Star Asia Investment Corporation
http://starasia-reit.com/en/

Semi-Annual Reportfor the 11th Fiscal Period
from February 1, 2021 to July 31, 2021

Star Asia Investment Corporation (Securities CODE 3468)
Atago Greem Hills MORI Tower, 18th Floor 2-5-1 Atago, Minato - ku, Tokyo, Japan

Investment
Philosophy

FUND MANAGEMENT

Characteristics of Star Asia Investment Corporation (SAR)

1. A diversified REIT
Portfolio developed with diversified assets located mainly in the Tokyo Area (Note 1)

Basic Principles

FOR INVESTORSStar Asia Investment Corporation (SAR) makes investments

2. Steady growththrough a “unitholders’ interest-first” mindset in principle,

Pursuit of internal growth by the Asset Manager with abundant experience and know-how as well as
external growth based on asset management performed by the Star Asia Group

entrusting asset management to Star Asia Investment
Management Co., Ltd., which belongs to Star Asia, an

3. Initiatives focusing on unitholder value

independent real estate investment group that has
accumulated a track record in the Japanese real estate market.

Constant, “out-of-the-box” active management

SAR aims to maximize unitholders’ interests by conducting
flexible and agile portfolio management based on its unique

GROWTH

Investment policy

market analyses while focusing on income stability and growthof income, and implementing highly transparent managementthat discloses information necessary for unitholders in a timely
and appropriate manner.

TOKYO AREA

Contents
To Our Unitholders 

2Portfolio Overview 

6Financial Summary 

8Balance Sheet 

10Statement of Income and Retained Earnings 

12Statement of Changes in Unitholders' Equity 

13Statement of Cash Distributions 

14Statement of Cash Flows 15

Notes to Financial Statements 

16Supplementary Schedules 

36

Independent Auditor’s Report 

43

Prioritized,
focused investmentin the Tokyo Area (Note 1)
Investment ratio 70% or
higher in the Tokyo Area

Achieving income stability
and growth throughdiversification of asset
types

Investment primarily
in middle-size assets (Note 2)

STABILITY(Note 1)	“Tokyo area”: “Tokyo area” refers to Tokyo’s 23 wards and the cities of Kawasaki and Yokohama for office properties and retail facilities, and Tokyo and the three prefectures of Kanagawa, Saitama and Chiba for residential properties, logistics facilities, hotels andstudent residences.
(Note 2)	“Middle-size assets” are properties with acquisition prices of less than JPY10bn.

To Our Unitholders
Five-year trajectory since listing

Basis ofgrowthInitiatives

R&I

JCR

Negative
GoodwillA-(Stable)8.89 billion yen

To a new phase of growth

Aiming further improvement of ratings andearly inclusion in global indicesA(Stable)Diversified growth through active management(Three public offerings, seven asset
replacements, the Merger)

1st Public
Offering since
the Merger

Pursue growth in asset size based on
support by Star Asia Group(Ex: Capital recycling by Star Asia Group)

Acquisition of properties through the first Offering since the Merger

Star Asia Investment Corporation
Executive Director

Atsushi Kato
JPY
JPY

166.7 bn

179.6 bn

7 properties

Domestic offering

Asset size

management company Star Asia Investment Management Co., Ltd.

JPY

Form of Offering

Message
We appreciate your continued support and guidance of Star Asia Investment Corporation (SAR) and the asset

12.9 bn

No. of offered Investment Units(Based on
Acquisition
price)

115,000 units

five years
since listing
approx.

We believe that there are people facing unprecedented crisis and challenges caused by the novel coronavirus

Issue Price (Offer Price)

2.7x

57,330 yen
Payment Date

(COVID-19) pandemic among our shareholders, so we would like to express our sincere hope that such conditions

August 17, 2021

will be resolved, and that peaceful daily life will be regained as early as possible.

Total No. of Issued Investment
Units after the Offering

JPY 61.4 bn

SAR achieved steady growth by continuously executing measures in pursuing to maximize unitholders' interests

1,789,389 units

since its listing in April 2016. The asset size as of the end of 11th Fiscal Period is 166.7 billion yen and this wasrecently expanded to 179.6 billion yen (60 properties) with the acquisition of properties through a public offering
executed in August 2021. The executed acquisitions of properties are positioned as the initial step towards the18

asset size target of 300 billion yen in the medium-term management plan established in March 2021, and we consider focusing on external growth more than ever going forward to achieve the target.
During the 11th Fiscal Period, the timing to regain peaceful daily life from the COVID-19 infection continued to be
uncertain in Japan. On the other hand, SAR believes that there were signs that future economic conditions will turnupward, such as the Tokyo Olympic Games being successfully held and the increase in vaccination rate.
Under such circumstances, as a result of conducting management pursuing maximization of unitholders' interests
as well as seeking to maintain and enhance rent revenue from the portfolio, reduce construction costs withincreased order quantity of repair works, etc. and cost reductions with adjustments, etc., SAR posted operating

2(Note)

53

properties

properties

IPO(April 2016)

End of July 2021
(11th Fiscal Period)

60

properties

Acquisitions with
the Offering

After
Acquisition

Medium-Term
Management Plan

Credit ratings are the long-term issuer rating (JCR) and issuer rating (R&I) for SAR as of the date of this document, not credit ratings
for SAR’s investment units

We would like to report on the performance results as well as express our deep gratitude to our unitholders foryour support and understanding.

revenue of 5,560 million yen, ordinary income of 2,407 million yen, net income of 2,407 million yen and cash distri-We thank you for your continued support and encouragement and we hope that peaceful daily life will be regained

bution per unit of 1,462 yen.

from the COVID-19 pandemic as early as possible, as well as for your good health.

3

To Our Unitholders

Progress of Medium-Term Management Plan

Initiatives Related to ESG

SAR believes that it entered into a new growth phase as the foundations to accelerate growth are being prepared

SAR is enhancing its initiatives related to ESG, which has become a global policy issue. SAR newly established atwith (1) expanding its asset size to over 165 billion yen with the realization of merger (August 2020), (2) obtaining

Star Asia Investment Management, the Sustainability Promotion Division to strengthen initiatives related ESG andratings of A (stable) from Japan Credit Rating Agency, Ltd. (JCR), A- (stable) from Rating and Investment

organized the Sustainability Promotion Committee to clarify responsibilities related to the initiatives as well as toInformation, Inc. (R&I), (3) attaining a gain on negative goodwill (approx. 8.89 billion yen) associated with thediscuss and decide on various measures and policies.

merger, and that it is assumed to become a constituent of a global index (FTSE EPRA/NAREIT) at an early stage.

In March 2021, lead by the Sustainability Promotion Division, SAR set up goals regarding GHG (greenhouse gases),

In March 2021, about five years since listing, SAR formulated a medium-term management plan for next five years

energy consumption, water resource management and waste management with 2019 as the reference year as its

to achieve (1) an asset size of 300 billion yen and (2) a distribution per unit of 1,600 yen (approx. 2% growth per

initiatives related to E (environment). For these goals, SAR is continuing efforts toward achievement by asking for theannum) by 2026.

cooperation of property managers and tenants of SAR’s properties. Regarding the degree of goal achievement, theAs the first step to achieve this target, SAR acquired seven properties (total acquisition price: 12.96 billion yen) inannual figures and how its effects will be measured are planned to be disclosed on SAR’s website.

August 2021 as mentioned above. The newly acquired properties are comprised of two office buildings that have

In addition, SAR participated in the 2021 GRESB Real Estate Assessment as part of its ESG-related initiatives. In

internal growth potential, one urban retail facility with the anticipation that peaceful daily life will be regained fromits first participation, SAR was awarded “3 Stars” and “Green Star” ratings. The purpose of participation in the

the COVID-19 pandemic and increased value can be expected, and four residential properties that have high ratios

assessment is not about achieving a high assessment in itself, but SAR believes it is more important to fulfill its

of family type units where stable occupancy rates can be expected. Furthermore, regarding the distribution per

responsibilities as a J-REIT with a public nature by executing measures aiming to establish better environment (E),unit, SAR forecasts 1,476 yen for the fiscal period ending July 31, 2022, which is a 1.4% growth compared to thesociety (S) and governance (G) through enhancing the assessment.

forecast for the fiscal period ending January 31, 2022.
SAR will, in order to realize targets of the medium-term management plan, capitalize on the support from Star Asiagroup regarding expansion of asset size and cooperate with the sub-sponsor NIPPON KANZAI group with regards
to growth of distribution per unit as well as execute management that pursues the maximization of unitholders'interests.

Progression Status of Medium-Term Management Plan (Formulated in March 2021)
The asset size increased by 12.9 billion yen to total 179.6 billion yen due to the properties acquired in August 2021, andnormal distribution per unit (forecast) increased by 1.4% to 1,476 yen (forecast for the fiscal period ending July 2022).

Assets Size

Distribution Per Unit

166.7 billion

As of the end of July 2021

12.9 billion

Properties acquired August 2021

179.6 billion

As of the end of August 2021

Priority measures going forward:•T hink “outside the box” and consider all measures.
•S ponsor pipeline (The fund’s assets under management of JPY
141.3 billion, pursuit development deals)•F ind deals through the asset management company’s own
unique network.
•C onduct asset replacements as necessary.

Previous Normal Forecasted
Distribution Per Unit (12th Fiscal Period)

1,455 yen

+1.4%
Current Normal Forecasted
Distribution Per Unit (13th Fiscal Period)

ESG Policy
Our Company, as a member of the Star Asia Group, shares its Investment Philosophy and Guiding Principles. Furthermore, as theasset management company for Star Asia Investment Corporation, we engage in the real estate investment management business while giving consideration to the environment, society, and governance (hereinafter, collectively referred to as "ESG") in orderto enhance corporate value and exert comprehensive competitiveness while pursuing long-term sustainability and recognizing therole Star Asia Investment Corporation has been given in society in accordance with our basic philosophy of "Client First."
1

Action towards Climate Change

2Consideration towards Resource Circulation, Water Use, and Biodiversity

3

Pursuit of Health, Safety, and well-being

4

Securing and Developing Human Capital

5

Stakeholder Engagement

6

Establishing and Organizing a Governance System

New Organization of the Asset Management Company

1,476(Establishment of Sustainability Promotion Committee and Sustainability Promotion Division)yen

Priority measures going forward:• Cooperate with sub-sponsor (Nippon Kanzai Group)• Resolve rent gaps in the office portfolio.
• Reduce costs leveraging on the economy of scale• Rebuild the property management system to suit the portfoliomix.
• Optimize repair costs/ capital expenditures.

