January 24, 2018
Real Estate Investment Trust Securities Issuer
Sekisui House Reit, Inc.
Representative:

Junichi Inoue, Executive Director(Securities Code: 3309)

Asset Management Company
Sekisui House Investment Advisors, Ltd.
Representative:

Junichi Inoue,
President & Representative Director

Inquiries:

Atsuhiro Kida,
Director & General Manager
Management Division
TEL: +81-3-6447-4870 (main)

Real Estate Investment Trust Securities Issuer
Sekisui House Residential Investment Corporation
Representative:

Osamu Minami, Executive Director(Securities Code: 8973)

Asset Management Company
Sekisui House Asset Management, Ltd.
Representative:

Osamu Minami,
President & Representative Director

Inquiries:

Yoshiya Sasaki, General Manager
IR & Financial Affairs Department
TEL: +81-3-5770-8973 (main)

Notice Concerning Conclusion of a Merger Agreement between Sekisui House Reit, Inc. andSekisui House Residential Investment Corporation
Sekisui House Reit, Inc. (“SHR”) and Sekisui House Residential Investment Corporation (“SHI,” and collectively
with SHR, the “Two Investment Corporations”), today at their respective board of directors meetings, resolved to executean absorption-type merger, with May 1, 2018 as the effective date, whereby SHR will be the surviving corporation and
SHI will be the dissolving corporation in the merger (the “Investment Corporation Merger”), and today executed amerger agreement (the “Investment Corporation Merger Agreement”) to that effect as set forth below.
To unitholders in the United States:
This exchange offer or business combination is made for the securities of a foreign company. The offer is subject to disclosure
requirements of a foreign country that are different from those of the United States. Financial statements included in the document, if
any, have been prepared in accordance with foreign accounting standards that may not be comparable to the financial statements of
United States companies.
It may be difficult for you to enforce your rights and any claim you may have arising under the federal securities laws, since the issuer islocated in a foreign country, and some or all of its officers may be residents of a foreign country. You may not be able to sue a foreigncompany or its officers in a foreign court for violations of the U.S. securities laws. It may be difficult to compel a foreign company andits affiliates to subject themselves to a U.S. court’s judgment.
You should be aware that the issuer may purchase securities otherwise than under the exchange offer, such as in open market or
privately negotiated purchases.
Disclaimer: This translation is for informational purposes only. If there is any discrepancy between the Japanese version of the English translation, the Japanese version shall prevail.

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1.

Purpose of the Investment Corporation Merger
The Japanese economy, due to improvements in the employment and income environment resulting from thegovernment’s economic policies and the Bank of Japan’s monetary policies, continues on a path of gradual recovery, butmany uncertainties regarding the global economy, including monetary policy in the U.S., political trends in the countriesof Europe and the U.S., and geopolitical risks throughout the world, together with questions about the future direction of
the Bank of Japan’s policy of quantitative and qualitative monetary easing, accompanied by negative interest rates andother factors affecting Japanese and overseas financial and capital markets, continue to require close scrutiny.
Against the backdrop of a favorable financing environment resulting from the monetary easing, investment activity inJapanese real estate continues at a brisk pace, but at the same time, in the Tokyo Stock Exchange, Inc. (the “Tokyo Stock
Exchange”) Real Estate Investment Trust Securities Market (the “ Tokyo Stock Exchange REIT Market”), against the
backdrop of an outflow of funds from J-REIT specialized investment trusts, since around March 2017, the Tokyo Stock
Exchange REIT Index and the Tokyo Stock Exchange REIT Market overall has been weak. Furthermore, with the
Nikkei Stock Average hitting its highest level since the collapse of the economic bubble and the stock market exhibiting abullish tone, it may be that, in reaction to this, the flow of money back into the Tokyo Stock Exchange REIT Market isshowing some weakness.
In addition to these economic trends, in the current environment of decreasing investment returns resulting from therise in real estate prices, it is essential to ensure stability and growth for the long-term enhancement of unitholder value,
and in the Tokyo Stock Exchange REIT Market, we believe that this means achieving an asset scale of a certain size andensuring flexible asset management.
The asset management companies of the Two Investment Corporations (the asset management company of SHR is
Sekisui House Investment Advisors, Ltd. (“SHIA”), and the asset management company of SHI is Sekisui House AssetManagement, Ltd. (“SHAM,” and collectively with SHIA, the “Two Asset Management Companies”) are each whollyowned subsidiaries of Sekisui House, Ltd. (“Sekisui House”), and receiving support from the Sekisui House Group(comprised of Sekisui House and its 269 consolidated subsidiaries and its 26 affiliates accounted for by the equity
method (as of July 31, 2017)), have each built track records in asset management.
SHR was listed on the Tokyo Stock Exchange REIT Market in December 2014 as an investment corporation focusedon investment in commercial properties including office buildings, hotels and retail properties. etc., and since beginninginvestment activities with a portfolio of 3 properties having an acquisition price totaling 114.3 billion yen, now has aninvestment record spanning 6 fiscal periods. In Japan, where earthquakes, typhoons and other natural disasters have beenfrequent, SHR, understanding that the demand of tenants for sustainable bases of operation for their businesses isincreasing, has designated commercial properties in locations fulfilling those needs (“Strategic Locations”) or having
high functionality (“High Quality”) as “Prime Properties” and made them its core investment targets. Utilizing pipeline
support from Sekisui House, SHR has grown its portfolio to 6 properties with a total acquisition price of 200.7 billion
yen, which it has financed through 3 capital increases by means of public offerings.
SHI was listed on the Tokyo Stock Exchange Real Estate Investment Trust Securities Market in July 2005 as Joint
REIT Investment Corporation, focused on investment in residential properties and commercial facilities, and since
beginning investment activities with a portfolio of 16 properties having a total acquisition price of 41.3 billion yen, now
has an investment record spanning 24 fiscal periods. In March 2010, a joint structure was established with Sekisui House
becoming a sponsor and Spring Investment Co., Ltd. (“Spring Investment”) as a joint sponsor, and in June 2010, thecorporation’s corporate name was changed to “Sekisui House SI Investment Corporation”. Thereafter, the corporation’s
articles of incorporation were changed to make residential properties the sole target of investment, and in June 2014, inorder to give a strong appeal to the change in investment target, the corporate name was changed to “Sekisui House SI
Residential Investment Corporation”. In March 2017, Sekisui House acquired the shares in SHAM held by Spring
Investment, with Sekisui House thus becoming the wholly-owning parent company of SHAM. In conjunction with thisDisclaimer: This translation is for informational purposes only. If there is any discrepancy between the Japanese version of the English translation, the Japanese version shall prevail.

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transition to a single sponsor structure with Sekisui House becoming the sole sponsor, in June 2017, SHI made a partial
amendment to its articles of incorporation and changed its corporate name to “Sekisui House Residential Investment
Corporation”. SHI has made building a portfolio that centers on high quality rental residential properties planned anddeveloped by Sekisui House Group its basic strategy, and has registered steady growth based primarily on the acquisitionof properties through the ongoing support of the Sekisui House Group; in the approximately 12 years since it was listed,
it has grown its portfolio to 113 properties with a total acquisition price of 206.9 billion yen, which it has financed
through 7 capital increases by means of public offerings.
The Two Investment Corporations have worked to expand their assets and secure stable returns by utilizing theirrespective strengths with the aim of long-term enhancement of unitholder value. However, of the 11 REITs in the office
REIT (Note) sector, SHR ranks 7th, and having small asset size and a small number of properties, diversification has been
insufficient. Of the 8 REITs in the residential REIT (Note) sector, SHI ranks 4th, but its overall asset scale and the size ofeach individual property is small, and the speed of its asset growth has been gradual. The Two Investment Corporations
see these factors, respectively, as the current challenges confronting them. In these circumstances, as one approach inorder to meet the challenges facing them, and to build portfolios with stability of returns and growth potential and to
conduct their operations with the flexibility needed to contribute to the long-term enhancement of unitholder value, theTwo Investment Corporations agreed to initiate discussions about a possible merger of the two corporations and together
exhaustively examined that possibility. As a result, they reached the conclusion that expanding the scale of their assets
and increasing their market presence through a merger of the Two Investment Corporations, and improving theopportunity for growth by utilizing the integrated corporate strength of the Sekisui House Group, thereby securing strong
returns and stability and growth of distributions through the steady increase of assets under management, would be theirbest strategy for maximizing unitholder value; accordingly, today the Two Investment Corporations concluded theInvestment Corporation Merger Agreement.
Note:

An “office REIT” refers to a Tokyo Stock Exchange REIT Market-listed J-REIT where 90% or more of its Portfolio consists ofoffice buildings on an asset scale basis, and a “residential REIT” refers to a Tokyo Stock Exchange REIT Market-listed J-REIT
where 90% or more of its portfolio consists of residential buildings on an asset scale basis. The rankings of the Two Investment
Corporations were based on total acquisition price indicated on the latest announced financial information for all REITs,
including the Two Investment Corporations, as of January 19, 2018.

The Two Investment Corporations believe that their merger will have the following significance.
(1) Creation of a highly stable diversified REIT having high quality residential properties and office buildings as itscore assets
The surviving corporation in the Investment Corporation Merger (“New SHR”) will have residential properties andcommercial properties including office buildings and hotels as its main investment targets, placing priority on Prime
Properties, which it defines as high quality residential properties and commercial properties in strategic locations. (Note)
New SHR will continue to position and invest in residential buildings, which form people’s bases of living, and officebuildings, which form the bases of operation for businesses, as the core assets of the portfolio, and will engage ininvestment in hotels with growth prospects; by doing so the company will aim to build a portfolio characterized by both
high stability and high quality.
Note: SHR calls commercial properties that either are in locations that meet the needs of tenants for “sustainable bases of operation”
for their businesses (strategic locations) or have high functionality (high quality) such as convenience, “Prime Properties,” but
New SHR designates a residential property or commercial property, which is situated in a location suitable for tenants’ “bases
for sustainable living” or for tenants’ “sustainable bases of operation” (strategic locations), with these locations further
having high basic efficiency as residences in terms of comfort and safety or the functionality which tenants seek, (high quality)“Prime Properties,” and in conjunction with the Investment Corporation Merger, thus expands the applicability of “Prime
Properties” to also include residential properties while at the same time repositioning it as a concept comprising both strategic
location and high quality.

Disclaimer: This translation is for informational purposes only. If there is any discrepancy between the Japanese version of the English translation, the Japanese version shall prevail.

