March 11, 2020
For Immediate Release
Real Estate Investment Trust Securities Issuer
Star Asia Investment Corporation
Representative: Atsushi Kato, Executive Officer(Code: 3468)
Asset Management Company
Star Asia Investment Management Co., Ltd.
Representative:
Atsushi Kato
President and CEO
Contact:
Akiko Kanno
Director and CFO
TEL: +81-3-5425-1340

Notice Concerning Unitholders’ Meeting Regarding Approval of the Merger Agreement Etc.
Star Asia Investment Corporation (“SAR”), by resolution of its board of directors meeting held today, decided
the proposed agenda items for SAR’s 4th general meeting of unitholders scheduled to be held on March 31, 2020
(the “Unitholders’ Meeting”) as described below.
The following matters shall come to effect upon passing of the resolutions at the Unitholders’ Meeting.

1.

Contents of Proposed Agenda Items and the Reasons for the Proposals
As stated in the press release dated March 2, 2020 entitled “Notice Concerning Execution of a Merger
Agreement by and between Star Asia Investment Corporation and Sakura Sogo REIT Investment
Corporation”, SAR has agreed to execute an absorption-type merger (the “Merger”) where SAR will be thesurviving corporation and Sakura Sogo REIT Investment Corporation will be the dissolving corporation totake effect on August 1, 2020, and signed a merger agreement with respect to the Merger. The merger
agreement will be presented to the Unitholders’ Meeting for approval.
Furthermore, given the planned Merger, a partial amendment to the articles of incorporation will be
proposed (the “Amendment of Articles of Incorporation”), (1) in order to clarify the definition of acquisition
price which is used in the calculation of on-going fees I in the case where SAR executes the Merger,
necessary wording will be added to Article 37, Paragraph 1, Item 1 of the Articles of Incorporation, and (2) inorder to clarify the treatment of the goodwill amortization amount upon calculating on-going fees II in thecase where goodwill arises due to SAR executing the Merger, necessary wording will be added to Article 37
Paragraph 1 Item 2 of the Articles of Incorporation .
(Please refer to the attachment “Convocation Notice of the 4th General Meeting of Unitholders” for detailsof the proposed agenda items.)
We kindly ask all unitholders to support and approve the Merger and the Amendment to the Articles ofIncorporation.

2.

Schedule of Unitholders’ Meeting
March 11, 2020
Proposed Agenda Items for the Unitholders’ Meeting approved by the Board.
March 11, 2020
Send out Convocation Notice for the Unitholders’ Meeting1March 31, 2020

Unitholders’ Meeting (scheduled)<Attachment>
Convocation Notice of the 4th General Meeting of Unitholders<For Reference>
March 2, 2020

Notice Concerning Execution of a Merger Agreement by and between Star Asia
Investment Corporation and Sakura Sogo REIT Investment Corporation* Star Asia Investment Corporation website address: http://starasia-reit.com/en/
This is an English translation of the announcement in Japanese dated March 11, 2020. However, no assurance orwarranties are given for the completeness or accuracy of this English translation.

2

(Securities Code: 3468)
March 11, 2020

To our unitholders
Atago Green Hills Mori Tower 18F,
2-5-1, Atago, Minato-ku, Tokyo
Star Asia Investment Corporation
Atsushi Kato, Executive Director

Convocation Notice of the 4th General Meeting of Unitholders
We would like to announce and invite you to attend the 4th General Meeting of Unitholders (the “General Meeting ofUnitholders”) of Star Asia Investment Corporation (“SAR”), which will be held as described below.
If you are unable to attend the General Meeting of Unitholders, you may exercise your voting rights by using the Voting
Rights Exercise Form. In such a case, please consider the Reference Documents for the General Meeting of Unitholders
set out below, indicate your approval or disapproval on the enclosed Voting Rights Exercise Form, and return it so thatit reaches SAR by 6:00 P.M. on Monday, March 30, 2020.
Furthermore, SAR has set forth the provisions regarding “deemed approval” as follows in Article 14 of its Articles ofIncorporation, in accordance with Article 93, Paragraph 1 of the Act on Investment Trusts and Investment Corporations.
Therefore, please note that if you are unable to attend the General Meeting of Unitholders and do not exercise yourvoting rights by using the Voting Rights Exercise Form, you will be deemed as having approved each of the proposals
submitted to the General Meeting of Unitholders, and the number of your voting rights will be included in the numberof voting rights of the unitholders present thereat.
<Excerpt from Current Articles of Incorporation>
Articles of Incorporation
Article 14 Deemed Approval
1. Unitholders who do not attend a general meeting of unitholders and do not exercise voting rights shall be deemed to approve
the proposals for resolution (excluding proposals whose purposes conflict with each other in cases where multiple proposals
are submitted) submitted to the general meeting of unitholders.
2. The number of voting rights of unitholders deemed to approve the proposals for resolution in accordance with the provisionof the preceding paragraph shall be included in the number of voting rights of attending unitholders.
Meeting Details
1. Date and Time:

10:00 A.M. on Tuesday, March 31, 2020
(The reception desk is scheduled to open at 9:30 A.M.)

2. Location:

AP Shinbashi, A-PLACE Shinbashi-ekimae, 1-12-9, Shinbashi,
Minato-ku, Tokyo(Please refer to the map to the location at the end of this document.)

3. Purpose of the Meeting:
Matters to be Resolved
Proposal 1: Approval of Agreement on Absorption-Type Merger with Sakura Sogo REIT Investment Corporation
Proposal 2:

Partial Amendments to the Articles of Incorporation[Requests]▪ When attending the General Meeting of Unitholders, please submit the enclosed Voting Rights Exercise Form to thereception desk at the venue.
▪ When exercising your voting rights by proxy, another unitholder holding the voting rights may attend the General Meetingof Unitholders as your proxy. In such a case, please submit a document certifying the authority of the proxy (including thequalification of the proxy) together with a Voting Rights Exercise Form to the reception desk at the venue. Please note thata person other than a unitholder entitled to exercise his/her voting rights, such as a proxy who is not a unitholder or anyaccompanying person, is not permitted to enter the venue.
[Notice]▪ How to Announce the Amendments to the Reference Documents for the General Meeting of Unitholders
If any amendment has been made to the Reference Documents for the General Meeting of Unitholders by the day
immediately preceding the General Meeting of Unitholders, the amended version will be posted on SAR’s website(http://starasia-reit.com/) on the Internet.

2

Reference Documents for the General Meeting of Unitholders
Proposals and Reference Matters
Proposal 1 Approval of Agreement on Absorption-Type Merger with Sakura Sogo REIT Investment Corporation
1.

Reason of the absorption type merger

SAR and Sakura Sogo REIT Investment Corporation (“SSR”), based on the Memorandum of Understanding Regarding Merger
executed between SAR and SSR on January 30, 2020 (the “MOU”), resolved to execute an absorption-type merger, with August
1, 2020 as the effective date, whereby SAR will be the surviving corporation and SSR will be the dissolving corporation in themerger (the “Merger”). SAR and SSR subsequently executed a merger agreement (the “Merger Agreement”) to that effect on
March 2, 2020.
(1) History of SAR
SAR was listed on the Real Estate Investment Trust Securities Market of the Tokyo Stock Exchange (the “Tokyo Stock
Exchange”) in April 2016 as a diversified REIT with 18 properties (with a total acquisition price of 61.4 billion yen). SAR
entrusts its asset management functions to Star Asia Investment Management Co., Ltd. (“SAIM”), which belongs to Star Asia
Group (Note 1), an independent property investment group. SAR has expanded its capital base through public offerings forproperty acquisitions three times so far, and has been developing its portfolio with diversified assets, including office buildings,
residences, logistics facilities and hotels mainly in the Tokyo area. Since its listing, SAR has been advocating active
management, the basic principle of which is to maximize unitholder value. SAR examines and take various measures bythinking outside the box. Typical examples include four asset replacements (Note 2) that enabled distribution of profits on saleto the unitholders of SAR by enhancing the portfolio quality and producing profits on the sale of such properties, as well as
investments in mezzanine debt which only SAR alone has conducted among the listed REITs as of March 2, 2020. As of March
2, 2020, SAR has had seven fiscal periods of operating history since its listing and manages a portfolio of 34 properties (witha total acquisition price of 102.3 billion yen).
(Note 1) “Star Asia Group” is a group led by Malcolm F. MacLean IV and Taro Masuyama, who founded the group and remain
key players of the group to this day. “Star Asia Group” consists of all related entities and investment destinations(funds in which both Malcolm F. MacLean IV and Taro Masuyama are involved in the decision-making and theinvestment destinations of such funds).
(Note 2) The fifth asset replacement scheduled by SAR is not included.
(2) History of SSR
SSR was listed on the Real Estate Investment Trust Securities Market of the Tokyo Stock Exchange in September 2016 as adiversified REIT holding 18 properties (with a total acquisition price of 57.3 billion yen), sponsored by the Galileo Group(Note 1), an Australian independent property and fund management group, and the Nippon Kanzai Group (Note 2). SSR has
had seven fiscal periods of operating history since its listing and manages a portfolio of 18 properties (with a total acquisition
price of 57.5 billion yen) as of March 2, 2020.
However, SSR has not received sufficient support from the Galileo Group, its main sponsor, and despite SSR being listed ataround the same time as SAR, its asset size as of March 2, 2020 is roughly the same as the size as of SSR’s listing. Additionally,
SSR has never expanded its capital base through a public offering. Furthermore, a relatively high level of asset management
fees and average interest on loans were among the factors hindering the growth of distributions per unit. Moreover, SSR has
only sold properties but has not conducted any acquisition in the fiscal period ended in June 2018. This has resulted in thelowered earning capacity of the portfolio, and profits on sale have been allocated to costs of preparing suspended issuances ofinvestment units instead of being distributed to unitholders. This management approach is not considered to be prioritizing
unitholders, and distributions per unit have been stagnant since the second fiscal period after SSR’s listing, in which it became
unaffected by factors such as fixed property tax. Therefore, SSR has been reconsidering a growth strategy which includes the3possibility of a merger.
(Note 1) “Galileo Group” is an Australia-based business group led by Galileo Sydney Holdings Pty Limited, Galaxy JREIT
Pty Limited and Werrett Family Pty Ltd, and engages in the property development and fund management businesses.
(Note 2) “Nippon Kanzai Group” is a business group led by Nippon Kanzai Co., Ltd. (which is listed on the first section of theTokyo Stock Exchange).
(3) Background of execution of the Merger Agreement
In light of the situation of SSR as described above, Lion Partners GK (“LPGK”), an affiliate of Star Asia Group, announced aproposal for the Merger (the “Proposal”) on May 10, 2019 and requested to hold a general meeting of unitholders of SSR aspart of the necessary procedures for consummation of the Merger. Subsequently, on June 28, 2019, LPGK received approval
from the Director-General of the Kanto Local Finance Bureau to convene SSR’s general meeting of unitholders and held thegeneral meeting of unitholders at 10:00 am on August 30, 2019 (hereinafter referred to as the “Unitholders’ Meeting Convened
by LPGK”).
Among the following Proposed Agenda Items 1 through 4, the Unitholders’ Meeting Convened by LPGK voted on Proposed
Agenda Items 2 through 4. Proposed Agenda Item 1 was withdrawn because Executive Director Makoto Muranaka had resigned.
All voted agenda items, Proposed Agenda Item 2 through Proposed Agenda Item 4, were adopted and approved by resolution
as per the original proposals. (With respect to Proposed Agenda Item 2 and Proposed Agenda Item 4, an attending unitholder
submitted a motion requesting amendment of the proposal, but both of such motions were rejected.)
Proposed

AgendaItem 1:
Proposed

AgendaItem 2:
Proposed

AgendaItem 3:
Proposed
Item 4:

Removal of Executive Director Makoto Muranaka
Appointment of Executive Director Toru Sugihara
Cancellation of the asset management entrustment agreement with Sakura Real Estate Funds
Management, Inc.

AgendaEntering into an asset management entrustment agreement with Star Asia Investment
Management Co., Ltd.

In connection with the resolutions at the Unitholders’ Meeting Convened by LPGK, Galaxy JREIT Pty Limited, which is aunitholder of SSR and the shareholder that owns all of the voting rights in Sakura Real Estate Funds Management, Inc.
(“SREFM”), which had been the asset management company of SSR until February 29, 2020, later filed an action seeking
rescission of the resolutions adopted at the unitholders’ meeting with the Tokyo District Court (the “Action for Rescission of
Resolutions”) as well as a petition for an order of injunction to suspend the performance of duties and to appoint an acting
representative for SSR’s executive director, a petition for an order of injunction to suspend the effects of resolutions of general
meeting of unitholders, etc., and a petition for an order of injunction to prohibit certain acts on the basis of seeking to preserve
the right to seek an injunction against illegal acts (hereinafter collectively referred to as the “Petitions”). However, the Action
for Rescission of Resolutions has been dismissed by the Tokyo District Court on February 27, 2020. Each of the Petitions has
been either dismissed by the court (A petition for permission to appeal, however, has been filed against the Tokyo high court’s
dismissal of the immediate appeal as to one of the Petitions.) or withdrawn by the petitioner (furthermore, a petition for aprovisional disposition order against SSR relating to the rights under the asset management agreement has been separately filed
by SREFM).
In the course of its discussions with SAR to review the Merger, SSR has established a special committee (the “Special
Committee”) consisting of Shigeru Kaneda and Hirotaka Isayama, Supervisory Directors of SSR, who are independent fromStar Asia Group and the result of the Merger, and Kiyoshi Kondaibo, a third party. SSR has executed the MOU supported by
an opinion on January 30, 2020 from the Special Committee concluding that it is reasonable for SSR to enter into the MOU
and to review, negotiate, and conduct due diligence with a view toward an expedited execution of a definitive agreement.
4

After executing the MOU, each of SAR and SSR has conducted due diligence and entered into discussions regarding the termsof the Merger based on the MOU. SAR and SSR have executed the Merger Agreement on March 2, 2020 because they haveagreed to the terms of the Merger, including the merger ratio.
(4) Purpose of the Merger
SAR believes that the Merger will contribute to: (i) further diversification of its portfolio both in terms of geographical area
and asset type and increase stability of portfolio revenue through the expansion of asset size; (ii) improved efficiency ofoperational costs; and (iii) larger market capitalization and improved liquidity.
As for SSR, the Merger is also expected to enable it to achieve its initial goal of having 150 billion yen of assets undermanagement. Additionally, the Merger is expected to increase the stability of SSR’s portfolio revenue through diversification
both in terms of area and asset type due to the expansion in asset size, and realize improved efficiency of SSR’s operationalcosts and increase its market capitalization and the liquidity of its investment units. Furthermore, SSR believes the Merger isthe best option because a management approach that seeks to maximize unitholder value can be expected after the Merger as aresult of active management by SAIM and the promotion of external growth by taking advantage of the preferential negotiatingrights that SAR enjoys.
The asset size of SAR after the Merger is expected to be 53 properties (Note) with a value of 166.8 billion yen (Note), which
is a significant step toward the asset size of 200 billion yen, which SAR has set as the goal for external growth. In addition,
SAR believes that expansion of the asset size (and increase in the number of properties held) will increase its flexibility inconducting active management. After the Merger, SAR will seek to maximize unitholder value of the SAR after the Merger,
taking advantage of the strong support from the Star Asia Group in contributing to SAR’s external growth.
(Note) Total of number of properties and asset size (based on the acquisition price) after the acquisition and sale of the asset
described in the “3. Summary of the contents of the matters set forth in Items 1 to 3, Paragraph 1, Article 194 of theRegulation for Enforcement of the Act on Investment Trusts and Investment Corporations, (3) Matters concerning thesurviving corporation in the absorption-type merger” scheduled by SAR, and the number of properties and the estimatedacquisition price of the assets held by SSR (which price is as described in the appraisal report as of November 1, 2019obtained by SAR), respectively.
We would appreciate it if you could agree with the content of the Merger and approve the Merger Agreement.
2. Summary of the contents of the Merger Agreement
As described in Attachment 1 hereto.
3. Summary of the contents of the matters set forth in Items 1 to 3, Paragraph 1, Article 194 of the Regulation for Enforcementof the Act on Investment Trusts and Investment Corporations(1) Matters regarding appropriateness of provisions for number of investment units of the surviving corporation delivered tothe unitholders of the dissolving corporation in lieu of their investment units by the surviving corporation for the absorptiontype merger or calculation method of number of such investment units and total amount of unitholders' capital of the surviving
corporation and allocation of investment units of the surviving corporation to unitholders of the dissolving corporation(i) Matters regarding appropriateness of provisions for number of investment units of the surviving corporation delivered tothe unitholders of the dissolving corporation in lieu of their investment units by the surviving corporation for the absorptiontype merger or calculation method of number of such investment units and allocation of investment units of the surviving
corporation to unitholders of the dissolving corporation(a) Number of investment units of SAR or amount of money to be allocated for each investment unit of SSR
SAR

SSR

(Surviving corporation in the(Dissolving corporation in the absorption-

absorption-type merger)

type merger)
51.78
Allocation(Reference):ofinvestment

1

Prior to taking into consideration theunits under

Investment Unit Split

the Merger

0.89(Note 1)The number of new SAR investment units (the “Investment Units”) to be issued as a result of the Merger (the numberof units after the Investment Unit Split of SAR): 592,741 investment units(Note 2)SAR plans to split one investment unit into two investment units with July 31, 2020 as the record date for splitting theinvestment units and August 1, 2020 as the effective date of the split (the “Investment Unit Split”); the allocation ratio
shown above and the number of new investment units SAR will allocate and deliver are subject to the Investment Unit
Split taking effect. The merger ratio before the Investment Unit Split is SSR 0.89 to SAR 1; however, on the basis ofthat ratio, against one SSR investment unit, 0.89 SAR Investment Units would be allocated and delivered, and thiswould result in many SSR unitholders being allocated fractions of less than one Investment Unit. To make it possible
for SSR unitholders to continue holding Investment Units after the Merger, a split of the investment units will be
carried out before the effective date of the Merger, in the ratio of two investment units to one Investment Unit for
purpose of delivering to all SSR unitholders at least one Investment Unit, and for every one SSR investment unit, 1.78
Investment Units post-Investment Unit Split will be allocated and delivered.
(Note 3)As a result of allocating 1.78 Investment Units to SSR unitholders for each SSR investment unit held, fractions of lessthan one investment unit will occur in the number of investment units that must be delivered. Those fractional unitsof less than one share will be sold through market transactions, and the proceeds from such sale will be delivered tothe unitholders allocated fractional shares in accordance with the fractions held pursuant to the Act on Investment
Trusts and Investment Corporations (Act No. 198 of 1951, as amended, the “Investment Trust Act”).
(Note 4)In addition to the abovementioned investment units, SAR intends to pay SSR unitholders (the unitholders stated orrecorded in the final unitholders’ register on the day before the effective date of the Merger (excluding those SSR
unitholders who have demanded the purchase of their investment units pursuant to Article 149-3 of the Investment
Trust Act) (hereinafter referred to as the “Unitholders Subject to Allocation”), in lieu of cash distributions for thebusiness period of SSR from January 1, 2020 to July 31, 2020, a merger consideration in the form of cash distribution
based on SSR’s distributable income for that same period of an amount (disregarding fractions of a yen) which is thequotient resulting from a division of the amount of SSR’s distributable income on the date before the effective date of
the Merger by the number of issued SSR investment units on that date as reduced by the number of investment units
held by unitholders other than the Unitholders Subject to Allocation. The merger consideration will be paid within areasonable period from the effective date of the Merger.
In addition, SSR will submit before a general meeting of its unitholders, which is scheduled to be held on March 30,
2020, a proposal for an amendment to be made to its articles of incorporation with a view to changing its fiscal periods
from the current dates of June 30 and December 31 to January 31 and July 31. If the aforementioned amendment isapproved in the general meeting of the unitholders, the last period before the effective date of the Merger is expected
to be a seven -month business period from January 1, 2020 to July 31, 2020, and cash distributions with June 30, 2020as the record date will not be distributed (and instead, as mentioned above, a merger consideration in the form of cash
distributions based on SSR’s distributable income for that same period will be paid).
(b) Basis for the calculations
SAR has appointed Nomura Securities Co., Ltd. (“Nomura Securities”), and SSR has appointed Mizuho Securities Co., Ltd.
(“Mizuho Securities”), respectively, as their financial advisors for the Merger. SAR and SSR have requested their respective
financial advisors to conduct financial analysis with regard to the merger ratio used in the Merger in order to calculate the6merger ratio used in the Merger in a fair manner. Summaries of the calculations made by Nomura Securities and Mizuho
Securities each indicate figures prior to taking into account the Investment Unit Split, by SAR, of one investment unit into two
investment units as mentioned in the section “(a) Number of investment units of SAR or amount of money to be allocated foreach investment unit of SSR” above.
Because the investment units in SAR and SSR are both listed on the Tokyo Stock Exchange and market prices are available,
Nomura Securities used average market investment unit price analysis, and because there are multiple listed investment
corporations comparable to each of SAR and SSR and an analogical estimate based on comparable investment corporations is
possible, it also used a comparable investment corporation analysis. To reflect the state of future business operations in thecalculations, Nomura Securities conducted a discounted cash flow analysis (“DCF Analysis”). Further, to reflect in its
estimations the amount of the impact of fair value and realizable value on net assets, Nomura Securities also used the adjusted
net asset method in its calculations. A summary of Nomura Securities’ calculations is shown below. The range of values for themerger ratio shown indicates the range of estimates for SSR when the value for one Investment Unit is considered to be 1.
In its average market investment unit price analysis, Nomura Securities used the simple average of the closing prices on May
10, 2019 (the “First Calculation Base Date”), the five business days including and preceding the First Calculation Base Date,the one-month period including and preceding the First Calculation Base Date, the three-month period including and preceding
the First Calculation Base Date, and the six-month period including and preceding the First Calculation Base Date, as well as
the simple arithmetic average of the closing prices on February 27, 2020 (the “Second Calculation Base Date”), the five businessdays including and preceding the Second Calculation Base Date, the one-month period including and preceding the Second
Calculation Base Date, the three-month period including and preceding the Second Calculation Base Date, and the six-month
period including and preceding the Second Calculation Base Date, respectively.
SAR’s business plan that Nomura used as the basis for the DCF Analysis includes certain fiscal periods for which significant
increase or decrease in profits is expected. A substantial increase in profits from the previous period is expected for the fiscal
period ending July 2020 with an operating profit of 2,346 million yen, an ordinary profit of 2,072 million yen, and a net profitof 2,072 million yen. A substantial decrease in profits from the previous period is expected for the fiscal period ending July
2021 with an operating profit of 1,755 million yen, an ordinary profit of 1,477 million yen, and a net profit of 1,476 million
yen. These are due to gain on the sale of Alphabet Seven, which is planned to be sold in the fiscal periods ending July 2020and January 2021.
For details of the supplemental explanation regarding the assumptions and disclaimers of Nomura Securities’ analysis, pleaserefer to (Note 1) at the end of this paragraph.
Valuation Method

