ITOCHU Advance Logistics Investment : Semi-Annual Report

Financial Highlights

January 2022 (7th period)

＊Unless otherwise noted, figures expressed in whole numbers are rounded down to the nearest unit, and figures expressed in decimal numbers are rounded off to the nearest digit.

President Message

In the 7th FP (ending January 2022), although still in the midst of the COVID-19, we continued to perform well and increased income, revenue and distribution, and we have not received any notification from our tenants of incidents that would have a significant impact on their facility operations as of March 17, 2022. I believe this is largely thanks to the generous support we receive from our investors and stakeholders, for which I am truly grateful.

Distribution per Unit (DPU) has increased to 2,755 yen from the latest forecast (2,724 yen) due to the full period contribution of income by 2properties acquired in April last years and internal growth such as increase in rent, reduction of operating expenses of the Investment Corporation including property management costs and interest expenses. We have also worked for improvement of NOI and initiatives for ESG. We plan DPU for the 8th FP (ending July 2022), 2,689 yen (latest forecast of 2,683 yen) and for the 9th FP (ending February 2023(7months fiscal period due to fiscal period change)), 3,239 yen.

As announced on January 27, 2022, ITOCHU REIT Management Co., Ltd. plans to merge with AD Investment Management Corporation, which is also a J-REIT asset management company in the ITOCHU Group, to which Advance Residence Investment Corporation ("ADR") entrusts the management of its asset effective from June 1, 2022. The merger is a business restructuring to enhance the real estate asset management business of ITOCHU Group and is intended to share and upgrade the management know-how of both companies, consolidate and expand opportunities to obtain property information, improve operational productivity through efficient use of human resources, and secure excellent human resources through the management of multiple investment corporations. This will expand the scope of our asset management business, and under stronger sponsorship than ever before, we intend to further enhance the value of our unitholders. The merger relates to the asset management company, and there are no plans to merge the investment corporations managed by the two companies. We plan to hold 4th general meeting of unitholders of the Investment Corporation on April 27 of this year and the followingthree amendments to the Articles of Incorporation of the Investment Corporation will be proposed at the meeting. The first is to change the fiscal period of the Investment Corporation to February/August in order to avoid duplication and rationalize the account closing operations in the new company. Second, to link the effects of strengthening of the revenue by expanding the asset size held by the Investment Corporation and rationalization of account closing operations described above to the improvement of unitholder value, the management fee structure of the Investment Corporation will be changed (nearly 10% reduction of total management fee compared to the current structure). And third, the name of the Investment Corporation will be changed to "Advance Logistics Investment Corporation". This change is intended to unify the names of investment corporations managed by the new asset management company under "Advance," and is a part of strengthening its brand strategy by ITOCHU Group. As announced on the website of IAL on March 17, 2022, sponsorship of ITOCHU Group will not weaken, but rather will be further strengthened after the merger, so there is absolutely no need to be concerned.

The logistics real estate market, although in the middle of the sixth wave of the COVID-19 pandemic, has not suffered any significant impact. Instead, the robust demand for logistics operators is becoming apparent mainly due to the change in consumption structure owing to consumers' increase use of online shopping.

However, we will continue forward with external and internal growth, ESG initiatives, solid cash management. Additionally, in furtherance of our commitment to be the J-REIT that is valued by our stakeholders, IAL will continue to work hard for reinforcing governance and other management systems with an awareness of its social responsibilities and public missions.

We are fully aware of our mission to meet the expectation of our investors and stakeholders. We will remain committed to making aggressive moves after the merger as well in order to be the J-REIT of your choice. We respectfully ask for your continued and long-lasting support.

March17, 2022

Junichi Shoji

Representative Director, President & CEO

ITOCHU REIT Management Co., Ltd.

Change management structure to manage multiple funds through merger.

Steadily realize the effects of merger to enhance unitholder value and enhance cooperative relationship with the sponsor.

Aims and Effects of Merger

• 1. Expansion of investment opportunities and acquisition of property information

• 2. Sharing know-how of each company

• 3. Strengthen human resource development and recruitment capabilities

Change Article of Incorporation of IAL

• 1. Change of trade Name of IAL

  Unify the trade name of the managing REITs to "Advance" as part of brand strategy.

• 2. Change of financial period

  Change fiscal period of IAL from January/July to February/August to eliminate overlap of busy periods for account closing with ADR etc (start from 9th FP). Thus, 9th FP shall be 7 months irregular FP from August 1, 2022 to February 28, 2023.

• 3. Change of Asset management fee(s)

  Review the current asset management fee structure to enhance unitholder value linked with strengthened revenue base through asset size expansion and by rationalization effect of account closing operations, etc. (Total compensation reduced by nearly 10%)

Management fee IIIIncome before income taxes ×Adjusted EPU × 0.005%

Total assets × 0.05%

NOI of rental business × 5.0%Income before income taxes ×Adjusted EPU × 0.004%

Principle of

Listed REIT Priority

Name Logistics facilities Rental residences

1st

ADL(IAL)

ADROthers

ADP

2nd

ADP ADP －

Asset size expanded to 111.4 bn Yen. Achieved growth in DPU, NAV per unit, and unrealized gains

NOI yield after stabilized property taxes of the ※2 properties acquired previous FP is 4.9%

Change of DPU

Unit:Yen ■ ■ Distributions in excess of retained earnings per unit ■ ■ DPU(excluding distributions in excess of retained earnings)

 Full FP contribution of income from IMP Tokyo-adachi and IMP Miyoshi acquired in previous FP.  Acquired preferential negotiation rights of IMP Minoh (Kansai area) and IMP Kasugai(Chubu area),

thus, area diversification progressed.

•  Promote contract renewal with tenant companies scheduled to expire in September 2022.

•  Reduce property management costs for IMP Noda and IMP Kashiwa2.

•  Plan to start new solar panel roof lease at IMP Inzai2 from December 2022.

•  Revised distribution policy from 7th FP (ending January 31, 2022).

•  Entered the FTSE EPRA Nareit Index (expected to improve liquidity).

•  JCR's rating is upgraded to AA- (stable).

•  Issued 2nd Green Bond of 2 bn yen to promote diversification of lenders and financing methods.

•  Awarded GRESB "4-star" rating. Strengthening efforts to achieve "5-star" rating.

•  Expressed support for the TCFD recommendations and established internal system to address climate change risk.

•  IMP Inzai2, Tokyo-Adachi, Miyoshi received the highest BELS rating of "5 stars".

•  Promote energy (decarbonization) and resource conservation by adding solar panels etc.

※ IMP is abbreviation for "i Missions Park", logistic facility developed by ITOCHU Group.

2,425 287

2,517

2,311 261

2,395 269

2,492 238

1,729 273

1st FP (Jan. 2019)

2nd FP (Jul. 2019)

3rd FP (Jan. 2020)

4th FP (Jul. 2020)

5th FP (Jan. 2021)

6th FP (Jul. 2021)

※DPU per unit decreased over the previous fiscal period due to a public offering during the period, properties acquired that were non-performing for the full-year, and unexpected cost.