Translation
This is an English language translation of the original Japanese announcement on our Website released on August 27, 2014.
However, no assurance or warranties are given with respect to the accuracy or completeness of this English language translation.
The Japanese original shall prevail in the case of any discrepancies between this translation and the Japanese original.

Summary of Financial Results (REIT) for the Fiscal Period Ended
June 30, 2014
August 27, 2014
Name of Issuer:

Invincible Investment Corporation

Stock Exchange Listing:Tokyo Stock Exchange

Securities Code:

8963

URL

Representative:
Name of Asset Manager:
Representative:
Contact:

Naoki Fukuda, Executive Director
Consonant Investment Management Co., Ltd.
Naoki Fukuda, President & CEO
Akiko Watanabe, Manager, Planning Department

Scheduled Date of Filing of
Securities Report:
2014
Supplementary Materials for
Financial Results:
Presentation Meeting:

September26,

http://www.invincible-inv.co.jp/

TEL. +81-3-5411-2731

Scheduled Date ofCommencement for Distribution
Payments:
September 25, 2014

Yes
Yes (for analysts and investors)

1.

(values are rounded down to the nearest million yen)
Financial Results for the Fiscal Period ended June 30, 2014 (from January 1, 2014 to June 30, 2014)(1)

Operating Results(Percentages indicate percentage change from the receding period)
Operating Income
Ordinary Income
Net Income

Operating Revenues
Millions of yen

Fiscal period
ended June30, 2014
Fiscal period
ended December
31, 2013%

Millions of yen%

Millions of yen

%

37.8

2,234

76.5

902

155.4

901

155.6

2,740

(0.7)

1,265

2.8

353

5.3

352

5.3

Fiscal period
ended June30, 2014
Fiscal period
ended December
31, 2013

(2)

%

3,775

Net Income per Unit

(Note)

Millions of yen

Net Income/ Unitholders’EquityOrdinary Income/Total Ordinary Income/Ordinary
Revenues
Assets

yen

%

%

%

573

2.5

1.1

23.9

259

1.0

0.4

12.9

Net Income per Unit is calculated based on the average number of investment units during the period and is rounded to the nearest yen.

Distributions
Distribution perDistribution
Unit (Excluding
AmountExcess Profit
excess profit(Excluding
Distribution per
distribution per
excess profit
Unit
unit)
distribution per
unit)
Fiscal period
ended June30,
2014
Fiscal period
ended December
31, 2013

Excess Profit
Distribution
AmountDividend Payout
Ratio

Distribution/
Net AssetsyenMillions of yen

yen

Millions of yen

%

%

573

901

0

0

100.0

2.5

237

372

0

0

105.7

1.0

(Note 1) Invincible Investment Corporation (INV) reversed JPY 20 million out of surplus and decided to distribute JPY 237 per unit for the fiscal period
ended December 31, 2013.
(Note 2) Dividend payout ratio is calculated by dividing distribution amount by net income.

(3)

Financial Position
Total Assets

Fiscal period ended June30, 2014
Fiscal period ended
December 31, 2013

Net Assets

Net Assets/Total Assets

Net Assets per Unit

Millions of yen

Millions of yen%

yen

79,26136,37345.9

23,121

79,17635,84445.3

22,785(Note)Net Assets per Unit is calculated based on the number of investment units issued and outstanding at the end of each period, and is rounded to
the nearest yen.

(4)

Cash Flows
Cash Flows fromOperating Activities

Fiscal period ended
June 30, 2014
Fiscal period ended
December 31, 2013

Cash Flows from
Investment Activities

Cash Flows from
Financing Activities

Closing Balance of Cashand Cash Equivalents

Millions of yen

Millions of yen

Millions of yen

Millions of yen

6,622(5,802)(1,482)

3,524

1,771

(169)

(1,532)

4,187

2

2.

Forecast for the Fiscal Period ending December 31, 2014 (from July 1, 2014 to December 31, 2014)(Percentages in brackets represent change from preceding period)
Distribution per
Unit (excluding Excess Profit
Operating Income Ordinary Income
Net Income
excess profit Distribution per
Unit
distribution perunit)

Operating
Revenues

Fiscal Period
endingDecember 31,
2014(Reference)

3.

Millionsof yen%Millionsof yen

4,323

14.5

2,429

%

8.7

Millionsof yen1,602 77.6%

Millionsof yen%1,601 77.6

yen

yen

600

0

Estimated net income per unit for the fiscal period ending December 31, 2014 is JPY 600.

Others(1)
Changes in Accounting Policies, Accounting Estimates or Restatements(a) Changes in Accounting Policies due to Revisions to
Accounting Standards and Other Regulations
None(b) Changes in Accounting Policies due to Other Reasons
None(c) Changes in Accounting Estimates
None(d) Restatements
None(2)
Number of Investment Units Issued and Outstanding(a) Number of Units Issued and Outstanding as of the
End of the Fiscal Period (Including Treasury Units) June 30, 2014

1,573,179

December 31, 2013

1,573,179(b) Number of Treasury Units at End of Fiscal Period June 30, 2014

0

December 31, 2013

0(Note)
unit.

Please refer to the “Notes Related to Per Unit Information” on page 40 for the number of units used as a basis for calculating net income per

ͤThe Implementation Status of Statutory Audit
At the time of this financial report, the audit procedures for the financial statements pursuant to the Financial Instruments
and Exchange Act are yet to be completed.
ͤExplanation on the Appropriate Use of the Forecast of Results and Other Matters of Special Consideration(Explanation on the Appropriate Use of the Forecast of Results)
The forward-looking statements in this material are based on the information currently available to us and certain
assumptions which we believe are reasonable. Actual operating performance may differ significantly due to factors wecannot predict as of this date, including gains or losses from the disposition of properties, repayment of borrowings,
decreases in rents and changes in operating conditions. Further, there is no guarantee of the payment of the forecast
distribution amount.
Please refer to “Assumptions for the Forecasts for the Fiscal Period ending December 31, 2014 (from July 1, 2014 toDecember 31, 2014)” on page 14 for assumptions used in the forecasts and precautions regarding the use of such forecasts.

3

1. Related Companies of the Investment Corporation
Disclosure is omitted because there have been no material changes in the “Structure of the Investment
Corporation”section of the latest securities report (filed on March 26, 2014).

2. Management Policy and Operating Condition(1)

Management Policy
Consonant Investment Management Co., Ltd., the asset manager to which INV entrusts the management of its

assets (the “Asset Manager”), decided to partially revise its internal rules (the “Investment Guidelines”) as of June 23,
2014. According to this revision, there have some changes in the “Investment Policy,” and “Distribution Policy”
sections of INV. Please refer to pages 67 - 85 below for the “Investment Policy” and “Distribution Policy” after therevision.
(2)

Operating ConditionaOverview of the Reporting Period(a)Main Trends in the Investment Corporation
INV was established in January 2002 based on the Investment Trust and Investment Corporation Act (Law No.

198 of 1951, as amended; hereinafter referred to as the “Investment Trust Act”). In May 2004, INV was listed on the
Osaka Securities Exchange (application for delisting was made in August 2007), and in August 2006 it was listed on
the Real Estate Investment and Trust Securities Section of the Tokyo Securities Exchange (Ticker Code: 8963).
In addition, a merger (“the Merger”) with LCP Investment Corporation (“LCP”) was implemented on February
1, 2010.
Ever since the commencement of sponsorship from Calliope Godo Kaisha (“Calliope”), an affiliate of Fortress
Investment Group LLC (“FIG” and together with Calliope and its other affiliates, the “Fortress Group”) on July 2011,
INV has been dedicating itself to the improvement of its properties’ occupancy rates and the reduction of various
expenditures by strengthening its asset management capabilities. Furthermore, in September 2012, it newly acquired
24 residential properties without issuing any equity and strived to improve earnings and distributions per unit throughthe external growth.
Moreover, in December 2013, INV implemented the refinancing of existing borrowings with new borrowings
arranged by Sumitomo Mitsui Banking Corporation (SMBC) and The Bank of Tokyo-Mitsubishi UFJ, Ltd. (BTMU)
and with funds raised via third-party allotment to the Fortress Group, etc. I N V realized the improvement of its
earnings-generating power as a result of the significant reduction of interest expenses and the strengthening of its
lender formation and established the base for the external growth as well as improvement of the financial stability.
During the fiscal period ended June 30, 2014 (the “reporting period”), under the situation of establishing the basefor such internal and external growth, INV implemented the exchange of the properties for the purpose of theestablishment of the portfolio which might realize both stability and growth of the rent income under the current
economic environment, through sale of 7 senior housing properties and acquisition of 2 limited service/extended stay
hotels in May 2014. In order to make the funds for the acquisition of such 2 hotels and a prepayment of the existing
borrowings in the trust, INV obtained a new loan arranged by three megabanks, Sumitomo Mitsui Banking
Corporation, The Bank of Tokyo‐Mitsubishi UFJ, Ltd. and Mizuho Bank, Ltd. and realized further decreasing of

4

loan costs and strengthening of its lender formation.
Moreover, INV resolved at its Board of Directors held on June 23, 2014 to issue new investment units through theglobal public offering and the third-party allotment in connection with the overallotment for the global offering (the“Capital Increase”). INV made a decision to acquire additional 18 limited service hotels (Trust Beneficiary Interests in
Domestic Real Estates) in July 2014 (the “18 Hotels”) by the funds procured through the global offering and new loan
along with the refinancing of the existing syndicated loan (the “Refinancing” and together with the acquisition of the 18
Hotels, the “Transactions”). In addition, in order to endeavor to establish a portfolio which places a strong emphasis on
both improved stability and future growth, the Asset Manager made a revision to the Investment Guidelines to the effectof positioning hotels as its Core Assets along with residential properties as of June 23, 2014.
Through the Transactions, INV has realized the expansion of the asset scale and the aggregate market value, theestablishment of high-quality portfolio with stability of revenues and upside of the rent and further decreasing the loancosts, and aims to further increase unitholder value through the improvement of the net income and the distribution perunit that have been steadily implemented after the commencement of the sponsorship of Fortress Group.
Please refer to “(c) Significant subsequent events” below for the details of the Transactions.
(b)

Operational Environment and Performance
During the first quarter of 2014, on the back of the rush demand due to the rise in the consumption tax and strong

corporate performance among other things, the actual GDP growth rate achieved positive growth for 6 consecutive
quarter period and the economic expansion continued. In and after April 2014, although the reaction of such rush
demand produced the decrease, the income environment gradually improved such as that the jobs-to-applicants ratio
improved to be 1.1 and the overall unemployment rate improved to be 3.7% in June 2014 and the movement of increasein salary including base salary expanded mainly in large-scale companies, it is expected that moderate upswing would
continue for the second half of 2014 due to solid corporate performance and recovery of consumption.
Regarding the real estate investment market, on the back of economic recovery and expectation to get out of
deflation, etc., the transaction price rose in large city area, mainly Tokyo. According to the Japanese Real Estate
Investor Survey (April 2014) by Japan Real Estate Institute, the capitalization rate of investors decreased in respect ofeach use of offices, residences, retail felicities and hotels, etc. and the investment demand of investors maintained a highstandard such as the fact that 92% of the investors responded to positively make a new investment over the next year.
Regarding the property rental market, in the Tokyo metropolitan area and parts of other major cities, the vacancy
rate of the office building has bottomed, the floor intensive transfer per corporate group unit has been activatedas well as the expansion in leasing space in the same buildings, and in central Tokyo, rents increased for new
construction projects and premium properties.
In addition, with respect to the residential sector, which had seen a continuous trend in declining rent after the
Lehman shock, the market trend of the rent apparently improved with focusing the inner-city small typeproperties. The Asset Manager grasped the movement of such recovery of market, and as a result of theadvance implementation of measures to increase rent, INV realized the rent increase in respect of 53.3% of the
new lease agreements for residential properties (+1.8% increase compared to previous agreement) and the rent
increase in respect of 24.9% of the renewed lease agreements for residential properties (+0.8% increase
compared to agreements before renewal). In addition, with respect to the net leasing cost (the number ofmonths subject to advertising expenses + the number of months subject to free rent – the number of months forkey money), INV reduced an average of 0.87 month per new lease agreement, the year-on-year 0.03 month5decrease and -0.41 month decrease compared to budget.
With respect to the hotels newly positioned as the Core Assets, in and after March 2014, the number offoreign passengers visiting Japan exceeded a million for 4 months in a row and the number of foreign guest of
domestic accommodations for the first quarter of 2014 increased by 37.3%, on year-on-year basis. On theother hand, according to the Japan Construction Starts Report of the Ministry of Land, Infrastructure,
Transport and Tourism, the new provisions of accommodations which started the construction remained at alow level around under 1,000 buildings per year over the past 5 years compared with approximately 1,500
buildings per year before 2008, and the average operating rate of business hotels in Tokyo which was 82.7% in
the preceding year increased to 84.0% from January to March in 2014 (the Japan Tourism Agency Surveys)
and high operating rate has been maintained and favorable condition continued.
In such an environment, INV sold 7 senior housing properties and acquired 2 limited service hotels in thereporting period, and acquired additional 18 Hotels properties in July 2014 as described above.
INV’s entire portfolio in the reporting period saw its occupancy rate recorded 97.1% in March 2014, the highest
after the Merger, and the average occupancy rate for the period was 96.2%, remained stable from the year ended
December 31, 2013 (the “preceding period”).
At the end of the reporting period, the number of properties held by INV totaled 73, including 63 residential
properties, 2 hotels, 7 retail and office building as well as one parking lot with a total acquisition value of JPY 77,988
million, the total appraisal value of JPY 77,268 million and a total leasable area of 154,773.28 m2. As a result of theabove trends in real estate investments and the rental market, as well as the above implementation of internal growthstrategies, the appraisal value of 71 properties excluding 7 senior housing properties sold on May 22, 2014 and 2
hotels acquired on May 23, 2014 increased by JPY 1,169 million (or 1.7%) over the preceding period, from JPY
70,608 million as of the end of the preceding period to JPY 71,778 million as of the end of the reporting period,
representing the fifth consecutive fiscal period for which there was an increase.
(c)

Overview of Fund Raising
I n order to fund the acquisition of new 2 Hotels and a portion of various expenses related thereto and the

prepayment of a portion of existing borrowings in the trust (total balance of borrowings: JPY 11,000 million; averageinterest rate at the time of repayment: 2.50%), INV raised funds from a loan (amount borrowed: JPY 13,500 million;interest on borrowings upon the execution of the refinancing: 0.98%) syndicated by Sumitomo Mitsui Banking
Corporation, The Bank of Tokyo-Mitsubishi UFJ, Ltd., Mizuho Bank, Ltd. and Sumitomo Mitsui Trust Bank,
Limited as lenders as of May 23, 2014. The refinancing has enabled INV to reduce its interest-bearing debt ratio,
decrease interest expenses, and further strengthen its lender formation including three megabanks.
As a result of implementing the above measures, as of the end of the reporting period, the outstanding balance of
the interest- bearing debt of INV was JPY 41,000 million, with the interest-bearing debt ratio cat 51.7% (Note).
Further, as described in “(c) Significant subsequent events” below, in order to procude the funds for the acquisitionof the 18 Hotels acquired as of July 17, 2014 and refinancing of the existing borrowings, INV decided to obtain a loan(amount borrowed: JPY 57,300 million; interest on borrowings upon the execution of the Refinancing: 0.98%)
through syndicated lenders arranged by Sumitomo Mitsui Banking Corporation, The Bank of Tokyo‐Mitsubishi UFJ,
Ltd. and Mizuho Bank, Ltd. on June 23, 2014, executed the loan agreement on the same date, and implemented theborrowing on July 17, 2014, and realized the further decrease in average borrowings costs.

6

(Note) The calculation for the interest-bearing debt ratio uses the calculation formula below:
Interest-bearing debt ratio = amount of interest-bearing debt ÷ total amount of assets at end of period x 100(d)

Overview of Results of Operations and Distributions
As a result of the above, operating income for the reporting period increased by JPY 968 million from thepreceding period (76.5% increase compared to the preceding period) to JPY 2,234 million, and net income for thereporting period increased by JPY 549 million from the preceding period (155.6% increase compared to the preceding
period) to JPY 901 million.
With respect to distributions, it was determined to distribute the total amount of net income excluding thefractions less than one JPY per unit, without a reversal of the surplus resulting from the negative goodwill (the“Surplus”) from the Merger in February 2010.
As the result of the above, the distribution per unit for the reporting period was above the forecast of the
distribution per unit for the period ended June 30, 2014 (the reporting period) (JPY 464 per unit) disclosed in theSummary of Financial Results as of February 26, 2014 and became JPY 573, increased by JPY 109 (23.5% ).
bOutlook for the Fiscal Period Ending December 31, 2014(a)

Future operational policy and issues to be addressed(i)External growth strategy
New Property Acquisitions
INV believes that with significant increase of total market value through implementation of the Capital Increase as

described above, significant reduction of borrowing costs through implementation of further refinancing and its further
strengthened lender formation, both debt and equity fund raising capacity has been enhanced, thus greatly improving theexternal growth potential of INV.

The Fortress Group is an investment manager committed to long-term, large-scale real estate investments in theJapanese real estate market, and holds excellent pipeline assets that are well balanced in terms of sectors. Upon
acquisition of new properties from these pipeline assets through implementation of the Capital Increase, INV also
entered into a memorandum, as of June 23, 2014, concerning preferential negotiating rights in respect of the acquisitionof 22 limited service hotels out of the pipeline assets of the Fortress Group, in order to ensure further future growth.
By utilizing such pipeline support by the sponsor and the property sale information resulting from the independent
network of the Asset Manager, to whom INV entrust the management of assets, INV will consider and execute property
acquisitions that contribute to stable growth in profits and cash flow and increase the distribution per unit.
Property Sales
While INV places priority on increasing unitholders’ value through external growth, taking into account theongoing high level of activity in the real estate trading market, it also plans to review as appropriate points such as its
portfolio composition and geographic distribution in considering property sales.
(ii)

Strategy for internal growth
INV will continue to strengthen its collaborative ties with Property Management (PM) companies and brokers to7

further boost occupancy rates and earning capabilities of its properties.
With respect to residential properties, in consideration of the fact that the fiscal period ending December 31, 2014
(the “next reporting period”), falls within the off-season of the housing rental market, INV will prepare policies
concerning management of the new lease agreement, increasing rent at lease renewals and administration of net leasing
costs for each property held by INV. INV will continue to aim to maximize the actual rent following the reporting
period.
With respect to the newly acquired hotel properties, INV intends to closely monitor the management, for the
purpose of increasing rent revenue, by adding 2 persons in charge of asset management (AM), establishing a systemfor checking the status of hotel operations in the meeting with hotel operators, and proper understanding of theoperational situations of each hotel held by INV, (ii) situation of the surrounding hotels, and the market trends.
Furthermore, because the implementation of appropriate maintenance and repair plans is of the utmost importance inmaintaining and enhancing the competitiveness and market value of properties as well as improving tenant satisfaction,
and, stable operation of hotels, thorough attention will be placed on the preparation of strategic plans and on theirflexible implementation.
(iii) Financial strategy
As a result of strengthening the financial base by the refinancing implemented during the reporting period and theTransactions implemented in July 2014, INV will promote a financial strategy which envisages to make borrowings
without securities in the future and to obtain credit ratings. Also, INV seeks to strengthen its earnings base by wayof lengthening of the borrowing terms, further reduction of borrowing costs, strengthening of its lender formation,
improving fund raising capacity and flexibility, and, furthermore, by way of acquiring new properties andimproving the earnings of the existing properties held by INV. From a financial perspective, INV will aim to
maximize unitholders’ value, which will result in improving distributions per unit.
(iv) Compliance risk management
While the executive officer of INV concurrently serves as the representative director at the Asset Manager, two
supervisory directors (an attorney and a certified public account) oversee the execution of the executive officer’s duties
via the Board of Directors of INV. In addition, the compliance officer of the Asset Manager attends each meeting of
the Board of Directors in the capacity of an observer.
The Asset Manager has a compliance officer who is responsible for compliance with laws, regulations andother relevant matters as well as overall management of transactions with sponsor related parties. Moreover, it has
in place a compliance committee which, chaired by such compliance officer, is in charge of deliberating on
compliance with laws, regulations and other relevant matters as well as transactions with sponsor related parties.
Compliance committee meetings are attended by an outside expert (an attorney) who, sitting in as a compliancecommittee member, conducts rigorous deliberations on the existence of conflicts of interest in transactions with sponsor
related parties as well as strict examinations with respect to INV’s compliance with laws and regulations.
INV intends to continually take steps to strengthen its compliance structure.
c

Significant subsequent events
INV issued the new investment units through the global public offering and the third-party allotment conducted inconnection with the overallotment secondary offering for the global public offering in the fiscal period ending
December 31, 2014 (23rd fiscal period). INV acquired the 18 Hotels by the funds procured through the Capital Increase8along with the refinancing of the existing borrowings.
The Capital Increase, accompanying acquisition of the 18 Hotels, and the refinancing were implemented in linewith the portfolio repositioning and refinancing completed in May 2014, to further enhance INV’s unitholder value
under the support of the sponsor, Fortress Group.
(a)Issuance of New Investment Units
INV resolved at its meeting of the Board of Directors held on June 23, 2014 and July 9, 2014 respectively to

conduct the issuance of new investment units and secondary distribution of investment units. Payment for the newinvestment units issued through the public offering was completed on July 16, 2014, in accordance with the following
terms and conditions. In addition, with respect to the issuance of new investment units through the third-party allotment
in connection with the overallotment secondary offering, the payment was completed on August 13, 2014. As a result,the unitholders’ equity of INV is JPY 53,096 million and the number of investment units issued and outstanding of INV
increased to 2,668,686.
(i)Issuance of new investment units through public offering: 1,040,000 units
Domestic public offering: 527,322 units
Overseas offering: 512,678 units: JPY 22,688 per unit
: JPY 21,873 per unit
: JPY 22,747,920,000: July 16, 2014

Number of New Investment Units Issued
Issue Price (Offer Price)Amount Paid In (Issue Value)
Total Amount Paid In (Total Issue Value)
Payment Date(ii) Secondary offering of investment units outside Japan
Number of Investment Units Offered in the Secondary
Offering
Offer Price
Total Offer Value
Seller: 70,151 units: JPY 22,688 per unit
: JPY 1,591,585,888: Infinite Value Investment Ltd.

(iii) Secondary offering of investment units (overallotment secondary offering)Number of Investment Units Offered in the Secondary
Offering
Offer Price
Total Offer Value
Delivery Date

: 55,507 units: JPY 22,688 per unit
: JPY 1,259,342,816: July 17, 2014(iv) Issuance of new investment units through third-party allotment
Number of New Investment Units Issued: 55,507 units

Amount Paid In (Issue Value)
Total Amount Paid In (Total Issue Value)
Payment Date
Allotee: JPY 21,873 per unit
: JPY 1,214,104,611: August 13, 2014
: SMBC Nikko Securities Inc.

(b)

Refinancing
INV implemented a new syndicate loan (New Syndicate Loan (C)) with a variable interest rate of 0.8% + one-month JPY TIBOR to fund a portion of the acquisition of the 18 Hotels and to refinance the New Syndicate Loan (A)(existing borrowings) carrying a variable interest rate of 1.50% + one-month JPY TIBOR at a more lower interest rate,
in addition to the New Syndicate Loan (B) (existing borrowings).

9

As a result, INV’s outstanding balance of the interest-bearing debt of is JPY 67,260 million and INV’s averageinterest rate is 1.09% after the implementation of refinancing as of July 17, 2014.
(i) Overview of Borrowing of Funds
New Syndicate Loan (C)LenderBorrowing
Date

BorrowingAmountInterestRate(annual)Principal
Maturity
Date

Borrowing
MethodSumitomo Mitsui Banking Corporation
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Mizuho Bank, Ltd.
Citibank Japan Ltd.
Shinsei Bank, Limited
Sumitomo Mitsui Trust Bank, Limited
Resona Bank, Limited

July
2014

JPY 57,300
million0.98000%
Variableinterest rate
(Note 1)

July 14,2017

Secured(Note 2) /with noguarantee

17,(Note 1) Interest rate applicable for the period from July 17, 2014 to August 28, 2014.
One-month JPY TIBOR (Base Rate) + spread (0.8%); however, two-month JPY TIBOR + spread (0.8%) for the first interest
calculation period only.
(Note 2) The following assets are pledged as collateral for the borrowings.
First priority pledges over the real estate trust beneficiary interests for 65 properties: Nisshin Palacestage Daitabashi, Nisshin
Palacestage Higashi-Nagasaki, Growth Maison Gotanda, Growth Maison Kameido, Emerald House, Harmonie Ochanomizu,
Suncrest Shakujii Koen, Growth Maison Shin-Yokohama, Belle Face Ueno Okachimachi, Grand Rire Kameido, Growth Maison
Ikebukuro, Growth Maison Yoga, Route Tachikawa, Shibuya Honmachi Mansion, City Heights Kinuta, Acseeds Tower Kawaguchi
Namiki, Capital Heights Kagurazaka, College Square Machida, Belair Meguro, Wacore Tsunashima I, Foros Nakamurabashi,
Growth Maison Kaijin, College Square Machiya, City House Tokyo Shinbashi, Winbell Kagurazaka, Nishiwaseda Cresent Mansion,
Lexington Square Akebonobashi, Casa Eremitaggio, Towa City Coop Shinotsuka II, Bichsel Musashiseki, Lexel Mansion Ueno
Matsugaya, Towa City Coop Sengencho, Royal Park Omachi, Lexington Square Haginomachi, Visconti Kakuozan, Lexington
Square Daitabashi, Lexington Square Honjo Azumabashi, AMS TOWER Minami 6-Jo, Spacia Ebisu, Kindai Kagakusha Building,
Lexington Plaza Nishigotanda, Cross Square NAKANO, Ohki Aoba Building, Lexington Plaza Hachiman, AEON TOWN Sukagawa,
Hotel MyStays Kanda, Hotel MyStays Asakusa, Hotel MyStays Kyoto-Shijo, MyStays Shin Urayasu Conference Center, Hotel
MyStays Maihama, Hotel Vista Premio Dojima, Hotel MyStays Nagoya-Sakae, Hotel MyStays Sakaisuji-Honmachi, Hotel MyStays
Yokohama, Hotel MyStays Nippori, Hotel MyStays Fukuoka-Tenjin-Minami, Flexstay Inn Iidabashi, Hotel MyStays Ueno Inaricho,
Flexstay Inn Shinagawa, Flexstay Inn Tokiwadai, Flexstay Inn Sugamo, Hotel MyStays Otemae, Flexstay Inn Kiyosumi Shirakawa,Flexstay Inn Nakanobu P1 and Flexstay Inn Nakanobu P2. First priority mortgages over two real estate properties: Shinjuku Island
and Times Kanda-Sudacho 4th. Floating lien over the real estate trust beneficiary interests for nine properties: Hotel MyStays Kanda,
Hotel MyStays Kyoto-Shijo, MyStays Shin Urayasu Conference Center, Hotel MyStays Maihama, Hotel Vista Premio Dojima, Hotel
MyStays Nagoya-Sakae, Hotel MyStays Sakaisuji-Honmachi, Hotel MyStays Yokohama and Hotel MyStays Fukuoka-TenjinMinami.

