9th

Fiscal Period Business Report(Statement of Financial Performance)

May 1, 2018 - October 31, 2018

Hopeful future
for Japan

Stock
Code
6-2-1 Ginza, Chuo Ward, Tokyo3308
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 697 million yen in operating revenue, 271 million yen in operating income and 243
million yen in net income for the fiscal period ended October 2018 (9th Fiscal Period). Concerning distributions, NHI declareda distribution amount per unit of 3,260 yen and a distribution amount in excess of earnings per unit of 870 yen, bringing thetotal distribution amount per unit to 4,130 yen. See page 3 for Financial and Management Highlights
The asset size as of the end of the 9th Fiscal Period stood at 19,318 million yen. During the 10th Fiscal Period, NHI
acquired Irise Komae Bettei (30% quasi-co-ownership interest) (acquisition price: 394.5 million yen). NHI will aim toenhance portfolio value through investments in carefully selected properties going forward.
See pages 4 and 5 for details of Growth Strategy

With the above acquisition, the number of operators of facilities owned by NHI now stands at 11. NHI has realized
maintenance and improvement of portfolio stability by pressing forward diversification ofoperators and concluding long-term fixed rent lease agreements.
See page 9 for Stable Management Strategy

On the financial front, NHI will continue to work to further strengthen its financial
standing while reducing refinancing risks in the future. See page 11 for Financial Conditions
Going forward, NHI will strive to maximize unitholders’ value together with 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.
Healthcare Investment Corporation
Executive俊一
Director
Shunichi Suzuki Nippon日本ヘルスケア投資法人
執行役員 鈴木
Contents

I. Overview of Nippon Healthcare Investment Corporation

II. Asset Management Report…………………………… 12

To Our Investors……………………………………………… 2

III. Balance Sheets… ……………………………………… 18

Financial and Management Highlights………………………… 3

IV. Statements of Income………………………………… 20

Growth Strategy of Nippon Healthcare Investment Corporation…… 4

V. Statements of Changes in Net Assets… ………… 21

Portfolio List………………………………………………… 6

VI. Statements of Cash Flows…………………………… 21

Portfolio Map………………………………………………… 7

VII. Notes to Financial Statements……………………… 22

Portfolio Status……………………………………………… 8

VIII. Independent Auditor’s Report……………………… 32

Stable Management Strategy/Initiatives for ESG… …………… 9

IX. Description of Asset Manager… …………………… 33

Financial Conditions… ……………………………………… 11

X. Investor Information…………………………………… 34
Please refer to the pages starting from the back cover for information on operators.

2

Financial and Management Highlights
Steady growth in asset size and maintenance of stable distribution level■ Actual Financial Results for Fiscal Period Ended October 2018 (9th Fiscal Period), and Financial Results Forecasts for Fiscal PeriodEnding April 2019 (10th Fiscal Period) and Fiscal Period Ending October 2019 (11th Fiscal Period)
8th Fiscal
9th Fiscal
PeriodPeriod(April 2018) (October 2018) Difference(result)

10th Fiscal
Period(April 2019)(result)(forecast)Difference
from 9th
FiscalPeriod11th Fiscal Difference
Periodfrom 10th(October 2019) Fiscal
Period(forecast)

No. of properties owned at the end of the
fiscal period
Operating revenues (million yen)

22

22

-

23

+1

23

-

697

697

-0

705

+7

707

+2

Operating expenses (million yen)

424

425

+1

424

-0

427

+2

Operating income (million yen)

273

271

-1

280

+8

280

-0

Non-operating expenses (million yen)

27

28

+0

28

+0

29

+0

Ordinary income (million yen)

247

244

-3

251

+7

251

-0

Net income (million yen)

246

243

-3

250

+7

250

-0

■ Distribution Result for 9th Fiscal Period, Distribution Forecasts for 10th Fiscal Period and 11th Fiscal Period
8th Fiscal
9th Fiscal
PeriodPeriod(April 2018) (October 2018) Difference

Number of investment units issued andoutstanding at the end of the fiscal period (units)
Distribution per unit

10th Fiscal Difference
Periodfrom 9th(April 2019)
FiscalPeriod(forecast)(result)(result)

74,632

74,632-

74,632-

74,632

-

4,163

4,130

-33

4,230

+100

4,230

-

3,303

3,260

-43

3,360

+100

3,350

-10

860

870

+10

870

-

880

+10

2,657

2,674

+17

2,724

+50

2,746

+22

32.4

32.5

+0.1

31.9

-0.6

32.0

+0.1

(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)Depreciation per unit (yen)Ratio of distribution in excess of earnings
to depreciation per unit (%)■ Operating Revenues■ Operating Income■ Net Income(million yen)
1,000

(million yen)600

(million yen)
400

500

800
600

11th Fiscal Difference
Periodfrom 10th(October 2019) Fiscal
Period(forecast)

300

697

679

697

697

697

400
300

400

200

274

200

277

273

273

246

249

244

246

243

5th FP

6th FP

7th FP

8th FP

9th FP

271
100

200

100
0

0
5th FP

6th FP

7th FP

8th FP

9th FP0
5th FP

6th FP

7th FP

8th FP

9th FP■ Distribution per Unit (including distribution in excess of earnings)
(yen)
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0

Distribution inexcess of
earnings per unit
Distribution
per unit
excluding
distribution inexcess of
earnings

（

）

3,471

4,067
768

4,295
800

4,130

4,230

4,230

860

870

870

880

3,303

3,260

3,360

3,350

4,124

4,163

800

850

3,343

3,274

4,106

4,143

800

3,306

810
2,661

3,299

3,495

Fiscal Period
Fiscal Period
Fiscal Period
Fiscal Period
Fiscal Period
Fiscal Period
Fiscal Period
Fiscal Period
Fiscal Period
Fiscal Period
ended April 2015 ended October 2015 ended April 2016 ended October 2016 ended April 2017 ended October 2017 ended April 2018 ended October 2018 ending April 2019 ending October 2019(2nd FP)(3rd FP)(4th FP)(5th FP)(6th FP)(7th FP)(8th FP)(9th FP)(10th FP)
(11th FP)I. Overview of Nippon Healthcare Investment Corporation

3

Growth Strategy of Nippon Healthcare Investment Corporation
External growth through acquisition of carefully selected properties and expansion of pipeline■ Increase in Number of Property Acquisitions Using Bridge Funds Formed by Daiwa Securities Group (sponsor) andDaiwa ACA HealthCare as Pipelines

Sponsor’s Bridge Funds
Pipeline with properties totaling 14 billion yen (part)

Nichii Home Kachidoki(Tentative) Kasama Project

Irise Komae Bettei(70% quasi-co-ownershipinterest)

Investment Corporation

Alpha Living Takamatsu
Konyamachi

Daiwa ACA HealthCare Inc. (pipeline support agreement to be concluded)
Conclusion of a pipeline support agreement with Daiwa ACA HealthCare, of which a stake of 66% is heldby the sponsor, is under discussion (Scheduled to be concluded in January 2019)• Seek to acquire properties from funds formed by Daiwa ACA HealthCare going forward

Daiwa ACA HealthCare Inc.

SponsorFuturepipelines[Principal businesses] Investment in care facilities/
hospitals in Japan

Investment(66%)• Investment in promising nursing care-related real estate andhospital real estate• Investment in operators which own healthcare real estate (Businesssuccession of medical corporations, care providers, etc.)■ External Growth Through Acquisition of Carefully Selected Properties(million yen)

30,000

Irise Komae Bettei(30% quasi-co-ownershipinterest)

25,00020,00015,00013,28016,05818,608 19,318 19,318 19,318 19,318 19,318 19,712

10,0005,000
0At the time of listing Fiscal Period ended Fiscal Period ended Fiscal Period ended Fiscal Period ended Fiscal Period ended Fiscal Period ended Fiscal Period ended As of December
20, 2018
October 2015 (3rd FP) April 2016 (4th FP) October 2016 (5th FP) April 2017 (6th FP) October 2017 (7th FP) April 2018 (8th FP) October 2018 (9th FP)
Total

14

properties

Total

17

properties

Total

21

properties

Total

22

properties

Total

22

properties■ Ratios of Investment in Regions
RegionDefinition

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

Cities outside the Three Major Metropolitan Areas
with populations of 200,000 or more
Cities outside the Three Major Metropolitan Areasand the Core City Areas with populations under
200,000(Note) Incorporation ratio is based on the acquisition price.

4

Total

22

properties

Total

22

properties

Total

22

properties

Total

23

properties■ Ratios of Investment in Healthcare Facility Types
Target Incorporation
incorporation
ratio(Note)
ratio

50%
or more61.8%

50%
or less38.2%

10%
or less

0.0%Classification of healthcare facility

Targetincorporation
ratio

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 less
Other

10% or less

(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 with prefecturesthat meet the registration criteria stipulated by the Act on Securement of Stable Supply for
Elderly Persons’ Housing.

