Mori Hills REIT Investment Corporation
Semiannual Report
29th Fiscal Period(August 1, 2020 - January 31, 2021)

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 the twentyninth fiscal period which ended January 31, 2021.
In the twenty-ninth fiscal period, the Japanese economy saw lasting improvement centered on consumer
spending due to the effects of various policies as more economic activities resumed after the lifting of the stateof emergency, but the economy started to weaken again from the end of the year when COVID-19 spread oncemore.
In such an economic environment, the vacancy rate in the rental office building market continued to rise against
the backdrop of the spread of remote work triggered by the pandemic and the weakening business sentiment,
and these conditions also resulted in stagnant growth in rent levels.
As for the luxury rental housing market, occupancy rates and rent levels remained solid, driven by the ongoingsteady demand for quality housing in central Tokyo amid new supply remaining at a stable level. In terms of thereal estate trading market, transaction prices continued to be high due to the increase in transactions centeredon large properties backed by the ongoing favorable fund-raising environment and investors inside and outsideof Japan showing no change in their investment appetite.
In the twenty-ninth 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-ninth fiscal period, was comprised of 11 properties undermanagement with a total leasable area of 178,845.68m2. MHR has already invested 402,910 million yen (basedon the acquisition price) into this portfolio. The occupancy rate at the end of the twenty-ninth fiscal period was
98.8%.
The asset management activities described above resulted in MHR recording 9,820 million yen in operating
revenue, 6,173 million yen in operating income, 5,576 million yen in ordinary income, 5,575 million yen in net
income and 2,909 yen in dividend per unit in the twenty-ninth period.
MHR acquired an additional part of Toranomon Hills Mori Tower (acquisition price: 12,220 million yen) on
September 1, 2020. MHR plans to acquire further additional parts of Toranomon Hills Mori Tower (acquisition
price: 7,870 million yen) on August 2, 2021.
These acquisitions are expected to enhance the portfolio size and increase dividends. As a result, MHR declared
dividends per unit of 2,910 yen for the thirty fiscal period ending July 31, 2021.
MHR will continue to seek maximization of unitholder value by maintaining and increasing dividends continuously
while retaining stability of earnings through fixed-rent master leases alongside actively pursuing external growthutilizing the property pipeline of Mori Building Group.
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: 29th period

Dividend per unit: 30th period forecast*

2,910yen

2,909 yen

*The forecasted figure for the 30th fiscal period is a 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)

3,200

8th
period
Jul.
2010

9th
period
Jan.
2011

10th
period
Jul.
2011

・・・

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

27th
period
Jan.
2020

28th
period
Jul.
2020

29th
period
Jan.
2021

30th
period
Jul.
2021

2,910
2,898 2,909 (forecast)

3,000

21 consecutive
fiscal period
increase

2,800

26th
period
Jul.
2019

2,600

2,400

2,200

2,000

1,800

1,600

1,400

1,315

1,200
※ 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 indicators
28th period

29th period

February 1, 2020 July 31, 2020 (182 days)

August 1, 2020 January 31, 2021 (184 days)

29th - 28th period

Operating revenue

9,602 million yen

9,820 million yen+218 million yen

Operating income

6,028 million yen

6,173 million yen+145 million yen

Ordinary income

5,434 million yen

5,576 million yen+141 million yen

Net income

5,433 million yen

5,575 million yen+141 million yen

Dividend/unit

2,898 yen/unit

2,909 yen/unit+ 11 yen/unit

Total units outstanding

1,874,960 units

1,916,330 units

390,690 million yen

402,910 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 the Property Acquisition
MHR acquired an additional part of Toranomon Hills Mori Tower on September 1, 2020.
MHR plans to acquire further additional parts of Toranomon Hills Mori Tower on August 2, 2021.
Toranomon Hills Mori Tower Premium (Additional acquisition)

Location

23-1, Toranomon 1-chome,
Minato-ku, Tokyo

C onstruction date

May 2014

Total number of floors

52 floors above ground,
5 floors below ground

Gross floor area

241,581.95 m2

Acquired as of
September 1, 2020
To be acquired on
August 2, 2021

The trust beneficial interests in 87.95% co-ownership interest incompartmentalized ownership of the 28-35th floors

Portions ofacquisition(Acquired on September 1, 2020) 17% quasi-co-ownership interest(To be acquired on August 2, 2021) 11% quasi-co-ownership interest

Acquisition
priceAppraisalvalue

NOI yield

12,220 mn yen

15,232 mn yen

3.4%

7,870 mn yen

9,856 mn yen

4

3.4%

Total acquired: 78% quasi-coownership interest including
past acquisition

Toranomon Hills is located in the “Special Zone for Asian Headquarters”
where the Tokyo Metropolitan Government seeks to attract foreigncompanies. This building is Tokyo’s new landmark and consists of Japan’s

Toranomon Hills

first Andaz hotel “Andaz Tokyo”, high-specification offices, a high classresidential area with outstanding views where hotel services are available,international-standard conference facilities and commercial facilities tosupport various urban functions, along with an open space of about 6,000m².

OfficeToranomon Hills Mori Tower

Offices occupy the 6th to the 35th floors of “Toranomon Hills Mori Tower”, a super high rise tower with 52
floors rising 247 meters above ground and a gross floor area of 30,000 tsubo. Standard rent floors’ average
size is about 1,000 tsubo (about 3,300m²) with a ceiling height of 2.8 meters and they provide flexible andcomfortable workspaces without pillars. Six transit stations and 11 lines are nearby and provide access to
Haneda Airport which makes this building an optimal global business base.

[Location map]

[Acquisition portion (Portion of the red area)]

Hotel

Residential

OfficeConference
facilities
Restaurant, etc.

