Disclaimers
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) (the “AIFMD”) as implemented
in their respective jurisdictions. Accordingly, you should not use this document for any otherpurpose.
Netherlands
The units of Daiwa Securities Living Investment Corporation (“DLI” or the “AIF”) are being
marketed in the Netherlands under Section 1:13b of the Netherlands Financial Supervision
Act (Wet op het financieel toezicht, or the “Wft”). In accordance with this provision, Daiwa
Real Estate Asset Management Co., Ltd. (the “AIFM”) has submitted a notification with theDutch Authority for the Financial Markets (Autoriteit Financiële Markten, the “AFM”) of its
intention to offer these units in the Netherlands. The units of DLI will not, directly or
indirectly, be offered, sold, transferred or delivered in the Netherlands, except to or byindividuals or entities that qualify as qualified investors (gekwalificeerde beleggers) within
the meaning of Article 1:1 of the Wft. As a consequence, neither the AIFM nor DLI is subject
to the license requirement pursuant to the Wft. Consequently, the AIFM and DLI are only
subject to limited supervision of the AFM and the Netherlands Central Bank (DeNederlandsche Bank) for the compliance with the ongoing regulatory requirements as
referred to in the Netherlands law implementation of Article 42 of the AIFMD. This Article
23 AIFMD prospectus is not subject to approval by the AFM. No approved prospectus isrequired to be published in the Netherlands pursuant to Article 3 of the Regulation (EU)2017/1129 (the “Prospectus Regulation”) as amended and applicable in the Netherlands.
United Kingdom
Units of DLI 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”), DLI is an unregulated collective investment scheme which has not beenauthorized by the FCA.
Accordingly, any communication of an invitation or inducement to invest in DLI may only bemade to (i) investment professionals falling within Article 19(5) of the Financial Services andMarkets Act 2000 (Financial Promotion) Order 2005, as amended, or the “Order”; (ii) highnet worth companies falling within Articles 49(2)(a) to (d) of the Order or (iii) other persons
to whom it may lawfully be communicated (all such persons referred to under (i), (ii), and(iii) of this paragraph, together being referred to as “Relevant Persons”).
In the United Kingdom, this document and its contents are directed only at Relevant Persons
and must not be acted on or relied on by persons who are not Relevant Persons. The
transmission of this document and its contents in the United Kingdom to any person otherthan a Relevant Person is unauthorized and may contravene the FSMA and other United
Kingdom securities laws and regulations. Prohibition of Sales to United Kingdom Retail
Investors

In addition to the restrictions under the AIFMD, as retained by the United Kingdom in its
domestic laws, the units of DLI are not intended to be offered, sold or otherwise madeavailable to and should not be offered, sold or otherwise made available to any retail investor
in the United Kingdom. For these purposes of this provision, a “retail investor” means aperson who is one (or more) of: (i) a retail client, as defined in point (8) of Article 2 ofRegulation (EU) No 2017/565 as it forms part of domestic law by virtue of the European
Union (Withdrawal) Act 2018 (“EUWA”); or (ii) a customer within the meaning of theprovisions of the FSMA and any rules or regulations made under the FSMA to implement
Directive (EU) 2016/97, where that customer would not qualify as a professional client, as
defined in point (8) of Article 2(1) of Regulation (EU) No 600/2014 as it forms part ofdomestic law by virtue of the EUWA; or (iii) not a qualified investor defined in Article 2 ofRegulation (EU) 2017/1129, as it forms part of domestic law by virtue of the EUWA; and theexpression “offer” includes the communication in any form and by any means of sufficient
information on the terms of the offer and the international units to be offered so as to enable
an investor to decide to purchase or subscribe the international units. Consequently no key
information document required by Regulation (EU) No 1286/2014, as it forms part ofdomestic law by virtue of the EUWA (the “UK PRIIPs Regulation”), for offering or sellingthe units of DLI or otherwise making them available to retail investors in the United
Kingdom has been prepared. Therefore, offering or selling the units of DLI or otherwise
making them available to any retail investor in the United Kingdom may be unlawful under
the UK PRIIPs Regulation.
European Economic Area
In addition to the restrictions under the AIFMD, the units of DLI are not intended to beoffered, sold or otherwise made available to and should not be offered, sold or otherwise
made available to any retail investor in the European Economic Area (the “EEA”). For these
purposes, a retail investor means a person who is one (or more) of: (i) a retail client as
defined in point (11) of Article 4(1) of Directive 2014/65/EU, as amended, (the “MiFID II”);(ii) a customer within the meaning of Directive (EU) 2016/97, where that customer would not
qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II; or (iii) nota qualified investor as defined in the Prospectus Regulation, as amended. Consequently, no
key information document required by Regulation (EU) No 1286/2014 (the “PRIIPs
Regulation”) for offering or selling the units of DLI or otherwise making them available toretail investors in the EEA. Therefore, offering or selling the units of DLI or otherwise
making them available to any retail investor in the EEA may be unlawful under the PRIIPs
Regulation.

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Article 23 (1)(a)Objectives of the AIF

Investment strategy

The objective of Daiwa Securities Living Investment Corporation (“DLI”) is to make stable
distributions of profits to its unitholders over the medium to long term through DLI’s basic
policy of achieving sustainable growth and improving the quality of its portfolio in
accordance with its portfolio composition policies.
DLI invests in real estate-related properties for residential use throughout Japan. In
particular, DLI believes that it can generate stable earnings by investing in rental
apartment properties from two categories, studio rental apartment properties and family
rental apartment properties. Studio rental apartment properties are rental apartmentbuildings that consist primarily of studio units, which DLI believes are attractive tohouseholds consisting of one or two people with no children. Family rental apartment
properties are rental apartment buildings that consist primarily of units with one or more
bedrooms, which DLI believes are attractive to households consisting of families withchildren. In addition to real estate-related properties for residential use, DLI invests in realestate-related properties for healthcare facility use such as elder care facilities, medicalcare facilities and life science facilities throughout in Japan. DLI diversify investment inhealthcare facilities in Japan while focusing investment on the healthcare facility categoryof “private nursing homes and other facilities for the elderly” such as fee-based homes forthe elderly for which large demand is expected in the medium to long term.
DLI has set non-binding a portfolio composition target ratio based on property type underwhich more than 60% of DLI’s portfolio by acquisition price is to consist of rental
apartment properties and less than 40% is to consist of healthcare facilities. In order toachieve geographic diversification, DLI has also set a non-binding geographic target. For
rental apartment properties, DLI targets mainly the 23 wards of Tokyo and the Tokyo
metropolitan area, and the Kinki metropolitan area, the Chukyo metropolitan area, andother areas where population growth is expected in the long term. For healthcare
facilities, DLI targets nationwide and in particular those areas near (in general, withinapproximately 3 km to 5 km of the relevant healthcare facility) commercial areas where
the elderly population is expected to increase, mainly in the above three major
metropolitan areas. DLI has set non-binding portfolio composition target ratio based on
acquisition price under which more than 70% of DLI’s portfolio is to consist of properties
in the three major metropolitan areas and less than 30% of DLI’s portfolio is to consist of
properties outside the three major metropolitan areas.

Types of assets the AIF
may invest inTechniques it may
employ and all
associated risks

In addition, under its present management strategy, DLI generally targets properties withan acquisition price of at least ¥0.1 billion.
Real property, real property equivalents such as leasehold rights and surface rights, trust
beneficiary interests in trust real property, money mainly invested in real property andmoney mainly invested in equity interests in anonymous associations, and real propertybacked securities, such as preferred equity certificates, beneficial certificates, investment
unit certificates, where more than half of the underlying assets are invested in real
property, beneficial certificates of specified purpose trusts and/or equity interest
certificates of anonymous associations.
DLI aims to increase unitholder value by investing in real estate-related properties forresidential use and healthcare facility use throughout Japan, in particular studio rental
apartment properties, family rental apartment properties and the healthcare facility
category of “private nursing homes and other facilities for the elderly”. The principal risks
with respect to investment in DLI are as follows:

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•
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any adverse conditions in the Japanese economy;
DLI’s potential inability to acquire properties to execute its growth and investment
strategy in a manner that is accretive to earnings;
DLI’s exclusive focus on rental apartments and healthcare facilities;
the geographic concentration of DLI’s portfolio in the greater Tokyo area;
competition for tenants which may adversely affect DLI’s ability to retain its
current tenants, find new tenants and achieve favorable rents;
potential increases in prevailing market interest rates which could increase DLI’sinterest expense and result in a decline in the market price of its units;large potential losses if any of DLI’s properties incur damage from a natural or
man-made disaster;
illiquidity in the real estate market which may limit DLI’s ability to grow or adjust
its portfolio;
the possibility that DLI may not close future property acquisitions;defects relating to DLI’s properties;
reliance on experts for appraisals and engineering, environmental, seismic andother reports, which are subject to significant uncertainties;
loss of rental revenues in the event of lease terminations, decreased leaserenewals, default by tenants, or rent reductions or refunds;
the possibility that buildings DLI owns may violate earthquake resistance or otherbuilding codes, and that buildings may collapse in even minor earthquakes or may
be required to be strengthened or demolished by DLI at significant expense;
master lease agreements which expose DLI to the risk of becoming an unsecured
creditor of its master lessees in the event of their insolvency;
any inability to obtain financing for future acquisitions, or any restrictions on DLI’s
activities under its financing arrangements;
the possibility of a downgrading of DLI’s credit ratings;
DLI’s dependence on the performance of service providers to which it is required
to assign various key functions;the possibility that the level of support DLI receives from the real estatecompanies with whom it has concluded business collaboration agreements may
fall short of expectations;the possibility that the termination of the agreements regarding the managementof healthcare facilities with AIP Healthcare Japan GK will have an adverse effect on
DLI;
DLI’s dependence on the efforts of key personnel of Daiwa Real Estate AssetManagement Co., Ltd. (the “Asset Manager”);
the possibility of competition for the same properties among DLI, Daiwa Office
Investment Corporation, Daiwa Residential Private Investment Corporation andpossibly other funds;
the possibility that failure to satisfy a complex series of requirements pursuant toJapanese tax regulations may disqualify DLI from certain taxation benefits;
the possibility that DLI’s ownership rights in some of its properties may bedeclared invalid or limited; andthe circumstances specific to healthcare facilities such as a decline in demand,increased competition for acquisition and need for maintenance and renovationsof such facilities.

