Mori Hills REIT Investment Corporation
Semiannual Report
27th Fiscal Period(August 1, 2019 - January 31, 2020)

1

To Our Unitholders
All of us at Mori Hills REIT Investment Corporation (“MHR”) wish to extend our deep appreciation to ourunitholders for your continuous support of MHR. I am pleased to report on MHR’s performance for thetwenty-seventh fiscal period which ended January 31, 2020.
In the twenty-seventh fiscal period, the Japanese economy saw deteriorating business sentiment centering on
the manufacturing industry in light of a slowdown of the global economy burdened by the prolonged US-China
trade conflict. However, the economy remained steady due to the ongoing improvements in employment andhousehold income and labor-saving investment against the backdrop of strong corporate earnings.
Within this economic environment, the rent level continued to be on an upward trend in the rental office building
market as the supply-demand balance remained tight due to the vacancy rate in central Tokyo continuing to be
low, and the leasing up of tenants into new buildings progressing steadily. In the luxury rental housing market,
occupancy rates and rent levels remained solid driven by the ongoing stable demand for quality housing in central
Tokyo amid limited new supply. In the real estate trading market transaction prices continue to be high, driven by
the strong investment appetite from investors at home and abroad and by the favorable fund-raising
environment. Transaction amounts also remained at a high level.
In the twenty-seventh fiscal period, MHR strove to maintain and enhance tenant satisfaction through measures
such as efficient and systematic operational management and maintenance and repair of properties in its
portfolio by better understanding tenant needs. Moreover, MHR maintained and enhanced occupancy rates andrents by proactively launching leasing activities targeting new and existing tenants while foreseeing trends inrental market conditions.
MHR’s real estate portfolio, as of the end of the twenty-seventh fiscal period, was comprised of 11 properties
under management with a total leasable area of 174,699.12m2. MHR has already invested 390,690 million yen(based on the acquisition price) into this portfolio. The occupancy rate at the end of the twenty-seventh fiscal
period was 99.2%. The asset management activities described above resulted in MHR recording 9,631 million yen
in operating revenue, 6,026 million yen in operating income, 5,407 million yen in ordinary income, 5,406 million
yen in net income and 2,883 yen in dividend per unit in the twenty-seventh fiscal period.
MHR declared dividends per unit of 2,890 yen for the twenty-eighth fiscal period ending July 31, 2020.
In addition, MHR will continue to seek to maximize unitholder value through further improvements in profitability
and stability by progressively achieving steady internal growth with a close watch on rental market trends while
actively pursuing external growth utilizing Mori Building Groups’ property pipeline.
I would like to ask for your continued support.

Hideyuki Isobe
Executive Director, Mori Hills REIT Investment Corporation
President and CEO, Mori Building Investment Management Co., Ltd.

2

Financial Highlights
Dividend per unit: 27th period

Dividend per unit: 28th period forecast*

2,883 yen

2,890 yen

*The forecasted figure for the 28th fiscal period is projection from historical figures based on certain assumptions.
Accordingly, the figure may differ from actual results. Furthermore, the forecast shall not be construed as a guarantee of dividend amount.

Change in dividend per unit
(yen/
unit)

3,000

8th
period
Jul.
2010

9th
period
Jan.
2011

10th
period
Jul.
2011

11th
period
Jan.
2012

12th
period
Jul.
2012

13th
period
Jan.
2013

14th
period
Jul.
2013

15th
period
Jan.
2014

16th
period
Jul.
2014

17th
period
Jan.
2015

18th
period
Jul.
2015

19th
period
Jan.
2016

20th
period
Jul.
2016

21st
period
Jan.
2017

22nd
period
Jul.
2017

23rd
period
Jan.
2018

24th
period
Jul.
2018

25th
period
Jan.
2019

26th
period
Jul.
2019

2,850

27th
period
Jan.
2020

28th
period
Jul.
2020

2,890
2,883 (forecast)

19 consecutive
fiscal period increase

2,800

2,600

(119.2% increase in 9.5 years)
2,400

2,200

2,000

1,800

1,600

1,400

1,200

1,315

※ Implemented a 5-for-1 investment unit split effective on February 1, 2014.
Actual dividends per unit were divided by 5 for the periods before the split of investment units in the graph.

Changes in major financial indicator
26th period

27th period

February 1, 2019 July 31, 2019 (181 days)

August 1, 2019 January 31, 2020 (184 days)

27th - 26th period

Operating revenue

9,561 million yen

9,631 million yen+69 million yen

Operating income

5,971 million yen

6,026 million yen+54 million yen

Ordinary income

5,346 million yen

5,407 million yen+61 million yen

Net income

5,344 million yen

5,406 million yen+61 million yen

Dividend/unit

2,850 yen/unit

2,883 yen/unit+ 33 yen/unit

Total units outstanding

1,874,960 units

1,874,960 units

390,690 million yen

390,690 million yen

Acquisition price(Note) Unless otherwise stated in this document, all amounts are rounded down below the unit and all fractions and areas are rounded up below the decimal point.

3

Overview of Portfolio
MHR has developed an urban portfolio mainly in Central Tokyo through its “investment in the city” concept, taking
advantage of market opportunities and our competitive strengths to enhance profitability as well as portfolio
value.
Portfolio breakdown
Area

Tokyo’s Five
Central Wards
and their vicinity

Tokyo’s ThreeCentral Wards

87.5%

100%

Type

Size

5.6%

1.7%

6.4%
1.7%

88.0%

98.3%
98.3%

88.0%
■ 30,000 ㎡ or more
■ Under 30,000 ㎡■ Office■ Residential■ Retail(Note 1) The ratios represent proportion of acquisition price to total acquisition price.
(Note 2) Chart showing “Size” does not include Laforet Harajuku (Land).
(Note 3) For calculation of breakdown by type, acquisition price for Akasaka Tameike Tower and Atago Green Hills are divided into offices and residences.

Portfolio list4

5

Earthquake-resistance capacity
Best portfolio PML among J-REITs

PML

Earthquakeresistant feature

Roppongi Hills Mori Tower

0.59%

Seismic damping

ARK Mori Building

0.78%

Seismic damping

0.73%

Seismic damping

1.56%

Seismic damping

Toranomon Hills Mori Tower

0.50%

Seismic damping

Holland Hills Mori Tower

0.85%

Seismic damping

Akasaka Tameike Tower

1.79%

Seismic damping

2.35%

Seismic damping

2.34%

Seismic damping

5.94%

－

2.20%

－

2.20%

－

Property name

Lowest portfolio
PML of all listed
J-REITs

0.93%

Koraku Mori Building
ARK Hills South Tower

MORI Tower
Atago Green Hills

Forest Tower

Type

OfficeOffice(Partly
residential)

Plaza※PML refers to the probable maximum loss ratio
expected to result from an earthquake.
A smaller percentage indicates superiority inearthquake-resistance.

Roppongi First Plaza
Roppongi View Tower

Residential

Environmental performance
Highest quality ratio of green building (GB) certified properties among all J-REITs※ Based on acquisition price excluding Laforet Harajuku (Land)

6

Financial Status
MHR’s cost of debt has decreased along with the improvement in LTV ratio (appraisal value basis).
We will continue to maintain a debt duration level that allows us to further strengthen our healthy financial base.
Trend in LTV (appraisal value basis) and average interest rate (including borrowing expenses)(%)■ LTV (appraisal value basis)(%)■ Average interest rate

65.0

2.5
2 .0 %

60.0

2 .1 %

2 .1 %
2.0

55.0
1.5
1 .1 %

50.0

0 .9 %

0 .8 %

45.0

0 .8 %

0 .7 6 %1.0
0 .7 4 %0 .7 1 %0 .6 9 %0 .6 9 %0 .6 8 %
0.5

40.0

・・・
5 7 .4 %5 6 .4 %5 3 .7 %4 3 .2 %4 3 .2 %4 2 .3 %4 2 .4 %4 2 .1 %4 2 .3 %4 1 .9 %4 0 .4 %3 9 .4 %3 8 .2 %9th
period10th
period11th
period18th
period19th
period20th
period21st
period22nd
period23rd
period24th
period25th
period26th
period27th
period

Jan.
2011

Jul.
2011

Jan.
2012

Jul.
2015

Jan.
2016

Jul.
2016

Jan.
2017

Jul.
2017

Jan.
2018

Jul.
2018

Jan.
2019

Jul.
2019

Jan.
2020

35.0

0.0

・・・

(Note) Average interest rate is calculated as [(interest expenses + interest expenses on investment corporation bonds + borrowing expenses + amortization of
investment corporation bond issuance costs) × 365 ÷ operating days during each period ÷ average interest-bearing debt balance during each period].

Extension in remaining duration of debt
(years)
5.5

5.0
4 .4

4.5
4.0

4 .5
4 .2

3 .7

4 .0
3 .8

3 .7

4 .3

4 .4

4 .6

3.5
3.0
2.5

・・・

2.0
1.5

1 .5

1 .2

1 .4

1.0
9th
period10th
period11th
period

Jan.
2011

Jul.
2011

Jan.
2012

・・・

18th
period19th
period20th
period21st
period22nd
period23rd
period24th
period25th
period26th
period27th
period

Jul.
2015

Jan.
2016

Jul.
2016

Jan.
2017

Jul.
2017

Jan.
2018

Jul.
2018

Jan.
2019

Jul.
2019

Jan.
2020

7

Overview of debt financing
End of the 26th period
Jul. 31, 2019

End of the 27th period
Jan. 31, 2020

179,222 mn yen

179,222 mn yen

45.7%

45.7%

39.4%

38.2%

4.4 years

4.6 years

Debt Balance
LTV (book value basis)(N ote 1 )LTV (appraisal value basis)(N ote 2 )Avg. remaining duration(Note 1) LTV (book value basis) is calculated as [Interest bearing debt / Total assets].
(Note 2) LTV (appraisal value basis) is calculated as [Interest-bearing debt / Appraisal value based total assets (Total assets + Total appraisal value - Total
book value)].

Long-term debt ratio / Fixed rate ratio[Long and short-term debt ratio]

Rating[Fixed rate ratio]

Japan Credit Rating (JCR)
Long-term issuer rating

AA

Fixed
88.2%

(Stable)Overview of maturity (as of January 31, 2020)(billion yen)

20
Investment corporation bonds

Long-term loans

15

10

7
6

5
5
0

3.5

6.5

2

12.5
9.5

9.2
6

11.2

8.2

8.3

7.6
2

2

6.8
7.1

1.5

9.7

4.9
4

2

8.6

8.6

9.2
3.5

3.9

2.7

28th
29th
30th
31st 32nd 33rd 34th
35th
36th
37th
38th
39th
40th
41st 42nd 43rd 44th
45th
46th
47th
48th
period period period period period period period period period period period period period period period period period period period period period
Jul.
Jan.
Jan.
Jan.
Jul.
Jul.
Jul.
Jan.
Jan.
Jul.
Jan.
Jan.
Jul.
Jan.
Jul.
Jul.
Jan.
Jul.
Jul.
Jan.
Jul.
2020 2021 2021 2022 2022 2023 2023 2024 2024 2025 2025 2026 2026 2027 2027 2028 2028 2029 2029 2030 2030

8

Portfolio Management
MHR maintained and enhanced occupancy rates and rents by proactively launching marketing activities targeting
new and existing tenants based on a flexible price policy.
Rent and occupancy rate
[Office](yen/tsubo)(%)

40,000100

35,00030,00090

25,00020,00015,00080

10,000
5,000
0

Feb.
2019

Mar.

Apr.

May

Jun.

Jul.

Aug.

Sep.

Oct.

Nov.

Dec.

Jan.
2020

Rent (yen/tsubo)

30,89730,90030,93430,93130,93830,94331,00031,00231,00631,00831,05731,047

Occupancy rate

99.9%

99.9%

100%

99.9%

99.9%

100%

100%

100%

100%

100%

99.9%

100%

70

[Residential](yen/tsubo)(%)

25,000100

20,00090

15,00010,000

80

5,000
0

Feb.
2019

Mar.

Apr.

May

Jun.

Jul.

Aug.

Sep.

Oct.

Nov.

Dec.

Jan.
2020

Rent (yen/tsubo)

15,40715,45815,457

15,551

15,556

15,55915,603

15,603

15,76315,704

15,74815,766

Occupancy rate

97.5%

97.2%

96.7%

96.3%

96.6%

96.6%

96.2%

96.6%

96.4%

96.2%

96.0%

95.6%

+5.4%

+5.3%

Result of tenants’ rent revision[Office][Residential]

(%)
+10

(%)
+10

+7.1%

+6.9%

+6.7%
+5.5%

+5

+5.9%

+6.0%

26th
Jul. 201927th
Jan. 2020

+5

+4.2%

+2.1%
+2.5%

※Average of all contracts subject to revision+1.5%※Average of all contracts subject to revision

0

0
22nd
Jul. 2017

23rd
Jan. 201824th
Jul. 2018

25th
Jan. 201926th
Jul. 201927th
Jan. 2020

22nd
Jul. 2017

23rd
Jan. 201824th
Jul. 2018

25th
Jan. 2019(Note 1) Figures indicate the results of rent revisions of properties at which pass-through master lease agreements are applied.
(Note 2) Figures are calculated based on asset acquisitions and monthly rents which reflect move outs of end tenants confirmed as of January 31, 2020.

