March 2, 2018
Real Estate Investment Trust Securities Issuer
1-31 Minami Aoyama 3-chome, Minato-ku, Tokyo
Sekisui House Residential Investment Corporation
Representative:
Osamu Minami, Executive Director(Securities Code: 8973)
Asset Management Company
1-31 Minami Aoyama 3-chome, Minato-ku, Tokyo
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 Convocation of General Meeting of Unitholders Regarding the Approval of a Merger Agreement andPartial Amendments of the Articles of Incorporation, and like
Sekisui House Residential Investment Corporation (“SHI”) hereby announces that it has resolved at the Board of
Directors’ meeting held today to reach decisions concerning the approval of a merger agreement with Sekisui House Reit,
Inc. (“SHR”), cancellation of the asset management entrustment agreement with Sekisui House Asset Management, Ltd.
(“SHAM”), and partial amendments to its Articles of Incorporation at its Ninth General Meeting of Unitholders (“General
Meeting of Unitholders”) held on March 27, 2018.
The resolutions will take effect upon approval by the General Meeting of Unitholders. Details of the resolutions areprovided as follows.
1.

Approval of the Merger Agreement with Sekisui House Reit, Inc.

As stated in the “Notice Concerning Conclusion of a Merger Agreement between Sekisui House Reit, Inc. and Sekisui
House Residential Investment Corporation,” dated January 24, 2018, SHI resolved to execute an absorption-type merger,
with May 1, 2018 as the effective date, whereby SHR will be the surviving corporation and SHI (collectively with SHR,
the “Two Investment Corporations”) will be the dissolving corporation in the merger (the “Investment Corporation
Merger”), and executed a merger agreement (the “Investment Corporation Merger Agreement”).
All unitholders are requested to grant their approval to the Investment Corporation Merger Agreement.
(For the outline of the proposal to approve the Investment Corporation Merger Agreement, please see the attached“Notice Concerning the Ninth General Meeting of Unitholders”)
2.

Cancellation of the Asset Management Entrustment Agreement with Sekisui House Asset Management, Ltd.

Following the Investment Corporation Merger, SHI plans to cancel its asset management entrustment agreement with
SHAM (the “Asset Management Entrustment Agreement”), subject to the Investment Corporation Merger becoming
effective, on the effective date of the Investment Corporation Merger, upon obtaining approval from a general meeting ofunitholders.
(For the outline of the proposal to cancel the Asset Management Entrustment Agreement with SHAM, please see theattached “Notice Concerning the Ninth General Meeting of Unitholders”)
Sekisui House Investment Advisors, Ltd. (“SHIA”), the asset management company for SHR, is expected to continue
managing the assets of the surviving corporation following the Investment Corporation Merger.
Furthermore, 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”
which the Two Investment Corporations released on January 24, 2018, SHIA and SHAM have executed anabsorption-type merger (the “Asset Management Company Merger”) with May 1, 2018 as the effective date, subject tothe Investment Corporation Merger taking effect, whereby SHIA will be the surviving company and SHAM will be thedissolving company in the Asset Management Company Merger, in order to provide for the effective management of theassets held by the surviving corporation(Note).
(Note) It is planned that, simultaneously with the effectiveness of the Asset Management Company Merger, SHIA willchange its corporate name to “Sekisui House Asset Management, Ltd.”

1

3.

Partial Amendments to the Articles of Incorporation
Reasons for partial amendments and overview of the amendments are as follows:(1) To amend the final term of SHI’s fiscal period from the current last days of March and September to the lastdays of April and October in order to change the fiscal period to end on the day before the Investment
Corporation Merger takes effect, and to amend SHI’s 25 th fiscal period to a seven month period from October 1,
2017 to April 30, 2018 (Amendments to Article 33 of the current Articles of Incorporation and Article 41 of the
proposed amendment to the current Articles of Incorporation).
(2) Following the changes to the fiscal period in (1) above, to amend the base date for the General Meeting ofUnitholders as well as the recording date of the unitholder roster (Amendments to Article 9 and Article 15 of thecurrent Articles of Incorporation).

(For the outline of the proposal of the partial amendments to the Articles of Incorporation, please see the attached “NoticeConcerning the Ninth General Meeting of Unitholders”)
4.

Schedule
March 2, 2018
March 12, 2018
March 27, 2018

The Board of Directors’ approval for resolutions to be submitted to the General Meeting ofUnitholders
Delivery of the Notice Concerning the Ninth General Meeting of Unitholders (scheduled)
Holding of the General Meeting of Unitholders (scheduled)(Note) Following the approval of the proposals at the General Meeting of Unitholders, SHI will submit all documents as
required by laws and regulations.

* Address of the website of the investment corporation:

http://www.shi-reit.co.jp/eng/<Attachment>
Notice Concerning the Ninth General Meeting of Unitholders

2Translation of Japanese Original
To Our Unitholders
March 12, 2018
1-31 Minami Aoyama 3-chome, Minato-ku, Tokyo
Sekisui House Residential Investment Corporation
Osamu Minami, Executive Director
Notice Concerning the Ninth General Meeting of Unitholders
You are cordially invited to attend the Ninth General Meeting of Unitholders of Sekisui
House Residential Investment Corporation (“SHI”). The Meeting will be held as described
below.
If you are unable to attend the meeting, you can exercise your voting rights in writing.
Please review the “Reference Material for the General Meeting of Unitholders” mentioned
below, vote on the proposals in the enclosed Voting Rights Exercise Form, and return it by
no later than Monday, March 26, 2018, 6:00 pm.
In addition, SHI established the provision of “deemed approval” in Item 1 and 2 ofArticle 14 of the current Articles of Incorporation pursuant to Article 93.1 of the Act on
Investment Trusts and Investment Corporations. Accordingly, if you are unable to attend theMeeting and are unable to vote using the Voting Rights Exercise Form, please be aware thatyou will be deemed as having attended and approved each agenda item.
(Excerpt from SHI’s Current Articles of Incorporation)
Article 14 (Deemed Approval)
1. Unitholders who do not attend a general unitholders’ meeting and do not exercise voting
rights shall be deemed to have voted in favor of the proposals for resolution submitted to
the general unitholders’ meeting (excluding, in cases where multiple proposals are
submitted, any proposals whose purposes conflict with each other).
2. The number of voting rights of unitholders deemed to have voted in favor of the proposals
for resolution pursuant to the preceding paragraph will be included in the number ofvoting rights of unitholders present.
Respectfully yours.

1. Date and Time
Tuesday, March 27, 2018, 10:00 a.m.
2. Place
6-1 Otemachi 2-chome, Chiyoda-ku, Tokyo
Asahi Seimei Otemachi building 27F
Otemachi Sunsky Room, Conference Room A
3. Agenda of the Meeting
Resolution Agenda:
Agenda No. 1: Approval of a Merger Agreement with Sekisui House Reit, Inc............ P.3
Agenda No. 2: Cancellation of the Asset Management Entrustment Agreement with
Sekisui House Asset Management, Ltd................................................ P.13
Agenda No. 3: Partial amendments of the Articles of Incorporation ........................... P.13
(Requests)• For those attending the meeting, please present the enclosed Voting Rights Exercise
Form at the reception desk.
• For those voting by proxy, a unitholder can vote by having another individual
unitholder who holds voting rights attend the General Meeting of Unitholders and act asproxy. In that case, please submit a Power of Representation Form and a Voting Rights
Exercise Form at the reception desk.
• Following the General Meeting of Unitholders, Sekisui House Asset Management,
Ltd., SHI’s asset management company, will hold an “Asset Management Briefing”
at the same venue. Those attending the meeting are cordially invited to the briefing
as well.
(Information)• Method of Revising the Reference Materials of the General Meeting of Unitholders
When it is necessary to revise agenda items contained in the Reference Materials of theGeneral Meeting of Unitholders, we will post the revisions on SHI’s website(http://www.shi-reit.co.jp/eng/).

Reference Material for the General Meeting of Unitholders
Agenda and Reference Items
Agenda No. 1: Approval of a Merger Agreement with Sekisui House Reit, Inc.
1.

Reason for absorption-type merger
Sekisui House Residential Investment Corporation (“SHI”) resolved to execute anabsorption-type merger, with May 1, 2018 as the effective date (“Effective Date”),
whereby SHI will be the dissolving corporation and Sekisui House Reit, Inc. (“SHR”,
and collectively with SHI, the “Two Investment Corporations”) will be the surviving
corporation in the merger (the “Investment Corporation Merger”), and executed amerger agreement (the “Investment Corporation Merger Agreement”) dated January 24,
2018.
The asset management companies of the Two Investment Corporations (the asset
management company of SHI is Sekisui House Asset Management, Ltd. (“SHAM”),
and the asset management company of SHR is Sekisui House Investment Advisors, Ltd.
(“SHIA”), and collectively with SHAM, the “Two Asset Management Companies”) areeach wholly-owned subsidiaries of Sekisui House, Ltd. (“Sekisui House”), andreceiving support from the Sekisui House Group have each built track records in asset
management.
The Two Investment Corporations have worked to expand their assets and securestable returns by utilizing their respective strengths with the aim of long-term
enhancement of unitholder value. However, they reached the conclusion that expanding
the scale of their assets and increasing their market presence through a merger of theTwo Investment Corporations, and improving the opportunity 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 their best strategy for maximizing unitholder value.
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 its core assets, (2) Increase of varied
growth opportunities by utilizing the integrated corporate strength of the Sekisui HouseGroup, and (3) Greater market presence due to an increase in the scale of assets.
We believe that following the Investment Corporation Merger, the benefits from themerger will become apparent in the greater stability of the investment unit price owing
to an increase in distributions made possible through external and internal growth andimproved liquidity of the investment unit.
SHR will be the surviving corporation under an absorption-type merger and SHI will
be dissolved in the Investment Corporation Merger.
All unitholders are requested to grant their approval to the Investment Corporation
Merger Agreement.

2.

Overview of the Investment Corporation Merger Agreement
As set forth in Attachment 1.



3.

Summary of matters set forth in Article 193, Paragraph 1, Item (1) through Item (3) of
the Ordinance for the Enforcement of the Act on Investment Trusts and Investment
Corporations.
(1) Appropriateness of the merger consideration(i) The total amount, method of calculation, and appropriateness of the allocationof the Merger Consideration
I.
Matters regarding allocation and merger ratioa.
Allocation of new investment units
For each SHI investment unit (“Investment Unit”) held by
SHI unitholders (SHI, SHR, and the unitholders stated or recordedin the final unitholders register on the day prior to the Effective
Date (excluding the SHI unitholders who demanded the purchaseof their investment units pursuant to the provisions of Article
149-3 of the Act on Investment Trusts and Investments
Corporations (Act No. 198 of 1951, including subsequent
amendments, the “Investment Trusts Act”) (excluding thoseunitholders who retracted such purchase demand) hereinafterreferred to as the “Unitholders Subject to Allocation”)) SHR willconduct a split, subject to the Investment Corporation Merger
taking effect, on the Effective Date in the ratio of 2 Investment
Units to 1 SHR investment unit (“Investment Unit Split”), and forevery 1 Investment Unit, 1.65 post-Investment Unit Split SHR
investment units will be allocated and delivered to the Unitholders
Subject to Allocation. As a result of the allocation, fractions ofless than one investment unit will occur in the number ofinvestment units that must be delivered. Those fractional units ofless than one share will be sold through market transactions, andthe proceeds from the sales will be delivered to the unitholders
allocated fractional shares in accordance with the fraction pursuant
to the applicable laws and regulations. The Investment Unit Split
taking effect on the Effective Date is the suspensive condition forallocation and distribution. In the case where the Investment
Unit Split does not take place on the Effective Date, SHI and SHR
will consult in good faith and agree to change the Effective Date,and take necessary measures for the Investment Corporation
Merger to take effect.
SHR
SHI(Surviving corporation in(Dissolving corporation in
the absorption-type
the absorption-typemerger)merger)1.65
Allocation of Investment
units under the Investment
Corporation Merger

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

b.

II.

Merger consideration in the form of cash distribution
In addition to the abovementioned investment units, SHR
intends to pay Unitholders Subject to Allocation, or the registeredpledgees of investment units held in lieu of the cash distributions
for the business period of SHI’s final term amended by Agenda
No. 3, 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 quotientresulting from dividing the amount of SHI’s distributable incomeon the date prior to the Effective Date (income as defined by
Article 136-1 of the Investment Trusts Act) by the number ofissued 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 from the
Effective Date.
Basis for the Calculation
SHI has appointed Mizuho Securities Co., Ltd. (“Mizuho
Securities”), and SHR has appointed Nomura Securities Co., Ltd.
(“Nomura Securities”), respectively, as their financial advisors for theInvestment Corporation Merger and requested them to calculate themerger ratio. The summaries of the calculations made by Mizuho
Securities and Nomura Securities each indicate figures prior to taking
into account the Investment Unit Split by SHR under the Investment
Corporation Merger above.
In performing its analysis, Mizuho Securities reviewed the financial
information of the Two Investment Corporations, in addition toreviewing the terms and conditions of the Investment Corporation
Merger. Because the investment units of the Two Investment
Corporations are listed on the Tokyo Stock Exchange and market
investment unit prices are publicly available, Mizuho Securities used amarket investment unit price analysis, and because there are multiple
listed investment corporations that are comparable to each of the Two
Investment Corporations and an analogical estimate based oncomparable investment corporations is possible, it also conducted acomparable investment corporation analysis; in addition Mizuho
Securities conducted the dividend discount model as a method ofanalysis (“DDM Analysis”) of the investment unit value based on
dividends that unitholders of the Two 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 therange of the number of SHR investment units to be allocated for each
investment unit of SHI. In performing the investment unit price analysis,
Mizuho Securities adopted January 23, 2018 as the reference date andreviewed the closing investment unit price on the reference date and theaverage of the closing investment unit prices during most recent week,
the most recent month, the most 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 ofMizuho Securities’ analysis, please refer to Note 1 at the end of thissection.
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 㹼 0.859
0.804 㹼 0.968
0.539 㹼 0.988

Adjusted Net Asset Value Approach
0.781
Because the investment units of the Two Investment Corporations
are both listed on the Tokyo Stock Exchange and there is a market pricefor the units, Nomura Securities used average market investment unit
price analysis, and because there are multiple companies comparable toeach of the Two Investment Corporations and an analogical estimatebased on comparable investment corporations is possible, it also used acomparable investment corporation analysis; in order to reflect the stateof future business operations in the calculations, Nomura Securities
made a discounted cash flow analysis (“DCF Analysis”), and in order toalso reflect in its estimations the amount of the impact of fair value andrealizable value on net assets, it also used the adjusted net asset method
in its calculations. A summary of Nomura Securities’ calculations isshown below. The range of values for the merger ratio shown indicatesthe 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 the closing prices on
the calculation base date, which was set as January 23, 2018, the fivebusiness 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 to Note 2 at the end of this section.
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

Range of Merger Ratio

Adjusted Net Asset Method

0.780



0.850 㹼 0.859
0.801 㹼 1.006
0.785 㹼 0.846

As a result of discussions and negotiations over an extended period
comprehensively taking into consideration such factors as the financial
performance and state of the assets and liabilities 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 determined that the above merger ratios areappropriate, concluded the Investment Corporation Merger Agreement.
The following are measures that SHI and SHR have implemented toensure fairness when entering into the Investment Corporation Merger
Agreement:a.
The propriety of the Investment Corporation Merger and measures
to ensure fairness in the process of consideration 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 the Investment
Trust Act, and all material matters of their considerations weredeliberated and approved by their respective board of directors.
In addition, SHI appointed Ito and Mitomi Law Office, andSHR appointed Anderson Mori & Tomotsune as their respective
legal advisors for the Investment Corporation Merger, and theyeach received advice concerning the methodology and process
relating to the procedures and decision-making process for theInvestment Corporation Merger.
b.
Measures to ensure fairness in the calculation of the merger ratio
As discussed 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 wasdetermined by comprehensively taking into account the results ofsuch analyses together with other factors.
SHI, 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 reportproviding 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, SHI’s board of directors
concluded that sufficient steps had been taken to ensure thefairness of the Investment Corporation Merger.
SHR, for its part, in order to ensure the fairness of theInvestment 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 theInvestment Corporation Merger.
On the basis of the foregoing, SHR’s board of directors
concluded that sufficient steps had been taken to ensure thefairness of the Investment Corporation Merger.
The Two Investment Corporations did not, however, obtainwritten opinions (so-called “fairness opinions”) from theirrespective financial advisors to the effect that the merger ratio isreasonable from a financial perspective for their respective
unitholdersc.
Engagement of an independent advisor
SHI, in order to receive advice when considering theInvestment 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 (b)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 a written merger ratio calculation report or a fairness
opinion from SMBC Nikko Securities.
Note 1: In analyzing merger ratio, Mizuho Securities relied upon andassumed 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 uponwhich 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 theinformation provided to Mizuho Securities or discussed between
Mizuho Securities and the Two Investment Corporations
materially incorrect, or if there is a fact or circumstance notdisclosed at the time of delivery of a written merger ratio
calculation report, or which occurs subsequent to delivery of awritten 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 unaware of any fact that would make the information provided
to or discussed with Mizuho Securities incomplete or misleading.
In addition, Mizuho Securities did not conduct an independentvaluation or appraisal of any assets or liabilities (including
derivatives, off-balance sheet assets and liabilities and othercontingent 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, any suchvaluation 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 thecapitalization, 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 inconnection with analysis of merger ratio that was not provided ordisclosed to Mizuho Securities by the corporations, or wasprovided or disclosed but the effect it has on the value of theinvestment units could not be determined at this time, or could nototherwise be used by Mizuho Securities as a basis of Mizuho
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 reliedon the assumptions and financial projections and the business
forecast without independent verification of the feasibility of suchassumptions and forecasts, and Mizuho Securities expressed noview as to any analyses or forecasts referred to in its analysis or
the assumptions on which they are based. Mizuho Securities is nota legal, regulatory, or tax expert and therefore relied on theassessments made by advisors to the corporations with respect tosuch issues. Mizuho Securities further assumed that the Merger
will qualify as a tax-free reorganization 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 purpose of
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.
Note 2: Nomura Securities, in calculating the merger ratio, in general used
information received from the Two Investment Corporations andpublicly disclosed information and, assuming those materials andinformation, etc. all to be accurate and complete, 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 thebook and other contingent liabilities) of the Two Investment

Corporations, nor did it request a third party to do so. In addition,
Nomura Securities assumed that the financial forecasts (including
profit plans and other information) provided by the Two
Investment Corporations were reasonably prepared by theirrespective managements on the basis of the best estimates andjudgments available at the time such forecasts were provided.
III. Relationships with the Institutions Which Performed the Calculations
Neither Mizuho Securities nor Nomura Securities fall under arelated 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 thatmust be indicated with respect to the Investment Corporation Merger.
(ii) Reasoning behind Choosing Cash as Part of the Merger Consideration
SHR intends to pay Unitholders Subject to Allocation, or the registeredpledgees of investment units held in lieu of the cash distributions for thebusiness period of SHI’s final term amended by Agenda No.3, a merger
consideration in the form of cash distribution within a reasonable period fromthe Effective Date.
This is in order to distribute to unitholders the results of SHI’s asset
management for the final term ending on the date prior to the Effective Date(assuming Agenda No.3 is approved, from October 1, 2017 to April 30, 2018)
by merger consideration in the form of cash distribution.
(iii) Matters Relating to Total Unitholders’ Capital of SHR
I.
Total unitholders’ capital: 0 yen
II. Capital Surplus: The amount of change in unitholder capital as specified
in Article 22, Paragraph 1 of the Ordinance for Enforcement of theOrdinance on Accountings of Investment Corporations (Cabinet Office
Ordinance No. 47 of 2006, including subsequent amendments), less theamount specified in the preceding item.
(2) Matters to consider regarding the merger consideration(i) Provisions in the Articles of Incorporation of the surviving corporation (SHR)
As set forth in Attachment 2. As mentioned in Attachment 1 “Merger
Agreement”, SHR will hold a general meeting of unitholders to amend its
Articles of Incorporation in accordance to Attachment 7.1 (Proposed
Amendments to SHR’s Articles of Incorporation) of Attachment 1.
(ii) Matters regarding the realization of investment units distributed as merger
consideration
I.
Market to trade the investment units
Tokyo Stock Exchange Real Estate Investment Trust Market
II. Intermediary, brokerage, or agency service for the trade of theinvestment unit
Traders or securities companies that are members of the market
mentioned in I.
(iii) Market price of the units to be distributed as merger consideration

MonthHighest(yen)
Lowest(yen)

The following is the highest and lowest market closing prices of the
SHR’s past six months:
AugustSeptember OctoberNovember December January
2017
2017
2017
2017
2017
2018
135,700

134,000

132,300

133,500

135,000

148,500

133,900

129,400

125,900

123,700

130,000

131,600(3) Matters regarding Financial Statements(i) Matters regarding the surviving corporation (SHR)
I.
Overview of the financial statement, investment report and cash
distribution statement of SHR during the last Fiscal Period.
As set forth in Attachment 3.
II. Disposal of material assets, assumption of material obligations, andother events having a material impact on SHR’s financial condition
occurring after the last day of the latest Fiscal Period.
a.
In order to provide for the effective management of the assets heldby the surviving corporation, as of January 24, 2018 the Two
Asset Management Companies have executed an absorption-typemerger (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 themerger.
b.
SHR resolved to split its investment units as follows (the“Investment Unit Split”)(a) Purpose of the Investment Unit Split
The Investment Corporation Merger will be carried out
through an absorption-type merger having SHR as thesurviving corporation, and the merger ratio, before
considering the Investment Unit Split, would be SHR 1: SHI
0.825. However, based on this merger ratio, 0.825 units of
SHR would be allotted to every unit of SHI, which would
mean that a number of SHI unitholders would receive lessthan one SHR unit. For this reason, in order to enable SHI
unitholders to continue holding SHR units even after theInvestment Corporation Merger, for the purpose of issuing 1
SHR unit or more to all SHI unitholders, it was decided that
the SHR units will be split 2-for-1.
(b) Details of the Investment Unit Split
SHR units owned by the SHR unitholders set forth orrecorded in the final unitholder roster on April 30, 2018 (theday before the Effective Date) will be split 2-for-1. The
Investment Unit Split shall come into effect on May 1, 2018(the Effective Date), provided that all conditions precedent
for the Investment Corporation Merger set forth in theInvestment Corporation Merger Agreement are satisfied.



(ii)

Matters regarding the dissolving corporation (SHI)
Disposal of material assets, assumption of material obligations, andother events having a material impact on SHI’s financial condition occurring
after the last day of the latest Fiscal Period.
a.
In order to provide for the effective management of the assets heldby the surviving corporation, as of January 24, 2018 the Two
Asset Management Companies have executed the AssetManagement Company Merger with May 1, 2018 as the effective
date, subject to the Investment Corporation Merger taking effect.
b.
SHI will put before a general meeting of its unitholders, which isscheduled to be held on March 27, 2018, a proposal for anamendment of its articles of incorporation with a view to changing
its accounting periods from the current March 31 and September
30 to April 30 and October 31. If the aforementioned amendment
is approved in the general meeting of the unitholders, the lastperiod before the Effective Date is expected to be a seven-monthbusiness period from October 1, 2017 to April 30, 2018.
c.
On January 24, 2018, SHI executed a sale and purchase agreementwith Sekisui House regarding acquisition of trust beneficiaryinterests relating to six residential properties (Prime Maison
Shirokanedai Tower, Prime Maison Otsuka, Prime Maison
Asakusabashi, Prime Maison Daikanyama, Prime Maison
Gotenyama West, and Esty Maison Toyosu Residence(Note)) fromSekisui House with May 1, 2018, the day that the Investment
Corporation Merger will take effect, as the acquisition date. It isplanned that after the Investment Corporation Merger takes effect,
SHR will assume from SHI its status as purchaser and all its rights
and duties under the sale and purchase agreement, and execute theacquisition immediately thereafter. The sale and purchaseagreement does not make the Investment Corporation Merger
taking effect a suspensive condition for acquisition of the assets by
SHI, but the agreement does provide that in the case where theInvestment Corporation Merger does not take place, SHI and
Sekisui House will consult in good faith regarding how to proceed.
Note: The property name of the “Esty Maison Toyosu Residence” is“Toyosu Residence” as of today, but after its acquisition, its
property name is scheduled to be changed with the brand name“Esty Maison”, so its changed property name has been stated.
d.

On January 24, 2018, SHI executed with the respective transferees
sale and purchase agreements regarding the transfer of trust
beneficiary interests relating to 12 residential properties (Esty
Maison Machida, Esty Maison Shinkawasaki, Esty Maison
Megurohoncho, Esty Maison Joto, Esty Maison Tenjinhigashi I,
Esty Maison Tenjinhigashi II, Esty Maison Shijonishinotoin, Esty
Maison Hachiojiminamino, Esty Maison Nishinakajima, Esty
Maison Kawaramachi, Esty Maison Shibaura, Esty Maison
Tsutsujigaoka) to multiple domestic limited liability companies
with May 1, 2018 as the planned transfer date. It is planned that



4

after the Investment Corporation Merger takes effect, SHR willassume from SHI its status as seller and all rights and duties under
the sale and purchase agreement, and execute the acquisition
immediately thereafter. The sale and purchase agreement does notmake the Investment Corporation Merger taking effect asuspensive condition for transfer of the assets by SHI.
This agenda item is subject to approval of Agenda No. 3 “Partial amendments of the
Articles of Incorporation” as set forth in the original draft.

Agenda No. 2: Cancellation of the Asset Management Entrustment Agreement with Sekisui
House Asset Management, Ltd
Following the Investment Corporation Merger, SHI plans to cancel its asset
management entrustment agreement with SHAM on May 1, 2018, subject to theInvestment Corporation Merger becoming effective, on the Effective Date, upon
obtaining approval from a general meeting of unitholders.
Sekisui House Investment Advisors, Ltd. (“SHIA”), the asset management company
for SHR, is expected to continue managing the assets of the surviving corporation
following the Investment Corporation Merger.
This agenda item is subject to approval of Agenda No. 1 “Approval of a Merger
Agreement with Sekisui House Reit, Inc.” as set forth in the original draft.
Agenda No. 3: Partial amendments of the Articles of Incorporation
1

Reason for Amendments to the Articles of Incorporation(1) To amend the final term of SHI’s fiscal period from the current last days of Marchand September to the last days of April and October in order to change the fiscal
period to end on the day before the Investment Corporation Merger Agreementtakes effect, and to amend SHI’s 25th fiscal period to a seven month period from
October 1, 2017 to April 30, 2018 (Amendments to Article 33 of the current
Articles of Incorporation and Article 41 of the proposed amendment to the current
Articles of Incorporation).
(2) Following the changes to the fiscal period in (1) above, to amend the base date for
the General Meeting of Unitholders as well as the recording date of the unitholder
roster (Amendments to Article 9 and Article 15 of the current Articles ofIncorporation).
(3) This agenda is subject to approval of Agenda No. 1 “Approval of a Merger
Agreement with Sekisui House Reit, Inc.” as set forth in the original draft.

2

Overview of Amendments
The Partial Amendments are as follows:

Current Articles of Incorporation
Article 9 General Meeting of Unitholders(Proposed amendments are underlined.)
Proposed Amendments
Article 9 General Meeting of Unitholders

1-2.
(omitted)
3. A general meeting of unitholders shall be
convened on June 10, 2016, or without

1-2.
(unchanged)
3. A general meeting of unitholders shall be
convened on June 10, 2016, or withoutdelay thereafter, and subsequently beconvened on July 10 or without delay
thereafter every two years. In addition, ageneral meeting of unitholders may beheld from time to time when it isnecessary.

delay thereafter, and subsequently beconvened on June 10 or without delay
thereafter every two years. In addition, ageneral meeting of unitholders may beheld from time to time when it isnecessary.
4.

(omitted)

Article 15

4.

Record Date(unchanged)

Article 15

Record Date

1. If the Investment Corporation convenes a 1. If the Investment Corporation convenes a
general meeting of unitholders pursuant togeneral meeting of unitholders pursuant to
the first sentence of Paragraph 3 of Article
the first sentence of Paragraph 3 of Article
9, the Investment Corporation shall deem
9, the Investment Corporation shall deemthe unitholders recorded or registered in
the unitholders recorded or registered in
the final register of unitholders as of thethe final register of unitholders as of theend of April 2018 and subsequently as ofend of March 2016 and subsequently as ofthe end of March every two years to be
the end of April every two years to be thethe unitholders who are entitled tounitholders who are entitled to exercise
exercise their rights at such general
their rights at such general meeting of
meeting of unitholders.
unitholders.
2-4. (omitted)
2-4. (unchanged)
Article 33 Accounting Settlement Day

Article 33 Accounting Settlement Day

The business term of the Investment
Corporation shall be from April 1 to the last
day of September, and from October 1 to thelast day of March in the following year, eachyear (the last day of each business term ishereinafter referred to as the “Accounting
Settlement Day”).