■ Utilization Methods of Cash on Hand
Of various options for utilizing cash on hand (property acquisition, repayment of loans, acquisition of own investment units, distributions in excess of earnings,etc.), acquired a property which can continuously contribute most to distribution as well as distributions in excess of earnings in previous fiscal periods.
Assumed scenario
Specific measures
Distributions in excess Implement distributions in excess of earnings every accounting period with an upper limit of 40% ofdepreciationof earnings
Acquisition of new
properties• Allocate fund for property acquisition since cash on hand accumulates by around 100 million yen
every fiscal period• Consider continuous acquisition from bridge funds in accordance with the amount of cash on hand

Repayment of loans

Reduce debt cost through repayment of interest-bearing liabilities

Acquisition of own
investment units

Seek capital efficiency through acquisition/retirement of own investment units

Effect/impact
Contribution to stable distribution
Continuous contribution to
distribution
Low cost cut effectWill lead to a decline of liquidity
due to a decrease in the number
of issued investment units

We will aim for maximization of unitholders’ value through efficient use of funds.
■ Property Acquired in 10th Fiscal Period (Ending April 2019)

Irise Komae Bettei (30% quasi-co-ownership interest)
Irise Komae
Bettei

Kitami Fureai Park
NogawaGreen Space

Location
Komae-city, Tokyo
Acquisition date December 20, 2018
Acquisition price 394.5 million yen
Total leased
2,016.73
area (m²)
Structure/ floors RC/3F

Komae
City OfficeKitami Stationyue
Odakwara Lin
Oda
aya Dori
Komae Station Setagt
Stree

Number of59
Rooms (room)
Resident
59
capacity (people)
Room area range (m²) 18.00
Opening date
March 1, 2017

Operator
Company Name
Head office

Seijogakuen-Mae
Station

No

ga

wa

Riv

er

Site Features: The Property is located a 12-minute walk from
Kitami Station on the Odakyu Odawara Line in an administrative
district between Komae City and Setagaya Ward.
Regional features: The area within a 3-km radius of theProperty spans all of Komae City and part of Chofu City andSetagaya Ward. The number of elderly people aged 75 years
or over is 122,000, accounting for 32.6% of the total
population of the two cities and one ward. The number of
elderly people aged 75 or over in Komae City is expected toincrease to 12,400 in 2025 from 10,600 in 2018.
Property features: The Property is a relatively new facility,
completed in 2017, and has private rooms of mainly around 18
m², the standard room size for facilities with nursing care. The
rooms are equipped with a sink and toilet.

Facilities managed by the operator

HITOWA Care Services Co., Ltd.

Facilities under management
Number of facilities
Daily Life Long-Term Care Admitted
48
to a Specified Facility
Residential-type fee-based homes
52
for the elderly
Elderly housing with supportive
9
services
Group homes
5
Total
114

1-4-5 Roppongi, Minato-ku, Tokyo
President and Chief Executive Officer
Representative
Yoshiteru Hakamada
Date of Incorporation November 2006
Amount of Capital 100 million yen
Attribute (listed market) Unlisted
Operations of fee-based homes for the elderly andhousing with supportive services under the
Description of Business elderly
brand of “Irise”; and operations of group homes
business and day services business

Number of rooms

2,836
3,276
614
81
6,807

(Source) Website of the operator, etc.

■ Increase Rate of Number of People Requiring Support or Nursing Care in Komae City
The number of people requiring support ornursing care in Komae City was 3,778 in2017, and is estimated to be 4,470 in 2020
(up 18% form 2017) and 5,296 in 2025 (up
40% from 2017).
As for the entire Tokyo, the number of people
requiring support or nursing care was591,631 in 2017 and is estimated to be
748,703 in 2025 (up 27% from 2017). Thus
the increase rate is greater for Komae City.

Number of people requiring support or nursing care in Komae City
(Persons) 6,000
5,000
4,000

Up 40%

Support level 1

Support level 2

Nursing care level 1
Nursing care level 3
Nursing care level 5

Nursing care level 2
Nursing care level 4 Estimate(Up 27% for Tokyo on average)

3,000
2,000
1,000
0
2012

2013

2014

2015

2016

2017

2018

2019

2020

2025

I. Overview of Nippon Healthcare Investment Corporation

5

Portfolio List (as of December 20, 2018)
Consists of 23 properties and 11 operators

Acquisition(Note 1) period
No

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21

Property nameFacility type

(Note 1)

(Note 1)Fee-based homes forthe elderly withnursing care
Residential-type
2nd Fiscal Super Court
fee-based homes for
Period JR Nara-Ekimae
the elderly
Fee-based homes for
1st Fiscal Sompo Care LAVIER
the elderly with
Period Hiroshima Hikarigaoka
nursing careFee-based homes for
1st Fiscal Sompo Care LAVIER
the elderly with
Period Sagamihara Chuo
nursing careFee-based homes for2nd Fiscal Sompo Care LAVIER
the elderly with
Period Kinugasayama Koen
nursing careFee-based homes for
5th Fiscal Sompo no ie
the elderly with
Period Nishitanabeekimae
nursing careFee-based homes for
1st Fiscal
the elderly with
Sawayaka Kaikyokan
Periodnursing careFee-based homes for
1st Fiscal
the elderly with
Sawayaka Meisuikan
Periodnursing care
Residential-type
1st Fiscal Sawayaka Heart Life
fee-based homes for
Period Nishikyogoku
the elderly
Fee-based homes for2nd Fiscal
the elderly with
Sawayaka Hinodekan
Periodnursing care
Residential-type
2nd Fiscal Sawayaka Riverside
fee-based homes for
Period Kurinoki
the elderly
Residential-type
2nd Fiscal Sawayaka Obatakefee-based homes for
Period Sanbankan
the elderly
Fee-based homes for
1st Fiscal Nichii Care Center
the elderly with
Period Fukushima Omori
nursing careFee-based homes for2nd Fiscal
the elderly with
La’nassica Arakogawa
Periodnursing care
Residential-type
1st Fiscal
fee-based homes forVerger Hirakata
Periodthe elderly
Fee-based homes for3rd Fiscal Minna-no-ie Omiya
the elderly with
Period Tsutsujigaoka Park (Note 7) nursing careFee-based homes for3rd Fiscal Minna-no-ie Chuo-ku
the elderly with
Period En’nami
nursing careFee-based homes for3rd Fiscal Silver Heights
the elderly with
Period Hitsujigaoka No. 3
nursing care
Residential-type
4th Fiscal Alpha Living Okayama fee-based
homes for
Period Nishigawa Ryokudokoen
the elderly
Residential-type
4th Fiscal Alpha Living Okayama fee-based
homes for
Period Korakuen
the elderly
Residential-type
4th Fiscal Alpha Living Takamatsu fee-based
homes for
Period Ekimae
the elderly

1st Fiscal Charm Suite
Period Ryokuchi Koen

OperatorCharm Care
Corporation

Toyonaka City,
Osaka

1,950

9.9

3,060

128

98.4

98.4

0.0

Super Court Co.,
Nara City, Nara
Ltd.

1,569

8.0

1,750

155

93.5

92.9

-0.6

Hiroshima City,
Hiroshima

960

4.9

1,230

80

97.5

93.7

-3.8

1,170

5.9

1,780

80

71.2

78.7

7.5

1,839

9.3

2,060

104

90.3

89.4

-0.9

Osaka City,
Osaka

710

3.6

739

42

97.6

97.6

0.0

Kitakyushu
City, Fukuoka

630

3.2

898

65

98.4

95.3

-3.1

Kitakyushu
City, Fukuoka

590

3.0

813

87

100.0

100.0

0.0

Kyoto City,
Kyoto

750

3.8

1,140

84

98.8

94.0

-4.8

Niigata City,
Niigata

773

3.9

920

50

100.0

96.0

-4.0

Niigata City,
Niigata

266

1.3

323

33

94.8

94.8

0.0

Kitakyushu
City, Fukuoka

289

1.5

355

50

100.0

94.0

-6.0

Nichiigakkan Co., Fukushima City,
Fukushima
Ltd.

265

1.3

341

52

100.0

100.0

0.0

Cedar Co., Ltd.

Nagoya City,
Aichi

1,279

6.5

1,430

100

98.0

98.0

0.0

Nihon Kaigo Iryo
Center Co., Ltd.

Hirakata City,
Osaka

950

4.8

1,590

104

70.0

76.6

6.6

Saitama City,
Saitama

740

3.8

776

33

93.9

84.8

-9.1

Saitama City,
Saitama

838

4.3

860

51

64.7

80.3

15.6

Sapporo City,
Hokkaido

1,200

6.1

1,340

109

93.6

92.7

-0.9

Okayama City,
Okayama

730

3.7

787

53

87.2

76.3

-10.9

Okayama City,
Okayama

610

3.1

658

45

89.5

89.5

0.0

Takamatsu
City, Kagawa

605

3.1

641

43

90.9

81.8

-9.1

Takamatsu
City, Kagawa

605

3.1

626

50

85.1

83.3

-1.8

Komae City,
Tokyo

394

2.0

399

59

-

98.3

-

11 operators 23 properties Total

19,712100.0

24,516

1,657

-

-

-

Sagamihara
Sompo Care Inc. City, Kanagawa(Note 8)
Yokosuka City,
Kanagawa

Sawayaka Club
Co., Ltd.

Wisnet Co., Ltd.
Silver Heights
Sapporo Co., Ltd.

Anabuki Medical
Care Inc.

Fiscal Alpha Living Takamatsu Elderly housing with
22 4thPeriod
supportive services
Hyakkenmachi
FiscalIrise Komae Bettei
23 10thPeriod

Fee-based homes forthe elderly withnursing care

Location

Acquisition priceAppraisal Number Occupancy Occupancy(million yen) (Note 2)
value
of rooms rate in the rate in the
Share of (million yen) (rooms) 8th FP (%) 9th FP (%) Difference
portfolio(Note 5)(Note 6)(Note 3)(Note 4)(%)

HITOWA Care
Services Co., Ltd.

