MIRAI : Semi Annual Report for the Fiscal Period ended April 30, 2021 (The 10th Period)

MIRAI Corporation

Semi Annual Report

For the Fiscal Period ended April 30, 2021 (The 10th Period)

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To the Unitholders

-Aiming for growth with "Agile Response" to post-COVID-19 from "Revitalization" in COVID-19-

In the 10th fiscal period (fiscal period ended April 30, 2021), MIRAI Corporation steadily promoted the three "Revitalization Plan" to address the issues that emerged due to the COVID-19 crisis and the achievement of the plan is generally in sight.

On the other hand, looking at the world, particularly in Europe and in the United States, the number of infection has been decreasing and the economy is beginning to show signs of recovery due to the significant progress of vaccination. It is expected that Japan will follow the same path in the future. The post-COVID-19 world is beginning to emerge, however, compared to pre-COVID-19, we foresee that it will be a new world where "things that never change", "things that change" and "things that evolve" co-exist.

Now that the achievement of "Revitalization Plan" is in sight, from the 11th fiscal period (fiscal period ending October 31, 2021), MIRAI will, instead of confronting this major trend in the post-COVID-19 era, establish a foothold for the next growth with "Agile Response" unique to a diversified REIT.

MIRAI Corporation Michio Suganuma, Executive Director

• Distributions

The 10th Period	The 11th Period	The 12th Period
Actual distributions per unit	Forecast distributions per unit (Note)	Forecast distributions per unit (Note)
(Start of cash distribution payment on July	(the Fiscal Period ending October 31,	(the Fiscal Period ending April 30, 2022)
8, 2021)	2021)
1,247 yen	1,260 yen	1,260 yen

(Note) This forecast is calculated based on certain assumptions as of June 15, 2021 and subject to change due to conditions such as change in rent income thorough tenant turnovers, acquisition and disposition of assets, and additional unit issuance. The forecast should not be construed as guarantee of DPU.

◼	Financial Results
(billion yen)		Operationg revenue	Net profit	DPU		(yen)
6			4.9	5.3	5.4	5.3	4.9	1,800
		4.4	1,563	1,561
	3.9				1,600
4	1,417	1,436			1,429
1,451
							1,247	1,400
2								1,200
		1.9	2.2	2.4	2.5	2.3	2.0
	1.7
0								1,000
	4th FP	5th FP	6th FP	7th FP	8th FP	9th FP	10th FP

(Note) MIRAI implemented a four-for-one investment unit split with April 30, 2019 as record date. For the purpose of comparison, the figures before 6th FP are post-split figures.

Primary Data (As of the End of April 2021)

• Portfolio

MIRAI implemented asset replacement (acquired four properties / disposed three properties) after the fiscal period ended October 2020.

Number of properties	: 34
AUM	: 153.9 billion yen
Appraisal value	: 165.3 billion yen
Occupancy rate	: 98.1%
NOI yield (10th FP result)	: 4.0% *based on book value
Portfolio PML	: 3.0%

Ratio by Tenant	Ratio by Asset Type			Ratio by Area
(based on rent)	(based on acquisiton price)			(based on acquisiton price)
	Others			Others
	9.2%		Nagoya 13.5%
	Hotel
	17.2%		area
Top 10	Core Assets		8.9%	Three
		Metropolitan
37.5%	87.6%
	Osaka	Areas
Others		Office	area	86.5%
62.5%		Tokyo
	54.5%	16.9%
	Retail		area
	19.1%				60.7%

(Note) Ratio by tenant is based on lease contract in place with end tenants as of the end of April 2021. BizMiiX Yodoyabashi (former Hotel WBF Yodoyabashi-Minami) is classified as office by adding the additional investment related to conversion on the acquisition price.

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• Finance

Stable financial base maintained on the back of Mitsui & Co.'s credit.

