SEMIANNUAL REPORTFiscal Period Ended February 28, 2019

Financial Highlights
for the Fiscal Period Ended February 28, 2019

Distributions Per Unit
(JPY)

Operating Revenues(JPY millions)

Net Income(JPY millions)

5,492

2,493

1,170

Portfolio Size
(JPY millions)

Period-Average Occupancy

Loan-to-Value Ratio

Average Debt Cost

83,219

99.9%

27.0%

0.47%

SEMIANNUAL REPORT

1

Credit Rating

JCR AA(Stable)

Message from the Management

I would like to take this opportunity to thank our unitholders for their support towards Mitsubishi Estate Logistics REIT Investment
Corporation (MEL).
In April 2019, I was appointed president of the asset management company Mitsubishi Jisho Investment Advisors Inc. (“MJIA”).
Thanks to the continued support of its numerous stakeholders, including unitholders, we have the honor of being able to announce MEL’s
financial results for its fifth fiscal period, ended February 28, 2019.
From 2001, I spent seven years handling investor relations at Japan Real Estate Asset Management, which was the first J-REIT asset
management company in Japan to be publicly listed and, like ourselves, was sponsored by Mitsubishi Estate Co., Ltd. (“MEC”). My
numerous exchanges of opinion with unitholders at the time played a major role in shaping the “customer-first” orientation I have carriedforward since that time. I am delighted to return again to the real estate investment management business.
As in the past, we will continue to engage closely in dialogue with unitholders as we strive to enhance unitholder value by fulfilling our
mission as an investment company to provide steady and stable growth.

Haruhiko Araki
President & CEO
Mitsubishi Jisho Investment Advisors, Inc.

Thank you for your support of Mitsubishi Estate Logistics REIT Investment Corporation.
During the fiscal period under review, we acquired two properties (Logicross Atsugi and Logicross Kobe Sanda) from our sponsor, MEC,
through a follow-on offering at the beginning of the period. This move has allowed us to expand our scale of assets and increase
distributions. We also grew steadily, thanks to an increase in rents for the second consecutive period since our IPO and to theimplementation of a series of measures to promote internal growth.
Along with our results for the period, we announced our new investment plans with the aim of clarifying our policy directions going
forward. Unit investment prices have been bearish since the follow-on offering announced in August 2018. We are well aware of theconcern unitholders have felt during this period. After considering a variety of measures, we have decided to embark on a “Three Pillars”(note) policy comprising a growth-oriented stance and immediate measures.
In line with the first of these three pillars, we will engage in dialogue, prioritizing common interests with our unitholders.
I ask for your ongoing support.

Masaki Sakagawa

Haruhiko Araki

Masaki Sakagawa

Executive Director
Mitsubishi Estate Logistics REIT Investment Corporation
Executive Vice President, General Manager,
Logistics REIT Management Department of Mitsubishi Jisho Investment Advisors, Inc.
Note: Please see p.4 for details.

S E M I A N N U A L

R E P O RT

2

Our Strength“HYBRID” Style and Focus on Sponsor’s Pipeline

Development / Facilities Management

Investment / Asset Management

SponsorOverview

Asset Management Company

Dedicated to city development in the Marunouchi
area (Tokyo) for over 120 years

Established in 2001, when the scheme of realestate securitization was emerging in Japan

Contributing to society through a variety ofbusiness activities as a comprehensive real estatedeveloper

Its track record includes structuring and managing
various types of real estate funds, including thelargest private REIT in Japan

Overview

Promoting the logistics facility business as a
growth area

SupportProven track records in a variety of asset types ininvestment and asset management

Unique property sourcing capacity with discerning
judgement

Constant supply of pipeline properties as thesponsor through its business of developing andmanaging advanced types of logistics facilities

SupportUtilization of MEC group’s know-how andcorporate customer relations in the leasing activities

S E M I A N N U A L

Flexible acquisition strategy using a wide range ofschemes, including bridge funds
Competitive real estate fund management
capability backed by a diverse deal track record

R E P O RT

3

Management Plan Designed to Maximize Unitholders’ Value in Med- to -Long Term

New Management Policy based on “Three Pillars”
Measures Implemented

1

Alignment
Align interest with investors

Introduced asset
management fee fully
linked to investment
unit price

Measures for Future Consideration

Initiatives for ESG;
promote green
portfolio

Introduction of cumulative investment
Buyback investment units(Guidelines have already been organized)

2

Discipline
Disciplined growth3

HybridEnhance MEL’s uniquestrategy-the hybrid model

External growth without
damaging portfolio yields

Flexible financing
Property acquisition utilizing LTV

Flexible
propertyacquisition
throughutilizingbridge funds
Securedpipelines
through MJIA
sourcing

S E M I A N N U A L

Personnel
exchange
withTokyo Ryutsu
Center (“TRC”)

R E P O RT

4

Increase pipeline properties
from sponsor
Enhance collaboration with TRC

Asset Management Fee Fully Linked to Investment Unit Price

MEL’s Asset Management Fee Structure
Asset Management Fee Ⅰ(AUM-linked)

Total assets as of the end of previous period x 0.2% (upper limit)

Asset Management Fee Ⅱ(NOI-linked)

Adjusted NOI x 5.0% (upper limit)
Adjusted net income before tax x net income before tax per unit x 0.001% (upper limit)

Asset Management Fee Ⅲ(Unitholder interest-linked)

Introduced of “investment unit price-linked management fee”
Performance against TSE REIT Index ((a) – (b)) x market capitalization (for fiscal period of each term) x 0.1% (upper limit)(a) : Fluctuations in MEL’s investment unit price (incl. dividends)(b) : Fluctuations in the TSE REIT Index (incl. dividends)

First J-REIT to Introduce Asset Management Fee Fully Linked to Investment Unit PerformanceStrengthen the linkage between the Asset Management Company and unitholderinterest by giving incentives to Asset Management Company for improving
unitholder interest. Align both parties interest by introducing an asset
management fee reflecting above performance.
Investment unit price
JPY 262,100
3,851.10 pts

JPY 262,100
3,851.10 pts
Mar. 29, 2019

Calculation Period

Reference date(Previous period)

Reference date(Present period)

DPU to include

FP Ending Feb. 2020

Last business dayof Mar. 2019

Last business day
of Sept. 2019

FP Ending Aug. 2019

FP Ending Aug. 2020

Last business day
of Sept. 2019

Last business dayof Mar. 2020

FP Ending Feb. 2020

TSE REIT Index (incl. dividends)
+DPU

+DPU

If MEL’s growth rateis greater(a)-(b)=positive↓
Increase Fee
If TSE REIT Index
growth rate is greater(a)-(b)=negative↓
Decrease Fee

Sep. 30, 2019

S E M I A N N U A L

For the period ending February 2020
< Example >■ Closing price of MEL’s investment unit as of Mar. 29, 2019 : JPY 262,100■ TSE REIT Index (incl. dividends) as of Mar. 29, 2019 : 3,851.10pt■ Closing price of MEL’s investment unit as of Sept. 30, 2019 : X■ TSE REIT Index (incl. dividends) as of Sept. 30, 2019 : Y(a) = (「X」-JPY 262,100+JPY 5,492 (Forecast) / JPY 262,100(b) = (「Y」- 3,851.10pt ) / 3,851.10pt