3(2) Increase of varied growth opportunities by utilizing the integrated corporate strength of the Sekisui House GroupIt can be expected that the Investment Corporation Merger will enhance external growth potential from an increase ininvestment opportunities due to increased asset size and an expansion of the usage types of target investments. In
addition, by continuing to utilize to the fullest extent the solid support of the Sekisui House Group in terms of both
growth and stability, which has always been the strength of the Two Investment Corporations, New SHR will aim forstable income and asset growth. Also, as outlined below, while on the one hand acquiring assets from Sekisui House inconjunction with the Investment Corporation Merger (the “Asset Acquisition”), New SHR intends also to sell such assets
to third parties in the case where maintenance and repair costs are expected to increase (collectively with the Asset
Acquisition, the “Asset Replacement”) so as to raise the overall quality of its portfolio.
(3) Greater market presence due to an increase in the scale of assets
The asset scale subsequent to the Investment Corporation Merger and the Asset Replacement is projected to be 113
properties having a total acquisition price of 439.8 billion yen (tentative), which we believe will be sufficient to increase
New SHR’s presence in the REIT market. We also believe the increase in asset scale will improve the valuation andcredit ratings of the New SHR.
Sekisui House, the sponsor of the Two Investment Corporations, strives for the creation of residences andenvironments rich in humanity, aiming to be a “company which is a living environment creator” contributing to building
a society where everyone can live comfortably, and the Two Investment Corporations have always shared this corporate
philosophy in carrying out their operations.
Subsequent to the merger of the Two Investment Corporations, New SHR, keeping in mind the philosophy of Sekisui
House, will primarily target “residential properties” including residential buildings and other assets, and “commercial
properties”, including office buildings and hotels which fall under “High Quality” Prime Properties situated in “Strategic
Locations” and will pursue a growth strategy leveraging to the fullest the real estate development and management
capabilities of the Sekisui House Group. In addition, it will strive to make it possible for its unitholders, tenants and allother stakeholders to move forward together while aiming to “provide high quality social capital” and “maximization ofunitholders value” through asset management seeking medium and long-term income stability and a steady increase ofmanaged assets.
We believe that following the Investment Corporation Merger, the benefits from the merger will become apparent in
the greater stability of the investment unit price owing to an increase in distributions made possible through internal andexternal growth and improved liquidity.
In regard to the Asset Replacement mentioned above, as stated in the “Notice Concerning Acquisition of Trust
Beneficiary Interests in Domestic Real Estate and Leases (Prime Maison Shirokanedai Tower and Five Other Properties)
and Sale and Cancellation of Leases (Esty Maison Machida and Eleven Other Properties)” released today by the Two
Investment Corporations, New SHR expects to sell to third parties, from among the assets held by SHI, 12 residential
properties which are old, and for which the cost of future repair and maintenance is expected to increase, for an
anticipated sale price totaling 16.4 billion yen and also acquire from Sekisui House 6 residential properties at an expectedacquisition price of 25.3 billion yen, thereby improving the overall quality of its portfolio.
As stated in the “Notice Concerning Conclusion of a Merger Agreement between Sekisui House Investment Advisors,
Ltd. and Sekisui House Asset Management, Ltd., Which Are the Asset Management Companies” released today by the
Two Investment Corporations, in order to provide for the effective management of the assets held by New SHR, the Two
Asset Management Companies have agreed to execute an absorption-type merger (the “Asset Management Company
Merger”) with May 1, 2018 as the effective date, subject to the Investment Corporation Merger taking effect, whereby
SHIA will be the surviving company and SHAM will be the dissolving company in the merger, and today executed amerger agreement to that effect.
Disclaimer: This translation is for informational purposes only. If there is any discrepancy between the Japanese version of the English translation, the Japanese version shall prevail.

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2.

Overview of the Investment Corporation Merger(1) Schedule of the Investment Corporation Merger
SHR
Board of Directors meeting to approve the Investment Corporation Merger Agreement
Date of conclusion of the Investment Corporation Merger Agreement

January 24, 2018

Date for announcing the record date for the general meeting of unitholders

January 25, 2018

(tentative)

Record date for the general meeting of unitholders

February 9, 2018

(tentative)

Date of general meeting of unitholders

March 27, 2018

(tentative)

Record date for splitting the investment units

April 30, 2018

(tentative)

Effective date for splitting the investment units

May 1, 2018

Effective date of the Investment Corporation Merger
Registration date of the Investment Corporation Merger

Early May 2018

(tentative)(tentative)

Note: SHR plans to split one investment unit into two investment units with April 30, 2018 as the record date for splitting theinvestment units and May 1, 2018 as the effective date (the “Investment Unit Split”). Please refer to (3) Note 2 below
for more detail.

SHI
Board of Directors meeting to approve the Investment Corporation Merger Agreement
Date of conclusion of the Investment Corporation Merger Agreement

January 24, 2018

Date for announcing the record date for the general meeting of unitholders

January 25, 2018

(tentative)

Record date for the general meeting of unitholders

February 9, 2018

(tentative)

Date of general meeting of unitholders

March 27, 2018

(tentative)

Date of delisting

April 25, 2018

(tentative)

Effective date of the Investment Corporation Merger

May 1, 2018

(tentative)

Registration date of Investment Corporation Merger

Early May 2018

(tentative)(2) Form of the Merger
SHR will be the surviving corporation under an absorption-type merger and SHI will be dissolved in theInvestment Corporation Merger.
(3) Allocation of Investment Units under the Investment Corporation Merger
SHR(Surviving corporation in theabsorption-type merger)

SHI(Dissolving corporation in theabsorption-type merger)
1.65

Allocation of investment
units under the Investment
Corporation Merger

1(Reference)
Prior to taking into consideration theInvestment Unit Split
0.825

Note 1: The number of New SHR investment units to be issued as a result of the Investment Corporation Merger (the numberof units after taking into account the Investment Unit Split of SHR): 1,824,091 investment units
Note 2: SHR plans to split one investment unit into two investment units with April 30, 2018 as the record date for splitting
the investment units and May 1, 2018 as the effective date; the allocation ratio shown above and the number of new
investment units SHR will allocate and deliver are subject to the Investment Unit Split taking effect. The merger ratio
prior to taking into consideration the Investment Unit Split is SHI 0.825 to SHR 1; however, on the basis of that ratio,
against 1 SHI investment unit, 0.825 SHR investment units would be allocated and delivered, and this would result inmany SHI unitholders being allocated a fraction of less than one SHR investment unit. Accordingly, in order to deliver
to all SHI unitholders at least one SHR investment unit and make it possible for them to continue holding SHR
Disclaimer: This translation is for informational purposes only. If there is any discrepancy between the Japanese version of the English translation, the Japanese version shall prevail.

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investment units after the Investment Corporation Merger, a split of the investment units will be carried out in the ratioof 2 investment units to 1 SHR investment unit, and for every 1 SHI investment unit, 1.65 post-Investment Unit Split
SHR investment units will be allocated and delivered. For more details on the Investment Unit Split, please refer tothe “Notice Concerning a Split of Investment Units,” which SHR released today.
Note 3: As a result of allocating 1.65 SHR investment units to SHI unitholders for each SHI investment unit held, fractions ofless than one investment unit will occur in the number of investment units that must be delivered. Those fractional
units of less than one share will be sold through market transactions, and the proceeds from the sales will be delivered
to the unitholders allocated fractional shares in accordance with the fraction pursuant to the provisions of Article 88 of
the Act on Investment Trusts and Investment Corporations (Act No. 198 of 1951, including subsequent amendments,
the “Investment Trust Act”).
Note 4: In addition to the abovementioned investment units, SHR intends to pay SHI unitholders (the unitholders stated orrecorded in the final unitholders register on the day prior to the effective date of the Investment Corporation Merger(excluding the SHI unitholders who demanded the purchase of their investment units pursuant to the provisions ofArticle 149-3 of the Investment Trust Act (excluding those unitholders who retracted such purchase demand)
hereinafter referred to as the “Unitholders Subject to Allocation”), or the registered pledgees of investment units heldin lieu of the cash distributions for the business period of SHI’s final term, a merger consideration in the form of cash
distribution based on SHI’s distributable income for that same period in an amount (dropping any fractions of a yen)which is the quotient resulting from dividing the amount of SHI’s distributable income on the date prior to theeffective date of the merger by the number of issued SHI investment units on that date reduced by the number ofinvestment units held by unitholders other than the Unitholders Subject to Allocation) within a reasonable period fromthe effective date of the Investment Corporation Merger. Details will be notified as soon as they are finalized.
In addition, SHI will put before a general meeting of its unitholders, which is scheduled to be held on March 27, 2018,a proposal for an amendment of its articles of incorporation with a view to changing its accounting periods from thecurrent March 31 and September 30 to April 30 and October 31. If the aforementioned amendment is approved in thegeneral meeting of the unitholders, the last period before the effective date of the Investment Corporation Merger is
expected to be a seven-month business period from October 1, 2017 to April 30, 2018, and cash distributions with
March 31, 2018 as the record date will not be distributed (as mentioned above, a merger consideration in the form of
cash distributions based on SHI’s distributable income for that same period will be paid).

(4) Changes to the Articles of Incorporation of the Surviving Corporation
Based on the Investment Corporation Merger, in order to transform itself, as New SHR, into a “diversified
REIT” with a high degree of stability having as its core assets high-quality “residential and office buildings,” SHR
plans to put before a general meeting of its unitholders, which is scheduled for March 27, 2018, a resolution,subject to the Investment Corporation Merger becoming effective, for an amendment of its articles of incorporation(the “Amendment of the Articles of Incorporation”) with a view to establishing new investment policies andinvestment targets. Further, regardless of whether the Investment Corporation Merger will become effective, aMerger Fee will be stipulated in the Amendment of the Articles of Incorporation as a new management fee to theasset management company. Please refer to Attachment 1 for details of the Amendment of the Articles ofIncorporation.
New SHR will, promptly upon the Amendment of the Articles of Incorporation taking effect, file a notification
pursuant to Article 191 of the Investment Trust Act.
(5) Principal Conditions of the Investment Corporation Merger
The Investment Corporation Merger is subject to the following conditions precedent being satisfied as of the dateprior to its effective date: (i) that approvals by the general unitholders’ meetings of the Two Investment
Corporations, the procedures in accordance with other relevant laws and regulations, and the receipt of approvals
and authorizations considered necessary for the implementation of the matters planned in regard to or related to theInvestment Corporation Merger have been obtained and/or completed; (ii) that there have been no breaches ofagreements, violations of financial covenants or overdue payments of monetary liabilities (including taxes andpublic charges) by either of the Two Investment Corporations (excluding, however, any minor items); (iii) that
there has been no occurrence of an event of acceleration, suspension of payment or inability to pay debts by eitherof the Two Investment Corporations; (iv) that subsequent to the implementation and effectiveness of theInvestment Corporation Merger, consents covering the basic terms and conditions of loans have been received inDisclaimer: This translation is for informational purposes only. If there is any discrepancy between the Japanese version of the English translation, the Japanese version shall prevail.