The business term of the Investment
Corporation shall be from May 1 to the last
day of October, and from November 1 to thelast day of April in the following year, eachyear (the last day of each business term ishereinafter referred to as the “Accounting
Settlement Day”).

(New)

Chapter 9 Supplementary Provisions(New)

Article 41 Changes to Business Term andAccounting Settlement Day
Regardless of the provisions of Article 33, thebusiness term of the Investment Corporation
for the 25th fiscal period shall be from
October 1, 2017 to the last day of April 2018.

Reference Matters
Among the agenda items submitted to the general meeting of unitholders, if there is any
oppositional proposal, with respect to any such agenda item, the “deemed approval”
provisions specified in Item 1 and 2 of Article 14 of the current Investment Corporation’s
articles of incorporation will not apply.
End



Attachment 1

Merger Agreement

January 24, 2018-1-

Merger Agreement
Sekisui House Reit, Inc. (“SHR”) and Sekisui House Residential Investment Corporation (“SHI”), in
regard to the merger of SHR and SHI (“Merger”), have entered into this Merger Agreement ("Agreement")
as set out below as of January 24, 2018 (“Execution Date”).

Article 1: Method of Merger
In accordance with the provisions of this Agreement, SHR and SHI shall carry out an absorption-typemerger with SHR as the surviving corporation and SHI as the dissolving corporation pursuant to theprovisions of Article 147 of the Act on Investment Trusts and Investment Corporations (Act No. 198 of1951, as amended; “Investment Trusts Act”).

Article 2: Corporate Names and Addresses of Merger Parties
The corporate names and addresses of the surviving corporation and dissolving corporation are as
follows:(1)

Corporate name and address of surviving corporation
Corporate name:Sekisui House Reit, Inc.
Address:
1-6-6 Motoakasaka, Minato-ku, Tokyo(2)

Corporate name and address of dissolving corporation
Corporate name:Sekisui House Residential Investment Corporation
Address:
3-1-31 Minami-Aoyama, Minato-ku, Tokyo

Article 3: Split of SHR’s Investment Units
Provided that this Agreement has not been cancelled in accordance with Article 13 or other provisions of
this Agreement, the investment units of unitholders set forth or recorded in SHR’s latest unitholder registryon the day preceding the day on which the Merger comes into force (“Effective Date”) will be split into
two investment units for every one investment unit on the Effective Date (“Investment Unit Split”).

Article 4: Method of Calculation of Number of Investment Units to be Delivered Upon Merger and Matters
Relating to Allotment Thereof
1.

Upon the Merger, SHR shall issue new investment units after the split in accordance with
Article 3 in the number obtained by multiplying the total number of investment units in SHI
held by the unitholders set forth or recorded in SHI’s latest unitholder registry on the day
preceding the Effective Date (excluding SHR, SHI, and unitholders of SHI that have demandedpurchase of their investment units pursuant to Article 149-3, of the Investment Trusts Act(excluding unitholders that have withdrawn such demand for purchase); “Unitholders Subject to
Allocation”) by 1.65 (rounded down to the nearest whole number) and shall deliver toUnitholders Subject to Allocation 1.65 SHR investment units after the split in accordance with
Article 3 per each of their investment units; provided, however, that such delivery’s and theMerger coming into force will be subject to the condition precedent that the Investment Unit
-2-

Split comes into force on the Effective Date, and if the Investment Unit Split does not come into
force on the Effective Date, SHR and SHI shall consult in good faith and reach an agreement
before changing the Effective Date specified in Article 6 or taking other measures towards the
Merger coming into force.
2.

In a case under the preceding paragraph, if there are any fractions of less than one SHR
investment unit in the investment units that must be delivered to Unitholders Subject to
Allocation, SHR shall process such fractions pursuant to Article 149-17 of the Investment Trusts
Act.

Article 5: Matters Relating to Total Unitholders’ Capital of Surviving Corporation
SHR’s total unitholders’ capital and capital surplus to be added upon the Merger will be as follows;
provided, however, that SHR and SHI can consult and reach an agreement, taking into account SHR’s and
SHI’s asset condition on the day preceding the Effective Date, to change such amounts:(1)

Total unitholders’ capital: 0 yen(2)Capital surplus: The amount of change in unitholders’ equity, etc. as specified in Article 22,
Paragraph 1 of the Regulations on Accounting of Investment Corporations(Cabinet Office Ordinance No. 47 of 2006, as amended), less the amountspecified in the preceding item.

Article 6: Effective Date
The Effective Date of the Merger will be May 1, 2018; provided, however, that depending on thenecessity of carrying out the procedures for the Merger and other factors, SHR and SHI can separately
consult and change the Effective Date after reaching agreement.

Article 7: General Meeting of Unitholders
1.

On March 27, 2018 or such other day SHR and SHI separately agree, SHR will convene a general
meeting of unitholders to request approval of (i) a proposal to approve this Agreement pursuant to
Article 149-7, Paragraph 1 of the Investment Trusts Act; (ii) a proposal to amend SHR’s articles ofincorporation as set forth in Attachment 7.1; and (iii) such other proposals as SHR and SHI
separately agree.

2.

On March 27, 2018 or such other day SHR and SHI separately agree, SHI will convene a general
meeting of unitholders to request approval of (i) a proposal to approve this Agreement pursuant to
Article 149-2, Paragraph 1 of the Investment Trusts Act (subject to approval of the proposal toamend the articles of incorporation as set forth in (iii) below); (ii) a proposal to terminate the asset
management service agreement with Sekisui House Asset Management, Ltd. (“SHAM”) on the
Effective Date on the condition precedent that the Merger comes into force; (iii) a proposal to amend
SHI’s articles of incorporation as set forth in Attachment 7.2 (subject to approval of the proposal toapprove this Agreement as set forth in (i) above); and (iv) such other proposals as SHR and SHI
separately agree.
-3-

Article 8: Corporate Name and Affiliates, etc. of SHR After Merger
1.

After the Merger, SHR’s corporate name will be Sekisui House Reit, Inc.

2.

SHR’s post-Merger Asset Management Company (meaning an asset management company specified
in Article 2, Paragraph 21 of the Investment Trusts Act; hereinafter the same), Asset CustodyCompany (meaning an asset custody company specified in Article 2, Paragraph 22 of the Investment
Trusts Act; hereinafter the same) and General Administrative Services Providers (meaning generaladministrative services providers specified in Article 2, Paragraph 23 of the Investment Trusts Act,
which accepts entrustment of the administrative services specified in the items of Article 117 of theInvestment Trusts Act; hereinafter the same), and accounting auditor will not change upon the
Merger. Further, with respect to the agreement with one of SHI’s General Administrative Services
Providers, The Bank of Tokyo-Mitsubishi UFJ, Ltd., which is the General Administrative Services
Provider for investment corporation bonds, SHR shall succeed to such agreement through the
Merger, and The Bank of Tokyo-Mitsubishi UFJ, Ltd. will become a General Administrative
Services Provider of SHR.

3.

Provided that the Merger comes into force, on the Effective Date, SHI will terminate any asset
management service agreement or institutional management administrative service agreement with
SHAM, asset custody agreement with Asset Custody Company, general administrative services
agreement (excluding the agreement with The Bank of Tokyo-Mitsubishi UFJ, Ltd., which is theGeneral Administrative Services Provider for investment corporation bonds) with its General
Administrative Services Providers, the exclusive right to negotiate agreement between SHAM andSekisui House, Ltd., the audit agreement with its accounting auditor (excluding the portion forauditing of SHI’s financial statements for the Fiscal Period having its Settlement Date on the last dayof April 2018 as amended by the resolution of Paragraph 2, Item (iii) of the preceding article as
required pursuant to the Financial Instruments and Exchange Act (Act No. 25 of 1948; asamended)), and assorted agreements, etc. ancillary to the foregoing agreements, as well as suchother agreements as SHR and SHI separately agree.

4.

Notwithstanding the preceding three paragraphs, SHR and SHI can separately consult and agree toamend the foregoing provisions.

Article 9: Merger Consideration
Instead of cash distribution proceeds to SHI’s unitholders for SHI’s Fiscal Period ending on the day
preceding the Effective Date as amended by the resolution offset forth in Article 7, Paragraph 2, Item (iii),
SHR shall pay to Unitholders Subject to Allocation or the registered pledgees of their units merger
consideration of an amount calculated in accordance with the following formula per SHI investment unit
they hold (fractions of less than one yen will be discarded) within a reasonable time after the Effective
Date, taking into account SHI’s income calculations for the relevant Fiscal Period and administrative workfor payment of merger consideration, etc.:
Amount ofmergerconsideration perunit㸻Amount of SHI’s Distributable Income as of the day
preceding the Effective Date
The total number of SHI’s investment units issued as ofthe day preceding the Effective Date

-4-

In the above formula, “Amount of SHI’s Distributable Income as of the day preceding the Effective Date”
means the amount of profit set forth in Article 136, Paragraph 1 of the Investment Trusts Act, and “The
total number of SHI’s investment units issued as of the day preceding the Effective Date” means the total
number of SHI’s investment units issued as of the day preceding the Effective Date less the number ofinvestment units held by SHI’s unitholders other than Unitholders Subject to Allocation.

Article 10: Distribution of Cash
1.

During the period from (and including) the Execution Date until (but excluding) the Effective Date,as cash distributions for the Fiscal Period ended on the last day of October 2017, SHR shall
distribute a total amount of 2,625 million yen (2,710 yen per investment unit) to the unitholders orinvestment unit pledge holders set forth or recorded in SHR’s final unitholder registry on the last dayof October 2017, and except for such cash distributions, shall not pay any cash distributions to any
unitholder or purchase investment units for consideration by agreement with any unitholder.

2.

During the period from (and including) the Execution Date until (but excluding) the Effective Date,as cash distributions for the Fiscal Period ended on the last day of September 2017, SHI shall
distribute a total amount of 2,492 million yen (2,255 yen per investment unit) to the unitholders orinvestment unit pledge holders set forth or recorded in SHI’s final unitholder registry on the last day
of September 2017, and except for such cash distributions, shall not pay any cash distributions to
any unitholder or purchase investment units for consideration by agreement with any unitholder.

3.

Notwithstanding the preceding two paragraphs, if the Effective Date is changed to a day later thanMay 1, 2018, SHR and SHI shall consult and come to an agreement regarding the handling of cash
distributions.

Article 11: Succession to Corporate Assets, etc.
On the Effective Date, SHR shall succeed to all of SHI’s assets, liabilities, and rights and duties as of theEffective Date.

Article 12: Covenants
1.

During the period from (and including) the Execution Date until (but excluding) the Effective Date,
SHR and SHI shall each, using usual methods that are substantially identical to the methods usedprior to the execution of this Agreement, execute their operations and manage and invest their assets
with the due care of a competent manager and cause their Asset Management Companies, Asset
Custody Companies, General Administrative Services Providers and other third parties to do thesame, and shall not engage in conduct having a material impact on their assets or rights and duties(including without limitation issuance of investment units, issuance of investment corporation
bonds, new loans (excluding loans for repayment of existing loans), and execution or performanceof agreements for sale or acquisition of property) only after obtaining the other party’s consent inadvance (such consent shall not be unreasonably refused or withheld); provided, however, that theforegoing shall not apply to conduct clearly specified in this Agreement.

2.

During the period from (and including) the Execution Date until (but excluding) the Effective Date,
SHR and SHI shall take practical measures necessary for the Merger, including SHR’s succession to-5-

SHI’s assets, liabilities and obligations in conjunction with the Merger, adjustment of the investment
corporation systems that will survive the Merger and etc., and shall exchange information andotherwise provide necessary cooperation in order to take such measures.
3.

During the period from (and including) the Execution Date until (but excluding) the Effective Date,
if SHR or SHI learns of an event with respect to itself that is reasonably likely to have a material
impact on its business or financial condition or on the Merger (including without limitation breachof loan agreements, violation of laws or regulations by SHR or SHI, or findings etc. by theauthorities), it shall immediately notify the other party. In such case, SHR and SHI shall consult ingood faith and consider countermeasures, and make utmost efforts to resolve the event.

4.

By (and including) the day preceding the Effective Date, SHI shall, with respect to the agreements(“Pipeline Support Agreements”) set forth in Attachment 12.4(2) among SHI, SHAM, and thecompanies (“Pipeline Support Companies”) set forth in Attachment 12.4(1), execute agreements(“Pipeline Support Agreement Amendments”) in substance reasonably satisfactory to SHR so that,even if the asset management agreement between SHI and SHAM terminates, from the Effective
Date onward, the Pipeline Support Agreements between SHR and SHR’s Asset Management
Company Sekisui House Investment Advisors, Ltd. (corporate name will be changed to Sekisui
House Asset Management, Ltd. after the Merger comes into force; “SHIA”), and the respective
Pipeline Support Companies can continue.

5.

By (and including) the day preceding the Effective Date, SHR and SHI shall, each under its own
responsibility, lawfully and validly obtain from the counterparties to any agreements that containprovisions under which a right of cancellation will arise, or is likely to arise, to the counterparty
because of the execution of the Merger or because of assorted changes ancillary thereto (excluding
agreements that the relevant counterparty party to this Agreement agrees) written consent to theeffect that they consent without objection to the execution of the Merger and assorted changes
ancillary thereto.

6.

By (and including) the day preceding the Effective Date, SHI shall execute sale and purchaseagreements under which, on the Effective Date (provided, however, that if SHR and SHI haveagreed otherwise, then the date so agreed; in such case, when agreeing upon a different date, neither
SHR nor SHI shall unreasonable refuse its consent), SHI will acquire the property set forth inAttachment 12.6(1) and sell the property set forth in Attachment 12.6(2), and shall perform its duties
under each sale and purchase agreement as required for performance thereunder (limited to duties
that can be performed by (and including) the day preceding the Effective Date).

Article 13: Conditions for Merger
If on (and including) the day preceding the Effective Date, any of the following conditions precedent to
the Merger’s coming into force has not been satisfied or if it has become clear that any of the following
conditions precedent to the Merger’s coming into force will not be satisfied by the day preceding theEffective Date (inclusive)(provided, however, that in all cases, the foregoing shall not apply if the relevant
condition precedent is not satisfied for a reason attributable to a party, its persons concerned or its AssetManagement Company), a party hereto will be entitled to notify the other party in writing prior to the
Effective Date, and cancel this Agreement without incurring any liability or payment duties to the otherparty (provided, however, that the foregoing shall not apply to liability or payment duties in a case where
the party that gave such notice is in breach of other provisions of this Agreement). If SHR or SHI fails to-6-exercise its right of cancellation by the day preceding (and including) the Effective Date, the Merger shallcome into force as of the Effective Date.
(1)

That, as required in relation to the Merger and/or for carrying out the matters contemplated inrelation to the Merger, approval has been obtained from general meetings of unitholders of SHR
and SHI (including without limitation approval of the proposals specified in Article 7, Paragraph
1 and Paragraph 2), and other procedures have been completed and permits and approvals havebeen obtained, in accordance with applicable laws and regulations;(2)

That neither SHR nor SHI is in breach of any duties under agreements (including thisAgreement) or breach of financial covenants provisions, and is not late in payment of any
monetary obligations (including taxes and public charges) (in each case, excluding de minimis
matters);(3)

That no event of acceleration (including any event that would constitute an event of acceleration
upon the passage of time and/or notice), suspension of payment, or inability to pay has occurredwith respect to SHR or SHI;

(4)

That advance consent has been obtained from all financial institutions providing loans to SHR or
SHI regarding the execution of the Merger and the basic conditions of loans from the Effective
Date onwards (with respect to agreements for loans, including necessary allowances to avoid theoccurrence of any breach of financial covenants provisions, breach of covenants, or occurrenceof event of acceleration with respect to SHR after the Merger), and such consent has not been
withdrawn;(5)

That SHR and SHI have reasonably confirmed that U.S. securities law does not require filingprocedures of Form F-4 for the Merger;(6)

That no petition has been filed against SHR or SHI for commencement of bankruptcy
proceedings, commencement of civil rehabilitation proceedings, or commencement ofcomparable legal insolvency proceedings;(7)

That neither SHR nor SHIA, and neither SHI nor SHAM, has been subject to revocation ofregistration by supervisory authorities, suspension of operations in whole or in part, or otheradministrative disposition having a material impediment or material impact on theimplementation of the Merger;(8)

That the Pipeline Support Agreement Amendments have all been lawfully and validly executed,
and since (and including) the Effective Date, the Pipeline Support Agreements continue to be
lawful and valid between SHR and SHIA, and the respective Pipeline Support Companies;(9)

That it has been agreed among the parties to the agreements specified in Article 8, Paragraph 3that such agreements will be terminated as of the Effective Date under conditions reasonably
satisfactory to SHR subject to the coming into force of the Merger (even if this item is notsatisfied, SHI may not cancel this Agreement); and(10)

In addition to the foregoing, that no event has occurred that is reasonably determined tomarkedly impede or make markedly difficult the realization of the Merger.

-7-

Article 14: Change of Merger Conditions and Cancellation of Agreement
1. During the period from (and including) the Execution Date until the day preceding the Effective
Date (inclusive) (i) if any important change occurs with respect to the assets or business condition of
SHR or SHI; (ii) if it is reasonably determined that the implementation of the Merger has become
impossible or markedly difficult; (iii) if it becomes difficult to attain the purposes of the Merger
because of other reasons; or (iv) if it comes to light that any such event may occur, SHR and SHI
can consult in good faith and reach an agreement upon changing conditions for the Merger orotherwise amending this Agreement, or they can cancel this Agreement.
2. Even in a case where this Agreement has been cancelled in accordance with the preceding article or
the preceding paragraph, the provisions of this paragraph and Article 16 through Article 18 shallcontinue to have effective force.

Article 15: Public Announcement
If SHR or SHI will make a public announcement regarding the execution or content of this Agreement
or otherwise regarding the Merger, it shall first agree with the other party regarding the content, timing,and method, etc. thereof before making such announcement.

Article 16: Allocation of Expenses
Except as otherwise agreed between SHR and SHI, with respect to the allocation of expenses incurredby SHR and SHI by the Effective Date in connection with the execution and performance of thisAgreement (including without limitation fees to attorneys, certified public accountants, tax attorneys,
research companies, advisors, and other professionals appointed respectively by SHR and SHI and otherexpenses; expenses arising subject to the Merger coming into force are not included), SHR and SHI shalleach be responsible for payment of expenses it incurs; SHI shall record expenses it is responsible for as
expenses for the Fiscal Period ending by the day preceding the Effective Date (inclusive).

Article 17: Governing Law
This Agreement shall be governed by and construed in accordance with the laws of Japan.

Article 18: Jurisdiction
SHR and SHI agree that the Tokyo District Court will be the exclusive court of first instance withrespect to any dispute relating to this Agreement.

Article 19: Good-Faith Consultation
With respect to any matters necessary for the Merger other than what is specified in this Agreement,
SHR and SHI shall separately consult in accordance with the purpose of this Agreement and settle thematter.
-8-

(The remainder of this page is intentionally blank.)-9-

IN WITNESS WHEREOF, this Agreement has been prepared in duplicate, upon affixing the names andseals of each of SHR and SHI, each shall retain one original.

January 24, 2018

SHR:
Junichi Inoue
Executive Director
Sekisui House Reit, Inc.
1-6-6 Motoakasaka, Minato-ku, Tokyo
SHI:
Osamu Minami
Executive Director
Sekisui House Residential Investment Corporation
3-1-31 Minami-Aoyama, Minato-ku, Tokyo- 10 -

Attachment 7.1 (Proposed Amendments to SHR’s Articles of Incorporation)
Proposed Amendments to the Articles of Incorporation(Proposed amendments are underlined.)
Current Articles of Incorporation
Proposed Amendments
Article 5 Total Number of Issuable Investment Units, Article 5 Total Number of Issuable Investment Units,
Etc.
Etc.
1. The total number of issuable investment units for
the Investment Corporation is ten million(10,000,000) units.
2. - 3. (omitted)

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

Article 9 General Meeting of Unitholders

Article 9 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 beconvened on July 1 and onwards every two years
without delay. In addition, the general meetings ofunitholders may be held 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, 2020and onwards without delay, and subsequently beconvened on January 1 every two years andonwards without delay. In addition, the general
meetings of unitholders may be held from time totime when it is necessary.
2. (unchanged)

Article 12 Record Date

Article 12 Record Date

1. If the Investment Corporation convenes a general
meeting of unitholders pursuant to the first sentenceof Paragraph 1 of Article 9, the Investment
Corporation shall deem the unitholders recorded orregistered in the final register of unitholders as ofthe end of April in 2018 and subsequently as of theend of April in every two years to be theunitholders who are entitled to exercise their rights
at such general meeting of unitholders. In addition
to such case, if a general meeting of unitholders is
to be held on a day within three months after theimmediately preceding Accounting Settlement Day(as defined in Article 45; the same shall apply
hereinafter), the Investment Corporation shall deemthe unitholders recorded or registered in the final
register of unitholders for such Accounting
Settlement Day to be the unitholders who areentitled 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 sentenceof Paragraph 1 of Article 9, the Investment
Corporation shall deem the unitholders recorded orregistered in the final register of unitholders as ofthe end of October in 2019 and subsequently as ofthe end of October in every two years to be theunitholders who are entitled to exercise their rights
at such general meeting of unitholders. In addition
to such case, if a general meeting of unitholders is
to be held on a day within three months after theimmediately preceding Accounting Settlement Day(as defined in Article 45; the same shall apply
hereinafter), the Investment Corporation shall deemthe unitholders recorded or registered in the final
register of unitholders for such Accounting
Settlement Day to be the unitholders who areentitled to exercise their rights at such general
meeting of unitholders.
2. (unchanged)

Article 31 Basic Policy of Asset Management

Article 31 Basic Policy of Asset Management

The Investment Corporation shall manage its assets byinvesting continuously and principally in Real Estates
and Other Assets (as defined in Paragraph 1 of Article
32). The purpose of the Investment Corporation is toachieve 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
management that pursues stable earnings over the
medium to long term and steady growth in the

The Investment Corporation shall manage its assets byinvesting continuously and principally in Real Estates
and Other Assets (as defined in Paragraph 1 of Article
32). The purpose of the Investment Corporation is toachieve 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 termand steady growth in the Managed Assets.

- 11 -

Current Articles of Incorporation
Managed Assets.

Proposed Amendments

Article 32 Categories, Purpose and Scope of Target
Assets of Asset Management

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)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 the same together with money
associated with the real estates, and also
including trust beneficiary rights in trust of such
trust beneficiary rights, but excluding thosefalling under the Real Estates and Other Assets);(b) (unchanged)(c) Equity interests in an agreement where one
party makes a financial contribution to anotherparty to manage the Real Estates and Other
Assets or the assets listed in the Items (a) and(b), and the other party manages that
contribution principally as an investment in thoseassets and distributes profits from suchmanagement (“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 foreigncounty, or trust beneficiary rights in trust of only
real estate, real estate lease rights or surface
rights or the assets listed in Items (a) to (d)established under the laws and regulations of aforeign country(f) Preferred equity securities (as set forth in the
Act on Securitization of Assets (Law No. 105 of
1998, as amended) (the “Asset SecuritizationAct”) (limited to those the purpose of which is toinvest the amount exceeding the half of theassets in the Real Estates and Other Assets or theassets listed in Items (a) to (e) (the “Real EstateRelated 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 theassets 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 thepurpose of which is to invest the amountexceeding the half of the assets in the Real
Estate-Related Assets)(j) Assets of the same nature as those listed in Item(f) or (i) established under the laws andregulations of a foreign country (limited to those(a) (omitted)(b) Equity interests in an agreement where one
party makes a financial contribution to anotherparty to manage the Real Estates and Other
Assets or the assets listed in the preceding item,
and the other party manages that contribution
principally as an investment in those assets anddistributes 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
the assets listed in Items (a) to (c) establishedunder the laws and regulations of a foreigncountry(e) Preferred equity securities (as set forth in the
Act on Securitization of Assets (Law No. 105 of
1998, as amended) (the “Asset SecuritizationAct”) (limited to those the purpose of which is toinvest the amount exceeding the half of theassets in the Real Estates and Other Assets or theassets listed in Items (a) to (d) (the “Real EstateRelated 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 theReal Estates and Other Assets or the assets listed
in Item (a) or (b)) (limited to those the purposeof which is to invest the amount exceeding thehalf 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 andregulations of a foreign country (limited to those- 12 -

Current Articles of Incorporation
the purpose of which is to invest the amountexceeding 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 asecurities investment trust as set forth in theInvestment Trusts Act which are intended to be
managed as an investment 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 (ActNo. 89 of 1896, as amended) (the “Civil Code”),such as facilities, equipment, and other items
attached to the Real Estate-Related Assets(excluding those set forth in Item (z) of
Paragraph 2 of Article 32)(e) - (n) (omitted)
4. (omitted)

Proposed Amendments
the purpose of which is to invest the amountexceeding 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 asecurities investment trust as set forth in theInvestment Trusts Act which are intended to be
managed as an investment 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)- (c) (unchanged)(d) Movables as set forth in the Civil Code (ActNo. 89 of 1896, as amended) (the “Civil Code”),such as facilities, equipment, and other items
attached to the Real Estate-Related Assets(excluding those set forth in Item (aa) of
Paragraph 2 of Article 32)(e) - (n) (unchanged)
4. (unchanged)

Article 33 Investment Policy

Article 33 Investment Policy

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

1.

2. The investment area of the Commercial Properties
shall be mainly in Japan but the Investment
Corporation may invest overseas.
(Add)- 13 -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
and the Commercial Properties shall be mainly inJapan but the Investment Corporation may invest
overseas.
3. The main geographical areas for investment of the
Residential Properties in Japan shall be Greater

Current Articles of Incorporation

3. The main geographical areas for investment of theCommercial Properties in Japan shall be the Three
Major Metropolitan Areas (which collectively
refers to Greater Tokyo, Osaka Area and NagoyaArea) centering on the 23 wards of Tokyo, Osaka
City and Nagoya City. The main geographicalareas for investment of the overseas Commercial
Properties are Singapore, Australia and the U.S., aswell as other countries and regions where thepopulation and economy are expected to grow.
(Add)

Proposed Amendments
Tokyo and major cities in Japan other than Greater
Tokyo such as the ordinance-designated cities, andcommuting 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 to Greater Tokyo, Osaka Area and NagoyaArea) centering on the 23 wards of Tokyo, Osaka
City and Nagoya City and major cities in Japanother than the Three Major Metropolitan Areas.

5. The main geographical areas for investment of theoverseas Residential Properties and Commercial
Properties are Singapore, Australia and the U.S., aswell as other countries and regions where thepopulation and economy are expected to grow.