R E P O RT

5

External Growth Strategy■ Capability to develop logistics facilities independently based on extensive land information■ Capability to assess properties backed by experience in continuously acquiring properties
from 2001■ Capability to co-develop facilities backed by MEC’s development ability and credibility■ Flexible and diversified property acquisition strategy by leveraging the capability to manage
real estate funds

Properties with preferential negotiation right developed by Mitsubishi Estate Group

1,181,000 m

Mitsubishi Estate Group
Occupancy
Rate
100%

2

Properties with a preferential negotiationright through MJIA Sourcing

Bridge FundOccupancy
Rate
Approx.70%

Occupancy
Rate
100%

213,000 m

2

Third-Party Bridge

Sponsor relation

Occupancy
Rate
100%

Osaka Nishi-Yodogawa Logistics Center

Logicross Nagoya Kasadera

LOGIPORT Osaka Taisho

IHI Group Sakai Factory (land)(38,000 m2)
Completed in FY2018 (Jointly)(80,000 m2)
Completed in FY2018 (Independently)(121,000 m2)
Completed in FY2017 (Jointly)(87,000 m2)

Occupancy
Rate
100%

Pre-leased
Approx.90%

Improved occupancy rate

Occupancy
Rate
100%

MJ Logipark Tsuchiura 1(15,000 m2)
Completed in FY2014
Occupancy
Rate
100%

Logicross Yokohama Kohoku

LOGIPORT Kawasaki Bay

Logicross Narashino

MJ Logipark Kasugai 1(16,000 m2)
Complete in FY2019 (Independently)(296,000 m2)
Complete in FY2019 (Jointly)(39,000 m2)
Completed in FY2017 (Independently)(58,000 m2)
Completed in FY2016
Occupancy
Rate
100%

(17,000 m2)
Completed in FY1990

Other
multiple projects

400,000 m

2

Logicross Atsugi II

Saito Moegi Logistics Facilities Project

MJ Logipark Sendai 1(34,000 m2)
Complete in FY2019 (Independently)(32,000 m2/125,000 m2)
Complete FY2020/2021 (Jointly)(36,000 m2)
Completed in FY2008

Notes: As of Apr. 15, 2019.

S E M I A N N U A L

R E P O RT

MJ Logipark Nishinomiya 1

6

Internal Growth Strategy

Efforts to improve Tenants’ Satisfaction (Example)
Improvement by switching to LED based on Green Lease contract

Overview■ Installed LED lighting at the cost of MEL■ Receipt of a half of the reduction in electricity bills
and maintenance cost to be borne by tenant asGreen Lease fee

Advanced LED with tablet-controlled and time-controlled dimming systems

Effects

By
installingLED■ Income will increase by JPY 1.9 mn per fiscal period
due to the receipt of green lease fee■ Tenants’ electricity bills are reduced substantiallyElectricity
use■ The latest dimming functions capable of adjustinggrouping and brightness improved tenants’convenience
Image of grouping

By advanced
dimmingsystems

Image of reduced electricity use

Review of contract with electricity supplier (Logicross Fukuoka Hisayama, MJ Logipark Fukuoka 1)

Overview■ Reviewed the contract with electricity suppliersand changed the supplier for two properties

Review of contract with electricity supplier

Effects■ Saved on tenants’ electricity bills and improved
their satisfaction

Power company
A

Power company
B

Power company
C

Asset Manager■ The contract will be reviewed once every year

Optimal procurement

Logicross
Fukuoka Hisayama

MJ Logipark
Fukuoka 1

Efforts to reduce costs borne by Investment Corporation (Example)
Review asset evaluation of the properties (MJ Logipark Funabashi 1, LOGIPORT Sagamihara)

Overview■ Review asset evaluation of the properties held
■ Negotiation with relevant government officeregarding difference from evaluation, if any

Property tax

Effects■ Decreased property tax for two properties (JPY 1.7
mn reduction per fiscal period)

JPY 1.7 mn
reduction per fiscal period■ Refund of property tax due to review in asset
valuation (+JPY 12 mn during the 6th fiscal period)■ Negotiation is underway for other properties
Before review

S E M I A N N U A L

R E P O RT

7

After review

Portfolio Summary

Logicross Fukuoka Hisayama

MJ Logipark Funabashi 1

Acquisition price

JPY 5,770 million

Acquisition price

JPY 5,400 million

Occupancy rate

100.0%

Occupancy rate

100.0%

Logicross Atsugi

MJ Logipark Atsugi 1

Acquisition price

JPY 8,440 million

Acquisition priceJPY 6,653 million

Occupancy rate

100.0%

Occupancy rate

100.0%

Logicross Kobe Sanda

MJ Logipark Kazo 1

Acquisition price

JPY 3,900 million

Acquisition price

JPY 1,272 million

Occupancy rate

100.0%

Occupancy rate

100.0%LOGIPORT Sagamihara

MJ Logipark Osaka 1(Beneficiary interest 49%)

Acquisition price

JPY 21,364 million

Acquisition priceJPY 6,090 million

Occupancy rate

99.7%

Occupancy rate

100.0%LOGIPORT Hashimoto

MJ Logipark Fukuoka 1(Beneficiary interest 45%)

Acquisition price

JPY 18,200 million

Acquisition priceJPY 6,130 million

Occupancy rate

100.0%

Occupancy rate

100.0%

Note: As of Feb. 28, 2019

S E M I A N N U A L

R E P O RT

8

Our Portfolio and Acquisition Pipelines

Tokyo Metropolitan Area
Current Assets
SapporoPipeline Assets

Gunma

TochigiTohoku Expressway

Head Office / Branches of the Sponsor

Joban Expressway

MJ Logipark Tsuchiura 1
Kan-etsu Expressway

MJ Logipark Sendai 1

Ibaraki

MJ Logipark Kazo 1

Sendai

MJ Logipark Kasugai 1
Logicross Nagoya Kasadera

SaitamaTokyo

Logicross Fukuoka Hisayama

Ken-o Expressway
NagoyaOsaka

Hiroshima

Fukuoka

Tokyo-Gaikan
Expressway

Yokohama

MJ Logipark Fukuoka 1

Tokyo

Osaka Metropolitan Area
Chugoku Expressway

Logicross Kobe Sanda

Sanyo Expressway

Chuo Expressway

Saito Moegi Logistics Facilities Project

LOGIPORT Hashimoto
LOGIPORT Sagamihara

Osaka International Airport
Daini Keihan Expressway

Meishin Expressway

Osaka Nishi-Yodogawa Logistics Center

Osaka Branch
Osaka Port
Kobe Airport

MJ Logipark Atsugi 1

Osaka

Logicross Atsugi

Kinki Expressway

LOGIPORT Osaka Taisho
MJ Logipark Osaka 1

Kanagawa

IHI Group Sakai Factory (Land)

Hanshin Expressway

Nara

Kansai International Airport

Note: As of Apr. 15, 2019. Properties noted “other multiple projects” on p.6 are not included in the map since it has not been disclosed by the sponsor.