970

Sustainability Initiatives
Approach to Sustainability
MHR and Mori Building Investment Management Co., Ltd. (MIM) aim to contribute to the creation anddevelopment of cities by providing investment opportunities in high-quality urban assets to investors, as statedin the Basic Policy of MHR and Company Mission of MIM.
Society today is faced with various challenges such as global warming, preservation of ecosystems and otherenvironmental problems, as well as social problems, including human rights and the decreasing birthrate/aging
population. Companies need to contribute to solving these issues amidst conducting business activities, and webelieve that working on these issues will in fact lead to increasing our competitiveness.
MHR and MIM aim to contribute to the realization of a sustainable society and maximization of unitholder value
in the medium to long term by emphasizing ESG (Environment, Social and Governance) and investing in
high-quality urban assets while striving to improve various environmental and social performance levels.
Sustainability Promotion System
Our operations connected to sustainability will be promoted primarily by the Sustainability Committee to beestablished by MIM.
The Chairperson of the Committee shall be the President & CEO while all directors and some administration staff
shall comprise the committeepersons. Various initiatives will be implemented based on the Sustainability
Promotion Program which is established every fiscal year.
In principle, the Committee shall meet four times a year and shall formulate policies and the Sustainability
Promotion Program, monitor progress of programs, deliberate various suggestions from departments, etc. in lightof social conditions and the operating status of MHR. The President & CEO approves the policies and promotion
programs, constantly monitors the thorough promotion of sustainability, and establishes and maintains asustainability promotion structure as a responsible party in promoting sustainability.
Moreover, sustainability-related efforts shall be reported on periodically to the Board of Directors of both MHR andMIM. Each Board oversees the status of initiatives for important issues related to ESG and the status ofcompliance and risk management.
Initiatives throughout the Entire Supply Chain
Promotion of sustainability operations, whether environmental or social, requires initiatives that involve thewhole supply chain. We believe it is necessary to pursue initiatives with various stakeholders with whom ourvalues are aligned.
By proactively initiating communication with stakeholders such as tenants, local residents, property managementcompanies and our sponsor Mori Building that provides the property pipeline, and aligning our values, we aim tocontribute to the realization of a sustainable society.

10Sustainability Initiatives: 1) Environment
MHR aims to contribute to the realization of a sustainable society and maximization of unitholder value in themedium to long term by investing in high-quality urban assets while striving to improve various environmental
and social performance levels.
MIM obtains a third-party sustainability evaluation in order to better understand its own achievement level anduses this as a benchmark for further improvement.

Green Building Certified Properties
Property Name

Type of Assessment

RatingRoppongi Hills Mori Tower

Rank S

ARK Mori Building

Rank S

Koraku Mori Building

CASBEE for Existing Buildings

Rank A

Akasaka Tameike Tower

Rank A

Atago Green Hills MORI Tower

Rank SARK Hills South Tower

DBJ Green Building Certific ation

Toranomon Hills Mori Tower

4 stars
Rank SCASBEE for Existing Buildings

Holland Hills Mori Tower

Rank S(Certificates Coverage Ratio)

Certified Properties

Portfolio Data

Ratio

In acquisition pric e343.7 bn yen

368.8 bn yen

93.2%

In leasable floor area

143,592㎡

172,136㎡

83.4%

In number of properties

8 properties

10 properties

80.0%※ Excluding Laforet Harajuku (Land)GRESB Green Star Designation
GRESB is a benchmark that measures the sustainability performance of real estate companies
and real estate management institutions based on an annual survey conducted by the GRESB
B.V., composed primarily of European pension fund groups.
In the 2019 GRESB Assessment, MHR was designed as Green Star for the eighth consecutive
year. In addition, MHR received 4 Stars in the GRESB Rating. (Note)GRESB Four-Quadrant Model Scores by Region(Source) Prepared by the Asset Manager based on the disclosed data by GRESB.
(Note) The comparative assessment of the overall score was initially introduced in 2016. It is a global ranking utilizing a five-star scale(“5 Stars” indicating the highest rank).

11

Promotion of Energy-conservation
MHR promotes energy-conservation through initiatives such as replacement of LED lighting in common areas andrepair work of air-conditioning. MHR also makes active efforts to reduce environmental loads through proper
separation and disposal of waste.
(Roppongi View Tower: Renovation of common area with LED lighting)

Collaborating with Tenants
MHR holds an “environmental countermeasure council” once or twice a year depending on the office building. The
council generates a report on the efforts to improve sustainability and raises awareness for power saving
methods. MHR also promotes environmental initiatives by communicating with tenants. MHR provides “WEBcloud services” as a tool to make tenants’ energy usage visible, and offers helpful measures for tenants’ energy
conservation.
In addition to these efforts, MHR is further deepening relationships with tenants by introducing “green leases”
which serve to align financial incentives and secure commitments from both parties. MHR is gradually expanding
this approach since the introduction of the first green lease in ARK Hills South Tower.

12

Sustainability Initiatives: 2) Social
Problems concerning human rights and labor have become global issues and, in Japan, the rectification of long
working hours and the promotion of women and elderly people have become significant social issues as the labor
force shrinks alongside a declining birthrate and aging population.
We believe that employing diverse and excellent human resources and supporting the continued development of
their abilities is not just a source of competitiveness for MHR but also the duty of MHR towards its employees.
MHR and MIM respects human rights and it is our policy to not discriminate against employees based on theirbeliefs, religion, age, gender, origin, mental and physical disabilities, etc.
We will work to establish a diversity-oriented working environment where our human resources can be effective.
We will introduce multifaceted systems and measures so that each and every employee with diverse lifestyles andvalues can maximize their abilities and continue their career in a healthy and safe manner as they grow.
Talent Development
In order to realize MIM's company mission (“MIM is dedicated to the creation and development of major
metropolitan cities and MIM will provide investment opportunities in high-quality urban assets to investors bothin Japan and overseas as a leading professional in the real estate investment fund business.”), MIM believes that
it is essential to attract and retain a diverse and capable workforce and to continuously support their career
growth and self-development.
To cultivate human resources with flexible thinking and high ethical standards together with a high degree ofexpertise, mainly in real estate and finance, MHR introduces essential knowledge and skills throughon-the-job-training (OJT) and conventional training to improve staff effectiveness, to clarify company issues andto constantly improve management methods. MHR conducts a semi-annual staff assessment program "Personnel Assessment and Feedback" as a core component of our talent development strategy.
MHR also subsidizes the expense for acquiring licenses and qualifications by public and private organizations
necessary for work to improve employees' skills as professionals in the real estate fund business.
(Qualifications held by employees as of the end of February 2020)
・ ARES Certified Master: 8
・ Real Estate Appraiser: 2
・ Real Estate Transaction Agent: 8
・ Certified Building Administrator: 2・ Certified Public Accountant: 3
・ Chartered Member of Securities Analysts Association of Japan: 1

Employee Stock Ownership Plan (ESOP)MHR established the "ESOP" by aligning interests of MHR’s investors and MIM’s employees aiming to improve
unitholders' value over the medium to long term, and to improve welfare benefits for MIM’s employees.
Promoting Women’s Participation
MHR is aiming for a workplace environment where each employee can fully demonstrate their individuality andabilities and MHR is working on creating a pleasant working environment for women. A child-care leave systemand flexible working hours are provided and MHR promotes active use of a short-time work system and paid
holidays.

13

Tenant Satisfaction Surveys
MHR conducts “tenant satisfaction surveys” once every two years in office buildings and once a year in mostresidential properties.
The survey content starts with general matters such as location and image to matters related to facilities andother hard aspects as well as soft aspects such as management systems. The thoughts of the tenants are used
as a reference in our property management.
Local Communities
MHR aims to foster a rich environment for the local community through various communication activities. In
MHR’s properties such as Roppongi Hills and ARK Hills, events and activities are held like the “Hills Marche” and“Hills Machi-Iku Project” in which local people can participate.

All Japanese Listed Companies' Website Ranking
Nikko Investor Relations Co., Ltd. announces a valuation of websites of alllisted companies by investigating the degree of information disclosure
based on objective evaluation items from its unique perspective.
MHR’s website has received “Total Ranking: The Best Site" for the fifth
consecutive year.

14

Sustainability Initiatives: 3) GovernanceIn order to contribute to the realization of a sustainable society, we aim to maximize unitholder value over the
medium to long term. We believe that it is absolutely imperative to remain a company that is trusted by society.
By firmly acknowledging this belief, MHR and MIM work on building fair and effective corporate governance andstrive to enhance internal control through thorough compliance and risk management based on an appropriate
compliance and internal control structure.
Corporate Governance
MHR shall have at least one executive director and at least two supervisory directors (or, at least one more than
the number of the executive directors), and the board of directors shall be comprised of the executive directors
and supervisory directors.
In addition to a general meeting of all unitholders, MHR’s governance structure consists of one executive director,
two supervisory directors, the board of directors and an accounting auditor, and entrusts its operation to MIM.
MIM is required to perform its business operations in good faith and with due care of a prudent manager for MHR
in line with the purpose of the investment management business, and accordingly performs conscientious asset
investment and management pertaining to real estate properties based on an appropriate compliance structure
and internal control structure in order for MHR to gain high trust from the securities market and investors.
(MIM’s organization)

General Meeting of
Shareholders

Corporate Auditor

Board of Directors

President & CEO

Investment
Committee

Investment
Dept.

Compliance
Committee

AssetManagement
Dept.

Financial
Dept.

Administration
Dept.

15

Compliance
Dept.

Compliance
The Compliance Department conducts inspections on legal compliance and confirms consistency with internal
rules. MIM confirms whether there are any conflict of interest transactions with related parties. In this way, MIM
is striving to ensure comprehensive internal control, while also striving to enhance its risk management structure
as well as its effectiveness.
Furthermore, MIM has a set of internal rules (self-imposed regulations) which stipulate rules such as its Related
Parties Transaction Guidelines. These Guidelines stipulate matters concerning transactions, etc. with relatedparties. Through MIM’s compliance with these Guidelines, we have established a structure which ensures that the
aforementioned transactions are managed appropriately and that MIM sufficiently executes the duty of care of agood manager and duty of loyalty to MHR.
(Process to counter transactions involving conflicts of interest)
Approved by MHR's Board of Directors(In case of an acquisition fromany related party)

Reject or pass back the proposal

Deliberation and resolution at MIM's Board of Directors (Note)

Deliberation and resolution at the Compliance Committee

Deliberation and resolution at the Investment Committee

Review by the Compliance Officer

Selection of investment grade properties and preparation of an
original proposal by the Investment Department(Note) A director who is classified as a related party officer is not able to participate in the resolution when acquiring an asset from a related party.

