AEON REIT Investment : 21st Fiscal Period(Ended Jul. 2023) Financial Report

(4) Cash flows

2. Forecasts of performance for the fiscal periods ending January 31, 2024 (August 1, 2023 - January 31, 2024) and July 31, 2024 (February 1, 2024 - July 31, 2024)

(Percentages show changes from the previous period)

*Other

(1) Changes in accounting policies, changes in accounting estimates, and retrospective restatement

1. Changes in accounting policies due to revisions to accounting standards and other regulations: None

1. Total number of investment units issued and outstanding
   a. Total number of investment units issued and outstanding at end of period (including treasury investment units)

1. Number of treasury investment units at end of period

(Note) Please refer to "Per Unit Information" on page 31 for the number of investment units used as the basis for calculating net income per unit.

* Status of audit procedures

This financial report is not subject to audit procedures by public accountants or audit corporations.

* Special notes

Forward-looking statements presented in this financial report, including forecasts of performance, are based on information currently available to AEON REIT and on certain assumptions AEON REIT deems to be reasonable. As such, actual operating and other results may differ materially from these forecasts as a consequence of numerous factors. Furthermore, these forecasts shall not be construed as a guarantee of the distribution amount. Please refer to "Assumptions for Forecasts of Performance for the Fiscal Periods Ending January 2024 (August 1, 2023 - January 31, 2024) and July 2024 (February 1, 2024 - July 31, 2024)" on pages 7 and 8 for information on assumptions for the forecasts of operating results.

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1. Status of Asset Management

1. Status of Asset Management

1. Summary of results for the current fiscal period

(A) Overview of AEON REIT

AEON REIT Investment Corporation (hereinafter, "AEON REIT") invests primarily in retail and related properties which, as an integral part of the communities in which they are located, form the backbone of communities and their retail business infrastructure. Through said investment, we aim to ensure stable earnings over the medium to long term and achieve steady portfolio growth.

AEON REIT was established on November 30, 2012, in accordance with the Act on Investment Trusts and Investment Corporations (Act No. 198 of 1951, as amended; hereinafter, the "Investment Trusts Act"), with AEON Reit Management Co., Ltd. (hereinafter, the "Asset Manager") serving as the organizer. AEON REIT was listed on the Real Estate Investment Trust Securities Market (J-REIT market) of the Tokyo Stock Exchange (securities code: 3292) on November 22, 2013. In the fiscal period under review (21st fiscal period), AEON REIT issued new investment units in February 2023 (total paid-in amount: ¥10,418 million). Using the procured funds in combination with ¥9,300 million in new debt financing, AEON REIT acquired 2 properties comprising AEON MALL Wakayama and AEON MALL Miyakonojo Ekimae (total acquisition price: ¥21,300 million).

The real estate held by AEON REIT as of July 31, 2023, totaled 49 properties in Japan and overseas, including AEON MALL SEREMBAN 2 it owns through an overseas real estate holding corporation established in Malaysia (hereinafter, the "Overseas SPC"), with a total acquisition price of ¥468,332 million. Total leasable area is 4,241,745.30 m2 and the occupancy rate of the entire portfolio is 100.0% as of the same date.

1. Operating environment and performance

1. Operating environment

In the fiscal period under review (the 21st fiscal period), the Japanese economy saw the real GDP growth rate (first preliminary estimates) for April through June 2023 rise by 1.5% quarter on quarter, achieving positive growth for the third consecutive quarter, amid COVID-19 being re-classified to a Class 5 infectious disease under the Infectious Diseases Control Law in May. This was because production and exports of automobiles increased as supply constraints were eased and foreign demand increased with consumption by inbound tourists (foreign visitors to Japan) continuing to recover, although consumer spending was weak against general price hikes despite an increase in spending for restaurants and eateries, accommodation, and other face-to-face services. In Malaysia, the real GDP for the second quarter of 2023 rose 2.9% year on year. For the Malaysian economy, this was the lowest growth in almost two years, impacted by sluggish exports and the global economic slowdown.