S E M I A N N U A L

Tomei
Expressway

Metropolitan Expressway
Bayshore Route

Logicross Narashino

Tokyo Ryutsu CenterTokyo International Airport(Haneda Airport)

Logicross Yokohama Kohoku
Logicross Atsugi II

Kobe Port

MJ Logipark Funabashi1

Tokyo Port

Shin-Meishin Expressway

MJ Logipark Nishinomiya 1

Hyogo

Head Office

R E P O RT

9

LOGIPORT Kawasaki Bay
Kawasaki Port
Yokohama Port

Yokohama Branch

Chiba

NaritaInternational
AirportOur Portfolio
MEL's Investment Policy
Logistics facilities

80

Property Type(based on acquisition price)% or more

Tokyo metropolitan area

Other logistics related facilities

20

Investment Area(based on acquisition price)% or less50% or more

Other areas50% or less

Portfolio Diversification
Tenant Diversification (Based on leased area)

By Investment Area (Based on acquisition price)■ Sankyu Inc.
■ MITAKA SOKO Co., Ltd.
■ Sun Toshi Tatemono K.K.
■ Mitsubishi Estate Co., Ltd.
■ Fukuoka Logistic Systems Corp.
■ Company A (communications)■ Fuji Echo Co., Ltd.
■ Company B (wholesale)■ Fresh Creator Co., Ltd.
■ Company C (warehousing)■ Company D (e-commerce)■ Tokyo metropolitan area
■ Osaka metropolitan area
■ Other■ Others

11.0%
8.4%

31.3%

By Total Floor Space (Based on acquisition price)
1.5%■ 30,000 m or more
■ 10,000 m2 to less than 30,000 m2■ Less than 10,000 m2
2

14.3%

29.3%

12.0%

7.9%
7.5%
2.9%
3.2%
3.6%
5.0%

69.2%
73.7%

7.5%
6.6%
5.1%

By Access Convenience (Based on acquisition price)

By Access Convenience (Based on acquisition price)

Distance from Nearest Train Station

Distance from Major Trunk Road

■ 1.5 km or less
■ More than 1.5 km■ 1 km or less
■ More than 1 km to 3 km
■ More than 3 km

Acquisition Source (Based on acquisition price)■ Developed by the Sponsor■ Sourced by Asset Management Company

7.4%

30.7%

40.4%
52.2%
40.4%

59.6%

69.3%

Note: As of Feb. 28, 2019

S E M I A N N U A L

R E P O RT

10

Financial Strategy

Financial Highlights

Our Lenders
3.3% 2.1%

Long-Term Debt Ratio

100.0

%

Fixed Interest Rate
Debt Ratio

83.3

%

Average Remaining
Debt Duration

5.2

5.2
%
9.0%
Total Debt Balance

years

12.1%

JPY

23.9
billion

15.7%

Average Debt Cost

0.47%

Credit Rating

JCR:

AA-

(Stable)Debt Capacity (up to 40%)

Debt Capacity (up to 50%)

Approx.

Approx.

JPY

19.0
billionJPY

40.0
billion

36.8%

15.7%

Loan-to-Value Ratio

27.0%
Debt Maturity Schedule■ MUFG Bank, Ltd.

■ The Bank of Fukuoka, Ltd.

■ Sumitomo Mitsui Banking Corporation■ Shinkin Central Bank

■ Mizuho Bank, Ltd.

■ The Norinchukin Bank

■ Development Bank of Japan Inc.

■ Shinsei Bank, Limited■ Long-term debt

(JPY mn)

6,000
5,000
4,000
3,000
2,000
1,000

Note: As of Feb. 28, 2019

0

2019

S E M I A N N U A L

2020

R E P O RT

2021

11

2022

2023

2024

2025

2026

2027

2028

(year)

ESG Initiatives

Energy Saving Initiatives

Formulation of Sustainability Policy (February 1, 2019)
1 Initiative for achieving energy saving at properties undermanagement and low-carbon society
2 Initiative for improved water resources management andwaste management
3 Improving tenants’ safety/security and satisfaction

5 Collaboration with external stakeholders
6 Disclosure of ESG information and use of external
evaluation
7 Compliance and risk management

4 Initiative towards officers and employees

Insulated sandwich panels
for exterior walls

Environment Initiatives
Sustainable Building Certifications (As of February 28, 2019)6

properties / out of 10with building certifications

Building Certifications

Installation of
motion-detection sensors

Enhanced greenery

BCP Initiatives

250,19767m2

of floor area withbuilding certifications%of the proporties in our portfolio
have building certifications

Properties

Total Floor Area (m2)

Ratio (%)

CASBEE4

206,513

55

BELS

4

115,992

31

DBJ Green Building

1

36,08210Installation of private power
generators

Seismic isolators

Proactive Participation in CSR Activities

GRESB Assessment“Global Real Estate Sustainability Benchmark (GRESB)” is a benchmark developed by a group of leading
European pension funds. It evaluates the ESG performance of real estate companies and funds, and isbecoming a de facto standard among major institutional investors utilized in their investment decisionmaking processes. MEL aims to obtain a “Green Star” rating in future GRESB real estate assessments.

Cleanup activity after Firework Festival
Volunteer work near MJ Logipark Atsugi 1

Use of Renewable Energy

Free beverage service for tenants at
LOGIPORT Sagamihara

Sound Corporate Governance
MEL is composed of one Executive Director, two Supervisory Directors, and the Board of Directors, on which all MEL’s directors
serve as members, plus an accounting auditor as well as the General Meeting of Unitholders.
MEL is prohibited from having any employees under the Japanese Act on Investment Trusts and Investment Corporations, andtherefore commissions business operations to its asset management company, MJIA.

Logicross Fukuoka Hisayama

Logicross Atsugi

S E M I A N N U A L

R E P O RT

12

Unitholder Information

Breakdown by Units

Major Unitholders
0.9%■ Domestic individuals and others : 55,527 unit

Number ofInvestment Units

Share ofInvestment Units (%)

The Master Trust Bank of Japan, Ltd. (Trust Account)

26,732

10.87

Japan Trustee Services Bank, Ltd. (Trust Account)

21,126

8.59

Mitsubishi Estate Co., Ltd.

10,000

4.06

The Nomura Trust and Banking Company, Ltd. (Trust Account)

6,992

2.84

Tokyo Century Corporation

6,654

2.70

The Chugoku Bank, Limited

5,372

2.18

The Shinkumi Federation Bank

4,806

1.95

The Hyakujushi Bank, Ltd

4,324

1.75

Trust and Custody Services Bank, Ltd. (Securities Investment Trust Account)

4,107

1.67

The Iyo Bank, Ltd.