5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

87.8%

100%

Type

Size

5.4%

1.6%

6.2%

88.3%

98.4%

■ 30,000 ㎡ or more

■ Office■ Residential■ Retail■ Under 30,000 ㎡(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 list6

7

Earthquake-resistance capacity
Best among all 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

Property name

Lowest portfolio
PML of all listed
J-REITs

0.91%

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)

8

5.94%

－

2.20%

－

2.20%

－

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

(%)
65.0

2.5
■ LTV (appraisal value basis)

2 .0 %

60.0

2 .1 %■ Average interest rate

2 .1 %
2.0

55.0
1.5
50.0
0 .7 6 %
45.0

40.0

1.0
0 .7 6 %0 .7 4 %0 .7 1 %0 .6 9 %0 .6 9 %0 .6 8 %0 .6 6 %0 .6 3 %0.5・・・

5 7 .4 %5 6 .4 %5 3 .7 %4 2 .4 %4 2 .1 %4 2 .3 %4 1 .9 %4 0 .4 %3 9 .4 %3 8 .2 %3 8 .0 %3 8 .1 %9th
period10th
period11th
period21st
period22nd
period23rd
period24th
period25th
period26th
period27th
period28th
period29th
period

Jan.
2011

Jul.
2011

Jan.
2012

Jan.
2017

Jul.
2017

Jan.
2018

Jul.
2018

Jan.
2019

Jul.
2019

Jan.
2020

Jul.
2020

Jan.
2021

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
4.5

4 .2

4 .0

4 .3

4 .4

4 .6

4 .7

4 .6

3 .8

3 .7

21st
period22nd
period23rd
period24th
period25th
period26th
period27th
period28th
period29th
period

Jan.
2017

Jul.
2017

Jan.
2018

Jul.
2018

Jan.
2019

Jul.
2019

Jan.
2020

Jul.
2020

Jan.
2021

4.0
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

・・・

9

Overview of debt financing

Debt Balance
LTV (book value basis)

End of 28th period
Jul. 31, 2020

End of 29th period
Jan. 31, 2021

179,222 mn yen

184,422 mn yen

45.7%

45.8%

38.0%

38.1%

4.7 years

4.6 years(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
91.7%

Long-term
100%(Stable)Overview of maturity (as of January 31, 2021)(billion yen)

20
Long-term loans

Investment corporation bonds

15

10

5

8.0
6.5

12.5
9.5

9.2

11.2

2

2

2

7.8
8.2

9.7

7.6

6.0
0

8.2

9.1
5

4

13.6

10.9

13.1
5.9

5.3

2

4.7

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
Jul.
2021

Jan.
2022

Jul.
2022

Jan.
2023

Jul.
2023

Jan.
2024

Jul.
2024

Jan.
2025

Jul.
2025

Jan.
2026

10

Jul.
2026

Jan.
2027

Jul.
2027

Jan.
2028

Jul.
2028

Jan.
2029

Jul.
2029

Jan.
2030

Jul.
2030

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

30,00090
20,00080
10,000

0

Feb.
2020

Mar.

Apr.

May

Jun.

Jul.

Aug.

Sep.

Oct.

Nov.

Dec.

Jan.
2021

Rent (yen/tsubo)

31,021

31,084

31,10831,13031,152

31,33931,221

31,332

31,32931,37731,252

31,342

Occupancy rate

99.9%

99.9%

99.9%

99.9%

99.9%

98.4%

99.8%

99.8%

99.8%

98.8%

99.6%

99.6%

70

[Residential](yen/tsubo)(%)

25,000100

20,00090

15,00010,000

80
5,000
0

Feb.
2020

Mar.

Apr.

May

Jun.

Jul.

Aug.

Sep.

Oct.

Nov.

Dec.

Jan.
2021

Rent (yen/tsubo)

15,76915,66815,83015,771

15,82915,733

15,766

15,767

15,65015,69015,795

15,778

Occupancy rate

95.5%

96.6%

95.8%

95.8%

96.4%

96.2%

95.5%

95.2%

94.5%

95.0%

94.9%

94.5%

70

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

(%)

(%)

+10

+10

+8

+8

+7.1%

+6.9%

+5.6%

+6

+3.6%

+4

+2

0

+6

+2.5%

26th
Jul. 201927th
Jan. 2020

+5.9%

+6.0%
+4.8%

+2.7%

+2

+1.5%

25th
Jan. 2019

+5.3%

+4

※Average of all contracts subject to revision
24th
Jul. 2018

+5.4%

0
28th
Jul. 2020※Average of all contracts subject to revision
24th
Jul. 2018

29th
Jan. 2021

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

28th
Jul. 2020(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 acquisition and monthly rents which reflect move outs of end tenants confirmed as of January 31, 2021.

11

29th
Jan. 2021

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
stated in the Basic Policy of MHR and the 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 businessactivities, and we believe 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
Operations connected to sustainability will be promoted primarily by the Sustainability Committee establishedby 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 on various suggestions from departments, etc.
in light of social conditions and the operating status of MHR. The President & CEO approves the policies andpromotion programs, constantly monitors the thorough promotion of sustainability, and establishes andmaintains a sustainability 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
and MIM. 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 that joint initiatives with various stakeholders with aligned values arenecessary.
By actively stimulating interactive communication with stakeholders such as tenants, local residents, property
management companies and our sponsor Mori Building that provides the property pipeline, and aligning ourvalues, we aim to contribute to the realization of a sustainable society.

12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 Certification

Toranomon Hills Mori Tower
Holland Hills Mori Tower

4 stars
Rank SCASBEE for Existing Buildings

Rank S(Certificates Coverage Ratio)

In ac quisition pric e

Certified Properties

Portfolio Data

Ratio

Ratio (objective)

355.9 bn yen

381.0 bn yen

93.4%

Maintain over 90%※ Excluding Laforet Harajuku (Land)

CO2 (Climate Change)
Working to reduce greenhouse gas emissions and engaging in other measures against global warming willcontribute to easing the impact on the climate. Moreover, providing real estate properties with excellent
functionality in terms of addressing these challenges is likely to engender more positive opinion and stronger
support from tenants and this will lead to the enhanced competitiveness of the portfolio.
MHR and MIM will aim to combine compact cities benefiting from multifaceted urban functions together withthe various high energy-efficient systems in order to realize cities with excellent environmental efficiency.
Through comprehensive and high-quality management of these urban areas, we will continue our efforts to
reduce carbon emissions and engage in initiatives to counter global warming and climate change.
(Objective and Performance of Reduction Greenhouse Gas Emissions)
Performance

Short-range objective

Long-range objective(Year 2019)(year 2024)(year 2030)

20.6% reduction(intensity basis : vs year 2013)

25.0% reduction(intensity basis : vs year 2013)

30.0% reduction(intensity basis : vs year 2013)13

(Carbon Dioxide Emission and Intensity)
Figures, with the exception of some, are verified and validated by an independent third party. Scope 1 isentirely CO2.
[Boundary] Offices of MHR and MIM and properties owned by MHR (Cover rate: See the table below)(kg-CO2/m2)(t-CO2)40,000

125.0
107.9

106.3

103.7

101.0

95.9

30,00020,00017,651

19,80920,002

21,12820,720

100.0

75.0

50.0
10,000025.0Year 2015

Year 2016

Year 2017

Year 2018Year 2019

Scope 1

1,463

1,487

1,626

1,843

1,767

Scope 2

16,18718,321

18,376

19,285

18,9520.05

Scope 3

0.11

0.04

0.04

0.07

Intensity

107.9

106.3

103.7

101.0

95.9

Verification/Guarantee rate

78.1%

80.7%

78.9%

77.4%

77.4%

Cover rate

85.3%

86.8%

87.0%

87.4%

87.6%

0.0

* Carbon dioxide emissions are calculated based on the "Manual for Calculating and Reporting Greenhouse Gas Emissions" by the
Ministry of the Environment and the Ministry of Economy, Trade and Industry. Also, intensity is calculated by dividing the carbon
dioxide emissions by the calculated total floor area.