Range of Merger Ratio

Average Market Investment Unit Price
Analysis0.80 - 0.81

(First Calculation Base Date)
Average Market Investment Unit Price
Analysis0.83 - 0.84

(Second Calculation Base Date)
Comparable Investment Corporation
Analysis0.89 - 1.09

DCF Analysis

0.83 - 0.93

Adjusted Net Asset Method

0.90

In performing its analysis, Mizuho Securities has reviewed the financial information disclosed by SAR and SSR as well as the
published information available to the public and other information. Because the investment units of SAR and SSR are both7

listed on the Tokyo Stock Exchange and market prices are available, Mizuho Securities used a market investment unit pricebased analysis. In addition because there are multiple listed investment corporations that are similar to SAR and SSR to acertain degree in terms of, among others, owned real property portfolio and others from the viewpoint of analyzing the rangeof merger ratio, although they are not directly comparable with SAR and SSR, and an analogical estimate of the unitholder
value based on comparable investment corporations is possible, Mizuho Securities also conducted a comparable investment
corporation analysis. In addition, Mizuho Securities constructed the dividend discount models analysis as a method of
calculation (“DDM Analysis”) of the unitholder value based on dividends that unitholders of SAR and SSR could expect toreceive in the future. For purposes of reflecting the market value of properties held by each of SAR and SSR, Mizuho Securities
also used the adjusted net asset method.
The calculated ranges of the merger ratio shown below are ranges of the number of SAR investment units to be allocated foreach Investment Unit.
Valuation Method

Range of Merger Ratio

Market Investment Unit Price

0.83 - 0.84

Based Analysis
Comparable Investment

0.81 - 1.04

Corporation Analysis
DDM Analysis

0.80 - 1.09

Adjusted Net Asset Method0.87 - 0.90

In performing the market investment unit price based analysis, Mizuho Securities has adopted February 27, 2020 as thereference date (the “Reference Date”) and has reviewed the investment unit price on the Reference Date and the average of theclosing investment unit prices over the most recent five business days, the most recent month, the most recent three-month
period and the most recent six-month period, each ending on the Reference Date.
In performing the DDM Analysis, Mizuho Securities assessed the unitholder’s value for SSR and SAR by discounting each
investment corporation’s future theorized dividend based on financial forecasts at a certain discount rate to the present value.
When estimating SSR’s future theorized dividend based on financial forecasts, for purposes of the financial forecasts preparedby SREFM for the period from June 2020 to December 2022, Mizuho Securities took into consideration that the asset
management fee rate will decrease due to the change of the asset management company from SREFM to SAIM, as the Special
Committee concluded it reasonable to do so. On the other hand, when estimating SAR’s future theorized dividend based on
financial forecasts, Mizuho Securities amended the financial forecasts prepared by SAIM for the period from July 2020 toJanuary 2023, so that it will not take into consideration the sale of properties owned by SAR and the acquisition of new
properties, as the Special Committee concluded it reasonable to do so. The financial forecasts of SAR and SSR used as thebasis for the calculation in the DDM Analysis were not created on the assumption that the Merger will be implemented. There
were no fiscal years in which a significant increase or decrease in profit was expected in the future profit plans of SAR and
SSR, on which Mizuho Securities relied in performing the DDM Analysis.
For details of the supplemental explanation regarding the assumptions and disclaimers for Mizuho Securities’ analysis, pleaserefer to (Note 2) at the end of this paragraph.
(Note 1) In determining the merger ratio, Nomura Securities assumed that public information and all information provided to
Nomura Securities were accurate and complete without independent verification of the accuracy or completeness ofsuch information. Nomura Securities neither conducted an independent evaluation, appraisal or assessment nor
requested a third-party institution to appraise or assess the assets or liabilities (including derivatives products, offbalance-sheet assets and liabilities and other contingent liabilities) of SAR and SSR, including the analysis andevaluation of individual assets and liabilities. It is assumed that the information included in the financial forecasts of8each of SAR and SSR (including profit plans and other information) has been reasonably examined or prepared basedon the best and good faith forecasts and judgment of the management of SAR and SSR that are currently available.
Nomura Securities’ calculation reflects the information obtained by Nomura Securities by February 27, 2020 andprevailing economic conditions. Nomura Securities’ calculation was made for the sole purpose of assisting theinstitution that determines the business execution of Star Asia Investment Corporation to assess the fairness of themerger ratio.
(Note 2) In determining the merger ratio, Mizuho Securities has relied upon and assumed the accuracy and completeness of all
public information examined by Mizuho Securities and the financial or other information that was furnished to Mizuho
Securities by SAR and SSR or the asset management company of each of SAR and SSR (including a former asset
management company the asset management agreement of which was terminated at the time of delivery of the written
merger ratio calculation report; hereinafter the same) or discussed between Mizuho Securities and SAR and SSR andthe Special Committee, and upon which calculation of the merger ratio is substantially based. Mizuho Securities did
not independently verify (nor does it assumes responsibility or liability for independently verifying) the accuracy orcompleteness of such information. The contents of Mizuho Securities’ written merger ratio calculation report could
potentially be different if there are matters that would make the information provided to Mizuho Securities or discussed
between Mizuho Securities and SAR and SSR and the Special Committee materially incorrect, or if there is a fact or
circumstance not disclosed at the time of delivery of the written merger ratio calculation report, or which occurs
subsequent to the delivery of the written merger ratio calculation report (including facts which potentially existed at
the time of delivery of the written merger ratio calculation report and which are clarified subsequently). Mizuho
Securities has assumed that the executive directors of each of SAR and SSR or officers and employees of the asset
management company of each of SAR and SSR were unaware of any fact that would make the information provided
to or discussed with Mizuho Securities incomplete or misleading. In addition, Mizuho Securities did not conduct an
independent valuation or appraisal of any assets or liabilities (including derivatives, off-balance sheet assets andliabilities and other contingent liabilities), or the reserves of either company or its affiliates. Mizuho Securities was
not independently provided with any such valuation or appraisal by a third party, nor did Mizuho Securities make any
request to any third party for any such valuation or appraisal. Mizuho Securities has not assumed any obligation to
conduct any inspection of the properties or facilities of SAR or SSR, nor has Mizuho Securities evaluated thecapitalization, solvency or fair value of SAR or SSR under any law relating to bankruptcy, insolvency or similar
matters. With respect to any information that Mizuho Securities has requested in connection with the calculation of
the merger ratio but which SAR and SSR have not provided or disclosed to Mizuho Securities by SAR and SSR, orinformation that was provided or disclosed to Mizuho Securities, but whose impact on the unitholder value of SAR
and SSR is undetermined at present (including lawsuits and petitions pending at the time of delivery of the written
merger ratio calculation report), or which could not otherwise be used by Mizuho Securities as a basis of Mizuho
Securities’ evaluation, Mizuho Securities has made certain assumptions it believed to be reasonable and appropriate,or was based on the premise that there was no such impact. Mizuho Securities has not verified the impact of suchassumptions or premise on the future financial conditions of SAR and SSR if such assumptions prove to be materially
inaccurate. With respect to the financial forecasts and other forward-looking information provided to Mizuho
Securities, Mizuho Securities has assumed that such information was reasonably prepared by the executive directorsof each of SAR and SSR or officers and employees of the asset management company of each of SAR and SSR on abasis reflecting the best currently available estimates and judgments of the executive directors as to the expected future
results of the operations and financial conditions of the companies. In addition, Mizuho Securities made certain
adjustments to the financial forecasts and business plans of each of SAR and SSR based on the Special Committee’srequest, subject to the condition that the details of such adjustments and details of the financial forecasts and businessplans before the adjustment were reported to the Special Committee, and the Special Committee has confirmed thereasonableness of the details and preconditions of such adjustment. Mizuho Securities relies on the financial forecasts
and business plans after the adjustment or modification and does not rely on independent verification of the feasibility9

of such financial forecasts and business plans. Mizuho Securities has expresses no view as to any analyses or forecasts
referred to in the written merger ratio calculation report or the assumptions on which they are based. Mizuho Securities
is not a legal, regulatory, or tax expert and, accordingly, it has relied on the assessments made by the relevant advisors
to SAR and SSR with respect to such issues. Mizuho has further assumed that the Merger will qualify as a tax-freereorganization for Japanese corporate tax purposes.
Mizuho Securities has provided the results of its financial analysis to SSR in response to SSR’s request for the sole
purpose of assisting the board of directors of SSR to determine the merger ratio. Mizuho Securities has not expressed
its opinion that the merger ratio is fair from a financial perspective.
(c) Background to calculations
As a result of discussions and negotiations over an extended period comprehensively taking into consideration such factors as
the financial performance and state of the assets and liabilities of each of SAR and SSR, their future business prospects, themerits of the Merger and the results of the analyses performed by their respective financial advisors, SAR and SSR determinedthat the above merger ratios are fair.
For the process regarding the assessment of the merger ratio by SSR, please also refer to “(e) Measures to Ensure Fairness i.
Measures to ensure fairness in assessing the propriety of the Merger and the merger ratio” below.
(d) Relationships with the institutions which performed the calculations
Neither Nomura Securities nor Mizuho Securities is deemed a related party of SAR or SSR pursuant to Article 67, paragraph
4 of the Ordinance on Accounting at Investment Corporations (Cabinet Office Ordinance No. 47 of 2006, including subsequent
amendments) and neither has any material interests to be disclosed with respect to the Merger.
(e) Measures to ensure fairness
i. Measures to ensure fairness in assessing the propriety of the Merger and the merger ratio
In the course of assessing the terms of the Merger, SAR reported on a timely basis the status of its assessment to its board of
directors composed of one executive director and two supervisory directors, whose independence from the asset managementcompany is ensured in terms of the Investment Trust Act, and all material matters of its assessments were deliberated andapproved by its board of directors.
In addition, SAR appointed Anderson Mori & Tomotsune as its legal advisor for the Merger, and received advice concerning
the methodology and process relating to the procedures and decision-making process for the Merger.
With respect to SSR, Executive Director Toru Sugihara appointed by the Proposal had been a director of SAIM, which is SAR’s
asset management company, before the Proposal was submitted, and even thereafter he had been the representative director of
LPGK, which made the Proposal. He is also an employee of Star Asia Management Japan Ltd., a subsidiary of Star Asia
Management Ltd., with which SAR and SAIM have each executed a sponsor support agreement. Although, he has retired as
director of SAIM and representative director of LPGK and is not engaging in any duties other than as executive director of
SSR, it cannot be ruled out that he could be deemed to be potentially subject to the influence of Star Asia Group when making
decisions. Further, since SSR’s asset management company has been changed to SAIM as of March 1, 2020, such that SSR
and SAR now share the same asset management company, it cannot be ruled out that the Merger may cause conflicts of interest
due to its structure. Given the foregoing, SSR has taken the following measures to ensure the fairness of the Merger.
a. Obtaining Report from Independent Special Committee
Given that the potential conflicts of interest due to the Merger cannot be ruled out because of its structure as stated above, SSR
has established the Special Committee consisting of three members, namely, Mr. Shigeru Kaneda and Mr. Hirotaka Isayama,
Supervisory Directors of SSR, who are independent from Star Asia Group (including SAR) and the result of the Merger, andMr. Kiyoshi Kondaibo who is a third party (for the independence and appropriateness of Mr. Kondaibo, please see the tablebelow) at the meeting of its board of directors held on December 19, 2019, in order to ensure the fairness of the decisions to be10

made when considering whether it is appropriate to carry out the Merger and the fairness of its terms. In addition, SSR delegatedto the Special Committee the task of assessing the propriety of the Merger and to give its opinions to SSR’s board of directors.
Career history

Main reason of the appointment
He is not an interested party of the Star Asia GroupAs for the success and failure of the Merger, despite
having 50 investment units of SSR, he is deemed tohave independence because he shares a mutual interest
with general unitholders
He has worked for Japanese financial institutions andforeign investment banks and has been involved innumerous M&A and REIT projects and has profoundknowledge in finances
He has been officer of an asset management company
of a Japanese investment corporation and has profoundknowledge in REIT operation

April 1988: The Mitsubishi Bank, Ltd. (currently MUFG
Bank, Ltd.)
December 1993: Mitsubishi Finance (Hong Kong) Limited
August 1995: The Mitsubishi Bank, Ltd. (currently MUFG
Bank, Ltd.), Singapore Branch
February

2000:

Financial

Product

Development

Department, Securitization Group of the Mitsubishi Bank,
Ltd. (currently MUFG Bank, Ltd.)
July 2003: Head of REIT Business Promotion Departmentof Mitsubishi Securities Co., Ltd. (currently Mitsubishi UFJ
Morgan Stanley Securities Co., Ltd.)
August 2005: Head of Real Estate Investment Banking
Group of Deutsche Securities Inc.
February 2008: Managing Director and Head of Real Estate
Investment Banking Group of Deutsche Securities Inc.
December 2013: Director, Vice President and Head ofFinance & Planning Division of Sojitz REIT Advisors K.K.
(resigned in June 2017)

In the resolution of SSR’s board of directors to establish the Special Committee, SSR’s board of directors also decided that: (i)the determination by the Special Committee, including its affirmative or negative opinions concerning the Merger, must be
respected to the maximum extent when deciding on the Merger at a meeting of the board of directors; and (ii) if the Special
Committee determines that the implementation of the Merger or its terms are not appropriate, the board of directors of SSR
will decide against carrying out the Merger. Also in the resolution, SSR’s board of directors authorized the Special Committee,
among others, : (a) to negotiate with SAR about the Merger; (b) to appoint a financial or legal advisor for the Special Committee
or designate or approve a financial or legal advisor for SSR; and (c) to receive information necessary to assess and appraise theMerger from the board of directors of SSR. Remuneration is paid to the members of the Special Committee based on the numberof hours they spend performing their duties, respectively, regardless of the content of their opinions.
Upon such delegation, the Special Committee carefully consulted and discussed these issues by preparing reports, sharing
information, deliberating and reaching decisions through its meetings that were held eleven times in total during the period
from December 19, 2019 until February 28, 2020, and by other means such as e-mail as appropriate. In such discussions andassessment, the Special Committee received advice from Mori Hamada & Matsumoto, legal advisor of SSR, concerning themethod of discussion and the content of determination and other matters related to the Merger.
The Special Committee received necessary information for assessment of the Merger, including detailed explanations andinformation on SAR’s initial proposal for the Merger, SAR’s proposal for the merger ratio of the Merger, the respective
preparation procedures for and contents of business plans of SAR and SSR, assumptions for the calculation of the merger ratio
by Mizuho Securities and the results thereof, and drafts of the timely disclosure and convocation notice of the general meetingof unitholders relating to the Merger. The Special Committee also received professional advice from the advisors, and thus it
received sufficient information for its determination. In addition to negotiations with SAR on the MOU, the Special Committee
was kept informed about the details of SAR’s proposal for the merger ratio in a timely manner whenever SSR received any
such proposal from SAR, since the time SSR received the first SAR proposal for the merger ratio on February 13, 2020 after
the Unitholders’ Meeting Convened by LPGK and discussed and reviewed such proposal taking into account financial advice
11from Mizuho Securities. After such discussion and review and with a view to obtaining more favorable terms of the Merger
than those in the merger proposal announced by Star Asia Group on August 7, 2019, the Special Committee negotiated with
SAR the terms of the Merger by, among others, instructing and requesting Mizuho Securities to request SAR to increase themerger ratio and discussing directly with SAR. The anticipated merger ratio of the Merger announced by Star Asia Group on
August 7, 2019 was to allocate 0.88 investment unit of SAR (before the Investment Unit Split) to one investment unit of SSR,
but as a result of such negotiations by the Special Committee, it was finally agreed to allocate 0.89 investment unit of SAR(before the Investment Unit Split) to one investment unit of SSR. The Special Committee submitted its report as of March 2,2020 to SSR’s board of directors to the effect that it was appropriate for SSR to carry out the Merger since: (a) the Merger wasdeemed as capable of increasing the value of SSR; (b) fair procedures were being implemented to secure the interests of SSR’s
general unitholders upon the Merger; and (c) the terms of the Merger were deemed fair. The outline of the report is as follows:(a) Assessment from the viewpoint of increasing the value of SSR
It is reasonable to determine that the Merger contributes to increasing the value of SSR since: (i) implementation of the Merger
is expected to stabilize distributions, secure external growth potential and reduce certain operational costs, and therefore theMerger is considered beneficial to the resolution of various issues faced by SSR and to increasing the value of SSR; and (ii)with advice from Mizuho Securities, screening of investment corporations that may be a potential counterparty of a merger
with SSR was conducted, and it was confirmed with several investment corporations that were highly likely to make a merger
proposal challenging the Merger whether they intended to make a specific proposal for a merger with SSR, and even thoughan opportunity was provided for the making of such proposal over a long period of time, no proposal for a merger, acquisition,
alliance or other similar transaction was made by any third party (except the Proposal and a proposal that was made during themarket check conducted by SSR prior to a merger with MIRAI Corporation). Therefore, there are no actual options, other than
the Proposal, that may contribute to increasing the value of SSR.
(b) Assessment from the viewpoint of securing the interests of general unitholders through fair procedures
It is recognized that, in connection with the Merger, (a) there are situations that may be deemed as equivalent to transactions
between independent parties in the course of determining the terms and conditions of the transaction, (b) there are opportunities
for general unitholders to make appropriate decisions based on sufficient information, and (c) fair procedures are implemented
to secure the interests of general unitholders, by taking into consideration the following matters and others:(i) the Special Committee, composed of independent members, was established for purposes of assessing the proposed Merger.
The Special Committee discussed and assessed SAR’s proposal for the Merger and negotiated with SAR over the terms of the
Merger after receiving information necessary for assessing the Merger and obtaining advice from the advisors based on its
professional knowledge and a written merger ratio calculation report from a third-party appraiser, and the Special Committee
is recognized as having operated effectively.
(ii) As described in d. below, since it cannot be denied that SSR’s Executive Director Mr. Sugihara may be deemed as potentiallysubject to the influence of Star Asia Group, he and SAIM, the asset management company, are not involved in the decisionmaking process and the assessment and negotiation of the Merger.
(iii) As described in e. below, the market check was conducted carefully.
(iv) Certain disclosure of information is scheduled in the timely disclosure of execution of the MOU, timely disclosure of
execution of the Merger Agreement, Convocation Notice of General Meeting of Unitholders and others.
(c) Appropriateness of terms of transactions
The merger ratio of the Merger is appropriate, because (i) the preparation procedures and contents of SSR’s business plan and
SAR’s business plan, which are the basis for calculation through the DDM Analysis in the written merger ratio calculation
report prepared by Mizuho Securities, are not particularly unreasonable, (ii) the written merger ratio calculation report is notparticularly unreasonable in terms of the methods and results of calculation, and can be deemed reliable, and the merger ratioof the Merger exceeds the upper limit of the valuation range based on the market investment unit price based analysis, and is12

within the valuation range based on the comparable investment corporation analysis, the DDM Analysis and the adjusted net
asset method, and (iii) the merger ratio is the ratio agreed upon as a result of good faith negotiations between the Special
Committee and SAR. In addition, the terms of the Merger transactions are fair because no any unfavorable terms has been
imposed on SSR in connection with the Merger.
(d) Conclusion
Based on (a) through (c) above, it is appropriate for SSR to consummate the Merger because (i) the Merger will contribute to
the improvement of SSR’s value, and (ii) there are fair procedures in place to protect the interests of SSR’s general unitholders
in connection with the Merger, and the terms of the Merger transactions are fair.
b. Receiving a calculation report from an independent third-party appraiser
SSR has appointed Mizuho Securities (which is independent of SAR and SSR) as its financial advisor and third-party appraiser
for the Merger with the approval of the Special Committee, and received a written merger ratio calculation report on February
28, 2020. For a summary of the written merger ratio calculation report, please refer to “(b) Basis for the calculations” above.
SSR’s fee for Mizuho Securities is a contingent fee that will be paid subject to successful completion of the Merger andsatisfaction of some other terms.
c. Obtaining advice from an independent legal advisor
SSR has appointed Mori Hamada & Matsumoto (which is independent of SAR and SSR) as its legal advisor for the Merger
with the approval of the Special Committee, and obtained legal advice on such matters as the methods and process ofdeliberation on the Merger at the Special Committee, and details of measures to ensure fairness in considering the Merger.
d. Non-involvement of those who have an interest in the process of decision-making, examination and negotiations relating to
the Merger
Since it cannot be ruled out that Mr. Sugihara, SSR’s executive director, could be deemed to be influenced by the Star Asia
Group when making decisions, he has not participated in the deliberation and resolution concerning the execution of the Merger
Agreement at SSR’s board of directors, nor has he participated in discussions and negotiations with SAR over the merger ratioof the Merger and other terms of the transaction. As he is SSR’s sole executive director, Mr. Sugihara has provided necessary
explanations and information to the Special Committee, and carried out various administrative procedures to examine theMerger. In the process of examining the Merger, however, the Special Committee expelled Mr. Sugihara from the floor andkept him out of the deliberation and examination of matters for which the Special Committee determined Mr. Sugihara should
not participate in discussions from the standpoint of independence based on the advice from Mori Hamada & Matsumoto. Mr.
Sugihara therefore has not been involved in the substantial deliberation and examination of the Merger at the Special Committee.
In addition, SSR’s asset management company was changed to SAIM, which is SAR’s asset management company, on March
1, 2020, which means that SSR and SAR now retain the same asset management company. However, SAIM has never been
involved in the examination of the terms of the Merger, including the appropriateness and merger ratio of the Merger, nor has
it participated in discussions and negotiations with SAR over the terms of the Merger in its capacity as SSR’s asset managementcompany.
e. Conducting a market check
The Special Committee conducted a market check from the standpoint of identifying potential acquirers other than SAR and
ensuring the fairness of the merger ratio. Specifically, the Special Committee checked the details of the market check conductedby SSR when the Proposal was made and, based on the results of the market check, confirmed with several investment
corporations, through Mizuho Securities, whether they had the intention of considering the merger with SSR, taking into
account the feasibility of the merger that will contribute to SSR’s interests and other factors. As a result of the confirmation of
their intentions, all the investment corporations replied that they had no ultimate intention to offer any specific proposal for the13