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advance from all financial institutions lending to either SHR or SHI , and those consents have not been rescinded;(v) that each of the Two Investment Corporations has reasonably confirmed that it is not required to file aregistration statement on Form F-4 in regard to the Investment Corporation Merger under the Securities Act of theUnited States; (vi) that no petition for commencement of bankruptcy proceedings, commencement of civil
rehabilitation proceedings or commencement of other similar legal insolvency proceedings has been filed against
either SHR or SHI; (vii) that no revocation of registrations, suspension of all or part of operations or otheradministrative disposition which could cause serious impediment to or have a serious adverse impact on theexecution of the Investment Corporation Merger has been taken by a supervisory government agency against eitherof the Two Investment Corporations or either of the Two Asset Management Companies; (viii) that each of theamendment agreements for the pipeline support agreement (meaning the amendment agreements concluded by
SHI by the effective date to the effect that, even with the termination of the asset management agreement between
SHI and SHAM, subsequent to the effective date, each Pipeline Support Agreement (as defined below) between
SHR and SHIA and, respectively, each of the Pipeline Support Companies (as defined below) can continue) has
been lawfully and validly executed, and that, subsequent to the effective date, each of the exclusive right tonegotiate agreements (the “Pipeline Support Agreements”) between SHI and SHAM with each of the Pipeline
Support Companies (as defined below) will remain legally in force between SHR and SHIA with, respectively,
each of Sekiwa Real Estate, Ltd., Sekiwa Real Estate Kansai, Ltd., Sekiwa Real Estate Kanto, Ltd., Sekiwa Real
Estate Kyushu, Ltd., Sekiwa Real Estate Chugoku, Ltd., Sekiwa Real Estate Chubu, Ltd. and Sekiwa Real Estate
Tohoku, Ltd. (the “Pipeline Support Companies”); and (ix) that the cancellations, subject to the Investment
Corporation Merger becoming effective, on its effective date of the asset management agreement and theinstitutional operations administration agreement between SHI and SHAM, the asset custody agreement with theasset custody company, the general administrative services agreement with the general administrative services
provider (excluding, however, the agreement with the general administrative services provider, The Bank of TokyoMitsubishi UFJ, Ltd., in regard to the investment corporation bonds), the exclusive right to negotiate agreement
among SHI, SHAM and Sekisui House and the auditing agreement with the financial auditor (excluding the part of
the audit pertaining to the audit of SHI’s financial statements required pursuant to the Financial Instruments andExchange Act (Act No. 25 of 1948, including subsequent amendments) in regard to the business term, making
April 30, 2018 the changed accounting term of SHI on the basis of the proposal to change SHI’s articles ofincorporation), the agreements ancillary to the foregoing agreements and other agreements as separately stipulatedby agreement of the Two Investment Corporations have been agreed to by the parties to the agreements on terms
reasonably judged satisfactory by SHI.
On the date prior to the effective date of the Investment Corporation Merger, if any of the above conditions
precedent to the Investment Corporation Merger has not been satisfied, or if it becomes clear that any of the above
conditions precedent to the Investment Corporation Merger will not be fulfilled by the date prior to the effective
date of the Investment Corporation Merger, SHR or SHI, in advance of the effective date, may cancel theInvestment Corporation Merger Agreement by giving notice in writing to the other party without incurring any
liability or payment obligation against the other party (this does not include, however, liabilities or payment
obligations arising from a breach of any of the other provisions of the Investment Corporation Merger Agreement),
except in the case where the conditions precedent cannot be satisfied due to a cause attributable to the cancelling
party itself, a related party or its asset management company; provided, however, that even if (ix) above is notsatisfied, SHI may not cancel the Investment Corporation Merger Agreement.
3.

Basis for Calculation of the Allocation of Investment Units under the Investment Corporation Merger(1) Basis for Calculation
SHR has appointed Nomura Securities Co., Ltd. (“Nomura Securities”), and SHI has appointed Mizuho
Securities Co., Ltd. (“Mizuho Securities”), respectively, as their financial advisors for the Investment Corporation

Disclaimer: This translation is for informational purposes only. If there is any discrepancy between the Japanese version of the English translation, the Japanese version shall prevail.

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Merger and requested them to calculate the merger ratio.
The summaries of the calculations made by Nomura Securities and Mizuho Securities each indicate figures prior
to taking into account the Investment Unit Split, by SHR, of one investment unit into two investment units asmentioned in “2. Overview of the Investment Corporation Merger (3) Allocation of Investment Units under theInvestment Corporation Merger” above.
Because the investment units of the Two Investment Corporations are both listed on the Tokyo Stock Exchange
and there is a market price for the units, Nomura Securities used average market investment unit price analysis, andbecause there are multiple companies comparable to each of the Two Investment Corporations and an analogicalestimate based on comparable investment corporations is possible, it also used a comparable investment
corporation analysis; in order to reflect the state of future business operations in the calculations, Nomura Securities
made a discounted cash flow analysis (“DCF Analysis”), and in order to also reflect in its estimations the amount of
the impact of fair value and realizable value on net assets, it also used the adjusted net asset method in its
calculations. A summary of Nomura Securities’ calculations is shown below. The range of values for the merger
ratio shown indicates the range of estimates for SHI when the value for one SHR investment unit is considered to
be 1.
In its average market investment unit price analysis, Nomura Securities used the simple arithmetic average of theclosing prices on the calculation base date, which was set as January 23, 2018, the five business days preceding the
calculation base date, the one-month period preceding the calculation base date, the three-month period preceding
the calculation base date, and the six-month period preceding the calculation base date. For details in the
supplemental explanation regarding the assumptions and disclaimers of Nomura Securities’ analysis, please refer toNote 1 at the end of this press release.
In the future profit plans of the Two Investment Corporations, which formed the bases for Nomura Securities’
DCF analysis, there were no fiscal periods in which major changes in profits were projected.
Valuation Method
Average Market Investment Unit Price
Analysis
Comparable Investment Corporation
Analysis
DCF Analysis
Adjusted Net Asset Method

Range of Merger Ratio
0.850 ～ 0.859
0.801 ～ 1.006
0.785 ～ 0.846
0.780

In performing its analysis, Mizuho Securities reviewed the financial information of the Two Investment
Corporations, in addition to reviewing the terms and conditions of the Investment Corporation Merger. Because theinvestment units of the Two Investment Corporations are listed on the Tokyo Stock Exchange and market
investment unit prices are publicly available, Mizuho Securities used a market investment unit price analysis, andbecause there are multiple listed investment corporations that are comparable to each of the Two Investment
Corporations and an analysis based on comparable investment corporations is possible, it also conducted acomparable investment corporation analysis; in addition Mizuho Securities conducted the dividend discount model
as a method of analysis (“DDM Analysis”) of the investment unit value based on dividends that unitholders of theTwo Investment Corporations could be expected to receive in the future, and for the purpose of reflecting themarket value of assets held by each corporation, also used the adjusted net asset value approach.
The calculated ranges of the merger ratio shown below are the range of the number of SHR investment units tobe allocated for each investment unit of SHI. In performing the investment unit price analysis, Mizuho Securities
adopted January 23, 2018 as the reference date and reviewed the closing investment unit price on the reference date
and the average of the closing investment unit prices during most recent week, the most recent month, the mostDisclaimer: This translation is for informational purposes only. If there is any discrepancy between the Japanese version of the English translation, the Japanese version shall prevail.

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recent three months and the most recent six months, each ending on the reference date
For details in the supplemental explanation regarding the assumptions and disclaimers of Mizuho Securities’
analysis, please refer to Note 2 at the end of this press release.
In the future profit plans of the Two Investment Corporations which formed the bases for Mizuho Securities’
DDM Analysis, there were no fiscal periods in which significant changes in profits were projected.
Valuation Method

Range of Merger Ratio

Investment Unit Price Analysis
Comparable Investment Corporation
Analysis
Dividend Discount Model

0.850 ～ 0.859

Adjusted Net Asset Value Approach

0.781

0.804 ～ 0.968
0.539 ～ 0.988(2) Background to the Calculations
As a result of discussions and negotiations over an extended period comprehensively taking into considerationsuch factors as the financial performance and state of the assets and liabilities of each of the Two Investment
Corporations, their future business prospects, the merits of the Investment Corporation Merger and the results of
the analyses performed by their respective financial advisors, the Two Investment Corporations, having determinedthat the above merger ratios are appropriate, concluded the Investment Corporation Merger Agreement.
(3) Relationships with the Institutions Which Performed the Calculations
Neither Nomura Securities nor Mizuho Securities falls under a related party of the Two Investment Corporations
as defined in Article 67, paragraph 4 of the Ordinance on Accounting at Investment Corporations (Cabinet Office
Ordinance No. 47 of 2006, including subsequent amendments) and neither has any material interests that must be
indicated with respect to the Investment Corporation Merger.
(4) Prospects and Reasons for Delisting
The Investment Corporation Merger is planned to be executed in the form of an absorption-type merger whereby
SHR will be the surviving corporation and SHI will be dissolved in accordance with Article 143(iv) of theInvestment Trust Act. The investment units issued by SHI are expected to be delisted on April 25, 2018, threebusiness days prior to the effective date of the Investment Corporation Merger, in accordance with the delisting
criteria stipulated by the Tokyo Stock Exchange. As consideration for the Investment Corporation Merger, each of
SHI’s unitholders will be allocated new SHR investment units according to the number of SHI investment units
they hold, thus becoming SHR unitholders, and because SHR investment units are listed on the Tokyo Stock
Exchange, those unitholders will continue to have the opportunity to trade their investment units on the Tokyo
Stock Exchange.
(5) Measures to Ensure Fairnessi.

The propriety of the Investment Corporation Merger and measures to ensure fairness in the process ofconsideration of the merger ratio

In the course of their consideration of the Investment Corporation Merger, the Two Investment Corporations
reported on a timely basis the status of their considerations to the board of directors of each of the investment
corporations, with each board being composed of the investment corporation’s executive director and two
supervisory directors, whose independence from the asset management companies is ensured in terms of theInvestment Trust Act, and all material matters of their considerations were deliberated and approved by theirrespective board of directors.
In addition, SHR appointed Anderson Mori & Tomotsune, and SHI appointed Ito and Mitomi Law Office as
Disclaimer: This translation is for informational purposes only. If there is any discrepancy between the Japanese version of the English translation, the Japanese version shall prevail.

9their respective legal advisors for the Investment Corporation Merger, and they each received advice concerning
the methodology and process relating to the procedures and decision-making process for the Investment
Corporation Merger.
ii.

Measures to ensure fairness in the calculation of the merger ratio

As discussed in (1) through (3) above, each of the Two Investment Corporations requested its respective
financial advisor to perform a financial analysis in regard to the merger ratio and the merger ratio was determinedby comprehensively taking into account the results of such analyses together with other factors.
SHR, in order to ensure the fairness of the Investment Corporation Merger and for the benefit of its shareholders,obtained from Nomura Securities, an independent third-party financial advisor, a written merger ratio calculation
report providing an analysis from a financial perspective based on certain assumptions in regard to the allocation
under the Investment Corporation Merger.
On the basis of the foregoing, SHR’s board of directors concluded that sufficient steps had been taken to ensure
the fairness of the Investment Corporation Merger.
SHI, for its part, in order to ensure the fairness of the Investment Corporation Merger and for the benefit of its
shareholders, obtained from Mizuho Securities, an independent third-party financial advisor, a written merger ratio
calculation report providing an analysis from a financial perspective based on certain assumptions in regard to theallocation under the Investment Corporation Merger.
On the basis of the foregoing, SHI’s board of directors concluded that sufficient steps had been taken to ensure
the fairness of the Investment Corporation Merger.
The Two Investment Corporations did not, however, obtain written opinions (so-called “fairness opinions”) fromtheir respective financial advisors to the effect that the merger ratio is reasonable from a financial perspective for
their respective unitholders.
iii.

Engagement of an independent advisor

SHI, in order to receive advice when considering the Investment Corporation Merger, as well as other support
for the implementation of the Investment Corporation Merger, in addition to the independent third-party financial
advisor mentioned in (ii) above, from which it requested the calculation of the merger ratio, also engaged SMBC
Nikko Securities Inc. (“SMBC Nikko Securities”) as an independent advisor. SHI did not, however, obtain awritten merger ratio calculation report or a fairness opinion from SMBC Nikko Securities.

Disclaimer: This translation is for informational purposes only. If there is any discrepancy between the Japanese version of the English translation, the Japanese version shall prevail.

10

4.

Outline of the Parties to the Investment Corporation Merger
Surviving corporation in theabsorption-type merger
(1)

Name

Sekisui House Reit, Inc.