Shareholder's Meeting
Corporate Auditor
Bord of Directors Meeting
Compliance Committee

Sustainability Promotion Committee

Investment Committee
President and CEO
Compliance Officer

300

Asset Size (Target): JPY
billionIndicative number of properties 100

4

1,600

Distribution Per Unit (Target):yen or more
Growth objective of 2% per annum

Investment Management Division

Sustainability Promotion Division

Finance Management Division

5

Portfolio Overview (As of August 31, 2021)
RSC-10

RSC-11

RSC-13

RSC-14

Minami-Azabu
Shibuya Building

OFC-01

Honmachibashi
Tower

Nishi-Shinjuku
Matsuya Building

Shibuya MK Building

Asahi Building

Hakata-eki
East PlaceUrban Park Koenji

Urban Park Ichigao

Urban Park Gyotoku

Shiroi Logiman

Urban Park Sekime

Urban Park Imazato

Completed: Jun. 15, 1993

Completed: Feb. 8, 2010

Completed: May 28, 1987

Completed: Jul. 31, 1993

Completed: Nov. 25, 1994

Completed: Feb. 24, 1986

Completed: Oct. 13, 1987

Completed: Jul. 10, 1998

Completed: Mar. 24, 1995

Completed: May 9, 1995

Completed: Aug. 18, 1989

Completed: Dec. 20, 1991

OFC-10

OFC-11

OFC-04OFC-12

OFC-06

OFC-13

OFC-08

RSC-15

RSC-16

RSC-12

RSC-17

RSC-18

RSC-19

RSC-20Higashi-KobeCenter Building

Amusement Media
Gakuin Shinkan

Seishin BLDG.

NK BLDG.

Urban Park Yoyogi

Urban Park
Tokiwadai Koen

Urban Park Mitsuike
Koen

Urban Park Ryogoku

Urban Park
Mizonokuchi

Urban Park
MiyamaedairaCompleted: Jul. 13, 1992

Completed: Nov. 2, 1994

Completed: Jan. 6, 1992

Completed: Jan. 25, 1999

Completed: Mar. 31, 1989

Completed: Oct. 28, 1991

Completed: Sep. 4, 2017

Completed: Feb. 17, 1994

Completed: Mar. 24, 1992

Completed: Oct. 31, 1997

Completed: Aug. 23, 1988

Completed: Jun. 10, 2021

OFC-16

OFC-17

OFC-18

OFC-21

RSC-21

LGC-02

LGC-03

Tsukasamachi
BLDG.

Takadanobaba
AccessAzabu Amerex
BLDG.

Hiei-Kudan BLDG.

Shin-Yokohama
Nara BLDG.

The Portal Akihabara

Urban Park Tsurumi

Iwatsuki Logistics

Yokohama Logistics

Funabashi Logistics

Completed: Jan. 20, 1988

Completed: Jan. 14, 1994

Completed: Jun. 30, 1988

Completed: Sep. 17, 1991

Completed: Mar. 17, 1992

Completed: May 31, 2002

Completed: Feb. 17, 1994

Completed: Oct. 29, 2014

Completed: Oct. 1, 1994

RTL-03

LGC-05Tokorozawa
Logistics

Completed: Aug. 14, 2015

Completed: Apr. 30, 1999

OFC-23

RTL-05

LGC-07

LGC-09

LGC-10

HTL-01

HTL-02

Urban Center
HakataLa Park Kishiwada

Suroy Mall
Chikushino

Seiyu Minakuchi

BAGUS Ikebukuro
West

Funabashi Nishiura
Logistics II

Matsubushi
Logistics

Funabashi Hi-Tech
Park Factory I

Funabashi Hi-Tech
Park Factory II

R&B Hotel Umeda
East

Smile Hotel Namba

Completed: May 30, 1990

Completed: Aug. 27, 2020

Completed: Aug. 30, 1994

Completed: Jun. 22, 2007

Completed: May 31, 1999

Completed: Nov. 20, 1992

Completed:
Mar. 20, 1991 (Warehouse)
May 15, 1972 (Factory)
May 13, 1986 (Office)Completed: Mar. 31, 1997

Completed: May 19, 2003

Completed: Sep. 5, 2001

Completed: Oct. 20, 2000

Completed: Feb. 6, 2008

RSC-02

RSC-05

RSC-06

RSC-07

Urban Park Daikanyama

Urban Park Namba

Urban Park Gokokuji

Urban Park Kashiwa

Urban Park
Ryokuchi Koen

BEST WESTERNTokyo Nishikasai

BEST WESTERN
Yokohama

Hotel WBF Fukuoka
Tenjin Minami

GLANSITAKIHABARABest Western Tokyo
Nishikasai Grande

KOKO HOTEL
Osaka Namba

Completed: Jun. 9, 2013

Completed: Feb. 28, 1990

Completed: Aug. 28, 1997

Completed: Mar. 10, 1989

Completed: Mar. 19, 1991

Completed: Sep. 21, 1987

Completed: Feb. 20, 2017

Completed: Sep. 20, 2017

Completed: Feb. 7, 2017

Completed: Apr. 7, 2017

Completed:Nov. 15, 1982 (Existing)May 30, 2006 (Newly built)

RSC-08

HTL-03

LGC-08Completed:
Sep. 25, 1992 (Building 1)
Aug. 5, 1997 (Building 2)

LGC-04

Baraki Logistics

OFC-22Completed: Nov. 29, 1999

RTL-02

LGC-01OHA Building

RSC-01

RTL-01

OFC-20

OFC-15

RSC-09Amusement Media
Gakuin Honkan

OFC-19OFC-14

OFC-09

Nihonbashi Hamacho
Park Building

Urban Park
Azabujuban

6

OFC-03

HTL-04

HTL-05

HTL-06

HTL-07

HTL-08

7

Financial Summary
Historical Operating Trends(Note 1) The operating periods for Star Asia Investment Corporation (SAR) are the six-month periods from February 1 to July 31 and August 1
to January 31 of the following year.

7th Fiscal
PeriodFiscal Period

8th Fiscal
Period

9th Fiscal
Period10th Fiscal
Period11th Fiscal
Period(February 1, 2019 (August 1, 2019 to (February 1, 2020 (August 1, 2020 to (February 1, 2021
to July 31, 2019) January 31, 2020) to July 31, 2020) January 31, 2021) to July 31, 2021)(Note 2) Unless otherwise specifically noted, amounts are rounded down to the unit displayed and percentages are rounded to the first decimal place.

(million yen)

3,785

3,227

3,996

6,672

5,560

(Note 3) SAR conducted an investment unit split to carry out a 2-for-1 split of investment units with July 31, 2020 as the record date andAugust 1, 2020 as the effective date for the investment unit split. Net assets per unit and FFO per unit are calculated assuming thatthe investment unit split was conducted at the beginning of the 9th fiscal period.

Operating revenue from real estate leasing (million yen)

3,334

3,200

3,314

5,648

5,536

(Note 4) It is calculated based on the following formula.

(million yen)

1,559

1,506

1,864

3,295

2,721

Ratio of ordinary income
Ordinary income ÷ {(total assets at beginning of period + total assets at end of period) ÷ 2} × 100
to total assets(million yen)

1,214

1,189

1,173

2,179

2,189

Return on equity

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

Equity ratio at end of
periodNet assets at end of period ÷ total assets at end of period × 100

Operating revenue
Operating expenses
Operating expenses from real estateleasing
Operating income(million yen)

2,225

1,721

2,131

3,376

2,838

Ordinary income(million yen)

1,965

1,494

1,857

2,911

2,407

Net income(million yen)

1,964

1,493

1,857

11,801

2,407

Total assets(million yen)

110,240

109,649

113,035

179,789

179,170(%)(-0.8)(-0.5)(3.1)(59.1)(-0.3)(million yen)

54,73954,29954,61489,60089,179(%)(-0.2)(-0.8)(0.6)(64.1)(-0.5)

Interest-bearing debt

(million yen)

51,58051,58054,32082,44082,440Unitholders’ capital(million yen)

52,74552,74552,74552,74552,745

Total number of investment units issued andoutstanding(units)

540,824

540,824

540,824

1,674,389

1,674,389

Net assets per unit (Note 3)(yen)

101,215

100,401

50,49253,51253,260(million yen)

1,960

1,507

1,858

2,806

2,447

(yen)

3,625

2,788

3,436

1,676

1,462

Cash distribution of earnings per unit

(yen)

3,625

2,788

3,436

1,676

1,462

Cash distributions in excess of earnings
per unit

(yen)

–

–

–

–

–

Ratio of ordinary income to total assets (Note 4)

(%)

1.8

1.4

1.7

2.0

1.3

[Annualized]

(%)

(3.6)

(2.7)

(3.3)

(3.9)

(2.7)

(%)

3.6

2.7

3.4

16.4

2.7

(%)

(7.2)

(5.4)

(6.8)

(32.5)

(5.4)

(%)

49.7

49.5

48.3

49.8

49.8

(0.3)

(-0.1)(-1.2)(1.5)(-0.1)

(%)

99.8

100.9

100.1

23.8

101.7

(days)

181

184

182

184

181

Number of properties at end of period(properties)

34

34

36

53

53

Depreciation(million yen)

415

420

432

628

633

Capital expenditures(million yen)

189

131

188

331

363

(million yen)

2,535

2,431

2,573

4,097

3,980

(million yen)

1,957

1,914

1,640

2,564

3,040

(yen)

3,620

3,539

1,516

1,531

1,815

(%)

46.8

47.0

48.1

45.9

46.0

[Period-on-period variation]
Net assets[Period-on-period variation]

Total cash distribution
Cash distributions per unit

Return on equity(Note 4)

[Annualized]
Equity ratio at end of period(Note 4)

[Period-on-period variation]
Cash distribution payout ratio(Note 4)

Cash distribution payout
Cash distribution per unit (excluding cash distribution in excess of earnings) ÷ net income per unit × 100
ratio
Lease NOI(Net Operating Income)Operating revenue from real estate leasing - operating expenses from real estate leasing + depreciation

FFO(Funds from Operation)

Net income + Depreciation - loss on sales of real estate
The figures of 10th fiscal period is calculated after deducting 8,891 million yen of gain on negative goodwill
from net income.