merger with SSR.
In addition, SSR agreed upon its obligation to preferentially negotiate with SAR in the MOU. However, SSR also agreed that
if a third party other than SAR makes a counterproposal, SSR may discuss and negotiate the counterproposal to the extent theSpecial Committee would consider reasonably necessary (except where such counterproposal is made based on its active
contact with third parties after the execution of the MOU), which gives third parties an opportunity to make counterproposals.
Although there was approximately a 10-month period between the date of the Proposal and the execution of the Merger
Agreement, no third party offered any proposal for merger, acquisition, alliance or other transactions, except for those made in
the market check conducted by SSR prior to its merger with MIRAI Corporation.
ii. Measures to ensure fairness in the calculation of the merger ratio
As discussed in (b) through (d) above, each of SAR and SSR has requested its respective financial advisor to perform a financial
analysis in regard to the merger ratio and the merger ratio was determined by comprehensively taking into account the resultsof such analyses together with other factors.
SAR, in order to ensure the fairness of the Merger and for the benefit of its unitholders, obtained from Nomura Securities, an
independent third-party financial advisor, a written merger ratio calculation report providing an analysis from a financial
perspective based on certain assumptions in regard to the allocation under the Merger.
SSR, for its part, in order to ensure the fairness of the Merger and for the benefit of its unitholders, obtained from Mizuho
Securities, an independent third-party financial advisor, a written merger ratio calculation report providing an analysis from afinancial perspective based on certain assumptions in regard to the allocation under the Merger.
In addition, as mentioned in “i. Measures to ensure fairness in assessing the propriety of the Merger and the merger ratio”
above, SSR’s Special Committee (i) received an explanation from Mizuho Securities about details of the calculation results,
preconditions of the calculation, and matters taken into account in the course of the calculation in connection with the written
merger ratio calculation report prepared by Mizuho Securities, (ii) had a question and answer session with Mizuho Securities,and (iii) fully deliberated and examined details of the written merger ratio calculation report. As a result, the special committee
concluded that the contents of the written merger ratio calculation report prepared by Mizuho Securities are not particularly
unreasonable, and made its report as stated in “i. Measures to ensure fairness in assessing the propriety of the Merger and themerger ratio” above.
SAR and SSR did not, however, obtain written opinions (so-called “fairness opinions”) from their respective financial advisors
to the effect that the merger ratio is reasonable from a financial perspective for their respective unitholders.
(ii) Matters regarding appropriateness of provisions for matters regarding total amount of unitholders’ capital of the surviving
corporation in the absorption-type merger
The total amount of unitholders’ capital and the capital surplus of SAR to be added at the time of the Merger will be as set forth
below (although it should be noted that SAR and SSR may make amendments to such amounts upon discussion and agreement
in consideration of the financial conditions of SAR and SSR on the date before the effective date of the Merger).
(a) Total amount of unitholders’ capital: JPY 0(b) Capital surplus: An amount calculated by subtracting (a) from the amount of change in unitholders’ capital, as determined
pursuant to Paragraph 1, Article 22 of the Ordinance on Accounting of Investment Corporations (Cabinet Office Ordinance
No. 47 of 2006, as amended)(2) Matters concerning the dissolving corporation in the absorption-type merger(i) Contents of the financial documents, asset management report and statements on the distribution of monies related to thefinal fiscal period
As described in Attachment 2 hereto.
(ii) Details of material asset disposals, assumption of material debts and other events that materially affect the condition of
14

assets after the last day of the final fiscal period(a) For the Merger, SSR has resolved to table before a general meeting of its unitholders, which is scheduled to be held on
March 30, 2020, a proposal for an amendment to be made to its articles of incorporation with a view to changing its accounting
periods from the current June 30 and December 31 to July 31 and January 31. If the aforementioned amendment is approvedin the General Meeting of Unitholders, the final period for SSR before the effective date of the Merger is expected to be aseven-month fiscal period from January 1, 2020 to July 31, 2020.
(b) Galaxy JREIT Pty Limited, a unitholder of SSR, filed an action seeking rescission of resolutions of unitholders’ meeting
against SSR. As of February 27, 2020, such action has been dismissed.
(3) Matters concerning the surviving corporation in the absorption-type merger(1) Details of the material asset disposals, assumption of material debts and other events that materially affect the condition ofassets after the last day of the final fiscal period(a) SAR has resolved to carry out the Investment Unit Split as follows.
i. Purpose of the split
The Merger will be conducted through an absorption-type merger with SAR being the surviving corporation in the absorptiontype merger. The merger ratio before taking into consideration the Investment Unit Split is SSR 0.89 to SAR 1; however, on
the basis of that ratio, against 1 SSR investment unit, 0.89 Investment Units would be allocated and delivered, which would
result in many SSR unitholders being allocated a fraction of less than one Investment Unit. Accordingly, in order to make itpossible for SSR unitholders to continue holding the Investment Units after the Merger, a split of the investment units will be
carried out, in the ratio of 2 investment units to 1 Investment Unit for purposes of delivering to all SSR unitholders at least one
Investment Unit.
ii. Method of the split
Investment units held by the unitholders stated or recorded in the final unitholders register on July 31, 2020, the date before
the effective date of the Merger will be split in the ratio of 2 investment units to 1 Investment Unit. The Investment Unit Split
will take effect on August 1, 2020, which is the effective date of the Merger under the condition that the Merger Agreement has
not been canceled.
(b) SAR has executed a sale and purchase agreement on March 2, 2020, for the acquisition of real estate trust beneficiaryinterests in respect of Urban Park Ichigao and Urban Park Gyotoku from HASEKO Real Estate Development, inc. and LIXIL
Realty Corporation respectively, with March 13, 2020 as the scheduled acquisition date.
(c) SAR has executed a sale and purchase agreement on March 2, 2020, for the transfer of real estate trust beneficiary interests
in respect of Alphabet Seven (40% of quasi-co-ownership interest on July 1, 2020 and 60% of quasi-co-ownership interest on
December 1, 2020) to Kanden Realty & Development Co., Ltd. with July 1, 2020 and December 1, 2020 as the scheduledtransfer date.

15

Proposal 2 Partial Amendments to the Articles of Incorporation
1. Outline of and Reasons for Proposal(1)
Given that it is planned to carry out the Merger, we hereby propose to add necessary words to Article 37, Paragraph
1, Item 1 of the Articles of Incorporation in order to clarify the definition of acquisition price which is used to
calculate midterm fee I in the event that SAR carries out a merger.
Further, we hereby propose to add necessary words to Article 37, Paragraph 1, Item 2 of the Articles ofIncorporation in order to clarify the treatment of the amount of amortization of goodwill and other relevant amounts(2)

when calculating midterm fee II in the event that goodwill arises as a result of a merger by SAR.
We hereby propose to add a new provision, Article 42 (Supplementary Provision), to the Articles of Incorporationin order to cause the amendments to the Articles of Incorporation stated in (1) above to become effective as ofAugust 1, 2020, and to delete the said supplementary provision once the amendments become effective.

16

2. Details of Amendments
Details of the amendments are as follows.
(The underlined parts indicate the amendments.)

Current Articles of Incorporation

Amendment Proposal

Article 37 (Standards for Payment of Asset

Article 37 (Standards for Payment of AssetManagement Fees to Asset Management
Company)
1. The method of calculating fees payable tothe asset management company to which theInvestment
Corporation
entruststhemanagement of its investment assets(hereinafter,the“AssetManagement
Company”) shall be as follows:(1) Midterm fee I
The midterm fee I shall be the amount (rounded
down to the nearest yen) obtained bymultiplying the total valuation amount of theinvestment assets by a rate to be agreed uponwith the Asset Management Company, whichshall be up to 0.3%. The total valuation amountof the investment assets shall be the total of A.
and B. below:
A. As for the real estate, etc. in Article 29,
Paragraph 1, Item 1 (1) through (4), the total of
the amounts obtained by multiplying (i) theappraisal value (if no appraisal value is obtained
as of the end of the relevant fiscal period, theselling price (meaning the price stipulated in therelevant sales agreement, etc., and excluding theconsumption tax and local consumption tax(hereinafter, the “consumption tax, etc.”)) or
acquisition price (meaning the price stipulated
in the relevant sales agreement, etc., andexcluding the acquisition fee and other expenses
related to the acquisition and the consumption
tax, etc.), whichever is lower, of each of therelevant assets as of the end of the relevant fiscal
period by (ii) the number of days of holding
each of the relevant assets in the relevant fiscal
period, and dividing the resulting figure by the
number of days in a year (365 days for a year
other than a leap year, and 366 days for a leap
year; hereinafter the same)

Management Fees to Asset Management
Company)
1. The method of calculating fees payable tothe asset management company to which theInvestment
Corporation
entruststhemanagement of its investment assets(hereinafter,the“AssetManagement
Company”) shall be as follows:(1) Midterm fee I
The midterm fee I shall be the amount (rounded
down to the nearest yen) obtained bymultiplying the total valuation amount of theinvestment assets by a rate to be agreed uponwith the Asset Management Company, whichshall be up to 0.3%. The total valuation amountof the investment assets shall be the total of A.
and B. below:
A. As for the real estate, etc. in Article 29,
Paragraph 1, Item 1 (1) through (4), the total of
the amounts obtained by multiplying (i) theappraisal value (if no appraisal value is obtained
as of the end of the relevant fiscal period, theselling price (meaning the price stipulated in therelevant sales agreement, etc., and excluding theconsumption tax and local consumption tax(hereinafter, the “consumption tax, etc.”)) or
acquisition price (meaning the price, etc.
stipulated in the relevant sales agreement, etc.
(or the acquisition value by the Investment
Corporation if such asset is succeeded to by theInvestment Corporation through an absorptiontype merger in which the Investment
Corporation
becomesthesurvivingcorporation), and excluding the acquisition fee
and other expenses related to the acquisition andthe consumption tax, etc.), whichever is lower,of each of the relevant assets as of the end of therelevant fiscal period by (ii) the number of daysof holding each of the relevant assets in therelevant fiscal period, and dividing the resulting
figure by the number of days in a year (365 days
for a year other than a leap year, and 366 days
for a leap year; hereinafter the same)
B. As for the real estate, etc. in Article 29,
Paragraph 1, Item 1 (5), real estate-backed
securities in Article 29, Paragraph 1, Item 2, andassets related to the real estate-related loans andother monetary claims, etc. in Article 29,
Paragraph 1, Item 3 (11) through (13) among theother specified assets in Article 29, Paragraph 1,
Item 3, the total of the amounts obtained bymultiplying (i) the value of each of the relevant

B. As for the real estate, etc. in Article 29,
Paragraph 1, Item 1 (5), real estate-backed
securities in Article 29, Paragraph 1, Item 2, andassets related to the real estate-related loans andother monetary claims, etc. in Article 29,
Paragraph 1, Item 3 (11) through (13) among theother specified assets in Article 29, Paragraph 1,
Item 3, the total of the amounts obtained bymultiplying (i) the value of each of the relevant
17assets valued by the method set forth in Article
33, Paragraph 1 as of the end of the relevant
fiscal period by (ii) the number of days ofholding each of the relevant assets in therelevant fiscal period, and dividing the resulting
figure by the number of days in a year.
(2) Midterm fee II
The midterm fee II shall be the amount (rounded
down to the nearest yen) (i.e. the amountcalculated by the following formula) obtainedby multiplying (i) the amount obtained by
dividing the distributable amount before
deducting the midterm fee II as of the end of therelevant fiscal period of the Investment
Corporation (if a loss carried forward isincluded in the net income before tax (before
deducting the midterm fee II and nondeductible
consumption tax, etc.) calculated in accordancewith generally accepted corporate accounting
standards in Japan, the amount after
compensating for the amount of the loss carriedforward) by the total number of issued andoutstanding investment units as of the end of therelevant
fiscalperiod(hereinafter,“distributions per unit before deducting
midterm fee II”) by (ii) the “total real estate
rental revenue minus real estate rental expenses(excluding depreciation expenses and losses onretirement of non-current assets) in the relevant
fiscal period (hereinafter, “NOI”)” and (iii) a
rate to be agreed upon with the AssetManagement Company, which shall be up to
0.002%.
Midterm fee II = Distributions per unit before
deducting midterm fee II x NOI x a rate up to
0.002% (rounded down to the nearest yen)If the Investment Corporation holds its
undisposed or uncancelled investment units asof the end of the relevant settlement date, thetotal number of issued and outstanding
investment units shall mean the total number ofissued and outstanding investment units as ofthe end of the relevant settlement date less thenumber of investment units held by theInvestment Corporation. If investment units
have been consolidated or split, the total number
of issued and outstanding investment units as ofthe settlement date of the fiscal period in which
the consolidation or split has been conducted
and any subsequent fiscal periods shall be thenumber that is adjusted to the number ofinvestment units before the consolidation or
split using the consolidation ratio or split ratio.

assets valued by the method set forth in Article
33, Paragraph 1 as of the end of the relevant
fiscal period by (ii) the number of days ofholding each of the relevant assets in therelevant fiscal period, and dividing the resulting
figure by the number of days in a year.
(2) Midterm fee II
The midterm fee II shall be the amount (rounded
down to the nearest yen) (i.e. the amountcalculated by the following formula) obtainedby multiplying (i) the amount obtained by
dividing the distributable amount before
deducting the midterm fee II as of the end of therelevant fiscal period of the Investment
Corporation (if a loss carried forward isincluded in the net income before tax (excluding
the gains on negative goodwill incurred andbefore deducting the amount of amortization of
goodwill, the midterm fee II and nondeductible
consumption tax, etc.) calculated in accordancewith generally accepted corporate accounting
standards in Japan, the amount after
compensating for the amount of the loss carriedforward) by the total number of issued andoutstanding investment units as of the end of therelevant
fiscalperiod(hereinafter,“distributions per unit before deducting
midterm fee II”) by (ii) the “total real estate
rental revenue minus real estate rental expenses(excluding depreciation expenses and losses onretirement of non-current assets) in the relevant
fiscal period (hereinafter, “NOI”)” and (iii) a
rate to be agreed upon with the AssetManagement Company, which shall be up to
0.002%.
Midterm fee II = Distributions per unit before
deducting midterm fee II x NOI x a rate up to
0.002% (rounded down to the nearest yen)If the Investment Corporation holds its
undisposed or uncancelled investment units asof the end of the relevant settlement date, thetotal number of issued and outstanding
investment units shall mean the total number ofissued and outstanding investment units as ofthe end of the relevant settlement date less thenumber of investment units held by theInvestment Corporation. If investment units
have been consolidated or split, the total number
of issued and outstanding investment units as ofthe settlement date of the fiscal period in which
the consolidation or split has been conducted
and any subsequent fiscal periods shall be thenumber that is adjusted to the number ofinvestment units before the consolidation or
split using the consolidation ratio or split ratio.

(3) to (5) [omitted]
2. [omitted](3) to (5) [same as current provisions]
2. [same as current provisions]18

(newly established)

Article 42 (Supplementary Provision)
The amendments to Article 37 shall become
effective as of August 1, 2020. This Article shallbe deleted as of the effective date of theamendments to Article 37.

19

Other Reference Matters
If any of the proposals submitted to the General Meeting of Unitholders conflicts with any of the others, the provision of“deemed approval” which is provided for in Article 93, Paragraph 1 of the Investment Trust Act and Article 14 of the Articles
of Incorporation of SAR will not apply to any of such proposals.
Neither Proposal No. 1 nor Proposal No. 2 above constitutes such a conflicting proposal.
END

20

Attachment 1[Translation]

MERGER AGREEMENT

March 2, 2020
21

MERGER AGREEMENTStar Asia Investment Corporation (“SAR”) and Sakura Sogo REIT Investment Corporation (“SSR”) enter into thismerger agreement (the “Agreement”) as follows in relation to the merger between SAR and SSR (the “Merger”).

Article 1

Method of the Merger

In accordance with the provisions of this Agreement, SAR and SSR shall implement an absorption-type merger with
SAR as the surviving corporation and SSR as the dissolving corporation under Article 147 of the Act on Investment
Trusts and Investment Corporations (Act No. 198 of 1951, as amended; the “Investment Trusts Act”).

Article 2

Names and addresses of merging parties

The names and addresses of the surviving corporation and the dissolving corporation are as follows.
(1)

(2)

Name and address of the surviving corporation
Name:Star Asia Investment Corporation

Address:

Atago Green Hills Mori Tower 18F, 2-5-1, Atago, Minato-ku, Tokyo

Name and address of the dissolving corporation
Name:

Sakura Sogo REIT Investment Corporation

Address:

3-8-11, Kudan Minami Chiyoda-ku, Tokyo

Article 3

Split of SAR’s investment units

Subject to satisfaction of all conditions precedent set forth in Article 13, SAR shall split the investment units ownedby the unitholders stated or recorded on the final unitholders register of SAR as of the day immediately preceding theeffective date of the Merger (“Effective Date”) into 2 investment units for every one investment unit on the Effective
Date (“Investment Unit Split”).

Article 4

Method for calculating the number of investment units to be issued and allotted at the time of
the Merger and matters regarding the allotment

4.1

At the time of the Merger, SAR shall issue new investment units after the split in accordance with Article 3
in such number as is calculated by multiplying by 1.78 the aggregate number of investment units in SSR
owned by the unitholders stated or recorded in the final unitholders register of SSR as of the Effective Date(excluding SAR, SSR, and the unitholders of SSR who have requested the purchase of their investment units0in accordance with the provisions of Article 149-3 of the Investment Trusts Act (except for the unitholders
who have withdrawn such request for the purchase); the “Allotted Unitholders”), and shall allot and deliverto the Allotted Unitholders 1.78 investment units in SAR after the split in accordance with Article 3 per one
investment unit in SSR owned by the Allotted Unitholders. In this case, however, the effect of the allotment
and delivery, as well as the Merger, shall be subject to the condition precedent that the Investment Unit Split
takes effect on the Effective Date, and if the Investment Unit Split does not take effect on the Effective Date,
SAR and SSR shall consult in good faith and reach an agreement for changing the Effective Date specified in
Article 6 and for taking other necessary measures for the Merger to take effect.
4.2

In the case of the preceding paragraph, if there is any fraction of less than one investment unit in the investment
units in SAR to be allotted to the Allotted Unitholders, SAR shall treat such fraction in accordance with theprovisions of Article 149-17 of the Investment Trusts Act.

Article 5

Matters regarding total unitholders’ capital of the surviving corporation

The amount by which the total unitholders’ capital and the capital surplus of SAR will increase upon the Merger shallbe as follows; provided, however, that SAR and SSR may change such amount upon agreement through consultation,
taking into consideration the financial conditions of SAR and SSR on the day immediately preceding the Effective
Date.
(1)

Unitholders’ Capital: 0 yen(2)Capital Surplus: The amount obtained by deducting the amount set out in the preceding item from the amountof increase or decrease in the unitholders’ equity, etc., set out in Article 22, Paragraph 1 of the Ordinance on
Accountings of Investment Corporations (Cabinet Office Ordinance No. 47 of 2006, as amended)

Article 6

Effective Date

The effective date of the Merger shall be August 1, 2020; provided, however, that SAR and SSR may change theEffective Date upon agreement through consultation, if necessary in order to complete the procedures for the Merger
or for any other reason.

Article 7
7.1

General meeting of unitholders

SAR shall hold a general meeting of unitholders on March 31, 2020 or a date separately determined by SAR
and SSR upon agreement, and request such general meeting of unitholders to approve (i) this Agreement, in
accordance with the provisions of Article 149-7, Paragraph 1 of the Investment Trusts Act, and (ii) otherproposals separately determined by SAR and SSR upon agreement.

7.2

SSR shall hold a general meeting of unitholders on March 30, 2020 or a date separately determined by SAR
and SSR upon agreement, and request such general meeting of unitholders to approve (i) this Agreement, in1

accordance with the provisions of Article 149-2, Paragraph 1 of the Investment Trusts Act, (ii) termination of
the asset management agreement as of the Effective Date subject to the Merger taking effect, and (iii) otherproposals separately determined by SAR and SSR upon agreement.

Article 8

Post-merger trade name and related entities, etc. of SAR

8.1

SAR’s post-merger trade name shall be Star Asia Investment Corporation.

8.2

SAR’s asset manager (which shall mean an asset manager as referred to in Article 2, Paragraph 21 of theInvestment Trusts Act; the same hereinafter), asset custody company (which shall mean an asset custodycompany as referred to in Article 2, Paragraph 22 of the Investment Trusts Act; the same hereinafter),administrative agent (which shall mean an administrative agent as referred to in Article 2, Paragraph 23 of theInvestment Trusts Act to which the services set out in each item of Article 117 of the Investment Trusts Act
shall be entrusted; the same hereinafter), and accounting auditor shall not be changed upon the Merger.

8.3

Subject to the effectiveness of the Merger, SSR shall, upon the Effective Date, terminate SSR’s asset
management agreement with its asset manager, asset custody agreement with its asset custody company,
administration agreements with its administrative agents, audit agreement (excluding audits of SSR’s financial
statements required under the Financial Instruments and Exchange Act (Act No. 25 of 1948, as amended) for
its fiscal period ending on July 31, 2020) with its accounting auditor, and any other agreement separately
determined by SAR and SSR upon agreement.

8.4

Notwithstanding the preceding three paragraphs, SAR and SSR may change the provisions thereof upon
agreement through consultation.