(2)

Address of headquarters

1-6-6 Motoakasaka, Minato-ku, Tokyo(3)

Executive director

Junichi Inoue

Dissolving corporation in theabsorption-type merger
Sekisui House Residential Investment
Corporation
3-1-31 Minami-Aoyama, Minato-ku,
TokyoOsamu Minami(4)

Total capital

110,189 million yen

98,633 million yen(5)Date of incorporation
Total number ofinvestment units issued
Accounting terms
Principal assets undermanagement

September 8, 2014

April 20, 2005

969,000 units

1,105,510 units

April, OctoberMarch, September (Note 1)

Real estate trust beneficiary interests

Real estate trust beneficiary interests

The Bank of Tokyo-Mitsubishi UFJ,
Ltd.,
Sumitomo Mitsui Banking Corporation,
Mizuho Bank, Ltd.,
Sumitomo Mitsui Trust Bank, Ltd.
Japan Trustee Services
25.31%
Bank, Ltd. (trust account)

Mizuho Bank, Ltd.,
Sumitomo Mitsui Banking Corporation,
The Bank of Tokyo-Mitsubishi UFJ,Ltd.,
Mizuho Trust & Banking Co., Ltd.
Japan Trustee Services
26.17%
Bank, Ltd. (trust account)

The Master Trust Bank ofJapan, Ltd. (trust account)

13.24%

Sekisui House, Ltd.

6.72%

The Master Trust Bank ofJapan, Ltd. (trust account)
The Nomura Trust andBanking Co., Ltd.
(investment account)

(6)
(7)
(8)

(9)

(10)

(11)

Main banks

Major unitholders andratio of investment units
held (Note 2)

Trust & Custody Services
Bank, Ltd. (securities
investment trust account)
The Nomura Trust andBanking Co., Ltd.
(investment account)
Operating results for the last three business terms

3.80%

5.20%

Sekisui House, Ltd.

3.52%

3.68%

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

2.49%

SHR
Accounting term

11.17%

SHI

Oct. 2016

Apr. 2017

Oct. 2017

Sept. 2016

Mar. 2017

Sept. 2017

Operating revenue

4,059

4,144

4,580

6,693

6,919

6,916

Operating income

2,664

2,704

2,987

2,739

3,060

3,001

Ordinary income

2,321

2,381

2,626

2,193

2,502

2,494

Net income

2,320

2,380

2,625

2,192

2,501

2,493

Net income per unit (yen)

2,634

2,663

2,737

2,153

2,288

2,255

Distribution per unit (yen)

2,596

2,663

2,710

2,145

2,234

2,255

Net assets per unit (yen)114,498

114,565

116,424

89,66891,64891,669Net assets

102,361

102,421112,815

91,292

101,318

101,341

Total assets

189,257

189,627

207,142203,257

210,166

210,009(Unit: millions of yen unless otherwise noted)
(12)
(13)

(14)

Asset managementcompany
Address of asset
management company
Name and title ofrepresentative of asset
management company

Sekisui House Investment Advisors,Ltd.
1-6-6 Motoakasaka, Minato-ku, Tokyo
Junichi Inoue, President &Representative Director

Sekisui House Asset Management, Ltd.
3-1-31 Minami-Aoyama, Minato-ku,
TokyoOsamu Minami, President &Representative Director

Disclaimer: This translation is for informational purposes only. If there is any discrepancy between the Japanese version of the English translation, the Japanese version shall prevail.

11

Surviving corporation in theabsorption-type merger(15)

Dissolving corporation in theabsorption-type merger

Relationship between theparties
Capital relationship

Between the parties to the Investment Corporation Merger and the Two AssetManagement Companies, there are no capital relationships that need to be noted.

Personal relationship

Between the parties to the Investment Corporation Merger and the Two AssetManagement Companies, there are no personal relationships that need to be noted.

Business relationship

Status as a related party

Between the parties to the Investment Corporation Merger and the Two AssetManagement Companies, there are no business relationships that need to be noted.
The parties to the Investment Corporation Merger do not fall under related parties.
The Two Asset Management Companies are both wholly-owned subsidiaries of
Sekisui House and have the same parent company; accordingly, they mutually fallunder related parties.

Note 1: SHI plans to put before a general meeting of its unitholders, which is scheduled to be held on March 27, 2018, a
proposal for an amendment of its articles of incorporation with a view to changing its accounting periods to April 30
and October 31.
Note 2: The “ratio of investment units held” is shown to the second decimal place, and the same applies hereinafter.

5.

Status after the Investment Corporation Merger(1) Status of the Surviving Corporation
(1)
(2)
(3)
(4)
(5)
(6)

Name
Address of headquarters
Executive director
Total capital
Accounting terms
Net assets

Surviving Corporation in the Absorption-Type Merger
Sekisui House Reit, Inc.
4-15-1 Akasaka, Minato-ku, Tokyo (tentative) (Note 1)
Junichi Inoue
Undetermined (Currently not yet finalized)
April, October
Undetermined (Currently not yet finalized)(7)

Total assets

Undetermined (Currently not yet finalized)

Asset managementcompany
Address of asset
management company
Name and title ofrepresentative of asset
management company

Sekisui House Asset Management, Ltd. (tentative) (Note 2)(currently Sekisui House Investment Advisors, Ltd.)

(8)
(9)

(10)

4-15-1 Akasaka, Minato-ku, Tokyo (tentative) (Note 1)
Junichi Inoue, President & Representative Director

Note 1: It is planned that New SHR and SHIA will move their head offices on May 1, 2018, the effective date of theInvestment Corporation Merger. Details will be notified as soon as they are finalized.
Note 2: Simultaneously with the effectiveness of the Asset Management Company Merger, SHIA plans to change its
corporate name to “Sekisui House Asset Management, Ltd.” For more detail, please refer to the “Notice Concerning
Conclusion of a Merger Agreement between Sekisui House Investment Advisors Ltd. and Sekisui House AssetManagement, Ltd., Which Are the Asset Management Companies” which the Two Asset Management Companies
released today.

(2) Major Unitholders and Ratio of Investment Units Held Before and After the Investment Corporation Merger
Before the Investment Corporation Merger(Note 1)SHR
Japan Trustee Services Bank, Ltd.
(trust account)
The Master Trust Bank of Japan, Ltd.
(trust account)

25.31%
13.24%

Sekisui House, Ltd.

6.72%

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

5.20%

SHI (Note 1)
Japan Trustee Services Bank, Ltd.
(trust account)
The Master Trust Bank of Japan, Ltd.
(trust account)
The Nomura Trust and Banking Co., Ltd.
(investment account)Sekisui House, Ltd.

26.17%
11.17%
3.80%
3.52%

Disclaimer: This translation is for informational purposes only. If there is any discrepancy between the Japanese version of the English translation, the Japanese version shall prevail.

12The Nomura Trust and Banking Co., Ltd.
(investment account)
STATE STREET BANK ‐ WESTPENSION FUND CLIENTS – EXEMPT
505233
STATE STREET BANK AND TRUSTCOMPANY 505012
The Hachijuni Bank, Ltd.

3.68%

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

2.49%

1.66%

Mitsubishi UFJ Trust and Banking
Corporation

1.81%

1.41%

The Hachijuni Bank, Ltd.

1.80%

1.32%

DEUTSCHE BANK AG LONDON GPF
CLIENT OMNI - FULL TAX 613
STATE STREET BANK ‐ WESTPENSION FUND CLIENTS – EXEMPT
505233
The Fuji Fire and Marine Insurance Co.,
Ltd.

1.78%

Mitsubishi UFJ Morgan Stanley Securities
Co., Ltd.

1.06%

STICHTING PENSIOENFONDSMETAAL EN TECHNIEK

1.05%

1.72%

1.54%

After the Investment Corporation Merger (simple total after taking into account the merger ratio) (Note 2)
Japan Trustee Services Bank, Ltd. (trust account)

25.72%The Master Trust Bank of Japan, Ltd. (trust account)

12.24%

Sekisui House, Ltd.

5.17%

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

3.89%

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

3.74%

STATE STREET BANK ‐ WEST PENSION FUND CLIENTS – EXEMPT 505233

1.69%

The Hachijuni Bank, Ltd.

1.55%

Mitsubishi UFJ Trust and Banking Corporation

0.88%

DEUTSCHE BANK AG LONDON GPF CLIENT OMNI - FULL TAX 613

0.86%

The Fuji Fire and Marine Insurance Co., Ltd.

0.75%

Note 1: Figures shown are respectively based on SHR’s unitholders register as of October 31, 2017 and SHI’s unitholders
register as of September 30, 2017. Accordingly, the figures may not reflect the actual holdings of the unitholders.
Note 2: For the post-merger major unitholders and ratios of investment the number units held, the number of investment units
is calculated on the basis of the ratio of investment units held by the major unitholders prior to the abovementioned
merger and on the assumption of SHR investment units being allocated in accordance with the content of “2.
Overview of the Merger (3) Allocation of Units Under the Investment Corporation Merger” above.

(3) Changes to the Asset Management Agreements
After the Investment Corporation Merger becomes effective, New SHR intends to continue entrusting functions
relating to the management of assets to SHIA, to which it currently entrusts asset management. To this end, SHR
and SHIA plan to conclude an amendment agreement regarding their asset management agreement, subject to theInvestment Corporation Merger and the Amendment of the Articles of Incorporation becoming effective, making
the changes needed in conjunction with the Amendment of the Articles of Incorporation.
In addition, SHI, upon obtaining the approval of a general meeting of its unitholders, plans to cancel its asset
management agreement with SHAM, subject to the Investment Corporation Merger taking effect.
(4) Changes to Investment Guidelines
SHIA plans to revise its investment policy in regard to the guidelines for SHR asset management. Please refer toAttachment 2 for a summary of the currently planned changes to investment policy. The specific content of thechanges to the asset management guidelines will be advised as soon as they are finalized.
(5) Changes to Agreements with Sponsors
SHR today concluded, subject to the Investment Corporation Merger taking effect, a support agreement among
New SHR and SHIA with Sekisui House (the “New Sponsor Support Agreement”) by and among SHR and SHIA
and Sekisui House to take effect on the effective date of the Investment Corporation Merger. The New Sponsor
Disclaimer: This translation is for informational purposes only. If there is any discrepancy between the Japanese version of the English translation, the Japanese version shall prevail.

13

Support Agreement in substance consolidates the prior Sponsor Support Agreement and Pipeline Support
Agreement (collectively the “Prior Sponsor Support Agreements”) concluded by and among the same parties andthe prior Exclusive Right to Negotiate Agreement concluded by SHI and SHAM with Sekisui House (the “Prior
Exclusive Right to Negotiate Agreement”).
In conjunction therewith, the Two Investment Corporations and the Two Asset Management Companies haverespectively agreed with Sekisui House, subject to the Investment Corporation Merger taking effect, to cancel the
Prior Sponsor Support Agreements and Prior Exclusive Right to Negotiate Agreement on the effective date of theInvestment Corporation Merger.
Changes to the Pipeline Support Agreements of SHI and SHAM with each of the Pipeline Support Companies
currently have not yet been decided, but discussions are planned to provide for the continuation of thoseagreements subsequent to the Investment Corporation Merger, and notification will be made as soon as the matters
are finalized.
6.

Outline of Accounting Treatment
It is expected that the purchase method will be used in the accounting treatment of the Investment Corporation Merger

with SHR as the acquiring corporation and SHI as the acquired corporation, applying the Accounting Standards for
Business Combinations (ASBJ Statement No. 21, revision dated September 13, 2013).
Goodwill or negative goodwill is expected to arise as a result of the Investment Corporation Merger, but the amount iscurrently uncertain. It will be advised as soon as determined.