LTV (based on total assets)	: 48.6%
Long-term fixed interest debt ratio : 96.2%
Average interest rate	: 0.53%
Average remaining maturity	: 3.4 years
Rating	: Japan Credit Rating Agency, Ltd. (JCR) / A+ (Stable)

Rating and Investment Information, Inc. (R&I) / A (Stable)

• Composition of Assets of MIRAI

			The 9th Period	The 10th Period
Asset type		Category	As of October 31, 2020	As of April 30, 2021
	Total amount held	Ratio to total assets	Total amount held	Ratio to total assets
			(Million yen)	(%)	(Million yen)	(%)
		Office	-	-	2,233	1.4
Real estate		Industrial	-	-	2,418	1.5
		Subtotal	-	-	4,651	2.9
		Office	86,075	54.1	82,377	50.9
		Retail	25,238	15.9	30,042	18.6
Real estate in trust		Hotel	29,576	18.6	26,680	16.5
	Industrial	7,884	5.0	7,831	4.8
		Educational	4,060	2.6	4,072	2.5
		Subtotal	152,834	96.0	151,005	93.3
Deposits and other assets	6,387	4.0	6,158	3.8
Total assets		159,222	100.0	161,815	100.0

(Note 1) Total amount held is based on the balance sheet amount (book value after depreciation in the case of real estate and real estate in trust) as of the end of the period.

(Note 2) Real estate in trust does not include construction in progress in trust.

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1 Overview of Asset Management

(1) Operating Results of MIRAI Corporation (hereinafter "MIRAI")

			The 6th Period		The 7th Period	The 8th Period		The 9th Period	The 10th Period
Period			From Nov. 1, 2018		From May 1, 2019	From Nov. 1, 2019		From May 1, 2020	From Nov. 1, 2020
			to Apr. 30, 2019		to Oct. 31, 2019	to Apr. 30, 2020		to Oct. 31, 2020	to Apr. 30, 2021
Operating revenue	(Million yen)		4,959		5,340	5,448		5,367	4,973
Operating expenses	(Million yen)		2,427		2,623	2,583		2,744	2,652
Operating income	(Million yen)		2,531		2,716	2,865		2,622	2,321
Ordinary income	(Million yen)		2,270		2,474	2,595		2,378	2,073
Net income	(Million yen)		2,271		2,472	2,594		2,376	2,072
Total assets	(Million yen)		152,493		153,052	161,027		159,222	161,815
[Changes from the previous period]	(%)		[15.7]		[0.4]	[5.2]		[(1.1)]	[1.6]
Net assets	(Million yen)		70,854		70,925	75,572		75,428	75,110
[Changes from the previous period]	(%)		[15.0]		[0.1]	[6.6]		[0.2]	[(0.4)]
Interest-bearing debt	(Million yen)		74,700		74,700	77,700		75,700	78,700
Unitholders' capital (Note 3)	(Million yen)		69,074		69,074	73,516		73,516	73,516
Total number of outstanding investment units	(Units)		395,410		1,581,640	1,662,240		1,662,240	1,662,240
Net assets per unit (Note 4)	(Yen)		44,797		44,843	45,464		45,377	45,186
Total distributions	(Million yen)		2,271		2,472	2,594		2,375	2,072
Distributions per unit	(Yen)		5,745		1,563	1,561		1,429	1,247
Of which, profit distribution per unit	(Yen)		4,501		1,481	1,561		1,429	1,238
Of which, distributions in excess of earnings per unit	(Yen)		1,244		82	-		-	9
Ordinary income to total assets (Note 5)	(%)		1.6		1.6	1.7		1.5	1.3
Net income to net assets (Note 5)	(%)		3.4		3.5	3.5		3.1	2.8
Net assets to total assets at end of period (Note 5)	(%)		46.5		46.3	46.9		47.4	46.4
[Changes from the previous period]	(%)		[(0.3)]		[(0.1)]	[0.6]		[0.4]	[(1.0)]
Payout ratio (Note 5)	(%)		78.3		94.7	100.0		99.9	99.3

(Note 1) The fiscal period of MIRAI is six months from May 1 to October 31 and from November 1 to April 30 of the following year.

(Note 2) Unless otherwise stated, all figures are rounded down to the nearest million yen, and percentages are rounded to the first decimal place.

(Note 3) Unitholders' capital does not take into account changes in unitholders' capital due to the implementation of distributions in excess of earnings related to the reserve for adjustment of temporary differences, etc.

(Note 4) As a four-for-one unit split was conducted effective May 1, 2019, the net asset value per unit is calculated based on the assumption that the said unit split was conducted at the beginning of the 6th fiscal period.

(Note 5) Calculated based on the following formula.