4

In addition, DLI is subject to potential risks related to:
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DLI’s liability for any unforeseen loss, damage or injury suffered by a third party at
its properties;
adverse consequences if DLI’s rental revenues decline while most of its operating
expenses are fixed;
contractual penalties and market risks to which DLI may be exposed in relation to
forward commitment contracts DLI has entered into or will enter into;
DLI’s reliance on industry and market data that are subject to significant
uncertainties;
the possibility that the environmental assessments of DLI’s properties made priorto acquisition may not have uncovered all environmental liabilities, while
Japanese laws subject property owners to strict environmental liability;
the possibility that a high loan-to-value (“LTV”) ratio may increase DLI’s exposure
to changes in interest rates;
potential impairment losses relating to DLI’s properties and adverse tax effects
upon recognizing impairments;
risks associated with DLI’s investments in Japanese anonymous associations;risks associated with DLI’s holding interests in properties through investing inpreferred securities of special purpose companies;
risks associated with DLI’s investments in monetary claims secured by real
property, trust beneficiary interests in trusts whose assets are monetary claims
secured by trust beneficiary interests in real property, or securities secured bytrust beneficiary interests in real property;risks associated with acquiring properties under development before theircompletion, including the risks of delay, changes, and suspension of theconstruction or development of such projects;
potential conflicts of interest between DLI and the Asset Manager or Daiwa
Securities Group Inc. (the “Sponsor”);
strict supervision by the regulatory authorities of J-REITs and their asset
managers;
Japanese tax authorities’ potential disagreement with the interpretations of theJapanese tax laws and regulations DLI used for prior periods, which may force DLI
to pay additional taxes for those periods;
the possibility that DLI may not be able to benefit from reductions in certain realestate taxes enjoyed by qualified J-REITs;
the possibility that changes in Japanese tax laws may significantly increase DLI’s
tax burden;
DLI’s expected treatment as a “passive foreign investment company” for U.S.
federal income tax purposes;
the possibility that unitholders may be subject to U.S. Foreign Account Tax
Compliance Act (FATCA) withholding tax after 2016;
the risk that DLI may lose its rights in a property it owns or intends to acquire if
the purchase of the property is recharacterized as a secured financing;
the risk that DLI’s leasehold or subleasehold rights in underlying land may beterminated or may not be asserted against a third party in some cases;
risks associated with properties for which third parties hold leasehold interests inthe land and own the buildings on such land;5the possibility that rights relating to properties in the form of compartmentalized
ownership interests may be affected by the intentions of other owners;• the possibility that rights relating to properties in the form of property coownership may be affected by the intentions of other owners;• DLI’s properties being subject to preferential negotiation rights, rights of firstrefusal or other similar rights held by third parties;• the possibility that tax increases or adverse changes in applicable laws may affect
DLI’s potential liabilities relating to its properties and operations;• the cost of complying with regulations applicable to the properties in DLI’s
portfolio;• the possibility that DLI, which owns many of the properties in its portfolio throughtrust beneficiary interests, may suffer losses as a trust beneficiary;• the possibility that the Alternative Investment Fund Managers Directive may
negatively affect DLI’s ability to market its units in the EEA and increase its
compliance costs associated with the marketing of its units in the EEA;
• the possibility that DLI’s units may be deemed to constitute “plan assets” for
ERISA purposes, which may lead to the rescission of certain transactions, tax or
fiduciary liability and DLI’s being held in violation of ERISA requirements;• risks related to global health events, such as the COVID-19 pandemic;• risks related to global political developments and uncertainty, such as ongoingmilitary conflicts in the Middle East and Ukraine, developments relating to Taiwan,
and tension between South Korea and North Korea;• risks related to sharp rise in oil, electricity, water and other commodity prices;• risks related to instability in the global financial system; and• risks related to uncertainty in the Bank of Japan’s policy including its policy on
prevailing market interest rates.
DLI is subject to investment restrictions under Japanese laws and regulations, including
the Act on Investment Trusts and Investment Corporations (the “ITA”) and the Financial
Instruments and Exchange Act (the “FIEA”). These restrictions require that DLI must invest
primarily in specified assets as defined in the ITA. Specified assets include, but are notlimited to, securities, real estate, leaseholds of real estate, and surface rights (chijō-ken)(i.e., the right to use land for the purpose of having a structure on it), as well as trust
beneficiary interests in securities, real estate, leaseholds of real estate and surface rights.
•

Any applicable
investment restrictions

Furthermore, under the listing rules of the Tokyo Stock Exchange, any listed J-REIT such as
DLI must invest substantially all of its assets in real estate, real estate-related assets andliquid 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 in these assets, and real estate-related assets in this context include,
but are not limited to, anonymous association (tokumei kumiai) interests in investments inreal estate. A J-REIT that lists its units on the Tokyo Stock Exchange must also comply with
the Investment Trusts Association, Japan rules, which require the J-REIT to invest morethan 50% of its assets in real estate and asset backed securities that are backed primarily
by real estate, which includes, but is not limited to, real estate, leaseholds of real estate,surface rights or trust beneficiary interests in real estate, and surface rights or leaseholdsof land.
Pursuant to the ITA, investment corporations may not independently develop land for
housing or to construct buildings, but may outsource such activities in certain
circumstances.

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Circumstances in which
the AIF may use leverage
The types and sources ofleverage permitted andassociated risks

The basic investment policy of DLI is set out in DLI’s articles of incorporation. Moreover,
the Asset Manager has established asset management guidelines to provide more detailed
policies based on this basic policy. However, the Asset Manager may amend or revise theasset management guidelines it has established without a vote of DLI’s unitholders to theextent permitted in DLI’s articles of incorporation.
DLI may borrow funds or issue bonds for such purposes as property acquisitions, property
repair or improvement, repayment of tenant leasehold and security deposits, payment of
DLI’s expenses and repayment of DLI’s indebtedness.
DLI currently has outstanding short- and long-term loans as well as outstanding bonds. All
of DLI’s currently outstanding borrowings are unsecured and unguaranteed and are
subject to fixed, hedged floating, or unhedged floating interest rates. DLI borrows only
from institutional investors as defined in the Special Taxation Measures Act (assuming that
DLI’s tenant leasehold and security deposits are not loans for this purpose).
DLI’s debt financing arrangements may contain affirmative and negative covenants,
including covenants that require maintaining specific financial ratios or levels of cash
reserves, restrict distributions to unitholders or require posting collateral as security.
Financial and other covenants may limit DLI’s operational flexibility and distribution
amounts to unitholders. Breach of any such covenants contained in debt instruments
could require DLI to post additional collateral or result in the acceleration of these debt
instruments. In addition, DLI’s cash flow may be insufficient to meet its required principal
and interest payments, which may trigger events of default that also entitle lenders torequire DLI to collateralize its properties or demand that the entire outstanding balance
be paid.
In the event of an increase in interest rates, to the extent that DLI has debt with unhedged
floating interest rates or DLI takes out new debt, DLI’s interest payments may increase,which could reduce the amounts available for cash distributions to unitholders. Higher
interest rates may also limit DLI’s capacity for short-and long-term borrowings, which
would limit DLI’s ability to acquire properties. Even if DLI maintains a conservative LTV
ratio, DLI’s interest expense or exposure to changes in interest rates could increase due tomacroeconomic factors or market conditions beyond DLI’s control.

Any restrictions onleverage
Any restrictions on
collateral and asset
reuse arrangements
Maximum level ofleverage which the AIFM
is entitled to employ onbehalf of the AIF
Article 23(1) (b)Procedure by which the
AIF may change its
investment strategy /investment policy

Under DLI’s articles of incorporation, DLI has an internal limit of ¥1 trillion on theaggregate principal amount of borrowings and bonds outstanding.
No applicable arrangements.
DLI has set an upper limit of 60% as a general rule for its LTV ratio. DLI may, however,temporarily exceed this limit as a result of new property acquisitions or the timing of theissuance of new investment units.
Changes to DLI’s basic investment policy require an amendment of its articles ofincorporation. Such amendment requires a quorum of a majority of the total issued units
and at least a two-thirds vote of the voting rights represented at a general meeting ofunitholders. Unitholders should note, however, that unitholders who do not attend anddo not exercise their voting rights at a general meeting of unitholders are deemed to be inagreement with proposals submitted at such meeting, except in the case of proposals forwhich contrary proposals are also submitted at the meeting.