7.

Future Outlook
SHI plans to put before the general meeting of its unitholders, which is scheduled to be held on March 27, 2018, a

proposal for an amendment of its articles of incorporation with a view to changing its accounting periods from thecurrent March 31 and September 30 to April 30 and October 31. For information about operating results for its term
ending April 30, 2018 (October 1, 2017 to April 30, 2018), its final business period prior to the effective date of theInvestment Corporation Merger, please refer to the “Notice Concerning Forecast of Operating Results for the Fiscal
Period Ending April 30, 2018 (Final Fiscal Period) and Merger Consideration,” which SHI released today.
In regard to the forecast of operating results subsequent to the Investment Corporation Merger, please refer to the“Notice Concerning the Forecast of Operating Results and Distributions Subsequent to the Merger of Sekisui House Reit,
Inc. and Sekisui House Residential Investment Corporation for the Fiscal Periods Ending October 31, 2018 and April 30,
2019,” which the Two Investment Corporations released today.

*Addresses of the websites of the Two Investment Corporations
Sekisui House Reit, Inc.:

http://sekisuihouse-reit.co.jp/en/

Sekisui House Residential Investment Corporation:

http://www.shi-reit.co.jp/eng/

Disclaimer: This translation is for informational purposes only. If there is any discrepancy between the Japanese version of the English translation, the Japanese version shall prevail.

14Note 1: Nomura Securities, in calculating the merger ratio, in general used information received from the Two Investment
Corporations and publicly disclosed information and, assuming those materials and information, etc. all to be accurate andcomplete, did not independently verify their accuracy and completeness. Nomura Securities also did not independently assess,appraise or inspect the assets and liabilities (including assets and liabilities off the book and other contingent liabilities) of theTwo Investment Corporations, nor did it request a third party to do so. In addition, Nomura Securities assumed that thefinancial forecasts (including profit plans and other information) provided by the Two Investment Corporations werereasonably prepared by their respective managements on the basis of the best estimates and judgments available at the timesuch forecasts were provided.
Note 2: In analyzing merger ratio, Mizuho Securities relied upon and assumed the accuracy and completeness of financial condition orother information relating to the Two Investment Corporations that was publicly available or was furnished to or discussed with
Mizuho Securities by the Two Investment Corporations and upon which the analysis of Mizuho Securities is based. Mizuho
Securities did not independently verify (nor assume responsibility or liability for independently verifying) any such information
or its accuracy or completeness. The contents expressed in Mizuho Securities’ a written merger ratio calculation report could
potentially differ if there are matters that would make the information provided to Mizuho Securities or discussed between
Mizuho Securities and the corporations materially incorrect, or if there is a fact or circumstance not disclosed at the time ofdelivery of a written merger ratio calculation report, or which occurs subsequent to delivery of a written merger ratio
calculation report (including facts which potentially existed at the time a written merger ratio calculation report was delivered
but became apparent subsequently). Mizuho Securities assumed that the executive directors of each corporation are unawareof any fact that would make the information provided to or discussed with Mizuho Securities incomplete or misleading. In
addition, Mizuho Securities did not conduct an independent valuation or appraisal of any assets or liabilities (including
derivatives, off-balance sheet assets and liabilities and other contingent liabilities), or the reserves of either corporation, andMizuho Securities was not independently provided with, nor did Mizuho Securities make any request to a third party for, anysuch valuation or appraisal. Mizuho Securities did not assume any obligation to conduct any inspection of the properties or
facilities of either corporation, nor did Mizuho Securities evaluate the capitalization, solvency or fair value of either corporation
under any law relating to bankruptcy, insolvency or similar matters.
With respect to any information Mizuho Securities requested in connection with analysis of merger ratio that was not provided
or disclosed to Mizuho Securities by the corporations, or could not otherwise be used by Mizuho Securities as a basis ofMizuho Securities’ evaluation, Mizuho Securities used assumptions it believed to be reasonable and appropriate, and Mizuho
Securities did not verify the effect on either corporation’s future financial condition in the event that such assumptions prove
to be materially inaccurate.
With respect to the financial forecasts and other forward-looking information provided to Mizuho Securities, Mizuho Securities
assumed that such information was reasonably prepared by the executive directors of each corporation on a basis reflecting thebest currently available estimates and judgments of executive directors as to the expected future results of operations andfinancial conditions of the corporations. Mizuho Securities relied on the assumptions and financial projections and thebusiness forecast without independent verification of the feasibility of such assumptions and forecasts, and Mizuho Securities
expressed no view as to any analyses or forecasts referred to in its analysis or the assumptions on which they are based.
Mizuho Securities is not a legal, regulatory, or tax expert and therefore relied on the assessments made by advisors to thecorporations with respect to such issues. Mizuho Securities further assumed that the Merger will qualify as a tax-freereorganization for Japanese corporate tax purposes.
The financial analysis results Mizuho Securities have provided to SHI in response to the request of SHI are for the sole purposeof assisting the board of directors of SHI to determine the merger ratio, and such financial analysis results are not for the
purpose of expressing Mizuho Securities’ opinion as to fairness on the merger ratio.

Disclaimer: This translation is for informational purposes only. If there is any discrepancy between the Japanese version of the English translation, the Japanese version shall prevail.

15

Attachment 1: Proposed Amendments to the Articles of Incorporation(Proposed amendments are underlined.)
Current Articles of Incorporation
Article 5
Etc.

Proposed Amendments

Total Number of Issuable Investment Units, Article 5
Etc.

Total Number of Issuable Investment Units,

1. The total number of issuable investment units for theInvestment Corporation is ten million (10,000,000)
units.
2. - 3. (omitted)

1. The total number of issuable investment units for theInvestment Corporation is twenty million (20,000,000)
units.
2. - 3. (unchanged)

Article 9

Article 9

General Meeting of Unitholders

General Meeting of Unitholders

1. A general meeting of unitholders of the Investment
Corporation shall be held within the 23 wards ofTokyo, and shall be convened on July 1, 2018 andonwards without delay, and subsequently be convened
on July 1 and onwards every two years without delay.
In addition, the general meetings of unitholders may beheld from time to time when it is necessary.
2. (omitted)

1. A general meeting of unitholders of the Investment
Corporation shall be held within the 23 wards ofTokyo, and shall be convened on January 1, 2020 and
onwards without delay, and subsequently be convened
on January 1 every two years and onwards without
delay. In addition, the general meetings of unitholders
may be held from time to time when it is necessary.
2. (unchanged)

Article 12

Article 12

Record Date

Record Date

1. If the Investment Corporation convenes a general
meeting of unitholders pursuant to the first sentence ofParagraph 1 of Article 9, the Investment Corporation
shall deem the unitholders recorded or registered in the
final register of unitholders as of the end of April in2018 and subsequently as of the end of April in every
two years to be the unitholders who are entitled toexercise their rights at such general meeting ofunitholders. In addition to such case, if a general
meeting of unitholders is to be held on a day within
three months after the immediately preceding
Accounting Settlement Day (as defined in Article 45;
the same shall apply hereinafter), the Investment
Corporation shall deem the unitholders recorded orregistered in the final register of unitholders for such
Accounting Settlement Day to be the unitholders whoare entitled to exercise their rights at such general
meeting of unitholders.
2. (omitted)

1. If the Investment Corporation convenes a general
meeting of unitholders pursuant to the first sentence ofParagraph 1 of Article 9, the Investment Corporation
shall deem the unitholders recorded or registered in the
final register of unitholders as of the end of October in2019 and subsequently as of the end of October inevery two years to be the unitholders who are entitled
to exercise their rights at such general meeting ofunitholders. In addition to such case, if a general
meeting of unitholders is to be held on a day within
three months after the immediately preceding
Accounting Settlement Day (as defined in Article 45;
the same shall apply hereinafter), the Investment
Corporation shall deem the unitholders recorded orregistered in the final register of unitholders for such
Accounting Settlement Day to be the unitholders whoare entitled to exercise their rights at such general
meeting of unitholders.
2. (unchanged)

Article 31

Article 31

Basic Policy of Asset Management

The Investment Corporation shall manage its assets byinvesting continuously and principally in Real Estates andOther Assets (as defined in Paragraph 1 of Article 32).
The purpose of the Investment Corporation is to achieve
mutual growth and prosperity together with all
stakeholders such as unitholders and tenant companies,
aiming at providing high-quality social capital andmaximizing unitholder value through asset managementthat pursues stable earnings over the medium to long term

Basic Policy of Asset Management

The Investment Corporation shall manage its assets byinvesting continuously and principally in Real Estates andOther Assets (as defined in Paragraph 1 of Article 32).
The purpose of the Investment Corporation is to achieve
mutual growth and prosperity together with all
stakeholders such as unitholders and tenants, aiming at
providing high-quality social capital and maximizing
unitholder value through asset management that pursues
stable earnings over the medium to long term and steadyDisclaimer: This translation is for informational purposes only. If there is any discrepancy between the Japanese version of the English translation, the Japanese version shall prevail.

16

Current Articles of Incorporation

Proposed Amendments

and steady growth in the Managed Assets.

growth in the Managed Assets.

Article 32

Article 32

Categories, Purpose and Scope of Target
Assets of Asset Management

1. (omitted)
2. Besides the Real Estates and Other Assets, theInvestment Corporation may invest in the following
Specified Assets:(Add)(a) (omitted)(b) Equity interests in an agreement where one party
makes a financial contribution to another party to
manage the Real Estates and Other Assets or theassets listed in the preceding item, and the otherparty manages that contribution principally as aninvestment in those assets and distributes profits
from such management (“Equity Interests in Silent
Partnership on Real Estate”)(c) (omitted)(d) Real estate, real estate lease rights or surface
rights under the laws and regulations of a foreigncounty, or trust beneficiary rights in trust of realestate, real estate lease rights or surface rights or theassets listed in Items (a) to (c) established under thelaws and regulations of a foreign country(e) Preferred equity securities (as set forth in the Act
on Securitization of Assets (Law No. 105 of 1998, as
amended) (the “Asset Securitization Act”) (limited tothose the purpose of which is to invest the amountexceeding the half of the assets in the Real Estates
and Other Assets or the assets listed in Items (a) to(d) (the “Real Estate-Related Assets”))(f) (omitted)(g) (omitted)(h) Beneficiary certificates of a specified purpose
trust (as set forth in the Asset Securitization Act)(excluding the Real Estates and Other Assets, theassets falling under Item (a) or (c) and the assets
listed in Item (d) which are to be invested in the Real
Estates and Other Assets or the assets listed in Item(a) or (b)) (limited to those the purpose of which is toinvest the amount exceeding the half of the assets in
the Real Estate-Related Assets);(i) Assets of the same nature as those listed in Item(e) or (h) established under the laws and regulationsof a foreign country (limited to those the purpose of

Categories, Purpose and Scope of Target
Assets of Asset Management

1. (unchanged)
2. Besides the Real Estates and Other Assets, theInvestment Corporation may invest in the following
Specified Assets:(a)
Trust beneficiary rights in trust of real estate,real estate lease rights or surface rights (including
comprehensive trust beneficiary rights in trust of thesame together with money associated with the realestates, and also including trust beneficiary rights intrust of such trust beneficiary rights, but excluding
those falling under the Real Estates and Other
Assets);(b) (unchanged)(c) Equity interests in an agreement where one party
makes a financial contribution to another party to
manage the Real Estates and Other Assets or theassets listed in the Items (a) and (b), and the otherparty manages that contribution principally as aninvestment in those assets and distributes profits
from such management (“Equity Interests in Silent
Partnership on Real Estate”)(d) (unchanged)(e) Real estate, real estate lease rights or surface rights
under the laws and regulations of a foreign county, or
trust beneficiary rights in trust of only real estate, realestate lease rights or surface rights or the assets listed
in Items (a) to (d) established under the laws andregulations of a foreign country(f) Preferred equity securities (as set forth in the Act
on Securitization of Assets (Law No. 105 of 1998, as
amended) (the “Asset Securitization Act”) (limited tothose the purpose of which is to invest the amountexceeding the half of the assets in the Real Estates
and Other Assets or the assets listed in Items (a) to(e) (the “Real Estate-Related Assets”))(g) (unchanged)(h) (unchanged)(i) Beneficiary certificates of a specified purpose trust(as set forth in the Asset Securitization Act)(excluding the Real Estates and Other Assets, theassets falling under Item (a), (b) or (d) and the assets
listed in Item (e) which are to be invested in the Real
Estates and Other Assets or the assets listed in Item(a), (b) or (c)) (limited to those the purpose of whichis to invest the amount exceeding the half of theassets in the Real Estate-Related Assets)(j) Assets of the same nature as those listed in Item (f)or (i) established under the laws and regulations of aforeign country (limited to those the purpose ofDisclaimer: This translation is for informational purposes only. If there is any discrepancy between the Japanese version of the English translation, the Japanese version shall prevail.