16

Mori Building’s Extensive Property Pipeline
Mori Building’s total assets have an estimated value of 2.0 trillion yen and the number of properties undermanagement is 96 buildings. (Note 1)
MHR has the “preferential negotiation rights” (Note2) on sales of Mori Building Co., Ltd. properties, which serves as
the driving force for external growth.
Recent redevelopment projects in Toranomon Hills area
Toranomon Hills Residential tower
Projected completion Jan. 2021
Toranomon Hills Mori Tower
Opened Jun. 2014
Toranomon Hills Station Tower(Tentative name)

Projected completion Jul. 2023
Toranomon Hills Business tower (Note 3)
Completion Jan. 2020

Total area: approx. 7.5ha
Total floor area: approx. 800,000m2
Toranomon Hills Station of
Hibiya subway line
Projected to open June 6, 2020

Office space: approx. 300,000m2
Residential units: approx. 720
Green space: approx. 15,000m2

Toranomon-Azabudai Project (Projected completion March 2023)

Main Tower(A district)

West Tower(B-1 district)

East Tower(B-2 district)Total area: approx. 8.1ha
Total floor area: approx. 860,400m2
Office space: approx. 213,900m2
Residential units: approx. 1,400
Green space: approx. 24,000m2

17In Operation

MHR (Note 4)

MB Group (Note 5)

Planning/Under Construction(Source) Prepared by the Asset Manager based on Mori Building’s “Mori Building Handy Map/ Mori Building Map/Home Route Support Map 2020.”(Note 1) “Total asset” is as of the end of March 2019 and number of properties under management is as of April 1, 2019.
(Note 2) There are some exceptions.
(Note 3) Mori Building participates as a member of the project.
(Note 4) Some of the properties have been partially acquired and held by MHR.
(Note 5) Properties are developed, owned, managed and planned for development by Mori Building Group as of April 1, 2020 and there are no properties anticipated to be acquired18

Unit Price Performance(yen)

200,000
PublicOffering inMar. 2013

190,000

PublicOffering in
Sep. 2013

PublicOffering in
Aug. 2014

PublicOffering inFeb. 2016

PublicOffering in
Aug. 2018180,000
170,000
160,000
150,000
140,000
130,000
Mori Hills REIT

120,000
110,000
100,000

TSE REIT Index

90,00080,00070,00060,00050,00040,00030,000Sep. 14,2010Marketvalue

9thJan. 31,
2011

10th

11th

Jan. 31,
2012

Jul. 31,
2011

13th

12th

14th

Jul. 31, Jan. 31, Jul. 31,
2012
2013
2013

15th

Jan. 31,
2014

16th

Jul. 31,
2014

17th

18th

Jan. 31, Jul. 31,
2015
2015

19th

20th

21st

Jan. 31, Jul. 31, Jan. 31,
2016
2016
2017

22nd

23rd

25th

24th

26th

27th

Jul. 31, Jan. 31, Jul. 31, Jan. 31, Jul. 31, Jan. 31,
2017
2018
2019
2019
2020
2018

41.9 bn yen

340.6 bn yen(Sep. 14, 2010)(Jan. 31, 2020)(Note) TSE REIT Index is adjusted as of the 8th period result announcement (Sep. 14, 2010) and shows the relative performance vs. MHR’s unit price performance.

Unitholders Breakdown (as of January 31, 2020)＜Number of unitholders＞＜Number of investment units＞

Other domestic
Financialcorporations

institutions

1.6%

Foreigncorporations

Foreign(Incl. securities

corporations

companies)

and individuals

1.5%

2.1%

and individuals

Individuals
5.8%

17.7%
Financial

Otherdomestic
corporations

institutions(Incl. securities
companies)

17.1%

Individuals

59.4%(Investment

94.8%

trust 35.2%)

19

Risk Factors
An investment in our units involves significant risks. The principal risks with respect to investment in Mori Hills REIT
Investment Corporation are as follows.
Property and Business Risks
Any adverse conditions in the Japanese economy could adversely affect our properties.
We may not be able to acquire properties to execute our growth and investment strategy in a manner that is accretive
to earnings and the amount of dividends per unit.
The high concentration in our portfolio of premium properties in central Tokyo could have a material adverse effecton our business.
Increases in prevailing market interest rates may increase our interest expense and may result in a decline in themarket price of our units.
Our reliance on Mori Building Co., Ltd. and other Mori Building Group companies could have a material adverse
effect on our business.
Competition for tenants may adversely affect our ability to retain our current tenants, find new tenants and achievefavorable rental rates.
We may suffer large losses if any of our properties incur damage from a natural or man-made disaster or acts ofviolence.
We may incur unexpected expenses, expenditure or other losses for repair or maintenance of our properties.
We may be strictly liable for any unforeseen loss, damage or injury suffered by a third party at our properties.
Because most of our operating expenses are largely fixed, we may suffer adverse consequences if our rental
revenues decline.
Illiquidity in the real estate market may limit our ability to grow or adjust our portfolio.
Defects relating to our properties may adversely affect our financial condition and results of operations.
We rely on expert reports for appraisals and PML percentages, and these reports are subject to significant
uncertainties.
We rely on industry and market data that are subject to significant uncertainties.
The environmental assessments of our properties made prior to our ownership may not have uncovered allenvironmental liabilities, and Japanese laws subject property owners to strict environmental liabilities.
To the extent we purchase or commit to purchase properties still in the development stage, we will be exposed toincreased risks and uncertainties.
We may lose rental revenues in the event of lease terminations, decreased lease renewals, defaults, nonpayment bytenants on rental obligations or requests or demands for reduction in rents or if tenants experience financial
difficulties or insolvency.
Any of our current or future properties, may violate earthquake resistance or other building codes, and any suchbuildings may collapse in even minor earthquakes or may be required to be strengthened or demolished by us atsignificant expense.
20

Master lease agreements expose us to the risk of becoming an unsecured creditor of Mori Building Co., Ltd. as ourmaster lessee in the event of its insolvency.
Decreases in tenant lease and guarantee deposits would increase our funding costs.
Any inability to obtain financing for future acquisitions, or any restrictions on our activities under our financing
arrangements, could adversely affect us.
A high LTV ratio may increase our exposure to changes in interest rates and adversely affect us.
We may suffer impairment losses relating to our properties and may also suffer adverse tax effects upon recognizing
impairments.
A downgrading of our credit rating may affect payments of principal of or interest on our bonds.
The past performance of our sponsor, Mori Building Co., Ltd., is not an indicator or guarantee of our future results.
Our financial statements are prepared in accordance with Japanese GAAP, which differs in certain material respects
from IFRS, U.S. GAAP and generally accepted accounting principles and financial reporting standards in otherjurisdictions.

Management and Governance Risks
Our success depends on the performances of service providers to which we are required to assign various key
functions.
There are potential conflicts of interest between us and certain Mori Building Group companies, including the AssetManager.
We depend on the efforts of key personnel of the Asset Manager.
Unitholders have limited control over our investment policies.
J-REITs and their asset managers are subject to tight supervision by the regulatory authorities.
If unitholders do not exercise their voting rights, we may count their votes in favor of proposals at a general meetingof unitholders.

Taxation Risks
Our failure to satisfy a complex series of requirements pursuant to Japanese tax regulations would disqualify us fromcertain taxation benefits and significantly reduce our distributions to our unitholders.
If the Japanese tax authorities disagree with the interpretations we used for prior periods, we may be forced to pay
additional taxes for those periods.
We may not be able to benefit from reductions in certain real estate transfer taxes enjoyed by qualified J-REITs.
Changes in Japanese tax laws may significantly increase our tax burden.
We expect to be treated as a “passive foreign investment company” for U.S. federal income tax purposes.
Unitholders may be subject to U.S. Foreign Account Tax Compliance Act (FATCA) withholding tax after 2018.
Legal and Regulatory Risks
Our ownership rights in some of our properties may be declared invalid or limited.
We may lose our rights in a property we own if the purchase of the property is recharacterized as a secured
21

financing.
Our leasehold or subleasehold rights may be terminated or may not be asserted against a third party in some cases,or our leases with our tenants could be modified.
Properties for which third parties hold leasehold rights in the land and own the buildings may subject us to various
risks.
Many of our properties are in the form of compartmentalized ownership interests (kubun shoyū-ken) and our rights
relating to such properties may be affected by the intentions of other owners.
Many of our properties are in the form of property co-ownership (kyōyū) or trust beneficiary interest coownership(junkyōyū) and our rights relating to such properties may be affected by the intentions of other owners.
Some of our properties are subject to preferential purchase rights, rights of first refusal or other similar rights heldby lessees, tenants or other third parties.
Tax increases or adverse changes in applicable laws may affect our potential liabilities relating to our properties andoperations.
Our costs of complying with regulations applicable to our properties could adversely affect our results of operations.
We own a substantial portion of our properties through trust beneficiary interests and may suffer losses as a trust
beneficiary.
The AIFMD may negatively affect our ability to market our units in the EEA and increase our compliance costs
associated with marketing of our units in the EEA.
Our units may be deemed to constitute “plan assets” for ERISA purposes, which may lead to the rescission of certaintransactions, tax or fiduciary liability and our being held in violation of ERISA requirements.

22

Disclaimer
This report has been prepared by Mori Hills REIT Investment Corporation (“MHR”) for informational purposes only andshould not be construed as an offer of any transactions or the solicitation of an offer of any transactions. Please inquirewith the various securities companies concerning the purchase of MHR investment units. This report’s content includes
forward-looking statements about business performance; however, no guarantees are implied concerning future businessperformance.
Although the data and opinions contained in this report are derived from what we believe are reliable and accurate
sources, we do not guarantee their accuracy or completeness. The contents contained herein may change or cease to exist
without prior notice. Regardless of the purpose, any reproduction and/or use of this document in any shape or form
without the prior written consent from MHR is prohibited.
This report contains charts, data, etc. that were prepared by Mori Building Investment Management Co., Ltd. (hereafter,
the “asset manager”) based on charts, data, indicators, etc. released by third parties. Furthermore, this report includes
statements based on analyses, judgments, and other observations concerning such matters by the asset manager as of thedate of preparation.

23

FINANCIAL STATEMENTS
BALANCE SHEET(Unit: thousands of yen)
As ofJanuary 31, 2020

July 31, 2019

AssetsCurrent assets
Cash and deposits

5,646,194

3,923,970

Cash and deposits in trust

5,461,338

6,295,543

Operating accounts receivable

332,778

370,512Prepaid expenses

435,169

431,886

Derivatives
Total current assets

89－

11,875,571

11,021,912

22,074,160

22,074,160

Noncurrent assets
Property, plant and equipment
Land
Buildings in trust

82,047,156

81,918,977

Accumulated depreciation(17,114,483 )(16,124,966)

Buildings in trust, net

64,932,672

65,794,010

924,038

921,547

Accumulated depreciation(316,756 )(308,260)

Structures in trust, net

607,282

613,287

Machinery and equipment in trust

913,334

910,898

Accumulated depreciation(285,559 )(263,302)

Machinery and equipment in trust, net

627,775

647,596

Structures in trust

Tools, furniture and fixtures in trust

253,299

237,085(158,080 )(144,267)

95,21992,818260,234,866

260,234,866

3,237

1,949

348,575,213

349,458,688

30,650,962

30,650,962

0372

30,650,962

30,651,335

Lease and guarantee deposits

10,00010,000Long-term prepaid expenses

1,002,323

1,013,172

36

44

Accumulated depreciation
Tools, furniture and fixtures in trust, net
Land in trust
Construction in progress in trust
Total property, plant and equipment
Intangible assets
Leasehold rights in trust
Other intangible assets in trust
Total intangible assets
Investments and other assets

Deferred tax assets
Derivatives

19,359－1,031,720

1,023,217

380,257,896

381,133,241

Investment corporation bonds issuance cost

63,64773,556

Investment unit issuance cost

20,85627,808

Total deferred assets

84,503

101,365

392,217,971

392,256,519

Total investments and other assets
Total noncurrent assets
Deferred assets

Total assets1

(Unit: thousands of yen)
As ofJanuary 31, 2020

July 31, 2019

Liabilities
Current liabilities
Operating accounts payable

215,675

216,835

Current portion of investment corporation bonds

8,500,000

5,000,000

Current portion of long-term loans payable

13,022,000

22,922,000

Accounts payable – other

31,581

14,250Accrued expenses

345,287

333,025

1,331

1,445

Income taxes payable
Accrued consumption taxes

216,732

484,072

Advances received

1,224,521

1,222,824

Deposits received

29,15870,12292

787

Derivatives liabilities
Other
Total current liabilities

83－

23,586,464

30,265,364

Noncurrent liabilities
Investment corporation bonds

13,500,000

17,000,000

Long-term loans payable

144,200,000

134,300,000

Lease and guarantee deposits in trust

14,727,643

14,570,283

743,940784,044

173,171,584

166,654,327

196,758,048

196,919,691

190,460,106

190,460,106(468,740 )(174,371 )(468,740 )(174,371 )

189,991,366

190,285,734

Reserve for reduction entry

291,944

291,944

Total voluntary retained earnings

291,944

291,944

Unappropriated retained earnings

5,901,196

5,543,979

Total surplus

6,193,140

5,835,924

196,184,506

196,121,658(724,583 )(784,831 )Derivatives liabilities
Total noncurrent liabilities
Total liabilities
Net assets
Unitholders’ equity
Unitholders’ capital
Deduction from unitholders' capital
Allowance for temporary difference adjustments(Note10)
Total deduction from unitholders' capital
Unitholders' capital, net
Surplus
Voluntary retained earnings

Total unitholders’ equity
Valuation and translation adjustments
Deferred gains or losses on hedges(724,583 )(784,831 )Total net assets (Note10)

Total valuation and translation adjustments

195,459,922

195,336,827

Total liabilities and net assets

392,217,971

392,256,519

2

STATEMENT OF INCOME AND RETAINED EARNINGS(Unit: thousands of yen)
For the six months ended
January 31, 2020

July 31, 2019

Operating revenue
Rent revenues (Note14)

9,377,544

9,323,944

253,917

237,931

9,631,462

9,561,876

3,224,074

3,225,332

Asset management fee

266,704

260,906

Directors’ compensation

4,200

4,200

Other operating revenues (Note14)
Total operating revenue
Operating expenses
Expenses related to properties (Note14)