Article 34 Investment Restrictions

Article 34 Investment Restrictions

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

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

Article 39 Method of and Standards for Asset
Evaluation

Article 39 Method of and Standards for Asset
Evaluation

The method of and standards for asset evaluation of the The method of and standards for asset evaluation of theInvestment Corporation shall be determined by theInvestment Corporation shall be determined by the type
type of the Managed Asset, and shall be as follows as a of the Managed Asset, and shall be as follows as a
general rule.
general rule.
(a) Real estate, real estate lease rights and(a) Real estate, real estate lease rights andsurface rights of the Real Estates andsurface rights of the Real Estates andOther Assets as set forth in Paragraph 1 of
Other Assets as set forth in Paragraph 1 of
Article 32; and those under the laws andArticle 32; and those under the laws andregulations of a foreign country as set
regulations of a foreign country as set
forth in Item (d) of Paragraph 2 of Article
forth in Item (e) of Paragraph 2 of Article32:32:
 (omitted)
 (unchanged)(b) Trust beneficiary rights in trust of real(b) Trust beneficiary rights in trust of realestate, real estate lease rights and surface
estate, real estate lease rights and surface
rights of the Real Estates and Other Assets
rights as set forth in Paragraph 1 and Itemas set forth in Paragraph 1 of Article 32;(a) of Paragraph 2 of Article 32; and trust
beneficiary rights in trust of real estate,
and those only in trust of real estate, realestate lease rights and surface rights
real estate lease rights and surface rights
established under the laws and regulations
established under the laws and regulationsof a foreign country as set forth in Item (d)of a foreign country as set forth in Item (e)of Paragraph 2 of Article 32:
of Paragraph 2 of Article 32:(omitted)(unchanged)(c) Trust beneficiary rights in monetary trusts, the(c) Trust beneficiary rights in monetary trusts, the- 14 -

Current Articles of Incorporation
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 Paragraph 2
of Article 32, Item (a); and those establishedunder the laws and regulations of a foreigncountry as set forth in Item (d) of Paragraph 2 ofArticle 32:

 (omitted)(d) Equity Interests in Silent Partnership on Real
Estate as set forth in Item (b) of Paragraph 2 ofArticle 32; and those established under the laws
and regulations of a foreign country as set forthin 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
forth in Item (y) of Paragraph 2 of Article 32:
 (omitted)(i) (omitted)

Proposed Amendments
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; and trust beneficiaryrights in monetary trusts established under thelaws and regulations of a foreign country as set
forth in Item (e) of Paragraph 2 of Article 32, thepurpose 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: (unchanged)(d) Equity Interests in Silent Partnership on Real
Estate as set forth in Item (c) of Paragraph 2 ofArticle 32; and those established under the laws
and regulations of a foreign country as set forthin 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 forthin Item (d) of Paragraph 2 of Article 32; and trust
beneficiary rights in monetary trusts establishedunder the laws and regulations of a foreigncountry as set forth in Item (e) of Paragraph 2 ofArticle 32, the purpose of which is to manage thetrust assets as an investment in Equity Interests
in Silent Partnership on Real Estate as set forthin Item (d) of Paragraph 2 of Article 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
forth in Item (z) of Paragraph 2 of Article 32: (unchanged)(i) (unchanged)

Article 40 Value in Securities Registration
Statements, Securities Reports and AssetManagement Reports

Article 40 Value in Securities Registration
Statements, Securities Reports and AssetManagement Reports

If making evaluations in a way that differs from themethods set forth in Article 39 for the purposes ofrecording a value in a securities registration
statement, securities report and asset management
report, etc., evaluations shall be made in the followingway.
(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; those under
the laws and regulations of a foreign country as
set forth in Item (d) of Paragraph 2 of Article 32;
and those held by the Corporation Holding
Overseas Real Estate as set forth in Paragraph 1
of Article 32:

If making evaluations in a way that differs from themethods set forth in Article 39 for the purposes ofrecording a value in a securities registration statement,
securities report and asset management report, etc.,
evaluations shall be made in the following way.

- 15 -(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; those under thelaws and regulations of a foreign country as set
forth in Item (e) of Paragraph 2 of Article 32; andthose held by the Corporation Holding Overseas
Real Estate as set forth in Paragraph 1 of Article
32:

Current Articles of Incorporation
 (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 trust beneficiaryrights in monetary trusts, the purpose of which is
to manage the trust assets principally as aninvestment in real estate, real estate lease rights
or surface rights as set forth in Item (a) of
Paragraph 2 of Article 32; and trust beneficiaryrights only in trust of real estate, real estate leaserights or surface rights established under thelaws 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,
the purpose of which is to manage the trust
assets principally as an investment in real estate,real estate lease 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 inmonetary trusts, the purpose of which is to
manage the trust assets principally as aninvestment in Equity Interests in Silent
Partnership on Real Estate as set forth in Item(c) of Paragraph 2 of Article 32; and Equity
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 beneficiaryrights in monetary trusts, the purpose of whichis 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 ofArticle 32:
 (omitted)

Proposed Amendments(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 inmonetary trusts, the purpose of which is to
manage the trust assets as an investment in realestate, 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 of real 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 beneficiaryrights in monetary trusts, the purpose of which is
to manage the trust assets as an investment inreal estate, real estate lease rights or surface
rights as set forth in Item (b) of Paragraph 2 ofArticle 32: (unchanged)(c) Trust beneficiary rights in monetary trusts, thepurpose of which 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; and trust
beneficiary rights in monetary trusts establishedunder the laws and regulations of a foreigncountry as set forth in Item (e) of Paragraph 2 ofArticle 32, the purpose of which is to manage thetrust assets as an investment in Equity Interests
in Silent Partnership on Real Estate as set forthin Items (c) and (d) of Paragraph 2 of Article 32:

Article 52 Standards for Fee Payment to
Accounting Auditor

Article 52 Standards for Fee Payment to
Accounting Auditor

The Investment Corporation shall pay fees to theaccounting auditor in an amount determined by
the board of directors that is no more than 20
million yen for each Accounting Settlement Day
subject to audit, by the last day of February andAugust each year for the period of six months up
to such day, through bank transfer to an accountdesignated by the accounting auditor.

The Investment Corporation shall pay fees to theaccounting auditor in an amount determined by
the board of directors that is no more than 25
million yen for each Accounting Settlement Day
subject to audit, by the last day of February andAugust each year for the period of six months up
to such day, through bank transfer to an accountdesignated by the accounting auditor.

(Add)


(unchanged)

Article 55 Effectuation of Amendment
The amendments in Paragraph 1 of Article 5 andArticles 31, 33 and 52 in these Articles ofIncorporation shall take effect on the effective dateof the absorption-type merger between theInvestment Corporation as the surviving- 16 -

Current Articles of Incorporation

Proposed Amendments
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 toeffectuation of the Merger. This Article shall bedeleted after the amendments in these Articles ofIncorporation takes effect pursuant to this Article.

- 17 -

Current Articles of Incorporation
Attachment
Management Fee to Asset Management Company

Proposed Amendments
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
Management Fee I shall be calculated by multiplying(i) the total net assets of the Investment Corporation on (i) the total net assets (less the amount equivalent tounamortized positive goodwill) of the Investment
the balance sheet (limited to those approved by theboard of directors pursuant to Article 131, Paragraph 2 Corporation on the balance sheet (limited to thoseof the Investment Trusts Act) for the latest Accounting approved by the board of directors pursuant to Article
131, Paragraph 2 of the Investment Trusts Act) for the
Settlement Day by (ii) a rate separately agreed by thelatest Accounting Settlement Day by (ii) a rate
Investment Corporation and the Asset Management
Company (up to 0.5% per annum), on a per diem basis. separately agreed by the Investment Corporation andIn this calculation method, the actual number of days in the Asset Management Company (up to 0.5% per
the relevant business term shall be assumed to be 365 annum), on a per diem basis. In this calculation
days in a year and any fraction less than one yen shall method, the actual number of days in the relevantbusiness term shall be assumed to be 365 days in a year
be rounded down.
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) Management Fee II for each business term shall be (i)the distributable amount before deduction of
the distributable amount before deduction ofManagement Fee II for the relevant business term ofManagement Fee II for the relevant business term of
the Investment Corporation (i.e., the amount of the net the Investment Corporation (i.e., the amount of the net
profit for the period before tax (after adding the amountprofit for the period before tax on the profit and lossof amortization of goodwill and deducting the gains onstatement (limited to those approved by the board ofnegative goodwill incurred) on the profit and loss
directors pursuant to Article 131, Paragraph 2 of thestatement (limited to those approved by the board of
Investment Trusts Act; the same shall apply
hereinafter) plus the amount of Management Fee II for directors pursuant to Article 131, Paragraph 2 of theInvestment Trusts Act; the same shall apply
the business term, after a loss carried forward iscompensated, if any) divided by (ii) the total number of hereinafter) plus the amount of Management Fee II for
outstanding units as of the Accounting Settlement Day the business term (including the amount of the nonof the relevant business term, and multiplied by (iii) (a) deductible consumption tax on Management Fee II),
the operating profits before deduction of Management after a loss carried forward is compensated, if any)
divided by (ii) the total number of issued andFee II (i.e., the amount of the operating profits on theoutstanding units as of the Accounting Settlement Day
profit and loss statement plus the amount ofof the relevant business term (the “Distributable
Management Fee II for the business term) and (b) aAmount per Unit”), and multiplied by (iii) (a) therate separately agreed by the Investment Corporationand the Asset Management Company (up to 0.004%). operating profits before deduction of Management Fee
II (i.e., the amount of the operating profits on the profit
In this calculation method, any fraction less than one
yen shall be rounded down, and divisions shall be done and loss statement plus the amount of amortization of
goodwill and Management Fee II for the business termat the end of the calculation, and the lower limit shall(including the amount of the non-deductible
be zero yen.
consumption tax on Management Fee II)) and (b) a rate
separately agreed by the Investment Corporation and
the Asset Management Company (up to 0.004%). In
this calculation method, any fraction less than one yen
shall be rounded down, and divisions shall be done at
the end of the calculation, 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
Estate-Related Assets (excluding the consumption tax,
- 18 -

3. Management Fee III (Acquisition Fee)Management Fee III shall be calculated by multiplying(i) the trading value for the acquisition of the Real
Estate-Related Assets (excluding the consumption tax,

Current Articles of Incorporation
other similar taxes and expenses and the like) by (ii) a
rate separately agreed between the Investment
Corporation and the Asset Management Company (upto 0.5%) (in the case of acquisition from any interested
party as set forth in the “Rules for Transactions with
Interested Parties” of the Asset Management Company,
such rate shall be up to 0.25%), any fraction less than
one yen being rounded down.

Proposed Amendments
other similar taxes and expenses and the like) by (ii) a
rate separately agreed between the Investment
Corporation and the Asset Management Company (upto 0.5%) (in the case of acquisition from any interested
party as set forth in the “Rules for Transactions with
Interested Parties” of the Asset Management Company,
there shall be no Acquisition Fee), any fraction lessthan 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 EstateRelated Assets (excluding the consumption tax, othersimilar taxes and expenses and the like) by (b) a rate
separately agreed between the Investment Corporationand the Asset Management Company (up to 0.5%) (inthe case of sale to any interested party as set forth in“Rules for Transactions with Interested Parties” of theAsset Management Company, there shall be nodisposition 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
Estate-Related Assets (excluding the consumption tax,other similar taxes and expenses and the like) by (ii) a
rate separately agreed between the Investment
Corporation and the Asset Management Company (upto 0.5%) (in the case of disposition to any 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.

(Add)

5. Management Fee V (Merger Fee)
In a consolidation-type merger or absorption-typemerger (collectively, a “merger”) between theInvestment Corporation and another investment
corporation, if such merger takes effect after the AssetManagement Company investigates and assesses theassets and other properties held by such investment
corporation and conducts any other business associatedwith the merger, Management Fee V shall be calculated
by multiplying (i) the then assessed value of the Real
Estate-Related Assets held by such investment
corporation when such merger takes effect by (ii) a rate
separately agreed between the Investment Corporationand the Asset Management Company (up to 0.8%).

5. Timing of Payment of Management Fee
6. Timing of Payment of Management Fee
Management Fee I and Management Fee II shall beManagement Fee I and Management Fee II shall be paid
within three months from the Accounting Settlement
paid within three months from the Accounting
Day of the relevant business term of the Investment
Settlement Day of the relevant business term of the
Corporation.
Investment Corporation.
Management Fee III shall be paid on or before the last Management Fee III shall be paid on or before the last
day of the following month of the month in which the day of the following month of the month in which theInvestment Corporation has acquired the relevant asset. Investment Corporation has acquired the relevant asset.
Management Fee IV shall be paid on or before the last Management Fee IV shall be paid on or before the last
day of the following month of the month in which the day of the following month of the month in which theInvestment Corporation has dispositioned the relevant
Investment Corporation has sold the relevant asset.
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 theInvestment Corporation acquired such investment- 19 -

Current Articles of Incorporation

Proposed Amendments
units, the number of the treasury investment units of
the Investment Corporation shall be excluded from thetotal number of issued and outstanding investment
units as of such Accounting Settlement Day for the
purpose of calculation of 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
of issued and outstanding investment units,
Management Fee II for a business term ending on orafter the day on which such split of the investment
units takes effect shall be calculated by making an
adjustment in which the Distributable Amount per Unit
is multiplied by the Split Ratio (as defined below)
related to the total number of issued and outstanding
investment units.
In this paragraph (2),“Split Ratio” shall be calculated, in the case of any splitof the investment units of the Investment Corporationthat increases the total number of issued andoutstanding 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 andoutstanding 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 andoutstanding investment units, Management Fee II for abusiness term ending on or after the issue date of such
Rights Offering shall be calculated by making an
adjustment in which the Distributable 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
acquisition rights related to an allotment without
contribution to unitholders.
“Ratio of Allotment without Contribution” means aratio to be calculated in the following formula in thecase of a Rights Offering.
㸺Calculation Formula㸼
Ratio of Allotment without Contribution 㸻 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 at Market 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(as defined 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 perunit at the time of exercising investment unit
- 20 -

Current Articles of Incorporation

Proposed Amendments
acquisition rights allotted without contribution insuch Rights Offering by (ii) a Market Price per
Unit (as defined below), or by another ratio
determined by 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
the Investment 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 theimmediately preceding day), in the case of Rights
Offering.
“Number of Incremental Units” means the number ofunits increased as a result of such Rights Offering in
the case of Rights Offering.

- 21 -

Attachment 7.2 (Proposed Amendments to SHI’s Articles of Incorporation)
Proposed Amendments to the Articles of Incorporation(Proposed amendments are underlined.)
Current Articles of Incorporation
Proposed Amendments
Article 9 General Meeting of Unitholders
Article 9 General Meeting of Unitholders
1-2. (omitted)
3. A general meeting of unitholders shall be convened
on June 10, 2016, or without delay thereafter, andsubsequently be convened on June 10 or without
delay thereafter every two years. In addition, ageneral meeting of unitholders may be held fromtime to time when it is necessary.

1-2. (unchanged)
3. A general meeting of unitholders shall be convened
on June 10, 2016, or without delay thereafter, andsubsequently be convened on July 10 or without
delay thereafter every two years. In addition, ageneral meeting of unitholders may be held fromtime to time when it is necessary.

4.

4.

(omitted)(unchanged)

Article 15 Record Date

Article 15 Record Date

1. If the Investment Corporation convenes a general
meeting of unitholders pursuant to the first sentenceof Paragraph 3 of Article 9, the Investment
Corporation shall deem the unitholders recorded orregistered in the final register of unitholders as ofthe end of March 2016 and subsequently as of theend of March every two years to be the unitholders
who are entitled to exercise their rights at suchgeneral meeting of unitholders.
2-4. (omitted)

1. If the Investment Corporation convenes a general
meeting of unitholders pursuant to the first sentenceof Paragraph 3 of Article 9, the Investment
Corporation shall deem the unitholders recorded orregistered in the final register of unitholders as ofthe end of April 2018 and subsequently as of theend of April every two years to be the unitholders
who are entitled to exercise their rights at suchgeneral meeting of unitholders.
2-4. (unchanged)

Article 33 Accounting Settlement Day

Article 33 Accounting Settlement Day

The business term of the Investment Corporation shallbe from April1 to the last day of September, and from
October 1 to the last day of March in the following
year, each year (the last day of each business term ishereinafter referred to as the “Accounting SettlementDay”).

The business term of the Investment Corporation shallbe from May 1 to the last day of October, and from
November 1 to the last day of April in the following
year, each year (the last day of each business term ishereinafter referred to as the “Accounting SettlementDay”).

(Add)

Chapter 9 Supplementary Provisions(Add)

Article 41 Changes to Business Term and Accounting
Settlement Day
Regardless of the provisions of Article 33, the businessterm of the Investment Corporation for the 25th fiscal
period shall be from October 1, 2017 to the last day ofApril 2018.

- 22 -

Attachment 12.4(1) (Pipeline Support Companies)
1. Sekiwa Real Estate, Ltd.
2. Sekiwa Real Estate Kansai, Ltd.
3. Sekiwa Real Estate Kanto, Ltd.
4. Sekiwa Real Estate Kyushu, Ltd.
5. Sekiwa Real Estate Chugoku, Ltd.
6. Sekiwa Real Estate Chubu, Ltd.
7. Sekiwa Real Estate Tohoku, Ltd.

- 23 -

Attachment 12.4(2) (Pipeline Support Agreements)
1. The Exclusive Right to Negotiate Agreement among SHI, SHAM and Sekiwa Real Estate, Ltd. dated January
11, 2012
2. The Exclusive Right to Negotiate Agreement among SHI, SHAM and Sekiwa Real Estate Kansai, Ltd. dated
January 11, 2012
3. The Exclusive Right to Negotiate Agreement among SHI, SHAM and Sekiwa Real Estate Kanto, Ltd. dated
August 1, 2013
4. The Exclusive Right to Negotiate Agreement among SHI, SHAM and Sekiwa Real Estate Kyushu, Ltd. dated
January 11, 2012
5. The Exclusive Right to Negotiate Agreement among SHI, SHAM and Sekiwa Real Estate Chugoku, Ltd.
dated July 31, 2014
6. The Exclusive Right to Negotiate Agreement among SHI, SHAM and Sekiwa Real Estate Chubu, Ltd. dated
January 11, 2012
7. The Exclusive Right to Negotiate Agreement among SHI, SHAM and Sekiwa Real Estate Tohoku, Ltd. dated
July 31, 2014

- 24 -

Attachment 12.6(1) (Properties to be Acquired)(1) Prime Maison Shirokanedai Tower
Prime Maison
Planned acquisition priceShirokanedai Tower(million yen)
Form of right
Trust beneficiary interest
Trustee(Address) 1-1-17 Kamiosaki, Shinagawa-ku, Tokyo
Location(Lot number) 1-537-40 Kamiosaki, Shinagawa-ku, Tokyo
Form ofForm ofOwnershipownershipownership
Commercial district,
Land use
Category 1 residential
Use
district
district
Total floor
Land
Building area (m2)Structure/
number ofArea (m2)
1,786.53
floorsConstruction
completion
date
Property name

7,950
Undecided

Ownership
Apartment complex
8,896.22
RC, 23FMay 20, 2016(2) Prime Maison Otsuka
Planned acquisition price(million yen)
Form of right
Trust beneficiary interest
Trustee(Address) 1-15-1 Kitaotsuka, Toshima-ku, Tokyo
Location(Lot number) 1-15-4 Kitaotsuka, Toshima-ku, Tokyo
Form ofForm ofOwnershipownershipownership
Property nameLand use
district

Prime Maison Otsuka

Commercial district

Land

Use
Building

Area (m2)649.05

Total floorarea (m2)Structure/
number offloorsConstruction
completion
date

3,700
Undecided

Ownership
Apartment complex andretail store
5,949.18
RC/S, 19F

January 11, 2017(3) Prime Maison Asakusabashi
Prime Maison
Planned acquisition price
Asakusabashi(million yen)
Form of right
Trust beneficiary interest
Trustee(Address) 2-21-8 Yanagibashi, Taito-ku, Tokyo
Location(Lot number) 2-11-18 Yanagibashi, Taito-ku, Tokyo
Form ofForm ofLand
Ownership
Building
ownershipownership
Property name- 25 -

1,680
Undecided

Ownership

Land use
district

Commercial district

Area (m2)

Use
Total floorarea (m2)Structure/
number offloorsConstruction
completion
date

422.87

Apartment complex
2,652.02
RC, 13F

October 7, 2016(4) Prime Maison Daikanyama
Prime Maison
Planned acquisition price
Daikanyama(million yen)
Form of right
Trust beneficiary interest
Trustee(Address) 1-9-6 Aobadai, Meguro-ku, Tokyo
Location(Lot number) 1-143-6 Aobadai, Meguro-ku, Tokyo
Form ofForm ofOwnershipownershipownership
Category 1 low-rise
Land use
exclusive residential
Use
district
district
Total floor
Land
Building area (m2)Structure/
number of2
Area (m )1,041.02
floorsConstruction
completion
date
Property name

2,520
Undecided

Ownership
Apartment complex
2,522.21
RC, 3F/B2F

January 12, 2017(5) Prime Maison Gotenyama West
Prime Maison Gotenyama Planned acquisition priceWest(million yen)
Form of right
Trust beneficiary interest
Trustee(Address) 6-5-8 Kitashinagawa, Shinagawa-ku, Tokyo
Location(Lot number) 6-387-2 Kitashinagawa, Shinagawa-ku, Tokyo
Form ofForm ofOwnershipownershipownership
Category 1 low-rise
Land use
exclusive residential
Use
district
district
Total floor
Land
Building area (m2)Structure/
number ofArea (m2)3,167.72
floorsConstruction
completion
date
Property name- 26 -

3,400
Undecided

Ownership
Apartment complex
5,520.41
RC, 4F/B1F

January 18, 2011

(6) Toyosu Residence
Property nameToyosu Residence

Planned acquisition price(million yen)

6,050

Form of right

Trust beneficiary interest

Trustee

Sumitomo Mitsui Trust
Bank, Limited

Location(Address) 3-5-3 Toyosu, Koto-ku, Tokyo(Lot number) 3-1-43 Toyosu, Koto-ku, Tokyo and one other plot
Form of
Ordinary fixed-term land
Form ofownershiplease rightownership
Land use
district

Industrial district

Land

Use
Building

Area (m2)

8,818.22- 27 -

Total floorarea (m2)Structure/
number offloorsConstruction
completion
date

Ownership
Apartment complex,
office, and retail store
26,364.53
RC, 14F

February 28, 2008

Attachment 12.6(2) (Properties to be Sold)

Usage
Residence-11
Residence-14
Residence-21
Residence-28
Residence-35
Residence-36
Residence-37
Residence-40
Residence-41
Residence-72
Residence-106
Residence-109

Property nameEsty Maison Machida
Esty Maison Shinkawasaki
Esty Maison Megurohoncho
Esty Maison Joto
Esty Maison Tenjinhigashi I
Esty Maison Tenjinhigashi II
Esty Maison Shijonishinotoin
Esty Maison Hachiojiminamino
Esty Maison Nishinakajima
Esty Maison Kawaramachi
Esty Maison Shibaura
Esty Maison Tsutsujigaoka- 28 -

Attachment 2

Articles of Incorporation

Sekisui House Reit, Inc.

-1-

Articles of Incorporation
Established on September 2, 2014
Amended on October 16, 2014
Amended on July 28, 2016

Chapter 1
Article 1

General Provisions

Corporate Name

The name of the Investment Corporation in Japanese shall be Sekisui House Reit Toshi Hojin.
In English, the Investment Corporation shall be called Sekisui House Reit, Inc.
Article 2

PurposeThe purpose of the Investment Corporation is to manage its assets principally as an investment
in real estates and other assets (as set forth in the Regulation for Enforcement of the Act on
Investment Trusts and Investment Corporations (Order of the Prime Minister’s Office No. 129
of 2000, as amended) (the “Regulation for Enforcement of the Investment Trusts Act”)), among
the specified assets (the “Specified Assets”) as set forth in Article 2, Paragraph 1 of the Act on
Investment Trusts and Investment Corporations (Law No. 198 of 1951, as amended) (the“Investment Trusts Act”) .
Article 3

Location of Head Office

The head office of the Investment Corporation is in Minato-ku, Tokyo.
Article 4

Method of Public Notice

The Investment Corporation shall publish all public notices in Nihon Keizai Shimbun.
Chapter 2
Article 5Investment Unit

Total Number of Issuable Investment Units, Etc.

1. The total number of issuable investment units for the Investment Corporation is ten million(10,000,000) units.
2. The proportion of the issue price of the investment units to be offered in Japan to the total
issue price of the investment units of the Investment Corporation shall be more than fifty
hundredths.
3. The Investment Corporation may solicit persons who subscribe for the investment units it
issues within the total number of issuable investment units as stated in Paragraph 1 above and-2-with the approval of the board of directors.

The amount to be paid per unit at the time ofissuance of the offered investment units (which means the investment units to be allocated tothose who applied for the subscription for such investment units in response to such
solicitation) shall be the amount determined and approved by the board of directors as fairamount in light of the assets held by the Investment Corporation (the “Managed Assets”).
Article 6

Redemption of Investment Units upon Request of a Unitholder and Acquisitionof Treasury Investment Units

1. The Investment Corporation shall not redeem any investment units upon request of aunitholder.
2. The Investment Corporation may acquire its investment units with compensation byagreement with its unitholders.
Article 7

Matters regarding the Handling of Investment Units

Recording and registration in the register of unitholders of the Investment Corporation,
procedures for unitholders to exercise their rights and any other procedures and charges relating
to the handling of investment units are subject to the laws and regulations, and these Articles ofIncorporation, as well as the provisions of the Investment Units Handling Rules prescribed by
the board of directors.
Article 8

Minimum Net Asset ValueThe Investment Corporation shall hold a minimum net asset value of fifty-million yen(¥50,000,000) at all times.
Chapter 3
Article 9

General Meetings of Unitholders

General Meeting of Unitholders

1. A general meeting of unitholders of the Investment Corporation shall be held within the 23
wards of Tokyo, and shall be convened on July 1, 2018 and onwards without delay, andsubsequently be convened on July 1 and onwards every two years without delay.

Inaddition, the general meetings of unitholders may be held from time to time when it isnecessary.
2. To convene a general meeting of unitholders, the date of such general meeting of unitholders
shall be announced in public notice at least two months prior to such date, and a notice shallbe issued to each unitholder in writing or by electromagnetic means pursuant to the laws andregulations at least two weeks prior to such date.

-3-

However, such public notice is notrequired in the case where the general meeting of unitholders is held before twenty-five (25)months have elapsed since the last general meeting of unitholders was held in accordancewith the provision of the first sentence of the immediately preceding paragraph.
Article 10

Convener

Unless otherwise provided by the laws and regulations, general meetings of unitholders shall be
convened by the executive director if there is one executive director, or by one executive
director according to the order predetermined by the board of directors if there are two or more
executive directors.
Article 11

Chair

The executive director shall chair general meetings of unitholders if there is one executive
director, and one executive director shall chair general meetings of unitholders according to theorder predetermined by the board of directors if there are two or more executive directors.

If

there are no executive directors or all executive directors are unable to do so, one supervisory
director shall chair the general meeting of unitholders according to the order predetermined by
the board of directors.
Article 12

Record Date

1. If the Investment Corporation convenes a general meeting of unitholders pursuant to the first
sentence of Paragraph 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 in 2018 andsubsequently as of the end of April in every two years to be the unitholders who are entitled
to exercise their rights at such general meeting of unitholders.

In addition to such case, if ageneral meeting of unitholders is to be held on a day within three months after theimmediately preceding Accounting Settlement Day (as defined in Article 45; the same shallapply hereinafter), the Investment Corporation shall deem the unitholders recorded orregistered in the final register of unitholders for such Accounting Settlement Day to be theunitholders who are entitled to exercise their rights at such general meeting of unitholders.
2. Notwithstanding the preceding paragraph, the Investment Corporation may, in accordancewith a resolution of the board of directors, make an advance public notice and deem theunitholders recorded or registered or the registered investment unit pledgees in the final
register of unitholders on a certain date to be the unitholders or the registered investment unit
pledgees who are entitled to exercise their rights.

-4-Article 13

Exercise of Voting Rights by Proxy

1. Each unitholder is entitled to exercise its voting rights by proxy, who shall be one unitholder
with voting rights in the Investment Corporation.
2. In the case of the preceding paragraph, such unitholders or proxies shall, for each general
meeting of unitholders, submit to the Investment Corporation in advance a document
evidencing their power of attorney or provide the Investment Corporation by electromagnetic
means with the information that should be contained in such document.

Unitholders or

proxies who intend to provide the information to be contained in the document evidencing
their power of attorney by electromagnetic means shall indicate the Investment Corporation
the type and content of the electromagnetic means they will use and obtain written or
electromagnetic consent in advance.
Article 14

Exercise of Voting Rights in Writing

1. A unitholder may exercise its voting rights in writing by stating in a document for the
exercise of voting rights (the “Voting Rights Exercise Form”) the necessary matters andsubmitting the completed Voting Rights Exercise Form to the Investment Corporation by thetime set forth by the laws and regulations.
2. The number of voting rights exercised in writing pursuant to the preceding paragraph shall be
included in the number of voting rights of unitholders present.
Article 15

Exercise of Voting Rights by Electromagnetic Means

1. A unitholder may exercise its voting rights by electromagnetic means by providing theInvestment Corporation with the information that is required to be stated in the Voting Rights
Exercise Form by electromagnetic means by the time set forth in the laws and regulations,with the consent of the Investment Corporation, in accordance with the provisions of the laws
and regulations.
2. The number of voting rights exercised by electromagnetic means pursuant to the preceding
paragraph shall be included in the number of voting rights of unitholders present.
Article 16

Method of Resolution

Unless otherwise provided by the laws and regulations or these Articles of Incorporation,
resolutions of a general meeting of unitholders shall be passed with a majority of the voting
rights of the unitholders present.

