4th

Fiscal Period Business Report(Statement of Financial Performance)

November 1, 2015 – April 30, 2016

Hopeful future
for Japan

6-2-1 Ginza, Chuo Ward, Tokyo

http://www.nippon-healthcare.co.jp/en/

I. Overview of Nippon Healthcare Investment Corporation
To Our Investors
Message from Executive Director
We would like to express our deep gratitude to all our unitholders for your support of Nippon Healthcare Investment
Corporation (“NHI”).
NHI posted financial performance of 667 million yen in operating revenue, 289 million yen in operating income and 260
million yen in net income for the fiscal period ended April 2016 (4th Fiscal Period). Concerning distributions, NHI declared a
distribution amount per unit of 3,495 yen and a distribution amount in excess of earnings per unit of 800 yen, bringing thetotal distribution amount per unit to 4,295 yen. See page 3 for Financial and Management Highlights
During the 4th Fiscal Period, NHI acquired Alpha Living Okayama Nishigawa Ryokudokoen, Alpha Living Okayama
Korakuen, Alpha Living Takamatsu Ekimae and Alpha Living Takamatsu Hyakkenmachi (total acquisition price: 2,550
million yen) with the capital gained through the public offering announced in October 2015, expanding the asset size
from 13,280 million yen at the time of listing to 18,608 million yen. NHI will aim to enhance portfolio value throughinvestments in carefully selected properties going forward. See page 5 for details of External Growth
The number of operators of facilities owned by NHI has increased from 7 at the time of listing to 10 in the fiscal period
ended April 2016. NHI has realized maintenance and improvement of portfolio stability bypressing forward diversification of operators and concluding long-term fixed rent leaseagreements. See page 7 for Stable Management Strategy
On the financial front, NHI has promoted diversification of payment dates. NHI willcontinue to work to further strengthen its financial standing while reducing refinancing
risks in the future. See page 10 for Financial Conditions
Going forward, NHI will strive to maximize unitholders’ value together withthe joint efforts by Daiwa Real Estate Asset Management Co. Ltd., the asset
manager for NHI, Daiwa Securities Group Inc., the sponsor, and AIP Healthcare
Japan GK, the advisor.
We wish for the continued success of our unitholders and ask for yourcontinued support of NHI.

Hiroshi Fujioka Nippon Healthcare Investment Corporation Executive Director
Contents

I. Overview of Nippon Healthcare Investment Corporation
To Our Investors……………………………………………… 2
Financial and Management Highlights………………………… 3
Characteristics of Nippon Healthcare Investment Corporation…… 4External Growth……………………………………………… 5

II. Investor Information…………………………………… 12
III. Asset Management Report…………………………… 14
IV. Balance Sheets… ……………………………………… 20
V. Statements of Income………………………………… 22

Portfolio Status……………………………………………… 6
Stable Management Strategy………………………………… 7
Portfolio List………………………………………………… 8
Portfolio Map………………………………………………… 9
Financial Conditions… ……………………………………… 10
Description of Asset Manager………………………………… 11

VI. Statements of Changes in Net Assets… ………… 23
VII. Statements of Cash Flows…………………………… 23
VIII. Notes to Financial Statements……………………… 24
IX. Independent Auditor’s Report… …………………… 33
Please refer to the pages starting from the back cover for information on the operators

2

Financial and Management Highlights
Steady growth in asset size and maintenance of stable distribution level■ Actual Financial Results for Fiscal Period Ended April 2016 (4th Fiscal Period), Forecast of Operating Results for Fiscal PeriodEnding October 2016 (5th Fiscal Period) and Fiscal Period Ending April 2017 (6th Fiscal Period)
3rd Fiscal
Period

4th Fiscal
Period(result)(result)

5th Fiscal Difference
from 4th
Period(October 2016) Fiscal
Period(forecast)(October 2015) (April 2016) Difference

6th Fiscal Difference
from 5th
Period(April 2017)
FiscalPeriod(forecast)

No. of properties owned at the end of the
fiscal period

17

21

4

21

-

21

-

Operating revenue (million yen)

555

667

111

676

9

676

0

Operating expense (million yen)

330

377

46

404

27

405

0

Recurrent income (million yen)

224

289

64

271

-17

271

-0

Non-operating expenses (million yen)

23

27

4

27

-0

27

-0

Ordinary income (million yen)

201

261

60

244

-17

244

0

Net income (million yen)

200

260

60

243

-17

243

0

■ Distribution Result for 4th Fiscal Period, Distribution Forecast for 5th Fiscal Period and 6th Fiscal Period
5th Fiscal Difference
from 4th
Period(October 2016) Fiscal
Period(forecast)

4th Fiscal
Period(result)(result)

60,80074,632

13,832

74,632-

74,632

-

4,067

4,295

228

4,060

-235

4,060

-

3,299

3,495

196

3,260

-235

3,260

-

768

800

32

800

-

800

-

(October 2015) (April 2016) Difference

Number of investment units issued andoutstanding at the end of the fiscal period (units)
Distribution per unit
(including distribution in excess of earnings) (yen)Distribution per unit

(excluding distribution in excess of earnings) (yen)Distribution in excess of earnings
per unit (yen)■ Distribution per Unit (including distribution in excess of earning)
(yen)
4,500

4,067

4,000

768

3,000

4,295
800

Distribution inexcess of
earnings per unit

2,500

810

■ Asset Size (total amount of acquisition prices)(million yen)
20,000

4,060

4,060

800

800

18,60816,05816,000

3,471

3,500

3,299

6th Fiscal Difference
from 5th
Period(April 2017)
FiscalPeriod(forecast)

3rd Fiscal
Period

3,495

3,260

13,2803,260
12,000

2,661

2,000
8,000
1,500
1,000

Distribution
per unit
excluding
distribution inexcess of
earnings

（

）

7,265

4,000

500
0

0
Fiscal Period
ended
April 2015
(2nd FP)

Fiscal Period Fiscal Period Fiscal Period Fiscal Period
ended
ended
endingendingOctober 2015 April 2016 October 2016 April 2017
(3rd FP)(4th FP)(5th FP)(6th FP)

Fiscal Period
ended
October 2014
(1st FP)

Fiscal Period
ended
April 2015
(2nd FP)

Fiscal Period
ended
October 2015
(3rd FP)

Fiscal Period
ended
April 2016
(4th FP)I. Overview of Nippon Healthcare Investment Corporation

3

Characteristics of Nippon Healthcare Investment Corporation
Contributing to society and delivering returns to unitholders through substantial support system

1

Growth through investment in the growing senior market◦ Social demand for healthcare facilities is expected to grow in the medium to long term through further aging of the population.
◦ NHI aims to expand assets under management in the medium to long term using our expertise on healthcare,extensive network and fund raising capabilities.

Japan’s graying
population
The ratio of thenumber of people 65
years or older(elderly population)
to the total
population(population agingrate) in Japan is
expected to rise, andthe population of theelderly living alone is
expected to growalong with the rising
population aging
rate.

2
3
4

■ Fill-Rate of Housing for Elderly to Elderly Population Target Rate for 2025
Fill-rate of housing for elderly toelderly population(%) 4.0

Capacity of housing for elderly
1.60 (million)

1.463

Fill-rate of housing for elderly to elderly population

2.1%(2014)

3.0

Housing for elderly for
approximately 770,000 is needed

4.0%(2025)

1.0

0.89

0.99

1.09

1.20

Approx. 0.77

Urgent need for widespread availabilityof housing for elderly

2.0

0.0

Policy target by
the Ministry ofLand, Infrastructure,
Transport and Tourism

1.85

1.18

1.23

1.30
0.383

2010

0.54

0.60

0.65

0.71

0.80

0.332

0.137

0.173

0.199

0.228

0.299

0.120

0.153

0.263

0.357

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2.04

2.10

0.651

0.693

2013

2014

1.48
0.571

0.80

0.40

0.441

0.00
2011

2012

2025

(Source) Cabinet Office, Ministry of Health, Labour and Welfare, Ministry of Internal Affairs and Communications, National Institute of Population and Social Security Research, etc.

Investment in social infrastructure
to contribute to society

Expansion of social demand in line with shortage of private nursing homes and facilities for the elderly◦ NHI will contribute to the development of quality healthcare
facilities which serve as social infrastructure.

Nippon Healthcare
Investment Corporation
Supply of capital to operators
through acquisition of private
nursing homes and facilities
for the elderly

Supply of capital
Sales of properties

Operators
Development of facilities
with funds gained fromsales of facilities

Promotion of supply of quality private nursing homes and facilities for the elderly

Stable cash flow
◦ To stabilize cash flow, NHI will sign long-term fixed-rent lease agreements with operating bodies (“operators”) of healthcare facilities.

Unitholder return policy utilizing asset characteristics◦ NHI will implement unitholder returns through distributions inexcess of earnings utilizing the asset characteristic of a high rateof depreciation.
◦ NHI offers a unitholder benefits program for the purpose of
expanding the horizons of NHI's unitholders, under theagreement with operators of healthcare facilities which NHI
owns.

5

Rental income
Rental business expenses
Depreciationand SG&A expenses
Distributions
Distributions in excess of earnings
Distributions (income) in excess ofearnings(refund of investment) with an upper
limit of 40% of depreciation
Distributions to unitholders
Income before taxes

Substantial support system by sponsor and advisor◦NHI will develop the support system that brings together thecomprehensive strengths of Daiwa Securities Group Inc. (sponsor),an expert finance company, and AIP Healthcare Japan GK(advisor), an expert healthcare company.
◦NHI’s asset manager is able to establish cooperative relations
with a wide range of operators as it is very independent with noparticipation of operator groups.

4

Investment Corporation
SponsorOperators

10 companies
Asset Manager

AdvisorExternal Growth
Continuous development of portfolio through acquisition of carefully selected properties■ Ratios of Investment in Regions
Ratios ofinvestment
in regions■ Ratios of Investment in Healthcare Facility Types
Targetincorporation
ratio

Definition

Tokyo, Kanagawa, Chiba and Saitama
Three Major The greater Tokyo area: prefectures
Metropolitan
The
Chukyoarea:
Aichi,
Mie and Gifu prefecturesAreas
The Kinki area: Osaka, Kyoto, Hyogo, Nara and Shiga prefectures

Fee-based homes for the elderly (Note 1) (withPrivate nursing nursing care / health-type / residential-type)homes and other60%
facilities for the Elderly housing with supportive services (Note 2)
or moreelderly
Other private nursing homes and facilities for the elderly
Medical facilities
40% or less50%

or moreCore City
Areas

Cities outside the Three Major Metropolitan Areas withpopulations of 200,000 or more

50%
or less

Other

Cities outside the Three Major Metropolitan Areas and the Core
City Areas with populations under 200,000

10%or less

Alpha Living Okayama Korakuen

Alpha Living
402
Okayama Korakuen

LocationSan

Okayama
Korakuen

Okayama Sta.

Joka

AEON MALL
OkayamaAlpha Living
Okayama Nishigawa
Ryokudokoen

Okayama ElectricTramway
Higashiyama Main Line

Okayama ElectricTramway
Seikibashi Line

Acquisition dateNovember 24, 2015
Acquisition price (million yen) 730
Total leased area (m2)2,124.16
Structure / floors
RC/7F
Number of rooms (rooms) 53
Resident capacity
55
Range of room size (m2)
18.06 ~ 36.63
Opening date
October 1, 2014

San
Mainyo
Line
yo S
hink
ans
en

Alpha Living Okayama Nishigawa Ryokudokoen
Okayama-shi,
Okayama

10% or less

Other

(Note 1) “Fee-based homes for the elderly” refer to facilities as defined by Article 29 of the Act on
Social Welfare for the Elderly. However, this excludes facilities that fall under the category ofelderly housing with supportive services.
(Note 2) “Elderly housing with supportive services” refers to rental housing registered by prefecturesthat meet the registration criteria stipulated by the Act on Securement of Stable Supply for
Elderly Persons’ Housing.

■ Properties Acquired in 4th FP (ended April 2016)

LocationTargetincorporation
ratio

Classification of healthcare facility

Asahi Gawa
Okayama
CastleOkayamaPrefectural
Government

Daiunjimae
Okayama City Office

0

300m

Okayama-shi,
OkayamaAcquisition dateNovember 24, 2015
Acquisition price (million yen) 610
Total leased area (m2)2,128.44
Structure / floors
RC/4F
Number of rooms (rooms) 45
Resident capacity
48
Range of room size (m2)
18.40~37.94
Opening date
March 1, 2015

Site Features The Property is located close to Okayama Station and the prefectural
government’s office of Okayama, which are in the center of Okayama City. Trees areplanted effectively along the nearby Nishigawa River, creating a tasteful community
environment with a park on the north side of the Property.
Property Features The Property was completed in 2014 and is relatively new andprovides private rooms of around 18m2 which is a standard room size for facilities
with nursing care. The rooms are equipped with sink and toilet.

Site Features The Property is closely located to the east side of Asahigawa River,which runs north to south in Okayama City. On its south, across an arterial road, isKorakuen, which is one of the three great gardens of Japan and Okayama castle; andquiet residential areas spread on the west and southwest sides.
Property Features The Property which opened in 2015 was converted from a recreation
property owned by a local major company in Okayama City. The Property provides
private rooms of around 18m2 to 25m2 which is a standard room size for facilities withnursing care. The rooms are equipped with sink and toilet.

Alpha Living Takamatsu Ekimae

Alpha Living Takamatsu Hyakkenmachi

Acquisition dateNovember 24, 2015
Acquisition price (million yen) 605
Total leased area (m2)
1,848.06
Structure / floors
RC/6F
Number of rooms (rooms) 43
Resident capacity
44
Range of room size (m2)
18.00 ~ 45.71
Opening dateJuly 15, 2014

LocationTakamatsu Chikkou Sta.

Takamatsu Sta.

Takamatsukita
Police Station

Tamamo Park
(Takamatsu Castle Ruins)

Alpha Living
Takamatsu Ekimae
30

Kataharamachi Sta.