FFO per unit

FFO ÷ total number of investment units issued and outstanding[Other reference Information]
Number of operating days

Lease NOI (Net Operating Income)FFO (Funds from Operation)
FFO per unit

(Note 4)(Note 4)(Note 3) (Note 4)

Ratio of interest-bearing debt to total assets
at end of period (LTV)89Financial Statements

Balance Sheet(Unit: thousand yen)

(Unit: thousand yen)

10th fiscal period

11th fiscal period

10th fiscal period

11th fiscal period(As of January 31, 2021)(As of July 31, 2021)(As of January 31, 2021)(As of July 31, 2021)

621,461544,542

AssetsLiabilities

Current assets

Current liabilities

Cash and deposits

3,565,028

3,169,688

Operating accounts payable

Cash and deposits in trust

7,515,934

7,536,399

Short-term borrowings

2,150,000

2,150,000

Operating accounts receivable

82,34896,187

Current portion of long-term borrowings

22,660,000

23,450,000

Prepaid expenses

188,497

177,085

Accounts payable – others

541,206

492,764–

83,497

Accrued expenses

43,534

41,562

9,208

7,506

Income taxes payable

605

605

11,361,017

11,070,364

Accrued consumption taxes

252,480

71,861

Advances received

835,113913,623

Others30,58823,834

27,134,990

27,688,794

57,630,000

56,840,000

6,142

6,142

5,197,022

5,217,745

221,075

238,654

63,054,239

62,302,542

90,189,230

89,991,336

52,745,966

52,745,966

25,132,218

25,132,218

Reserve for temporary difference adjustment–*2 8,891,236

Total voluntary reserve–

8,891,236

Unappropriated retained earnings (undisposed loss)

11,942,013

2,651,806

Total surplus

37,074,231

36,675,261

89,820,197

89,421,227(219,679)(241,749)

Consumption taxes receivable
OthersTotal current assets
Non-current assets
Property, plant and equipment
Tools, furniture and fixtures

114

114

Accumulated depreciation

(14)

(42)

Tools, furniture and fixtures, net

100

71

49,326,896

49,655,872

Leasehold and guarantee deposits received

Accumulated depreciation(3,460,097)(4,084,344)

Leasehold and guarantee deposits received in trust

Buildings in trust, net

45,866,798

45,571,527

Others

20,635

20,635

Accumulated depreciation(3,671)(4,393)Structures in trust, net

16,964

16,242

Machinery and equipment in trust

73,226

97,214

Accumulated depreciation(14,997)(18,872)

Unitholders’ capital

Machinery and equipment in trust, net

58,22878,341

SurplusTools, furniture and fixtures in trust

47,02356,654

Unitholders’ capital surplus

Accumulated depreciation(16,360)(20,334)

Voluntary reserve

Tools, furniture and fixtures in trust, net

30,66336,319117,051,893

117,051,893–

550

163,024,648

162,754,946

Buildings in trust

Structures in trust

Land in trust
Construction in progress in trust
Total property, plant and equipment

Total current liabilities
Non-current liabilities
Long-term borrowings

Total non-current liabilities
Total liabilities
Net assets
Unitholders’ equity

Total unitholders’ equity

Intangible assets
Leasehold rights in trust

4,082,300

4,082,300

Valuation and translation adjustments

Total intangible assets

4,082,300

4,082,300

Deferred gains or losses on hedges
Total valuation and translation adjustments

Investments and other assets
Investment securities

756,206

692,234

Long-term loans receivable

300,000

300,000

Long-term prepaid expenses

245,057

260,510

Leasehold and guarantee deposits

20,51910,459Total investments and other assets

1,321,782

1,263,203

168,428,731

168,100,450

179,789,748

179,170,815

Total non-current assets
Total assets

10		Total net assets
Total liabilities and net assets(219,679)(241,749)* 89,600,518* 89,179,478

179,789,748

179,170,815

1

1

11

Financial Statements

Financial Statements

Statement of Income and Retained Earnings

Statement of Changes in Unitholders’ Equity(Unit: thousand yen)

10th fiscal period (from August 1, 2020 to January 31, 2021)(Unit: thousand yen)

11th fiscal period
10th fiscal period(From August 1, 2020 (From February 1, 2021
to July 31, 2021)
to January 31, 2021)

SurplusOperating revenue
Rental revenue* 5,259,516* 5,184,498

Other lease business revenue* 389,105*1 351,786

Gain on sales of real estate*2 993,574–

29,93324,495

6,672,130

5,560,780*1 2,179,316*1 2,189,167

Loss on sales of real estate*2 19,285–

Asset management fee

405,303

380,024

Asset custody and administrative service fees

47,427

38,699Directors’ compensations

2,400

2,400

Merger expenses

448,870–

Other operating expenses

192,798

111,699

Total operating expenses

3,295,402

2,721,990

3,376,728

2,838,789

51

63

4,111

3,390

Interest on refund

1

1

Others

0

–

4,164

3,454

Other revenue
Total operating revenue

1

1

Operating income
Non-operating income
Interest income
Reversal of unpaid distribution

Total non-operating income

Unitholders’capital1

Operating expenses
Expenses related to lease business

Balance at beginning of the period

Increase by merger

1,998,562

54,744,528(129,943)(129,943)

54,614,584

25,132,218

25,132,218

25,132,218

1,998,562

25,132,218(1,858,271)

Net income

11,801,722

11,801,722

11,801,722

11,801,722

Net changes of
items other thanunitholders’ equity(89,735)(89,735)(89,735)

Total changes of
items during theperiod–25,132,218

9,943,450

35,075,669

35,075,669(89,735)(89,735)

34,985,933

Balance at end of
the period*1 52,745,966

25,132,218

11,942,013

37,074,231

89,820,197(219,679)(219,679)

89,600,518

11th fiscal period (from February 1, 2021 to July 31, 2021)(Unit: thousand yen)

Valuation and translation adjustments

Unitholders’ equity
Surplus
Voluntary reserve
Unitholders’capital170,497

132,679

Total non-operating expenses

469,801

434,333

2,911,090

2,407,910

Gain on negative goodwill

8,891,236–

Total extraordinary income

8,891,236–

Income before income taxes

11,802,327

2,407,910

Income taxes - current

605

605

Total income taxes

605

605

Provision ofreserve fortemporarydifference
adjustment

11,801,722

2,407,305

Net income

140,290

244,500

11,942,013

2,651,806

Balance at
beginning of
the period

CapitalsurplusReserve fortemporarydifference
adjustment

Total
voluntary
reserve

52,745,966 25,132,218––

Unappropriatedretained earnings (undisposed loss)

Total
unitholders’equityTotal
surplus11,942,013 37,074,231 89,820,197

Total
Deferred valuation
gains or and translosses onlationhedgesadjustments(219,679)(219,679)

Total net
assets89,600,518

Changes of
items during
the period
Dividends fromsurplus8,891,236

8,891,236(2,806,275)(2,806,275)(2,806,275)(2,806,275)(8,891,236)

–

–

–

2,407,305

2,407,305

2,407,305

2,407,305

Net changes of
items otherthan unitholders’ equity
Total changesof items during
the period

12–(1,858,271)

Borrowing related expenses

Unappropriated retained earnings (undisposed loss)

Total net
assets(1,858,271)

301,653

Retained earnings brought forward

Total valuationand translation
adjustments(1,858,271)

299,303

Net income

Deferred gains
or losses onhedgesDividends fromsurplusInterest expenses

Extraordinary income

Capitalsurplus52,745,966

Total unitholders’ equity

Unappropriatedretained earnTotal surplus
ings (undisposed loss)

Changes of items
during the period

Non-operating expenses

Ordinary income

Valuation and translation
adjustments

Unitholders’ equity–(398,970)(22,069)(22,069)(22,069)–

8,891,236

8,891,236(9,290,206)(398,970)(22,069)(22,069)(421,039)

Balance at end 1* 52,745,966 25,132,218of the period

8,891,236

8,891,236

2,651,806 36,675,261 89,421,227(241,749)(241,749)

89,179,478

13Financial Statements

Financial Statements

Statement of Cash Distributions

Statement of Cash Flows(Unit: yen)I.

Unappropriated retained earnings

10th fiscal period

11th fiscal period(From August 1, 2020 to January 31, 2021)(From February 1, 2021 to July 31, 2021)

11,942,013,083

2,651,806,438

III. Cash distribution[Cash distribution per unit]
Cash distribution of earnings[Cash distribution of earnings per unit]

11th fiscal period
10th fiscal period(From August 1, 2020 (From February 1, 2021
to July 31, 2021)
to January 31, 2021)
Cash flows from operating activities

II. Reversal of voluntary reserve
Reversal of reserve for temporary
difference adjustment *1(Unit: thousand yen)

Income before income taxes–

88,912,365

2,806,275,964

2,447,956,718(1,676)(1,462)2,806,275,964

2,447,956,718(1,676)(1,462)

Depreciation

2,407,910

628,353

633,013(8,891,236)

–

(51)

(63)

Interest expenses

299,303

301,653

Decrease (increase) in operating accounts receivable

21,847(13,838)–(83,497)

Gain on negative goodwill
Interest income

Increase in consumption taxes receivable

IV. Total voluntary reserve

11,802,327

Provision of reserve for temporary
difference adjustment *1

Increase (decrease) in accrued consumption taxes

149,670(180,619)

8,891,236,430–

Decrease (increase) in prepaid expenses(12,177)

11,412

V. Retained earnings carried forward

244,500,689

292,762,085

Decrease in long-term prepaid expenses(76,386)(15,453)

Increase (decrease) in operating accounts payable

57,449(123,131)

Decrease in accounts payable - other(60,409)(35,359)

Increase (decrease) in advances received(237,771)

78,509Decrease from sales of property, plant and equipment in trust

7,501,405–

Method of calculation of amount of cash
distributions

Pursuant to the cash distribution policy
provided in Article 35, Paragraph 1 of
SAR’s Articles of Incorporation, SAR
shall distribute in excess of the amountequivalent to 90% of the amount of
distributable earnings of SAR as definedin Article 67-15, Paragraph 1 of the Act
on Special Measures Concerning
Taxation. In accordance with suchpolicy, concerning cash distribution of
earnings (not including cash distribution
in excess of earnings), the decision wasmade to accumulate 8,891,236,430
yen, which is equivalent to the amountof gain on negative goodwill, of theunappropriated retained earnings as
reserve for temporary difference adjustment, and distribute 2,806,275,964 yenof the remaining amount.

Pursuant to the cash distribution policy
provided in Article 35, Paragraph 1 of
SAR’s Articles of Incorporation, SAR
shall distribute in excess of the amountequivalent to 90% of the amount of
distributable earnings of SAR as definedin Article 67-15, Paragraph 1 of the Act
on Special Measures Concerning
Taxation. In accordance with suchpolicy, concerning cash distribution of
earnings (not including cash distribution
in excess of earnings), the decision wasmade to distribute 2,447,956,718 yen,which is equivalent to the sum of theamount remaining after reserving
48,261,396 yen from net income andthe amount of reversal of reserve fortemporary difference adjustment of
88,912,365 yen.

Others, net
SubtotalInterest income received
Interest expenses paid
Income taxes paid
Net cash provided by operating activities

1,457(3,762)

11,183,783

2,976,775

51

63(298,957)(303,625)(1,562)(443)

10,883,314

2,672,769

Cash flows from investing activities
Purchase of property, plant and equipment

(114)

–

(7,305,472)(330,859)

Repayments of leasehold and guarantee deposits received

(453)

(72)

Proceeds from leasehold and guarantee deposits received–

72

Repayments of leasehold and guarantee deposits received in trust(433,786)(124,421)

Proceeds from leasehold and guarantee deposits received in trust

199,839

145,144263

10,060Purchase of property, plant and equipment in trust

Proceeds from collection of leasehold and guarantee deposits
Proceeds from redemption of investment securities

96,64657,887(7,443,077)(242,189)

Proceeds from short-term borrowings

2,150,000

1,660,000

Repayments of short-term borrowings(4,900,000)(1,660,000)

Proceeds from long-term borrowings

12,750,000

8,960,000

Repayments of long-term borrowings(11,080,000)(8,960,000)

Dividends paid

(2,688,002)(2,805,455)

Net cash used in financing activities(3,768,002)(2,805,455)

Net increase (decrease) in cash and cash equivalents(327,765)(374,875)

Cash and cash equivalents at beginning of period

6,219,277

11,080,963

Net cash used in investing activities
Cash flows from financing activities

Net increase in cash and cash equivalents due to merger
Cash and cash equivalents at end of period
14

5,189,451–* 11,080,963* 10,706,087

1

1

15

Financial Statements

Notes to Financial Statements
Organization
Star Asia Investment Corporation (SAR) was established as a diversified real estate investment trust on
December 1, 2015 under the Act on Investment Trusts and Investment Corporations (Act No. 198 of 1951, as
amended) and was listed on the Tokyo Stock Exchange Real Estate Investment Trust Section on April 20, 2016(securities code: 3468). SAR has assigned the asset management of its portfolio to Star Asia Investment
Management Co., Ltd., a financial instruments business operator under the Financial Instruments andAs for silent partnership equity interests, the method of incorporating the amount equivalent to equity
interests corresponding to net amount of gain or loss from silent partnership is adopted.