Article 9

Payment upon the merger

In lieu of cash distribution to the unitholders of SSR for SSR’s fiscal period ending on the day immediately preceding
the Effective Date, SAR shall make a payment to the Allotted Unitholders upon the merger. The amount of suchpayment shall be calculated by the following formula (with any fractional amount of less than one yen to be roundeddown) per one investment unit in SSR owned by the Allotted Unitholders, and within a period after the Effective Datethat is reasonable in consideration of the determination of profit for that fiscal period of SSR, the process of rendering
payment upon the merger, and other factors:
Distributable profit of SSR
as of the day immediately

Amount of payment upon
the merger per one

preceding the Effective Date=

Outstanding investment units in SSR

investment unit

as of the day immediately
preceding the Effective Date

In the formula set out above, the term “Outstanding investment units in SSR as of the day immediately preceding the2

Effective Date” shall mean the number of investment units calculated by deducting the number of investment units
held by the unitholders of SSR other than the Allotted Unitholders from the outstanding number of investment units
in SSR as of the day immediately preceding the Effective Date.

Article 10 Cash distribution
10.1

Until the Effective Date, SAR shall not pay any cash distribution to its unitholders (except for the cash
distribution paid to unitholders or investment unit pledge holders stated or recorded on the final unitholders
register of SAR as of the January 31, 2020, the amount of which shall be up to the amount of distributableprofits (which means the amount of profits as set forth in Article 136, Paragraph 1 of the Investment TrustsAct) for the fiscal period ended January 31, 2020) or purchase investment units for consideration by agreementwith any unitholder.

10.2

Until the Effective Date, SSR shall distribute 704,630,116 yen in total (2,116 yen per investment unit) tounitholders or investment unit pledge holders stated or recorded on the final unitholders register of SSR as ofDecember 31, 2019 as cash distributions for the fiscal period ended on December 31, 2019, and except forsuch cash distributions, shall not pay any cash distributions to any unitholder or purchase investment units forconsideration by agreement with any unitholder.

10.3

Notwithstanding the preceding two paragraphs, if the Effective Date is changed to a date after August 1, 2020,
SAR and SSR will determine the treatment of cash distributions upon agreement through consultation.

Article 11 Succession of corporate property
On the Effective Date, SAR shall succeed to any and all assets, liabilities, rights and obligations of SSR existing asof the Effective Date.

Article 12 Covenants
12.1

From the execution date of this Agreement to the Effective Date, SAR and SSR shall each conduct theirrespective businesses and manage and operate their respective properties with the due care of a prudent
manager, and cause their respective asset managers, asset custody companies, administrative agents, and otherthird parties to do the same, and shall obtain the prior consent of the other party before taking any action thatmight materially affect their respective assets, rights or obligations (including, but not limited to, issuance ofinvestment units, issuance of investment corporation bonds, incurrence of new borrowings (excluding any
borrowing to pay existing loans), or entering into or performing a sale or purchase agreement for real property),
unless otherwise expressly provided for herein or in any other agreement executed as of the execution date ofthis Agreement.

12.2

SAR and SSR shall immediately give notice to the other party, if, during the period on or before the Effective3

Date, either party learns of any event which may reasonably have a material impact on their business, financial
condition, or the Merger (including, but not limited to, an event such as a breach of any loan agreement,
breach of law or ordinance by SAR or SSR, or a matter indicated by the relevant authorities). In this case,
SAR and SSR shall discuss and consider how to deal with such event in good faith and shall use best efforts
to resolve such issues.

Article 13 Conditions for the Merger
If any of the following conditions precedent to the Merger is not satisfied as of the day immediately before theEffective Date, or if it becomes clear that any of such conditions precedent to the Merger will not be satisfied on or
before the day immediately preceding the Effective Date (in both cases, except if either party fails to satisfy theconditions precedent due to a reason attributable to itself or its asset manager), then either party may cancel thisAgreement without assuming any liability or payment obligation to the other party by giving written notice to theother party before the Effective Date (except for any liability or payment obligation owed by the party which provided
such notice pursuant to breach of any other provision of this Agreement):(1)

approval at the general meetings of unitholders of both SAR and SSR (including, but not limited to, approvals
for proposals set forth in Article 7, Paragraph 1 and Paragraph 2) and other procedures pursuant to applicablelaws and ordinances have been completed, and all necessary permits and approvals have been obtained, as
required in relation to the Merger or in order to implement the matters contemplated in connection with the
Merger;(2)

neither SAR nor SSR is in breach of a contractual obligation (including those under this Agreement) or
financial covenant or delayed in payment of a monetary debt (including taxes and other public charges);
provided, however, that minor breaches and delays in payment shall be excluded;(3)

there is no occurrence of any acceleration event (including any event that would constitute an acceleration
event either with the passage of time or notice, or both), suspension of payments, or insolvency by SAR or
SSR;

(4)

consent has been obtained from each financial institution lending money to SAR or SSR with respect toconducting the Merger and the basic borrowing conditions applicable on or after the effective date of the
Merger (for each loan agreement, including necessary measures so that no breach of financial covenant clause,
breach of covenant clause, or acceleration event attributable to SAR occurs after the Merger), and such consent
has not been withdrawn;(5)each of SAR and SSR has reasonably confirmed that the procedures for filing of Form F-4 are not necessary
for the Merger under the U.S. Securities Act;

(6)

no petition for the commencement of bankruptcy procedures, civil rehabilitation procedures, or any othersimilar legal insolvency procedures is filed with respect to SAR or SSR;

(7)

SAR and SSR, as well as the asset managers of SAR and SSR, have not been subject to revocation of4

registration by a supervisory agency, suspension of all or a part of its business, or other administrative
disposition that materially impairs, or has a materially adverse effect on, the implementation of the Merger;and(8)in addition to the above, there is no event which is reasonably judged to materially impede the Merger or to
make it impracticable.

Article 14 Change of conditions for the Merger and termination of this Agreement
If, during the period from the execution date of this Agreement to the Effective Date, (i) there is any material change
in the assets or the business condition of SAR or SSR, (ii) it is reasonably concluded that the implementation of the
Merger has become impossible or impracticable, (iii) it becomes difficult to achieve the purpose of the Merger for
any other reason, or (iv) it becomes clear that there are grounds to believe that any of the above circumstances may
arise, then SAR and SSR may, upon agreement through consultation in good faith, change the conditions of the Merger
or any other provisions of this Agreement, or terminate this Agreement.

Article 15 Announcements
In the event SAR or SSR makes a public announcement in relation to the Merger such as the execution of thisAgreement, its contents, or otherwise, the party shall make such announcement only with the prior consent of theother party hereto as to the announcement’s content, timing, method, etc.

Article 16 Costs and expenses
Each of SAR and SSR shall be responsible for its own expenses incurred by each of them before the Effective Date
relating to the execution and performance of this Agreement (including, but not limited to, fees to legal counsels,certified public accountants, tax accountants, research companies, advisers and other experts appointed by each ofthem; however, the expenses arising subject to the Merger taking effect are not included). SSR shall record theexpenses that it is responsible for as expenses for the fiscal period ending before the Effective Date.

Article 17 Governing law
This Agreement shall be governed by and construed in accordance with the laws of Japan.

Article 18 Jurisdiction
SAR and SSR agree that the Tokyo District Court shall be the court of first instance having exclusive jurisdiction inany dispute related to this Agreement.

5

Article 19 Good faith consultation
Any necessary matters concerning the Merger as well as those provided for in this Agreement shall be separately
determined through mutual consultation by SAR and SSR in accordance with the purpose of this Agreement.

(The remainder of this page has been intentionally left blank.)

6

This Agreement has been prepared in two originals, to which each of SAR and SSR shall affix its name and seal andretain one original.

March 2, 2020

SAR

Star Asia Investment Corporation
Atago Green Hills Mori Tower 18F, 2-5-1, Atago, Minato-ku, Tokyo
Executive Director Atsushi Kato

SSR

Sakura Sogo REIT Investment Corporation
3-8-11, Kudan Minami Chiyoda-ku, Tokyo
Executive Director Toru Sugihara

7

Attachment 2
Financial Statements, Asset Management Report and Statement of Cash Distributions of Sakura Sogo REIT
Investment Corporation Regarding the Latest Fiscal Period
I.

Asset Management Report
II.

Balance Sheet

III. Statement of Income
IV. Statement of Unitholders’ Equity
V.

Notes

VI. Statement of Cash Distributions
VII. Statement of Cash Flows (Reference Information)

8

Ⅰ. Asset Management Report
1 Overview of Asset Management(1) Operation status of Sakura Sogo REIT Investment Corporation (SSR)
3rd fiscal
periodSeptember 1,
2017 toFebruary 28,
2018

Fiscal period

Operating revenue (Note 2)
Of which, real estateleasing revenue (Note 2)
Operating expenses (Note 2)
Of which, real estateleasing expenses (Note 2)
Operating income (Note 2)
Ordinary income (Note 2)
Net income (Note 2)
Total assets[Period to period]
Net assets[Period to period]
Interest-bearing debt
Unitholders’ capital
Total number of investment
units
issuedandoutstanding
Net assets per unit
Total cash distribution
Of which, total cash
distribution of earnings
Of which, total cash
distribution in excess ofearnings
Cash distribution per unitOf
which,
cash
distribution of earnings
per unit
Of which, cash distribution
in excess of earnings per
unit
Ratio of ordinary income tototal assets (Note 5)[Annualized value] (Note6)

Return on equity (Note 5)(Millionyen)(Millionyen)(Millionyen)(Millionyen)(Millionyen)(Millionyen)(Millionyen)(Millionyen)

4th fiscal
period5th fiscal
periodMarch 1, 2018 July 1, 2018 to
December 31,
to June 30,
2018
2018
(Note 1)(Note 2)

6th fiscal
periodJanuary 1,
2019 to June30, 2019

7th fiscal
periodJuly 1, 2019 to
December 31,
2019

2,662

1,768

2,362

2,394

2,391

2,400

1,625

2,362

2,394

2,391

1,357

913

1,316

1,357

1,345

1,091

718

1,063

1,074

1,088

1,304

854

1,046

1,037

1,046

1,153

615

885

874

872

1,152

615

886

885

704

63,19762,752

61,64363,38963,111(%)[0.1][(0.7)][(1.8)][2.8][(0.4)](Millionyen)

30,40729,87030,14130,14029,959(%)[0.7][(1.8)][0.9][(0.0)][(0.6)]

29,00029,00027,60029,20029,20029,25429,25429,25429,25429,254(Units)333,001

333,001

333,001

333,001

333,001(Yen)

91,312

89,70090,51390,512

89,967

1,152

615

886

885

704

1,152

615

886

885

704

(Million
yen)

－

－

－

－

－

(Yen)

3,460

1,848

2,662

2,660

2,116

(Yen)

3,460

1,848

2,662

2,660

2,116

(Yen)

－

－

－

－

－

(%)

1.8

1.0

1.4

1.4

1.4

(%)

[3.7]

[2.9]

[2.8]

[2.8]

[2.7]

(%)

3.8

2.0

3.0

2.9

2.3

(Millionyen)(Millionyen)(Millionyen)(Millionyen)

9[Annualized value] (Note6)

Equity ratio (Note 5)[Periodon
Periodchange]Cash distribution payout
ratio (Note 5)[Otherreference
information]
Number of operating days
(Note 6)

Number of investment
properties at end of period

(%)

[7.7]

[6.1]

[5.9]

[5.9]

[4.7]

(%)
(%)

48.1

47.6

[0.3]

[(0.5)]

48.9

47.5

47.5

[1.3]

[(1.4)]

[0.0]

(%)

100.0

100.1

100.0

100.0

100.0

(Days)

181

122

184

181

184

18

17

17

18

18

255

176

243

247

256

128

172

203

205

231

1,564

1,084

1,543

1,567

1,559

1,146

649

1,129

1,133

961

Lease NOI (Net Operating
Income) (Note 2)(Note 5)
FFO (Funds fromOperation) (Note 2)(Note 5)(Properti
es)(Millionyen)(Millionyen)(Millionyen)(Millionyen)

FFO per unit (Note 2)(Note 5)

(Yen)

3,441

1,951

3,392

3,403

2,886

Debt to total assets ratio at
the end of period (LTV)

(%)

45.9

46.2

44.8

46.1

46.3

Depreciation
Capital expenditures(Note 5)10

(Note 1) SSR changed the ends of its fiscal periods from the end of February and the end of August of each year to the end of June and the end of
December of each year by a resolution adopted at the 2nd general meeting of unitholders held on May 31, 2018, and accordingly the fiscal
period ended on the end of June, 2018 became a four-month period from March 1, 2018 to June 30, 2018.
(Note 2) The figures for the fiscal period ended on the end of June 2018 after the conversion into those for a six-month period by multiplying by 6/4 are
as follows: operating revenue of 2,652 million yen, of which real estate leasing revenue of 2,438 million yen; operating expenses of 1,370
million yen, of which real estate leasing expenses of 1,077 million yen; operating income of 1,281 million yen; ordinary income of 923 million
yen; net income of 923 million yen; lease NOI of 1,626 million yen; FFO of 974 million yen; and FFO per unit of 2,926 yen. These figures are
merely indicative and are not subject to audit under Article 130 of the “Act on Investment Trusts and Investment Corporations.”(Note 3) The figures of operating revenue and others exclude consumption taxes.
(Note 4) Unless otherwise specified, all figures are rounded down to the nearest whole unit indicated and all percentages are rounded to the nearest firstdecimal place.
(Note 5) Calculated using the following formulas, respectively.
Ratio of ordinary income to total
assetsOrdinary income ÷ {(total assets at the beginning of period + total assets at the end of period) ÷ 2} × 100

Return on equity

Net income ÷ {(net assets at the beginning of period + net assets at the end of period) ÷ 2} × 100

Equity ratio

Net assets at the end of period ÷ total assets at the end of period × 100

Cash distribution payout ratio

Cash distribution per unit (not including cash distribution in excess of earnings) ÷ net income per unit ×
100

Lease NOI (net operating income)Real estate leasing revenue - real estate leasing expenses + depreciation
Only the amount of depreciation included in leasing expenses is used.

FFO (funds from operation)

Net income + depreciation - gain or loss on sales of real estate
Only the amount of depreciation included in leasing expenses is used.

FFO per unit

FFO ÷ total number of investment units issued and outstanding

Debt to total assets ratio at the endof period (LTV)Interest-bearing debt ÷ total assets at the end of period × 100(Note 6) Calculation to annualize a figure is made based on 365 days per year and 181 days for the 3rd fiscal period, 122 days for the 4th fiscal period,
184 days for the 5th fiscal period, 181 days for the 6th fiscal period and 184 days for the 7th fiscal period.

11

(2) Status of asset management during the 7th fiscal period(i) Significant developments of the investment corporation

SSR was incorporated as of April 1, 2016 under the Act on Investment Trusts andInvestment Corporations (Act No. 198 of 1951, as amended; the “Investment Trust Act”),
with the capital of 100.1 million yen (1,001 units), for which Sakura Real Estate Funds
Management, Inc. (the “Asset Management Company”) was the organizer, and registeredwith the Kanto Local Finance Bureau under the Investment Trust Act as of April 26, 2016
(Registration No.: Director General of the Kanto Local Finance Bureau No. 116).
Afterwards, SSR issued and offered new investment units (29,154 million yen (332,000
units)) by way of a public offering, for which the due date of payment was September 7,
2016, and became listed on the J-REIT section of Tokyo Stock Exchange, Inc. (“TSE”) asof September 8, 2016 (Securities Code: 3473). Consequently, the amount of unitholders’capital is 29,254 million yen and the total number of investment units issued andoutstanding is 333,001 units as of the end of the 7th fiscal period.
The basic philosophy of SSR is to leverage its core feature as a diversified REIT, to securea stable income over the medium to long-term and maximize unitholder value by building
a portfolio which SSR believes to be optimal in light of the real estate investment
environment and pursuing both cash-flow growth and stability.
(ii) Asset management environment and performance(Asset management environment)
The Japanese economy during the 7th fiscal period (ended on the end of December 2019)was on a recovery track, with real GDP growth of 0.4% (annual growth of 1.8%) in the
July-September 2019 period (according to the second preliminary report on quarter-onquarter changes in seasonally adjusted GDP).
As to the office rental market, according to the data published by CBRE K.K., the vacancy
rate of all-grade office buildings in the five major wards of Tokyo (Chiyoda-ward, Chuoward, Minato-ward, Shinjuku-ward, and Shibuya-ward) during the 4th quarter (October toDecember) of 2019 is 0.5%, which remains at the same level as the 4th quarter of 2018.
The vacancy rate of Grade B offices in Tokyo (meaning the office buildings for rent within
the office area in 23 wards in Tokyo, the floor area of a standard floor of which is 200 tsubo(approximately 661 m2) or more, the total floor area of which is 2,000 tsubo (approximately
6,612 m2) to no more than 7,000 tsubo (approximately 23,141 m2), conforming to the newearthquake-resistance standard) during the 4th quarter of 2019 is 0.7%, which also remains
at the same level as the 4th quarter of 2018.
As to the retail facility rental market, the commercial market is in a difficult situation as canbe seen from the retail sales in November 2019 which decreased by 6.5% from the samemonth of 2018 according to the final data on trends in retail sales published by the Ministryof Economy, Trade and Industry and the sales of existing shopping centers in December
2019 which decreased by 3.6% from the same month of 2018 according to the statistics
report on the shopping center (“SC”) sales in December 2019 published by Japan Councilof Shopping Centers. However, the tenants of the retail facilities owned by SSR are being
replaced smoothly and their occupancy rates have generally been well.
In the metropolitan areas of Tokyo, Chiba, and Osaka, where SSR’s residential propertiesare located, demand remains stable due to an increase in population and the number ofhouseholds because of their continued inflow from other areas, and high occupancy rates
are being maintained and rent levels are rising.

12

(Asset management performance)(Administration and management of assets held by SSR)
As of the end of the 7th fiscal period, the occupancy rate of properties increased by 1.1
point to 99.0% from 97.9% as of the end of the 6th fiscal period. As a result of SSR’s
continued effort to implement strategic and flexible leasing activities, SSR maintained, asof the end of the 7th fiscal period, high occupancy rates of 100 % for office buildings(100% as of the end of the 6th fiscal period), 98.8% for retail facilities (97.1% as of theend of the 6th fiscal period), 98.6% for residences (98.1% as of the end of the 6th fiscal
period), and 100% for other facilities (100% as of the end of the 6th fiscal period). The
results of asset administration and management by usage are as follows:(Office buildings)
Although a lot of tenants of NK Building were replaced during the 7th fiscal period, we
successfully executed leasing agreements with new tenants without a vacancy period
except one tenant space which has been already occupied since November. As a result,the occupancy rates of all the eight properties as of the end of the 7th fiscal period
reached 100% and SSR stably managed the properties with a high average occupancy
rate of 99.3%.
(Retail facilities)
A stable management of retail facilities was maintained with a high occupancy rate of
98.8% as of the end of the 7th fiscal period and a high average occupancy rate of 98.4%
during the 7th fiscal period. SSR has also been continuously carrying out capital
expenditure works and strategic tenant solicitation activities in order to improve theability of each property to attract customers, and since its listing, SSR is maintaining ahigh average occupancy rate during each fiscal period (98.0% for the fiscal period
ended on the end of February 2017, 98.7% for the fiscal period ended on the end of
August 2017, 98.9% for the fiscal period ended on the end of February 2018, 99.0% for
the fiscal period ended on the end of June 2018, 99.0% for the fiscal period ended on
the end of December 2018 and 97.6% for the fiscal period ended on the end of June2019).
(Residences)
Since many of lease agreements with respect to Abode Yoyogi terminated as the timingof first renewal of such agreements after its construction occurred in the 7th fiscal
period, its occupancy rate temporally dropped to 71.8% (as of the end of September)but has recovered to 89.1% (as of the end of December) through SSR’s active efforts
for leasing. Other three properties maintained high occupancy rates and high rent levels
and the average occupancy rate of all the residences held by SSR during the 7th fiscal
period was 98.0%.
(Other facilities)
Both of two other facilities (factories) maintained a occupancy rate of 100% and their
management remain stable.
(iii) Overview of procurement of funds

During the 7th fiscal period, SSR refinanced 4,900 million yen of borrowings (long-termborrowings: 4,000 million yen, short-term borrowings: 900 million yen) which became due
on August 30, 2019, and, thereby, the amount of borrowings outstanding as of the end of
the 7th fiscal period was 29,200 million yen (short-term borrowings: 4,900 million yen,13

long-term borrowings to be repaid within one year: 6,000 million yen, long-termborrowings: 18,300 million yen). 6,000 million yen of long-term borrowings to be repaid
within one year and 12,700 million yen out of long-term borrowings were obtained at a
fixed rate, in order to avoid the risk of a rise in interest rates.
(iv) Overview of business performance and cash distribution

As a result of the asset management described above, the business results for the 7th fiscal
period were as follows: operating revenue of 2,391 million yen; operating income of 1,046
million yen; ordinary income of 872 million yen; and net income of 704 million yen.
As to the cash distribution in the 7th fiscal period, SSR decided, in accordance with the
distribution policy set forth in SSR’s Article of Incorporation, to distribute 704,630,116 yen
as a cash distribution of earnings, which is the maximum amount calculated by multiplying
the total number of investment units issued and outstanding (333,001 units) by an integral
number within the amount of earnings provided for in Article 136, Paragraph 1 of theInvestment Trust Act. Accordingly, the amount of cash distribution per investment unit was
2,116 yen.

14

(3) Capital increases, etc.

The following are the changes in unitholders’ capital and the total number of investment
units issued and outstanding from the date of incorporation of SSR to the end of 7th fiscal
period (which ended on December 31, 2019).
Date

April 1, 2016

September 7,
2016

Total number of investment
units issued and outstanding(Units)Unitholders’ capital(Thousand yen)

Description

Incorporation
through
privateplacement
Capitalincreasethroughpublicoffering

ChangeRemarks

ChangeBalance

Balance

100,100

100,100

1,001

1,001

(Note 1)

29,154,580

29,254,680

332,000

333,001(Note 2)

(Note 1) Investment units were issued at an issue price of 100,000 yen per unit upon the incorporation of SSR.
(Note 2) New investment units were issued through a public offering at an issue price of 91,000 yen (issue value of 87,815 yen) per unit for the
purpose of procuring funds for acquisition of new properties.