(ii) Overview of Prepayment of Existing Borrowings
New Syndicate Loan (A)LenderSumitomo Mitsui Banking Corporation
The Bank of Tokyo-Mitsubishi UFJ,Ltd.
Shinsei Bank, Limited
Citibank Japan Ltd.
Shinsei Trust & Banking Co., Ltd.
Aozora Bank, Ltd.

Borrowing
Date

Repayment
AmountInterestRate(annual)Principal
Maturity
Date

December20, 2013

JPY 17,552
million(Note 1)1.64636%
Variableinterest rate
(Note 2)

December20, 2016

Borrowing Method

Secured / with noguarantee(Note 1) The repayment amount is the balance of borrowings after the repayment agreed as of June 30, 2014(JPY 16.96 million).
(Note 2) Interest rate applicable for the period from June 30, 2014 to July 30, 2014.
One-month JPY TIBOR (Base Rate) + spread (1.5%)

New Syndicate Loan (B)10Lender

Borrowing
Date

Repayment
AmountInterestRate(annual)Principal
Maturity
Date

Borrowing Method

Sumitomo Mitsui Banking Corporation
The Bank of Tokyo-Mitsubishi UFJ,Ltd.
Mizuho Bank, Ltd.
Sumitomo Mitsui Trust Bank, Limited

May
2014

JPY 13,488
million(Note 1)0.94636％
Variableinterest rate
(Note 2)

May 22,
2015

Secured /guarantee

23,

with

no

(Note 1) The repayment amount is the balance of borrowings after the repayment agreed as of June 30, 2014 (JPY 11.25 million).
(Note 2) Interest rate applicable for the period from June 30, 2014 to July 30, 2014.
One-month JPY TIBOR (Base Rate) + spread (0.8%)(c)Acquisition of Assets
In addition to the high level of revenue stability provided up to now by the portfolio focused on the greater Tokyo

area and residential properties, INV, on July 17, 2014, acquired the 18 Hotels that provide both stability and potential
for further growth, in order to bring in stable revenue and high growth potential of hotels and thereby construct a
portfolio which places a strong emphasis on both improved stability and future growth.
As a result, the total number of properties held by INV after the acquisition increased to 91 properties (63residential properties, 20 hotels, 7 retail and office buildings as well as one parking lot) with a total acquisition price of
JPY 117,927 million and total leasable area of 224,574.36 m2.
The overview of 18 Hotels is as follows.

Use

Acquisition Price(JPY million)(Note 1)

Appraisal
Value atAcquisition(JPY million)(Note 2)

Property
NumberName of Property

Location

D3

Hotel MyStays
Kyoto-Shijo

Kyoto-shi,
Kyoto

6,024

Shijodori Holding
6,110 Tokutei Mokuteki
KaishaD4

MyStays ShinUrayasu
Conference Center

Urayasu-shi,
Chiba

4,930

4,980

Zephyrus Tokutei
Mokuteki Kaisha

D5

Hotel MyStays
Maihama

Urayasu-shi,
Chiba

4,870

4,920

Zephyrus Tokutei
Mokuteki Kaisha

D6

Hotel Vista Premio Osaka-shi,
Dojima
Osaka

3,845

3,900

Danube Tokutei
Mokuteki Kaisha

D7

Hotel MyStays
Nagoya-Sakae

Nagoya-shi,
Aichi

2,958

3,000

Zephyrus Tokutei
Mokuteki Kaisha

D8

Hotel MyStays
SakaisujiHonmachi

Osaka-shi,
Osaka

2,514

Nagahoribashi
2,530 Holding Tokutei
Mokuteki Kaisha

D9Hotel MyStays
Yokohama

Yokohamashi,
Kanagawa

2,119

2,150

Zephyrus Tokutei
Mokuteki Kaisha

D10

Hotel MyStays
NipporiArakawa-ku,
Tokyo

1,898

1,910

Nishi Tokutei
Mokuteki Kaisha

D11

Hotel MyStays
Fukuoka-TenjinMinami

Fukuoka-shi,
Fukuoka

1,570

Shijodori Holding
1,580 Tokutei Mokuteki
KaishaD12

Flexstay Inn
Iidabashi

Shinjuku-ku,
Tokyo

1,381

1,390

Hotel

11

Seller

Aki Tokutei
Mokuteki Kaisha

Category ofSpecified
Assets

Trust
Beneficial
Interest
Trust
Beneficial
Interest
Trust
Beneficial
Interest
Trust
Beneficial
Interest
Trust
Beneficial
Interest
Trust
Beneficial
Interest
Trust
Beneficial
Interest
Trust
Beneficial
Interest
Trust
Beneficial
Interest
Trust
Beneficial
Interest

Use

Appraisal
Value atAcquisition(JPY million)(Note 2)

Property
NumberName of Property

Location

Acquisition Price(JPY million)(Note 1)

D13

Hotel MyStays
Ueno Inaricho

Taito-ku,
Tokyo

1,331

1,340

Nishi Tokutei
Mokuteki Kaisha

D14

Flexstay Inn
ShinagawaShinagawaku, Tokyo

1,242

1,250

Nishi Tokutei
Mokuteki Kaisha

D15

Flexstay Inn
Tokiwadai

Itabashi-ku,
Tokyo

1,242

1,250

Aki Tokutei
Mokuteki Kaisha

D16

Flexstay Inn
SugamoToshima-ku,
Tokyo

1,192

1,200

Aki Tokutei
Mokuteki Kaisha

D17

Hotel MyStays
OtemaeOsaka-shi,
Osaka

1,192

1,200

Aki Tokutei
Mokuteki Kaisha

D18

Flexstay Inn
Kiyosumi
Shirakawa

Koto-ku,
Tokyo

749

754

Aki Tokutei
Mokuteki Kaisha

D19

Flexstay Inn
Nakanobu P1

Shinagawaku, Tokyo

589

593

Aki Tokutei
Mokuteki Kaisha

D20

Flexstay Inn
Nakanobu P2

Shinagawaku, Tokyo

283

285

Aki Tokutei
Mokuteki Kaisha

39,93840,342

Total

SellerCategory ofSpecified
Assets

Trust
Beneficial
Interest
Trust
Beneficial
Interest
Trust
Beneficial
Interest
Trust
Beneficial
Interest
Trust
Beneficial
Interest
Trust
Beneficial
Interest
Trust
Beneficial
Interest
Trust
Beneficial
Interest(Note 1) Acquisition prices do not include adjustments for property taxes or city planning taxes, or national or local consumption taxes.
Amounts are rounded down to the nearest million yen.
(Note 2) Appraisal value at Acquisition is the appraisal value as of April 30, 2014 based on the appraisal report from Japan Real Estate
Institute.

12

(d)

Operational Outlook
The following forecast is made for the fiscal period ending December 31, 2014.

Fiscal Period ending December 31, 2014 (from July 1, 2014 to December 31, 2014)
Operating Revenues

JPY 4,323 million

Operating Income

JPY 2,429 million

Ordinary Income

JPY 1,602 million

Net Income

JPY 1,601 million

Earnings per Unit

JPY 600

Reversal of Surplus per Unit

JPY 0Distribution per Unit (excluding Excess Profit Distribution per Unit)

JPY 600

Excess Profit Distribution per Unit

JPY 0

INV plans to distribute all net income excluding fractions less than one JPY per unit, using the proceeds from net
income for the fiscal period ending December 31, 2014.
Based on the above, INV plans to distribute JPY 1,601 million in total (distribution per unit: JPY 600), for the
fiscal period ending December 31, 2014. The total distribution amount exceeds 90% of the amount of distributable
income (Note 2). The Surplus after the distribution for the fiscal period ending December 31, 2014 will remain JPY 73
million.

(Note 1) Due to the Capital Increase, the number of investment units issued and outstanding at the end of the fiscal period ending December
31, 2014 is 2,668,686 units.
(Note 2) One of the tax conduit requirements is the dividend payment requirement, in which investment corporations are required to distributeat least 90% of their distributable income (Note 3).
(Note 3) Amount of distributable income (JPY 1,661 million (*)) × 90% = JPY 1,495 million(*)

Distributable income (JPY 1,661 million) = Net income before taxes (JPY 1,602 million) + Amortization of negative goodwill foreach fiscal period (JPY 59 million) (**)(**)

Amortization of negative goodwill for each fiscal period (JPY 59 million) = Gain on negative goodwill accrued upon the merger(JPY 11,843 million) × (Number of months of fiscal period ÷ 1,200 months (***))(***)

1,200 months = 100 years × 12 months (1 year)

For the assumptions underlying the operational outlook for the fiscal period ending December 31, 2014, please see“Assumptions for the Forecasts for the Fiscal Period ending December 31, 2014 (from July 1, 2014 to December 31,2014)”.
(Cautionary Note regarding Forward Looking Statements)
Forward looking statements such as the forecasts set forth herein are based on information currently available andcertain assumptions that are deemed reasonable. Actual operating performance may vary significantly due to factors notforeseen at the time of this present notice, such as the occurrence of gains and losses associated with the sale ofproperties, repayment of borrowings and a decrease in rent received.
distribution amounts.

13

Also, this forecast is not a guarantee ofAssumptions for the Forecasts for the Fiscal Period ending December 31, 2014 (from July 1, 2014 to December 31, 2014)
Item
Fiscal Period
Assets under Management

Units Outstanding

Interest-bearing Liabilities

Operating Revenues

Operating Expenses

Non-operating Expenses

Distribution per Unit
Excess Profit Distribution per
Unit
OthersAssumptions
From July 1, 2014 to December 31, 2014
The assets under management are based on the properties held by INV as of today. Also,
INV assumes there will be no new acquisitions or disposals of existing properties
thereafter through to the end of the fiscal period.
INV assumes the number of units issued and outstanding is 2,668,686 units, which isbased on the number of units issued by INV as of today. Also, INV assumes there will be
no additional issuance of investment units thereafter through to the end of the fiscal
period.
Balance at the end of the fiscal period: JPY 67,260 million
During this fiscal period, INV assumes there will be no additional repayments of theborrowings and no new borrowings through to the end of the fiscal period.
INV assumes it will earn operating revenues of JPY 4,323 million for the fiscal period.
The breakdown is as follows:・Rental revenues
JPY 4,323 million(of this amount, JPY 1,740 million are for hotel rent)
Rental revenues are calculated based on historical data and taking into account tenant
trends, property competitiveness, the market environment and other factors. In addition,
INV assumes there will be no delinquencies or non-payment of rent by tenants.
INV assumes it will incur property-related expenses of JPY 1,661 million. The
breakdown is as follows:・Facility management fees
JPY 475 million(of this amount, JPY 40 million are for repair costs)
・Taxes and other public charges
JPY 163 million
・Insurance expenses
JPY 5 million
・Other expenses
JPY 134 million
・Depreciation expenses
JPY 881 million
Other than these property-related expenses, INV assumes it will incur operating expensesof JPY 232 million for the fiscal period.
INV assumes it will incur non-operating expenses of JPY 827 million for the fiscal period.
The breakdown is as follows:・Interest expenses
JPY 370 million
・Finance related costs
JPY 300 million(of this amount, JPY 194 million are for one-time expenses incurred in therefinancing as of July 17, 2014)
・Other non-operating expenses
JPY 157 million(of this amount, JPY 157 million are for expenses related to the issuance of new
investment units incurred in the capital increase as of July 16, 2014)
The distribution per unit is calculated in accordance with the cash distribution policy set
forth in INV’s articles of incorporation.
INV assumes it will pay the distribution using net income as the source, and plans to
distribute JPY 1,601 million in total (JPY 600 per unit).
INV currently does not expect to make distributions in excess of profits (excess profit
distribution per unit).
INV assumes there will be no amendments to laws and ordinances, the taxation system,
accounting standards and other regulations that will affect the foregoing forecasts.
In addition, INV assumes there will no unforeseen material changes in the market
environment, including general economic trends and real estate market conditions.

14(For Reference)
As mentioned above, INV issued new investment units through the global public offering and the third-party
allotment conducted in connection with the overallotment secondary offering for the global public offering in the fiscal
period ending December 31, 2014 (23rd fiscal period). INV acquired the 18 Hotels by the funds procured through theCapital Increase along with the refinancing of the existing borrowings (hereinafter together with the Capital Increase
and the Refinancing, the “Transactions”).
For ease of reference, figures for net income per unit, distribution per unit and simulated earnings per unit aresummarized in the table below.
Forecasts for simulated earnings per unit are shown for reference purposes, and indicate simulated earnings perunit after excluding one-time expenses associated with the Transactions etc. as if they had taken place prior to thebeginning of the fiscal period ended June 30, 2014.
The simulated earnings per unit is purely a simulation intended to describe the effect of the transactions, etc.
described above and is neither a forecast nor prospect relating to INV’s net income or distribution per unit for a given
operating period.

<Simulated Earnings per Unit>
Net Income per Unit
(Note 1)

Distribution per Unit

Simulated Earnings
per Unit

JPY 573

JPY 573

JPY 600

JPY 600

JPY 600

JPY 628

Fiscal Period ended
June 30, 2014
Fiscal Period ending
December 31, 2014 (forecast)(Note 1) Net income per unit in the fiscal period ended June 30, 2014 is calculated assuming that the number ofinvestment units issued and outstanding is 1,573,179 units, and net income per unit in the fiscal period ending
December 31, 2014 is calculated assuming that the number of investment units issued and outstanding is

2,668,686 units.
(Note 2) Figures in the above table are rounded down to the indicated amount.
Simulated earnings per unit refers to net income per unit calculated by applying the simulated adjustment below,
eliminating the effects of such factors as one-time expenses and treating the assets anticipated to be acquired as if they
were acquired prior to the beginning of the fiscal period ended June 30, 2014.
Simulated adjustment is based on the total of the following adjustments:(a)Elimination of the gains from the sale of seven senior housing properties as of May, 2014.

(b)

The impact based on the assumption that the repositioning of the portfolio through the sale of seven senior
housing properties and the acquisition of two hotels in May, 2014, and the acquisition of the 18 Hotels were
implemented prior to beginning of the fiscal period ended June 30, 2014.

(c)

The impact based on the assumption that each refinancing implemented in May, 2014 and July, 2014 was
implemented prior to beginning of the the fiscal period ended June 30, 2014.

(d)

The tax amount based on the assumption that property taxes and city planning taxes were expensed at the
beginning of the the fiscal period ended June 30, 2014 on the two hotels acquired in May 2014 and the 18
Hotels acquired in July, 2014.

15

(e)

Elimination of various one-time expenses in connection with the implementation of the Transactions.

(f)With respect to both the the fiscal period ended June 30, 2014 and the the fiscal period ending December 31,
2014, the calculation is based on the assumption that a total of 1,095,507 units (1,040,000 units through the
public offering and 55,507 units through the third-party allotment) were issued at the beginning of the the fiscal
period ended June 30, 2014 and the number of investment unites issued and outstanding is 2,668,686 units.

The simulated earnings per unit for the the fiscal period ended June 30, 2014 and the the fiscal period ending
December 31, 2014 is purely a simulation intended to calculate the normalized earnings per unit taking into
consideration the effect of the transactions, etc. described above and is neither a forecast nor prospect relating to INV’s
earnings or distribution per unit for a given operating period. Accordingly, there is no guarantee that the simulated
earnings per unit will ever be realized for any future operating period, and INV is not obligated to revise any of thesimulated figures regardless of any changes in circumstances that may affect the above simulation.

16

3. Financial Statements(1)

Balance Sheets

Fiscal Period ended
December 31, 2013(as of December 31, 2013)
AssetsCurrent assets
Cash and deposits
Cash and deposits in trust
Accrued revenue
Accounts receivables
Prepaid expenses
Consumption tax receivable
Advance payment
OthersAllowance for doubtful accounts
Total current assets
Non-current assets
Property, plant and equipment
Buildings
Accumulated depreciation
Buildings, net
Equipment
Accumulated depreciation
Equipment, net
Building improvements
Accumulated depreciation
Building improvements, net
Land
Buildings in trust
Accumulated depreciation(Unit: thousands of yen)
Fiscal Period ended
June 30, 2014(as of June 30, 2014)※1 1,457,257※1 759,058※1 2,729,902※1 2,765,504

10,948122,3217,419
10(2,573)

2,574
71,193
120,941
17,1380(1,391)

4,325,286

3,735,018※1 2,680,174※1 85,914(218,377)(7,783)2,461,796

78,131※1 50,691※1 38,862(27,985)(17,352)

22,706

21,510※1 3,848※1 2,779(1,518)(1,138)

2,330

1,640

※1 2,713,620※1 711,834※1 29,762,419※1 31,162,188(2,339,358)(2,623,404)

Buildings in trust, net

27,423,061

28,538,783

Equipment in trust
Accumulated depreciation※1 6,763,740※1 7,151,824(1,690,614)(1,891,879)

Equipment in trust, net

5,073,126

5,259,944

Building improvements in trust
Accumulated depreciation※1 320,904※1 321,317(97,258)(109,047)

223,646

212,270※1 155,616※1 177,438(74,970)(85,898)

Building improvements in trust, net
Tools, furniture and fixtures in trust
Accumulated depreciation
Tools, furniture and fixtures in trust, net
Land in trust
Total property, plant and equipment
Intangible assets
OthersTotal intangible assets
Total investment and other assets
Guarantee deposits
Long-term prepaid expenses
OthersTotal investments and other assets
Total non-current assets
1780,646

91,540※1 36,582,527※1 40,447,565

74,583,461

75,363,220

137

106

137

106

10,000224,371
33,375

10,000
119,338
34,070267,746

163,40974,851,345

75,526,736

Total assets

Fiscal Period ended
December 31, 2013(as of December 31, 2013)
79,176,632

18(Unit: thousands of yen)
Fiscal Period ended
June 30, 2014(as of June 30, 2014)
79,261,754

Fiscal Period ended
December 31, 2013(as of December 31, 2013)
Liabilities
Current liabilities
Accounts payable
Short-term debts
Current portion of long-term debts
Current portion of long-term debts in trust
Accrued liabilities
Accrued expenses
Accrued income taxes
Accrued consumption taxes
Advances received
Deposits received

174,201※1 203,520※1 105,833
5,000
229,843525
385,886
5,048

Total current liabilities
Non-current liabilities
Long-term debts
Long-term debts in trust(Unit: thousands of yen)
Fiscal Period ended
June 30, 2014(as of June 30, 2014)

143,439※1 13,488,750※1 17,552,100

32,733
121,934520
143,637
357,52232,927

1,109,859

31,873,567※1 20,146,480※1 20,854,166※1 9,960,000

Tenant leasehold and security deposits in trust
Tenant leasehold and security deposits

1,037,721
183,579

1,025,726
28,663

Total non-current liabilities

42,221,948

11,014,390

43,331,808

42,887,957

29,134,389

29,134,389

6,264,432
446,0036,264,432
974,975

6,710,435

7,239,407

Total liabilities
Net assets
Unitholders’ equity
Unitholders’ capital
SurplusCapital surplus
Unappropriated retained earnings/loss
Total surplus
Total unitholders’ equity
Total net assets
Total liabilities and net assets

19

35,844,824

36,373,796※2 35,844,824※2 36,373,796

79,176,632

79,261,754

(2)Statement of Income(Unit: thousands of yen)
Fiscal Period ended
June 30, 2014
(from January 1, 2014 toJune 30, 2014)

Fiscal Period ended
December 31, 2013
(from July 1, 2013 to
December 31, 2013)
Operating revenues
Rental revenues
Gain on sales of properties

2,740,449-

2,772,419
1,003,352

Total operating revenues

2,740,449

3,775,772

1,261,221
125,000
4,800
3,986
19,0891,045
2,561
56,975

1,281,791
125,000
4,800
3,906
18,224
107,404

1,474,679

1,541,127

1,265,770

2,234,644

400
354,737
406

404
475
898

Total non-operating revenues

355,544

1,777

Non-operating expenses
Interest expenses
Finance related costs
Investment unit issuance expenses
Miscellaneous losses

672,128
579,038
15,4871,300

376,514842,043
115,438
5

Total non-operating expenses

Operating expenses
Property related expenses
Asset management fees
Directors’ remuneration
Asset custodian fees
Administrative service fees
Provision of allowance for doubtful accounts
Bad debt loss
Other operating expenses
Total operating expenses
Operating income
Non-operating revenues
Interest revenues
Profit from finance related cost adjustment
Reversal of allowance for doubtful accounts
Miscellaneous income

1,267,953

1,334,001

Ordinary income

353,360

902,420

Net income before taxes

353,360

902,420605

605

Corporate tax, etc.
Total corporate tax, etc.

605

605

Net income

352,755

901,815

Retained earnings at the beginning of the period
Unappropriated retained earnings/Loss at the end of theperiod93,24773,159446,003

974,97520

(3)Statement of Unitholders’ Equity

Fiscal Period ended December 31, 2013 (from July 1, 2013 to December 31, 2013)(Unit: thousands of yen)
Unitholders’ Equity
Surplus
Unitholders’ Capital

Balance at the beginningof the period

26,134,396

Capital Surplus

UnappropriatedRetained
Earnings/Loss

6,264,432

449,196

Total Surplus
6,713,628

Total Unitholders’EquityTotal Net Assets

32,848,025

32,848,025

2,999,992

2,999,992

Change during the period
Issuance of new
investment units
Distributions fromsurplus2,999,992

Net income
Total change during theperiodBalance at the end of theperiod(355,949)(355,949)(355,949)(355,949)

352,755

352,755

352,755

352,755

2,999,992-(3,193)(3,193)

2,996,799

2,996,799

29,134,389

6,264,432

446,0036,710,435

35,844,824

35,844,824

Fiscal Period ended June 30, 2014 (from January 1, 2014 to June 30, 2014)(Unit: thousands of yen)
Unitholders’ Equity
Surplus
Unitholders’ Capital

Balance at the beginningof the period

29,134,389

Total Unitholders’EquityTotal Net Assets

Capital Surplus

UnappropriatedRetained
Earnings/Loss

6,264,432

446,0036,710,435

35,844,824

35,844,824(372,843)(372,843)(372,843)(372,843)

901,815

901,815

901,815

901,815

Total Surplus

Change during the period
Issuance of new
investment units
Distributions fromsurplus
Net income
Total change during theperiodBalance at the end of theperiod--528,972

528,972

528,972

528,972

29,134,389

6,264,432

974,975

7,239,407

36,373,796

36,373,796

21

(4)

Statement of Cash Distribution

Fiscal Period ended December 31, 2013
Fiscal Period ended June 30, 2014
(from July 1, 2013 to December 31, 2013) (from January 1, 2014 to June 30, 2014)
I

Unappropriated retained earnings

446,003,163 yen

974,975,488 yen

IIDistribution amount372,843,423 yen

901,431,567 yen(237 yen)(573 yen)

73,159,740 yen

73,543,921 yen

In accordance with the distribution
policy set forth in Article 17, Paragraph
1 of the Articles of Incorporation of
INV, the distribution amount shall be
the amount which does not exceed theamount of profits but exceeds 90% of
the distributable profit as defined in
Article 67-15 of the Special Taxation
Measures Act. However, in the eventthat any tax losses arise, or if no profits
have been recorded for tax purposesdue to tax losses carried forward, thedistribution amount may be as reasonably
determined by INV. Pursuant to thispolicy, INV determined the distribution
amount to be 372,843,423 yen, which isthe sum of net income of 352,755,880
yen and reversal of surplus of
20,870,811 yen. INV did not distributeany amounts in excess of profit, as set
forth in Article 17, Paragraph 4 of the
Articles of Incorporation.

In accordance with the distribution
policy set forth in Article 17, Paragraph
1 of the Articles of Incorporation of
INV, the distribution amount shall be
the amount which does not exceed theamount of profits but exceeds 90% of
the distributable profit as defined in
Article 67-15 of the Special Taxation
Measures Act. However, in the eventthat any tax losses arise, or if no profits
have been recorded for tax purposesdue to tax losses carried forward, thedistribution amount may be as reasonably
determined by INV. Pursuant to thispolicy, INV determined the distribution
amount to be 901,431,567 yen out of
the net income of 901,815,748 yen.
INV did not distribute any amounts inexcess of profit, as set forth in Article
17, Paragraph 4 of the Articles ofIncorporation.

(Distribution per unit)
III Retained earnings carried forward
Calculation method of distribution
amount22

(5)Statement of Cash Flows(Unit: thousands of yen)
Fiscal Period ended
June 30, 2014
(from January 1, 2014 toJune 30, 2014)

Fiscal Period ended
December 31, 2013
(from July 1, 2013 to
December 31, 2013)
Cash flows from operating activities
Net income before taxes
Depreciation expenses
Investment unit issuance expenses
Finance related costs
Amortization of tenant leasehold and security deposits
in trust
Interest received
Profit from finance related cost adjustment
Interest paid
Increase (decrease) in allowance for doubtful accounts
Decrease (increase) in accounts receivable
Decrease (increase) in deposit payments
Decrease (increase) in consumption tax receivable
Increase (decrease) in accrued consumption tax
payableIncrease (decrease) in accounts payable
Increase (decrease) in accrued liabilities
Increase (decrease) in accrued expenses
Increase (decrease) in advances received
Increase (decrease) in deposits received
Decrease in property and equipment due to sale
Others353,360
527,451
15,487579,038

902,420
527,945
115,438
842,043

(683)

(435)

(400)
(354,737)
672,1281,045
6,458
748,197(7,419)(404)
376,514(1,181)(60,244)7,419(24,902)

143,637

24,617(127,432)
8,411(3,553)
5,481(87,869)(1,613)
18,110(28,364)
10,9094,367,451(6,762)

Subtotal

2,422,548

7,125,015

Proceeds of interest
Payment of interest
Payment of corporate taxes, etc.