-5-Article 17

Deemed Approval

1. Unitholders who do not attend a general meeting of unitholders and do not exercise voting
rights shall be deemed to approve the proposals for resolution submitted to the general
meeting of unitholders (excluding any proposals with purposes that conflict with each otherin the case that multiple proposals are submitted).
2. The number of voting rights of unitholders deemed to approve the proposals for resolution
pursuant to the preceding paragraph shall be included in the number of voting rights ofunitholders present.
Article 18

Minutes

The minutes of the general meetings of unitholders which describe the outline of the progress of
the agenda and the result thereof and other items provided by the laws and regulations shall be
prepared.
Article 19

Rules for the General Meetings of Unitholders

Matters regarding the general meetings of unitholders shall be subject to the Rules for the
General Meetings of Unitholders prescribed by the board of directors, as well as the laws andregulations and these Articles of Incorporation.
Chapter 4
Article 20

Organizations other than General Meetings of Unitholders

Number of Directors and Composition of the Board of Directors

The Investment Corporation shall have at least one executive director and at least two
supervisory directors (at least a number one more than the number of executive directors), andexecutive directors and supervisor directors (the “Directors”) shall compose the board of
directors.
Article 21

Appointment of Directors

Directors shall be appointed by resolution of the general meeting of unitholders.
Article 22

Term of Directors

1. The term of office of Directors shall be two (2) years after the appointment; provided,
however, that this shall not prevent such term from being extended or shortened to the extent
permitted by the laws and regulations by resolution of the general meeting of unitholders.
The term of office of Directors appointed to fill a vacancy or increase numbers shall be thesame as the remaining term of their predecessors or the other Directors still in office.

-6-

2. The resolution concerning the appointment of a Director who is appointed to fill a vacancy
shall be effective until the term of office of the incumbent Director who is appointed at thegeneral meeting of unitholders at which such resolution is passed (if the Director is notappointed at such general meeting of unitholders, the last general meeting of unitholders at
which the Director is appointed) expires.

However, such term shall not be restricted frombeing shortened by resolution of the general meeting of unitholders.
Article 23

Convener and Chair of Meeting of the Board of Directors

1. Unless otherwise provided by the laws and regulations, meetings of the board of directors
shall be convened and chaired by the executive director if there is one executive director, orby one executive director according to the order predetermined by the board of directors if
there are two or more executive directors.
2. Convocation notices for meetings of the board of directors are issued to all the Directors atleast three days before the date of a meeting of the board of directors.

However, theconvocation period may be abridged or the convocation procedures may be omitted, with theagreement of all the Directors.
Article 24

Method of Resolution of Meeting of the Board of Directors

Unless otherwise provided by the laws and regulations or these Articles of Incorporation,
resolutions of a meeting of the board of directors shall be passed with a majority of the
Directors present, when a majority of the Directors who are entitled to particiapte in the
resolution are present.
Article 25

Minutes of the meetings of the Board of Directors

The minutes of the meetings of the board of directors which describe and record the outline ofthe progress of the agenda and the result thereof and other items provided by the laws andregulations shall be prepared.

The Directors present shall sign, name and seal, or

electromagnetically sign such minutes.
Article 26

Rules for the Board of Directors

Matters regarding the board of directors shall be subject to the Rules for the Board of Directors
prescribed by the board of directors, as well as the laws and regulations and these Articles ofIncorporation.

-7-

Article 27

Exemption of Directors from Liabilities to Damages

The Investment Corporation may exempt an Director from its liability under Article 115-6,
Paragraph 1 of the Investment Trusts Act, to the extent permitted by the laws and regulations, byresolution of the board of directors in the event that the Director has acted in good faith andwithout gross negligence in the conduct of duties and that such exemption is consideredparticularly necessary in light of the details of the facts giving rise to the liability, the status of
the execution of the Director’s duties and any other factors.
Article 28

Appointment of Accounting Auditor

Accounting auditors shall be appointed by resolution of the general meetings of unitholders.
Article 29

Term of Accounting Auditor

1. The term of office of accounting auditors shall be the period up to the closing of the first
general meeting of unitholders which is held after the first Accounting Settlement Day thatcomes after one year has elapsed since such accounting auditor took his/her office.
2. Unless any other specific resolution is made in the general meetings of unitholders as set
forth in the preceding paragraph, the accounting auditors are deemed to be re-appointed insuch general meeting of unitholders.
Article 30

Exemption of Accounting Auditors from Liabilities to Damages

The Investment Corporation may exempt an accounting auditor from its liability under Article
115-6, Paragraph 1 of the Investment Trusts Act, to the extent permitted by the laws andregulations, by resolution of the board of directors in the event that the accounting auditor has
acted in good faith and without gross negligence in the conduct of duties and that such
exemption is considered particularly necessary in light of the details of the facts giving rise to
the liability, the status of the execution of the accounting auditor’s duties and any other factors.
Chapter 5
Article 31

Asset Management

Basic Policy of Asset Management

The Investment Corporation shall manage its assets by investing continuously and principally inReal Estates and Other Assets (as defined in Paragraph 1 of Article 32).

The purpose of theInvestment 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 and maximizing unitholder value through asset management that pursues stable earnings
over the medium to long term and steady growth in the Managed Assets.

-8-Article 32

Categories, Purpose and Scope of Target Assets of Asset Management

1. The Investment Corporation shall invest primarily in real estate, real estate lease rights,
surface rights, trust beneficiary rights in trust of the above assets only and issued andoutstanding shares of a corporation stipulated in Article 221-2, Paragraph 1 of the Regulation
for Enforcement of the Investment Trusts Act (the “Corporation Holding Overseas Real
Estate”) (limited to such outstanding shares as acquired in excess of the number obtained bymultiplying the total number of such outstanding shares (excluding the shares held by such
Corporation Holding Overseas Real Estate) by the ratio set forth in Article 221 of theRegulation for Enforcement of the Investment Trusts Act) (the “Real Estates and Other
Assets”)
2. Besides the Real Estates and Other Assets, the Investment Corporation may invest in thefollowing Specified Assets:(a) 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;(b) Equity interests in an agreement where one party makes a financial contribution to anotherparty to manage the Real Estates and Other Assets or the assets listed in the preceding item,
and the other party manages that contribution principally as an investment in those assets
and distributes profits from such management (“Equity Interests in Silent Partnership on
Real Estate”);(c) Trust beneficiary rights in monetary trusts, the purpose of which is to manage the trust
assets principally as an investment in Equity Interests in Silent Partnership on Real Estate;(d) Real estate, real estate lease rights or surface rights under the laws and regulations of aforeign county, or trust beneficiary rights in trust of real estate, real estate lease rights or
surface rights or the assets listed in Items (a) to (c) established under the laws andregulations 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 to those the purpose ofwhich is to invest the amount exceeding 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)

Beneficiary certificates (as set forth in the Investment Trusts Act) (limited to those thepurpose of which is to invest the amount exceeding the half of the assets in the Real
Estate-Related Assets);(g) Investment securities (as set forth in the Investment Trusts Act) (limited to those thepurpose of which is to invest the amount exceeding the half of the assets in the Real
Estate-Related Assets);(h) Beneficiary certificates of a specified purpose trust (as set forth in the Asset Securitization-9-Act) (excluding the Real Estates and Other Assets, the assets 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 andregulations of a foreign country (limited to those the purpose of which is to invest theamount exceeding the half of the assets in the Real Estate-Related Assets);(j)

Deposits;(k) Call loans;(l)Monetary claims (excluding the assets listed in Item (j) or (k));(m) National government bonds;(n) Municipal bonds;(o) Debentures issued by a corporation pursuant to a special act (as set forth in the Financial
Instruments and Exchange Act (Act No. 25 of 1948, as amended) (the “FIEA”);(p) Specified bond certificates as set forth in the Asset Securitization Act;(q) Bond certificates;(r)

Share certificates (including those of a corporation under the laws and regulations of aforeign country; limited to those the purpose of which is to substantially invest in the Real
Estate-Related Assets or those to be acquired incidental to or in relation to an investment in
the Real Estate-Related Assets; and excluding those of a Corporation Holding Overseas
Real Estate as set forth in Paragraph 1);(s)

Beneficiary certificates of a bond investment trust (which are beneficiary certificates of asecurities investment trust as set forth in the Investment Trusts Act which are intended tobe managed as an investment in the assets, etc. listed in Item (m), (n), (q), (u) or (v));(t)

Investment corporation bond certificates as set forth in the Investment Trusts Act;(u) Commercial papers;(v) Negotiable certificates of deposit issued by a foreign corporation;(w) Trust beneficiary rights in monetary trusts, the purpose of which is to manage the trust
assets as investment in the assets as set forth in Items (j) to (v);(x) Assets of the same nature as those listed in the preceding item that were established under
the laws and regulations of a foreign country;(y) Rights related to derivatives transactions (as set forth in the Order for Enforcement of the
Act on Investment Trusts and Investment Corporations (Cabinet Order No. 480 of 2000, as
amended) (the “Investment Trusts Act Enforcement Order”); and(z) Renewable energy power generation facilities (as set forth in Article 3, Item 11 of theInvestment Trusts Act Enforcement Order).

- 10 -

3. In addition to the Specified Assets as set forth in Paragraphs 1 and 2 above, the Investment
Corporation may invest in the following assets:(a) Trademark rights, or exclusive rights to use or non-exclusive rights to use therefor as set
forth in the Trademark Act (Act No. 127 of 1959, as amended);(b) Right to use the source of hot springs as set forth in the Hot Springs Act (Act No. 125 of1948, as amended); rights to use hot springs as set forth in the Sightseeing Facility Estate
Mortgage Act (Act No. 91 of 1968, as amended) and the hot-spring rights (onsen-ken) or
the rights to use hot springs (onsen riyo-ken) admitted under customary law; and facilities
and the like related to such hot springs;(c) Carbon dioxide equivalent quota provided for in the Act on Promotion of Global WarmingCountermeasures (Act No. 117 of 1998, as amended) or other quota similar thereto or
emission right (including emission right concerning greenhouse gases);(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 the Real Estate-Related
Assets (excluding those set forth in Item (z) of Paragraph 2 of Article 32);(e) Copyrights and other similar rights as set forth in the Copyright Act (Act No. 48 of 1970,
as amended);(f)Equity interests in a partnership under the Civil Code (limited to those established byinvesting real estates, real estate lease rights or surface rights and the purpose for which islease, operation or management thereof);(g) Easements;(h) Specified equity as set forth in the Asset Securitization Act;(i)

Status of member of limited liability companies as set forth in the Companies Act (Act No.
86 of 2005, as amended);(j)Status of contributor of funds for a general incorporated association (including claim forrefund of the funds) as set forth in the Act on General Incorporated Associations andGeneral Incorporated Foundations (Act No. 48 of 2006, as amended);(k) Trust beneficiary rights in trust of the assets listed in Items (a) to (j) as trust assets;(l)

Rights related to various insurance contracts;(m) Assets of the same nature as those listed in Items (f), and (h) to (l), established under thelaws and regulations of a foreign country; and(n) Other assets obtainable under the rules of financial instruments exchanges or other similarorganizations, which are necessary or useful for management of the Real Estate-Related
Assets held by the Investment Corporation.
4. With respect to the Rights That Must Be Indicated on Securities as set forth in Article 2,
Paragraph 2 of the FIEA, if no such securities indicating rights have been issued, such rights- 11 -

shall be regarded as such securities and Paragraphs 1 to 3 shall apply.
Article 33

Investment Policy

1. The Investment Corporation shall position non-residential, business purpose real estates thatare used mainly as office buildings, retail properties or hotels, etc. (the “Commercial
Properties”) as its central investment target.
2. The investment area of the Commercial Properties shall be mainly in Japan but theInvestment Corporation may invest overseas.
3. The main geographical areas for investment of the Commercial Properties in Japan shall be
the Three Major Metropolitan Areas (which collectively refers to Greater Tokyo, Osaka Area
and Nagoya Area) centering on the 23 wards of Tokyo, Osaka City and Nagoya City.

The

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

Investment Restrictions

1. The Investment Corporation shall invest in monetary claims and securities (excluding thosefalling under the Real Estate-Related Assets), focusing on the safety and redeemability, andshall not make investments only in pursuit of profits from active investment.
2. The Investment Corporation shall make investments in the rights related to derivatives
transactions as set forth in Item (y) of Paragraph 2 of Article 32 only for the purpose ofhedging exchange risk, price fluctuation risk, interest rate risk and other risk factors arisingfrom the Managed Assets or liabilities of the Investment Corporation.
3. The Investment Corporation shall manage assets so that seventy-five hundredths or more of
the total amount of the Specified Assets held by the Investment Corporation is made up of
specified real estate (real estate, real estate lease rights or surface rights, or trust beneficiaryrights in trust of ownership of real estate, land lease rights or surface rights from Specified
Assets acquired by the Investment Corporation).
Article 35

Reinvestment of Proceeds, Etc.

The Investment Corporation may appropriate proceeds from sales of the Managed Assets,interests, dividends and redemption money on securities, interest, etc., trust dividends, profit
distributions from Equity Interests in Silent Partnership, rent income from the Real Estates andOther Assets and any other proceeds, as well as leasehold deposit and tenant security deposit, toinvestment or reinvestment.

- 12 -

Article 36

Purpose and Scope of Lending of Portfolio Assets

1. In principle, the Investment Corporation shall lease the real estates within the Managed
Assets (including underlying real estates of the Real Estate-Related Assets) for the purpose of
securing mid- to long-term and stable income.
2. In leasing the real estates, the Investment Corporation may receive leasehold deposit or
tenant security deposit or other similar money, and shall manage such received money inaccordance with Articles 31, 34 and 35.
3. The Investment Corporation may lend the Managed Assets other than the real estates(including underlying real estates of the Real Estate-Related Assets).
Chapter 6
Article 37

Asset Evaluation

Principles for Evaluating Assets

The Investment Corporation shall evaluate the Managed Assets in accordance with the generally
accepted corporate accounting standards and practices.

In evaluation of the Managed Assets,

the Investment Corporation shall comply with the general principal of consistency in order toensure the reliability of the evaluation results, and carry out its business appropriately andfaithfully for the interest of unitholders.
Article 38

Asset Evaluation Record Date

The asset evaluation record date for the Investment Corporation shall be each Accounting
Settlement Day set forth in Article 45.

However, the record date for securities (excluding thosein which the Investment Corporation has invested with the intention to hold to maturity) andother Specified Assets that can be evaluated using the value based on the market value shall be
the end of every month.
Article 39

Method of and Standards for Asset Evaluation

The method of and standards for asset evaluation of the Investment Corporation shall be
determined by the type of the 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; and those under the laws and regulations of aforeign country as set forth in Item (d) of Paragraph 2 of Article 32:
To be evaluated by subtracting the accumulated depreciation from the acquisition price.
The amount of depreciation for buildings and equipment is calculated using the straightline method.

However, the calculation method may be changed if such calculation

method as employed by the Investment Corporation is believed to be inappropriate on- 13 -

justifiable grounds and if it is reasonably believed that such change will cause no harm interms of investor protection.
(b) Trust beneficiary rights in trust of 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; and those onlyin trust of real estate, real estate lease rights and surface rights established under the laws
and regulations of a foreign country as set forth in Item (d) of Paragraph 2 of Article 32:
Real estate, real estate lease rights and surface rights as the trust assets are evaluated bysubtracting the accumulated depreciation from the acquisition price.

The amount ofdepreciation for buildings and equipment is calculated using the straight line method.
However, the calculation method may be changed only when the calculation in the straightline method becomes inappropriate on justifiable grounds and if it is reasonably believedthat such change will cause no harm in terms of investor protection.

Financial assets andliabilities contained in the trust assets are evaluated in accordance with the generally
accepted corporate accounting standards and practices.

Trust beneficiary rights are thenevaluated by subtracting the total amount of trust liabilities from the total amount of trust
assets to obtain the amount equivalent to the share of the trust beneficiary rights.
(c) 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 (a) of Paragraph 2 of Article 32; and trust beneficiary rights in monetary trusts
established under the laws and regulations of a foreign country as set forth in Item (d) of
Paragraph 2 of Article 32, the purpose 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 (a) of
Paragraph 2 of Article 32:
Real estate, real estate lease rights and surface rights as the trust assets are evaluated inaccordance with Item (a).

Financial assets and liabilities contained in the trust assets areevaluated in accordance with the generally accepted corporate accounting standards andpractices.

Trust beneficiary rights of such trust are then evaluated by subtracting the total

amount of trust liabilities from the total amount of trust assets to obtain the amountequivalent to the share of the trust beneficiary rights.
(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 regulations of a foreign country as
set forth in Item (d) of Paragraph 2 of Article 32:
Real estate, real estate lease rights and surface rights as the assets of silent partnership are
evaluated in accordance with Item (a).

Financial assets and liabilities contained in theassets of silent partnership are evaluated in accordance with the generally accepted
corporate accounting standards and practices.

- 14 -

Equity Interests in Silent Partnership arethen evaluated by subtracting the total amount of liabilities from the total amount of assets
to obtain the net asset value of the silent partnership that is equivalent to the Investment
Corporation’s equity interest in such silent partnership.
(e) Trust beneficiary rights in monetary trusts, 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; and trust beneficiary rights inmonetary trusts established under the laws and regulations of a foreign country as set forthin Item (d) of Paragraph 2 of Article 32, the purpose of which is to manage the trust assets
as an investment in Equity Interests in Silent Partnership on Real Estate as set forth in Item(c) of Paragraph 2 of Article 32:
Equity Interests in Silent Partnership as the assets of the trust assets are evaluated inaccordance with Item (d).

Financial assets and liabilities are evaluated in accordance withthe generally accepted corporate accounting standards and practices and then are evaluatedby subtracting the total amount of trust liabilities from the total amount of trust assets toobtain the amount equivalent to the share of the trust beneficiary rights.
(f)Securities (including share certificates of the Corporation Holding Overseas Real Estate as
set forth in Paragraph 1 of Article 32, and excluding those listed in each of the preceding
Items):(i) Securities listed on the financial products exchange, OTC securities, and othersecurities listed in Article 6, Paragraph 1, Item 3 of the Regulations on Accounting ofInvestment Corporations (Cabinet Office Order No. 47 of 2006, as amended) (the“Investment Corporations Accounting Regulations”):
To be evaluated by market value (the amount calculated based on the publishedclosing price or an equivalent amount produced in a reasonable calculation method).
(ii) Other Securities:
To be evaluated in accordance with the generally accepted corporate accounting
standards and practices and/or other Investment Corporations Accounting Regulations.

(g) Monetary claims as set forth in Item (l) of Paragraph 2 of Article 32:
To be evaluated by subtracting the allowance for bad debts calculated in accordance withthe estimated cost of bad debts from the acquisition price.

However, if such monetaryclaims are acquired for a price higher or lower than the value of such claim, when the
difference between the acquisition price and the value of such claim is considered as rateadjustment, the monetary claims are evaluated by subtracting the allowance for bad debts
from the amount calculated on an amortized cost basis.
(h) Rights related to derivatives transactions as set forth in Item (y) of Paragraph 2 of Article32:- 15 -

(i) Claims and debts produced as a result of transactions of derivatives listed on thefinancial instruments exchange:
To be evaluated with a price calculated based on the closing price of the relevant
financial instruments exchange.

If no closing price is provided on such day, theamount calculated based on the closing price of the day immediately preceding suchday will be used.
(ii) Claims and debts produced as a result of transactions of unlisted and unquoted
derivatives on the financial instruments exchange:
To be evaluated with a price calculated in a reasonable manner as a price equivalent to
the market price.

If it is believed that calculation of the fair evaluation amount isextremely difficult, the evaluation will be performed based on the acquisition value.
However, hedge accounting is applicable to transactions recognized as hedgetransactions in accordance with the generally accepted corporate accounting standards
and practices.

Special accounting method for interest rate swaps is applicable totransactions satisfying the requirements for the special accounting method for interest
rate swaps as set forth in the accounting standards for financial instruments.
(i)

Others:If the evaluation of an asset is not set forth in the above items, the asset is evaluated, byeach type of assets, as the amount that should be affixed using the evaluation regulations of
the Investment Trusts Association, Japan (the “JITA”) or the generally accepted corporate
accounting standards and practices.

Article 40

Value in Securities Registration Statements, Securities Reports and AssetManagement Reports

If making evaluations in a way that differs from the methods set forth in Article 39 for the
purposes of recording a value in a securities registration statement, securities report and asset
management report, etc., evaluations shall be made in the following way.
(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; those under the laws and regulations of a foreigncountry as set forth in Item (d) of Paragraph 2 of Article 32; and those held by the
Corporation Holding Overseas Real Estate as set forth in Paragraph 1 of Article 32:
In principle, to be evaluated as the amount calculated from the appraisal by a real property
appraiser (if such assets are in any foreign currency, the amount converted into JPY).
(b) Trust beneficiary rights in trust of 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; and trust
beneficiary rights in monetary trusts, the purpose of which is to manage the trust assets- 16 -

principally as an investment in real estate, real estate lease rights or surface rights as set
forth in Item (a) of Paragraph 2 of Article 32; and trust beneficiary rights only in trust ofreal estate, real estate lease rights or surface rights established under the laws andregulations of a foreign country as set forth in Item (d) of Paragraph 2 of Article 32; andtrust beneficiary rights in monetary trusts, the purpose of which is to manage the trust
assets principally as an investment in real estate, real estate lease rights or surface rights as
set forth in Item (a) of Paragraph 2 of Article 32:
The trust assets which are real estate, real estate lease rights and surface rights areevaluated, in principle, as the amount produced from the appraisal by the real property
appraiser (if such assets are in any foreign currency, the amount converted into JPY), andtrust assets which are financial assets or liabilities are evaluated in accordance with thegenerally accepted corporate accounting standards and practices. Trust beneficiary rights
are then evaluated by subtracting the total amount of trust liabilities from the total amountof trust assets to obtain the amount equivalent to the share of the trust beneficiary rights.
(c) Equity Interests in Silent Partnership on Real Estate as set forth in Item (b) of Paragraph 2
of Article 32; and trust beneficiary rights in monetary trusts, 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; and Equity
Interests in Silent Partnership on Real Estate established under the laws and regulations of
a foreign country as set forth in Item (d) of Paragraph 2 of Article 32; and trust beneficiaryrights in monetary trusts, the purpose of which is to manage the trust assets as aninvestment in the Equity Interest in Silent Partnership on Real Estate as set forth in Item (c)of Paragraph 2 of Article 32:
Real estate, real estate lease rights and surface rights which are underlying assets of silent
partnership are evaluated following the preceding Item.

Financial assets and liabilities

which are underlying assets of silent partnership are evaluated in accordance with thegenerally accepted corporate accounting standards and practices.

Equity Interests in

Silent Partnership are then evaluated by subtracting the total amount of liabilities for suchsilent partnership from the total amount of assets therefor to obtain the net asset value ofthe silent partnership that is equivalent to the Investment Corporation’s equity interest insuch silent partnership.

Equity Interests in Silent Partnership which are trust assets areevaluated in accordance the first sentence of this Item, and the financial assets andliabilities are evaluated in accordance with the generally accepted corporate accounting
standards and practices, and then are evaluated with the amount calculated by subtracting
the total amount of liabilities from the total amount of assets to obtain the amountequivalent to the share of the trust beneficiary rights of such trust.

- 17 -

Chapter 7
Article 41

Borrowings and Issuance of Investment Corporation Bonds

Purpose of Borrowings and Issuance of Investment Corporation Bonds

The Investment Corporation may make borrowings from qualified institutional investors as set
forth in Article 2, Paragraph 3, Item 1 of the FIEA (limited to institutional investors specified by
Article 67-15 of the Special Taxation Measures Law (Law No. 26 of 1957, as amended)) (the“Special Taxation Measures Law”) or issue investment corporation bonds (including short-term
investment corporation bonds; the same shall apply hereinafter), in order to use the funds forsuch purpose as set forth in the following Article, aiming at steady growth in the Managed
Assets and realization of efficient and safe management.
Article 42

Use of Borrowings and Funds Raised by Issuance of Investment Corporation
Bonds

Subject to the provisions of the laws and regulations, the Investment Corporation shall spend theborrowings and funds raised by the issuance of investment corporation bonds by acquiring
assets, making repairs, repaying tenant leasehold deposit and tenant security deposit, paying
distributions, paying the Investment Corporation’s expenses or repaying debts (including
fulfillment of borrowings and investment corporation bond debts).
Article 43

Limits for Borrowings and Issuance of Investment Corporation Bonds

Borrowings and issuance of investment corporation bonds shall be limited to one trillion(1,000,000,000,000) yen respectively and the aggregate amount thereof shall not exceed one
trillion (1,000,000,000,000) yen.
Article 44

Provision of Collateral

When making borrowings or issuing investment corporation bonds, the Investment Corporation
may provide the Managed Assets as collateral.
Chapter 8
Article 45

Calculation

Business Term and Accounting Settlement Day

The business term of the Investment Corporation shall be from May 1 to the last day of October,and from November 1 to the last day of April in the following year, each year (the last day ofeach business term is hereinafter referred to as the “Accounting Settlement Day”).

- 18 -

Article 46

Cash Distribution Policies

The Investment Corporation shall, in principle, pay distributions based on the following
policies.
1. Method for calculating total amount of money to be distributed to unitholders(a) The Investment Corporation’s profits (the “Distributable Amount”) shall be calculated bysubtracting (i) the sum of the total unitholders’ capital and the capital surplus (the total
unitholders’ capital and the like) from (ii) the net asset value produced by subtracting thetotal amount of liabilities from the total amount of assets on the balance sheet as of the
Accounting Settlement Day, in accordance with the generally accepted corporate
accounting standards and practices.
(b) The Investment Corporation shall distribute the amount which is in excess of an amountequivalent to ninety hundredths (if the calculation of this amount is changed pursuant torevisions of the laws and regulations, etc., such revised amount) of the distributable income
amount of the Investment Corporation as stipulated in Article 67-15, Paragraph 1 of theSpecial Taxation Measures Law.

The Investment Corporation may save, reserve orotherwise dispose of, long-term reserves for repair, reserves for distributions, and othersimilar reserves and provisions, as well as other amounts, that are deemed necessary tomaintain or improve the value of the Managed Assets.

However, this shall not apply if

any tax loss arises or there is no profit for tax purposes due to carry-over of such losses,
and the amount reasonably determined by the Investment Corporation shall apply instead.
2. Cash distributions in excess of profits
If the Investment Corporation deems it appropriate in light of the economic conditions, trendof real estate market and lease market, or if it serves to mitigate its burden of taxation such as
corporate tax, the Investment Corporation may make cash distributions to unitholders in theamount determined by the Investment Corporation itself as cash in excess of profits.

Anyamount distributed to unitholders in excess of profits shall be first deducted from the capitalsurplus, and the remainder then subtracted from the total unitholders’ capital.
Article 47

Method of Cash Distribution

The Investment Corporation shall pay cash distributions to unitholders and registered unitholder
pledgees recorded or registered on the final register of unitholders as of the Accounting
Settlement Day in proportion to the number of units held, or the number of units intended forregistered unitholder pledge. The Investment Corporation shall make such distributions within
three months of the Accounting Settlement Day as a general rule.

- 19 -

Article 48

Limitation of Cash Distribution

The Investment Corporation is relieved of its duty to pay any cash distributions to a unitholder
if three full years have passed from the day of commencing payments without being received by
the unitholder.
Article 49

No interest will accumulate on any unpaid cash distributions.

JITA Regulations

The Investment Corporation shall comply with these Articles of Incorporation and the JITA’s
rules and regulations with regards to distribution of money.
Chapter 9
Article 50

Fees

Standards for Fee Payment to Asset Management Company

Standards for the amount or payment of the management fees payable by the Investment
Corporation to the asset management company to which the Investment Corporation entrusts
management of its assets (the “Asset Management Company”) shall be as set forth in Appendix
that forms part of these Articles of Incorporation.
Article 51

Standards for Fee Payment to Executive Directors and Supervisory Directors

The Investment Corporation shall pay fees to each executive director monthly by the last day of
the relevant month in an amount determined by the board of directors in light of general trends
of price and wage and the like, that is no more than 1,000,000 yen per month.