[Changes in trading price of investment units]
The highest and lowest prices (closing prices) of the investment units of SSR on TSE’s JREIT section by period are as follows:
Fiscal period

3rd fiscal period
September 1,
2017 to February
28, 2018

4th fiscal period
March 1, 2018 toJune 30, 2018

5th fiscal period
July 1, 2018 to
December 31,
2018

6th fiscal period
January 1, 2019
to June 30, 2019

7th fiscal period
July 1, 2019 to
December 31,
2019

Highest101,600 yen

95,000 yen

92,700 yen

92,500 yen

101,100 yen

Lowest

85,900 yen

91,000 yen

78,900 yen

80,000 yen

90,200 yen(4) Results of cash distribution, etc.

SSR decided to distribute all unappropriated retained earnings (excluding a fractional
portion which, if otherwise distributed, per-unit cash distribution would contain an amountless than one yen) in the 7th fiscal period aiming to make the amount of cash distributionof earnings deductible to the maximum extent permitted by applying the special provisions
under the taxation system (Article 67-15 of the Act on Special Measures Concerning
Taxation), and as a result, the amount of cash distribution per unit was 2,116 yen.
3rd fiscal period
5th fiscal period
7th fiscal period
September 1, 4th fiscal period
6th fiscal period
July 1, 2018 to
July 1, 2019 to2017 toMarch 1, 2018
January 1, 2019
December 31,
December 31,
February 28, to June 30, 2018
to June 30, 2019
2018
2019
2018

Fiscal period

Total unappropriatedretained earnings forthe period
Amount of retained
earnings
Total
cash
distribution[Cash distribution
per unit]
Of which, total cash
distributionof(Thousandyen)

1,152,373

615,536

886,466

885,939

704,679

189

150

17

156

49

1,152,183

615,385

886,448885,782

704,630

(Yen)

3,460

1,848

2,662

2,660

2,116

(Thousandyen)

1,152,183

615,385

886,448885,782

704,630(Thousandyen)(Thousandyen)

15

earnings[Cash distribution of(Yen)earnings per unit]
Of which, total (Thousand
contribution refunds
yen)[Contribution(Yen)refunds per unit]

3,460

1,848

2,662

2,660

2,116

－

－

－

－

－

－

－

－

－

－

16

(5) Future investment policy and issues to address(i) Investment environment

According to the “Monthly Economic Report (January 2020)” released by the Cabinet
Office on January 22, 2020, the Japanese economy remains weak for the time being, but it
is expected to continue to moderately recover, as the employment and income environments
continue to improve and due to the effects of various measures. However, attention should
be given to situations in overseas economies and influence of volatility in financial andcapital markets, including the situations over trade issues such as U.S.-China trade friction,
uncertainty of overseas economies, influence of volatility in financial and capital markets,
the UK leaving the EU, and the state of affairs over the Middle East region, and attention
should also be given to domestic consumption situations after a consumption tax increase.
With regard to the real estate transaction market, it is expected that the overheating in thereal estate acquisition environment and the upward trend in real estate transaction prices
will continue due to a prolonged low interest rate environment resulting from the easymoney policy of the Bank of Japan.
(ii) Future management policy and issues to address(Office buildings market)
We expect that the needs for relocation of offices due to office expansion or consolidationthat were seen during the 7th fiscal period will continue in the next fiscal period. SSR’s
assets under management also showed this trend. Some office spaces were cancelled
because the existing tenants moved out from SSR’s assets due to office relocation to a larger
office space or office consolidation, while some new tenants moved in for the same reasons.
We will promote leasing activities to conclude lease agreements as soon as possible
concerning office spaces that will be cancelled in the future. We will also continue
negotiations with existing tenants for a rent rise, with the aim of further increasing rental
revenue.
(Retail facilities market)
Sales at nationwide shopping centers increased, compared to the same month last year, inAugust 2019 when summer merchandise sales were strong due to rising temperatures, etc.
and in September 2019 when sales were boosted by a rush of demand before theconsumption tax increase, but thereafter fell below the same month last year due to slow
purchase activity after the consumption tax increase and a warm winter. SSR looks tofavorable consumer behavior after the end of such slow purchase activity due to theconsumption tax increase, and strives to maintain and improve the sales of existing tenantsby planning events to motivate customers to visit the tenants and carrying out capital
expenditure works in a planned manner. SSR will also work to improve the stability ofearnings from its properties by strategically switching tenants and soliciting new tenants
while promptly assessing changes in consumer trends.
(Residence rental market)
We will continue our efforts, as we did in the 7th fiscal period, to strengthen ties withproperty management companies of SSR’s properties to ensure convenience and comfort
for existing tenants. We will also conduct leasing activities taking advantage of rental
market trends in each area and property characteristics, in order to further improve
occupancy rates and profitability.

17(a) External growth
Because of a prolonged low interest rate environment due to the easy-money policy of
the Bank of Japan, transaction yields in each sector remain low. Although we are facing
severe competition to acquire properties in the market, we will strive to create a system
to get many and stable opportunities to acquire properties.
More specifically, we will strengthen relationships with various real estate holding
companies and intermediaries, thereby collecting broad and much information andsecuring more opportunities to consider acquiring high-quality properties.
(b) Internal growth
In order to increase revenues, we will closely examine rent trends based on disclosed data
and rents in the neighborhood, and if our current rents are lower than market rents, wewell actively negotiate with tenants to increase respective rents.
We will also pursue a possibility of internal growth by improving tenant satisfaction
through productive and efficient capital expenditure works and close communication withtenants.
(c) Financial policy
The basic policy of SSR is to create a stable and sound financial basis for maintaining andimproving earnings over the medium- and long-term.
a. Equity financing
Aiming at the growth of the size and value of investment assets, we will flexibly issue
new investment units with comprehensively taking into account the dilution of therights of existing unitholders and a decrease in the transaction price of investment
units that may be caused in association with such dilution, the timing of acquisitionof new real estate-related assets, the ratio of interest-bearing debt to total assets(“LTV”), financial environment, economic and market conditions, and other factors.
b. Debt financing
ⅰ. We will cap our LTV at 60% and control leverage in a flexible and careful manner
while ensuring sufficient capital reserves.
ⅱ. The balance between the flexibility of financing and the stability of finances istaken into consideration when borrowing funds or issuing investment corporation
bonds. We will also ensure a proper financing by negotiating with multiple
financial institutions about terms and conditions thereof, including financing
costs and period, and the necessity of collateral provision, and bycomprehensively reviewing such terms and conditions taking into accountinterest rate trends, market levels, financial flexibility and stability, and thebalance of composition of lenders.
ⅲ. In order to reduce the risks of an increase in interest rates and refinancing, we willconsider lengthening the financing period, fixing interest rates and diversifying
repayment dates, etc. as necessary.

18

(6) Significant subsequent events

Significant subsequent events occurred to SSR after the end of the 7th fiscal period(December 31, 2019) are as follows:(a) Execution of a memorandum of understanding regarding a merger with Star Asia
Investment Corporation
SSR established a special committee in order to ensure the fairness of decisions to be madewhen considering whether it was appropriate to carry out a merger with Star Asia
Investment Corporation and the fairness of the terms of such merger. After these issues
were deliberated by the special committee, SSR executed with Star Asia Investment
Corporation a memorandum of understanding regarding the merger on January 30, 2020.
SSR will discuss with Star Asia Investment Corporation for realizing the merger. (Thisevent has been announced in the “Notice Concerning Execution of Memorandum ofUnderstanding and Measures to Ensure Fairness Regarding Merger with Star Asia
Investment Corporation” dated January 30, 2020.)(b) Execution of an asset management agreement with Star Asia Investment Management
Co., Ltd. and changes in specified associated corporations related thereto
The asset management agreement between SSR and the Asset Management Company
terminates as of February 29, 2020. On February 18, 2020, SSR executed an asset
management agreement with Star Asia Investment Management Co., Ltd. which ismanaging the assets of Star Asia Investment Corporation, and as of March 1, 2020, Star
Asia Investment Management Co., Ltd. becomes SSR’s asset management company. In
association with such change, the parent company of SSR’s asset management company
and other specified associated corporations are also changed. (This event has beenannounced in the “Notice Concerning Execution of Asset Management Agreement withStar Asia Investment Management Co., Ltd. and Changes in Specified AssociatedCorporations Related Thereto” dated February 18, 2020.)(Reference information)(c) Filing of actions and petitions for an order of injunction, etc.
Actions and petitions for an order of injunction were filed against SSR and its Executive
Director Toru Sugihara by Galaxy JREIT Pty Limited (“Galaxy”) which is a unitholder ofSSR. The actions and petitions currently pending are as follows. It is expected that adecision will be rendered for the action stated in a. below on February 27, 2020.
a. Filing by a unitholder of an action for rescission of a resolution of unitholder’s general
meeting (This event has been announced in the “Notice Concerning Filing of an
Action for Rescission of a Resolution of Unitholders’ Meeting and a Petition for
Order of Injunction by Unitholder” dated September 24, 2019.)
b. Filing by a unitholder of a petition for an order of injunction to suspend performanceof duties by the executive director and to appoint an acting representative (This event
has been announced in the “Notice Concerning Filing of an Action for Rescission of
a Resolution of Unitholders’ Meeting and a Petition for Order of Injunction by
Unitholder” dated September 24, 2019.)
c. Filing by a unitholder of a petition for an order of injunction to suspend the effect ofa resolution to terminate the asset management agreement with the Asset

19

Management Company and the effect of a resolution to execute an asset managementagreement with Star Asia Investment Management Co., Ltd. (This event has beenannounced in the “Notice Concerning Court Ruling to Dismiss a Petition for Orderof Injunction by Unitholder and Filing of Immediate Appeal by Unitholder against
the Court Ruling” dated January 14, 2020.)
In addition, the following petition for an order of injunction was filed against SSR by the
Asset Management Company, which is currently pending.
d. Filing by the Asset Management Company of a petition for an order of injunction topreserve its status as the asset management company (This event has been announced
in the “Notice Concerning Filing of a Petition for Order of Injunction by AssetManagement Company” dated January 20, 2020.)(d) Receipt of a document for exercise of unitholder’s proposing rights
SSR received from Galaxy a document for exercise of unitholder’s proposing rights dated
January 31, 2020 with respect to the proposals for the general meeting of unitholders to beheld on March 30, 2020. (This event has been announced in the “Notice Concerning Receipt
of a Document for Exercise of Unitholder’s Proposing Rights” dated February 3, 2020.)

20

２ Overview of SSR(1) Status of capital contributions
Fiscal period
Total
numberofinvestment
units
authorized (Units)
Total
numberofinvestment units issued
and outstanding (Units)
Unitholders’capital(Million yen)
Number of unitholders(Number)

3rd fiscal
period(February 28,
2018)

4th fiscal
period(June 30,2018)

5th fiscal
period(December
31, 2018)

6th fiscal
period(June 30,2019)

7th fiscal
period(December
31, 2019)

10,000,00
0

10,000,00
0

10,000,00
0

10,000,00
0

10,000,00
0

333,001

333,001

333,001

333,001

333,001

29,25429,25429,25429,25429,254

17,423

17,922

17,893

17,371

13,757(2) Matters concerning unitholders

The top ten unitholders in terms of the percentage of unit holdings as of December 31, 2019are as follows:
Investment units
held(Units)Ownership ratio ofinvestment units
outstanding (Note)(%)

The Master Trust Bank of Japan, Ltd. (Trust account)

24,915

7.5

Japan Trustee Services Bank, Ltd. (Trust account)

22,652

6.8

Lion Partners Godo Kaisha

16,896

5.1

14,907

4.5

12,684

3.8

10,634

3.2

10,144

3.0

8,700

2.6

8,700

2.6

8,651

2.6

138,883

41.7

Name

BNY GCM CLIENT ACCOUNT JPRD AC ISG (FE－AC)
Standing Proxy MUFG Bank, Ltd.
Morgan Stanley MUFG Securities Co., Ltd.
Trust & Custody Services Bank, Ltd. (Securities investment
trust account)
EVO FUNDNIPPON KANZAI Co., Ltd.
GALAXY JREIT PTY LIMITEDStanding Proxy SMBC Nikko Securities Inc.
The Nomura Trust and Banking Co., Ltd. (Investment trust
account)
Total(Note)The ownership ratio of investment units outstanding is rounded to the nearest first decimal place.

(3) Matters concerning directors, etc.

(i) The Executive Director, Supervisory Directors, and Accounting Auditor during the 7th
fiscal period are as follows:

Title of position

Name

Main concurrent positions, etc.

Executive
Director

Toru Sugihara (Note 1)

－

21

Total
remuneration foreachposition in thefiscal period(Thousand yen)40Supervisory
Directors(Note 2)

Accounting
Auditor

Shigeru Kaneda

URYU & ITOGA
Attorney-at-law

1,500

Hirotaka Isayama

Isayama Certified Public Accountant
OfficePresident

1,500

－

6,500

PricewaterhouseCoopers
Aarata LLC(Note 1) At the extraordinary general meeting of unitholders held on August 30, 2019, Mr. Makoto Muranaka resigned as executive director and
Mr. Toru Sugihara was appointed.
The amount of remuneration for Mr. Makoto Muranaka during the 7th fiscal period is 1,000 thousand yen.
(Note 2) Supervisory directors may be officers of other corporations other than the corporations stated above, but none of such corporations,
including the corporations stated above are related parties of SSR.

22

(ii) Policy for deciding on the removal or non-reappointment of the accounting auditor
The accounting auditor will be removed if it is found that such accounting auditor falls
under any of the items of Article 105, Paragraph 1 of the Investment Trust Act. Nonreappointment of the accounting auditor will be considered at a meeting of SSR’s board of
directors, comprehensively taking into account the quality of its audits, the amount of audit
fees, and other various factors.
(4) The Asset Management Company, Custodian, and General Administrative Agent

The asset management company, custodian, and general administrative agent as ofDecember 31, 2019 are as follows:
Category of entrusting

Name

Asset Management Company

Sakura Real Estate Funds Management, Inc.

Custodian
General Administrative Agent (Unitholder registryadministration and organization management services)
General Administrative Agent (Accounting and otherservices)

Sumitomo Mitsui Trust Bank, Limited(Note)

Sumitomo Mitsui Trust Bank, Limited
Kaneyama & Associates

As of the date of this Report, it is expected that Sakura Real Estate Funds Management, Inc. will cease to be SSR’s asset managementcompany as of February 29, 2020 and thereafter Star Asia Investment Management Co., Ltd. will be SSR’s asset management company.

3 Status of assets held by SSR(1) Composition of SSR’ assets

The composition of SSR’s assets as of December 31, 2019 is as follows:
6th fiscal period(As of June 30, 2019)
Type of assets

Usage of assets

Officebuildings

Geographic area
(Note 1)

Total amount
held(Million yen)

As a percentage
of total assets(%)

Total amount
held(Million yen)

As a percentage
of total assets(%)(Note 2)

(Note 3)(Note 2)

(Note 3)Tokyo
metropolitan
area
Regional
major cities
OthersRetailfacilities
Real estate in
trust

Tokyo
metropolitan
area
Regional
major cities
OthersResidencesTokyo
metropolitan
area
Regional
major cities
OthersOther
facilities

7th fiscal period(As of December 31, 2019)Tokyo
metropolitan
area
Regional
major cities

23

26,54441.9

26,582

42.1

－

－

－

－

－

－

－

－

－

－

－

－

18,17728.7

18,167

28.8

4,036

6.4

4,004

6.3

3,730

5.9

3,710

5.9

2,852

4.5

2,863

4.5

－

－

－

－

2,378

3.8

2,366

3.7

－

－

－

－

Others
Subtotal

－

－

－

－

57,72091.1

57,695

91.4

Deposits and other assets

5,669

8.9

5,416

8.6

Total assets

63,389100.0

63,111100.0(Note 1) “Tokyo metropolitan area” means Tokyo, Kanagawa, Chiba and Saitama prefectures; the same apply hereinafter.
“Regional major cities” means cities designated by Cabinet Order and surrounding commutable areas, excluding Tokyo metropolitan area;
the same apply hereinafter.
“Others” means areas other than Tokyo metropolitan area and regional major cities; the same apply hereinafter.
(Note 2) “Total amount held” is based on the figures on the balance sheet as of the end of each fiscal period (excluding real estate in trust, the valueof which is based on the depreciated book value). “Total amount held” is rounded down to the nearest million yen.
(Note 3) “As a percentage of total assets” is rounded to the nearest first decimal place.

24

(2) Principal assets held

An overview of the principal assets (top ten properties based on the values on the balance
sheet) held by SSR as of December 31, 2019 is as follows:

Name of real estate, etc.

Book value(Million yen)

Leasable area(m2)
(Note 1)

Leased area(m2)
(Note 2)

Occupancy
rate(%)(Note 3)As apercentage of
total leasing
revenue(%)(Note 4)

Primaryuse

Seishin Building

7,973

5,616.80

5,616.80

100.0

10.2 Office building

Suroy Mall Chikushino

7,563

32,110.04

31,344.51

97.6

12.0

Retail facility

La Park Kishiwada

6,502

40,875.16

40,289.18

98.6

21.4

Retail facility

Suroy Mall Nagamine

4,101

12,600.67

12,600.67

100.0

Retail facility

Seiyu Minakuchi

4,004

23,814.87

23,814.87

100.0

7.8
Not disclosed(Note 5)3,860

3,250.68

3,250.68

100.0

5.1 Office building

3,811

3,394.35

3,394.35

100.0

4.6 Office building

Takadanobaba Access

3,431

3,691.49

3,691.49

100.0

4.6 Office building

Shiroi Logiman
Azabu
Amerex
Building

2,103

21,971.25

21,760.65

99.0

6.2

2,034

2,240.03

2,240.03

100.0

3.0 Office building

Total

45,387

149,565.34

148,003.23

99.0

Tsukasamachi
Building
NK Building

Not disclosed(Note 5)Retail facility

Residences－(Note 1) “Leasable area” is the area of the building of each real estate in trust (including its annex buildings, warehouses and other similar buildings
but excluding its parking area and rooms for various usages) as of December 31, 2019, which is deemed to be leasable based on the relevant
lease agreement, building drawing or other document.
(Note 2) “Leased area” is the total of leased areas (excluding areas used for events) of the building of real estate in trust (including its annex buildings,
warehouses and other similar buildings but excluding its parking areas and rooms for various usages) as of December 31, 2019 specified
in the lease agreements, respectively. If the master lease company has executed a pass-through-type master lease agreement with the lessor
or other relevant party, “leased area” is the total of areas leased to end-tenants specified in the sub-lease agreements concerning the realestate in trust as of December 31, 2019. Please note that some lease agreements include in the leased area a certain area which is notincluded in the total floor area and thus the total leased area may exceed the total floor area of such building. With respect to La Park
Kishiwada, Suroy Mall Chikushino and Suroy Mall Nagamine, the areas where ATMs are installed are excluded.
(Note 3) “Occupancy rate” is the occupancy rate as of December 31, 2019 (the ratio of leased area to leasable area) and is rounded to the nearest
first decimal place.
(Note 4) “As a percentage of total leasing revenue” is rounded to the nearest first decimal place.
(Note 5) The figures are not disclosed because the consent of respective tenants regarding disclosure has not been obtained and if such figures areotherwise disclosed, disadvantages such as a difficulty to maintain the respective lease agreements for a long period of time may be caused
as a relationship of trust between SSR and such tenants may be destroyed, thereby ultimately causing damage to interests of unitholders.

25(3) Details of real estate portfolio assets

An overview of the assets held by SSR as of December 31, 2019 is as follows:

Usage

Geographic
area

Name of real estate,
etc.

Location

Form ofownership

Shinjukuward,Tokyo
ChiyodaNK Building
ward,
Tokyo
ChiyodaTsukasamachi
ward,
BuildingTokyo
ShinjukuTakadanobaba Access ward,
Tokyo
Tokyo
metropolitan
Minatoarea
Azabu
Amerexward,
BuildingTokyo
ChiyodaHiei Kudan Building ward,
Tokyo
Yokohama
Shin Yokohama Nara
city,
Bldg
Kanagawa
ChiyodaThe Portal Akihabara ward,Tokyo

Beneficial
interest in
trust
Beneficial
interest in
trust
Beneficial
interest in
trust
Beneficial
interest in
trust
Beneficial
interest in
trust
Beneficial
interest in
trust
Beneficial
interest in
trust
Beneficial
interest in
trust

Seishin Building

Officebuildings

Subtotal

Regional
major cities

Retailfacilities

Others

La Park Kishiwada

Kishiwada
city, Osaka

Suroy
Chikushino

Chikushinocity,
FukuokaMall

Seiyu Minakuchi

Koka city,
Shiga

Kumamoto
Regional
Suroy Mall Nagamine city,
major cities
Kumamoto

Beneficial
interest in
trust
Beneficial
interest in
trust
Beneficial
interest in
trust
Beneficial
interest in
trust

SubtotalTokyo
metropolitan
area
Residences
Regional
major cities

Shiroi Logiman

Shiroi city,
Chiba

ShibuyaAbode Yoyogi Parkside ward,
Tokyo
Matsuya
SekimeResidence Osaka city,
Osaka

Urban Plaza Imazato

Osaka city,
Osaka

26

Beneficial
interest in
trust
Beneficial
interest in
trust
Beneficial
interest in
trust
Beneficial
interest in
trust

Appraisalvalue at the
Leasable area Book value
end of(m2)(Million
period(Note 1)yen)(Millionyen)(Note 2)5,616.80

7,973

9,610

3,394.35

3,811

4,650

3,250.68

3,860

4,300

3,691.49

3,431

3,720

2,240.03

2,034

2,470

2,298.86

1,969

2,190

4,057.89

1,941

2,070

941.69

1,559

1,620

25,491.79

26,582

30,63040,875.16

6,502

6,550

32,110.04

7,563

7,510

23,814.87

4,004

4,130

12,600.67

4,101

4,470

109,400.74

22,171

22,66021,971.25

2,103

2,190

1,286.50

1,607

1,760

7,767.37

1,907

1,970

4,648.64

956

952

Subtotal
Funabashi Hi Tech Funabashi
Park I
city, Chiba

OtherfacilitiesTokyo
metropolitan
area
Funabashi Hi Tech Funabashi
Park IIcity, Chiba

Beneficial
interest in
trust
Beneficial
interest in
trust

35,673.76

6,574

6,872

Not disclosed(Note 3)

1,683

1,800

Not disclosed(Note 3)682

782

Not disclosed(Note 3)
183,141.19

Subtotal
Total

2,366

2,582

57,69562,744(Note 1) “Leasable area” is the area of the building of each real estate in trust (including its annex buildings, warehouses and other similar buildings
but excluding its parking area and rooms for various usages) as of December 31, 2019, which is deemed to be leasable based on the relevant
lease agreement, building drawing or other document.
(Note 2) “Appraisal value at the end of period” is the appraisal value in the real estate appraisal report (the appraisal date: as of December 31, 2019)prepared by Daiwa Real Estate Appraisal Co., Ltd., which is rounded down to the nearest million yen. The appraisal value does notguarantee or assure that a sale and purchase of such building is or will be carried out at such value. Daiwa Real Estate Appraisal Co., Ltd.
which conducted the appraisal has no special interest in SSR or the Asset Management Company.
(Note 3) The figures are not disclosed because the consent of respective tenants regarding disclosure has not been obtained and if such figures areotherwise disclosed, disadvantages such as a difficulty to maintain the respective lease agreements for a long period of time may be caused
as a relationship of trust between SSR and such tenants may be destroyed, thereby ultimately causing damage to interests of unitholders.

