Mori Hills REIT Investment Corporation
Semiannual Report
35th Fiscal Period(August 1, 2023 – January 31, 2024)

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 thirtyfifth fiscal period which ended January 31, 2024.
In the thirty-fifth fiscal period, although weakness was seen in consumer spending and capital investment due
to the ongoing impact of price hikes and labor shortages, the Japanese economy remained strong, underpinnedby the increase in exports and inbound demand.
Under such an economic environment, in the rental office market demand remained strong against the backdropof the steady employment situation. Office vacancy rates are gradually improving but have yet to fully recover,and rent levels maintained their sluggish conditions. As for the luxury rental housing market, occupancy rates
and rent levels remained solid driven by ongoing stable demand for quality housing in central Tokyo. In termsof the real estate trading market, although property acquisition activities by foreign companies remained
stagnant, the transaction amount remained at a high level thanks to large transactions by corporations anddevelopers. Transaction prices also remained at a high level.
In the thirty-fifth fiscal period, MHR strove to maintain and enhance tenant satisfaction through measures suchas 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 and rents byproactively launching leasing activities targeting new and existing tenants while foreseeing trends in rental
market conditions.
MHR’s real estate portfolio, as of the end of the thirty-fifth fiscal period, was comprised of 11 properties undermanagement with a total leasable area of 180,797.12m2. MHR has already invested 404,670 million yen (basedon the acquisition price) into this portfolio. The occupancy rate at the end of the thirty-fifth fiscal period was
97.2%.
The asset management activities described above resulted in MHR recording in the thirty-fifth fiscal period
11,176 million yen in operating revenue, 6,803 million yen in operating income, 6,291 million yen in ordinary
income and 6,289 million yen in net income and 3,282 yen in dividend per unit. MHR disposed of a part of
Laforet Harajuku (Land) (disposition price: 2,926 million yen) on December 1, 2023. A 1,373 million yen gain
was realized on the disposition, all of the gain will be distributed.
In addition, MHR plans to dispose of a further part of Laforet Harajuku (Land) (disposition price: 2,968 million
yen) on July 1, 2024. For the thirty-sixth fiscal period ending July 31, 2024, dividends per unit is expected tobe 3,070 yen.
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: 35th period

Dividend per unit: 36th period forecast*

3,070 yen

3,282 yen

* The forecasted figure for the 36th 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)

8th
period
Jul.
2010

9th
period
Jan.
2011

10th
period
Jul.
2011

・・・

20th
period
Jul.
2016

21st
period
Jan.
2017

22n d
period
Jul.
2017

23rd
period
Jan.
2018

24th
period
Jul.
2018

25th
period
Jan.
2019

26th
period
Jul.
2019

27th
period
Jan.
2020

28th
period
Jul.
2020

29th
period
Jan.
2021

30th
period
Jul.
2021

31st
period
Jan.
2022

32n d
period
Jul.
2022

33rd
period
Jan.
2023

34th
period
Jul.
2023

3,352

3,400

After increasing for 26 consecutive fiscal periods,
DPU decreased but maintained a high level thanks
to gain on disposition

3,200

35th
period
Jan.
2024

36th
period
Jul.
2024

3,282
(forecast)

3,070

3,000

2,800

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
34th period

35th period

February 1, 2023 July 31, 2023 (181 days)

August 1, 2023 January 31, 2024 (184 days)

Operating revenue

11,215 million yen

11,176 million yen

Operating income

6,955 million yen

6,803 million yen

Ordinary income

6,424 million yen

6,291 million yen

Net income

6,423 million yen

6,289 million yen

Dividend/unit

3,352 yen/unit

3,282 yen/unit

Total units outstanding

1,916,330 units

1,916,330 units

406,197 million yen

404,670 million yen

Acquisition price34th - 35th period△38 million yen△152 million yen△133 million yen△133 million yen△70 yen/unit(Note) Unless otherwise stated in this document, all amounts are rounded down below the unit and all fractions and areas are rounded up below the decimal point.

3

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

Type

Size
1.6%

98.4%

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

Portfolio list4

5

Earthquake-resistance capacity
A group of properties based on high quake-resistant engineering standards stipulated by Mori Building, thesponsor of MHR
Property name

Level above the newearthquake resistancestandard (Note 1)

PML (Note 2)

Roppongi Hills Mori Tower

◎

0.59%

ARK Mori Building

◎

0.78%

Koraku Mori Building

◎

0.73%

ARK Hills South Tower

◎

1.56%

Toranomon Hills Mori Tower

◎

0.50%

Holland Hills Mori Tower

◎

0.85%

Akasaka Tameike Tower

◎

1.79%

Atago Green Hills MORI Tower

◎

2.35%

(Note 1) Earthquake resistance performance above standards stipulated in the current Building Standards Act(Note 2) PML refers to the probable maximum loss ratio expected to result from an earthquake.
A smaller percentage indicates superiority in earthquake-resistance.

Environmental performance
Highest quality ratio of green building (GB) certified properties among all J-REITs

Ratio of GB
certified properties
in portfolio

93.5%
In highest ratings
79.1%* In acquisition price base by excluding Laforet Harajuku (Land)

6

Financial Status
MHR’s cost of debt has decreased along with the improvement in LTV ratio (appraisal value basis). We 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
1.0
0.69%

45.0

0.68% 0.66% 0.63%
0.61% 0.58%
0.56% 0.55% 0.55% 0.53%
0.5

40.0

・・・

35.0

57.4% 56.4% 53.7%

39.4% 38.2% 38.0% 38.1% 38.3% 37.7% 36.6% 36.5% 36.9% 36.7%

9th
period
Jan.
2011

26th
period
Jul.
2019

10th
period
Jul.
2011

11th
period
Jan.
2012

・・・

27th
period
Jan.
2020

28th
period
Jul.
2020

29th
period
Jan.
2021

30th
period
Jul.
2021

31st
period
Jan.
2022

32nd
period
Jul.
2022

33rd
period
Jan.
2023

34th
period
Jul.
2023

35th
periodJan.
2024(Note) Average interest rate is calculated as [(interest expenses + interest expenses on investment corporation bonds + borrowing expenses + amortization of
investment corporation bond issuance costs) × 365 ÷ operating days during each period ÷ average interest-bearing debt balance during each period].

Extension in remaining duration of debt
(years)

5.5
5.0
4.4

4.5

4.6

4.7

4.6

4.5

4.6

4.5
4.2

4.2

4.0

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

26th
period27th
period28th
period29th
period30th
period31st
period32nd
period33rd
period34th
period35th
period

Jul.
2019

Jan.
2020

Jul.
2020

Jan.
2021

Jul.
2021

Jan.
2022

Jul.
2022

Jan.
2023

Jul.
2023

Jan.
2024

7

0.0

Overview of debt financing
Debt Balanc e
LTV (book value basis)

End of the 34th period
Jul. 31, 2023

End of the 35th period
Jan. 31, 2024

192,422 mn yen

190,422 mn yen

46.4%

46.1%

36.9%

36.7%

4.2 years

4.0 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
80.1%

Long-term
100%(Stable)Overview of maturity (as of January 31, 2024)(billion yen)

20
Long-term loans

Investment corporation bonds

15
8.8
10

5

8.0
8.2
7.6

14.6

17.0
14.3

14.2

11.0

8.0
12.4
8.1

7.3

5.0
2.0

0

9.8

9.1

2.0

6.5
3.8

2.0

4.2
1.5

2.8

1.5

36th
37th
38th
39th
40th
41st 42nd 43rd
44th
45th
46th
47th
48th
49th
50th
51st 52nd 53rd
54th
period period period period period period period period period period period period period period period period period period period
Jul.
2024

Jan.
2025

Jul.
2025

Jan.
2026

Jul.
2026

Jan.
2027

Jul.
2027

Jan.
2028

Jul.
2028

Jan.
2029

8

Jul.
2029

Jan.
2030

Jul.
2030

Jan.
2031

Jul.
2031

Jan.
2032

Jul.
2032

Jan.
2033

Jul.
2033

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.
2023

Mar

Apr.

May.

Jun.

Jul.

Aug.

Sept.

Oct.

Nov.

Dec.

Jan.
2024

Rent (yen/tsubo)

30,92030,95930,92730,92430,89330,90830,90330,89130,88630,94330,94430,932

Occupancy rate

99.1%

99.2%

99.2%

99.2%

99.6%

99.4%

99.5%

99.5%

99.4%

98.8%

99.1%

97.5%

70

[Residential](yen/tsubo)(%)

25,000100

20,00090

15,00010,000

80

5,000
0

Feb.
2023

Mar

Apr.

May.

Jun.

Jul.

Aug.

Sept.

Oct.

Nov.

Dec.

Jan.
2024

Rent (yen/tsubo)

15,97516,085

16,145

16,130

16,11816,09816,198

16,216

16,21016,18916,201

16,281

Occupancy rate

98.4%

98.6%

98.5%

98.1%

98.4%

97.0%

96.8%

97.1%

96.6%

96.4%

95.6%

96.0%

70

Result of tenants’ rent revision (pass-through type)[Office][Residential]

(%)

(%)

+6

+5

+4.5%
+0

+0.6%

△5
△10
△15

+3.6%

+4
△0.7%

△1.1%

△1.2%

△2.2%

+2

※ Average of all contracts subject to revision
31st
Jan. 2022

32nd
Jul. 2022

33rd
Jan. 2023

+1.5%

+1.1%

+1.0%

+0

△8.5%

30th
Jul. 2021+3.3%※ Average of all contracts subject to revision
34th
Jul. 2023△2

35thJan. 2024

30thJul. 2021

31stJan. 2022

32nd
Jul. 2022

33rd
Jan. 2023

34th
Jul. 2023(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, 2024.

