Ichigo Preserves and Improves Real Estate[Provisional Translation Only]
This English translation of the original Japanese document is provided solely for information purposes.
Should there be any discrepancies between this translation and the Japanese original, the latter shall prevail.

September 13, 2018
IssuerIchigo Hotel REIT Investment Corporation (“Ichigo Hotel,” 3463)
1-1-1 Uchisaiwaicho, Chiyoda-ku, Tokyo
Representative: Osamu Miyashita, Executive Director
www.ichigo-hotel.co.jp/english
Asset Management Company
Ichigo Investment Advisors Co., Ltd.
Representative: Wataru Orii, PresidentInquiries: Hiroto Tajitsu, Head of Administration
Tel: +81-3-3502-4892

Proposed Amendments to Articles of Incorporation and Election of Directors(First J-REIT to Implement No Fixed Fee, Performance Fee-Only Structure)
Ichigo Hotel’s Board of Directors has decided to submit the following proposals to amend
its Articles of Incorporation (AOI) and elect Directors at its October 27, 2018
Shareholder Meeting. The amended AOI and the election of Directors will become
effective upon shareholder approval at the Shareholder Meeting.
1. Purpose of the Proposed Amendmentsa. Drive increased shareholder value by becoming the first J-REIT with a no fixed fee,performance-fee only asset management structure (effective date February 1, 2019,the beginning of Ichigo Hotel’s July 2019 fiscal period).
(Article 41 and Attachments).
Specifically, Ichigo Hotel proposes to:(1) Eliminate the “Asset Management Fee I” linked to Ichigo Hotel’s total assets
under management (AUM)(2) Eliminate the “Asset Acquisition Fee” linked to Ichigo Hotel acquiring an asset(3) Eliminate the “Asset Sale Fee” linked to Ichigo Hotel selling an asset(4) In tandem with the above fee eliminations, increase the “Asset Management FeeII,” which is directly linked to shareholder value creation, from 0.002% to0.0036%, and rename it the “NOI & Dividend Performance Fee” to clarify its
meaning. Clarifying language has also been added to account for treasury sharesor any stock splits or consolidations.
(5) Introduce a “Gains on Sale Performance Fee” of 15% which is directly linked toshareholder value creation. (The fee has a high-water mark, such that it will only
be paid if the cumulative sum of all of Ichigo Hotel’s Gains/Losses on Sales todate are positive.)
The proposed new fee structure results in 15.4% lower fees on an actual to-date andforecast basis (i.e., the calculated cumulative sum of actual asset management fees
since Ichigo Hotel’s listing, plus forecast asset management fees for the January andJuly 2019 fiscal periods).
b. Clarify and modify language (Article 9, Item 2, Article 30, Item 1)
1

Proposed Amendments to Asset Management Fee Structure
Before Change(Until January 31, 2019)

AM Fee Structure

AssetSizeBasedEarningsBased

After Change(From February 1, 2019)

AM Fee I

Total Asset ValueX

0.4%–Asset
Acquisition Fee

Acquisition Price

X1%–AssetSale Fee

Sale Price

X

0.5%

–AM Fee II(NOI & Dividend
Performance Fee)NOI x Dividend

X

0.002%

0.0036%

Increased

Gains on Sale
Performance Fee

Gains on Sale

X

－15%

New

Eliminated

AM Fee Structure Comparison
Actual AM Fees (Jan 2016 – Jul 2018) + Forecast AM Fees (Jan 2019 – Jul 2019)(JPY million)

2,056-15.4%

13526

1,740104827
1,636688

Before Change

After Change(Estimate)

2■ AM Fee I (AUM-linked)■ AM Fee II (NOI & Dividend Performance Fee)
■ Asset Acquisition Fee■ Asset Sale Fee■ Gains on Sale Performance FeeProposed Amendments to Articles of Incorporation (AOI)(Amended areas underlined)
Current

After Amendment

Article 9 Shareholder Meeting Convocation
1. (omitted)
2. A Shareholder Meeting is to be called
without delay on October 1, 2018 orthereafter, and thereafter bi-annually
without delay on October 1 or thereafter.

Article 9 Shareholder Meeting Convocation
1. (no change)
2. (Note: A minor Japanese language change
was made which is immaterial to theEnglish translation.)