390
(650,982)
(606)

404
(502,533)(609)

Cash flows from operating activities

1,771,350

6,622,276(158,960)-(5,618,018)(154,916)(49,761)(93,087)

39,531

81,527

Cash flows from investing activities
Payment for acquisition of tangible assets in trust
Repayment of tenant leasehold and security deposits
Repayment of tenant leasehold and security deposits
in trust
Proceeds of tenant leasehold and security deposits intrust
OthersCash flows from investing activities
Cash flows from financing activities
Proceeds from short-term debt
Repayment of short-term debt
Proceeds from long-term debt
Repayment of long-term debt
Repayment of long-term debt in trust
Finance related costs
Payment of distributions
Proceeds from issuance of investment units
Payment of investment unit issuance expenses
OthersCash flows from financing activities
Increase (decrease) in cash and cash equivalents
23

(694)

(17,833)(169,885)(5,802,328)

20,350,000(22,891,500)(1,618,501)(355,323)
2,999,992(16,787)

13,500,000(11,250)(2,797,899)(11,000,000)(732,126)(342,802)(98,468)-(1,532,119)(1,482,546)

69,344(662,597)

Beginning balance of cash and cash equivalents
Closing balance of cash and cash equivalents

24

Fiscal Period ended
December 31, 2013
(from July 1, 2013 to
December 31, 2013)
4,117,815(Unit: thousands of yen)
Fiscal Period ended
June 30, 2014
(from January 1, 2014 toJune 30, 2014)
4,187,160

4,187,160

3,524,562

(6)Notes Concerning Going Concerns Assumption

None
(7)

Notes Concerning Significant Accounting Policies

1. Method of depreciation of non-current assets(a) Property, plant and equipment
The straight-line method is used.
The useful lives of major property, plant and equipment are as follows.
Buildings

40-77 years

Equipment

8-24 years

Building improvements

7-18 years

Buildings in trust

6-66 years

Equipment in trust

2-32 years

Building improvements in trust

4-55 years

Tools, furniture and fixtures in trust

2-15 years(b) Intangible assets
The straight-line method is used.
(c) Long-term prepaid expenses
The straight-line method is used.
2. Method of calculating allowances
Allowance for doubtful accounts
To reserve for losses on doubtful accounts, allowances are provided for normal receivables using a rate determined basedon past bad debt experiences, and specific allowances are provided for accounts with a possibility of default based on theestimated amounts considered to be uncollectible by considering the collectability of accounts on an individual basis.
3. Revenue and expense recognition
Accounting treatment of property taxes and other taxes
With respect to property taxes, city planning taxes and depreciable asset taxes, of the tax amount assessed anddetermined, the amount corresponding to the relevant fiscal period is accounted for as property related expenses.
Of the amounts paid to the seller for acquisitions of real estate, the amount equivalent to property taxes is capitalized aspart of the acquisition cost of the real estate or trust beneficiary interests in real estate instead of being charged as expense.
The amount equivalent to property taxes that was included as part of the acquisition of real estate during this fiscal period is
JPY 10,574 thousand.

4. Cash and cash equivalents as stated in Statement of Cash Flows
Cash and cash equivalents as stated in the Statement of Cash Flows consist of cash on hand and cash in trust, floating
deposits, deposits in trust and short-term investments that are very liquid and realizable with a maturity of three months orless when purchased and that are subject to insignificant risks of changes in value.

5. Other significant matters which constitute the basis for preparation of financial statements
25

(i) Accounting treatment of trust beneficiary interests in real estate
As to trust beneficiary interests in real estate, all accounts of assets and liabilities within assets in trust, as well as all
income generated and expenses incurred from assets in trust, are recorded in the relevant balance sheets and income
statement accounts. Of such items, the following significant trust assets and liabilities are shown separately on the balance
sheet.
(a) Cash and deposits in trust(b) Buildings in trust
Equipment in trust
Building improvements in trust
Tools, furniture and fixtures in trust
Land in trust(c) Tenant leasehold and security deposits in trust(d) Long-term debts in trust(ii) Accounting treatment of deferred charges(a) Investment unit issuance expenses
The full amount is recorded as expense at the time of expenditure.
(iii) Accounting treatment of consumption taxes
Transactions subject to consumption taxes are recorded at amounts exclusive of consumption taxes.
(8)Notes to the Financial Statements(Notes to the Balance Sheets)※1.

Assets pledged as collateral and liabilities with collateral

Assets pledged as collateral are as follows.
Fiscal Period ended
December 31, 2013(as of December 31, 2013)
167,136(Unit: thousands of yen)
Fiscal Period ended
June 30, 2014(as of June 30, 2014)
153,187

Cash and deposits in trust

2,729,902

2,765,504

Buildings

2,461,796

78,131Equipment

22,706

21,510

Building improvements

2,330

1,640

Land

2,713,620

711,834

Buildings in trust

27,423,061

28,538,783

Equipment in trust

5,073,126

5,259,944

Building improvements in trust

223,646

212,270

Tools, furniture and fixtures in trust

80,646

91,540Cash and deposits

Land in trust
Total

36,582,527

40,447,565

77,480,500

78,281,912

Liabilities with collateral are as follows.

-(Unit: thousands of yen)
Fiscal Period ended
June 30, 2014(as of June 30, 2014)
13,488,750

203,520

17,552,100

20,146,480-

Fiscal Period ended
December 31, 2013(as of December 31, 2013)
Short-term debts
Current portion of long-term debts
Long-term debts
26

Current portion of long-term debts in trust

105,833

Long-term debts in trust
Total

-

20,854,166

9,960,000

41,310,000

41,000,850※2. Minimum net assets as required by Article 67, Paragraph 4 of the Act on Investment Trusts and Investment Corporations
Fiscal Period ended
December 31, 2013(as of December 31, 2013)
50,000(Unit: thousands of yen)
Fiscal Period ended
June 30, 2014(as of June 30, 2014)
50,00027

(Notes to Statement of Income)※1.

Rental revenues and property related expenses(Unit: thousands of yen)
Fiscal Period ended
June 30, 2014
(from January 1, 2014 toJune 30, 2014)

Fiscal Period ended
December 31, 2013
(from July 1, 2013 to
December 31, 2013)
A.

Real property rental revenues

Rent/common area charges

2,542,588

2,555,746

197,861

216,6732,740,449

2,772,419

Maintenance costs

435,966

446,688

Taxes and public dues

175,993

174,451

Other revenues
Total
B.

Real property related expenses

Insurance expenses

5,085

4,952

Other expenses

116,754

127,784

Depreciation expenses

527,420

527,914

Total

1,261,221

1,281,791

C.

1,479,227

1,490,627

Operating income from rental revenues (A-B)※2.

Gain on sales of properties

Fiscal Period ended December 31, 2013 (from July 1, 2013 to December 31, 2013)
None
Fiscal Period ended June 30, 2014 (from January 1, 2014 to June 30, 2014)Bon Sejour
Chitose Funabashi
Proceeds from sales ofproperties
Cost of sales ofproperties
Other expenses onsales of properties
Gain on sales ofproperties※3.

Bon Sejour Hino

832,153

777,256

730,459

587,138

657,193622,386

551,565

468,167

6,623

5,450

5,414

4,363

168,337

149,419

173,480

114,607

Bon Sejour Komaki
Proceeds from sales ofproperties
Cost of sales ofproperties
Other expenses onsales of properties
Gain on sales ofproperties

Bon Sejour Yotsugi(Unit: thousands of yen)
Bon SejourMusashi Shinjo

Bon Sejour
Hadano Shibusawa

Bon Sejour Itami

1,280,824

735,268

472,718

984,869

633,486

449,783

12,563

6,243

4,357

283,391

95,53918,577

Profit from finance related cost adjustment
With respect to the exit fees which were to be paid pursuant to the Shinsei Trust Loan A and the Shinsei Trust

Loan B, 1,337,460 thousand yen was recognized as an accrued expense in a prior period on the basis that it would be paidon the maturity date of the borrowings. However, as a result of the prepayment of such borrowings during the fiscal period
ended December 31, 2013, such exit fees were refunded, which was recognized as profit from finance related cost adjustment.

28

(Notes to Statement of Unitholders’ Equity)
Number of investment units authorized and number of investment units issued and outstanding
Fiscal Period ended
Fiscal Period ended
December 31, 2013
June 30, 2014
(from July 1, 2013 to(from January 1, 2014 toDecember 31, 2013)
June 30, 2014)
Number of investment units authorized
10,000,000 units
10,000,000 units
Number of investment units issued and outstanding

1,573,179 units

1,573,179 units(Notes to Statement of Cash Flow)
Relationship between cash and cash equivalents in statement of cash flows and amounts in accompanying balance sheet(Unit: thousands of yen)
Fiscal Period ended
Fiscal Period ended
December 31, 2013
June 30, 2014
(from July 1, 2013 to(from January 1, 2014 toDecember 31, 2013)
June 30, 2014)
Cash and deposits
1,457,257
759,058※1.

Cash and deposits in trust

2,729,902

2,765,504

Cash and cash equivalents

4,187,160

3,524,562

29

(Notes Related to Lease Contracts)
Operating lease transactions (as lessee)
Remaining lease payments
Fiscal Period ended
December 31, 2013(as of December 31, 2013)
112,249(Unit: thousands of yen)
Fiscal Period ended
June 30, 2014(as of June 30, 2014)
112,249

Due after one year

2,336,413

2,280,288

Total

2,448,662

2,392,537

Fiscal Period ended
December 31, 2013(as of December 31, 2013)
669,922(Unit: thousands of yen)
Fiscal Period ended
June 30, 2014(as of June 30, 2014)
507,089

Due after one year

6,914,939

4,342,958

Total

7,584,862

4,850,048

Due within one year

Operating lease transactions (as lessor)
Remaining lease payments

Due within one year

(Notes Related to Financial Instruments)
1.

Status of financial instruments(1) Policy for financial instruments
INV principally conducts its operations through investments in real estate and other specified assets to seek to ensurestable income in the medium to long term.
The policy for raising funds is principally through issuing new investment units or entering into debt.
Derivative transactions are to be entered into for the purpose of hedging against the rate of future interest rate increases,
etc. and not for speculation. There are currently no derivative transactions that have been entered into.
Surplus funds are managed carefully after carefully taking into account safety, liquidity, the interest rate environment
and financing.

(2) Nature and extent of risks arising from financial instruments and risk management
The funds raised through borrowings are mainly used to acquire real estate properties or properties in trust (including
related acquisition costs) and for the repayment of existing debt. Liquidity risks relating to debt are managed by the financedepartment of the Asset Manager by preparing and updating plans for funds, and monitoring the covenants set forth in loan
agreements.

(3) Supplemental information regarding market value, etc. for financial instruments
The fair value of financial instruments is based on quoted market prices if available. When quoted market prices are notavailable, fair value is estimated using valuation techniques which contain various assumptions. If other valuation models orassumptions were used, the estimated value may differ.

30

2.

Estimated fair value of financial instruments

Book value, fair value and the difference between values as of December 31, 2013 are as follows.
(Unit: thousands of yen)Book Value

Fair Value

Difference(1) Cash and deposits

1,457,257

1,457,257-(2) Cash and deposits in trust

2,729,902

2,729,902-

Total assets

4,187,160

4,187,160

-

-

-

-

203,520

203,520-

20,146,480

20,146,480-

105,833

106,409576

20,854,166

21,127,212

273,045

41,310,000

41,583,622

273,622(3) Short-term debts(4) Current portion of long-term debts(5) Long-term debts(6) Current portion of long-term debts in trust(7) Long-term debts in trust
Total liabilities

Book value, fair value and the difference between values as of June 30, 2014 are as follows.
(Unit: thousands of yen)Book Value(1) Cash and deposits

Fair Value

Difference

759,058

759,058-(2) Cash and deposits in trust

2,765,504

2,765,504-

Total assets

3,524,562

3,524,562-(3) Short-term debts

13,488,750

13,488,750-(4) Current portion of long-term debts

17,552,100

17,552,100-(5) Long-term debts

-

-

-

(6) Current portion of long-term debts in trust

-

-

-

9,960,000

10,122,527

162,527

41,000,850

41,163,378

162,527(7) Long-term debts in trust
Total liabilities(Note 1) Methods to calculate fair values of financial instruments(1) Cash and deposits(2) Cash and deposits in trust(3) Short-term debts

Due to the short maturities, the book value of these instruments is deemed a reasonable approximation of the fair value,
and therefore, the book value is used as the fair value.
(4) Current portion of long-term debts(5) Long-term debts(6) Current portion of long-term debts in trust(7) Long-term debts in trust
The fair values of long-term debt with fixed interest rates are determined based on the present value of contractual cash
flows discounted at current market interest rates which would be applicable to new debt with the same amount.
Long-term debt with floating interest rates reflecting changes in market rates within a short term period are stated at theirbook value as their book values approximate their fair values.
(Note 2) Financial instruments for which fair value is extremely difficult to value(Unit: thousands of yen)
Fiscal Period ended
June 30, 2014(as of June 30, 2014)

Fiscal Period ended
December 31, 2013(as of December 31, 2013)

Tenant leasehold and183,579
28,663security deposits
Tenant leasehold and1,037,721
1,025,726
security deposits in trust
Tenant leasehold and security deposits and tenant leasehold and security deposits in trust have no observable market
price, and it is impracticable to reasonably estimate their future cash flows because it because the repayment dates of those31

deposits and the timing of the lessee’s exit from the property are not certain. Thus, their fair value is not disclosed.
(Note 3) Remaining schedule of monetary claims after the closing date of the fiscal period
As of December 31, 2013
(Unit: thousands of yen)
Due after One Due after Two Due after Three Due after Four Due after Five
to Two Years to Three Years to Four Years to Five Years
Years

Due within
One Year
Cash and deposits

1,457,257

-

-

-

-

-

Cash and deposits in trust

2,729,902

-

-

-

-

-

4,187,160

-

-

-

-

-

Total
As of June 30, 2014

(Unit: thousands of yen)
Due after One Due after Two Due after Three Due after Four Due after Five
to Two Years to Three Years to Four Years to Five Years
Years

Due within
One Year
Cash and deposits
Cash and deposits in trust
Total

759,058

-

-

-

-

-

2,765,504

-

-

-

-

-

3,524,562

-

-

-

-

-

(Note 4) Redemption schedule of long-term debts and other interest-bearing indebtedness after the closing date of the fiscal period
As of December 31, 2013
(Unit: thousands of yen)
Due after One Due after Two Due after Three Due after Four Due after Five
to Two Years to Three Years to Four Years to Five Years
Years

Due within
One Year
Current portion of long-term
debts
Long-term debts
Current portion of long-term
debts in trust
Long-term debts in trust
Total

203,520

-

-

-

-

-

-

203,520

19,942,960

-

-

-

105,833

-

-

-

-

-

-

450,442516,273

3,819,427

6,196,028

9,871,993

309,353

653,962

20,459,233

3,819,427

6,196,028

9,871,993

As of June 30, 2014
(Unit: thousands of yen)
Due after One Due after Two Due after Three Due after Four Due after Five
to Two Years to Three Years to Four Years to Five Years
Years

Due within
One Year
Current portion of long-term
debts
Long-term debts
Current portion of long-term
debts in trust
Long-term debts in trust
Total

17,552,100

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

54,894

74,6392,863,679

5,217,347

1,749,439

17,552,100

54,894

74,6392,863,679

5,217,347

1,749,439

32

(Notes Related to Investment Securities)
None(Notes Related to Derivative Transactions)
None(Notes Related to Retirements Payments)
None(Notes Related to Asset Retirement Obligations)
None(Notes Related to Segment and Related Information)
I. Segment Information
Disclosure is omitted because the real estate investment business is the INV’s sole business and it has no reportablesegments.
II. Related Information
Fiscal Period ended December 31, 2013 (from July 1, 2013 to December 31, 2013)
1. Information about each product and service
Disclosure is omitted because net sales to external customers for a single product/service category accounted for over
90% of the operating revenue on the statement of income.
2. Information about each geographic area
(1) Net sales
Disclosure is omitted because net sales to external customers in Japan accounted for over 90% of the operating
revenue on the statement of income.
(2) Property, plant and equipment
Disclosure is omitted because the amount of property, plant and equipment located in Japan accounted for over 90%of the amount of property, plant and equipment on the balance sheet.
3. Information about each major customer
Disclosure is omitted because net sales to any single external customer accounted for less than 10% of theoperating revenue on the statement of income.
Fiscal Period ended June 30, 2014 (from January 1, 2014 to June 30, 2014)
1. Information about each product and service
Disclosure is omitted because net sales to external customers for a single product/service category accounted for over
90% of the operating revenue on the statement of income.
2. Information about each geographic area
(1) Net sales
Disclosure is omitted because net sales to external customers in Japan accounted for over 90% of the operating
revenue on the statement of income.
(2) Property, plant and equipment
Disclosure is omitted because the amount of property, plant and equipment located in Japan accounted for over33

90% of the amount of property, plant and equipment on the balance sheet.
3. Information about each major customer
Disclosure is omitted because net sales to any single external customer accounted for less than 10% of the operating
revenue on the statement of income.

34

(Notes Related to Rental Properties)
INV owns residential and other properties principally in the Tokyo area and major regional cities for the purpose of earning
stable rental revenues. The book value, amount changed during the period and balance at the end of the period are as follows.
(Unit: thousands of yen)
Fiscal Period ended
June 30, 2014
(from January 1, 2014 toJune 30, 2014)

Fiscal Period ended
December 31, 2013
(from July 1, 2013 to
December 31, 2013)

Residential

Book value

Balance at the
beginning of the period
Change during theperiodBalance at the end of
the period

Fair value at the end of the period

OfficeBook value

Balance at the
beginning of the period
Change during theperiodBalance at the end of
the period

Fair value at the end of the period

RetailBook value

Balance at the
beginning of the period
Change during theperiodBalance at the end of
the period

Fair value at the end of the period

ParkingBook value

Balance at the
beginning of the period
Change during theperiodBalance at the end of
the period

Fair value at the end of the period

SeniorBook value

Balance at the
beginning of the period
Change during theperiodBalance at the end of
the period

Fair value at the end of the period

HotelBook value

Balance at the
beginning of the period
Change during theperiodBalance at the end of
the period

Fair value at the end of the period

Total

Book value

Balance at the
beginning of the period
Change during theperiodBalance at the end of
the period

Fair value at the end of the period

56,520,161

56,192,804(327,357)(318,340)

56,192,804

55,874,464

57,921,000

58,865,000

8,567,749

8,585,639

17,889(5,687)

8,585,639

8,579,951

7,175,000

7,288,000

5,352,806

5,318,657(34,149)(43,018)

5,318,657

5,275,638

5,420,000

5,520,000

100,851

100,838

(13)

(13)

100,838

100,825

92,800105,000

4,412,629

4,385,522(27,106)(4,385,522)

4,385,522-

4,821,000

-

-

-

-

5,532,341-

5,532,341-

5,490,000

74,954,199

74,583,461(370,738)

779,759

74,583,461

75,363,220

75,429,800

77,268,000(Note 1) Book value is the figure calculated by decreasing the amount of depreciation from acquisition price (including
acquisition-related costs).
(Note 2) The major factor of the increase for the fiscal period ended December 31, 2013 was capital expenditures related toconstruction work, and the major factor of the decrease was depreciation. The major factor of the increase for the
fiscal period ended June 30, 2014 was acquisition of new hotels and capital expenditures related to construction work,35

and the major factor of the decrease was sale of senior housing properties and depreciation.
(Note 3) The fair value as of the end of the reporting period is determined based on the appraisal value provided by Asset
Research and Development Inc., Japan Real Estate Institute, Morii Appraisal & Investment Consulting Inc. andTanizawa Sogo Appraisal Co., Ltd.
For information related to profits and losses from rental properties, please refer to “Notes to Statement of Income.”

36

(Notes Related to Tax Accounting)1.

Significant components of deferred tax assets and liabilities(Unit: thousands of yen)
Fiscal Period ended
June 30, 2014
(from January 1, 2014 toJune 30, 2014)

Fiscal Period ended
December 31, 2013
(from July 1, 2013 to
December 31, 2013)(Deferred tax assets - current assets)
Enterprise tax payable

590

517

Accounts receivable (merger)

211

197

Allowance for doubtful accounts

941

475

Subtotal

1,743

1,190

Valuation allowance

1,743

1,190

Total

-

-

(Net deferred tax assets - current)--

Buildings and other (merger)

1,177,288

812,820(Deferred tax assets - non-current assets)
Land (merger)

2,547,099

2,251,597

Long-term accrued expenses

7,401,300

7,746,144

Subtotal

11,125,688

10,810,561

Valuation allowance

11,125,688

10,810,561

Total

-

-

(Net deferred tax assets - non-current)

-

-

36.59

(Unit: %)Fiscal Period ended
June 30, 2014
(from January 1, 2014 toJune 30, 2014)
36.59

-

-

(36.59)(34.98)Others0.17(1.54)

Effective tax rate

0.17

0.07

2.

Significant difference between statutory tax rate and the effective tax rate
Fiscal Period ended
December 31, 2013
(from July 1, 2013 to
December 31, 2013)

Statutory tax rate
Deductible cash distributions
Provision of reserve for reduction entry

3.

Revision of the amounts of deferred tax assets and liabilities due to changes in rate of any Corporation Tax, etc.
As a result of the promulgation of the “Act on Partial Revision of the Income Tax Act, etc.” (Act No. 10 of 2014) on March 31,

2014, the statutory tax rate used to calculate deferred tax assets and liabilities is changed from 36.59% to 34.16% for temporary
differences expected to be eliminated in the fiscal period ending December 31, 2014 (23rd fiscal period) and the fiscal period
ending June 30, 2015 (24th fiscal period). This change in tax rate has no effect on the amounts of deferred tax assets andliabilities, and deferred income taxes.
(Notes Related to Equity-Method Income)
None

37

(Notes Related to Transactions with Related Parties)
1.

Transactions with Parent Company and Major Unitholders
Fiscal Period ended December 31, 2013 (from July 1, 2013 to December 31, 2013)

Classification

Name

Shinsei Trust andBanking Co., Ltd.

Address

Chuo-ku,Tokyo

StatedCapital Business or(Millions Occupationof yen)5,000

Financialbusiness

Ratio of
VotingRights
Owned
(%)

-

Type ofTransaction

Transaction
Amount(Thousandsof yen)(Note 1)

Account

Balance atthe End of
the Period(Thousandsof yen)(Note 1)

Repaymentof long-term
debts(Note 2)
(Note 3)9,604,000

Repaymentof longterm debts-

RelationshipCommon Business
Board RelationMember
ship-

LenderInterested partyof the AssetManager

Financerelated fees
(Note 6)

Interest
expenses(Note 1)
(Note 2)
(Note 3)(Note 4)(Note 5)(Note 6)Long-term
prepaid
expenses
Prepaid
expenses
143,196
Long-term
accruedexpenses
Accruedexpenses
Accrued
282,863
expenses-Affiliateof theInvestment
Rayo GodoparentSubscription
Minato-ku,
manageKaisha
0.1
9.53
companyof capital
1,999,999
Tokyo
ment
(Note 5)of theincreasebusiness
Asset
Manager
Consumption taxes are not included in transaction amounts, but are included in the balance at the end of the period.
The financing includes transactions for which Calliope, which became the parent company of the Asset Manager on July 29, 2011, had aportion of the economic benefit.
Calliope holds 609,942 units (holding ratio: 38.77%) of the issued investment units of INV.
The terms and conditions have been determined based on the Asset Manager’s internal rules and manual regarding transactions with thesponsor company.
Rayo Godo Kaisha and the Asset Manager have no capital relationship to be disclosed. Rayo Godo Kaisha has received an anonymous
partnership investment through funds that are managed by FIG, an affiliate of Calliope.
Accrued expenses and long-term accrued expenses decreased due to redemption before maturity date and this transaction is not included above.

Fiscal Period ended June 30, 2014 (from January 1, 2014 to June 30, 2014)

Classification

Name

Address

StatedCapital Business or(Millions Occupationof yen)Ratio of
VotingRightsOwned(%)

RelationshipCommon Business
Board RelationMember
shipType ofTransaction

Transaction
Amount(Thousandsof yen)(Note 1)

Account

Balance atthe End of
the Period(Thousandsof yen)(Note 1)

Seller of Purchase of
trust
trust
Zephyrus Tokutei
benefibeneficiary
Chiyoda-ku,
Mokuteki Kaisha
ciary2,851,000
interests in
Tokyo(Note 3).
interests
real estate
in real(Note 2)
Interested party
estate(Note 5)of the Asset
Seller of Purchase ofManagertrust
trust
Investment
Nishi Tokutei
benefibeneficiary
Sumida-ku,
manageMokuteki Kaisha
0.1
ciary interests in real 2,584,000
Tokyo
ment
(Note 3)interests
estatebusinessin real(Note 2)
estate(Note 5)(Note 1) Consumption taxes are not included in transaction amounts, but are included in the balance at the end of the period.
(Note 2) The terms and conditions have been determined based on the Asset Manager’s internal rules and manual regarding transactions with thesponsor company.
(Note 3) Zephyrus Tokutei Mokuteki Kaisha and Nishi Tokutei Mokuteki Kaisha have no capital relationship with the Asset Manager to be disclosed.
The funds have received an anonymous partnership investment through funds that are managed by FIG, an affiliate of Calliope. Accordingly,
INV treats Zephyrus Tokutei Mokuteki Kaisha and Nishi Tokutei Mokuteki Kaisha as the equivalent of interested party.
(Note 4) Calliope holds 609,942 units (holding ratio: 38.77%) of the issued investment units of INV.
(Note 5) The purchase of trust beneficiary interests pertains to following properties. The transaction amount is the purchase price stated in the trust
beneficiary purchase agreement, in which other expenses on acquisition, property taxes, city planning taxes and consumption taxes are notincluded.
Investment
manage0.1
ment
business

38

Property Number

Name of Property

D1

Hotel MyStays Kanda

2,851,000

D2Hotel MyStays Asakusa

2,584,000

Total

5,435,000

2.