In the real estate investment market, investors in Japan and abroad remained highly willing to acquire properties, while paying close attention to how the monetary policy of the Bank of Japan (BOJ) and long- term yield would proceed. Although the market is felt overheated differently by asset type and by area, it should become ever more important going forward to discern the profitability of individual properties and timeliness of transactions in consideration of interest trends, etc.

In the J-REIT market, excessive caution over rising interest rates and the sense of uncertainty about the office market gradually dissipated, and, in July 2023, the Tokyo Stock Exchange (TSE) REIT Index recovered to the 1,900-point level based on closing price for the first time in seven months. Subsequently, given the BOJ's decision at its Monetary Policy Meeting in July to flexibly conduct yield curve control, the market worried about the prospect of higher long-term yields and occasionally showed a weak note. At the end of the 21st fiscal period, the TSE REIT Index stood at 1,877.19 points based on closing price.

(b) Performance

In the 21st fiscal period, AEON REIT continued steady external growth as it acquired 2 properties comprising AEON MALL Wakayama and AEON MALL Miyakonojo Ekimae (total acquisition price: ¥21,300 million) in February 2023 using funds procured through issuance of new investment units as well as through new

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debt financing. With the acquisition of these properties, AEON REIT expanded its portfolio size to ¥468.3 billion. Moreover, in order to further solidify the foundation for future external growth, AEON REIT concluded the Pipeline Support Agreement and the Shopping Center Management Agreement with United Super Markets Holdings Inc. in July 2023.

In terms of internal growth, AEON REIT re-installed the flooring of the main entrance and the food court area on the second floor of the facility at AEON Chigasaki-Chuo Shopping Center in order to enhance the functionality of the property. At AEON MALL Morioka, as renovations were being conducted in phases, such as expansion of the area of the sales floor necessary to attract tenants, to accommodate the opening of a new station adjacent to the facility in March 2023, AEON REIT conducted installation of shutters and other work associated with the expanded sections, achieving a rent increase. As such, in coordination with the tenants (master lessees), AEON REIT is promoting investments aimed at reinforcing competitiveness as well as maintaining and enhancing the functions of its properties.

1. Financing

1. Issuance of new investment units

AEON REIT conducted additional issuance of new investment units to allocate funds for part of the acquisition of the 2 properties comprising AEON MALL Wakayama and AEON MALL Miyakonojo Ekimae (total acquisition price: ¥21,300 million), with the payment dates set at February 1, 2023, for the issuance of new investment units through public offering (75,700 units) and at February 21, 2023, for the issuance of new investment units through third-party allotment (3,785 units). Accordingly, the total number of investment units issued and outstanding as of the end of the 21st fiscal period ended July 31, 2023, is 2,123,952 units.

(b) Debt financing, etc.

In the 21st fiscal period, AEON REIT conducted debt financing totaling ¥9,300 million on February 1, 2023, to partly fund the acquisition of the 2 properties it acquired in February 2023, and related expenses.

As of July 31, 2023, AEON REIT had a balance of interest-bearing debt totaling ¥188,400 million, with the LTV ratio (the ratio of the balance of interest-bearing debt plus tenant leasehold and security deposits and tenant leasehold and security deposits in trust to total assets held by AEON REIT) standing at 44.8%.

The ratio of long-terminterest-bearing debt (the ratio of long-terminterest-bearing debt (including the current portion of long-term loans payable) to total interest-bearing debt) was 95.1% as of July 31, 2023. The ratio of fixed-rate debt (the ratio of interest-bearing debt with fixed interest payment (including interest- bearing debt with interest fixed through swaps) to total interest-bearing debt) was 92.8% as of the same date. Together with the abovementioned LTV, these figures indicate that AEON REIT has maintained a sound and conservative financial structure. AEON REIT works to diversify the repayment dates and extend maturities of interest-bearing debt with an aim to further reinforce its financial base.