17

Current Articles of Incorporation

Proposed Amendments

which is to invest the amount exceeding the half of
the assets in the Real Estate-Related Assets)(j) (omitted)(k) (omitted)(l) Monetary claims (excluding the assets listed in
Item (j) or (k))(m) (omitted)(n) (omitted)(o) (omitted)(p) (omitted)(q) (omitted)(r) (omitted)(s) Beneficiary certificates of a bond investment trust(which are beneficiary certificates of a securities
investment trust as set forth in the Investment Trusts
Act which are intended to be managed as aninvestment in the assets, etc. listed in Item (m), (n),(q), (u) or (v))(t) (omitted)(u) (omitted)(v) (omitted)(w) Trust beneficiary rights in monetary trusts, thepurpose of which is to manage the trust assets asinvestment in the assets as set forth in Items (j) to (v)(x) (omitted)(y) (omitted)(z) (omitted)
3. In addition to the Specified Assets as set forth inParagraphs 1 and 2 above, the Investment Corporation
may invest in the following assets:(a) - (c) (omitted)(d) Movables as set forth in the Civil Code (Act No.
89 of 1896, as amended) (the “Civil Code”), such as
facilities, equipment, and other items attached to theReal Estate-Related Assets (excluding those set forthin Item (z) of Paragraph 2 of Article 32)(e) - (n) (omitted)
4.
(omitted)

which is to invest the amount exceeding the half of
the assets in the Real Estate-Related Assets)(k) (unchanged)(l) (unchanged)(m) Monetary claims (excluding the assets listed in
Item (k) or (l))(n) (unchanged)(o) (unchanged)(p) (unchanged)(q) (unchanged)(r) (unchanged)(s) (unchanged)(t) Beneficiary certificates of a bond investment trust(which are beneficiary certificates of a securities
investment trust as set forth in the Investment Trusts
Act which are intended to be managed as aninvestment in the assets, etc. listed in Item (n), (o),(r), (v) or (w))(u) (unchanged)(v) (unchanged)(w) (unchanged)(x) Trust beneficiary rights in monetary trusts, thepurpose of which is to manage the trust assets asinvestment in the assets as set forth in Items (k) to(w)(y) (unchanged)(z) (unchanged)(aa) (unchanged)
3. In addition to the Specified Assets as set forth inParagraphs 1 and 2 above, the Investment Corporation
may invest in the following assets:(a)- (b) (unchanged)(d) Movables as set forth in the Civil Code (Act No. 89
of 1896, as amended) (the “Civil Code”), such as
facilities, equipment, and other items attached to theReal Estate-Related Assets (excluding those set forthin Item (aa) of Paragraph 2 of Article 32)(e) - (n) (unchanged)
4.
(unchanged)

Article 33

Article 33

Investment Policy

1. The Investment Corporation shall position nonresidential, business purpose real estates that are usedmainly as office buildings, retail properties or hotels,
etc. (the “Commercial Properties”) as its central
investment target.

Investment Policy

1.

2. The investment area of the Commercial Properties shallbe mainly in Japan but the Investment Corporation may
invest overseas.
(Add)

The Investment Corporation shall position realestates mainly for residential use (the “Residential
Properties”) and non-residential, business purpose
real estates that are used mainly as office buildings,
hotels and retail properties, etc. (the “Commercial
Properties”) as its primary investment target.
2. The investment area of the Residential Properties andthe Commercial Properties shall be mainly in Japan but
the Investment Corporation may invest overseas.
3. The main geographical areas for investment of the
Residential Properties in Japan shall be Greater Tokyo

Disclaimer: This translation is for informational purposes only. If there is any discrepancy between the Japanese version of the English translation, the Japanese version shall prevail.

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Current Articles of Incorporation

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3. The main geographical areas for investment of theCommercial Properties in Japan shall be the Three
Major Metropolitan Areas (which collectively refers toGreater Tokyo, Osaka Area and Nagoya Area)
centering on the 23 wards of Tokyo, Osaka City andNagoya City. The main geographical areas forinvestment of the overseas Commercial Properties are
Singapore, Australia and the U.S., as well as othercountries and regions where the population andeconomy are expected to grow.
(Add)

Article 34

Investment Restrictions

and major cities in Japan other than Greater Tokyo suchas the ordinance-designated cities, and commuting
areas around them..
4. The main geographical areas for investment of theCommercial Properties in Japan shall be the Three
Major Metropolitan Areas (which collectively refers toGreater Tokyo, Osaka Area and Nagoya Area)
centering on the 23 wards of Tokyo, Osaka City andNagoya City and major cities in Japan other than theThree Major Metropolitan Areas.

5. The main geographical areas for investment of theoverseas Residential Properties and Commercial
Properties are Singapore, Australia and the U.S., as wellas other countries and regions where the population andeconomy are expected to grow.
Article 34

Investment Restrictions

1. (omitted)
2. The Investment Corporation shall make investments in
the rights related to derivatives transactions as set forthin Item (y) of Paragraph 2 of Article 32 only for the
purpose of hedging exchange risk, price fluctuation
risk, interest rate risk and other risk factors arising from
the Managed Assets or liabilities of the Investment
Corporation.
3. (omitted)

1. (unchanged)
2. The Investment Corporation shall make investments in
the rights related to derivatives transactions as set forthin Item (z) of Paragraph 2 of Article 32 only for the
purpose of hedging exchange risk, price fluctuation
risk, interest rate risk and other risk factors arising from
the Managed Assets or liabilities of the Investment
Corporation.
3. (unchanged)

Article 39

Article 39

Method of and Standards for Asset
Evaluation

The method of and standards for asset evaluation of theInvestment Corporation shall be determined by the type ofthe Managed Asset, and shall be as follows as a general
rule.
(a) Real estate, real estate lease rights and surface
rights of the Real Estates and Other Assets as
set forth in Paragraph 1 of Article 32; andthose under the laws and regulations of aforeign country as set forth in Item (d) of
Paragraph 2 of Article 32:(omitted)(b) Trust beneficiary rights in trust of real estate,real estate lease rights and surface rights of theReal Estates and Other Assets as set forth inParagraph 1 of Article 32; and those only intrust of real estate, real estate lease rights andsurface rights established under the laws andregulations of a foreign country as set forth in
Item (d) of Paragraph 2 of Article 32:(omitted)

Method of and Standards for Asset
Evaluation

The method of and standards for asset evaluation of theInvestment Corporation shall be determined by the type ofthe Managed Asset, and shall be as follows as a general
rule.
(a) Real estate, real estate lease rights and surface
rights of the Real Estates and Other Assets as
set forth in Paragraph 1 of Article 32; andthose under the laws and regulations of aforeign country as set forth in Item (e) of
Paragraph 2 of Article 32:(unchanged)(b) Trust beneficiary rights in trust of real estate,real estate lease rights and surface rights as set
forth in Paragraph 1 and Item (a) of Paragraph
2 of Article 32; and trust beneficiary rights intrust of real estate, real estate lease rights andsurface rights established under the laws andregulations of a foreign country as set forth in
Item (e) of Paragraph 2 of Article 32:(unchanged)

Disclaimer: This translation is for informational purposes only. If there is any discrepancy between the Japanese version of the English translation, the Japanese version shall prevail.

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Current Articles of Incorporation

Proposed Amendments(c) Trust beneficiary rights in monetary trusts, thepurpose of which is to manage the trust assets as aninvestment in real estate, real estate lease rights or
surface rights as set forth in Paragraph 2 of Article
32, Item (a); and those established under the laws
and regulations of a foreign country as set forth in
Item (d) of Paragraph 2 of Article 32:(c) Trust beneficiary rights in monetary trusts, thepurpose of which is to manage the trust assets as aninvestment in real estate, real estate lease rights or
surface rights as set forth in Item (b) of Paragraph 2
of Article 32; and trust beneficiary rights in monetarytrusts established under the laws and regulations of aforeign country as set forth in Item (e) of Paragraph 2
of Article 32, the purpose of which is to manage thetrust assets as an investment in real estate, real estatelease rights or surface rights as set forth in Item (b)of Paragraph 2 of Article 32:(unchanged)(d) Equity Interests in Silent Partnership on Real Estate
as set forth in Item (c) of Paragraph 2 of Article 32;
and those established under the laws and regulationsof a foreign country as set forth in Item (e) of
Paragraph 2 of Article 32:(unchanged)(e) Trust beneficiary rights in monetary trusts, thepurpose of which is to manage the trust assets
principally as an investment in Equity Interests in
Silent Partnership on Real Estate as set forth in Item(d) of Paragraph 2 of Article 32; and trust beneficiaryrights in monetary trusts established under the laws
and regulations of a foreign country as set forth in
Item (e) of Paragraph 2 of Article 32, the purpose ofwhich is to manage the trust assets as an investment
in Equity Interests in Silent Partnership on Real
Estate as set forth in Item (d) of Paragraph 2 ofArticle 32:(unchanged)(f) (unchanged)(g) Monetary claims as set forth in Item (m) of
Paragraph 2 of Article 32:(unchanged)(h) Rights related to derivatives transactions as set forthin Item (z) of Paragraph 2 of Article 32:(unchanged)(i) (unchanged)(omitted)(d) Equity Interests in Silent Partnership on Real Estate
as set forth in Item (b) of Paragraph 2 of Article 32;
and those established under the laws and regulationsof a foreign country as set forth in Item (d) of
Paragraph 2 of Article 32:(omitted)(e) Trust beneficiary rights in monetary trusts, thepurpose of which is to manage the trust assets
principally as an investment in Equity Interests in
Silent Partnership on Real Estate; and thoseestablished under the laws and regulations of aforeign country as set forth in Item (d) of Paragraph
2 of Article 32:(omitted)(f) (omitted)(g) Monetary claims as set forth in Item (l) of
Paragraph 2 of Article 32:(omitted)(h) Rights related to derivatives transactions as set forthin Item (y) of Paragraph 2 of Article 32:(omitted)(i) (omitted)
Article 40

Value in Securities Registration Statements, Article 40
Value in Securities Registration Statements,
Securities Reports and Asset Management
Securities Reports and Asset Management
Reports
ReportsIf making evaluations in a way that differs from theIf making evaluations in a way that differs from themethods set forth in Article 39 for the purposes ofmethods set forth in Article 39 for the purposes ofrecording a value in a securities registration statement,
recording a value in a securities registration statement,
securities report and asset management report, etc.,
securities report and asset management report, etc.,
evaluations shall be made in the following way.
evaluations shall be made in the following way.
(a) Real estate, real estate lease rights and surface rights (a) Real estate, real estate lease rights and surface rights ofof the Real Estates and Other Assets as set forth in
the Real Estates and Other Assets as set forth inParagraph 1 of Article 32; those under the laws andParagraph 1 of Article 32; those under the laws andregulations of a foreign country as set forth in Item
regulations of a foreign country as set forth in Item (e)(d) of Paragraph 2 of Article 32; and those held byof Paragraph 2 of Article 32; and those held by theDisclaimer: This translation is for informational purposes only. If there is any discrepancy between the Japanese version of the English translation, the Japanese version shall prevail.