Purchase Price (Thousands of yen)Transactions with Affiliates
None for both the fiscal period ended December 31, 2013 and the fiscal period ended June 30, 2014

3.

Transactions with Companies under Common Control
None for both the fiscal period ended December 31, 2013 and the fiscal period ended June 30, 2014

4.

Transactions with Directors and Major Unitholders
Fiscal Period ended December 31, 2013 (from July 1, 2013 to December 31, 2013)

Classification

Name

Business or Occupation

Executive Director of INV and
Directors andPresident & CEO of Consonant
Naoki Fukuda
close relatives
Investment Management Co.,
Ltd.

Same asabove

Same asabove

Same as above

Ratio of
Voting Rights
Owned

Details of Transactions-

Payment of asset
management fees toConsonant Investment
Management Co., Ltd.
(Note 1)-

Payment of generaladministration fees fororganizational management toConsonant Investment
Management Co., Ltd.
(Note 2)

Transaction
Amount(Thousands ofyen)(Note 3)

Account

Balance at theEnd of the
Period(Thousands ofyen)(Note 3)125,000

Trade and otherpayables

65,625600

Trade and otherpayables315(Note 1) Naoki Fukuda served as a representative of the third party (the Asset Manager), and the fee is as set forth in the Articles of Incorporation of INV.
(Note 2) Naoki Fukuda served as a representative of the third party (the Asset Manager), and the fee is as set forth in the agreement, “General
Administrative Agreement relating to Organizational Management, between INV and the Asset Manager.
(Note 3) Consumption taxes are not included in transaction amounts, but are included in the balance of the end of the period.

Fiscal Period ended June 30, 2014 (from January 1, 2014 to June 30, 2014)

Classification

Name

Business or Occupation

Executive Director of INV and
Directors andPresident & CEO of Consonant
Naoki Fukuda
close relatives
Investment Management Co.,
Ltd.

Same asabove

Same asabove

Same as above

Ratio of
Voting Rights
Owned

Details of Transactions-

Payment of asset
management fees toConsonant Investment
Management Co., Ltd.
(Note 1)-

Payment of generaladministration fees fororganizational management toConsonant Investment
Management Co., Ltd.
(Note 2)

Transaction
Amount(Thousands ofyen)(Note 3)

Account

Balance at theEnd of the
Period(Thousands ofyen)(Note 3)126,083

Trade and otherpayables

68,670600

Trade and otherpayables324(Note 1) Naoki Fukuda served as a representative of the third party (the Asset Manager), and the fee is as set forth in the Articles of Incorporation of INV.
(Note 2) Naoki Fukuda served as a representative of the third party (the Asset Manager), and the fee is as set forth in the agreement, “General
Administrative Agreement relating to Organizational Management, between INV and the Asset Manager.
(Note 3) Consumption taxes are not included in transaction amounts, but are included in the balance of the end of the period.

39

(Notes Related to Per Unit Information)

Net assets per unit

Fiscal Period ended
December 31, 2013
(from July 1, 2013 to
December 31, 2013)
22,785 yen

Fiscal Period ended
June 30, 2014
(from January 1, 2014 toJune 30, 2014)
23,121 yen

Net income per unit

259 yen573 yen

Net income per unit is calculated by dividing net income for the period by the daily weighted average number of investment
units issued and outstanding. Diluted net income per unit is not stated as there are no diluted units.
(Note)The basis for calculating net income per unit is as follows.

Net income for the fiscal period (thousands of yen)Amounts not attributable to common unit holders(thousands of yen)
Net income attributable to common unit holders(thousands of yen)
Average number of investment units during the period(units)Fiscal Period ended
December 31, 2013
(from July 1, 2013 to
December 31, 2013)
352,755

Fiscal Period ended
June 30, 2014
(from January 1, 2014 toJune 30, 2014)
901,815――352,755

901,815

1,362,959

1,573,179(Significant Subsequent Events)
1. Issuance of New Investment Units
INV resolved at its meeting of the Board of Directors held on June 23, 2014 and July 9, 2014 respectively to conduct theissuance of new investment units and secondary distribution of investment units. The payment for the new investment units
issued through the public offering was completed on July 16, 2014, and the new investment units were issued in accordancewith the following terms and conditions. In addition, with respect to the issuance of new investment units through the thirdparty allotment in connection with the overallotment secondary offering, the payment was completed on August 13, 2014. As
a result, the unitholders’ equity of INV is JPY 53,096 million and the number of investment units issued and outstanding of
INV increased to 2,668,686.
(i)Issuance of new investment units through public offering

Number of New Investment Units Issued
Domestic public offering
Overseas offering
Issue Price (Offer Price)
Total Issue Price (Total Offer Price)Amount Paid In (Issue Value)
Total Amount Paid In (Total Issue Value)
Payment Date

: 1,040,000 units: 527,322 units: 512,678 units: JPY 22,688 per unit
: JPY 23,595,520,000: JPY 21,873 per unit
: JPY 22,747,920,000: Wednesday, July 16, 2014(ii) Secondary offering of investment units outside Japan
Number of Investment Units Offered in the Secondary
Offering
Offer Price
Total Offer Value
Seller: 70,151 units: JPY 22,688 per unit
: JPY 1,591,585,888: Infinite Value Investment Ltd.

(iii) Secondary offering of investment units (overallotment secondary offering)Number of Investment Units Offered in the Secondary
Offering
Offer Price40: 55,507 units: JPY 22,688 per unit

Total Offer Value
Delivery Date

: JPY 1,259,342,816: Thursday, July 17, 2014(iv) Issuance of new investment units through third-party allotment
Number of New Investment Units Issued: 55,507 units

Amount Paid In (Issue Value)
Total Amount Paid In (Total Issue Value)
Payment Date
Allotee: JPY 21,873 per unit
: JPY 1,214,104,611: Wednesday, August 13, 2014
: SMBC Nikko Securities Inc.

2. Borrowing of Funds
In order to fund a portion of the acquisition of the trust beneficiary interests for the 18 hotel properties, which INV acquiredon July 17, 2014 (see “4. Acquisition of Assets” below), and to refinance the existing syndicate loan (New Syndicate Loan
(A)) at a more lower interest rate, INV completed the following new borrowing as of July 17, 2014, in addition to the existing
borrowing (New Syndicate Loan (B)).
New Syndicate Loan (C)LenderBorrowing amountInterest rate, etc.
Interest payment date

: Sumitomo Mitsui Banking Corporation, The Bank of Tokyo-Mitsubishi UFJ, Ltd.,
Mizuho Bank, Ltd., Citibank Japan Ltd., Shinsei Bank, Limited, Sumitomo Mitsui Trust
Bank, Limited and Resona Bank, Limited: JPY57,300 million: Base Rate (one-month JPY TIBOR) + 0.80%: On (1) the last Japanese business day of each month before the principal maturity date,
beginning with August 29, 2014, and (2) the principal maturity datePrincipal repayment method: Lump-sum repayment

Borrowing method
Borrowing date
Maturity Date

: Secured (Note1) / with no guarantee: July 17, 2014
: July 14, 2017

(Note 1) The following assets are pledged as collateral for the borrowings.
First priority pledges over the real estate trust beneficiary interests for 65 properties: Nisshin Palacestage Daitabashi, Nisshin Palacestage
Higashi-Nagasaki, Growth Maison Gotanda, Growth Maison Kameido, Emerald House, Harmonie Ochanomizu, Suncrest Shakujii Koen,
Growth Maison Shin-Yokohama, Belle Face Ueno Okachimachi, Grand Rire Kameido, Growth Maison Ikebukuro, Growth Maison Yoga,
Route Tachikawa, Shibuya Honmachi Mansion, City Heights Kinuta, Acseeds Tower Kawaguchi Namiki, Capital Heights Kagurazaka,
College Square Machida, Belair Meguro, Wacore Tsunashima I, Foros Nakamurabashi, Growth Maison Kaijin, College Square Machiya,
City House Tokyo Shinbashi, Winbell Kagurazaka, Nishiwaseda Cresent Mansion, Lexington Square Akebonobashi, Casa Eremitaggio,
Towa City Coop Shinotsuka II, Bichsel Musashiseki, Lexel Mansion Ueno Matsugaya, Towa City Coop Sengencho, Royal Park Omachi,
Lexington Square Haginomachi, Visconti Kakuozan, Lexington Square Daitabashi, Lexington Square Honjo Azumabashi, AMS TOWER
Minami 6-Jo, Spacia Ebisu, Kindai Kagakusha Building, Lexington Plaza Nishigotanda, Cross Square NAKANO, Ohki Aoba Building,
Lexington Plaza Hachiman, AEON TOWN Sukagawa, Hotel MyStays Kanda, Hotel MyStays Asakusa, Hotel MyStays Kyoto-Shijo,
MyStays Shin Urayasu Conference Center, Hotel MyStays Maihama, Hotel Vista Premio Dojima, Hotel MyStays Nagoya-Sakae, Hotel
MyStays Sakaisuji-Honmachi, Hotel MyStays Yokohama, Hotel MyStays Nippori, Hotel MyStays Fukuoka-Tenjin-Minami, Flexstay Inn
Iidabashi, Hotel MyStays Ueno Inaricho, Flexstay Inn Shinagawa, Flexstay Inn Tokiwadai, Flexstay Inn Sugamo, Hotel MyStays Otemae,
Flexstay Inn Kiyosumi Shirakawa, Flexstay Inn Nakanobu P1 and Flexstay Inn Nakanobu P2. First priority mortgages over two real estate
properties: Shinjuku Island and Times Kanda-Sudacho 4th. Floating lien over nine properties: Hotel MyStays Kanda, Hotel MyStays
Kyoto-Shijo, MyStays Shin Urayasu Conference Center, Hotel MyStays Maihama, Hotel Vista Premio Dojima, Hotel MyStays NagoyaSakae, Hotel MyStays Sakaisuji-Honmachi, Hotel MyStays Yokohama and Hotel MyStays Fukuoka-Tenjin-Minami.

3.

Prepayment of Borrowings
In order to complete the acquisition of the 18 hotel properties on July 17, 2014, reduce borrowing costs further andstrengthen lender formation, IVN completed the refinancing and the prepayment of the following borrowings.

41

New Syndicate Loan (A)LenderBalance of Borrowings
Initial Loan AmountInterest Rate, Etc.
Borrowing Method
Borrowing Date
Maturity Date
Prepayment Date
Repayment Amount
Borrowing Amount Outstanding
After Repayment: Sumitomo Mitsui Banking Corporation, The Bank of Tokyo-Mitsubishi UFJ, Ltd., Shinsei
Bank, Limited, Citibank Japan Ltd., Shinsei Trust & Banking Co., Ltd. and Aozora Bank,Ltd.
: JPY17,552 million: JPY20,350 million: Base Rate (one-month JPY TIBOR) + 1.50%: Borrowing based on the term loan agreement dated as of December 17, 2013
Secured / with no guarantee: December 20, 2013
: December 20, 2016
: July 17, 2014
: JPY17,552 million: JPY0 million

New Syndicate Loan (B)Lender: Sumitomo Mitsui Banking Corporation, The Bank of Tokyo-Mitsubishi UFJ, Ltd., Mizuho
Bank, Ltd. and Sumitomo Mitsui Trust Bank, Limited

Balance of Borrowings
Initial Loan AmountInterest Rate, Etc.
Borrowing Method
Borrowing Date
Maturity Date
Prepayment Date
Repayment Amount
Borrowing Amount Outstanding
After Repayment: JPY13,448 million: JPY13,500 million: Base Rate (one-month JPY TIBOR) + 0.80%: Borrowing based on the term loan agreement dated as of May 21, 2014
Secured / with no guarantee: May 23, 2014
: May 22, 2015
: July 17, 2014
: JPY13,488 million: JPY0 million

4. Acquisition of Assets
INV decided to acquire the following 18 properties (total acquisition price of JPY 39,938 million) on June 23, 2014, andcompleted the acquisition of all of the 18 properties on July 17, 2014.
Property number: D3 Name of property: Hotel MyStays Kyoto-Shijo
Acquisition Date
Acquisition Price (Note 1)
Location
Construction Date
Category of Assets
SellerTotal Floor Area
Total Leasable Area

July 17, 2014
JPY6,024 million
52, Kasaboko-cho, Higashiiru, Aburanokoji, Shijyo-dori, Shimogyo, Kyoto-shi
January 2008
Trust Beneficial Interest
Shijodori Holding Tokutei Mokuteki Kaisha
7,241.51m2
7,241.51m2

Property number: D4 Name of property: MyStays Shin-Urayasu Conference Center
Acquisition Date
Acquisition Price (Note 1)
Location

July 17, 2014
JPY4,930 million
2-1-4, Akemi, Urayasu-shi, Chiba
42

Construction Date
Category of Assets
SellerTotal Floor Area
Total Leasable Area

March 2009
Trust Beneficial Interest
Zephyrus Tokutei Mokuteki Kaisha
6,232.30m2
6,232.30m2

Property number: D5 Name of property: Hotel MyStays Maihama
Acquisition Date
Acquisition Price (Note 1)
Location
Construction Date
Category of Assets
SellerTotal Floor Area
Total Leasable Area

July 17, 2014
JPY4,870 million
3-5-1, Tekko-dori, Urayasu-shi, Chiba
June 2005
Trust Beneficial Interest
Zephyrus Tokutei Mokuteki Kaisha
2,456.36m2
2,456.36m2

Property number: D6 Name of property: Hotel Vista Premio Dojima
Acquisition Date
Acquisition Price (Note 1)
Location
Construction Date
Category of Assets
SellerTotal Floor Area
Total Leasable Area

July 17, 2014
JPY3,845 million
2-4-1, Sonezakishinchi, Kita-ku, Osaka
August 1990
Trust Beneficial Interest
Danube Tokutei Mokuteki Kaisha
9,445.32m2
9,445.32m2

Property number: D7 Name of property: Hotel MyStays Nagoya-Sakae
Acquisition Date
Acquisition Price (Note 1)
Location
Construction Date
Category of Assets
SellerTotal Floor Area
Total Leasable Area

July 17, 2014
JPY2,958 million
2-23-22, Higashisakura, Naka-ku, Nagoya, Aichi
November 1979
Trust Beneficial Interest
Zephyrus Tokutei Mokuteki Kaisha
9,064.71m2
9,064.71m2

Property number: D8 Name of property: Hotel MyStays Sakaisuji-Honmachi
Acquisition Date
Acquisition Price (Note 1)
Location
Construction Date
Category of Assets
SellerTotal Floor Area
Total Leasable Area

July 17, 2014
JPY2,514 million
1-4-8, Awaji-machi, Chuo-ku, Osaka-shi, Osaka
July 2008
Trust Beneficial Interest
Nagahoribashi Holding Tokutei Mokuteki Kaisha
4,188.83m2
4,188.83m2

Property number: D9 Name of property: Hotel MyStays Yokohama
Acquisition Date
Acquisition Price (Note 1)
Location
Construction Date
Category of Assets
SellerTotal Floor Area
Total Leasable Area

July 17, 2014
JPY2,119 million
4-81, Sueyoshi-cho, Naka-ku, Yokohama-shi, Kanagawa
October 1974
Trust Beneficial Interest
Zephyrus Tokutei Mokuteki Kaisha
7,379.43m2
7,379.43m2

43Property number: D10 Name of property: Hotel MyStays Nippori
Acquisition Date
Acquisition Price (Note 1)
Location
Construction Date
Category of Assets
SellerTotal Floor Area
Total Leasable Area

July 17, 2014
JPY1,898 million
5-43-7, Higashi-Nippori, Arakawa-ku, Tokyo
April 1987
Trust Beneficial Interest
Nishi Tokutei Mokuteki Kaisha
1,719.29m2
1,719.29m2

Property number: D11 Name of property: Hotel MyStays Fukuoka-Tenjin-Minami
Acquisition Date
Acquisition Price (Note 1)
Location
Construction Date
Category of Assets
SellerTotal Floor Area
Total Leasable Area

July 17, 2014
JPY1,570 million
3-14-20, Haruyoshi, Chuo-ku, Fukuoka-shi, Fukuoka
February 2008
Trust Beneficial Interest
Shijodori Holding Tokutei Mokuteki Kaisha
3,412.71m2
3,412.71m2

Property number: D12 Name of property: Flexstay Inn Iidabashi
Acquisition Date
Acquisition Price (Note 1)
Location
Construction Date
Category of Assets
SellerTotal Floor Area
Total Leasable Area

July 17, 2014
JPY1,381 million
3-26, Shin-Ogawa-cho, Shinjuku-ku, Tokyo
December 1990
Trust Beneficial Interest
Aki Tokutei Mokuteki Kaisha
2,953.38m2
2,953.38m2

Property number: D13 Name of property: Hotel MyStays Ueno Inaricho
Acquisition Date
Acquisition Price (Note 1)
Location
Construction Date
Category of Assets
SellerTotal Floor Area
Total Leasable Area

July 17, 2014
JPY1,331 million
1-5-7, Matsugaya, Taito-ku, Tokyo
December 1986
Trust Beneficial Interest
Nishi Tokutei Mokuteki Kaisha
1,150.76m2
1,150.76m2

Property number: D14 Name of property: Flexstay Inn Shinagawa
Acquisition Date
Acquisition Price (Note 1)
Location
Construction Date
Category of Assets
SellerTotal Floor Area
Total Leasable Area

July 17, 2014
JPY1,242 million
1-22-19, Kitashinagawa, Shinagawa-ku, Tokyo
October 1986
Trust Beneficial Interest
Nishi Tokutei Mokuteki Kaisha
1,134.52m2
1,134.52m2

Property number: D15 Name of property: Flexstay Inn Tokiwadai
Acquisition Date
Acquisition Price (Note 1)
Location
Construction Date
Category of Assets
SellerTotal Floor Area
Total Leasable Area

July 17, 2014
JPY1,242 million
1-52-5, Tokiwadai, Itabashi-ku, Tokyo
December 1989
Trust Beneficial Interest
Aki Tokutei Mokuteki Kaisha
2,539.75m2
2,539.75m2
44

Property number: D16 Name of property: Flexstay Inn Sugamo
Acquisition Date
Acquisition Price (Note 1)
Location
Construction Date
Category of Assets
SellerTotal Floor Area
Total Leasable Area

July 17, 2014
JPY1,192 million
3-6-16, Sugamo, Toshima-ku, Tokyo
January 1992
Trust Beneficial Interest
Aki Tokutei Mokuteki Kaisha
2,089.86m2
2,089.86m2

Property number: D17 Name of property: Hotel MyStays Otemae
Acquisition Date
Acquisition Price (Note 1)
Location
Construction Date
Category of Assets
SellerTotal Floor Area
Total Leasable Area

July 17, 2014
JPY1,192 million
1-3-2, Tokui-cho, Chuo-ku, Osaka-shi, Osaka
December 1986
Trust Beneficial Interest
Aki Tokutei Mokuteki Kaisha
4,956.66m2
4,956.66m2

Property number: D18 Name of property: Flexstay Inn Kiyosumi Shirakawa
Acquisition Date
Acquisition Price (Note 1)
Location
Construction Date
Category of Assets
SellerTotal Floor Area
Total Leasable Area

July 17, 2014
JPY749 million
1-12-16, Tokiwa, Koto-ku, Tokyo
May 1992
Trust Beneficial Interest
Aki Tokutei Mokuteki Kaisha
2,673.64m2
2,673.64m2

Property number: D19 Name of property: Flexstay Inn Nakanobu P1Acquisition Date
Acquisition Price (Note 1)
Location
Construction Date
Category of Assets
SellerTotal Floor Area
Total Leasable Area

July 17, 2014
JPY589 million
4-27-12, Futaba, Shinagawa-ku, Tokyo
September 1986
Trust Beneficial Interest
Aki Tokutei Mokuteki Kaisha
770.56m2
770.56m2

Property number: D20 Name of property: Flexstay Inn Nakanobu P2Acquisition Date
Acquisition Price (Note 1)
Location
Construction Date
Category of Assets
SellerTotal Floor Area
Total Leasable Area

July 17, 2014
JPY283 million
4-27-8, Futaba, Shinagawa-ku, Tokyo
March 1989
Trust Beneficial Interest
Aki Tokutei Mokuteki Kaisha
319.49m2
319.49m2(Note 1) Acquisition price is based on the purchase price indicated in the relevant purchase agreement and does not include acquisition costs,
property taxes, city planning taxes and consumption taxes, etc.

(9)Changes in Number of Investment Units Issued and Outstanding

Changes in the number of investment units issued and outstanding and unitholders’ equity from the date of establishment to
the end of the reporting period are as follows.

45

Date

Type of Issue

Number of Investment Units
Issued and Outstanding (units)
Increase
Total

Unitholders’ Equity (yen)Increase

Total

Reference

400

400

200,000,000

200,000,000(Note 1)

December 26, 2003

Private placement
for incorporation
Private placement

2,700

3,100

1,012,500,000

1,212,500,000(Note 2)January 9, 2004

Private Placement

1,350

4,450

506,250,000

1,718,750,000(Note 2)January 21, 2003

Private placement

1,333

5,783

499,875,000

2,218,625,000(Note 2)January 27, 2004

Private placement

267

6,050

100,125,000

2,318,750,000(Note 2)January 28, 2004

Private placement

800

6,850

300,000,000

2,618,750,000(Note 2)January 31, 2004

Private placement

266

7,116

99,750,000

2,718,500,000(Note 2)February 5, 2004

Private placement

800

7,916

300,000,000

3,018,500,000(Note 2)February 7, 2004

Private placement

1,333

9,249

499,875,000

3,518,375,000(Note 2)

May 17, 2004

Public offering

9,000

18,2493,377,250,000

6,895,625,000(Note 3)February 7, 2005

Public offering

10,65028,8993,937,667,100

10,833,292,100(Note 4)

July 31, 2006

Public offering

25,00053,8998,301,125,000

19,134,417,100(Note 5)February 1, 2010

Unit split

215,596

269,495-

19,134,417,100(Note 6)367,200

636,695-

19,134,417,100(Note 7)

711,597

1,348,292

6,999,979,689

26,134,396,789(Note 8)224,887

1,573,179

2,999,992,580

29,134,389,369(Note 9)January 18, 2002

February 1, 2010
July 29, 2011
December 20, 2013

MergerThird-party
allotment
Third-party
allotment(Note 1)

INV was incorporated through a private placement at a price of 500,000 yen per unit.

(Note 2)

New investment units were issued in a private placement at a price of 375,000 yen per unit to raise funds for the acquisition of new(Note 3)New investment units were issued in a public offering at a price of 395,000 per unit (375,250) yen after deducting the underwriters’(Note 4)

discount) to raise funds for the acquisition of new properties.
New investment units were issued in a public offering at a price of 385,140 yen per unit (369,734 yen after deducting the underwriters’(Note 5)

discount) to raise funds for the acquisition of new properties.
New investment units were issued in a public offering at a price of 348,740 yen per unit (332,045 yen after deducting the underwriters’(Note 6)

An investment unit slit of 5 units per 1 unit was conducted.

(Note 7)A merger by absorption pursuant to Article 147 of the Act on Investment Trusts and Investment Corporations was conducted with LCP,

properties.

discount) to raise funds for the acquisition of new properties.

with INV as the surviving entity. As a result of the merger by absorption, 4 investment units of INV (after the investment unit split)
were allotted for each LCP investment unit. The number of LCP investment units issued as of the time of the merger by absorption was
91,800 units.
(Note 8)New investment units were issued in a third party allotment at a price of 9,387 yen per unit to make repayment of existing debt, etc.

(Note 9)New investment units were issued in a third party allotment at a price of 13,340 yen per unit to make repayment of existing debt, etc.

4. Change in Directors
Changes in directors are disclosed in a timely manner upon the determination of such changes.

46

5. Reference Information(1)

Composition of INV’s Assets

Type of
Purpose

Geographic area

asset

(Note 1)

Previous Period(as of December 31, 2013)
Ratio of total
Amount held
assets(millions of yen)

Current Period(as of June 30, 2014)
Ratio of total
Amount held
assets(millions of yen)

(Note 2)

(Note 2)(%)(%)

Greater Tokyo
Residential

Office/RetailRealestateSenior, hourly
parking, etc

area
Major regional
citiesSubtotal
Greater Tokyo
area
Major regional
citiesSubtotal
Greater Tokyo
area
Major regional

－

－

－

－

－

－

－

－

－

－

－

－

714

0.9

712

0.9

－

－

－

－

714

0.9

712

0.9

3,044

3.8

100

0.1

1,441

1.8

－

－

4,486

5.7

100

0.1

－

－

－

－

－

－

－

－

－
5,200

－
6.6

－
813

－
1.0

44,10855.7

43,90955.4

citiesSubtotalRealestate intrust

Greater Tokyo
area
Major regionalHotelcitiesSubtotal
Total real estate
Greater Tokyo
area
Major regional
Residential
citiesSubtotal
Greater Tokyo
area
Major regional
Office/RetailcitiesSubtotal
Greater Tokyo
area
Major regional
Senior, hourly
citiesparking, etc

12,08415.3

11,96515.1

56,19271.0

55,874

70.5

7,111

9.0

7,106

9.0

6,078

7.7

6,037

7.6

13,19016.7

13,143

16.6

－

－

－

－

－

－

－

－

Subtotal

－

－

－

－

－

－

5,532

7.0

－

－

－

－

－

－

5,532

7.0

Total real estate in trust

69,383

87.6

74,55094.1

Deposits and other assets

4,593

5.8

3,898

4.9

79,176100.0

79,261

100.0(74,583)(94.2)(75,363)(95.1)

Hotel

Greater Tokyo
area
Major regional
citiesSubtotal

Total assets (Note 3)(Note 1)

Greater Tokyo area refers to Tokyo, Kanagawa Prefecture, Chiba Prefecture and Saitama Prefecture.

47

(Note 2)(Note 3)“Amount held” is from the balance sheet as of the end of the reporting period and is calculated by deducting accumulated depreciationfrom the acquisition price (including acquisition related costs).
The figure indicated in“()” in “Total assets” shows the amount related to actual owned real estate.