27The leasing status of real estate, etc. held by SSR is as follows:
6th fiscal period(January 1, 2019 to June 30, 2019)

Usage

Officebuildings

Geographic
area

Name of realestate, etc.

22

100.0

229

9.6

22

100.0

243

10.2

NK Building

5

100.0

124

5.2

9

100.0

109

4.6

6

100.0

115

4.8

6

100.0

121

5.1

9

100.0

106

4.5

9

100.0

108

4.6

6

100.0

69

2.9

6

100.0

71

3.0

10

100.0

67

2.8

10

100.0

66

2.8

16

100.0

82

3.5

16

100.0

83

3.5

8

100.0

4

0.2

8

100.0

35

1.5

Subtotal

Retailfacilities

Other
facilities

82

100.0

800

33.4

86

100.0

840

35.1

La Park
Kishiwada

48

98.5

498

20.8

49

98.6

512

21.4

Suroy Mall
Chikushino

22

92.2

353

14.8

24

97.6

287

12.0

Not
disclosed(Note 4)

1

100.0

Not
disclosed(Note 4)Not
disclosed(Note 4)

Seiyu Minakuchi

1

100.0

Not
disclosed(Note 4)

Suroy Mall
Nagamine

21

99.3

179

7.5

22

100.0

185

7.8

Subtotal

92

97.1

Not
disclosed(Note 4)Not
disclosed(Note 4)

96

98.8

Not
disclosed(Note 4)Not
disclosed(Note 4)

Shiroi LogimanTokyo
metropolitan
Abode Yoyogi
area
ParksideMatsuyaResidence
Regional
Sekimemajor cities
Urban Plaza
Imazato

292

97.7

139

5.8

295

99.0

148

6.2

28

100.0

45

1.9

26

89.1

42

1.8

128

98.7

86

3.6

129

98.9

85

3.6

67

98.5

39

1.7

67

98.5

38

1.6

Subtotal

515

98.1

311

13.0

517

98.6

315

13.2

1

100.0

100.0

100.0

1

100.0

2

100.0

Not
disclosed(Note 4)Not
disclosed(Note 4)Not
disclosed(Note 4)

1

1

Not
disclosed(Note 4)Not
disclosed(Note 4)Not
disclosed(Note 4)

2

100.0

Not
disclosed(Note 4)Not
disclosed(Note 4)Not
disclosed(Note 4)Not
disclosed(Note 4)Not
disclosed(Note 4)Not
disclosed(Note 4)

691

97.9

2,394

100.0

701

99.0

2,391

100.0

OthersRegional
major cities

Residences

As a
Leasing
As aOccupancy
percentage
Occupancy Leasing
revenuepercentage
Number ofrateof totalrate
revenue(during the
Number ofof totaltenants(%)
leasing(%)(during theperiod)tenants
leasing(end of therevenue(end of the period)(Million(Note 1)revenue(Note 1)
period)(%)
period)(Millionyen)(%)(Note 2)
(Note 3)(Note 2)yen)
(Note 5)(Note 3)(Note 5)Seishin Building

Tsukasamachi
Building
Takadanobaba
Tokyo
Accessmetropolitan Azabu Amerex
area
Building
Hiei Kudan
Building
Shin Yokohama
Nara Bldg
The Portal
Akihabara

Regional
major cities

7th fiscal period(July 1, 2019 to December 31, 2019)

Funabashi Hi Tech
Park ITokyo
metropolitan
area
Funabashi Hi Tech
Park II
Subtotal
Total(Note 1) “Number of tenants” is the total number of tenants (excluding those of warehouses, signboards, parking areas, etc.) under the leaseagreements concerning each real estate in trust as of the end of each fiscal period. If a single tenant is leasing multiple rental units in aproperty under the same tenant name, the tenant is counted as one tenant regardless of the number of rental units. If a pass-through typemaster lease agreement has been concluded for the property, the total number of end-tenants (excluding those of warehouses, signboards,

28

(Note 2)(Note 3)(Note 4)(Note 5)parking areas, etc.) is stated. With respect to La Park Kishiwada, Suroy Mall Chikushino and Suroy Mall Nagamine, the tenants and theirsub-lessees who are renting the areas to install ATMs are excluded.
“Occupancy rate” is the occupancy rate as of the end of each fiscal period (the ratio of leased area to leasable area) and is rounded to thenearest first decimal place.
“As a percentage of total leasing revenue” is rounded to the nearest first decimal place.
The figures are not disclosed because the consent of respective tenants regarding disclosure has not been obtained and if such figures areotherwise disclosed, disadvantages such as a difficulty to maintain the respective lease agreements for a long period of time may be caused
as a relationship of trust between SSR and such tenants may be destroyed, thereby ultimately causing damage to interests of unitholders.
The Portal Akihabara was acquired on June 3, 2019 and the figures are based on leasing revenue for 28 days.

29

(4) Specific transaction contract amounts and fair value

Not applicable.
(5) Status of other assets

As of December 31, 2019, no specified assets are included in SSR’s investment targets
portfolio, other than those stated in “(3) Details of real estate portfolio assets” above.
(6) Status of assets by country and region

No assets are held in countries and regions other than Japan.
4 Capital expenditures on real estate held
(1) Schedule of capital expenditures

Name of real estate,
etc.

Location

Purpose

PeriodUpgradingof
conditioning system

Seishin Building

Shinjukuward,Tokyo

air From: April 2020
To: May 2020

20,000－－

From: July 2020
To: July 2020

16,200－－

air From: October 2020
To: October 2020

38,000－－trans From: April 2020
To: April 2020

10,000－－

From: July 2020
To: July 2020

24,000－－

air From: April 2020
To: May 2020

21,000－－

10,540－－50,550－－Upgrading of automatic
fire alarm system andemergency
announcement system
Upgradingof
conditioning system

NK Building

Tsukasamachi
Building

Shin
Yokohama
Nara Bldg

Chiyodaward,Tokyo
Chiyodaward,
Tokyo

Yokohama
city,
Kanagawa

Upgradingreactorof

Estimated construction costs(Thousand yen)Amount of
Total
payment
Total amountamountduring 7th
already paid
fiscal period

Upgrading of elevator
Upgradingof
conditioning system

Upgrading of parts of From: December
automatedparking
2020
facility
To: December 2020
Upgradingof
air From: May 2020
conditioning system
To: June 2020
Upgradingof
conditioning system

air From: October 2020
To: November 2020

48,000－－Upgrading of elevator

From: October 2020
To: November 2020

24,000－－12,892－－42,000－－27,000－－16,667－－

Chikushino
Suroy
Mall
From: March 2020
city,
Renewal of tenant areas
Chikushino
To: March 2020
Fukuoka
Koka city, Replacementof
air From: January 2020
Seiyu Minakuchi
Shiga
conditioning system
To: June 2020
From: September
Matsuya Residence Osaka city, Repair of external walls
2020
SekimeOsakaof parking tower
To: September 2020
Funabashi Hi Tech Funabashi Improvement of interior, From: June 2020
Park IIcity, Chiba equipment, etc.
To: June 2020

(2) Capital expenditures during the fiscal period

An overview of main capital expenditure works conducted by SSR for its assets during the30

7th fiscal period are as follows. The amount of expenses and costs for works conducted by
SSR for all its assets during the 7th fiscal period totaled 274,909 thousand yen, out of whichthose falling under capital expenditures were 231,205 thousand yen, and those included in
the expenses of the 7th fiscal period as repair expenses were 43,704 thousand yen.
Location

Purpose

PeriodConstructi
on costs(Thousandyen)

NK Building

Chiyoda-ward,Tokyo

Renewal of rooms andcommon areas

Form: July 2019
To: September 201949,830

Takadanobaba AccessShinjuku-ward,Tokyo

5th repair work of external
walls

From: November 2019
To: December 2019

21,992

Renewal of tenant areas

16,350

Kishiwada
Osaka

From: December 2019
To: December 2019

La Park Kishiwada

From: October 2019
To: December 201912,037
26,63027,670Name of real estate, etc.

Suroy
Chikushino
Matsuya
SekimeMall
Residencecity,
Upgradingof
conditioning system

air

Chikushino city,
Fukuoka

Renewal of tenant areas

From: September 2019
To: September 2019

Osaka city, Osaka

Renewal of elevator

From: December 2019
To: December 2019(3) Cash reserved for long-term repair and maintenance plan

Not applicable.

5. Expenses and liabilities(1) Details of expenses related to asset management(Unit: thousand yen)
6th fiscal period
Item

7th fiscal period

January 1, 2019 toJuly 1, 2019 toJune 30, 2019

December 31, 2019

169,303

174,610

Asset management fee (Note)
Custodian fee

3,074

3,159

General administrative agent fee

20,27821,181

Director remuneration

6,000

4,040

Non-deductible consumption tax

11,1408,173

Other expenses

72,74445,243

282,540

256,408

Total(Note)In addition to the amount above, asset management fee of 15,000 thousand yen was incurred as asset management fee relating to property
acquisition included in the acquisition cost of THE PORTAL AKIHABARA in the 6th fiscal period. No additional fee was incurred in the
7th fiscal period.

－

31

－

(2) Status of borrowings
The status of borrowings as of December 31, 2019 is as follows:

Classificati
on

Shortterm loans
payableLender

Drawd
own
date

Balanceat thebeginnin
g ofcurrent
period(Millionyen)

Sumitomo Mitsui Trust
Bank, Limited.

August
31,
2018

900

Sumitomo Mitsui Banking
Corporation
Aozora Bank, Ltd.
The Nishi-Nippon City
Bank, Ltd.
The Bank of Fukuoka,
Ltd.
Sumitomo Mitsui Trust
Bank, Limited.
Resona Bank, Limited

Repay
ment
date

Repayment
methodApplication

Remarks－

0.26736%

August
30,
2019

Lump
payment
at term
end(Note 2)

Unsecured,noguarantee

0.27427%

Februar
y 28,
2020

Lump
payment
at term
end(Note 2)

Unsecured,noguarantee

0.71096%

August
30,
2019

Lump
payment
at term
end(Note 2)

Unsecured,noguarantee

0.81842%

August
31,
2020

Lump
payment
at term
end(Note 2)

Unsecured,noguarantee

0.81842%

August
31,
2020

Lump
payment
at term
end(Note 2)

Unsecured,noguarantee

0.93842%

August
31,
2021

Lump
payment
at term
end(Note 2)

Unsecured,noguarante
e

－

200

－

1,000

－

1,000

－

1,000

－

900

－

600

－

200

Subtotal
Sumitomo Mitsui Banking
Corporation
Shinsei Bank, Limited

900

4,900

200

－

200

－

600

－

Aozora Bank, Ltd.
The Nishi-Nippon City
Bank, Ltd.
The Bank of Fukuoka,
Ltd.
Sumitomo Mitsui Banking
Corporation
Shinsei Bank, Limited
Resona Bank, Limited

September 9,
2016

September 9,
2019

1,000

－

1,000

－

1,000

－

－

1,950

－

1,950

－

600

－

500

ORIX Bank Corporation

－

1,000

Subtotal
Sumitomo Mitsui Banking
Corporation
Shinsei Bank, Limited

4,000

6,000

1,950

－

1,950

－

Aozora Bank, Ltd.

Resona Bank, LimitedAozora Bank, Ltd.
Longterm loans
payableAverageinterest
rate(Note 1)

Shinsei Bank, Limited

Resona Bank, Limited

Current
portion of
long-term
loans
payableAugust30,
2019

Balanceat theend ofcurrent
period(Millionyen)

ORIX Bank Corporation
Sumitomo Mitsui Banking
Corporation
Shinsei Bank, Limited
Resona Bank, LimitedAozora Bank, Ltd.
ORIX Bank Corporation

September 9,
2016

September 9,
2016

600

－

500

－

1,000

－

1,950

1,950

1,950

1,950

600

600

500

500

1,000

1,000

－

32

－

Sumitomo Mitsui Banking
Corporation
Resona Bank, Limited
Shinsei Bank, Limited
Sumitomo Mitsui Banking
Corporation
Shinsei Bank, LimitedAozora Bank, Ltd.
Resona Bank, Limited
Sumitomo Mitsui Banking
Corporation
The Nishi-Nippon City
Bank, Ltd.
Shinsei Bank, Limited

2,500

August31,
2017

August31,
2018

June 3,
2019

Aozora Bank, Ltd.
Subtotal
Total

0.87191%

August
31,
2022

Lump
payment
at term
end(Note 2)

Unsecured,noguarantee

1.07777%

Februar
y 28,
2023

Lump
payment
at term
end(Note 2)

Unsecured,noguarantee

0.76853
%

May
31,
2022

Lump
payment
at term
end(Note 2)

Unsecured,noguarante
e

2,500

600

600

2,500

2,500

1,950

1,950

1,950

1,950

800

800

400

400

450

450

500

500

450

450

200

200

24,30029,20018,30029,200(Note 1) “Average interest rate” is the weighted average interest rate during the fiscal period, rounded to the fifth decimal place.
(Note 2) The uses of funds are funds for the purchase of real estate or real estate beneficiary interests in trust, funds for refinancing borrowings, and working capital.

(3) Status of investment corporate bonds
Not applicable.
(4) Status of short-term investment corporate bonds
Not applicable.
(5) Status of subscription rights for new investment units
Not applicable.

－

33

－

6. Acquisitions and transfers during the fiscal period(1) Acquisitions and transfers of real estate, asset-backed securities, infrastructure assets, andinfrastructure-related assets
Not applicable.
(2) Purchases and sales of other assets
Not applicable.
(3) Surveys on the prices, etc. of specific assets
Not applicable.
(4) Status of transactions with interested persons, etc.
(i) Status of sales and purchase transactions with interested persons, etc.
Not applicable.
(ii) Status of lease to interested persons, etc.

Total Rental revenue(Thousand yen)

Name of lessee
Sakura Real Estate Funds Management,
Inc.
Japan Property Solutions Co., Ltd.

6,117
546

(iii) Amounts of commissions paid, etc.

Item

Outsourcing
expenses

Other
expensesrelated to rent
businessTotalamount ofcommissi
ons paid,
etc. (A)(Thousandyen)

Breakdown of transactions with interested persons, etc.

As apercentag
e of total
amount(B/A)(%)

Paid toPaidamount(B)(Thousandyen)

Nippon Kanzai Co., Ltd.

34,370

9.8

Tokyo Capital Management Co., Ltd.

81,924

23.3

Japan Property Solutions Co., Ltd.

23,902

6.8

Master Lessee Mars Limited GK

1,620

0.5

Nippon Kanzai Co., Ltd.

3,677

10.7

0

0.0

351,634

34,236
Japan Property Solutions Co., Ltd.

(Note 1) “Interested persons, etc.” means the interested persons, etc. of the Asset Management Company prescribed in Article 123 of the Order for
Enforcement of the Act on Investment Trusts and Investment Corporations (“Order for Enforcement of the Investment Trusts Act”) and
Article 26, Paragraph 1, Item 27 of the Regulation on Asset Management Reports, etc. concerning Investment Trusts and Investment
Corporations issued by The Investment Trusts Association, Japan.
(Note 2) Apart from the transactions and commissions paid, etc. stated above, the amounts paid for repair work, etc. which were ordered to interested
persons, etc. during the fiscal period are as follows:
Paid amountPaid to(Thousand yen)
Nippon Kanzai Co., Ltd.
59,913
Tokyo Capital Management Co., Ltd.
2,119
Japan Property Solutions Co., Ltd.
262

－

34

－

(5) Status of transactions between the Asset Management Company related to concurrent
operations conducted by that Asset Management Company
Sakura Real Estate Funds Management, Inc. that is the Asset Management Company of SSR is notconcurrently engaged in the type I financial instruments trading business, type II financial
instruments trading business, real estate brokerage business and real estate specified joint enterprisebusiness, and thus there are no such transactions.

7. Accounting status(1) Status of assets, liabilities, capital, and profit and loss
For details, refer to “II. Balance Sheet,” “III. Statement of Income,” “IV. Statement of Unitholders’Equity,” “V. Notes,” and “VI. Statement of Cash Distributions” below.
(2) Changes in the method for calculating depreciation
Not applicable.
(3) Changes in the appraisal method for real estate and infrastructure assets
Not applicable.

8. Others(1) Notices(i) Unitholders’ Meeting(a) The general meeting of unitholders was held by Lion Partners GK, a minority unitholder, on
August 30, 2019 and the following resolutions were made:ProposalContent of the resolution
Because Executive Director Makoto Muranaka resigned as Executive
director of SSR prior to the opening of the general meeting, nodeliberations and votes were held on this matter.
Although a proposal for appointment of Tamotsu Hagino as Executive
Director was submitted as a motion to amend this matter, this matter was
adopted and approved as per the original proposal, and Mr. Toru
Sugihara was appointed.

Proposal 1: Removal of Executive Director Makoto Muranaka

Proposal 2: Appointment of Executive Director Toru Sugihara
Proposal 3: Cancellation of the asset management entrustment
agreement with Sakura Real Estate Funds Management, Inc.

This matter was adopted and approved as per the original proposal.

Proposal 4: Entering into an asset management entrustment
agreement with Star Asia Investment Management Co., Ltd.

Although a proposal for the execution of an asset management
entrustment agreement with Mitsui Bussan & Idera Partners Co., Ltd.
was submitted as a motion to amend this matter, this matter was adopted
and approved as per the original proposal.

(b) The 3rd general meeting of unitholders was held on August 30, 2019. The results of themeeting were as follows:
Proposal

Results

Proposal 1: Approval of an agreement on absorption-type merger
with MIRAI Corporation
Proposal 2: Cancellation of the asset management entrustment

This matter was not submitted to the meeting because the quorum was
not met.
This proposal was subject to the approval of Proposal 1, but Proposal 1

－

35

－

agreement with Sakura Real Estate Funds Management, Inc. on thecondition that the merger with MIRAI Corporation comes intoforce

was not submitted to the meeting; therefore, this proposal waswithdrawn.
This matter was not submitted to the meeting because the quorum was
not met.

Proposal 3: Partial amendments to the articles of incorporation(ii) Board of Directors of SSR
The following is a summary of the execution and changes in major agreements approved at
the board meeting of SSR during the 7th fiscal period.
Date of the board
meeting

AgendaSummary

August 5, 2019

Execution of a merger agreementwith MIRAI Corporation

September 13, 2019

Cancellation of a merger agreementwith MIRAI Corporation

Following the adoption and approval of this agenda, SSR entered into a merger
agreement with MIRAI Corporaiton, under which MIRAI Corporation was thesurviving corporation and SSR was the dissolving corporation in the absorption-typemerger, with the effective date of the merger being November 1, 2019.
However, such merger was not submitted to the meeting because a quorum was not
met at the general meeting of unitholders held on August 30, 2019 as stated in 1)(a)above.
Based on the results at the 3rd general meeting of unitholders held on August 30,
2019, the cancellation of a merger agreement executed with MIRAI Corporation was
adopted and approved.

(2) Status of investment trust beneficiary certificates set by own company
The investment units of SSR held by Sakura Real Estate Funds Management, Inc., the AssetManagement Company, are as follows.
a. Status of acquisition, etc.
Date of acquisition

Number of units
acquired (Units)

April 1, 2016

1

Total

1

Number of units
disposed (Units)－

Number of units
held (Units)

Remarks

1－(Note)

1(Note) Investment units were acquired at 100,000 yen per unit upon the incorporation of SSR.

b. Status of holding, etc.

Numberof units
held atend ofperiod(Units)Totalamountheld atend ofperiod(Reference)
Unitprice atend ofperiod(Yen)

As apercent
age oftotal
numberof units
issued(%)(Reference)
Total
numberof units
issued atend ofperiod(Units)

1st fiscal
periodApril 1, 2016 to
February 28, 20171

81,80081,8000.0

333,001

2nd fiscal
periodMarch 1, 2017 toAugust 31, 20171

89,70089,7000.0

333,001－36－

3rd fiscal
periodSeptember 1, 2017 to
February 28, 20181

94,70094,7000.0

333,001

4th fiscal
periodMarch 1, 2018 toJune 30, 20181

91,20091,2000.0

333,001

5th fiscal
periodJuly 1, 2018 to
December 31, 20181

80,30080,3000.0

333,001

6th fiscal
periodJanuary 1, 2019 toJune 30, 20191

88,50088,5000.0

333,001

7th fiscal
periodJuly 1, 2019 to
December 31, 20191

97,50097,5000.0

333,001(Note) Calculated by multiplying the number of units held at the end of the period by the unit price at the end of the period.

(3) Status of overseas real estate holding company and real estate held by it
Not applicable.
(4) Rounding of amounts and percentages
Unless otherwise specifically noted, amounts are rounded down to the unit displayed andpercentages are rounded to the first decimal place in this document.