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Current Articles of Incorporation

Proposed Amendments

the Corporation Holding Overseas Real Estate as set
forth in Paragraph 1 of Article 32:(omitted)(b) Trust beneficiary rights in trust of real estate, realestate lease rights and surface rights of the Real
Estates and Other Assets as set forth in Paragraph 1
of Article 32; and trust beneficiary rights inmonetary trusts, the purpose of which is to manage
the trust assets principally as an investment in realestate, real estate lease rights or surface rights as set
forth in Item (a) of Paragraph 2 of Article 32; andtrust beneficiary rights only in trust of real estate,real estate lease rights or surface rights establishedunder the laws and regulations of a foreign country
as set forth in Item (d) of Paragraph 2 of Article 32;
and trust beneficiary rights in monetary trusts, thepurpose of which is to manage the trust assets
principally as an investment in real estate, real estatelease rights or surface rights as set forth in Item (a)of Paragraph 2 of Article 32:(omitted)(c) Equity Interests in Silent Partnership on Real
Estate as set forth in Item (b) of Paragraph 2 ofArticle 32; and trust beneficiary rights in monetarytrusts, the purpose of which is to manage the trust
assets principally as an investment in Equity
Interests in Silent Partnership on Real Estate as set
forth in Item (c) of Paragraph 2 of Article 32; andEquity Interests in Silent Partnership on Real Estateestablished under the laws and regulations of aforeign country as set forth in Item (d) of Paragraph
2 of Article 32; and trust beneficiary rights inmonetary trusts, the purpose of which is to manage
the trust assets as an investment in the Equity
Interest in Silent Partnership on Real Estate as set
forth in Item (c) of Paragraph 2 of Article 32:(omitted)

Corporation Holding Overseas Real Estate as set forthin Paragraph 1 of Article 32:(unchanged)(b) Trust beneficiary rights in trust of real estate, realestate lease rights and surface rights as set forth inParagraph 1 and Item (a) of Paragraph 2 of Article
32; and trust beneficiary rights in monetary trusts,
the purpose of which is to manage the trust assets as
an investment in real estate, real estate lease rights or
surface rights as set forth in Item (b) of Paragraph 2
of Article 32; and trust beneficiary rights in trust ofreal estate, real estate lease rights or surface rights
established under the laws and regulations of aforeign country as set forth in Item (e) of Paragraph 2
of Article 32; and trust beneficiary rights in monetarytrusts, the purpose of which is to manage the trust
assets as an investment in real estate, real estate leaserights or surface rights as set forth in Item (b) of
Paragraph 2 of Article 32:

Article 52
Auditor

Article 52
AuditorStandards for Fee Payment to Accounting

The Investment Corporation shall pay fees to theaccounting auditor in an amount determined by theboard of directors that is no more than 20 million yen
for each Accounting Settlement Day subject to audit,
by the last day of February and August each year forthe period of six months up to such day, throughbank transfer to an account designated by theaccounting auditor.
(Add)(unchanged)(c) Trust beneficiary rights in monetary trusts, thepurpose of which is to manage the trust assets as aninvestment in Equity Interests in Silent Partnership
on Real Estate as set forth in Items (c) and (d) of
Paragraph 2 of Article 32; and trust beneficiary rights
in monetary trusts established under the laws andregulations of a foreign country as set forth in Item(e) of Paragraph 2 of Article 32, the purpose ofwhich is to manage the trust assets as an investment
in Equity Interests in Silent Partnership on Real
Estate as set forth in Items (c) and (d) of Paragraph 2
of Article 32:(unchanged)
Standards for Fee Payment to Accounting

The Investment Corporation shall pay fees to theaccounting auditor in an amount determined by theboard of directors that is no more than 25 million yen
for each Accounting Settlement Day subject to audit,
by the last day of February and August each year forthe period of six months up to such day, throughbank transfer to an account designated by theaccounting auditor.
Article 55

Effectuation of Amendment

The amendments in Paragraph 1 of Article 5 andArticles 31, 33 and 52 in these Articles of Incorporation
Disclaimer: This translation is for informational purposes only. If there is any discrepancy between the Japanese version of the English translation, the Japanese version shall prevail.

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Current Articles of Incorporation

Proposed Amendments
shall take effect on the effective date of the absorptiontype merger between the Investment Corporation as thesurviving corporation and Sekisui House Residential
Investment Corporation as the absorbed corporation
under the merger agreement dated January 24, 2018
between the Investment Corporation and Sekisui House
Residential Investment Corporation (the “Merger”),
subject to effectuation of the Merger. This Article
shall be deleted after the amendments in these Articles
of Incorporation takes effect pursuant to this Article.

Attachment
Management Fee to Asset Management Company

Attachment
Management Fee to Asset Management Company

1. Management Fee I (Ongoing Operational and
1. Management Fee I (Ongoing Operational andManagement Fee I)
Management Fee I)
Management Fee I shall be calculated by multiplying (i)Management Fee I shall be calculated by multiplying (i)the total net assets of the Investment Corporation on thethe total net assets (less the amount equivalent tobalance sheet (limited to those approved by the board of
unamortized positive goodwill) of the Investment
directors pursuant to Article 131, Paragraph 2 of the
Corporation on the balance sheet (limited to those
Investment Trusts Act) for the latest Accounting Settlement approved by the board of directors pursuant to Article 131,
Day by (ii) a rate separately agreed by the Investment
Paragraph 2 of the Investment Trusts Act) for the latest
Corporation and the Asset Management Company (up to
Accounting Settlement Day by (ii) a rate separately agreed
0.5% per annum), on a per diem basis. In this calculation by the Investment Corporation and the Asset Management
method, the actual number of days in the relevant business Company (up to 0.5% per annum), on a per diem basis.
term shall be assumed to be 365 days in a year and any
In this calculation method, the actual number of days in thefraction less than one yen shall be rounded down.
relevant business term shall be assumed to be 365 days in ayear and any fraction less than one yen shall be rounded
down.

2. Management Fee II (Ongoing Operational and
2. Management Fee II (Ongoing Operational andManagement Fee II)Management Fee II)Management Fee II for each business term shall be (i) the Management Fee II for each business term shall be (i) the
distributable amount before deduction of Management Fee distributable amount before deduction of Management Fee
II for the relevant business term of the Investment
II for the relevant business term of the Investment
Corporation (i.e., the amount of the net profit for the period Corporation (i.e., the amount of the net profit for the period
before tax on the profit and loss statement (limited to those before tax (after adding the amount of amortization of
approved by the board of directors pursuant to Article 131, goodwill and deducting the gains on negative goodwill
Paragraph 2 of the Investment Trusts Act; the same shallincurred) on the profit and loss statement (limited to those
apply hereinafter) plus the amount of Management Fee II approved by the board of directors pursuant to Article 131,
for the business term, after a loss carried forward is
Paragraph 2 of the Investment Trusts Act; the same shallcompensated, if any) divided by (ii) the total number ofapply hereinafter) plus the amount of Management Fee II
outstanding units as of the Accounting Settlement Day of for the business term (including the amount of the nonthe relevant business term, and multiplied by (iii) (a) the
deductible consumption tax on Management Fee II), after aoperating profits before deduction of Management Fee II loss carried forward is compensated, if any) divided by (ii)(i.e., the amount of the operating profits on the profit andthe total number of issued and outstanding units as of theloss statement plus the amount of Management Fee II for Accounting Settlement Day of the relevant business term
the business term) and (b) a rate separately agreed by the(the “Distributable Amount per Unit”), and multiplied by
Investment Corporation and the Asset Management(iii) (a) the operating profits before deduction ofCompany (up to 0.004%). In this calculation method,
Management Fee II (i.e., the amount of the operating
any fraction less than one yen shall be rounded down, and profits on the profit and loss statement plus the amount ofdivisions shall be done at the end of the calculation, and the amortization of goodwill and Management Fee II for the
lower limit shall be zero yen.
business term (including the amount of the non-deductible
Disclaimer: This translation is for informational purposes only. If there is any discrepancy between the Japanese version of the English translation, the Japanese version shall prevail.

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Current Articles of Incorporation

Proposed Amendments
consumption tax on Management Fee II)) and (b) a rate
separately agreed by the Investment Corporation and theAsset Management Company (up to 0.004%). In thiscalculation method, any fraction less than one yen shall be
rounded down, and divisions shall be done at the end of thecalculation, and the lower limit shall be zero yen.

3. Management Fee III (Acquisition Fee)Management Fee III shall be calculated by multiplying (i)the trading value for the acquisition of the Real EstateRelated Assets (excluding the consumption tax, othersimilar taxes and expenses and the like) by (ii) a rate
separately agreed between the Investment Corporation and
the Asset Management Company (up to 0.5%) (in the caseof acquisition from any interested party as set forth in the“Rules for Transactions with Interested Parties” of theAsset Management Company, such rate shall be up to
0.25%), any fraction less than one yen being rounded
down.

3. Management Fee III (Acquisition Fee)Management Fee III shall be calculated by multiplying (i)the trading value for the acquisition of the Real EstateRelated Assets (excluding the consumption tax, othersimilar taxes and expenses and the like) by (ii) a rate
separately agreed between the Investment Corporation and
the Asset Management Company (up to 0.5%) (in the caseof acquisition from any interested party as set forth in the“Rules for Transactions with Interested Parties” of theAsset Management Company, there shall be no AcquisitionFee), any fraction less than one yen being rounded down.

4. Management Fee IV (Disposition Fee)Management Fee IV shall be calculated by multiplying (a)the trading value for the sale of the Real Estate-Related
Assets (excluding the consumption tax, other similar taxes
and expenses and the like) by (b) a rate separately agreed
between the Investment Corporation and the AssetManagement Company (up to 0.5%) (in the case of sale toany interested party as set forth in “Rules for Transactions
with Interested Parties” of the Asset Management
Company, there shall be no disposition fee), any fraction
less than one yen being rounded down.

4. Management Fee IV (Disposition Fee)Management Fee IV shall be calculated by multiplying (i)the trading value for the disposition of the Real EstateRelated Assets (excluding the consumption tax, othersimilar taxes and expenses and the like) by (ii) a rate
separately agreed between the Investment Corporation and
the Asset Management Company (up to 0.5%) (in the caseof disposition to any interested party as set forth in “Rules
for Transactions with Interested Parties” of the AssetManagement Company, there shall be no disposition fee),any fraction less than one yen being rounded down.

