March 2, 2020

Real Estate Investment Trust Securities Issuer
Star Asia Investment Corporation
Representative: Atsushi Kato, Executive Director(Securities Code: 3468)
Real Estate Investment Trust Securities Issuer
Sakura Sogo REIT Investment Corporation
Representative: Toru Sugihara, Executive Director(Securities Code: 3473)
Asset Management Company
Star Asia Investment Management Co., Ltd.
Representative: Atsushi Kato, President and CEO
Inquiries:
Akiko Kanno, Director and CFO
TEL: 03-5425-1340

Notice Concerning Execution of a Merger Agreement by and between
Star Asia Investment Corporation and Sakura Sogo REIT Investment Corporation
Star Asia Investment Corporation (“SAR”) and Sakura Sogo REIT Investment Corporation (“SSR”),
based on a memorandum of understanding regarding merger (the “MOU”) executed by and between themand announced in the “Notice Concerning Execution of Memorandum of Understanding Regarding Merger
with Sakura Sogo REIT Investment Corporation” by SAR and “Notice Concerning Execution ofMemorandum of Understanding and Measures to Ensure Fairness Regarding Merger with Star Asia
Investment Corporation” by SSR (the “SSR’s Press Release on Execution of Memorandum ofUnderstanding”), both dated January 30, 2020, after the completion of necessary procedures for themerger, such as the conduct of due diligence, have today at their respective board of directors meetings,
resolved to undertake an absorption-type merger, with August 1, 2020 as the effective date as described
below, whereby SAR will be the surviving corporation and SSR will be the dissolving corporation in themerger (the “Merger”), and have today also executed a merger agreement (the “Merger Agreement”) to that
effect as set forth below.
To unitholders in the United States:
The merger described in this press release involves securities of a foreign company. The offer is subject to disclosure
requirements of a foreign country that are different from those of the United States. Financial information included in thisdocument, if any, was excerpted from financial statements prepared in accordance with foreign accounting standards that
may not be comparable to the financial statements of United States companies. In addition, it may be difficult for you to
enforce your rights and any claim you may have arising under the U.S. federal securities laws, since the issuer is located ina foreign country and all of its officers and directors are residents of a foreign country. You may not be able to sue a foreigncompany or its officers or directors in a foreign court for violations of the U.S. securities laws. It may be difficult to compel a
foreign company and its affiliates to subject themselves to a U.S. court’s judgment.
You should be aware that the issuer may purchase securities otherwise than under the merger, such as in the open market
or through privately negotiated purchases.
This document has been translated from the Japanese-language original document for reference purposes only. In the eventof any conflict or discrepancy between this document and the Japanese-language original, the Japanese-language original
shall prevail in all respects.

1

1.

Purpose of the Merger
The economic environment in Japan has generally been maintained in good condition andcompanies have maintained a high level of earnings as a result of increased investments in equipment
and improvements in the areas of employment and wages. However, the Bank of Japan is continuingwith its monetary easing policy in the midst of uncertainties about the world economy due to events
like the trade conflict between the US and China as well as the emergence of a new type of viralpneumonia. It is necessary to continue paying attention to the trend of domestic and overseas
financial markets and capital markets.
As for the property market, various market participants such as listed REITs, private REITs,
overseas investors and domestic business entities continue to invest actively while financing
continues to be available because of the monetary easing policy adopted by the Bank of Japan.
Competition in property deals is becoming more intense and yields remain low, while investment
targets are becoming more diverse with 64 listed REITs and over 30 private REITs existing as of today.
Considering current conditions in the property market, it is important to take effective measures tomaximize unitholder profit, rather than to seek forcible expansion of asset size through property
acquisitions.
Based on this, SAR and SSR are certain that the Merger, which is expected to bring about many
merits for unitholders of SAR and SSR, such as an increase in revenue stability owing to the
expansion of asset size, an increase in distributions per unit as a result of cost reduction, andenhanced liquidity of investment units due to an increase in the market capitalization, will contribute to
the maximization of value for unitholders of SAR and SSR.
<History of SAR>
SAR was listed on the Real Estate Investment Trust Securities Market of 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 (Note1), an independent property investment group. SAR has
increased its capital through public offerings for property acquisitions three times so far, and has beendeveloping 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 maximization of unitholder value. SAR examines and take various
measures by thinking outside the box. Typical examples include four asset replacements (Note2) thatenabled distribution of profits on sale to the unitholders by enhancing the portfolio quality andproducing profits on the sale of such properties, as well as investments in mezzanine debt which isonly SAR has conducted among the listed REITs today. As of the date of this press release, SAR has
had seven fiscal periods of operating history since its listing and manages a portfolio of 34 properties(with a 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 thegroup 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 the investment destinations of such funds).
(Note 2) SAR’s fifth asset replacement described in the “Notice Concerning Acquisition and Transfer of Real
Estate Beneficial Interest in Trust (Fifth Asset Replacement)” announced by SAR on the date of thispress release 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 a diversified 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 fundmanagement group, and the Nippon Kanzai Group (Note 2). SSR has had seven fiscal periods ofoperating history since its listing and manages a portfolio of 18 properties (with a total acquisition priceof 57.5 billion yen) as of the date of this press release.
However, SSR has not received sufficient support from the Galileo Group, its main sponsor, anddespite SSR being listed at around the same time as SAR, its asset size as of the date of this press
release is roughly the same as the size as of SSR’s listing. Additionally, SSR has never increased its
capital through a public offering. Furthermore, a relatively high level of asset management fees andaverage interest on loans were one of 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 the lowered earning capacity of the portfolio, and profits onsale have been allocated to the costs of preparing suspended issuances of investment units instead ofbeing 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 beenreconsidering a growth strategy which includes the 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 andfund management businesses.
(Note 2) “Nippon Kanzai Group” is a business group led by Nippon Kanzai Co., Ltd. (which is listed on the firstsection of the Tokyo Stock Exchange).