(D) Initiatives on sustainability

AEON REIT is making endeavors for Environment, Social, and Governance (ESG) awareness. It works to reduce environmental burden and coordinate and cooperate with its stakeholders in pursuit of realizing a sustainable society as its corporate social responsibility. In December 2021, AEON Reit Management Co., Ltd. that conducts asset management for AEON REIT identified its materiality (important agendas) and

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expressed support for the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), with an aim to clarify its policy and structure for addressing ESG issues and promote enhanced disclosure of what it is doing in the endeavor.

A variety of initiatives have been recognized by external institutions, as exemplified by AEON REIT obtaining "Five Star" in the GRESB (Global Real Estate Sustainability Benchmark) Real Estate Assessment, which grants rating in five stages based on global ranking of total scores, in October 2022, marking the third consecutive year with the rating. AEON REIT has also received the "Green Star" rating for the seventh consecutive year, evaluated as an excellent participant in both of the Management Component, which measures the entity's policy and organizational structure for promoting ESG, and the Performance Component, which measures the environmental performance of the entity's portfolio properties and joint initiatives with tenants, etc.

As for assessment for properties, AEON REIT newly obtained DBJ Green Building Certification for 3 properties in total, comprising AEON MALL Wakayama, AEON MALL Kasai-Hojo and AEON MALL Miyakonojo Ekimae, in the 21st fiscal period. Moreover, AEON REIT re-obtained certifications for 4 properties in total (3 by the DBJ Green Building Certification and 1 by the CASBEE (Comprehensive Assessment System for Built Environment Efficiency) for Real Estate Certification. As of the end of the 21st fiscal period (July 31, 2023), AEON REIT has obtained third-party certifications for 86.8% of its portfolio properties (based on total leasable area), with the DBJ Green Building Certification for 31 properties, BELS certification for 1 property, and CASBEE Certification for Real Estate for 4 properties.

Other than the above, the Asset Manager was certified by the CERTIFIED 2023 Health & Productivity Management Outstanding Organizations Recognition Program (for SMEs) in March 2023, marking the fourth consecutive year with the certification. Both AEON REIT and the Asset Manager will continue to take initiatives on ESG issues in a proactive manner.

(E) Results and cash distribution

As a result of the above operations, AEON REIT posted operating revenue of ¥21,008 million, operating income of ¥7,970 million, ordinary income of ¥7,048 million, and net income of ¥7,047 million for the 21st fiscal period ended July 31, 2023.

As for cash distribution for the 21st fiscal period, distribution per unit came to ¥3,350 as a result of adding ¥65 million in reversal of distribution reserve (the amount obtained by deducting unappropriated retained earnings from the amount obtained by multiplying the forecast cash distribution per unit for the 21st fiscal period, as disclosed in the earnings forecast made in the previous fiscal period, by the total number of investment units issued and outstanding as of the end of the fiscal period) to ¥7,049 million in unappropriated retained earnings.

Furthermore, AEON REIT shall distribute cash in excess of earnings for each fiscal period as a rule pursuant to the policy for cash distribution in excess of earnings as stipulated in Article 35-2 of its Articles of Incorporation. For the 21st fiscal period, however, with ¥440 million in distribution reserve it has provided for securing stable distributions, AEON REIT will not distribute cash in excess of earnings in accordance with Article 136 in the Act on Investment Trusts and Investment Corporations.

1. Outlook for the next fiscal period

1. Outlook for overall performance

Looking ahead, the Japanese and Malaysian economies are expected to head for a gradual recovery due to such factors as improvements in the employment and income environments centering on rising wages and an increase in demand from foreign tourists. Attention must be paid, however, to the impact of such factors as rising general prices, concerns about stagnancy in overseas economies, and the fluctuations in the financial and capital markets accompanying the interest rate hikes in Japan and abroad.

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