3. – 4. (omitted)

3. – 4. (no change)

Article 30 Investment Policy
Article 30 Investment Policy
1. The Investment Corporation primarily
1. (Note: A minor change was made in theinvests in real estate (as defined by Article
Japanese language that is immaterial to the31, Paragraph 2 of The Hotel Business
English translation.)
Law, Act No. 138 of 1948, the same shallapply hereinafter) used as, and in real estate
securities representing the ownership (asdefined by Article 31, Paragraph 3, thesame shall apply hereinafter) of lodgingfacilities and their incidental facilities andequipment (including swimming pools,
meeting rooms, banquet halls, retail stores,
and other leisure facilities) for running alodging business, as defined by The HotelBusiness Law (Act No. 138 of 1948,
including amendments thereafter). In
addition, the Investment Corporation also
invests in real estate used as and in realestate securities representing the ownershipof rental apartments or lodging facilities
that are furnished and equipped withamenities for creating a comfortable living
environment, and rental apartments orlodging facilities and their incidental
facilities and equipment that provide
reception and other services to lessees andguests.
2. – 7. (no change)

2. – 7. (no change)
Article 41 AOI Amendment Effective Date
The effective date of these AOI amendments
is February 1, 2019.

3

Current
Attachments

After Amendment
Attachments

Asset Management Fee Structure

Asset Management Fee Structure

The Investment Corporation shall pay thedesignated fees to the financial instruments
dealer in which it entrusts the management ofassets (the “Asset Management Company”),
in accordance with the payment calculation
method and timing specified below.

The Investment Corporation shall pay thedesignated asset management fees to thefinancial instruments dealer in which it
entrusts the management of assets (the “AssetManagement Company”), in accordance withthe payment calculation method and timing
specified below.

The Investment Corporation shall pay thedesignated fees, corresponding consumption
tax, and local consumption tax to the AssetManagement Company. In cases where thecalculated figure generates a fraction smaller
than JPY 1, the fraction shall be rounded off.

The Investment Corporation shall pay thedesignated asset management fees,corresponding consumption tax, and local
consumption tax to the Asset Management
Company. In cases where the calculation
generates a negative figure, it shall be treatedas a zero; when it generates a fraction smaller
than JPY 1, the fraction shall be rounded off.

1. Asset Management Fee I(deleted)

Asset Management Fee I is incurred for
management of assets during the period fromthe day following the end of the previous
fiscal period until three months after the endof the relevant fiscal period (“CalculationPeriod I”) and for the period starting from theday following the end of Calculation Period I
until the next fiscal period (“CalculationPeriod II”), and is calculated as follows:
Multiplying the total assets of the Investment
Corporation, the calculation of which is
described below, by up to 0.4% annually, as
agreed upon with the Asset Management
Company, and then pro-rating this amount by
the actual number of operating days in
Calculation Period I or Calculation Period II
divided by 365.* (Fractions smaller than JPY
1 shall be rounded off.)
The Asset Management Fee I incurred during
Calculation Period I shall be paid within threemonths from the last day of Calculation
Period I, and the Asset Management Fee I
incurred during Calculation Period II shall be
paid within three months from the last day ofCalculation Period II.
*In cases when the first day of the relevant
fiscal period falls upon a leap year, thedenominator shall be 366.
4Current

After Amendment

The total assets of the Investment Corporation
during Calculation Period I are the total assets
figure recorded in the balance sheet of thefiscal period immediately prior to Calculation
Period I (as approved at a board of directors
meeting per the Investment Trust andInvestment Corporation Act).
The total assets of the Investment Corporation
during Calculation Period II are the total
assets recorded in the balance sheet of thefiscal period immediately prior to Calculation
Period II, adding the acquisition price1 of realestate-related assets acquired by theInvestment Corporation during Calculation
Period I, and deducting the book value2 in thefiscal period immediately prior to Calculation
Period I of real estate-related assets soldduring Calculation Period I.
1The acquisition price recorded in thecontract minus expenses related to theacquisition, consumption tax, and local
consumption tax

2The acquisition price in cases where the realestate-related asset is not recorded in thebalance sheet during the relevant fiscal
period5Current
2. Asset Management Fee II

After Amendment
1. NOI & Dividend Performance Fee(renamed Asset Management Fee II)

Asset Management Fee II is calculated by:1) dividing the Investment Corporation’s
distributable earnings (before the deduction ofAsset Management Fee II)3 in the relevant
fiscal period by total shares outstanding in thesame period to generate the Dividend per
Share (DPS); 2) multiplying the DPS in (1) by
Net Operating Income (NOI), calculated as
total rental income minus total rent-related
expenses (excluding depreciation and losses
on disposal of fixed assets) of the relevant
fiscal period; and 3) multiplying the amountin (2) by up to 0.002%, as agreed upon with
the Asset Management Company. (Fractions
smaller than JPY 1 shall be rounded off.)

