DISCLAIMER
This document has been prepared solely for the purpose of providing U.K. and Dutch
investors with certain information under Article 23 of the European Alternative Investment
Fund Managers Directive (European Directive 2011/61/EU) as implemented in theirrespective jurisdictions. Accordingly, you should not use this document for any otherpurpose.
Netherlands
The units of Nippon Accommodations Fund Inc. (“NAF” or the “AIF”) are being marketed in
the Netherlands under Section 1:13b of the Dutch Financial Supervision Act (Wet op het
financieel toezicht, or the “Wft”). In accordance with this provision, Mitsui Fudosan
Accommodations Fund Management Co., Ltd. (the “AIFM”) has notified the Dutch Authority
for the Financial Markets of its intention to offer these units in the Netherlands. The units of
NAF will not, directly or indirectly, be offered, sold, transferred or delivered in the
Netherlands, except to or by individuals or entities that are qualified investors(gekwalificeerde beleggers) within the meaning of Article 1:1 of the Wft, and as aconsequence neither the AIFM nor NAF is subject to the license requirement pursuant to
the Wft. Consequently, neither the AIFM nor NAF is subject to supervision of the Dutch
Central Bank (De Nederlandsche Bank, “DNB”) or the Netherlands Authority for Financial
Markets (Autoriteit Financiële Markten, the “AFM”) and this Article 23 AIFMD Prospectus is
not subject to approval by the AFM. No approved prospectus is required to be published in
the Netherlands pursuant to Article 3 of the European Directive 2003/71/EC (the EU
Prospectus Directive) as amended and implemented in Netherlands law. The AIFM is solely
subject to limited ongoing regulatory requirements as referred to in Article 42 of the AIFMD.
United Kingdom
Units of NAF are being marketed in the United Kingdom pursuant to Article 59 of the United
Kingdom Alternative Investment Fund Managers Regulations 2013. In accordance with thisprovision, the AIFM has notified the Financial Conduct Authority (the “FCA”) of its intention
to offer these units in the United Kingdom.
For the purposes of the United Kingdom Financial Services and Markets Act 2000 (“FSMA”)
NAF is an unregulated collective investment scheme which has not been authorized by the
FCA.
Accordingly, any communication of an invitation or inducement to invest in NAF may bemade to persons in the United Kingdom only if the communication falls within one or moreof the categories of exempt financial promotions under the Financial Services and Markets
Act (Financial Promotion) Order 2005 (the “Order”), such as financial promotions
communicated to:(1) persons who are investment professionals, as defined in article 19 of the Order;(2) persons who are certified high net worth individuals, as defined in article 48 of theOrder;(3) persons who are high net worth companies, unincorporated associations, or otherentities listed in article 49 of the Order; or(4) persons who are certified sophisticated investors, as defined in article 50 of theOrder,
or if the communication is made to persons to whom such an invitation or inducement mayotherwise lawfully be communicated. The distribution of this document to any person in the
United Kingdom in circumstances not falling within one of the above categories is not
permitted and may contravene FSMA. No person falling outside those categories should
treat this document as constituting a promotion to him, or act on it for any purposes
whatever.
In relation to each Member State of the European Economic Area which has implemented
the Prospectus Directive (each, a Relevant Member State), with effect from and including
the date on which the Prospectus Directive is implemented in that Relevant Member State(the Relevant Implementation Date) no offer of units of NAF may be made to the public inthat Relevant Member State except in circumstances falling within Article 3(2) of theProspectus Directive, provided that no such offer of units shall require the publication of aprospectus pursuant to Article 3 of the Prospectus Directive, or a supplement to aprospectus pursuant to Article 16 of the Prospectus Directive.
For the purposes of this provision, the expression “an offer of units to the public” in relation
to any units in any Relevant Member State means the communication in any form and by
any means of sufficient information on the terms of the offer and the units to be offered so
as to enable an investor to decide to purchase or subscribe the units, as the same may bevaried in that Member State by any measure implementing the Prospectus Directive in that
Member State, the expression “Prospectus Directive” means Directive 2003/71/EC (andamendments thereto, including the 2010 PD Amending Directive, to the extent
implemented in the Relevant Member State), and includes any relevant implementing
measure in the Relevant Member State and the expression “2010 PD Amending Directive”
means Directive 2010/73/EU.