(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 feebased 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” for Irise Komae Bettei is as of December 1, 2018. That for other facilities is as of October 31, 2018. “Appraisal value” for Irise Komae Bettei is calculated for the 30% quasi-co-ownershipinterest.
(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. “Number of rooms” for Irise Komae Bettei
indicates the number of rooms in the entire facility.
(Note 5) “Occupancy rate” is obtained by dividing the number of residents indicated in the written explanation of important matter received in May 2018 from operators by the resident capacity, rounded down to thefirst decimal place.
(Note 6) “Occupancy rate” is obtained by dividing the number of residents indicated in the written explanation of important matters received in November 2018 from operators by the resident capacity, rounded down to
the first decimal place.
(Note 7) “Minna-no-ie Omiya Yoshinocho” changed its name to “Minna-no-ie Omiya Tsutsujigaoka Park” on December 1, 2018. The same applies hereinafter.
(Note 8) The corporate name of Sompo Care Message Inc. was changed to Sompo Care Inc. as of April 1, 2018 and an absorption-type merger of Sompo Care Next Inc. was conducted as of July 1, 2018. The same
applies hereinafter.

6

Portfolio Map (as of December 20, 2018)
Making diversified investment in healthcare facilities in Japan

Three Major Metropolitan Areas
1

2

4

5

6

9

Charm Suite
Ryokuchi Koen

Super Court
JR Nara-Ekimae

Sompo Care LAVIER
Sagamihara Chuo

Sompo Care LAVIER
Kinugasayama Koen

Sompo no ie
Nishitanabeekimae

Sawayaka Heart Life
Nishikyogoku

Toyonaka City, Osaka

14

Nara City, Nara

15

Sagamihara City, Kanagawa

Yokosuka City, Kanagawa

Osaka City, Osaka

Kyoto City, Kyoto

16

18 Silver Heights Hitsujigaoka No. 3

La’nassica Arakogawa
Nagoya City, Aichi

Verger Hirakata
Hirakata City, Osaka

Minna-no-ie
Omiya Tsutsujigaoka Park

10 Sawayaka Hinodekan

Saitama City, Saitama

11 Sawayaka Riverside

Kurinoki17
9 Sawayaka Heart Life Nishikyogoku

13 Nichii Care Center

Fukushima Omori

1 Charm Suite Ryokuchi Koen

16 Minna-no-ie Omiya

20 Alpha Living Okayama Korakuen

Minna-no-ie
Chuo-ku En’nami

3

Saitama City, Saitama

23

Tsutsujigaoka Park

19 Alpha Living Okayama Nishigawa Ryokudokoen

17 Minna-no-ie

Sompo Care LAVIERE Hiroshima Hikarigaoka

Chuo-ku En’nami
23 Irise Komae Bettei
5 Sompo Care LAVIER

Kinugasayama Koen

12 Sawayaka Obatake Sanbankan
7 Sawayaka Kaikyokan

14 La’nassica Arakogawa

8 Sawayaka Meisuikan

4 Sompo Care LAVIER

Sagamihara Chuo

2 Super Court JR Nara-Ekimae
15 Verger Hirakata
6 Sompo no ie Nishitanabeekimae

Irise Komae Bettei

22 Alpha Living Takamatsu Hyakkenmachi

Komae City, Tokyo

21 Alpha Living Takamatsu EkimaeCore City Areas
3

7

8

10

11

12

Sompo Care LAVIER
Hiroshima Hikarigaoka

Sawayaka Kaikyokan

Sawayaka Meisuikan

Sawayaka Hinodekan

Sawayaka Riverside
Kurinoki

Sawayaka Obatake
Sanbankan

13

18

19

20

21

22

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 names indicate types of facilities; orange for fee-based homes for the elderly withnursing 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

7

Portfolio Status (as of December 20, 2018)
Focusing investment on private nursing homes and other facilities for the elderly for which large demand is expected

Diversification Status■ Region■ Type■ Operator

Elderly housingwith supportive
services

Nihon Kaigo Iryo HITOWA Care Services Co., Ltd. 2.0%
Center 4.8%
Nichii Gakkan 1.3%
Silver Heights
Sapporo 6.1%
Sompo

3.1%
Core City
Areas

Three Major
Metropolitan
Areas

38.2%

Care Inc.

6.5%

Cedar

8.0%

Super Court

23.7%
Sawayaka
Club

61.8%

AnabukiMedicalCare

Wisnet8.0%
Fee-based home for the elderly 96.9%
With nursing care 67.7%
Residential-type 29.3%

16.7%

12.9%
Charm Care Corporation 9.9%

(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■ Proportion of Long-Term Care Fee (Note 2)■ Rent-Paying Capacity (Note 1)

More than 60%,
but 70% or less

26.6%

5.4%

More than
2.0x

1.2x or less

1.6x

24.1%

50.1

More than
5%, but 15%
or less

50％ or less%More than
50%, but on average
60% or lessMore than on average More than
1.2x, but
1.5x, but
1.5x or less2.0x or less

16.7%

■ Proportion of One-Time Entrance Fee
Amortization Income (Note 3)

46.5%

3.5% 5% or less

37.6% on average 62.4%

48.1%

32.6%

(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 October 2017 to September 2018 disclosed by the respective operators. However, data for Nichii Care Center Fukushima
Omori are based on information on business income and expenditures from July 2017 to June 2018; for La’nassica Arakogawa from April 2017 to March 2018; and for Silver Heights Hitsujigaoka
No.3 from September 2017 to August 2018. For Irise Komae Bettei, figures indicate those for the entire facility.

■ Portfolio Occupancy Rates(%)
100

Total resident capacity (right axis)(persons)
2,000

Occupancy rate (left axis)

90.6%
80

1,600

60

1,200

40

800

20

400

0

0
May 2015

Oct. 2015

Stableoccupancy rates

Apr. 2016

Oct. 2016

Apr. 2017

Oct. 2017

Oct. 2018

・The overall occupancy rate dropped by 0.6% from 91.2% at the end of April 2018 to 90.6% at the end of October 2018.
・The period average dropped by 0.6% from 90.8% for the 8th Fiscal Period to 90.2% for the 9th Fiscal Period.
・Although occupancy rates dropped in period-on-period comparison for both period-end and period-average, they remain stable at above 90%.

(Note) Occupancy rates are obtained by dividing the number of residents based on interviews with all facilities at the end of each month, by resident capacity.

8

Apr. 2018

Stable Management Strategy/Initiatives for ESG
Concluding long-term fixed rent lease agreements

Lease Agreements with Highly Reliable Operators
Number of facilities Number of rooms
operated (cases) operated (rooms)(Note 1)
(Note1 and 2)429
13,970Operator
Nichiigakkan Co., Ltd.
Sompo Care Inc.

428

26,131

Wisnet Co., Ltd.

125

3,524

HITOWA Care Services Co., Ltd.

114

6,807

Sawayaka Club Co., Ltd.

82

4,814

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

48
48
42
30
21
3

3,236
3,209
2,254
1,338
905
321

Established

Attributes

August 1973 Listed on the first section of the Tokyo Stock Exchange
Subsidiary of Sompo Holdings, Inc., a company listed on the first section of the Tokyo Stock
May 1997 Exchange
Subsidiary of Sohgo Security Services Co., Ltd. a company listed on the first section of theJanuary 1998
Tokyo Stock Exchange
November 2006 December 2004 Subsidiary of Uchiyama Holdings Co., Ltd., a company listed on the first section of the Tokyo
Stock Exchange
August 1984 Listed on the first section of the Tokyo Stock Exchange
May 1995 April 1981 Listed on JASDAQ Standard on the Tokyo Stock Exchange
June 2009 Subsidiary of Anabuki Kosan Inc., a company listed on the first section of the Tokyo Stock Exchange
October 1997 December 1961 -(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 October 31, 2018).
(Note 2) Operators are indicated in order of the number of facilities they operate.

Overview and Status of Management Back-Up Agreement (as of October 31, 2018)
No. of Operators: 10
Investment
Corporation

Asset
ManagerManagement

Hokkaido Area

No. of Operators: 5

Ownership

Chubu Area

Healthcare
facility A

Operator A

Healthcare
facility B

Operator B

Healthcare
facility C

Operator C

Each operator has
concluded amanagement
back-upagreement with NHI.
Discuss handoverof operation to otheroperators in caseof contingency

No. of Operators: 4

Chugoku Area

Tohoku Area

No. of Operators: 4

No. of Operators: 4

Kyushu Area

Kanto Area

No. of Operators: 5

No. of Operators: 6

Kinki Area

No. of Operators: 8

Shikoku Area

No. of Operators: 5

Management Back-Up Contractors

Initiatives for ESG (Environment)■ Establishment of the Sustainability Committee• Daiwa Real Estate Asset Management Co. Ltd., the asset
management company of NHI, established theSustainability Committee with the Representative Director
as the committee chairperson in June 2014 to promote
initiatives for ESG in a continuous and organizationalmanner.
• Committee meetings are held three times or more a year
on average to share ESG-related information among
officers and employees, including the management team,for further improvements.

■ Energy-Saving Initiatives Based on the Environmental Policy
Installation of solar panels

Installation of LED lighting

Installed solar panels on the rooftop of
Minna-no-ie Chuo-ku En’nami

Installed LED lighting at Verger Hirakata andCharm Sweet Ryokuchi Koen

Rooftop view of Minna-no-ie Chuo-ku En’nami

Installation of LED lighting at Verger Hirakata

I. Overview of Nippon Healthcare Investment Corporation

9

Stable Management Strategy/Initiatives for ESG

Initiatives for ESG (Social)■ Social Contribution to Solving Important Issues in Japan

Careful Selection of Operators and Monitoring After Making Investments
Operator evaluation items at the time of property acquisition• Quality and variety of services that each operator provides• Credibility and operational skills of the operator

Quantitative
Perspective•Stability, profitability, growth potential and productivity of theoperator’s finances•Stability, profitability, growth potential of the operator’shealthcare business•The company’s history and the number of years in business(The items are confirmed on the basis that such financial
data, etc. be provided by the operator.)