<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 a proposal for the Merger (the “Proposal”) on May 10, 2019 and requested tohold a general meeting of unitholders of SSR as part of the necessary procedures for consummationof 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 theoriginal 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 suchmotions were rejected.)
Proposed Agenda Item 1:

Removal of Executive Director Makoto Muranaka

Proposed Agenda Item 2:

Appointment of Executive Director Toru Sugihara

Proposed Agenda Item 3:

Cancellation of the asset management entrustment agreementwith Sakura Real Estate Funds Management, Inc.

Proposed Agenda Item 4:Entering into an asset management entrustment agreement

3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 a unitholder 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 managementcompany 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 performance of duties and to
appoint an acting representative for SSR’s executive director, a petition for an order of injunction tosuspend 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
(although the period for filing an appeal has not yet elapsed, so it is uncertain whether an appeal will
be filed or not). 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. In addition, the petitioner may file an immediate appeal against the otherdismissal.) or withdrawn by the petitioner (furthermore, a petition for a provisional 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 from Star Asia Group and the result of the Merger,
and Kiyoshi Kondaibo, a third party. SSR has executed an MOU for the Merger with SSR because it
has received an opinion on January 30, 2020 from the Special Committee concluding that it isreasonable for SSR to enter into the MOU and to review, negotiate, and conduct due diligence with aview toward an expedited execution of a definitive agreement.
After executing the MOU, each of SAR and SSR has conducted due diligence and entered into
discussions regarding the terms of the Merger based on the MOU. SAR and SSR have executed theMerger Agreement today because they have agreed to the terms of the Merger, including the merger
ratio.
<Purpose of the Merger>
SAR believes that the Merger will contribute to: (i) further diversification of its portfolio both in termsof geographical area and asset type and increase stability of portfolio revenue through the expansionof asset size; (ii) improved efficiency of operational costs; and (iii) larger market capitalization andimproved liquidity.
As for SSR, the Merger is also expected to enable it to achieve its initial goal of having 150 billion
yen of assets under management. 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 operational costs 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 a result of active management by SAIM and the promotion of external
growth by taking advantage of the preferential negotiating rights that SAR enjoys.

4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 great 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 increasein the number of properties held) will increase its flexibility in conducting active management. After the
Merger, SAR will seek to maximize unitholder value of the SAR after the Merger, taking advantage ofthe strong support from the Star Asia Group in contributing to SAR’s external growth.
Along with the Merger, SAR is scheduled to acquire and transfer assets as described in the “NoticeConcerning Acquisition and Transfer of Real Estate Beneficial Interest in Trust (Fifth Asset
Replacement)” announced on the date of this press release, aiming to improve the quality of its
portfolio as well as to return profits to unitholders.
(Note) Total of number of properties and asset size (based on the acquisition price) after the acquisition andsale of the asset described in the “Notice Concerning Acquisition and Transfer of Real Estate
Beneficial Interest in Trust (Fifth Asset Replacement)” announced by SAR on the date of this press
release, and the number of properties and the estimated acquisition price of the assets held by SSR(which price is as described in the appraisal report as of November 1, 2019 obtained by SAR),
respectively.

2.

Overview of the Merger(1) Schedule of the Merger
SAR
Record date for the general meeting ofJanuary 31, 2020
unitholders
Board of Directors meeting to approve theMerger Agreement
March 2, 2020
Date of execution of the Merger Agreement
Date of general meeting of unitholders
March 31, 2020 (tentative)
Record date for splitting the investment units
July 31, 2020 (tentative)
Effective date for splitting the investment units
August 1, 2020 (tentative)
Effective date of the Merger
Registration date of the Merger
Early August, 2020 (tentative)（Note1） SAR plans to split one investment unit into two investment units with July 31, 2020 as
the record date for splitting the investment units and August 1, 2020 as the effective
date of the split (the “Investment Unit Split”). Please refer to “(3) Allocation of
Investment Units under the Merger (Note 2)” below for more details.
SSR
Record date for the general meeting ofunitholders
Board of Directors meeting to approve theMerger Agreement
Date of execution of the Merger Agreement
Date of general meeting of unitholders
Date of delisting
Effective date of the Merger
Registration date of the Merger

5

December 31, 2019

March 2, 2020
March 30, 2020 (tentative)
July 30, 2020 (tentative)
August 1, 2020 (tentative)
Early August, 2020 (tentative)

(2) Form of the Merger
SAR will be the surviving corporation under an absorption-type merger and SSR will be dissolvedin the Merger.
(3) Allocation of Investment Units under the Merger
SAR(Surviving corporation in theabsorption-type merger)