Current Period(as of June 30, 2014)

Previous Period(as of December 31, 2013)

Amount (millions of yen) Ratio to total assets (%) Amount (millions of yen) Ratio to total assets (%)
Total Liabilities

43,331

54.7

42,887

54.1

Total Net Assets
Total Liabilities and Net

35,84445.3

36,37345.9

79,176100.0

79,261

100.0

Assets48

(2)Real Estate Properties
The following summarizes the real estate and real estate held in trust that INV held as of December 31, 2013.

aProperty
number(Note 1)Price and investment ratio

Name of property

BalanceAcquisition
Investment Appraisal value as
priceof December 31,
sheet
ratio (%)
2013
Type of (millions of carrying
yen)(millions of yen)value
ownership(Note 3) (millions of (Note 4)(Note 5)yen)

Location (Note 2)

Trust
A26

Nisshin Palacestage Daitabashi

1-31-2 Izumi, Suginami Ward, Tokyo

beneficiary

1,251

1,138

1.6

1,140 (Note 6)

1,229

1,118

1.6

1,240 (Note 6)

888

846

1.1

931 (Note 6)

1,070

1,012

1.4

1,060 (Note 6)

1,505

1,419

1.9

1,190 (Note 6)

1,428

1,380

1.8

1,250 (Note 6)

1,088

1,069

1.4

1,010 (Note 6)

1,059

994

1.4

1,080 (Note 6)

1,023

983

1.3

924 (Note 6)

906

855

1.2

918 (Note 6)

825

777

1.1

838 (Note 6)

795

764

1.0

682 (Note 6)

interests
Trust
A27

Nisshin
Palacestage
NagasakiHigashi-

5-4-1 Nagasaki, Toshima Ward, Tokyo

beneficiaryinterests
Trust

A28

Growth Maison Gotanda

2-26-6 Nishi-Gotanda, Shinagawa Ward,beneficiaryTokyo
interests
Trust

A29

Growth Maison Kameido

6-58-16 Kameido, Koto Ward, Tokyo

beneficiaryinterests
Trust

A30

Emerald House

3-27-18 Itabashi, Itabashi Ward, Tokyo

beneficiaryinterests
Trust

A31

Harmonie Ochanomizu

2-5-5 Yushima, Bunkyo Ward, Tokyo

beneficiaryinterests
Trust

A32

Suncrest Shakujii-Koen

3-15-35 Takanodai, Nerima Ward, Tokyo

beneficiaryinterests
Trust

A33

Growth Maison Shin-Yokohama

3-16-2 Shin-Yokohama, Kohoku-ku,
Yokohama City, Kanagawa Prefecture

beneficiaryinterests
Trust

A34

Belle Face Ueno-Okachimachi

1-27-5 Higashi-Ueno, Taito Ward, Tokyo

beneficiaryinterests
Trust

A35

Grand Rire Kameido

3-39-12 Kameido, Koto Ward, Tokyo

beneficiaryinterests
Trust

A36

Growth Maison Ikebukuro3-31-14 Nishi-Ikebukuro, Toshima Ward,beneficiaryTokyo
interests
Trust

A37

Growth Maison Yoga

1-15-15 Okamoto, Setagaya Ward, Tokyo

beneficiaryinterests

49

Property
number(Note 1)Name of property

BalanceAcquisition
Investment Appraisal value as
priceof December 31,
sheet
ratio (%)
2013
Type of (millions of carrying
yen)(millions of yen)value
ownership(Note
4)(Note 3) (millions of(Note 5)yen)

Location (Note 2)

Trust
A38

Route Tachikawa

3-7-6 Nishikicho, Tachikawa City, Tokyo

beneficiary

676

653

0.9

595 (Note 6)

651

655

0.8

591 (Note 6)

646

646

0.8

457 (Note 6)

620

571

0.8

684 (Note 6)

604

616

0.8

540 (Note 6)

589

570

0.8

529 (Note 6)

589

572

0.8

551 (Note 6)

572

547

0.7

499 (Note 6)

566

530

0.7

550 (Note 6)

557

531

0.7

454 (Note 6)

510

477

0.7

500 (Note 6)

2,520

2,405

3.2

2,720 (Note 7)

3,260

3,128

4.2

3,490 (Note 8)

1,880

1,849

2.4

2,180 (Note 8)interests
Trust
A39

Shibuya-Honmachi Mansion

2-35-2 Honmachi, Shibuya Ward, Tokyo

beneficiaryinterests
Trust

A40

City Heights Kinuta

4-13-15 Kinuta, Setagaya Ward, Tokyo

beneficiaryinterests
Trust

A41

A42

Acseeds Tower KawaguchiNamiki

Capital Heights Kagurazaka

2-5-13 Namiki, Kawaguchi City, Saitama
Prefecture

beneficiaryinterests
Trust

71-1 Enokicho, Shinjuku Ward, Tokyo

beneficiaryinterests
Trust

A43

College Square Machida

3-4-4 Nakamachi, Machida City, Tokyo

beneficiaryinterests
Trust

A44

Belair Meguro

1-2-15 Meguro, Meguro Ward, Tokyo

beneficiaryinterests
Trust

A45

Wacore Tsunashima I

2-7-47 Tarumachi, Kohoku-ku, Yokohama
City, Kanagawa Prefecture

A46

Foros Nakamurabashi

beneficiaryinterests
Trust

1-6-6 Koyama, Nerima Ward, Tokyo

beneficiaryinterests
Trust

A47

Growth Maison Kaijin

5-29-51 Kaijin, Funabashi City, Chiba
Prefecture

A48

College Square Machiya

beneficiaryinterests
Trust

7-3-1 Arakawa, Arakawa Ward, Tokyo

beneficiaryinterests
Trust

A51

City House Tokyo Shinbashi

6-19-1 Shinbashi, Minato Ward, Tokyo

beneficiaryinterests
Trust

A52

Winbell Kagurazaka

6-15 Shin-Ogawacho, Shinjuku Ward,beneficiaryTokyo
interests
Trust

A53

Nishiwaseda Cresent Mansion

3-18-9 Nishi-Waseda, Shinjuku Ward,beneficiaryTokyo
interests

50

Property
number(Note 1)Name of property

BalanceAcquisition
Investment Appraisal value as
priceof December 31,
sheet
ratio (%)
2013
Type of (millions of carrying
yen)(millions of yen)value
ownership(Note
4)(Note 3) (millions of(Note 5)yen)

Location (Note 2)

Trust
A54

Lexington Square Akebonobashi

3-8 Yochomachi, Shinjuku Ward, Tokyo

beneficiary

1,450

1,377

1.9

1,600 (Note 9)

1,070

996

1.4

996 (Note 7)

866

831

1.1

949 (Note 7)

577

558

0.7

634 (Note 8)

970

899

1.2

1,070 (Note 9)

1,110

1,046

1.4

1,250 (Note 7)

415

393

0.5

508 (Note 7)

330

307

0.4

422 (Note 7)

255

240

0.3

244 (Note 9)

977

906

1.3

1,040 (Note 9)

511

468

0.7

549 (Note 9)interests
Trust
A56

Casa Eremitaggio

1-14-15 Nakane, Meguro Ward, Tokyo

beneficiaryinterests
Trust

A59

Towa City Coop Shinotsuka II

5-49-7 Higashi-Ikebukuro, Toshima Ward,beneficiaryTokyo
interests
Trust

A61

Bichsel Musashiseki

1-22-7 Sekimachi-Kita, Nerima Ward,beneficiaryTokyo
interests
Trust

A62

Lexel Mansion Ueno Matsugaya

3-10-2 Matsugaya, Taito Ward, Tokyo

beneficiaryinterests
Trust

A63

Towa City Coop Sengencho

4-338-2 Sengencho, Nishi-ku, Yokohama
City, Kanagawa Prefecture

beneficiaryinterests
Trust

A64

Royal Park Omachi

2-11-10 Omachi, Aoba-ku, Sendai City,
beneficiary
Miyagi Prefectureinterests
Trust

A65

Lexington Square Haginomachi

1-15-16 Haginomachi, Miyagino-ku,
Sendai City, Miyagi Prefecture

beneficiaryinterests
Trust

A66

Visconti Kakuozan

2-44 Otanacho, Chikusa-ku, Nagoya City,
beneficiary
Aichi Prefectureinterests
Trust

A71

Lexington Square Daitabashi

1-33-8 Izumi, Suginami Ward, Tokyo

beneficiaryinterests
Trust

A72

Lexington Square Honjo
Azumabashi

4-20-6 Higashikomagata, Sumida Ward,beneficiaryTokyo
interests

51

Property
number(Note 1)Name of property

BalanceAcquisition
Investment Appraisal value as
price
of
sheet
ratio (%)
Type ofDecember 31, 2013
(millions of carrying
ownershipyen)(millions of yen)
value
(Note 3) (millions of (Note 4)(Note 5)yen)

Location (Note 2)

Trust
A73

AMS TOWER Minami 6-Jo

2-5-15 Minami 6-Jo Nishi, Chuo-ku,
beneficiary
Sapporo City, Hokkaido

1,180

1,057

1.5

1,120 (Note 9)

7,010

6,693

9.0

6,930 (Note 7)

1,660

1,656

2.1

1,720 (Note 7)

1,260

1,250

1.6

1,300 (Note 7)

973

966

1.2

1,040 (Note 7)

674

669

0.9

718 (Note 7)

657

653

0.8

720 (Note 7)

625

620

0.8

667 (Note 7)

608

604

0.8

644 (Note 7)

597

594

0.8

649 (Note 7)

595

591

0.8

619 (Note 7)

581

576

0.7

669 (Note 7)

544

542

0.7

577 (Note 7)

543

542

0.7

569 (Note 7)

interests
Trust
A75

Spacia Ebisu

3-6-22 Higashi, Shibuya Ward, Tokyo

beneficiaryinterests
Trust

A76

Neo Prominence

3-21-5 Shimo, Kita Ward, Tokyo

beneficiaryinterests
Trust

A77

Invoice Shin-Kobe Residence

3-3-8 Ikutacho Chuo Ward, Kobe City,
beneficiary
Hyogo Prefectureinterests
Trust

A78

Cosmo Court Motomachi

3-12-20 Motomachi Dori Chuo Ward,beneficiary
Kobe City, Hyogo Prefectureinterests
Trust

A79

Revest Honjin

2-13 Torii Dori Nakamura Ward, Nagoya
City, Aichi Prefecture

A80

Revest Matsubarainterests
Trust

3-13-12 Matsubara Naka Ward ,Nagoya
City, Aichi Prefecture

A81

Sun Terrace Minami Ikebukuro

beneficiary

beneficiaryinterests
Trust

2-22-6 Minami Ikebukuro, Toshima Ward,beneficiaryTokyo
interests
Trust

A82

Alba Noritake Shinmachi

3-6-8 Noritake Shinmachi, Nishi Ward,
Nagoya City, Aichi Prefecture

beneficiaryinterests
Trust

A83

Revest Meieki Minami

2-13-33 Meiekiminami, Nakamura Ward,beneficiary
Nagoya City, Aichi Prefectureinterests
Trust

A84

Revest Heian

2-13-17 Heian, Kita Ward, Nagoya City,
beneficiary
Aichi Prefectureinterests
Trust

A85

Vendir Hamaotsu Ekimae

1-2-15 Hama Otsu, Otsu City, Shiga

beneficiary

Prefecture

A86

Salvo Sala

interests
Trust

2-6-21 Shimanouchi Chuo Ward, Osaka
City, Osaka Prefecture

A87

Excellente Kagurazaka

beneficiaryinterests
Trust128-1 Yamabukicho Shinjuku
Tokyo, and other one parcel

Ward,

beneficiaryinterests

52

Property
number(Note 1)Name of property

BalanceAcquisition
Investment Appraisal value as
price
of
sheet
ratio (%)
Type ofDecember 31, 2013
(millions of carrying
ownershipyen)(millions of yen)
value
(Note 3) (millions of (Note 4)(Note 5)yen)

Location (Note 2)

Trust
A88

3-4-11 Edobori, Nishi Ward, Osaka City,
Osaka Prefecture

Luna Court Edobori

beneficiary

525

522

0.7

549 (Note 7)

512

508

0.7

553 (Note 7)

456

454

0.6

497 (Note 7)

446

444

0.6

474 (Note 7)

412

411

0.5

455 (Note 7)

374

373

0.5

402 (Note 7)

373

371

0.5

389 (Note 7)

355

355

0.5

382 (Note 7)

335

334

0.4

372 (Note 7)

331

328

0.4

338 (Note 7)

310

310

0.4

335 (Note 7)

297

295

0.4

312 (Note 7)

58,08355,874

74.5

58,865

1,301

1,234

1.7

1,010 (Note 6)

715

712

0.9

556 (Note 8)interests
Trust
A89

7-2-2 Motomachi Dori, Chuo Ward, Kobe

Winntage Kobe Motomachi

City, Hyogo Prefecture

A90

Queen's Court Fukuzumi

beneficiaryinterests
Trust

1-3-10 Fukuzumi, Koto Ward, Tokyo

beneficiaryinterests

380-1 Kawaranomachi, Higashinotoin
A91

Dori Nijo Kudaru, Chukyo Ward, Kyoto

Corp Higashinotoin

City, Kyoto Prefecture, and other twoparcels

Trustbeneficiaryinterests
Trust

A92

5-14-17 Higashi Oi, Shinagawa Ward,Tokyo

Belair Oimachi

beneficiaryinterests
Trust

A93

3-18 Minami Tsukaguchimachi,
Amagasaki City, Hyogo Prefecture

Siete Minami-Tsukaguchi

beneficiaryinterests
Trust

A94

A95

Prime Life Sannomiya Isogami

4-3-23 Isogamidori ,Chuo Ward, Kobe

Koen

City Hyogo Prefecture

HERMITAGE NANBA WEST

interests
Trust

4-10-3 Sakuragawa Naniwa Ward, Osaka
City, Osaka Prefecture

A96

Century Park Shinkawa 1-bankan

beneficiary

beneficiaryinterests
Trust

4-1-2 Shinkawamachi Minato Ward,
Nagoya City, Aichi Prefecture

beneficiaryinterests
Trust

A97

West Avenue

1-5-17 Nishi, Kunitachi City, Tokyo

beneficiaryinterests
Trust

A98

Little River Honmachibashi

1-34 Honmachibashi Chuo Ward, Osaka
City, Osaka Prefecture

A99

Prime Life Mikage

beneficiaryinterests
Trust

2-25-11 Mikage Tsukamachi Higashi
Nada Ward, Kobe City, Hyogo Prefecture

beneficiaryinterests

Subtotal (63 properties)

-

Trust
B8

Kindai Kagakusha Building

2-7-15, Ichigaya Tamachi, Shinjuku Ward,beneficiaryTokyo
interests
6-5-1 Nishi-Shinjuku, Shinjuku Ward,

B9

Shinjuku Island

Real estate
Tokyo

53

Property
number(Note 1)Name of property

BalanceAcquisition
Investment Appraisal value as
price
of
sheet
ratio (%)
Type ofDecember 31, 2013
(millions of carrying
ownershipyen)(millions of yen)
value
(Note 3) (millions of (Note 4)(Note 5)yen)

Location (Note 2)

Trust
B14

Lexington Plaza Nishigotanda

5-2-4 Nishigotanda, Shinagawa Ward,Tokyo

beneficiary

4,880

4,801

6.3

4,140 (Note 7)

1,060

1,070

1.4

938 (Note 7)

816

761

1.0

644 (Note 9)

3,280

3,184

4.2

3,330 (Note 8)

2,320

2,091

3.0

2,190 (Note 8)

14,372

13,85518.4

12,808

97

100

0.1

105 (Note 6)

97

100

0.1

105

2,851

2,907

3.7

2,880 (Note 7)

2,584

2,625

3.3

2,610 (Note 7)

Subtotal (2 properties)

5,435

5,532

7.0

5,490

-

Total (73 properties)

77,98875,363100.0

77,268-interests
Trust
B15

Cross Square NAKANO

5-24-18 Nakano, Nakano Ward, Tokyo

beneficiaryinterests
Trust

B16

Ohki Aoba Building

9-7 Futsukacho, Aoba-ku, Sendai City,
Miyagi Prefecture

beneficiaryinterests
Trust

B17

Lexington Plaza Hachiman

3-1-50 Hachiman, Aoba-ku, Sendai City,
Miyagi Prefecture

beneficiaryinterests
Trust

B18

AEON TOWN Sukagawa

105 Furukawa, Sukagawa City, Fukushima
beneficiary
Prefectureinterests
Subtotal (7 properties)

C1

Stop Parking Kanda-Sudacho(Note 10)-

1-22-7, 1-22-15 Kanda sudacho, Chiyoda
Real estate
Ward, Tokyo
Subtotal (1 properties)

-

Trust
D1

Hotel MyStays Kanda

1-2-2 Iwamotocho, Chiyoda Ward, Tokyo

beneficiaryinterests
Trust

D2

Hotel MyStays Asakusa

1-21-11 Honjyo, Sumida Ward, Tokyo

beneficiaryinterests

54

(Note 1) “Property number” indicates the categorization of properties acquired by INV according to use, with “A” forresidential, “B” for office
and retail and “C” for senior and parking lots, and a number assigned for each property. The number following “A”, “B” and “C” is assigned based on
how early the acquisition was made, except that for acquisitions made at the same time the number isassigned based on how large theacquisition price was.
(Note 2) “Location” is in principle based on the indicated address (jyukyohyoji), except that if the jyukyohyoji system has not been implemented forsuch property, the location is based on the land number (banchi).
(Note 3) “Acquisition price” is the purchase price indicated in the real estate or trust beneficiary purchase agreement. Such price excludes
consumption taxes and has been rounded down to the nearest hundred million yen.
(Note 4) “Investment ratio” is the ratio of the acquisition price to the aggregate acquisition price of INV’s portfolio, and has
been rounded
to one decimal place.
(Note 5) “Appraisal value as of December 31, 2013” is the value appraised or researched by the real estate appraiser as of the end of the fiscal period
in accordance with the Articles of Incorporation of INV and the regulations of the Investment Trust Association, Japan.
The real estateappraisers are as follows.
Real estate appraiser(Note 6)

Asset Research and Development Inc.

(Note 7) Japan Real Estate Institute(Note 8) Morii Appraisal & Investment Consulting Inc(Note 9) Tanizawa Sogo Appraisal Co., Ltd.

(Note 10) The name of property was changed to “Times Kanda-Sudacho 4th” as of July 1, 2014. The same shall apply hereinafter in this document.

bCapital expenditures for assets under management(a) Schedule for capital expenditures
The schedule for the principal capital expenditures for property maintenance construction etc. as of the end of the fiscal
period for the real estate assets is as follows.
Estimated Cost (Thousands of yen)
Name of Property

Location

Scheduled Time of

Purpose

Implementation

Payment for
Total

the Fiscal
Period

B16

Ohki

Aoba

Building

SendaiCity,

MaintenanceMiyagiconstruction

Prefecture

exterior walls

Advance
Payments

From Novemberof2014 to December

40,800――26,000――15,573――13,000

―

―

8,100

―

―

5,806

―

―

2014

Maintenance
A53

Nishiwaseda

Shinjuku

construction

Crescent Mansion

Ward, Tokyo

miscellaneousof From August 2014 toDecember 2014

drainage pipe
B8

B17

B15

A26

Kindai Kagakusha

Shinjuku

Building

Ward, Tokyo

Lexington

Plaza

Hachiman

Cross
NAKANO

Sendai City,
MiyagiPrefecture

SquareRenewalconstruction of air
conditioning system
Renewalconstructionofasphalt for rooftop
parking area

Nakano Ward,

RenovationTokyo

construction

Nisshin

Suginami

Renewal

Palacestage

Ward, Tokyo

construction

From October 2014
to October 2014
From November
2014 to December
2014
From September
2014 to December
2014
From Decemberof552014 to December

Daitabashi

prepaid hot water

2014

unit

(b) Capital expenditures for the fiscal period ended June 30, 2014
The principal construction constituting capital expenditures for the real estate assets for the fiscal period ended June 30,
2014 is as follows. Capital expenditures for the fiscal period was 135,796 thousand yen, and together with 40,506 of repair
cost included in this fiscal period’s expenses, construction work totaling 176,303 thousand yen was implemented.
Name of Property
A32

Location

PurposeSuncrest Shakujii-

Nerima Ward,

Large-scale

Koen

Tokyo

construction
RenewalB8Time of

Payment (Thousands of

Implementationyen)maintenance From April 2014 to

30,365June 2014

construction

of

air

Kindai Kagakusha

Shinjuku

conditioning system on the first From April 2014 to

Building

Ward, Tokyo

basement floor and three other

17,423

May 2014

floors
Ohki

B16

Aoba

Building
Lexington

B14

Plaza

Nishigotanda

A47

Growth

MaisonKaijinSendaiCity,

Renewalconstruction

of

air

Miyagiconditioning system on the 1st,

Prefecture

2nd and 4th floors

ShinagawaRenewalWard, Tokyo

conditioning system on 1st floor

Funabashi
City,

Chiba

Prefecture

constructionofFrom April 2014 to

16,075June 2014

air From April 2014 to

14,240April 2014

Maintenance construction work From March 2014
on mechanical parking facility

12,481to March 2014

Other construction

45,210Total

135,796(c) Reserved funds for long-term maintenance plan (repair reserves)
INV has reserved funds, as below, from the cash flow of the relevant fiscal period towards large-scale maintenancerepairs in the medium to long term future in accordance with the long-term maintenance plan for each property.

Fiscal period

18th Fiscal

19th Fiscal

20th Fiscal

21st Fiscal

22nd Fiscal

PeriodPeriodPeriodPeriodPeriodFrom January
1, 2012 to June30, 2012

Reserved funds at beginning of
periodAmount reserved (Note)
Amount reversed (Note)
Amount carried over for next

From July 1,
2012 toDecember 31,
2012

From January
1, 2013 to June30, 2013

From July 1,
2013 toDecember 31,
2013

From January 1,
2014 to June 30,2014

356,408

487,561

541,609571,543524,730

thousand yen

thousand yen

thousand yen

thousand yen

thousand yen

163,931

151,076

165,233

165,271

199,177

thousand yen

thousand yen

thousand yen

thousand yen

thousand yen

32,777

97,028135,298

212,084

144,225

thousand yen

thousand yen

thousand yen

thousand yen

thousand yen

487,561

541,609571,543524,730

579,682

56

Fiscal period
fiscal period(Note)c18th Fiscal

19th Fiscal

20th Fiscal

21st Fiscal

22nd Fiscal

PeriodPeriodPeriodPeriodPeriodthousand yen

thousand yen

thousand yen

thousand yen

thousand yen

The amount reserved for the relevant fiscal period includes the reserves for acquired properties, and the amount reversed includes thereserves for disposed properties.