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

After renovation

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 raise 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.
14

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 thelabor force shrinks alongside a declining birthrate and aging population.
We believe that employing diverse and excellent people and supporting the continued development of theirabilities is not just a source of competitiveness for MHR but also the duty of MHR towards its employees.
MHR and MIM respect 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 staff 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 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
both in 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, MIM introduces essential knowledge and skills through on-thejob-training (OJT) and conventional training to improve staff effectiveness, to clarify company issues and toconstantly improve management methods. MIM conducts a semi-annual staff assessment program "Personnel Assessment and Feedback" as a core component of our talent development strategy.
MIM 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 March 2021)
・ ARES Certified Master: 9
・ Real Estate Appraiser: 3
・ Real Estate Transaction Agent: 9
・ Certified Building Administrator: 2・ Certified Public Accountant: 4・ 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 leavesystem and flexible working hours are provided and MHR promotes active use of a short-time work systemand paid holidays.

15

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 and extends to matters related tofacilities and other hard aspects as well as soft aspects such as management systems. The thoughts of thetenants 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
all listed 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 six
consecutive years.

16

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 bysociety.
By firmly acknowledging this belief, MHR and MIM work on building fair and effective corporate governanceand strive 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 executive directors), and the board of directors shall be comprised of the executive directors andsupervisory 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 the 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 compliancestructure and internal control structure ensuring that MHR gain full 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.

Asset
Management
Dept.

Compliance
Committee

Financial
Dept.

Accounting
Dept.

17

Administration
Dept.

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, MIM has established a structure which ensures thatthe aforementioned transactions are managed appropriately and that MIM sufficiently executes the duty of careof a good 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.

18

Important ESG Issues (MHR’s Materiality)

19

GRESB Assessment
In the 2020 GRESB Real Estate Assessment, MHR received a “Green Star”
rating for the ninth consecutive year, and received the highest evaluationof “5 Stars” in the GRESB Rating (Note).
(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” as the highest rank).

GRESB is an annual benchmarking assessment to measure ESG (Environmental, Social and Governance) integration of real estate companies
and funds, as well as the name of organization which runs the assessment. It was founded in 2009 by a group of major European pension
funds who played leading roles in launching Principles for Responsible Investment (PRI).

ESG Report (Japanese)
This report describes the overall efforts of MHR and the Asset Manager
Mori Building Investment Management Co., Ltd. to contribute to therealization of a sustainable society and to maximize unitholder value overthe medium to long term.

URL: https://www.mori-hills-reit.co.jp/Portals/0/images/ir/ir_pdf/ESG_Report_2020.pdf

MHR’s Website
The pages dedicated to ESG have expanded, and information isproactively disclosed.

URL: https://www.mori-hills-reit.co.jp/en/outline/Sustainability/tabid/171/Default.aspx20Mori Building’s Extensive Property Pipeline
Mori Building’s total assets have an estimated value of 2.2 trillion yen and the number of properties undermanagement is 96 buildings. (Note 1)
MHR has the “preferential negotiation rights” (Note 2) 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 in 2021
Toranomon Hills Mori Tower
Opened Jun. 2014
Toranomon Hills Station Tower(Tentative name)

Projected completion Jul. 2023
Toranomon Hills Business Tower (Note 3)
Opened Jun. 2020

Total area: approx. 7.5ha
Total floor area: approx. 800,000m2
Office space: approx. 300,000m2

Toranomon Hills Station of
Hibiya subway line
Opened Jun. 2020

Residential units: approx. 720
2Retail space: approx. 26,000m

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. 861,500m2
Office space: approx. 213,900m2
Residential units: approx. 1,400
Green space: approx. 24,000m2

21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 2021.”(Note 1) “Total asset” is as of the end of September 2020 and number of properties under management is as of April 2020.
(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, 2021 and there are no properties anticipated to be acquired22

Unit Price Performance(yen)
200,000
PublicOffering in
Sep. 2013

PublicOffering inMar. 2013

190,000

PublicOffering in
Aug. 2014

PublicOffering inFeb. 2016

PublicOffering in
Aug. 2020

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

Mori Hills REIT

120,000
110,000
100,000
90,000TSE REIT Index

80,00070,00060,00050,00040,00030,000

9th

10th

11th

12th

13th

14th

15th

16th

17th

18th

19th

20th

21st

22nd

23rd

24th

25th

26th

27th

28th

29th

Sep. 14, Jan. 31, Jul. 31, Jan. 31, Jul. 31, Jan. 31, Jul. 31, Jan. 31, Jul. 31, Jan. 31, Jul. 31, Jan. 31, Jul. 31, Jan. 31, Jul. 31, Jan. 31, Jul. 31, Jan. 31, Jul. 31, Jan. 31, Jul. 31, Jan. 31,
2019
2021
2020
2020
2010
2014
2016
2018
2019
2017
2011
2013
2015
2016
2017
2012
2013
2014
2012
2015
2018
2011

Marketvalue

41.9 bn yen

279.4 bn yen(Sep. 14, 2010)(Jan. 31, 2021)(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, 2021)＜Number of unitholders＞＜Number of investment units＞

Other domestic
Financialcorporations

institutions

1.6%

Foreigncorporations

Foreign(Incl. securities

corporations

companies)

and individuals

1.4%

2.1%

and individuals

Individuals
6.0%

15.9%

Other
domestic
corporations
16.6%

Individuals

Financial
institutions(Incl. securities
companies)
61.5%(Investment

94.9%

trust 35.6%)

23

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.
24

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.
An epidemic such as SARS, MERS and COVID-19 may have a significant long-term adverse impact on economic
activities which in turn may adversely affect the performance of the portfolio and market price of our units.

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.

25

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
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.

26

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 theprior 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.