SSR(Dissolving corporation in theabsorption-type merger)
1.78

Allocation of investment units
under the Merger

1(Reference):
Before the Investment Unit
Split
0.89

(Note 1) The number of new SAR investment units to be issued as a result of the Merger (the number of 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 the investment units and August 1, 2020 as the effective date of the 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 of that ratio, against one SSR investment unit, 0.89 SAR
investment units would be allocated and delivered, and this would result in many SSR unitholders
being allocated fractions of less than one SAR investment unit. To make it possible for SSR
unitholders to continue holding SAR 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
SAR investment unit for the purpose of delivering to all SSR unitholders at least one SAR investment
unit, and for every one SSR investment unit, 1.78 SAR investment units post-Investment Unit Split
will be allocated and delivered. For more details on the Investment Unit Split, please refer to the“Notice Concerning a Split of Investment Units,” released by SAR today.
(Note 3) As a result of allocating 1.78 SAR 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 share will be sold through market transactions,and the proceeds from such sale will be delivered to the unitholders allocated fractional shares inaccordance 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 (theunitholders stated or recorded 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 the business period of SSR fromJanuary 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) whichis the quotient 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 a reasonable period from the effective dateof the Merger. Details will be notified as soon as they are finalized.

6

In addition, SSR will table before a general meeting of its unitholders, which is scheduled to be heldon March 30, 2020, a proposal for an amendment to be made to its articles of incorporation with aview 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 is approved in the general meeting of the unitholders,
the last period before the effective date of the Merger is expected to be a seven -month businessperiod from January 1, 2020 to July 31, 2020, and cash distributions with June 30, 2020 as therecord date will not be distributed (and instead, as mentioned above, a merger consideration in theform of cash distributions based on SSR’s distributable income for that same period will be paid).

(4) Changes to the Articles of Incorporation of the Surviving Corporation
SAR is considering to submit to its general meeting of unitholders, scheduled to be held on March
31, 2020, a proposal for partial amendment of its articles of incorporation to clarify the method of
calculating asset management fees in the case of a merger (the “Amendment of the Articles ofIncorporation”). However, no amendment of the articles of incorporation (subject to the Merger
becoming effective) is currently scheduled. Details of the Amendment of the Articles of Incorporation
will be disclosed as soon as they are finalized.
In addition, SAR plans to file a notification pursuant to Article 191 of the Investment Trust Act assoon as such amendment of the articles of incorporation becomes effective.
(5) Main Conditions of the Merger
The Merger is based on the premise that the following conditions and other conditions asprovided in the Merger Agreement are satisfied. If such conditions are not satisfied by the datepreceding the effective date of the Merger or it becomes clear that such conditions will not besatisfied by the date preceding the effective date of the Merger, either SAR and SSR has the right tocancel the Merger Agreement upon prior written notice to the other before the effective date of the
Merger, without owing any responsibilities or liabilities, except where the party making such notice
owes responsibilities and liabilities as a result of a breach by such party of certain other terms of the
Merger Agreement.
­
approvals by the general unitholders’ meetings of SAR and SSR, the procedures inaccordance with other relevant laws and regulations, and approvals and authorizations
considered necessary for the implementation of the matters planned in regard to or related
to the Merger having been obtained and/or completed;­
there having been no breaches of agreements, violations of financial covenants or overdue
payments of monetary liabilities (including taxes and public charges) by either of SAR orSSR (excluding minor items);­
there having been no occurrence of an event of acceleration (including events ofacceleration due to passing of time or notice, or both), suspension of payment or inability to
pay debts by either SAR or SSR;­
consents covering the implementation of the Merger and the basic terms and conditions ofloans subsequent to the effectiveness of the Merger having been received in advance fromall financial institutions lending to either SAR or SSR, and those consents not having been
rescinded; and, in respect of each loan agreement, all necessary measures having beentaken to ensure no breach of any financial covenant clause, no breach of covenant clauseand no occurrence of any acceleration event attributable to SAR after the Merger;­
each of SAR and SSR having reasonably confirmed that it is not required to file aregistration statement on Form F-4 in regard to the Merger under the Securities Act of the

7

­

­

­

3.

United States;
no petition for commencement of bankruptcy proceedings, commencement of civil
rehabilitation proceedings or commencement of other similar legal insolvency proceedings
having been filed against either SAR or SSR.
no revocation of registrations, suspension of all or part of operations or other administrative
disposition which could cause serious impediment to or have a serious adverse impact on
the execution of the Merger having been taken by a supervisory government agency
against SAR and SSR, and their asset management companies;
there has occurred no other event that would reasonably be deemed to seriously prevent
realization of the Merger or to make it significantly difficult to realize the Merger other than
the above.