2

Article 23 (1)(a)Objectives of

Nippon Accommodations Fund Inc. (“NAF” or the “AIF”) invests in “Accommodation Assets”,

the AIF

which includes rental apartments, dormitories/student apartments, serviced apartments, seniorresidences and corporate housing and specifically does not include hotel properties; particularly,
NAF invests in newly developed residential properties created in response to ongoing social andlifestyle changes.
The basic policy of NAF is to maximize the value of “Accommodation Assets” by providing
accommodations, i.e., services that satisfy diverse tenant needs. NAF takes amedium‐to‐long‐term perspective in managing assets to secure stable earnings and steadily
increase assets under management.

Investment

NAF emphasizes Greater Tokyo and other major cities in investing in Accommodation Assets. By

strategy

region, approximately 80 percent of NAF’s assets are in the 23 wards of Tokyo. NAF mostly
invests in large‐scale properties and utilizes Mitsui Fudosan Group’s value chain for its investment
management from planning/development to management/operation of Accommodation Assets.
NAF further utilizes Mitsui Fudosan Group properties and extensive real estate information
network to give NAF greater access to investment opportunities.

Types of assets

Real estate, trust beneficiary interests in real estate, real estate securities, specified assets andthe AIF mayother assets.

invest inTechniques it

NAF achieves its objective by investing in real estate consisting of Accommodation Assets. NAF

may employ

also invests in securities, beneficiary certificates representing beneficial interests in trusts andand allother assets backed by Accommodation Assets.

associated risks

The principal risks with respect to investment in NAF are as follows:

any adverse conditions in the Japanese economy could adversely affect NAF;



NAF may not be able to acquire properties to execute the growth and investment
strategy in a manner that is accretive to earnings;

illiquidity in the real estate market may limit the ability to grow or adjust the portfolio;the past experience of our asset manager, Mitsui Fudosan Accommodations FundManagement Co., Ltd., in the Japanese real estate market is not an indicator or guaranteeof future results;

NAF’s reliance on Mitsui Fudosan Group, Mitsui Fudosan Accommodations FundManagement Co., Ltd. and other third service providers could have a material adverse
effect on business;there are potential conflicts of interest between NAF and Mitsui Fudosan Group as wellas the AIFM;



NAF’s revenues largely comprise leasing revenues from the portfolio properties, which
may be negatively affected by vacancies, decreases in rent, and late or missed payments
by tenants;

NAF faces significant competition in seeking tenants and it may be difficult to find3

replacement tenants;

increases in prevailing market interest rates may increase interest expense and may
result in a decline in the market price of NAF’s units;NAF may suffer large losses if any of the properties incurs damage from a natural or
man‐made disaster;most of the properties in the portfolio are concentrated in Tokyo 23 wards and areresidential properties;



any inability to obtain financing for future acquisitions could adversely affect the growthof the portfolio;NAF’s failure to satisfy a complex series of requirements pursuant to Japanese tax
regulations would disqualify NAF from certain taxation benefits and significantly reducethe cash distributions to the unitholders; andownership rights in some of NAF’s properties may be declared invalid or limited.

In addition, we are subject to the following risks:risks related to increasing operating costs;

risks related to NAF’s dependence on the efforts of the AIFM’s key personnel;risks related to the restrictive covenants under debt financing arrangement;risks related to entering into forward commitment contracts;risks related to third party leasehold interests in the land underlying NAF properties;risks related to holding the property in the form of stratified ownership (kubun shoyū)interests or co‐ownership interests (kyōyū‐mochibun);risks related to holding the property through trust beneficiary interests;risks related to properties not in operation (including properties under development);risks related to the defective title, design, construction or other defects or problems in
the properties;risks related to impairment losses relating to the properties;risks related to tenant leasehold deposits and/or security deposits;risks related to tenant’s default as a result of financial difficulty or insolvency;risks related to the insolvency of master lessors;

risks related to the insolvency of a property seller following our purchase of a property;risks related to relying on expert appraisals and engineering, environmental and seismic
reports as well as industry and market data;risks related to the presence of hazardous or toxic substances in the properties, or the
failure to properly remediate such substances;

risks related to strict environmental liabilities for the properties;risks related to the amendment of applicable administrative laws and local ordinances;

risks related to holding Japanese anonymous association (tokumei kumiai) interests;risks related to investments in trust beneficiary interests;risks related to the tight supervision by regulatory authorities and compliance with4

applicable rules and regulations;risks related to tax authority disagreement with the AIFM’s interpretations of theJapanese tax laws and regulations;risks related to being unable to benefit from reductions in certain real estate taxes
enjoyed by qualified J‐REITs; andrisks related to changes in Japanese tax laws.