27

FINANCIAL STATEMENTS
BALANCE SHEET(Unit: thousands of yen)
As ofJanuary 31, 2021

July 31, 2020

AssetsCurrent assets
Cash and deposits

5,479,946

6,575,310

Cash and deposits in trust

5,340,188

4,984,129

Operating accounts receivable

262,390292,705

Prepaid expenses

399,805

418,683

Consumption taxes receivable

21,946－24－

11,504,301

12,270,828

Land

22,074,160

22,074,160

Buildings in trust

85,286,897

82,735,523

Accumulated depreciation(19,121,190 )(18,110,310)

Buildings in trust, net

66,165,707

64,625,213

Other
Total current assets
Noncurrent assets
Property, plant and equipment

Structures in trust

964,111929,677

Accumulated depreciation(334,274 )(325,377)

Structures in trust, net

629,836604,300

Machinery and equipment in trust

954,633

933,374

Accumulated depreciation(332,281 )(308,755)

Machinery and equipment in trust, net

622,352

624,619

286,086

271,676

Accumulated depreciation(184,581 )(171,265)

Tools, furniture and fixtures in trust, net

101,505

100,411

270,106,484

260,234,866

Tools, furniture and fixtures in trust

Land in trust
Construction in progress in trust

4,809

2,526

359,704,855

348,266,097

Leasehold rights in trust

30,650,962

30,650,962

Total intangible assets

30,650,962

30,650,962

Lease and guarantee deposits

10,00010,000Long-term prepaid expenses

915,537

965,213

23

14

Total property, plant and equipment
Intangible assets

Investments and other assets

Deferred tax assets
Derivatives

1,013

26,359926,574

1,001,587

391,282,393

379,918,648

Investment corporation bonds issuance cost

67,30054,624

Investment unit issuance cost

33,746

13,904

Total deferred assets

101,047

68,529402,887,742

392,258,006

Total investments and other assets
Total noncurrent assets
Deferred assets

Total assets1

(Unit: thousands of yen)
As ofJanuary 31, 2021

July 31, 2020

Liabilities
Current liabilities
Operating accounts payable

288,253

241,338

Current portion of investment corporation bonds

2,000,000

5,500,000

Current portion of long-term loans payable

19,000,000

12,500,000

Accounts payable – other

14,46420,040Accrued expenses

311,302297,799

1,087

901

Income taxes payable
Accrued consumption taxes
Advances received
Deposits received
Total current liabilities－

145,114

1,258,454

1,213,975

21,327

21,562

22,894,889

19,940,732

Noncurrent liabilities
Investment corporation bonds

15,000,000

11,500,000

Long-term loans payable

148,422,000

149,722,000

Lease and guarantee deposits in trust

14,957,614

14,856,183

849,472

735,791

179,229,087

176,813,975

202,123,976

196,754,707

195,718,191

190,460,106(393,340 )(408,492 )(393,340 )(408,492 )

195,324,850

190,051,613

Reserve for reduction entry

291,944

291,944

Total voluntary retained earnings

291,944

291,944

Unappropriated retained earnings

5,995,429

5,869,173

Total surplus

6,287,373

6,161,117

201,612,224

196,212,731(848,458 )(709,432 )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(848,458 )(709,432 )Total net assets (Note10)

Total valuation and translation adjustments

200,763,766

195,503,298

Total liabilities and net assets

402,887,742

392,258,006

2

STATEMENT OF INCOME AND RETAINED EARNINGS(Unit: thousands of yen)
For the six months ended
January 31, 2021

July 31, 2020

Operating revenue
Rent revenues (Note14)

9,614,085

9,389,038

206,546

213,218

9,820,632

9,602,257

3,315,661

3,251,861

Asset management fee

229,246

224,815

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

9,805

Administrative service fees

18,996

18,528Other operating expenses

68,79164,155

Total operating expenses

3,646,701

3,573,365

6,173,930

6,028,891

Operating income
Non-operating income
Interest income

54

48

Gain on forfeiture of unclaimed dividends

941

1,379

Total non-operating income

995

1,428

Interest expenses

383,400

370,700

Interest expenses on investment corporation bonds

49,526

61,175

7,757

9,022

Borrowing expenses

143,930

145,882

Amortization of investment unit issuance cost

12,310

6,952

Other

1,873

1,922

Non-operating expenses

Amortization of investment corporation bonds
issuance cost

598,798

595,654

Ordinary income

Total non-operating expenses

5,576,128

5,434,665

Income before income taxes

5,576,128

5,434,665

Income taxes-current

1,095

909

Income taxes-deferred

(8)

22

Total income taxes
Net income
Retained earnings brought forward
Unappropriated retained earnings (undisposed loss)

3

1,086

931

5,575,042

5,433,733

420,387

435,439

5,995,429

5,869,173

STATEMENT OF CHANGES IN NET ASSETSFor the six months ended January 31, 2021
(Unit: thousands of yen)
Unitholders’ equity

Unitholders’capitalBalance at August 1, 2020
Change during the period
Issuance of new investment
units
Dividends from surplus
Reversal of allowance fortemporary difference
adjustments
Net income
Net changes of items otherthan unitholders’ equity

Unitholders’ capital

Surplus

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

190,460,106(408,492)(408,492)

5,258,085

Unitholders'
capital, net

190,051,613

Reserve for
reduction
entry

Total
voluntary
retainedearnings

291,944

291,9445,258,085

15,151

15,151

15,151

Total changes of items during
the period

5,258,085

15,151

15,151

5,273,237－－

Balance at January 31, 2021

195,718,191(393,340)(393,340)

195,324,850

291,944

291,944

Valuation and translation
adjustments

Unitholders’ equity
Surplus
Unappropri
ated
retainedearnings
Balance at August 1, 2020
Change during the period
Issuance of new investment
units
Dividends from surplus
Reversal of allowance fortemporary difference
adjustments
Net income
Net changes of items otherthan unitholders’ equity

5,869,173

Total
surplus6,161,117

Total
unitholders’equity196,212,731

Deferred
gains orlosses onhedges(709,432)

Total
valuationandtranslation
adjustments(709,432)

Total net
assets

195,503,298

5,258,085

5,258,085(5,433,634)(5,433,634)(5,433,634)(5,433,634)(15,151)(15,151)－－

5,575,042

5,575,042

5,575,042

5,575,042(139,026)(139,026)(139,026)

Total changes of items during
the period

126,256

126,256

5,399,493(139,026)(139,026)

5,260,467

Balance at January 31, 2021

5,995,429

6,287,373

201,612,224(848,458)(848,458)

200,763,766

4For the six months ended July 31, 2020
(Unit: thousands of yen)
Unitholders’ equity

Unitholders’capitalBalance at February 1, 2020

Unitholders’ capital

Surplus

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

190,460,106

Balance at July 31, 2020

Reserve for
reduction
entry

Total
voluntary
retainedearnings

291,944

291,944(468,740)(468,740)

189,991,366

60,24760,24760,247－60,24760,24760,247－－

190,460,106(408,492)(408,492)