7Additionally, the asset management guidelines of the Asset Manager, which provide thedetails of the basic policies set forth in DLI’s articles of incorporation, may be amended orrevised by the Asset Manager without a vote of DLI’s unitholders, to the extent permitted
under DLI’s articles of incorporation.
Article 23(1) (c)Description of the main
legal implications of thecontractual relationshipentered into for the
purpose of investment,
including jurisdiction,
applicable law, and theexistence or not of any
legal instruments
providing for therecognition andenforcement of
judgments in the
territory where the AIF isestablishedDLI is a corporate-type investment trust in the form of investment corporation (toshi
hojin) provided for under the ITA. Therefore, the relationship between DLI and its
unitholders is governed by DLI’s articles of incorporation (as opposed to individual
agreements), which can be amended from time to time upon resolution of a generalunitholders’ meeting. DLI’s articles of incorporation stipulate rules relating to generalunitholders meetings, including the convocation, setting of record date, exercise of voting
rights, resolutions and election of DLI’s directors.
The relationship between DLI and its unitholders is also governed by, and is subject to theprovisions of, Japanese law, including the ITA.
The courts in Japan would recognize as a valid judgment any final and conclusive civil
judgment for monetary claims (which, for this purpose, are limited to those of a purely
civil nature and do not include monetary claims of the nature of criminal or administrative
sanction, such as punitive damages, even though they take the form of civil claims) against
DLI obtained in a foreign court provided that (i) the jurisdiction of such foreign court isadmitted under the laws of Japan, (ii) DLI has received service of process for thecommencement of the relevant proceedings, otherwise than by a public notice or any
method comparable thereto, or has appeared without any reservation before such foreign
court, (iii) neither such judgment nor the relevant proceeding is repugnant to public policy
as applied in Japan, (iv) there exists reciprocity as to the recognition by such foreign courtof a final judgment obtained in a Japanese court and (v) there is no conflicting judgementon the subject matter by any Japanese court.
DLI has entered into the following asset management and business collaborationagreements, each of which is governed by Japanese law:
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Asset management agreement dated August 27, 2018 between DLI and the AssetManagerBusiness collaboration agreement dated March 17, 2006 among DLI, the AssetManager and TAKARA Co., LTD.
Business collaboration agreement dated October 31, 2008 among DLI, the AssetManager and MAINICHI COMNET Co., Ltd.
Business collaboration agreement dated November 25, 2008 among DLI, the AssetManager and HASEKO LIVENET, Inc.
Pipeline support agreement dated May 31, 2019 among DLI, the Asset Manager
and Daiwa ACA Healthcare Inc.

The Asset Manager has entered into the following support agreement with the Sponsor,
which is governed by Japanese law:••Sponsor support agreement dated December 11, 2015 between the AssetManager and Daiwa Securities Group Inc.
Advisory agreement dated December 27, 2013 between the Asset Manager and
AIP Healthcare Japan GK.

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Article 23(1) (d)The identity of the AIFM,
AIF's depositary, auditor
and any other service
providers and a
description of theirduties and the investors'
rights thereto

Additionally, DLI has entered into purchase and sale agreements with sellers and buyers inconnection with the acquisition or disposition of properties, as well as trust agreementswith major Japanese trust banks pursuant to which DLI holds some of the properties in its
portfolio in the form of trust beneficiary interests.
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Asset Manager (AIFM): Daiwa Real Estate Asset Management Co., Ltd.
Auditor: Grant Thornton Taiyo LLC
Custodian: Mitsubishi UFJ Trust and Banking Corporation (“MUTB”)
General administrators: MUTB
Transfer agent: MUTB
Special account administrators: Mizuho Trust & Banking Co., Ltd.
Administrator for bonds: MUFG Bank, Ltd.

The Asset Manager’s duties include management of DLI’s properties, handling complaints
received from third-parties, responsibility for DLI’s financial affairs (including planning andbudgeting functions and management of debt and equity issuances to fund DLI’s
acquisitions), disclosure of information about DLI and investor relations activities,
preparation and delivery of reports pursuant to the ITA, and other related services basedon DLI’s individual requests.
The FIEA provides that the Asset Manager owes DLI a fiduciary duty and must conduct its
activities as asset manager in good faith. The FIEA also prohibits the Asset Manager fromengaging in certain specified conduct, including entering into transactions outside theordinary course of business or with interested parties of the Asset Manager that arecontrary to or violate DLI’s interests. Pursuant to the ITA, DLI’s unitholders have the rightto approve the execution or termination of the asset management agreement at a general
meeting of unitholders, except in specific cases set forth under the ITA.
The auditor’s responsibilities include preparing an audit report on DLI’s financial
statements for each of DLI’s fiscal periods.
Other service providers owe contractual obligations under their respective agreementswith DLI. The custodian provides custodial services for DLI’s assets, the generaladministrators provide services such as administration of accounting matters andassistance with preparation of disclosure documents, the transfer agent provides services
such as administration and custody of the unitholders’ register, calculation of distributions
and preparation of voting ballots for general meetings of unitholders, the special accountadministrators provide services in connection with the administration of DLI’s special
accounts, and the administrator for bonds provides services related to DLI’s bonds.
Unitholders do not have direct rights against the Asset Manager, auditor, custodian,general administrators, transfer agent, special account administrators or administrator forbonds.

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Article 23(1) (e)Description of how the
AIFM complies with therequirements to coverprofessional liability risks(own funds /professional indemnity
insurance)
Article 23(1) (f)Description of any
delegated management
function such as
portfolio management
or risk management andof any safekeeping
function delegated by
the depositary, theidentification of thedelegate and any
conflicts of interest that
may arise from suchdelegations
Article 23(1) (g)Description of the AIF’s
valuation procedure andpricing methodology,
including the methods
used in valuing hard-tovalue assets

Not applicable.

Not applicable.
There is no delegation of such functions beyond the Asset Manager, which is responsible
for portfolio and risk management, and the asset custodian, which is responsible forsafekeeping activities.

DLI values its assets pursuant to the ITA, the Ordinance on Accountings of Investment
Corporations and the valuation rules of the Investment Trusts Association, Japan, and inaccordance with generally accepted accounting principles in Japan applicable to J-REITs.
As a J-REIT, DLI may only use the valuation methods prescribed in the rules of theInvestment Trusts Association, Japan. The asset evaluation methods and standards used in
specific cases are set forth in DLI’s articles of incorporation and depend on the type of
asset and the purpose of the valuation.
Hard-to-value assets include assets such as equity interests in real estate anonymous
associations (tokumei kumiai) and beneficiary interests in trusts of money principallyinvested in real estate anonymous associations, as well as tenant leasehold and security
deposits. Future cash flows of hard-to-value assets are difficult to estimate. DLI values
hard-to-value assets differently depending on the asset, but pursuant to the valuation
rules of the Investment Trusts Association, Japan or in accordance with generally accepted
accounting principles in Japan applicable to J-REITs.

Article 23(1) (h)Description of the AIF’s
liquidity risk
management, including
redemption rights innormal and exceptional
circumstances andexisting redemption
arrangements withinvestors

Net cash provided by operating activities constitutes DLI’s primary source of liquidity tofund distributions, interest payments on outstanding loans payable, fees to the AssetManager and other service providers, property taxes, repairs and maintenance, andcapital expenditures for its properties in the ordinary course of business. DLI is required to
set aside reserves for repairs and maintenance.
However, DLI’s ability to use its cash flows from operations to finance property
acquisitions is severely limited because DLI is generally required, subject to certain
internal reserves that DLI may establish as a reserve for reduction in the period in which itpurchases a property, to distribute in excess of 90% of its distributable profits for eachfiscal period to its unitholders in order to maintain its favorable tax treatment under the10

Special Taxation Measures Act. Therefore, DLI depends on outside financing in order tofinance property acquisitions, including borrowings from financial institutions, equity
financing and bond issuances. By financing its property acquisitions only after it identifies
acquisition candidates, DLI seeks to limit the amount of its cash and deposits for which it
has no immediate use.
DLI considers the receipt of tenant leasehold and security deposits in evaluating its
liquidity needs.
DLI controls liquidity-related risk by observing an upper limit of 60% as a general rule for
its LTV ratio, combining short- and long-term debt, diversifying repayment and maturity
dates, evaluating the availability of commitment lines and maintaining a proper balance
between debt subject to fixed and floating interest rates. DLI has an internal limit of ¥1
trillion on the aggregate principal amount of borrowings and bonds outstanding.
Because DLI is a closed-end investment corporation, unitholders are not entitled torequest the redemption of their investment.
Article 23(1) (i)Description of all fees,
charges and expenses
and a maximum amountwhich is directly /indirectly borne by theinvestors

Directors’ compensation: DLI’s articles of incorporation provide that DLI may pay its
executive directors up to ¥800,000 per director per month and its supervisory directors up
to ¥500,000 per director per month.
Asset management, acquisition and disposition Fees: DLI pays the Asset Manager asset
management, acquisition and disposition fees as follows:•

Asset Management fees. DLI pays the Asset Manager asset management fees,
which are composed of type 1 management fees and type 2 management fees as
described below:•••

Type 1 management fee: DLI pays to the Asset Manager a type 1 management
fee for each calculation period, which is the three-month period ending on the
final day of March, June, September or December of each year, payable after
the end of each calculation period. This type 1 management fee is up to 0.20%
of the total asset valuation calculated using the following method on anannualized (365-day per year) basis and rounded down to the nearest yen.
• The total asset valuation for each calculation period is the total
appraisal value (i.e., (x) appraisal value or other value which is
obtained pursuant to the articles of incorporation or (y) if such value
is not available, acquisition price (as shown in the relevant agreement
for acquisition of such assets and excluding acquisition related costs
as well as national and local consumption taxes)) of real estate-related
investment assets as of the last day of the immediately preceding
fiscal period.
Type 2 management fee: The type 2 management fee is up to 8.0% of theincome before income taxes (including depreciation of goodwill and excluding
gain on negative goodwill) prior to the deduction of the type 2 management
fee as of the end of business term of DLI. The type 2 management fee is dueby the end of the month that follows the month in which the financial
statements are approved by DLI’s board of directors.