935thJan. 2024

Sustainability Initiatives
Approach to Sustainability
MHR and Mori Building Investment Management Co., Ltd. (MIM), the asset manager, aim to contribute to thecreation and development of cities by providing investment opportunities in high-quality urban assets toinvestors while maximizing unitholder value through investment focused on the competitiveness and ability tocreate value of the “City,” as stated in the Basic Policy and Company Mission of MHR and MIM.
Society today is faced with various challenges, and companies are expected to contribute to solving theseissues as they conduct business activities. We believe that working on these issues will in fact lead toincreasing 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 focusing on ESG (Environmental, Social and Governance) initiatives andinvesting in high-quality urban assets while striving to improve various social issues.
Sustainability Promotion System
MHR’s operations connected to sustainability are promoted primarily by the Sustainability Committee
established by MIM.
The Chairperson of the Committee is the President & CEO while Managing Director, all general managers andsome planning department staff comprise the committeepersons. Various initiatives are implemented based on
the Sustainability Promotion Program which is established every fiscal year.
In principle, the Committee meets twice a year and formulates policies and the content of the Sustainability
Promotion Program, monitors progress of programs, deliberates on various suggestions from departments,
etc. in light of social conditions and the operating status of MHR. The President & CEO approves the policies
and promotion programs, constantly monitors the thorough promotion of sustainability, and establishes andmaintains a sustainability promotion structure as a responsible party in promoting sustainability.
Moreover, sustainability-related efforts are reported on periodically to the Board of Directors of both MHR andMIM. Each Board oversees the status of initiatives for important issues related to ESG and the status ofcompliance and risk management.
Initiatives throughout the Entire Supply Chain
Promotion of sustainability operations, whether environmental or social, requires initiatives that involve thewhole supply chain. We believe 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 with our sponsor Mori Building, and by aligning our values, we aim to contributeto the realization of a sustainable society.

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

Type of Assessment

RatingRoppongi Hills Mori Tower

Rank S

ARK Mori Building

Rank S

Koraku Mori Building

CASBEE for Real Estate

Rank S

Akasaka Tameike Tower

Rank A

Atago Green Hills MORI Tower

Rank SARK Hills South Tower

DBJ Green Building Certific ation

Toranomon Hills Mori Tower

4 stars
Rank SCASBEE for Real Estate

Holland Hills Mori Tower

Rank S(Certificates Coverage Ratio)
Short-range objective(FY 2024)

Maintain over 90%(in acquisition pric e)

Long-range objective(FY 2030)

Maintain over 90%(in ac quisition pric e)

Performance(As of July 31,2023)

Performance (referenc e)

93.5%(in acquisition pric e)(As of July 31,2023)

84.0%(in leasable floor area)

80.0%(in number of properties:
8/10 properties)* Excluding Laforet Harajuku (Land)

Promotion of Energy Conservation
MHR promotes energy conservation through(Roppongi View Tower: Renovation of common area with LED lighting)
Before renovation

After renovation

initiatives such as replacement of LED lighting
in common areas and repair work of airconditioning at Roppongi First Plaza, Roppongi
View Tower and Akasaka Tameike Tower(residential).
MHR also makes active efforts to reduce
environmental loads through proper
separation and disposal of waste.

Collaborating with Tenants
MHR holds an environmental countermeasure council once or twice a year depending on the office building.
The council generates a report on the efforts to improve sustainability and raises awareness for power saving
methods. As a reference for tenants to draw specific measures for conservation of energy, MHR has provided,
at all office properties it owns, “WEB cloud services” as a tool to make tenants’ energy usage visible(properties with the service as a percentage of all owned properties: 98% based on acquisition price).
In addition to these efforts, MHR is further deepening relationships with tenants by introducing “green leases”
which secure commitments from both parties. MHR is gradually expanding this approach since the introductionof the first green lease in ARK Hills South Tower.
11

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 match compact cities compounded with multifaceted urban functions together withthe various high energy-efficient systems 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.
(Reduction in Greenhouse Gas Emissions)
MHR revised its targets in June 2022 to promote further reduction.
We aim to reduce CO2 emissions of MHR’s and MIM’s offices and properties owned by MHR (total emissions;
Scopes 1, 2 and 3) by 50% by FY 2030 when compared with FY 2019 as the baseline year and achieve netzero emissions by FY 2050.
Medium-term target

Long-term target

Performance(FY 2030)(FY 2050)(FY 2022)

50% reduction

18.0% reduction

Net-Zero(total amount basis: vs FY 2019)(total amount basis: vs FY 2019)(Carbon Dioxide Emission and Intensity)
Figures, with certain exceptions, are verified and validated by an independent third party. Scope 1 is entirely
CO2.
[Boundary] Offices of MHR and MIM and properties owned by MHR (Cover rate: See the table below)
2(kg-CO2/m )(t-CO2)40,000150
31,894125

31,251
28,49330,00029,09425,632

101.0

100

95.9

20,000

81.5

75

77.9
61.7

50

10,00025

0FY 2018

FY 2019

FY 2020

FY 2021

FY 2022

Scope 1

1,843

1,767

1,718

1,696

1,755

Scope 2

19,285

18,952

16,151

15,77012,145

Scope 3

10,766

10,531

10,624

11,627

11,732

Intensity

101.0

95.9

81.5

77.9

61.7

Verific ation/Guarantee rate

77.4%

77.4%

77.7%

78.2%

78.3%

Cover rate

87.4%

87.6%

87.8%

88.0%

88.1%

* 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.
* Intensity is calculated by dividing the carbon dioxide emissions (Scope 1, 2&3) by the calculated total floor area.
* For Scope 3, the calculation target was expanded in accordance with the above manual starting in FY 2020. The figures for FY
2019 and before were changed in accordance with the new standard.

120Sustainability Initiatives: 2) Social
Problems concerning human rights and labor are critical global concerns, 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 an 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 grow their career in a healthy and safe manner.
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. In addition, in order to improve staff effectiveness, to clarify
company issues and to constantly 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 2024)
・ ARES Certified Master: 9
・ Real Estate Appraiser: 4
・ Real Estate Transaction Agent: 11
・ 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.

13

Tenant Satisfaction Surveys
MHR conducts tenant satisfaction surveys once every two years in office buildings and as appropriate inresidential 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 the tenants are used as a reference in our property management.
Local Communities
MHR aims to foster a rich environment for the local community through various communication activities.
As community investments in MHR’s properties such as Roppongi Hills and ARK Hills, events and activities areheld 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: Outstanding Site".

14

Sustainability Initiatives: 3) GovernanceIn order to contribute to the realization of a sustainable society, we aim to maximize unitholder value over the
medium to long term. We believe that it is absolutely imperative to remain a company that is trusted 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 GovernanceIn addition to a general meeting of all unitholders, MHR’s governance structure consists of one executive director,
four supervisory directors, the board of directors and an accounting auditor as required by the Act on Investment
Trusts and Investment Corporations.
The executive director undertakes executive management and represents MHR. The supervisory directors
oversee the executive director's performance of the position’s duties.
The board of directors is comprised of the executive director and the supervisory directors and makes important
decisions regarding the execution of MHR’s duties, such as approval of the executive director's execution of
MHR’s important duties and approval of financial statements.
The executive director reports to the supervisory directors from time to time regarding the status of asset
management, compliance and risk management and other matters.
Each supervisory director oversees the execution of duties by the executive director through the reporting on
investigation requested by the supervisory directors.
The Accounting Auditor performs the audit of financial statements etc. of MHR and reports to the supervisory
directors in the event of discovering any serious actions in violation of laws and regulations or actions violating
the proper execution of duties by the executive director.
(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.

15

Administration
Dept.

Planning
Dept.

Compliance
Dept.

Compliance
The Compliance Department conducts inspections on legal compliance and confirms consistency with internal
rules. MIM confirms whether there exist 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 the c ase of an ac quisition
from any 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) The Director (Part-time) is unable to participate in the resolution of the Board of Directors since this individual will be considered a board member of a related
party when acquiring an asset from a related party.

16

Important ESG Issues (MHR’s Materiality)

17

MSCI ESGMHR has been selected as a constituent of the MSCI Japan ESG Select Leaders Index, provided by MSCI. This
index is composed of companies selected by MSCI from among the constituents of the MSCI Japan IMI Index
for excellence in ESG initiatives.

DISCLAIMER
THE INCLUSION OF MHR IN ANY MSCI INDEX, AND THE USE OF MSCI LOGOS, TRADEMARKS, SERVICE MARKS OR INDEX NAMES HEREIN,
DO NOT CONSTITUTE A SPONSORSHIP, ENDORSEMENT OR PROMOTION OF MHR BY MSCI OR ANY OF ITS AFFILIATES. THE MSCI INDEXESARE THE EXCLUSIVE PROPERTY OF MSCI. MSCI AND THE MSCI INDEX NAMES AND LOGOS ARE TRADEMARKS OR SERVICE MARKS OF MSCIOR ITS AFFILIATES.

GRESB Assessment
In the 2023 GRESB Real Estate Assessment, MHR received a “Green Star” rating forthe twelfth consecutive year, and received an evaluation of “4 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 the organization which runs theassessment. It was founded in 2009 by a group of major European pension funds who played leading roles
in launching Principles for Responsible Investment (PRI).

18

Integrated Report
This report describes the overall efforts of MHR and MIM tocontribute to the realization of a sustainable society and to
maximize unitholder value over the medium to long term.