2. Method of depreciation of non-current assets
Property, plant and equipment (including trust assets)
The straight-line method is adopted. The useful life of primary property, plant and equipment is as follows:

Exchange Act (Act No. 25 of 1948, as amended), through which SAR executed active management pursuing to

Buildings

2-69 years

maximize interest of unitholders and thrived to expand its asset size and to increase cash distributions per unit.

Structures

7-30 years

Machinery and equipment

7-17 years

Tools, furniture and fixtures

2-15 years

The asset size as of the end of 11th fiscal period is 166,710 million yen (on the basis of acquisition price. The
properties succeeded from Sakura Sogo REIT Investment Corporation (SSR) with the absorption-type merger(the Merger) in August 2020 are on the basis of receipt price. The same shall apply hereinafter.), and has grownby approximately 2.7 times from 61,493 million yen, the asset size as of the listing. Furthermore, SAR executed
acquisition of properties through public offering (seven properties, total acquisition price of 12,965 million yen) in
August 2021 subsequent to the end of 11th fiscal period, and the asset size as of September 30, 2021 is
179,675 million yen.

Basis of Presentation

3. Revenue and expense recognition
Accounting for fixed property tax, etc.
Accounting for fixed property tax, city planning tax, depreciable asset tax, etc. (“fixed property tax, etc.”) on
real estate or beneficiary interest in trust for real estate held is that the amount corresponding to the fiscal
period out of the tax amount assessed and determined is expensed as expenses related to lease business.
The amount equivalent to fixed property tax, etc. in the initial fiscal year borne by SAR upon acquisition ofSAR prepared the financial statements attached hereto in accordance with the accounting principles generally

real estate or beneficiary interest in trust for real estate is not recognized as expenses but included in theaccepted in Japan (J-GAAP), but J-GAAP differs from international accounting standards in certain aspects ofcost of acquisition of the related real estate, etc. In the fiscal period under review, there was no amountaccounting modifications and disclosure standards.

equivalent to fixed property tax, etc. included in the cost of acquisition of real estate, etc.

The financial statements attached hereto are a translation of audited financial statements prepared from SAR’s
accounting records for the purpose of domestic disclosure.
Upon preparation of the financial statements attached hereto, treatments including additions to notes related to
the financial statements issued in Japan are made in order to present in a format more familiar to the readers
outside Japan.

4. Hedge accounting approach(1) Hedge accounting approach
Deferral hedge accounting is adopted.
(2) Hedging instruments and hedged items

SAR’s fiscal periods are for six months ending at the end of every January and July.

Hedging instruments: Interest rate swap transaction

As SAR has no subsidiaries, consolidated financial statements are not prepared.

Hedged items: Interest on borrowings(3) Hedging policy

Notes on the Going Concern Assumption
Not applicable.

SAR conducts derivative transactions for the purpose of hedging the risks provided in its Articles ofIncorporation pursuant to basic rules on risk management.
(4) Method of assessing the effectiveness of hedging

Notes on Matters Relating to Significant Accounting Policies
1. Evaluation standards and methods of valuation of securities
Other securitiesThose with fair value
Fair value method or market value method (Variances are directly included in net assets.)Those with no fair value

The effectiveness of hedging is assessed by comparing the cumulative change in cash flows of the hedging
instruments with the cumulative change in cash flows of the hedged items and verifying the ratio of theamount of change in the two.

5. Cash and cash equivalents
Cash and cash equivalents in the statement of cash flows comprise cash on hand and cash in trust, demand
deposits and deposits in trust, and short-term investments with a maturity of three months or less from the dateof acquisition that are readily convertible to cash and that are subject to an insignificant risk of changes in value.

Cost method through moving-average method

16

17

Financial Statements
Notes to Financial Statements

6. Other matters serving as the basis for preparation of financial statements(1) Accounting for beneficiary interest in trust for real estate, etc.
Concerning beneficiary interest in trust for real estate, etc. held, all accounts of assets and liabilities withintrust assets as well as all accounts of revenue and expenses from the trust assets are recognized in the(2) Scheduled date of application
SAR will apply the accounting standard for revenue recognition, etc. from the beginning of the fiscal period
ending January 31, 2022.
(3) Impact of application of the accounting standard and implementation guidance

relevant account item of the balance sheet and the statement of income and retained earnings.

The amount of impact on the financial statements by the application of the Accounting Standard for

The following material items of the trust assets recognized in the relevant account item are separately listed

Revenue Recognition, etc. is being assessed at present.

on the balance sheet.
1) Cash and deposits in trust2) Buildings in trust; Structures in trust; Machinery and equipment in trust; Tools, furniture and fixtures intrust; Land in trust; Construction in progress in trust

2. Accounting Standard for Fair Value Measurement, etc.
- Accounting Standard for Fair Value Measurement (Corporate Accounting Standards No. 30 issued by
ASBJ on July 4, 2019)- Accounting Standard for Financial Instruments (Corporate Accounting Standards No. 10 issued by ASBJ

3) Leasehold rights in trust

on July 4, 2019)4) Leasehold and guarantee deposits received in trust- Implementation Guidance on Accounting Standard for Fair Value Measurement (ASBJ Guidance No. 31(2) Accounting for consumption taxes

issued by ASBJ on June 17, 2021)

Taxes are excluded from the transaction amounts in accounting for consumption tax and local consumption- Implementation Guidance on Disclosure about Fair Value of Financial Instruments (ASBJ Guidance No. 19

tax.

issued by ASBJ on March 31, 2020)

Non-deductible consumption tax on acquisition of assets is included in the acquisition cost of each asset.

(1) Overview
IASB and FASB have established detailed guidance for fair value measurement (IFRS 13 “Fair Value

Notes on Unapplied Accounting Standards

Measurement” under the International Financial Reporting Standards (IFRS) and Topic 820 “Fair Value

1. Accounting Standard for Revenue Recognition, etc.

almost the same content. In light of this, ASBJ worked to secure consistency of the Japanese accounting

Measurement” of Accounting Standards Codification under the U.S. accounting standards) containing- Accounting Standard for Revenue Recognition (ASBJ Statement No. 29 issued by Accounting Standards

standards with the international accounting standards, mainly in terms of the guidance on and disclosure of

Board of Japan (ASBJ) on March 31, 2021)

the fair value of financial instruments, and published the Accounting Standard for Fair Value Measurement,- Implementation Guidance on Accounting Standard for Revenue Recognition (ASBJ Guidance No. 30

etc.

issued by ASBJ on March 26, 2021)

The basic principles of ASBJ for the development of accounting standard for fair value measurement was to- Implementation Guidance on Disclosure about Fair Value of Financial Instruments (ASBJ Guidance No. 19

adopt all provisions of IFRS 13 as a rule by using a unified calculation method, from the point of view ofissued by ASBJ on March 31, 2020)(1) Overview
The International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB)
jointly developed a comprehensive accounting standard for revenue recognition, and published "Revenue
from Contracts with Customers" (IFRS 15 by IASB and Topic 606 by FASB) in May 2014. IFRS 15 isapplicable for accounting periods beginning on or after January 1, 2018 and Topic 606 is applicable foraccounting periods beginning after December 15, 2017. In accordance with this, ASBJ has developed acomprehensive accounting standard for revenue recognition and published it together with an

improving the comparability between financial statements of the Japanese and foreign companies.
Moreover, in consideration of the practices conducted in Japan to date, ASBJ determined to establish othertreatments for individual items, to the extent that they do not greatly harm the comparability between thefinancial statements.
(2) Scheduled date of application
SAR will apply the accounting standard for fair value measurement, etc. from the beginning of the fiscal
period ending January 31, 2022.
(3) Impact of application of the accounting standard and implementation guidance

implementation guidance.

The amount of impact on the financial statements by the application of the Accounting Standard for Fair

For the development of accounting standard for revenue recognition, the basic principles of ASBJ were to

Value Measurement, etc. is being assessed at present.

make IFRS 15 a starting point. By doing so, ASBJ established the accounting standard from the point ofview of the comparability, which is a benefit for securing consistency with IFRS 15, between financial
statements based on IFRS or those based on other accounting standards. Alternative accounting
treatments are also to be added to the extent that they do not harm the comparability in case where there
are items to be considered in the actual practice conducted in Japan to date.
18

19

Financial Statements
Notes to Financial Statements

Notes on Change in Presentation

Notes to the Statement of Income and Retained Earnings“Proceeds from collection of leasehold and guarantee deposits” which was originally included in “Other, net” in“Cash flows from investing activities” has been listed separately from the current fiscal period due to the*1 Breakdown of operating income (loss) from real estate leasing(Unit: thousand yen)increase in quantitative significance. In order to reflect such change in presentation method, SAR reclassified

10th fiscal period

11th fiscal period(From August 1, 2020
to January 1, 2021)(From February 1, 2021
to July 31, 2021)

4,476,854

4,413,190

Common area maintenance revenue

555,635

540,735

Parking revenue

190,492

195,685

Facility use revenue

31,70330,677

Other rental revenue

4,830

4,209

5,259,516

5,184,498

the financial statements for the comparative fiscal period. As a result, the 263 thousand yen presented in“Other, net” in “Cash flows from investing activities” in the statement of cash flows for the comparative fiscal
period has been reclassified as 263 thousand yen of “Proceeds from collection of leasehold and guarantee

A. Operating revenue from real estate leasing
Rental revenue

deposits.”

Rent revenue

Notes to the Balance Sheet*1	Minimum net assets as provided in Article 67, Paragraph 4 of the Act on Investment Trusts
and Investment Corporations(Unit: thousand yen)

10th fiscal period (As of January 31, 2021)

11th fiscal period (As of July 31, 2021)

Other lease business revenue

50,00050,000Utilities reimbursement

315,752

258,593

Other revenue

73,352

93,192

389,105

351,786

5,648,622

5,536,284

Management fee

412,710

419,406

Utilities expenses

301,349

260,562

Property taxes

425,403421,132

Repair expenses

181,948

220,204

Trust fee

22,614

22,864

Insurance premium

9,110

12,192

Depreciation

628,353

633,013

Other expenses

197,825

199,789

2,179,316

2,189,167

3,469,305

3,347,117*2 Matters on provision and reversal of reserve for temporary difference adjustment

B. Operating expenses from real estate leasing

Not applicable.

Expenses related to lease business11th fiscal period (As of July 31, 2021)(Unit: thousand yen)

Balance at
Initial amount beginning of
the period
Gain onnegativegoodwill (Note)20

8,891,236

Total
Total operating revenue from real estate leasing

10th fiscal period (As of January 31, 2021)(Note)

Total–

Provisionamountduring theperiod8,891,236

Reversalamountduring theperiod–Balance at
end of theperiodReasons for provisionand reversal

8,891,236

Provision of gain on negative goodwill throughmerger

It is the balance of amount subdivided into the gains on negative goodwill which were allocated in the past fiscal periods. SAR willreverse an amount equivalent to more than 1% of the initial amount (equivalent to the averaged amount for 50 years) in each fiscal
period, starting with the fiscal period ending January 31, 2022.