3,652

1.48

Total

93,765

38.14■ Financial institutions : 135,917 unit
■ Other domestic entities : 27,159 units

10.1%
22.6%

■ Foreign entities : 24,886 unit
■ Securities companies : 2,326 unit

11.0%

245,815
Units Issued
andOutstanding

55.3%

Breakdown by Unitholders■ Domestic individuals and others : 11,761 unitholders■ Financial institutions : 157 unitholders■ Other domestic entities : 318 unitholders

0.8%
2.6%
1.3%

0.1%

Continuous same-boat investment in MEL by the sponsor■ Foreign entities : 98 unitholders■ Securities companies : 17 unitholders

12,351

Investment in MEL

95.2%

by MEC

Unitholders

10,000units(4.1%)(As of Feb. 28, 2019)

Note: As of Feb. 28, 2019

S E M I A N N U A L

R E P O RT

13

Financial Section
BALANCE SHEETBALANCE SHEET, continued
Thousands of yen
August 31, 2018ASSETS
Current assets:
Cash and deposits (Notes 4, 6)
Cash and deposits in trust (Notes 4, 6)
Operating accounts receivable
Prepaid expenses
Consumption taxes receivable
Other current assets
Total current assets
Fixed assets:
Property and equipment (Notes 5, 7)
Buildings in trust
Less: accumulated depreciation
Buildings in trust, net
Structures in trust (Note 12)
Less: accumulated depreciation
Structures in trust, net
Tools, furniture and fixtures in trust
Less: accumulated depreciation
Tools, furniture and fixtures in trust, net
Land in trust
Total property and equipment
Intangible assets (Note 5)
Software
Other intangible assets
Total intangible assets
Investments and other assets
Deferred tax assets (Note 13)
Long-term prepaid expenses
Security deposit
Total investments and other assets
Total fixed assets
Deferred assets:
Organization expenses
Total deferred assets
Total assets

¥

As of

1,869,456
2,527,566
26,751
26,142
3,834
4,453,750

Thousands of yen

February 28, 2019¥

33,073,864(893,213)
32,180,650
1,118,406(22,533)
1,095,873
144
(12)
132
37,655,333
70,931,988
7,735
891
8,626
12
14,92810,00024,94070,965,555¥

The accompanying notes are an integral part of these financial statements.

34,271
34,27175,453,578¥

1,856,912
3,185,098
18,674
20,637
312,168
5,393,492

37,515,698(1,365,361)
36,150,337
1,288,743(35,273)
1,253,469
689
(28)
661
45,603,368
83,007,836

6,785
841
7,626

11
14,161
10,00024,172
83,039,635

28,22328,22388,461,352

August 31, 2018
LIABILITIESCurrent liabilities:
Operating accounts payable
Long term loans payable
due within one year (Notes 6,11)
Accounts payable
Distributions payable
Accrued expenses
Income taxes payable
Consumption taxes payable
Advances received
Deposits received
Total current liabilities
Non-current liabilities
Long-term loans payable (Notes 6, 11)
Tenant leasehold and security deposits in trust(Note 6)
Total non-current liabilities
Total liabilities
NET ASSETS
Unitholders’ equity
Unitholders’ capital
Units authorized: 10,000,000 units
Units issued and outstanding: 245,815units
as of February 28, 2019, and 214,000 units as ofAugust 31, 2018
Unitholders’ capital, gross
Deduction from unitholders’ capital
Unitholders’ capital, net
SurplusRetained earnings
Total surplus
Total unitholders’ equity
Total net assets (Note 10)
Total liabilities and net assets¥¥

The accompanying notes are an integral part of these financial statements.

As of

71,563February 28, 2019¥

140,574-

4,000,000

12,873
4,439
243,452861
108,215
313,57883
755,068

7,075
4,984
264,448837
407,446
4,825,367

18,901,000

19,924,000

1,230,295

1,529,276

20,131,295
20,886,363

21,453,276
26,278,644

53,564,490

61,011,843

53,685,400(120,910)
53,564,490

61,262,651(250,808)
61,011,843

1,002,724
1,002,724
54,567,214
54,567,214
75,453,578

1,170,864
1,170,864
62,182,708
62,182,708
88,461,352

¥


14

SEMIANNUAL REPORTSEMIANNUAL REPORT

15

Financial Section
STATEMENT OF INCOME AND RETAINED EARNINGSSTATEMENT OF CHANGES IN NET ASSETSFor the period ended February 28, 2019

Thousands of yen

Thousands of yen
Unitholders’ equity
Surplus

For the period ended
August 31, 2018
February 28, 2019
Operating revenues:
Operating rental revenues (Note 8)
Other rental revenues (Note 8)
Total operating revenues
Operating expenses:
Expenses related to property rental business (Note 8)
Asset management fee
Asset custody fee
Administrative service fee
Directors’ compensation
Commission paid
Other operating expenses
Total operating expenses
Operating income
Non-operating income:Interest income
Interest on refund
Insurance income
Other non-operating income
Total non-operating income
Non-operating expenses:
Interest expenses
Borrowing related expenses
Amortization of organization expenses
Amortization of investment unit issuance expenses
Losses due to disaster
Loss on reduction of tangible fixed assets
Total non-operating expenses
Ordinary income
Income before income taxes
Income taxes-current (Note 13)
Income taxes-deferred (Note 13)
Total income taxes
Net income
Retained earnings brought forward
Unappropriated retained earnings¥

2,043,691
143,164
2,186,855

¥

21
3,320
3,342

2,358,795
134,976
2,493,772
940,015
190,172848
17,8692,400
49,54425,5781,226,428
1,267,344

23
30,210130,23438,4909,391
6,047
53,9301,003,371
1,003,371
865
(12)
852
1,002,518
206
1,002,724

48,37810,516
6,047
31,26325,4974,303
126,007
1,171,572
1,171,572841
1
842
1,170,729
134
1,170,864

860,255
178,404730
16,7562,400
46,76827,5801,132,896
1,053,959

¥

¥

Yen

Net income per unit (Note 14)

For the fiscal period ended
August 31, 2018
February 28, 2019
¥
4,684
¥
4,798

The accompanying notes are an integral part of these financial statements.