Basis for Calculation of Allocation of Investment Units under the Merger(1) Basis for Calculation
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 the 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 “2. Overview of the Merger (3) Allocation of Investment
Units under the Merger” above.
Because the investment units of SAR and SSR are both listed on the Tokyo Stock Exchange andmarket 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 acomparable 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 summaryof Nomura Securities’ calculations is shown below. The range of values for the merger ratio shown
indicates the range of estimates for SSR when the value for one SAR investment unit is considered
to be 1.
In its average market investment unit price analysis, Nomura Securities used the simple averageof 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 andpreceding 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 BaseDate, as well as the simple arithmetic average of the closing prices on February 27, 2020 (the“Second Calculation Base Date”), the five business days including and preceding the Second
Calculation Base Date, the one-month period including and preceding the Second Calculation BaseDate, the three-month period including and preceding the Second Calculation Base Date, and thesix-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 in8

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 profit of 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 isplanned to be sold in the fiscal periods ending July 2020 and January 2021. For details in the
supplemental explanation regarding the assumptions and disclaimers of Nomura Securities’
analysis, please refer to Note 1 at the end of this press release.
Valuation Method

Range of Merger Ratio

Average Market Investment Unit
Price Analysis(First Calculation Base Date)
Average Market Investment Unit
Price Analysis(Second Calculation Base Date)
Comparable Investment
Corporation Analysis
DCF Analysis
Adjusted Net Asset Method0.80 - 0.81

0.83 - 0.84

0.89 - 1.09
0.83 - 0.93
0.90

In performing its analysis, Mizuho Securities 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 both listed on the Tokyo Stock Exchange and market
prices are available, Mizuho Securities used a market investment unit price based analysis. In
addition because there are multiple listed investment corporations that are similar to SAR and SSR
to a certain degree in terms of, among others, owned real property portfolio and others from theviewpoint of analyzing the range of 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 conducted the dividend discount model analysis as amethod of calculation (“DDM Analysis”) of the unitholder value based on dividends that unitholdersof SAR and SSR could be expected to receive in the future, and for the purpose of reflecting themarket 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 the range of the number of SAR
investment units to be allocated for each investment unit of SSR.

Valuation Method

Range of Merger Ratio

Market Investment Unit Price
Based Analysis
Comparable Investment
Corporation Analysis

0.83 - 0.84
0.81 - 1.04

9

DDM Analysis

0.80 - 1.09

Adjusted Net Asset Method0.87 - 0.90

In performing the market investment unit price based analysis, Mizuho Securities adopted
February 27, 2020 as the reference date (the “Reference Date”) and reviewed the investment unit
price on the Reference Date and the average of the closing investment unit prices during the mostrecent five business days, the most recent month, the most recent three-month period and the mostrecent six-month period, each ending on the Reference Date.
In performing the DDM Analysis, Mizuho Securities assessed the unitholder’s value for SSR andSAR 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 prepared by SREFM
for the period from June 2020 to December 2022, Mizuho Securities took into consideration that theasset 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 theacquisition of new properties, as the Special Committee concluded it reasonable to do so. The
financial forecasts of SAR and SSR used as the basis for the calculation in the DDM Analysis were
not created on the assumption that the Merger will be implemented. There were no fiscal years inwhich 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, please refer to Note 2 at the end of this press release.
(2) 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 ofeach of SAR and SSR, their future business prospects, the merits of the Merger and the results of
the analyses performed by their respective financial advisors, SAR and SSR determined that theabove merger ratios are fair.
For the process regarding the assessment of the merger ratio by SSR, please also refer to “(5)Measures to Ensure Fairness i. Measures to ensure fairness in assessing the propriety of the
Merger and the merger ratio” below.
(3) 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.
(4) Prospects and Reasons for Delisting
The Merger is planned to be executed in the form of an absorption-type merger whereby SAR willbe the surviving corporation and SSR will be dissolved in accordance with Article 143(iv) of theInvestment Trust Act. The SSR investment units are expected to be delisted on July 30, 2020, two

10

business days prior to the effective date of the Merger, in accordance with the delisting criteria
stipulated by the Tokyo Stock Exchange. As consideration for the Merger, each of SSR’s unitholders
will be allocated new SAR investment units according to the number of SSR investment units theyhold, thus becoming SAR unitholders, and because SAR investment units are listed on the Tokyo
Stock Exchange, those unitholders will continue to have the opportunity to trade their investment
units on the Tokyo Stock Exchange.
(5) 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 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 management company is ensured in terms of theInvestment Trust Act, and all material matters of its assessments were deliberated and approved byits board of directors.
In addition, SAR appointed Anderson Mori & Tomotsune as its legal advisor for the Merger, andreceived advice concerning the methodology and process relating to the procedures anddecision-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 bepotentially 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 andSAR 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, and Mr. Kiyoshi
Kondaibo who is a third party (for the independence and appropriateness of Mr. Kondaibo, pleasesee SSR’s Press Release on Execution of Memorandum of Understanding) at the meeting of its
board of directors held on December 19, 2019, in order to ensure the fairness of the decisions to bemade when considering whether it is appropriate to carry out the Merger and the fairness of its
terms. In addition, SSR delegated to the Special Committee the task of assessing the propriety of
the Merger and to give its opinions to SSR’s board of directors.
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 of11

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 theMerger; (b) to appoint a financial or legal advisor for the Special Committee or designate or approvea financial or legal advisor for SSR; and (c) to receive information necessary to assess and appraise
the Merger from the board of directors of SSR. Remuneration is paid to the members of the Special
Committee based on the number of 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 thatwere 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 and assessment, theSpecial Committee received advice from Mori Hamada & Matsumoto, legal advisor of SSR,
concerning the method 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 and information on SAR’s initial proposal for the Merger, SAR’s proposal forthe merger ratio of the Merger, the respective preparation procedures for and contents of businessplans of SAR and SSR, assumptions for the calculation of the merger ratio by Mizuho Securities andthe 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 fromthe advisors, and thus it received sufficient information for its determination. In addition tonegotiations 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 from Mizuho Securities. After such discussion and review andwith 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
about the terms of the Merger by among others, instructing and requesting Mizuho Securities torequest SAR to increase the merger 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 aresult 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 effectthat it was appropriate for SSR to carry out the Merger since: (a) the Merger was deemed ascapable of increasing the value of SSR; (b) fair procedures were being implemented to secure theinterests of SSR’s general unitholders upon the Merger; and (c) the terms of the Merger weredeemed 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 growthpotential and reduce certain operational costs, and therefore the Merger is considered beneficial
to the resolution of various issues faced by SSR and to increasing the value of SSR; and (ii) withadvice from Mizuho Securities, screening of investment corporations that may be a potential