Acquisition fees. DLI pays the Asset Manager acquisition fees as follows:

11

•
•

For each new rental apartment property DLI acquires (excluding acquisition
through a merger), the Asset Manager receives an acquisition fee of up to 1.0%of the purchase price, rounded down to the nearest yen.
For each new healthcare facility DLI acquires (excluding acquisition through amerger), the Asset Manager receives an acquisition fee of up to 1.5% of thepurchase price, rounded down to the nearest yen. The acquisition fee is due by
the end of the month immediately following the month of the acquisition.
Acquisition fees are capitalized as part of the purchase price of the relevant
property.

•

Disposition fees. For each property DLI disposes of (excluding transfer through amerger), the Asset Manager receives a disposition fee (with units of less than one
yen disregarded) of up to 0.5% of the disposition price. The disposition fee is dueby the end of the month immediately following the month of the disposition.

•

Merger Fee. This shall be, in case of a merger with other investment corporations(including a consolidation-type merger and an absorption-type merger whereby DLI is
the surviving corporation or the absorbed corporation; hereinafter the same shallapply), when the Asset Management Company investigates and evaluates the assets,etc. held by the other party of the merger and performs other services related to themerger on behalf of DLI and the merger takes effect, the amount (with units of lessthan one yen disregarded) that results from multiplying the total appraisal value ofreal estate-related investment assets held by the other party of the merger that isbeing succeeded or to be held by the newly established entity under the
consolidation-type merger or the surviving corporation under the absorption-typemerger on the day that the merger takes effect by a rate that will be a maximum of
1.0%. The time of payment of the Merger Fee shall be within three months from theend of the month in which the effective date of the merger falls.

Custodian fee:
DLI pays custodian fees to MUTB for each calculation period, which is the three-month
period that ends on the last day of March, June, September or December of each year.
The amount of custodian fees payable for each calculation period is determined based on
DLI’s total assets recorded on the balance sheet for the immediately preceding fiscal
period up to the amount calculated using the table below, plus national and local
consumption taxes.
Total assets¥10 billion or less.................................................................................................
Over ¥10 billion and not more than ¥50 billion.................................................................................................
Over ¥50 billion and not more than ¥100 billion.................................................................................................
Over ¥100 billion and not more than ¥200 billion.................................................................................................
Over ¥200 billion and not more than ¥300 billion.................................................................................................
Over ¥300 billion and not more than ¥500 billion.................................................................................................

12

Fee calculation method¥7,000,000¥7,000,000 + (Total assets - ¥10billion ) × 0.050%¥27,000,000 + (Total assets - ¥50
billion ) × 0.040%¥47,000,000 + (Total assets ¥100 billion ) × 0.035%¥82,000,000 + (Total assets ¥200 billion ) × 0.030%¥112,000,000 + (Total assets ¥300 billion ) × 0.025%

Over ¥500 billion.................................................................................................

¥162,000,000 + (Total assets ¥500 billion ) × 0.020%

Notwithstanding the above, if unitholders’ capital recorded on the balance sheet for the
fiscal period immediately preceding the first day of the calculation period did not exceed¥500 million, the custodian fees for the calculation period are ¥150,000 plus national andlocal consumption taxes. However, if unitholders’ capital first surpassed ¥500 million
during the calculation period, the custodian fees shall be the sum of (i) ¥150,000 prorated
based on the number of days from the beginning of the calculation period until the day on
which unitholders’ capital first surpassed ¥500 million and (ii) an amount calculated inaccordance with the table above based on the amount of unitholders’ capital as of the dayon which unitholders’ capital first surpassed ¥500 million and prorated based on thenumber of days from such day until the end of the calculation period, plus national andlocal consumption taxes.
If the fees as set out above become inadequate due to a change in economic conditions orotherwise, such fees may be revised by agreement between MUTB and DLI upon mutual
consultation.
General administrator fee (MUTB):DLI pays general administration fees to MUTB for each calculation period, which is thethree-month period ending on the last day of March, June, September or December of
each year. The amount of general administration fees payable for each calculation period
is determined based on the total assets recorded on DLI’s balance sheet for theimmediately preceding fiscal period up to the amount calculated using the table below,
plus national and local consumption taxes.
Total assets¥10 billion or lessOver ¥10 billion and not more than ¥50 billion .........................
Over ¥50 billion and not more than ¥100 billion .......................
Over ¥100 billion and not more than ¥200 billion .....................
Over ¥200 billion and not more than ¥300 billion .....................
Over ¥300 billion and not more than ¥500 billion .....................
Over ¥500 billion ........................................................................

Fee calculation method¥11,000,000¥11,000,000 + (Total assets ¥10 billion ) × 0.080%¥43,000,000 + (Total assets ¥50 billion ) × 0.060%¥73,000,000 + (Total assets ¥100 billion ) × 0.055%¥128,000,000 + (Total assets ¥200 billion ) × 0.040%¥168,000,000 + (Total assets ¥300 billion ) × 0.035%¥238,000,000 + (Total assets ¥500 billion ) × 0.030%

Notwithstanding the above, if unitholders’ capital recorded on the balance sheet for the
fiscal period immediately preceding the first day of the calculation period did not exceed¥500 million, the general administration fee for the calculation period is ¥240,000 plus
national and local consumption taxes. However, if unitholders’ capital first surpassed ¥500
million during the calculation period, the general administration fee is the sum of (i)¥240,000 prorated based on the number of days from the beginning of the calculation
period until the day on which unitholders’ capital first surpassed ¥500 million and (ii) an
amount calculated in accordance with the table above based on the amount ofunitholders’ capital as of the day on which unitholders’ capital first surpassed ¥500 million

13and prorated based on the number of days from such day until the end of the calculation
period, plus national and local consumption taxes.
If the fees as set out above become inadequate due to a change in economic conditions orotherwise, such fees may be revised by agreement between MUTB and DLI upon mutual
consultation.
General administrator fee (Asset Manager):
DLI pays to the Asset Manager an administrative service fee of ¥900,000 per six-month
period for services relating to administration of meetings of the board of directors. In
addition, DLI pays to the Asset Manager an administrative service fee of ¥200,000 per
meeting for services relating to the administration of unitholders’ meetings.
Transfer agent fee:
DLI pays MUTB transfer agency fees up to the amounts described below, or as determined
upon consultation between DLI and MUTB.
Standard fees:•

Monthly standard fees are equal to one sixth of the total amount of fees calculated
in the manner below. There is a minimum monthly fee of ¥220,000.
Number of unitholders
Up to 5,000 Unitholders.............................................................
Over 5,000 and up to 10,000 .....................................................
Over 10,000 and up to 30,000 ...................................................
Over 30,000 and up to 50,000 ...................................................
Over 50,000 and up to 100,000 .................................................
Over 100,000..............................................................................

•

¥390
¥330
¥280
¥230
¥180
¥150

Fees per unitholder

Other fees:

DLI pays to MUTB fees for various other transfer agency services, including fees inconnection with the calculation and payment of distributions, notices, voting ballots
for general unitholders’ meetings and certificates and investigations.
Special Account Administrator Fee (Mizuho Trust & Banking Co., Ltd.):
DLI pays fees to Mizuho Trust & Banking Co., Ltd. for services rendered in connection withthe administration of its special accounts up to the amounts described below, or as
determined upon consultation between DLI and Mizuho Trust & Banking Co., Ltd.
•Special account administration fees:

These fees are based on the total number of accounts (investors) as of the end of
the relevant month and are calculated according to the table below. There is aminimum special account administration fee of ¥35,000 per month.
Number of accounts (investors)
Up to 5,000 accounts (investors) ...............................................
Over 5,000 and up to 10,000 .....................................................

14

Fees per account (investor)
¥150
¥140

Over 10,000 and up to 30,000 ...................................................
Over 30,000 and up to 50,000 ...................................................
Over 50,000 and up to 100,000 .................................................
Over 100,000..............................................................................

•

¥130
¥120
¥110
¥100

Other fees:

DLI pays to Mizuho Trust & Banking Co., Ltd. fees for other special accounts
administration services, including fees for confirmation of requests for transfers andhandling brokerage and transfer services.
Bond Administration Fee:
DLI pays fees to MUFG Bank, Ltd. for services related to bonds, including a maximum
standard service fee of ¥16,000,000.