Alpha Living
Takamatsu
Hyakkenmachi

Takamatsu City Office
Chuo Park

11

Site Features The Property is located an approximate five-minute walk from
Takamatsu Statin on the JR Yosan Line, enjoying the transport convenience. The area
is also close to a commercial district with local shopping streets, offering daily
convenience.
Property Features The residential-type Property for the elderly completed in year
2014 is relatively new and provides private rooms of around 18m2 which is astandard room size for facilities with nursing care. The rooms are equipped with sinkand toilet. There is also a dental clinic on the first floor.

Taka
Electrimcatsu-Kotoh
Railroa ira
Kotohira
Line dTakamatsu-shi,
KagawaChuo DoriStreetLocatione/Lin
an LineYos toku
Ko

0

200m

Takamatsu-shi,
KagawaAcquisition dateNovember 24, 2015
Acquisition price (million yen) 605
Total leased area (m2)
1,929.16
Structure / floors
RC/10F
Number of rooms (rooms) 52
Resident capacity
54
Range of room size (m2)
21.29 ~ 40.80
Opening dateAugust 15, 2010

Site Features The Property is located a four-minute walk to Kataharamachi Station
on Kotohira Line of Takamatsu-Kotohira Electric Railroad and is also within walking
distance to Takamatsu Station on the JR Yosan Line. It is fairly close to an area where
Takamatsu Mitsukoshi department store and other brand shops are located. There isalso a shopping arcade on the west side, boasting excellent living convenience.
Property Features The Property which is an elderly housing with supportive services
provides private rooms of around 27m2 which is larger than the standard size forrooms designed for independent elderly people. The rooms are equipped withmini-kitchen, bathroom, sink and toilet.

■ Status of Property Acquisition by Sourcing Route
Properties acquired before listing
14 properties/13,280 million yen
AssetManagement
Company’s unique
network

Off-balancing in Silver Heights Hitsujigaoka No.3
line with M&A
・M&A cases for business succession
・Needs for securing liquidity on hand

Change ofownersSponsor group
Advisor

Properties acquired in the 3rd FP
3 properties/2,778 million yen

14 properties/13,280 million yen

Minna-no-ie Omiya Yoshinocho
Minna-no-ie Chuo-ku En'nami
・Properties introduced by the sponsor group
・Needs for asset management from owners

Properties acquired in the 4th FP
4 properties/2,550 million yen

Sales &
Leaseback

Alpha Living Okayama Nishigawa Ryokudokoen
Alpha Living Okayama Korakuen
Alpha Living Takamatsu Ekimae
Alpha Living Takamatsu Hyakkenmachi

5 properties/3,750 million yen

・Properties sold by developer group whichowns operators
・Exclusive needs for facility management
2 properties/1,578 million yen
14 properties/13,280 million yen

I. Overview of Nippon Healthcare Investment Corporation

5

Portfolio Status
Focusing investment on private nursing homes and other facilities for the elderly for which large demand is expected

Diversification Status■ Region■ Type■ Operator
Nihon Kaigo Iryo Center 5.1%
Silver Heights Sapporo
Nichiigakkan 1.4%

Elderly housingwith supportive
services

6.4%

3.3%

Sompo
Care Next

Cedar

6.9%

Core City
Areas

Three Major
Metropolitan
Areas

40.4%

21.3%

Super Court

Sawayaka
Club

8.4%

59.6%

17.7%

AnabukiMedical Care

13.7%

Wisnet

8.5%

Fee-based home for the elderly 96.7%

With nursing care 65.7%

Charm Care Corporation 10.5%

Residential-type 31.0%(Note) The ratios in the above three pie charts are calculated based on total acquisition prices, and rounded to the first decimal place.

Portfolio Status■ Rent-Paying Capacity (Note 1)■ Proportion of One-Time Entrance Fee
Amortization Income (Note 3)

More than 60%,
but 70% or lessMore than 15%,
but 20% or less

4.2%

More than
2.0x

14.5%

14.6%

1.2x or less27.2%

■ Proportion of Long-Term Care Fee (Note 2)

50％ or lessMore than% 47.7%50%, but
60% or less on average

50.1

1.4x More thanMore than on average 1.5x, but
2.0x or less
1.2x, but
1.5x or less
37.5%

More than
5%, but 15%

5.3% 5% or less

26.1% on average 59.4%

48.1%

20.6%

(Note 1) “Rent-paying capacity” refers to the multiple obtained by dividing the respective acquired asset's most recent EBITDAR by rent. EBITDAR ＝ Operating Income + Depreciation + Rent
(Note 2) “Proportion of long-term care fee” refers to the proportion of the acquired asset's net sales that is accounted for by long-term care fee (including residents’ co-payment portion).
(Note 3) “Proportion of one-time entrance fee amortization income” refers to the proportion of the acquired asset's net sales that is accounted for by one-time entrance fee amortization income.
(*) Data are based on information on business income and expenditures from April 2015 to March 2016 disclosed by the respective operator. However, data for Nichii Care Center Fukushima Omori are basedon information on business income and expenditures from January 2015 to December 2015; for Silver Heights Hitsujigaoka No.3 from March 2015 to February 2016.

Portfolio Management Improvement Case
La'nassica Arakogawa
Location

Nagoya-shi, Aichi

Acquisition dateNovember 24, 2015

Acquisition price (million yen)

1,279

Total leased area (m2)

3,590.40

Structure / floors

S/4F

Number of rooms (rooms)

100

Resident capacity

100

Range of room size (m2)

18.00~19.65

Opening dateJune 1, 2008

Condition at the time of acquisition

・Lack of care staff and difficulty of recruitment influenced the acceptance of newresidents.
Retention of care staff and solution to lack of staff
・Newly allocated two move-in consultants and executed individual interview of all
personnel with the director.

6■ La'nassica Arakogawa Occupancy Rates(%)100Upon acquisition(November 2014)

90
80
70
60

Apr. Apr. Apr. Apr. Dec. Mar. Jun. Sept. Dec. Mar.
2011 2012 2013 2014 2014 2015 2015 2015 2015 2016

Improvement in occupancy rates

・The director and the move-in staff personally deployed active marketing to hospitals,
medical facilities, in-home long-term care support offices, health and welfare for theelderly and practiced reinforcement of marketing.

Stable Management Strategy
Concluding long-term fixed rent lease agreements

Lease Agreements with Highly Reliable Operators
Number of
Number of
facilities
operated (cases) rooms operated(rooms)(Note 1)
(Note 1)408
12,873Operator
Nichiigakkan Co., Ltd.
Wisnet Co., Ltd. (Note 2)

124

3,504

Sompo Care Next, Inc.

116

8,743

Sawayaka Club Co., Ltd.
Super Court Co., Ltd.
Charm Care Corporation
Cedar Co., Ltd.
Nihon Kaigo Iryo Center Co., Ltd.
Anabuki Medical Care Inc.
Silver Heights Sapporo Co., Ltd.

66
45
39
30
25
22
3

4,042
3,019
2,042
2,092
1,099
941
321

Established

Attributes

August 1973 Listed on the first section of the Tokyo Stock Exchange
Subsidiary of Sohgo Security Services Co., Ltd. a company listed on the first section of theJanuary 1998 Tokyo Stock Exchange
Subsidiary of Sompo Japan Nipponkoa Holdings, Inc., a company listed on the first section of
the Tokyo Stock Exchange
December 2004 Subsidiary of Uchiyama Holdings Co., Ltd., a company listed on the first section of the Tokyo Stock Exchange
May 1995 August 1984 Listed on JASDAQ Standard on the Tokyo Stock Exchange
April 1981 Listed on JASDAQ Standard on the Tokyo Stock Exchange
October 1997 June 2009 Subsidiary of Anabuki Kosan Inc., a company listed on the first section of the Tokyo Stock Exchange
December 1961 November 1992

(Note 1) Number of facilities operated and Number of rooms operated indicate the number of facilities and the number of rooms for fee-based homes for the elderly, group homes and elderly housing with supportive
services based on operators’ websites and interviews with them (as of April 30, 2016).
(Note 2) Wisnet Co., Ltd. transferred 69.54% of its issued shares to Sohgo Security Service Co., Ltd. on May 6, 2016.

Management

Investment Corporation

Asset Manager

Ownership

Healthcare facility A

Healthcare facility B

Healthcare facility C

Operator A

Operator B

Operator C…
…

Management Back-up Contractors

Hokkaido Area

Each operator has concluded a management
back-up agreement with NHI.
Discuss handover of operation to otheroperators in case of contingency

No. of Operators: 10

No. of Operators: 4

Total 503 facilities

Chubu Area

No. of Operators: 4

Chugoku Area

Tohoku Area

No. of Operators: 4

No. of Operators: 3

Kyushu Area

Kanto Area

No. of Operators: 4

No. of Operators: 6

Kinki Area

No. of Operators: 8

Shikoku Area

No. of Operators: 4

Development of Quality Portfolio through Careful Selection and Continuous Evaluation of Operators■ At the Time of New Acquisition■ At the Time of Continuous Evaluation

Careful selection of operators

Continuous evaluation

Conducting due diligence utilizing the screening know-how of financial institutions

Conducting the same evaluation as at the time of acquisition even after acquisition◦ Conduct due diligence utilizing the screening know-how held by the◦ Six members are placed in the Healthcare Management Team. (Threesponsor group, which is a financial institution, in order to confirm continuity
and superiority of operators’ operations.

etc. including the following.

NHI’s Board of Directors(Note)

Asset Management
Company’s Boardof Directors

Compliance Committee

Investment Committee

Compliance Officer

Acquisition Department

Flow of decision-making through to property acquisition(Note) Approval by NHI’s Board of Directors is required for transactions with interested parties.

concurrent positions).

◦ Regularly conduct the same evaluation as at the time of property acquisition.
◦ In addition, visit facilities, etc. and conduct facility monitoring, interviews,
Monitoring (Twice or more/year)
・The Asset Manager and PM companies visit operators’ facilities andconduct examinations every fiscal period.
Interviewing (Once or more/year)
・Confirming the following items with directors and care providers at facilities:(1) Responses to residents(2) Employees training program(3) Status of governance (including items to check for prevention of resident
mistreatment)

I. Overview of Nippon Healthcare Investment Corporation

7

Portfolio List (as of April 30, 2016)
Consists of 10 operators and 21 properties

Acquisition(Note 1)
periodNo.

Property nameFacility type

(Note 1)

(Note 1)Fee-based homes forthe elderly withnursing careAcquisition price(million yen) (Note 2)

Appraisal Number of
value
rooms
Share of (million yen) (rooms)(Note 3)(Note 4)
portfolio(%)

Operator

Location

Charm Care Corporation

Toyonaka City, Osaka

1,950

10.5

3,030

128

1

1st Fiscal
Charm Suite Ryokuchi Koen
Period2

Residential-type
2nd Fiscal
Super Court JR Nara-Ekimae fee-based homes for Super Court Co., Ltd.
Periodthe elderly

Nara City, Nara

1,569

8.4

1,720

155

3

homes for1st Fiscal Sompo Care LAVIER Hiroshima Fee-based
the elderly with
Period Hikarigaoka (Note 5)
nursing care

Hiroshima City,
Hiroshima

960

5.2

1,220

80

4

1st Fiscal Sompo Care LAVIER
Period Sagamihara Chuo (Note 5)

Fee-based homes forthe elderly withnursing care

Sagamihara City,
Kanagawa

1,170

6.3

1,720

80

5

2nd Fiscal Sompo Care LAVIER
Period Kinugasayama Koen (Note 5)

Fee-based homes forthe elderly withnursing care

Yokosuka City,
Kanagawa

1,839

9.9

2,030

104

6

1st Fiscal
Sawayaka Kaikyokan
PeriodFee-based homes forthe elderly withnursing care

Kitakyushu City,
Fukuoka

630

3.4

886

65

7

1st Fiscal
Sawayaka Meisuikan
PeriodFee-based homes forthe elderly withnursing care

Kitakyushu City,
Fukuoka

590

3.2

802

87

8

1st Fiscal Sawayaka Heart Life
Period Nishikyogoku

Residential-type
fee-based homes forthe elderly

Kyoto City, Kyoto

750

4.0

1,210

84

9

2nd Fiscal
Sawayaka Hinodekan
PeriodFee-based homes forthe elderly withnursing care

Niigata City, Niigata

773

4.2

924

50

10

Residential-type
2nd Fiscal
Sawayaka Riverside Kurinoki fee-based homes for
Periodthe elderly

Niigata City, Niigata

266

1.4

319

33

11

2nd Fiscal Sawayaka Obatake
Period Sanbankan

Kitakyushu City,
Fukuoka

289

1.6

350

50

12

homes for1st Fiscal Nichii Care Center Fukushima Fee-based
the elderly with
Nichiigakkan Co., Ltd.
Period Omori
nursing care

Fukushima City,
Fukushima

265

1.4

349

52

13

2nd Fiscal
La’nassica Arakogawa
PeriodFee-based homes forthe elderly withnursing care

Cedar Co., Ltd.

Nagoya City, Aichi

1,279

6.9

1,410

100

14

1st Fiscal
Verger Hirakata
PeriodResidential-type
fee-based homes forthe elderly

Nihon Kaigo Iryo Center
Co., Ltd.

Hirakata City, Osaka

950

5.1

1,570

104

15

3rd Fiscal Minna-no-ie Omiya
Period Yoshinocho

Fee-based homes forthe elderly withnursing care

Saitama City, Saitama

740

4.0

785

33

Saitama City, Saitama

838

4.5

885

51

Sapporo City, Hokkaido

1,200

6.4

1,320

109

Okayama City, Okayama

730

3.9

776

53

Okayama City, Okayama

610

3.3

661

45

Takamatsu City, Kagawa

605

3.3

631

43

Takamatsu City, Kagawa

605

3.3

617

50

10 operators 21 properties Total

18,608100.0

23,215

1,556

Sompo Care Next Inc.

Sawayaka Club Co., Ltd.