Asset custody fee

9,806

9,863

Administrative service fees

18,79919,861Other operating expenses (Note14)
Total operating expenses
Operating income

81,47369,767

3,605,057

3,589,931

6,026,404

5,971,944

Non-operating income
Interest income

44

58

1,035

979

－

947

1,079

1,985

Interest expenses

377,420375,336

Interest expenses on investment corporation bonds

67,75568,555

9,909

10,193

155,732

164,678

6,952

6,952

Gain on forfeiture of unclaimed dividends
Interest on refund
Total non-operating income
Non-operating expenses

Amortization of investment corporation bonds
issuance cost
Borrowing expenses
Amortization of investment unit issuance cost
Other

1,885

1,930

619,654627,646

Ordinary income

5,407,830

5,346,284

Income before income taxes

5,407,830

5,346,284

1,338

1,454

Total non-operating expenses

Income taxes-current
Income taxes-deferred
Total income taxes
Net income
Retained earnings brought forward
Unappropriated retained earnings (undisposed loss)

3

7

(1)

1,346

1,453

5,406,483

5,344,831

494,712

199,148

5,901,196

5,543,979

STATEMENT OF CHANGES IN NET ASSETSFor the six months ended January 31, 2020
(Unit: thousands of yen)
Unitholders’ equity

Unitholders’capitalBalance at August 1, 2019

Unitholders’ capital

Surplus

Deduction fromunitholders' capital
Allowance
Total
for
deduction
temporaryfromdifference
unitholders'adjustments
capitalVoluntary retained
earnings

190,460,106

Balance at January 31, 2020

Reserve for
reduction
entry

Total
voluntary
retainedearnings

291,944

291,944(174,371)(174,371)

190,285,734(294,368)(294,368)(294,368)－(294,368)(294,368)(294,368)－－

190,460,106(468,740)(468,740)

189,991,366

291,944

291,944

Change during the period
Dividends from surplus
Dividends in excess ofearnings from allowancefor temporary difference
adjustments
Net income
Net changes of items otherthan unitholders’ equity
Total changes of items during
the period

Unitholders'
capital, net

Valuation and translation
adjustments

Unitholders’ equity
Surplus

Balance at August 1, 2019
Change during the period
Dividends from surplus
Dividends in excess ofearnings from allowancefor temporary difference
adjustments
Net income
Net changes of items otherthan unitholders’ equity

Total
unitholders’equityDeferred
gains orlosses onhedgesTotalvaluationandtranslation
adjustments

Total net
assetsUnappropri
ated
retainedearnings

Total
surplus5,543,979

5,835,924

196,121,658(5,049,267)(5,049,267)(5,049,267)(5,049,267)(294,368)(294,368)

5,406,483

5,406,483

5,406,483

5,406,483(784,831)(784,831)

195,336,827

60,24760,24760,247

Total changes of items during
the period

357,216357,216

62,84760,24760,247123,095

Balance at January 31, 2020

5,901,196

6,193,140

196,184,506(724,583)(724,583)

195,459,922

4

For the six months ended July 31, 2019
(Unit: thousands of yen)
Unitholders’ equity

Unitholders’capitalBalance at February 1, 2019

Unitholders’ capital

Surplus

Deduction fromunitholders' capital
Allowance
Total
for
deduction
temporaryfromdifference
unitholders'adjustments
capitalVoluntary retained
earnings

190,460,106

Balance at July 31, 2019

Reserve for
reduction
entry

Total
voluntary
retainedearnings

291,944

291,944－－

190,460,106(174,371)(174,371)(174,371)－(174,371)(174,371)(174,371)－－

190,460,106(174,371)(174,371)

190,285,734

291,944

291,944

Change during the period
Dividends from surplus
Dividends in excess ofearnings from allowancefor temporary difference
adjustments
Net income
Net changes of items otherthan unitholders’ equity
Total changes of items during
the period

Unitholders'
capital, net

Valuation and translation
adjustments

Unitholders’ equity
Surplus
Unappropri
ated
retainedearnings
Balance at February 1, 2019
Change during the period
Dividends from surplus
Dividends in excess ofearnings from allowancefor temporary difference
adjustments
Net income
Net changes of items otherthan unitholders’ equity
Total changes of items during
the period
Balance at July 31, 2019

Total
surplusTotal
unitholders’equityDeferred
gains orlosses onhedges5,607,858

196,067,964(5,116,765)(5,116,765)(5,116,765)(5,116,765)(174,371)(174,371)

5,344,831

5,344,831

5,344,831(489,295)

Total net
assets5,315,914

5,344,831(489,295)

Total
valuationandtranslation
adjustments

195,578,668(295,535)(295,535)(295,535)

228,065

228,065

53,694(295,535)(295,535)(241,841)

5,543,979

5,835,924

196,121,658(784,831)(784,831)

195,336,827

5

STATEMENT OF CASH DISTRIBUTIONS(Unit: yen)
For the six months ended

For the six months ended

January 31, 2020

July 31, 2019

Ⅰ. Unappropriated retained earnings

5,901,196,611

5,543,979,968

Ⅱ. Addition of dividends in excess ofearnings－

294,368,720－

294,368,720

60,247,403－

60,247,403－

5,405,509,680

5,343,636,000

2,883

2,850

5,405,509,680

5,049,267,280

2,883

2,693

－

294,368,720－

157

435,439,528

494,712,688

Allowance for temporary difference
adjustments
Ⅲ. Capitalization
Reversal of allowance for temporary
difference adjustments
Ⅳ. Amount of Dividends
Amount of dividends per unit
Dividends of earnings
Dividends of earnings per unit
Allowance for temporary difference
adjustments
Dividends in excess of earnings per unit
(allowance for temporary difference
adjustments)
Ⅴ. Retained earnings carried forward

6For the six months ended
January 31, 2020
Method of calculating the amount ofdividends

Pursuant

to

the

terms

For the six months ended
July 31, 2019ofthePursuant

to

the

terms

of

the

distribution policy set forth in Article 37 distribution policy set forth in Article 37
(1)

of

the

Company’s

Articlesof (1)

oftheCompany’s

Articlesof

Incorporation, the amount of dividends Incorporation, the amount of dividends
shall bein excess of an amount shall bein excess of an amountequivalent to 90% of the Company’s equivalent to 90% of the Company’s
earnings available for dividends as earnings available for dividends as
defined in Article 67-15 of the Special defined in Article 67-15 of the Special
Taxation Measures Law, but not in Taxation Measures Law, but not inexcess of the amount of earnings as excess of the amount of earnings as
defined in Article 136, Paragraph 1 of defined in Article 136, Paragraph 1 ofthe Investment Trust Act. Based on such the Investment Trust Act. Based on suchpolicy, the Company decided to pay out policy, the Company decided to pay out
dividends of earnings (5,405,509,680 dividends of earnings (5,049,267,280yen), which is the integral multiple of yen), which is the integral multiple ofthe total number of investment units the total number of investment units
issuedandoutstanding(1,874,960 issued and outstanding (1,874,960 units)

units), out of the amount obtained by out of the amount of earnings as defined
subtracting the reversal of allowance for in Article 136, Paragraph 1 of thetemporary difference adjustments (as Investment Trust Act.
defined in Article 2, Paragraph 2, Item

In addition, pursuant to the terms of

30 of the Ordinance on Accountings of the distribution policy set forth inInvestment

Corporations)fromthe Article 37 (2) of the Company’s Articles

amount of earnings as defined in Article of Incorporation, the Company decided
136, Paragraph 1 of the Investment to pay out dividends attributable toTrust Act.

allowance

for

temporarydifference

As a result, the Company declared adjustments (294,368,720 yen), which is
dividends per unit of 2,883 yen.

the integral multiple of the total numberofinvestment

units

issuedandoutstanding (1,874,960 units) in due
consideration of the impact of the itemsof deduction from net assets (as definedin Article 2, Paragraph 2, Item 30 (b) of
the

Ordinanceon

Accountingsof

Investment Corporations) on dividends.
As a result, the Company declared
dividends per unit of 2,850 yen.

7

STATEMENT OF CASH FLOWS(Unit: thousands of yen)
For the six months ended
January 31, 2020

July 31, 2019

Net cash provided by (used in) operating activities
Income before income taxes

5,407,830

5,346,284

Depreciation and amortization

1,034,455

1,058,120

9,909

10,193

6,952

6,952

(44)

(58 )

Amortization of investment corporation bonds
issuance cost
Amortization of investment unit issuance cost
Interest income
Gain on forfeiture of unclaimed dividends(1,035)(979 )

Interest expenses

445,175

443,892

Decrease (increase) in operating accounts receivable

40,505

48,795Decrease (increase) in consumption taxes receivable－

230,911

Increase (decrease) in operating accounts payable

13,282(64,833 )Increase (decrease) in accounts payable – other

16,6002,636

Increase (decrease) in accrued expenses
Increase (decrease) in accrued consumption taxes

12,285

15,761(267,340)

484,076

Increase (decrease) in advances received

1,697(4,105 )Increase (decrease) in deposits received(40,964)

41,463

Decrease (increase) in prepaid expenses(3,283)(5,212 )Decrease (increase) in long-term prepaid expenses

10,848(15,308 )Other, net

83

15

6,686,957

7,598,606

4458(445,198)(449,279 )(1,452)(1,430 )6,240,351

7,147,955

Purchase of property, plant and equipment in trust(205,905)(620,364 )Repayments of lease and guarantee deposits in trust(26,233)(66,699 )Proceeds from lease and guarantee deposits in trust

221,677

241,984

Net cash provided by (used in) investing activities(10,461)(445,080 )SubtotalInterest income received
Interest expenses paid
Income taxes paid
Net cash provided by (used in) operating activities
Net cash provided by (used in) investing activities

Net cash provided by (used in) financing activities
Proceeds from long-term loans payable

15,900,000

12,000,000

Repayments of long-term loans payable(15,900,000)(12,000,000 )Redemption of investment corporation bonds－(3,000,000 )Cash dividends paid

(5,341,870)(5,289,514 )Net cash provided by (used in) financing activities(5,341,870)(8,289,514 )Net increase (decrease) in cash and cash equivalents

888,019(1,586,638 )Cash and cash equivalents at beginning of the period

10,219,514

11,806,152

Cash and cash equivalents at end of the period (Note18)

11,107,533

10,219,514

8

NOTES TO FINANCIAL STATEMENTS
For the six months ended January 31, 2020 and July 31, 2019

1. ORGANIZATION
Mori Hills REIT Investment Corporation (“the Company”) was incorporated by Mori Building Investment
Management Co., Ltd. (the Company’s Asset Manager) on February 2, 2006 with 100 million yen in capital (200units), and registration was approved based on Article 187 of the Act on Investment Trusts and Investment
Corporations of Japan (the “Investment Trust Act”) on March 6, 2006 (Registration No. 51 filed with the
Director-General of the Kanto Local Finance Bureau). Subsequently, the Company was listed on the Real Estate
Investment Trust Section of the Tokyo Stock Exchange on November 30, 2006 (Securities Code: 3234).
The Company’s real estate portfolio as of January 31, 2020 was comprised of 11 properties undermanagement with a total leasable floor area of 174,699.12m2. The Company has already invested 390,690 million yen(based on acquisition price) into this portfolio. The occupancy rate as of January 31, 2020 was 99.2%.

2. BASIS OF PRESENTATION
The financial statements of the Company have been prepared in accordance with accounting principles
generally accepted in Japan (“Japanese GAAP”), including provisions set forth in the Financial Instruments andExchange Act of Japan and the Investment Trust Act and related regulations, which are different in certain respects
as to the application and disclosure requirements of International Financial Reporting Standards. The accompanying
financial statements are basically a translation of the financial statements of the Company, which were prepared inaccordance with Japanese GAAP and were presented in the Securities Report of the Company filed with the Kanto
Local Finance Bureau of the Ministry of Finance. In preparing the accompanying financial statements, certain
reclassifications have been made to the financial statements issued domestically in order to present them in a format
which is more familiar to readers outside Japan. The amounts have been rounded down to the nearest thousand yen in
the accompanying financial statements. The Company does not prepare consolidated financial statements, as theCompany has no subsidiaries.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(1) Property, plant and equipment (including assets in trust) and depreciation
Depreciation of property, plant and equipment of the Company is calculated principally by the straight-line
method based on the following estimated useful lives determined by the Company. Significant renewals andadditions are capitalized at cost. Maintenance and repairs are charged to income.
Buildings
3~68 years
Structures

3~68 years

Machinery and equipment

8~33 years

Tools, furniture and fixtures 3~15 years(2) Intangible assets (including assets in trust)Intangible assets are amortized by the straight-line method based on the estimated useful lives.
(3) Long-term prepaid expenses
Long-term prepaid expenses are amortized by the straight-line method based on the estimated useful lives.
(4) Investment corporation bonds issuance cost
Investment corporation bonds issuance cost is amortized using the straight-line method over the term of thebonds.
(5) Investment unit issuance cost
Investment unit issuance cost is amortized using the straight-line method over three years.
(6) Revenue recognition
Revenues from leasing of investment properties are recognized as rent revenues over the lease period.