Article 23(1) (j)Description of the AIFM's
procedure to ensure fairtreatment of investors
and details of any
preferential treatment
received by investors,
including detailing thetype of investors andtheir legal or economic
links with the AIF or
AIFM
Article 23(1) (k)The latest annual reportreferred to in Article
22(1)Article 23(1) (l)The procedure andconditions for the issue
and sale of the units

Auditor Fee:
DLI may pay Grant Thornton Taiyo LLC up to ¥30 million per fiscal period. The board of
officers is responsible for determining the actual compensation amount.
Under Article 77 paragraph 4 of the ITA, which applies the requirements of Article 109
paragraph 1 of the Companies Act of Japan to investment corporations, investment
corporations are required to treat unitholders equally depending on the number andcontent of units held. In addition, upon liquidation, the allotment of residual assets tounitholders is required to be made equally depending on the number of units held under
Article 77 paragraph 2 item 2 and Article 158 of the ITA.

Additional information may be found in our most recent semi-annual report prepared inaccordance with Article 22 of the AIFMD, which is available at the AIFM’s office located at
2-1, Ginza 6-chome, Chuo-ku, Tokyo, Japan.

DLI is authorized under its articles of incorporation to issue up to 5,000,000 units. DLI’sunits have been listed on the Tokyo Stock Exchange since June 22, 2006.
Secondary market sales and transfers of units will be conducted in accordance with therules of the Tokyo Stock Exchange. Unit prices on the Tokyo Stock Exchange aredetermined on a real-time basis by the equilibrium 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 priceor special quote.

15

Article 23(1) (m)Latest net asset value ofthe AIF or latest market
price of the unit or shareof the AIF
Article 23(1) (n)Details of the historicalperformance of the AIF,
where available

DLI’s unit’s latest market price is publicly available at the Tokyo Stock Exchange or fromfinancial information venders (including Reuters, which can be viewed athttps://www.reuters.com/markets/companies/8986.T)
The units of DLI were listed on the Tokyo Stock Exchange on June 22, 2006.
The most recent five fiscal periods’ performance of the units is as follows.
Total Assets(JPY millions)Fiscal period
31st Fiscal Period(April 1, 2021 toSeptember 30, 2021)
32nd Fiscal Period(October 1, 2021 toMarch 31, 2022)
33rd Fiscal Period(April 1, 2022 toSeptember 30, 2022)
34th Fiscal Period(October 1, 2022 toMarch 31, 2023)
35th Fiscal Period(April 1, 2023 to
September 30, 2023)

Article 23(1) (o)Identity of the prime
broker, any material
arrangements of the AIF
with its prime brokers,
how conflicts of interest
are managed with theprime broker and theprovision in the contract
with the depositary on
the possibility of transfer
and reuse of AIF assets,
and information about
any transfer of liability tothe prime broker that
may exist
Article 23(1) (p)Description of how andwhen periodic
disclosures will be madein relation to leverage,

Total Net Assets(JPY millions)

Net Assets per unit
(JPY)

336,301

157,295

73,793350,956

165,372

75,002353,676

165,218

74,932366,565

171,436

75,826

367,532

171,996

76,074

No applicable prime broker.

The AIFM will disclose the matters described in Articles 23(4) and 23(5) periodicallythrough DLI’s website and semi-annual report.

16liquidity and risk profileof the assets, pursuant
to Articles 23(4) and23(5)Article 23(2)The AIFM shall informthe investors before they
invest in the AIF of any
arrangement made by
the depositary tocontractually discharge
itself of liability inaccordance with Article
21(13)The AIFM shall also
inform investors of any
changes with respect todepositary liability
without delay
Article 23(4)(a)Percentage of the AIF's
assets which are subject
to special arrangements
arising from their illiquid
nature. The percentage
shall be calculated as the
net value of those assets
subject to special
arrangements divided by
the net asset value ofthe AIF concerned
Overview of any special
arrangements, including
whether they relate toside pockets, gates orother arrangements
Valuation methodology
applied to assets which
are subject to sucharrangements
How management andperformance fees apply
to such assets
Article 23(4)(b)Any new arrangements
for managing theliquidity of the AIF
For each AIF that the
AIFM manages that is

Not applicable.

Not applicable.

There are no assets that are subject to special arrangements arising from their illiquid
nature.

There are no such special arrangements.

There are no such special arrangements.

There are no such special arrangements.

Any new arrangements or change in applicable arrangements will be disclosed at an
appropriate time.
Any new arrangements or change in applicable arrangements will be disclosed at an
appropriate time.

17

not an unleveraged
closed-end AIF, notify toinvestors whenever they
make changes to its
liquidity management
systems (which enable
an AIFM to monitor theliquidity risk of the AIF
and to ensure theliquidity profile of theinvestments of the AIF
complies with its
underlying obligations)that are material inaccordance with Article
106(1) of Regulation (EU)No 231/2013 (ie. there isa substantial likelihoodthat a reasonable
investor, becoming
aware of suchinformation, would
reconsider its
investment in the AIF,
including because suchinformation could
impact an investor’sability 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 they
activate gates, side
pockets or similar special
arrangements or where
they decide to suspend
redemptions
Overview of changes toliquidity arrangements,
even if not special
arrangements
Terms of redemption
and circumstanceswhere management
discretion applies, where
relevant

Any new arrangements or change in applicable arrangements will be disclosed at an
appropriate time.

Any new arrangements or change in applicable arrangements will be disclosed at an
appropriate time.
DLI is a closed-end investment corporation and unitholders are not entitled to request theredemption of their investment.

18

Also any voting or otherrestrictions exercisable,
the length of any lock-up
or any provision
concerning ‘first in line’or ‘pro-rating’ on gatesand suspensions shall be
included
Article 23(4)(c)
The current risk profileof the AIF and the risk
management systems
employed by the AIFM
to manage those risks

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

The Asset Manager stipulates basic provisions of risk management in its risk management
rules. The appropriateness and effectiveness of the Asset Manager’s risk management
systems are regularly reviewed and evaluated by the Asset Manager.
The use of long-term loans and bonds to finance asset acquisitions and for other purposes
gives rise to liquidity risks. DLI controls such risks by observing an upper limit of 60% as a
general rule for its LTV ratio, diversifying repayment and maturity dates, diversifying
financing methods and lenders, maintaining a proper balance between debt subject tofixed and floating interest rates, retaining a certain amount of liquid cash deposits, andevaluating the availability of commitment lines.
Some of DLI’s current loans have unhedged floating interest rates that are exposed to therisk of interest rate fluctuations. Moreover, DLI may decide to take out further loans withunhedged floating interest rates in the future. DLI, in order to reduce the impact causedby rising interest rates, closely monitors the movement of interest rates.
Derivative transactions (interest rate swap transactions) may be used to hedge against therisks of increases in floating interest rates.
DLI’s use of tenant leasehold and security deposits gives rise to liquidity risk since
repayment of these deposits is triggered when tenants move out of DLI’s properties. Thisrisk is controlled through such measures as preparing cash management plans andretaining cash and deposits sufficient to return deposits to tenants.

Measures to assess thesensitivity of the AIF’s
portfolio to the most
relevant risks to which
the AIF is or could be
exposedIf risk limits set by the
AIFM have been or are
likely to be exceeded
and where these risk
limits have been
exceeded a descriptionof the circumstances andthe remedial measures
taken
Article 23(5)(a)Any changes to the
maximum amount ofleverage which the AIFM

No such measures have been implemented.

No such situation has occurred.

Any new arrangements or change in applicable arrangements will be disclosed at an
appropriate time.

19may employ on behalf of
the AIF, calculated inaccordance with thegross and commitment
methods. This shall
include the original andrevised maximum levelof leverage calculated inaccordance with Articles
7 and 8 of Regulation(EU) No 231/2013,
whereby the level ofleverage shall becalculated as therelevant exposure
divided by the net asset
value of the AIF.
Any right of the reuse ofcollateral or any
guarantee granted under
the leveraging
agreement, including thenature of the rights
granted for the reuse ofcollateral and the natureof the guarantees
granted
Details of any change inservice providers relating
to the above.
Article 23(5)(b)Information on the total
amount of leverage
employed by the AIF
calculated in accordancewith the gross andcommitment methods

No such right or guarantee exists.

Any new arrangements or change in applicable arrangements will be disclosed at an
appropriate time.
The aggregate amount of interest-bearing debt (including bonds) was JPY 188,137 million
as of September 30, 2023.