Residential-type
fee-based homes forthe elderly

16

Fee-based homes for3rd Fiscal
Minna-no-ie Chuo-ku En’nami the elderly with
Periodnursing care17

3rd Fiscal Silver Heights Hitsujigaoka
Period No. 3

Fee-based homes forthe elderly withnursing care18

4th Fiscal Alpha Living Okayama
Period Nishigawa Ryokudokoen

Residential-type
fee-based homes forthe elderly

19

4th Fiscal Alpha Living Okayama
Period Korakuen

Residential-type
fee-based homes forthe elderly

20

4th Fiscal Alpha Living Takamatsu
Period Ekimae

Residential-type
fee-based homes forthe elderly

21

4th Fiscal Alpha Living Takamatsu
Period Hyakkenmachi

Elderly housing withsupportive services

Wisnet Co., Ltd.

Silver Heights SapporoCo., Ltd.

Anabuki Medical Care
Inc.

(Note 1) Red numbers refer to Three Major Metropolitan Areas and blue numbers to Core City Areas. The background colors for Property name and Facility type columns indicate types of facilities; orange for fee-based
homes for the elderly with nursing care, blue for residential-type fee-based homes for the elderly and yellow-green for elderly housing with supportive services.
(Note 2) “Acquisition price” is excluding consumption tax, local consumption tax and the various expenses required for the acquisition. “Share of portfolio” is the respective acquisition price expressed as a percentageof the total of the acquisition prices, rounded to the first decimal place. Therefore the total of “Share of portfolio” may be different from the figure indicated in “Total.”(Note 3) “Appraisal value” is as of April 30, 2016.
(Note 4) “Number of rooms” is the figure indicated in the written explanation of important matters pertaining to the fee-based home for the elderly provided by the operator.
(Note 5) The property names were changed on April 1, 2016 in accordance with the brand unification of the Sompo Care Next Inc. facilities.

8Portfolio Map (as of April 30, 2016)
Making diversified investment in healthcare facilities in Japan

Three Major Metropolitan Areas
1

2

4

5

8

Charm Suite
Ryokuchi Koen

Super Court
JR Nara-Ekimae

Sompo Care LAVIER
Sagamihara Chuo

Sompo Care LAVIER
Kinugasayama Koen

Sawayaka Heart Life
Nishikyogoku

13

14

15

Toyonaka City, Osaka

Nara City, Nara

Sagamihara City, Kanagawa

Yokosuka City, Kanagawa

Kyoto City, Kyoto

17 Silver Heights Hitsujigaoka No. 3

9 Sawayaka Hinodekan
10 Sawayaka Riverside

La’nassica Arakogawa
Nagoya City, Aichi

Verger Hirakata

Kurinoki

Minna-no-ie
Omiya Yoshinocho

Hirakata City, Osaka

Saitama City, Saitama

8 Sawayaka Heart Life Nishikyogoku

16

12 Nichii Care Center

Fukushima Omori

19 Alpha Living Okayama Korakuen
18 Alpha Living Okayama Nishigawa Ryokudokoen

15 Minna-no-ie Omiya Yoshinocho

Sompo Care LAVIERE Hiroshima Hikarigaoka

16 Minna-no-ie Chuo-ku En’nami

35 Sompo Care LAVIER

Kinugasayama Koen
Minna-no-ie
Chuo-ku En’nami

4 Sompo Care LAVIER

11 Sawayaka Obatake Sanbankan

Sagamihara Chuo

6 Sawayaka Kaikyokan

Saitama City, Saitama

13 La’nassica Arakogawa

7 Sawayaka Meisuikan

2 Super Court JR Nara-Ekimae
14 Verger Hirakata
1 Charm Suite Ryokuchi Koen
21 Alpha Living Takamatsu Hyakkenmachi
20 Alpha Living Takamatsu EkimaeCore City Areas
3

6

7

9

10

11

Sompo Care LAVIER
Hiroshima Hikarigaoka

Sawayaka Kaikyokan

Sawayaka Meisuikan

Sawayaka Hinodekan

Sawayaka Riverside
Kurinoki

Sawayaka Obatake
Sanbankan

12

17

18

19

20

21

Nichii Care Center
Fukushima Omori

Silver Heights
Hitsujigaoka No. 3

Alpha Living Okayama
Nishigawa Ryokudokoen

Alpha Living Okayama
Korakuen

Alpha Living Takamatsu
EkimaeAlpha Living Takamatsu
Hyakkenmachi

Kitakyushu City, Fukuoka

Kitakyushu City, Fukuoka

Niigata City, Niigata

Hiroshima City, Hiroshima

Fukushima City, Fukushima

Niigata City, Niigata

Sapporo City, Hokkaido

Okayama City, Okayama

Okayama City, Okayama

Takamatsu City, Kagawa

Kitakyushu City, Fukuoka

Takamatsu City, Kagawa(Note) Red numbers refer to Three Major Metropolitan Areas and blue numbers to Core City Areas. The background colors for Property name and Facility type columns indicate types of facilities; orange for fee-based
homes for the elderly with nursing care, blue for residential-type fee-based homes for the elderly and yellow-green for elderly housing with supportive services.

I. Overview of Nippon Healthcare Investment Corporation

9

Financial Conditions
Conducting stable financial management by converting interest rate into a fixed rate and diversifying repayment dates

Status of Interest-Bearing Liabilities (as of April 30, 2016)
Term

Balance
Interest rate
Type of interest(million yen)(%) (Note 1)

LenderMizuho Bank (Note 2)
Resona Bank (Note 2)
Sumitomo Mitsui Trust Bank (Note 2)
Mizuho Trust & Banking (Note 2)
The Musashino Bank (Note 2) (Note 3)
Shinkin Central Bank
Long-term
The Dai-ichi Life Insurance
Mizuho Bank (Note 2)
Mizuho Trust & Banking (Note 2)
The Musashino Bank (Note 2)
Resona Bank (Note 2)
Shinkin Central Bank (Note 2)
Sumitomo Mitsui Trust Bank (Note 2)
Total

800
1,000
1,200
1,200
700
500
500
500
500
500
500
500
400
500
9,300

Fixed

Floating-

Drawdown date

0.344
0.532
0.532
0.431
0.532
0.329
0.355
0.431
0.524
0.524
0.524
0.474
0.293
T+0.225-

Repayment deadline
October 31, 2017
October 31, 2019
October 31, 2019
October 31, 2018
October 31, 2019
October 31, 2017
October 31, 2017
October 31, 2018
May 29, 2020
May 29, 2020
May 29, 2020
October 30, 2020
October 31, 2018
April 30, 2020-

November 5, 2014

June 1, 2015
October 15, 2015
April 28, 2016-

(Note 1) Interest rates are rounded to the third decimal place.
(Note 2) For loans of which variable interest rates have been converted to, in effect, fixed rates through a swap agreement, interest rate indicates the rate after such conversion.
(Note 3) Interest rates are converted on a one year=365 days basis.

■ Ratio of Long-Term Loans
and Short-Term Loans
Long-term loans■ Ratio of Fixed Rates
and Variable Rates

Ratio of floating rate

5.4%

100.0%

Ratio of fixed rate

94.6%
■ Repayment Schedule(million yen)
3,000

Average remaining
period (Note 1)

2,500

3.1years(as of April 30, 2016)

2,000
1,500
1,000

LTV (Note 2)0
5th FP
6th FP
7th FP
8th FP
9th FP 10th FP 11th FP 12th FP 13th FP
endingendingendingendingendingendingendingendingendingOct. 2016 Apr. 2017 Oct. 2017 Apr. 2018 Oct. 2018 Apr. 2019 Oct. 2019 Apr. 2020 Oct. 2020

(Note 1) Average remaining period is rounded to the first decimal place.
(Note 2) LTV is calculated based on total assets.

Indices that Include NHI

10

44.6%
(as of April 30, 2016)

500

Month / year

Name of index

September 2015

Thomson Reuters GPR / APREA Composite Index

Description of Asset Manager

Organization of Asset Manager (as of June 30, 2016)■ Corporate Profile■ Directors and Auditors

Company Name
Address
Established
Paid-in Capital
President

Daiwa Real Estate Asset Management Co., Ltd.
6-2-1 Ginza, Chuo-ku, Tokyo
October 21, 2004
200 million yen
Akira Yamanouchi

Board of Directors

9
Executive directors: 4 / Executive auditors: 1
Non-executive directors: 2 / Non-executive auditors: 2

Employees

66 (excluding dispatched employees)

President and Representative Director
Vice President and Representative Director
Vice President and Representative Director
Director
Director (non-executive)
Director (non-executive)
Auditor
Auditor (non-executive)
Auditor (non-executive)

Akira Yamanouchi
Yuji Shinotsuka
Yoshiki Nishigaki
Naoyuki Owa
Mikita Komatsu
Akihiko Ogino
Tamaki Shibayama
Morimasa Matsuda
Shinji Kiso

Registration No. 355 (Financial Instruments), Director
Registration of Financial
General,Instruments Business Operator
Kanto Local Finance Bureau (Kinsho)
Building Lots and Buildings
Transaction Business License

License No. (3)-83920, Governor of Tokyo

Discretionary Agent for Real
Estate Transaction Approval

License No. 34, Minister of Land, Infrastructure, Transport
and Tourism

Association Membership

Member of The Investment Trusts Association, Japan
Member of Japan Investment Advisers Association
Member of Type II Financial Instruments Firms Association■ Organizational Chart
Shareholders’ Meeting
Corporate Auditors
Board of Directors

Compliance Committee
Investment Committee（*）
Valuation Committee

Compliance Officer
President and Representative Director

Internal Control OfficeAcquisition Department

Origination
Department

Office Investment
Team
Residential
Investment Team
Healthcare
Investment Team
Infrastructure
Investment Team

Asset Management
Department
Office Management
Team
Residential
Management Team
Healthcare
Management Team
Investment
Planning Team
Construction
Management Team

Private FundManagement Department

Customer Relations
Department

Finance Department

Administration
Department

Corporate Planning
Department

Finance Team
Accounting TeamManagement Team

*Set up separately for each
investment corporation

Structure
Asset Custodian②

Investment Corporation③

Administrator of Unitholders’ Register

Mizuho Trust & Banking Co., Ltd.

Sumitomo Mitsui Trust Bank, Ltd.

Management Back-up Contractors
Sawayaka Club Co., Ltd.
Cedar Co., Ltd.
Super Court Co., Ltd.
Charm Care Corporation
Nichiigakkan Co., Ltd.
Nihon Kaigo Iryo Center Co., Ltd.
Sompo Care Next Inc.
Wisnet Co., Ltd.
Silver Heights Sapporo Co., Ltd.
Anabuki Medical Care Inc.

General Meeting of Unitholders⑤

Board of Directors
Executive Director: Hiroshi Fujioka
Supervisory Director: Tomohiko Shimizu
Supervisory Director: Chizuko Nakata④

General Administrator (Accounting, etc.)
Heiseikaikeisha Tax Corporation

Accounting Auditor
KPMG AZSA LLC①
Specially Related Company(Parent company of the Asset Manager)⑥

Asset Manager General Administration

Sponsor(Organization)

Daiwa Securities Group Inc.

Daiwa Real Estate Asset Management Co., Ltd.

⑦

AdvisorAIP Healthcare Japan GK① Asset management agreement/General administration affairs agreement related to operation ④ General administrator of accounting agreement② Asset custodian agreement⑤ Management back-up agreement③ General administrator of unitholders’ registry agreement⑥ Sponsor support agreement⑦ Advisory agreement

I. Overview of Nippon Healthcare Investment Corporation

11

II. Investor Information
History of Investment Unit Prices(yen) 350,000

24,000 (units)
Unit price (left axis)

Volume (right axis)

300,000

21,000250,000

15,000200,000

12,000150,000

9,000

100,000

6,000

50,0003,000

0Nov. 2014

0
Dec.

Jan. 2015

Feb.

Mar.

Apr.

May

Jun.

Jul.

Aug.

Sep.

Oct.

Nov.

Dec.

Jan. 2016

Feb.

Mar.

Apr.

Overview of Investment Units and Unitholders (as of April 30, 2016)■ No. of Investment Units by Investor TypeFP ended
April 2016
(4th FP)

Individuals/others
38,066 units (51.0%)

Total 74,632 units

FP ended
October 2015
(3rd FP)
Total 60,800 units

Financial institutions■ No. of Unitholders
by Investor Type19,837 units (26.6%)

Foreigners 3,710 units (5.0%)

Other domestic companies 12,015 units (16.1%)
Securities companies 1,004 units (1.3%)
Individuals/others
16,319 units (26.8%)

Financial institutions
16,195 units (26.6%)

Other domestic companies 26,976 units (44.4%)

Foreigners 764 units (1.3%)

Financial
institutions
Other domestic
companies

29(0.3%)

Foreigners

45(0.5%)

Securities
companies

22(0.2%)

Total

9,171

147
(1.6%)IR Calendar
Number of Percentage
Units Owned
Share(units)(%)

1. Daiwa Securities Group Inc.
The Master Trust Bank of Japan, Ltd. (Investment Trust
2.
Account)
Japan Trustee Services Bank Ltd. (Trust Investment Trust
3.
Account)& Custody Services Bank Ltd. (Trust Investment Trust
4. Trust
Account)
The Nomura Trust and Banking Co., Ltd. (Investment Trust
5. Account)
6. Daiwa Real Estate Asset Management Co., Ltd.
7. State Street Bank and Trust Company 505001
8. Yonezawa Shinkin Bank
Mellon Bank N. A. as Agent for its Client Mellon Omnibus
8.
US Pension
10. Chugoku Bank, Ltd.

7,600

10.2

5,291

7.1

4,829

6.5

Total

2,969

4.0

1,416

1.9

1,000
900
700

1.3
1.2
0.9

700

0.9

667

0.9

26,072

34.9(Note) Rounded to the first decimal place

12

8,928
(97.4%)

Securities companies 546 units (0.9%)

Top Ten Unitholders (as of April 30, 2016)
Name of Investor

Individuals/others

June 21, 2016・Announcement of results
for the fiscal period ended April 2016
July 14, 2016・Sending of Financial and Management
Status Report (Asset Management Report)
for FP ended April 2016
July 15, 2016・Commencement of payout of distributions
for the fiscal period ended April 2016
July 28, 2016・3rd General Meeting of Unitholders

Apr.
Jan. Account closing
month
Dec.
June
Account closing
month
July
Oct.
December 2016・Announcement of results for the
fiscal period ending October 2016
January 2017・Sending of Financial and Management
Status Report (Asset Management Report)
for FP ending October 2016
January 2017・Commencement of payout of distributions
for the fiscal period ending October 2016

Investor Memo
End of fiscal period

April 30 and October 31 of each year

General Meeting of Unitholders

Held at least once every two years

Date for finalizing Unitholders with voting
rights for the General Meeting of Unitholders Date publicly announced beforehand
Reference date for finalizing payment
April 30 and October 31 of each year (distributions are paid within three months of the reference date)of distributions
Listed financial instruments exchangeTokyo Stock Exchange (securities code: 3308)

Newspaper in which notice is posted

Nihon Keizai Shimbun

Manager of Unitholder Registry, etc.