190,051,613

291,944

291,944

Change during the period
Dividends from surplus
Reversal of allowance fortemporary 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 February 1, 2020
Change during the period
Dividends from surplus
Reversal of allowance fortemporary difference
adjustments
Net income
Net changes of items otherthan unitholders’ equity
Total changes of items during
the period
Balance at July 31, 2020

Total
unitholders’equityDeferred
gains orlosses onhedgesTotalvaluationandtranslation
adjustments

Total net
assetsUnappropri
ated
retainedearnings

Total
surplus5,901,196

6,193,140

196,184,506(5,405,509)(5,405,509)(5,405,509)(5,405,509)(60,247)(60,247)－－

5,433,733

5,433,733

5,433,733

5,433,733(724,583)(724,583)

195,459,922

15,151

15,151

15,151(32,023)(32,023)

28,22415,151

15,151

43,3755,869,173

6,161,117

196,212,731(709,432)(709,432)

195,503,298

5

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

For the six months ended

January 31, 2021

July 31, 2020

Ⅰ. Unappropriated retained earnings
Ⅱ Addition of dividends in excess ofearnings
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

5,995,429,871

5,869,173,511

136,059,430－

136,059,430－－

15,151,632－

15,151,632

5,574,603,970

5,433,634,080

2,909

2,898

5,438,544,540

5,433,634,080

2,838

2,898

136,059,430

－

71

－

556,885,331

420,387,799

Method of calculating the amount ofdividends

For the six months ended

For the six months ended

January 31, 2021

July 31, 2020

Pursuant

to

the

terms

of

the

Pursuant

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

be

in excess ofanamount shallbein excess ofanamountequivalent 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 (5,438,544,540 dividends of earnings (5,433,634,080yen), which is the integral multiple of yen), which is the integral multiple ofthe total number of investment units the total number of investment units
issued and outstanding (1,916,330 units) issued

andoutstanding(1,874,960

out of the amount of earnings as defined units), out of the amount obtained byin Article 136, Paragraph 1 of the subtracting the reversal of allowance forInvestment Trust Act.

temporary difference adjustments (asIn addition, pursuant to the terms of defined in Article 2, Paragraph 2, Itemthe distribution policy set forth in 30 of the Ordinance on Accountings ofArticle 37 (2) of the Company’s Articles Investment

Corporations)

from

the

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

for

temporarydifference Trust Act.

adjustments (136,059,430 yen), which is

As a result, the Company declared

the integral multiple of the total number dividends per unit of 2,898 yen.
ofinvestment

units

issuedandoutstanding (1,916,330 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 2,909 yen.

7

STATEMENT OF CASH FLOWS(Unit: thousands of yen)
For the six months ended
January 31, 2021

July 31, 2020

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

5,576,128

5,434,665

Depreciation and amortization

1,056,619

1,041,061

7,757

9,022

12,310

6,952

(54)

(48 )

Amortization of investment corporation bonds
issuance cost
Amortization of investment unit issuance cost
Interest income
Gain on forfeiture of unclaimed dividends(941)(1,379 )432,926

431,875

Decrease (increase) in operating accounts receivable

25,64041,003

Decrease (increase) in consumption taxes receivable(21,946)－

Increase (decrease) in operating accounts payable

40,657

16,969

Increase (decrease) in accounts payable – other(4,251)(10,796 )Interest expenses

Increase (decrease) in accrued expenses

4,902(46,766 )(145,114)(71,498 )Increase (decrease) in advances received

44,479(10,545 )Increase (decrease) in deposits received(235)(7,595 )Decrease (increase) in prepaid expenses

18,87816,485Decrease (increase) in long-term prepaid expenses

49,676

37,110

Increase (decrease) in accrued consumption taxes

Other, net

(24)

(71 )

7,097,409

6,886,443

5448(424,325)(432,597 )(909)(1,339 )6,672,228

6,452,555

Purchase of property, plant and equipment in trust(12,478,273)(693,420 )Repayments of lease and guarantee deposits in trust(364,315)(117,924 )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

Proceeds from lease and guarantee deposits in trust

459,574

215,570

Net cash provided by (used in) investing activities(12,383,015)(595,774 )Proceeds from long-term loans payable

11,200,000

12,022,000

Repayments of long-term loans payable(6,000,000)(7,022,000 )Net cash provided by (used in) financing activities

Proceeds from issuance of investment corporation bonds

3,479,567－

Redemption of investment corporation bonds(3,500,000)(5,000,000 )Proceeds from issuance of investment units

5,225,932－

Cash dividends paid

(5,434,018)(5,404,873 )Net cash provided by (used in) financing activities

4,971,481(5,404,873 )Net increase (decrease) in cash and cash equivalents(739,304)

451,906

Cash and cash equivalents at beginning of the period

11,559,439

11,107,533

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

10,820,134

11,559,439

8

NOTES TO FINANCIAL STATEMENTS
For the six months ended January 31, 2021 and July 31, 2020

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, 2021 was comprised of 11 properties undermanagement with a total leasable floor area of 178,845.68m2. The Company has already invested 402,910 million yen(based on acquisition price) into this portfolio. The occupancy rate as of January 31, 2021 was 98.8%.

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 13,256 thousand yen for the period ended January 31,
2021 and none for the period ended July 31, 2020, 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 31, 2020)
・ “Implementation Guidance on Accounting Standard for Revenue Recognition” (ASBJ Guidance No. 30 issued on
March 26, 2021)
・ “Implementation Guidance on Disclosures about Fair Value of Financial Instruments” (ASBJ Guidance No. 19
issued on March 31, 2020)(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)
・ “Accounting Standard for Financial Instruments” (ASBJ Statement No. 10 issued on July 4, 2019)
・ “Implementation Guidance on Accounting Standard for Fair Value Measurement” (ASBJ Guidance No. 31 issued on
July 4, 2019)
・ “Implementation Guidance on Accounting Standard for Disclosures about Fair Value of Financial Instruments”(ASBJ Guidance No. 19 issued on March 31, 2020)(1) Overview
The International Accounting Standards Board (IASB) and the Financial Accounting Standards Board(FASB) have established similar contents and detailed guidance regarding fair value measurement (IFRS 13 “Fair
Value Measurement” in IFRS and Accounting Standards Codification Topic 820 “Fair Value Measurement” in U.S.
GAAPｓ). In light of this establishment, ASBJ has worked on the consistency of Japanese GAAP with suchinternational accounting standards regarding the guidance on fair value of financial instruments and disclosures,and issued the Accounting Standard for Fair Value Measurement and the Implementation Guidance on AccountingStandard for Fair Value Measurement.
As the basic policy of ASBJ for the development of accounting standards for fair value measurement, byusing the unified measurement method, from the view point of improvement of the comparability of financial
statements among domestic and foreign companies, ASBJ decided to adopt all the provisions of IFRS 13 basically. In
addition, considering the practices that have been executed in our country, within the scope not to significantly
impair the comparability between the financial statements, the other treatments to the individual items aredefined.