Unitholders’ capital
Deduction ofUnitholders’
Unitholders’unitholders’capital, net
capital, grosscapitalBalance as of
September 1, 2018

Total
unitholders’
UnappropriatedTotal surplus
equityretained earnings

Total net
assets

53,685,400(120,910)

53,564,490

1,002,724

1,002,724

54,567,214

54,567,214

Issuance of new
investments

7,577,251-

7,577,251--

7,577,251

7,577,251

distributions inexcess ofretained earnings-(129,898)(129,898)--(129,898)(129,898)

Surplus cash
distributions

-

-

-

(1,002,590) (1,002,590)(1,002,590) (1,002,590)

Net income

-

-

-

1,170,729

1,170,729

1,170,729

1,170,729

Total change during
the period

7,577,251(129,898)

7,447,353

168,139

168,139

7,615,493

7,615,493

Balance as ofFebruary 28, 2019
(Note 10)

61,262,651(250,808)

61,011,843

1,170,864

1,170,864

62,182,708

62,182,708

Total
unitholders’
UnappropriatedTotal surplus
equityretained earnings

Total net
assets(Note 10)
Change during theperiodFor the period ended August 31, 2018
Thousands of yen
Unitholders’ equity
Surplus

Unitholders’ capital
Deduction ofUnitholders’
Unitholders’unitholders’capital, net
capital, grosscapitalBalance as of March
1, 2018 (Note 10)

53,685,400-

53,685,400

1,073,416

1,073,416

54,758,816

54,758,816-(120,910)(120,910)--(120,910)(120,910)---(1,073,210) (1,073,210)(1,073,210) (1,073,210)

-

-

-

1,002,518

1,002,518

1,002,518

1,002,518

Total change during
the period-(120,910)(120,910)(70,691)(70,691)(191,601)(191,601)

Balance as of August
31, 2018 (Note 10)

53,685,400(120,910)

53,564,490

1,002,724

1,002,724

54,567,214

54,567,214

Change during theperiodDistributions inexcess ofretained earnings
Surplus cash
distributions
Net income

The accompanying notes are an integral part of these financial statements.


16

SEMIANNUAL REPORTSEMIANNUAL REPORT

17

Financial Section
STATEMENT OF CASH FLOWS
Thousands of yen
For the period ended
August 31, 2018
February 28, 2019
Cash flows from operating activities:
Income before income taxes
Depreciation
Amortization of investment unit issuanceInterest income
Interest expenses
Insurance income
Loss on reduction of tangible fixed assets
Losses due to disaster
Decrease (Increase) in operating accounts receivable
Decrease (Increase) in consumption taxes receivable
Decrease (Increase) in prepaid expenses
Decrease (Increase) in long-term prepaid expenses
Increase (Decrease) in operating accounts payable
Increase (Decrease) in accounts payable
Increase (Decrease) in accrued expenses
Increase (Decrease) in consumption taxes payable
Increase (Decrease) in advances received
OthersSubtotalInterest received
Interest paid
Insurance income due to disaster
Payments due to disaster
Income taxes paid
Net cash provided by (used in) operating activities
Cash flows from investing activities:
Purchases of property and equipment in trust
Proceeds from tenant leasehold and security deposits
in trust
Repayments from tenant leasehold and security
deposits in trust
Net cash provided by investing activities
Cash flows from financing activities:
Proceeds from short-term loans payable
Repayments of short-term loans payable
Proceeds from long-term loans payable
Proceeds from issuance of new investment units
Payment of distributions of retained earnings
Payment of distributions in excess of retained earnings
Net cash provided by (used in) financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of period
Cash and cash equivalents at the end of period (Note 4)
The accompanying notes are an integral part of these financial statements.

18

¥

¥

1,003,371
434,019(21)
38,490(7,049)2,517,417
1,367
11,489(546)
3,947
73,873
108,215(29,388)
2,153
4,157,339
21(38,004)(608)
4,118,748¥

1,171,572
485,904
31,263(23)
48,378(30,210)4,303
25,497
8,076(312,168)
5,504
766
45,918(5,798)19,762(108,215)
93,8689,798
1,494,200
23(47,145)
30,210(25,497)(865)
1,450,925(75,392)(12,541,961)

13,282

300,506(18,135)(1,525)(80,246)(12,242,980)(2,618,000)(1,069,453)(120,226)(3,807,680)
230,821
4,166,201
4,397,022

12,961,000(12,961,000)
5,023,000
7,545,987(1,002,300)(129,642)
11,437,044
644,989
4,397,022
5,042,011¥

NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATIONa) Organization
Mitsubishi Estate Logistics REIT Investment Corporation (hereinafter “MEL”) was established on July 6, 2016 under the “Act on
Investment Trust and Investment Corporation” (hereinafter the “Investment Trust Law”), and was listed on the REIT Securities
Market of the Tokyo Stock Exchange on September 14, 2017, with Mitsubishi Estate Co., Ltd. (hereinafter “MEC”), one of thelargest comprehensive developers in Japan, acting as a sponsor. MEL focuses on investing in logistics facilities primarily in theTokyo Metropolitan Area. MEL is externally managed by a licensed asset management company, Mitsubishi Jisho Investment
Advisors, Inc. (hereinafter the “Asset Manager” or “MJIA”). On September 13, 2017, MEL issued 198,000 new units through apublic offering and raised approximately 49,678 million yen. Those units are listed on the J-REIT section of the Tokyo Stock
Exchange. MEL acquired 8 properties (aggregate acquisition price: 70,879 million yen) on September 14, 2017 following its listing
and acquired 2 properties (aggregate acquisition price: 12,340 million yen) on September 3, 2018 during the reporting fiscal
period. As of February 28, 2019, MEL held in the form of beneficiary right in trust in 10 properties (aggregate acquisition price:
83,219 million yen). The total leasable area was 355,904.80㎡ and the occupancy rate remained high at 99.9% as of the end of
the reporting fiscal period.
b)Basis of Presentation
The accompanying financial statements have been prepared in accordance with the provisions set forth in the Investment Trust
Law, the Japanese Financial Instruments and Exchange Act and their related accounting regulations, and in conformity withaccounting principles generally accepted in Japan (hereinafter the “Japanese GAAP”), which are different in certain respects as toapplication and disclosure requirements from International Financial Reporting Standards. The accompanying financial
statements have been reformatted and translated into English from the financial statements of MEL prepared in accordance withJapanese GAAP, and filed with the appropriate Local Finance Bureau of the Ministry of Finance as required by the Financial
Instruments and Exchange Act. In preparing these financial statements, certain reclassifications and modifications 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. As permitted by the regulations under the Financial Instruments and Exchange Act of Japan, amounts of less than
one thousand yen have been omitted. As a result, the totals shown in the accompanying financial statements do not necessarily
agree with the sums of the individual amounts. MEL’s fiscal period is a six-month period that ends at the end of February andAugust of each year. MEL does not prepare consolidated financial statements as it has no subsidiaries.

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa)Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand and cash in trust, floating deposits, deposits in trust and short-term
investments that are very liquid and realizable with a maturity of three months or less when purchased and that are subject toinsignificant risks of changes in value.

b)

Property and Equipment
Property and equipment are stated at cost. Depreciation of property and equipment, including property and equipment in trust,is calculated by the straight-line method over the estimated useful lives as follows:
Buildings
Structures
Tools, furniture and fixtures

2-60 years
10-58 years
6-10 yearsc)Intangible Assets
Intangible assets are stated at cost. Amortization of intangible assets, including intangible assets in trust, is calculated by thestraight-line method over the estimated useful lives.

d)Long-term Prepaid Expenses
Long-term prepaid expenses are amortized by the straight-line method.

e)Organization Expenses
All organization expenses are amortized over five years using straight-line method.

f)Investment Unit Issuance Expenses
The full amount of investment unit issuance expenses is recorded as expense when incurred.