Ordinary income to total assets	Ordinary income / {(Total assets at beginning of period + Total assets at end of period) / 2} * 100
Net income to net assets	Net income / {(Net assets at beginning of period + Net assets at end of period) / 2} * 100
Net assets to total assets at end of period (%)	Net assets at end of period / Total assets at end of period * 100
Payout ratio	Total distributions (excluding distributions in excess of earnings) / Net income * 100

1. Summary of Operating Results for the Fiscal Period under Review
   (i) Main History of MIRAI
   MIRAI is diversified J-REIT. Based on the Act on Investment Trusts and Investment Corporations of Japan (Act No. 198 of 1951; including revisions enforced thereafter) (hereinafter "AITIC"), MIRAI was founded on December 4, 2015 with a capital contribution of 150 million yen (750 units), by Mitsui Bussan & IDERA Partners Co., Ltd. (hereinafter the "Asset manager") as the founding planner and was listed on the REIT section of the Tokyo Stock Exchange on December 16, 2016 (securities code: 3476). As April 30, 2021, the total number of outstanding investment units are 1,662,240 and MIRAI owns 34 properties (total acquisition price of 153,904 million yen).
   MIRAI positions assets located in the three major metropolitan areas of Japan with high population concentrations as its main investment targets and aims to obtain mid-to-long term stable cash flows and sustained growth in unitholders' value by building a portfolio centered on its "Core Assets" (Note).

(Note) "Core Assets" means the assets that constitute the core of MIRAI's portfolio. Specifically, among traditional investment properties such as offices, retail properties, hotels, residential and logistics properties. Occupancy rates of 80% or more must be secured in principle (including cases where such occupancy rates are expected) with MIRAI to determine a stable rental income to be expected.

(ii) Operating Environment and Business Performance

During the fiscal period under review, the Japanese economy continued to be in a severe situation due to the spread of the COVID-19, and the hotel and retail facility sectors in particular were greatly affected. In the hotel sector, many hotels experienced a significant drop in occupancy rates in January and February due to the impact of the state of emergency declaration, etc. Thereafter, occupancy rates gradually recovered in March and April, mainly for business-use hotels. However, a full-fledged recovery has not yet been achieved due to the re-issuance of the state of emergency declaration mainly in major metropolitan areas after April 25 and its extension. In addition, inbound and tourism-oriented hotels are expected to continue to be affected by the COVID-19. In the retail facility sector, the impact of the spread of the COVID-19 has been limited except for some urban properties, and in April, Mi-Nara, a retail complex in Nara Prefecture, underwent a redevelopment including the replacement of core tenants in order to improve its prosperity. In the office leasing market, the

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impact of the COVID-19 has become apparent in some properties. In BizMiiX Yodoyabashi, the conversion from a "hotel" to a "ready- to-use serviced office" was completed and tenants started using the building in January.

Under such circumstances, MIRAI acquired four properties in total: "TCA Building" (acquisition price: 2,120 million yen) on January

28, 2021, "Odawara Material Storage and Delivery Center (land)" (acquisition price: 2,300 million yen) on March 1, 2021, "Cainz Mall

Hikone (land)" (acquisition price: 3,598 million yen) and "Maxvalu Takatori (land)" (acquisition price: 950 million yen) on March 31,

2021. In addition, MIRAI disposed "Comfort Hotel Shin-Yamaguchi" (disposition price: 920 million yen) on November 30, 2020, and

"Hillcoat Higashi-Shinjuku" (disposition price: 4,380 million yen) and "Nippo Hommachi Building" (disposition price: 1,700 million yen) on March 26, 2021. As a result, as of the end of the 10th fiscal period, MIRAI had 34 properties under management, with a total acquisition price of 153,904 million yen, a total leasable area of 347,247.73 sqm, and occupancy rate of 98.1%.

(iii) Overview of Fund Procurement

During this fiscal period under review, MIRAI borrowed 1,500 million yen in short-term borrowings based on the commitment line on January 28, 2021 to fund the acquisition of "TCA Building", and borrowed 2,000 million yen in short-term borrowings on March 1, 2021 to fund the acquisition of "Odawara Material Storage and Delivery Center (land)". In addition, MIRAI repaid 500 million yen in short-term borrowings based on the commitment line before maturity using part of the proceeds from the disposition of the property on March 29, 2021. Furthermore, MIRAI borrowed 1,500 million yen in long-term borrowings on the same day to repay 1,500 million yen in borrowings maturing on April 30, 2021. The balance of borrowings and investment corporation bonds as of the end of the 10th fiscal period was 78,700 million yen (of which 3,000 million yen was short-term borrowings, 11,500 million yen was current portion of long- term borrowings, 62,200 million yen was long-term borrowings, and 2,000 million yen was investment corporation bonds).