20

Pre-contractual disclosure for the financial products referred to in Article 8, paragraphs
1, 2 and 2a, of Regulation (EU) 2019/2088 and Article 6, first paragraph, of Regulation (EU)2020/852
Product Name: Daiwa Securities Living Investment Corporation
Daiwa Securities Living Investment Corporation (“DLI”) promotes environmental or social characteristics
but does not have as its objective a sustainable investment within the meaning of Article 9(1) of Regulation(EU) 2019/2088 (“SFDR”). DLI has no employees in accordance with the prohibition on having employees
under the Act on Investment Trusts and Investment Corporations of Japan and relies on Daiwa Real Estate
Asset Management Co., Ltd. (the “Asset Manager”), to manage and operate the properties in DLI’s
portfolio. DLI and the Asset Manager are hereinafter referred to collectively as “we,” “us” or “our.”References to “fiscal year” or “FY” are to the 12 months began or beginning April 1 of the year specified
in line with the fiscal year of the Asset Manager, unless noted otherwise.
Does this financial product have a sustainable investment objective?
☐ Yes
☒ No
☐ It will make a minimum of sustainable☐ It promotes Environmental/Social (E/S)
investments with an environmental
characteristics and while it does not have as its
objective: __%objective a sustainable investment, it will have aminimum proportion of __% of sustainable
investments☐ in economic activities that
qualify as environmentally☐ with an environmental objective in economic
sustainable under the EU
Taxonomy
activities that qualify as environmentally
sustainable under the EU Taxonomy☐ in economic activities that do☐ with an environmental objective in
not qualify as environmentally
sustainable under the EU
economic activities that do not qualify as
Taxonomyenvironmentally sustainable under the EU
Taxonomy☐ with a social objective☐ It will make a minimum of sustainable
investments with a social objective:__%☒ It promotes E/S characteristics, but will not makeany sustainable investments

What environmental and/or social characteristics are promoted by this financial product?
DLI’s mission is to support everyone’s life and lifestyle; our goal is to provide comfortable living spaces,
rental housing and healthcare facilities, suitable for each life stage of our customers. For this goal, DLI
proactively makes investments in healthcare facilities, which occupied 28.9% of its portfolio as of September
30, 2023, on an acquisition price basis. These healthcare facilities include elderly care facilities, medicalcare facilities and life science facilities in various parts of Japan, and DLI aims to build a portfolio of up to
40% in healthcare facilities, on an acquisition price basis. In Japan’s aging society, healthcare facilities thatprimarily serve the elderly population have significant social value, as recognized by the United Nations
Sustainable Development Goals (“SDGs”), such as SDG2 (Zero Hunger), SDG3 (Good Health and Wellbeing), SDG6 (Clean Water and Sanitation), SDG11 (Sustainable Cities and Communities) and SDG13(Climate Action). Furthermore, we focus on promoting environmental, social and governance, or ESG,
characteristics in managing all of DLI’s assets in the belief that emphasis on ESG contributes to theenhancement of DLI’s medium- to long-term corporate value. DLI has implemented a number ofenvironmental initiatives, including resource and energy-saving measures, as described in detail below.
No specific index has been designated as reference benchmark to determine whether DLI is aligned with theenvironmental and/or social characteristics that it promotes.

What sustainability indicators are used to measure the attainment of each of the environmental or social
characteristics promoted by this financial product?
DLI has set a portfolio composition target ratio under which up to 40% consists of healthcare facilities andmore than 60% consists of real estate-related properties for residential use, in each case on an acquisition
price basis. As of September 30, 2023, DLI’s portfolio is comprised of 28.9% healthcare facilities and 71.1%
real estate-related properties for residential use, in each case on an acquisition price basis.
Additionally, DLI and the Asset Manager use the following indicators to measure progress made on theenvironmental or social characteristics promoted by DLI:•

Global Real Estate Sustainability Benchmark (“GRESB”) Real Estate Assessment. DLI and theAsset Manager have participated in the GRESB Real Estate Assessment every year since the fiscal
period ended September 30, 2018. GRESB is an industry-led international organization that
evaluates sustainability performance of real estate portfolios (including listed funds, private funds
and direct investments). In 2023, DLI was awarded a “Green Star” rating for its outstandingachievement in both the management component and environmental performance component of theenvironmental characteristics assessment. DLI also received the highest rating, “A Level” in the
GRESB Disclosure Assessment.

•

MSCI ESG Rating. Using an ESG evaluation framework created by MSCI ESG Research LLC, the
MSCI ESG rating assigns a rating on a seven-tiered scale, ranging from “AAA” to “CCC,” basedon exposure to industry-specific ESG risks and management capabilities for handling those risks incomparison with other companies in the same industry. The MSCI ESG rating is one of theparameters for listing companies on the MSCI Japan ESG Select Leaders Index, which is considered
as a qualifying ESG index for passive management by Japan’s Government Pension Investment
Fund and is used by over 1,300 institutional investors around the world and in the creation of over
1,000 investment indexes. DLI has obtained an MSCI ESG rating of “[BB]” as of [April 2023].

•

Development Bank of Japan Inc. (“DBJ”) Green Building Certification. The DBJ Green Building
Certification Program, launched by DBJ in April 2011, managed by Japan Real Estate Instituteunder the supervision of DBJ since 2017, awards “Green Building” certification to properties that
demonstrate good environmental and social practices. In assessing the properties, they take into
account various factors ranging form the properties’ environmental performances to their disaster
relief capacities. Among the properties in DLI’s portfolio, the following properties have been
awarded the DBJ Green Building Certification: Chijikoukanmae Tower Residence, the Residence
Honmoku Yokohama Bayside, Serenite Honmachi Grande, and Granpark Tenjin.

•

Japan Credit Rating Agency, Ltd. (“JCR”) Social Finance Framework Evaluation. The JCR Social
Finance Evaluation assesses whether a social finance framework, social bond or a social loan is inline with the International Capital Market Association’s is the Social Bond Principles. In May 2021,
DLI received the highest grade, Social 1(F). In the evaluation, JCR verified that all of the proceedsfrom the issuance of bonds or borrowings of loans under DLI’s social finance framework were used
to finance projects that have positive social impacts., and rated DLI’s social project selection criteria
as reasonable and transparent.

•

The Task Force on Climate-related Financial Disclosures (“TCFD”). In December 2021, the AssetManager established the Climate Change Resilience Policy to lay out our objectives and our
corporate functions for addressing climate-change related issues and to widen the scope of
disclosure of our climate-change related initiatives. We announced our support for the TCFD
recommendations in December 2021. In January 2022, the Asset Manager joined the TCFD
consortium, a group of domestic companies that support TCFD recommendations. As we recognizethat climate change is an important issue, we will gradually strengthen our efforts to disclose
information related to climate change, while identifying and analyzing risks and opportunities
related to climate change and continuously working to reduce the environmental impact of ourbusiness based on the TCFD recommendations.

•

Energy Saving Initiatives. The Asset Manager tracks and monitors consumption of energy,
including electricity, urban and propane gas and steam energy in common areas of DLI’s properties
that the Asset Manager manages, and measures progress against annual and medium- to long-termtargets. These targets are shared with property managers and tenants so that the Asset Manager cancollaborate with such parties to continuously reduce energy consumption. DLI aims to reduceenergy consumption intensity of DLI’s properties by 1% per year (5% over five years) for theproperties in DLI’s portfolio. In addition, DLI has implemented eco-friendly equipment, such as
LED lighting, high-efficiency heating equipment and energy-saving air conditioning systems. As of
September 30, 2023, DLI has installed 614 LED light bulbs and 627 energy-saving air conditioning
units. In addition, DLI has installed solar panels to some of our healthcare facilities.

•

Reduction of Greenhouse Gas (“GHG”) Emissions Initiatives. The Asset Manager tracks andmonitors GHG emissions, including direct emission from burning fuels and indirect emission frompower purchases and procurement over the entire supply chain at DLI’s properties and measuresprogress against established targets. The Asset Manager tries to reduce the environmental impact of
DLI’s properties that emit high levels of GHG. DLI aims to reduce GHG emissions intensity fromenergy sources by 1% per year (5% over five years) for the properties in DLI’s portfolio. DLI has
implemented equipment that contributes to reduction of GHG emissions.

•

Water-saving Initiatives. The Asset Manager tracks and monitors water consumption in common
areas of DLI’s properties that the Asset Manager manages. DLI aims to reduce water consumption
intensity by 0.2% per year (1% over five years) for the properties in DLI’s portfolio. DLI has
implemented water-saving equipment such as water-saving toilets.

•

Sustainable Procurement Initiatives. The Asset Manager takes into account the following criteria inchoosing products and services we purchased: (i) low consumption of fossil fuels and energy, (ii)low usage and emission of substances with adverse effects on environment and human health, (iii)
designed to conserve biodiversity and ecology, (iv) designed for long-term usage, (v) designed tobe reusable and recyclable, (vi) uses reclaimed material and has environmental certification, (vii)
easily disposable, and (viii) reduced procurement amount to reduce waste. Furthermore, the AssetManager selects property managers and suppliers based on their sustainability framework andability to cooperate with the Asset Manager’s ESG practices, in addition to their creditworthiness,
product or service quality and price.

•

Sustainability Framework. In choosing property managers and suppliers, the Asset Manager takes
into consideration whether the property manager or supplier (i) has adopted an environmental
management system such as ISO14001 and obtains third-party certification, or otherwise fulfills the
ESG requirements established by the Asset Manager, (ii) selects any subcontractor by taking into
account its sustainability policy and makes it comply with the Asset Manager’s ESG requirements,(iii) establishes and follows appropriate and employee-friendly work environment, (iv) promotes
diversity of human resources and work-life balance, and prohibits unfair labor, (v) has corporate
ethics guidelines including anti-corruption policy, (vi) engages in and contributes to areas andcommunities surrounding DLI’s properties, and (vii) has a disaster risk management system.