Qualitative
Perspective•The operator’s attitude towards information disclosure•Degree of importance, etc. of healthcare-related business inthe operator group•Strength, securement of human resources, etc. at thehealthcare facility•Working environment and employment situation of facility
workers•Compliance system at the operator or at each facility(Documents provided by the operator, results of interviews
and research by outside experts, etc. are used for confirming
the items.)

Continuous facility management/monitoring system• The Asset Management Company strives to enhance value of facilities by regularlycollecting information on the operation from the operators and the facility directors incooperation with PM companies, etc.
• The Asset Management Company visits facilities, etc. and conduct facility monitoring,interviews, etc. including the following
Monitoring (twice or more/year)• The Asset Manager and PM companies
visit operators’ facilities and conduct
examinations every fiscal period.
Interviewing (once or more/year)• Confirming the following items withdirectors 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)

Facility monitoring
Sompo Care LAVIERE Sagamihara
Chuo (Oct. 2018)

Alpha Living Takamatsu
Hyakkenmachi (Oct. 2018)

Provision of excellent healthcare facilities operated by skillful operators■ Creation of Employment in Local Communities
Employment by each facility: Caregivers and cleaning staff of each facility operated by the operators are comprised of people living within a radiusof about 3km from the facility. Therefore, the facilities have contributed to creation of employment in local communities.

Initiatives for ESG (Governance)■ Corporate Governance■ Compliance System

The Asset Management Company of NHI has established a governancesystem that gives top priority to compliance, and strives to prevent
conflicts of interest, manage risks and comply with laws and regulations.

The Asset Management Company not only adheres strictly to all laws
and regulations, rules, internal regulations and market rules related to its
business but also focuses on conducting sincere and fair corporate
activities while fully understanding social norms.
Departments Responsible for the Compliance System

Decision-Making Flow for Transactions with Interested Parties
The Asset Management Company selects assets to invest in and decides on theacquisition following the investment policy and the rules for preventing conflicts ofinterest set forth in the management guidelines.
The Asset Management Company has established the Investment Committee and theCompliance Committee as a system to prevent conflict of interest transactions andconducted proper management.
Decision-making process from preparation/submission of proposals on investment
management to their approvals is shown below.
Each relevant
department

Compliance
Officer

Investment
Committee

Compliance
Committee

Board ofDirectors

ProposalExamination
and approval

Examination
and approval

Examination
and approval

Deliberation
and approvalor report

Persons having a special interest may not exercise voting rights on matters resolved
at the Investment Committee, Compliance Committee or Board of Directors.

10

Board of Directors• Decision on basic matters concerning compliance

Compliance Officer

Role• Design, planning andpromotion of all
aspects of compliance• Centralized
management ofcompliance issues• Implementation of
information
maintenance andPoints management asconcurrently Chief
Information Security
OfﬁcerCompliance
Committee

Internal Control
Office• Deliberation andresolution oncompliance matters,
etc.

• Implementation ofinternal audits• Securing of internal
control environment• Deliberations include
two external
committee members
who are experts incompliance• Resolutions
unanimous• Securing ofcompletely
independent internal
controlFinancial Conditions
Stable financial management by converting interest rates into fixed rates and diversifying repayment dates

Status of Interest-Bearing Liabilities (as of October 31, 2018)
Term

Lender(Note 2)Current portion Resona Bankof long-term Mizuho Bank (Note 2)loans payable Mizuho Trust & Banking (Note 2)Long-term

Mizuho Bank (Note 2)
Mizuho Trust & Banking (Note 2)
The Musashino Bank (Note 2)
Resona Bank (Note 2)
Sumitomo Mitsui Trust Bank (Note 2)
Mizuho Bank (Note 2)
Shinkin Central Bank (Note 2)
The Musashino Bank (Note 2)
Shinsei Bank (Note 2)
Sumitomo Mitsui Trust Bank (Note 2)
Shinkin Central Bank (Note 2)
Shinsei Bank (Note 2)
The Dai-ichi Life Insurance
Total of 8 banks

Balance(million yen)
1,200
1,000
700
500
500
500
500
500
800
500
500
500
1,200
400
300
200
9,800

Type of interest

Interest rate(%) (Note 1)
0.532
0.532
0.532
0.524
0.524
0.524
0.474
0.138
0.402
0.265
0.365
0.467
0.390
0.390
0.467
0.480

Fixed

Fixed

-

Drawdown date

Repayment deadline

November 5, 2014

October 31, 2019

June 1, 2015

May 29, 2020

October 15, 2015
April 28, 2016

October 30, 2020
April 30, 2020
October 31, 2022
October 30, 2020
April 28, 2022
September 29, 2023

October 31, 2017
September 28, 2018

October 31, 2022
October 31, 2018--

September 29, 2023
October 31, 2023-

(Note 1) Interest rates are rounded to the third decimal place.
(Note 2) For loans of which floating interest rates have been converted to, in effect, fixed rates through a swap agreement, interest rate indicates the rate after such conversion.

■ Ratio of Long-Term Loans and Short-Term Loans Payable■ Ratio of Fixed Rates and Floating Rates

Current portionof long-termloans payable

29.6%

Long-term loans payable

Fixed rate

100.0%

70.4%■ Repayment Schedule(million yen)
3,000

Average remaining
period (Note 1)

2,500

2.5 years(as of October 31, 2018)

2,000
1,500
1,000

LTV (Note 2)

46.5%(as of October 31, 2018)

500
0
10th FP 11th FP 12th FP 13th FP 14th FP 15th FP 16th FP 17th FP 18th FP 19th FP
endingendingending ending ending
endingendingendingendingendingApr. 2019 Oct. 2019 Apr. 2020 Oct. 2020 Apr. 2021 Oct. 2021 Apr. 2022 Oct. 2022 Apr. 2023 Oct. 2023

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

Indices that Include NHIMonth/year

Name of index

September 2015

Thomson Reuters GPR / APREA Composite Index

I. Overview of Nippon Healthcare Investment Corporation

11

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

9th Period
From May. 1, 2018
To Oct. 31, 2018)(

8th Period
From Nov. 1, 2017
To Apr. 30, 2018)(

7th Period
From May. 1, 2017
To Oct. 31, 2017)(

6th Period
From Nov. 1, 2016
To Apr. 30, 2017)(

5th Period
From May 1, 2016
To Oct. 31, 2016)

(1) Operating Performance(Millions of yen, except per unit data or where otherwise indicated)
Operating revenues
698
698
698
698
679
Rental revenues
698
698
698
698
679
Operating expenses
426
425
425
420
405
Property-related expenses
290
299
297
295
272
Operating income
272
273
273
278
275
Ordinary income
244
247
245
250
248
Net income
243
247
244
249
247
(2) Properties, etc. (as of end of period)
Total assets
21,06821,146
21,21821,27021,316[period-on-period percentage changes][-0.4%][-0.3%][-0.2%][-0.2%][+2.2%]
Interest-bearing liabilities
9,800
9,800
9,800
9,800
9,800
Net assets
10,345
10,412
10,474
10,538
10,595[period-on-period percentage changes][-0.6%][-0.6%][-0.6%][-0.5%][-0.7%]
Unitholders’ capital, net
Note 2
10,102
10,166
10,22910,28910,349(3) Distributions
Total distribution amount
308
311
308
309
306
Total distribution of retained earnings
243
247
245
249
246
Total distribution in excess of retained earnings
65
64
63
60
60
Dividend payout
100%
100%
100%
100%
100%
(4) Per Unit Information
Total number of units issued (units)
74,632
74,632
74,632
74,632
74,632
Net assets per unit (yen)138,613
139,516
140,337
141,206
141,969
Distribution per unit (yen)
4,130
4,163
4,124
4,143
4,106
Distribution amount from earnings per unit (yen)
3,260
3,303
3,274
3,343
3,306
Distribution amount in excess of earnings per unit (yen)
870
860
850
800
800
(5) Financial Indicators
ROA
1.2%
1.2%
1.2%
1.2%
1.2%
Notes 3and 4[annual rate][2.3%][2.4%][2.3%][2.4%][2.3%]
ROE
2.3%
2.4%
2.3%
2.4%
2.3%
Notes 4and 5[annual rate][4.6%][4.8%][4.6%][4.8%][4.6%]
Capital ratio
49.1%
49.2%
49.4%
49.5%
49.7%
[period-on-period percentage changes][-0.1%][-0.1%][-0.1%][-0.2%][-1.5%]LTV (loan to value)
46.5%
46.3%
46.2%
46.1%
46.0%
Property leasing cash flows (NOI)
Note 6
607
597
596
597
596
(6) Other Referential Information
Number of investment properties
22
22
22
22
22
Number of tenants
Note 7
22
22
22
22
22
Total rentable area (m2)
67,298.83 67,298.83 67,298.83 67,298.83 67,298.83
Occupancy rate
Note 8100.0%
100.0%
100.0%
100.0%
100.0%
Depreciation
200
198
196
194
188
Capital expenditures
32
26
60
30
20
(Note 1) Operating revenues, etc. do not include consumption taxes, etc.
(Note 2) The indicated amounts are unitholders’ equity less deduction amount of unitholders’ equity.
(Note 3) ROA: Ordinary income ÷ [(Total assets at beginning of period + Total assets at end of period) ÷ 2] × 100(Note 4) Annualized figures are calculated by using the asset management period of the respective fiscal period; 184 days for the 5th Fiscal
Period; 181 days for the 6th Fiscal Period; 184 days for the 7th Fiscal Period; 181 days for the 8th Fiscal Period and 184 days for the
9th Fiscal Period.
(Note 5) ROE: Net income ÷ [(Net assets at beginning of period + Net assets at end of period) ÷ 2] × 100(Note 6) Property leasing cash flows (NOI): Rental revenues − Property-related expenses + Depreciation(Note 7) Number of tenants is the total number of end tenants.
(Note 8) Occupancy rate: Total leased area ÷ Total rentable area × 100