Total operating expenses from real estate leasing
C. Operating income (loss) from real estate leasing [A—B]21

Financial Statements
Notes to Financial Statements

Notes to the Statement of Cash Distributions*2 Breakdown of gain (loss) on sales of real estate
10th fiscal period (from August 1, 2020 to January 31, 2021)(Unit: thousand yen)

Suroy Mall Nagamine
Real estate sale income

3,500,000

Real estate sale cost

3,443,833

Other real estate sale expenses

37,905Gain on sales of real estate

18,261

10th fiscal period

11th fiscal period(From August 1, 2020 to January 1, 2021)(From February 1, 2021 to July 31, 2021)*1 Reserve for temporary difference adjustment
SAR accumulated 8,891,236 thousand yen as reserve fortemporary difference adjustment in the 10th fiscal period.
From the 11th fiscal period, SAR plans to reverse the sameamount or more in each fiscal period over a period of up to
50 years.

*1 Reserve for temporary difference adjustment
SAR accumulated 8,891,236 thousand yen as reserve fortemporary difference adjustment in the 10th fiscal period.
From the 11th fiscal period, SAR plans to reverse the sameamount or more in each fiscal period over a period of up to
50 years. In the fiscal period under review, SAR decided toreverse 88,912 thousand yen.

(Unit: thousand yen)

Funabashi Nishiura Logistics I
Real estate sale income

3,030,000

Real estate sale cost

2,957,546

Other real estate sale expenses

91,739Loss on sales of real estate

19,285

Notes to the Statement of Cash Flows*1	Reconciliation of cash and cash equivalents at end of period to the amount of balance
sheet items(Unit: thousand yen)

10th fiscal period

11th fiscal period(From August 1, 2020
to January 1, 2021)(From February 1, 2021
to July 31, 2021)

Cash and deposits

3,565,028

3,169,688

Cash and deposits in trust

7,515,934

7,536,399

Cash and cash equivalents

11,080,963

10,706,087(Unit: thousand yen)Alphabet Seven(quasi co­ownership interest of 60%)
Real estate sale income

2,100,000

Real estate sale cost

1,100,025

Other real estate sale expenses

24,661Gain on sales of real estate

975,313

2 Description of significant non-cash transactions
10th fiscal period (from August 1, 2020 to January 31, 2021)

11th fiscal period (from February 1, 2021 to July 31, 2021)

The main breakdown of assets and liabilities succeeded from SSR due to the absorption-type merger with

Not applicable.

SAR as the surviving corporation and SSR as the dissolving corporation is as follows. Unitholders’ capitalsurplus increased by 25,132,218 thousand yen due to the Merger.

Notes to the Statement of Changes in Unitholders’ Equity(Unit: thousand yen)*1	Total number of investment units authorized and total number of investment units issued
and outstanding

Current assets

5,301,130

Non-current assets

62,647,946

Total assets

67,949,077

Current liabilities

12,624,609

10th fiscal period

11th fiscal period(From August 1, 2020
to January 1, 2021)(From February 1, 2021
to July 31, 2021)

Total number of investment units authorized

10,000,000 units

10,000,000 units

Non-current liabilities

21,301,013

Total number of investment units issued and outstanding

1,674,389 units

1,674,389 units

Total liabilities

33,925,622

11th fiscal period (from February 1, 2021 to July 31, 2021)
Not applicable.

22

23

Financial Statements
Notes to Financial Statements

Notes on Lease Transactions

10th fiscal period (As of January 31, 2021)(Unit: thousand yen)

Operating leases (as lessor)

Carrying amount

Future minimum lease payments(Unit: thousand yen)

10th fiscal period

11th fiscal period(As of January 31, 2021)(As of July 31, 2021)

Not later than 1 year

5,322,499

5,328,242

Later than 1 year

8,998,739

8,126,573

Total

14,321,239

13,454,815

Notes on Financial Instruments

Fair value

Difference(1) Cash and deposits

3,565,028

3,565,028–(2) Cash and deposits in trust

7,515,934

7,515,934–(3) Investment securities

673,480

673,480–(4) Long-term loans receivable

300,000

300,000–

12,054,443

12,054,443–(5) Short-term borrowings

2,150,000

2,150,000–(6) Current portion of long-term borrowings

22,660,000

22,660,000–(7) Long-term borrowings

57,630,000

57,658,969

28,96982,440,000

82,468,969

28,969(219,679)(219,679)–

Assets total

Liabilities total(8) Derivative transactions *1

1. Matters relating to status of financial instruments(1) Policy for handling financial instruments

11th fiscal period (As of July 31, 2021)(Unit: thousand yen)

SAR shall procure funds to allocate to acquisition of real estate related assets, repayment of interest-bearing
liabilities, etc. through mainly issuance of investment units, borrowing from financial institutions, issuance ofinvestment corporation bonds, etc. Upon procuring funds through interest-bearing liabilities, dueconsideration shall be given to fund procurement agility and financial stability.
(2) Description of financial instruments and associated risks, and risk management system

Carrying amount

Fair value

Difference(1) Cash and deposits

3,169,688

3,169,688–(2) Cash and deposits in trust

7,536,399

7,536,399–(3) Investment securities

672,850

672,850–(4) Long-term loans receivable

300,000

300,000–

11,678,937

11,678,937–

Assets total

The funds procured through borrowings, which shall be for the purpose of mainly acquisition of assets, areexposed to liquidity risk until the repayment date, but the concerned risks are managed by taking such(5) Short-term borrowings

2,150,000

2,150,000–

measures as lengthening the procurement periods and staggering the maturities. In addition, borrowings(6) Current portion of long-term borrowings

23,450,000

23,450,000–

with floating interest rates are exposed to interest rate fluctuation risk, but derivative transactions (interest(7) Long-term borrowings

56,840,000

56,861,428

21,42882,440,000

82,461,428

21,428(241,749)(241,749)–

Liabilities total

rate swap transactions) are utilized as hedging instruments to, in effect, convert interest rates to fixed rates
in order to mitigate that risk. For the hedge accounting approach, hedging instruments, hedged items,(8) Derivative transactions *1

hedging policy and method of assessing the effectiveness of hedging, please refer to “4. Method of hedge*1

accounting” described under “Notes on Matters Relating to Significant Accounting Policies” earlier in thisAssets and liabilities arising from derivative transactions are offset and presented in the net amount, with the balance shown in parentheses ( ) when in a net liability position.

document.
(3) Supplementary explanation to matters relating to fair value, etc. of financial instruments
Not applicable.

2. Matters relating to fair value, etc. of financial instruments
The carrying amount, fair value and the amount of difference between them, are as follows. Financial
instruments for which estimation of fair value is recognized to be extremely difficult are not included. Pleaserefer to “Note 2.”(Note 1) Method of calculation of the fair value of financial instruments(1) Cash and deposits; (2) Cash and deposits in trust; (5) Short-term borrowings; (6) Current portion of long-term borrowings		Since these are settled in a short period of time, the fair value is approximately the same as the book value, and thus stated atbook value.
(3) Investment securities; (4) Long-term loans receivable;		Since interest income etc. from mezzanine loan debt (corporate bonds, beneficiary interest in trust and loans receivable) are allbased on floating interest rates under terms and conditions stipulating that interest rates be reviewed every set period of time,
the fair value is approximately the same as the book value, and thus stated at book value.
(7) Long-term borrowings		These are calculated by the present value obtained by discounting the total principal and interest by the rate expected whensimilar funds are additionally borrowed in correspondence with the remaining term. Since long-term borrowings with floatinginterest rates are under terms and conditions that interest rates be reviewed every set period of time, the fair value is approximately the same as the book value, and thus stated at that value.
(8) Derivative transactions
		

24

Please refer to “Notes on Derivative Transactions” later in this document.

25

Financial Statements
Notes to Financial Statements(Note 2) Carrying amount of financial instruments for which estimation of fair value is recognized to be difficult(Unit: thousand yen)

Category

Other securities

10th fiscal period(As of January 31, 2021)

11th fiscal period(As of July 31, 2021)

6,142

6,142

5,197,022

5,217,745

82,726

19,384

Leasehold and guarantee deposits received *1
Leasehold and guarantee deposits received in trust *1
Investment securities *2

Notes on Securities*1		Leasehold and guarantee deposits received and leasehold and guarantee deposits received in trust are not subject to valuation at fair value because a reasonable estimation of cash flows is recognized to be extremely difficult due to there being nomarket value and difficulty of calculating the actual deposit period from when lessees move in to when they move out.
*2		Fair values of silent partnership equity interest in investment securities are not subject to disclosure of fair value as they haveno market value and their fair values are extremely difficult to measure.
(Note 3) Amount of redemption of monetary claims scheduled to be due after the date of settlement of accounts

10th fiscal period (As of January 31, 2021)(Unit: thousand yen)

Category(1) Stocks
Carrying
amountgreater thanacquisition
cost

10th fiscal period (As of January 31, 2021)(Unit: thousand yen)

Difference

–

–

–

1) Government bonds, municipal bonds, etc.

–

–

–

2) Corporate bonds

–

–

–

3) Others–––(3) Others

–

–

–

Subtotal–––(1) Stocks

–

–

–

–

–

–

400,000

400,000

–

–

–

–

(2) Bonds

Not later
than 1 year

Later than
1 year and notlater than
2 years

Later than
2 years andnot later than
3 years

Later than
3 years andnot later than
4 years

Later than
4 years andnot later than
5 years

Later than
5 years

Cash and deposits

3,565,028

–

–

–

–

–

Cash and deposits in trust

7,515,934

–

–

–

–

–

Investment securities––

523,480–

150,000–

Long-term loans receivable––

300,000–––(3) Others

273,480

273,480–

11,080,963–

823,480–

150,000–

Subtotal

673,480

673,480–

673,480

673,480–

Total(Unit: thousand yen)

Not later
than 1 year

Later than
1 year and notlater than
2 years

Later than
2 years andnot later than
3 years

Later than
3 years andnot later than
4 years

Later than
4 years andnot later than
5 years

Later than
5 years

Cash and deposits

3,169,688

–

–

–

–

–

Cash and deposits in trust

7,536,399

–

–

–

–

–

–

–

522,850

150,000

–

–

–

–

300,000–––

10,706,087–

822,850

150,000––

Investment securities
Long-term loans receivable
Total

Carrying
amount lessthan or equal
to acquisition
cost(2) Bonds
1) Government bonds, municipal bonds, etc.
2) Corporate bonds3) Others

Total

11th fiscal period (As of July 31, 2021)(Note 4) Amount of repayment of borrowings scheduled to be due after the date of settlement of accounts
10th fiscal period (As of January 31, 2021)(Unit: thousand yen)

Not later
than 1 year

Later than
1 year and notlater than
2 years

Later than
2 years andnot later than
3 years

Later than
3 years andnot later than
4 years

Later than
4 years andnot later than
5 years

Later than
5 years

Short-term borrowings

2,150,000

–

–

–

–

–

Long-term borrowings

22,660,000

15,350,000

14,630,000

8,500,000

19,150,000

–

Total

24,810,000

15,350,000

14,630,000

8,500,000

19,150,000–

11th fiscal period (As of July 31, 2021)(Unit: thousand yen)

26

Carrying amount Acquisition cost

(Note)

Silent partnership equity interests (carrying amount: 82,726 thousand yen) are not included in above because they have nomarket value and their fair values are extremely difficult to measure.