11

(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.
・“Accounting Standard for Disclosure of Accounting Estimates” (ASBJ Statement No. 31 issued on March 31, 2020)(1) Overview
IASB issued a revised International Accounting Standard No.1 (“IAS 1”), “Presentation of Financial
Statements” in 2003. The disclosure of “Sources of estimation uncertainty” is required in paragraph 125 of IAS 1, as
highly useful information to the users of financial statements, and the disclosure as notes information has beenrequested to be considered under Japanese GAAP as well. Accordingly, ASBJ developed and issued AccountingStandard for Disclosure of Accounting Estimates.
As the basic policy of ASBJ for the development of the Accounting Standard, by showing the principle(disclosure purpose) rather than expanding individual notes, a company should judge its own specific disclosure
content in light of the disclosure purpose. For the development, the provisions in the paragraph 125 of IAS 1 wereused as a reference.
(2) Scheduled date of application
The accounting standards will be applied from the beginning of the fiscal period ending July 31, 2021.
・“Accounting Standard for Accounting Policy Disclosures, Accounting Changes and Error Corrections” (ASBJ
Statement No. 24 issued on March 31, 2020)(1) Overview
In response to the recommendation considering the enhancement of note information in regards to“Principles and Procedures of Accounting Treatment Adopted When Related Accounting Standards Are Uncertain”,
ASBJ revised Accounting Standard for Accounting Policy Disclosures, Accounting Changes and Error Corrections.
Working to improve the note information related to “Principles and Procedures of Accounting Treatment
Adopted When Related Accounting Standards Are Uncertain”, the provision of Financial Accounting Principles(note 1-2) will be followed to avoid influencing actual practice when the relevant accounting standards exist.
(2) Scheduled date of application
The accounting standards will be applied from the beginning of the fiscal period ending July 31, 2021.

12

5. ADDITIONAL INFORMATION
Notes on Provision and Reversal of Allowance for Temporary Difference Adjustments
For the six months ended January 31, 2021
(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 on

Incurrence of loss on valuation ofhedgesinterest swaps

Allowance for temporary difference
adjustments
136,059(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, 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 on

Changes in fair value of derivative

hedgestransactions

Reversal of allowance for temporary
difference adjustments
15,151(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.

13

6. PROPERTY AND EQUIPMENT
For the six months ended January 31, 2021
(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

82,735,523

2,551,373－

85,286,897

19,121,190

1,010,880

66,165,707(Note)

Structures in trust

929,677

34,433－964,111334,274

8,897

629,836(Note)

Machinery andequipment in trust

933,374

21,258－954,633

332,281

23,525622,352(Note)

Tools, furniture andfixtures in trust

271,676

14,410－286,086

184,581

13,316

101,505－

260,234,866

9,871,618－

270,106,484－－

270,106,484

2,526

2,282

－

4,809

－

－

4,809

367,181,806

12,495,377－

379,677,183

19,972,327

1,056,619

359,704,855

30,650,962－－

30,650,962－－

30,650,962

Subtotal

30,650,962－－

30,650,962－－

30,650,962

Total

397,832,768

12,495,377－

410,328,146

19,972,327

1,056,619

390,355,818

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

Leasehold rights
in trust(Note)(Note) The amount of increase during the period is primarily attributable to the acquisition of a portion of Toranomon Hills Mori Tower.

7. SHORT-TERM LOANS PAYABLE
For the six months ended January 31, 2021
Not applicable.

14

－

－

8. INVESTMENT CORPORATION BONDS
For the six months ended January 31, 2021
(Unit: thousands of yen)
Issue
date

Balance at
beginning of
the period

Amount ofincreaseduring theperiodAmount ofdecreaseduring theperiodBalance at
end of theperiodInterest
rate

Redemption
maturity
dateFeb. 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

2,000,000－－

2,000,000

0.8200%

May 26,2025

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

Nov. 25,2020－

3,500,000－

3,500,000

0.2500%Nov. 25,2025

17,000,000

3,500,000

3,500,000

17,000,000

Bond
Eleventh Series
Unsecured
Investment
Corporation Bonds
Twelfth 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
Twentieth Series
Unsecured
Investment
Corporation Bonds(green bond)
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

2,000,000－－

2,000,000

7,000,000

15

9. LONG-TERM LOANS PAYABLE
For the six months ended January 31, 2021
(1) Current portion of 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－

1,500,000－

1,500,000

0.4932%

Aug. 31, 2021－

1,500,000－

1,500,000

0.4932%

Aug. 31, 2021

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－

1,500,000－

1,500,000

0.4932%

Aug. 31, 2021

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－

1,500,000－

1,500,000

0.4932%

Aug. 31, 2021

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

12,500,000

12,500,000

6,000,000

19,000,000

MUFG Bank, Ltd.

Use offunds

Remarks

Unsecured/
Mizuho Bank, Ltd

Sumitomo Mitsui
Banking
Corporation

Sumitomo Mitsui
Trust Bank, Ltd.

Total

16

(Note 2)

Unguaranteed(2) Long-term loans payable(Unit: thousands of yen)
Lender

MUFG Bank, Ltd.

Balance at
beginning of
the period

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

Repayment
date

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

0.7020%

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

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

0.2887%

Nov. 30, 2028

2,200,000－－

2,200,000

0.1930%Nov. 30, 2026

2,816,000－－

2,816,000

0.2560%

May 31, 2027－

1,400,000－

1,400,000

0.2377%

Aug. 31, 2027－

2,400,000－

2,400,000

0.2432%

Nov. 30, 2027

Use offunds

Remarks

Unsecured/

17(Note 2)

