Q2 FY11/21 Financial Earnings Summary

Q2 FY11/21

Financial Earnings Summary

Notice: This document is a translation of the original Japanese document and is only for reference purposes. In the event of any discrepancy between this translated document and the original Japanese document, the latter shall prevail.

F i r s t B r o t h e r s C o . , L t d . ( 3 4 5 4 )

July 9, 2021

Message from the management

We at First Brothers would like to express our sincere gratitude to all our stakeholders for your continued support.

In 1H FY11/21, First Brothers reported gross profit of 3.77 billion yen, operating profit of 2.86 billion yen, ordinary profit of 2.61 billion yen, and profit attributable to owners of parent of 1.74 billion yen.

During the period, we already sold 11.3 billion yen in properties to actively rotate the assets in our real estate portfolio, and recorded corresponding profit. At the same time, we accelerated new investments in operational assets such as hotels.

As far as term profit (mainly income from leasing) is concerned, we continued to build up our portfolio under the expansion strategy for our portfolio of properties for lease that we have pursued all along, and gross profit from leasing remained above selling, general and administrative (SGA) expenses in 1H FY11/21. We regard income from leasing as a stable earnings foundation that will continue to underpin our earnings going forward.

Viewing the present economic environment as an opportunity for change, we, as the First Brothers Group, are not only pushing ahead with our original investment approach centered on real estate, but also undertaking initiatives to expand into fields where we can provide our own services. Going forward, we will continue to operate our businesses while considering making bold changes to our portfolio and businesses to adjust to the prevailing times.

Turning to dividends, our businesses are subject to annual earnings fluctuations. We therefore aspire to be a company that shareholders will continue to support over the medium to long term, and our policy is to provide stable and continuous dividends. We target a dividend on equity ratio (DOE) of 2.0%, and plan to pay a year- end dividend of 27 yen per share in FY11/21.

We ask for your continued understanding and support.

July 9, 2021

Tomoki Yoshihara

President

First Brothers Co., Ltd.

About us (1)

Company overview

About us (2)

Group's major businesses

Since our inception in February 2004, the First Brothers Group has grown centering around the core business of originating funds that mainly target real estate and managing investment assets on behalf of institutional investors*1. Around the time of our stock listing in February 2015, we made significant changes to our business structure. Today, we are an investment company managing our own investment assets*2, securing stable income primarily from real estate properties while also investing in various peripheral fields.

(1) Real estate investment

First Brothers maintains a portfolio of real estate for lease through which we expect to generate stable income over the medium to long term. From the vast number of properties available on the market, we carefully select and invest in small to medium-scale properties, and add value to them in various ways. We also develop new properties when sufficient returns can be expected. Our portfolio undergoes rotation as appropriate to realize gains from added property value.

We also conduct joint investments with institutional investors if we find investment opportunities in large-scale real estate projects.

(2) Private equity investment

First Brothers undertakes various other investment projects such as investment in distressed debt, venture capital, and unlisted company stocks.

(3) Renewable energy

Among the many forms of renewable energy, we focus our business development efforts on the geothermal energy sector. Although commercialization will take several years, we believe this is an area of investment where we can leverage our Group's expertise to make a visible contribution to society.

(4) Fund business

The fund business involves fund origination and provision of asset management services to institutional investors. Our funds invest in relatively large properties worth several billion to tens of billions of yen, and we adopt an investment strategy of securing both investment income and capital gains. Guided by our rule of conduct of "Client first," the First Brothers Group's top priority is to provide investment services that put client satisfaction above all else. Since we buy or sell investment assets for our funds at the most profitable timing, the Group's AUM balance changes significantly in tandem with real estate market trends.

We also apply the know-how that we have fostered in our fund business to occasionally handle asset management of active real estate investments that investors are running independently.

*1 Investment Management business: ((4) above)

The Investment Management business provides client asset management through private funds that mainly invest in real estate and real estate beneficiary rights. This involves a series of business activities from investment strategy planning, proposals, and property acquisitions to property management during the investment period and disposition (sale of investment property). Investment Management has been the source of the Group's progress.

*2 Investment Banking business ((1), (2), and (3) above)

The Investment Banking business represents investment activities in which the Group is the principal investor. The business centers on investments in real estate for lease that are projected to return a stable income. It also includes private equity investments that harness the platforms and strengths of our existing businesses, investments in renewable energy and other social infrastructure, and joint investments (same-boat investments) in private funds formed by the Group. These investment activities form the pillar of the Group's growth.

Topics for Q2 FY11/21 (1)

Portfolio of properties for lease (principal investment)

The First Brothers Group is expanding its portfolio by acquiring properties for lease that are projected to return a stable income over the medium to long term.

In cumulative Q2 FY11/21, we acquired new quality properties for lease to expand our portfolio, and sold some properties to achieve portfolio rotation.

The balance of our portfolio and corresponding book value, market value, and unrealized gain are shown below.

*1 Balance and increase/decrease values are based on acquisition price (before tax). Increase values include increases from M&A and from completion of development projects.

*2 Book value is adjusted by adding transaction costs at the time of acquisition to the acquisition price, and reflecting capital expenditures and depreciation for the investment period.

*3 Market value is the most recent appraised value or assessment value based on the appraised value, and unrealized gain is the difference between this value and book value.

*4 Assumed APR for stable operation (cash-based net income from rents minus administrative expenses, etc., divided by acquisition price).

The graphs below break down the balance (acquisition price-based, as of end Q2 FY11/21) of our portfolio of properties for lease by location and use.

*5 Mixed-use properties calculated based on primary usage.