12

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 though an 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 the market check conducted by SSR prior to a merger withMIRAI 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 deemedas 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 makeappropriate decisions based on sufficient information, and (c) fair procedures are implemented tosecure the interests of general unitholders, by taking into consideration the following matters andothers:(i) the Special Committee, composed of independent members, was established for purposesof 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 theadvisors based on its professional knowledge and a written merger ratio calculation reportfrom 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 potentially subject to the influence of Star Asia Group, he andSAIM, the asset management company, are not involved in the decision-making process andthe 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 ofGeneral Meeting of Unitholders and others.
(c) Appropriateness of terms of transactions
The merger ratio of the Merger is appropriate, because (i) the preparation procedures andcontents 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 judged
reliable, and the merger ratio of the Merger exceeds the upper limit of the valuation range basedon the market investment unit price based analysis, and is within the valuation range based on thecomparable investment corporation analysis, the DDM Analysis and the adjusted net asset
method, and (iii) the merger ratio is the ratio agreed upon through good faith negotiations
between the Special Committee and SAR. In addition, the terms of the Merger transactions arefair because no any unfavorable terms has been imposed on SSR in connection with the Merger.

13(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 proceduresin place to protect the interests of SSR’s general unitholders in connection with the Merger, andthe 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, andreceived a written merger ratio calculation report on February 28, 2020. For a summary of thewritten merger ratio calculation report, please refer to “(1) Basis for Calculation” above. SSR’s fee
for Mizuho Securities is a contingent fee that will be paid subject to successful completion of the
Merger and satisfaction 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 of deliberation 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, examinationand 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 ratio of
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 the Merger. In the process of examining the Merger,
however, the Special Committee expelled Mr. Sugihara from the floor and kept him out of thedeliberation 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 sameasset management company. However, SAIM has never been involved in the examination of theterms 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 management company.
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 conducted by SSR when the Proposal was
made and, based on the results of the market check, confirmed with several investment

14

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 andother 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 the 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 the Special Committee would consider
reasonably necessary (except where such counterproposal is made based on its active contact withthird parties after the execution of the MOU), which gives third parties an opportunity to makecounterproposals. 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 (1) through (3) 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 results of such analyses together withother 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 inregard 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 a financial perspective based on certain assumptions inregard to the allocation under the Merger.
In addition, as mentioned in i. above, SSR’s Special Committee (i) received an explanation from
Mizuho Securities about details of the calculation results, preconditions of the calculation, andmatters 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, andmade its report as stated in i. above.
SAR and SSR did not, however, obtain written opinions (so-called “fairness opinions”) from theirrespective financial advisors to the effect that the merger ratio is reasonable from a financial
perspective for their respective unitholders.
4.

Outline of Merging Parties
Surviving Corporation
(1)

Name

Star Asia Investment Corporation(2)

Location

2-5-1, Atago, Minato-ku, Tokyo

15

Dissolving Corporation
Sakura Sogo REIT Investment
Corporation
3-8-11, Kudan Minami, Chiyoda-ku,
Tokyo

(3)
(4)
(5)

Name of Executive

Atsushi Kato

Toru Sugihara

52,745 million yen

29,254 million yen

December 1, 2015

April 1, 2016

540,824 units

333,001 units

Fiscal Period-EndsJanuary and July

June and December (Note 2)Main Assets under

Real estate and real estate beneficiary

Real estate and real estate beneficiaryManagement

interests in trustinterests in trust

Director
Unitholders’ Capital
Date of
Incorporation
Total Number of(6)

Outstanding
Investment Units(Note 1)

(7)
(8)

Total Number of(9)Assets(Note 1)
Book Value at End(10)of Fiscal Period(Note 1)

(11)

Office buildings

11

Office buildings

8

Residences

7

Retail facilities

4

Logistics facilities

8

Residences4

Hotels8

Others2

Office buildings

36,068 million yen

Office buildings

26,582 million yen

Residences

15,571 million yen

Retail facilities

22,171 million yen

Logistics facilities

30,877 million yen

Residences

6,574 million yen

Hotels

20,634 million yen

Others2,366 million yen

Sumitomo Mitsui Banking Corporation,

Main Finance

Mizuho Bank, Ltd., and nine other

Providers

9.2%

Japan, Ltd. (Trust account)
Japan Trustee Services(12)

and seven other banks

banks
The Master Trust Bank of

Major Unitholders

Bank, Ltd. (Trust account)and Holding Ratio

STAR ASIA CAPITAL I LLC

Sumitomo Mitsui Banking Corporation,

7.1%
4.5%

(Note 1)The Master Trust Bank ofJapan, Ltd. (Trust account)

7.5%

Japan Trustee Services

6.8%

Bank, Ltd. (Trust account)
Lion Partners Godo Kaisha

5.1%

BNY GCM CLIENT
STAR ASIA CAPITAL II LLC

4.5%

ACCOUNT JPRD AC ISG

4.5%(FE-AC)(13)

STAR ASIA CAPITAL III LLC

4.5%

STAR ASIA CAPITAL IV LLC

4.5%

Morgan Stanley MUFG

3.8%

Securities Co., Ltd.