9(7) Accounting for property taxes
For property tax, city planning tax and depreciable assets tax, the Company charges the amount of property
taxes assessed and determined applicable to the fiscal period to expenses related to properties.
Registered owners of properties in Japan as of January 1 are responsible for paying property taxes for thecalendar year based on assessments by local governments. Therefore, registered owners who sold properties to theCompany were liable for property taxes for the calendar year, including the period from the date of the acquisitionby the Company until the end of the year. The Company reimbursed sellers of properties for the equivalent amountof property taxes and included the amount in the acquisition cost of real estate. The amount equivalent to property
taxes included in the cost of acquisition of real estate was none for the period ended January 31, 2020 and period
ended July 31, 2019, respectively.
(8) Hedge accounting approach(a) Hedge accounting approach
Deferred hedge accounting is applied for interest rate swap transactions. However, special treatment isapplied for interest rate swaps when the requirements for special treatment are fulfilled.
(b) Hedging instruments and hedged items
Hedging instruments: Interest rate swap transactions
Hedged items:

Borrowing interest rates(c) Hedging policy
The Company conducts derivative transactions to hedge risks as stipulated in the Company’s Articles ofIncorporation in accordance with the Company’s risk management policy.
(d) Method for assessing the effectiveness of hedging
The Company evaluates by comparing the cumulative change in market rates of hedged items and hedging
instruments or cash flow and based on the amount of change in both during the period from the start of hedging towhen the effectiveness is being determined.
However, the assessment of hedge effectiveness is omitted, as it is assumed that important terms of thehedging instruments and hedged items are identical so that interest rate or cash flow fluctuations will be fully
offset at the inception of the hedge and continuously thereafter. Moreover, assessment of the effectiveness isomitted for interest rate swaps when the requirements for special treatment are fulfilled.
(9) Cash and cash equivalents
Cash and cash equivalents in the statement of cash flows consist of cash on hand and deposits in trust;deposits and deposits in trust that can be withdrawn at any time; and short-term investments with a maturity of
three months or less from the date of acquisition, which are readily convertible to cash and bear only an
insignificant risk of price fluctuation.
(10) Accounting for trust beneficial interest in real estate
For trust beneficial interest in real estate owned by the Company, all accounts of assets and liabilities within
the assets in trust as well as all accounts of revenue generated and expenses incurred from the assets in trust arerecognized in the relevant accounts of the balance sheet and statement of income and retained earnings.
The following material items of the assets in trust recognized in the relevant accounts are separately listedon the balance sheet.
(a) Cash and deposits in trust(b) Buildings in trust; structures in trust; machinery and equipment in trust; tools, furniture and fixtures in trust;land in trust; construction in progress in trust; leasehold rights in trust; and other intangible assets in trust(c) Lease and guarantee deposits in trust(11) Consumption taxes
Transactions subject to consumption taxes are recorded at amounts exclusive of consumption taxes.
Non-deductible consumption taxes related to the acquisition of assets are treated as the cost of applicable assets.

10

4. ACCOUNTING STANDARDS NOT YET APPLIED
・ “Accounting Standard for Revenue Recognition” (Accounting Standards Board of Japan (ASBJ) Statement No. 29
issued on March 30, 2018)
・ “Implementation Guidance on Accounting Standard for Revenue Recognition” (ASBJ Guidance No. 30 issued on
March 30, 2018)(1) Overview
The International Accounting Standards Board (IASB) and the Financial Accounting Standards Board(FASB) in the United States have jointly developed comprehensive accounting standards for revenue recognition
and issued “Revenue from Contracts with Customers” (IFRS 15 in IASB and Topic 606 in FASB) in May 2014. Given
the situation where IFRS 15 will be applied from fiscal years beginning on or after January 1, 2018 and that Topic
606 will be applied from fiscal years beginning after December 15, 2017, the ASBJ has developed comprehensive
accounting standards for revenue recognition and issued them together with the implementation guidance.
The basic policy of the ASBJ when it developed the accounting standards for revenue recognition was tospecify the accounting standards, incorporating the basic principles of IFRS 15 as a starting point, from theperspective of comparability between financial statements, which is one of the benefits of maintaining compatibility
with IFRS 15. The basic policy also stipulates that if there is an item to which consideration should be given, suchas practices that have been conducted thus far in Japan, alternative treatments will be added to the extent to which
comparability is not impaired.
(2) Scheduled date of application
The accounting standards will be applied from the beginning of the fiscal period ending January 31, 2022.
(3) Impact of applying the accounting standards
The level of the impact on the financial statements of applying the “Accounting Standard for Revenue
Recognition” and its guidance is currently under evaluation.
・ “Accounting Standard for Fair Value Measurement” (Accounting Standards Board of Japan (ASBJ) Statement
No. 30 issued on July 4, 2019)
・ “Implementation Guidance on Accounting Standard for Fair Value Measurement” (ASBJ Guidance No. 31 issued on
July 4, 2019)(1) Overview
The International Accounting Standards Board (IASB) and the Financial Accounting Standards Board(FASB) have established detailed guidance regarding fair value measurement (IFRS 13 “Fair Value Measurement”
in IFRS and Topic 820 “Fair Value Measurement” in FASB). The ASBJ repeatedly considered the guidance
regarding fair value of financial instruments and disclosure in order to improve the comparability with suchinternational accounting standards, and issued the Accounting Standard for Fair Value Measurement and the
Implementation Guidance on Accounting Standard for Fair Value Measurement.
(2) Scheduled date of application
The accounting standards will be applied from the beginning of the fiscal period ending January 31, 2022.
(3) Impact of applying the accounting standards
The level of the impact on the financial statements of applying the “Accounting Standard for Fair Value
Measurement” and its guidance is currently under evaluation.

11

5. ADDITIONAL INFORMATION
Notes on Provision and Reversal of Allowance for Temporary Difference Adjustments
For the six months ended January 31, 2020
(1) Reason for reversal, and related asset, etc. and amount of reversal(Unit: thousands of yen)
Related asset, etc.

Reason for reversal

Deferred gains or losses

Changes in fair value of derivativeon hedges

transactions

Reversal of allowance for temporary
difference adjustments
60,247(2) Specific method of reversal
Deferred gains or losses on hedges
Reversal in line with changes in fair value of derivative transactions that are the hedging instruments isplanned.
For the six months ended July 31, 2019(1) Reason for provision, and related asset, etc. and amount of provision(Unit: thousands of yen)
Related asset, etc.

Reason for provision

Deferred gains or losses

Incurrence of loss on valuation of

on hedges

interest swaps

Allowance for temporary difference
adjustments
294,368(2) Specific method of reversal
Deferred gains or losses on hedges
Reversal in line with changes in fair value of derivative transactions that are the hedging instruments isplanned.

12

6. PROPERTY AND EQUIPMENT
For the six months ended January 31, 2020
(Unit: thousands of yen)
Balance at
beginning of
the period

Amount ofincreaseduring theperiodAmount ofdecreaseduring theperiodBalance at
end of theperiodLand

22,074,160－－

22,074,160－－

22,074,160－

Buildings in trust

81,918,977

128,178－

82,047,156

17,114,483

989,516

64,932,672－

Structures in trust

921,5472,490－

924,038

316,756

8,495

607,282－

Machinery andequipment in trust

910,898

2,436－

913,334

285,559

22,256

627,775－

Tools, furniture andfixtures in trust

237,085

16,213－

253,299

158,080

13,813

95,219－260,234,866－－

260,234,866－－

260,234,866

－

1,949

1,288

－

3,237

－

－

3,237

－

366,299,485

150,607－366,450,092

17,874,879

1,034,082

348,575,213

Leasehold rights
in trust

30,650,962－－

30,650,962－－

30,650,962－

Other intangible
assets in trust

11,952－－

11,952

11,952372

0－Subtotal

30,662,915－－

30,662,915

11,952372

30,650,962

Total

396,962,401

150,607－397,113,008

17,886,831

1,034,455

379,226,176

Property, plant and equipment

Type of asset

Land in trust
Construction inprogress in trust
Subtotal

Intangible
assets

Accumulated depreciation/
Accumulated amortization Net balance at
end of theRemarks
Depreciation
periodandamortization

7. SHORT-TERM LOANS PAYABLE
For the six months ended January 31, 2020
Not applicable.

138. INVESTMENT CORPORATION BONDS
For the six months ended January 31, 2020
(Unit: thousands of yen)
Issue
date

Balance at
beginning of
the period

Amount ofincreaseduring theperiodAmount ofdecreaseduring theperiodBalance at
end of theperiodInterest
rate

Redemption
maturitydate

May 24,2013

2,000,000－－

2,000,000

1.2600%

May 22,2020

Feb. 24,2014

2,000,000－－

2,000,000

0.6880%Feb. 24,
2021

Nov. 27,2014

2,000,000－－

2,000,000

0.8650%Nov. 27,2024

May 26,2015

3,000,000－－

3,000,000

0.3220%

May 26,2020

May 26,2015

2,000,000－－

2,000,000

0.8200%

May 26,2025

Bond
Ninth Series
Unsecured
Investment
Corporation Bonds
Eleventh Series
Unsecured
Investment
Corporation Bonds
Twelfth Series
Unsecured
Investment
Corporation Bonds
Thirteenth Series
Unsecured
Investment
Corporation Bonds
Fourteenth Series
Unsecured
Investment
Corporation Bonds
Fifteenth Series
Unsecured
Investment
Corporation Bonds
Sixteenth Series
Unsecured
Investment
Corporation Bonds
Seventeenth Series
Unsecured
Investment
Corporation Bonds
Eighteenth Series
Unsecured
Investment
Corporation Bonds
Nineteenth Series
Unsecured
Investment
Corporation Bonds

Nov. 26,2015

3,500,000－－

3,500,000

0.3800%Nov. 26,
2020

Nov. 26,2015

1,500,000－－

1,500,000

0.8860%Nov. 26,2025

Aug.30,2016

2,000,000－－

2,000,000

0.3400%Aug. 28,2026

Jan. 31,2017

2,000,000－－

2,000,000

0.4900%Jan. 29,2027

Jun. 30,2017

2,000,000－－

2,000,000

0.5000%Jun. 30,2027

22,000,000－－

22,000,000

Total(Note 1)

Use offunds

Collateral(Note 1)none

The funds are used for the acquisition cost of trust beneficial interests, the repayment of loans payable and redemption of investment
corporation bonds.

(Note 2) The redemption schedule of investment corporation bonds for each of the five years after the balance sheet date is as follows.
(Unit: thousands of yen)

Investment corporation bonds

Due within 1 year

Due after 1 year,
but within 2 years

Due after 2 years,
but within 3 years

Due after 3 years,
but within 4 years

Due after 4 years,
but within 5 years

8,500,000

2,000,000－－

2,000,000

149. LONG-TERM LOANS PAYABLE
For the six months ended January 31, 2020
(1) Current portion of long-term loans payable(Unit: thousands of yen)
Lender

MUFG Bank, Ltd.

Mizuho Bank, Ltd.

Balance at
beginning of
the period

Amount ofincreaseduring theperiodAmount ofdecreaseduring theperiodBalance at
end of theperiodAverageinterest
rate(Note 1)

Repayment
date

1,100,000－

1,100,000－

0.4434%

Nov. 29, 2019

1,100,000－

1,100,000－

0.4434%

Nov. 29, 2019574,000－－

574,000

0.4000%

May 29, 2020

574,000－－

574,000

0.4000%

May 29, 2020

834,000－－

834,000

0.3760%

May 29, 2020

834,000－－

834,000

0.3760%

May 29, 2020－

1,200,000－

1,200,000

0.6242%

Nov. 30, 2020－

1,200,000－

1,200,000

0.6242%

Nov. 30, 2020

1,100,000－

1,100,000－

0.4434%

Nov. 29, 2019574,000－－

574,000

0.4000%

May 29, 2020

834,000－－

834,000

0.3760%

May 29, 2020－

1,200,000－

1,200,000

0.6242%

Nov. 30, 2020

1,600,000－

1,600,000－

0.4434%

Nov. 29, 2019

Use offunds

Unsecured/(Note 2)300,000－－

300,000

0.4000%

May 29, 2020

834,000－－

834,000

0.3760%

May 29, 2020－

1,440,000－

1,440,000

0.6242%

Nov. 30, 2020

1,000,000－

1,000,000－

0.4434%

Nov. 29, 2019

834,000－－

834,000

0.3760%

May 29, 2020－

960,000－

960,000

0.6242%

Nov. 30, 2020

2,500,000－

2,500,000－

0.3155%

Aug. 30, 2019

830,000－－

830,000

0.3760%

May 29, 2020

2,000,000－

2,000,000－

0.4434%

Nov. 29, 2019

2,000,000－

2,000,000－

0.4434%

Nov. 29, 2019

Aozora Bank, Ltd.