URL: https://www.mori-hills-reit.co.jp/ir/tabid/477/Default.aspx

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.aspx

19Mori Building’s Extensive Property Pipeline
Mori Building’s total assets have an estimated value of 2.6 trillion yen and the number of properties undermanagement is 93 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
Completion: Jan. 2022

Toranomon Hills
Mori Tower
Completion: May 2014

Toranomon Hills
Station Tower
Completion: Jul. 2023
Toranomon Hills
Business Tower
Completion: Jan. 2020

Total area: approx. 7.5ha
Total floor area: approx. 790,000m2
Office space: approx. 300,000m2

Toranomon Hills Station on
Hibiya subway line
Opened: Jun. 2020

Residential units: approx. 730
Retail units: approx. 170
Green space: approx. 21,000m2ⓒThe Boundary

Azabudai Hills (Opened on November 24, 2023)

Mori JP Tower

Residence B

Residence A

Total area: approx. 8.1ha
Total floor area: approx. 861,700m2
Office space: approx. 214,500m2
Residential units: approx. 1,400
Green space: approx. 2.4haⓒDBOX for Mori Building Co., Ltd. - Azabudai Hills

20

In Operation

MHR (Note 3)

MB Group (Note 4)

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 2024.”(Note 1) “Total assets” is as of the end of September 2023 and number of properties under management is as of April 2023.
(Note 2) There are some exceptions.
(Note 3) Some of the properties have been partially acquired and held by MHR.
(Note 4) Properties are developed, owned, managed and planned for development by Mori Building Group as of April 1, 2024 and there are no properties anticipated to be acquired by MHR.

21

Unit Price Performance(yen)(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, 2024)＜Number of unitholders＞＜Number of investment units＞

Other domestic
Financialcorporations

institutions

1.6%

Foreigncorporations

Foreign(Incl. securities

corporations

companies)

and individuals

1.0%

1.9%

and individuals

Individuals
7.5%

14.9%
Other
domestic
corporations
17.0%

Individuals

Financial
institutions(Incl. securities
companies)

60.6%(Investment

95.5%

trust 35.6%)

22

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.
23

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.
Legal and Regulatory Risks
24

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.

25

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 inquire withthe various securities companies concerning the purchase of MHR investment units. This report’s content includes forwardlooking statements about business performance; however, no guarantees are implied concerning future business performance.
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 priornotice. Regardless of the purpose, any reproduction and/or use of this document in any shape or form without the prior writtenconsent 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 the date of preparation.

26

Independent Auditor’s Report

The Board of Directors
Mori Hills REIT Investment Corporation

OpinionWe have audited the accompanying financial statements of Mori Hills REIT Investment
Corporation (the Company), which comprise the balance sheet as at January 31, 2024, and thestatements of income and retained earnings, changes in net assets, cash distributions, and cash
flows for the six-month period then ended, and notes to the financial statements, all expressed inJapanese yen.
In our opinion, the accompanying financial statements present fairly, in all material respects, thefinancial position of the Company as at January 31, 2024, and its financial performance and its
cash flows for the six-month period then ended in accordance with accounting principles
generally accepted in Japan.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the
Audit of the Financial Statements section of our report. We are independent of the Company inaccordance with the ethical requirements that are relevant to our audit of the financial statements inJapan, and we have fulfilled our other ethical responsibilities in accordance with theserequirements. We believe that the audit evidence we have obtained is sufficient and appropriate
to provide a basis for our opinion.
Other Information
The other information comprises the information included in the Semiannual Report that contains
audited financial statements but does not include the financial statements and our auditor’s report
thereon. Management is responsible for preparation and disclosure of the other information. The
Supervisory Director is responsible for overseeing the Company’s reporting process of the otherinformation.
Our opinion on the financial statements does not cover the other information and we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the otherinformation and, in doing so, consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the audit or otherwise appears to bematerially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of
this other information, we are required to report that fact.
We have nothing to report in this regard.

Responsibilities of Management and the Supervisory Director for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statementsin accordance with accounting principles generally accepted in Japan, and for such internal
control as management determines is necessary to enable the preparation of financial statementsthat are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company’s
ability to continue as a going concern and disclosing, as required by accounting principles
generally accepted in Japan, matters related to going concern.
The Supervisory Director is responsible for overseeing the Company’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with auditing standards generally accepted in Japan, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:・ Identify and assess the risks of material misstatement of the financial statements, whether due
to fraud or error, design and perform audit procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate to provide a basis for our opinion.
・ Consider internal control relevant to the audit in order to design audit procedures that areappropriate in the circumstances for our risk assessments, while the purpose of the audit of
the financial statements is not expressing an opinion on the effectiveness of the Company’s
internal control.
・ Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
・ Conclude on the appropriateness of management’s use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the Company’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention
in our auditor’s report to the related disclosures in the financial statements or, if suchdisclosures are inadequate, to modify our opinion. Our conclusions are based on the audit
evidence obtained up to the date of our auditor’s report. However, future events or conditions
may cause the Company to cease to continue as a going concern.
・ Evaluate the overall presentation, structure and content of the financial statements, including thedisclosures, and whether the financial statements represent the underlying transactions andevents in a manner that achieves fair presentation in accordance with accounting principles
generally accepted in Japan.
We communicate with the Executive Director regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies ininternal control that we identify during our audit.

We also provide the Executive Director with a statement that we have complied with the ethicalrequirements regarding independence that are relevant to our audit of the financial statements inJapan, and to communicate with them all relationships and other matters that may reasonably bethought to bear on our independence, and where applicable, actions taken to eliminate threats or
safeguards applied to reduce threats to an acceptable level.

Fee-related Information
The fees for the audits of the financial statements of Mori Hills REIT Investment Corporationand other services provided by us and other EY member firms for the six-month period ended
January 31, 2024 are presented in paragraph 21 titled “FEES TO ACCOUNTING AUDITOR”
included in “NOTES TO FINANCIAL STATEMENTS”.
Interest Required to Be Disclosed by the Certified Public Accountants Act of Japan
Our firm and its designated engagement partners do not have any interest in the Company whichis required to be disclosed pursuant to the provisions of the Certified Public Accountants Act ofJapan.
Ernst & Young ShinNihon LLC
Tokyo, Japan
April 23, 2024

柴 田 憲 一Kenichi Shibata
Designated Engagement Partner
Certified Public Accountant

齋

木

夏

Natsuki Saiki
Designated Engagement Partner
Certified Public Accountant

生FINANCIAL STATEMENTS
BALANCE SHEET(Unit: thousands of yen)
As ofJanuary 31, 2024

July 31, 2023

AssetsCurrent assets
Cash and deposits

16,334,764

16,049,336

Cash and deposits in trust

5,657,110

5,332,444

Operating accounts receivable

222,885

224,435

Prepaid expenses

371,083

379,625

Derivatives

1,186

－

Other

63,572－

22,650,603

21,985,841

89,285,167

89,165,658

Accumulated depreciation(25,307,503)(24,283,408)

Buildings in trust, net

63,977,663

64,882,250

Total current assets
Noncurrent assets
Property, plant and equipment
Buildings in trust

Structures in trust

1,003,940

1,001,726

Accumulated depreciation(389,733)(380,441)

Structures in trust, net

614,207621,285

Machinery and equipment in trust

1,067,967

1,069,037

Accumulated depreciation(492,666)(469,025)

Machinery and equipment in trust, net

575,300

600,011448,352

439,608(274,563)(265,035)

Tools, furniture and fixtures in trust
Accumulated depreciation
Tools, furniture and fixtures in trust, net
Land in trust
Construction in progress in trust
Total property, plant and equipment

173,789

174,572

292,406,110

293,951,302

9,988

10,021

357,757,060

360,239,443

30,650,962

30,650,962

637

746

30,651,599

30,651,709

Intangible assets
Leasehold rights in trust
Other intangible assets in trust
Total intangible assets
Investments and other assets
Lease and guarantee deposits

10,00010,000Long-term prepaid expenses

574,795

674,294

Deferred tax assets
Derivatives
Total investments and other assets

27

21

1,344,317

1,258,547

1,929,140

1,942,864

390,337,800

392,834,017

Investment corporation bonds issuance cost

76,033

68,265

Total deferred assets

76,033

68,265413,064,436

414,888,123

Total noncurrent assets
Deferred assets

Total assets1

(Unit: thousands of yen)
As ofJanuary 31, 2024

July 31, 2023

Liabilities
Current liabilities
251,587

202,331

Current portion of investment corporation bonds

Operating accounts payable

2,000,000－

Current portion of long-term loans payable

15,800,000

18,800,000

Accounts payable – other

10,862

11,935

Accrued expenses

778,790761,048

1,156

1,042

Income taxes payable

318,746

158,581

Advances received

Accrued consumption taxes

1,306,935

1,312,728

Deposits received

27,322

29,535Derivatives liabilities

6,028

4,176

20,501,429

21,281,381

Investment corporation bonds

21,600,000

20,300,000

Long-term loans payable

151,022,000

153,322,000

Lease and guarantee deposits in trust

15,152,472

15,147,763

Total current liabilities
Noncurrent liabilities

Derivatives liabilities
Total noncurrent liabilities
Total liabilities

10,484

39,240187,784,956

188,809,003

208,286,386

210,090,385

195,718,191

195,718,191

1,412,588

1,412,588

Net assets
Unitholders’ equity
Unitholders’ capital
Surplus
Voluntary retained earnings
Reserve for reduction entry
Total voluntary retained earnings
Unappropriated retained earnings
Total surplus

1,412,588

1,412,588

6,318,278

6,451,828

7,730,866

7,864,416

203,449,058

203,582,607

Deferred gains or losses on hedges

1,328,991

1,215,130

Total valuation and translation adjustments

1,328,991

1,215,130

Total net assets (Note8)