SEMIANNUAL REPORTSEMIANNUAL REPORT

19

Financial Sectiong)Beneficiary Rights in Trust
As to beneficiary rights in trust, all accounts of assets and liabilities for assets in trust as well as the related income generated
and expenses incurred are recorded in the relevant balance sheet and statement of income and retained earnings accounts.
Important line items included in accounting for financial assets and liabilities in the MEL’s balance sheet are cash and deposits intrust, buildings in trust, structures in trust, tools, furniture and fixtures in trust, land in trust and tenant leasehold and security
deposits in trust.

6.
a)

h)

Taxes on Property and Equipment
With respect to property taxes, city planning taxes and depreciable asset taxes, of the tax amount assessed and determined, theamount corresponding to the relevant fiscal period is accounted for as rental expenses.
Of the amounts paid for the acquisitions of real estate properties or beneficiary right in trust of real estate, the amountequivalent to property taxes is capitalized as part of the acquisition cost of the relevant property instead of being charged as an
expense. Not applicable for the reporting period.

i)Consumption Taxes
Transactions subject to consumption taxes are recorded at amounts exclusive of consumption taxes.

(2) Type of Financial Instruments, related Risks and Risk Management System
Bank loans are mainly made to procure funds for acquisition of properties, repayment of bank loans. Although MEL is
exposed to liquidity risks upon repayment, by diversifying the maturities and lending institutions, securing liquidity of cash inhand and managing such liquidity risks by preparing and monitoring cash flows projection, such risks are maintained undercontrol. In addition, some loans bear floating interest rates and are exposed to potential risks of rising interest rates. MEL
attempts to mitigate such risks on its operations by maintaining a conservative loan to value ratio and increasing the ratio of
long-term fixed interest rate loans.
The security deposits which MEL has received from the tenants are exposed to liquidity risk due to cancelation of leaseagreement before the maturity date. In the case of trust beneficiary interest in real estate, MEL secures safety byaccumulating a portion in the trust account, and in the case of real estate, leasehold rights of real estate, and superficies, MEL
secures safety by accumulating a portion in bank savings account or bank time deposit account. Moreover, MEL ensuressafety by accurately tracking the timing of the tenant move-ins and outs and anticipating the fund demand utilizing historical

3.

CHANGES IN PRESENTATION
MEL adopted “Partial Amendments to Accounting Standard for Tax Effect Accounting” (ASBJ Statement No. 28, February 16,2018) from the fiscal period ended February 28, 2019, changes are made to present deferred tax assets under investments andother assets and deferred tax liabilities under noncurrent liabilities. As a result, 12 thousand yen of deferred tax assets which wasunder “current assets” in the balance sheets of the previous fiscal period is under “investments and other assets.”

4.

CASH AND CASH EQUIVALENTS
Relationship between cash and cash equivalents in statement of cash flows and accounts and amounts in the accompanying
balance sheet are as follows:

August 31, 2018
Cash and deposits¥   Cash and deposits in trust

1,869,456¥  

4,397,022¥   1,856,912(3) Supplemental Explanation Regarding the Estimated Fair Values of Financial Instruments
The fair value of financial instruments is based on their quoted market price, if available. When there is no quoted market

3,185,098¥  

5,042,011

PROPERTY AND EQUIPMENT AND INTANGIBLE ASSETS
Property and equipment and intangible assets as of February 28, 2019 are as follows:
Thousands of yen

Depreciation
Net balance
Decrease Balance as of
as of
Depreciation
Type of assets
Remarks
during the February 28, Accumulated
February 28,
for theperiod2019
depreciation
2019
periodBuildings in trust ¥ 33,073,864 ¥ 4,441,834 ¥- ¥ 37,515,698 ¥ 1,365,361 ¥ 472,147 ¥ 36,150,337 (Note)
Structures in
1,118,406
174,6394,303
1,288,743
35,273
12,7401,253,469 (Note)
Property trust
Tools, furniture
and
144
545
－
689
28
16
661
equipment and fixtures intrust
Land in trust
37,655,333
7,948,035－
45,603,368－－
45,603,368 (Note)
Total property and equipment
71,847,748 12,565,055
4,303
84,408,499 1,400,663
484,904
83,007,836
Software
¥
9,500
¥
- ¥
- ¥
9,500 ¥
2,715 ¥
950 ¥6,785
Intangible
Other intangible
assets
1,000
1,000
158
50
841
assetsTotal intangible assets
10,500－－10,500
2,873
1,000
7,626
Balance as of
September 1,
2018data. February 28, 2019

2,527,566

Cash and cash equivalents

5.

Thousands of yen
As ofIncreaseduring theperiodFINANCIAL INSTRUMENTS
Overview(1) Policy for Financial Instruments
MEL procures funds for the acquisition of assets and repayment of debt mainly through bank loans or the issuance of new
investment units.
In borrowing funds, MEL takes consideration in interest rate trend, debt cost, floating or fixed interest rate, borrowing
period and repayment date.
In the case of borrowing, the lender shall be limited to qualified institutional investors as stipulated in Article 2, Paragraph
3, Item of the Financial Instruments and Exchange Act of Japan (limited to institutional investors prescribed in Article 67-15 of
the Taxation Special Measures Law), with in principle no collateral / no guarantee. However, MEL may provide assets as
collateral in consideration of financing environment and economic conditions. In addition, in order to flexibly procure thenecessary funds related to MEL's operation such as property acquisition and repayment debt financing, MEL may enter into
the overdraft agreements, commitment line agreements or conclude the reserved agreements.
MEL generally invests surplus funds in bank deposits, considering the safety and liquidity of the investment and also
reflecting the market environment and cash positions of MEL itself. MEL enters into derivative transactions solely for the
purposes of reducing risks of rising interest rates related to financings and other types of risks. MEL does not use derivativetransactions for speculative purposes. Not applicable for the reporting period.

price available, fair value is based on a price that is reasonably estimated. Since various assumptions and factors are reflectedin estimating the fair value, different assumptions and factors could result in a different value.
b)

Estimated Fair Value of Financial Instruments
The book value, fair value and differences between the values as of February 28, 2019 and August 31, 2018 are as follows:
Financial instruments for which the fair value is extremely difficult to estimate are excluded from the following table (see Note 2
below).
Thousands of yen
As of February 28, 2019
Book value(1) Cash and deposits¥  1,856,912¥

  5,042,011(2) Cash and deposits in trust
Total assets

Fair value¥  1,856,912¥

  5,042,011

3,185,098

Difference
¥

 

  -

¥



 -

3,185,098-(3) Long -term loans payable due within one year

4,000,000

4,000,000-(4) Long-term loans payable

19,924,000

20,064,009

140,009¥   23,924,000¥   24,064,009

Total liabilities¥  140,009(Note) The amount of increase during the period is primarily attributable to the acquisition of properties.
20

SEMIANNUAL REPORTSEMIANNUAL REPORT

21

Financial Section
Repayment schedule for debt after August 31, 2018

Thousands of yen

Thousands of yen

As of August 31, 2018
Book value(1) Cash and deposits¥(2) Cash and deposits in trust