11th fiscal period (As of July 31, 2021)(Unit: thousand yen)

Category(1) Stocks
Carrying
amountgreater thanacquisition
cost

Carrying
amount lessthan or equal
to acquisition
cost

Not later
than 1 year

Later than
1 year and notlater than
2 years

Later than
2 years andnot later than
3 years

Later than
3 years andnot later than
4 years

Later than
4 years andnot later than
5 years

Later than
5 years

Total

Short-term borrowings

2,150,000

–

–

–

–

–

(Note)

Long-term borrowings

23,450,000

15,390,000

13,340,000

7,300,000

17,810,000

3,000,000

Total

25,600,000

15,390,000

13,340,000

7,300,000

17,810,000

3,000,000

Carrying amount Acquisition cost

Difference

–

–

–

1) Government bonds, municipal bonds, etc.

–

–

–

2) Corporate bonds

–

–

–

3) Others–––(3) Others

–

–

–

Subtotal–––(1) Stocks

–

–

–

–

–

–

400,000

400,000

–

–

–

–

(3) Others

272,850

272,850–

Subtotal

672,850

672,850–

672,850

672,850–(2) Bonds(2) Bonds
1) Government bonds, municipal bonds, etc.
2) Corporate bonds3) Others

Silent partnership equity interests (carrying amount: 19,384 thousand yen) are not included in above because they have nomarket value and their fair values are extremely difficult to measure.

27

Financial Statements
Notes to Financial Statements

Notes on Derivative Transactions

Notes on Tax-Effect Accounting

1. Derivative transactions to which hedge accounting is not applied

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

10th fiscal period (As of January 31, 2021)
10th fiscal period

11th fiscal period(As of January 31, 2021)(As of July 31, 2021)

1,230,867

1,203,727

Acquisition cost of securities

2,269

1,359

Deferred gains or losses on hedges

69,111

76,054

Not applicable.
11th fiscal period (As of July 31, 2021)

Deferred tax assets
Valuation adjustment upon merger

Not applicable.

2. Derivative transactions to which hedge accounting is applied
The following is the contract amount or the amount equivalent to the principal provided in the contract as of theDeferred tax assets, subtotal

1,302,248

1,281,140

date of settlement of accounts for each hedge accounting approach.

Valuation allowance(1,302,248)(1,281,140)

10th fiscal period (As of January 31, 2021)

Deferred tax assets, total

–

–

–

–

(Unit: thousand yen)

Hedge accounting
approachPrinciple method of
accounting

Type, etc. of derivativetransaction

Contract amount, etc. (Note 1)
Main hedged item

Interest rate swap transaction
Long-term(floating receivable; fixedborrowings
payable)Of which, later
than 1 year

Fair value(Note 2)

Deferred tax assets, net

2.	Breakdown of major components that caused any significant differences between thestatutory tax rate and the effective income tax rate after application of tax-effect accounting(Unit: %)52,630,000

45,330,000(219,679)

10th fiscal period

11th fiscal period(As of January 31, 2021)(As of July 31, 2021)

31.46

31.46

Deductible distributions payable(5.94)(30.49)Gain on negative goodwill(23.70)–

Reversal of excess depreciation(1.88)(0.83)

Others0.07(0.12)

Effective income tax rate after application of tax-effect accounting

0.01

0.03

(Note 1) Contract amount, etc. is based on notional principal.

Statutory tax rate

(Note 2) Fair value is calculated based on the price quoted by lending financial institutions, etc.

[Adjustments]

11th fiscal period (As of July 31, 2021)(Unit: thousand yen)

Hedge accounting
approachPrinciple method of
accounting

Type, etc. of derivativetransaction

Contract amount, etc. (Note 1)
Main hedged item

Interest rate swap transaction
Long-term(floating receivable; fixedborrowings
payable)Of which, later
than 1 year
54,290,000(Note 1) Contract amount, etc. is based on notional principal.
(Note 2) Fair value is calculated based on the price quoted by lending financial institutions, etc.

46,140,000

Fair value(Note 2)

(241,749)

Notes on Share of Profit or Loss of Entities Accounted for Using Equity Method,etc.
10th fiscal period (As of January 31, 2021)
Not applicable.

Notes on Retirement Benefits
10th fiscal period (As of January 31, 2021)

11th fiscal period (As of July 31, 2021)
Not applicable.

Not applicable.
11th fiscal period (As of July 31, 2021)
Not applicable.

Notes on Related-Party Transactions
1. Parent company, major corporate unitholders, etc.
10th fiscal period (from August 1, 2020 to January 31, 2021)
Not applicable.
11th fiscal period (from February 1, 2021 to July 31, 2021)
Not applicable.

28

29

Financial Statements
Notes to Financial Statements

Notes to the Business Combination

2. Affiliated companies, etc.
10th fiscal period (from August 1, 2020 to January 31, 2021)

10th fiscal period (from August 1, 2020 to January 31, 2021)

Not applicable.

Business combination through acquisition

11th fiscal period (from February 1, 2021 to July 31, 2021)

1. Overview of business combination

Not applicable.

(1) Name and business description of acquired entity
Name of acquired entity: Sakura Sogo REIT Investment Corporation

3. Fellow subsidiaries, etc.

Business description: Investing in and managing mainly specified assets based on the Investment Trusts

10th fiscal period (from August 1, 2020 to January 31, 2021)

Act

Not applicable.

(2) Main reason for business combination

11th fiscal period (from February 1, 2021 to July 31, 2021)

The Merger was conducted based on the determination that realization of the Merger would contributeNot applicable.

to maximization of unitholder value for both SAR and SSR, by improving revenue stability owing to
expansion of asset size, increase of DPU as a result of cost reduction, and enhanced liquidity ofinvestment units due to an increase in market capitalization.

4. Directors, major individual unitholders, etc.

(3) Date of business combination (effective date of merger)

10th fiscal period (from August 1, 2020 to January 31, 2021)(Unit: thousand yen)Type

Director,or close
relative of
director

Name ofcompany,
etc. orpersonAtsushi
Kato

Address–

Capitalstock orinvestments incapital–Description ofbusiness or
occupation

Percentage
of votingDescription Transaction
rights, etc.
of transaction
amountheld by (in)SAR

Account
item

Executive
Director of SAR,
and President
and CEO of theAsset Manager

Payment ofasset management fee
to the AssetManager (Note 1)

Accounts
payable– others

0.02%

871,288(Note 2) (Note 3)

Balanceat end ofperiod445,834

Director,or close
relative of
director

Name ofcompany,
etc. orpersonAtsushi
Kato

Address––

Star Asia Investment Corporation(6) Main grounds for the determination of acquiring entity
SAR became the acquiring entity after comprehensively taking into account the corporate size including
the amount of total assets and net income, relative voting rights ratio of unitholders, composition of

Description ofbusiness or
occupation

Percentage
of votingDescription Transaction
rights, etc.
of transaction
amountheld by (in)SAR

Account
item

Executive
Director of SAR,
and President
and CEO of theAsset Manager

Payment ofasset management fee
to the AssetManager (Note 1)

Accounts
payable– others

0.02%

Absorption-type merger with SAR as the surviving corporation and SSR as the dissolving corporation.

(Note 2)

(Unit: thousand yen)Type(4) Legal form of business combination(5) Name of investment corporation after business combination

11th fiscal period (from February 1, 2021 to July 31, 2021)
Capitalstock orinvestments incapitalAugust 1, 2020

380,024(Note 2)

Balanceat end ofperiodboard of directors, etc. and other factors based on the Accounting Standard for Business Combinations.
2. Business period of acquired entity included in the income statement for the 10th fiscal period
From August 1, 2020 to January 31, 2021
3. Acquisition cost of acquired entity and its breakdown

418,026(Note 2)

(Note 1) The transaction was conducted by Atsushi Kato as President and CEO of a third party (the Asset Manager), and the transaction
amount is based on the terms and conditions provided in the Articles of Incorporation of SAR.
(Note 2) Of the amounts above, the transaction amount does not include consumption tax, while the balance at the end of the period
includes consumption tax.
(Note 3) The asset management fee for the 10th fiscal period includes the acquisition incentive portion included in the book value of individual real estate, etc. in the amount of 66,660 thousand yen, the property transfer incentive portion in the amount of 86,300
thousand yen and the merger incentive portion in the amount of 313,025 thousand yen.

Fair value of SAR’s investment units delivered on the date of business combination: 25,132,218 thousand yen
4.	Exchange ratio of investment units delivered as compensation for acquisition, calculation method of suchratio and number of investment units delivered(1) Exchange ratio of investment units
SAR allocated and delivered to unitholders 1.78 SAR investment units for every 1.0 SSR investment unit.
SAR conducted an investment unit split to carry out a 2-for-1 split of investment units with July 31, 2020as the record date.
(2) Calculation method
SAR appointed Nomura Securities Co., Ltd. and SSR appointed Mizuho Securities Co., Ltd. as thefinancial advisors, and requested the calculation of the merger ratio. They calculated the merger ratio
based on valuation methods including the market investment unit price method and dividend discount

30

31

Financial Statements
Notes to Financial Statements

model (DDM) method, and judged that the above exchange ratio is appropriate as a result of having
repeated discussions and negotiations by comprehensively taking into account factors such as the resultof calculation.

Notes on Investments in Rental Properties
SAR owns rental real estate, etc. for the purpose of earning revenue from leasing. The carrying amount, amountof increase (decrease) during the period and fair value of these investments in rental properties are as follows:(3) Number of investment units delivered(Unit: thousand yen)592,741 units

10th fiscal period

11th fiscal period(From August 1, 2020
to January 1, 2021)(From February 1, 2021
to July 31, 2021)

Balance at beginning of period

105,337,137

167,106,948

Amount of increase (decrease) during period

61,769,811(270,251)

Balance at end of period

167,106,948

166,836,697

175,821,000

177,211,000

5. Description and amount of major acquisition-related expenses(Unit: thousand yen)

Description

AmountMerger fee

313,025

6. Matters relating to distribution of acquisition cost(1)	Amount of assets succeeded and liabilities assumed on the date of business combination and the main
breakdown of such assets and liabilities(Unit: thousand yen)

Current assets

5,301,130

Non-current assets

62,647,946

Total assets

67,949,077

Current liabilities

12,624,609

Non-current liabilities

21,301,013

Total liabilities

33,925,622

Carrying amount

Fair value at end of period(Note 1) Carrying amount is the amount of the cost of acquisition, less accumulated depreciation.
(Note 2) Of the amount of increase (decrease) in investments in rental properties during the 10th fiscal period, the amount of increase ismainly attributable to the succession of real estate beneficiary interest in trust of 18 properties from SSR with which SAR conducted an absorption-type merger (62,605,000 thousand yen), acquisition of real estate beneficiary interest in trust of two properties (6,962,670 thousand yen) and capital expenditures (331,900 thousand yen), while the amount of decrease is mainly
attributable to disposition of real estate beneficiary interest in trust of three properties (60% quasi co-ownership interest for one ofthem) (7,501,405 thousand yen) and depreciation (628,353 thousand yen). Of the amount of increase (decrease) during the 11th
fiscal period, the amount of increase is mainly attributable to capital expenditures (363,439 thousand yen), while the amount ofdecrease is mainly attributable to depreciation (633,013 thousand yen).
(Note 3) Fair value at the end of the period is the appraisal value by an outside real estate appraiser.