204,778,050

204,797,738

Total liabilities and net assets

413,064,436

414,888,123

Total unitholders’ equity
Valuation and translation adjustments

2

STATEMENT OF INCOME AND RETAINED EARNINGS(Unit: thousands of yen)
For the six months ended
January 31, 2024

July 31, 2023

Operating revenue
Rent revenues (Note12)
Other operating revenues (Note12)

9,538,463

9,625,377

264,526

213,524

Gain on transfer of real estate properties(Note12)

1,373,579

1,376,290

Total operating revenue

11,176,568

11,215,192

3,628,677

3,516,964

626,906

619,720

Operating expenses
Expenses related to properties (Note12)
Asset management fee
Directors’ compensation

8,400

8,400

Asset custody fee

10,372

10,381

Administrative service fees

16,037

16,162Other operating expenses (Note12)

82,75287,721

Total operating expenses

4,373,146

4,259,350

6,803,422

6,955,842

93

80

Gain on forfeiture of unclaimed dividends

1,211

942

Total non-operating income

1,304

1,023

Interest expenses

339,877

344,405

Interest expenses on investment corporation bonds

55,74052,950

10,251

8,790

105,796

118,569－

5,358

Operating income
Non-operating income
Interest income

Non-operating expenses

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

1,907

1,907

513,573

531,981

Ordinary income

6,291,153

6,424,883

Income before income taxes

6,291,153

6,424,883

1,170

1,055

Total non-operating expenses

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

3

(5)

(8)

1,164

1,046

6,289,988

6,423,836

28,28927,991

6,318,278

6,451,828

STATEMENT OF CHANGES IN NET ASSETSFor the six months ended January 31, 2024
(Unit: thousands of yen)
Unitholders’ equity
Surplus
Voluntary retained
earnings
Unappropria
Total
ted retained
Reserve forvoluntaryearnings
reduction
retainedentry
earnings

Total
surplusTotal
unitholders’equity6,451,828

7,864,416

203,582,607

Dividends from surplus(6,423,538)(6,423,538)(6,423,538)

Net income

6,289,988

6,289,988

6,289,988

Unitholders’capitalBalance at August 1, 2023

195,718,191

1,412,588

1,412,588

Change during the period

Net changes of items otherthan unitholders’ equity
Total changes of items during
the period
Balance at January 31, 2024

－

－

－

(133,549)(133,549)(133,549)

195,718,191

1,412,588

1,412,588

6,318,278

7,730,866

203,449,058

Valuation andtranslation adjustments
Deferred
gains orlosses onhedgesBalance at August 1, 2023

1,215,130

Total
valuationandtranslation
adjustments

Total net
assets1,215,130

204,797,738

Change during the period
Dividends from surplus(6,423,538)

Net income

6,289,988

Net changes of items otherthan unitholders’ equity
Total changes of items during
the period
Balance at January 31, 2024

113,860

113,860

113,860

113,860

113,860(19,688)

1,328,991

1,328,991

204,778,050

4For the six months ended July 31, 2023
(Unit: thousands of yen)
Unitholders’ equity

Unitholders’capitalBalance at February 1, 2023

195,718,191

Surplus
Voluntary retained
earnings
Unappropria
Total
ted retained
Reserve forvoluntaryearnings
reduction
retainedentry
earnings
833,304

833,304

579,283

579,283

6,432,918

Total
surplusTotal
unitholders’equity7,266,222

202,984,414

Change during the period
Reserve for reduction entry(579,283)－－

Dividends from surplus(5,825,643)(5,825,643)(5,825,643)

Net income

6,423,836

6,423,836

6,423,836

Net changes of items otherthan unitholders’ equity
Total changes of items during
the period
Balance at July 31, 2023－

579,283

579,283

18,909598,193598,193

195,718,191

1,412,588

1,412,588

6,451,828

7,864,416

203,582,607

Valuation andtranslation adjustments
Deferred
gains orlosses onhedgesBalance at February 1, 2023

2,170,819

Totalvaluationandtranslation
adjustments

Total net
assets2,170,819

205,155,234

Change during the period
Reserve for reduction entry－

Dividends from surplus(5,825,643)

Net income

6,423,836

Net changes of items otherthan unitholders’ equity
Total changes of items during
the period
Balance at July 31, 2023

(955,688)(955,688)(955,688)(955,688)(955,688)(357,495)

1,215,130

1,215,130

204,797,738

5

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

For the six months ended

January 31, 2024

July 31, 2023

Ⅰ. Unappropriated retained earnings

6,318,278,661

6,451,828,092

Ⅱ. Amount of Dividends

6,289,395,060

6,423,538,160

Amount of dividends per unit
Ⅲ. Retained earnings carried forwardPursuant

Method of calculating the amount ofdividends

to

the

3,282

3,352

28,883,601

28,289,932

terms

of

the

Pursuant

to

the

terms

of

the

distribution policy set forth in Article 37

distribution policy set forth in Article 37

(1)

(1)

of

the

Company’s

Articles

of

of

the

Company’s

Articlesof

Incorporation, the amount of dividends

Incorporation, the amount of dividends

shall be in excess of an amount equivalent

shall be in excess of an amount equivalent

to

to

90%

of

the

Company’s

earnings

90%

of

the

Company’s

earnings

available for dividends as defined inavailable for dividends as defined in

Article 67-15 of the Special Taxation

Article 67-15 of the Special Taxation

Measures Law, but not in excess of the

Measures Law, but not in excess of theamount of earnings as defined in Article

amount of earnings as defined in Article

136, Paragraph 1 of the Investment Trust

136, Paragraph 1 of the Investment Trust

Act. Based on such policy, the Company

Act. Based on such policy, the Company

decided to pay out dividends of earnings

decided to pay out dividends of earnings(6,289,395,060(6,423,538,160

yen),

which

is

the

yen),

which

is

the

maximum integral multiple of the total

maximum integral multiple of the total

number of investment units issued andnumber of investment units issued andoutstanding (1,916,330 units), out of theoutstanding (1,916,330 units), out of theamountamountremaining

after

reservingremaining

after

reservingretained earnings carried forward fromretained earnings carried forward fromthe unappropriated retained earnings.

the unappropriated retained earnings.

As a result, the Company declared
dividends per unit of 3,282 yen.

6

As a result, the Company declared
dividends per unit of 3,352 yen.

STATEMENT OF CASH FLOWS(Unit: thousands of yen)
For the six months ended
January 31, 2024

July 31, 2023

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

6,291,153

6,424,883

Depreciation and amortization

1,083,376

1,097,092

10,251

8,790

－

5,358

Amortization of investment corporation bonds issuance cost
Amortization of investment unit issuance cost
Interest income
Gain on forfeiture of unclaimed dividends
Interest expenses

(93)

(80)

(1,211)(942)

395,618

397,355

Decrease (increase) in operating accounts receivable

1,517(6,382)

Increase (decrease) in operating accounts payable

45,338(6,826)

Increase (decrease) in accounts payable – other(1,103)

537

Increase (decrease) in accrued expenses

8,557(52,928)

160,166(107,972)

Increase (decrease) in advances received(5,793)

13,776

Increase (decrease) in deposits received(2,213)(3,517)

Decrease (increase) in prepaid expenses

8,542(22,642)

Decrease (increase) in long-term prepaid expenses

99,4997,967

1,545,191

1,545,191(17,915)145

9,620,883

9,299,807

Increase (decrease) in accrued consumption taxes

Decrease in property, plant and equipment in trust due to sale
Other, net
SubtotalInterest income received
Interest expenses paid
Income taxes paid

93

80

(386,434)(399,856)(1,057)(884)

9,233,484

8,899,147

Purchase of property, plant and equipment in trust(186,943)(691,698)

Repayments of lease and guarantee deposits in trust(170,633)(56,290)

Proceeds from lease and guarantee deposits in trust

174,502141,259

Net cash provided by (used in) investing activities(183,073)(606,729)

Proceeds from long-term loans payable

5,900,000

9,200,000

Repayments of long-term loans payable

Net cash provided by (used in) operating activities
Net cash provided by (used in) investing activities

Net cash provided by (used in) financing activities(11,200,000)(9,200,000)

Proceeds from issuance of investment corporation bonds

3,281,980－

Cash dividends paid

(6,422,296)(5,824,808)

Net cash provided by (used in) financing activities(8,440,316)(5,824,808)

Net increase (decrease) in cash and cash equivalents

610,094

2,467,609

Cash and cash equivalents at beginning of the period

21,381,780

18,914,170

Cash and cash equivalents at end of the period (Note16)

21,991,874

21,381,780

7

NOTES TO FINANCIAL STATEMENTS
For the six months ended January 31, 2024 and July 31, 2023

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 (200 units),
and registration was approved based on Article 187 of the Act on Investment Trusts and Investment Corporations ofJapan (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 theTokyo Stock Exchange on November 30, 2006 (Securities Code: 3234).
The Company’s real estate portfolio as of January 31, 2024 was comprised of 11 properties under managementwith a total leasable floor area of 180,797.12m2. The Company has already invested 404,670 million yen (based on
acquisition price) into this portfolio. The occupancy rate as of January 31, 2024 was 97.2 %.