Business Results for the Last 3 Fiscal Periods(In units of million yen unless otherwise specified; figures rounded down to the nearest unit)

Fiscal Period Ended:

Sakura Sogo REIT Investment

Star Asia Investment Corporation

Corporation

Jul. 2018

Jan. 2019

Jul. 2019

Dec. 2018

Jun. 2019

Dec. 2019

Operating Revenue

2,810

3,844

3,785

2,362

2,394

2,391

Operating Profit

1,576

2,406

2,225

1,046

1,037

1,046

Ordinary Profit

1,305

2,073

1,965

885

874

872

Net Profit

1,305

2,049

1,964

886

885

704

Net Profit per Unit (yen)

2,775

3,889

3,632

2,661

2,660

2,115

Distributions per Unit (yen)

2,773

3,720

3,625

2,662

2,660

2,116

Net Assets per Unit (yen)100,477

101,400

101,215

90,51390,512

89,967

16

Net Assets

47,287

54,83954,73930,14130,14029,959Total Assets

93,553111,079

110,240

61,64363,38963,111Name of Asset(14)

Management

Star Asia Investment Management Co., Ltd. (Note 3)

Company
Location of Asset(15)

Management

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

Company
Name and Title of(16)

Representative ofAsset Management

Atsushi Kato, President and CEO

Company(17)

Relationship between Parties Involved
CapitalRelationship

While there is no capital relationship required to be disclosed between the Merging
Parties, the asset management company for both the surviving corporation and thedissolving corporation is SAIM.
While there is no personnel relationship required to be disclosed between the
Merging Parties, it should be noted that the asset management company for boththe surviving corporation and the dissolving corporation is SAIM, whose President

Personnel

and CEO is also the Executive Director of the surviving corporation. In addition, Mr.

Relationship

Toru Sugihara, Executive Director of the dissolving corporation, is an employee of
the Tokyo Branch of Star Asia Management Japan Ltd., a subsidiary of Star Asia
Management Ltd., with which SAR and the asset management company executeda sponsor support agreement.

Business
Relationship

There is no business relationship required to be disclosed between: (a) SAR and its
asset management company, and their related persons and affiliates; and (b) SSR
and its asset management company, and their related persons and affiliates.
The dissolving corporation (SSR) is not a related party of the surviving corporation

Status as Related
Party(SAR) and the surviving corporation (SAR) is not a related party of the dissolving
corporation (SSR). However, the asset management company for both thedissolving corporation and the surviving corporation is SAIM and it is a related partyof each of them.

(Note 1) The relevant figures are as of July 31, 2019 for SAR, and as of December 31, 2019 for SSR. The“holding ratio” is rounded to the nearest tenth.
(Note 2) SSR will submit to its general meeting of unitholders to be held on March 30, 2020 a proposal toamend its articles of incorporation in order to change the ends of its fiscal periods to the end ofJanuary and the end of July.
(Note 3) As announced in the “Notice Concerning Execution of Asset Management Agreement with Star Asia
Investment Management Co., Ltd. and Resulting Change of Specified Associated Corporations”
dated February 18, 2020 released by SSR, SSR has executed a new asset management agreementwith SAIM on February 18, 2020, which has come into effect as of March 1, 2020. The asset
management agreement with SREFM was terminated as of February 29, 2020. The asset
management agreement to which SSR is a party will be terminated subject to approval to be17

obtained at SSR’s general meeting of unitholders and on the condition that the Merger becomes
effective. Regarding the resolution of the Unitholders’ Meeting Convened by LPGK related to thecancellation of the asset management agreement with SREFM and execution of the asset
management agreement with SAIM, please note that although a lawsuit and other legal proceedings
were instituted to rescind the resolution of the general meeting of unitholders, the lawsuit to rescind
the resolution of the general meeting of unitholders was dismissed on February 27, 2020 (although
the period for appeal has not expired, and it remains to be confirmed whether or not there will be an
appeal).

5.

Post-Merger Status(1) Status of Surviving Corporation
Surviving Corporation
(1)

Name

Star Asia Investment Corporation(2)

Location

2-5-1, Atago, Minato-ku, Tokyo(3)

Name of Executive
Director

Atsushi Kato

(4)

Unitholders’ Capital

To be determined (Not yet determined.)(5)

Fiscal Period-EndsJanuary and July

(6)

Net Assets

To be determined (Not yet determined.)(7)

Total Assets

To be determined (Not yet determined.)