Sumitomo Mitsui Trust Bank, Limited, 1-4-1 Marunouchi, Chiyoda-ku, Tokyo 100-8233

Office handling administrative affairs

Transfer Agency Department of Sumitomo Mitsui Trust Bank, Limited, 2-8-4 Izumi, Suginami-ku, Tokyo 168-0063
Phone 0120-782-031 (toll-free in Japan)

Service counter

Head Office and all branches of the Sumitomo Mitsui Trust Bank nationwide

Procedures for Changing Address, Etc.
Please notify the securities company you are dealing with for changes in address, name, etc. For procedures concerning investment units recorded in
special account, please contact Stock Transfer Agency Department at Sumitomo Mitsui Trust Bank, Limited (TEL: 0120-782-031 (toll-free in Japan)).

Distributions
Distributions will be payable upon presenting the “Receipt for Distributions” at a post office nearby. In case the due date has been passed, please
designate the method of receiving on the back of the receipt and send it to Stock Transfer Agency Department at Sumitomo Mitsui Trust Bank,
Limited, or bring it to the head office or branch offices of the bank to receive it. Please note that distributions will not be payable after three years of
the payment start date as specified by the Articles of Incorporation of NHI. If you wish to receive distributions via bank transfer, etc. in the future,please contact the securities company you are dealing with.

Notice[Concerning Statement of Distributions]
The “Statement of Distributions” sent upon payment of distributions serves as a “Notice of Payment” required pursuant to the Act on Special
Measures Concerning Taxation. The document may be used to confirm the amount of distributions after receiving, or can serve as an attachment
document upon filing a tax return. Thus please make sure to keep it if you are planning to file a tax return. However, if you have selected the methodof allocation of dividends in proportion to the number of shares, the amount of withholding tax will be calculated by the securities company, etc.
Please confirm with the securities company you are dealing with for any attachment document required for filing a tax return.

Provision of Information via Website

Notice on the 3rd General Meeting ofUnitholders and Briefing Session on
Asset Management for 4th Fiscal Period
NHI will hold the 3rd general meeting of unitholders
and briefing session on asset management for the
fiscal period ended April 2016 (4th fiscal period).
1. Date and time: July 28, 2016 (Thursday)
10:00 a.m.~ (venue opening at
9:40 a.m.)
2. Venue:

In order to have unitholders deepen understanding of NHI, NHI has been putting forth
effort to communicate information through its website. It provides information on theoverview of the portfolio and operators as well as healthcare REIT structure. A service
providing e-mail notification of news release updates and such to those registered on“IR Email Distribution Service” is also available.
NHI’s website

http://www.nippon-healthcare.co.jp/en/

17F, GranTokyo North Tower,
1-9-1 Marunouchi,
Chiyoda-ku, Tokyo

Briefing Session on Asset Management isscheduled to be held at the same venue after
the General Meeting of Unitholders on the day.
The scheduled presenter is Akira Yamanouchi,
President of Daiwa Real Estate AssetManagement Co., Ltd.

II. Investor Information

13

III. Asset Management Report
1. Management Status and Other Performance Highlights Data
Fiscal Period(

4th Period
From Nov. 1, 2015
To Apr. 30, 2016

) (3rd Period
From May 1, 2015
To Oct. 31, 2015)(

2nd Period
From Nov. 1, 2014
To Apr. 30, 2015)(

1st Period
From Jan. 7, 2014
To Oct. 31, 2014)

(1) Operating Performance(Millions of yen, except per unit data or where otherwise indicated)
Operating revenues
667
556
508
355
Rental revenues
667
556
508
355
Operating expenses
377
331
262
185
Property-related expenses
258
208
166
113
Operating income
290
225
246
170
Ordinary income
262
201
163
131
Net income
261
201
162
130
(2) Properties, etc. (as of end of period)
Total assets
20,84817,667
15,135
8,466[period-on-period percentage changes][+18.0%][+16.7%][+78.8%][-]Interest-bearing liabilities
9,300
8,800
6,400
5,850
Net assets
10,669
8,035
8,046
2,110
[period-on-period percentage changes][+32.8%][-0.1%][+281.4%][-]
Unitholders’ capital, net
Note 3
10,408
7,835
7,884
1,980
(3) Distributions
Total distribution amount
321
247
211
130
Total distribution of retained earnings
261
200
162
130
Total distribution in excess of retained earnings
60
47
49
Dividend payout
Note 4
100%
100%
100%
100%
(4) Per Unit Information
Total number of units issued (units)
74,63260,80060,80019,800Net assets per unit (yen)142,958
132,160
132,332
106,546
Distribution per unit (yen)
4,295
4,067
3,471
6,546
Distribution amount from earnings per unit (yen)
3,495
3,299
2,661
6,546
Distribution amount in excess of earnings per unit (yen)
800
768
810
(5) Financial Indicators
ROA
1.4%
1.2%
1.4%
1.5%
Notes 5and 6[annual rate][2.7%][2.4%][2.8%][2.6%]
ROE
2.8%
2.5%
3.2%
6.1%
Notes 6and 7[annual rate][5.6%][4.9%][6.4%][10.3%]
Capital ratio
51.2%
45.5%
53.2%
24.9%
[period-on-period percentage changes][5.7%][-7.7%][28.2%][-]LTV (loan to value)
44.6%
49.8%
42.3%
69.1%
Property leasing cash flows (NOI)
Note 8
596
499
479
336
(6) Other Referential Information
Number of investment properties
21
17
14
8
Number of tenants
Note 921
17
14
8
Total rentable area (m2)
65,203.04
57,173.22
46,142.60
27,793.71
Occupancy rate
Note 10100.0%
100.0%
100.0%
100.0%
Depreciation
187
152
138
94
Capital expenditures
102
0
1(Note 1)The Fund has two fiscal periods per year, a six months period from May 1 to October 31, and November 1 to April 30 of the following
year. However, the first fiscal period of the Fund is from the date of incorporation (January 7, 2014) to the end of October 2014.
(Note 2) Operating revenues, etc. do not include consumption taxes, etc.
(Note 3) The indicated amounts are unitholders’ equity less deduction amount of unitholders’ equity.
(Note 4) Dividend payouts for the 1st, 2nd and 4th fiscal periods are calculated by the following formula since issuances of new investment
units were implemented.
Dividend payout: [Total distribution amount (excluding distribution in excess of earnings) ÷ Net income] × 100(Note 5) ROA: Ordinary income ÷ [(Total assets at beginning of period + Total assets at end of period) ÷ 2] × 100(Note 6) Annualized figures are calculated by using the asset management period of the respective fiscal period; 218 days from March 28,
2014, the actual commencement date of the asset management, to October 31, 2014 for the 1st Fiscal Period; 181 days for the 2nd
Fiscal Period; 184 days for the 3rd Fiscal Period; and 182 days for the 4th Fiscal Period.
ROA and ROE for the 1st Fiscal Period are calculated based on total assets at end of period and net assets at end of period,
respectively.
(Note 7) ROE: Net income ÷ [(Net assets at beginning of period + Net assets at end of period) ÷ 2] × 100(Note 8) Property leasing cash flows (NOI): Rental revenues − Property-related expenses + Depreciation(Note 9) Number of tenants is the total number of end tenants.
(Note 10) Occupancy rate: Total leased area ÷ Total rentable area × 100

14

2. Developments in Asset Management in the Fiscal Period under Review(1) Brief History of the Investment Corporation
Nippon Healthcare Investment Corporation (hereinafter referred to as “NHI”) was incorporated on January 7, 2014
under the Act on Investment Trusts and Investment Corporations (Act No. 198 of 1951; including amendments
thereto) (hereinafter referred to as the “Investment Trusts Act”) with Daiwa Real Estate Asset Management Co.
Ltd. (hereinafter referred to as the “Asset Management Company”) as the organizer. After its incorporation, NHI
conducted an additional issuance of investment units through private placement (18,800 units) on April 3, 2014. NHI
commenced actual management with the acquisition of eight properties on March 28, 2014 by using the proceedsfrom the concerned capital increase through private placement and loans.
After accumulating a track record for roughly seven months after the start of asset management, in the previous
fiscal period, NHI conducted a public offering through the issuance of an additional 39,000 investment units on
November 4, 2014. On the following day, NHI made additional acquisitions of six properties concurrently with thelisting on the REIT Securities Section of the Tokyo Stock Exchange (the “TSE”) (Securities code: 3308). In the 3rd
Fiscal Period, NHI made additional acquisitions of three properties with borrowing and cash on hand. Furthermore,
NHI implemented an additional issuance of investment units through public offering (12,130 units) on November 17,
2015 and additionally acquired four properties. Through the additional acquisition of properties, the total acquisition
price which was 13,280 million yen as of the listing increased to 18,608 million yen as of April 30, 2016.
As the first Japanese REIT specializing in healthcare facilities in that it invests solely in properties of which theprincipal use is healthcare facilities, NHI effectively utilizes investor capital to initiate expansion of supply of highquality healthcare facilities that provide users with high-standard services, while at the same time produce ample anddependable returns to investors for further capital circulation. In this way, NHI aims at creating a new value cyclefor healthcare facilities and the services provided, together with investors. Through these efforts, NHI would like tocontribute to the realization of Japan’s major policy to improve the residential environment for the elderly by effectively
utilizing private sector funds.
(2) Investment Environment and Management Performance(A) Investment Environment (from November 1, 2015 to April 30, 2016)
NHI was established to address Japan’s structural problem of age demographics where the younger
population is decreasing and the ratio of elderly people is increasing, and the associated social demand
for the enhancement of private nursing homes and other facilities for the elderly, which are thought to belacking.
Japan has the population of the elderly aged 65 years or over (hereinafter referred to as the elderly
population) accounting for approximately one-quarter of the total population as of December 1, 2015
(according to the Ministry of Internal Affairs and Communications’ “Population Estimates” announced on
May 20, 2016), and the population of the elderly is forecast to continue to account for an increasingly
greater proportion and the population of the elderly living alone is forecast to continue to grow. There isthus recognized to be sufficient potential for greater development of housing for the elderly with nursing
care services, etc. that are designed for the elderly to reside (referring to “silver housing” (public housing
for the elderly), “good rental housing for the elderly,” “elderly housing with supportive services,” “feebased homes for the elderly” and “low-cost homes for the elderly;” the same shall apply hereinafter).
The Ministry of Land, Infrastructure, Transport and Tourism has set as a policy target that the ratio of housing
for the elderly to the elderly population shall be 4% in 2025. In order to accomplish this policy target, newsupply of housing for the elderly for approximately 770,000 people (estimate) is required by 2025.
In this manner, as social demand is mounting for healthcare facilities – particularly, private nursing
homes and other facilities for the elderly – and the enhancement of private nursing homes and otherfacilities for the elderly is one of the priority tasks even as a national policy, NHI will focus investment for
the time being on private nursing homes and other facilities for the elderly among healthcare facilities andthereby seize opportunities to earn cash flows arising from the mounting social demand.
(B) Management Performance
In the 4th Fiscal Period (fiscal period ended April 2016), NHI acquired four properties (Alpha Living Okayama
Nishigawa Ryokudokoen, Alpha Living Okayama Korakuen, Alpha Living Takamatsu Ekimae and Alpha Living
Takamatsu Hyakkenmachi; sum total of acquisition price: 2,550 million yen) on November 24, 2015.
Concerning the properties held as of the end of the 4th Fiscal Period (April 30, 2016), the leasable floor area
was 65,203.04m2 and the occupancy rate was 100.0%.