Any applicable

NAF is subject to investment restrictions under Japanese laws and regulations (e.g., the Act on

investment

Investment Trusts and Investment Corporations (the “ITA”), the Financial Instruments andrestrictions

Exchange Act (the “FIEA”)) as well as its articles of incorporation.
NAF must invest primarily in specified assets as defined in the ITA. Specified assets include, but
are not limited to, securities, real estate, leaseholds of real estate, surface rights (chijō‐ken) (i.e.,right to use land for the purpose of having a structure on it) or trust beneficiary interests forsecurities or real estate, leaseholds of real estate or surface rights. A listed J‐REIT must invest
substantially all of its assets in real estate, real estate‐related assets and liquid assets as provided
by the listing requirements. Real estate in this context includes, but is not limited to, real estate,leaseholds of real estate, surface rights, and trust beneficiary interests for these assets, and realestate‐related assets in this context include, but are not limited to, anonymous association(tokumei kumiai) interests for investment in real estate. Pursuant to the ITA, investment
corporations may not independently develop land or construct buildings, but must outsourcesuch activities.

Circumstances

NAF may take out loans or issue long‐term or short‐term corporate bonds for the purpose of

in which the AIF

investing in properties, conducting repairs and related work, paying cash distributions, operating

may usecapital, repaying obligations (including repayment of tenant leasehold or security deposits, andleverageobligations related to loans or long‐term or short‐term corporate bonds) and other activities.

The types andLoans or investment corporation bonds. Currently all of NAF’s outstanding long‐ and short‐termsources ofloans as well as outstanding bonds are unsecured and unguaranteed.

leveragepermitted andLoans or investment corporation bonds in which NAF enters or NAF issues may be subject toassociated risks

restrictive covenants in connection with any future indebtedness that may restrict operations andlimit its ability to make cash distributions to unitholders, to dispose of properties or to acquire
additional properties. Furthermore, if NAF were to violate such restrictive covenants, such as withregard to loan‐to‐value ratios, lenders may be entitled to require NAF to collateralize portfolio
properties or demand that the entire outstanding balance be paid.
In the event of an increase in interest rates, to the extent that NAF has any debt with unhedged
floating rates of interest or NAF incurs new debt, interest payments may increase, which in turn
could reduce the amount of cash available for distributions to unitholders. Higher interest rates

5

may also limit the capacity for short‐ and long‐term borrowings, which would in turn limit NAF’s
ability to acquire properties, and could cause the market price of the units to decline.
Any restrictions

The maximum amount of each loan and corporate bond issuance is 1 trillion yen, and theon leverage

aggregate amount of all such debt cannot exceed 1 trillion yen.

Any restrictions

No applicable arrangements.

on collateraland asset reusearrangements
Maximum level

NAF has set an upper limit of 60% as a general rule for its loan‐to‐value, or LTV, ratio in order toof leverage

operate with a stable financial condition. NAF may, however, temporarily exceed such levels as awhich the AIFM

result of property acquisitions or other events.

is entitled to
employ on
behalf of the
AIF
Article 23(1) (b)Procedure by

Amendment of the articles of incorporation. Amendment requires a quorum of a majority of thewhich the AIF

total issued units and at least a two‐thirds vote of the voting rights represented at the meeting.

may change its

However, the guidelines of the AIFM, which provide more detailed policies within NAF’s overall

investment

investment strategy and policy, can be modified without such formal amendment of the articles

strategy /of incorporation.

investment
policyArticle 23(1) (c)Description of
the main legal
implications of

AIFM has entered into the following agreements with Mitsui Fudosan Residential Co., Ltd.:

An agreement on the provision of real estate information and advisory services.