Unguaranteed(Unit: thousands of yen)
LenderBalance at
beginning of
the period

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

Repayment
date

1,300,000－

1,300,000－

0.7535%

Nov. 30, 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

0.4137%

Aug. 31, 2029

1,952,000－－

1,952,000

0.4137%

May 31, 2029

1,000,000－－

1,000,000

0.2010%Aug. 29, 2025

1,100,000－－

1,100,000

0.3290%

May 31, 2027

1,408,000－－

1,408,000

0.3990%

May 31, 2029－

1,400,000－

1,400,000

0.3235%

Aug. 31, 2029－

1,200,000－

1,200,000

0.2682%

Nov. 30, 2027

1,560,000－

1,560,000－

0.7535%

Nov. 30, 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

0.4000%Nov. 30, 2027

1,600,000－－

1,600,000

0.4720%

May 31, 2028

1,134,000－－

1,134,000

0.4800%Nov. 30, 2028－

1,400,000－

1,400,000

0.3731%

Aug. 31, 2028－

1,440,000－

1,440,000

0.3793%

Nov. 30, 2028

Use offunds

Remarks

Mizuho Bank, Ltd

Unsecured/

Sumitomo Mitsui
Banking
Corporation

18(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

1,040,000－

1,040,000－

0.7535%

Nov. 30, 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

0.1350%Nov. 29, 2024

834,000－－

834,000

0.2650%

May 30, 2025－

960,000－

960,000

0.2575%

Nov. 28, 2025

Use offunds

Unsecured/(Note 2)

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

0.1675%

May 29, 2026

2,000,000－－

2,000,000

0.2637%

Nov. 30, 2028

1,000,000－－

1,000,000

0.2937%

May 20, 2030

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

0.3137%

Aug. 31, 2029

830,000－－

830,000

0.3000%

May 31, 2028－

1,000,000－

1,000,000

0.2726%

Aug. 31, 2026

The Bank ofFukuoka, Ltd.

Resona Bank, Ltd.

19

Remarks

Unguaranteed(Unit: thousands of yen)
Lender

The Norinchukin
Bank

Balance at
beginning of
the period

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

Repayment
date

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

0.2675%

May 29, 2026

600,000－－

600,000

0.2610%

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

0.4137%

Nov. 30, 2028

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

0.3550%Nov. 30, 2027

500,000－－

500,000

0.3637%

May 22, 2028

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

0.4480%

May 21, 2029

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

0.5725%

May 20, 2030

1,000,000－－

1,000,000

0.2170%Aug. 31, 2026

500,000－－

500,000

0.3200%

May 20, 2027

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

0.4800%

May 22, 2028

149,722,000

11,200,000

12,500,000

148,422,000

Use offunds

Remarks(Note 2)

Unsecured/
Unguaranteed

Development Bankof Japan Inc.

Shinsei Bank, Ltd

Mizuho Trust &Banking Co., Ltd.

The Nishi-Nippon
City Bank, Ltd.

Chugoku Bank
Ltd.
Aozora Bank, Ltd.
The Hiroshima
Bank, Ltd.
The Oita Bank,Ltd.
Shinkin Central
Bank
Nippon Life
Insurance
Company
Total

20

(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)
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

15,500,000

20,400,000

15,800,000

17,194,000

Long-term loans payable

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, 2021
(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

408,492－

15,151

393,340

Reason for reversal
Changes in fair valueof derivativetransactions(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, 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－

60,247

408,492

Reason for reversal
Changes in fair value

468,740of derivativetransactions(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.

21

11. INCOME TAXES(1) Breakdown of significant components of deferred tax assets and deferred tax liabilities(Unit: thousands of yen)
As ofJanuary 31, 2021

July 31, 2020

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

23

14

267,244

231,480

Subtotal deferred tax assets

267,267

231,494

Valuation allowance(267,244)(231,480)

23

14

23

14

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, 2021
Statutory tax rate

July 31, 2020
31.46%

31.46%[Adjustments]
Deductible cash distributions(31.45%)(31.45%)

Others

0.01%

0.01%

Effective tax rate

0.02%

0.02%

12. PER UNIT INFORMATION
For the six months ended
January 31, 2021

July 31, 2020

Net assets per unit (yen)104,764

104,270

Net income per unit (yen)

2,919

2,898

(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, 2021
Net income (thousands of yen)

July 31, 2020
5,575,042

5,433,733－－

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

5,575,042

5,433,733

Average number of investment units
during the period (units)

1,909,317

1,874,960

Amounts not attributable to common
unitholders (thousands of yen)22

13. RELATED PARTY TRANSACTIONS(1) Parent company and major corporate unitholders
For the six months ended January 31, 2021

Type

Other
relatedcompany

Name

Mori
Building
Co., Ltd.

Capital stock
Percentage
orof votingRelationshipinvestments in Description of rights held
Locationwithcapitalbusinessin (by)related party(thousands ofrelatedyen)
party

Minatoku,
Tokyo79,500,000

Real estatebusiness

15.0%
directly
held byrelatedparty

Leasing andmanagement ofreal estate

Description oftransaction

Amount oftransaction(thousandsof yen)(Note 1)

Account
item

Acquisition of
Property（Note 2）
（Note 6）

12,220,000－

Leasing ofproperties(Note 3)(Note 7)

Payment ofproperty
operation andmanagement
fees(Note 8)Deposit of leaseand guarantee(Note 5)(Note 9)Balanceat end ofthe period(thousandsof yen)－Operatingaccounts
1
receivable
Advances
6,305,594
1,147,885
received
Lease andguarantee
10,229,638
deposits
in trust
Prepaid
3,198
expenses
277,454
Operating(Note 4)accounts
58,519payable－Lease andguarantee
deposits
in trust

53,886(Note 1) The amount does not include consumption taxes.
(Note 2) A portion of Toranomon Hills Mori Tower(Note 3) Roppongi Hills Mori Tower, ARK Mori Building, Atago Green Hills, Toranomon Hills Mori Tower and a portion of ARK Hills South Tower(Note 4) The amount includes fees (7,809 thousand yen) that are not charged to expenses but recognized as assets.
(Note 5) Roppongi View Tower[Transaction terms and conditions and related policies](Note 6) Acquisition decisions are made in accordance with the provisions of the Related Parties Transaction Guidelines stipulated by theCompany’s Asset Manager and compliance regulations Furthermore, acquisitions are not made at a value exceeding the appraisal value
as determined by an independent third-party real estate appraiser (including corporations).
(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.
(Note 8) 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 9) 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

For the six months ended July 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)

6,087,456

283,110(Note 3)－

Account
item

Operatingaccounts
receivable
Advances
received
Lease andguarantee
deposits
in trust
Prepaid
expenses

Balanceat end ofthe period(thousandsof yen)551
1,093,271
9,790,142
3,018

Operatingaccounts
payable56,266

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 (37,969 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.

24

(2) Subsidiaries and affiliates
For the six months ended January 31, 2021
Not applicable.
For the six months ended July 31, 2020
Not applicable.
(3) Subsidiaries of parent company
For the six months ended January 31, 2021

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 Buildingof otherInvestment Minatorelated Management ku, Tokyo
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 4)
directors

Balanceat end of
Account
the period
item(thousandsof yen)241,466 Accrued(Note 3) expenses

252,170(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.
(Note 3) The amount of management fees includes 12,220 thousand yen in acquisition fees pertaining to a real estate acquisition included in
the book value of real estate.
[Transaction terms and conditions and related policies](Note 4) 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, 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

224,815

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

247,296(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.