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

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

8(6) Revenue recognition
The details of main performance obligations concerning revenue generated from contracts between the
Company and its customers and the normal point in time to satisfy said performance obligations (normal point intime to recognize revenue) are as follows.
(a) Transfer of real estate
For the proceeds from transfer of real estate, the Company recognizes revenue when the purchaser who is acustomer obtains control of the relevant real estate as a result of the seller fulfilling its delivery obligations stipulated
in the transaction agreement of the real estate.
(b) Utilities income
The Company recognizes utilities income in accordance with the supply of electricity and water, etc. to thelessee who is a customer based on the lease agreement of real estate and details of agreements incidental to it. Of
the utilities income, in the case that the Company deems itself to be an agent, the net amount obtained by deducting
the amount it pays to other parties from the amount it receives as charges for electricity and gas, etc. supplied by
the said other parties is recognized as revenue.
(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 acquisition by
the Company until the end of the year. The Company reimbursed sellers of properties for the equivalent amount ofproperty 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 were none for the period ended January 31, 2024 and July 31, 2023,
respectively.
(8) Hedge accounting approach(a) Hedge accounting approach
Deferred hedge accounting is applied for interest rate swap transactions. However, special treatment is applied
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 the hedging
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 is omitted 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 pricefluctuation.

9(10) Accounting for trust beneficiary interest in real estate
For trust beneficiary 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 listed on
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; landin trust; construction in progress in trust; leasehold rights in trust; and other intangible assets in trust(c) Lease and guarantee deposits in trust(11) Non-deductible consumption taxes
Non-deductible consumption taxes related to the acquisition of assets are treated as the acquisition cost of
applicable assets.

4. PROPERTY AND EQUIPMENT
For the six months ended January 31, 2024

Property, plant and equipment(Unit: thousands of yen)Type of asset

Balance at
beginning of
the period

Amount ofincreaseduring theperiodAmount ofdecreaseduring theperiodBalance at
end of theperiodBuildings in trust

89,165,658

167,794

48,28689,285,167

25,307,503

1,028,977

63,977,663－

Structures in trust

1,001,726

2,214

－

1,003,940

389,733

9,292

614,207－

Machinery andequipment in trust

1,069,037

5,090

6,160

1,067,967

492,666

28,779575,300－

Tools, furniture andfixtures in trust

439,608

16,634

7,889

448,352

274,563

16,217

173,789－

293,951,302－

1,545,191

292,406,110－－

292,406,110

10,021

－

33

9,988

－

－

9,988

385,637,354

191,733

1,607,560

384,221,527

26,464,467

1,083,266

357,757,060

Leasehold rights
in trust

30,650,962－－

30,650,962－－

30,650,962－

Other intangible
assets in trust

1,092

－

－

1,092

454

109

637

－

Subtotal

30,652,054－－

30,652,054

454

109

30,651,599

Total

416,289,409

191,733

1,607,560

414,873,582

26,464,922

1,083,376

388,408,660

Land in trust
Construction inprogress in trust
Subtotal

Intangible
assets

Accumulated depreciation/
Accumulated amortization Net balance at
end of theRemarks
Depreciation
periodandamortization(Note) The amount of decrease during the period is primarily attributable to the transfer of a part of Laforet Harajuku (Land).

5. SHORT-TERM LOANS PAYABLE
For the six months ended January 31, 2024
Not applicable.

10(Note)－

6. INVESTMENT CORPORATION BONDS
For the six months ended January 31, 2024
(Unit: thousands of yen)
Bond
Twelfth Series
Unsecured
Investment
Corporation Bonds
Fourteenth 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)Twenty-first Series
Unsecured
Investment
Corporation Bonds(green bond)Twenty-second
SeriesUnsecured
Investment
Corporation Bonds(green bond)Twenty-third
SeriesUnsecured
Investment
Corporation Bonds(green bond)Twenty-fourth
SeriesUnsecured
Investment
Corporation Bonds(green bond)

Issue
date

Balance at
beginning of
the period

Amount ofincreaseduring theperiodAmount ofdecreaseduring theperiodBalance at
end of theperiodInterest
rate

Redemption
maturity
date

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

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

Feb. 22,2021

2,000,000－－

2,000,000

0.5000％Feb. 21,2031

Jul. 30,2021

1,800,000－－

1,800,000

0.4200％Jul. 30,
2031

Nov. 30,2021

1,500,000－－

1,500,000

0.4000％Nov. 28,
2031

Nov. 29,2023－

3,300,000－

3,300,000

0.4900％Nov. 27,2026

20,300,000

3,300,000－

23,600,000

Total

Use offunds

Collateral(Note 1)

none

(Note 1)

The funds are used for the acquisition cost of trust beneficiary interests, the repayment of loans payable and redemption of investment corporation(Note 2)

The redemption schedule of investment corporation bonds for each of the five years after the balance sheet date is as follows.

bonds.

(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

7,000,000

7,300,000

2,000,000－

11

7. LONG-TERM LOANS PAYABLE
For the six months ended January 31, 2024
(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

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－

3,000,000－

3,000,000

0.4260%Aug. 30, 2024

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

1,000,000－－

1,000,000

0.4100%Mar. 29, 2024－

1,300,000－

1,300,000

0.3760%Aug. 30, 2024

500,000－

500,000－

0.6529%Aug. 31, 2023

500,000－

500,000－

0.6529%Aug. 31, 2023

1,600,000－

1,600,000－

0.6155%

Nov. 30, 2023

1,500,000－－

1,500,000

0.4100%Mar. 29, 2024

600,000－－

600,000

0.4100%Mar. 29, 2024

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－

0.3315%

Aug. 31, 2023－

1,000,000－

1,000,000

0.1350%Nov. 29, 2024

1,000,000－－

1,000,000

0.4100%Mar. 29, 2024－

1,000,000－

1,000,000

0.4893%

Nov. 29, 2024

Aozora Bank, Ltd.

1,000,000－－

1,000,000

0.4100%Mar. 29, 2024

Sumitomo Mitsui
Banking
Corporation

500,000－

500,000－

0.6529%Aug. 31, 2023

800,000－－

800,000

0.4100%Mar. 29, 2024

SBI Shinsei Bank,
Limited

1,500,000－

1,500,000－

0.6155%

Nov. 30, 2023

Total

18,800,000

8,200,000

11,200,000

15,800,000

Use offunds

Remarks

Mizuho Bank, Ltd

The Norinchukin
Bank

The Bank ofFukuoka, Ltd.

MUFG Bank, Ltd

Unsecured/

Sumitomo Mitsui
Trust Bank, Ltd.

Development Bankof Japan Inc.
The Nishi-Nippon
City Bank, Ltd.

12

(Note 2)

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

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

Repayment
date

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

0.2796%

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

0.2130%Aug. 31, 2027

2,400,000－－

2,400,000

0.2160%Nov. 30, 2027

MUFG Bank, Ltd

Use offunds

Unsecured/(Note 2)

2,738,000－－

2,738,000

0.3524%

May 31, 2029

1,600,000－－

1,600,000

0.3500%Feb. 28, 2029

1,400,000－－

1,400,000

0.3550%Aug. 31, 2029

1,100,000－－

1,100,000

0.4580%Nov. 30, 2029

1,579,000－－

1,579,000

0.5600%Nov. 30, 2029

800,000－－

800,000

0.6000%

May 31, 2030－

500,000－

500,000

1.0670%Feb. 28, 2031－

500,000－

500,000

1.1025%

Nov. 29, 2030

13

Remarks

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

Balance at
beginning of
the period

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

Repayment
date

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－

0.4260%Aug. 30, 2024

1,400,000－－

1,400,000

0.4046%

Aug. 31, 2029

1,952,000－－

1,952,000

0.4046%

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

0.3590%Aug. 31, 2029

1,200,000－－

1,200,000

0.2410%Nov. 30, 2027

1,369,000－－

1,369,000

0.2350%

May 31, 2028

1,500,000－－

1,500,000

0.3170%Aug. 30, 2030

1,300,000－－

1,300,000

0.4244%

Nov. 29, 2030

3,000,000－－

3,000,000

0.3206%

May 23, 2031

1,114,000－－

1,114,000

0.3208%

May 30, 2031－

500,000－

500,000

0.3200%Nov. 30, 2032

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

0.3780%Aug. 31, 2028

1,440,000－－

1,440,000

0.3860%Nov. 30, 2028

1,099,000－－

1,099,000

0.3524%

May 31, 2029

1,500,000－－

1,500,000

0.3542%

Aug. 31, 2029

1,560,000－－

1,560,000

0.4580%Nov. 30, 2029

890,000－－

890,000

0.3708%

May 31, 2030

1,600,000－－

1,600,000

0.3208%

Nov. 29, 2030

2,200,000－－

2,200,000

0.2983%Mar. 31, 2031

Use offunds

Remarks

Unsecured/

Sumitomo Mitsui
Banking
Corporation

14(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

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

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

0.2100%Nov. 28, 2025

1,294,000－－

1,294,000

0.2268%May 29, 2026

1,040,000－－

1,040,000

0.2840%Nov. 30, 2026

1,117,000－－

1,117,000

0.2508%

May 31, 2027－

2,400,000－

2,400,000

0.2500%Aug. 31, 2028－

500,000－

500,000

0.2500%Nov. 30, 2028

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

0.3046%

Aug. 31, 2029

Use offunds

Remarks

Sumitomo Mitsui
Trust Bank, Ltd.

Resona Bank, Ltd

Unsecured/(Note 2)830,000－－

830,000

0.3000%

May 31, 2028

1,000,000－－

1,000,000

0.2370%Aug. 31, 2026

800,000－－

800,000

0.2733%Mar. 29, 2030

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

0.2546%

Nov. 30, 2028

1,000,000－－

1,000,000

0.2846%

May 20, 2030

500,000－－

500,000

0.1910%Jul. 30, 2027

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

0.3546%

May 22, 2028

1,000,000－－

1,000,000

0.3536%

Jul. 31, 2029

500,000－－

500,000

0.3733%Mar. 31, 2031－

1,500,000－

1,500,000

0.4200%Nov. 30, 2032

The Bank ofFukuoka, Ltd.