•

Cooperation with the Asset Manager’s ESG practices. The Asset Manager requires the property
managers or suppliers to engage in (i) energy-saving, water-saving and reduction of greenhouse gas
emissions, (ii) appropriate waste management and recycling promotion, (iii) control and reductionof hazardous chemical substances and maintenance of health and safety including water quality, and(iv) maintenance of favorable relationships with tenants.

What are the objectives of the sustainable investments that the financial product partiallyintends to make and how does the sustainable investment contribute to such objectives?
Not applicable.

How do the sustainable investments that the financial product partially intends to make, notcause significant harm to any environmental or social sustainable investment objective?
Not applicable.
Principal adverse impacts
Does DLI consider principal adverse impacts on sustainability factors?
Yes, we consider principal adverse impacts on sustainability factors. We continuously collectinformation on DLI’s portfolio’s principal adverse impact indicators, including exposure to fossil fuels
through real estate assets, exposure to energy-inefficient real estate assets, greenhouse gas (“GHG”)
emissions and energy consumption intensity. We aim to manage the risks connected to principal adverse
impacts through our investment decisions in several ways, including general screening criteria and due
diligence as described below.
•

Exposure to fossil fuels through real estate assets. DLI does not invest in real estate assets
involved in the extraction, storage, transport or manufacture of fossil fuels.

•

Exposure to energy-inefficient real estate assets. We classify properties that have been awarded
one of the following certifications as “Green Assets”: DBJ Green Building Certification, theComprehensive Assessment System for Built Environment Efficiency (“CASBEE”)
certification, and the Building Energy-efficiency Labeling System (“BELS”) certification. As
of September 30, 2023, 18.4% of the properties in DLI’s portfolios were Green Assets basedon gross floor area. We consider properties that are not Green Assets as energy-inefficientinvestment assets. We will continue our efforts to maintain and increase the percentage of Green
Assets in DLI’s portfolio.

•

GHG emissions. GHG emissions generated by our rental housing properties were 3,387 t-CO2
in FY2021 and 3,611 t-CO2 in FY2022. GHG emissions generated by our healthcare facilities
was 16,238 t-CO2 in FY2021 and 17,372 t-CO2 in FY2022.

•

Energy consumption intensity. Energy consumption intensity of our rental housing properties
was 0.109 MWh/m2 in FY2021 and 0.109 MWh/m2 in FY2022. Energy consumption intensityof our healthcare facilities was 0.236 MWh/m2 in FY2021 and 0.232 MWh/m2 in FY2022.

Investment Strategy
What investment strategy does DLI follow?
DLI takes into account sustainability factors throughout our investment decision-making process as follows.
•

Investment Policy. DLI invests in healthcare facilities such as elderly care facilities, medical carefacilities and life science facilities throughout Japan in addition to residential properties. DLI
considers tenants/operators’ financial stability, management effectiveness, governance and legal
compliance to ensure that residents of DLI’s healthcare facilities have stable living arrangements.

•

Due Diligence. The Asset Manager investigates the environmental and geological conditions of each
property to determine the possibility of environmental hazardous substances and land pollution. The
Asset Manager conducts, with assistance from outside experts, financial, property and legal due
diligence review to evaluate investments. DLI invests only in properties that have no environmental
hazardous substances. We generally do not invest in properties that exceed the land pollution
threshold specified in the Enforcement of Soil Contamination Countermeasures Act (Act No. 53 of
2002) of Japan (the “Soil Contamination Act”), and when we do, the Asset Manager consults
professionals to weigh their impact on the surrounding environment and people against theeconomic benefits they would bring before making investment decisions.

•Social Finance Framework. DLI has established a social finance framework to provide investors
with opportunities to invest in properties with positive social impact.
o

Use of Proceeds. Funds raised through social bonds or social loans under DLI’s social
finance framework will be used to acquire properties that meet the following eligible
criteria or to refinance the funds used on such properties: (i) paid elderly facilities/homes
or serviced senior housings and (ii) medical facilities (hospitals, clinics and “medicalmalls”).

oSelection process of projects. The Asset Manager’s Finance Department will evaluate andselect projects based on sustainability considerations. The project is then examined by the
Asset Manager’s Sustainability Promotion Committee, which provides its opinion on the
project from a sustainability perspective, considered by the Asset Manager’s Investment
Committee and the Board of Directors, and approved by the DLI’s Board of Directors.

oManagement of procured funds. Any unallocated funds will be managed in cash or cash
equivalent. If any asset purchased with social finance funds is subsequently sold, theproceeds from the sale will be managed so that that total balance of social finance funds
will not exceed the social finance-eligible debt limit, which is set at the total acquisition
price of assets that meet the social finance eligible criteria, multiplied by DLI’s portfolio
LTV.

oReporting. The following matters will be disclosed annually on DLI’s website: (i) social
finance status, (ii) allocation of funds and (iii) output indicators, such as the number ofacquired healthcare facilities, number of users, occupancy rates and number of beds, andoutcome indicators, such as changes in the amount of investment by DLI in healthcare
facilities.

What are the binding elements of the investment strategy used to select the investments to attain each of
the environmental or social characteristics promoted by the investments units of DLI?
A binding element of the investment strategy is DLI’s social finance framework. With respect to any property
acquired or refinanced through the social finance framework, the Asset Manager’s the Sustainable Promotion
Committee is required select assets for investment meeting the eligible criteria.
The other binding elements of the investment strategy are the exclusion of properties not meeting thethresholds for environmental hazardous substances, soil contamination and other environmental
contamination in accordance with the Soil Contamination Act and other environmental laws and ordinances.
What is the committed minimum rate to reduce the scope of the investments considered prior to theapplication of that investment strategy?

As discussed in detail above, DLI invests only in properties that have been subjected to ESG-related due
diligence review. In selecting healthcare properties, DLI takes into account the operators’ financial stability,
management effectiveness, and governance and legal compliance.
What is the policy to assess good governance practices of the investee companies?
DLI invests directly or indirectly through trust beneficiary interests in real estate and real estate-related assets.
Therefore, due diligence review (including the assessment of good governance practices) in relation toinvestee companies is not applicable.
While there is no third-party rating used for assessment of DLI’s governance practices, DLI and the Assetmanager have implemented the following measures to assess and enhance DLI’s governance systems:•

Adoption of performance-linked asset management fees. DLI pays performance-linked fees basedon the total asset valuation to the Asset manager to align the interest of DLI’s unitholders and theinterest of the Asset Manager.

•

Related-party transactions. DLI is not allowed to carry out related-party transactions which amountexceed certain threshold without the approval of DLI’s board of directors.

•

Transparent and appropriate information disclosure. DLI holds management calls for its overseas
unitholders and engages with a wide range of unitholders at its earnings meetings, which are held
via teleconference. DLI makes ongoing disclosures in Japanese pursuant to the Financial
Instruments and Exchange Act and other applicable laws and regulations in Japan, and provides
English translations where practicable.

Asset Allocation
What is the asset allocation planned for the investment units of DLI?
As of September 30, 2023, 18.4% of the properties in DLI’s portfolio were Green Assets, and 81.6% were
not qualified as Green Assets, based on gross floor area. As of December 1, 2023, 28.9% of the properties
in DLI’s portfolio were healthcare facilities based on acquisition price. As described in more detail above,
all of DLI’s properties are evaluated against environmental and/or social characteristics promoted by DLI.
DLI and the Asset Manager view DLI’s Green Assets as investments aligned with environmental
characteristics and DLI’s healthcare facilities as investments aligned with social characteristics.

18.4%/28.9%* is #1 Alignedwith E/S characteristics#1B Other E/S characteristics

Daiwa Securities Living
Investment Corporation
81.6%/71.1%* qualifies as#2 Other* The percentages indicate the proportion of the Green Assets and the properties that are not qualified asGreen Assets (in each case based on gross floor area) and the healthcare facilities and the properties thatare not healthcare facilities (in each based on acquisition price) in DLI’s portfolio, respectively.
#1 Aligned with E/S characteristics includes the investments of the financial product used to attain theenvironmental or social characteristics promoted by the financial product.
The sub-category #1B Other E/S characteristics covers investments aligned with the environmental orsocial characteristics that do not qualify as sustainable investments.

#2 Other includes the remaining investments of the financial product which are neither aligned with theenvironmental or social characteristics, nor are qualified as sustainable investments.
How does the use of derivatives attain the environmental or social characteristics promoted by thisfinancial product?
Not applicable.
To what minimum extent are sustainable investments with an environmental objective aligned with the
EU Taxonomy?
Not applicable.
Does this financial product invest in fossil gas and / or nuclear energy related activities thatcomply with the EU Taxonomy?
No. DLI does not invest in real estate assets involved in fossil gas and / or nuclear energy-related
activities.
What is the minimum share of investments in transitional and enabling activities?
Not applicable.
What is the minimum share of sustainable investments with an environmental objective that are notaligned with the EU Taxonomy?
Not applicable.
What is the minimum share of socially sustainable investments?
Not applicable.
What investments are included under “#2 Other”, what is their purpose and are there any minimum
environmental or social safeguards?
“#2 Other” includes the assets that do not qualify as Green Assets or are not healthcare facilities.
Index as Reference Benchmark
Is a specific index designated as a reference benchmark to determine whether the investment units of
DLI are aligned with the environmental or social characteristics that it promotes?
No specific index has been designated as reference benchmark to determine whether DLI is aligned withthe environmental and/or social characteristics that it promotes.
How is the reference benchmark continuously aligned with each of the environmental or social
characteristics promoted by DLI?
Not applicable.
How is the alignment of the investment strategy with the methodology of the index ensured on acontinuous basis?
Not applicable.