－

37

－

Ⅱ. Balance Sheet(Unit: thousand yen)
6th fiscal period (reference)(As of June 30, 2019)

7th fiscal period(As of December 31, 2019)

AssetsCurrent assets
Cash and deposits

598,134

518,328

4,532,632

4,356,576

Operating accounts receivable

62,54066,422

Prepaid expenses

84,12492,744

Deposits paid

18,455

16,350Cash and deposits in trust

Other
Total current assets

11

394

5,295,899

5,050,817

14,923,172

15,132,852

Non-current assets
Property, plant and equipment
Buildings in trust
Accumulated depreciation(1,230,637)(1,464,891)

Buildings in trust, net

13,692,534

13,667,960

Structures in trust

449,193

450,855

Accumulated depreciation(101,384)(118,659)

Structures in trust, net

347,809332,195

Machinery and equipment in trust

34,79740,961

Accumulated depreciation(4,949)(6,740)Machinery and equipment in trust, net

29,84834,220Tools, furniture and fixtures in trust
Accumulated depreciation
Tools, furniture and fixtures in trust, net

36,63650,336(10,194)(13,509)

26,44236,826

Land in trust

42,953,181

42,953,181

Total property, plant and equipment

57,049,815

57,024,385

Leasehold rights in trust

670,865

670,865

Other

12,391

9,611

Total intangible assets

683,257

680,477

Intangible assets

Investments and other assets
Deferred tax assets

19

17

Long-term prepaid expenses

113,236

85,252Long-term deposits

237,580

261,037

Other

10,00010,000Total investments and other assets

360,835

356,307

58,093,908

58,061,170

63,389,808

63,111,987

Total non-current assets
Total assets

－

38

－

(Unit: thousand yen)
6th fiscal period(reference)(As of June 30, 2019)

7th fiscal period(As of December 31,
2019)

Operating accounts payable

331,858

250,346

Short-term loans payable

900,000

4,900,000

4,000,000

6,000,000

174,205

155,659

997

971

5,217

44,176

Advances received

360,835

361,908

Other

35,97857,2885,809,092

11,770,351

Long-term loans payable

24,300,000

18,300,000

Tenant leasehold and security deposits in trust

3,140,097

3,082,276

Total non-current liabilities

27,440,097

21,382,276

33,249,189

33,152,627

29,254,680

29,254,680

Unappropriated retained earnings (undisposed
loss)

885,939

704,679

Total surplus

885,939

704,679

30,140,619

29,959,359

30,140,619

29,959,359

63,389,808

63,111,987

Liabilities
Current liabilities

Current portion of long-term loans payable
Accounts payable - other
Income taxes payable
Accrued consumption taxes

Total current liabilities
Non-current liabilities

Total liabilities
Net assets
Unitholders’ equity
Unitholders’ capital
Surplus

Total unitholders’ equity
Total net assets*1
Total liabilities and net assets

－

39

－

Ⅲ. Statement of Income(Unit: thousand yen)
6th fiscal period(reference)
From: January 1, 2019
To: June 30, 2019

7th fiscal period
From: July 1, 2019
To: December 31, 20192,022,934

2,054,703

Operating revenue
Lease business revenue*1
Other lease business revenue*1
Total operating revenue

371,966

337,004

2,394,901

2,391,708

1,074,650

1,088,711

169,303

174,610

Operating expenses
Expenses related to rent business*1*2
Asset management fee
Asset custody fee

3,074

3,159

Administrative service fee

20,27821,181

Directors’ compensations

6,000

4,040

Non-deductible consumption tax

11,1408,173

Other operating expenses*2

72,74445,243

Total operating expenses

1,357,190

1,345,120

1,037,710

1,046,588

Interest income

23

23

Other

180

13

Total non-operating income

203

37

Interest expenses

119,656

121,295

Borrowing related expenses

43,34452,870Total non-operating expenses

163,000

174,166

874,912872,459

Insurance income*3

48,804－

Total extraordinary income

48,804－36,802－

Operating income
Non-operating income

Non-operating expenses

Ordinary income
Extraordinary income

Extraordinary loss
Loss on disaster*3
Expenses related to general meetings of unitholders
and merger, etc. *4－

166,961

Total Extraordinary loss

36,802

166,961

Income before income taxes

886,915

705,498

Income taxes - current

1,000

974

Income taxes-deferred(7)

1

Total income taxes
Net income

－

40

－

993

975

885,921704,522

Retained earnings brought forward
Unappropriated retained earnings (undisposed loss)

－

41

－

17

156

885,939

704,679

Ⅳ. Statement of Unitholders’ Equity
6th fiscal period (reference) (from January 1, 2019 to June 30, 2019)(Unit:
thousand yen)

Unitholders’ equity
Surplus

Balanceatbeginningof
the period
Changesofitems during theperiodDividends
from surplus
Net income
Total changesof items during
the period
Balance at endof the period

Total
net assets

Unitholders’capitalUnappropriatedretained earnings(undisposed
loss)

Total surplus

Totalunitholders’equity29,254,680

886,466

886,466

30,141,146

30,141,146－(886,448)(886,448)(886,448)(886,448)－

885,921885,921885,921885,921

－

(526)

(526)

(526)

(526)

(*1 )29,254,680

885,939885,939

30,140,619

30,140,619

7th fiscal period (from July 1, 2019 to December 31, 2019)(Unit:
thousand yen)

Unitholders’ equity
Surplus

Balanceatbeginningof
the period
Changesofitems during theperiodDividends
from surplus
Net income
Total changesof items during
the period
Balance at endof the period

Totalunitholders’equityTotal
net assets

Unitholders’capitalUnappropriatedretained earnings(undisposed
loss)

29,254,680

885,939885,939

30,140,619

30,140,619－(885,782)(885,782)(885,782)(885,782)－

704,522704,522704,522704,522－(181,259)(181,259)(181,259)(181,259)(*1 )29,254,680

704,679

704,679

29,959,359

29,959,359

－

42

Total
surplus－

Ⅴ. Notes[Notes on the Going Concern Assumption]
6th fiscal period (reference)
From: January 1, 2019
To: June 30, 2019

(

)

(

Not applicable.

7th fiscal period
From: July 1, 2019
To: December 31,
2019)

Not applicable.

[Notes on Matters Concerning Significant Accounting Policies]
6th fiscal period (reference)
From: January 1, 2019
To: June 30, 2019

Item

(

)

(

Property, plant and equipment

7th fiscal period
From: July 1, 2019
To: December 31,
2019)

1. Method of depreciation of non-(1)

current assets(including trust assets)(including trust assets)

The straight-line method is adopted. The

The straight-line method is adopted. The

useful life of primary property, plant anduseful life of primary property, plant andequipment is as follows:

equipment is as follows:
2-70

Buildings

years
2-70

Structures
Machinery

years
and

equipment

10 years(1) Property, plant and equipment

2-70

Buildings

years
2-70

Structures
Machinery

years
and

equipment

10 years

Tools, furniture and6-15

Tools, furniture and

6-15

fixturesyears

fixturesyears(2) Intangible assets(2) Intangible assets

The straight-line method is adopted.

The straight-line method is adopted.

The remaining period or useful life of

The remaining period or useful life ofprimary intangible assets is as follows:
Software5 years

primary intangible assets is as follows:
Software5 years

2. Standards for revenue andAccounting for fixed property tax, etc.

Accounting for fixed property tax, etc.

expense recognition

Accounting for fixed property tax, city

Accounting for fixed property tax, city

planning tax, depreciable asset tax, etc.

planning tax, depreciable asset tax, etc.

on real estate or beneficiary interest in

on real estate or beneficiary interest in

trust for real estate held is that, of the tax

trust for real estate held is that, of the tax

amount assessed and determined, theamount assessed and determined, theamount corresponding to the concerned

amount corresponding to the concerned

calculation period is expensed as

calculation period is expensed as

expenses related to rent business.

expenses related to rent business.

The amount equivalent to fixed property

The amount equivalent to fixed property

tax, etc. in the initial fiscal year borne bytax, etc. in the initial fiscal year borne by

SSR upon acquisition of real estate or

SSR upon acquisition of real estate or

beneficiary interest in trust for real

beneficiary interest in trust for realestate is not recognized as expenses but

estate is not recognized as expenses but

included in the cost of acquisition of the

included in the cost of acquisition of theconcerned real estate, etc. In the 6thconcerned real estate, etc. In the 7th

fiscal period, the amount equivalent tofiscal period, the amount equivalent to

－

43

－

fixed property tax, etc. included in the

fixed property tax, etc. included in thecost of acquisition of real estate, etc. wascost of acquisition of real estate, etc. was

1,783 thousand yen.

nil.

－

44

－

6th fiscal period (reference)
From: January 1, 2019
To: June 30, 2019

Item

3.

Other

serving(significant
asthe

preparationofmatters

basis

for

financialstatements)(

7th fiscal period
From: July 1, 2019
To: December 31,
2019)(1) Accounting for beneficiary interest(1) Accounting for beneficiary interestin trust for real estate, etc.

in trust for real estate, etc.

Concerning beneficiary interest in trust

Concerning beneficiary interest in trust

for real estate, etc. held, all accounts offor real estate, etc. held, all accounts ofassets and liabilities within trust assets

assets and liabilities within trust assets

as well as all accounts of revenue andas well as all accounts of revenue andexpenses from the trust assets are

expenses from the trust assets arerecognized in the relevant account item

recognized in the relevant account itemof the balance sheet and the statement ofof the balance sheet and the statement ofincome.

income.

The following material items of the trust

The following material items of the trust

assets recognized in the relevant accountassets recognized in the relevant accountitem are separately listed on the balance

item are separately listed on the balance

sheet.

sheet.

1) Cash and deposits in trust

1) Cash and deposits in trust2) Buildings in trust; Structures in trust;2) Buildings in trust; Structures in trust;

Machinery and equipment in trust;

Machinery and equipment in trust;Tools, furniture and fixtures in trust;Tools, furniture and fixtures in trust;Land in trust

Land in trust3) Leasehold rights in trust
4)

Tenantleasehold3) Leasehold rights in trust

andsecurity

4)

Tenantleaseholdandsecurity

deposits in trust

deposits in trust(2) Accounting for consumption tax, etc.

(2) Accounting for consumption tax, etc.

he accounting for consumption tax andhe accounting for consumption tax andlocal consumption tax are excluded

local consumption tax are excluded

from the transaction amounts. Non-from the transaction amounts. Non-deductible consumption tax is expensed

deductible consumption tax is expensed

as expenses for the 6th fiscal period.

as expenses for the 7th fiscal period.

[Notes to the Balance Sheet]
6th fiscal period (reference)(As of June 30, 2019)

7th fiscal period(As of December 31, 2019)*1. Minimum net assets as provided in Article 67,
Paragraph 4 of the Act on Investment Trusts and Investment
Corporations:
50,000 thousand yen*1. Minimum net assets as provided in Article 67,
Paragraph 4 of the Act on Investment Trusts and Investment
Corporations:
50,000 thousand yen

－

45

－

[Notes to the Statement of Income]
6th fiscal period (reference)
From: January 1, 2019
To: June 30, 2019

(

)

(

*1. Breakdown of operating income (loss) from real estateleasing(Unit: thousand yen)
A. Operating revenue
from real estate leasing
Lease business revenue
Rental revenue
1,734,012
Commonarea
288,9212,022,934
maintenance revenue
Other lease businessrevenue
Utilities reimbursement
156,861
Parking revenue
96,269Other rental revenue
118,835
371,966
Total operating revenue from
2,394,901
real estate leasing
B. Operating expenses
from real estate leasing
Expenses related to rent
business
Outsourcing expenses
Utilities expenses
Taxes and dues
Repair expenses
Insurance premium
Trust fee
Depreciation
Other expenses related torent businessTotal operating expenses fromreal estate leasing
C. Operating income (loss)
from real estate leasing (A－B))*1. Breakdown of operating income (loss) from real estateleasing(Unit: thousand yen)
A. Operating revenue
from real estate leasing
Lease business revenue
Rental revenue
1,757,227
Commonarea
297,476
2,054,703
maintenance revenue
Other lease businessrevenue
Utilities reimbursement
178,589
Parking revenue
96,121Other rental revenue
62,293
337,004
Total operating revenue from
2,391,708
real estate leasing
B. Operating expenses
from real estate leasing
Expenses related to rent
business
Outsourcing expenses
Utilities expenses
Taxes and dues
Repair expenses
Insurance premium
Trust fee
Depreciation
Other expenses related torent businessTotal operating expenses fromreal estate leasing

342,986
174,799
190,999
63,047
4,880
13,036247,378
37,521
1,074,650

C. Operating income (loss)
from real estate leasing (A－B)

1,320,250－

7th fiscal period
From: July 1, 2019
To: December 31,
2019

46

－

351,634
191,766
191,01243,704
6,344
13,376
256,635
34,236
1,088,711

1,302,997

*2. The amounts incurred for depreciation are as follows:(Unit: thousand yen)
6th fiscal period (reference)
From: January 1, 2019
To: June 30, 2019

(

)

(

7th fiscal period
From: July 1, 2019
To: December 31,
2019)

Expenses related to rent business
Property, plant and equipment

247,378

256,635

2,780

2,780

Other operating expenses
Intangible assets*3. Consists of repair expenses incurred upon the occurrence of a natural disaster and corresponding insurance proceeds.
*4. Consists of expenses for responding to the request to hold the general meeting of unitholders made by one of the minority
unitholders, Lion Partners GK, expenses incurred for seeking and considering measures against the proposal for merger made byStar Asia Investment Corporation, expenses incurred for considering merger with MIRAI Corporation, expenses incurred forholding the general meetings of unitholders organized respectively by Lion Partners GK and SSR on August 30, 2019, and expenses
for responding to the litigations filed by one of the minority unitholders, Galaxy JREIT Pty Limited with respect to the results ofboth general meetings of unitholders.

－

47

－

[Notes to the Statement of Unitholders’ Equity]
6th fiscal period (reference)
From: January 1, 2019
To: June 30, 2019

(

)

(

*1. Total number of investment units authorized and total
number of investment units issued and outstanding
Total number of investment units
authorizedissued and outstanding)*1. Total number of investment units authorized and total
number of investment units issued and outstanding

10,000,000

Total number of investment units

units

Total number of investment units

7th fiscal period
From: July 1, 2019
To: December 31,
2019

authorized

333,001

units

Total number of investment units

units

10,000,000

issued and outstanding

333,001
units[Notes on Tax-Effect Accounting]
6th fiscal period (reference)(As of June 30, 2019)

7th fiscal period(As of December 31, 2019)

1. Breakdown of main causes for occurrence of deferred tax assets
and deferred tax liabilities(Unit: thousand yen)

1. Breakdown of main causes for occurrence of deferred tax assets
and deferred tax liabilities(Unit: thousand yen)

Deferred tax assets
Non-deductible accrued enterprise tax
Total
Deferred tax assets, net

Deferred tax assets
Non-deductible accrued enterprise tax
Total
Deferred tax assets, net

19
19
19

2. Breakdown of major components that caused any
significant differences between the statutory tax rate and theeffective income tax rate after application of tax-effectaccounting(Unit: %)Statutory tax rate
(Adjustments)
Deductible distributions payable
Other
Effective income tax rate
after application of tax-effect accounting

2. Breakdown of major components that caused any
significant differences between the statutory tax rate and theeffective income tax rate after application of tax-effectaccounting(Unit: %)31.51

Statutory tax rate
(Adjustments)
Deductible distributions payable
Other
Effective income tax rate
after application of tax-effect accounting(31.47)0.07
0.11[Notes on Fixed Assets Exercised Through a Lease]
6th fiscal period (reference)
From: January 1, 2019
To: June 30, 2019

(

)

(

Not applicable.

Not applicable.

－

17
17
17

48

－

7th fiscal period
From: July 1, 2019
To: December 31,
2019

)

31.51
(31.47)0.10
0.14

[Notes on Financial Instruments]

6th fiscal period (reference) (from January 1, 2019 to June 30, 2019)
1. Matters concerning status of financial instruments(1) Policy for handling financial instruments
SSR shall procure funds to allocate to acquisition of real estate related assets, repayment ofinterest‐bearing liabilities, etc. through mainly issuance of investment units, borrowing fromfinancial institutions, issuance of investment corporation bonds, etc. Upon procuring funds
through interest‐bearing liabilities, SSR aims to stagger maturities, extend borrowing periods
and lower and fix interest on borrowings in order to establish a stable asset managementfoundation in the medium and long term, and due consideration shall be given to fundprocurement agility and financial stability.
(2) Description of financial instruments and associated risks, and risk management system
The funds procured through loans, which shall be for the purpose of mainly acquisition ofassets, are exposed to liquidity risk and interest rate fluctuation risk, but the concerned risks
are managed by dispersing the procurement destinations and staggering the maturities, and byconsidering using surplus and procuring funds from capital markets throughissuance ofinvestment units(3) Supplementary explanation to matters concerning fair value, etc. of financial instruments
The fair value of financial instruments include value based on market price, and in the absenceof market price, value reasonably calculated. In the calculation of such value, the adoption ofcertain conditions precedent may result in the difference between values, depending on
different conditions precedent.
2. Matters concerning fair value, etc. of financial instruments

The carrying amount and fair value as of June 30, 2019, and the amount of difference between
these, are as follows:
Financial instruments for which estimation of fair value is recognized to be difficult are notincluded. Please refer to “Note 2” below.

(1)Cash and deposits(2)

Cash and deposits in
trust
Assets total

(3)
(4)
(5)

Short-termloanspayableCurrent portion of longterm loans payable
Long-term
loans
payableLiabilities total

Carrying amount(Unit: thousand yen)

Fair value(Unit: thousand yen)Amount of difference(Unit: thousand yen)

598,134

598,134－

4,532,632

4,532,632－

5,130,766

5,130,766－

900,000

900,000－

4,000,000

3,999,490(510)

24,300,000

24,338,547

38,547

29,200,000

29,238,037

38,037－49－

(Note 1) Method of calculation of the fair value of financial instruments(1) Cash and deposits; (2) Cash and deposits in trust
Because these are settled in a short period of time, the fair value is approximately the same as the book value and thus stated at that book value.
(3) Short-term loans payable
Because these are settled in a short period of time, and are based on floating interest rates, the fair value is approximately the same as the book value andthus stated at that book value.
(4) Current portion of long-term loans payable; (5) Long-term loans payable
These are calculated by the present value obtained by discounting the total principal and interest by the rate expected when similar funds are additionallyborrowed in correspondence with the remaining term.
(Note 2) Financial instruments for which estimation of fair value is recognized to be extremely difficult
Category
Tenant leasehold and security deposits intrust(Unit: thousand yen)

Carrying amount
3,140,097

With respect to tenant leasehold and security deposits in trust, since there is no market price and the lease agreement is likely to be cancelled or extended
and/or renewed even with a specified lease term, and it is difficult to calculate the actual deposit period, it is impossible to reasonably estimate cash flows.
Therefore, since estimation of cash flows is recognized to be extremely difficult, tenant leasehold and security deposits in trust are not subject to valuation
at fair value.
(Note 3) Amount of redemption of monetary claims scheduled to be due after the date of settlement of accounts(June 30, 2019)(Unit: thousand yen)

Not later than 1 year
Cash and deposits

598,134

Cash and deposits in trust

4,532,632

Total

5,130,766(Note 4) Amount of repayment of loans scheduled to be due after the date of settlement of accounts(June 30, 2019)

Short-termloans payable
Long-termloans payable
Total(Unit: thousand yen)

Not later than
1 yearLater than 1
year and notlater than 2
years

Later than 2
years and notlater than 3
years

Later than 3
years and notlater than 4
years

Later than 4
years and notlater than 5
years

Later than 5
years

900,000

－

－

－

－

－

4,000,000

6,000,000

7,600,000

10,700,000－－

4,900,000

6,000,000

7,600,000

10,700,000

－

－

－

50

－

7th fiscal period (from July 1, 2019 to December 31, 2019)
1. Matters concerning status of financial instruments(1) Policy for handling financial instruments
SSR shall procure funds to allocate to acquisition of real estate related assets, repayment ofinterest‐bearing liabilities, etc. through mainly issuance of investment units, borrowing fromfinancial institutions, issuance of investment corporation bonds, etc. Upon procuring funds
through interest‐bearing liabilities, SSR aims to stagger maturities, extend borrowing periods
and lower and fix interest on borrowings in order to establish a stable asset managementfoundation in the medium and long term, and due consideration shall be given to fundprocurement agility and financial stability.
(2) Description of financial instruments and associated risks, and risk management system
The funds procured through loans, which shall be for the purpose of mainly acquisition ofassets, are exposed to liquidity risk and interest rate fluctuation risk, but the concerned risks
are managed by dispersing the procurement destinations and staggering the maturities, and byconsidering using surplus and procuring funds from capital markets through issuance ofinvestment units.
(3) Supplementary explanation to matters concerning fair value, etc. of financial instruments
The fair value of financial instruments include value based on market price, and in the absenceof market price, value reasonably calculated. In the calculation of such value, the adoption ofcertain conditions precedent may result in the difference between values, depending on
different conditions precedent.
2. Matters concerning fair value, etc. of financial instruments

The carrying amount and fair value as of December 31, 2019, and the amount of difference
between these, are as follows:
Financial instruments for which estimation of fair value is recognized to be difficult are notincluded. Please refer to “Note 2” below.
Carrying amount(Unit: thousand yen)
(1)

Cash and deposits(2)

Cash and deposits in
trust

(3)

Short-termloanspayableCurrent portion of longterm loans payable
Long-term
loans
payableAssets total

(4)
(5)

Liabilities total

Fair value(Unit: thousand yen)Amount of difference(Unit: thousand yen)

518,328

518,328－

4,356,576

4,356,576－

4,874,905

4,874,905－

4,900,000

4,900,000－

6,000,000

5,997,753(2,246)18,300,000

18,314,800

14,80029,200,000

29,212,554

12,554(Note 1) Method of calculation of the fair value of financial instruments(1) Cash and deposits; (2) Cash and deposits in trust
Because these are settled in a short period of time, the fair value is approximately the same as the book value and thus stated at that book value.
(3) Short-term loans payable
Because these are settled in a short period of time, and are based on floating interest rates, the fair value is approximately the same as the book value andthus stated at that book value.
(4) Current portion of long-term loans payable; (5) Long-term loans payable
These are calculated by the present value obtained by discounting the total principal and interest by the rate expected when similar funds are additionallyborrowed in correspondence with the remaining term.