III. Asset Management Report15

(3) Overview of Capital Procurement(A) Procurement of Funds for Acquisitions
In the 4th Fiscal Period, NHI implemented the following issuance of investment units and borrowing offunds for use as funds for acquisition, etc. of new properties and funds for an early repayment of loan.
(a) NHI implemented capital increases through public offering with payment on November 17, 2015,(number of investment units issued of 12,130 units, issue amount of 189,440 yen per unit and total
amount of issue amount of 2,297,907,200 yen) capital increase through third-party allotment withpayment on December 16, 2015, (number of investment units issued of 1,702 units, issue amount of
189,440 yen per unit and total amount of issue amount of 322,426,880 yen) as well as short-termborrowing of funds on November 24, 2015 from Mizuho Bank, Ltd. of 900 million yen based on acommitment-type term loan contract, for use as funds for acquisition, etc. of new properties that wereacquired on November 24, 2015 (Alpha Living Okayama Nishigawa Ryokudokoen, Alpha Living
Okayama Korakuen, Alpha Living Takamatsu Ekimae and Alpha Living Takamatsu Hyakkenmachi) andas part of funds for future acquisitions of specified assets.
(b) NHI conducted borrowing of funds on April 28, 2016 from Sumitomo Mitsui Trust Bank, Limited of 500
million yen in order to make early repayment on April 28, 2016 of 500 million yen out of the 900 million
yen short-term loan borrowed from Mizuho Bank, Ltd. on November 24, 2015.
Furthermore, NHI made early repayment on February 29, 2016 of 400 million yen out of the 900
million yen short-term loan borrowed from Mizuho Bank, Ltd on November 24, 2015.
(B) Status of Interest-Bearing Liabilities
As a result of the above, the balance of interest-bearing liabilities outstanding at the end of the 4th Fiscal
Period (as of April 30, 2016) totaled 9,300 million yen (all long-term loans payable), and the averageremaining period at the end of the 4th Fiscal Period was 3.07 years.
In addition, none are due for repayment within one year after the end of the 4th Fiscal Period.
(4) Capital Expenditures During the Fiscal Period under Review
The following summarizes the main construction work that constitutes capital expenditures conductedduring the 4th Fiscal Period. Capital expenditures for the 4th Fiscal Period amounted to 10 million yen and,
when combined with the 20 million yen in repair expenses charged to 4th Fiscal Period expenses, totaled 30
million yen in construction work implemented.
Name of Property
Expenditure
Purpose
Period(Location)(millions of yen)
Sawayaka Kaikyokan (Kitakyushu-shi, Replacement of high
From: December 2015
2
Fukuoka)
voltage service cable
To: December 2015
Sompo Care LAVIERE Hiroshima
Renovation work of slope
From: April 2016
2
Hikarigaoka (Hiroshima-shi, Hiroshima) in parking area for bicycles
To: April 2016
From: November 2015
Other
6
To: April 2016
Total
10(5) Overview of Financial Performance and Distributions
As a result of the management described above, NHI posted financial performance for the 4th Fiscal Period of
667 million yen in operating revenue, 290 million yen in operating income, 262 million yen in ordinary incomeand 261 million yen in net income.
Concerning distributions, to ensure that the amount equivalent to distributions from earnings would be
included in the amount of tax-deductible expenses based on application of special provisions for taxation on
investment corporations (Article 67-15 of the Act on Special Measures Concerning Taxation (Act No. 26 of 1957;
including amendments thereto) (hereinafter referred to as the “Special Taxation Measures Act”)), NHI decided to
distribute the entire amount of unappropriated retained earnings, excluding fractions of the distribution amount
per unit that are less than 1 yen. Accordingly, NHI declared a distribution amount per unit of 3,495 yen.
In addition, in principle, NHI adopts a policy of implementing cash distributions in excess of earnings
uninterruptedly every fiscal period in accordance with the distribution policy set out in the articles of incorporation(Note). Based on this policy, NHI decided to distribute 59,705,600 yen, which is the amount roughly equivalent to
32% of the 187 million yen in depreciation for the 4th Fiscal Period, as reimbursement of investments in capital.
Accordingly, NHI declared a distribution amount in excess of earnings per unit of 800 yen.
(Note) NHI adopts a policy of implementing uninterrupted distributions in excess of earnings (reimbursement of investments in capital) in an amount not toexceed 40% of depreciation in every accounting period within the scope that would not have adverse impact on the financial position of NHI after
setting aside the cash and deposits that NHI deems appropriate, taking into account the status of establishment of lines of credit, etc., in order to notaffect long-term repair plans in light of the capital expenditures for each accounting period assumed based on the long-term repair plans and to meetneeds for funds (new acquisition of investment assets, repairs and capital expenditures required to maintain and enhance portfolio assets, NHI’s
working capital, repayment of obligations, payout of distributions, etc.).
The six-month average amount of the sum total amount of emergency repair expenses, short-term repair expenses and long-term repair expenses
stated in the engineering report by Tokio Marine & Nichido Risk Consulting Co., Ltd. and Assets Research and Development Inc. for all assets held asof the end of the 4th Fiscal Period (21 properties) is 28 million yen.

16

3. Future Management Policy and Tasks(1) Investment Environment
Japan has the population of the elderly accounting for approximately one-quarter of the total population,and the population of the elderly is expected to continue to account for an increasingly greater proportionand the population of the elderly living alone is expected to continue to grow. With the development of
medical technology, among other factors, the average life expectancy at birth for Japanese people is at 80.50
years for males and 86.83 years for females according to the Ministry of Health, Labour and Welfare’s“Abridged Life Tables for Japan 2014,” while record-highs were set in terms of the population aged 65 years
or over at 34 million people and the proportion of the elderly population is at 26.8% of the total population of
127 million as of December 1, 2015 according to the Ministry of Internal Affairs and Communications’“Population Estimates” (announced on May 20, 2016).
According to the National Institute of Population and Social Security Research’s “Population Projections forJapan (January 2012),” the total population will increase to 124 million people, the elderly population to 36
million people and the proportion of the elderly population to 29.1% in 2020 and then, while the total
population will decrease by approximately 40 million people from that at present to 86 million people, theelderly population will reach 34 million people and the proportion of the elderly population to 39.9% in 2060.
To provide for future growth in demand for housing for the elderly, the Ministry of Land, Infrastructure,
Transport and Tourism has set as a policy target that the ratio of housing for the elderly to the elderly
population shall be 4% by 2025. In order to accomplish this policy target, new supply of housing for theelderly for approximately 770,000 people (estimate) is required by 2025.
In such an environment, there is recognized to be sufficient potential for greater development of housing forthe elderly with nursing care services, etc. that are designed for the elderly to reside through effective
utilization of private sector funds.
(2) Management Policy and Tasks(A) Strategy for Managing Existing Properties
NHI implements the following measures to earn stable revenue and serve to maintain and enhanceunitholder value.
(a) Stabilization of earnings
In principle, NHI shall invest in properties with the actual remaining lease contract period at the timeof acquisition of 10 years of more, taking into account also the possibility of contract renewal. In viewof lease agreements concluded between NHI or trustees and operators realizing conversion of
expenses borne by operators into fixed rates and stabilization of earnings of NHI, the policy shall be to
make the lease agreements of content that, in principle, operators pay a fixed amount of rent. The
lease agreements with operators for the assets that NHI has acquired are all fixed-rent agreements.
(b) Criteria and methods for selecting operators
In the event of acquisition of healthcare facilities, not only the quality of the facilities as real estate,
but also the creditworthiness, operational capabilities, etc. of the operators operating the facilities are
regarded as important factors by NHI in realizing stable occupancy. This is because the operators
being capable of providing services of a quality and type that matches the entrance fee, monthly
service fee, etc. in order to be the residents’ choice and the operators being capable of operating thefacilities continuously are regarded as important factors in terms of also the profitability and asset valueof healthcare facilities.
(c) Employment of “Backup Operator Membership”
NHI has concluded an agreement on backup of operational management with each and every
operator of acquired assets. The main purpose of said agreement is that, in the event that a leaseagreement for a healthcare facility held by NHI has ended or is expected to end due to contract
termination, contract cancellation or other reason, where NHI requests the operator to operate thehealthcare facility by conclusion of a new lease agreement with NHI or the trustee, the operator shallsincerely discuss the request. In addition, NHI shall consider concluding a similar agreement with also
the operators of healthcare facilities to be acquired in the future. Such relationship by agreement with
operators is referred to as “Backup Operator Membership.”III. Asset Management Report17(B) Investment Strategy for New Properties
NHI aims to realize stable external growth through not only leveraging the track record and network of
the Asset Management Company, but also sourcing property information, etc. by working in collaboration
with the sponsor group and adviser.
(a) Track record and network of the Asset Management Company
The Asset Management Company is striving for property acquisitions that utilize the wide range ofproperty sourcing channels based on strong relationship building with various related parties (businesscompanies, financial institutions, major real estate brokerage companies and real estate brokerage
parties, etc.) accumulated through asset management of Daiwa Office Investment Corporation (balanceof assets for which management is entrusted as of the end of May 2016: approximately 458.3 billion
yen) and Daiwa Residential Private Investment Corporation (balance of assets for which management
is entrusted as of the end of May 2016: approximately 84.5 billion yen). In addition, in order to expand
and boost opportunities to acquire healthcare facilities in which NHI invests, the Asset Management
Company has installed an investment team specializing in healthcare facilities and is promoting also
the building of relationships with new suppliers and sources of property information (healthcare facility
operators, developers, etc.) other than existing property sourcing channels to collect property
information.
(b) Sourcing of property information, etc. by working in collaboration with the sponsor group
The Asset Management Company believes that leveraging the network of branches and clients
possessed by the sponsor group, the Daiwa Securities Group, as needed will enable a search acrossJapan for operators that meet the selection criteria set forth by the Asset Management Company andconsideration of the feasibility of collaboration in property acquisition and development, commissioningof facility operation, etc., and thinks that expansion of property acquisition opportunities can thus beexpected.
(c) Sourcing of property information, etc. by working in collaboration with the adviser
The Asset Management Company has concluded an advisory agreement with AIP Healthcare Japan
GK, which implements an investment strategy that has been focused on the healthcare sector(hospitals and nursing care facilities) since 2001 and has been engaged in investment specializing inprivate nursing homes and other facilities for the elderly since 2008. Based on this agreement, theAsset Management Company receives advice on information provision, management and operation ofhealthcare facilities that are the investment assets of NHI, collaboration with operators, etc. The AssetManagement Company believes that this would contribute to realization of stable performance in themedium to long term of NHI.
In the 4th Fiscal Period (fiscal period ended April 2016), NHI acquired four properties (Alpha Living
Okayama Nishigawa Ryokudokoen, Alpha Living Okayama Korakuen, Alpha Living Takamatsu Ekimae andAlpha Living Takamatsu Hyakkenmachi; sum total of acquisition price: 2,550 million yen) on November 24,
2015.
(C) Financial Strategy
NHI will procure and manage funds in accordance with the following policy in pursuit of realization of
stable revenue and steady growth and efficient management of assets under management.
(a) Additional issuance of investment units
Additional issuance of investment units shall be implemented with agility, while comprehensively
taking into account the timing of acquisition of real estate that are to be newly acquired, ratio ofinterest-bearing liabilities to total assets (hereinafter referred to as “LTV”), economic and market
conditions, etc. and also taking into consideration the dilution of investment units.

18(b) Borrowing of funds and issuance of investment corporation bonds
LTV shall be set at a level that takes heed of securing of financing capacity and, in principle, nohigher than 60%. However, LTV may temporarily exceed 60% for such purposes as acquisition of new
investment assets and reduction of refinancing risk.
In order to build a stable financial base and underpin future growth strategies, NHI shall not only
establish a so-called main-bank system of having leading financial institutions as its main banks ofaccount, but also make proactive efforts to diversify fund procurement sources through such means as
borrowing from multiple lenders and issuing investment corporation bonds.
Funds shall be procured appropriately by negotiating with several financial institutions over borrowing
costs, borrowing period, whether or not collateral is provided and other terms and conditions upon the
borrowing of funds, and comprehensively considering the terms and conditions while taking into
consideration the balance of interest rate trends, market level, financial agility and security, lendercomposition and other factors.
In order to reduce the risk of interest rate fluctuations and refinancing risk, NHI shall consider
extending financing periods, converting interest rates to fixed rates, staggering repayment dates,
introducing highly-flexible financial covenants, etc. as needed.
NHI shall consider securing committed, revolving or other lines of credit as needed for agile
procurement of various required funds.
(c) Fund management
NHI shall retain at all times the cash and deposits that NHI deems appropriate, taking into accountalso the status of establishment of lines of credit, etc., in order to meet needs for funds (newacquisition of investment assets, repairs and capital expenditures required to maintain and enhance
portfolio assets, NHI’s working capital, repayment of obligations, payout of distributions, etc.).
NHI shall pursue efficient fund management whereby, of the amount equivalent to depreciation, theamount remaining after setting aside cash and deposits shall be allocated to implementing cash
distributions in excess of earnings to unitholders uninterruptedly every fiscal period in an amount not toexceed 40% of depreciation in every accounting period, comprehensively taking into account NHI’s
surrounding economic environment and real estate market trends, the status of portfolio assets andfinancial status of NHI and other factors.
There may be cases where surplus funds will be invested into securities and monetary claims that arehighly secure and liquid.
Derivative transactions (Article 2, Paragraph 6 of the Investment Trusts Act) shall be limited to thosemanaged for the purpose of hedging the risk of fluctuations in interest rates on the liabilities of NHI.
(D) Schedule of Capital Expenditures
The following summarizes the main capital expenditures in line with currently planned construction
works for renovation, etc. Furthermore, the scheduled construction amounts include portions that will becharged as expenses in terms of accounting.
Name of Property(Location)
Charm Suite Ryokuchi
Koen (Toyonaka-shi,
Osaka)
Silver Heights
Hitsujigaoka No.3
(Sapporo-shi,
Hokkaido)
Sawayaka Kaikyokan(Kitakyushu-shi,
Fukuoka)PurposeEstimated Period

Estimated Cost (millions of yen)
Payment for Cumulative
Total
the current amount paid
periodUpgrade water heater From: October 2016
for bathroom
To: October 2016

9

-

-

Replacement ofbatteries for guidelight and emergency
light

From: October 2016
To: October 2016

4

-

-

Construction work on From: October 2016
rooftop drain pan
To: October 2016

1

-

-

III. Asset Management Report19IV. Balance Sheets
As of April 30, 2016 and October 31, 2015

(Thousands of yen)

As ofApril 30, 2016

As of
October 31, 2015

AssetsCurrent Assets:
Cash and cash equivalents [Notes 3, 4 and 5]

1,601,495

965,199

Consumption tax refundable

2,191

2,069

Prepaid expenses

15,342

19,142

Deferred tax assets [Note 13]

15

14

Other current assets

378

874

Total Current Assets

1,619,421

987,298

Land in trust accounts

7,528,825

6,504,957

Buildings and structures in trust accounts

12,189,211

10,474,057

3,915

1,325

-

1,910

Less: accumulated depreciation(570,714)(383,629)

Leasehold rights in trust accounts

40,88640,88619,192,123

16,639,506

177

188

Software

2,585

2,952

Lease and guarantee deposits in trust

10,00010,000Long-term prepaid expenses

23,57826,636

Total Other Assets

36,34039,776

20,847,884

17,666,580

Investment Properties, at cost: [Notes 4, 6 and 7]

Tools, furniture and fixtures in trust accounts
Construction in progress including trust accounts

Total Investment Properties, net
Other Assets:
Right of trademark

Total Assets
The accompanying notes are an integral part of these financial statements.