Further, theInvestment Corporation shall pay fees to each supervisory director monthly by the last day of
the relevant month in an amount determined by the board of directors in light of general trends
of price and wage and the like, that is no more than 500,000 yen per month.
Article 52

Standards for Fee Payment to Accounting Auditor

The Investment Corporation shall pay fees to the accounting auditor in an amount determinedby the board 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 for the period of six
months up to such day, through bank transfer to an account designated by the accounting
auditor.

- 20 -

Chapter 10
Article 53

Entrustment of Business and Administration

Entrustment of Business and Administration

1. The Investment Corporation entrusts the Asset Management Company with services related
to the management of its assets pursuant to Article 198 of the Investment Trusts Act, andentrusts the asset custody company with services related to the custody of its assets pursuant
to Article 208 of the Investment Trusts Act.
2. The Investment Corporation entrusts administrative services other than those related to the
management and custody of its assets, as set forth in Article 117 of the Investment Trusts Act,to a third party determined by the board of directors, as necessary.
Chapter 11
Article 54

Supplementary Provisions

Consumption Tax and Local Consumption Tax

The Investment Corporation may assume consumption tax, local consumption tax and othersimilar taxes imposed on taxable items under the Consumption Tax Act (Act No. 108 of 1988,
as amended) (the “Consumption Tax, Etc.” in this Article) among costs and expenses pertaining
to the management of the Managed Assets and other costs and expenses payable by theInvestment Corporation.

In this case, the Investment Corporation shall pay the amountequivalent to the Consumption Tax, Etc. in addition to the other amount of the taxable items.
Unless otherwise specified, all the amounts described in these Articles of Incorporation are
exclusive of the Consumption Tax, Etc.

- 21 -

Appendix: Management Fee to Asset Management Company
Established on September 2, 2014
Amended on October 16, 2014
Amended on July 28, 2016- 22 -

Appendix

Management Fee to Asset Management Company
Followings are the calculation methods and the timing for the payment of the management
fee to be paid to the Asset Management Company.

The Investment Corporation shall pay

such fees and the amount equivalent to the consumption tax and local consumption tax
thereon to a bank account designated by the Asset Management Company by means oftransfer (the Investment Corporation shall bear the bank transfer fee and the consumption tax
and local consumption tax thereon).
1.

Management Fee I (Ongoing Operational and Management Fee I)
Management Fee I shall be calculated by multiplying (i) the total net assets of theInvestment Corporation on the balance sheet (limited to those approved by the board of
directors pursuant to Article 131, Paragraph 2 of the Investment Trusts Act) for the latest
Accounting Settlement Day by (ii) a rate separately agreed by the Investment Corporationand the Asset Management Company (up to 0.5% per annum), on a per diem basis.

In thiscalculation method, the actual number of days in the relevant business term shall be assumed
to be 365 days in a year and any fraction less than one yen shall be rounded down.
2.

Management Fee II (Ongoing Operational and Management Fee II)Management Fee II for each business term shall be (i) the distributable amount before

deduction of Management Fee II for the relevant business term of the Investment Corporation(i.e., the amount of the net profit for the period before tax on the profit and loss statement(limited to those approved by the board of directors pursuant to Article 131, Paragraph 2 ofthe Investment Trusts Act; the same shall apply hereinafter) plus the amount of Management
Fee II for the business term, after a loss carried forward is compensated, if any) divided by(ii) the total number of issued and outstanding units as of the Accounting Settlement Day of
the relevant business term, and multiplied by (iii) (a) the operating profits before deduction ofManagement Fee II (i.e., the amount of the operating profits on the profit and loss statement
plus the amount of Management Fee II for the business term) and (b) a rate separately agreed
by the Investment Corporation and the Asset Management Company (up to 0.004%).

In thiscalculation method, any fraction less than one yen shall be rounded down, and divisions shallbe done at the end of the calculation, and the lower limit shall be zero yen.

- 23 -

Appendix

3.

Management Fee III (Acquisition Fee)Management Fee III shall be calculated by multiplying (i) the trading value for theacquisition of the Real Estate-Related Assets (excluding the consumption tax, other similartaxes 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 case of acquisition
from any interested party as set forth in the “Rules for Transactions with Interested Parties”
of the Asset Management Company, such rate shall be up to 0.25%), 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 andexpenses and the like) by (b) a rate separately agreed between the Investment Corporationand the Asset Management Company (up to 0.5%) (in the case of sale to any 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.
5.

Timing of Payment of Management Fee
Management Fee I and Management Fee II shall be paid within three months from the

Accounting Settlement Day of the relevant business term of the Investment Corporation.
Management Fee III shall be paid on or before the last day of the following month of themonth in which the Investment Corporation has acquired the relevant asset.
Management Fee IV shall be paid on or before the last day of the following month of themonth in which the Investment Corporation has sold the relevant asset.

- 24 -

Attachment 3

Sekisui House REIT, INC.
6th Fiscal Period (From May 1, 2017 to October 31, 2017)

Outline of asset management operation
Financial Statements
Balance Sheet
Statement of Income and Retained Earnings
Statement of Changes in Net Assets
Statement of Cash Distributions
Statement of Cash Flows
Notes to Financial Statements-1-Outline of asset management operation
1. Developments in Asset Management in the Fiscal Period under Review(1) Brief History of the Investment Corporation
Sekisui House Reit, Inc. (“SHR”), that has as its sponsor Sekisui House, Ltd. (“Sekisui House”), one of theleading homebuilders in Japan with an established development and management track record also in theproperty development business, was established on September 8, 2014 and is listed on the Real Estate
Investment Trust Section of the Tokyo Stock Exchange, Inc. (“Tokyo Stock Exchange”) on December 3, 2014(securities code: 3309).
SHR’s policy is to conduct asset management that seeks to secure stable earnings over the medium to long termand steady growth of its investment assets, mainly by investing in commercial properties (Note 1), in particularcommercial properties which are situated in strategic locations or are of a high quality (referred to by SHR as
prime properties) positioned as its core investment targets.
Based on the policy described above, SHR acquired three properties (with an aggregate acquisition price (Note2) of 114,300 million yen) on December 3, 2014, the day it was listed, and thereafter began managing them.
After acquiring a property (with an acquisition price of 38,600 million yen) on May 19, 2015, SHR acquired three
additional properties (with an aggregate acquisition price of 26,650 million yen), one of which is an additional
portion of a property part of which is already owned by SHR on May 24, 2016. Thereafter, on May 24, 2017, SHR
acquired two additional properties (with an aggregate acquisition price of 21,200 million yen), both of which are
additional portions of properties part of which are already owned by SHR. As of October 31, 2017 (the end of the
fiscal period under review), SHR owns six properties (with an aggregate acquisition price of 200,750 million yen)
as its investment assets.
(Note 1) “Commercial properties” refer to real estate mainly used for business purposes other than for residence, such as officebuildings, retail properties and hotels. Residential properties include student dormitories, company housing and serviced
housing for the elderly. The same shall apply hereinafter.
(Note 2) “Acquisition price” is the sale and purchase price stated in the sale and purchase agreement for each of the owned assets(excluding consumption tax and local consumption tax, as well as commission and various other expenses; rounded down to
the nearest million yen). The same shall apply hereinafter.

(2) Management Environment and Management Performance
Management Environment
During the fiscal period under review, amid a moderate recovery of private consumptionbacked by
improvements in employment and income levels, corporate earnings have continued to improve. This has
enabled the Japanese economy to continue on a trend of moderate recovery.
In the real estate transaction market, competition for property is still overheated. Amid strong investor appetite
for property acquisition as a result of sustained low vacancy rates, a nearly unchanged financing environment,
and the like, high-quality properties remain in short supply; accordingly, cap rates continue to be below.
As for the office leasing market, as a result of firm and sustained demand, vacancy rates are currently
experiencing a moderate decline in regional major cities as well as in central Tokyo.
With regard to the environment surrounding retail properties, according to the Outlook for Economic Activity
and Prices (October 2017) released by the Bank of Japan, sales figures of department stores have picked up.
Sales in supermarkets across Japan have also been on a gradual uptrend. Furthermore, sales of convenience
stores in Japan are continuing on an upward trajectory. In line with these trends, improvements in private
consumption have solidified. In light of these movements, demand for new store openings has remained firm andrent levels have remained steady across the country.
The hotel market remains favorable. The number of foreign tourists visiting Japan is still increasing: from Julyto September 2017, the number of foreign tourists to Japan totaled around 7.44 million, representing an 18.8%
quarter-on-quarter increase as compared to the previous year. In addition, the average hotel-occupancy rates inmajor cities across Japan have stayed high, and have exceeded occupancy levels in the same period of theprevious year.

-2-



 Management Performance
On May 24, 2017, SHR acquired real estate trust beneficiary interests as assets in trust for Garden City
Shinagawa Gotenyama (the 3rd portion acquired) (Shinagawa-ku, Tokyo; acquisition price: 4,000 million yen)and Hommachi Garden City (Hotel portion) (Chuo-ku, Osaka-shi, Osaka; acquisition price: 17,200 million yen.).
As a result, the assets held by SHR as of the end of the fiscal period under review are six properties with anaggregate acquisition price of 200,750 million yen and total leasable area of 112,032.96m2. In addition, of the six
properties, master lease agreements with Sekisui House as lessee have been executed for five properties and along-term lease agreement with one tenant as lessee has been executed for one property, resulting in occupancy
rate as of the end of the fiscal period under review of 100.0%.
(3) Overview of Fund Procurementa. Issuance of New Investment Units
During the fiscal period under review, SHR issued new investment units through the public offering (of 71,400
units) on May 24, 2017, and issued additional new investment units by way of third-party allotment (of 3,600
units) on June 12 of the same year. As a result, as of the end of the fiscal period under review, unitholders’capital is 110,189 million yen and the total number of investment units issued and outstanding is 969,000 units.
b. Borrowings and Issuance of Investment Corporation Bonds
For the acquisition of the aforementioned real estate trust beneficiary interests (relating to two underlying
properties), SHR procured short-term loans in the total amount of 7,600 million yen on May 24, 2017 to use as
funds for acquisitions and related expenses. As for its short-term loans, SHR also made early partial repaymentsof 3,500 million yen with (i) proceeds from its issuance of new investment units by way of the third-party
allotment conducted on June 12, 2017 and its cash on hand on June 15, 2017, (ii) proceeds from its issuance ofinvestment corporation bonds on July 13, 2017 at a total issue amount of 3,000 million yen (which is the second
such issuance for SHR) and its cash on hand on July 14, 2017. The remaining short-term loans of 4,100 million
yen were refinanced to long-term loans on August 31, 2017. SHR has worked to diversify the repayment dates of
its debts, extend the term of its debts and change part of the interest rates of its debts to fixed rates.
As a result, as of the end of the fiscal period under review, the balance of interest-bearing liabilities is 84,400
million yen and the ratio of total interest-bearing liabilities to total assets (“LTV (total assets basis)”) is 40.7%.
c. Credit Rating
The following table sets forth the rating status of SHR as of the end of the fiscal period under review.
Credit Rating Agency

Rating TypeJapan Credit Rating Agency, Ltd.
(JCR)

Long-term issuer rating: AAï
Rating outlook: Stable

Japan Credit Rating Agency, Ltd.
(JCR)

Bond rating: AAï(4) Overview of Business Performance and Distributions
Results in the fiscal period under review are operating revenue of 4,580 million yen (an increase of 10.5% overthat of the previous fiscal period), operating income of 2,987 million yen (an increase of 10.5% over that of theprevious fiscal period) and ordinary income of 2,626 million yen (an increase of 10.3% over that of the previous
fiscal period), resulting in net income of 2,625 million yen (an increase of 10.3% over that of the previous fiscal
period). In addition, concerning distributions, the decision has been made to distribute the entire amount of
unappropriated retained earnings (excluding the portion in respect of which distribution per investment unit isless than 1 yen), with the intention of having the maximum amount of distribution of earnings included indeductible expenses based on the application of special tax treatment for investment corporations (Article 67-15
of the Act on Special Measures Concerning Taxation (Act No. 26 of 1957, as amended)). As a result, thedistribution per investment unit is 2,710 yen (an increase of 1.8% over that of the previous fiscal period).


-3-

2.

Status of Capital Increase, etc.
The following table sets forth the increase(/decrease) in unitholders’ capital and the total number of investment
units issued and outstanding since the establishment of SHR through to the end of the fiscal period underreview.

Date

Event

Increase(Decrease)
September 8, 2014

Total number ofinvestment units
issued and outstanding(units)Unitholders’ capital(million yen)

Private placement forincorporation

Balance

Increase(Decrease)

Note

Balance

200

200

2,000

2,000

(Note 1)

December 2, 2014

Public offering

63,69063,890600,000

602,000(Note 2)

December 24, 2014

Third-party allotment

3,184

67,07430,000632,000(Note 3)

May 19, 2015

Public offering

19,67386,748154,200

786,200(Note 4)

June 12, 2015

Third-party allotment

995

87,7437,800

794,000(Note 5)

May 24, 2016

Public offering

11,70699,45095,200889,200(Note 6)

June 21, 2016

Third-party allotment

590

100,040

4,800

894,000(Note 7)

May 24, 2017

Public offering

9,661

109,70271,400965,400(Note 8)June 12, 2017

Third-party allotment

487

110,1893,600

969,000(Note 9)(Note 1) New investment units were issued at an offer price of 100,000 yen per unit upon the establishment of SHR on September 8,
2014.
(Note 2) New investment units were issued at an offer price of 110,000 yen (with the issue price being 106,150 yen) per unit through apublic offering to procure funds for the acquisition of new properties.
(Note 3) New investment units were issued at an issue price of 106,150 yen per unit by way of third-party allotment and proceeds
thereof were intended to use to make part repayment of loans. Out of proceeds from the issuance of new investment units, aportion was allocated for partial repayment of loans and the remaining was allocated to fund part of the acquisition cost of anew property.
(Note 4) New investment units were issued at an offer price of 131,917 yen (with the issue price being 127,587 yen) per unit through apublic offering to procure funds for the acquisition of a new property.
(Note 5) New investment units were issued at an issue price of 127,587 yen per unit by way of third-party allotment and proceeds
thereof were intended to use to make part-repayment of loans or as part of future acquisition funds for specified assets.
(Note 6) New investment units were issued at an offer price of 127,140 yen (with the issue price being 122,967 yen) per unit through apublic offering to procure funds for the acquisition of new properties.
(Note 7) New investment units were issued at an issue price of 122,967 yen per unit by way of third-party allotment and proceeds
thereof were intended to use to make future part-repayment of loans or as part of future acquisition funds for specified assets.
(Note 8) New investment units were issued at an offer price of 139,912 yen (with the issue price being 135,320 yen) per unit through apublic offering to procure funds for the acquisition of new properties.
(Note 9) New investment units were issued at an issue price of 135,320 yen per unit by way of third-party allotment, with the proceeds
thereof intended to be used for the partial repayment of the short-term loans that had been taken up to finance the acquisitionof the new properties.

[Changes in Market Price of Investment Securities]
The following table sets forth the fiscal period high and low (closing price) on the Tokyo Stock Exchange Real
Estate Investment Trust Section on which SHR investment securities are listed.
2nd fiscal period
3rd fiscal period
4th fiscal period
5th fiscal period
6th fiscal period
Fiscal period From: May 1, 2015 From: Nov. 1, 2015 From: May 1, 2016 From: Nov. 1, 2016 From: May 1, 2017
To: Oct. 31, 2015
To: Apr. 30, 2016
To: Oct. 31, 2016
To: Apr. 30, 2017
To: Oct. 31, 2017High (yen)142,500

133,500

157,900

153,900

146,400

Low (yen)

111,400

116,700

125,800

138,000

125,900

-4-



3.

Performance of Distribution, etc.
Distribution per unit for the fiscal period under review (that is, the 6th fiscal period) is 2,710 yen. The policy is
to distribute almost the entire amount of unappropriated retained earnings with the intention of applying thespecial treatment of corporation tax under which the amount equivalent to distribution of earnings is deductible
from the taxable income of investment corporations as deductible expenses (Article 67-15 of the Act on Special
Measures Concerning Taxation).
2nd fiscal period 3rd fiscal period 4th fiscal period 5th fiscal period 6th fiscal period
From:
From:
From:
From:
From:
May 1, 2017
Nov. 1, 2016
Fiscal period
May 1, 2015
May 1, 2016
Nov. 1, 2015
To:
To:
To:
To:
To:
Oct. 31, 2017
Apr. 30, 2017
Oct. 31, 2015
Oct. 31, 2016
Apr. 30, 2016

Total amount of unappropriated1,951,805

1,967,034

2,321,003

2,381,018

2,626,016

153

296

179

296

26

1,951,652

1,966,738

2,320,824

2,380,722

2,625,990[2,458][2,477][2,596][2,663][2,710]1,951,652

1,966,738

2,320,824

2,380,722

2,625,990[Distribution of earnings per unit](yen)[2,458][2,477][2,596][2,663][2,710]Total amount of refund ofinvestment in capital out of thetotal amount of cash distribution(thousand yen)

㸫

㸫

㸫

㸫

㸫

[㸫]

[㸫]

[㸫]

[㸫]

[㸫]

㸫

㸫

㸫

㸫

㸫

[㸫]

[㸫]

[㸫]

[㸫]

[㸫]

㸫

㸫

㸫

㸫

㸫

[㸫]

[㸫]

[㸫]

[㸫]

[㸫]

retained earnings (thousand yen)Amount of accumulated earnings(thousand yen)
Total amount of cash distribution(thousand yen)[Distribution per unit] (yen)Total amount of distribution of
earnings out of the total amountof cash distribution(thousand yen)[Amount of refund of investment
in capital per unit] (yen)Total distribution amount fromreserve for temporary difference
adjustments out of total amountof refund of investment in capital
(thousand yen)[Distribution amount fromreserve for temporary difference
adjustments per unit out of
amount of refund of investment
in capital per unit] (yen)
Total distribution amount from
distribution reducing unitholders’capital for tax purpose out of total
amount of refund of investment
in capital(thousand yen)
[Distribution amount from
distribution reducing unitholders’capital for tax purpose out of
amount of refund of investment
in capital per unit](yen)
-5-

4. Future Management Policy(1) Future Trends Outlook
Looking ahead, the Japanese economy is expected to recover moderately, supported by the effects of various
economic policies, under circumstances where employment rates and income levels continue rising, according to
the Monthly Economic Report (November 2017) released by the Cabinet Office.
Notwithstanding this, we have to be mindful of the impact of economic uncertainties overseas, such as thepolicies adopted by the U.S. government, issues involving North Korea, and fluctuations in global financial andcapital markets.
In the office leasing market, although the impact of possible future mass supply in the Tokyo area requires close
attention, firm demand, backed by sustained strong corporate earnings, is expected to continue, including inregional cities.
As to the real estate market, as long as there is no environmental changes that cause a shift to risk avoidancetrends in the Japanese and overseas financial markets, the cap rate is likely to remain low for the time being.
The hotel market will likely continue to see sustained high occupancy rates, supported by the expected increasein foreign tourists’ numbers and firm domestic demand.
(2) Future Management Policy and Challenges to Address
In the next and subsequent fiscal periods, SHR will continue to focus on prime properties, commercial properties
situated in strategic locations or that are of a high quality, as its core commercial property investment targets.
By implementing growth strategies that take full advantage of the real estate development and operation
capabilities and other strengths of Sekisui House, which has established an extensive track record of developing
and operating commercial properties, SHR will, through the support of its sponsor, seek to secure stableearnings over the medium to long term and steady growth of its investment assets and thereby aim to maximize
unitholder value. Meanwhile at Sekisui House Investment Advisors, Ltd. (the “Asset Management Company”),
investment opportunities will also be explored through its own initiatives in efforts to advance portfolio
diversification.
SHR’s policy is to set as its core investment areas the Three major metropolitan areas with Three large cities,
namely the Tokyo 23 Wards, Osaka City and Nagoya City, all of which SHR has knowledge in the course ofdevelopments made by Sekisui House (Note).
SHR has executed a pipeline support agreement with Sekisui House. This agreement provides for utilization of
the urban redevelopment business track record and know-how of Sekisui House, allowing SHR to seek fromSekisui House property acquisition support for external growth (pipeline support). Specifically, such support will(a) grant to SHR preferential negotiation rights with regard to the sale of domestic real estate, etc. owned ordeveloped by Sekisui House, (b) provide SHR with information on real estate, etc. owned or developed in Japanby third parties, (c) provide SHR with warehousing functions, and (d) provide SHR with support for theredevelopment of owned properties. In addition, SHR can seek from Sekisui House (a) property management
services for owned assets, and (b) in relation to management of owned assets for internal growth, (i) technologies
and know-how that contribute to the improvement of tenant satisfaction or other factors, including energyefficiency and eco-friendliness, that contribute to the enhancement of property value, (ii) personnel support,
including provision of know-how required for the operation of SHR, and (iii) support in areas such as negotiationof master lease agreements.
By implementing growth strategies that take full advantage of the versatile support from Sekisui House forexternal growth and internal growth as described above, SHR will seek to secure stable earnings and steady
growth of its investment assets and thereby aim to maximize unitholder value.
(Note)The “Three large cities” refer to the Tokyo 23 wards, Osaka City and Nagoya City. In addition, the “Three major metropolitan
areas” refer to “Greater Tokyo,” the “Osaka area” and the “Nagoya area,” where “Greater Tokyo” refers to Tokyo, Kanagawa
Prefecture, Chiba Prefecture and Saitama Prefecture, the “Osaka area” refers to Osaka Prefecture, Kyoto Prefecture, Hyogo
Prefecture and Nara Prefecture and the “Nagoya area” refers to Aichi Prefecture. The same shall apply hereinafter.



-6-



(3) Financial Strategy
SHR has adopted as its policy the conduct of stable and sound financial operations in order to secure stableearnings over the medium to long term and enhance unitholder value. Specifically, the policy is to form strong
and stable business relationships with leading domestic financial institutions, centering on megabanks,bolstered by the creditworthiness of the sponsor Sekisui House, and also to reduce refinancing risks and risks offluctuations in interest rates by exploring the extension of borrowing periods and working to diversify dates for
repayment, etc., while pursuing the optimum balance between fixed-rate and floating-rate debts.
In addition, SHR’s LTV policy (on a total assets basis) is to manage LTV at the conservative level of between
40% and 50% with attention being paid to the maintenance of funding capacity. SHR’s LTV, which was at 40.8%
at the end of the previous fiscal period, became 40.7% at the end of the current fiscal period.
SHR will work to diversify its sources for direct and indirect financing, such as by issuing investment
corporation bonds and the like in consideration of the market environment, SHR’s financial standing, and otherfactors, as a whole, while striving to continue stable and sound financial operations.

-7-5. Significant Subsequent Events(1) Merger with Sekisui House Residential Investment Corporation
SHR and Sekisui House Residential Investment Corporation (“SHI,” and collectively with SHR, the “TwoInvestment Corporations”), at their respective board of directors meetings held on January 24, 2018, resolved to
execute an 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 executed a merger agreement (the “Investment Corporation Merger Agreement”) on January 24, 2018.
i) Purpose of the Investment Corporation Merger
Two Investment Corporations 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 the opportunity
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 their best strategy for maximizing unitholder value; accordingly, the Two Investment Corporations
concluded the Investment Corporation Merger Agreement.
ii) Merger Ratio
As a result of the Investment Corporation Merger, for every 1 SHI investment unit, 1.65 post-Investment
Unit Split (as defined at “(2) Split of Investment Units” below; the same shall apply hereinafter.) SHR
investment units will be allocated and delivered (Note). Fractions of less than one investment unit will occur
in the number of investment units that must be delivered, and therefore, those fractional units of less than
one share will be sold through market transactions, and the proceeds from the sales will be delivered to theunitholders 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 Trusts Act”).
(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 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. For more details on
the Investment Unit Split, please refer to “(2) Split of Investment Units” stated below.

iii) Merger Consideration
As of the date of this document, in addition to the abovementioned investment units, SHR intends to pay SHI
unitholders (the unitholders stated or recorded in the final unitholders register on April 30, 2018, the dayprior 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 of Article 149-3 of theInvestment Trusts Act (excluding those unitholders who retracted such purchase demand) hereinafterreferred to as the “Unitholders Subject to Allocation”)), or the registered pledgees of investment units held inlieu 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 the effective date of the merger by the number of issued SHI investment units on that date
reduced by the number of investment units held by unitholders other than the Unitholders Subject to
Allocation within a reasonable period from the effective date of the Investment Corporation Merger.
In addition, as of the date of this document, SHI will put before a general meeting of its unitholders, which isscheduled to be held on March 27, 2018, a proposal for an amendment of its articles of incorporation with aview to changing its accounting periods from the current March 31 and September 30 to April 30 and October
31. If the aforementioned amendment is approved, 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.

-8-



iv) Overview of certain financial information in respect of SHI as at the end of September 2017 (being the end of
the latest fiscal period from April 1, 2017 to September 30, 2017)
Business:
Operating revenue:

Investment and management, mainly in respect of Specified Assets, based on theInvestment Trusts Act
6,916 million yen

Net income:

2,493 million yen

Total assets:
Liabilities:
Net assets:

210,009 million yen
108,667 million yen
101,341 million yen(2) Split of Investment Units
SHR resolved, at the board of directors meeting held on January 24, 2018, to split its investment units as follows(the “Investment Unit Split”).
i) Purpose of the Investment Unit Split
As described in “(1) Merger with Sekisui House Residential Investment Corporation” above, SHR and SHI
have agreed to implement the Investment Corporation Merger and for this purpose have executed theInvestment Corporation Merger Agreement on January 24, 2018.
The Investment Corporation Merger will be carried out through an absorption-type merger having SHR as
the surviving corporation, and the merger ratio, before considering the Investment Unit Split, would be SHR
1: SHI 0.825. However, based on this merger ratio, 0.825 units of SHR would be allotted to every unit of SHI,
which would mean that a number of SHI unitholders would receive less than one SHR unit. For this reason,in order to enable SHI unitholders to continue holding SHR units even after the Investment Corporation
Merger, for the purpose of issuing 1 SHR unit or more to all SHI unitholders, it was decided that the SHR
units will be split 2-for-1.
ii) Method of the Investment Unit Split
SHR units owned by the unitholders set forth or recorded in the final unitholder roster on April 30, 2018 (theday before the effective date of the Investment Corporation Merger) will be split 2-for-1. The Investment Unit
Split shall come into effect on May 1, 2018 (the effective date of the Investment Corporation Merger),provided that all conditions precedent for the Investment Corporation Merger set forth in the Investment
Corporation Merger Agreement are satisfied.
iii) Number of investment units to increase after the Investment Unit Split(a)

Total number of outstanding units prior to the Investment Unit Split: 969,000 units(b)

Increase in the number of units through the Investment Unit Split: 969,000 units(c)Total number of outstanding units following the Investment Unit Split: 1,938,000 units(d)Total number of outstanding units following the Investment
Corporation Merger: 3,762,091 units(Note 1)(e)

Number of authorized investment units following the Investment Unit
Split and the Investment Corporation Merger: 20,000,000 units(Note 2)

(Note 1): The number under the assumption that, in connection with the Investment Corporation Merger, 1.65 SHR units
following the Investment Unit Split would be allocated to every SHI unit with respect to all outstanding SHI units(1,105,510 units) as of the date of this document.
(Note 2): SHR’s authorized investment units constitute 10,000,000 units, but as a result of the Investment Corporation Merger, asof the date of this document, the articles of incorporation are expected to be partially amended, with the authorized
investment units to be changed as of the effective date of the Investment Corporation Merger. Therefore, the figures
stated above has been calculated taking into account such changes.

iv) Timeline of the Investment Unit Split(a)Announcement of the record date

March 30, 2018 (tentative)(b)

Record date

April 30, 2018 (tentative)(c)

Effective date

May 1, 2018 (tentative)-9-v) Impact on Information of per Unit
Information on a per unit basis, on the assumption that the Investment Unit Split is executed at the
beginning of the previous fiscal period is as set forth in the following table.
(a)

Net assets per unit:(ended April 2017) 57,282 yen(ended October 2017) 58,212 yen(b)

Net income per unit:(ended April 2017)(ended October 2017)

1,331 yen

1,368 yen

(Reference Information)(1) Borrowing of Funds
SHR conducted the borrowing of funds on November 30, 2017 as described below for use as repayment funds ofthe existing borrowing totaling 14,000 million yen which was due for repayment on November 30, 2017.
<Fixed Interest Rate Borrowing>
Category

LenderLoan

Interest rate

amount(Note 2) (Note 3)(mm yen)(Note 4)750

0.32000%

Drawdown

Borrowingdate

methodRepayment

Repayment

date

method(Note 5)(Note 6)

Security

The Bank ofTokyoMitsubishi
UFJ, Ltd.
Loan
syndicate

July 13,with TheBank ofTokyo-

Borrowing
1,200

0.35341%

based on the

Mitsubishi

individual

UFJ, Ltd. as

loanarranger

agreement,

Long(Note 1)

Nov. 30,

dated Nov.

term

The Bank of

2017

28, 2017,

TokyoMitsubishi

750

Lump-sum
repayment
at maturity

with the0.34000%

Unsecured
Unguaranteed

lenders

UFJ, Ltd.

shown to theLoanleft as the

syndicateloanerwith TheMay 31,
2023

Bank ofTokyo-

2022

1,200

0.42622%

Mitsubishi
UFJ, Ltd. asarranger(Note 1)
(Note 1) The loan syndicate comprises Mitsubishi UFJ Trust and Banking Corporation and Development Bank of Japan Inc.
(Note 2) Borrowing expenses, etc. payable to the lender are not included.
(Note 3) The first interest payment date shall be the last day of May 2018, and subsequent interest payment dates shall be the last days of
May and November of each year and the principal repayment date. However, if the concerned date is not a business day, then it
shall be the next business day, and if that next business day falls into the next calendar month, then it shall be the business day
immediately preceding the concerned date.
(Note 4) The first interest calculation period shall be from November 30, 2017 to the last day of May 2018.
(Note 5) If the concerned date is not a business day, then the repayment date shall be the next business day, and if that next business day
falls into the next calendar month, then it shall be the business day immediately preceding the concerned date.
(Note 6) During the period from the Borrowing’s drawdown to the repayment date, SHR may make early repayment of loans, in whole or inpart, if SHR gives prior written notice and other certain terms and conditions are met.