Condition of income, etc. (From January 1, 2014 to June 30, 2014)(Unit: Thousands of yen)
Total ofrental-Total ofrentalrevenue
Property(i)

Property NameNo.

related
Rent,
commonarea fees

Facility
Other
incomeexpenses(ii)

Depreciation

Tax andInsurance
management other public expenses
feechargesOtherexpensesProfitandexpenses

Loss

(iii)

((i)-(ii))NOI((i)-(ii)+(iii))

A26

Nisshin Palacestage Daitabashi

39,801

36,585

3,216

18,039

6,557

1,571

70

1,978

7,861

21,761

29,623

A27

Nisshin Palacestage HigashiNagasaki

46,42041,2905,130

25,961

9,770

2,649

97

1,467

11,976

20,45932,435A28

Growth Maison Gotanda

27,344

26,772

572

8,405

2,180

1,322

33

519

4,350

18,93923,290A29

Growth Maison Kameido

32,376

29,717

2,659

16,226

4,899

1,685

45

3,692

5,903

16,15022,053

A30

Emerald House

49,34838,057

11,291

25,568

8,387

2,563

100

4,754

9,762

23,77933,541

A31

Harmonie Ochanomizu

39,80936,8882,920

15,044

4,551

1,826

69

1,488

7,109

24,76431,873A32

Suncrest Shakujii-Koen

35,961

32,844

3,116

18,263

6,272

3,120

101

1,727

7,042

17,697

24,739A33

Growth Maison Shin-Yokohama

33,24629,921

3,324

15,258

4,483

2,395

70

2,223

6,085

17,98824,073

A34

Belle Face Ueno-Okachimachi

33,576

29,643

3,933

14,239

4,832

1,670

44

2,337

5,355

19,336

24,692

A35

Grand Rire Kameido

26,61926,619

-

7,967

230

1,702

47

500

5,487

18,652

24,139A36

Growth Maison Ikebukuro

26,20823,5372,670

10,461

2,825

1,057

41

1,289

5,247

15,747

20,994A37

Growth Maison Yoga

22,653

21,630

1,022

8,528

2,232

1,355

41

994

3,905

14,12418,029

A38

Route Tachikawa

20,293

18,825

1,467

9,382

2,731

1,053

41

1,483

4,071

10,91014,982

A39

Shibuya-Honmachi Mansion

20,105

19,274

831

8,056

3,902

902

35

1,067

2,148

12,04914,197

A40City Heights Kinuta

17,62916,894

734

5,019

1,494

956

35

1,059

1,472

12,61014,082

A41

Acseeds Tower Kawaguchi-Namiki

25,14623,217

1,928

10,704

3,010

1,127

38

1,488

5,038

14,442

19,481

A42

Capital Heights Kagurazaka

18,00017,129

871

8,036

3,590

1,073

38

1,189

2,144

9,963

12,108

A43

College Square Machida

18,26818,268

-

4,036

363

502

29

500

2,640

14,231

16,872

A44

Belair Meguro

15,901

14,952

948

5,991

1,563

850

22

1,243

2,311

9,909

12,220A45

Wacore Tsunashima I

17,314

16,706607

10,747

3,948

894

31

1,913

3,959

6,566

10,525

A46

Foros Nakamurabashi

17,95816,812

1,146

10,425

3,862

987

36

1,245

4,294

7,533

11,827A47

Growth Maison Kaijin

21,922

20,103

1,818

15,285

6,238

2,054

85

815

6,092

6,636

12,728

A48

College Square Machiya

14,706

14,706

-

5,212

193

941

29

500

3,549

9,493

13,042

A51

City House Tokyo Shinbashi

89,437

86,237

3,200

34,634

13,506

4,905

114

3,044

13,06454,80367,867

A52

Winbell Kagurazaka

105,410

97,2038,207

35,567

8,477

6,265

148

4,947

15,72869,84285,571

A53

Nishiwaseda Cresent Mansion

70,931

66,692

4,238

24,27011,940

3,508

106

2,461

6,253

46,66052,914

A54

Lexington Square Akebonobashi

47,71545,4472,268

19,021

4,504

2,175

59

3,667

8,615

28,69337,309

A56

Casa Eremitaggio

28,492

26,6591,833

15,822

3,444

1,695

46

1,641

8,994

12,66921,664

A59

Towa City Coop Shinotsuka II

33,31532,327987

12,989

4,828

1,372

52

2,009

4,727

20,32525,052

A61

Bichsel Musashiseki

24,02822,7001,328

11,896

5,884

1,167

48

2,177

2,618

12,132

14,750

A62

Lexel Mansion Ueno Matsugaya

33,83931,097

2,741

15,111

3,542

1,900

58

1,393

8,216

18,72826,944

A63

Towa City Coop Sengencho

59,39654,454

4,941

31,48818,030

3,005

107

2,767

7,578

27,90735,486

A64

Royal Park Omachi

24,956

21,547

3,409

13,619

6,870

1,591

61

978

4,118

11,336

15,454

A65

Lexington Square Haginomachi

18,02316,021

2,001

8,376

2,578

1,148

38

1,059

3,550

9,647

13,198

A66

Visconti Kakuozan

11,774

10,782

991

6,692

2,872

920

22

1,092

1,784

5,081

6,866

A71

Lexington Square Daitabashi

31,37729,604

1,773

15,081

3,022

1,544

42

2,468

8,002

16,29624,299

A72

Lexington
Azumabashi

17,881

17,433

448

8,529

1,710

809

30

1,085

4,893

9,352

14,245A73

AMS TOWER Minami 6-Jo

50,486

48,1292,357

27,278

7,455

2,147

120

3,434

14,11923,20837,327

A75

Spacia Ebisu

186,312

165,420

20,89172,80815,4688,662

241

11,56136,874

113,503150,378

A76

Neo Prominence

63,03753,332

9,704

30,44814,324

3,508

125

2,595

9,894

32,58842,482

A77

Invoice Shin-Kobe Residence

45,92742,9093,018

25,249

6,928

2,754

73

4,041

11,451

20,67832,130A78

Cosmo Court Motomachi

36,80235,916886

17,931

4,572

2,307

71

1,007

9,972

18,871

28,843

A79

Revest Honjin

31,30428,523

2,781

15,064

3,989

1,784

63

1,846

7,380

16,23923,620

SquareHonjo

57

Total ofrental-Total ofrentalrevenue
Property
Property Name

(i)

No.

related
Rent,
commonarea fees

Facility
Other
incomeexpenses(ii)

Depreciation

Tax andInsurance
management other public expenses
feechargesOtherexpensesProfitandexpenses

Loss

(iii)

((i)-(ii))NOI((i)-(ii)+(iii))

A80

Revest Matsubara

28,954

27,166

1,788

13,051

3,335

1,855

57

838

6,963

15,903

22,867

A81

Sun Terrace Minami Ikebukuro

21,891

19,4872,403

11,045

4,037

906

30

1,212

4,857

10,845

15,703

A82

Alba Noritake Shinmachi

25,422

24,2881,134

13,383

3,741

1,729

57

1,005

6,849

12,03918,888

A83

Revest Meieki Minami

24,91923,708

1,210

12,638

3,056

1,650

60

1,002

6,868

12,281

19,150

A84

Revest Heian

23,57022,942627

10,560

2,045

1,404

42

708

6,359

13,01019,369A85

Vendir Hamaotsu Ekimae

32,42630,246

2,180

15,567

5,203

1,954

68

1,383

6,958

16,85923,817

A86

Salvo Sala

23,992

22,950

1,042

11,050

3,155

1,577

47

825

5,444

12,942

18,386

A87

Excellente Kagurazaka

17,842

17,357

484

8,227

1,873

778

28

1,351

4,194

9,615

13,809A88

Luna Court Edobori

20,912

19,991

921

9,404

2,633

1,173

36

496

5,064

11,508

16,572

A89

Winntage Kobe Motomachi

22,14821,410737

12,601

2,879

1,587

44

2,284

5,805

9,546

15,351

A90

Queen's Court Fukuzumi

16,521

15,320

1,200

7,829

2,465

761

25

1,382

3,195

8,691

11,886

A91

Corp Higashinotoin

16,98015,776

1,204

8,346

2,638

903

32

991

3,780

8,634

12,414

A92

Belair Oimachi

15,415

14,404

1,011

6,003

1,571

656

21

1,077

2,675

9,412

12,087

A93

Siete Minami-Tsukaguchi

16,437

15,330

1,106

8,623

3,323

983

44

1,031

3,240

7,813

11,053

A94

Prime Life Sannomiya Isogami Koen

14,64013,936

703

7,156

1,719

846

24

1,140

3,426

7,483

10,91058

Rentalrevenue

Property
No.

Property Name
(i)

Rent,
commonarea fees

ProfitandLeasingrelated

Facility
Tax andInsurance
expenses management other public expenses(ii)
fee
charges

Other
incomeOther
expenses

Depreciation
expenses
(iii)

Loss

NOI
((i)-(ii)+(iii))((i)-(ii))

A95

HERMITAGE NANBA WEST

14,842

14,211

631

7,681

2,013

1,022

28

1,258

3,359

7,161

10,521

A96

Century Park Shinkawa 1-bankan

17,19014,491

2,698

8,244

2,173

886

41

1,344

3,798

8,945

12,744

A97

West Avenue

12,666

11,859

807

7,387

2,629

566

22

1,238

2,931

5,278

8,210

A98

Little River Honmachibashi

12,971

12,880

90

6,238

1,734

943

25

829

2,705

6,733

9,439

A99

Prime Life Mikage

11,809

11,623

185

5,953

1,383

760

20

827

2,960

5,856

8,816

B8

Kindai Kagakusha Building

38,73534,055

4,680

23,660

7,736

4,366

74

1,850

9,632

15,07524,707

B9

Shinjuku Island(Note 1)

(Note 1)

(Note 1)

(Note 1)

(Note 1)

(Note 1)

(Note 1)

(Note 1)

(Note 1)

(Note 1)

(Note 1)

B14

Lexington Plaza Nishigotanda

126,690111,945

14,74575,701

27,322

12,684200

9,350

26,14450,98977,133

B15

Cross Square NAKANO

28,68523,568

5,116

15,223

6,795

3,851

85

740

3,749

13,461

17,211

B16

Ohki Aoba Building

40,55932,1598,399

30,247

11,061

4,016

106

829

14,233

10,312

24,545

B17

Lexington Plaza Hachiman

163,313

131,345

31,967

79,412

46,193

11,555165743

20,75583,900104,655

B18

AEON TOWN Sukagawa

142,116

142,116-

94,35956,124

7,967

205

623

29,43847,756

77,195

C1

Stop Parking Kanda-Sudacho

2,443

2,443

-

706

-

253

-

439

13

1,736

1,750

C21

Bon Sejour Chitose Funabashi(Note 2)

18,592

17,481

1,110

4,692

150

2,261

50

1

2,229

13,89916,129C22

Bon Sejour Yotsugi i (Note 2)

17,485

17,485

-

3,794

149

1,302

33

-

2,309

13,691

16,000C23

Bon Sejour Hino i (Note 2)

16,63916,639

-

3,456

142

1,539

38

-

1,736

13,182

14,919C24

Bon Sejour Musashi Shinjo(Note 2)13,80913,809

-

2,731

111

1,209

35

-

1,374

11,077

12,452C25

Bon Sejour Komaki i (Note 2)

35,22635,226-

10,814

134

5,767

160

-

4,752

24,412

29,164

C26

Bon Sejour Hadano Shibusawa(Note 2)

18,441

18,183

257

5,981

142

2,365

68

-

3,404

12,45915,864

C27

Bon Sejour Itami (Note 2)

12,442

12,442

-

4,187

96

1,781

45

-

2,263

8,254

10,518

D1

Hotel MyStays Kanda (Note 3)

27,512

27,512

-

3,464

-

-

11

107

3,345

24,04727,392

D2

Hotel MyStays Asakusa (Note 3)

29,90329,903

-

3,754

-

-

5

106

3,641

26,14929,7912,772,419

2,555,746

216,673

1,281,791

446,688

174,451

4,952

127,784

527,914

1,490,627

2,018,542

Total(Note1)(Note 2)
(Note 3)Not disclosed because the consent of the tenant was not obtained.
These seven properties were transferred as of May 22, 2014, the operation period of which is from January 1, 2014 to May 22, 2014.
These two properties were acquired as of May 23, 2014, the operation period of which is from May 23, 2014 to June 30, 2014.

59

(3)

Tenant SummaryaSummary of lease conditions by property(As of June 30, 2014)
RentalLeasable Area

Leased Area

2

2

LeasableUnits(units)(Note 3)

Revenue

LeasedUnits Number of(units)tenants(Note 4)

Ratio of
Rental(Thousands of Revenue
(%)
yen)

Type of
Lease (Note7)

Property
No

Property Name

A26

Nisshin Palacestage Daitabashi

1,771.13

1,666.59

98

92

1 Best Property Corporation

39,801

1.4

Pass throughmaster lease

A27

Nisshin Palacestage HigashiNagasaki

2,681.94

2,619.30

60

58

1 Best Property Corporation

46,420

1.7

Pass throughmaster lease

27,344

1.0

Pass throughmaster lease(m )(Note 1)(m )(Note 2)Tenants (Note 5)(Note 6)

Pacific Development &A28

Growth Maison Gotanda

1,051.50

1,051.50

48

48

1 Management

A29

Growth Maison Kameido

1,367.96

1,221.54

66

59

1 Mitsui Home Estate Co., Ltd.

32,376

1.2

Pass throughmaster lease

A30

Emerald House

2,152.31

2,152.31

96

96

1 Tokyo Gakusei Life Co., Ltd.

49,348

1.8

Pass throughmaster lease

39,8091.4

Pass throughmaster lease

35,961

1.3

Pass throughmaster lease33,246

1.2

Pass throughmaster lease

Co., Ltd

Pacific Development &A31

Harmonie Ochanomizu

1,748.24

1,594.12

65

58

1 Management

A32

Suncrest Shakujii-Koen

3,029.16

2,937.72

29

28

1 Mitsui Home Estate Co., Ltd.

Co., Ltd.

Pacific Development &A33

Growth Maison Shin-Yokohama

1,858.44

1,615.78

68

59

1 Management

A34

Belle Face Ueno-Okachimachi

1,351.11

1,328.76

64

63

1 Mainichicomnet Co., Ltd.

33,576

1.2

Pass throughmaster lease

A35

Grand Rire Kameido

1,562.26

1,562.26

72

72

1 J.S.B. Co., Ltd.

26,6191.0

Fixed rentmaster lease

A36

Growth Maison Ikebukuro

952.89861.284238

126,208

0.9

Pass throughmaster lease

A37

Growth Maison Yoga

1,015.34

988.3339

38

1 Mitsui Home Estate Co., Ltd.

22,6530.8

Pass throughmaster lease

20,293

0.7

Pass throughmaster lease

20,105

0.7

Pass throughmaster lease

Co., Ltd

Pacific Development & Management
Co., Ltd

Pacific Development &A38

Route Tachikawa

1,368.57

1,322.13

24

23

1 Management
Co., Ltd
Pacific Development &A39

Shibuya-Honmachi Mansion

1,167.50

1,167.50

25

25

1 Management

A40

City Heights Kinuta

1,235.93

1,235.93

19

19

1 Mitsui Home Estate Co., Ltd.

17,6290.6

Pass throughmaster lease

A41

Acseeds Tower KawaguchiNamiki

1,210.74

1,126.18

57

53

1 Access Group, Inc.

25,146

0.9

Pass throughmaster lease

A42

Capital Heights Kagurazaka

1,126.65

1,019.27

26

24

1 Mitsui Home Estate Co., Ltd.

18,000

0.6

Pass throughmaster lease

A43

College Square Machida

1,047.75

1,047.75

62

62

1 Mainichicomnet Co., Ltd.

18,268

0.7

Fixed rentmaster lease

A44

Belair Meguro

557.05557.0525

25

115,901

0.6

Pass throughmaster lease

17,314

0.6

Pass throughmaster lease

Co., Ltd

Pacific Development & Management
Co., Ltd
Pacific Development & Management

A45

Wacore Tsunashima I

907.46853.6150

47

1Co., Ltd

A46

Foros Nakamurabashi

815.77815.7737

37

1 Mitsui Home Estate Co., Ltd.

17,958

0.6

Pass throughmaster lease

A47

Growth Maison Kaijin

2,040.27

1,836.34

34

30

1 Mitsui Home Estate Co., Ltd.

21,922

0.8

Pass throughmaster lease

A48

College Square Machiya

871.35871.3543

43

1 Mainichicomnet Co., Ltd.

14,706

0.5

Fixed rentmaster lease

A51

City House Tokyo Shinbashi

3,364.00

3,178.86

86

81

1 Mitsui Home Estate Co., Ltd.

89,437

3.2

Pass throughmaster lease60

RentalLeasable Area
Property
No

Property Name

2(m )(Note 1)

Leased Area
2(m )(Note 2)

LeasableUnits(units)(Note 3)

Revenue

LeasedUnits Number of(units)tenants(Note 4)

Tenants (Note 5)

Ratio of
Rental(Thousands of Revenue
(%)
yen)

Type of
Lease (Note
7)(Note 6)
A52

Winbell Kagurazaka

4,032.70

3,975.60

118

116

1 Mitsui Home Estate Co., Ltd.

A53

Nishiwaseda Cresent Mansion

4,310.77

3,986.36

69

64

1

105,410

3.8

Pass throughmaster lease

70,931

2.6

Pass throughmaster lease

47,715

1.7

Pass throughmaster lease

28,492

1.0

Pass throughmaster lease

Pacific Development & Management
Co., Ltd
A54

Lexington Square Akebonobashi

1,987.88

1,854.1188

82

1 Mitsui Home Estate Co., Ltd.

A56

Casa Eremitaggio

1,197.19

1,161.61

17

16

1

Pacific Development & Management
Co., Ltd
A59

Towa City Coop Shinotsuka II

1,627.13

1,510.74

58

53

1 Mitsui Home Estate Co., Ltd.

33,315

1.2

Pass throughmaster lease

A61

Bichsel Musashiseki

1,220.24

1,150.45

70

66

1 Mitsui Home Estate Co., Ltd.

24,028

0.9

Pass throughmaster lease

A62

Lexel Mansion Ueno Matsugaya

1,969.45

1,897.28

29

28

1

33,8391.2

Pass throughmaster lease

59,396

2.1

Pass throughmaster lease

Pacific Development & Management
Co., Ltd
Pacific Development & Management
A63

Towa City Coop Sengencho

3,426.36

3,051.95

154

137

1

A64

Royal Park Omachi

1,929.59

1,748.21

51

46

1 One-Eyed Capital Advisers

24,956

0.9

Pass throughmaster lease

A65

Lexington Square Haginomachi

1,528.58

1,488.53

39

38

1 One-Eyed Capital Advisers

18,023

0.7

Pass throughmaster lease

A66

Visconti Kakuozan

705.75705.758

8

1 Mitsui Home Estate Co., Ltd.

11,774

0.4

Pass throughmaster lease

Co., Ltd

61

RentalLeasable Area
Property
No

Property Name

2(m )(Note 1)

Leased Area
2(m )(Note 2)

LeasableUnits(units)(Note 3)

Revenue

LeasedUnits Number of(units)tenants(Note 4)

Tenants (Note 5)

Ratio of
Rental(Thousands of Revenue
(%)
yen)

Type of
Lease (Note
7)(Note 6)
A71

Lexington Square Daitabashi

1,430.64

1,299.82

43

39

1 Nisshin Jyutaku Support K.K.

31,377

1.1

Pass throughmaster lease784.74760.0433

32

1 Nisshin Jyutaku Support K.K.

17,881

0.6

Pass throughmaster lease

50,486

1.8

Pass throughmaster lease

186,312

6.7

Pass throughmaster lease

Lexington Square Honjo
A72
Azumabashi
A73

AMS TOWER Minami 6-Jo

4,460.56

4,095.17

120

110

1 Big Service Co., Ltd.

A75

Spacia Ebisu

7,794.91

7,015.54

109

98

1

Pacific Development & Management
Co., LtdA76

Neo Prominence

3,574.70

3,177.27

52

46

1 Goodworks Co., Ltd.

63,037

2.3

Pass throughmaster lease

A77

Invoice Shin-Kobe Residence

2,773.71

2,617.83

81

77

1 Sohgoh Real Estate

45,927

1.7

Pass throughmaster lease

A78

Cosmo Court Motomachi

2,310.49

2,088.16

82

74

1 Global Community Co., Ltd

36,802

1.3

Pass throughmaster lease

A79

Revest Honjin

1,933.80

1,836.658076

1 Mininet, Inc

31,304

1.1

Pass throughmaster lease

A80

Revest Matsubara

1,955.40

1,784.06

70

64

1 Mininet, Inc

28,954

1.0

Pass throughmaster lease

A81

Sun Terrace Minami Ikebukuro

898.70804.1038

34

1 Goodworks Co., Ltd.

21,891

0.8

Pass throughmaster lease

A82

Alba Noritake Shinmachi

1,731.68

1,587.26

64

59

1 Mininet, Inc

25,422

0.9

Pass throughmaster lease

A83

Revest Meieki Minami

1,634.60

1,529.79

61

57

1 Mininet, Inc

24,9190.9

Pass throughmaster lease

A84

Revest Heian

1,554.03

1,529.03

40

39

1 Mininet, Inc

23,570

0.9

Pass throughmaster lease

A85

Vendir Hamaotsu Ekimae

2,670.66

2,516.01

81

76

1 Mininet, Inc

32,426

1.2

Pass throughmaster lease

A86

Salvo Sala

1,428.12

1,307.25

54

49

1 Daygran, Inc.

23,992

0.9

Pass throughmaster lease

A87

Excellente Kagurazaka

701.92681.2933

32

1 Goodworks Co., Ltd.

17,842

0.6

Pass throughmaster lease

A88

Luna Court Edobori

1,185.50

1,044.08

50

44

1 Nihon Housing Co., Ltd.

20,912

0.8

Pass throughmaster lease

A89

Winntage Kobe Motomachi

1,433.35

1,305.31

57

52

1 Global Community Co., Ltd.

22,148

0.8

Pass throughmaster lease

A90

Queen's Court Fukuzumi

765.18765.1825

25

1 Goodworks Co., Ltd.

16,521

0.6

Pass throughmaster lease

A91

Corp Higashinotoin

1,029.05

929.5642

38

1 Global Community Co., Ltd.

16,980

0.6

Pass throughmaster lease

A92

Belair Oimachi

530.60510.1026

25

1 Goodworks Co., Ltd.

15,415

0.6

Pass throughmaster lease

A93

Siete Minami-Tsukaguchi

1,020.86

944.4440

37

1 Goodworks Co., Ltd.

16,437

0.6

Pass throughmaster lease

A94

Prime Life Sannomiya Isogami
Koen

789.12789.1232

32

1 Global Community Co., Ltd.

14,640

0.5

Pass throughmaster lease

A95

HERMITAGE NANBA WEST

992.76913.4821

19

1 Daygran, Inc.

14,842

0.5

Pass throughmaster lease

A96

Centurybankan1,477.62

1,477.62

44

44

1 Goodworks Co., Ltd.

17,190

0.6

Pass throughmaster lease

A97

West Avenue

794.80675.5840

34

1 Joint Property Co., Ltd.

12,666

0.5

Pass throughmaster lease

A98

Little River Honmachibashi

974.81914.9131

29

1 Goodworks Co., Ltd.

12,971

0.5

Pass throughmaster lease

A99

Prime Life Mikage

761.18711.1328

26

1 Global Community Co., Ltd.

11,8090.4

Pass throughmaster lease

B8

Kindai Kagakusha Building

1,451.54

1,379.14

13

12

1 Sohgoh Real Estate

38,735

1.4

B9

Shinjuku Island

526.43526.43

1

1

1

Park

Shinkawa

1-(Note 8)(Note 8)(Note 8)Pass throughmaster lease
Directvariable rent
lease
(Note 9)Variable rent

B14

Lexington Plaza Nishigotanda

6,033.58

6,033.58

11

11

8 Community One Co., Ltd.

B15

Cross Square NAKANO

2,145.00

1,378.38

45

23

1

B16

Ohki Aoba Building

2,178.41

2,178.41

13

13

1 Tozai Asset Management Co., Ltd.

62

Shin-ei Real Estate Business Co.,Ltd.

126,690

4.6

28,6851.0

40,5591.5

lease(Note 10)
Pass throughmaster lease
Fixed rentmaster lease

RentalLeasable Area
Property
No

Property Name

2(m )(Note 1)

Leased Area
2(m )(Note 2)

LeasableUnits(units)(Note 3)

LeasedUnits Number of(units)tenants(Note 4)

Revenue

Tenants (Note 5)

Ratio of
Rental(Thousands of Revenue
(%)
yen)

Type of
Lease (Note
7)(Note 6)
B17

Lexington Plaza Hachiman

8,419.15

8,419.15

18

18

1 Tokyo Biso Kogyo Corporation

163,313

5.9

Pass throughmaster lease

B18

AEON TOWN Sukagawa

18,440.58

18,440.58

1

1

1 Aeon Town Co., Ltd.

142,116

5.1

Fixed rentmaster lease

C1

Stop Parking Kanda-Sudacho

81.04

81.04

1

1

1 Office-attend Co., Ltd. (Note 13)

2,443

0.1

Direct fixed
rent lease(Note 11)63

RentalLeasable Area
Property
No

Property Name

2(m )(Note 1)

Leased Area
2(m )(Note 2)

LeasableUnits(units)(Note 3)

LeasedUnits Number of(units)Tenants(Note 4)

Revenue

Tenants (Note 5)

Ratio of
Rental(Thousands of Revenue
(%)
yen)

Type of
Lease (Note
7)(Note 6)
D1

Hotel MyStays Kanda

2,585.72

2,585.72

126

126

Flexstay Hotel Management Co.,
1 Ltd. (Note 14)

D2

Hotel MyStays Asakusa

3,327.38

3,327.38

160

160

1

Flexhotel Management Co., Ltd.
(Note 14)

29,903

Total

154,773.28

147,121.41

3,802

3,565

80

－

2,772,419

27,512

Fixed rent
plus variable
1.0 rent type
operation(Note 12)
Fixed rent
plus variable
1.1 rent type
operation(Note 12)100.0－(Note 1)

“Leasable Area” is based on the portion of each property or property in trust owned by INV and leasable as residential, office, retail etc.

(Note 2)

“Leased Area” is the portion of leasable area for which there is actually a lease agreement and is based on the area indicated in the leaseagreements.

(Note 3)

“Leasable Units” is the number of units possible to lease for each property or property in trust.

(Note 4)

“Leased Units” is the number of units actually leased to tenants and end-tenants based on lease agreements.

(Note 5)“Tenant” is the master lessee where there is a master lease agreement between INV or the trustee and a master lease company, and theprincipal lessee where there are direct lease agreements with end-tenants.

(Note 6)

“Rental Revenue” is the aggregate rent revenue for each property for the fiscal period, rounded down to the nearest thousand yen.

(Note 7)

Pursuant to pass through master lease agreements between the master lease company and the trustee, the master lease company pays theamount paid by end-tenants pursuant to subleases. Pursuant to fixed rent master lease agreements, the master lease company pays fixed
rent.

(Note 8)Not disclosed because the consent of the tenant was not obtained.

(Note 9)A direct lease agreement has been entered into between INV and the tenant (without using a master lease company), and rent is received
from the end tenant pursuant thereto.

(Note 10) A direct lease agreement has been entered into between the trustee and the tenant (without using a master lease company), and rent isreceived from the end tenant pursuant thereto.
(Note 11) A direct lease agreement has been entered into between INV and the tenant (without using a master lease company).The lease is fixed rent
regardless of use or occupancy conditions.
(Note 12) A direct lease agreement has been entered into between INV and the tenant. The lease is a fixed rent plus variable rent type operation
where, in addition to the fixed rent, a variable rent is established that allows the total rent to be varied based on the GOP (Gross Operating
Profit) attained under the hotel operations of the tenant.
(Note 13) The tenant was replaced with “Times24. Co., Ltd.” as of July 26, 2014.
(Note 14) The company name was changed to “MyStays Hotel Management Co., Ltd.” as of July 28, 2014.

64

bOccupancy trend(Unit: %)Property
No.

