OBR (Own Book Redevelopment)" (Note) is underway, and we are planning to re-sign contracts with increased rents at several existing properties, thereby achieving strong internal growth. Moving forward, there will continue to be a focus on finding opportunities for organic growth, without relying on external capital.

(Note) OBR refers to redevelopment pursued by JLF itself on a property owned by JLF. The same applies hereafter.

Results of Operations

The following table illustrates the financial results of the six-month period July 31, 2021(The 32nd Period from February 1, 2021 to July 31, 2021) and the six-month period January 31, 2021 (The 31st Period from August 1, 2020 to January, 2021):

	Period ended July 31, 2021	Period ended January 31, 2021
Operating revenue	¥9,154 million	¥9,120 million
Operating expenses	¥4,852 million	¥4,605 million
Operating income	¥3,302 million	¥4,514 million
Ordinary income	¥3,914 million	¥4,120 million
Net income	¥3,913 million	¥4,120 million
Earnings per unit	¥4,323	¥4,552
Distributions in excess of earnings per unit	¥0	¥0
Dividends per unit	¥4,800	¥4,800

(Note) Dividends per unit for the six-month period ended July 31, 2021 were calculated by adding 431 million yen as reversal of reserve for reduction entry to unappropriated retained earnings for the six-month period under review and dividing it by the total number of investment units issued and outstanding.

Dividends per unit for the six-month period ended January 31, 2021 were calculated by adding 224 million yen as reversal of reserve for reduction entry to unappropriated retained earnings for the six-month period under review and dividing it by the total number of investment units issued and outstanding.

In the 32nd Period from February 1, 2021 to July 31, 2021, net income decreased 206 million yen from the previous period to 3,913 million yen. Major factors for the change in net income were as follows.

Chiba Kita LC (repair and maintenance costs of renovation, etc.) Aisai LC (acquired March 2021)

Urayasu LC (fixed asset writedowns tied to OBR (equivalent to demolition costs), etc.) Other existing properties (decrease in R&M costs)

Other existing properties (decrease in brokerage fee, etc.) G&A expenses

Non-operating P/L

• 281 million yen
  +46 million yen -9 million yen +29 million yen +24 million yen -20 million yen +5 million yen

In the 32nd Period from February 1, 2021 to July 31, 2021, the "Special provisions for taxation in the case of advanced acquisition of land, etc. in 2009 and 2010" (Act on Special Measures Concerning Taxation (Act No. 26 of 1957, including subsequent

3

amendments)) was applied. (Act on Special Measures Concerning Taxation (Act No. 26 of 1957, including subsequent amendments)) (Article 66-2 of the Act on Special Measures Concerning Taxation (Act No. 26 of 1957, including subsequent amendments)) (hereinafter referred to as the "Special Taxation Measures Law") (Article 66-2). Based on this policy, JLF decided to distribute 4,344 million yen, which is the sum of unappropriated retained earnings and the reversal of the reserve for reduction entry of 431 million yen, as distributions on earnings. As a result, JLF's dividend per investment unit was 4,800 yen.

Business Outlook

Recognition of the Environment

Looking at the economic environment in Japan, although there is still a sense of caution about the COVID-19 infection for the time being, the economy is expected to improve at a moderate pace as the effects of the infection gradually abate, thanks to the recovery of foreign demand, an accommodative financial environment, and the effects of the government's economic measures. However, there is a high degree of uncertainty regarding the timing of the convergence of the COVID-19 infection and the impact it will have on the domestic and overseas economies, so we need to keep a close watch on the situation.

In the logistics real estate leasing market, strong demand is expected to continue due to the expansion of the e-commerce market, which will continue even under the influence of the new coronavirus infection. The supply-demand balance is unlikely to be significantly disrupted. In the market for the sale and purchase of logistics real estate, funds are flowing into the Japanese real estate market amid the continuing low interest rate environment worldwide, and many investors are paying attention to the defensive nature of logistics facilities, so transaction yields will remain low and the acquisition environment is expected to remain severe.

Under this environment, we will continue to pursue "stability" and "growth" in distributions per unit by seizing opportunities to acquire properties through relative transactions, etc., while continuing to manage properties through "ACTIVE Asset Management" in a manner that is less susceptible to changes in the environment.

4