- 10 -



<Floating Interest Rate Borrowing>
Category

LenderLoan

Interest rate

amount(Note 2) (Note 3)(mm yen)(Note 4)

Drawdown

Borrowingdate

methodRepayment

Repayment

date

method(Note 7)(Note 8)

Security

Loan
syndicateBase rate (JBA

with The

1-monthBank ofTokyo-

5,050

Mitsubishi

Borrowing

Japanese Yen

based on the

TIBOR) plus

individual

0.21%

UFJ, Ltd. as

agreement

Long(Note 1)

Nov. 30,

dated Nov.

term

Loan

2017

28, 2017,

syndicateTokyoMitsubishi
UFJ, Ltd. asarranger

5,050

repayment
at maturity

Unsecured
Unguaranteed

lender1-monthBank ofLump-sumwith theBase rate (JBA

with The

2022

loan

(Note 5)

arranger

July 13,

shown to theJapanese Yenleft as the

TIBOR) plus

loaner

0.26%

May 31,
2023(Note 6)(Note 1)
(Note 1) The loan syndicate comprises Sumitomo Mitsui Banking Corporation, Mizuho Bank, Ltd., Sumitomo Mitsui Trust Bank, Limited,
Resona Bank, Limited, The Norinchukin Bank and Mizuho Trust & Banking Co., Ltd.
(Note 2) Borrowing expenses, etc. payable to the lender are not included.
(Note 3) The base rate applicable to the calculation period for the interest payable on an interest payment date shall be the one-month
Japanese Yen TIBOR (Tokyo Interbank Offered Rate) published by JBA TIBOR Administration two business days prior to theinterest payment date immediately preceding the respective interest payment date. The base rate is subject to review every interest
payment date. However, in cases where there is no rate corresponding to the interest calculation period, the base rate shall be thebase rate corresponding to the concerned period calculated based on the method provided in the contract.
(Note 4) The first interest payment date shall be the last day of December 2017, and subsequent interest payment dates shall be the lastdays of every month and the principal repayment date. However, if the concerned date is not a business day, then it shall be thenext business day, and if that next business day falls into the next calendar month, then it shall be the business day immediately
preceding the concerned date. The first interest calculation period shall be from November 30, 2017 to the last day of December
2017.
(Note 5) The interest rate is fixed at 0.34800%, in fact, by conclusion of the interest rate swap agreement.
(Note 6) The interest rate is fixed at 0.41800%, in fact, by conclusion of the interest rate swap agreement.
(Note 7) If the concerned date is not a business day, then the repayment date shall be the next business day, and if that next business day
falls into the next calendar month, then it shall be the business day immediately preceding the concerned date.
(Note 8) During the period from the Borrowing’s drawdown to the repayment date, SHR may make early repayment of loans, in whole or inpart, if SHR gives prior written notice and other certain terms and conditions are met.

(2) Acquisition and Sale of Assets
SHI entered into real estate sale and purchase agreements to acquire Prime Maison Shirokanedai Tower and 5
other properties, and to sell Esty Maison Machida and 11 other properties (such acquisitions and the sales being
hereinafter collectively referred to as the “Asset Replacement”). As of the date of this document, the settlementand delivery of the Asset Replacement is scheduled to take place on May 1, 2018, which is the effective date of theInvestment Corporation Merger as described in “(1) Merger with Sekisui House Residential Investment
Corporation” above. Due to the Investment Corporation Merger, SHR, which will be the surviving corporation after
the merger, is scheduled to succeed to and assume the status of either purchaser or seller, and exercise all rights andperform all duties thereof, under the sale and purchase agreements pertaining to the Asset Replacement. In the eventthat the Investment Corporation Merger does not take effect, SHR will not be considered a party related to SHI
because SHI will execute the Asset Replacement as a purchaser or seller.

- 11 -

Outline of the Investment Corporation
1.

Status of Capital
Fiscal period

Total number of investment units

As of the end of As of the end of As of the end of As of the end of As of the end of
2nd fiscal period 3rd fiscal period 4th fiscal period 5th fiscal period 6th fiscal period(Oct. 31, 2015) (Apr. 30, 2016) (Oct. 31, 2016) (Apr. 30, 2017) (Oct. 31, 2017)
10,000,000

10,000,000

10,000,000

10,000,000

10,000,000

794,000

794,000

894,000

894,000

969,000

Unitholders’ capital (million yen)

87,74387,743100,040

100,040

110,189

Number of unitholders (persons)

18,08916,545

13,74912,44914,490authorized (units)
Total number of investment units
issued and outstanding (units)

2.

Matters Concerning Investment Units
Of the unitholders as of the end of the fiscal period under review, the following are the top ten unitholders interms of investment unitholding ratio.
Number ofunits owned(units)Percentage of
owned units tototal units issued
and outstanding(%)

Japan Trustee Services Bank, Ltd. (Trust Account)

245,286

25.31

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

128,376

13.25

Sekisui House, Ltd.

65,200

6.73

Trust & Custody Services Bank, Ltd. (Securities Investment Trust Account)

50,411

5.20

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

35,728

3.69

STATE STREET BANK - WEST PENSION FUND CLIENTS - EXEMPT 505233

16,177

1.67

STATE STREET BANK AND TRUST COMPANY 505012

13,688

1.41

The Hachijuni Bank, Ltd.

12,8181.32

Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.

10,309

1.06

STICHTING PENSIOENFONDS METAAL EN TECHNIEK

10,204

1.05

588,197

60.70

Name

Total
(Note)

Percentage of owned units to total units issued and outstanding is rounded to the nearest second decimal place.

- 12 -



3.

Matters Concerning Directors, etc.

(1) Name of executive director, supervisory directors and independent auditor
The following table sets forth information on the executive director, supervisory directors and independent
auditor of SHR in the fiscal period under review.
Position
Executive
Director

Name

Junichi Inoue

Key concurrently held position, etc.

Total amount of compensationfor each position during period(thousand yen)

President & Representative Director,
Sekisui House Investment Advisors, Ltd.

㸫

Director, Shigeru Nomura Certified PublicSupervisory

Shigeru Nomura

Director

Member of Corporate Revitalization
Committee, The Resolution and Collection

1,800

Corporation (RCC)
Tatsushi Omiya

Independent
AuditorAccountant OfficeOutside Director, Eiken Chemical Co., Ltd.

Ernst & Young
ShinNihon LLC

Outside Director, QB Net Holdings Co., Ltd.
Partner, City Law Offices㸫

1,800
13,800(Note 2)

(Note 1) None of the executive director or supervisory directors owns SHR investment units in his own name or in the name of anotherperson. In addition, supervisory directors may be officers of other corporations other than those stated above, but none of suchcorporations, including those stated above, has vested interest in SHR.
(Note 2) The total amount of compensation for the Independent Auditor, as stated above, is an approximation and includes
compensation for preparing comfort letters for the issuance of new investment units in May 2017 and the issuance of theSecond Series Unsecured Investment Corporation Bonds in July 2017, as well as compensation for auditing English financial
statements.

(2) Policy for determining whether to dismiss or refuse the reappointment of independent auditor
Dismissal of the independent auditor is subject to consideration at a meeting of the board of directors of SHR inaccordance with the provisions of the Investment Trusts Act. Refusal of reappointment of the independent
auditor is also subject to consideration at a meeting of the board of directors of SHR by taking into account thequality of audits, amount of audit fee and various other circumstances in a comprehensive manner.
(3)

Matters concerning entities that have been ordered to suspend operations within the past two years
On December 22, 2015, SHR’s independent auditor received an order from the Financial Services Agency tosuspend operations relating to the conclusion of new contracts for three months (from January 1, 2016 to March
31, 2016).

- 13 -

4.

Asset Management Company, Asset Custodian and Administrative AgentsThe following table sets forth information on the asset management company, asset custodian andadministrative agents of SHR as of the end of the fiscal period under review.
Entrustment category

Name

Asset Management Company

Sekisui House Investment Advisors, Ltd.

Asset Custodian

Mitsubishi UFJ Trust and Banking Corporation

Administrative Agent (Transfer Agent)Mizuho Trust & Banking Co., Ltd.

Administrative Agent (Administrative Agent forOperation of Administrative Instruments)
Administrative Agent (Administrative Agent for
Investment Corporation Bonds)

Mitsubishi UFJ Trust and Banking Corporation

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

- 14 -



Condition of investment assets
1.

Composition of Assets of the Investment Corporation
The following table sets forth the composition of assets of SHR as of the end of the fiscal period under review.

Type ofasset

Geographical area,etc.

Three major

As of the end of 5th fiscal period(Apr. 30, 2017)

As of the end of 6th fiscal period(Oct. 31, 2017)

Total amountheld(million yen)

As a percentage
of total assets(%)

Total amountheld(million yen)

As a percentage
of total assets(%)(Note 1)

(Note 2)

(Note 1)

(Note 2)

177,418

93.6

198,055

95.6

Other areas

㸫

㸫

㸫

㸫

Total of real estate in trust

177,418

93.6

198,055

95.6

Deposits and other assets

12,209

6.4

9,086

4.4

Total amount of assets

189,627100.0

207,142100.0

Real estate

metropolitan areas

in trust(Note 1) “Total amount held” is the carrying amount (or, for real estate in trust, the depreciated book value) as of the end of the fiscal
period under review, rounded down to the nearest million yen.
(Note 2) Figures under the heading “As a percentage of total assets” have been rounded to the nearest first decimal place.
(Note 3) SHR does not own any overseas real estate, etc. as of the end of the fiscal period under review.


2.

Major Portfolio Assets
The following table sets forth an overview of the portfolio assets of SHR as of the end of the fiscal period underreview.
Book value
Leasable
LeasedOccupancy
As a percentage ofat the end of
Name of
area
area
rate
total property-related
Main
periodreal estate, etc.
(m2)(%)
operating revenueuse(m2)(million yen)
(Note 2)
(Note 3)(Note 4)(%) (Note 5)(Note 1)

Garden City
Shinagawa Gotenyama(Note 6)58,974

31,236.34

31,236.34

100.0

28.5

Officebuilding

Gotenyama SH
Building

50,722

19,999.97

19,999.97

100.0

23.8

Officebuilding

Hommachi Minami
Garden City

22,481

16,699.46

16,699.46

100.0

12.8

Officebuilding

17,006.94

17,006.94

100.0

19.7

Officebuilding

17,27018,092.98

18,092.98

100.0

7.7

Hotel

HK Yodoyabashi
Garden Avenue

4,391

4,554.52

4,554.52

100.0

3.3

Officebuilding

Hirokoji
Garden Avenue

6,326

4,442.75

4,442.75

100.0

4.1

Officebuilding

Total

198,055

112,032.96

112,032.96

100.0

100.0

㸫

Office building portion
Hommachi
Garden City
(Note 7)37,888
Hotel portion- 15 -

(Note 1) “Book value at end of period” refers to the depreciated book value of each property as of the end of the fiscal period underreview, rounded down to the nearest million yen. As such, the sum total of the “Book value at end of period” of each property
may not match the figure indicated in the column for the total.
(Note 2) “Leasable area” refers to the floor area available for leasing based on the lease agreement or building drawing, etc. for each
property that is valid as of the end of the fiscal period under review, rounded down to the second decimal place.
(Note 3)“Leased area” refers to the sum total of the leased area indicated in the respective lease agreements for each of the properties
that are valid as of the end of the fiscal period under review (or, if a pass-through type master lease agreementthat is valid
as of the end of each fiscal period has been concluded for the property, the lease agreements with the respective end tenants
concluded as of the end of the fiscal period under review).
(Note 4) “Occupancy rate” refers to the ratio of leased area to leasable area of each property as of the end of the fiscal period underreview, rounded to the nearest first decimal place. The figure indicated in the total column is the occupancy rate of the entire
portfolio, which is the ratio of total leased area of each property to total leasable area of each property, rounded to the nearest
first decimal place.
(Note 5) Figures under the heading “As a percentage of total property-related operating revenue” indicate the ratio of property-related
operating revenue of each property to total property-related operating revenue, rounded to the nearest first decimal place. As
such, the sum total of the figures in respect of each property may not match the figure indicated in the column for the total.
The same shall apply hereinafter.
(Note 6) SHR acquired sectional ownership rights to all of the exclusively-owned portions of the 4th, 7th and 8th floors and part of the
exclusively-owned portions of the 2nd, 3rd and 6th floors of Garden City Shinagawa Gotenyama, together with theaccompanying right of site (ratio of right of site: 2,103,349/3,857,806 (or approximately 54.5%)) (the “1st portion acquired”), on
December 3, 2014. Subsequently, SHR acquired sectional ownership rights to part of the exclusively-owned portions of the 2nd,
3rd, 5th and 6th floors of Garden City Shinagawa Gotenyama, together with the accompanying right of site (ratio of right ofsite: 820,252/3,857,806 (or approximately 21.3%)) (the “2nd portion acquired”), on May 24, 2016. Further SHR acquired
sectional ownership rights to part of the exclusively-owned portions of the 2nd floor and all of the exclusively-owned portionsof the 9th floor of Garden City Shinagawa Gotenyama, together with the accompanying right of site (ratio of right of site:
200,039/3,857,806 (or approximately 5.2%)) (the “3rd portion acquired”), on May 24, 2017.
(Note 7) SHR acquired sectional ownership rights to all of the exclusively-owned portions used as office and retail property in
Hommachi Garden City, together with the accompanying right of site, on May 19, 2015 ( “Hommachi Garden City (Officebuilding portion)” or “Office building portion”). The ratio of the exclusively-owned area is approximately 52.7% of the
exclusively-owned area of the entire building, and the ratio of right of site is 68,645/100,000 for the office portion and
1,104/100,000 for the retail portion, totaling 69,749/100,000 (or approximately 69.7%)). SHR subsequently acquired sectional
ownership rights to all of the exclusively-owned portions used as a hotel in Hommachi Garden City, together with theaccompanying right of site, on May 24, 2017 ( “Hommachi Garden City (Hotel portion)” or the “Hotel portion”). The ratio of the
exclusively-owned area is approximately 47.3% of the exclusively-owned area of the entire building and the ratio of right ofsite is 30,251/100,000 (or approximately 30.3%)). SHR owns sectional ownership rights and the accompanying rights of site, as
well as the annex to the entire Hommachi Garden City building. Hommachi Garden City includes co-ownership interest in thecommon portion pursuant to the relevant bylaws (parking, management offices, etc.), but there is no accompanying ratio ofright of site.

3.

Details of Assets (Real Estate, etc.) in the Portfolio
The following table sets forth an overview of the assets held by SHR as of the end of the fiscal period underreview.
Name ofreal estate, etc.

Location

Type of ownership

Garden City
Shinagawa Gotenyama

6-7-29 Kitashinagawa,Shinagawa-ku, Tokyo

Gotenyama
SH Building

6-5-17 Kitashinagawa,Shinagawa-ku, Tokyo

Hommachi Minami
Garden City

3-6-1 Kitakyuhojimachi,
Chuo-ku, Osaka-shi, Osaka

Real estate trust
beneficiaryinterests
Real estate trust
beneficiaryinterests
Real estate trust
beneficiaryinterests

Hommachi
Garden City

3-6-4 Hommachi, Chuo-ku,
Osaka-shi, Osaka

Real estate trust
beneficiaryinterests

Book value
at end of period(million yen)
(Note 1)

Estimated value
at end of period(million yen)
(Note 2)58,97471,00050,72258,50022,481

28,600

Office building portion
37,888
Hotel portion
17,270- 16 -

44,60017,700
HK Yodoyabashi
Garden Avenue

4-3-9 Fushimimachi,

Hirokoji
Garden Avenue

4-24-16, Meieki, Nakamura-Chuo-ku, Osaka-shi, Osakaku, Nagoya-shi, Aichi

Total

Real estate trust
beneficiaryinterests
Real estate trust
beneficiaryinterests

㸫

㸫

4,391

5,570

6,326

7,110

198,055

233,080(Note 1) “Book value at end of period” refers to the book value after depreciation of each property as of the end of the fiscal period
under review, rounded down to the nearest million yen. As such, the sum total of the figures in respect of each property may
not match the figure indicated in the column for the total.
(Note 2) “Estimated value at end of period” refers to the value stated in each real estate appraisal report (based on real estateappraisal reports prepared by Daiwa Real Estate Appraisal Co., Ltd., The Tanizawa Sżgż Appraisal Co., Ltd., Rich Appraisal
Institute Co., Ltd. and Japan Real Estate Institute with the end of the fiscal period under review as the date of valuation),rounded down to the nearest million yen.

The following table sets forth the status of leasing of real estate, etc. held by SHR.
5th fiscal period
6th fiscal period
From: Nov. 1, 2016
From: May 1, 2017
To: Apr. 30, 2017
To: Oct. 31, 2017
PropertyPropertyAs a
As a
relatedrelatedpercentage
percentage Number Occupancy
Number Occupancy
operatingoperatingof total
rateofof totalrateofrevenuerevenue
property[at end oftenants
property[at end oftenants[during[during
Name ofrelatedfiscalrelated[at endfiscal[at endfiscalfiscalreal estate, etc.
operatingperiod]of fiscal
operatingperiod]of fiscal
period]period]revenue(%)
revenueperiod](%)
period](million(million(%)(Note 2)
(Note 1)(%)
(Note 2)
(Note 1)yen)
yen)
(Note 3)(Note 3)
Garden City
Shinagawa
1
100.0
1,233
29.8
1
100.0
1,307
28.5
Gotenyama
Gotenyama SH
1
100.0
1,089
26.3
1
100.0
1,088
23.8
Building
HommachiMinami
1
100.0
586
14.2
1
100.0
586
12.8
Garden City
Office building portion
1
100.0
903
21.8
1
100.0
903
19.7
HommachiHotel portion
Garden City
㸫
㸫
㸫
㸫
1
100.0
352
7.7
HK
Yodoyabashi
Garden Avenue
Hirokoji
Garden Avenue
Total

1 (7)

100.0

145

3.5

1 (7)

100.0

151

3.3

1 (9)

100.0

185

4.5

1 (9)

100.0

189

4.1

2 (16)

100.0

4,144

100.0

2 (16)

100.0

4,580

100.0

(Note 1) “Number of tenants” refers to the sum total of the number of tenants under, and indicated in, the respective lease agreements
for each property that are valid as of the end of each fiscal period (or, if a master lease agreementthat is valid as of the end ofeach fiscal period has been concluded for the property, the number of lessees under the master lease agreement). If a passthrough type master lease agreementthat is valid as of the end of each fiscal period has been concludedfor the property, thenumber of end tenants for the property is indicated in parenthesis.
In the “Total” column, a tenant that leases spaces in multiple properties is counted as one. The sum total of the number of end
tenants for properties where pass-through type master lease agreementsthat are valid as of the end of each fiscal period
have been concluded is indicated in parenthesis.
(Note 2) “Occupancy rate” refers to the ratio of leased area to leasable area of each property as of the end of each fiscal period, rounded
to the nearest first decimal place. The total column indicates the occupancy rate of the entire portfolio, which indicates theratio of total leased area of each property to total leasable area of each property, rounded to the nearest first decimal place.
(Note 3) “Property-related operating revenue [during fiscal period]” refers to the sum total of property-related operating revenue ineach fiscal period in respect of each property, rounded down to the nearest million yen. As such, the sum of “Property-related
operating revenue [during fiscal period]” in respect of each property may not match the figure indicated in the column for the
total.

- 17 -

4.

Details of Renewable Energy Power Generation Facility, etc.
Not applicable.

5.

Details of Right to Operate Public Facility, etc.
Not applicable.

6.

Details of Investment Securities
Not applicable.

7.

Table of Status of Contract Amount, etc. and Fair Value of Specified Transactions
The following table sets forth the status of contract amount, etc. and fair value of specified transactions at SHR
as of the end of the fiscal period under review.
Contract amount, etc.
(thousand yen) (Note 1)

Category

Type

Transaction other thanmarket transaction

Interest rate swap transaction(Under which floating interest
rates are receivable and fixedinterest rates are payable)

Amountdue after 1 year

50,350,000

Fair value(thousand yen)
(Note 2)50,350,000㸫(Note 1) The contract amount, etc. of interest rate swap transactions is based on notional principal amounts.
(Note 2) The fair value is omitted because the transaction meets the criteria for special accounting under the Accounting Standards for
Financial Instruments.

8.

Status of Other Assets
Trust beneficiary interests with real estate as the main assets in trust are stated in “3. Details of Assets (Real
Estate, etc.) in the Portfolio” above. As of the end of the fiscal period under review, there are no specified assets
other than real estate, etc., asset-backed securities, etc. and infrastructure assets, etc. in the portfolio.

9.

Status of Holding of Assets by Country and Region
As of the end of the fiscal period under review, there are no portfolio real estate, etc. in any other country or
region besides Japan.

- 18 -



Capital expenditures for property
1.

Schedule of Capital Expenditures
The main capital expenditure amounts accompanying renovation work, etc. currently planned for assets held by
SHR, is as follows. However, a portion of such amounts may ultimately be classified as expenses in the course of
the accounting process.
Scheduled amount (million yen)
(Note)Name of real estate,etc.

PurposeScheduled period(location)

TotalamountPayment for

Amountthe fiscal period

already

under review

paid

8

㸫

㸫

Hommachi Garden
City (Hotel portion)(Chuo-ku, Osaka-shi,

Upgrading of integrated
heat meters

From: January 2018
To: January 2018

Osaka)
Garden City
Shinagawa Gotenyama(Kitashinagawa,Shinagawa-ku, Tokyo)
Hommachi Garden
City (Office building
portion) (Chuo-ku,
Osaka-shi, Osaka)
Garden City
Shinagawa Gotenyama(Kitashinagawa,Shinagawa-ku, Tokyo)
Garden City
Shinagawa Gotenyama(Kitashinagawa,Shinagawa-ku, Tokyo)(Note)

Upgrading of integrated
watt meters

From: January 2018
To: March 2018

7

㸫

㸫

Upgrading of integrated

From: January 2018
To: January 2018

6

㸫

㸫

power generators

From: December 2017
To: March 2018

5

㸫

㸫

Replacement of battery
for guide light

From: August 2018
To: September 2018

4

㸫

㸫

heat meters

Installation of emergency”Scheduled amount” refers to the amount arrived at by multiplying (i) the full amount required for the work by (ii) the ratio of
SHR’s ownership in the real estate trust beneficiary interest.

- 19 -

2.

Capital Expenditures During Period
An overview of capital expenditures conducted by SHR for its assets during the fiscal period under review is as
set forth in the following table. Total capital expenditures during the fiscal period under review was 12 million
yen and, together with 28 million yen of repair expenses charged to expenses in the fiscal period under review,
work amounting to 40 million yen was implemented.
Name of real estate, etc.
(location)

Hommachi Garden City
(Hotel portion) (Chuo-ku,
Osaka-shi, Osaka)Purpose

PeriodUpgrading of integrated heatmetersPayment amount(million yen)

From: October 2017
To: October 20173

Hommachi Garden City
(Office building portion)(Chuo-ku, Osaka-shi,

Upgrading of water meters

From: August 2017
To: September 2017

2

Osaka)
Garden City Shinagawa
Gotenyama(Kitashinagawa,

Replacement of central device forlighting control system and UPS

From: July 2017
To: September 20172

Shinagawa-ku, Tokyo)

3.

Other capital expenditures

3

Total

12

Cash Reserves for Long-Term Repair Plans
No cash was reserved for long-term repair plans as of the end of the fiscal period under review.

- 20 -



Condition of expenses
Details of Expenses Pertaining to Management, etc.
(Unit: thousand yen)
5th fiscal period
From: Nov. 1, 2016
To: Apr. 30, 2017

Item
Asset management fee

6th fiscal period
From: May 1, 2017
To: Oct. 31, 2017332,503359,562

Asset custody fee

3,520

3,526

Administrative service fees

11,820

11,485

Directors’ compensations

3,600

3,600

Other expenses

35,86436,614387,308

414,789

Total(Note)In respect of asset management fees,in addition to the amounts shown above, there are management fees for property
acquisition (which are not applicable in the 5th fiscal period and amounting to 31,800 thousand yen in respect of the 6th fiscal
period) included in the book value of real estate, etc.

- 21 -

Condition of investment transactions
1.

Status, etc. of Sale and Purchase of Real Estate, etc., Asset-Backed Securities, etc., Infrastructure Assets, etc.
and Infrastructure-Related Assets
Acquisition
Name ofreal estate, etc.

Garden City
Shinagawa Gotenyama(3rd portion acquired)

Acquisition
date

2017
May 24,City (Hotel portion)

2017

Total
(Note)

Acquisition
price(million yen)
(Note)

May 24,

Hommachi Garden

Disposition㸫

Disposition
date

Disposition
price(million yen)
(Note)

Book value(million yen)

Gain (Loss)on sale(million yen)

4,000

㸫

㸫

㸫

㸫

17,200㸫㸫㸫㸫

21,200㸫㸫㸫㸫

“Acquisition price” and “Disposition price” refer to the sale and purchase price as stated in the sale and purchase agreement
for each property (excluding consumption tax and local consumption tax, as well as commissions and other various expenses;
rounded down to the nearest million yen). The same shall apply hereinafter.


2.

Status, etc. in respect of Sale and Purchase of Other Assets
Not applicable.
Main assets other than the abovementioned real estate, etc., asset-backed securities, etc., infrastructure assets,etc. and infrastructure-related assets are essentially bank deposits or bank deposits within assets in trust.


3. Investigation into Value, etc. of Specified Assets(1) Real Estate, etc. (Appraisal)
Acquisitionordisposition

Name ofreal estate, etc.

Acquisition
price or
disposition
price(million yen)

Date of
value

4,290

DAIWA
REAL
ESTATEAPPRAISAL
CO.,LTD.

March 31,2017

17,20017,600(Note 2)

Japan Real
EstateInstituteMarch 31,2017

21,20021,890㸫㸫Type ofasset

Acquisition

Garden City
Shinagawa
Gotenyama(3rd portion
acquired)May 24,2017

Real estate
trust
beneficiaryinterests

4,000

Acquisition

Hommachi
Garden City
(Hotel portion)

May 24,2017

Real estate
trust
beneficiaryinterests

㸫

㸫

Total

Appraisalvalue(million yen)
(Note 1)

Appraisal
firmTransaction
date(Note 1) The appraisal stated above is derived by applying the “Real Estate Appraisal Standards; Particulars; Chapter 3: Appraisal on
Value of Real Estate Subject to Securitization.”(Note 2) The limited market value of the hotel portion (based on the increased value from holding the building in its entirety) of
Hommachi Garden City is used. The market value of the Hotel portion (excluding the increased value from holding the wholebuilding) is 17,200 million yen.