Income (loss) from investments in rental properties is as stated in “Notes to the Statement of Income andRetained Earnings” earlier in this document.

(2) Amount and cause for occurrence of negative goodwill
Amount of negative goodwill : 8,891,236 thousand yen
Cause for occurrence:	Since the market value of net assets of SSR upon the businesscombination exceeded the acquisition cost, the difference is recognized
as negative goodwill.
Accounting:

Recorded in lump sum as extraordinary income in the 10th fiscal period.

7.	Estimated amount of impact on the statement of income and retained earnings for the 10th fiscal period
when assuming that the business combination has been completed on the date of commencement of the10th fiscal period
There is no impact as the date of business combination and the date of commencement of the 10th fiscal
period are the same.
11th fiscal period (from February 1, 2021 to July 31, 2021)
Not applicable.

Notes on Asset Retirement Obligations
10th fiscal period (from August 1, 2020 to January 31, 2021)
Not applicable.
11th fiscal period (from February 1, 2021 to July 31, 2021)
Not applicable.
32

Notes on Segment Information
1. Segment information
Segment information is omitted because SAR operates a single segment, which is the real estate leasing business.

2. Related information
10th fiscal period (from August 1, 2020 to January 31, 2021)(1) Information about products and services
Information about products and services is omitted because net sales to external customers for a single
product and service category are in excess of 90% of operating revenue on the statement of income andretained earnings.
(2) Information about geographic areas
1) Net sales
Information about net sales is omitted because net sales to external customers in Japan are in excess of
90% of operating revenue on the statement of income and retained earnings.
2) Property, plant and equipment
Information about property, plant and equipment is omitted because the amount of property, plant andequipment located in Japan is in excess of 90% of the amount of property, plant and equipment on thebalance sheet.
33

Financial Statements
Notes to Financial Statements

Notes on Significant Subsequent Events(3) Information about each major customer(Unit: thousand yen)

(Note)

Customer nameOperating revenue

Segment

Kanden Realty & Development Co., Ltd.

975,313 (Note)

Real estate leasing business

Issuance of new investment units
The issuance of new investment units for the purpose of acquiring real estate, etc. was resolved as follows atboard of directors’ meetings held on August 2, 2021 and August 11, 2021 and payment was completed on

Operating revenue is gain on sale of Alphabet Seven (quasi co-ownership interest: 60%).

August 17, 2021.

11th fiscal period (from February 1, 2021 to July 31, 2021)(1) Information about products and services<Issuance of new investment units through primary offering>

Information about products and services is omitted because net sales to external customers for a single

Number of new investment units issued: 115,000 units

product and service category are in excess of 90% of operating revenue on the statement of income andretained earnings.
(2) Information about geographic areas
1) Net sales
Information about net sales is omitted because net sales to external customers in Japan are in excess of
90% of operating revenue on the statement of income and retained earnings.

Issue price (offer price):

57,330 yen per unit

Total issue price (total offer price):

6,592,950,000 yen

Issue amount (paid-in amount):

55,389 yen per unit

Total issue amount (total paid-in amount): 6,369,735,000 yen
Payment date:August 17, 2021

2) Property, plant and equipment
The proceeds from the issuance of new investment units have been allocated to part of the acquisition

Information about property, plant and equipment is omitted because the amount of property, plant andequipment located in Japan is in excess of 90% of the amount of property, plant and equipment on thebalance sheet.

funds, and the real estate trust beneficiary interests in 7 properties were acquired on August 19, 2021 (totalacquisition price: 12,965 million yen).

(3) Information about each major customer

Additional Information

Information about each major customer is omitted because all net sales to a single external customer are(Accounting estimates due to the spread of COVID-19)

less than 10% of the operating revenue on the statement of income and retained earnings.

A rent system in which rents are entirely or partially linked to the operating revenue, etc. of hotels has been
adopted for some hotel properties owned by SAR including properties for which lease agreements haveNotes on Per Unit Information(Unit: yen)

been newly concluded, and variable rents are unlikely to occur as of the end of the 11th fiscal period due tothe temporary closure of hotels and decline in occupancy rates. SAR estimates future cash flow based on

10th fiscal period

11th fiscal period(From August 1, 2020
to January 1, 2021)(From February 1, 2021
to July 31, 2021)

Net assets per unit

53,51253,260Net income per unit

7,048

1,437

the assumption that the economic environment surrounding these properties will recover moderately upon
the application of impairment accounting of long-lived assets.
It is difficult to accurately predict when COVID-19 will be contained as well as the extent of its impact.
Therefore, the operating condition or financial condition of SAR may be influenced by the spread of
COVID-19 in the future.

(Note 1) Net income per unit is calculated by dividing net income by the daily weighted average number of investment units. 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:(Unit: thousand yen)

10th fiscal period

11th fiscal period(From August 1, 2020
to January 1, 2021)(From February 1, 2021
to July 31, 2021)

11,801,722

2,407,305––

Net income attributable to common investment units

11,801,722

2,407,305

Average number of investment units during period (units)

1,674,389

1,674,389

Net income
Amount not attributable to common unitholders

34

35

Financial Statements

Supplementary Schedules
1. Schedule of securities

3. Schedule of property, plant and equipment and intangible assets(Unit: thousand yen)

(1) Stocks
Not applicable.
Type of asset(2) Securities other than stocks(Unit: thousand yen)Type

Name of the security

Total
face
value

CorporatebondStar Asia Mezzanine
Loan Debt Investment
Series 1

400,000

Star Asia Mezzanine
Trust benefiLoan Debt Investment
ciary interests
Series 3

–

Book
value

400,000

122,850

Accrued Prepaid
interest accrued(Note 1)interest
3,388

–

34

–

Fair
value

Unrealized
gain orRemarks
loss

400,000–

122,850–

Star Asia Mezzanine
Trust benefiLoan Debt Investment
ciary interests
Series 5–

Silent partnership equity
Silent partnership equity interest in Godo Kaisya
SAPR7
interest–

19,384––

19,384

–

Total

–

692,234

4,276–

692,234–

150,000854–

150,000–(Note 2)
(Note 3)(Note 2)
(Note 4)(Note 2)
(Note 5)

Property,plant andequipment(Note 6)(Note 7)(Note 2) Because interest income etc. from mezzanine loan debt (corporate bonds and beneficiary interest in trust) are based on
floating interest rates and is to be renewed or revised every certain period, the fair value is approximately the same as thebook value and thus stated at that book value.
(Note 3) The underlying assets are trust beneficiary interests in a trust mainly comprised of Relief Premium Haneda.
(Note 4) The underlying assets are trust beneficiary interests in a trust mainly comprised of The Royal Garden Residence Shirokanedai.
(Note 5) The underlying assets are trust beneficiary interests in a trust mainly composed of Sanmaison Ohorikoenkita.

(Note 7) Overview of operating assets for silent partnership equity interest are as follows.
Name of the security

Type of specified asset

Name of real estate, etc.

Location (Indication ofresidential address)
1-22-17 Akebono-cho,Tachikawa-shi, Tokyo

2.	Contracted amount, etc. and fair value of derivative transactions and forward exchangetransactions(Unit: thousand yen)Contract amount, etc. (Note 1)

Transaction other thanmarket transaction
Total

Type
Interest rate swap transaction(floating receivable; fixed payable)–

Buildings intrust

49,326,896

329,820

Structures in
trust

20,635––

20,635

Machineryand equipment in trust

73,22623,987–

Tools, furniture andfixtures intrust

47,023

9,630–

Land in trust 117,051,893–

Subtotal
LeaseholdIntangible rights in trust
assetsSubtotal–

114

Accumulated depreciation or accumu- Net balance
lated amortization
at end of Remarks
theperiodFor theperiod4228

71844 49,655,872 4,084,344

624,41445,571,527

4,393

721

16,242

97,214

18,872

3,875

78,341

56,654

20,334

3,974

36,319– 117,051,893–– 117,051,893

–

–

–

–

550

550

166,519,790

363,989

4,082,300––

4,082,300––

4,082,300

4,082,300––

4,082,300––

4,082,300

170,602,090

363,989

844 166,882,935 4,127,988

844 170,965,235 4,127,988

550

633,013 162,754,946

633,013 166,837,247

4. Schedule of other specified assets

Silent partnership equity interest Beneficiary interest in trust of
OHA Building
in Godo Kaisya SAPR7
real estate

Category

114

Total

(Note 6) Book value is stated as fair value.

Amount Amount
Balance atofofincrease decrease end of theperiodduring the during theperiodperiodTools, furniture andfixtures

Constructionin progressin trust(Note 1) Accrued interest includes accrued dividends receivable on trust beneficiary interests.

Balance at
beginningof theperiodOf which, later
than 1 year

intangible assets.” Other specified assets other than beneficiary interest in trust are as follows:(Unit: thousand yen)Book value
Type

Name of the security

Quantity

Loan
receivable

Star Asia Mezzanine Loan
Debt Investment Series 4

–

Unit
price

Amount–300,000

Fair value
Unit
price
–

AmountUnrealized
gain orRemarks
loss

300,000–(Note 1)
(Note 2)

Fair value (Note 2)(Note 1) Because interest income etc. from mezzanine loan debt are based on floating interest rates, the fair value is approximately thesame as the book value and thus stated at that book value.

54,290,000

46,140,000(241,749)

54,290,000

46,140,000(241,749)(Note 1) Contract amount, etc. of interest rate swap is based on notional principal.

Beneficiary interest in trust is included in the above “3) Schedule of property, plant and equipment and(Note 2) The underlying assets are trust beneficiary interests in a trust mainly composed of DS Kaigan Building.

5. Schedule of investment corporation bonds
Not applicable.

(Note 2) Fair value is calculated based on the price quoted by lending financial institutions, etc.

36

37

Financial Statements
Supplementary Schedules

6. Schedule of borrowings(Unit: thousand yen)

Category(Note 2)

LenderThe Bank ofFukuoka, Ltd.
Resona Bank,
Limited.

Long-term borrowings

Amount ofdecreaseduring theperiodBalance at
end of theperiod

1,710,000––

1,710,000

390,000
50,000––––390,000

Averageinterest Repayment Repayment
Use
rate
date
methodCategory (Note 2)
Remarks

0.2815%50,000

Lump sum
repaymenton repayment date

(Note 4)

Amount ofincreaseduring theperiodAmount ofdecreaseduring theperiodBalance at
end of theperiodSumitomo Mitsui
Banking
Corporation

2,500,000––

2,500,000

Resona Bank,
Limited.