NAF has entered into the following agreements with Sumitomo Mitsui Trust Bank, Limited:the contractualAn asset custody agreement regarding NAF’s assets;

relationshipA transfer agency agreement regarding the units;

entered into for

Loan agreements over certain of our short‐ and long‐term loans; andthe purpose of

Agreements establishing Sumitomo Mitsui Trust Bank, Limited as the trustee for certain

investment,

trust beneficiary rights held by NAF;

includingjurisdiction,

All of the above agreements are governed by Japanese law.

applicable law,and theNAF is not involved in or threatened by any legal arbitration, administrative or other proceedings,

existence or not

the results of which might, individually or in the aggregate, be material.

of any legal
instruments

6

providing forthe recognition
andenforcement of
judgments inthe territory
where the AIF isestablished
Article 23(1) (d)The identity of AIFM (Asset Manager): Mitsui Fudosan Accommodations Fund Management Co., Ltd.

the AIFM, AIF's

 Auditor: KPMG AZSA LLC

depository, Custodian and Transfer Agent: Sumitomo Mitsui Trust Bank, Ltd.

auditor and any

 General Administrative Agent(Accounting): Heiseikaikeisha Tax Corporation

other service

 General Administrative Agent(Tax Return Filling): PwC Tax Japan

providers and a

 General Administrative Agent(Bond Administration): Sumitomo Mitsui Banking Corporation

description ofService providers owe contractual obligations under their respective agreements with the AIF or

their duties andAIFM, as the case may be. In addition, the FIEA provides that an asset manager owes a J‐REIT a

the investors'

fiduciary duty and must conduct its activities as the asset manager in good faith. The FIEA also

rights thereto

prohibits an asset manager from engaging in certain specified conduct, including entering intotransactions outside the ordinary course of business or with related parties of the asset manager
that are contrary to or violate the J‐REIT’s interests. Pursuant to the ITA, the unitholders have theright to approve the execution or termination of the asset management agreement at a general
meeting of unitholders.

Article 23(1) (e)Description of

Not applicable.

how the AIFM
complies withtherequirements tocover
professional
liability risks(own funds /professional
indemnity
insurance)

7

Article 23(1) (f)Description of

Not applicable. There is no delegation of such functions beyond the AIFM, which is responsible

any delegatedfor portfolio and risk management, and the Custodian, which is responsible for safekeeping

management

activities.

function such as
portfolio
management or
riskmanagement
and of any
safekeeping
functiondelegated by
the depositary,
theidentification of
the delegate
and any
conflicts ofinterest that
may arise fromsuch
delegations
Article 23(1) (g)Description of

NAF makes investment decisions based on its investment strategies and in accordance with its

the AIF’s

articles of incorporation and based on the results of due diligence, including the valuation ofvaluation

properties and consideration of the property appraisal value.

procedure and

NAF shall evaluate assets in accordance with its Article of Incorporation. The methods andpricing

standards that NAF uses for the evaluation of assets are based on the Regulations Concerning themethodology,

Calculations of Investment Corporations, as well as the Regulations Concerning Real Estateincluding theInvestment Trusts and Real Estate Investment Corporations and other regulations stipulated bymethods used

ITA, in addition to Japanese GAAP. J‐REITs may only use the valuation methods prescribed in thein valuing

rules of the Investment Trusts Association, Japan, which emphasize market price valuation.

hard‐to‐value
assetsRegarding hard to value assets, such assets comprise tenant security deposits including trust
accounts. Security deposits from tenants are not subject to fair value disclosure because they are
not marketable, and actual deposit period is not estimable as leases may be cancelled, renewed
or re‐signed even if a lease term is set in the lease contract. This makes a reasonable estimate of
future cash flows difficult. Valuation of such hard to value assets is included in the notes to our

8financial statements.
Article 23(1) (h)Description of

NAF seeks to manage the capital resources and liquidity sources to provide adequate funds for

the AIF’s

current and future financial obligations and other cash needs and acquisitions. Funds from loans

liquidity risk

and bonds are primarily used for acquiring assets and to repay interest‐bearing debt. NAF

management,

manages associated liquidity and interest rate fluctuation risk in ways such as diversifying its

includingcredit sources and maturities, and by mainly using fixed‐rate loans. NAF currently has

redemption

commitment line contracts of ¥10,000 million with two financial institutions. The unused amountrights in normalof such commitment line was ¥10,000 million as of February 29, 2016.

