To Our Unitholders

Shuichi Namba  President and Executive Director, Japan Retail Fund Investment Corporation

I would like to take this opportunity to express my sincere gratitude to all investors for their ongoing support of Japan Retail Fund Investment Corporation (JRF).

 In terms of domestic macroeconomic trends during the six months ended August 31, 2020 (37th fiscal period), Gross Domestic Product (GDP) growth was negative for the third consecutive quarter, affected by the spread of infection with COVID-19. In particular, in the April to June 2020 quarter final consumption expenditure of households declined sharply as people refrained from going out due to the declaration of a state of emergency, and private non-residential investment, etc. was largely negative. Capital markets were also impacted by COVID-19 leading to large falls in the Nikkei Stock Average, but recovery was seen due to monetary easing and other measures by various countries.

 Under the market environment described above, JRF acquired three new properties (Machinoma Omori, G-Bldg. Daikanyama 02 and G-Bldg. Tenjin Nishi-dori 02) and completed the sale of two properties (Ito-Yokado Nishikicho; 40% quasi-co-ownership of trust beneficiary interest, and Arkangel Daikanyama (land with leasehold interest); 45.04% quasi-co-ownership of trust beneficiary interest) as a part of portfolio asset replacement measures. In addition, JRF opened the aquarium at KAWASAKI Le FRONT in July 2020, thus completing the major renewal of the property carried out as part of measures to improve the value of existing properties. As a result, during this fiscal period, operating revenue decreased by 3.6% compared to the previous fiscal period to 30,848 million yen, while net income decreased by 5.3% compared to the previous fiscal period to 12,116 million yen, affected by COVID-19. Meanwhile, total distributions for the six months ended August 31, 2020 amounted to 11,711 million yen by adding 31 million yen in reversal of the retained earnings for temporary difference adjustment and by deducting reserve for reduction entry of property amounting to 437 million yen from unappropriated retained earnings at the end of the period. As a result, JRF was able to maintain distributions per unit at 4,500 yen, the same as in the previous fiscal period.

 There are concerns about a decline in consumer sentiment from the next fiscal period onwards while the impact of COVID-19 remains. However, we will make efforts to deliver stable distributions by using gains on sales of property and reserves while paying attention to the environment surrounding real estate and implementing flexible measures that are appropriate to the circumstances.

 Lastly, the merger between JRF and MCUBS MidCity Investment Corporation that was announced on August 28, 2020 was approved at the general meeting of unitholders held on October 23, 2020. From March 1, 2021, the trade name will be changed to Japan Metropolitan Fund Investment Corporation and operations will commence as a diversified REIT. While major changes are occurring in the ways people work, live and consume, various types of usage needs have emerged in urban areas. By promoting flexible operation of facilities by asset or by area level beyond the framework of asset classes and outside the boundaries of existing asset levels, we will work to provide greater stability and increase growth.

 We will continue to strive to live up to investors’ expectations, together with the asset manager, Mitsubishi Corp.-UBS Realty Inc., and look forward to receiving your continued support.

Shuichi Namba
Executive Director, Japan Retail Fund Investment Corporation