12

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 proceeds from theconcerned 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, and in the 4th
Fiscal Period, NHI implemented an additional issuance of investment units through public offering (12,130 units) on
November 17, 2015 and additionally acquired four properties. Furthermore, in the 5th Fiscal Period, NHI made an
additional acquisition of one property on October 6, 2016 with borrowing and cash on hand. Through these additional
acquisitions of a property, the total acquisition price of NHI properties is 19,318 million yen as of October 31, 2018.
As the REIT specializing in healthcare facilities in that it invests solely in properties of which the principal use ishealthcare facilities, NHI effectively utilizes investor capital to initiate expansion of supply of high-quality healthcare
facilities that provide users with high-standard services, while at the same time produce ample and dependable
returns to investors for further capital circulation. In this way, NHI aims at creating a new value cycle for healthcare
facilities and the services provided, together with investors. Through these efforts, NHI would like to contribute to therealization 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 May 1, 2018 to October 31, 2018)
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 more than one-quarter of the total population as of June 1,
2018 (according to the Ministry of Internal Affairs and Communications’ “Population Estimates”
announced on November 20, 2018), and the population of the elderly is forecast to continue to accountfor an increasingly greater proportion and the population of the elderly living alone is forecast to continue
to grow. There is thus recognized to be sufficient potential for greater development of housing for theelderly 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 withsupportive services,” “fee-based 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 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 9th Fiscal Period (fiscal period ended October 31, 2018), NHI acquired no investment properties.
Concerning the properties held as of the end of the 9th Fiscal Period (October 31, 2018), the leasable floorarea was 67,298.83m2 and the occupancy rate was 100.0%.

II. Asset Management Report13(3) Overview of Capital Procurement(A) Procurement of Funds for Repayment of Borrowings
In the 9th Fiscal Period (fiscal period ended October 31, 2018), NHI conducted the following borrowing offunds for repayment of borrowings.
(a) In order to procure funds for repayment of 500 million yen of borrowings from Mizuho Bank, Ltd. whichwere due for repayment on September 28, 2018, NHI conducted borrowing of the same amount from
Shinsei Bank, Ltd. on the same day.
(b) In order to procure funds for repayment of a total of 2,100 million yen of borrowings from Sumitomo
Mitsui Trust Bank, Ltd., The Dai-ichi Life Insurance Company, Ltd. and Shinkin Central Bank which were
due for repayment on October 31, 2018, NHI conducted borrowing of a total of 2,100 million yen from
Sumitomo Mitsui Trust Bank, Ltd., Shinkin Central Bank, Shinsei Bank, Ltd. and The Dai-ichi Life
Insurance Company, Ltd. on the same day.
NHI concluded interest rate swap agreements for borrowings totaling 2,400 million yen on October 31,
2018 to hedge against interest rate hike risks in the future.
(B) Status of Interest-Bearing Liabilities
As a result of the above, the balance of interest-bearing liabilities outstanding as of the end of the 9th
Fiscal Period (October 31, 2018) stood at 9,800 million yen (all long-term debt). The balance of the current
portion of long-term debt stood at 2,900 million yen. In addition, the average remaining period at the endof the 9th Fiscal Period was 2.5 years.
The unitholders’ capital (net) was 10,102 million yen, and the total number of units issued was 74,632
investment units as of the end of the 9th Fiscal Period.
(4) Capital Expenditures During the Fiscal Period under Review
The following summarizes the main construction work that constitutes capital expenditures conductedduring the 9th Fiscal Period. Capital expenditures for the 9th Fiscal Period amounted to 32 million yen and,
when combined with the 23 million yen in repair expenses charged to 9th Fiscal Period expenses, totaled 55
million yen in construction work implemented.
Name of Property
Expenditure
Purpose
Period(Location)(Millions of yen)Charm Suite Ryokuchi Koen
Renewal of electric hot
From: September 201817
(Toyonaka City, Osaka)
water supplying equipment
To: September 2018
Charm Suite Ryokuchi Koen
Renewal of air-conditioners From: October 20185
(Toyonaka City, Osaka)in dwelling units
To: October 2018
From: May 2018
Other
10
To: October 2018
Total
32(5) Overview of Financial Performance and Distributions
As a result of the management described above, NHI posted financial performance for the 9th Fiscal Period of
698 million yen in operating revenue, 272 million yen in operating income, 244 million yen in ordinary incomeand 243 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
3,260 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 ofincorporation (Note). Based on this policy, NHI decided to distribute 64,929,840 yen, which is the amountroughly equivalent to 33% of the 200 million yen in depreciation for the 9th Fiscal Period, as reimbursement ofinvestments in capital. Accordingly, NHI declared a distribution amount in excess of earnings per unit of 870
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 9th Fiscal Period (22 properties) is 29 million yen.

14

3. Future Management Policy and Tasks(1) Investment Environment
Japan has the population of the elderly accounting for approximately more than one-quarter of the total
population, and the population of the elderly is expected to continue to account for an increasingly greater
proportion and the population of the elderly living alone is expected to continue to grow. With thedevelopment of medical technology, among other factors, the average life expectancy at birth for Japanesepeople is at 81.09 years for males and 87.26 years for females according to the Ministry of Health, Labourand Welfare’s “Abridged Life Tables for Japan 2017,” while record-highs were set in terms of the population
aged 65 years or over at 35 million people and the proportion of the elderly population is at 28.0% of the total
population of 127 million as of June 1, 2018 according to the Ministry of Internal Affairs and Communications’“Population Estimates” (announced on November 20, 2018).
According to the National Institute of Population and Social Security Research’s “Population Projections forJapan (2017),” the total population will increase to 123 million people, the elderly population to 37 million
people and the proportion of the elderly population to 30.0% in 2025 and then, while the total population will
decrease by approximately 38 million people from that at present to 88 million people, the elderly population
will reach 34 million people and the proportion of the elderly population to 38.4% in 2065.
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 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, butalso 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, the operator shall sincerely
discuss the request. In addition, NHI shall consider concluding a similar agreement with also theoperators of healthcare facilities to be acquired in the future. Such relationship by agreement with
operators is referred to as “Backup Operator Membership.”

II. Asset Management Report15

(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 November 2018: approximately 459.7
billion yen) and Daiwa Residential Private Investment Corporation (balance of assets for which
management is entrusted as of the end of November 2018: approximately 110.0 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.
(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.

16(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)

PurposeCharm Suite Ryokuchi Renewal of airKoen
conditioners in(Toyonaka City, Osaka) dwelling units

Estimated Period
From: April 2019
To: April 2019

Estimated Cost (Millions of yen)
Payment for Cumulative
Total
the current amount paid
period4–

II. Asset Management Report–17III. Balance Sheets
As of October 31, 2018 and April 30, 2018

(Thousands of yen)

As of
October 31, 2018

As ofApril 30, 2018

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

1,851,753

1,778,876

Prepaid expenses

21,432

14,228Other current assets

2,834

1,681

Total Current Assets

1,876,019

1,794,785

Land in trust accounts

7,949,066

7,949,066

Buildings and structures in trust accounts

12,651,054

12,625,364

Machinery and equipment in trust accounts

18,324

18,324Tools, furniture and fixtures in trust accounts

45,394

38,598Construction in progress in trust accounts

1,004

–

Less: accumulated depreciation(1,546,629)(1,347,017)

Leasehold rights in trust accounts

40,88640,88619,159,099

19,325,221

Right of trademark

123

134

Software

749

1,117

Lease and guarantee deposits

10,00010,000Long-term prepaid expenses

22,48815,089Deferred tax assets [Note 12]13

1433,37326,35421,068,491

21,146,360

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

Total Investment Properties, net
Other Assets:

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

18

(Thousands of yen)

As of
October 31, 2018

As ofApril 30, 2018

Liabilities
Current Liabilities:
Operating accounts payable

31,97258,318–500,000

2,900,000

2,100,000

69,842

53,697870

885

Accrued consumption taxes

1,065

1,110

Rent received in advance

85,14085,140648

532

Other current liabilities

3,773

4,078

Total Current Liabilities

3,093,310

2,803,760

Long-term debt [Notes 4, 5 and 10]

6,900,000

7,200,000

Tenant security deposits [Note 5]

730,216730,216

7,630,216

7,930,216

10,723,526

10,733,976

10,504,334

10,504,334(402,680)(338,496)

10,101,654

10,165,838

243,311

246,546

10,344,965

10,412,384

Total Net Assets

10,344,965

10,412,384

Total Liabilities and Net Assets

21,068,491

21,146,360

Short-term debt [Notes 4, 5 and 10]
Long-term debt due within one year [Notes 4, 5 and 10]
Accounts payable – other
Income taxes payable

Deposits received

Long-Term Liabilities:

Total Long-Term Liabilities
Total Liabilities

Net Assets [Notes 9 and 13]
Unitholders’ Equity:
Unitholders’ capital
Deduction from unitholders’ capital
Unitholders’ capital, net
Units authorized: 10,000,000 units
Units issued and outstanding: 74,632 units
Retained earnings
Total Unitholders’ Equity

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

III. Balance Sheets

19IV. Statements of Income
For the six months ended October 31, 2018 and April 30, 2018

(Thousands of yen)