SBI Shinsei Bank,
Limited15

Unguaranteed(Unit: thousands of yen)
Lender

The Norinchukin
Bank

Development Bankof Japan Inc.

Mizuho Trust &Banking Co., Ltd.

The Nishi-Nippon
City Bank, Ltd.

Shinkin Central
Bank

Chugoku BankLtd.

MitsubishiUFJ Trustand Banking
Corporation(Note 3)

Balance at
beginning of
the period

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

Repayment
date

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

1,000,000－－

1,000,000

0.3536%

Jul. 31, 2029

1,000,000－－

1,000,000

0.4233%Mar. 31, 2032

750,000－－

750,000

0.6430%Feb. 26, 2027

500,000－－

500,000

0.6670%Aug. 31, 2027

2,000,000－－

2,000,000

0.4046%

Nov. 30, 2028

1,700,000－－

1,700,000

0.4200%Mar. 31, 2032

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

500,000－－

500,000

0.3733%Mar. 31, 2032

1,000,000－

1,000,000－

0.4893%

Nov. 29, 2024

500,000－－

500,000

0.5400%Aug. 29, 2025

1,000,000－－

1,000,000

0.5725%

May 20, 2030

700,000－－

700,000

0.4886%

Jul. 31, 2031

800,000－－

800,000

0.4708%Aug. 31, 2032

1,000,000－－

1,000,000

0.3033%

Sep. 29, 2028

1,600,000－－

1,600,000

0.3908%

Nov. 29, 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

0.2780%Jul. 31, 2028

1,500,000－－

1,500,000

0.4533%Mar. 31, 2033

16

Use offunds

Remarks(Note 2)

Unsecured/
Unguaranteed(Unit: thousands of yen)
Balance at
beginning of
the period

LenderAozora Bank, Ltd.

(Note 1)

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

Repayment
date

1,000,000－－

1,000,000

0.3736%

Jul. 31, 2029

1,000,000－－

1,000,000

0.2733%Mar. 29, 2030

1,000,000－－

1,000,000

0.3710%Nov. 30, 2027

1,000,000－－

1,000,000

0.4800%

May 22, 2028

1,000,000－－

1,000,000

0.2800%Jul. 31, 2028

1,000,000－－

1,000,000

0.3708%

May 31, 2032

153,322,000

5,900,000

8,200,000

151,022,000

The Hiroshima
Bank, Ltd.
The Oita Bank,
Ltd.
Nippon Life
Insurance
Company
Mitsui Sumitomo
Insurance
Company,
LimitedThe Bank of
Yokohama, Ltd.
Total

Amount ofincreaseduring theperiodUse offunds

Remarks(Note 2)

Unsecured/
Unguaranteed“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 beneficiary interests, the refinancing of loans payable, redemption of investment
corporation bonds and related expenses.

(Note 3)

Loan payable from Mitsubishi UFJ Trust and Banking Corporation was reattributed to the trust account.

(Note 4)

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

Long-term loans payable

Due after 1 year,
but within 2 years

Due after 2 years,
but within 3 years

Due after 3 years,
but within 4 years

Due after 4 years,
but within 5 years

17,194,000

19,884,000

24,527,000

31,377,000

8. NET ASSETS
Minimum net assets
The Company is required to maintain net assets of at least 50,000 thousand yen pursuant to the Investment Trust Act.

17

9. INCOME TAXES(1) Breakdown of significant components of deferred tax assets and deferred tax liabilities(Unit: thousands of yen)
As ofJanuary 31, 2024

July 31, 2023

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

27

21

5,194

13,659Subtotal deferred tax assets

5,222

13,680

Valuation allowance(5,194)(13,659)

27

21

27

21

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, 2024
Statutory tax rate

July 31, 2023
31.46%

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

Others

0.01%

0.01%

Effective tax rate

0.02%

0.02%

10. PER UNIT INFORMATION
For the six months ended
January 31, 2024

July 31, 2023

Net assets per unit (yen)106,859

106,869

Net income per unit (yen)

3,282

3,352

(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, 2024
Net income (thousands of yen)

July 31, 2023
6,289,988

6,423,836－－

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

6,289,988

6,423,836

Average number of investment units
during the period (units)

1,916,330

1,916,330

Amounts not attributable to common
unitholders (thousands of yen)18

11. RELATED PARTY TRANSACTIONS(1) Parent company and major corporate unitholders
For the six months ended January 31, 2024

Type

Name

Capital stockorinvestments
Locationin capital(thousands ofyen)

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

Amount oftransaction
Description of(thousands oftransactionyen)(Note 1)
Transfer ofproperty(Note 2)
(Note 6)

Other
relatedcompany(Note 1)Mori
MinatoBuilding
ku, TokyoCo., Ltd.

89,500,000

Real estatebusiness

15.0%
directly
held byrelatedparty

Leasing andmanagement ofreal estate

Leasing ofproperties(Note 3)(Note 7)
Payment ofproperty
operation andmanagement
fees(Note 8)Deposit of leaseand guarantee(Note 5)(Note 9)2,926,000

Account
item

Balanceat end of theperiod(thousandsof yen)－－Advances
1,171,981
received
Lease and
6,425,108
guarantee
10,360,591
deposits
in trust
Prepaid
4,934
expenses
267,806
Operating(Note 4)accounts
57,718payable－Lease andguarantee
deposits
in trust

53,886

The amount does not include consumption taxes.

(Note 2)

Part of Laforet Harajuku (Land)(Note 3)

Roppongi Hills Mori Tower, ARK Mori Building, Atago Green Hills and Toranomon Hills Mori Tower(Note 4)

The amount includes fees (5,345 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)

Transfer decisions are made in accordance with the provisions of the Related Parties Transaction Guidelines stipulated by theCompany’s Asset Manager and compliance regulations. Furthermore, transfers are not made at a value below 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.

19

For the six months ended July 31, 2023

Type

Name

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

Amount oftransaction
Description of(thousands oftransactionyen)(Note 1)
Transfer ofproperty(Note 2)
(Note 6)
Leasing ofproperties(Note 3)(Note 7)

Other
relatedcompany(Note 1)Mori
MinatoBuilding
ku, TokyoCo., Ltd.

89,500,000

Real estatebusiness

15.0%
directly
held byrelatedparty

Payment of
Leasing andproperty
management of operation andreal estate
management
fees(Note 8)
Payment ofotheroperatingexpenses(Note 9)Deposit of leaseand guarantee(Note 5)(Note 10)2,926,000

Balanceat end of the
Account
perioditem(thousandsof yen)－－Advances
1,170,080
received
Lease and
6,425,108
guarantee
10,360,591
deposits
in trust
Prepaid
5,878
expenses
277,542
Operating(Note 4)accounts
53,706payable

1,189

－

－

Lease andguarantee
deposits
in trust－

53,886

The amount does not include consumption taxes.

(Note 2)

Part of Laforet Harajuku (Land)(Note 3)

Roppongi Hills Mori Tower, ARK Mori Building, Atago Green Hills and Toranomon Hills Mori Tower(Note 4)

The amount includes fees (23,505 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)

Transfer decisions are made in accordance with the provisions of the Related Parties Transaction Guidelines stipulated by theCompany’s Asset Manager and compliance regulations. Furthermore, transfers are not made at a value below 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(Note 9)The Company decides on transactions in light of the market situation, the content of services provided, overall operational capacity

provided, overall operational capacity and other factors.
and other factors.
(Note 10) 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.

20

(2) Subsidiaries and affiliates
For the six months ended January 31, 2024
Not applicable.
For the six months ended July 31, 2023
Not applicable.
(3) Subsidiaries of parent company
For the six months ended January 31, 2024

Type

Name

Capital stock
Percentage
Amount ofBalanceorof votingRelationshiptransaction
at end ofinvestments Description of rights held
Description of
Account
with(thousands ofthe period
Locationin capitalbusinessin (by)transaction
item
related party
yen)(thousands(thousands ofrelated(Note 1)of yen)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 3)
directors

626,906

Accruedexpenses

689,596(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 the Company’s
Asset Manager.

[Transaction terms and conditions and related policies](Note 3)

The Company decides on transactions in light of the market situation, the content of services provided, overall operational capacityand other factors.

For the six months ended July 31, 2023

Type

Name

Capital stock
Percentage
Amount ofBalanceorof votingRelationshiptransaction
at end ofinvestments Description of rights held
Description of
Account
Locationwith(thousands ofthe period
in capitalbusinessin (by)transaction
item
related party
yen)(thousands(thousands ofrelated(Note 1)of yen)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 3)
directors

619,720

Accruedexpenses

681,692(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 the Company’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.

21

(4) Directors and major individual unitholders
For the six months ended January 31, 2024

Type

Name

Directors
and their
close
relatives

Capital stock
Percentage
Amount oforof votingDescription ofRelationshiptransaction
investments
rights held
Description ofbusiness or
with
Location(thousandsin capitalin (by)transactionof yen)position
related party(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)626,906

Account
item

Balanceat end ofthe period(thousandsof yen)Accruedexpenses

689,596(Note 1)

The amount does not include consumption taxes.

(Note 2)The transaction was conducted with Hideyuki Isobe as third-party representative (Mori Building Investment Management Co., Ltd.)and the amount of management fees is provided in the “Asset Management Contract” concluded between the Company and theCompany’s Asset Manager.

[Transaction terms and conditions and related policies](Note 3)

The Company decides on transactions in light of the market situation, the content of services provided, overall operational capacityand other factors.