(2) Others
Not applicable.

- 22 -


4.

Status of Transactions with Interested Persons, etc. (Note 1)(1) Status of Transactions
Amount of purchase and sale, etc.

Category

Amount of purchase, etc.

Total amountAmount of sale, etc.
㸫 million yen

21,200 million yen

Breakdown of status of transactions with interested persons
Sekisui House, Ltd.

㸫 million yen

21,200 million yen [100.0%](2) Amount of Commission Fee, etc. (Note 2)

Category

Management fee(Note 3)

Total amount ofcommission fee, etc.
(A)(thousand yen)
26,177

Breakdown of transactions with interested persons, etc.
Payee

Sekisui House, Ltd.

Amount paid(B)(thousand yen)

As apercentage of
total amount(B /A)(%)

26,177100.0(Note 1) “Interested persons, etc.” refers to interested persons, etc. of the asset management company with which SHR has executed an
asset management agreement as provided in Article 123 of the Order for Enforcement of the Act on Investment Trusts andInvestment Corporations (Orderfor Enforcement No. 480 of 2000, as amended) and Article 26, Item 27 of the Rules on
Investment Reports, etc. of Investment Trusts and Investment Corporations of The Investment Trusts Association, Japan.
(Note 2) There are no payments for repair work, etc. for orders placed to interested persons, etc. during the fiscal period under review
besides the commission fee, etc. indicated above.
(Note 3) “Management fee” has been rounded down to the nearest thousand yen.

5.

Status, etc. of Transactions with the Asset Management Company Pertaining to Business Operations ofConcurrent Business Engaged in by the Asset Management Company
There are no applicable transactions because as of the end of the fiscal period under review, the AssetManagement Company does not concurrently engage in any type I financial instruments or type II financial
instruments business (as defined in the Financial Instruments and Exchange Act), building lots and buildings
transaction business, or specified joint real estate ventures.
- 23 -

Other information
1.

Notice(1) General Meeting of Unitholders
No general meetings of unitholders were held during the fiscal period under review.
(2) Meeting of the Board of Directors of the Investment Corporation
In the fiscal period under review, regarding the matters, etc. provided in Items 2, 3, 5, 6 and 8 of Article 109,
Paragraph 2 of the Investment Trusts Act, the following matters were approved at a meeting of the board of
directors of SHR, as well as other matters deemed important.
Approval date

Matters approved

Overview
Administrative functions pertaining tosolicitation of persons to subscribe for new
investment units and other business
operations related to the issuance of new

May 9, 2017Conclusion of a new investment unit
underwriting agreement

investment units and secondary
distribution of investment units approvedat the meeting of the board of directors
held on the same date were entrusted to
Nomura Securities Co., Ltd., SMBC Nikko
Securities Inc., Mizuho Securities Co., Ltd.,
Daiwa Securities Co. Ltd. and Mitsubishi
UFJ Morgan Stanley Securities Co., Ltd.


2.

Handling of fractions of monetary amounts and percentage figures
Amounts have been rounded down and ratios have been rounded to the nearest specified unit unless otherwise
indicated in this document.

- 24 -

Financial Statements(1) Balance Sheet(Thousands of yen)

5th Fiscal Period(As of April 30, 2017)

AssetsCurrent assets
Cash and deposits
Cash and deposits in trust
Operating accounts receivable
Prepaid expenses
Deferred tax assets
Consumption taxes receivable
Other
Total current assets
Non-current assets
Property, plant and equipment
Buildings in trust
Accumulated depreciation
Buildings in trust, net
Structures in trust
Accumulated depreciation
Structures in trust, net
Machinery and equipment in trust
Accumulated depreciation
Machinery and equipment in trust, net
Tools, furniture and fixtures in trust
Accumulated depreciation
Tools, furniture and fixtures in trust, net
Land in trust
Construction in progress in trust
Total property, plant and equipment
Intangible assets
Other
Total intangible assets
Investments and other assets
Lease and guarantee deposits
Long-term prepaid expenses
Total investments and other assets
Total non-current assets
Deferred assets
Investment corporation bond issuance costs
Investment unit issuance costs
Total deferred assets
Total assets- 25 -

6th Fiscal Period(As of October 31, 2017)

4,115,187
7,662,531
16,70984,52316
㸫
11,35011,890,319

1,756,618
6,518,376
19,33076,1987
372,744㸫
8,743,275

53,345,801(2,678,821)
50,666,979
672,428(43,390)629,038
411
(23)
387
1,259
(297)
961
126,120,644
9,699
177,427,710

59,604,170(3,399,530)
56,204,639
683,807(52,592)
631,215
921
(58)
862
1,259
(447)
811
141,218,283
㸫198,055,813

3,882
3,882

3,147
3,147

20,181
239,863
260,044
177,691,637

20,181
227,164
247,345
198,306,306

17,45328,02645,479189,627,436

35,04557,907
92,952
207,142,534

(Thousands of yen)

5th Fiscal Period
Liabilities
Current liabilities
Operating accounts payable
Current portion of long-term loans payable
Accounts payable – otherAccrued expenses
Income taxes payable
Accrued consumption taxes
Total current liabilities
Non-current liabilities
Investment corporation bonds
Long-term loans payable
Tenant leasehold and security deposits in trust
Total non-current liabilities
Total liabilities
Net assets
Unitholders’ equity
Unitholders’ capital
Surplus
Unappropriated retained earnings
Total surplus
Total unitholders’ equity
Total net assets (Note 4)
Total liabilities and net assets
The accompanying notes are an integral part of these financial statements.

- 26 -(As of April 30, 2017)

6th Fiscal Period(As of October 31, 2017)

130,929
14,000,000
376,804
79,170938
284,571
14,872,413

172,924
14,000,000
402,587
82,238743
㸫
14,658,493

2,000,000
61,300,000
9,033,710
72,333,710
87,206,123

5,000,000
65,400,000
9,268,730
79,668,730
94,327,223

100,040,294

110,189,294

2,381,018
2,381,018
102,421,312
102,421,312
189,627,436

2,626,016
2,626,016
112,815,310
112,815,310
207,142,534

(2) Statement of Income and Retained Earnings(Thousands of yen)

Operating revenue
Rent revenue – real estate (Note 5)
Other lease business revenue (Note 5)
Total operating revenue
Operating expenses
Expenses related to rent business (Note 5)
Asset management fee
Asset custody fee
Administrative service fees
Directors’ compensations
Other operating expenses
Total operating expenses
Operating income
Non-operating income
Interest income
Interest on refund
Subsidy income
Total non-operating income
Non-operating expenses
Interest expenses
Interest expenses on investment corporation bonds
Borrowing related expenses
Amortization of investment unit issuance costs
Amortization of investment corporation bond issuance costs
Other
Total non-operating expenses
Ordinary income
Income before income taxes
Income taxes – current
Income taxes – deferred
Total income taxes
Net income
Retained earnings brought forward
Unappropriated retained earnings
The accompanying notes are an integral part of these financial statements.

- 27 -

5th Fiscal Period

6th Fiscal Period(From November 1, 2016 to(From May 1, 2017 toApril 30, 2017 )October 31, 2017

4,121,417
22,9704,144,387

4,550,426
30,0814,580,508

1,053,022
332,503
3,520
11,8203,600
35,864
1,440,331
2,704,056

1,178,033
359,5623,526
11,4853,600
36,614
1,592,823
2,987,685

50
1,521
10,935
12,50746㸫㸫
46283,125
3,383
39,818
7,006
934
515
334,784
2,381,779
2,381,779
945
(5)
940
2,380,839
179
2,381,018

293,464
5,568
43,16014,3842,258
2,416
361,252
2,626,479
2,626,479750
9759
2,625,719
296
2,626,016

(3) Statement of Changes in Net Assets
5th Fiscal Period (From November 1, 2016 to April 30, 2017)







(Thousands of yen)

Unitholders’ equity
Unitholders’capitalBalance at beginning of periodSurplus
Unappropriatedretained earnings

100,040,294

Total
surplusTotal
unitholders’equityTotal
net assets

2,321,003

2,321,003 102,361,297 102,361,297

Distribution from surplus(2,320,824)(2,320,824)(2,320,824)(2,320,824)

Net income

2,380,839

2,380,839

2,380,839

2,380,839

㸫60,01560,01560,01560,015100,040,294

2,381,018

Changes of items during period

Total changes of items during period
Balance at end of period (Note 6)

6th Fiscal Period (From May 1, 2017 to October 31, 2017)


2,381,018 102,421,312 102,421,312

(Thousands of yen)

Unitholders’ equity
Unitholders’capitalBalance at beginning of periodSurplus
Unappropriatedretained earnings

100,040,294

Total
surplusTotal
unitholders’equityTotal
net assets

2,381,018

2,381,018 102,421,312 102,421,312
10,149,000

10,149,000

Distribution from surplus(2,380,722)(2,380,722)(2,380,722)(2,380,722)

Net income

2,625,719

2,625,719

2,625,719

2,625,719

10,149,000

244,997

244,997

10,393,997

10,393,997

110,189,294

2,626,016

Changes of items during period
Issuance of new investment units

Total changes of items during period
Balance at end of period (Note 6)

10,149,000

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

- 28 -

2,626,016 112,815,310 112,815,310

(4) Statement of Cash Distributions
Item

5th Fiscal Period

6th Fiscal Period(From November 1, 2016 to(From May 1, 2017 toApril 30, 2017 )October 31, 2017 )Ϩ. Unappropriated retained earnings

2,381,018,583yen

2,626,016,489yen

ϩ. Cash distributions

2,380,722,000yen[2,663yen]

2,625,990,000yen[2,710yen][Cash distributions per unit]
Ϫ. Retained earnings carried forward
Method of calculating amount of distribution

296,583yen

26,489yen

The basic policy is to distribute

The basic policy is to distributein excess of an amountequivalent to 90% of thein excess of an amountamount of earnings available
for distribution of SHR
provided in Article 67-15,
Paragraph 1 of the Act on
Special Measures Concerning
Taxation as set forth in Article
46, Paragraph 1, Item 2 of the
Articles of Incorporation of
SHR.
Based on such policy, SHR
decided to pay out a
distribution of earnings of
2,380,722,000 yen, which is thelargest integral multiple of thetotal number of investment
units issued and outstanding(894,000 units) in an amountnot in excess of unappropriatedretained earnings for theperiod.
SHR will not distribute cash inexcess of earnings as set forthin Article 46, Paragraph 2 of
the Articles of Incorporation of
SHR.

- 29 -

equivalent to 90% of theamount of earnings available
for distribution of SHR
provided in Article 67-15,
Paragraph 1 of the Act on
Special Measures Concerning
Taxation as set forth in Article
46, Paragraph 1, Item 2 of the
Articles of Incorporation of
SHR.
Based on such policy, SHR
decided to pay out a
distribution of earnings of
2,625,990,000 yen, which is thelargest integral multiple of thetotal number of investment
units issued and outstanding(969,000 units) in an amountnot in excess of unappropriatedretained earnings for theperiod.
SHR will not distribute cash inexcess of earnings as set forthin Article 46, Paragraph 2 of
the Articles of Incorporation ofSHR.

(5) Statement of Cash Flows(Thousands of yen)

5th Fiscal Period

6th Fiscal Period(From November 1, 2016

(From May 1, 2017 toto April 30, 2017)

Cash flows from operating activities
Income before income taxes
Depreciation and amortization
Amortization of investment corporation bond issuance costs
Amortization of investment unit issuance costs
Interest income
Interest expenses
Decrease (increase) in operating accounts receivable
Decrease (increase) in consumption taxes receivable
Decrease (increase) in prepaid expenses
Decrease (increase) in long-term prepaid expenses
Increase (decrease) in operating accounts payable
Increase (decrease) in accounts payable – other
Increase (decrease) in accrued consumption taxes
Other, net
SubtotalInterest income received
Interest expenses paid
Income taxes paid
Net cash provided by operating activities
Cash flows from investing activities
Purchase of property, plant and equipment in trust
Proceeds from tenant leasehold and security deposits in trust
Repayments of tenant leasehold and security deposits in trust
Net cash provided by (used in) investing activities
Cash flows from financing activities
Proceeds from short-term loans payable
Repayments of short-term loans payable
Proceeds from long-term loans payable
Proceeds from issuance of investment corporation bondProceeds from issuance of investment units
Dividends paid
Net cash provided by (used in) financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period (Note 7)
The accompanying notes are an integral part of these financial statements.

- 30 -

October 31, 2017)

2,381,779
650,209
934
7,006
(50)
286,5097,543
461,715
3,593
35,763(31,608)
26,524
284,571(10,886)
4,103,606
50(280,352)(823)
3,822,480

2,626,479
730,830
2,258
14,384(46)
299,032(2,621)(372,744)
8,324
12,69858,92628,855(284,571)
11,3503,133,158
46(295,964)(945)
2,836,294(68,745)
2,177
(180)
(66,747)(21,377,917)
235,020
㸫
(21,142,896)

㸫
㸫
㸫
㸫
㸫
(2,321,072)(2,321,072)
1,434,660
10,343,058
11,777,719

7,600,000(7,600,000)
4,100,000
2,980,150
10,104,734(2,381,007)
14,803,877(3,502,724)
11,777,719
8,274,994

(6) Notes to Financial Statements
1. Organization
Sekisui House Reit, Inc. (“SHR”) is a Japanese real estate investment corporation established in September 2014
under the Act on Investment Trusts and Investment Corporations of Japan (the “Investment Trust Act”).
On December 3, 2014, SHR commenced its investment operations when it was listed on the Real Estate Investment
Trust Securities Market of the Tokyo Stock Exchange, and it acquired three properties (total acquisition cost of¥114.3 billion) on the same day.
SHR is externally managed by a licensed asset management company, Sekisui House Investment Advisors, Ltd.
2. Basis of Presentation
SHR maintains its accounting records and prepares its financial statements in accordance with accounting
principles generally accepted in Japan (“Japanese GAAP”), including provisions set forth in the Financial
Instruments and Exchange Act, the Investment Trust Act, the Companies Act and the related regulations, which are
different in certain respects as to the application and disclosure requirements of International Financial ReportingStandards.
The accompanying financial statements are basically a translation of the financial statements of SHR, which wereprepared in accordance with Japanese GAAP and were presented in its Securities Report filed with the Kanto Local
Finance Bureau. In preparing the accompanying financial statements, certain reclassifications and modifications
have been made to the financial statements issued domestically in order to present them in a format which is morefamiliar to readers outside Japan. In addition, the notes to the financial statements include certain information
which might not be required under Japanese GAAP but is presented herein as additional information.
SHR’s fiscal period is a six-month period, which ends at the end of April and October of each year.
SHR does not prepare consolidated financial statements as it has no subsidiaries.
Unless otherwise specified, amounts have been rounded down to the nearest thousand yen in the accompanying
financial statements and the notes thereto. As a result, the amounts shown in the financial statements and notes
thereto do not necessarily agree with the sum of the individual account balances.
3. Summary of Significant Accounting Policies(1)Property, plant and equipment (including assets in trust)
1. Method of depreciation
Depreciation is calculated using the straight-line method.
and amortization of nonThe useful lives of principal property, plant and equipment are as follows:
current assets
Buildings      6-65 years
Structures     
36-40 years
Machinery and equipment  10-18 years
Tools, furniture and fixtures  2-6 years(2)Intangible assets
Intangible assets are amortized utilizing the straight-line method.
(3)Long-term prepaid expenses
Long-term prepaid expenses are amortized utilizing the straight-line method.
2. Accounting for(1) Investment corporation bond issuance costs
deferred assets
Investment corporation bond issuance costs are amortized utilizing thestraight-line method over the redemption periods.
(2) Investment unit issuance costs
Investment unit issuance costs are amortized utilizing the straight-line
method (over 3 years).
Accounting for property taxes
3. Standards for
In accounting for property tax, city planning tax, depreciable asset tax, etc. onrevenue and expense
real estate, etc., of the tax amount assessed and determined, the amountrecognition
corresponding to the applicable calculation period is expensed as expenses
related to rent business.
Reimbursement of property tax, paid to the seller upon the acquisition of realestate or trust beneficiary interests of real estate as assets in trust, is notrecognized as expenses related to rent business in the corresponding fiscal
period but included in the acquisition cost of the property.
Property taxes capitalized as a part of the acquisition cost amounted to 78,845
thousand yen for the 6th fiscal period, and there were no property taxes
capitalized for the 5th fiscal period.

- 31 -

4. Method of hedge
accounting

5.

6.

(1)Method of hedge accounting
Deferral hedge accounting is applied. However, the special accounting
treatment is applied to interest rate swaps that meet the criteria for the
special accounting treatment.
(2)Hedging instruments and hedged items
Hedging instruments: Interest rate swap transactions
Hedged items:
Interest on loans(3)Hedging policy
SHR conducts derivative transactions for the purpose of hedging the risks set
forth in its Articles of Incorporation based on its basic risk management policy.
(4)Method for assessing the effectiveness of hedging
Interest rate swaps meet the criteria for the special accounting treatment andan assessment of the effectiveness is thus omitted.
The funds (cash and cash equivalents) in the statement of cash flows consist of cash
Scope of funds in theon hand and cash in trust; deposits that can be withdrawn at any time and deposits
statement of cash flows
in trust; and short-term investments with a maturity of three months or less fromthe date of acquisition, which are readily convertible to cash and bear only an
insignificant risk of price fluctuation.
Other significant matters (1)Accounting for trust beneficiary interests of real estate, etc. as assets in trust
Concerning trust beneficiary interests of real estate, etc. as assets in trust, allserving as basis foraccounts of assets and liabilities within assets in trust as well as all accounts
preparation ofof revenue and expenses from the assets in trust are recognized in the relevant
financial statements
account items on the balance sheet and the statement of income and retained
earnings.
The following material items of the assets in trust recognized in the relevant
account items are separately listed on the balance sheet.
ͳሻ Cash and deposits in trustʹሻ Buildings in trust; Structures in trust; Machinery and equipment in trust;Tools, furniture and fixtures in trust; Land in trust; Construction inprogress in trust͵ሻ Tenant leasehold and security deposits in trust(2)Accounting for consumption tax, etc.
Consumption tax and local consumption tax are excluded from the correspondingtransaction amounts.

- 32 -

4. Notes to Balance Sheet*1. Minimum net assets designated in Article 67-4 of the Investment Trust Act(Thousands of yen)

5th Fiscal Period

6th Fiscal Period(As of April 30, 2017)(As of October 31, 2017)

50,00050,0005. Notes to Statement of Income and Retained Earnings*1. Breakdown of property-related operating revenue and expenses(Thousands of yen)

5th Fiscal Period

6th Fiscal Period(From November 1, 2016

(From May 1, 2017 to
October 31, 2017)

to April 30, 2017)

A. Property-related operating revenue
Rent revenue – real estate
Rental income
Other

4,109,999
11,4184,121,417

4,538,496
11,93022,97024,7065,375

4,550,426

Other lease business revenue
Utilities revenue
Other

17,447
5,522

Total property-related operating revenue
B. Property-related operating expenses
Expenses related to rent businessSubcontract expenses

4,144,387

24,77924,546

Property management fees
Trust fees
Utilities expenses

24,9962,265
18,253

26,177
2,704
20,595

Property and other taxes
Insurance expenses

296,203
6,151

334,107
6,291

Repair expenses
Depreciation

25,632649,474

28,342730,095

Other expenses related to rent business

5,266

1,053,022

30,0814,580,508

5,171

1,178,033

Total property-related operating expenses

1,053,022

1,178,033

C. Property-related operating income [A ï B]

3,091,364

3,402,475

6. Notes to Statement of Changes in Net Assets*1. Total number of authorized investment units and total number of investment units issued
6th Fiscal Period
5th Fiscal Period(From November 1, 2016
to April 30, 2017)

Total number of authorized investment units
Total number of investment units issued- 33 -(From May 1, 2017 to
October 31, 2017)

10,000,000 units

10,000,000 units

894,000 units

969,000 units

7. Notes to Statement of Cash Flows*1. Reconciliation of cash and cash equivalents at end of period to the corresponding balance sheet items(Thousands of yen)
5th Fiscal Period(From November 1, 2016
to April 30, 2017)

6th Fiscal Period(From May 1, 2017 to
October 31, 2017)

Cash and deposits

4,115,187

1,756,618

Cash and deposits in trust

7,662,531

6,518,376

Cash and cash equivalents

11,777,719

8,274,994

8. Lease Transactions
Operating lease transactions as lessor
Future minimum lease payments(Thousands of yen)
5th Fiscal Period(As of April 30, 2017)

6th Fiscal Period(As of October 31, 2017)

Due within 1 year

8,178,120

9,159,073

Due after 1 year

38,316,796

35,656,637

46,494,917

44,815,711

Total
9. Financial Instruments

1. Status of financial instruments(1) Policy for financial instruments
Making it a policy to conduct stable and sound financial operations that would contribute to steady growthof its investment assets as well as efficient management and stability of management, SHR shall procure
funds through borrowings or the issuance of investment corporation bonds for the purposes of utilizing
such funds for the acquisition of assets, payments of repair expenses or distributions, operations of SHR,
repayment of obligations or other.
For derivative transactions, the policy is that derivative transactions shall be limited to those for the
purpose of hedging the risk of fluctuations in interest rates on liabilities and foreign currency risk in thecase of overseas real estate investments, and that no speculative transactions shall be conducted.
(2) Description of financial instruments and associated risks, and risk management structure
The funds procured through borrowings shall be used mainly for the acquisition of investment assets andfor repayment of loans.
The availability and terms and conditions of borrowings and the issuance of investment corporation bonds
may be affected by SHR’s financial creditworthiness, the interest rate situation and other factors, andthere is thus no guarantee that funds can be procured at SHR’s desired timing and terms and conditions.
Furthermore, loans with floating interest rates are susceptible to subsequent market trends.
SHR manages and limits the liquidity risk and the risk of fluctuations in interest rates associated withsuch fund procurement by diversifying fund procurement sources and means and by maintaining the ratio
of interest-bearing liabilities to total assets and the ratio of floating-rate loans to total loans at appropriate
levels. Furthermore, for certain loans with floating interest rates, derivative transactions (interest rate
swap transactions) are used as a hedging instrument for hedging the risk of fluctuations in interest rates
based on rules that set forth the basic policy for handling derivative transactions and risk management.
(3) Supplementary explanation of matters concerning fair value of financial instruments
The fair value of financial instruments, aside from values based on market price, includes values based onreasonable calculations when there is no market price. As the calculations involve variable factors, there
may be cases where the corresponding values will vary when different assumptions are adopted. In
addition, the contract amounts of derivative transactions in “2. Matters concerning fair value of financial
instruments” do not represent the market risk involved in the derivative transactions.
- 34 -

2. Matters concerning fair value of financial instruments
The following is the carrying amount and fair value of financial instruments as of April 30, 2017 andOctober 31, 2017, and the difference between them.
The following table does not include those for which fair value is recognized to be extremely difficult todetermine (please refer to (Note 2)).
5th Fiscal Period (As of April 30, 2017)(Thousands of yen)Book value
recorded on thebalance sheet

Fair value

Difference(1) Cash and deposits

4,115,187

4,115,187

㸫(2) Cash and deposits in trust

7,662,531

7,662,531

㸫

11,777,719

11,777,719

㸫(3) Current portion of long-term loans payable

14,000,000

14,000,000

㸫(4) Investment corporation bonds

2,000,000

1,980,000(20,000)(5) Long-term loans payable

61,300,000

62,904,555

1,604,555

77,300,000

78,884,555

1,584,555㸫㸫㸫

Total assets

Total liabilities(6) Derivative transactions
6th Fiscal Period (As of October 31, 2017)(Thousands of yen)Book value
recorded on thebalance sheet

Fair value

Difference(1) Cash and deposits

1,756,618

1,756,618

㸫(2) Cash and deposits in trust

6,518,376

6,518,376

㸫

8,274,994

8,274,994

㸫(3) Current portion of long-term loans payable

14,000,000

14,000,000㸫(4) Investment corporation bonds

5,000,000

4,980,500(19,500)(5) Long-term loans payable

65,400,000

66,990,706

1,590,706

84,400,000

85,971,206

1,571,206

㸫㸫㸫

Total assets

Total liabilities(6) Derivative transactions(Note 1) Method of calculating the fair value of financial instruments(1) Cash and deposits and (2) Cash and deposits in trust
As these are settled within a short period of time, the fair value is approximately the same as the book value and is thusstated at that book value.
(4) Investment corporation bonds
The fair value of investment corporation bonds are based on the quoted market price.
(3)Current portion of long-term loans payable (5) Long-term loans payable
As the current portion of long-term loans payable and long-term loans payable with floating interest rates reflect interest ratechanges within a short period of time, the fair value is approximately the same as the book value and is thus stated at thatbook value (provided, however, that for long-term loans payable with floating interest rates that qualify for the special
accounting treatment of interest rate swaps (please refer to “11. Derivative Transactions”), the fair value is based on themethod of calculation in which the sum total amount of principal and interest accounted for with the interest rate swap is
discounted by the rate assumed in the event of a similar new drawdown). In addition, for those with fixed interest rates, thefair value is based on the method of calculation in which the sum total amount of principal and interest is discounted by therate assumed in the event of a similar new drawdown corresponding to the remaining period.
(6) Derivative transactions
Please refer to “11. Derivative Transactions”.

- 35 -

(Note 2) Financial instruments for which fair value is recognized to be extremely difficult to determine
Tenant leasehold and security deposits in trust are not subject to valuation of fair value because a reasonable estimation of
cash flows is recognized to be extremely difficult because there is no market price and the difficulty of calculating the actual
deposit period from when lessees move in to when they move out.

(Thousands of yen)Item

5th Fiscal Period

6th Fiscal Period(As of April 30, 2017)(As of October 31, 2017)

9,033,710

9,268,730

Tenant leasehold and security deposits in trust(Note 3) Redemption schedule of monetary claims after the closing date

5th Fiscal Period (As of April 30, 2017)(Thousands of yen)
Due after
4 to 5 years
5 years

Due in1 year or less

1 to 2 years

2 to 3 years

3 to 4 years

Cash and deposits

4,115,187

㸫

㸫

㸫

㸫

㸫

Cash and deposits in trust

7,662,531

㸫

㸫

㸫

㸫

㸫

Total

11,777,719

㸫

㸫

㸫

㸫

㸫

6th Fiscal Period (As of October 31, 2017)(Thousands of yen)
Due after
4 to 5 years
5 years

Due in1 year or less

1 to 2 years

2 to 3 years

3 to 4 years

Cash and deposits

1,756,618

㸫

㸫

㸫

㸫

㸫

Cash and deposits in trust

6,518,376

㸫

㸫

㸫

㸫

㸫

Total

8,274,994

㸫

㸫

㸫

㸫

㸫

(Note 4) Repayment schedule of investment corporation bonds and loans after the closing date

5th Fiscal Period (As of April 30, 2017)

Current portion of longterm loans payable
Investment corporation
bonds(Thousands of yen)
Due after
4 to 5 years
5 years

Due in1 year or less

1 to 2 years

2 to 3 years

3 to 4 years

14,000,000

㸫

㸫

㸫

㸫

㸫

㸫

㸫

㸫

㸫

㸫

2,000,000

㸫㸫

14,000,000

11,050,000

17,000,000

19,250,000

Long-term loans payable
6th Fiscal Period (As of October 31, 2017)

Current portion of longterm loans payable
Investment corporationbonds
Long-term loans payable(Thousands of yen)
Due after
4 to 5 years
5 years

Due in1 year or less

1 to 2 years

2 to 3 years

3 to 4 years

14,000,000

㸫

㸫

㸫

㸫

㸫

㸫

㸫

㸫

㸫

3,000,000

2,000,000

㸫㸫

14,000,000

12,910,000

17,000,000

21,490,000

10. Securities
5th Fiscal Period (From November 1, 2016 to April 30, 2017)
Not applicable.
6th Fiscal Period (From May 1, 2017 to October 31, 2017)
Not applicable.
- 36 -

11. Derivative Transactions
1. Derivatives to which hedge accounting is not applied
5th Fiscal Period (As of April 30, 2017)
Not applicable.
6th Fiscal Period (As of October 31, 2017)
Not applicable.
2. Derivatives to which hedge accounting is applied
The following is the contract amount or the amount equivalent to the principal provided in the contract asof the closing date for each method of hedge accounting.
5th Fiscal Period (As of April 30, 2017)(Thousands of yen)Contract amount

Method ofhedge
accounting

Type ofderivative transactions

Main
hedgeditem

Specialaccounting
treatment forinterest rate
swaps

Interest rate swap
transaction
Floating interest ratereceivable and fixedinterest rate payable

Long-term
loans
payable50,350,000

Of which,over
1 yearFair value

Calculation
method offair value

50,350,000*㸫* As derivative transactions qualifying for the special accounting treatment for interest rate swaps are accounted for with the hedged
long-term loans payable, the fair value is included in the fair value of the underlying long-term loans payable (please refer to “ 9.
Financial Instruments; 2. Matters concerning fair value of financial instruments (Note 1)”).