2,000,000－

2,000,000－

0.3155%

Aug. 30, 2019

Shinsei Bank, Ltd.

900,000－

900,000－

0.4434%

Nov. 29, 2019

The NorinchukinBank600,000－

600,000－

0.4434%

Nov. 29, 2019

Total

22,922,000

6,000,000

15,900,000

13,022,000

Sumitomo Mitsui
Banking
Corporation

Sumitomo Mitsui
Trust Bank, Ltd.

Resona Bank, Ltd.
The Bank ofFukuoka, Ltd.
Development Bankof Japan Inc.

15

Remarks

Unguaranteed(2) Long-term loans payable(Unit: thousands of yen)
LenderBalance at
beginning of
the period

Amount ofincreaseduring theperiodAmount ofdecreaseduring theperiodBalance at
end of theperiodAverageinterest
rate(Note 1)

Repayment
date

1,200,000－

1,200,000－

0.6242%

Nov. 30, 2020

1,200,000－

1,200,000－

0.6242%

Nov. 30, 2020

1,300,000－－

1,300,000

0.7535%

Nov. 30, 2021

1,300,000－－

1,300,000

0.7535%

Nov. 30, 2021

1,369,000－－

1,369,000

0.5730%

May 31, 2021

1,369,000－－

1,369,000

0.5730%

May 31, 2021

1,369,000－－

1,369,000

0.7020%

May 31, 2022

1,369,000－－

1,369,000

0.7020%

May 31, 2022

1,500,000－－

1,500,000

0.4932%

Aug. 31, 2021

1,500,000－－

1,500,000

0.4932%

Aug. 31, 2021

500,000－－

500,000

0.6529%Aug. 31, 2023

MUFG Bank, Ltd.

Use offunds

Unsecured/(Note 2)500,000－－

500,000

0.6529%Aug. 31, 2023

1,600,000－－

1,600,000

0.4980%Nov. 30, 2022

1,600,000－－

1,600,000

0.6155%

Nov. 30, 2023

1,500,000－－

1,500,000

0.3290%Mar. 31, 2023

1,500,000－－

1,500,000

0.4100%Mar. 29, 2024

600,000－－

600,000

0.4100%Mar. 29, 2024

2,400,000－－

2,400,000

0.5040%Mar. 31, 2025

4,700,000－－

4,700,000

0.4065%

Aug. 31, 2027

5,000,000－－

5,000,000

0.4345%

Feb. 29, 2028

3,904,000－－

3,904,000

0.2969%Nov. 30, 2028－

2,200,000－

2,200,000

0.2182%

Nov. 30, 2026

16

Remarks

Unguaranteed(Unit: thousands of yen)
LenderMizuho Bank, Ltd

Balance at
beginning of
the period

Amount ofincreaseduring theperiodAmount ofdecreaseduring theperiodBalance at
end of theperiodAverageinterest
rate(Note 1)

Repayment
date

1,200,000－

1,200,000－

0.6242%

Nov. 30, 2020

1,300,000－－

1,300,000

0.7535%

Nov. 30, 2021

1,369,000－－

1,369,000

0.5730%

May 31, 2021

1,369,000－－

1,369,000

0.7020%

May 31, 2022

1,500,000－－

1,500,000

0.4932%

Aug. 31, 2021

500,000－－

500,000

0.6529%Aug. 31, 2023

1,600,000－－

1,600,000

0.6155%

Nov. 30, 2023

600,000－－

600,000

0.4100%Mar. 29, 2024

2,400,000－－

2,400,000

0.5040%Mar. 31, 2025

1,100,000－－

1,100,000

0.5775%

Jul. 31, 2029

2,700,000－－

2,700,000

0.6030%Feb. 28, 2030

3,000,000－－

3,000,000

0.1850%

May 23, 2022

3,000,000－－

3,000,000

0.4260%Aug. 30, 2024

1,400,000－－

1,400,000

0.4219%Aug. 31, 2029

1,952,000－－

1,952,000

0.4219%May 31, 2029－

1,000,000－

1,000,000

0.2029%Aug. 29, 2025－

1,100,000－

1,100,000

0.2932%

May 31, 2027

1,440,000－

1,440,000－

0.6242%

Nov. 30, 2020

1,560,000－－

1,560,000

0.7535%

Nov. 30, 2021

1,099,000－－

1,099,000

0.5730%

May 31, 2021

1,098,000－－

1,098,000

0.7020%

May 31, 2022

1,500,000－－

1,500,000

0.4932%

Aug. 31, 2021

500,000－－

500,000

0.6529%Aug. 31, 2023

1,600,000－－

1,600,000

0.4980%Nov. 30, 2022

2,200,000－－

2,200,000

0.3290%Mar. 31, 2023

800,000－－

800,000

0.4100%Mar. 29, 2024

1,100,000－－

1,100,000

0.4673%

Jul. 31, 2025

2,650,000－－

2,650,000

0.5460%Feb. 27, 2026

3,600,000－－

3,600,000

0.5640%Aug. 31, 2026

1,144,000－－

1,144,000

0.4009%Nov. 30, 2027－

1,600,000－

1,600,000

0.4132%

May 31, 2028

Use offunds

Remarks

Unsecured/

Sumitomo Mitsui
Banking
Corporation

17(Note 2)

Unguaranteed(Unit: thousands of yen)
LenderSumitomo Mitsui
Trust Bank, Ltd.

Balance at
beginning of
the period

Amount ofincreaseduring theperiodAmount ofdecreaseduring theperiodBalance at
end of theperiodAverageinterest
rate(Note 1)

Repayment
date

960,000－

960,000－

0.6242%

Nov. 30, 2020

1,040,000－－

1,040,000

0.7535%

Nov. 30, 2021

1,294,000－－

1,294,000

0.5730%

May 31, 2021

1,295,000－－

1,295,000

0.7020%

May 31, 2022

500,000－－

500,000

0.6529%Aug. 31, 2023

1,600,000－－

1,600,000

0.6155%

Nov. 30, 2023

600,000－－

600,000

0.4100%Mar. 29, 2024

2,400,000－－

2,400,000

0.5040%Mar. 31, 2025

1,000,000－－

1,000,000

0.5150%Jul. 31, 2026

2,000,000－－

2,000,000

0.4770%Jul. 31, 2028

2,600,000－－

2,600,000

0.5830%Feb. 26, 2027

2,400,000－－

2,400,000

0.3315%

Aug. 31, 2023

1,400,000－－

1,400,000

0.6670%Aug. 31, 2027－

1,000,000－

1,000,000

0.2182%

Nov. 29, 2024

1,000,000－－

1,000,000

0.4100%Mar. 29, 2024

500,000－－

500,000

0.5150%Jul. 31, 2026

500,000－－

500,000

0.4700%Aug. 29, 2025

1,300,000－－

1,300,000

0.3760%Aug. 30, 2024

2,000,000－－

2,000,000

0.1714%

May 29, 2026－

2,000,000－

2,000,000

0.2682%

Nov. 30, 2028

1,000,000－－

1,000,000

0.3290%Mar. 31, 2023

500,000－－

500,000

0.3735%

Jul. 31, 2024

600,000－－

600,000

0.4893%

Nov. 29, 2024

1,300,000－－

1,300,000

0.4260%Aug. 30, 2024

3,000,000－－

3,000,000

0.2714%

May 29, 2026－

600,000－

600,000

0.2932%

May 29, 2026

1,700,000－－

1,700,000

0.7963%Mar. 27, 2023

1,000,000－－

1,000,000

0.4100%Mar. 29, 2024

750,000－－

750,000

0.6430%Feb. 26, 2027

500,000－－

500,000

0.6670%Aug. 31, 2027－

2,000,000－

2,000,000

0.4182%

Nov. 30, 2028

Use offunds

Remarks

Unsecured/
The Bank ofFukuoka, Ltd.

The Norinchukin
Bank

Development Bankof Japan Inc.

18

(Note 2)

Unguaranteed(Unit: thousands of yen)
LenderResona Bank, Ltd.

Shinsei Bank, Ltd

Mizuho Trust &Banking Co., Ltd.

The Nishi-Nippon
City Bank, Ltd.

Aozora Bank, Ltd.
The Hiroshima
Bank, Ltd.
The Oita Bank,Ltd.
Shinkin Central
Bank
Chugoku Bank
Ltd.
Total

Balance at
beginning of
the period

Amount ofincreaseduring theperiodAmount ofdecreaseduring theperiodBalance at
end of theperiodAverageinterest
rate(Note 1)

Repayment
date

800,000－－

800,000

0.3290%Mar. 31, 2023

500,000－－

500,000

0.6130%Jul. 30, 2027

500,000－－

500,000

0.4700%Aug. 29, 2025

1,300,000－－

1,300,000

0.4805%

Aug. 31, 2028－

2,500,000－

2,500,000

0.3232%

Aug. 31, 2029

1,500,000－－

1,500,000

0.6155%

Nov. 30, 2023

500,000－－

500,000

0.3290%Mar. 31, 2023

500,000－－

500,000

0.5400%Aug. 29, 2025

1,300,000－－

1,300,000

0.5200%Aug. 29, 2025－

900,000－

900,000

0.3682%

Nov. 30, 2027

500,000－－

500,000

0.3290%Mar. 31, 2023

500,000－－

500,000

0.5775%

Jul. 31, 2029

1,500,000－－

1,500,000

0.4700%Aug. 29, 2025

1,300,000－－

1,300,000

0.4700%Aug. 29, 2025

1,000,000－－

1,000,000

0.4893%

Nov. 29, 2024

500,000－－

500,000

0.5400%Aug. 29, 2025

800,000－－

800,000

0.2570%Aug. 31, 2022

1,000,000－－

1,000,000

0.4100%Mar. 29, 2024

1,000,000－－

1,000,000

0.3290%Mar. 31, 2023

1,000,000－－

1,000,000

0.2300%Nov. 30, 2022

1,000,000－－

1,000,000

0.1795%

Sep. 30, 2022－

1,000,000－

1,000,000

0.2185%

Aug. 31, 2026

134,300,000

15,900,000

6,000,000

144,200,000

Use offunds

Remarks(Note 2)

Unsecured/
Unguaranteed(Note 1) “Average interest rate” indicates the interest rate on loans payable for the respective lending financial institutions rounded to fourdecimal places. In addition, concerning the loans payable for which an interest rate swap transaction has been entered into for the
purpose of avoiding the risk of fluctuations in interest rates, the interest rate shown is the interest rate after taking into account theeffect of the interest rate swap transaction.
(Note 2)

The funds are used for the acquisition cost of trust beneficial interests, the refinancing of loans payable, redemption of investment
corporation bonds and related expenses.

(Note 3) The repayment schedule of long-term loans payable (excluding the current portion of long-term loans payable) due within 5 years
after the balance sheet date is as follows.
(Unit: thousands of yen)

Long-term loans payable

Due after 1 year,
but within 2 years

Due after 2 years,
but within 3 years

Due after 3 years,
but within 4 years

Due after 4 years,
but within 5 years

19,000,000

15,500,000

20,400,000

15,800,000

1910. NET ASSETS(1) Minimum net assets
The Company is required to maintain net assets of at least 50,000 thousand yen pursuant to the Investment
Trust Act.
(2) Allowance for temporary difference adjustments
For the six months ended January 31, 2020(a) Reason for provision or reversal and related asset, etc. and amount of provision(Unit: thousands of yen)
Related asset,
etc.

Reason forprovision

Deferred gains or

Loss on valuation

losses on hedges

of interest swaps

InitialamountBalance at
beginningof theperiodAllowance
set aside
duringperiodReversalduringperiodBalance atthe end of
the period

468,740

174,371294,368－

468,740

Reason for reversal－(b) Specific method of reversal
Deferred gains or losses on hedges
Reversal in line with changes in fair value of derivative transactions that are the hedging instruments isplanned.
For the six months ended July 31, 2019(a) Reason for provision or reversal and related asset, etc. and amount of provision(Unit: thousands of yen)
Related asset,
etc.

Reason forprovision

Deferred gains or

Loss on valuation

losses on hedges

of interest swaps

InitialamountBalance at
beginningof theperiodAllowance
set aside
duringperiodReversalduringperiodBalance atthe end of
the period

174,371－

174,371－

174,371

Reason for reversal－(b) Specific method of reversal
Deferred gains or losses on hedges
Reversal in line with changes in fair value of derivative transactions that are the hedging instruments isplanned.