The NOI & Dividend Performance Fee iscalculated by: 1) dividing the Investment
Corporation’s distributable earnings3 (beforethe deduction of the NOI & Dividend
Performance Fee) in the relevant fiscal period
by total shares outstanding in the same period
to generate the Dividend per Share (DPS); 2)
multiplying the DPS in (1) by Net Operating
Income (NOI), calculated as total rental
income minus total rent-related expenses(excluding depreciation and losses on disposalof fixed assets) of the relevant fiscal period;and 3) multiplying the amount in (2) by
0.0036%.

Asset Management Fee II = DPS (before thededuction of the Asset Management Fee II) *NOI * an amount up to 0.002%, as agreed
upon with the Asset Management Company.
(Fractions smaller than JPY 1 shall be
rounded off.)

NOI & Dividend Performance Fee = DPS(before the deduction of the NOI & Dividend
Performance Fee) * NOI * 0.0036%

33

Distributable earnings (before the deductionof Asset Management Fee II) is pre-tax net
income (before the deduction of AssetManagement Fee II and applicableconsumption taxes) calculated in compliancewith generally accepted accounting
standards, and with the addition of losses
carried forward, if any.

Distributable earnings (before the deductionof the NOI & Dividend Performance Fee) is
pre-tax net income (before the deduction of
the NOI & Dividend Performance Fee andapplicable consumption taxes) calculated incompliance with generally accepted
accounting standards, and with the additionof losses carried forward, if any.

When the Investment Corporation holds
treasury shares during the relevant fiscalperiod, the total number of shares outstanding
shall be reduced by the number of treasury
shares held; in the event that a stock split or areverse stock split has been implemented, thetotal number of shares outstanding insubsequent periods shall be adjusted by theratio of the stock split or of the reverse stocksplit.
Payment shall be made within three months of Payment shall be made within three months ofthe end of the Investment Corporation’s
the end of the Investment Corporation’s
relevant fiscal period.
relevant fiscal period.

6

Current(deleted)
3. Asset Acquisition Fee
When the Investment Corporation acquires areal estate-related asset, an Asset Acquisition
Fee shall be calculated by multiplying theacquisition price by 1%, except in cases wherethe asset is acquired through a merger.

After AmendmentThe Asset Acquisition Fee payment date shallbe within one month from the end of the monthin which the asset was acquired (i.e., fromwhen the transfer of property rights becomeseffective).
4. Asset Sale Fee
When the Investment Corporation sells a realestate-related asset, an Asset Sale Fee shall becalculated by multiplying the sale price by0.5%.

(deleted)

The Asset Sale Fee payment date shall bewithin one month from the end of the monthin which the asset was sold (i.e., from when thetransfer of property rights becomes effective).
2. Gains on Sale Performance FeeWhen the Investment Corporation sells a realestate-related asset during the relevant fiscal
period and Gains on Sale are generated, aGains on Sale Performance Fee shall becalculated by multiplying the Gains on Sale
(before the deduction of the Gains on Sale
Performance Fee) by 15%.
Gains on Sale Performance Fee = Gains on
Sale of a real estate-related asset (before thededuction of the Gains on Sale PerformanceFee) * 15%
However, in cases where the Investment
Corporation’s cumulative sum of all Gains onSale of real estate-related assets minus thesum of all losses on such sales through therelevant fiscal period is negative, the Gains onSale Performance fee shall be zero.
The Gains on Sale Performance Fee payment
date shall be within three months of therelevant fiscal period.

7

2. Election of Directors
Due to the expiration of the Directors’ current terms of office as of this Shareholder
Meeting, Ichigo Hotel’s Board of Directors is proposing the re-election of Executive
Director Osamu Miyashita and Supervisory Directors Masaru Iida and Satoko Suzuki.
To ensure the minimum number of Directors as required by law, Ichigo Hotel’s Boardof Directors is also proposing the election of a new Alternative Executive Director and a
new Alternative Supervisory Director.
Career Summaries of Candidates
Title

Name(Birth Date)

Career Summary, Positions, Responsibilities, andImportant Concurrent Positions
April 1974
October 1991

ExecutiveDirector(Candidate)

Osamu Miyashita(June 13, 1949)