20

(Thousands of yen)

As ofApril 30, 2016

As of
October 31, 2015

Liabilities
Current Liabilities:
Operating accounts payable

23,862

16,385

Accounts payable – other

57,957

98,115910

896

74,027

69,127

303

598

Other current liabilities

1,640

870

Total Current Liabilities

158,699

185,991

9,300,000

8,800,000

719,884645,231

10,019,884

9,445,231

10,178,583

9,631,222

10,504,334

7,884,000(95,942)(49,248)

10,408,392

7,834,752

260,909200,606

10,669,301

8,035,358

Total Net Assets

10,669,301

8,035,358

Total Liabilities and Net Assets

20,847,884

17,666,580

Income taxes payable
Rent received in advance
Deposits received

Long-Term Liabilities:
Long-term debt [Notes 4, 5 and 10]
Tenant security deposits including trust accounts [Note 5]
Total Long-Term Liabilities
Total Liabilities

Net Assets [Notes 9 and 14]
Unitholders’ Equity:
Unitholders’ capital
Deduction from unitholders’ capital
Unitholders’ capital, net
Units authorized: 10,000,000 units
Units issued and outstanding: 74,632 units as of April 30,
2016 and 60,800 units as of October 31, 2015
Retained earnings
Total Unitholders’ Equity

The accompanying notes are an integral part of these financial statements.

IV. Balance Sheets

21

V. Statements of Income
For the six months ended April 30, 2016 and October 31, 2015

(Thousands of yen)

For the six months endedApril 30, 2016

For the six months ended
October 31, 2015

667,161555,589

667,161555,589

258,085

208,266

Asset management fees
Asset custody fees
Administrative service fees
Trust fees

58,122
630
8,595
6,252

49,037
554
8,163
4,909

Directors’ compensation
Audit fees

3,600
6,000
36,2033,600
4,400
51,729377,487
289,674

330,658
224,931

34
2

26
4

36

30

21,447
5,784
682-

18,0135,391
61

27,913
261,797

23,465
201,496

Income Before Income Taxes
Income taxes – current
Income taxes – deferred

261,797

201,496

915
(0)

901
(0)

Total Income Taxes [Note 13]
Net Income
Retained Earnings Brought Forward

915
260,88227
260,909901
200,595
11
200,606

Operating Revenues and Expenses
Operating Revenues:
Rental revenues [Note 8]
Total Operating Revenues
Operating Expenses:
Property-related expenses [Note 8]

Other operating expenses
Total Operating Expenses
Operating Income
Non-Operating Revenues and Expenses
Non-Operating Revenues:
Interest income
Other non-operating revenues
Total Non-Operating Revenues
Non-Operating Expenses:
Interest expense
Borrowing expenses
New Investment units issuance costs
Other non-operating expenses
Total Non-Operating Expenses
Ordinary Income

Retained Earnings at End of Period

The accompanying notes are an integral part of these financial statements.

22

V. Statements of Income

VI. Statements of Changes in Net Assets
For the six months ended April 30, 2016

Balance as of October 31, 2015
Issuance of new investment units
Distributions in excess of retained
earnings
Distributions of earnings
Net income
Balance as of April 30, 2016

(Thousands of yen)

Deduction
Number of Unitholders’fromUnitholders’Units
CapitalUnitholders' Capital, Net
Capital60,800 7,884,000(49,248) 7,834,752
13,832 2,620,334- 2,620,334--

74,632 10,504,334(46,694)

Retained
Earnings

Total

200,606-

8,035,358
2,620,334-(46,694)(46,694)(95,942) 10,408,392

For the six months ended October 31, 2015

(200,579)(200,579)
260,882
260,882
260,909 10,669,301(Thousands of yen)

Deduction
Number of Unitholders’fromUnitholders’Units
CapitalUnitholders' Capital, Net
Capital60,800 7,884,000- 7,884,000

Balance as of April 30, 2015
Distributions in excess of retained(49,248)(49,248)
earnings
Distributions of earnings
Net income
Balance as of October 31, 2015
60,800 7,884,000(49,248) 7,834,752
The accompanying notes are an integral part of these financial statements.

Retained
Earnings

Total

161,799

8,045,799-(49,248)(161,788)
200,595
200,606(161,788)
200,595
8,035,358

VII. Statements of Cash Flows
For the six months ended April 30, 2016 and October 31, 2015

Cash Flows from Operating Activities:
Income before income taxes
Depreciation and amortization
New investment units issuance costs
Interest expense
Increase (Decrease) in accounts payable
Increase (Decrease) in rent received in advanceCash payments of interest expense(Increase) Decrease in consumption taxes refundable
Other, net
Net Cash Provided by Operating Activities
Cash Flows from Investing Activities:
Payments for purchases of investment properties
Proceeds from tenant security deposits
Net Cash Used in Investing Activities
Cash Flows from Financing Activities:
Proceeds from short-term debt
Repayment of short-term debt
Proceeds from long-term debt
Proceeds from issuance of new investment units
Payments of distributions of earnings
Payments of distributions in excess of retained earnings
Net Cash Provided by Financing Activities
Net Change in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of Period
Cash and Cash Equivalents at End of Period (Note 3)(Thousands of yen)

For the six months
ended
April 30, 2016

For the six months
ended
October 31, 2015

261,797
187,463682
21,447(14,263)
4,900(21,330)
(122)
8,040
448,614201,496
152,155
18,01337,25615,092(17,902)
1,072(11,724)
395,458(2,760,003)
74,653(2,685,350)(3,007,609)
66,108(2,941,501)

900,000(900,000)
500,000
2,619,653(200,064)(46,557)
2,873,032
636,296
965,199
1,601,495

2,400,000(161,240)(49,038)
2,189,722(356,321)
1,321,520
965,199

The accompanying notes are an integral part of these financial statements.
VI. Statements of Changes in Net Assets
VII. Statements of Cash Flows23

VIII. Notes to Financial Statements
For the six months ended April 30, 2016 and October 31, 2015

Note 1 – Organization and Basis of Presentation
Organization
Nippon Healthcare Investment Corporation (hereinafter referred to as “NHI”) was established on January 7,
2014 as an investment corporation under the Act on Investment Trusts and Investment Corporations (Act No.
198 of 1951, including subsequent revisions, hereinafter referred to as the “Investment Trust Act”) by the founder(Daiwa Real Estate Asset Management (hereinafter referred to as “DREAM”)).
NHI is an externally managed real estate fund, established as an investment corporation. DREAM, as NHI’s
asset management company, is engaged in acquiring, managing, leasing, and renovating healthcare facilities.
Daiwa Securities Group Inc. currently owns 100% of DREAM.
On November 4, 2014, NHI had raised 5,616,000 thousand yen through an initial public offering of units. Those
units were listed on the J-REIT section of the Tokyo Stock Exchange.
As of April 30, 2016, NHI had trust beneficiary interests in 21 healthcare facilities with approximately 65,203
square meters of healthcare facilities space and had leased space to 21 tenants. The occupancy rate for thehealthcare facilities was 100%.
Basis of Presentation
The accompanying financial statements have been prepared in accordance with the provisions set forth in theInvestment Trust Act, the Financial Instruments and Exchange Act and their related accounting regulations, andin conformity with accounting principles generally accepted in Japan (“Japanese GAAP”), which are different incertain respects as to application and disclosure requirements of International Financial Reporting Standards or
accounting principles generally accepted in the United States of America.
The accompanying financial statements have been reformatted and translated into English from the financial
statements of NHI prepared in accordance with Japanese GAAP and filed with the appropriate Local Finance
Bureau of the Ministry of Finance as required by the Financial Instruments and Exchange Act. In preparing theaccompanying financial statements, relevant notes have been expanded and certain reclassifications have been
made from the Japanese GAAP financial statements. Certain supplementary information included in the statutory
Japanese GAAP financial statements, but not required for fair presentation, is not presented in theaccompanying financial statements.
NHI maintains its accounting records in Japanese yen.

Note 2 – Summary of Significant Accounting Policies
Cash and Cash Equivalents
Cash and cash equivalents consist of cash, demand deposits, and short-term investments which are highly
liquid, readily convertible to cash and with insignificant risk of market value fluctuation, with maturities of threemonths or less from the date of acquisition.
Investment Properties
Investment properties are recorded at cost, which includes the allocated purchase price, related costs andexpenses for acquisition of the properties. Property and equipment balances are depreciated using the straightline method over the estimated useful lives. The estimated useful lives of the principal tangible fixed assets(including assets held in trust) are as follows:
Buildings and structures
Tools, furniture and fixtures

As of April 30, 2016
4-58 years
3-10 years

As of October 31, 2015
4-58 years
6 years

Costs related to the renovation, construction and improvement of properties are capitalized. Expenditures for repairs
and maintenance which do not add to the value of a property or prolong its useful life are expensed as incurred.
New Investment Units Issuance Costs
The issuance costs of investment units are expensed when incurred.
Income Taxes
Income taxes are accounted for on the basis of income for financial statement purposes. The tax effect of temporary
differences between the amounts of assets and liabilities for financial statements and for income tax purposes isrecognized as deferred taxes.

24Real Estate Taxes
Real estate taxes are imposed on properties on a calendar year basis and expensed when incurred. In terms of
newly purchased properties, NHI capitalizes a portion of the real estate taxes that relate to a period from the purchasedate of each property until the end of the calendar year as part of the acquisition cost of the relevant property.
Capitalized real estate taxes amounted to 1,345 thousand yen for the six months ended April 30, 2016 and 6,877
thousand yen for the six months ended October 31, 2015.
Consumption Taxes
Consumption taxes are excluded from transaction amount.
Non-deductible consumption taxes on acquisition of assets are included in the acquisition costs of the relevant
asset.
Hedge Accounting
NHI conducts derivative transactions in order to hedge against risks defined in its Articles of Incorporation based on
its risk management policy. NHI utilizes derivative financial instruments such as interest-rate swap agreements only
for the purpose of hedging its exposure to changes in interest rates. NHI deferred recognition of gains or losses
resulting from changes in fair value of interest-rate swap agreements because its interest-rate agreements met thecriteria for deferral hedging accounting.
However, NHI applies special treatment to the interest-rate swap agreements that meet the criteria for such special
treatment. Under the special treatment, interest-rate swaps are not remeasured at fair value: instead, the net amount
paid or received under the interest-rate swap agreements is recognized and included in interest expense. The hedge
effectiveness for interest-rate swap agreements is assessed each fiscal period except for those that meet the criteriaof special treatment.
Revenue Recognition
Operating revenues consist of fixed rental revenues, which are recognized on an accrual basis over the life of eachlease.
Accounting Treatment of Beneficiary Interests in Trust Assets Including Real Estate
For trust beneficiary interests in real estate, all accounts of assets and liabilities within assets in trust, as well as all
income generated and expenses incurred from assets in trust, are recorded in the relevant balance sheet and income
statement accounts.

Note 3 – Cash and Cash Equivalents
Cash and cash equivalents stated on the accompanying balance sheets and statements of cash flows as ofApril 30, 2016 and October 31, 2015 consisted of the following:(Thousands of yen)

Cash and deposits
Cash and deposits in trust
Cash and cash equivalents

As of April 30, 2016
1,193,868
407,627
1,601,495

As of October 31, 2015
550,649
414,550
965,199

Note 4 – Pledged Assets and Secured Liabilities
The carrying amount of assets pledged as collateral and the secured liabilities as of April 30, 2016 and October
31, 2015 were as follows:(Thousands of yen)

Assets pledged:
Cash and cash equivalents
Land in trust accounts
Buildings and structures in trust accounts
Tools, furniture and fixtures in trust accounts
Leasehold rights in trust accounts
Total
Secured liabilities:
Long-term debt
Total

As of April 30, 2016

As of October 31, 2015

407,627
7,528,825
11,618,751
3,661
40,886
19,599,750

414,550
6,504,957
10,090,461
1,292
40,886
17,052,146

9,300,000
9,300,000

8,800,000
8,800,000

VIII. Notes to Financial Statements

25

Note 5 – Financial Instruments(For the six months ended April 30, 2016 and October 31, 2015)(1) Status of Financial Instruments(A) Policy for financial instruments
NHI procures funds through various financing methods (such as borrowings, issuance of investment
units) for acquisition and renovation of investment properties, payments of dividends and reimbursementof bank borrowings.
In financing through interest-bearing debt, to secure stable financing capacity and reduce future risk ofrising interests, NHI secures long-term fixed-rate borrowings with well-diversified maturities.
NHI manages surplus funds with safe and highly liquid money claims and securities (in principle,
deposits).
Derivative transactions are conducted only for the purpose of reducing risk of future interest rate
fluctuations.
(B) Types and risks of financial instruments and related risk management system
Proceeds from debt financing are used mainly for acquisition of investment properties. While these debts are
exposed to liquidity risk upon repayment, NHI manages the risk by maintaining the LTV ratio at low levels,
diversifying maturities, keeping the ratio of long-term debt to total debt at high levels, and diversifying lenders
with particular focus on domestic financial institutions. Bank borrowings with floating interest rates are exposedto the risk of future interest rate fluctuations and NHI manages that by using derivative transactions such as
interest-rate swap agreements.
NHI evaluates the effectiveness of hedges by comparing the accumulated cash-flow changes of hedged
items and that of hedging items, and then verifies the ratio of both amounts of changes. Furthermore, NHI
omits assessment of hedge effectiveness for the interest-rate swap agreements which meet the criteria ofspecial treatment.
Execution and management of derivative transactions have been carried out based on the regulations
defined in the basic policy of risk management.
Tenant security deposits represent funds deposited by tenants, and NHI is exposed to the risk of refunding
deposits in the event that a tenant terminates the contract. However, such risk is limited by reserving someparts of the funds.
Deposits are used for investing NHI’s surplus funds. These deposits are exposed to credit risks such as
bankruptcy of the depository financial institutions. NHI manages credit risk by restricting the tenor of thedeposit relatively short and setting a minimum credit rating requirement for the depository financial institutions.
(C) Supplementary explanation for fair value of financial instruments
The fair value of financial instruments is based on their quoted market price, if applicable. When there is noquoted market price available, fair value is reasonably estimated. As certain assumptions are used for theestimation of fair value, the result of such estimation may differ if different assumptions are used. Also, thecontractual amounts of derivative transactions do not represent the market risk involved in these derivativetransactions.
(2) Estimated Fair Value of Financial Instruments
The book value, fair value and difference between the two as of April 30, 2016 and October 31, 2015 are
as follows. The financial instruments whose fair value is extremely difficult to estimate are excluded fromthe following table.
(As of April 30, 2016)
Cash and cash equivalents
Total
Long-term debt
Total
Derivative transactions