6th Fiscal Period (As of October 31, 2017)(Thousands of yen)Contract amount

Method ofhedge
accounting

Type ofderivative transactions

Main
hedgeditem

Specialaccounting
treatment forinterest rate
swaps

Interest rate swap
transaction
Floating interest ratereceivable and fixedinterest rate payable

Long-term
loans
payable50,350,000

Of which,over
1 yearFair value

Calculation
method offair value

50,350,000*㸫* As derivative transactions qualifying for the special accounting treatment for interest rate swaps are accounted for with the hedged
long-term loans payable, the fair value is included in the fair value of the underlying long-term loans payable (please refer to “ 9.
Financial Instruments; 2. Matters concerning fair value of financial instruments (Note 1)”).

12. Retirement Benefits
5th Fiscal Period (From November 1, 2016 to April 30, 2017)
Not applicable.
6th Fiscal Period (From May 1, 2017 to October 31, 2017)
Not applicable.

- 37 -

13. Income Taxes
1. Breakdown of deferred tax assets and deferred tax liabilities by major cause(Thousands of yen)

5th Fiscal Period

6th Fiscal Period(As of April 30, 2017)(As of October 31, 2017)16

7

 Total deferred tax assets

16

7

Net deferred tax assets

16

7

Deferred tax assets
 Accrued business taxes not deductible fromtaxable income

2. Breakdown of major items that caused significant differences between the statutory tax rate and theeffective income tax rate after application of tax-effect accounting(%)
5th Fiscal Period

6th Fiscal Period(As of April 30, 2017)(As of October 31, 2017)

31.74

31.74

(31.73)(31.73) Other

0.03

0.02

Effective income tax rate
after application of tax-effect accounting

0.04

0.03

Statutory tax rate
[Adjustments]
 Deductible cash distribution

14. Profit or Loss of Affiliates Accounted for Under the Equity Method
5th Fiscal Period (From November 1, 2016 to April 30, 2017)
Not applicable.
6th Fiscal Period (From May 1, 2017 to October 31, 2017)
Not applicable.
15. Transactions with Related Parties
1. Parent company and major corporate unitholders.
5th Fiscal Period (From November 1, 2016 to April 30, 2017)
Not applicable.
6th Fiscal Period (From May 1, 2017 to October 31, 2017)
Not applicable.
2. Subsidiaries and affiliates.
5th Fiscal Period (From November 1, 2016 to April 30, 2017)
Not applicable.
6th Fiscal Period (From May 1, 2017 to October 31, 2017)
Not applicable.
3. Sister companies.
5th Fiscal Period (From November 1, 2016 to April 30, 2017)
Not applicable.
6th Fiscal Period (From May 1, 2017 to October 31, 2017)
Not applicable.

- 38 -

4. Directors and major individual unitholders.
5th Fiscal Period (From November 1, 2016 to April 30, 2017)
Type

Directoror close
relative

Name

JunichiInoue

Description ofPercentage ofbusiness or
occupation

voting rights
held by (in) SHR

Description oftransaction

Executive Director

Payment of assetof SHR and
Representative

management fee
to Sekisui House

Director of Sekisui
House Investment

㸫Advisors, Ltd.

Investment
Advisors, Ltd.

Transaction
amount(Thousands ofyen)

Account
item

Balanceat end of period(Thousands ofyen)

Accounts
332,503

payable– other

359,103(Note 1)

(Note 1) A transaction conducted by Junichi Inoue as a representative of a third party (Sekisui House Investment Advisors, Ltd.) andthe fee amount is based on terms and conditions set forth in the Articles of Incorporation of SHR.
(Note 2) Consumption taxes are not included in the transaction amount but are included in the balance at end of period.

6th Fiscal Period (From May 1, 2017 to October 31, 2017)
Type

Directoror close
relative

Name

Description ofbusiness orPercentage ofvoting rights

occupation

held by (in) SHR

JunichiInoue

Representative
Director of Sekisuiamount(Thousands ofyen)

Payment of asset
management fee

Executive Directorof SHR and㸫

to Sekisui House
Investment
Advisors, Ltd.
(Note 1)

House Investment
Advisors, Ltd.

Balance

Transaction
Description oftransaction

391,362(Note 2)

Account
item

at end of period(Thousands ofyen)

Accounts
payable388,327– other(Note 1) A transaction conducted by Junichi Inoue as a representative of a third party (Sekisui House Investment Advisors, Ltd.) andthe fee amount is based on terms and conditions set forth in the Articles of Incorporation of SHR.
(Note 2) The amount includes 31,800 thousand yen of asset management fees pertaining to real estate acquisitions included in thebook value of property, plant and equipment.
(Note 3) Consumption taxes are not included in the transaction amount but are included in the balance at end of period.

16. Asset Retirement Obligations
5th Fiscal Period (From November 1, 2016 to April 30, 2017)
Not applicable.
6th Fiscal Period (From May 1, 2017 to October 31, 2017)
Not applicable.

- 39 -

17. Investment and Rental Properties
SHR owns rental office buildings, etc. in Tokyo and other areas for the purpose of earning revenue from leasing.
The following is the carrying amount, amount of increase (decrease) during the period and fair value of theseinvestment and rental properties.
(Thousands of yen)

5th Fiscal Period

6th Fiscal Period(From November 1, 2016

(From May 1, 2017 to
October 31, 2017)

to April 30, 2017)

Carrying amount
Balance at beginning of period

177,986,512

177,418,011(568,501)

20,637,802

177,418,011

198,055,813

205,120,000

233,080,000

Amount of increase (decrease) during period
Balance at end of period
Fair value at end of period(Note 1) Carrying amount is the book value less accumulated depreciation.
(Note 2) Net decrease during the 5th fiscal period is mainly attributable to depreciation (649,474 thousand yen).
Net increase during the 6th fiscal period is mainly attributable to the acquisition of new properties (21,355,798 thousandyen), offset by depreciation (730,095 thousand yen).
(Note 3) Fair value at the end of the period is the appraisal value by outside real estate appraisers.

The property-related operating income in the 5th and 6th fiscal periods for investment and rental properties ispresented in “5. Notes to Statement of Income and Retained Earnings”.
18. Segment Information
1. Segment information
Segment information is omitted because SHR operates a single segment, which is the real estate leasing
business.
2. Related information
5th Fiscal Period (From November 1, 2016 to April 30, 2017)(1) Information about products and services
Information about products and services is omitted because net sales to external customers for a single
products and services category are in excess of 90% of operating revenue on the statement of income andretained earnings.
(2) Information about geographic areas
ͳሻ Operating revenue
Information about net sales is omitted because net sales to external customers in Japan are in excessof 90% of operating revenue on the statement of income and retained earnings.
ʹሻ Property, plant and equipment
Information about property, plant and equipment is omitted because the property, plant andequipment located in Japan is in excess of 90% of property, plant and equipment on the balance sheet.
(3) Information about major customers(Thousands of yen)

Name of customer

Operating revenue

Name of related segment

Sekisui House, Ltd.

2,724,312

Real estate leasing businessNot disclosed (Note)

1,088,998

Real estate leasing business(Note)

The customer is a general business company in Japan, but the name is not disclosed because consent has not beenobtained from the customer. The customer is not a group company of Sekisui House, Ltd.

6th Fiscal Period (From May 1, 2017 to October 31, 2017)- 40 -

(1) Information about products and services
Information about products and services is omitted because net sales to external customers for a single
products and services category are in excess of 90% of operating revenue on the statement of income andretained earnings.
(2) Information about geographic areas
ͳሻ Operating revenue
Information about net sales is omitted because net sales to external customers in Japan are in excessof 90% of operating revenue on the statement of income and retained earnings.
ʹሻ Property, plant and equipment
Information about property, plant and equipment is omitted because the property, plant andequipment located in Japan is in excess of 90% of property, plant and equipment on the balance sheet.
(3) Information about major customers(Thousands of yen)

Name of customer

Operating revenue

Name of related segment

Sekisui House, Ltd.

3,151,016

Real estate leasing businessNot disclosed (Note)

1,088,998

Real estate leasing business(Note)

The customer is a general business company in Japan, but the name is not disclosed because consent has not beenobtained from the customer. The customer is not a group company of Sekisui House, Ltd.

19. Per Unit Information
5th Fiscal Period

6th Fiscal Period(From November 1, 2016
to April 30, 2017)

to October 31, 2017)(From May 1, 2017

Net assets per unit

114,565yen

116,424yen

Net income per unit

2,663 yen

2,737 yen

(Note 1) Net income per unit is calculated by dividing net income by the daily weighted average number of investment units.
In addition, diluted net income per unit is not stated because there are no dilutive investment units.
(Note 2) The following is the basis for calculating net income per unit.

5th Fiscal Period

6th Fiscal Period(From November 1, 2016
to April 30, 2017)

to October 31, 2017)(From May 1, 2017

2,380,839

2,625,719

Amount not attributable to common unitholders (Thousands of yen)㸫㸫

Net income attributable to common investment units (Thousands ofyen)

2,380,839

2,625,719

894,000

959,253

Net income (Thousands of yen)

Average number of investment units during period (Units)- 41 -

20. Significant Subsequent Events
1. Merger between SHR and SHIThe Two Investment Corporations, at their respective Board of Directors’ meetings held on January 24, 2018,resolved to execute the Investment Corporation Merger, with May 1, 2018 as the effective date, and executed
the Investment Corporation Merger Agreement on the same day.
(1) Purpose of the Investment Corporation Merger
The Two Investment Corporations reached the conclusion that expanding the scale of their assets andincreasing their market presence through a merger of the Two Investment Corporations, and improving
opportunities 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 undermanagement, would be their best strategy for maximizing unitholder value; accordingly, the Two Investment
Corporations concluded the Investment Corporation Merger Agreement.
(2) Merger Ratio
As a result of the Investment Corporation Merger, for every 1 SHI investment unit, 1.65 post-Investment
Unit Split SHR investment units will be allocated and delivered (Note). The number of investment units thatmust be delivered will include fractional amounts of less than one unit, and therefore, those fractionalamounts will be sold through market transactions, and the proceeds from the sales will be distributed to theunitholders allocated such fractional amounts on a proportional basis pursuant to the provisions of Article 88of the Investment Trust Act.
(Note) SHR plans to split one investment unit into two investment units with April 30, 2018 as the record date and May 1, 2018as the effective date; the allocation ratio shown above and the number of new investment units SHR will allocate anddeliver are subject to the Investment Unit Split taking effect. For more details on the split of investment units, pleaserefer to “2. Split of Investment Units” stated below.

(3) Merger Consideration
As of the date of these financial statements, in addition to the abovementioned investment units, SHR
intends to pay the Unitholders Subject to Allocation or the registered pledgees of investment units held inlieu of cash distributions for the fiscal 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 (excluding amounts lessthan one yen), which is the quotient resulting from dividing the amount of SHI’s distributable income for the
fiscal period up to the date prior to the effective date of the merger by the number of issued SHI investment
units on that date less the number of investment units held by unitholders other than the Unitholders
Subject to Allocation within a reasonable period from the effective date of the Investment Corporation
Merger.
In addition, SHI will put before a general meeting of its unitholders, which is scheduled to be held on March
27, 2018, a proposal to amend its articles of incorporation with a view to changing its fiscal periods thatcurrently end on March 31 and September 30 to April 30 and October 31, to enable the implementation of theInvestment Corporation Merger. As a result, if the aforementioned amendment is approved, the last fiscal
period before the effective date of the Investment Corporation Merger is expected to end on April 30, 2018.
Specifically, such period is expected to be a seven-month fiscal period from October 1, 2017 to April 30, 2018.
(4) Summary of Certain Financial Information in Respect of SHI as at September 30, 2017 (end of the latest
fiscal period from April 1, 2017 to September 30, 2017)
Business description: Investment and management, mainly in respect of Specified Assets, based on theInvestment Trust Act
Operating revenue:
6,916 million yen
Net income:
2,493 million yen
Total assets:
210,009 million yen
Liabilities:
108,667 million yen
Net assets:
101,341 million yen- 42 -

2. Split of Investment Units
SHR resolved at the Board of Directors’ meeting held on January 24, 2018, to split its investment units asfollows.
(1) Purpose of the Investment Unit Split
As described in “1. Merger between SHR and SHI” above, SHR and SHI have agreed to implement theInvestment Corporation Merger and for this purpose have executed the Investment Corporation Merger
Agreement on January 24, 2018.
The Investment Corporation Merger will be carried out through an absorption-type merger with SHR as thesurviving corporation, and the merger ratio, before considering the Investment Unit Split, would be SHR 1:
SHI 0.825. However, based on this merger ratio, 0.825 units of SHR would be allocated for every unit of SHI,
which would result in a number of SHI unitholders receiving less than one unit of SHR. For this reason, sothat SHI unitholders may continue to hold SHR units even after the Investment Corporation Merger iscompleted, and for the purpose of issuing at least 1 SHR unit to all SHI unitholders, it was decided to
conduct a 2-for-1 split of SHR units.
(2) Method of the Investment Unit Split
SHR units owned by the unitholders set forth or recorded in the final unitholder register on April 30, 2018(the day before the effective date of the Investment Corporation Merger) will be split 2-for-1. The Investment
Unit Split shall come into effect on May 1, 2018 (the effective date of the Investment Corporation Merger),provided that all conditions precedent for the Investment Corporation Merger set forth in the Investment
Corporation Merger Agreement are satisfied.
(3) Increase in Number of Investment Units Due to the Investment Unit Split
1)

Total number of outstanding units prior to the Investment Unit Split: 969,000 units

2)

Increase in the number of units due to the Investment Unit Split: 969,000 units

Total number of outstanding units following the Investment Unit Split: 1,938,000 units

3)
4)
5)

Total number of outstanding units following the Investment
Corporation Merger
Number of authorized investment units following the Investment Unit
Split and the Investment Corporation Merger: 3,762,091 units (Note 1): 20,000,000 units (Note 2)

Note 1: This figure was calculated under the assumption that, in connection with the Investment Corporation Merger, 1.65 SHR
units following the Investment Unit Split would be allocated for every SHI unit with respect to all outstanding SHI units(1,105,510 units) as of the date of these financial statements.
Note 2: SHR’s authorized investment units constitute 10,000,000 units, but as a result of the Investment Corporation Merger, asof the date of these financial statements, the articles of incorporation are expected to be partially amended, with thenumber of authorized investment units to be changed as of the effective date of the Investment Corporation Merger.
Therefore, the figures stated above have been calculated taking into account such changes.

(4) Timeline of the Investment Unit Split
1)

Announcement of the record date

March 30, 2018 (tentative)

2)

Record date

April 30, 2018 (tentative)

3)

Effective date

May 1, 2018 (tentative)(5) Impact on Per Unit Information
Information on a per unit basis, on the assumption that the Investment Unit Split was executed at the
beginning of the previous fiscal period is set forth in the following table.
(fiscal period ended April 30, 2017)(fiscal period ended October 31,
1)
Net assets per unit:
57,282 yen2017) 58,212 yen(fiscal period ended April 30, 2017)(fiscal period ended October 31,
2)
Net income per unit:
1,331 yen2017) 1,368 yen- 43 -

(7) Supplementary Schedules
6th Fiscal Period (From May 1, 2017 to October 31, 2017) ͳǤ Schedule of securities(1) Shares
Not applicable.
(2) Securities other than shares
Not applicable.
2. Contract amount and fair value of derivative transactions(Thousands of yen)Contract amount (Note 1)
Category

Type

Transaction other thanmarket transaction

Fair value(Note 2)

Of which,over 1 year

Interest rate swap transaction
Floating interest rate receivableand fixed interest rate payable

50,350,000

50,350,000

㸫

Total

50,350,000

50,350,000㸫(Note 1) The contract amount of interest rate swap transactions is based on the notional principal.
(Note 2) The fair value is omitted because the transaction meets the criteria for the special accounting treatment under the
Accounting Standards for Financial Instruments.

͵Ǥ Schedule of property, plant and equipment and intangible assets(Thousands of yen)Type of assets

Balanceat beginningof period

Amount ofincreaseduringperiodAmount ofdecreaseduringperiodBalanceat end ofperiod53,345,801

6,258,369

㸫672,428

11,379411

Accumulated depreciation

Net balanceat end ofperiodNotes

720,70956,204,639(Note)

52,5929,201

631,215(Note)

921

58

34

862

㸫

1,259

447

149

811

㸫

㸫 141,218,283

㸫㸫

141,218,283

㸫

㸫

㸫

㸫

㸫

9,699 201,508,442

3,452,629

730,095

198,055,813

㸫

㸫

7,350

4,202

735

3,147

㸫

㸫

7,350

4,202

735

3,147

㸫

9,699 201,515,792

3,456,832

730,830

198,058,960

㸫oraccumulated
amortization

For theperiod

59,604,170

3,399,530

㸫

683,807

510

㸫

1,259

㸫

㸫

126,120,644

15,097,638

9,699

㸫

Subtotal

180,150,244

21,367,897

Intangible Other
assetsSubtotal

7,350

㸫

7,350

㸫

180,157,594

21,367,897

Buildings
in trust
Structuresin trust
Machineryandequipment in
Property,plant andequipment

trust
Tools,
furniture andfixtures intrust
Land in trust(Note)

Constructionin progress

9,699

in trust

Total(Note)The increase during the period is attributable to the acquisition of Garden City Shinagawa Gotenyama (additional
acquisition), Hommachi Garden City (hotel portion).

- 44 -

ͶǤ Schedule of other specified assets
Real estate trust beneficiary interests are included above in “͵Ǥ Schedule of property, plant and equipment
and intangible assets”.
ͷǤ Schedule of investment corporation bonds
Name

Issue date

Balance at
Amount ofBalancedecrease during
beginning ofat end of period
periodperiod(Millions of yen)
(Millions of yen) (Millions of yen)First Series
September 8,
Unsecured Investment
2016
Corporation Bond
Second Series
July 13,
Unsecured Investment
2017
Corporation Bond
Total

Couponrate(%)

Redemption Use of
dateproceeds

September 8,(Note 1) Unsecured
2026

2,000

㸫

2,000

0.340

㸫

㸫

3,000

0.240

2,000

㸫

5,000

July 13,
2022

Security(Note 1) Unsecured(Note 1) The proceeds are used as funds for repayment of loans payable.
(Note 2) This investment corporation bonds are equipped with pari passu clause among specified investment corporation bonds.
(Note 3) The following is the maturity schedule of investment corporation bonds within five years of the balance sheet date.

(Millions of yen)Due in1 year or less
Investment Corporation Bonds

1 to 2 years㸫

2 to 3 years㸫- 45 -

3 to 4 years㸫

4 to 5 years㸫

3,000,000

͸Ǥ Schedule of loans payable

Short-termloans payable

Category(Thousands of yen)

LenderBalanceat beginningof period

Amount ofincreaseduringperiodAmount ofdecreaseduringperiodBalanceat end ofperiodThe Bank of TokyoMitsubishi UFJ, Ltd.

㸫4,560,000

4,560,000

㸫

Sumitomo Mitsui Banking
Corporation㸫

3,040,000

3,040,000

㸫㸫

Subtotal
The Bank of TokyoMitsubishi UFJ, Ltd.
Development Bank ofJapan Inc.

7,600,000

7,600,000

1,500,000

㸫㸫

1,500,000

1,100,000

㸫㸫

1,100,000

The Norinchukin Bank

1,500,000

㸫㸫

1,500,000

Mizuho Bank, Ltd.

2,100,000

㸫㸫

2,100,000

1,300,000

㸫㸫

1,300,000

1,200,000

㸫㸫

1,200,000

2,100,000

㸫㸫

2,100,000

1,300,000

㸫㸫

1,300,000

1,900,000

㸫㸫

1,900,000

3,300,000

㸫㸫

3,300,000

800,000㸫㸫

800,000

800,000㸫㸫

800,000

1,800,000

㸫㸫

1,800,000

600,000㸫㸫

3,000,000

㸫㸫

3,000,000

1,800,000

㸫㸫

1,800,000

1,000,000

㸫㸫

1,000,000

900,000㸫㸫

900,000

4,200,000

㸫㸫

4,200,000

800,000㸫㸫

800,000

700,000㸫㸫

700,000

2,400,000

㸫㸫

2,400,000

900,000㸫㸫

3,700,000

㸫㸫

3,700,000

2,000,000

㸫㸫

2,000,000

900,000㸫㸫

900,000

1,400,000

㸫㸫

1,400,000

Mizuho Trust & Banking
Co., Ltd.
Sumitomo Mitsui Banking
Corporation
Sumitomo Mitsui Trust
Bank, Limited
Mitsubishi UFJ Trust andBanking Corporation
Resona Bank, Limited

Long-term loans payable

The Bank of TokyoMitsubishi UFJ, Ltd.
Development Bank ofJapan Inc.
The Norinchukin Bank
Mizuho Bank, Ltd.
Mizuho Trust & Banking
Co., Ltd.
Sumitomo Mitsui Banking
Corporation
Sumitomo Mitsui Trust
Bank, Limited
Mitsubishi UFJ Trust andBanking Corporation
Resona Bank, Limited
The Bank of TokyoMitsubishi UFJ, Ltd.
Development Bank ofJapan Inc.

  

The Norinchukin Bank
Mizuho Bank, Ltd.
Mizuho Trust & Banking
Co., Ltd.
Sumitomo Mitsui Banking
Corporation
Sumitomo Mitsui Trust
Bank, Limited
Mitsubishi UFJ Trust andBanking Corporation
Resona Bank, Limited- 46 -

㸫

Averageinterest
Repayment Repayment Use ofrate
Security
due date
method proceeds(%)(Note 1)
Purchase UnMay. 23, Lump-sum of assets secured
2018
0.21000
payment
andUn㸦Note 2㸧 at maturity related guaranexpenses teed
㸫
㸫
㸫
㸫
㸫

0.28095

600,000 0.65830

900,000 0.94060

Nov. 30,2017
㸦Note 3㸧Nov. 30,
2019

Nov. 30,
2021

Purchase UnLump-sum of assets secured
Unandpayment
at maturity related guaranexpenses teedCategory

LenderThe Bank of TokyoMitsubishi UFJ, Ltd.
Development Bank ofJapan Inc.

Amount ofincreaseduringperiodAmount ofdecreaseduringperiodBalanceat end ofperiod4,200,000

㸫㸫

4,200,000

Averageinterest
Repayment Repayment Use ofrate
Security
due date
method proceeds(%)(Note 1)300,000㸫㸫

300,000

700,000㸫㸫

700,000

3,700,000

㸫㸫

3,700,000

700,000㸫㸫

700,000

400,000㸫㸫

400,000

1,650,000

㸫㸫

The Norinchukin Bank

650,000㸫㸫

650,000

Mizuho Bank, Ltd.

950,000㸫㸫

950,000

500,000㸫㸫

500,000

1,650,000

㸫㸫

1,650,000

850,000㸫㸫

850,000

200,000㸫㸫

200,000

550,000㸫㸫

550,000

700,000㸫㸫

700,000 0.88470

650,000㸫㸫

650,000 0.88500

350,000㸫㸫

350,000

650,000㸫㸫

650,000

350,000㸫㸫

350,000

Resona Bank, Limited

300,000㸫㸫

300,000

The Bank of TokyoMitsubishi UFJ, Ltd.

750,000㸫㸫

750,000 1.00850

Mizuho Bank, Ltd.

400,000㸫㸫

400,000

300,000㸫㸫

300,000

700,000㸫㸫

700,000

350,000㸫㸫

350,000

500,000㸫㸫

500,000

Resona Bank, Limited

100,000㸫㸫

100,000

The Bank of TokyoMitsubishi UFJ, Ltd.

1,810,000

㸫㸫Mizuho Bank, Ltd.

900,000㸫㸫Mizuho Bank, Ltd.
Sumitomo Mitsui
Banking Corporation
Sumitomo Mitsui Trust
Bank, Limited
Mitsubishi UFJ Trustand Banking
Corporation
The Bank of TokyoMitsubishi UFJ, Ltd.

Mizuho Trust &Banking Co., Ltd.
Sumitomo Mitsui
Banking Corporation
Sumitomo Mitsui Trust
Bank, Limited
Mitsubishi UFJ Trustand Banking
Corporation
Long-term loans payable

Balanceatbeginningof period

Resona Bank, Limited
The Bank of TokyoMitsubishi UFJ, Ltd.
Development Bank ofJapan Inc.
Mizuho Bank, Ltd.
Sumitomo Mitsui Banking
Corporation
Sumitomo Mitsui Trust
Bank, Limited

Mizuho Trust & Banking
Co., Ltd.
Sumitomo Mitsui Banking
Corporation
Sumitomo Mitsui Trust
Bank, Limited
Mitsubishi UFJ Trust andBanking Corporation

Mitsubishi UFJ Trust andBanking Corporation

1.474501,650,000 0.61760

0.62760

Nov. 30,
2020

Lump-sumpayment
at maturity
Nov. 30,2022

0.894701.01850

㸫㸫- 47 -

Nov. 30,2023

1,810,000 0.60500
900,000
0.67000

440,000

Purch
ase ofassetsandrelated
expen
ses

Nov. 30,2024

440,000

Sep. 8,2026

Unsecured
UnguaranRepayme teed
nt of
loans
payableCategoryAmount ofincreaseduringperiodAmount ofdecreaseduringperiod

1,560,000

㸫㸫

1,560,000

830,000㸫㸫

830,000

Resona Bank, Limited

550,000㸫㸫

550,000

Development Bank ofJapan Inc.

370,000㸫㸫

370,000

The Norinchukin Bank

370,000㸫㸫

370,000

370,000㸫㸫

370,000㸫

870,000㸫

870,000㸫

480,000㸫

480,000

Resona Bank, Limited

㸫300,000㸫

300,000

The Norinchukin Bank

㸫210,000㸫

210,000

The Bank of TokyoMitsubishi UFJ, Ltd.

㸫

990,000㸫

990,000 0.37000

Mizuho Bank, Ltd.

㸫

550,000㸫

550,000㸫

260,000㸫

260,000

LenderSumitomo Mitsui Banking
Corporation
Sumitomo Mitsui Trust
Bank, Limited

Long-term loans payable

Averageinterest
Repayment Repayment Use of
Securityrate
due date
method proceeds(%)(Note 1)

Balanceatbeginningof period

Balanceat end ofperiod0.25595

Mizuho Trust & Banking
Co., Ltd.
Sumitomo Mitsui Banking
Corporation
Sumitomo Mitsui Trust
Bank, Limited

Mitsubishi UFJ Trust andBanking Corporation
Development Bank ofJapan Inc.
Mizuho Trust & Banking
Co., Ltd.

0.23286

0.45254

Nov. 30,
2020

Aug. 31,2021

Lump-sum Repayme Unpayment
nt of
securedat maturity loans
Unpayable guaranteed

Nov. 30,2023

㸫220,000㸫

220,000㸫

220,000㸫

220,000

Subtotal

75,300,000

4,100,000

㸫

79,400,000

㸫

㸫

㸫

㸫

㸫

Total

75,300,000

11,700,000

7,600,000

79,400,000

㸫

㸫

㸫

㸫

㸫

(Note 1) Average interest rate is the weighted average interest rate during the period. Interest rates are rounded to six decimal
places. The interest rates for loans hedged by interest rate swap transactions used to hedge the risk of interest rate
fluctuations are the interest rates reflecting the effect of the interest rate swaps.
(Note 2) SHR made early repayment of 500 million yen on June 15, 2017, 3,000 million yen on July 14, 2017 and 4,100 million yen
on August 31, 2017.
(Note 3) These loans are recorded in current liabilities on the balance sheet as current portion of long-term loans payable as of theend of the 6th fiscal period.
(Note 4) The following is the maturity schedule of long-term loans within five years of the balance sheet date.

(Thousands of yen)Due in1 year or lessLong-term loans payable

1 to 2 years

14,000,000

2 to 3 years㸫- 48 -

14,000,000

3 to 4 years
12,910,000

4 to 5 years
17,000,000