and exceptional
circumstances

NAF is a closed‐end investment corporation, and unitholders are not entitled to request theand existing

redemption of their investment.

redemption
arrangementswith investors
Article 23(1) (i)Description of Compensation: The articles of incorporation provide that the AIF may pay its executive andall fees, charges

supervisory officers up to 700,000 yen per month. The board of officers is responsible forand expenses

determining a reasonable compensation amount for the executive officer and each of theand a maximum

supervisory officers.

amount which
is directly /indirectly borne Asset Management Fee: The AIF will pay the Asset Manager an asset management fee asfollows:

by the investors
Management Fees 1 – The amount equivalent to 5% of the amount of the revenue arising fromreal estate, real estate‐related and real estate‐backed assets (“Real Estate”) as calculated on eachclosing date (provided, however, that revenues from the sale of Real Estate and other managed
assets will be excluded) will be payable.
Management Fees 2 – The amount equivalent to 5% of income before income tax
prior to deduction of Management Fees 1 and 2 as calculated on each closing date will bepayable.
Management Fees 3 – In the event that Real Estate is newly acquired, compensation equivalent
to 1 percent (0.5 percent if it is acquired from Related Parties) of the total amount of theacquisition price of said Real Estate (excluding consumption tax, local consumption tax, andacquisition costs) will be payable.

9Management Fees 4 – In the event that Real Estate is sold, compensation equivalent to 1 percent(0.5 percent if it is sold to Related Parties) of the total amount of the sales price of said Real
Estate (excluding consumption tax, local consumption tax) will be payable.
 General Administrators Fee: The AIF will pay the General Administrators as follows:
250,000 yen per meeting for services related to the meetings of the board of officers and
5,000,000 yen per meeting for services related to the meeting of unitholders.
 Tax Services Fee: A fixed amount of 1,500,000 yen per fiscal period.
 Accounting Fee:
One‐twelfth of the following in either (1) or (2) below each month:(1) A fixed amount of 11,000,000 yen plus 500,000 yen multiplied by the number ofproperties in NAF’s portfolio as of June 1 and December 1 of each year.
(2) A variable amount calculated at June 1 and December 1 of each year in accordance withthe following, based on the total value of our assets:
150 billion or less ......................................... 27 million yen
More than 150 and 250 or less .................... 27 million yen + (Total asset value – 150
billion yen) x 0.012%
More than 250 billion .................................. 39 million yen + (Total asset value – 250
billion yen) x 0.008%
 Transfer Agent Fee (Standard Fee):
Standard transfer agent fees are for services such as the preparation, maintenance and storage of
NAF’s unitholder register; and preparation of materials concerning end‐of‐period unitholder
statistical data (number of unitholders, total units held, and distribution per geographic area).
Monthly standard fees are determined by calculating one sixth of the total number of unitholders
falling under each section as shown below.
There is a minimum monthly fee of ¥200,000.
Up to 5,000 .......................................................................

480 yen5,001 to 10,000 ................................................................

420 yen

10,001 to 30,000 ..............................................................

360 yen30,001 to 50,000 ..............................................................

300 yen50,001 to 100,000 ............................................................

260 yenMore than 100,000 ..........................................................

225 yen

10

NAF also pays certain other fees in addition to the standard fee in connection with theadministration and handling of distributions (minimum of 350,000 yen per distribution) and othershareholder related functions.
 Custodian Fee: The AIF will pay the Custodian a fee for each fiscal period calculated as follows:
A maximum amount equal to the amount of total assets as indicated at the beginning of theperiod trial balance x 0.02%
 Auditor Fee: A fixed amount set by the board of officers of up to 20 million yen per fiscal
period.

NAF also pays fees to certain service providers in connection with;oAdministration of special accounts;o

Property Management;oAdministration for corporate bonds governance

Article 23(1) (j)Description ofUnder Article 77 paragraph 4 of the Act on Investment Trusts and Investment Corporations of

the AIFM's

Japan, which applies the requirements of Article 109 paragraph 1 of the Companies Act toprocedure toinvestment corporations, investment corporations are required to treat unitholders equally

ensure fairdepending on the number and content of units held. In addition, upon liquidation, the allotment

treatment ofof residual assets to unitholders is required to be made equally depending on the number units

investors andheld under Article 77 paragraph 2 item 2 and Article 158 of the ITA.

details of any
preferential
treatment
received byinvestors,
includingdetailing thetype ofinvestors andtheir legal or
economic links
with the AIF or
AIFM

11

Article 23(1) (k)The latest

Additional information may be found in our most recent semi‐annual report prepared inannual reportaccordance with Article 22 of the AIFMD, which is available at the Asset Manager’s office locatedreferred to in

at 1‐4‐1 Nihonbashi, Chuo‐ku, Tokyo.