For the six months ended July 31, 2023

Type

Name

Directors
and their
close
relatives

Capital stock
Percentage
Amount oforof votingtransaction
Description ofRelationshipinvestments
rights held
Description ofbusiness orwith(thousands
Locationin 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)

619,720

Account
item

Balanceat end ofthe period(thousandsof yen)Accruedexpenses

681,692(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.

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

Breakdown of property operating income
For the six months ended
January 31, 2024
A.

July 31, 2023

Property operating revenue
Rent revenues
Rent and common area revenue

9,532,656

Other rent revenue

9,619,687

5,806

9,538,463

5,689

9,625,377

Other operating revenues
Parking revenue

53,26656,670Utilities and other revenue

152,146

156,853

Cancellation penalty

59,113

264,526
9,802,989

Total property operating revenue
B.

213,524－

9,838,901

Property operating expenses
Expenses related to properties
Property management fees

1,220,986

Property taxes

814,603809,311

Utilities

148,292

159,236

Maintenance and repairs

119,066

61,214

Insurance premium

22,171

21,331

Custodian fees
Depreciation and amortization

C.

1,196,715

5,912

8,176

1,083,376

1,097,092

Rent expenses

153,299

Other lease business expenses

60,968148,2703,628,677

15,614

3,516,964

Total property operating expenses

3,628,677

3,516,964

Property operating income [A − B]

6,174,311

6,321,937(Unit: thousands of yen)Transactions with major unitholders
For the six months ended
January 31, 2024

July 31, 2023

From operating transactions
Rent revenues

6,425,108

6,425,108

Gain on transfer of real estate properties

1,373,579

1,376,290

262,460

254,037－

1,189

Expenses related to properties
Other operating expenses

Breakdown of gain on transfer of real estate properties(Unit: thousands of yen)

For the six months ended January 31, 2024
Laforet Harajuku (Land)
Revenue from transfer of real estate properties

2,926,000

Cost of transfer of real estate properties

1,545,191
7,229

Other transfer expenses

1,373,579

Gain on transfer of real estate properties

23

For the six months ended July 31, 2023
Laforet Harajuku (Land)
Revenue from transfer of real estate properties

2,926,000

Cost of transfer of real estate properties

1,545,191
4,517

Other transfer expenses

1,376,290

Gain on transfer of real estate properties

13. UNITHOLDERS’ EQUITY
For the six months ended
January 31, 2024

July 31, 2023

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

1,916,330 units

14. 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 theCompany.
(c) Supplementary explanation on matters concerning fair value of financial instruments
Certain assumptions, etc. are used in calculating the fair value of financial instruments, and there can be cases
where the values may vary based on different assumptions, etc. In addition, concerning the contract amount ofderivative transactions in “Derivative transactions” below the amount itself does not represent the value of themarket risks associated with the derivative transactions.

24

(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, 2024. Furthermore, notes on “Cash and deposits,” “Cash and deposits in trust” are omitted as these aresettled with cash and within a short period of time and thus the fair value approximates the book value. Notes on"Lease and guarantee deposits in trust" is also omitted as it lacks materiality.
(Unit: thousands of yen)
Carrying amount

Fair value

Difference(a) Current portion of investment corporation bonds

2,000,000

2,008,400

8,400(b) Current portion of long-term loans payable

15,800,000

15,800,000－(c) Investment corporation bonds

21,600,000

21,330,720(269,280)(d) Long-term loans payable

151,022,000

150,838,832(183,167)

Total

190,422,000

189,977,952(444,047)

Derivative transactions (Note1)

1,328,991

1,328,991－

The following are the carrying amount, fair value and the difference between them of financial instruments as ofJuly 31, 2023. Furthermore, notes on “Cash and deposits,” “Cash and deposits in trust” are omitted as these aresettled with cash and within a short period of time and thus the fair value approximates the book value. Notes on"Lease and guarantee deposits in trust" is also omitted as it lacks materiality.
(Unit: thousands of yen)
Carrying amount(a) Current portion of investment corporation bonds

Fair value

Difference

－

－

－

(b) Current portion of long-term loans payable

18,800,000

18,808,554

8,554(c) Investment corporation bonds

20,300,000

20,087,300(212,700)(d) Long-term loans payable

153,322,000

153,154,097(167,902)

Total

192,422,000

192,049,952(372,047)

Derivative transactions (Note1)

1,215,130

1,215,130－(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
Liabilities(a) Current portion of investment corporation bonds; (c) Investment corporation bonds
The fair value of these is based on market prices.
(b) Current portion of long-term loans payable; (d) 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.

25

(Note 3)

Investment corporation bonds and long-term loans payable scheduled to be due after the balance sheet date (as of January 31, 2024)

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

7,000,000

7,300,000

2,000,000－

5,300,000

Long-term loans payable

15,800,000

17,194,000

19,884,000

24,527,000

31,377,000

58,040,000

17,800,000

24,194,000

27,184,000

26,527,000

31,377,000

63,340,000

Total

Investment corporation bonds and long-term loans payable scheduled to be due after the balance sheet date (as of July 31, 2023)

Due within
1 yearInvestment corporation bonds
Long-term loans payable
Total

Due 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－

4,000,000

5,000,000

6,000,000－

5,300,000

18,800,000

17,334,000

19,104,000

18,723,000

28,943,000

69,218,000

18,800,000

21,334,000

24,104,000

24,723,000

28,943,000

74,518,000

15. DERIVATIVE TRANSACTIONS(1) Transactions for which hedge accounting is not applied
As of January 31, 2024
Not applicable
As of July 31, 2023
Not applicable(2) Transactions for which hedge accounting is applied
As of January 31, 2024
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

Type ofderivative transactionMainhedged item

Principle
methodInterest rate swap
transactions
Floating receivable;
Fixed payable

Long-termloans payable

Contract amountDue after 1 year
119,483,00026

103,683,000

Fair value

Method of calculating
the fair value

1,328,991

Based on the quoted
price obtained fromcounterparty financial
institutions.

As of July 31, 2023
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

Long-termloans payable

118,366,000

108,366,000

Long-termloans payable

8,800,000－

Fair value

Method of calculating
the fair value

1,215,130

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 to Liabilities(b) and (d) 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).

16. CASH AND CASH EQUIVALENTS
Relationship between cash and cash equivalents at end of the period in the statement of cash flows and cash
and deposits stated in the balance sheet(Unit: thousands of yen)
For the six months ended
January 31, 2024

July 31, 2023

Cash and deposits

16,334,764

16,049,336

Cash and deposits in trust

5,657,110

5,332,444

Cash and cash equivalents

21,991,874

21,381,780

17. LEASESOperating lease transactions (as lessor)
Future minimum rent revenues under existing non-cancelable lease agreements(Unit: thousands of yen)
As ofJanuary 31, 2024

July 31, 2023

Due within 1 year

4,023,935

4,258,333

Due after 1 year

5,692,667

6,564,159

9,716,603

10,822,492

Total

27

18. INVESTMENT AND RENTAL PROPERTIESThe Company owns real estate (primarily office buildings and residential and retail properties) available for leasein Tokyo. The following are the carrying amount, amount of increase (decrease) during the period and fair value at endof the period for these investment and rental properties.
(Unit: thousands of yen)
For the six months ended
January 31, 2024

July 31, 2023

Carrying amount
Balance at beginning of the period

390,891,153

392,815,826

Amount of increase (decrease)during the period(2,482,493)(1,924,673)

Balance at end of the period

388,408,660

390,891,153

493,742,000

496,940,000

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, 2024, the decrease is primarily attributable to the transfer of theproperty (Laforet Harajuku (Land) (1,545,191 thousand yen) and attributable to depreciation and amortization.
Of the increase (decrease) during the period ended July 31, 2023, the decrease is primarily attributable to the transfer of the property(Laforet Harajuku (Land) (1,545,191 thousand yen) and 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 andexpenses”

19. Revenue Recognition(1) Breakdown of information on revenue from contracts with customers
For the six months ended January 31, 2024
(Unit: thousands of yen)
Revenue from Contracts with Customers(Note 1)2,926,000

Transfer of real estate, etc. (Note 2)
Utilities income (Note 3)
Other
Total
(Note 1)

Sales to External Customers
1,373,579

100,554

100,554－

9,702,434

3,026,554

11,176,568

Rent revenues, etc. subject to the “Accounting Standard for Lease Transactions” (Corporate Accounting Standard No. 13) and thetransfer of real estate, etc. subject to the “Practical Guidelines on Accounting by Transferors for Securitization of Real Estate Using
Special Purpose Companies” (Accounting System Committee Report No. 15 of the Japanese Institute of Certified Public Accountants)are excluded from “Revenue from contracts with customers” as such revenue is not subject to Accounting Standard for Revenue
Recognition. Revenue from contracts with customers mainly represents proceeds from transfer of real estate and utilities income.

(Note 2)For the transfer of real estate, etc., the amount obtained by subtracting the cost of transfer of real estate, etc. and other transfer
expenses from the proceeds from transfer of real estate, etc. is indicated to record the amount as gain on transfer of real estate, etc.
in the statement of income and retained earnings based on Article 48, Paragraph 2 of the Ordinance on Accountings of Investment
Corporations (Cabinet Office Ordinance No. 47 of 2006).

(Note 3)

Utilities income indicates the amount recorded as revenue in accordance with the supply of electricity and water, etc. to the lessee
who is a customer based on the lease agreement of real estate and details of agreements incidental to it.