600,000––

600,000

Shinsei Bank,
Limited

2,500,000––

2,500,000

Sumitomo Mitsui
Banking
Corporation

970,000––

970,000

Lender(Note 1)

August 31,
2021

Balance at
beginningof theperiodUnsecured
andunguaranteed

Sumitomo Mitsui
Banking
Corporation–

830,000

830,000–

Mizuho Bank, Ltd.

–

830,000

830,000–

2,150,000

1,660,000

1,660,000

2,150,000

Mizuho Bank, Ltd.

920,000––

920,000–

Sumitomo Mitsui
Trust Bank,
Limited

800,000––

800,000

Aozora Bank, Ltd.

500,000––

500,000

Shinsei Bank,
Limited

500,000––

500,000

Resona Bank,
Limited.

500,000––

500,000

The Bank ofFukuoka, Ltd.

500,000––

500,000

Sumitomo Mitsui
Banking
Corporation

1,865,000––

1,865,000

Mizuho Bank, Ltd.

1,715,000––

1,715,000

Sumitomo Mitsui
Trust Bank,
Limited

1,050,000––

1,050,000

Aozora Bank, Ltd.

600,000––

600,000

Shinsei Bank,
Limited

600,000––

600,000

Subtotal

38

Amount ofincreaseduring theperiodSumitomo Mitsui
Banking
Corporation

1,950,000

Mizuho Bank, Ltd.

1,800,000––

1,950,000
1,800,000

1,050,000

MUFG Bank, Ltd.

700,000–

700,000–

Aozora Bank, Ltd.

600,000–

600,000–

Shinsei Bank,
Limited

600,000–

600,000–

Resona Bank,
Limited.

600,000

Sumitomo Mitsui
Banking
Corporation

1,950,000––

1,950,000

Shinsei Bank,
Limited

1,950,000––

1,950,000–

1,050,000

600,000

April 20,
2021–

Sumitomo Mitsui
Trust Bank,
Limited

–0.2773%

Lump sum
repaymenton repayment date–

0.6250%(Note 3)

April 20,2021

Lump sum
repaymenton repayment dateLong-term borrowings

Short-term borrowings

Shinsei Bank,
LimitedBalance at
beginningof theperiod

–0.9384%

August 31,
2021

Lump sum
repaymenton repayment date

(Note 4)

Unsecured
andunguaranteed––

600,000

Aozora Bank, Ltd.

500,000––

500,000

600,000––

600,000

ORIX Bank
Corporation

Resona Bank,
Limited.

1,000,000––

1,000,000

170,000––

170,000

Sumitomo Mitsui
Banking
Corporation

The Bank ofFukuoka, Ltd.

1,400,000––

1,400,000

500,000––

500,000

Mizuho Bank, Ltd.

1,050,000––

1,050,000

The Dai-ichi Life
Insurance
Company, Limited
Mizuho Trust &Banking Co., Ltd.

200,000––

200,000

Sumitomo Mitsui
Banking
Corporation

1,950,000––

1,950,000

500,000

Aozora Bank, Ltd.

400,000––

400,000

Shinsei Bank,
Limited

400,000––

400,000

Shinsei Bank,
LimitedResona Bank,
Limited.

400,000––

400,000––

500,000

0.7100%(Note 3)

April 20,2022

Lump sum
repaymenton repayment date

0.8815%(Note 3)

August 31,
2022

Lump sum
repaymenton repayment dateFebruary
20, 2023

Lump sum
repaymenton repayment date

(Note 4)600,000

1,950,000––

1,950,000

Aozora Bank, Ltd.

800,000––

800,000

Resona Bank,
Limited.

400,000––

400,000

Remarks(Note 1)0.7300%Resona Bank,
Limited.

Sumitomo Mitsui
Trust Bank,
LimitedAverageinterest Repayment Repayment
Use
rate
date
methodOctober 20,
0.5320%2021

Lump sum
repaymenton repayment dateFebruary28, 2023

Lump sum
repaymenton repayment date

1.0778%

Unsecured
andunguaranteed39

Financial Statements
Supplementary Schedules

Balance at
beginningof theperiodAmount ofincreaseduring theperiodAmount ofdecreaseduring theperiodBalance at
end of theperiodSumitomo Mitsui
Banking
Corporation

500,000––

500,000

Mizuho Bank, Ltd.

450,000––

Sumitomo Mitsui
Trust Bank,
Limited

700,000––

Aozora Bank, Ltd.

500,000

Long-term borrowings

Lender40––

Amount ofincreaseduring theperiodAmount ofdecreaseduring theperiodBalance at
end of theperiodSumitomo Mitsui
Banking
Corporation

450,000––

450,000

450,000

The Nishi-Nippon
City Bank, Ltd.

500,000––

500,000

700,000

Shinsei Bank,
Limited

450,000––

450,000

Aozora Bank, Ltd.

200,000––

200,000

Sumitomo Mitsui
Banking
Corporation

600,000

Resona Bank,
Limited.

500,000–––

830,000–

830,000––

Mizuho Bank, Ltd.

830,000–

830,000–

Sumitomo Mitsui
Banking
Corporation

1,950,000––

1,950,000

Mizuho Bank, Ltd.

2,500,000––

2,500,000

Sumitomo Mitsui
Trust Bank,
Limited

1,050,000––

1,050,000

750,000

Aozora Bank, Ltd.

600,000––

600,000

Shinsei Bank,
Limited

600,000––

600,000

Resona Bank,
Limited.

600,000––

600,000

0.6095%600,000

250,000––

250,000

The Nishi-Nippon
City Bank, Ltd.

500,000––

500,000

850,000

Mizuho Bank, Ltd.

750,000––––

LenderMarch 22,2022

Lump sum
repaymenton repayment date

500,000

The Bank ofFukuoka, Ltd.

Sumitomo Mitsui
Banking
Corporation

Remarks(Note 1)

(Note 3)

Shinsei Bank,
LimitedCategory (Note 2)

Balance at
beginningof theperiod500,000

Averageinterest Repayment Repayment
Use
rate
date
method

850,000

Sumitomo Mitsui
Trust Bank,
Limited

700,000––

700,000

Aozora Bank, Ltd.

500,000––

500,000

Shinsei Bank,
Limited

600,000––

600,000

Resona Bank,
Limited.

500,000––

500,000

The Bank ofFukuoka, Ltd.

240,000––

240,000

Mizuho Trust &Banking Co., Ltd.

200,000––

200,000

The Nishi-Nippon
City Bank, Ltd.

500,000––

500,000

0.8120%(Note 3)September
20, 2023

Lump sum
repaymenton repayment date

(Note 4)

Unsecured
andunguaranteed

Long-term borrowings

Category (Note 2)

500,000––

500,000

Sumitomo Mitsui
Banking
Corporation

2,150,000––

2,150,000

Mizuho Bank, Ltd.

2,000,000––

2,000,000

Aozora Bank, Ltd.

1,500,000––

1,500,000

Sumitomo Mitsui
Banking
Corporation

2,200,000––

2,200,000

Mizuho Bank, Ltd.

2,050,000––

2,050,000

The Nishi-Nippon
City Bank, Ltd.

Sumitomo Mitsui
Trust Bank,
Limited

1,250,000––

1,250,000

Resona Bank,
Limited.

0.7532%(Note 3)

April 22,2024

Lump sum
repaymenton repayment date

0.7685%

May 31,2022

Lump sum
repaymenton repayment date

0.2782%

March 22,2021

Repaymentininstallments

April 21,2025

Lump sum
repaymenton repayment dateFebruary29, 2024

Lump sum
repaymenton repayment dateAugust 29,
2025

Lump sum
repaymenton repayment date

October 29,
0.2815%2021

Lump sum
repaymenton repayment date

0.6850% October 31,(Note 3)2025

Lump sum
repaymenton repayment date

0.7588%0.5360%(Note 3)0.6975%1,000,000––

1,000,000

1,000,000––

1,000,000

600,000––

600,000

Resona Bank,
Limited.

400,000––

400,000

Aozora Bank, Ltd.

700,000––

700,000

Shinsei Bank,
Limited

700,000––

700,000

Resona Bank,
Limited.

700,000––

700,000

Sumitomo Mitsui
Banking
Corporation

1,350,000––

1,350,000

Mizuho Trust &Banking Co., Ltd.

400,000––

400,000

Mizuho Bank, Ltd.

1,000,000––

1,000,000

Sumitomo Mitsui
Trust Bank,
Limited

850,000––

850,000

Aozora Bank, Ltd.

400,000––

400,000

Remarks(Note 1)

(Note 3)

The Bank ofFukuoka, Ltd.

Sumitomo Mitsui
Trust Bank,
LimitedAverageinterest Repayment Repayment
Use
rate
date
method(Note 3)(Note 4)

Unsecured
andunguaranteed

41

Financial Statements

Financial Statements

Supplementary Schedules

Independent Auditor’s Report

Category (Note 2)

Balance at
beginningof theperiodAmount ofincreaseduring theperiodAmount ofdecreaseduring theperiodBalance at
end of theperiodSumitomo Mitsui
Banking
Corporation–

1,680,000–

1,680,000

Mizuho Bank, Ltd.

–1,530,000–

1,530,000

The Bank of
Yokohama, Ltd.

–

1,000,000–

1,000,000

Shinsei Bank,
Limited

–600,000–

600,000

Aozora Bank, Ltd.

–

600,000–

600,000

Sumitomo Mitsui
Trust Bank,
Limited

–550,000–

550,000

Sumitomo Mitsui
Banking
Corporation–

750,000–

750,000

Mizuho Bank, Ltd.

–

750,000–

750,000

Sumitomo Mitsui
Trust Bank,
Limited

–500,000–

500,000

The Kiyo Bank,
Ltd.

–

500,000–

500,000

Fukoku Mutual Life
Insurance
Company–

500,000–

500,000

Long-term borrowings

LenderSubtotal
Total

Averageinterest Repayment Repayment
Use
rate
date
method

0.7025%(Note 3)

April 30,2026

Lump sum
repaymenton repayment date

(Note 4)0.9455%(Note 3)80,290,000

8,960,000

8,960,000

80,290,000

82,440,000

10,620,000

10,620,000

82,440,000

Remarks(Note 1)

April 28,
2028

Unsecured
andunguaranteed

Lump sum
repaymenton repayment date

(Note 1) Average interest rate is the day-weighted average rate during the fiscal period.
(Note 2) Long-term borrowings includes current portion of long-term borrowings.
(Note 3) Interest rate swap transactions are undertaken to hedge against the risk of interest rate fluctuations. Interest rate taking into consideration the effect of interest rate swaps (interest rate fixation) is indicated.
(Note 4) Funds are used for acquisition funds of beneficiary interest in trust, repayment of debt, etc.
(Note 5) The yearly schedule of repayment for long-term borrowings within five years of the balance sheet date is as follows:(Unit: thousand yen)42

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
yearsLong-term borrowings

23,450,000

15,390,000

13,340,000

7,300,000

17,810,000

Total

23,450,000

15,390,000

13,340,000

7,300,000

17,810,000

43Financial Statements
Independent Auditor’s Report4445