20

11. INCOME TAXES(1) Breakdown of significant components of deferred tax assets and deferred tax liabilities(Unit: thousands of yen)
As ofJanuary 31, 2020

July 31, 2019

Deferred tax assets
Accrued enterprise tax excluded
from expenses
Deferred gains or losses on hedges

36

44

234,072

246,907

Subtotal deferred tax assets

234,109

246,952

Valuation allowance(234,072)(246,907)

36

44

36

44

Total deferred tax assets
Net deferred tax assets(2) Reconciliation of significant differences between the statutory tax rate and the effective tax rate
As ofJanuary 31, 2020
Statutory tax rate

July 31, 201931.51%

31.51%[Adjustments]
Deductible cash distributions(31.50%)(31.49%)Others

0.01%

0.01%

Effective tax rate

0.02%

0.03%

12. PER UNIT INFORMATION
For the six months ended
January 31, 2020

July 31, 2019

Net assets per unit (yen)104,247

104,181Net income per unit (yen)

2,883

2,850

(Note 1)

Net income per unit was calculated by dividing the net income by the daily weighted average number of investment units during
the period.
Diluted net income per unit has not been stated as there are no diluted investment units.

(Note 2)

The following is the basis for calculating net income per unit.

For the six months ended
January 31, 2020
Net income (thousands of yen)

July 31, 2019
5,406,483

5,344,831－－

Net income attributable to common
investment units (thousands of yen)

5,406,483

5,344,831

Average number of investment units
during the period (units)

1,874,960

1,874,960

Amounts not attributable to common
unitholders (thousands of yen)21

13. RELATED PARTY TRANSACTIONS(1) Parent company and major corporate unitholders
For the six months ended January 31, 2020

Type

Name

Capital stock
Percentage
orof votinginvestments Description of rights held
Locationin capitalbusinessin (by)(thousands ofrelatedyen)
party

Relationshipwithrelated party

Description oftransaction

Leasing ofproperties(Note 2)
(Note 5)
Other
relatedcompany

Mori
Building
Co., Ltd.

Minatoku,
Tokyo79,500,000

Real estatebusiness

15.0%
directly
held byrelatedparty

Leasing andmanagement ofreal estate

Payment ofproperty
operation andmanagement
fees(Note 6)
Deposit of leaseand guarantee(Note 4)(Note 7)

Amount oftransaction(thousandsof yen)(Note 1)

6,090,006

243,327(Note 3)－

Account
item

Operatingaccounts
receivable
Advances
received
Lease andguarantee
deposits
in trust
Prepaid
expenses

Balanceat end ofthe period(thousandsof yen)730
1,094,371
9,790,142
3,254

Operatingaccounts
payable53,112

Lease andguarantee
deposits
in trust

53,886(Note 1) The amount does not include consumption taxes.
(Note 2) Roppongi Hills Mori Tower, ARK Mori Building, Atago Green Hills, Toranomon Hills Mori Tower, a portion of Koraku Mori Building anda portion of ARK Hills South Tower(Note 3) The amount includes fees (4,175 thousand yen) that are not charged to expenses but recognized as assets.
(Note 4) Roppongi View Tower[Transaction terms and conditions and related policies](Note 5) The Company engages in transactions by conducting adequate procedures in line with the Related Parties Transaction Guidelines
stipulated by the Company’s Asset Manager and compliance regulations, after having comprehensively considered the market situationand other factors.
(Note 6) The Company decides on transactions by conducting adequate procedures in line with the Related Parties Transaction Guidelines
stipulated by the Company’s Asset Manager and compliance regulations, in light of the market situation, the content of services
provided, overall operational capacity and other factors.
(Note 7) The Company engages in transactions by conducting adequate procedures in line with the Related Parties Transaction Guidelines
stipulated by the Company’s Asset Manager and compliance regulations, after having comprehensively considered the market situationand other factors.

22

For the six months ended July 31, 2019

Type

Name

Capital stockorinvestments
Locationin capital(thousands ofyen)

Percentage
of votingRelationship
Description of rights heldwithbusinessin (by)related party
relatedparty

Description oftransaction

Leasing ofproperties(Note 2)
(Note 5)

Other
relatedcompany

Mori
Building
Co., Ltd.

Minatoku,Tokyo67,000,000

Real estatebusiness

15.0%
directly
held byrelatedparty

Payment ofproperty
Leasing andoperation andmanagement ofmanagement
real estate
fees(Note 6)
Payment ofotheroperatingexpenses(Note 7)
Deposit of leaseand guarantee(Note 4)(Note 8)Amount oftransaction(thousandsof yen)(Note 1)

Account
item

Operatingaccounts
receivable
Advances
6,092,668 received
Lease andguarantee
deposits
in trust
Prepaid
expenses
251,629
Operating(Note 3)
accounts
payable

1,277

－

－

Lease andguarantee
deposits
in trust

Balanceat end ofthe period(thousandsof yen)902
1,091,980
9,790,142
2,963
44,777－53,886(Note 1) The amount does not include consumption taxes.
(Note 2) Roppongi Hills Mori Tower, ARK Mori Building, Atago Green Hills, Toranomon Hills Mori Tower, a portion of Koraku Mori Building, aportion of ARK Hills South Tower, a portion of Roppongi First Plaza and a portion of Roppongi View Tower(Note 3) The amount includes fees (15,258 thousand yen) that are not charged to expenses but recognized as assets.
(Note 4) Roppongi View Tower[Transaction terms and conditions and related policies](Note 5) The Company engages in transactions by conducting adequate procedures in line with the Related Parties Transaction Guidelines
stipulated by the Company’s Asset Manager and compliance regulations, after having comprehensively considered the market situationand other factors.
(Note 6) The Company decides on transactions by conducting adequate procedures in line with the Related Parties Transaction Guidelines
stipulated by the Company’s Asset Manager and compliance regulations, in light of the market situation, the content of services
provided, overall operational capacity and other factors.
(Note 7) The Company decides on transactions in light of the market situation, the content of services provided, overall operational capacity andother factors.
(Note 8) The Company engages in transactions by conducting adequate procedures in line with the Related Parties Transaction Guidelines
stipulated by the Company’s Asset Manager and compliance regulations, after having comprehensively considered the market situationand other factors.

23

(2) Subsidiaries and affiliates
For the six months ended January 31, 2020
Not applicable.
For the six months ended July 31, 2019
Not applicable.
(3) Subsidiaries of parent company
For the six months ended January 31, 2020

Type

Name

Capital stock
Percentage
Amount oforof votingRelationshiptransaction
investments Description of rights held
Description of
Locationwith(thousandsin capitalbusinessin (by)transaction
related partyof yen)(thousands ofrelated(Note 1)
yen)
party

Subsidiary Mori Building
Minatoof other
Investmentku,
related ManagementTokyo
companyCo., Ltd.

Real estate,
trust
beneficiaryright and
200,000
otherfinancialasset
management
operations

None

Outsourcingof asset
Payment ofmanagement management
fees
Concurrent(Note 2)
post of(Note 3)
directors

266,704

Balanceat end of
Account
the period
item(thousandsof yen)Accruedexpenses

293,374(Note 1) The amount does not include consumption taxes.
(Note 2) The amount of management fees is provided in the “Asset Management Contract” concluded between the Company and theCompany’s Asset Manager.
[Transaction terms and conditions and related policies](Note 3) The Company decides on transactions in light of the market situation, the content of services provided, overall operational capacityand other factors.

For the six months ended July 31, 2019

Type

Name

Capital stock
Percentage
Amount oforof votingRelationshiptransaction
investments Description of rights held
Description of
Locationwith(thousandsin capitalbusinessin (by)transaction
related partyof yen)(thousands ofrelated(Note 1)
yen)
party

Subsidiary Mori Building
Minatoof other
Investmentku,
related ManagementTokyo
companyCo., Ltd.

Real estate,
trust
beneficiaryright and
200,000
otherfinancialasset
management
operations

None

Outsourcingof asset
Payment ofmanagement management
fees
Concurrent(Note 2)
post of(Note 3)
directors

260,906

Balanceat end of
Account
the period
item(thousandsof yen)Accruedexpenses

281,779(Note 1) The amount does not include consumption taxes.
(Note 2) The amount of management fees is provided in the “Asset Management Contract” concluded between the Company and theCompany’s Asset Manager.
[Transaction terms and conditions and related policies](Note 3) The Company decides on transactions in light of the market situation, the content of services provided, overall operational capacityand other factors.

24

(4) Directors and major individual unitholders
For the six months ended January 31, 2020

Type

Name

Directors
and their
close
relatives

Capital stock
Percentage
Amount oforof votingDescription ofRelationshiptransaction
investments
rights held
Description of
Locationbusiness orwith(thousandsin capitalin (by)transaction
position
related partyof yen)(thousands ofrelated(Note 1)
yen)
party

Hideyuki
Isobe－

Executive
Director of
the Company,
and President－& CEO ofMori Building
Investment
Management
Co., Ltd.

None

Executive
Payment of
Director of management
the Company,
fees toand President Mori Building& CEO ofInvestment
Mori Building Management
Investment
Co., Ltd.
Management(Note 2)
Co., Ltd.
(Note 3)

266,704

Account
item

Balanceat end ofthe period(thousandsof yen)Accruedexpenses

293,374(Note 1) The amount does not include consumption taxes.
(Note 2) The transaction was conducted with Hideyuki Isobe as third-party representative (Mori Building Investment Management Co., Ltd.)and the amount of management fees is provided in the “Asset Management Contract” concluded between the Company and theCompany’s Asset Manager.
[Transaction terms and conditions and related policies](Note 3) The Company decides on transactions in light of the market situation, the content of services provided, overall operational capacityand other factors.

For the six months ended July 31, 2019

Type

Name

Directors
and their
close
relatives

Capital stock
Percentage
Amount oforof votingDescription ofRelationshiptransaction
investments
rights held
Description of
Locationbusiness orwith(thousandsin capitalin (by)transaction
position
related partyof yen)(thousands ofrelated(Note 1)
yen)
party

Hideyuki
Isobe－

Executive
Director of
the Company,
and President－& CEO ofMori Building
Investment
Management
Co., Ltd.

None

Executive
Payment of
Director of management
the Company,
fees toand President Mori Building& CEO ofInvestment
Mori Building Management
Investment
Co., Ltd.
Management(Note 2)
Co., Ltd.
(Note 3)260,906

Account
item

Balanceat end ofthe period(thousandsof yen)Accruedexpenses

281,779(Note 1) The amount does not include consumption taxes.
(Note 2) The transaction was conducted with Hideyuki Isobe as third-party representative (Mori Building Investment Management Co., Ltd.)and the amount of management fees is provided in the “Asset Management Contract” concluded between the Company and theCompany’s Asset Manager.
[Transaction terms and conditions and related policies](Note 3) The Company decides on transactions in light of the market situation, the content of services provided, overall operational capacityand other factors.

25

14. BREAKDOWN OF PROPERTY-RELATED REVENUE AND EXPENSES(Unit: thousands of yen)

Breakdown of property operating income
For the six months ended
January 31, 2020
A.

July 31, 2019

Property operating revenue
Rent revenues
Rent and common area revenue
Other rent revenue

9,371,565

9,318,188

5,979

9,377,544

5,756

9,323,944

Other operating revenues
Parking revenue

57,844

59,861

Utilities and other revenue

194,906

175,152

Cancellation penalty

1,166

253,917

237,931

9,631,462

Total property operating revenue
B.

2,917

9,561,876

Property operating expenses
Expenses related to properties
Property management fees

1,104,176

1,082,549

Property taxes

705,466

659,480

Utilities

152,625

142,229

Maintenance and repairs

60,700117,152

Insurance premium

17,503

17,180

Custodian fees
Depreciation and amortization

C.