－

51

－

(Note 2) Financial instruments for which estimation of fair value is recognized to be extremely difficult
Category
Tenant leasehold and security deposits intrust(Unit: thousand yen)

Carrying amount
3,082,276

With respect to tenant leasehold and security deposits in trust, since there is no market price and the lease agreement is likely to be cancelled or extended
and/or renewed even with a specified lease term, and it is difficult to calculate the actual deposit period, it is impossible to reasonably estimate cash flows.
Therefore, since estimation of cash flows is recognized to be extremely difficult, tenant leasehold and security deposits in trust are not subject to valutation
at fair value.
(Note 3) Amount of redemption of monetary claims scheduled to be due after the date of settlement of accounts(December 31, 2019)(Unit: thousand yen)

Not later than 1 year
Cash and deposits

518,328

Cash and deposits in trust

4,356,576

Total

4,874,905(Note 4) Amount of repayment of loans scheduled to be due after the date of settlement of accounts (December 31, 2019)
Not later than
1 yearShort-termloans payable
Long-termloans payable
Total

Later than 1
year and notlater than 2
years

Later than 2
years and notlater than 3
years(Unit: thousand yen)

Later than 3
years and notlater than 4
years

Later than 4
years and notlater than 5
years

Later than 5
years

4,900,000

－

－

－

－

－

6,000,000

6,000,000

7,200,000

5,100,000－－

10,900,000

6,000,000

7,200,000

5,100,000

－

－

－

52

－

[Notes on Investment and Rental Properties]

6th fiscal period (reference) (from January 1, 2019 to June 30, 2019)
SSR owns office buildings, retail facilities, residences, etc. mainly in the Tokyo metropolitan
area and regional major cities for the purpose of earning revenue from leasing. The carrying
amount, amount of increase (decrease) during the period and fair value of these investment
and rental properties are as follows:(Unit: thousand yen)
Carrying amount
Balance at beginning of period

56,199,434

Amount of increase (decrease) during period

1,521,246

Balance at end of period

57,720,680

Fair value at end of period

61,511,000(Note 1) Carrying amount is the amount of the cost of acquisition, less accumulated depreciation.
(Note 2) Of the amount of increase (decrease) during the period, the amount of increase is mainly attributable to acquisition of beneficiary interests intrust of 1 property (1,563,289 thousand yen) and capital expenditure (205,335 thousand yen), while the amount of decrease is mainly attributable todepreciation (247,378 thousand yen).
(Note 3) Fair value at the end of the period is the appraisal value determined by an external real estate appraiser.

The income (loss) concerning investment and rental properties for the fiscal period ended June30, 2019 (6th fiscal period) are as stated in “Notes to the Statement of Income” earlier in thisdocument.
7th fiscal period (from July 1, 2019 to December 31, 2019)
SSR owns office buildings, retail facilities, residences, etc. mainly in the Tokyo metropolitan
area and regional major cities for the purpose of earning revenue from leasing. The carrying
amount, amount of increase (decrease) during the period and fair value of these investment
and rental properties are as follows:(Unit: thousand yen)
Carrying amount
Balance at beginning of period

57,720,680(25,430)

Amount of increase (decrease) during period
Balance at end of period

57,695,250

Fair value at end of period

62,744,000(Note 1) Carrying amount is the amount of the cost of acquisition, less accumulated depreciation.
(Note 2) Of the amount of increase (decrease) during the period, the amount of increase is mainly attributable to capital expenditure (231,205 thousandyen), while the amount of decrease is mainly attributable to depreciation (256,635 thousand yen).
(Note 3) Fair value at the end of the period is the appraisal value determined by an external real estate appraiser.

The income (loss) concerning investment and rental properties for the fiscal period ended
December 31, 2019 (7th fiscal period) are as stated in “Notes to the Statement of Income”
earlier in this document.

－

53

－

[Notes on Restriction of Asset Management]

6th fiscal period (reference) (from January 1, 2019 to June 30, 2019)
Not applicable.
7th fiscal period (from July 1, 2019 to December 31, 2019)
Not applicable.
[Notes on Related-Party Transactions]

6th fiscal period (reference) (from January 1, 2019 to June 30, 2019)
Attribute

Name ofcompany, etc. or
personDescriptionof businessor
occupation

Percentage
of votingrights held(%)

Description oftransaction
RealleasingAssetmanagementcompany

Custodian

SakuraReal
EstateFunds
Management,
Inc.

Sumitomo
Mitsui
Trust
Bank, Limited

Investment
manageme
nt businessBankingandtrustbusiness

estateTenantleasehold
trust

0.0
(held)－

Interested
Party

NIPPONKANZAILtd.

Co.,Tokyo CapitalManagement
Co., Ltd.

Real estate
manageme
nt business－Temporary
paymentof
expenses

58－－

Interest
expenses

1,165

Trust fee

2,000

Establishm
entof,manageme
nt of andadvice ondomestic
andinternationalrealestate funds

Repair

2.6(held)

ofwork(Note 2)

Paymentofother expenses
related to rent
business
Paymentofoutsourcing
expenses
Repair－work(Note 2)

Paymentofother expenses
related to rent
business

－

54

6,117

in

Payment
outsourcing
expenses
Interested
Party

Transactionamount(thousandyen)－

28,92067,292

3,028

82,4391,192

0Account
item
Advances
received
Tenantleaseholdandsecurity
deposits intrust
Accounts
payableShort-termloanspayableOthers(current
liabilities)
Operatingaccounts
payableOperatingaccounts
payableOperatingaccounts
payableOperatingaccounts
payableOperatingaccounts
payableOperatingaccounts
payable－Balanceat end ofperiod(thousand
yen)
1,101

5,098

58

900,000

19

66

5,134

42,183679

15,347620－

Interested
Party

Interested
Party

Master LesseeMars Limited G
KJapan Property
Solutions Co.,
Ltd.

Acquisition, holding,management,
dispositionor the likeofrealestateorreal estate
trust

Property
management,
outsourcing
and/ormanagement
andoperation

Payment
outsourcing
expenses

－

of

Real
estateleasing
Paymentofoutsourcing
expenses－

Repairwork(Note 2)

Paymentofother expenses
related to rent
business

1,544

3,276
24,174102

0－Advances
received
Operatingaccounts
payableOperatingaccounts
payable

－

589
4,572

110

Operatingaccounts
payable(Note 1) Of the amounts above, the transaction amount does not include consumption tax, etc., while the balance at the end of the period includes
consumption tax, etc.
(Note 2) Repair work includes repair expenses and capital expenditure.
(Note 3) The transaction terms and conditions are determined based on agreement.

－

55

－

0

7th fiscal period (from July 1, 2019 to December 31, 2019)
Attribute

Name ofcompany, etc. or
personDescriptionof businessor
occupation

Percentage
of votingrights held(%)

Description oftransaction
RealleasingAssetmanagementcompany

Custodian

SakuraReal
EstateFunds
Management,
Inc.

Sumitomo
Mitsui
Trust
Bank, Limited

Investment
manageme
nt businessBankingandtrustbusiness

estateTenantleasehold
trust

0.0
(held)－－

Temporary
paymentof
expenses

38－－

Interest
expenses

1,292

Trust fee

2,000－

Payment
outsourcing
expenses

Interested
Party

Interested
Party

NIPPONKANZAILtd.

Co.,Tokyo CapitalManagement
Co., Ltd.

Master LesseeMars Limited G
KReal estate
manageme
nt business

Establishm
entof,manageme
nt of andadvice ondomestic
andinternationalrealestate funds
Acquisition, holding,management,
dispositionor the likeofrealestateorreal estate
trust

Repair

2.6(held)

6,117

in

－

Interested
Party

Transactionamount(thousandyen)of34,370work(Note 2)

Paymentofother expenses
related to rent
business
Paymentofoutsourcing
expenses

59,913work(Note 2)

Payment
outsourcing
expenses

－

－

56

－

Advances
received
Tenantleaseholdandsecurity
deposits intrust
Accounts
payableShort-termloanspayableOthers(current
liabilities)
Operatingaccounts
payableDeposits
paid
Operatingaccounts
payableOperatingaccounts
payableBalanceat end ofperiod(thousand
yen)
1,121

5,098

38

900,000

72

－
5,930
11,951

45,112

3,677

Operatingaccounts
payable537

81,924

Operatingaccounts
payable15,847

2,119

Operatingaccounts
payable

703

1,620

－

－

－
Repair

Account
itemofInterested
Party

Japan Property
Solutions Co.,Ltd.

Property
management,
outsourcing
and/ormanagement
andoperationRealestateleasing
Paymentofoutsourcing
expenses－

Repairwork(Note 2)

Paymentofother expenses
related to rent
business

546
23,902262

0Advances
received
Operatingaccounts
payableOperatingaccounts
payableOperatingaccounts
payable

－
4,451

181

－

(Note 1) Of the amounts above, the transaction amount does not include consumption tax, etc., while the balance at the end of the period includes
consumption tax, etc.
(Note 2) Repair work includes repair expenses and capital expenditure.
(Note 3) The transaction terms and conditions are determined based on agreement.

－

57

－

[Notes on Per Unit Information]
6th fiscal period (reference)
From: January 1, 2019
To: June 30, 2019()

7th fiscal period
From: July 1, 2019
To: December 31,
2019

(

)

Net assets per unit

90,512 yen

89,967 yen

Net income per unit

2,660 yen

2,115 yen

(Note 1) Net income per unit is calculated by dividing net income by the average number of investment units during the period. In addition, diluted net
income per unit is not stated, because there are no diluted investment units.
(Note 2) The basis for calculation of net income per unit is as follows:

6th fiscal period (reference)
From: January 1,
2019
To: June 30, 2019885,921(

Net income (thousand yen)Amount not attributable to common unitholders (thousandyen)
Net income attributable to common investment units(thousand yen)
Average number of investment units during period (units)

－

58

－

)

(

7th fiscal period
From: July 1, 2019
To: December 31,
2019704,522)－－885,921704,522333,001

333,001

[Notes on Significant Subsequent Events]

6th fiscal period (reference) (from January 1, 2019 to June 30, 2019)
Execution of a Merger Agreement by and between SSR and MIRAI Corporation
SSR and MIRAI Corporation have, at their respective board of directors meetings held on
August 5, 2019, resolved to undertake an absorption-type merger, with November 1, 2019 as
the effective date as described below, whereby MIRAI Corporation will be the surviving
corporation and SSR will be the dissolving corporation in the merger (the “Merger”), and haveexecuted a merger agreement (the “Merger Agreement”).
a. Purpose of the Merger
SSR and MIRAI Corporation have held good faith discussions through their respective asset
management companies (Sakura Real Estate Funds Management, Inc. and Mitsui Bussan &Idera Partners Co., Ltd.). As a result of such discussions, SSR and MIRAI Corporation havedetermined that various synergistic effects are expected from the Merger, and have executed amemorandum of understanding regarding merger on July 19, 2019 (the “MOU”) and haveexecuted the Merger Agreement on August 5, 2019.
b. Overview of the Merger(i) Schedule of the Merger
Date of announcementof record date for thegeneral meeting ofunitholders
Record date for thegeneral meeting ofunitholders
Boardof
directors
meeting to approvemerger agreement
Date of execution of themerger agreement
Date of general meetingof unitholders

MIRAI Corporation

SSR

July 10, 2019

June 29, 2019

July 25, 2019

June 30, 2019

August 5, 2019

September 10, 2019

August 30, 2019

October 30, 2019
(tentative)
November 1, 2019 (tentative)－

Date of delisting

Effective date of merger
Registration date of
Early November 2019 (tentative)
merger(ii) Form of the Merger
MIRAI Corporation will be the surviving corporation in the absorption-type merger and SSR
will be the dissolving corporation in the absorption-type merger, and SSR will be dissolved in
the Merger.
(iii) Allocation of Investment Units under the Merger
MIRAI Corporation
SSR(Surviving corporation(Dissolving corporationin the absorption-type
in the absorption-type

－

59

－

merger)merger)1

1.67

Allocation of investment
units under the Merger(Note 1)The number of new MIRAI Corporation investment units to be issued as a result of the Merger: 556,111
investment units (tentative)(Note 2) As a result of allocating 1.67 MIRAI Corporation investment units to SSR unitholders for each SSR investment
unit held, fractions of less than one investment unit will occur in the number of investment units that must be
delivered. Those fractional units of less than one unit will be sold through market transactions, and the proceedsfrom such sale will be delivered to the unitholders allocated fractional units in accordance with the fractions held
pursuant to the law.
(Note 3) In addition to the abovementioned investment units, MIRAI Corporation intends to pay the unitholders stated orrecorded in the final unitholders’ register on the day before the effective date of the Merger (excluding those
SSR unitholders who have demanded the purchase of their investment units pursuant to Article 149-3 of theInvestment Trust Act) (hereinafter referred to as the “Unitholders Subject to Allocation”) or registered pledgeeof its investment units, in lieu of cash distributions by SSR to unitholders for the business period of SSR from
July 1, 2019 to October 31, 2019, a merger consideration in the form of cash distribution based on SSR’s
distributable income for that same period of an amount (disregarding fractions of a yen) which is the quotientresulting from a division of the amount of SSR’s distributable income on the date before the effective date of
the Merger by the total number of issued SSR investment units on that date as reduced by the number ofinvestment units held by unitholders other than the Unitholders Subject to Allocation.

c. Outline of the Surviving Corporation in the Absorption-type Merger (MIRAI Corporation)
for the Immediately Preceding Period (fiscal period ended April 2019)
Operating
4,959 million yen
revenue
Net profit
2,271 million yen
Total Assets
152,493 million yen
Liabilities
81,639 million yen
Net Assets
70,854 million yen
7th fiscal period (from July 1, 2019 to December 31, 2019)(1) Execution of a memorandum of understanding regarding a merger with Star Asia
Investment Corporation
SSR established a special committee in order to ensure the fairness of decisions to be madewhen considering whether it was appropriate to carry out a merger with Star Asia Investment
Corporation and the fairness of the terms of such merger. After these issues were deliberated
by the special committee, SSR executed with Star Asia Investment Corporation amemorandum of understanding regarding the merger on January 30, 2020. SSR will discusswith Star Asia Investment Corporation for realizing the merger. (This event has beenannounced in the “Notice Concerning Execution of Memorandum of Understanding and
Measures to Ensure Fairness Regarding Merger with Star Asia Investment Corporation” dated
January 30, 2020.)(2) Execution of an asset management agreement with Star Asia Investment Management Co.,
Ltd. and changes in specified associated corporations related thereto

－

60

－

The asset management agreement between SSR and the Asset Management Company
terminates as of February 29, 2020. On February 18, 2020, SSR executed an asset
management agreement with Star Asia Investment Management Co., Ltd. which is managing
the assets of Star Asia Investment Corporation, and as of March 1, 2020, Star Asia
Investment Management Co., Ltd. becomes SSR’s asset management company. In
association with such change, the parent company of SSR’s asset management company andother specified associated corporations are also changed. (This event has been announced in
the “Notice Concerning Execution of Asset Management Agreement with Star Asia
Investment Management Co., Ltd. and Changes in Specified Associated Corporations
Related Thereto” dated February 18, 2020.)

－

61

－

Ⅵ. Statement of Cash Distributions(Unit: yen)Classification

6th fiscal period (reference)
January 1, 2019
( to June 30, 2019 )7th fiscal period
July 1, 2019 to( December 31, 2019 )Ⅰ Unappropriated retained earnings

885,939,413

704,679,619

Ⅱ Cash distribution

885,782,660

704,630,116(2,660)(2,116)

156,753

49,503[Cash distribution per unit]
Ⅲ Retained earnings carried forward
Method of calculation of amount ofcash distribution

Pursuant to the cash distribution
policy provided in Article 46,
Paragraph 1 of SSR’s Articles ofIncorporation, SSR shall make cash
distribution in an amount up to theamount of the earnings and in excessof the amount equivalent to 90% of
the amount of distributable earningsof SSR as defined in Article 67-15 of
the Act on Special Measures
Concerning Taxation. In accordancewith such policy, the decision wasmade to distribute cash distributionof earnings of 885,782,660 yen as the
maximum value of an integral
multiple of the total number of issued
investment units of 333,001 units, inan amount not in excess of earnings.
SSR does not make cash distribution
in excess of earnings as set forth in
Article 46, Paragraph 2 of SSR’s
Articles of Incorporation.

－

62

－

Pursuant to the cash distribution
policy provided in Article 46,
Paragraph 1 of SSR’s Articles ofIncorporation, SSR shall make cash
distribution in an amount up to theamount of the earnings and in excessof the amount equivalent to 90% of
the amount of distributable earningsof SSR as defined in Article 67-15 of
the Act on Special Measures
Concerning Taxation. In accordancewith such policy, the decision wasmade to distribute cash distributionof earnings of 704,630,116 yen as the
maximum value of an integral
multiple of the total number of issued
investment units of 333,001 units, inan amount not in excess of earnings.
SSR does not make cash distribution
in excess of earnings as set forth in
Article 46, Paragraph 2 of SSR’s
Articles of Incorporation.

Ⅶ. Statement of Cash Flows (Reference Information)(Unit: thousand yen)
6th fiscal period(reference)
January 1, 2019
( to June 30, 2019 )Cash flows from operating activities
Income before income taxes
Depreciation
Interest income
Interest expenses
Insurance income
Disaster loss
Expenses for General Meeting ofUnitholders and Merger, etc.
Decrease (increase) in operating
accounts receivable
Decrease (increase) in consumption
taxes refund receivable
Decrease (increase) in prepaid
expenses
Decrease (increase) in deposits paid
Decrease (increase) in long-term
prepaid expenses
Decrease (increase) in long-term
deposits paid
Decrease (increase) in other assets
Increase (decrease) in operating
accounts payable
Increase (decrease) in accounts
payableIncrease (decrease) in consumption
taxes refund payable
Increase (decrease) in advances
received
Increase (decrease) in other liabilities
SubtotalInterest income received
Interest expenses paid
Insurance income received
Disaster loss paid
Expenses for General Meeting ofUnitholders and Merger, etc. paid
Corporate taxes, etc. paid

－

63

－

7th fiscal period
July 1, 2019 to( December 31, )2019

886,915250,158(23)
119,656(48,804)
36,802705,498
259,415(23)
121,295－－－

166,961(2,559)(3,882)

44,418－5,992(8,619)(6,505)2,105

18,47827,983(8,122)(23,456)

35

(382)

37,650(32,430)

27,016(26,457)

5,217

38,95921,596

1,073(19,779)
1,368,142
23(119,365)
117,619(69,445)

21,422
1,249,462
23(122,744)－(7,817)－(147,694)(844)(1,001)Cash flows from operating activities
Cash flows from investing activities
Purchase of property, plant andequipment in trust
Repayments of tenant leasehold andsecurity deposits in trust
Proceeds from tenant leasehold andsecurity deposits in trust
Deposit of deposits in trust with limited
use
Proceeds from repayment of deposits
in trust with limited use
Cash flows from investing activities
Cash flows from financing activities
Proceeds from short-term loans
receivable
Repayments of short-term loans
payableProceeds from long-term loans
receivable
Repayments of long-term loans
payableDividends paid
Cash flows from financing activities
Increase (decrease) in cash and cash
equivalents
Cash and cash equivalents at beginningof period
Cash and cash equivalents at end of
period (*1)

1,296,129

970,229(1,709,034)(283,825)(141,389)(215,380)

187,454

157,560(187,454)(157,560)

141,389

215,380(1,709,034)(283,825)－

4,900,000－(900,000)

1,600,000－－(4,000,000)(885,097)
714,902(884,444)(884,444)

301,996(198,040)

1,688,672

1,990,669

1,990,669

1,792,628(Note) The statement of cash flows was prepared under the “Regulation on the Terminology, Forms, andPreparation Methods of Financial Statements” (Ministry of Finance Order No. 59 of 1963) and attached
as reference information. This statement of cash flows has not been audited by an accounting auditor, as
it is not subject to an audit by an accounting auditor based on the provisions of Article 130 of the Act on
Investment Trusts and Investment Corporations.

－

64

－

[Notes on Matters Concerning Significant Accounting Policies] (Reference Information)
Classification

Scope of funds in thestatement of cash flows

6th fiscal period (reference)
1, 2019( toJanuary
June 30, 2019 )The funds (cash and cash
equivalents)
inthestatement of cash flows
comprise cash on hand andcash in trust, deposits
withdrawable on demandat any time and deposits intrust, as well as short-term
investments
withamaturity of 3 months orless from the date ofacquisition that are readily
convertible to cash and thataresubjecttoaninsignificant
riskofchanges in value.

－

65

－

7th fiscal period
July 1, 2019 to( December 31, )2019
The funds (cash and cash
equivalents)
inthestatement of cash flows
comprise cash on hand andcash in trust, deposits
withdrawable on demandat any time and deposits intrust, as well as short-term
investments
withamaturity of 3 months orless from the date ofacquisition that are readily
convertible to cash and thataresubjecttoaninsignificant
riskofchanges in value.

[Notes to the Statement of Cash Flows] (Reference Information)
7th fiscal period
July 1, 2019 to( December 31, )2019*1 Reconciliation of cash and cash
equivalents at end of period to theamount of balance sheet items(Unit: thousand yen)
518,328Cash
598,134
and deposits
Cash in trust and
4,356,576
4,532,632
deposits in trust
Deposits in trust(3,082,276)(3,140,097
with limited use(Note)Cash and cash
1,792,628
1,990,669
equivalents(Note) Deposits in trust reserved toreturn tenant leasehold andsecurity deposits deposited fromtenants.

6th fiscal period (reference)
1, 2019( toJanuary
June 30, 2019 )*1 Reconciliation of cash and cash
equivalents at end of period to theamount of balance sheet items(Unit: thousand yen)
598,134
Cash and deposits
Cash in trust and
4,532,632
deposits in trust
Deposits in trust(3,140,097)
with limited use(Note)Cash and cash
1,990,669
equivalents(Note) Deposits in trust reserved toreturn tenant leasehold andsecurity deposits deposited fromtenants.

66

598,134

518,328

4,532,632

4,356,576△3,140,097(3,082,276

1,990,669

1,792,628

Map to the Location of the 4th General Meeting of Unitholders[omitted]

67