For the purpose of securing flexible and stable fund procurement and structuring an even stronger financial base, MIRAI has established a commitment line with a maximum borrowing amount of 3,000 million yen (the balance of unexercised credit line as of the date of this document is 2,000 million yen).

(iv) Operating Results and Distributions

As a result of the above operation, MIRAI recorded operating revenue of 4,973 million yen, operating income of 2,321 million yen, ordinary income of 2,073 million yen, and net income of 2,072 million yen for the 10th fiscal period.

Profit distributions for the current fiscal period (excluding distributions in excess of earnings) shall be made in accordance with the distribution policy set forth in the Articles of MIRAI and in accordance with Article 67.15 of the Act on Special Measures Concerning Taxation (Law No. 26 of 1957, including subsequent amendments. hereinafter the "Act on Special Measures Concerning Taxation"), MIRAI decided to distribute 2,057,853,120 yen, which is the entire amount of the profit as defined in Article 136, Paragraph 1 of the AITIC, except for fractions of less than one yen, in an attempt to make profit distributions tax-deductible. In addition, MIRAI determined to make cash distribution in excess of earnings in an amount that it determines as the amount equivalent to the items of deduction from net assets (those provided in Article 2, Paragraph 2, Item 30, b of the Ordinance on Accountings of Investment Corporations) with due consideration of the impact of the items of deduction from net assets on cash distribution. Accordingly, in the fiscal period under review, the decision was made to distribute 14,960,160 yen, which is calculated as the amount equivalent to changes in deferred losses on hedges during the period of 15,349,964 yen, as cash distribution attributable to allowance for temporary difference adjustment (those provided in Article 2, Paragraph 2, Item 30 of the Ordinance on Accountings of Investment Corporations). As a result of the above, the distributions per investment units for the fiscal period under review (excluding distributions in excess of earnings) was 1,247 yen.

(3) Status of Capital Increase, etc.

Changes in the total number of outstanding investment units and unitholders' capital over the past five years are as follows.

								Total number of outstanding investment units			Unitholders' capital (Thousand yen) (Note 1)
	Date			Summary					(units)						Remarks
						Changes			Balance			Changes			Balance
	December 15,		Capital increase through public offering		293,000		293,750		51,742,335		51,892,335				(Note 2)
2016
	May 23, 2018			Capital increase through public offering				43,300			337,050			7,395,250			59,287,585				(Note 3)
	June 12, 2018		Capital increase through third-party allotment		2,160		339,210		368,908		59,656,493				(Note 4)
	November 1, 2018			Capital increase through public offering				53,500			392,710			8,965,583			68,622,077				(Note 5)
	November 27,		Capital increase through third-party allotment		2,700		395,410		452,468		69,074,546				(Note 6)
2018
	May 1, 2019			Split of investment units				1,186,230			1,581,640			-			69,074,546				(Note 7)
	December 24,		Capital increase through public offering		76,500		1,658,140		4,215,609		73,290,155				(Note 8)
2019
	January 21, 2020			Capital increase through third-party allotment				4,100			1,662,240			225,934			73,516,089				(Note 9)

(Note 1) Changes in unitholders' capital due to the implementation of distributions in excess of earnings related to the reserve for adjustment of temporary differences, etc. have not been taken into account.

(Note 2) New investment units were issued at the price of 183,000 yen per unit (paid-in amount: 176,595 yen) through a public offering for the acquisition of new properties, etc.

(Note 3) New investment units were issued at the price of 176,962 yen per unit (paid-in amount: 170,791 yen) through a public offering for the acquisition of new properties, etc.

(Note 4) New investment units were issued at the price of 170,791 yen per unit through third-party allotment in connection with a public offering for the acquisition of new properties, etc.

(Note 5) New investment units were issued at the price of 173,452 yen per unit (paid-in amount: 167,581 yen) through a public offering for the acquisition of new properties, etc.

(Note 6) New investment units were issued at the price of 167,581 yen per unit through third-party allotment in connection with a public offering for the acquisition of new properties, etc.

(Note 7) MIRAI conducted a four-for-one unit split with April 30, 2019 as the record date and May 1, 2019 as the effective date.

(Note 8) New investment units were issued at the price of 57,037 yen per unit (paid-in amount of 55,106 yen) through a public offering for the acquisition of new properties, etc.

(Note 9) New investment units were issued at the price of 55,106 yen per unit through third-party allotment in connection with a public offering for the acquisition of new properties, etc.

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