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 macroeconomic trends during the six months ended August 31, 2018 (33rd fiscal period), gross domestic product (GDP), which had continued to grow quarter over quarter for eight consecutive quarters, slowed to negative growth for the January to March 2018 quarter for the first time in nine quarters. However, GDP returned to a positive growth for the April to June 2018 quarter (second preliminary figures announced on September 10, 2018). The J-REIT market was firm, underpinned by inflows of investment funds on the strength of its defensive nature and undervalued prices. In the second half of July, the TSE J-REIT index was in a downward trend as 10-year JGB yields turned higher. Following the Monetary Policy Meeting on July 31, the BOJ announced it will continue its monetary easing policy. As a result, the concerns about the possibility of JGB yields rising were alleviated, and the TSE J-REIT index has since been solid.

Under the market environment described above, JRF issued the first Green Bond (the 12th Unsecured Investment Corporation Bonds), a first for J-REIT, as a new means of financing. It also acquired one new property (G-Bldg. Abeno 01 (Annex Building) (land with leasehold interest) while selling two GMS-type properties (Ito-Yokado Kawasaki (Main Building and Annex) and AEON Tobata Shopping Center). Looking at results for this fiscal period, operating revenue increased by 2.2% compared to the previous fiscal period to 32,685 million yen, and net income decreased by 4.8% to 11,644 million yen. Total distributions for the six months ended August 31, 2018 amounted to 11,597 million yen, by adding 31 million yen the reserve for temporary difference adjustments, and by deducting reserve for dividends amounting to 78 million yen from unappropriated retained earnings at the end of the period. As a result, distributions per unit were 4,430 yen, an increase of 20 yen over the previous period.

JRF seeks to continuously increase unitholder value by using the stability supported by its distinguishing asset scale as a J-REIT and diversified investment in retail facilities in a wide range of industries and business categories in various regions while pursuing improvements in both asset quality and profitability through further asset replacement measures and internal growth underpinned by retail management abilities.

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