Property Name

17th Fiscal

18th Fiscal

19th Fiscal

20th Fiscal

PeriodPeriodAsofthe
end ofPeriodPeriodAs ofthe
end ofAs ofthe endof

As of
the end
of

As of
the
end ofAs of
the
end ofAs of
the
end ofDec. 2012

Jun. 2013

Dec. 2013

Jan. 2014

Feb. 2014

Mar. 2014

As
ofthe
end ofDec. 2011

Jun.2012

st

21 Fiscal
Periodnd

22 Fiscal Period

As of
the
end ofAs of
the
end ofApr. 2014 May. 2014

As of
the
end of
Jun.
2014

A26

Nisshin Palacestage Daitabashi

94.8

95.8

96.9

98.0

95.0

95.9

95.9

97.0

94.1

94.1

A27

Nisshin Palacestage Higashi-Nagasaki

95.3

97.8

90.3

98.4

97.4

97.4

97.4

96.0

97.7

97.7

97.7

A28

Growth Maison Gotanda

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

A29

Growth Maison Kameido

89.4

95.4

94.0

94.0

89.3

92.4

95.4

96.9

95.4

93.8

89.3

A30

Emerald House

98.9

100.0

99.0

100.0

98.9

95.8

94.8

95.9

100.0

100.0

100.0

A31

Harmonie Ochanomizu

88.5

96.1

100.0

88.2

97.5

98.7

98.7

96.2

91.2

91.2

91.2

A32

Suncrest Shakujii-Koen

95.4

97.1

94.7

95.6

95.3

95.3

97.2

97.2

97.0

97.0

97.0

A33

Growth Maison Shin-Yokohama

100.0

94.1

98.5

97.1

94.1

94.3

91.5

91.5

86.8

86.8

86.9

A34

Belle Face Ueno-Okachimachi

93.4

100.0

98.4

100.0

100.0

98.5

95.3

100.0

100.0

100.0

98.3

A35

Grand Rire Kameido

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

A36

Growth Maison Ikebukuro

100.0

90.5

90.6

88.2

97.6

100.0

100.0

97.6

90.4

90.4

90.4

A37

Growth Maison Yoga

100.0

92.4

92.2

97.3

100.0

97.5

97.5

97.3

97.3

97.3

97.3

A38

Route Tachikawa

93.2

67.9

100.0

76.7

83.5

96.6

96.6

100.0

100.0

96.6

96.6

A39

Shibuya-Honmachi Mansion

96.5

96.5

100.0

80.8

96.4

96.4

93.0

96.5

100.0

100.0

100.0

A40

City Heights Kinuta

94.6

94.6

89.2

94.6

94.6

100.0

100.0

100.0

100.0

100.0

100.0

A41

Acseeds Tower Kawaguchi-Namiki

100.0

94.8

100.0

93.0

96.5

98.2

98.3

96.5

94.8

93.0

93.0

A42

Capital Heights Kagurazaka

85.7

84.4

92.5

97.2

91.0

91.0

93.3

93.3

86.9

90.5

90.5

A43

College Square Machida

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

A44

Belair Meguro

100.0

87.9

92.1

96.0

92.1

88.1

88.1

91.9

100.0

100.0

100.0

A45

Wacore Tsunashima I

98.0

84.2

96.1

90.0

82.1

94.0

94.0

98.0

94.1

94.1

94.1

A46

Foros Nakamurabashi

89.3

92.6

100.0

92.0

94.5

94.5

94.5

100.0

100.0

100.0

100.0

A47

Growth Maison Kaijin

97.4

96.7

97.1

94.4

100.0

100.0

97.7

92.6

90.0

90.0

90.0

A48

College Square Machiya

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

A51

City House Tokyo Shinbashi

88.5

93.0

90.8

100.0

100.0

97.4

97.6

97.6

95.7

97.0

94.5

A52

Winbell Kagurazaka

96.1

93.3

96.4

96.9

96.5

99.1

98.3

99.2

97.8

97.8

98.6

A53

Nishiwaseda Cresent Mansion

90.7

88.8

100.0

98.5

94.8

94.8

96.2

98.5

96.8

94.0

92.5

A54

Lexington Square Akebonobashi

91.3

93.4

93.1

94.4

89.7

92.0

94.5

97.8

95.6

94.4

93.3

A56

Casa Eremitaggio

90.5

90.0

92.9

90.0

90.0

90.0

90.0

90.0

87.0

87.0

97.0

A59

Towa City Coop Shinotsuka II

90.1

92.6

97.3

94.9

89.9

96.1

98.8

95.2

94.0

94.0

92.8

A61

Bichsel Musashiseki

90.0

97.1

97.1

95.7

92.9

92.9

92.9

100.0

97.1

94.3

94.3

A62

Lexel Mansion Ueno Matsugaya

93.2

96.3

93.2

86.8

100.0

100.0

96.3

100.0

96.3

96.3

96.3

A63

Towa City Coop Sengencho

96.3

89.8

94.3

94.9

90.5

91.8

93.7

96.2

93.0

89.1

89.1

A64

Royal Park Omachi

89.0

93.2

96.4

100.0

95.0

90.3

93.7

97.3

95.6

93.9

90.6

A65

Lexington Square Haginomachi

97.4

100.0

100.0

100.0

97.4

97.4

100.0

100.0

97.4

94.8

97.4

A66

Visconti Kakuozan

89.7

100.0

88.6

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

A71

Lexington Square Daitabashi

97.2

97.9

95.1

95.1

93.7

97.9

93.7

93.7

93.7

93.7

90.9

A72

Lexington Square Honjo Azumabashi

87.9

90.9

100.0

93.9

100.0

100.0

97.0

100.0

100.0

96.9

96.9

A73

AMS TOWER Minami 6-Jo

96.1

88.6

90.0

88.2

97.1

97.8

97.9

97.9

96.8

95.4

91.8

A75

Spacia Ebisu

91.3

97.1

92.2

90.2

89.2

89.2

89.2

90.1

90.4

90.7

90.0

A76

Neo Prominence

－

－

94.8

96.6

96.6

96.6

96.9

96.9

91.9

91.9

88.9

A77

Invoice Shin-Kobe Residence

－

－

99.1

98.6

95.4

93.5

93.0

91.6

90.2

91.6

94.4

A78

Cosmo Court Motomachi

－

－

97.5

92.7

98.7

98.7

98.7

97.6

94.0

91.6

90.4

A79

Revest Honjin

－

－

93.8

98.8

93.7

93.7

98.8

97.5

96.3

95.0

95.0

A80

Revest Matsubara

－

－

91.9

95.7

98.8

98.8

95.6

96.9

96.3

92.5

91.2

A81

Sun Terrace Minami Ikebukuro

－

－

100.0

97.4

97.4

97.4

97.4

97.4

94.7

89.5

89.5

A82

Alba Noritake Shinmachi

－

－

98.6

93.8

96.5

100.0

100.0

98.6

96.5

88.2

91.7

A83

Revest Meieki Minami

－

－

97.0

100.0

98.5

98.5

100.0

96.6

90.5

90.5

93.6

A84

Revest Heian

－

－

95.2

100.0

98.4

100.0

100.0

100.0

95.2

96.8

98.4

A85

Vendir Hamaotsu Ekimae

－

－

93.3

95.4

100.0

98.9

97.7

97.7

96.4

96.5

94.2

A86

Salvo Sala

－

－

89.9

98.0

96.7

96.7

95.0

98.3

96.2

91.2

91.5

A87

Excellente Kagurazaka

－

－

100.0

97.1

91.2

94.1

100.0

100.0

100.0

97.1

97.1

65

94.1

Property
No.

Property Name

17th Fiscal

18th Fiscal

19th Fiscal

20th Fiscal

PeriodPeriodAsofthe
end ofPeriodPeriodAs ofthe
end ofAs ofthe endof

As of
the end
of

As of
the
end ofAs of
the
end ofAs of
the
end ofDec. 2012

Jun. 2013

Dec. 2013

Jan. 2014

Feb. 2014

Mar. 2014

As
ofthe
end ofDec. 2011

Jun.2012

st

21 Fiscal
Periodnd

22 Fiscal Period

As of
the
end ofAs of
the
end ofApr. 2014 May. 2014

As of
the
end of
Jun.
2014

A88

Luna Court Edobori

－

－

96.0

98.0

98.0

98.0

98.0

96.0

94.0

94.0

A89

Winntage Kobe Motomachi

－

－

98.2

94.9

86.0

92.9

93.1

98.3

98.4

93.0

91.1

A90

Queen's Court Fukuzumi

－

－

100.0

100.0

100.0

96.6

95.9

95.9

100.0

96.6

100.0

A91

Corp Higashinotoin

－

－

100.0

97.7

95.1

92.7

92.7

87.9

87.9

90.3

90.3

A92

Belair Oimachi

－

－

92.6

100.0

96.4

100.0

100.0

96.1

96.1

100.0

96.1

A93

Siete Minami-Tsukaguchi

－

－

94.9

100.0

97.5

100.0

97.5

95.0

92.5

90.0

92.5

66

88.1

17th Fiscal

18th Fiscal

19th Fiscal

PeriodAs ofPeriodAs ofPeriodAs ofthe
end oftheend ofst

st

20 Fiscal
Period21 Fiscal
Period

As of

As of

As of

As of

As of

As of

As of

As of

the
end ofthe endofthe endoftheend oftheend oftheend oftheend oftheend oftheend ofnd

22 Fiscal Period

PtoprtyNo.

Property Name

Dec. 2011

Jun. 2012

Dec. 2012

Jun. 2013

Dec. 2013

Jan. 2014

Feb. 2014

Mar. 2014

A94

Prime Life Sannomiya Isogami Koen

－

－

100.0

100.0

93.8

100.0

100.0

100.0

96.9

100.0

A95

HERMITAGE NANBA WEST

－

－

91.2

86.9

96.0

91.7

91.7

92.0

96.0

96.0

92.0

A96

Century Park Shinkawa 1-bankan

－

－

100.0

90.9

97.7

97.7

95.4

95.4

93.2

97.8

100.0

A97

West Avenue

－

－

90.0

82.5

90.0

87.5

95.0

92.5

90.0

85.0

85.0

A98

Little River Honmachibashi

－

－

96.9

93.8

96.9

100.0

100.0

100.0

93.8

93.8

93.9

A99

Prime Life Mikage

－

－

85.5

100.0

96.6

96.6

100.0

100.0

90.1

90.1

93.4

B8

Kindai Kagakusha Building

85.5

85.5

100.0

100.0

100.0

100.0

100.0

100.0

100.0

95.0

95.0

Apr. 2014 May. 2014

Jun. 2014
100.0

B9

Shinjuku Island

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

B14

Lexington Plaza Nishigotanda

92.0

92.0

100.0

90.1

90.1

90.1

81.9

91.8

100.0

100.0

100.0

B15

Cross Square NAKANO

44.3

54.0

54.2

57.6

67.6

65.9

65.9

65.9

65.9

65.9

64.3

B16

Ohki Aoba Building

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

B17

Lexington Plaza Hachiman

94.6

94.6

94.6

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

B18

AEON TOWN Sukagawa

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

C1

Stop Parking Kanda-Sudacho

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

C21

Bon Sejour Chitose Funabashi

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

－

－

C22

Bon Sejour Yotsugi

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

－

－

C23

Bon Sejour Hino

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

－

－

C24

Bon Sejour Musashi Shinjo

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

－

－

C25

Bon Sejour Komaki

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

－

－

C26

Bon Sejour Hadano Shibusawa

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

－

－

C27

Bon Sejour Itami

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

－

－

D1

Hotel MyStays Kanda

－

－

－

－

－

－

－

－

－

100.0

100.0

D2

Hotel MyStays Asakusa

－

－

－

－

－

－

－

－

－

100.0

100.0

Total

95.0

95.1

96.2

95.9

96.3

96.7

96.4

97.1

96.4

95.4

95.1

(Note)“Occupancy Rate” is computed by dividing the leased area by leasable area, and rounded to one decimal place.

[Investment Policy]a.

Basic Policy
INV focuses most of its investment on real estate and real estate backed securities (collectively, "Real Estate Assets"),

aiming to guarantee sound growth of its assets and secure stable profits over the medium and long term.
b.

Portfolio Construction Policy
Based on the policies set out below, the Asset Manager aims to construct an optimum portfolio to fulfill the goals of thebasic policy above, giving full consideration to ever-changing real estate market trends, regional economic trends, financial
situations, capital market trends, changes in tax and legal frameworks and its own financial standing, as well as the credit
rating of tenants and details of rental agreements, etc. as required, while at the same time attempting to mitigate the various
risks involved in the management of its assets.
(a) Selection Policy for Investment Targets
INV will make investment primarily in residential properties or hotels, or Real Estate Assets backed by such residential
properties or hotels ("Core Assets"). INV will also make investment in properties used for purposes other than residences,hotels or Real Estate Assets backed by such non-residential properties or hotels ("Sub Assets") to diversify investment targets.
As compliments to the Core Assets, being residential properties and hotels, Sub Assets refers to office buildings, commercial
facilities, and facilities that fall under either "special nursing home for the elderly" or "housing for the elderly with life67

support services" among housing or accommodation facilities for the elderly, etc.) (collectively "Senior Citizens Properties"),
pay-by-the-hour parking lots and properties used for other purposes or Real Estate Assets backed by those properties.
As explained above, INV seeks to expand its portfolio by diversifying investment targets to Sub Assets, while making
focused investments in residential properties and hotels as Core Assets, thereby developing a comprehensive portfolio in
which risk is spread among a variety of different types of properties. (The portfolio allocation by property type is describedin “(2) Diversification by Property Type, D. Portfolio Allocation by Property Type” below.)
As described in “(2) Diversification by Property Type” below, INV believes that rental demands and market rents are
relatively stable for residential properties and can expect a stable investment over the medium and long term for residential
properties, as tenant credit risk can be diversified through a large number of tenants; therefore INV places residential
properties as Core Assets.
The above investment targets are shown in the diagram below:<Diagram of Investment Targets>Core Assets

Sub Assets(Properties of other types）

Residential Properties
Hotels

Office Buildings
Retail Properties
Senior Housing Properties
Parking Facilities, others

While steadily investing its assets, INV intends to diversify geographical risks by making investments across a numberof regions. (The portfolio allocation by geography is described in “(4) Portfolio Allocation by Geography” below.)
In line with its basic policy of asset management, INV endeavors to diversify risk and achieve sound growth of its
investment assets and secure stable profits over the medium and long term, by investing in various types of properties andacross a wide geographical area.
(b) Diversification by Property Type
A. Core Assets (Residences)(i) Characteristics of Residences
Rental demand and market rents are relatively stable for residences compared with properties for other uses as alarge proportion of tenants are individuals and the number of potential tenants is large, while the terms of rental
agreements with each tenant are relatively short, being around two years. For these reasons, INV considers
residences a stable investment over the medium and long term.
In addition, INV can diversify tenant credit risk as single tenants, while large in number, individually occupy asmaller percentage of the total investment portfolio and their credit events have a smaller impact on the overall
investment assets of INV.

68

(ii) Classification of Residences
In its residences investment, INV attempts to diversify the attributes of tenants by investing in a variety ofresidences and thereby offering properties that appeal to a wide range of tenants. From such perspective, INV
categorizes its residences investments by adopting the following classifications based on the floor area of eachdwelling.
<Classification of Residences>
Types of Residences

Characteristics

Compact Residence<Assumed residents>
Single dwellers<Important factors in location>
Near train station and easy access to commercial and business districts, etc.
<Standard floor plans of residence>
Studio or 1 bedroom, etc. (1R, 1K, 1DK or 1LDK etc. in standard Japaneseclassification terms)<Rentable area per unit>
Less than 35 m2<Characteristics of properties>
Demand is strong in the Tokyo metropolitan area and major regional cities
where population and the number of households are growing. The rent perunit area tends to be relatively high.

Spacious Residence<Assumed residents>
Typical families of around two to four members<Important factors in location>
Favorable living environment, in addition to easy access to business districts
and nearest train station<Standard floor plans of residence>
2 bedrooms or larger (or 2DK or larger in standard Japanese classification
terms)<Rentable area per unit>
Equal to or larger than 35 m2<Characteristics of properties>
Demand for these types of properties is expected to remain strong as housingneeds have shifted somewhat from owning to renting. In addition, there are
replacement needs for corporate housing.

(iii) Classification by Range of Rent for Residences
Although rental demands and market rents are relatively stable for residences due to the large number of potential
tenants, different ranges of rents attract different types of tenants, with a driving factor being the percentage of rent
as a proportion of income.
In general, the demand for properties in the higher rent range is limited mainly to doctors, lawyers, businessowners, corporate executives and so on. In contrast, The population of emander for a range of rents centering
around salaried workers is large and thus stable demands can be expected.
There are contrasting differences in the needs of tenants and the services individual tenants seek. There are also
specific differences in the change of demand due to economic trends. Therefore, INV identifies and breaks down
trends by range of rent in relation to residences using the following classifications based on average monthly rent
for each property type. Investments will be made based on the policies set out under "(3) Investment Approach by
Range of Rent for Residences."<Classification by Range of Rent for Residences>Classification

Specific ranges of rents

69

High-class Residence

Average monthly rent of JPY 200,000 or above

Standard Residence

Average monthly rent of less than JPY 200,000(Note) Average monthly rent means unit rent per dwelling calculated by dividing the total rent (including common
service charges but excluding fees for using ancillary facilities and also excluding portions used for other thanresidential purposes, if any) by total number of dwellings (excluding portions used for other than residential
purposes).
B. Core Assets (Hotels)
Hotels tend to have long-term rental agreements with each tenant, and have a unique characteristic of being affectedin particular by the operational ability and rent payment capacity of hotel operators. In addition, limited
service/extended stay hotels are increasing their market share and stable operation can be expected for such hotels.
INV plans to make a focused investment in limited service/extended stay hotels, as in addition to its stable revenue,
they are expected to further expand its market share and have a high potential for further growth in revenue.
Limited service hotels refer to hotels that focus more on revenue from guest rooms and offer limited amenities suchas food and banquet facilities, spa and gym. By focusing more on revenue from guest rooms, limited service hotels
generally have relatively high GOP margins. Extended stay hotels are a sub-category of limited service hotels thatoffer separate rates for weekly or monthly stays in order to achieve more stable occupancy rate and revenue.
C. Sub Assets (Properties of other types)
INV, while taking risk factors and other characteristics into consideration, makes investments in properties other thanresidential properties and hotels (office buildings, commercial facilities, Senior Citizens Properties, and pay-by-thehour parking lots, etc.) that complement the Core Assets, residential properties and hotels. The specific investment
targets by type of property, etc. and the respective investment policies are shown below. (Please note that these are
only some of the examples and investments may be made in other types of properties, etc.)(i) Office Buildings
INV invests in office buildings for which it judges sufficient rental demand can be expected among those
properties that boast convenient or superior locations in business districts located mainly in the central districts ofthree major urban areas in Japan and comparable areas, after comprehensively judging various factors such as
profitability, size of building, architectural and building specifications, earthquake resistance, attributes of tenants,
and environment.
(ii) Commercial Facilities
INV invests in versatile multifaceted facilities located near cities and large general merchandise stores in suburbs,
selecting those commercial facilities in superior locations while also taking the surrounding market conditions etc.
into consideration.
(iii) Senior Citizens Properties
Of the housing or accommodation facilities for the elderly, INV defines "special nursing home for the elderly" and"housing for the elderly with life support services" as Senior Citizens Properties and will make investments insuch properties as its investment targets.
Of the housing or accommodation facilities for the elderly, INV, in principle, does not invests in elderly carefacilities including the elderly daycare centers, short-term in-patient facilities for the elderly, nursing homes forthe elderly, intensive care homes for the elderly, low-cost homes for the elderly, welfare centers for the elderly,
long-term care support centers and other facilities under the Act on Social Welfare for the Elderly (Act No. 133 of
1963, as amended; "Welfare Act for the Aged"), long term care health facilities and so-called group homes under
the Long-Term Care Insurance Act (Act No. 123 of 1997, as amended), and housing for the elderly and otherfacilities under the Act on Public Housing (Act No 193 of 1951, as amended) unless INV determines that they areparticularly superior investment targets.
In the operations regarding Senior Citizens Properties, INV strives for efficiency by leveraging the expertise ofoperators who have track records in the operation of such properties. In addition, for the purpose of improving the70stability of operation in view of social and public nature of the operation of Senior Citizens Properties, INV, inprinciple, establishes a back-up operator who replaces the operator to rent Senior Citizens Property and operates it
if certain events occur including nonpayment of rent by the operator of Senior Citizens Property during a certain
period or bankruptcy thereof; provided, however, that no back-up operator may be established depending on the
track records, financial strength and creditworthiness of an operator. By such measures, INV provides more stable
services for dwellers.
The definitions and characteristics of "special nursing home for the elderly" and "housing for the elderly with life
support services" that fall into the category of Senior Citizens Properties are shown below.
Type

Definitions and Characteristics

Special Nursing Home for the Elderly"Special nursing home for the elderly" means a feebased home for the elderly as defined under Article 29of the Welfare Act for the Aged. These are facilities
that provide accommodation and nursing care services
related to bathing, eating and toileting, as well as meals
and other forms of daily assistance to elderly people, as
specified by the ministerial orders of the Ministry of
Health, Labour and Welfare. Excluded from thiscategory are elderly care facilities and residential
facilities that provide long-term care services fordementia patients in communal living provided under
the same Act and other facilities specified by theministerial orders of the Ministry of Health, Labour andWelfare.
"Special nursing home for the elderly" is qualified toprovide nursing care services to elderly people who
require it. Special nursing homes for the elderly are
required to register with the government of theprefecture in which they are located and are placed
under the supervision of local authorities.

Housing for the Elderly with Life Support Services"Housing for the elderly with life support services"mean residences that meet criteria concerning designs
and structures of residences, criteria concerning services
to residents, and respective requirements in thefollowing three criteria concerning the contents of thecontract and registered to the prefectures in which theresidencesarelocated.
(Residences)- Floor area (25m2 or more in principle)- Facilities such as toilets and washbasins to meetcertainlevelofcriteria
on
structures
Barrier-free(Services)- Provision of services (provision of safety confirmation
services and daily life consultation services at the least)(Contracts)- The contracts should aim for stable supply of
residencesforelderlypeople- Monies other thansecurity deposit, rents andcompensation for the services should not be collected- Rules for returning prepaid rents and preservative
measure should be established(iv) Pay-by-the-hour parking lot
INV examines investment targets in the category of pay-by-the-hour parking lots in consideration of theexperience, track record and creditworthiness of parking lot operators. It selects parking lots with a superior
location after comprehensively examining various factors such as ground surface connection to road, signboard
installation, regional characteristics and distance from the nearest train station.

71

The primary reasons for acquiring pay-by-the-hour parking lots are as follows. We can expect solid demand for
pay-by-the-hour parking, given the reinforced traffic regulations and crack down on illegal parking, etc., and thus
a certain level of revenue can be expected. In addition, these properties can be acquired with INV's own funds as,with the exception of some large-scale parking lots, they are generally small in size. Also, the management costs
are low as tenants are responsible for parking lot facilities and management. Furthermore, conversion into otheruse is relatively easy since many are located in commercial districts.
D. Portfolio Allocation by Property Type
Based on the perspectives set out in the above, INV invests its funds using an investment ratio by property type
deemed optimum to guarantee sound growth of investment assets and secure stable profits, as shown in the tablebelow.
In the process of acquiring assets that is necessary to construct its portfolio, while guaranteeing sound growth ofinvestment assets and securing stable profits, the investment ratio may sometimes temporarily deviate from the ratio
shown in the table below.
<Portfolio Allocation by Property Type>
Allocation ratio(based on acquisition price)

Type of Real Estate Assets

Residences and hotels

50% or above

Properties of other types(office buildings, commercial facilities, Senior Citizens
Properties, and pay-by-the-hour parking lot, etc.)

Less than 50%(c) Investment Approach by Range of Rent for Residences
While rental demand and market rents are relatively stable for residences, demand for properties in the high price range(High-class Residence) is limited. Rents for these properties may significantly increase at times, but they also have thepotential to plunge during a recession. Luxury properties are therefore susceptible to economic fluctuations.
For that reason, INV focuses its investments on properties that command an average monthly rent of less than JPY
200,000 (Standard Residence) and enjoy solid demand not subject to economic fluctuations. In doing so, it seeks the stability
that is characteristic of residences. At the same time, INV invests in luxury properties with superior locations and amenities,
to ensure the profitability of its investment activities.
(d) Portfolio Allocation by Geography
INV's target regions for investment are chiefly the Tokyo metropolitan area (Tokyo and Kanagawa, Chiba, and Saitama
prefectures) and cities designated as such by government ordinance. It further includes major cities and surrounding areas
nationwide to ensure flexibility in the pursuit of investment opportunities.

In addition, INV aims to construct a

geographically diverse portfolio of investment assets for the purpose of ensuring sound growth of investment assets andsecure stable profits over the medium and long term by avoiding the risk of economic fluctuations in certain regions as well
as avoiding concentrated investment in certain areas to spread earthquake-related risks, etc.
In accordance with the above approach, in regards to the geographical investment distribution for managing Real Estate
Assets, INV adopts the investment ratio shown in the table below. Hotels have higher allocation ratio in major regional cities
as compared to other types of properties, given that there are areas where hotels can be expected to have stable demand andgrowth potential outside of the Tokyo metropolitan area. In the process of acquiring Real Estate Assets that is necessary toconstruct its portfolio, while guaranteeing the medium and long term sound growth and securing stable profits, theinvestment ratio may sometimes temporarily deviate from the ratio shown in the table below.

72

<Portfolio Allocation by Geography>

c

Area

Specific Area

Allocation Ratio(based on acquisition price)

Tokyo Metropolitan Area

Tokyo, Kanagawa, Chiba and Saitama
Prefectures in Japan

65% or above(or 70% or above excluding hotels)

Major Regional Cities

Areas surrounding the Tokyo
metropolitan area, major cities
nationwide including cities designatedas such by government ordinance andsurrounding areas thereof in Japan

Less than 35%(or less than 30% excluding hotels)

Growth Strategy
One of INV' s basic policies is to aim for the sound growth of its investment assets over the medium and long term. To
achieve this aim, INV seeks the expansion of the size of its investment assets (external growth) and expansion of revenue
from investment assets (internal growth) based on the growth strategy shown below.

(a) External Growth
INV aims for external growth with an emphasis on stable profits over the medium to long term. To attain stable profits
over the medium to long term, INV will primarily acquire residential properties and hotels and position them as Core Assets.
INV will position office buildings, commercial facilities, Senior Citizens Properties and pay-by-the-hour parking lots, etc. as
Sub Assets, which are to complement the Core Assets, and examine the acquisition of a wide variety of property types giving
consideration to such factors as the market situation, portfolio composition ratios and the effect of portfolio allocation bygeography. Moreover, in order to improve capabilities to collect information on property transactions, INV will endeavor to
expand the information channels unique to the Asset Manager while broadly pursuing opportunities to acquire properties in
the market. In addition, INV will have periodical information exchanges and other opportunities to work with Calliope Godo
Kaisha, the primary unitholder of the Asset Manager, as well as Fortress Investment Group LLC and its affiliates, in an effort
to collect information on the market in a multi-faceted way.
<Collaboration with Pipeline Support Companies>
Aiming to increase opportunity to acquire properties, INV concluded individual “Support (Provision of Information)
Agreement on Real Estate Acquisitions, etc.” with the following real-estate company (“Pipeline Support Company” in theregion shown in the table below.

Outline of Big Co., Ltd.
Headquarters
Representative
Establishment
Listed/Unlisted
Outline：Chuo Ward, Sapporo City, Hokkaido, Japan：Akihiko Murakami, Representative Director：January 1987
：Unlisted：The company's main business is the management of real properties mainly located in
Sapporo City using its own property management system.