For the six months ended
October 31, 2018

For the six months endedApril 30, 2018697,553

697,767

697,553

697,767

290,043

298,789

Asset management fees
Asset custody fees
Administrative service fees
Trust fees

62,336734
17,331
6,500

61,433
737
10,517
6,450

Directors’ compensation
Audit fees

4,800
6,000
37,9274,800
6,000
35,869425,671
271,882

424,595
273,172

2
214
278

2
–
1,811

494

1,813

21,664
6,567

21,2006,390

28,231
244,145

27,590247,395

Income Before Income Taxes
Income taxes – current
Income taxes – deferred
Total Income Taxes [Note 12]244,145

247,395

870
1

885
1

871

886

Net Income
Retained Earnings Brought Forward
Retained Earnings at End of Period

243,27437
243,311

246,50937
246,546

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
Reversal of distribution payable
Insurance income
Total Non-Operating Revenues
Non-Operating Expenses:
Interest expense
Borrowing expenses
Total Non-Operating Expenses
Ordinary Income

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

20

IV. Statements of Income

V. Statements of Changes in Net Assets
For the six months ended April 30, 2018

Balance as of October 31, 2017
Distributions in excess of retained
earnings
Distributions of earnings
Net income
Balance as of April 30, 2018

(Thousands of yen)

Deduction
Number of Unitholders’fromUnitholders’Units
CapitalUnitholders’ Capital, net
capital74,632 10,504,334(275,059) 10,229,275
–

–

–
–
–
–
74,632 10,504,334(63,437)

Retained
Earnings

244,382 10,473,657(63,437)––––(338,496) 10,165,838

For the six months ended October 31, 2018

Total

–

(63,437)(244,345)(244,345)
246,509
246,509
246,546 10,412,384(Thousands of yen)

Deduction
Number of Unitholders’fromUnitholders’Units
CapitalUnitholders’ Capital, net
capital74,632 10,504,334(338,496) 10,165,838

Balance as of April 30, 2018
Distributions in excess of retained––(64,184)(64,184)
earnings
Distributions of earnings––––
Net income––––
Balance as of October 31, 2018
74,632 10,504,334(402,680) 10,101,654
The accompanying notes are an integral part of these financial statements.

Retained
Earnings

Total

246,546 10,412,384–(64,184)(246,509)(246,509)
243,274
243,274
243,311 10,344,965

VI. Statements of Cash Flows
For the six months ended October 31, 2018 and April 30, 2018

(Thousands of yen)

For the six months
ended
October 31, 2018

Cash Flows from Operating Activities:
Income before income taxes
244,145
Depreciation and amortization
199,990
Interest expense
21,664
Decrease (Increase) in prepaid expenses(7,204)
Increase (Decrease) in accounts payable
8,111
Decrease (Increase) in long-term prepaid expenses(7,398)Cash payments of interest expense(22,017)(2,003)
Other, net
Net Cash Provided by Operating Activities
435,288
Cash Flows from Investing Activities:
Payments for purchases of investment properties in trust(51,766)
accounts
Net Cash Used in Investing Activities(51,766)
Cash Flows from Financing Activities:
Repayments of short-term debt
(500,000)
Proceeds from long-term debt
2,600,000
Repayments of long-term debt
(2,100,000)
Payments of distributions of earnings(246,463)(64,182)
Payments of distributions in excess of retained earnings
Net Cash Used in Financing Activities(310,645)
Net Change in Cash and Cash Equivalents
72,877
1,778,876
Cash and Cash Equivalents at Beginning of Period
1,851,753
Cash and Cash Equivalents at End of Period (Note 3)
The accompanying notes are an integral part of these financial statements.

For the six months
ended
April 30, 2018247,395
198,746
21,2005,426(13,447)(276)(20,847)38
438,235(23,406)(23,406)–––(244,027)(63,325)(307,352)
107,477
1,671,399
1,778,876

V. Statements of Changes in Net Assets
VI. Statements of Cash Flows21

VII. Notes to Financial Statements
For the six months ended October 31, 2018 and April 30, 2018

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 October 31, 2018, NHI had trust beneficiary interests in 22 healthcare facilities with approximately 67,299
square meters of healthcare facilities space and had leased space to 22 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.
Changes in Presentation or Classification"Partial Amendments to Accounting Standard for Tax Effect Accounting" (ASBJ Statement No. 28, February
16, 2018) has been applied from the beginning of the 9th Fiscal Period.
Deferred tax assets are stated in the category of Other Assets, deferred tax liabilities are stated in the categoryof Long-Term Liabilities.

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 stated at cost, which includes the allocated purchase price, related costs andexpenses for acquisition of the properties. Investment properties balances are depreciated using the straight-line
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
Machinery and equipment
Tools, furniture and fixtures

As of October 31, 2018
3-58 years
17 years
2-15 years

As of April 30, 2018
3-58 years
17 years
2-15 years

Costs related to the renovation, construction and improvement of properties are capitalized. Expenditures for repairs
and maintenance which do not add value to a property or prolong its useful life are expensed when incurred.

22

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.
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.
There were no capitalized real estate taxes for the six months ended October 31, 2018 and the six months endedApril 30, 2018.
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 of
October 31, 2018 and April 30, 2018 consisted of the following:(Thousands of yen)

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

As of October 31, 2018
1,404,245
447,508
1,851,753

As of April 30, 2018
1,349,047
429,829
1,778,876

VII. Notes to Financial Statements

23

Note 4 – Pledged Assets and Secured Liabilities
The carrying amount of assets pledged as collateral and the secured liabilities as of October 31, 2018 and April
30, 2018 were as follows:(Thousands of yen)

Assets pledged:
Cash and deposits in trust accounts
Land in trust accounts
Buildings and structures in trust accounts
Machinery and equipment in trust accounts
Tools, furniture and fixtures in trust accounts
Construction in progress in trust accounts
Leasehold rights in trust accounts
Total

As of October 31, 2018

Secured liabilities:
Short-term debt
Long-term debt due within one year
Long-term debt
Total

As of April 30, 2018447,508
7,949,066
11,116,486
17,041
34,616
1,004
40,886
19,606,607

429,829
7,949,066
11,286,112
17,591
31,566–40,886
19,755,050–
2,900,000
6,900,000
9,800,000

500,000
2,100,000
7,200,000
9,800,000

Note 5 – Financial Instruments(For the six months ended October 31, 2018 and April 30, 2018)(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.

24

(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 October 31, 2018 and April 30, 2018 are
as follows. The financial instruments whose fair value is extremely difficult to estimate are excluded fromthe following table.
(As of October 31, 2018)
Cash and cash equivalents
Total
Long-term debt due within one year
Long-term debt
Total
Derivative transactions(Thousands of yen)Book Value
1,851,753
1,851,753
2,900,000
6,900,000
9,800,000–

Fair Value
1,851,753
1,851,753
2,903,832
6,889,594
9,793,426–(As of April 30, 2018)
Cash and cash equivalents
Total
Short-term debt
Long-term debt due within one year
Long-term debt
Total
Derivative transactions

Difference
–
–
3,832
(10,406)(6,574)–(Thousands of yen)Book Value
1,778,876
1,778,876
500,000
2,100,000
7,200,000
9,800,000–

Fair Value
1,778,876
1,778,876
500,000
2,100,278
7,200,558
9,800,836–

Difference
–
–
–
278
558
836
–

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) Short-term debt, long-term debt due within one year and long-term debt
For short-term debt, long-term debt due within one year and long-term debt with floating interest rates, theirfair 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 is assumed as their fair value. For short-term debt, longterm debt due within one year and long-term debt with fixed interest rates, their fair value is based on thepresent 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 due within one
year and long-term debt that qualifies for the special treatment of interest-rate swaps is determined bydiscounting the sum of its principal and interest payments net of any cash flows from the interest-rate swaps.

VII. Notes to Financial Statements25Derivative Transactions(1) Derivatives to which hedge accounting is applied(As of October 31, 2018)
Method of Hedge
Accounting
Special treatment forinterest 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
due within one
year and longterm debt

9,600,000(6,700,000)–(**)

9,600,000(6,700,000)

–

Total
(As of April 30, 2018)
Method of Hedge
Accounting
Special treatment forinterest rate swap
transactions

Fair Value(*)(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
due within one
year and longterm debt

8,800,000(7,200,000)–(**)

8,800,000(7,200,000)

–

Total

Fair Value(*)*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 (with the book value of 730,216 thousand yen as of October 31, 2018 and April 30,2018) that have been deposited from tenants are not marketable and the actual deposit period cannot be reliably
determined, thus making it impossible to reasonably estimate their future cash flows, and therefore, it isconsidered to be extremely difficult to estimate their fair value.
3. Redemption schedule for money claims(As of October 31, 2018)

Cash and cash equivalents
Total(As of April 30, 2018)

Cash and cash equivalents
Total

26

(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
1,404,245––––
1,404,245––––

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
1,778,876––––
1,778,876––––

Due after
5 years––

4. Redemption schedule for long-term debt
(As of October 31, 2018)(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
Long-term debt due within one year 2,900,000––––
Long-term debt
– 3,000,000– 2,900,000 1,000,000
Total
2,900,000 3,000,000– 2,900,000 1,000,000(As of April 30, 2018)

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
Short-term debt
500,000––––
Long-term debt due within one year 2,100,000––––
Long-term debt
– 3,400,000 2,500,000
500,000
800,000
Total
2,600,000 3,400,000 2,500,000
500,000
800,000

Due after
5 years––––

Note 6 – Schedule of Tangible Fixed Assets of Investment Properties(Thousands of yen)
Investment properties as of October 31, 2018 and April 30, 2018 consisted of the following:		
As of October 31, 2018
As of April 30, 2018
Acquisition Accumulated Book value
Acquisition Accumulated Book value
costs
depreciation
costs
depreciation
Land in trust accounts
7,949,066–
7,949,066
7,949,066–
7,949,066