Fair value

1,869,456¥

1,869,456

2,527,566

Total assets¥

4,397,022(3) Long-term loans payable due within one year
(4) Long-term loans payable

Difference¥-

2,527,566¥-

4,397,022

¥

-

-

-

-

18,901,000

18,887,140(13,859)

Long-term loans payable
Total

Total liabilities¥
18,901,000¥
18,887,140¥(13,859)(Note 1) Methods to estimate fair values of financial instruments(1) Cash and deposits and (2) Cash and deposits in trust
Due to the short maturities, the book value of these instruments is deemed a reasonable approximation of the7.

fair value, and therefore, the book value is used as the fair value.
(3) Long-term loans payable due within one year and (4) Long-term loans payable
The fair value of long-term loans payable is determined based on the present value of contractual cash flows
which would be applicable to new loans payable under the same terms. In terms of floating interest rate loans
payable, since it reflects the market interest rate in a short period of time, the fair value is approximately equal tothe book value. Thus, the book value is used.
(Note 2) Financial instruments for which the fair value is extremely difficult to estimate
As tenant leasehold and security deposits in trust has no available quoted market price, and it is impracticable toreasonably estimate their future cash flows, their fair value is not disclosed.
Thousands of yen
As ofAugust 31, 2018
Tenant leasehold and security deposits in trust¥

February 28, 20191,230,295¥

1,529,276(Note 3) Redemption schedule for monetary claims after February 28, 2019
Thousands of yen

Cash and deposits
Cash and deposits in trust
Total

As of August 31, 2018
Due after
Due within Due after one Due after two
Due after four Due after five
three to four
one yearto two years to three years
to five years
years
years
- ¥ 4,000,000
2,211,000
2,480,000 10,210,000¥- ¥ 4,000,000 ¥- ¥ 2,211,000 ¥ 2,480,000 ¥10,210,000

As of February 28, 2019
Due after
Due after four Due after fiveDue within Due after one Due after two
three to fourto two years to three years
to five years
years
one yearyears¥ 1,856,912 ¥
- ¥
- ¥
- ¥
- ¥
3,185,098¥ 5,042,011 ¥
- ¥
- ¥
- ¥
- ¥
-

INVESTMENT AND RENTAL PROPERTIESMEL owns logistics facilities for leasing for the purpose of earning rental income. The book value, changes during the reporting
fiscal period and fair value of the properties are as follows:
Thousands of yen
For the fiscal period ended
August 31, 2018
February 28, 2019
Book value (Note 1)
Balance at the beginning of the period¥71,295,451¥



70,931,988

Changes during the period (Note 2)
Balance at the end of the period¥(363,463)

70,931,988
12,075,847¥

83,007,836

Fair value at the end of the period (Note 3)¥
 74,980,000¥
 88,370,000(Note 1) Book value is calculated by deducting accumulated depreciation from acquisition cost.
(Note 2) The increase for the fiscal period ended August 31, 2018 was primarily a result of CAPEX for a total of 69,556 thousand
yen. The decrease was primarily a result of the recognition of depreciation, which amounted to 433,019 thousand yen.
The increase for the fiscal period ended February 28, 2019 was primarily a result of acquiring properties for a total of
12,510,301 thousand yen. The decrease was primarily a result of the recognition of depreciation, which amounted to484,904 thousand yen.
(Note 3) The fair value at the end of the period is determined based on appraised value provided by independent real estateappraisers.
Income and loss in connection with investment and rental properties are disclosed in “8. PROPERTY-RELATED REVENUES AND
EXPENSES.”

Redemption schedule for monetary claims after August 31, 2018
Thousands of yen

Cash and deposits
Cash and deposits in trust
Total

As of August 31, 2018
Due after
Due after four Due after fiveDue within Due after one Due after two
three to fourto two years to three years
to five years
years
one yearyears¥ 1,869,456
¥
¥
¥
¥
¥
2,527,566¥ 4,397,022
¥
¥
¥
¥
¥
-

(Note 4) Repayment schedule for debt after February 28, 2019
Thousands of yen
As of February 28, 2019
Due after
Due after four Due after fiveDue within Due after one Due after two
three to fourto two years to three years
to five years
years
one yearyears
Long-term loans payable
due within one year
Long-term loans payable
Total
22

¥ 4,000,000 ¥

-

¥

- ¥

- ¥

- ¥

-

¥ 4,000,000 ¥-

2,211,000
3,310,000
3,540,000 10,863,000¥ 2,211,000 ¥ 3,310,000 ¥ 3,540,000 ¥10,863,000

SEMIANNUAL REPORTSEMIANNUAL REPORT

23

Financial Section
8.

PROPERTY-RELATED REVENUES AND EXPENSES
The following table summarizes the revenues and expenses generated from property leasing activities for the fiscal periods

10. NET ASSETSa) Stated Capital
MEL issues only non-par value units in accordance with the Investment Trust Act. The entire amount of the issue price of newunits is designated as stated capital. The Investment Corporation is required to maintain net assets of at least 50 million yen as
required by the Investment Trust Act.

ended February 28, 2019 and August 31, 2018.
Thousands of yen
For the fiscal period ended
August 31, 2018
February 28, 2019
A. Property-related revenues
Operating rental revenues
 Rental revenues
 Common area charges
 TotalOther rental revenues
 Received utilities cost
 Others
 Total
Total property-related revenues
B. Property-related expenses
Rental expenses
Facility management fee
Property and other taxes
Insurance
Repair and maintenanceUtilities cost
Depreciation
Custodian fee
Others¥¥¥¥¥1,940,907
102,783
2,043,691¥

99,06444,099143,164
2,186,855¥

For the fiscal period ended

2,254,788
104,0072,358,795¥

August 31, 2018

90,60144,375
134,976
2,493,772

¥
¥


¥

¥
¥

87,649185,803
3,547
30,163
104,285
433,019
1,382
14,404¥860,255
1,326,599¥¥

123,684
184,581
3,957
29,427
96,523484,904
1,678
15,257940,015
1,553,757

9.

LEASES
The future minimum rental revenues from tenants subsequent to each fiscal period end under the non-cancelable operatingleases of properties are as follows:
Thousands of yen
As of

Due within one year
Due after one year

¥

Total

¥

SEMIANNUAL REPORTDistributions
Yen

Total rental expenses
C. Operating income from property leasing (A-B)

24b)

August 31, 2018 
3,412,347
9,981,099¥

13,393,446¥ February 28, 2019  4,894,348
20,209,065
 

25,103,413

I. Unappropriated retained earnings
II. Distributions in excess of retained earnings
 Deduction from unitholders’ capital
III. Distributions(Distributions per unit)
Of which, distributions of retained earnings(Of which, distributions in retained earnings
per unit)
Of which, distributions in excess of retained
earnings(Of which, distributions in excess of retained
earnings per unit)

February 28, 2019

1,002,724,829

IV. Retained earnings carried forward

129,898,000
1,132,488,000(5,292)
1,002,590,000

1,170,864,727

179,199,135
1,350,015,980(5,492)
1,170,816,845(4,685)(4,763)