(Add)

5. Management Fee V (Merger Fee)
In a consolidation-type merger or absorption-type merger(collectively, a “merger”) between the Investment
Corporation and another investment corporation, if suchmerger takes effect after the Asset Management Company
investigates and assesses the assets and other properties
held by such investment corporation and conducts anyother business associated with the merger, Management
Fee V shall be calculated by multiplying (i) the thenassessed value of the Real Estate-Related Assets held bysuch investment corporation when such merger takes effectby (ii) a rate separately agreed between the Investment
Corporation and the Asset Management Company (up to0.8%).

5. Timing of Payment of Management Fee
6. Timing of Payment of Management Fee
Management Fee I and Management Fee II shall be paid Management Fee I and Management Fee II shall be paid
within three months from the Accounting Settlement Day within three months from the Accounting Settlement Day ofof the relevant business term of the Investment
the relevant business term of the Investment Corporation.
Corporation.
Management Fee III shall be paid on or before the last day Management Fee III shall be paid on or before the last dayof the following month of the month in which theof the following month of the month in which theDisclaimer: This translation is for informational purposes only. If there is any discrepancy between the Japanese version of the English translation, the Japanese version shall prevail.

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Current Articles of Incorporation

Proposed Amendments

Investment Corporation has acquired the relevant asset.
Management Fee IV shall be paid on or before the last dayof the following month of the month in which theInvestment Corporation has sold the relevant asset.

Investment Corporation has acquired the relevant asset.
Management Fee IV shall be paid on or before the last dayof the following month of the month in which theInvestment Corporation has dispositioned the relevant asset.
Management Fee V shall be paid within two months after
the merger takes effect.

(Add)
(Add)

7. Adjustment Provision(1) If the Investment Corporation acquires its own
investment units and holds any undisposed or unretired
treasury investment units as of the Accounting Settlement
Day for the business term in which the Investment
Corporation acquired such investment units, the number of
the treasury investment units of the Investment
Corporation shall be excluded from the total number ofissued and outstanding investment units as of such
Accounting Settlement Day for the purpose of calculationof the Distributable Amount per Unit for the Management
Fee II.
(2) In the case of a split of the investment units of theInvestment Corporation that increases the total number ofissued and outstanding investment units, Management Fee
II for a business term ending on or after the day on whichsuch split of the investment units takes effect shall becalculated by making an adjustment in which theDistributable Amount per Unit is multiplied by the Split
Ratio (as defined below) related to the total number ofissued and outstanding investment units.
In this paragraph (2),“Split Ratio” shall be calculated, in the case of any split of
the investment units of the Investment Corporation that
increases the total number of issued and outstanding
investment units, by dividing (i) the total number of issued
and outstanding investment units immediately after such
split of the investment units takes effect by (ii) the total
number of issued and outstanding investment units
immediately before such split of the investment units takes
effect.

(Add)

(Add)

(3) In the case of a Rights Offering (as defined below)that increases the total number of issued and outstanding
investment units, Management Fee II for a business term
ending on or after the issue date of such Rights Offering
shall be calculated by making an adjustment in which theDistributable Amount per Unit is multiplied by the Ratio of
Allotment without Contribution (as defined below).
In this paragraph (3),“Rights Offering” means issuance of new investment units
as a result of the exercise of investment unit acquisitionrights related to an allotment without contribution tounitholders.
“Ratio of Allotment without Contribution” means a ratio to
be calculated in the following formula in the case of a
Rights Offering.

Disclaimer: This translation is for informational purposes only. If there is any discrepancy between the Japanese version of the English translation, the Japanese version shall prevail.

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Current Articles of Incorporation

Proposed Amendments＜Calculation Formula＞
Ratio of Allotment without Contribution ＝A/B
A: Number of the total number of issued andoutstanding investment units immediately after such Rights
Offering less the Number of Units Deemed to Be Issued atMarket Price (as defined below)
B: Total number of issued and outstanding
investment units immediately before such Rights Offering“Number of Units Deemed to Be Issued at Market
Price” shall be the Number of Incremental Units (asdefined below) (any fraction less than one (1) unit shall be
rounded down) multiplied by the ratio obtained by dividing(i) the amount to be paid per unit at the time of exercising
investment unit acquisition rights allotted without
contribution in such Rights Offering by (ii) a Market Priceper Unit (as defined below), or by another ratio determinedby the board of directors, in the case of Rights Offering.
“Market Price per Unit” means the closing price of an
ordinary market transaction of the investment units of theInvestment Corporation on the Tokyo Stock Exchange,
Inc. on the last day of the exercise period of the investment
unit acquisition rights allotted without contribution in such
Rights Offering (or, if there is no closing price on that day,the closing price of the immediately preceding day), in thecase of Rights Offering.
“Number of Incremental Units” means the number ofunits increased as a result of such Rights Offering in thecase of Rights Offering.

Disclaimer: This translation is for informational purposes only. If there is any discrepancy between the Japanese version of the English translation, the Japanese version shall prevail.

25

Attachment 2: Summary of the Changes to Investment Policy

Summary of the Changes to Investment Policy
Based on the Investment Corporation Merger, in order to transform itself as New SHR into a “diversified REIT” witha high degree of stability having as its core assets high-quality residential and office buildings, SHR plans to make partialchanges to its investment policy and investment targets. A summary of the specific changes to investment policy andinvestment targets is given below.

Priority Investment in Prime Properties with “Strategic Location” and “High Quality” as Pillars
New SHR will set, as primary investment targets, residential properties (meaning real estate whose principal use isresidential (including furnished residences with appliances, which do not fall under school dormitories, company housing,and service apartments); the same shall apply hereinafter) and commercial properties (meaning real estate whose
principal use is for office buildings, hotels (including service apartments) and retail properties, etc. (including serviced
housing for the elderly, fee-based homes for the aged, and daycare centers) and other non-residential business purposes;
the same shall apply hereinafter), and within these categories, it particularly believes that residential properties andcommercial properties located in “strategic locations” (meaning locations suited as “bases for sustainable living” forresidents or as “sustainable bases of business operations” for tenants; the same shall apply hereinafter) of high quality(meaning having high basic efficiency as residences in terms of comfort and safety, etc. and having the functionality, etc.
sought by tenants; the same shall apply hereinafter) are the investment targets promising medium- and long-term stable
income and designates those locations as Prime Properties intended to be its priority investment targets.
When selecting Prime Properties for investment, as the criteria for determining whether the property is situated in a
strategic location and is moreover of high quality as both a residential property and commercial property, New SHR willplace emphasis on those qualities of real estate sought by residents as “bases for sustainable living” and by companies as“sustainable bases of business operations,” which are the sources of cash flow. New SHR considers that the six elements
which constitute those “qualities of real estate sought by residents as ‘bases for sustainable living’ and by companies as‘sustainable bases of business operations’” are (a) economic zones, (b) convenience, (c) functionality/livability,(d) environmental consideration, (e) Business Continuity Planning (BCP)/safety, and (f) brand. Accordingly, New SHR’s
policy will be to make its investment decisions through a comprehensive assessment of whether a particular property has
the attributes of strategic location and high quality, that is to say, qualifies as a Prime Property, by focusing on an analysisof these six factors as the key points in an investment decision. New SHR will seek to secure stable income byprioritizing investment in residential properties and commercial properties that qualify as Prime Properties.
The primary target investment regions in Japan for residential properties will be Greater Tokyo (meaning Tokyo,
Kanagawa Prefecture, Chiba Prefecture, and Saitama Prefecture; the same shall apply hereinafter), government
designated cities, and other major cities throughout Japan outside of Greater Tokyo as well as their surrounding
commutable areas. The primary target investment regions in Japan for commercial properties will be the Three Major
Metropolitan Areas, centered on the three largest cities, and other major cities throughout Japan outside of the Three
Major Metropolitan Areas. The three largest cities refers to the 23 wards of Tokyo, Osaka City, and Nagoya City; theThree Major Metropolitan Areas refers to Greater Tokyo, the Osaka Area (meaning Osaka Prefecture, Kyoto Prefecture,
Hyogo Prefecture, and Nara Prefecture; the same shall apply hereinafter), and the Nagoya Area (meaning Aichi
Prefecture; the same shall apply hereinafter).
Disclaimer: This translation is for informational purposes only. If there is any discrepancy between the Japanese version of the English translation, the Japanese version shall prevail.

26

Portfolio Development Policy
1.

Investment Ratio by Asset Category
New SHR will build a portfolio positioning real estate whose primary uses are as residences and office buildings as itscore assets. Investment ratios by asset category and medium- to long-term investment ratio targets are shown in the tablebelow.
Investment Ratio by Asset Category
Primary Target AssetType

Investment Ratio(acquisition pricebasis)

Medium- to Long-TermTarget Investment Ratio(Note)

Residential properties

Residence

30 – 55%

approximately 45%

Office building

30 – 55%

approximately 45%

Hotel

0 – 30%approximately 10%

Retail property, etc.

0 – 10%approximately 0 - 10%

Commercial properties

Note: Target investment ratios for the New SHR portfolio are stated as medium- to long-term targets. New SHR does not makeany guarantees or promises that those targets will be achieved, and the actual investment ratios may differ substantiallyfrom the targets.

2.

Ratio by Geographical Area
New SHR will aim to invest primarily in Japan, maintaining a ratio (on an acquisition price basis) of 80% or more of

its assets in Japan (and an overseas investment ratio of up to 20%). In its domestic investing, New SHR considers
Greater Tokyo its priority investment area for residential properties and the Three Major Metropolitan Areas its priority
investment areas for commercial properties, etc.. In regard to residential properties within Greater Tokyo, its policy will
be to particularly focus investment on the 23 wards of Tokyo, where it foresees ample demand and a supply of superior
properties. For commercial properties in the Three Major Metropolitan Areas, which are the priority investment areas,
New SHR’s policy will be to especially focus investment on the three largest cities, where it believes it can achieve stable
investment results against a backdrop of robust demand by tenants for bases of business operations. A detailed
breakdown of investment ratios by geographical area is shown in the table below.
Investment Ratio for Residential Properties by Geographical Area
Asset Category

Area

Investment Ratio(acquisition price basis)(1) Tokyo
Greater Tokyo(2) Kanagawa Prefecture≪priority investment area≫(3) Chiba Prefecture

At least 70%(4) Saitama Prefecture
Major cities throughout Japan(1) Designated cities, etc. (Note 1)(2) Commutable areas of (1) above (Note 2)Less than 30%

Note 1: “Designated cities” means cities outside of Greater Tokyo which fall under government designated cities, heartland
cities, cities which were specially designated cities at the time of the abolishment of the former Specially Designated
Cities System or seats of prefectural governments.
Note 2: “Commutable area” means the region within 30 minutes’ commuting distance from a particular city.

Disclaimer: This translation is for informational purposes only. If there is any discrepancy between the Japanese version of the English translation, the Japanese version shall prevail.

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Investment Ratio for Commercial Properties by Geographical Area
Asset Category

Area

Three Major Metropolitan(1) Greater Tokyo

Areas(2) Osaka Area

≪priority investment area≫(3) Nagoya Area

Other

Investment Ratio(acquisition price basis)
At least 80%

All of Japan outside of the Three Major
Metropolitan Areas

Less than 20%

Disclaimer: This translation is for informational purposes only. If there is any discrepancy between the Japanese version of the English translation, the Japanese version shall prevail.

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