6,703

5,950

1,034,455

1,057,798

Rent expenses

127,661

Other lease business expenses

14,781

126,872
3,224,074

16,1183,225,332

Total property operating expenses

3,224,074

3,225,332

Property operating income [A − B]

6,407,387

6,336,544(Unit: thousands of yen)Transactions with major unitholders
For the six months ended
January 31, 2020

July 31, 2019

From operating transactions
Rent revenues
Other operating revenues
Expenses related to properties
Other operating expenses

26

6,087,720

6,090,222

2,286

2,446

239,152

236,370－1,277

15. UNITHOLDERS’ EQUITY
For the six months ended
January 31, 2020

July 31, 2019

Total number of investment
units authorized and total
number of investment units
issued and outstanding
Total number of investment
units authorized

10,000,000 units

10,000,000 units

Total number of investment
units issued and outstanding

1,874,960 units

1,874,960 units

16. FINANCIAL INSTRUMENTS(1) Policy for financial instruments(a) Policy for holding financial instruments
The Company makes use of various financial instruments in order to invest surplus funds efficiently. In
addition, concerning fund procurement, the Company adopts a policy of undertaking such fund raising primarily
through the issuance of investment units, the borrowing of funds and the issuance of investment corporation bonds.
The Company limits derivative transactions to those that are entered into for the purpose of hedging the risk of
future fluctuations in interest rates on loans payable, and does not engage in speculative transactions.
(b) Description of financial instruments and associated risks, and risk management structure
Deposits used for investing the Company’s surplus funds are exposed to credit risks, for example, the failure of
the financial institutions that are holding the deposits, but the Company limits the risks by diversifying financial
institutions.
Investment corporation bonds and long-term loans payable are used for fund procurement associated with theacquisition of real estate related assets or repayment of loans payable. Of these, loans payable with variable interest
rates are exposed to the risk of fluctuations in interest rates, but derivative transactions are utilized as hedging
instruments.
Interest rate swaps are utilized with the Company seeking to, in effect, convert fluctuating interest rates onfund procurement into fixed interest rates. For information on the method of hedge accounting approach, hedging
instruments and hedged items, hedging policy and method for assessing the effectiveness of hedging, please refer to“Summary of significant accounting policies; (8) Hedge accounting approach.”
Concerning derivative transactions, risks are managed pursuant to the risk management policy set forth by
the Company.
(c) Supplementary explanation on matters concerning fair value of financial instruments
The fair value of financial instruments, aside from values based on market price, include values based onreasonable calculations when no market price exists. Certain assumptions are used for the estimation of fair value.
Accordingly, the results of such estimation may change if different assumptions are used. In addition, concerning
the contract amount of derivative transactions in “Derivative transactions” below the amount itself does not
represent the value of the market risks associated with the derivative transactions.

27

(2) Fair value of financial instruments
The following are the carrying amount, fair value and the difference between them of financial instruments as ofJanuary 31, 2020.
(Unit: thousands of yen)
Carrying amount(a) Cash and deposits

Fair value

5,646,194(b) Cash and deposits in trust

Difference

5,646,194－

5,461,338

5,461,338－

11,107,533

11,107,533－(c) Current portion of investment corporation bonds

8,500,000

8,512,200

12,200(d) Current portion of long-term loans payable

13,022,000

13,042,636

20,636(e) Investment corporation bonds

13,500,000

13,592,690

92,690(f) Long-term loans payable

144,200,000

144,340,492

140,492

179,222,000

179,488,018

266,018(724,583)(724,583)

－

Total

Total
Derivative transactions (Note 1)

The following are the carrying amount, fair value and the difference between them of financial instruments as of July
31, 2019.
(Unit: thousands of yen)
Carrying amount(a) Cash and deposits

Fair value

3,923,970(b) Cash and deposits in trust
Total

Difference

3,923,970－

6,295,543

6,295,543－

10,219,514

10,219,514－(c) Current portion of investment corporation bonds

5,000,000

5,022,700

22,700(d) Current portion of long-term loans payable

22,922,000

22,922,000－(e) Investment corporation bonds

17,000,000

17,210,380

210,380(f) Long-term loans payable

134,300,000

134,574,414

274,414179,222,000

179,729,494

507,494(784,831)(784,831)－

Total
Derivative transactions (Note 1)(Note 1) Assets and liabilities from derivative transactions are indicated in net amounts and net liabilities are indicated in parentheses.
(Note 2) Method of calculating the fair value of financial instruments, and derivative transactions
Assets(a) Cash and deposits; (b) Cash and deposits in trust
As these are settled within a short period of time, the fair value is approximately the same as the book value and is thus stated atthat book value.
Liabilities(c) Current portion of investment corporation bonds; (e) Investment corporation bonds
The fair value of these is based on market prices.
(d) Current portion of long-term loans payable; (f) Long-term loans payable
Of long-term loans payable, as those with variable interest rates reflect market interest rates within a short period of time, the fairvalue is thought to be approximately the same as the book value and is thus stated at that book value (However, long-term loans
payable with variable interest rates that are subject to special treatment for interest rate swaps (please refer to “Derivativetransactions” below) are based on a calculation method of discounting the sum total amount of principal and interest accounted fortogether with said interest rate swaps by the rate reasonably estimated as being applicable in the event of a similar transaction.).
Meanwhile, those with fixed interest rates are based on a calculation method of discounting the sum total amount of principal andinterest by the rate reasonably estimated as being applicable in the event of a similar transaction.
Derivative transactions
Please refer to “Derivative transactions” below.

28

(Note 3) Redemption of monetary claims scheduled to be due after the balance sheet date (as of January 31, 2020)

Due within
1 yearDue after
1 year,but within
2 years

Due after
2 years,
but within
3 years

Due after
3 years,
but within
4 years(Unit: thousands of yen)
Due after
4 years,
Due after
but within
5 years
5 years

Cash and deposits

5,646,194

－

－

－

－

－

Cash and deposits in trust

5,461,338

－

－

－

－

－

11,107,533

－

－

－

－

－

Total

Redemption of monetary claims scheduled to be due after the balance sheet date (as of July 31, 2019)

Due within
1 yearDue after
1 year,but within
2 years

Due after
2 years,
but within
3 years

Due after
3 years,
but within
4 years(Unit: thousands of yen)
Due after
4 years,
Due after
but within
5 years
5 years

Cash and deposits

3,923,970

－

－

－

－

－

Cash and deposits in trust

6,295,543

－

－

－

－

－

10,219,514

－

－

－

－

－

Total

(Note 4) Investment corporation bonds and long-term loans payable scheduled to be due after the balance sheet date (as of January 31, 2020)

Due within
1 yearDue after
1 year,but within
2 years

Due after
2 years,
but within
3 years

Due after
3 years,
but within
4 years(Unit: thousands of yen)
Due after
4 years,
Due after
but within
5 years
5 years

Investment corporation bonds

8,500,000

2,000,000－－

2,000,000

9,500,000

Long-term loans payable

13,022,000

19,000,000

15,500,000

20,400,000

15,800,000

73,500,000

21,522,000

21,000,000

15,500,000

20,400,000

17,800,000

83,000,000

Total

Investment corporation bonds and long-term loans payable scheduled to be due after the balance sheet date (as of July 31, 2019)

Due within
1 yearDue after
1 year,but within
2 years

Due after
2 years,
but within
3 years

Due after
3 years,
but within
4 years(Unit: thousands of yen)
Due after
4 years,
Due after
but within
5 years
5 years

Investment corporation bonds

5,000,000

5,500,000－－－

11,500,000

Long-term loans payable

22,922,000

12,500,000

22,000,000

15,200,000

18,800,000

65,800,000

27,922,000

18,000,000

22,000,000

15,200,000

18,800,000

77,300,000

Total

17. DERIVATIVE TRANSACTIONS(1) Transactions for which hedge accounting is not applied
As of January 31, 2020
Not applicable
As of July 31, 2019
Not applicable29

(2) Transactions for which hedge accounting is applied
As of January 31, 2020
The following is the contract amount or amount equivalent to the principal provided in the contract as of thedate of settlement of accounts based on the each method of hedge accounting.
(Unit: thousands of yen)
Method ofType ofhedge accounting derivative transaction
Interest rate swap
Principle
transactions
methodFloating receivable;
Fixed payable
SpecialInterest rate swap
treatment fortransactions
interest rate
Floating receivable;
swaps
Fixed payable

Contract amountDue after 1 year

Mainhedged item

Fair value

Long-termloans payable

85,866,000

78,844,000(724,583)

Long-termloans payable

43,500,000

37,500,000*

Method of calculating
the fair value
Based on the quoted
price obtained fromcounterparty financial
institutions.
－*Derivative transactions that are subject to special treatment for interest rate swaps are accounted for together with long-term loans
payable that are the hedged items and the fair value is included in the fair value of those long-term loans payable (please refer toLiabilities (d) and (f) of (Note 2) Method of calculating the fair value of financial instruments, and derivative transactions of “Financial
instruments; (2) Fair value of financial instruments” above).

As of July 31, 2019
The following is the contract amount or amount equivalent to the principal provided in the contract as of thedate of settlement of accounts based on the each method of hedge accounting.
(Unit: thousands of yen)
Method ofhedge accounting
Principle
methodSpecialtreatment forinterest rate
swaps

Type ofderivative transaction
Interest rate swap
transactions
Floating receivable;
Fixed payable
Interest rate swap
transactions
Floating receivable;
Fixed payable

Contract amountMain
hedged item

Due after 1 year

Fair value

Method of calculating
the fair value

Long-termloans payable

89,122,000

70,700,000(784,831)

Based on the quoted
price obtained fromcounterparty financial
institutions.

Long-termloans payable

43,500,000

43,500,000*－*Derivative transactions that are subject to special treatment for interest rate swaps are accounted for together with long-term loans
payable that are the hedged items and the fair value is included in the fair value of those long-term loans payable (please refer toLiabilities (d) and (f) of (Note 2) Method of calculating the fair value of financial instruments, and derivative transactions of “Financial
instruments; (2) Fair value of financial instruments” above).

18. CASH AND CASH EQUIVALENTS
Relationship between cash and cash equivalents at end of the period in the statement of cash flows and cash anddeposits stated in the balance sheet(Unit: thousands of yen)
For the six months ended
January 31, 2020
Cash and deposits

July 31, 2019
5,646,194

3,923,970

Cash and deposits in trust

5,461,338

6,295,543

Cash and cash equivalents

11,107,533

10,219,514

30

19. LEASESOperating lease transactions (as lessor)
Future minimum rent revenues under existing non-cancelable lease agreements(Unit: thousands of yen)
As ofJanuary 31, 2020

July 31, 2019

Due within 1 year

4,561,306

4,295,643

Due after 1 year

12,851,440

12,741,853

17,412,746

17,037,496

Total

20. INVESTMENT AND RENTAL PROPERTIESThe Company owns real estate (primarily office buildings and residential and retail properties) available forlease in Tokyo. The following are the carrying amount, amount of increase (decrease) during the period and fair value
at end of the period for these investment and rental properties.
(Unit: thousands of yen)
For the six months ended
January 31, 2020

July 31, 2019

Carrying amount
Balance at beginning of the period
Amount of increase (decrease)during the period
Balance at end of the period
Fair value at end of the period

380,110,024

380,532,037(883,847)(422,012)

379,226,176

380,110,024

456,730,000

442,950,000(Note 1) The carrying amount is the acquisition cost less accumulated depreciation.
(Note 2)Of the decrease during the period ended January 31, 2020 and period ended July 31, 2019, the decrease is primarily attributable todepreciation and amortization.

(Note 3)

The fair value at end of the period is the appraisal value by a real estate appraiser (according to the “Real Estate Appraisal Report”
with the date of settlement of accounts as the appraisal date) pursuant to the method of and standards for asset valuation provided
in the Company’s Articles of Incorporation and the rules provided by The Investment Trusts Association, Japan.

Income and loss for investment and rental properties is presented in “Breakdown of property-related revenue
and expenses”

31

21. SEGMENT AND RELATED INFORMATION[Segment Information]
Disclosure is omitted because the Company operates as a single segment – Real estate leasing business.
[Related Information]
For the six months ended January 31, 2020
(1) Information about each product and service
Disclosure is omitted because operating revenue from external customers within a single product and service
category accounts for over 90% of the operating revenue on the statement of income and retained earnings.
(2) Information about each geographical area(a) Operating revenue
Disclosure is omitted because operating revenue from external customers in Japan accounts for over 90%of the operating revenue on the statement of income and retained earnings.
(b) Property, plant and equipment
Disclosure is omitted because the amount of property, plant and equipment located in Japan accounts forover 90% of the amount of property, plant and equipment on the balance sheet.
(3) Information about each major tenant(Unit: thousands of yen)
Name of tenantOperating revenue

Mori Building Co., Ltd.

6,090,006

Related segment
Real estate leasing business

For the six months ended July 31, 2019(1) Information about each product and service
Disclosure is omitted because operating revenue from external customers within a single product and service
category accounts for over 90% of the operating revenue on the statement of income and retained earnings.
(2) Information about each geographical area(a) Operating revenue
Disclosure is omitted because operating revenue from external customers in Japan accounts for over 90%of the operating revenue on the statement of income and retained earnings.
(b) Property, plant and equipment
Disclosure is omitted because the amount of property, plant and equipment located in Japan accounts forover 90% of the amount of property, plant and equipment on the balance sheet.
(3) Information about each major tenant(Unit: thousands of yen)
Name of tenantOperating revenue

Mori Building Co., Ltd.

6,092,668

22. SUBSEQUENT EVENTS
Not applicable.

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Related segment
Real estate leasing business