Buildings andstructuresin trust accounts
Machinery andequipment in trust
accounts
Tools, furniture andfixtures in trust
accounts
Construction inprogress in trust
accounts
Total

12,651,054(1,534,568)

11,116,486

12,625,364(1,339,252)

11,286,112

18,324(1,283)

17,041

18,324(733)

17,59145,394(10,778)

34,616

38,598(7,032)

31,566

1,004

–

1,004

–

–

–

20,664,842(1,546,629)

19,118,213

20,631,352(1,347,017)

19,284,335

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 October 31, 2018)
Book Value
Changeduring the
As of April 30, 2018
period(*1)
19,325,221(167,126)(For the six months ended April 30, 2018)
Book Value
Change during the
As of October 31, 2017
period(*2)
19,498,021(172,800)(Thousands of yen)

As of October 31, 201819,158,095

Fair value as of
October 31, 201824,117,000(Thousands of yen)

As of April 30, 2018
19,325,221

Fair value as ofApril 30, 201824,121,000(Note 1) The book value represents the acquisition costs less accumulated depreciation.
(Note 2) Significant changes(*1) For the six months ended October 31, 2018, the major reason of decrease is depreciation (199,612 thousand yen).
(*2) For the six months ended April 30, 2018, the major reason of decrease is depreciation (198,368 thousand yen).
(Note 3) The fair values as of October 31, 2018 and April 30, 2018 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 October 31, 2018 and April 30,
2018 are disclosed in Note 8.
VII. Notes to Financial Statements

27

Note 8 – Rental Revenues and Expenses
Rental revenues and expenses for the periods ended October 31, 2018 and April 30, 2018 were as follows:(Thousands of yen)

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

For the six months ended
October 31, 2018

For the six months endedApril 30, 2018697,553
697,553

697,767
697,767

13,1391,862
49,974
1,432
22,824
199,6121,200
290,043
407,510

13,1092,523
50,036
1,480
32,073
198,368
1,200
298,789
398,978

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 – Short-term debt, long-term debt due within one year and long-term debt
Short-term debt, long-term debt due within one year and long-term debt as of October 31, 2018 and April 30, 2018consisted of the following:(Thousands of yen)

Secured loans due 2018 to 2023, principally frombanks and insurance companies with interest rates
mainly ranging from 0.3% to 0.6%
Total

As of October 31, 2018

As of April 30, 2018

9,800,000

9,800,000

9,800,000

9,800,000[Note] The interest rates presented are daily weighted average interest rates. As for long-term debts due within one year and long-term debts whichwere hedged by interest-rate swaps for the purpose of avoiding interest rate fluctuation risk, the swapped interest rates are used.

The annual maturities of short-term debt, long-term debt due within one year andlong-term debt as of October 31, 2018 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

2,900,000
3,000,000–
2,900,000
1,000,000–

Note 11 – Leases
As Lessor
The future minimum rental revenues under existing non-cancelable operating leases as of October 31, 2018 andApril 30, 2018 were as follows:(Thousands of yen)

Due within one year
Due after one year
Total

28

As of October 31, 2018
1,393,218
9,745,824
11,139,042

As of April 30, 2018
1,393,218
10,399,125
11,792,343

Note 12 – 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 0.36% for the six months ended October 31, 2018 and for the six months ended April
30, 2018. 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 ended
October 31, 2018
April 30, 2018
Statutory tax rate
31.51%
31.74%
Deductible dividends(31.40)(31.63)
Others0.25
0.25
Effective tax rate
0.36%
0.36%
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 October 31, 2018 and April 30, 2018 wereas follows:(Thousands of yen)

As of October 31, 2018
Deferred tax assets:
Accrued enterprise tax
Total deferred tax assets
Net deferred tax assets

As of April 30, 2018
13
13
13

14
14
14

Note 13 – Per Unit Information
Information about net assets per unit and net income per unit as of October 31, 2018 and April 30, 2018 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 ended
October 31, 2018
138,613 yen
3,259 yen

For the six months endedApril 30, 2018
139,516 yen
3,302 yen

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 ended
October 31, 2018
243,274

For the six months endedApril 30, 2018
246,509––

Net income available to ordinary unitholders

243,274

246,509

Average number of units during the period (units)

74,632

74,632

Net income (thousands of yen)Amount not available to ordinary unitholders(thousands of yen)(thousands of yen)VII. Notes to Financial Statements

29

Note 14 – 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 243,300,320 yen
for the fiscal period ended October 31, 2018, which is the maximum integral multiple to 74,632 units issued andoutstanding as the distribution of earnings, and 246,509,496 yen for the fiscal period ended April 30, 2018,
which is the maximum integral multiple to 74,632 units. In addition, NHI will continue to make distributions inexcess of earnings (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 64,929,840 yen, which is calculated as the approximate equivalent of 33% of
199,612,253 yen of the depreciation amount posted for the fiscal period ended October 31, 2018, as
distributions in excess of earnings (refund of capital contribution to unitholders) and 64,183,520 yen for the fiscal
period ended April 30, 2018, which is calculated as the approximate equivalent of 32% of 198,367,756 yen of
the depreciation amount posted for the fiscal period ended April 30, 2018.
(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 ended
October 31, 2018
Total
Per unit
243,311,299

For the six months endedApril 30, 2018
Total
Per unit
246,546,358

64,929,840

64,183,520

243,300,320
64,929,840
308,230,160
10,979

3,260
870
4,130

246,509,496
64,183,520
310,693,016
36,862

3,303
860
4,163

Note 15 – Transactions with Related Parties(For the six months ended October 31, 2018)
No related-party transaction was entered into for the six months ended October 31, 2018.
(For the six months ended April 30, 2018)
No related-party transaction was entered into for the six months ended April 30, 2018.

Note 16 – Segment Information
For the six months ended October 31, 2018 and April 30, 2018
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.

30

Note17 – Significant Subsequent Events(1) Acquisition of Assets
NHI acquired the following real estate trust beneficiary interest on December 20, 2018.
Overview of acquired asset
Property nameIrise Komae Bettei

Type of asset acquired

Trust beneficiary interest in domestic real estate (Note)

Location

1-32-5 Higashi-nogawa, Komae City, Tokyo

Acquisition price394.5 million yen (excluding acquisition costs and consumption tax, etc.)

Date of delivery

December 20, 2018

Seller

GK DA Healthcare 2[Note] NHI acquired 30% quasi-co-ownership of trust beneficiary interest in the real estate as a primary asset in trust.
The remaining 70% quasi-co-ownership of trust beneficiary interest is owned by GK DA Healthcare 2.

VII. Notes to Financial Statements

31

VIII. Independent Auditor’s Report

32

VIII. Independent Auditor’s Report

IX. Description of Asset Manager
Organization of Asset Manager (as of December 1, 2018)■ 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

10
Executive directors: 5 Executive auditors: 1
Non-executive directors: 2; Non-executive auditors: 2

Employees
Registration of Financial
Instruments Business Operator
Building Lots and Buildings
Transaction Business License

108 (excluding dispatched employees)
Registration No. 355 (Financial Instruments), Director
General, Kanto Local Finance Bureau (Kinsho)

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

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

Akira Yamanouchi
Yuji Shinotsuka
Yoshiki Nishigaki
Toshio Fukushima
Hajime Imbe
Mikita Komatsu
Keiichi Ishikawa
Tamaki Shibayama
Morimasa Matsuda
Shinji Kiso

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

Shareholders’ Meeting
Corporate Auditors
Board of Directors
Compliance Committee

Compliance Officer

Investment Committee（*）
President andRepresentative Director
Acquisition and Asset Management Division
Acquisition
Department

Origination
Department

OfficeInvestment Team
Residential
Investment Team
Healthcare
Investment TeamHotelinvestment team
JRH Investment
Team

Asset
Management
Department
OfficeManagement Team
Residential
Management Team
Healthcare
Management TeamHotelmanagement team
Investment
Planning Team
Construction
Management TeamInternal Control OfficePrivate Fund Division
JRH Asset
Management
Department

Private FundManagement
Department

Corporate Division
Customer
Relations
Department

Finance
Department

AM TeamFinance Team

Portfolio
System Team

Accounting Team

Administration
Department

Corporate
Planning
Department

Compliance &Risk Management
Department

Management
Team

Structure
Asset Custodian②

Investment Corporation③

Administrator of Unitholders’ Register

Mizuho Trust & Banking Co., Ltd.

Sumitomo Mitsui Trust Bank, Ltd.

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

General Meeting of Unitholders⑤

Board of Directors
Executive Director: Shunichi Suzuki
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

① 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 agreement

AdvisorAIP Healthcare Japan GK⑦ Advisory agreement*Set up separately for each
investment corporation.

IX. Description of Asset Manager

33

X. Investor Information
History of Investment Unit Prices(yen) 190,000

900 (units)
Unit price (left axis)

185,000

Volume (right axis)

800

180,000700

175,000600

170,000

500

165,000

400

160,000300

155,000

200

150,000

100

145,000

0
Nov.
2016

Dec.

Jan.
2017

Feb.

Mar.

Apr.

May

Jun.

Jul.

Aug.

Sep.

Oct.

Nov.

Dec.

Jan.
2018

Feb.

Mar.

Apr.

May

Jun.

Jul.

Aug.

Sep.

Oct.