(8)
(9)

Name of AssetManagement Company
Location of AssetManagement Company

Star Asia Investment Management Co., Ltd.
Atago Green Hills Mori Tower 18F, 2-5-1, Atago, Minato-ku, Tokyo

Name and Title of(10)

Representative of Asset

Atsushi Kato, President and CEO

Management Company(2) Major Unitholders and Unitholding Ratio before and after Merger
Before Merger
Star Asia Investment Corporation (Note 1)
The Master Trust Bank of Japan,
Ltd. (Trust account)
Japan Trustee Services Bank, Ltd.
(Trust account)

Sakura Sogo REIT Investment Corporation (Note 1)
9.2%
7.1%

STAR ASIA CAPITAL I LLC

4.5%

STAR ASIA CAPITAL II LLC

4.5%

STAR ASIA CAPITAL III LLC

4.5%

STAR ASIA CAPITAL IV LLC

4.5%

The Master Trust Bank of Japan,
Ltd. (Trust account)
Japan Trustee Services Bank, Ltd.
(Trust account)
Lion Partners Godo Kaisha
BNY GCMCLIENT ACCOUNT JPRD AC ISG(FE-AC)Standing Proxy

7.5%
6.8%
5.1%

4.5%

MUFG Bank, Ltd.

Morgan Stanley MUFG Securities

3.8%

Co., Ltd.
Trust & Custody Services Bank,

3.0%

18

Trust & Custody Services Bank, Ltd.

3.2%

Ltd. (Securities investment trust(Securities investment trust account)account)
The Nomura Trust and Banking

3.0%

Co., Ltd. (Investment trust account)
NORTHERN TRUST

2.7%

EVO FUND

3.0%

NIPPON KANZAI Co., Ltd.

2.6%

GALAXY JREIT PTY LIMITED

2.6%

CO.(AVFC)RE UKDU
UCITS CLIENT NON LENDING

The Nomura Trust and Banking Co.,

10PCT

Ltd. (Investment trust account)

2.6%

TREATY ACCOUNTSSBTC CLIENT OMNIBUS

1.5%

ACCOUNT
After Merger (Simple total after taking into account the merger ratio)(Note 2)The Master Trust Bank of Japan, Ltd. (Trust account)

8.6%

Japan Trustee Services Bank, Ltd. (Trust account)

7.0%

Trust & Custody Services Bank, Ltd. (Securities investment trust account)

3.1%

STAR ASIA CAPITAL I LLC

2.9%

STAR ASIA CAPITAL II LLC

2.9%

STAR ASIA CAPITAL III LLC

2.9%

STAR ASIA CAPITAL IV LLC

2.9%

The Nomura Trust and Banking Co., Ltd. (Investment trust account)

2.8%

Morgan Stanley MUFG Securities Co., Ltd.

2.1%

BNY GCM CLIENT ACC

1.9%(Note 1) Figures shown are respectively based on SAR’s unitholders register as of July 31, 2019 and SSR’s
unitholders register as of December 31, 2019. Accordingly, the figures may not reflect the actual
holdings of the unitholders. The “holding ratio” is rounded to the nearest tenth.
(Note 2) For the major unitholders and their unit holding ratios after the Merger, the number of investment
units is calculated on the basis of the ratios of investment units held by the major unitholders prior tothe merger as described above and on the assumption of SAR investment units being allocated inaccordance with the content of “2. Overview of the Merger (3) Allocation of Investment Units under
the Merger” above. The “holding ratio” is rounded to the nearest tenth.

(3) Amendment to Asset Management Agreement
After the Merger, SAR plans to continue entrusting its asset management functions to SAIM (towhich SAR is currently entrusting such services).
As announced in the “Notice on Execution of Asset Management Agreement with Star Asia
Investment Management Co., Ltd. and Resulting Change of Specified Associated Corporations”
published by SSR on February 18, 2020, SSR entered into a new asset management agreementwith SAIM on February 18, 2020, which came into force as of March 1, 2020. The asset
management agreement between SSR and SREFM was terminated dated as of February 29, 2020.
The asset management agreement to which SSR is a party will be terminated subject to approval tobe obtained at SSR’s general meeting of unitholders and on the condition that the Merger becomes19effective. Regarding the resolution of the Unitholders’ Meeting Convened by LPGK related to thecancellation of the asset management agreement with SREFM and execution of the asset
management agreement with SAIM, please note that although a lawsuit and other legal proceedings
were instituted to rescind the resolution of the general meeting of unitholders, the lawsuit to rescind
the resolution of the general meeting of unitholders was dismissed on February 27, 2020 (although
the period for appeal has not expired, and it remains to be confirmed whether or not there will be an
appeal).
(4) Amendment to Investment Policy
SAIM has amended its guidelines on the management of SAR’s assets with a view to managing
SAR’s assets after the Merger. For more details, please see the “Notice Concerning Partial
Amendment to the Management Guidelines of the Asset Manager” announced today.
(5) Amendment to Agreement with Sponsor, Etc.
No amendment is expected to be made to the agreements that have been executed by andbetween SAR and its sponsor and other relevant parties as of the date of this Notice.
The asset custody agreement and the administrative services agreement concerning institutional
operations that have been executed by and between SSR and Sumitomo Mitsui Trust Bank, Limited
and the services agreement that has been executed by and between SSR and Kaneyama &Associates (a certified public accountants’ firm) will terminate upon the Merger.

6.

Outline of Accounting Treatment
The purchase method is expected to be used in the accounting treatment of the Merger with SAR as
the acquiring corporation and SSR as the acquired corporation, applying the Accounting Standards for
Business Combinations (ASBJ Statement No. 21, revised as of January 16, 2019). Goodwill or
negative goodwill is expected to arise as a result of the Merger, but the amount is currently uncertain.
It will be announced as soon as it has been determined.