Article 22(1)Article 23(1) (l)The procedure

NAF is authorized under the articles of incorporation to issue up to 4 million units. Its units haveand conditions

been listed on the Tokyo Stock Exchange since August 4, 2006. Secondary market sales andfor the issuetransfers of units will be conducted in accordance with the rules of the Tokyo Stock Exchange.

and sale of theUnit prices on the Tokyo Stock Exchange are determined on a real‐time basis by the equilibrium

units

between bids and offers. The Tokyo Stock Exchange sets daily price limits, which limit the
maximum range of fluctuation within a single trading day. Daily price limits are set according to
the previous day’s closing price or special quote.

Article 23(1)(m)
Latest net asset

NAF’s unit’s latest market price is publicly available at the Tokyo Stock Exchange or from financial

value of the AIF

information vendors (including Reuters, which can be viewed ator latest market

http://www.reuters.com/finance/stocks/overview?symbol=3226.T ).

price of the unitor share of the
AIF
Article 23(1) (n)Details of the

The units of NAF were listed on the Tokyo Stock Exchange on August 4, 2006.

historical

The most recent five fiscal period performance of the units is as follows.

performance of

Fiscal period (six months

Total Assets

Total Net Assets

Net Assets per unit

the AIF, whereended)(JPY million)(JPY million)(base value) (JPY)available

February 29, 2016

293,684

139,567

288,051

August 31, 2015

295,644

139,398

287,703

February 28, 2015

290,463

129,441

280,526

August 31, 2014

292,317

129,296

280,214(Note)

February 28, 2014

277,125

129,191

559,971(Note) NAF implemented a two‐for‐one split of investment units with the effective date of March
1, 2014.
Article 23(1) (o)Identity of the

Not applicable.

prime broker,
any material

12arrangementsof the AIF with
its prime
brokers, howconflicts ofinterest aremanaged withthe prime
broker and theprovision in thecontract withthe depositaryon thepossibility oftransfer andreuse of AIF
assets, andinformation
about anytransfer of
liability to theprime broker
that may exist
Article 23(1) (p)Description of

The AIFM will disclose the matters described in Articles 23(4) and 23(5) periodically through its

how and whenInternet website or semi‐annual report.

periodic
disclosures will
be made in
relation toleverage,liquidity andrisk profile of
the assets,pursuant to
Articles 23(4)and 23(5)13Article 23(2)The AIFM shallNot applicable.

inform theinvestors before
they invest in
the AIF of any
arrangement
made by thedepository tocontractuallydischarge itself
of liability inaccordancewith Article
21(13)The AIFM shallNot applicable.

also inform
investors of any
changes withrespect todepositary
liability without
delay
Article 23(4)(a)Percentage of the AIF's assets which

There are no assets that are subject to special arrangements arising fromare subject to special arrangements

their illiquid nature.

arising from their illiquid nature. The
percentage shall be calculated as the
net value of those assets subject tospecial arrangements divided by the
net asset value of the AIF concerned
Overview of any special

There are no such special arrangements.

arrangements, including whether
they relate to side pockets, gates orother arrangements
Valuation methodology applied to

There are no such special arrangements.

assets which are subject to sucharrangements

14How management and performance

There are no such special arrangements.

fees apply to such assets
Article 23(4)(b)Any new arrangements for managing

Any new arrangements or change in applicable arrangements will be

the liquidity of the AIF

disclosed at an appropriate time.

For each AIF that the AIFM manages

Any new arrangements or change in applicable arrangements will bethat is not an unleveraged closed‐end

disclosed at an appropriate time.