25

(4) Directors and major individual unitholders
For the six months ended January 31, 2021

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 4)

241,466(Note 3)

Account
item

Balanceat end ofthe period(thousandsof yen)Accruedexpenses

252,170(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.
(Note 3) The amount of management fees includes 12,220 thousand yen in acquisition fees pertaining to a real estate acquisition included in
the book value of real estate.
[Transaction terms and conditions and related policies](Note 4) 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, 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)

224,815

Account
item

Balanceat end ofthe period(thousandsof yen)Accruedexpenses

247,296(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.

26

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

Breakdown of property operating income
For the six months ended
January 31, 2021
A.

July 31, 2020

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

9,608,272

9,383,153

5,812

9,614,085

5,884

9,389,038

Other operating revenues
Parking revenue

51,17153,667

Utilities and other revenue

149,697

145,224

Cancellation penalty

5,677

Key money income

13,797
206,546－

213,218

9,820,632

Total property operating revenue
B.

529

9,602,257

Property operating expenses
Expenses related to properties
Property management fees

1,172,247

1,122,870

Property taxes

736,413725,205

Utilities

116,730

115,650

Maintenance and repairs

65,31979,298Insurance premium

17,877

17,313Custodian fees

5,968

5,950

Depreciation and amortization

C.

1,056,619

1,041,061

Rent expenses

129,800

129,153

Other lease business expenses

14,6843,315,661

15,3583,251,861

Total property operating expenses

3,315,661

3,251,861

Property operating income [A − B]

6,504,970

6,350,396(Unit: thousands of yen)Transactions with major unitholders
For the six months ended
January 31, 2021

July 31, 2020

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

27

6,305,587

6,086,486

7

970

269,644245,14115. UNITHOLDERS’ EQUITY
For the six months ended
January 31, 2021

July 31, 2020

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

1,916,330 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.

28

(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, 2021.
(Unit: thousands of yen)
Carrying amount(a) Cash and deposits

Fair value

5,479,946(b) Cash and deposits in trust

Difference

5,479,946－

5,340,188

5,340,188－

10,820,134

10,820,134－(c) Current portion of investment corporation bonds

2,000,000

2,000,340

340(d) Current portion of long-term loans payable

19,000,000

19,058,944

58,944(e) Investment corporation bonds

15,000,000

15,045,700

45,700(f) Long-term loans payable

148,422,000

148,440,141

18,141

184,422,000

184,545,126

123,126(848,458)(848,458)

－

Total

Total
Derivative transactions (Note1)

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

Fair value

6,575,310(b) Cash and deposits in trust
Total

Difference

6,575,310－

4,984,129

4,984,129－

11,559,439

11,559,439－(c) Current portion of investment corporation bonds

5,500,000

5,503,590

3,590(d) Current portion of long-term loans payable

12,500,000

12,533,139

33,139(e) Investment corporation bonds

11,500,000

11,471,300(28,700)(f) Long-term loans payable

149,722,000

149,824,801

102,801

179,222,000

179,332,830

110,830(709,432)(709,432)－

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.

29

(Note 3) Redemption of monetary claims scheduled to be due after the balance sheet date (as of January 31, 2021)(Unit: thousands of yen)
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

Due after
4 years,
but within
5 years

Due after
5 years

Cash and deposits

5,479,946

－

－

－

－

－

Cash and deposits in trust

5,340,188

－

－

－

－

－

10,820,134

－

－

－

－

－

Total

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

6,575,310

－

－

－

－

－

Cash and deposits in trust

4,984,129

－

－

－

－

－

11,559,439

－

－

－

－

－

Total

(Note 4) Investment corporation bonds and long-term loans payable scheduled to be due after the balance sheet date (as of January 31, 2021)

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

2,000,000－－

2,000,000

7,000,000

6,000,000

Long-term loans payable

19,000,000

15,500,000

20,400,000

15,800,000

17,194,000

79,528,000

21,000,000

15,500,000

20,400,000

17,800,000

24,194,000

85,528,000

Total

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

5,500,000－－－

4,000,000

7,500,000

Long-term loans payable

12,500,000

22,000,000

15,200,000

18,800,000

17,334,000

76,388,000

18,000,000

22,000,000

15,200,000

18,800,000

21,334,000

83,888,000

Total

17. DERIVATIVE TRANSACTIONS(1) Transactions for which hedge accounting is not applied
As of January 31, 2021
Not applicable
As of July 31, 2020
Not applicable30

(2) Transactions for which hedge accounting is applied
As of January 31, 2021
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 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

Long-termloans payable

106,966,000

106,966,000(848,458)

Long-termloans payable

37,500,000

18,500,000*

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, 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 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

95,766,000

95,766,000(709,432)

Based on the quoted
price obtained fromcounterparty financial
institutions.

Long-termloans payable

43,500,000

31,000,000*－*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, 2021
Cash and deposits

July 31, 2020
5,479,946

6,575,310

Cash and deposits in trust

5,340,188

4,984,129

Cash and cash equivalents

10,820,134

11,559,439

31

19. LEASESOperating lease transactions (as lessor)
Future minimum rent revenues under existing non-cancelable lease agreements(Unit: thousands of yen)
As ofJanuary 31, 2021

July 31, 2020

Due within 1 year

4,921,687

5,088,603

Due after 1 year

11,515,840

12,183,640

16,437,527

17,272,243

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, 2021

July 31, 2020

Carrying amount
Balance at beginning of the period

378,917,060

379,226,176

Amount of increase (decrease)during the period

11,438,757(309,115)

Balance at end of the period

390,355,818

378,917,060

471,642,000

457,890,000

Fair value at end of the period(Note 1) The carrying amount is the acquisition cost less accumulated depreciation.
(Note 2)Of the increase (decrease) during the period ended January 31, 2021, the increase is primarily attributable to the acquisition ofproperty (Toranomon Hills Mori Tower (approximately 2.4% of total exclusive floor area) (12,252,606 thousand yen)), the decrease is
primarily attributable to depreciation and amortization. Of the decrease during the period ended July 31, 2020, the decrease is
primarily attributable to depreciation 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”

32

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, 2021
(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.

6,305,594

Related segment
Real estate leasing business

For the six months ended July 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.

6,087,456

22. SUBSEQUENT EVENTS
Not applicable.

33

Related segment
Real estate leasing business