Joined Imperial Hotel, Ltd.
Seconded to Imperial Hotel Enterprises(Tsudanuma Crest Hotel)
December 1996 Tenant Affairs Manager, Imperial Hotel,Ltd.
June 2000
Head of Real Estate Division, Imperial
Hotel, Ltd.
June 2005
Director, Head of Real Estate Division,
Imperial Hotel, Ltd.
April 2011
President and Representative Director,
Imperial Hotel Hire K.K.
June 2014
Representative, Miyashita Associates
LLC (current)
July 2014
Advisor, Endo Research Institute, Ltd.
(current)
July 2015
Executive Director, Ichigo Hotel(current)8TitleName(Birth Date)

Career Summary, Positions, Responsibilities, andImportant Concurrent Positions
April 1989

Supervisory
Director(Candidate)

Masaru Iida
(February 15, 1967)

Joined The Sumitomo Bank, Limited(Now Sumitomo Mitsui BankingCorporation)
May 1993
LL.M. degree, University ofPennsylvania Law School
April 2001
Vice President Planning Dept. Treasury
Unit, Sumitomo Mitsui BankingCorporation
April 2006
J.D., Hitotsubashi University School ofLaw
December 2009 Qualified as Attorney at Law
January 2010
Joined Masuda & Partners Law Office
June 2011
External Corporate Auditor, DeNA Co.,
Ltd. (current)
July 2011
Founded Iida Business Law Office(current)
May 2013
External Director, Stats Investment
Management Co., Ltd. (current)
March 2015
External Corporate Auditor, Archaea
Energy Co., Ltd. (current)
July 2015
Supervisory Director, Ichigo Hotel(current)
August 2015
Corporate Auditor, Nishi-Tokyo Recycle
Center Co., Ltd. (current)
June 2016
External Corporate Auditor, Medicare
Life Insurance Co., Ltd. (current)
October 1996

SupervisoryDirector(Candidate)

Joined Tohmatsu & Co.
(Now Deloitte Touche Tohmatsu LLC)
September 2000 Director, Yurakusha Y.K.
August 2005
Representative, Suzuki Satoko CPA
Office (current)
July 2006
Auditor, PlaNet Finance Japan, NPO
Satoko Suzuki(Now Positive Planet Japan) (current)(November 22, 1973) September 2010 Auditor, Machizukuri Information
Center Kanagawa, NPO (current)
September 2012 Director, NPO Accounting & Tax
Professional Network, NPO (current)
July 2015
Supervisory Director, Ichigo Hotel(current)9Title

Name(Birth Date)

Career Summary, Positions, Responsibilities, andImportant Concurrent Positions
April 1977

Alternative
ExecutiveDirector(Candidate)

Hiromi Yamaguchi(March 6, 1954)

Tokyu Hotels International Corporation(Now Pan Pacific Hotels and Resorts)
April 1984
Head of Operations & Development
Division, Tokyu Hotels International
Corporation
April 1987
Seconded to Pan Pacific Properties Ltd.
as Controller, Administration & Finance
September 1989 Vice President & Financial Controller,
Alpha U.S.A. Inc.
May 1994
Assistant Controller, Westin HotelTokyo
April 1996
Director of Finance, Pan Pacific
Yokohama
January 2000Assistant General Manager, Finance,
People Innovation/Education, andFacilities Development & Maintenance,
Pan Pacific Yokohama
July 2007
Director, Archon Hospitality K.K. (NowAbilitas Hospitality Co., Ltd.)
October 2008
Chief Operating Officer, Archon
Hospitality K.K.
July 2013
Representative Director, Hospitality
Directions Co., Ltd. (current)
October 2004

AlternativeSupervisory
Director(Candidate)

Eriko Ishii(January 3, 1981)

Qualified as Attorney at Law
Mori Hamada & Matsumoto LPC
December 2007 Seconded to Planning and Coordination
Bureau, Corporate Accounting andDisclosure Division, Financial Services
AgencyAugust 2010
LL.M. degree, Columbia Law School
October 2010
Seconded to Legal Department, Itochu
Europe PLC (London)February 2011 Admitted as lawyer in New York
April 2016
Visiting Lecturer, Keio University Law
School (current)
July 2016
Partner, Shin Saiwai Law Office(current)
June 2018
Independent Director, Sophia Holdings
Co., Ltd. (current)

Note: The Director candidates are not related parties of Ichigo Hotel or its asset
management company, and they hold no Ichigo Hotel shares.
3. Schedule
September 13, 2018
October 5, 2018
October 27, 2018

Board of Directors Resolution
Distribution of Shareholder Meeting Materials (expected)
Shareholder Meeting (expected)

10