129,898,000

179,199,135

(607)

(729)

134,82947,882

Pursuant to the “Policy on the Distribution of Funds” as defined in Article 35, Paragraph 1 of the Articles of Incorporation, theamount of distributions shall be the amount which does not exceed the amount of profits but exceeds 90% of the distributableprofit as defined in Article 67-15 of the Special Taxation Measures Act. Based on the policy, MEL declared distribution amounts of
1,170,816,845 yen and 1,002,590,000 yen for the fiscal periods ended February 28, 2019 and August 31, 2018, respectively.
These amounts were equivalent to the maximum integral multiples of number of investment units issued and outstanding as ofthe end of each fiscal period. Based on the distribution policy as defined in Article 35, Paragraph 2 of the Articles ofIncorporation, MEL shall make Surplus Cash Distributions (SCD), defined as distributions in excess of retained earnings, as a returnof unitholders’ capital, each fiscal period on a continuous basis. In addition, due to temporary decrease in rental revenues for the
fiscal period ended February 28, 2019, MEL made One-time Surplus Cash Distributions equivalent to 7 percent of MEL’s
depreciation expense.
Accordingly, MEL declared SCD of 145,276,665 yen as a return of unitholders’ capital, which was the amount equivalent toapproximately 30.0% of depreciation expense and One-time Surplus Cash Distributions of 33,922,470 yen, equivalent to 7
percent of MEL’s depreciation expense. For the fiscal period ended August 31, 2018, MEL declared SCD of 129,898,000 yen, as areturn of unitholders’ capital, which was the amount equivalent to approximately 30.0% of depreciation expense for the period
ended August 31, 2018.

SEMIANNUAL REPORT

25

Financial Section
11. LONG-TERM LOANS PAYABLE
Long-term loans payable consisted of bank borrowings under loan agreements. The following table summarizes the longterm loans payable as of February 28, 2019 and August 31, 2018.

Classification

Repayment dateLong-term loans payable
due within one year

September 29, 2019

Weighted-averageinterest rate
0.2441%

Total long-term loans payable due within one year

Long-term loans payable

September 29, 20190.2441%

September 14, 2021

0.3263%September 14, 2022

0.3575%September 14, 2023

0.3913%September 14, 2024
September 14, 2025
September 14, 2026

0.4288%0.4675%0.5075%September 14, 2027

0.5500%

September 14, 2022
September 14, 2025
September 14, 2026

0.2400%0.3950%0.4538%September 14, 2028

0.5750%Total long-term loans payable

Thousands of yen
As ofAugust 31, 2018

February 28, 2019

¥

¥

¥
¥

¥
¥

Total

13. INCOME TAXESMEL is subject to Japanese corporate income taxes on its taxable income. The tax effects of temporary differences that give rise
to a significant portion of the deferred tax assets and liabilities as of February 28, 2019 and August 31, 2018 are as follows:

1,400,000
1,200,000
1,400,000
720,000
1,491,000
430,000
2,050,000
1,760,000
1,330,000
450,000
900,000
620,000
710,000
1,340,000
1,340,000
880,000
880,000
18,901,000
18,901,000

¥
¥

¥
¥

1,400,000
1,200,000
1,400,000
4,000,000
720,000
1,491,000
430,000
2,050,000
1,760,000
1,330,000
450,000
900,000
620,000
710,000
1,340,000
1,340,000
880,000
880,000
830,000
800,000
500,000
830,000
807,000
1,256,000
19,924,000
23,924,000

Thousands of yen
As ofEnterprise tax payable
Total deferred tax assets
Net deferred tax assets

Statutory tax rate
Adjustments:
Deductible cash distributions
Other
Actual effective income tax rate

Structures in trust

26

SEMIANNUAL REPORT  -February 28, 2019¥  4,303

¥

11
11
11

¥

For the fiscal period ended
August 31, 2018
February 28, 201931.74%
31.51%(31.72%)
0.06%
0.08%

(31.49%)
0.05%
0.07%

MEL has a policy of making cash distributions of earnings in excess of 90% of distributable income as defined in the Special
Taxation Measures Act for the fiscal period to qualify for conditions, as set forth in the Special Taxation Measures Act, to achieve a
deduction of cash distributions for income tax purposes. Based on this policy, MEL treated the cash distributions of earnings as atax deductible distribution as defined in the Special Taxation Measures Act.

14. PER UNIT INFORMATION
The following table summarizes per unit information for the fiscal periods ended February 28, 2019 and August 31, 2018.

Net income per unit
Basic net income per unit
Weighted average number of units outstanding

Yen
For the fiscal period ended
August 31, 2018
February 28, 2019¥

4,684
214,000¥

4,798
243,973

Net assets per unit
¥ 254,986¥ 252,965(Note) Basic net income per unit is based on the weighted average number of units issued and outstanding during theperiod. Diluted earnings per unit and related information are not disclosed as no dilutive units were outstanding.

12. REDUCTION ENTRY
The amount of reduction entry of property and equipment as of February 28, 2019 and August 31, 2018 are as follows:

August 31, 2018
¥

12
12
12

February 28, 2019¥

Reconciliations of major items that caused differences between the statutory tax rate and effective tax rate with respect to pretax income reflected in the accompanying statements of income for the fiscal periods ended February 28, 2019 and August 31,
2018 are as follows:

The stated interest rate is the weighted average interest rate during each fiscal period. The redemption schedules for longterm loans subsequent to February 28, 2019 and August 31, 2018 are disclosed in “6. FINANCIAL INSTRUMENTS.”

Thousands of yen
As ofAugust 31, 2018¥

15. TRANSACTION WITH RELATED PARTIESa) Transactions and Account Balances with the Parent Company and Major Unitholders
There were no transactions and account balances for both periods presented.
b)Transactions and Account Balances with Affiliates
There were no transactions and account balances for both periods presented.

c)Transactions and Account Balances with Companies under Common Control
There were no transactions and account balances for both periods presented.

d)Transactions and Account Balances with Board of Directors and Individual Unitholders
There were no transactions and account balances for both periods presented.
SEMIANNUAL REPORT

27

Financial Section
16. SEGMENT AND RELATED INFORMATION(For the fiscal periods ended February 28, 2019 and August 31, 2018)a) Segment Information
Disclosure is omitted because the real estate leasing business is MEL’s sole business and it has no reportable segment subject
to disclosure.
b)

Related Information(1) Information by Geographic Region(i) Operating Revenues
Disclosure is omitted because net sales to external customers in Japan account for over 90% of the operating revenues
on the statement of income and retained earnings.
(ii) Property and Equipment
Disclosure is omitted because the amount of property and equipment located in Japan accounts for over 90% of theamount of property and equipment on the balance sheet.
(2) Information by Each Major Customer
Disclosure is omitted because net sales to a single external customer account for less than 10% of the operating revenues
on the statement of income and retained earnings.

28

17. SIGNIFICANT SUBSEQUENT EVENTS
Not applicable

SEMIANNUAL REPORTSEMIANNUAL REPORT29