26(Thousands of yen)Book Value
1,601,495
1,601,495
9,300,000
9,300,000–

Fair Value
1,601,495
1,601,495
9,363,560
9,363,560–

Difference––
63,56063,560–(As of October 31, 2015)(Thousands of yen)Book Value
965,199
965,199
8,800,000
8,800,000–

Cash and cash equivalents
Total
Long-term debt
Total
Derivative transactions

Fair Value
965,199
965,199
8,789,863
8,789,863–

Difference––(10,137)(10,137)–

Notes:
1. Methods to estimate fair value of financial instruments and derivative transactions
Assets(1) Cash and cash equivalents
As these instruments are settled in short period of time, their fair value and book value are nearly identical.
Therefore, for these items, the book value is assumed as the fair value.
Liabilities(1) Long-term debt
For long-term debt with floating interest rates, their fair value and book value are nearly identical and there
are no significant changes in NHI’s credit risk after borrowing. Therefore, for these items, their book value isassumed as their fair value. For long-term debt with fixed interest rates, their fair value is based on the present
value of principle and interest cash flows discounted at the current interest rate estimated to be applied if
similar new debt is entered into. However, the fair value of certain floating-rate long term debt that qualifies forthe special treatment of interest-rate swaps is determined by discounting the sum of its principal and interest
payments net of any cash flows from the interest-rate swaps.
Derivative Transactions(1) Derivatives to which hedge accounting is applied(As of April 30, 2016)
Method of Hedge
Accounting
Special treatment
for interest rate swap
transactions(Thousands of yen)Type of Derivative
Transactions
Interest rate swap
transactions
Receive floating andpay fixed

Hedged Items

Contract Amount(due after one year)

Long-term
debt

Total
(As of October 31, 2015)
Method of Hedge
Accounting
Special treatment
for interest rate swap
transactions

Fair
Value(*)

7,800,000(7,800,000)–(**)

7,800,000(7,800,000)–(Thousands of yen)Type of Derivative
Transactions
Interest rate swap
transactions
Receive floating andpay fixed

Hedged Items

Contract Amount(due after one year)

Long-term
debt

Total

Fair
Value(*)

7,800,000(7,800,000)–(**)

7,800,000(7,800,000)–*The fair value is provided by the financial institution.
**The values of derivatives qualifying for special treatment of interest rate swap transactions are included in that of related long-term debt. This isbecause such swaps are handled together with hedged long-term debt.

2. Financial instruments whose fair value is extremely difficult to estimate
Tenant security deposits including trust accounts (with a book value of 719,884 thousand yen as of April 30,
2016 and 645,231 thousand yen as of October 31, 2015) that have been deposited from tenants are notmarketable and the actual deposit period cannot be reliably determined, thus making it impossible toreasonably estimate their future cash flows, and therefore, it is considered to be extremely difficult to estimate
their fair value.
VIII. Notes to Financial Statements27

3. Redemption schedule for money claims(As of April 30, 2016)(Thousands of yen)

Due within Due after
Due after
Due after
Due after
1 year1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years
1,601,495––––
1,601,495––––

Cash and cash equivalents
Total(As of October 31, 2015)

Due after
5 years––(Thousands of yen)

Due within Due after
Due after
Due after
Due after
1 year1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years
965,199––––
965,199––––

Cash and cash equivalents
Total

Due after
5 years––

4. Redemption schedule for long-term debt
(As of April 30, 2016)(Thousands of yen)

Due within Due after
Due after
Due after
Due after
1 year1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years– 1,800,000 2,100,000 3,400,000 2,000,000– 1,800,000 2,100,000 3,400,000 2,000,000

Long-term debt
Total
(As of October 31, 2015)

Due after
5 years––(Thousands of yen)

Due within Due after
Due after
Due after
Due after
1 year1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years– 1,800,000 2,100,000 2,900,000 2,000,000– 1,800,000 2,100,000 2,900,000 2,000,000

Long-term debt
Total

Due after
5 years––

Note 6 – Schedule of Tangible Fixed Assets of Investment Properties
Investment properties as of April 30, 2016 and October 31, 2015 consisted of the following:(Thousands of yen)

As of April 30, 2016
Acquisition
AccumulatedBook value
costs
depreciation

As of October 31, 2015
Acquisition
AccumulatedBook value
costs
depreciation

Land in trust
accounts

7,528,825–

7,528,825

6,504,957–

6,504,957

Buildings andstructuresin trust accounts

12,189,211(570,460)

11,618,751

10,474,057(383,596)

10,090,461

3,915

(254)

3,661

1,325

(33)

1,292

–

–

–

1,910

–

1,910

19,721,951(570,714)

19,151,237

16,982,249(383,629)

16,598,620

Tools, furniture andfixtures in trust
accounts
Construction inprogress
including trust
accounts
Total

28

Note 7 – Investment and Rental Properties
NHI owns fee-based homes for the elderly, etc. (including land) in the three major metropolitan areas and core cities.
The book value, net change in the book value and the fair value of the investment and rental properties are as follows:(For the six months ended April 30, 2016)
Book Value
As of
ChangeOctober 31, 2015
during the period(*1)
16,637,596
2,554,527(For the six months ended October 31, 2015)
Book Value
As of
ChangeApril 30, 2015
during the period(*2)
13,760,949
2,876,647(Thousands of yen)

As ofApril 30, 201619,192,123

Fair value as ofApril 30, 2016
23,215,000(Thousands of yen)

As of
October 31, 2015
16,637,596

Fair value as of
October 31, 2015
20,410,000(Note 1) The book value represents the acquisition costs less accumulated depreciation.
(Note 2) Significant changes(*1) For the six months ended April 30, 2016, the major reason of increase is acquisition of four properties (2,550,000 thousand yen). The
major reason of decrease is depreciation (187,085 thousand yen).
(*2) For the six months ended October 31, 2015, the major reason of increase is acquisition of three properties (2,778,000 thousand yen). The
major reason of decrease is depreciation (151,777 thousand yen).
(Note 3) The fair values as of April 30, 2016 and October 31, 2015 represent the sum of appraisal values estimated by external real estate appraisers.

Income and loss from investment and rental properties for the six months ended April 30, 2016 and October 31,
2015 are disclosed in Note 8.

Note 8 – Rental Revenues and Expenses
Rental revenues and expenses for the periods ended April 30, 2016 and October 31, 2015 were as follows:(Thousands of yen)

A Revenues from property leasing
Rental revenues
Total revenues from property leasing
B. Property-related expenses
Consignment expenses
Taxes and dues
Non-life insurance expenses
Repair expenses
Depreciation
Leasehold fees
Other property-related expenses
Total property-related expenses
C. Operating income from property leasing [A – B]

For the six months ended April
30, 2016

For the six months ended
October 31, 2015

667,161
667,161555,589555,589

11,57536,901
1,484
19,494
187,0851,200
346
258,085
409,076

9,821
30,608
1,185
13,675
151,777
1,200
208,266
347,323

Note 9 – Net Assets
NHI issues only non-par value units in accordance with the Investment Trust Act and all of the issue prices of newunits are designated as stated capital. NHI maintains at least 50,000 thousand yen as the minimum amount of net
assets, as required by the Investment Trust Act.

Note 10 – Long-Term Debt
Long-term debt as of April 30, 2016 and October 31, 2015 consisted of the following:(Thousands of yen)

Secured loans due 2017 to 2020, principally frombanks and insurance companies with interest rates
mainly ranging from 0.3% to 0.5%
Total

As of April 30, 2016

As of October 31, 2015

9,300,000

8,800,000

9,300,000

8,800,000[Note] The interest rate presented is the spot rate as of April 30, 2016. As for long-term debts which were hedged by interest-rate swaps for the
purpose of avoiding interest rate fluctuation risk, the swapped interest rates are used.
VIII. Notes to Financial Statements

29

The annual maturities of long-term debt as of April 30, 2016 were as follows:(Thousands of yen)

Due within one year
Due after one to two years
Due after two to three years
Due after three to four years
Due after four to five years
Due after five years

1,800,000
2,100,000
3,400,000
2,000,000-

Note 11 – Leases
As Lessor
The future minimum rental revenues under existing non-cancelable operating leases as of April 30, 2016 andOctober 31, 2015 were as follows:(Thousands of yen)

As of April 30, 2016
1,256,418
12,572,103
13,828,521

Due within one year
Due after one year
Total

As of October 31, 2015
1,162,805
11,845,138
13,007,943

Note 12 – Commitment-Type Term Loans
NHI has entered into credit facilities in the form of commitment-type term loan agreements with one bank as of
October 31, 2015 as follows:(Thousands of yen)

As of April 30, 2016

As of October 31, 2015
Total amount of commitment-type term loans
1,200,000
Borrowing execution balance
Net unused balance
1,200,000
NHI had no credit facilities in the form of commitment-type term loan agreements as of April 30, 2016.

Note 13 – Income Taxes
NHI is subject to income taxes in Japan. The effective tax rate on NHI’s income based on applicable Japanese
tax law was estimated as 0.35% for the six months ended April 30, 2016 and 0.45% for the six months ended
October 31, 2015. The following table summarizes the significant differences between the statutory tax rates and
NHI’s effective tax rates for financial statement purposes.
For the six months ended
For the six months endedApril 30, 2016
October 31, 2015
Statutory tax rate
32.31%
32.31%
Deductible dividends(32.19)(32.16)
Others0.23
0.30
Effective tax rate
0.35%
0.45%
NHI was established as an investment corporation under the Investment Trust Act, and as long as aninvestment corporation distributes to its unitholders at least 90% of earnings available for dividends for a period
and other requirements prescribed in the Special Taxation Measures Law of Japan are met, the investment
corporation is allowed to deduct the total amount of dividends, excluding distribution in excess of earnings, incalculating its taxable income under Japanese tax regulations.
The significant components of deferred tax assets and liabilities as of April 30, 2016 and October 31, 2015
were as follows:(Thousands of yen)

Deferred tax assets:
Accrued enterprise tax
Total deferred tax assets
Net deferred tax assets

30

As of April 30, 2016

As of October 31, 2015
15
15
15

14
14
14

With the Act on Partial Revision of the Income Tax Act, etc. (Act No. 15 of 2016) was enacted in the Diet
session on March 29, 2016, the corporate tax rate has been changed, effective for accounting periods startingon and after April 1, 2016. In accordance with this revision, the statutory tax rate used to calculate the deferred
tax assets and liabilities concerning the temporary differences, etc. expected to be reversed in the 5th Fiscal
Period ending October 2016 and 6th Fiscal Period ending April 2017 has been changed to 31.74%. The effect of
this change in the tax rate was immaterial.

Note 14 – Per Unit Information
Information about net assets per unit and net income per unit as of April 30, 2016 and October 31, 2015 andfor the periods then ended were as follows. The computation of net income per unit is based on the daily
weighted average number of units outstanding during the period. The computation of net assets per unit isbased on the number of units outstanding at each period end.

Net assets at period end per unit
Net income per unit

For the six months endedApril 30, 2016
142,958yen
3,566yen

For the six months ended
October 31, 2015
132,160yen
3,299yen

Net income per unit is calculated by dividing the net income by the daily weighted average number ofinvestment units issued and outstanding. The diluted net income per unit is not stated as there are no diluted
investment units.
(Note) The basis for calculating the net income per unit is as follows.

For the six months endedApril 30, 2016
260,882

For the six months ended
October 31, 2015
200,595––

Net income available to ordinary unitholders

260,882

200,595

Average number of units during the period (units)73,14460,800Net income (thousands of yen)Amount not available to ordinary unitholders(thousands of yen)(thousands of yen)

Note 15 – Distribution
In accordance with the cash distribution policy described in Article 33-1-1 of the Articles of Incorporation of
NHI, NHI determines that the amount of distribution shall exceed the amount equivalent to 90% of its
distributable profit as stipulated in Article 67-15 of the Special Taxation Measures Law, and shall be up to its
earnings as the maximum amount. Following this policy, NHI has decided that it shall distribute 260,838,840 yen
for the fiscal period ended April 2016, which is the maximum integral multiple to 74,632 units issued andoutstanding as the distribution of earnings, and 200,579,200 yen for the fiscal period ended October 2015, whichis the maximum integral multiple to 60,800 units. In addition, NHI will continue to make distributions in excess ofearnings (refund of capital contribution to unitholders) every period in accordance with the cash distribution
policy described in Article 33-1-2 of the Articles of Incorporation of NHI. Based on the policy, NHI has decided
that it shall distribute 59,705,600 yen, which is calculated as the approximate equivalent of 32% of 187,085,173
yen of the depreciation amount posted for the fiscal period ended April 2016, as distributions in excess ofearnings (refund of capital contribution to unitholders) and 46,694,400 yen for the fiscal period ended October
2015, which is calculated as the approximate equivalent of 31% of 151,776,702 yen of the depreciation amountposted for the fiscal period ended October 2015.
(Yen)

Unappropriated retained earnings
Distributions in excess of retained earnings
Deduction from unit holders’ capital
Distributions
Distributions of retained earnings
Distributions in excess of retained earnings
Total distributions
Retained earnings brought forward

For the six months endedApril 30, 2016
Total
Per unit
260,908,644

For the six months ended
October 31, 2015
Total
Per unit
200,605,559

59,705,600

46,694,400

260,838,840
59,705,600
320,544,440
69,804

3,495
800
4,295

200,579,200
46,694,400
247,273,600
26,359

3,299
768
4,067

VIII. Notes to Financial Statements

31

Note 16 – Transactions with Related Parties(For the six months ended April 30, 2016)
Classification
Name of company, etc.
Location
Capital stock (thousands of yen)
Business description
Percentage of voting rights, etc. held byrelated party (held in NHI)
Relation to the related party

Subsidiary of major unitholder
DA Healthcare Alpha LLC
Minato-ku, Tokyo
300
Real estate business–

Interested party
Acquisition of trust beneficiary interests in real estate (NoteNature of transaction
1, 2 and 3)
Amount of transaction (thousands of yen)
2,550,000
Account–
Balance at end of period (thousands of yen)–Consumption taxes are not included in transaction amounts.