7.

Outlook
For the outlook of the business results after the Merger, please see the “Notice on Outlook for
Business Results and Distributions for Fiscal Periods Ending on January 31, 2021 and July 31, 2021
after the Merger between Star Asia Investment Corporation and Sakura Sogo REIT Investment
Corporation” announced today.
For the impact of the execution of the Merger Agreement and other relevant events on SAR’s
business results for the fiscal period ending on July 31, 2020 (from February 1, 2020 to July 31, 2020),
please see the “Notice on Changes to Outlook for Business Results for Fiscal Periods Ending on
January 31, 2020 and July 31, 2020” announced by SAR today.
For the impact on business results for the fiscal period ending on July 31, 2020 (from January 1,
2020 to July 31, 2020), please see the “Notice on Outlook for SSR’s Business Results andDistributions for Fiscal Period Ending on July 31, 2020 (Final Period of Operation) and Cash Payment
on Merger” announced by SSR today.
END* This press release has been distributed to the Kabuto Club; the Ministry of Land, Infrastructure, Transport and20

Tourism Press Club, and the Ministry of Land, Infrastructure, Transport and Tourism Press Club for Construction
Publications.
* Websites of SAR and SSR
Star Asia Investment Corporation:

http://starasia-reit.com/en/

Sakura Sogo REIT Investment Corporation:

http://sakurasogoreit.com/en/<Other press releases SAR and SSR jointly issued today>

・・

Notice Concerning the Forecast of Operating Results and Distributions Subsequent to the Mergerof Star Asia Investment Corporation and Sakura Sogo REIT Investment Corporation for the Fiscal
Periods Ending January 31, 2021 and July 31, 2021
Supplementary Explanatory Material Regarding Press Releases dated today (March 2)

21

(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 of such 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, off-balance-sheet assets and liabilities and other contingent
liabilities) of SAR and SSR, including the analysis and evaluation of individual assets andliabilities. It is assumed that the information included in the financial forecasts of each ofSAR and SSR (including profit plans and other information) has been reasonably
examined or prepared based on the best and good faith forecasts and judgment of the
management of SAR and SSR that are currently available. Nomura Securities’ calculationreflects the information obtained by Nomura Securities by February 27, 2020 andprevailing economic conditions. Nomura Securities’ calculation was made for the sole
purpose of assisting the institution that determines the business execution of Star Asia
Investment Corporation to assess the fairness of the merger ratio.
(Note 2) In determining the merger ratio, Mizuho Securities 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 managementcompany the asset management agreement of which was terminated at the time ofdelivery of the written merger ratio calculation report; hereinafter the same) or discussed
between Mizuho Securities and SAR and SSR and the Special Committee, and uponwhich the calculation of the merger ratio is substantially based. Mizuho Securities did not
independently verify (nor assumes responsibility or liability for independently verifying) the
accuracy or completeness of such information. The contents expressed in Mizuho
Securities’ written merger ratio calculation report could potentially differ if there are mattersthat 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 and liabilities and other contingent liabilities), or the reserves of
either company or its affiliates, and Mizuho Securities was not independently provided withany such valuation or appraisal by a third party, nor did Mizuho Securities make any
request to a third party for any such valuation or appraisal. Mizuho Securities does notassume any obligation to conduct any inspection of the properties or facilities of SAR or
SSR, nor has Mizuho Securities evaluated the capitalization, solvency or fair value of SAR
or SSR under any law relating to bankruptcy, insolvency or similar matters. With respect toany information which Mizuho Securities requested in connection with the calculation of themerger ratio but was not provided or disclosed to Mizuho Securities by SAR and SSR,

22

which 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 relied on assumptions it believed to be reasonable and appropriate, or
was based on the premise that there was no such impact. Mizuho Securities did not verify
the impact of such assumptions or premise on the future financial conditions of SAR and
SSR in the event that such assumptions prove to be materially inaccurate.
With respect to the financial forecasts and other forward-looking information provided toMizuho Securities, Mizuho Securities assumed that such information was reasonably
prepared by the executive directors of each of SAR and SSR or officers and employees of
the asset management company of each of SAR and SSR on a basis 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 plansof each of SAR and SSR based on the Special Committee’s request, subject to thecondition that the details of such adjustments and details of the financial forecasts andbusiness plans before the adjustment were reported to the Special Committee, and theSpecial Committee has confirmed the reasonableness of such details and preconditions of
the adjustment. Mizuho Securities relies on the financial forecasts and business plans after
the adjustment or modification and does not rely on independent verification of thefeasibility 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, therefore, it has relied on the assessments made by therelevant advisors to SAR and SSR with respect to such issues. Mizuho has further
assumed that the Merger will qualify as a tax-free reorganization for Japanese corporate
tax purposes. Mizuho Securities has provided the results of its financial analysis to SSR in
response to the request of SSR for the sole purpose of assisting the board of directors of
SSR to determine the merger ratio. Mizuho Securities has not expressed its opinion thatthe merger ratio is fair from the financial perspective.
This is an English translation of the announcement in Japanese dated March 2, 2020.
However, no assurance or warranties are given for the completeness or accuracy of this English
translation.

23