How does the designated index differ from a relevant broad market index?
Not applicable.
Where can the methodology used for the calculation of the designated index be found?
Not applicable.
More Product-specific Information
Where can I find more product specific information online?
More product-specific information can be found on the website: https://www.daiwa-securitiesliving.co.jp/en/
Note Regarding the EU Taxonomy Regulation
As set out above, DLI promotes certain environmental characteristics.
The Asset Manager is required, under Regulation (EU) 2020/852 (the “EU Taxonomy Regulation”), todisclose whether its assets are aligned with the environmental objectives formulated in the EU Taxonomy
regulation. The EU Taxonomy Regulation is to be complemented by technical standards and screening
criteria which are currently developed. The technical screening criteria for the first two environmental
objectives (climate change mitigation and climate change adaptation) were adopted in December 2021. They
apply as of January 1, 2022.
DLI invests in economic activities that are eligible under the EU Taxonomy Regulation in respect of climatechange mitigation and/or climate change adaptation. This means that screening criteria for these investments
have been or will be developed. The Asset Manager expressly states that in view of the fact that theregulations are still under development or have only recently been adopted and the fact that, as a result
thereof, data on alignment of DLI’s investments with these environmental objectives and climate related
goals in line with EU Taxonomy Regulation are not sufficiently available, the Asset Manager is not currently
in a position to disclose on an accurate and reliable basis to what extent DLI’s investments technically qualify
as Taxonomy-aligned or “environmentally sustainable” within the specific meaning of the EU Taxonomy
Regulation. DLI’s investments may have a positive contribution to these environmental objectives and may
therefore eventually be considered Taxonomy-aligned, but at this stage, the Asset Manager is required tostate that there is no minimum proportion of DLI’s investments that qualify as such.
The Asset Manager further states that the “do no significant harm” principle applies only to those investments
underlying the financial product that takes into account the EU criteria for environmentally sustainableeconomic activities. The investments underlying the other portion of this financial product do not take into
account the EU criteria for environmentally sustainable economic activities.

INTEGRATION OF SUSTAINABILITY RISKS IN THE INVESTMENT DECISIONS, AND THE
IMPACT OF SUCH RISKS ON THE RETURNS OF DLI (SFDR ARTICLE 6 DISCLOSURE)Classification

Risk and Opportunity
Factors in Real EstateManagement
Stricter regulations
against GHG emissions
due to an introduction ofcarbon tax

Policy and Legal

Stricter energy-saving
standards, obligation toreport emissions

Enhancedcompetitiveness ofproperties that comply
with legal regulations

Technology

Transition Risks and Opportunities

Advancement andspread of energy-saving
and renewable energy
technologies

Fluctuations inproperties’ asset value
depending on
environmental
performanceMarketChanges in the stancesofinvestors/lenders/tenants
on investing and lending

Reputation
Acute

Increased loss due toseverer storm and flood
damageChronic

Physical Risks

Decline in reputationfrom investors andcustomers

Increased damage fromrise in averagetemperature/sea level

Potential Financial Impacts• Increased tax burden
due to the introduction ofcarbon tax, depending on
the volume of GHG
emissions from properties• Increased renovation
costs due to raised energysaving standards• Increased business
expenses related toemissions reporting• Increased rent income
from portfolio properties
with high environmental
performance• Decreased utility bills
thanks to improved energy
efficiency• Increased renovation
costs due to theintroduction of newtechnologies• Decreased utility bills
thanks to better energysaving performance• Fluctuations in
portfolio properties' asset
value depending on
environmental certificationacquisition rates• Fluctuations in rent
income depending on the
proportion of portfolio
properties with highenvironmental
performance• Decreased utility bills
thanks to better energysaving performance• Fluctuations in
reputation from ESGconscious investors andlenders• Fluctuations in ESGconscious tenants’ demand
for moving in and out• Better/Worse terms andconditions in financing
from financial institutions,etc.

• Decreased investment
unit prices/Lower ESG
ratings• Decreased profitabilityof properties with low
environmental
performance/resilience• Increased repair costs
and insurance premiums• Decreased rent income
due to lower occupancy
rates• Loss of business
opportunities/Increased
business continuity risks• Increased renovation
costs to protect portfolio
properties from water
intrusion, damage,destruction, etc.

Category

MediumTerm

4°C

Financial Impacts
Long
Term

1.5°C/2°C
Medium
Long
Term
Term

Risk

Small

Small

MediumMedium

Risk

Small

Small

MediumMediumOpportunity

Small

Small

Small

Medium

Risk

Small

Small

MediumMediumOpportunity

Small

Small

MediumMedium

Risk

Small

Small

MediumMediumOpportunity

Small

Small

Small

Medium

Risk

Small

Small

MediumMediumOpportunity

Small

Small

Small

Medium

Risk

Small

Small

MediumMediumRisk

MediumMedium

Small

Small

Risk

Small

Small

Small

Small

Countermeasures• Introduction of energy
management systems andrenewable energy• Planned reduction ofenergy consumption/GHG
emissions at portfolio
properties• Improvement of GHG
emissions through strategic
replacement/renovation ofproperties• Increase inenvironmental certificationacquisition rates• Introduction of cuttingedge technologies• Planned renovation
works• Promotion of transition
to power renewable energy• Increase inenvironmental certificationacquisition rates• Promotion of transition
to power from renewableenergy• Sufficient information
disclosure about portfolio
properties’ environmental
performance• Appropriate disclosureof ESG-related
information, including thaton climate change• Higher ratings in ESG
assessments by external
institution• Reduction of financing
costs through the use ofsustainability finance• Appropriate disclosureof ESG-related
information, including thaton climate change• Stronger stakeholder
engagement in ESG area
• Continuous
improvement ofenvironmental
performance/ Continuous
acquisition ofenvironmental
certifications• Risk comprehension
using hazard maps, etc.
• Portfolio of highly
resilient properties• Upgrading of facilities
to install high-efficiency air
conditioning systems,
introduction of energy
management systems• Collaborative energy
saving initiatives withtenants, including green
leases• Enhancement of BCP
measures• Promotion of greeningat portfolio properties.

*Scenario analysis is based on currently available information and objective forecast data from third-party
organizations and does not necessarily guarantee the accuracy of the information due to the inherent uncertainty
of known and unknown risks.

DLI and the Asset Manager address sustainability risks by taking into account environmental, social andgovernance, or ESG, factors in our investment decision process and on a continuous basis.
As DLI’s investment policy, DLI invests in healthcare facilities such as elderly care facilities, medical carefacilities and life science facilities throughout Japan in addition to real estate-related properties for residentialuse. DLI believes that investments in healthcare facilities address the high and rising demand for high-quality
healthcare facilities that service Japan’s super-aging population. DLI selects operators based on theirfinancial strength, management effectiveness, governance and legal compliance to ensure that residents of
DLI’s healthcare facilities have stable living arrangements.
The Asset Manager’s investment decision-making process involves assessment of material ESG-related risks
and opportunities to ensure that DLI’s sustainable investment strategy is implemented on a continuous basis.
With each acquisition opportunity, DLI and the Asset Manager review ESG-related due diligence findings.
These findings are required to be considered by the Asset Manager’s Investment Committee and Board of
Directors before a final decision is made on the investment.
As part of due diligence review prior to investment, the Asset Manager investigates the environmental andgeological conditions of each property to determine the possibility of environmental hazardous substancesand land pollution. The Asset Manager conducts, with assistance from outside experts, financial, property
and legal due diligence review to evaluate investments. DLI invests only in properties that have noenvironmental hazardous substances and generally do not exceed a certain land pollution threshold, whichis specified in the Enforcement Regulations of Soil Contamination Countermeasures Act in Japan. If a
property exceeds the land pollution threshold, the Asset Manager consults professionals regarding the impact
on the surrounding environment and people weighed against economic benefits before making an investment
decision. With respect to a healthcare facility, the Asset Manager investigates the surrounding area to assess
demographic trends, and the compliance structure and internal controls of the facility operator, in addition
to reviewing its general legal compliance.
In addition, the Asset Manager has established a sustainability promotion system and designated its President& CEO as the Chief Executive for Promoting Sustainability, in addition to establishing a Chief Sustainability
Officer to promote sustainability and responsible for executing sustainability measures and managing
progress, and a Sustainability Promotion Committee. Meetings of the Sustainability Promotion Committee
are held regularly (in principle, once a month) to discuss sustainability matters, including policies, goals andmeasures and social finance framework.
Furthermore, the Asset Manager tracks the sustainability measures including energy saving initiatives,
initiatives for reduction of GHG emissions and water-saving initiatives and receives information andproposals on healthcare facility management from AIP Healthcare Japan GK, which operates DLI’s
healthcare facilities to monitor sustainability factors with respect to the healthcare facilities.
We believe that taking into account ESG factors alongside traditional financial and operational factors in ourinvestment decision process and on a continuous basis enhance value creation for DLI’s unitholders.