AIF, notify to investors whenever they
make changes to its liquidity
management systems (which enable
an AIFM to monitor the liquidity riskof the AIF and to ensure the liquidity
profile of the investments of the AIF
complies with its underlying
obligations) that are material inaccordance with Article 106(1) ofRegulation (EU) No 231/2013 (ie.
there is a substantial likelihood that areasonable investor, becoming awareof such information, would reconsider
its investment in the AIF, including
because such information could
impact an investor’s ability to
exercise its rights in relation to its
investment, or otherwise prejudice
the interests of one or more investors
in the AIF).
Immediately notify investors where

Any new arrangements or change in applicable arrangements will bethey activate gates, side pockets ordisclosed at an appropriate time.

similar special arrangements or
where they decide to suspend
redemptions
Overview of changes to liquidity

Any new arrangements or change in applicable arrangements will bearrangements, even if not special

disclosed at an appropriate time.

arrangements
Terms of redemption and

NAF is a closed‐end investment corporation, and unitholders are notcircumstances where management

entitled to request the redemption of their investment.

discretion applies, where relevant
Also any voting or other restrictions

There are no voting or other restrictions on the rights attaching to units.

15

exercisable, the length of any lock‐up
or any provision concerning ‘first inline’ or ‘pro‐rating’ on gates andsuspensions shall be included
Article 23(4)(c)
The current risk profile of the AIF and

The appropriateness and effectiveness of the risk management structure

the risk management systems

are regularly evaluated and enhanced by the AIFM.

employed by the AIFM to manage
those risks

Deposits are exposed to risks of failure of the financial institution holding
the deposit and other credit risks, but such risks are controlled by striving todiversify the financial institutions holding the deposits.
Funds from loans and bonds are primarily used for acquiring assets and to
repay interest‐bearing debt. NAF manages associated liquidity and interest
rate fluctuation risk in ways such as by diversifying its credit sources andmaturities, dispersing repayment dates, establishing committed credit lines,
keeping sufficient liquidity in hand, and mainly using fixed‐rate loans. Our
credit line is in the amount of 10 billion yen; no amount has been drawn
down as of February 29, 2016.
Debt with a floating interest rate is exposed to interest rate fluctuation
risks, but the impact that interest rate rises have on the operations islimited by keeping the appraisal LTV at low levels, maintaining the
proportion of debt that is long‐term fixed‐rate debt at high levels, andsetting a procurement limit depending on the economic and financial
environment, terms of lease agreements with tenants, asset holding period
and other factors.
Furthermore, derivative transactions (interest rate swap transactions) areavailable as hedging instruments to mitigate the risks of rises in floatinginterest rates. NAF may enter into derivative transactions solely for the
purpose of hedging interest rate risk. Currently, NAF is not engaged in any
derivative transactions. NAF strives for efficiency in its funding plans andhas an operating policy of minimizing surplus funds.
Tenant security deposits are exposed to liquidity risk arising from vacatingof properties by tenants due to the termination of contract.
NAF manages this risk by monitoring forecasted cash flows on a monthly
basis to ensure it has sufficient funds.

16

Measures to assess the sensitivity of

No such measures have been implemented.

the AIF’s portfolio to the most
relevant risks to which the AIF is or
could be exposed
If risk limits set by the AIFM have

No such situation has occurred.

been or are likely to be exceeded andwhere these risk limits have been
exceeded a description of thecircumstances and the remedial
measures taken
Article 23(5)(a)Any changes to the maximum amountAny new arrangements or change in applicable arrangements will beof leverage which the AIFM may

disclosed at an appropriate time.

employ on behalf of the AIF,
calculated in accordance with thegross and commitment methods. This
shall include the original and revised
maximum level of leverage calculated
in accordance with Articles 7 and 8 ofRegulation (EU) No 231/2013,
whereby the level of leverage shall becalculated as the relevant exposure
divided by the net asset value of the
AIF.
Any right of the reuse of collateral or

No such right or guarantee exists.

any guarantee granted under theleveraging agreement, including thenature of the rights granted for thereuse of collateral and the nature of
the guarantees granted
Details of any change in service

Any new arrangements or change in applicable arrangements will be

providers relating to the above.

disclosed at an appropriate time.

Article 23(5)(b)Information on the total amount of

The aggregate amount of debt with interest is JPY 147,500 million as ofleverage employed by the AIF

February 29, 2016.

calculated in accordance with thegross and commitment methods

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