(Note 1) Acquisition of trust beneficiary interests in real estate mentioned above is for Alpha Living Okayama Nishigawa Ryokudokoen, Alpha Living
Okayama Korakuen, Alpha Living Takamatsu Ekimae and Alpha Living Takamatsu Hyakkenmachi, and the amount of transaction indicates theamount (purchasing amount for real estate, etc. indicated in the sales contract for trust beneficiary interests) that does not include expenses(taxes and dues, etc.) required for the acquisitions of the real estate, etc.
(Note 2) Terms of transaction with interested party are decided based on rules against conflict of interest, which are internal rules of the AssetManagement Company.
(Note 3) Terms of transaction are determined based on market prices.

(For the six months ended October 31, 2015)
No related-party transaction was entered into for the six months ended October 31, 2015

Note 17 – Segment Information
For the six months ended April 30, 2016 and October 31, 2015
Segment Information
Segment information has been omitted as NHI has only one segment, which is the property leasing business.
Related Information
Information about Products and Services
Disclosure of this information has been omitted as operating revenues to external customers for a single
product/service category account for more than 90% of the operating revenues on the statements ofincome and retained earnings.
Information about Geographic Areas(1) Operating revenues
Disclosure of this information has been omitted as domestic operating revenues account for morethan 90% of total operating revenues.
(2) Investment properties
Disclosure of this information has been omitted as domestic investment properties account for morethan 90% of the book value of the total investment properties.
Information about Major Tenants
Disclosure of this information has been omitted as there is no tenant that accounts for 10% or more of
the operating revenues recorded in the statements of income and retained earnings.

Note 18 – Significant Subsequent Events
None applicable.

32

IX. Independent Auditor’s Report

IX. Independent Auditor’s Report33[Feature] Introduction of Operators

Sompo Care Next operates 117 nursing homes nationwide
SakadoTsurugashima

SaitamaNishi Omiya
Kamifukuoka

Sompo Care LAVIER Sagamihara Chuo
Nursing home with full range rehabilitation/dementia
care surrounded by greenery in the center of Sagamihara.

SayamaFujimino
Iruma
Shiki Yanasegawa
HannouAsaka
Higashi Tokorozawa

Owned by
NipponHealthcare
Investment
Corporation

Location 3-6-3 Chuo, Chuo-ku, Sagamihara-shi, Kanagawa, 252-0239
Nearest Approximately 1.2km from Sagamihara Station on
station JR Yokohama Line

HamuraHigashiyamato
Minami Oizumi

TokyoMusashisakai
Sengawa
Fuchu
Chofu
Komae
Horinouchi
Wakabadai
Hachioji Katakura
Kawasaki
Machida Oyama
Miyamae
Machida Onoji
Ouzenji
Sagamihara Chuo
Fuchinobe
KobuchiAzaminoKamimizo
Minami Machida

List of Nursing Homes

Kunitachi Yagawa

Sompo Care LAVIER Kinugasayama Koen

Owned by
NipponHealthcare

Scenic area with one of the most famous cherry blossom
Investment
Corporation
viewing spots on the Miura Peninsula. A luxurious life
admiring the beauty of spring and fall sceneries starts here.
Location 4-8-15 Koyabe, Yokosuka-shi, Kanagawa, 238-0026
Nearest Approximately 1.2km from Kinugasa Station on JR Yokosuka LinestationKanagawa

Zama
YamatoZama Yatoyama Koen
Ayase (Opening in July 2016)
YayoidaiAtsugiKouza Shibuya

Honatsugi
Aikou Ishida
IseharaShonan Hiratsuka Nibankan

Sompo Care LAVIER Hiroshima Hikarigaoka
View from 100m above sea level. Peaceful life filled withsunlight in all seasons overlooking the city ofHiroshima and the ocean.

Owned by
NipponHealthcare
Investment
Corporation

Location 2-40 Hikarigaoka, Higashi-ku, Hiroshima-shi Hiroshima, 732-0051
Nearest 14-minute walk from Hiroshima Station on JR Sanyo Main Linestation7 Sompo Care Next Inc.

Tokaichiba
Chuorinkan

Odakyu Sagamihara

Oiso
Odawara Nibankan
OdawaraEbina

Rokuentoshi

Totsuka
Shonandai

Kita Kamakura
Shonan Hiratsuka
Kamakura Tokiwa
HayamaSompo Care Next Inc.

focusing on fee-based homes for the elderly with nursing care[as of July 1, 2016]

Omiya
Omiya Nibankan

Koshigaya

Nagareyama Otaka-no-moriMinami Urawa

Souka
Souka Matsubara
Musashi
Kawaguchi Angyo
Urawa
Toda
YashioAkatsuka Koen
MatsudoTakashimadaira
Higashi Matsudo
Hikarigaoka Koen Akabane
NerimaSaginomiya
Funabori

NaritaNarashinodai
Nishi Funabashi
Tsudanuma

YachiyoKatsutadai
List of Nursing Homes

Kinshicho

Ichinoe

Chiba

Setagaya Funabashi
Mitsuwadai
Chiba Tsubakimori

Seijyo Minami
Futako Tamagawa
Takatsu
Mizonokuchi Nibankan
Mizonokuchi Tamagawa
Motosumiyoshi
HanedaTsunashima

Hama Kawasaki

Chubu, Kinki and Chugoku Area

YokodaiKanazawa Hakkei

Kobe Ikawadani Rokko
Nishinomiya
Kobe Tarumi
Minami Horie
Hiroshima
Bentencho
Hikarigaoka
Kishiwada

Hiroshima
Funairi

Higashi Zushi
Yokosuka

Nagoya Nakamura
Atsuta

Hyogo

Aichi

Osaka

Trequarre

Yokosuka
Kinugasayama
Koen
Kurihama

Sompo Care Next Inc.

6

[Feature] Introduction of Operators

Working to assure every day is filled withsmiles for each resident

Feature on Nursing Homes

Reliable services are provided in every scene, including meals and nutrition guidance supported by professionals,
a dependable medical care system, comfortable living space and fun activities.
With the residents as the focus of services, multifaceted nursing care that is not available with individual care is offered.

Feature1

Team care that assures“continuing peace of mind”

Our home focuses on medical cooperation with close communication among those in charge of medicine, nursing and care.
While staff members keep an eye on even small changes in theresident’s physical and mental conditions on a day-to-day basis,
care managers, nurses, visiting doctors, pharmacists and others
team up to ensure the safety and peace of mind of residents.

Feature3

A space that pleasantly
supports independence

Our home not only provides a profoundly relaxing space but isalso designed and built with equipment to support residents’physical functions and desires for independent living. Easy-togrip knobs for residents with weak grip strength and colored
flooring that helps residents with dementia to recognize theirown rooms, generate “positive changes” in residents.

Feature2

Meals that lead to a healthy mind and body

We incorporate “nutrition care and management” where we draw
up daily meal and care plans based on the resident’s nutritional
status as well as try different menus to offer rich seasonal tastes.
We put forth efforts to serve “meals that make residents healthierday-by-day” by working with the care and rehabilitation sections.

Feature4

Activities that brighten everyday life

Seasonal events such as cherry blossom viewing and summer
festivals, cultural activities stimulating the five senses such as
Japanese traditional dance and calligraphy, and many more
events and recreational activities that bring excitement toeveryday life are offered.

Making everyday life more
comfortable and pleasant with
day-to-day care services

Eating assistance

Handling mail

Shopping services

Bathing assistance

Serving meals in own room

Conducting various formalities

Toilet assistance

Laundry

Beauty/barber services

A wide range of day-to-day care services are available to assurethat all residents will enjoy living at our home with peace of mind.

Daily life assistance

Cleaning

Regular check-ups

Emergency response with nurse call

Changing bedding

Doctor’s visits*Some services require fees depending on their frequency.

5 Sompo Care Next Inc.

Sompo Care Next Inc.

Establishing a society where everyone can grow oldwith peace of mind by creating a nursing care scenethat highlights the “person”

Message from President

Japan is the first among developed nations to have entered into a super-agedsociety. In addition to the structural change in shouldering social welfare costs
due to the increase in elderly population, issues such as nursing care refugees(people who are not able to receive nursing care) and nursing care retirement(retirement in order to take care of family members, etc.) have been identified asurgent. There are numerous problems to be solved for all the elderly people to beable to lead safe and genuinely rich lives.
We at Sompo Care Next Inc. strive to be a leader in creating a new nursing careindustry while at the same time contributing to solving these issues of modern
society.

Ken Endo
President and Chief Executive Officer
Sompo Care Next Inc.

In order to attain such a goal, we would like to start by focusing on the establishment and development of an environment to cultivate human resources. We will
provide training/educational facilities and a system which will allow each expert,
including care staff, to develop their skills in conjunction with performing dailytasks. By responding to the willingness of each member to “grow” and supportingthe cultivation of their careers, we aim to become a company where people
engaged in work at nursing homes can shine.
Furthermore, as a long-term goal, we will focus on research and development of
information and communication technology (ICT) in cooperation with Sompo
Holdings, Inc. By developing highly specialized ICT that suits the work at nursing
homes and eventually utilizing it on site, it will be possible to enhance theprecision of risk control which secures peace of mind and safety for residents andusers as well as reduce the burden on caregivers.
Expertise in the nursing care business that Sompo Care Next has accumulated
and our thoughts for residents and users. Knowledge and know-how on risk
control that Sompo Holdings, Inc. has accumulated through operating theinsurance business and its broad network. By means of integrating theseelements, we are determined to grow as a pioneer that opens up “future nursingcare” while aiming to establish a society where everyone can grow old withpeace of mind.

Training center “SOMPO Care Next Step Center”
Aiming to provide top quality nursing care services
Under the theme of “acquisition of knowledge/improvement of skills/enhancement of
humanity,” nursing care professionals will be cultivated through a wide range oftraining such as skill practice using a space similar to the rooms and equipment of
actual nursing homes, programs to foster the senses of nursing care and ethics inaddition to provision of knowledge on basic nursing care. Furthermore, the training
center will be used as a testing ground for introducing information and communication
technology (ICT) to nursing care facilities. We will promote introduction of ICT which will
be effective in improving the quality of nursing services by confirming the usability of
new technologies and verifying data collected through trial use.
Sompo Care Next Inc.

4

[Feature] Introduction of Operators

Sompo Care Next Inc.

Challenging beyond insurance

Becoming a Group that can support the“security, health and wellbeing”
of customers along single track
Sompo Holdings, Inc. operates the domestic life insurance business,overseas insurance business, nursing care & healthcare business and others while focusing on
domestic property and casualty (P&C) insurance business.
With these four businesses as its main pillars, it strives in becominga Group that can rival global players as a genuine service provider.

As a core business of theGroup, high-quality P&C
insurance products andservices that respond todiversifying risks areprovided.

Domestic P&C
Insurance

Global expansion fromdeveloped nations toemerging nations with a
network encompassing
210 cities in 32
countries.

Overseas
Insurance

Domestic
Life Insurance

Realizing “acceleration of
growth” by providing awide range of products
and services supporting
the life stages ofcustomers.

Nursing Care
& Healthcare

As a new business pillar,
aiming to provide top
quality services byutilizing management
resources and know-how
the Group has fostered.

Corporate Profile
Company name

Sompo Holdings, Inc.
*Sompo Japan Nipponkoa Holdings, Inc. changed its name to Sompo Holdings, Inc. on October 1, 2016.

Headquarters address

26-1, Nishi-Shinjuku 1-chome, Shinjuku-ku, Tokyo, 160-8338

Established

April 1, 2010

Paid-in capital

100 billion yen

No. of employees

440 *as of March 31, 2015

Business details

Management of P&C insurance companies, life insurance companies, and other companies controlled
as subsidiaries pursuant to the Insurance Business Law, and other related operations.

Group CEO

Kengo Sakurada, Representative Director, President and Executive Officer

3 Sompo Care Next Inc.

Sompo Care Next Inc.

Sompo Care Next Inc.

Sompo Care Next Inc. develops a wide range of businesses
which are related to nursing care, such as fee-based homes for the elderlywith nursing care, day service business and home-visit care business.
The company works to establish a society where everyone can grow old with peace of mind
by providing top quality services and maintaining
the importance of taking care of each customer.

Fee-based homes for theelderly with nursing care
At fee-based homes for the elderly with nursing care, care staff
stationed around-the-clock provide nursing care services suchas physical assistance in eating, bathing, using the toilet, etc.,
daily life assistance in cleaning, laundry, etc. as well as healthconsultation and rehabilitation.

Sompo Care LAVIER Kishiwada

Sompo Care LAVIER S Shonandai

Sompo Care Happy Days Mizonokuchi

Residential-type fee-based
homes for the elderly

Serviced residential
complexes for the elderly

Outpatient daycare(day service)

Condominiums for the elderly with meal
services and daily assistance. The day
service, home-visit long-term care officeand home-visit nursing care office are on
the same premises.

Barrier-free rental apartments for seniors
which provide services such as safetyassurance and daily life consultation.

Day service facilities which provide meals,bathing services, nursing care prevention
programs, recreational activities and such.

*Properties shown above are not properties owned by NHI or properties scheduled to be acquired by NHI in the future.

Corporate Profile
Company name

Sompo Care Next Inc.

Headquarters address

Shinagawa Seaside East Tower 12F, 4-12-8 Higashi Shinagawa, Shinagawa-ku, Tokyo 144-0002

Established

November 11, 1992

Paid-in capital

5.095 billion yen

No. of employees

7,145 (including part time workers) *as of March 1, 2016

Business details

Fee-based homes for the elderly with nursing care, residential-type fee-based homes for the elderly business,
serviced residential complexes for the elderly business, day service business, home-visit care (home assistanceservice) business, home-visit nursing care business and home-care support business.

Representative

Ken Endo, President

Sompo Care Next Inc.

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Feature Vol. 3

Introduction of Operators
Sompo Care Next Inc.

Sompo Care Next Inc.