Overview of Investment Units and Unitholders (as of October 31, 2018)■ No. of Investment Units by Investor TypeFP ended
October 2018
(9th FP)

Individuals/others
34,447 units (46.2%)

Financial institutions
18,632 units (25.0%)

Foreigners 8,281 units (11.1%)

Other domestic companies 12,228 units (16.4%)
Securities companies 1,044 units (1.4%)

Total 74,632 units

FP ended
April 2018
(8th FP)■ No. of Unitholders
by Investor Type

Individuals/others
35,474 units (47.5%)

Financial institutions
19,832 units (26.6%)

Foreigners 6,199 units (8.3%)

Other domestic companies 12,273 units (16.4%)
Securities companies 854 units (1.1%)

Total 74,632 units

Top Ten Unitholders (as of October 31, 2018)
Name of Investor

34

8,951
(97.5%)

Financial
institutions
Other domestic
companies

22(0.2%)

Foreigners

64(0.7%)

Securities
companies

21(0.2%)

Total

9,183

125
(1.4%)(Note) Rounded to the first decimal place

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

1. Daiwa Securities Group Inc.

7,600

10.2

2. The Master Trust Bank of Japan, Ltd. (Trust Account)

6,928

9.3

3. Japan Trustee Services Bank Ltd. (Trust Account)
The Nomura Trust and Banking Co., Ltd.
4.
(Investment Trust Account)
5. BNYM AGT/CLTS 10 PERCENTSCB SG S/A SCB THAILAND AC FOR6.
CIMBPRINCIPALPROPERTY JP000294300545
Trust & Custody Services Bank Ltd.
7.
(Securities Investment Trust Account)
8. Daiwa Real Estate Asset Management Co., Ltd.

4,631

6.2

2,291

3.1

2,000

2.7

1,702

2.3

1,033

1.4

1,000

1.3

9. Fukui Medical Credit Association

945

1.3

10. UENOYA BUILDING Co. Ltd.

903

1.2

Total

29,03338.9(Note) Rounded to the first decimal place

Individuals/others

December 19, 2018・Announcement of results
for the fiscal period ended October 2018
January 22, 2019・Sending of Financial and Management
Status Report (Asset Management Report)
for FP ended October 2018
January 23, 2019・Commencement of payout of distributions
for the fiscal period ended October 2018

Oct.
July Account closing
month
June
Dec.
Account closing
month
Jan.
Apr.
June 2019・Announcement of results for the
fiscal period ending April 2019
July 2019・Sending of Financial and Management
Status Report (Asset Management Report)
for FP ending April 2019
July 2019・Commencement of payout of distributions
for the fiscal period ending April 2019

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 specified in Article 16 of the Articles of Incorporation
Reference date for finalizing payment of April 30 and October 31 of each year (distributions are paid within three months of the reference date)
distributions
Listed financial instruments exchangeTokyo Stock Exchange (securities code: 3308)

Newspaper in which notice is posted

The Nikkei

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 tothe 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 Briefing Session on AssetManagement for 9th Fiscal Period
NHI will hold a briefing session on asset
management for the fiscal period ended October
2018 (9th fiscal period).
1. Date and time: February 5, 2019 (Tuesday)
10:00 a.m. ~ (venue opening at
9:40 a.m.)

In order to have investors 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

2. Venue:

18F, GranTokyo North Tower
1-9-1 Marunouchi,
Chiyoda-ku, Tokyo

3. Presenter:

Akira Yamanouchi, President of
Daiwa Real Estate AssetManagement Co., Ltd.

http://www.nippon-healthcare.co.jp/en/
X. Investor Information

35

Company Overview
Company name

Wisnet Co., Ltd.

Establishment

January 1998

CapitalHeadquarters
Officers

Number of employees
Number of offices
Affiliated companies/
ALSOK nursing care group

History
January 1998
October 1999

Company established as Wisnet Co., Ltd.
Designated as a home-visit long-term care provider underlong-term care insurance system, launched operation of ahelper station
Opened “Asagao Omiya” to launch operation of in-homenursing care support offices
Opened “Minna-no-ie Hasuda-higashi” to launch operationof group homes
Opened “Yu Miyahara” to launch operation of day service
centers
Opened “Minna-no-ie Omiya Yoshinocho” to launch
operation of short-stay service
Opened “Sukoyaka Higashi-urawa” to launch operation offee-based homes for the elderly with nursing care
Contracted Shiki City’ s consultation center for the elderly(Seseragi) to launch operation of Community General
Support Center
Opened “Wis Kokubunji” to launch operation of Elderly
housing with supportive services
Opened “Kodomo-no-ie Shiki-kamimuneoka” to launch
operation of licensed kindergartens
Opened “Minna-no-ie Owada to launch operation ofmultifunctional nursing care in a small group home setting
Became subsidiary of SOHGO SECURITY SERVICES CO., LTD.
through transfer of shares

390,080,000 yen
2-795 Mihashi, Omiya-ku,
Saitama-shi, Saitama 330-0856

January 2000

President andRepresentative Director: Yuichi Miyazawa

October 2000

Representative Director: Takashi Kumagai

August 2002

Director

Yoshihiro Endo

Director

Hiroaki Ishimaru

Director

Keiji Ando

Director

Mitsugu Ito

Director

Ichiro ShimadaSupervisor

Takeshi Oiwa

August 2004
April 2005
April 2006

3,318 (including part-time workers)

February 2008

194
SOHGO SECURITY SERVICES CO., LTD.

April 2010

HCM Corporation

March 2013

ALSOK Care & Support Co., Ltd.
CARE PLUS INC.

May 2016

ANTEI CARE Co., Ltd.
As of October 1, 2018

Headquarters/
Saitama Head Office2-795 Mihashi, Omiya-ku,
Saitama-shi, Saitama 330-0856

1-13-24 Sasame, Toda-shi, Saitama 335-0034

2-3-1 Kitashinyokohama, Kohoku-ku,
Yokohama-shi, Kanagawa 223-0059

LawsonHeadquarters/
Saitama Head Office

Toda City Fire Department

Approximately 5 minutes by Seibu bus fromthe JR Omiya Station
Approximately 4 minutes on foot from“Nakanamiki” bus stop

14 minutes on foot from the west exit ofToda Station on the JR Saikyo Line

ShinYokohama
I.C. To JR Shin-Yokohama Sta.

Kanagawa
Head Office

6 minutes on foot from
Kita-shin-yokohama Station on the Blue Line18 minutes on foot fromthe JR Shin-Yokohama Station

Wisnet Co., Ltd.
2-795 Mihashi, Omiya-ku, Saitama-shi, Saitama 330-0856
5 Introduction of Operators

Kappa Sushi
Yuai Clinic
Sukiya.

Niizo Kita
Marugame- ElementaryWestseimenexit
SchoolESPOT

Nippa Depot of Transportation
Bureau, City of
Yokohama

Toda
I.C. Saikyo Head Office Toda Shoyo
High School

LawsonMunicipal
SubwayBlue Line

Kita-shinyokohama
Sta.

Toda Sta

Lawson/Futaba Books

Kanagawa Head Office

SasameRiver

ShimamuraOmiya Sta.

“Nakanamiki” bus stop Omiya Sonic City

Saikyo Head OfficeBusiness Overview
Accommodation facility services
Group homes“Minna-no-ie”
Fee-based homes for the elderly with nursing care

“Minna-no-ie”“Sukoyaka”

Elderly housing with supportive services“Minna-no-ie”

Residential-type fee-based homes for the elderly“Sukoyaka”

At-home nursing care services

Day service centers“Yu” “Seikatsu Reha Yu”
Short-stay facilities“Minna-no-ie”
Multifunctional nursing care in a small group home setting“Minna-no-ie”

In-home nursing care support“Asagao”

Home-visit nursing care

“Wisnet Home Help Service”
Home-visit nursing

Other services
Licensed kindergartens“Kodomo-no-ie” “Tampopo”
Senior therapy
Home visiting massage service“Wisnet Home-Visit Nursing Station”

Community comprehensive support centers (contract)“Seseragi” “Akigase”
Home visiting beauty parlor/barber service
Care worker induction course
Introduction of Operators 4

What we value:“Three features only Wisnet can offer”“Peace of mind”

supported by the ALSOK GroupWe have introduced the ALSOK security system at all of our offices andfacilities. Knowing that trained security personnel will arrive in the case of
emergency provides a special sense of security.
Furthermore, we conduct evacuation drills for flood disasters under thesupervision of ALSOK and also provide all employees with training on how to
use the automated external defibrillators (AEDs) installed in offices and at
facilities.

“Broad range of services”
to meet users’ needs“Capable staff”
supporting users

We deliver “one-stop nursing careservices” in which a wide range ofservices that meet the various
needs of users are provided by one
company.

ALSOK Anshin Yoga

Nursingcare

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Support system tomake everyday life
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Meals

3 Introduction of Operators

We are particularly
focused on staff educationand training to develop
and improve the skills ofeach staff member, andprovide more than 60
training programs per year
covering a variety of areas.

Recreation

GreetingBased in Saitama, Tokyo and Kanagawa prefectures, Wisnet Co., Ltd.
operates over 200 nursing care service offices including primarily
group homes as well as fee-based homes for the elderly, day service
centers and home-visit long-term care offices.
“ALPOPO,” the symbol of Wisnet was designed based on adandelion, which is said to bring happiness, and represents ourdesire to “generate a positive cycle of smiles among everyone
associated with the company, including the users, their families andstaff members.” We will strive to deliver “safe and reliable” nursing
care services as a member of the ALSOK Group.

Yuichi Miyazawa
Representative Director

We appreciate your further support and encouragement going forward.

Introduction of Operators 2

Feature Vol. 8

Introduction of Operators

Wisnet Co., Ltd.

Nursing Care by ALSOK- Nursing care services with smiles and warmth ALSOK provides a safe, reliable livelihood filled with smiles
for the users and their families.