28For the six months ended July 31, 2023
(Unit: thousands of yen)
Revenue from Contracts with Customers

Sales to External Customers(Note 1)2,926,000

Transfer of real estate, etc. (Note 2)
Utilities income (Note 3)
Other
Total
(Note 1)

1,376,290

103,051

103,051－

9,735,850

3,029,051

11,215,192

Rent revenues, etc. subject to the “Accounting Standard for Lease Transactions” (Corporate Accounting Standard No. 13) and thetransfer of real estate, etc. subject to the “Practical Guidelines on Accounting by Transferors for Securitization of Real Estate Using
Special Purpose Companies” (Accounting System Committee Report No. 15 of the Japanese Institute of Certified Public Accountants)are excluded from “Revenue from contracts with customers” as such revenue is not subject to Accounting Standard for Revenue
Recognition. Revenue from contracts with customers mainly represents proceeds from transfer of real estate and utilities income.

(Note 2)For the transfer of real estate, etc., the amount obtained by subtracting the cost of transfer of real estate, etc. and other transfer
expenses from the proceeds from transfer of real estate, etc. is indicated to record the amount as gain on transfer of real estate, etc.
in the statement of income and retained earnings based on Article 48, Paragraph 2 of the Ordinance on Accountings of Investment
Corporations (Cabinet Office Ordinance No. 47 of 2006).

(Note 3)

Utilities income indicates the amount recorded as revenue in accordance with the supply of electricity and water, etc. to the lessee
who is a customer based on the lease agreement of real estate and details of agreements incidental to it.

(2) Information that provides a basis for understanding revenue from contracts with customers
For the six months ended January 31, 2024
As described in the notes on matters related to significant accounting policies.
For the six months ended July 31, 2023
As described in the notes on matters related to significant accounting policies.
(3) Information on relationship of satisfaction of performance obligations based on contracts with customers with cash
flow generated from said contracts and amount and period of revenue expected to be recognized in the next fiscal
period or thereafter from contracts with customers existing at the end of the fiscal period(a) Balance of contract assets and contract liabilities, etc.
(Unit: thousands of yen)

Claims generated from contracts with customers

For the six months

For the six months

ended January 31, 2024

ended July 31, 2023

18

421

245

18

Contract assets (balance at beginning of fiscal period)－－

Contract assets (balance at end of fiscal period)－－

Contract liabilities (balance at beginning of fiscal period)－－

Contract liabilities (balance at end of fiscal period)－－(balance at beginning of fiscal period)
Claims generated from contracts with customers(balance at end of fiscal period)

29

(b) Transaction value allocated to the remaining performance obligations
For the six months ended January 31, 2024
Not applicable.
With regard to utilities revenue, as the Company has the right to receive from customers an amount directly
corresponding to the value for the lessees, or customers, of sections for which performance is complete by the endof the fiscal period, the amount it has the right to claim is recognized as revenue in accordance with Paragraph
19 of the Implementation Guidance on Accounting Standard for Revenue Recognition. Accordingly, such is notincluded in the note on transaction value allocated to remaining performance obligations through application of
the provisions of Paragraph 80-22 (2) of the Accounting Standard for Revenue Recognition.
For the six months ended July 31, 2023
As of July 31, 2023, the total amount of the transaction price allocated to remaining performance obligations
pertaining to the transfer of real estate, etc. is 2,926,000 thousand yen due to real estate, etc. for which a transfer
agreement was concluded on March 17, 2023. The Company expects to recognize revenue for these performanceobligations due to the transfer of trust beneficiary interest (7% quasi co-ownership interest) of the above realestate, etc., which was planned for December 1, 2023.
With regard to utilities income, as the Company has the right to receive from customers an amount directly
corresponding to the value for the lessees, or customers, of sections for which performance is complete by the endof the fiscal period, the amount it has the right to claim is recognized as revenue in accordance with Paragraph
19 of the Implementation Guidance on Accounting Standard for Revenue Recognition. Accordingly, such is notincluded in the note on transaction value allocated to remaining performance obligations through application of
the provisions of Paragraph 80-22 (2) of the Accounting Standard for Revenue Recognition.

20. 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, 2024
(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.

7,798,687

30

Related segment
Real estate leasing businessFor the six months ended July 31, 2023
(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.

Related segment

7,801,399

Real estate leasing business21. FEES TO ACCOUNTING AUDITOR(Unit: thousands of yen)
For the six months ended

For the six months ended

January 31, 2024

July 31, 2023

Audit fees (Note 1)

13,20013,200Non-audit fees (Note 2)

2,800

－

(Note 1) Audit fees include the fees for the audit of the English financial statements (2,000 thousand yen for the six months ended January
31, 2024, and 2,000 thousand yen for the six months ended July 31, 2023).
(Note 2) Non-audit fees to those belonging to the same network as the accounting auditor amount to 2,600 thousand yen for the six months
ended January 31, 2024, and 2,600 thousand yen for the six months ended July 31, 2023.

3122. SUBSEQUENT EVENTSAsset transfer
The Company made the resolution at its Board of Directors’ meeting held on March 15, 2024, to additionallytransfer a part of Laforet Harajuku (Land).
The buyer Mori Building Co., Ltd. constitutes an interested party, etc. of the Company’s Asset Manager, and thetransaction constitutes a transaction with an interested party, etc. as defined in the Investment Trust Act. Accordingly,
to comply with applicable laws and regulations and with the asset management agreement, as well as to prevent theinterests of the Company from being negatively impacted with respect to the transfer price and other terms and conditions,
the Asset Manager has taken steps pursuant to the Related Parties Transaction Guidelines.
(i) Overview of Transfer
Property name

Laforet Harajuku (Land)
Trust beneficiary interest (Note 1) ((1): 7%

Trust beneficiary interest (Note 1) ((2): 7%

quasi co-ownership interest)

quasi co-ownership interest)

Book value

1,545 million yen (Note 2)

1,545 million yen (Note 2)

Transfer price

2,968 million yen (Note 3)

2,968 million yen (Note 3)

Gain (loss) on transfer

1,417 million yen (Note 4)

1,414 million yen (Note 4)

Sales agreement date

March 15, 2024

Anticipated Transfer dateJuly 1, 2024

Buyer

Mori Building Co., Ltd

Asset to be transferred

November 29, 2024

(Note 1) The Company plans to transfer trust beneficiary interest in ownership of land (land of Laforet Harajuku; hereafter the “Property”)
to which fixed-term business-use leasehold rights are attached for the purpose of owning retail and other facilities. However, theCompany will continue to hold the remaining 58% of the quasi co-ownership interest in the trust beneficiary interest.
(Note 2) Book value indicates the estimate of the book value of the property as of the anticipated transfer date based on the book value asof January 31, 2024. The same shall apply hereafter.
(Note 3) The transfer price does not include transfer-related costs and other expenses. The same shall apply hereafter.
(Note 4) The gain (loss) on transfer represents the amount obtained by deducting the book value and transfer-related costs from the transfer
price above. The same shall apply hereafter.

32

(ii) Details of the Asset to be transferred
Details of the Asset to be transferred
Laforet Harajuku (Land)

Property name

Trust beneficiary interest ((1): 7% quasi co-ownership interest
Type of specified asset(transfer on July 1, 2024) and (2): 7% quasi co-ownership interest(transfer on November 29, 2024))

Trustee

Sumitomo Mitsui Trust Bank, Ltd.

Trust establishment period

From July 1, 2022 to July 31, 2042

Location (Residential indication)

1-11-6 Jingumae, Shibuya-ku, Tokyo

Area (Note 1)

2,565.06 m2

Form of ownership

Ownership(1)：1,545 million yen

Book value(2)：1,545 million yen(1)：2,968 million yen

Transfer price(2)：2,968 million yen(1)：1,417 million yen

Gain (loss) on transfer(2)：1,414 million yen
Appraiser

Appraisal

Appraisalvalue (Note 2)

Anticipated Transfer dateJapan Real Estate Institute
5,936 million yen (Appraisal date: February 1, 2024)(1)：July 1, 2024
(2)：November 29, 2024 (Note 3)

Content of lease (As of March 15, 2024)
LesseeMori Building Ryutsu System Co., Ltd.

Type of agreement

Fixed-term business-use land lease agreement

Term of agreement

From September 15, 2010 to September 14, 2030
(20 years)

Gross rent income (annual rent) (Note 4)

186,984,000 yen

Deposits/ Guarantees

None

Total leasable floor area (Note 5)359.11 m2

Total leased floor area
(Note 6)
Other special consideration

359.11 m2
None(Note 1) Area is the area of the entire site as indicated in the real estate registry.
(Note 2) The appraisal value represents the figure for the 14% quasi co-ownership interest in the trust beneficiary interest.
(Note 3) Regardless of anticipated transfer date, December 1, 2024, is the beginning date when revenue and cost of the asset to betransferred will be attributed to the buyer.
(Note 4) The gross rent income (annual rent) represents the figure obtained by multiplying the monthly rent indicated in the rent review
memorandum related to the agreement for establishing the fixed-term business-use leasehold rights by the 14% quasi co-ownershipinterest in the trust beneficiary interest, rounding down the amount below the unit and multiplying that amount by 12.
(Note 5) The total leasable floor area represents the figure obtained by multiplying the floor area deemed leasable to the lessee by the 14%
quasi co-ownership interest in the trust beneficiary interest, rounded to the second decimal place.
(Note 6) The total leased floor area represents the figure obtained by multiplying the floor area leased to the lessee by the 14% quasi coownership interest in the trust beneficiary interest, rounded to the second decimal place.
(Note 7) In the case either the Company or Mori Building Co., Ltd, which is the buyer, is to transfer the quasi co-ownership interest in trust
beneficiary interest it holds to a third party, written approval from the other holder(s) of the quasi co-ownership interest isnecessary.

33