(Information Provision Service)
Pipeline Support Company is required to provide the Asset Manager, with the right of first refusal when it intends tosell properties that are aligned with investment policies and investment criteria defined in this Investment Guidelines or when
it is involved in the sale of such real properties by a third party, unless it is practically difficult to do so. Having received
information on the property, when the Asset Manager gives notice to Pipeline Support Company of its intention to purchasewithin seven business days: 1) If the property in question is owned by Pipeline Support Company, Pipeline Support
Company will in good faith negotiate terms of the sale with the Asset Manager; 2) If the property in question is owned by a73

third party, Pipeline Support Company will in good faith negotiate with the third party seller on behalf of INV as the buyer.
(Market Research Service)
Pipeline Support Company is required to make reports to INV and the Asset Manager on the real estate market. These
reports include trends in Japan and other specified regions, current demands and future trend, current situations and future
prospects regarding supply of the new properties, as well as needs of tenants and market rents.
(b) Internal Growth
INV aims to achieve steady internal growth by expanding revenues from investment assets through proactive andefficient operation and management based on the following policies.
A. Maintaining and Improving Income
INV aims to maintain and improve occupancy rates and income from properties by implementing the following
measures:(i) Boost satisfaction of tenants by providing quality services matched to suit the characteristics of individual
investment assets and tenant attributes and enhancing relationship with tenants.
(ii) Promptly identify tenant trends and engage in flexible leasing activities while working to respond to seasonal
demand(iii) For hotels, appropriately manage the status of hotel operations by the hotel operators, and aim to stabilize andmaximize hotel revenues and rental income.
(iv) Aim to maximize the value of assets acquired and relative competitiveness by drawing up long-term repair plans
suitable to the acquired assets and implementing well-organized repairs and capital investments.
B. Reducing operational and management costs
INV aims to reduce operational and management costs by implementing the following measures:(i) Drive maximization of revenue by regularly verifying appropriate management levels and attempting to reduce
maintenance and management fees and payments to various contractors to the extent possible. INV reviews the levelof management and reduces costs while ensuring the standards required to maintain and enhance income.
(ii) Promote efficient operation and management of assets acquired by leveraging a property management systemdesigned to efficiently manage reports from property management companies.
C. Efficient Supervision of Property Management
INV selects property management companies which have good knowledge and track records in property managementin each investment target region so as to efficiently supervise property management in accordance with INV's
investment policy of promoting geographically diversified investment.
Property management companies are selected after comprehensively examining their experience and capacity in theoperation and management of real properties, track records in managing the assets targeted for acquisition by INV,
networks with various contractors, and their capacity to operate and manage properties in accordance with the aims of
INV.
d.

Investment Perspective
INV ensures that the total amount of specified real estate (this means the specified assets acquired by INV that are realestate, real estate leasehold rights or surface rights, or the beneficiary interest of a trust having as trust assets real estate
ownership, land leasehold rights or surface rights) accounts for at least 75% of the total amount of specified assets held by
INV.
74

e.

Management Policy
The Asset Manager will manage the assets of INV in accordance with the management policy set forth below,

based on the basic policy, portfolio construction policy and investment perspectivedescribed above with the aim to maximize
unitholder value by securing sound growth of investment assets and stable profits.
(a) Criteria for Acquisitions
When making investment in Real Estate Assets which are investment targets of INV, such investment will be made inaccordance with the following criteria.
A. Size(Residential Properties and Senior Citizens Properties)
2

In principle, gross p r o p r i e t ary floor area of 500 m or more per property, except in the case of acquiring unit
ownership (kubun shoyu-ken) that has no acquisition criteria.
(Hotels, Office Buildings, Others (excluding Residential Properties and Senior Citizens Properties)
Determine acquisition on a property by property basis by taking into consideration such factors as size and investment
value.
B. Investment Amount(i) Minimum Investment AmountIn principle, the investment

amountperproperty

shall

be

JPY

300

millionormore.

(ii) Maximum Investment AmountIn order to secure the diversity of portfolio, the ratio of the investment amount per property to the entire portfolio
after the acquisition of such property shall be, in principle, 40 percent or less.
C. Equipment and Facilities(Residential Properties, Hotels and Senior Citizens Properties)
Set certain specifications for number of units, number of guest rooms (hotels), floor plan, type of guest rooms (hotels),interior, ceiling height, security equipment, air-conditioning, broadcast reception, Internet reception, plumbing,elevators, parking area, entrance, lobby (hotels) and other common facilities, and determine acquisition on a property
by property basis by comprehensively assessing factors such as geography and possibility of any post-acquisitionchanges.
(Office Buildings and Others (Excluding Residential Properties and Senior Citizens Properties))
Set certain specifications for conditions of shape of rent floors, floor plan, divisibility, ceiling height, electric power
capacity, air-conditioning system, floor load, luminous intensity, raised floor, security equipment, broadcast reception,
plumbing, elevators, parking area and other common facilities, and determine acquisition on a property by property
basis by comprehensively assessing factors such as geography and possibility of any post-acquisition changes.
D. Seismic Capacity
INV, in principle, invests in properties that has the capacity satisfying the new earthquake resistance standards (thisrefers to the earthquake resistance standards for buildings or other properties under the Building Standard Act (ActNo. 201 of 1950, as amended; “Building Standard Act”) after the amendment of 1981; hereinafter the same shallapply) or the standards equivalent to or more than that standard and of which the Probable Maximum Loss (seismicPML) (note) is 20 percent or less. If the seismic PML exceeds 20% or if the seismic PML of the entire portfolio
exceeds 10% due to the addition of individual property, INV will considers earthquake insurance coverage,
implementation of seismic strengthening works or other measures after comprehensively comparing the impact
caused by disasters with the costs of insurance, etc.
(Note) Probable Maximum Loss (seismic PML) means rate of probable maximum loss caused by earthquake and it
can be divided into PML of individual properties and PML of the entire portfolio. Although there is no unified andexact definition of seismic PML, INV defines seismic PML in this Investment Guidelines as the rate of the loss that75

could result from the severest earthquake (i.e. severe earthquake that happens only once in 475 years, the probabilityof which happening in 50 years is 10%) that could happen during the expected period of use of the property (50 years= useful life of a standard building), to the refinancing cost of the estimated expenses to restore the damage.
E. Environment, Geological Conditions, etc.
INV determines whether or not it makes investments after examining the following matters:(i) Usage or management condition of hazardous substances such as asbestos, chlorofluorocarbon and PCB.
(ii) Geological conditions, land use records and soil contamination, etc.
F. Age of Property
With respect to the investment in buildings, INV, in principle, invests in properties constructed after June 1981 inwhich the new earthquake resistance standard was adopted; provided, however, that INV may invest in properties
constructed before June 1981 if INV determines that they are investment grade as they satisfy the new earthquake
resistance standards or for other reasons.
G. Investment in Unleasable Properties
In principle, INV acquires real estate, etc. which are leased/leasable properties (note) at the time of delivery. INV
may acquire a property which is unleasable at the time of delivery after examining the impact on INV's managementof investment assets by comprehensively assessing the investment amount, the scheduled time when it becomesleasable, estimated revenues, etc.; provided, however, that this shall only apply to the case where the total contract
acquisition prices of previously delivered unleasable properties immeidiately after the delivery of such unleasableproperty will not exceed 10% of the total assets on INV’s balance sheet as of the most recent accounting date.
(Note) This means real estate, etc. with respect to which the construction of the building has been completed and suchbuilding is leased or leasable; provided, however, that real estates, etc., owned by INV that have become
leased/leasable at some point shall be deemed leased/leasable thereafter regardless of the leasing status after that(including cases of reconstruction or large-scale repair of a building). Properties other than leased/leasable propertiesare referred to as the “unleasable properties.”
H. Investment in Properties under Construction
INV may invest in properties developed by third parties prior to the completion of building construction if it is judgedthat sufficient tenants can be secured after the completion of construction and risks relating to the completion of
construction and delivery have been minimized. In addition, if INV judges that it contributes to the improvement of thevalue of the existing properties, INV may conduct an extension of properties already acquired to the extent permitted
by law after confirming that it is judged that sufficient tenant can be secured after the extension and the risks relating to
the completion of construction and delivery have been minimized.
I. Rights(i) In the Case of Co-ownership:a. INV may acquire a property even if the percentage of its co-ownership interests in such property is less than 50
percent.
b. In order to secure sufficient flexibility in the disposal of the property, INV confirms whether or not there are
special contractsthat set out the rights of first refusal among co-owners or any limiting conditions such as
restrictions on transfer or assignment, and details thereof.
c. In order to secure the stability of revenues, INV provides for appropriate procedures (including but not limited to
executing a contract prohibiting partition of co-ownership interest, fully providing the registration and an
agreement on the mutual use of land), to the extent possible, after fully confirming the attributes andcreditworthiness of other co-owners.
(ii) In the Case of Unit Ownership76

a. In order to secure sufficient flexibility in the disposal of the property, INV confirms whether or not there are
special contractsthat set out the rights of first refusal among unit owners or any limiting conditions such as
restrictions on transfer or assignment, and details thereof.
b. In order to secure the stability of revenues, INV takes its own measures as required (including but not limited toincreasing its reserves or providing for insurance on common elements separately from the management
association and fully providing the registration of the right of site) after confirming a management condition of amanagement association (reserves, debt to equity ratio, insurance status, etc.).
In addition, INV’s investment in housings for which INV has unit ownership (except for the case where INV has
all unit ownership for an entire building) shall, in principle, be less than 33 percent of the investment amount inresidences (note).
(Note) The investment amount refers to the total amount of accumulated acquisition prices of properties that INV
has already acquired and expected acquisition prices of properties of which INV plans to acquire unit ownership.
(iii) In the Case of Land Leasea. If INV invests in leased lands, INV, in principle, invest in land leasehold right as specified in the former
Leasehold Act (Act No. 49 of 1921, as amended) and the Act on Land and Building Leases (Act No. 90 of 1991,
as amended).
b. When INV invests in buildings on leased lands, INV, in principle, shall perfect such land leasehold right against
third parties by the registration of ownership of the buildings on leased lands or carefully examine measures, etc.,
to preserve the order of priority by making provisional registration for the land leasehold right or other methods.
INV may invest in such buildings only when such perfection or measures are confirmed; provided, however, that
if INV cannot obtain consents of land owners of leased lands or sublessors (if INV invest in buildings on
subleased lands) but it can be judged that risks remain within acceptable range based on the attributes, etc., ofland owners or sublessors, INV may invest in such buildings, without perfection against third parties orprovisional registration for the land leasehold right, etc., after taking other preservative measures.
c. INV carefully examines the attributes of the proprietary right holder of lands or land lease right holder andmakes its decision after fully examining the impact of revisions of land rent, charges for renewing the land lease
contract, approval of rebuilding proposals and approval of sales proposals and other factors on profitability.
(iv) In the Case of Security Interests and Usufruct
a. INV confirms whether or not any mortgage or other security interest has been created on the property to beacquired and the possibility of a cancellation of such mortgage at the time of acquisition.
b. INV confirms whether or not any surface right, servitude or other usufruct has been created by any third party on
the property to be acquired and details thereof (if any), and make its decision after fully investigating the impact
of such usufruct on profitability.
(b) Due Diligence on Investment Property
When acquiring investment properties, the Asset Manager makes comprehensive judgment after conducting analyticalassessment by using real estate appraisal report, including price survey report, and engineering report made by third party
experts who are fair and have investigation skills and experience, as well as economic, physical and legal investigations on
the following matters.
A. Detailed investigations including economic, physical and legal investigations are conducted on properties, etc., to be
managed.
Items to be
Evaluated
Economic
Investigation

Matters to be Investigated＜In the Case of Corporation＞
Type of business, history of business, size, listed/unlisted, financial conditions,
Tenant Investigation
stock movements, ratings of tenant, etc.
＜In the Case of Individuals＞
77

Items to be
Evaluated

MarketInvestigation
Matters relating to
Revenue

Location Factor

PhysicalInvestigation

Outline ofConstruction,
Equipment andSpecifications

Matters to be Investigated(i) Occupation, age, household income, income level, condition of assets of tenant,etc.
(ii) The number of tenants, purpose of use, conditions of rent received, etc.
(iii) Duration of lease, past occupancy rate, development of rent and future
prospects(iv) Occupancy and distribution percentage of tenant, etc.
Market rents, occupancy rate, trading area analysis, demand trends for competing
property/tenant, etc.
(i) Competitiveness investigation including tenant invitation/administrative
disposition, etc.
(ii) Rent level, details of rental agreement and probability of renewal thereof(iii) Investigation of proper level of cost and probability of cost burden expected infuture(iv) Actual fund reserve in comparison with repair plans(i) Street conditions, accessibility from major transportation facilities such as
railway, the number passengers getting on and aff at major transportation
facilities(ii) Location and accessibility of convenient facilities, economic facilities,
government and public offices, educational facilities, recreational facilities(iii) Utilization situation of surrounding lands and future trends thereof(iv) Condition of sunshine, view, landscape, noise, etc.
(v) Condition of name recognition, reputation, size in the region, etc.
(vi) City planning and region planning(vii) Width of frontal road, shape and size of the opening and depth<Items Common to All Purposes>(i) Design, principal structure, age of property, design company and constructor, etc.
(ii) Grade of interior and exterior materials<Residential properties and Senior Citizens Properties>
Setting certain specifications for number of unit, floor plan, interior, ceiling height,
security equipment, air-conditioning, broadcast reception, Internet reception,
plumbing, elevators, parking area, entrance, and other common facilities, andassessing factors such as geography and possibility of any post-acquisition changes<Office Buildings and Others (Excluding Residential Properties and Senior Citizens
Properties)>
Setting certain specifications for conditions of shape of rent floors, floor plan,divisibility, ceiling height, electric power capacity, air-conditioning system, floor load,
luminous intensity, raised floor, security equipment, broadcast reception, plumbing,elevators, parking area and other common facilities, and assessing factors such as
geography and possibility of any post-acquisition changes(i) Securing seismic capacity satisfying the new earthquake resistance standards orother standards equivalent to or more than that standard(ii) Conducting seismic risk analysis and seismic diagnosis(i) Status of compliance with the relevant laws and regulations (Fire Service Act(Act No. 186 of 1948, as amended), City Planning Act (Act No. 100 of 1968,
as amended）and other building laws and regulations), etc.
Building and(ii) Estimated repair costs in future (approximately 12 years) stated in a building
Management
condition report
Diagnosis (Note)(iii) Whether a management condition is good or bad, existence or nonexistence ofmanagement regulations and details thereof, quality and creditworthiness of amanagement company(i) Usage and management condition of hazardous substances such as asbestos,Environment andchlorofluorocarbon, PCB.
Soil, etc.
(ii) Geological conditions, land use records, soil contamination, etc.
Examining the certainty of rights of former owners, etc. In particular, with respect
to the properties whose rights are complicated such as co-ownership/unitownership/land lease properties and other properties, properties of which INV has
no ownership or has ownership with other persons, carefully examining the rights
including following matters:
Matters Relating to (i) Completion or incompletion of a perfection of a land leasehold right, andLegal Investigation
Rightsexistence or nonexistence of other rights that ranks senior to the land leasehold
right.
(ii) Completion or incompletion of a registration of rights of site, existence ornonexistence of restrictions by which buildings and rights of site may not be
separately disposed of and a registration thereof, percentage of ownershipinterests.
(iii) Preservative measures for security deposit, policy/measures for reserves based
Seismic Capacity
Diagnosis (Note)78

Items to be
Evaluated

Matters to be Investigatedon a long-term repair plan(iv) Existence or nonexistence of special contract not to partition property in coownership and a registration thereof, existence or nonexistence of appropriate
measures relating to demands for partition of property in co-ownership andsale of co-ownership interest, etc., and obligation among co-owners.
(v) Nature of unit of unit ownership(vi) Status of security created before INV’s acquisition, details of a contract andwhether or not it will be succeeded(vii) Details of an agreement/special contract, etc., executed with a lessor, unit
owner and co-owner, etc.
(viii) Attributes of a lessor, unit owner and co-owner, etc., such as a category ofcorporations/individuals(ix) As to trust beneficiary interest, details of a trust agreement(i) Purpose of use of tenant and form of agreement
Attributes of Tenant(ii) Existence or nonexistence of dispute with tenant
Boundary
Status of boundary confirmation, existence or nonexistence of encroachment objects
Investigationand conditions thereof(Note) When acquiring properties, INV will confirm seismic capacity as specified in the Building Standard Act byentrusting an investigation to confirm that no problem exists regarding earthquake-resistant construction, including
structural calculation sheets, to independent third party experts.
B. When investigating individual property, etc., and determining whether it is investment grade or not, INV seeks toequalize investigation levels in due diligence and determines whether it is investment grade or not after it fully examines
and understands matters to be considered in conducting transactions.
C. In the light of specialization, objectivity and transparency, INV entrusts building investigation (including seismicPML), environmental investigation, market investigation and real estate appraisal to independent outside investigationcompanies who have no interest.
(c) Holding Period
In principle, INV manages its assets with the aim of medium- to long-term holding and attempts to make stable growth of
the asset value; provided, however, that INV may sell individual assets for a strategic reason, a reason relating to portfolio
structuring or other reasons.
(d) Administrative Management Policy of Properties
A. Basic Policy
With respect to management of investment real estate, the Asset Manager sets forth the basic policy as to securestable profits and maintain and enhance asset value by maintaining and improving occupancy rates over medium tolong term, reducing costs and conducting repair and improvement construction deliberately. Specific policy is asfollows.
B. Tenant Sales● Upon leasing, the Asset Manager formulate leasing plan by investment assets of INV by fiscal period.
● Supplying trend of newly built lease property in surrounding area or in trade area, tenant trade by type of industries
and other properties contract cases, etc. are reflected in the leasing plan. The Asset Manager (i) establishes rent for
new offering tenants and continued rent of existing tenants, (ii) improves satisfaction of existing tenants, (iii) sets
forth policy for continued sales for potential new tenants and responds flexibly for leasing.
C. Development of Leasing Activities(Trend in surrounding area or trade area)● Based on market report and information collected from real estate broker, the Asset Manager analyzes prospects ofsupply/demand of tenant in surrounding area which each investment real estate belongs or in trade area, rent quotation,
occupancy rates, trend of competitive properties. If there is structural change in surrounding area or trend area
(development trend of newly built lease property, launch of new transportation, establishment of new stations, etc.),
the Asset Manager will analyze effects of such change.
(Selection of focused customer)79● The Asset Manager investigates and analyzes the movement and reason of tenant in surrounding area or trade area(business integration, business conversion, restructuring, etc.) and selects tenants (or type of industries) which should
be focused for sales activities.
(Consideration of optimal lease conditions)● For determining lease conditions of individual tenants, the Asset Manager will determine comprehensively
creditworthiness of such tenants, ratio of lease revenue from such tenants to revenue of total portfolio, contract form
(whether the contract is Fixed Term Building Lease Agreement or not).
(Understanding of trend of existing tenants)● The Asset Manager will communicate adequately with existing tenants and will promptly make effort to understandtrends of such tenants, demands and complaints, request for expansion of sales area.
D. Leasing Policy
When leasing acquired investment properties, the Asset Manager will stabilize revenue over medium to long term by
the following policy.
● Select high quality tenant.
● Review business types, contents of businesses, business results and credit information of financial condition of
corporation and individual who hope to move into as new tenants and execute Lease Agreement.
(i) Standards for Examination of Tenants
With respect to tenants expected to move into, the Asset Manager will examine the following items undercooperation with property management company and make efforts to execute Lease Agreement with favorablesocial attributes and creditworthiness.
<Examination Items>

Attributes

Business results
Creditworthiness

Contents of agreement

Corporation Tenant● Business types● Business history● Corporation scale● Listed/unlisted● Financial condition● Stock price trend● Evaluation details of company
examining corporation credit● Rating● Purpose of use● Rent, security deposits and● Lease term
● Existence and situation of joint
guarantor

Individual Tenant● Occupation- Service years- Scale, business types of company- Listed/unlisted of company● Age● Family structure of residents● Income level● Asset situation● Purpose of use● Rent, security deposits and● Lease term
● Situation of joint guarantor

E. Management Policy of Tenant(i) Management of Tenant● The Asset Manager promptly responds to request and complaint, etc. of tenants under cooperation of property
management companies.
● The Asset Manager makes efforts to improve satisfaction of tenants by communicating with tenants, promptly
and appropriately understanding feedback and complaint and respond thereto.
● To take every possible measures for safety, doors are locked automatically and security camera is establisheddepending on properties.
(ii) Rent Collection and Conservation Measures80● In the case of delinquent rent, the Asset Manager demands at an early point and makes efforts to resolvedelinquency.
● With respect to lease agreement with individual tenants without guarantor, lease guarantee is offered byguaranty company, in principle.
F. Management Policy of Building(i) Regular Management of Building
Under cooperation with property management company, the Asset Manager confirms management status of eachfacility of common areas of assets and proprietary areas and promptly repairs those failures found.
(ii) Repair Plan
The Asset Manager prepares efficient repair plan by property which will lead to maintenance and improvement ofcompetitiveness of properties from the medium to long term perspective and invests in facilities.
(iii) Reduction of Building Management Costs
The Asset Manager examines building management costs by each item, and if there is room for cost reduction, theAsset Manager will attempt to reduce costs, considering effects on tenants.
G. Administrative Management through Property M anagement C ompanies (PM C ompanies)(i) Utilization of Property Management Companies
In order to efficiently manage property management business pursuant to investment policy of portfolio allocation
by geography, INV is familiar with each investment region and select company with administrative management
performance.
(ii) Property Management Companies Selection Criteria
In order to secure stable income, the Asset Manager selects property management companies as outsourced
service provider, considering the following points.
● Experience and capability of operation and management of real estate● Actual results of assets scheduled to acquire● Network with related operators● Positive/negative performance of operation and management from INV perspective● Offer of capability of new tenants● Organization structure● Financial strength● Knowledge and experience regarding real estate market of regions in which such properties are located● Reporting capability regarding relevant real estate related assets● Fees and commissions level(iii) Understanding Administrative Management Status of Properties
The Asset Manager, by being reported the following matters every month, in principle, from property managementcompanies, understands administrative management status of property, analyzes differences between operation
plan of investment real estates and actual results, gives necessary instruction to property management companies
and aims to secure stable income.
● Deposit status from tenants● Status of expenditure of expenses, etc.
● Status of move in to and out of tenants● Status of building management● Status of requests and complaints from tenants and responses thereto● Lease market trend of neighborhood of such investment real estate(iv) Evaluation of Property Management Companies
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The Asset Manager checks status of business performance of property management companies in the process ofdaily asset management. As a result, in the case where the level of business performance is below the level which
the Asset Manager expects, property management companies may be changed.
H. Management of Hotel Operators
With respect to investments in hotels, the Asset Manager appropriately manages the status of hotel operations by thehotel operator as well as the trend of occupancy, revenue, etc. of the managed hotels through periodic meetings andimplements various measures to stabilize and maximize rental income.
(e) Insurance Policy
A. Regarding insurance coverage, in order to respond to damages, etc. by claim damages from third party due to firefrom such building and accident, fire insurance and comprehensive general liability insurance which are said to beappropriate will be covered.
B. Determination as to whether or not the investment assets should be insured against earthquake damage will be made bycomparing and considering the effects of disaster with the cost of casualty insurance premiums. In the case where
earthquake PML value of the entire portfolio exceeds 10% by property with earthquake PML value exceeding 20% andindividual property are added, the Asset Manager will consider earthquake insurance coverage and construction ofseismic strengthening.
(f) Sales Policy
INV reviews portfolio by the Asset Manager and considers sales of individual real estate in the case of a. through c. below,
considering each item of A. through F. below.
A.
B.
C.
D.
E.
F.

Real estate market condition over medium to long term
Income forecast in the future
Outlook of increase and decrease of asset value
Possibility and stability of location of real estate
Outlook of capital expenditures responding to deterioration and obsolescence of real estates
Importance of constituent of portfolioa. In the case where strategic importance is lostEx.) In the case were profitability of properties is low due to decrepit and it is determined that it is unlikely tomake profit of the target even by additional capital expenditures.
b. In the case where investor presenting attractive purchasing price appears
Ex.) In the case where strong purchase intention is presented by presenting attractive price exceeding potential
value in the region of real estate.
c. In the case where strategic sales contributes to revenue of INVEx.) In the case where value is increased due to improvement of vacancy rate, increase of rent.

f.

Financial Policy(a)Basic Policy
INV may borrow or issue investment corporation bonds (including short-term investment corporation bonds, the same
applies hereinafter) for the purpose of acquiring assets, repair or distribution payments, acquiring operational funding or
procuring funds for debt repayment etc., which are conducive to the efficient management of investment assets and thestability of management. The limit for borrowing funds or for issuing investment corporation bonds is JPY 500 billion.
Moreover, the aggregate sum must not exceed JPY 500 billion.

(b) INV is restricted to borrowing from qualified institutional investors as provided by the Financial Instruments andExchange Act (Act No. 25, 1948 and subsequent amendments, hereinafter "the FIEA") but limited to the institutional investors
as provided by the Act on Special Measures Concerning Taxation (Act No. 26, 1957 and subsequent amendments), Article 67,
Paragraph 15. Furthermore, INV will negotiate various terms such as borrowing period, interest rates, collateral, and fees, withmultiple financial institutions and select a lender by comprehensively judging the details of the terms. INV tries to ensure
diversification of lenders and repayment terms so as to mitigate refinancing risks.
(c)
The maximum ratio of the total outstanding balance of borrowings and investment corporation bonds to total assets(hereinafter the "Interest-Bearing Debt Ratio") is, in principle, 60%. However the Interest-Bearing Debt Ratio of 60% can be
temporarily exceeded as a result of acquiring new investment assets.

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(d) INV may undertake derivative transactions in order to hedge risk of interest rate fluctuations derived from its debts andother risks.
(e)
INV may conclude agreements to set up credit lines in advance such as commitment line agreements and reserve
agreements for as-needed basis borrowings for the purposes of ensuring agility in responding to funding needs for acquiring
investment assets, refunding tenant deposits or procuring operational funds.
(f)

When borrowing funds or issuing investment corporation bonds, INV may provide its investment assets as collateral.

(g) INV issues additional investment units after reviewing the long-term and stable growth prospects of assets, the financial
environment, and its own financial standing, while giving considerations to dilution of investment units (decline in percentageof equity of investment units due to additional issuance of new investment units and decrease in net asset value per investment
unit or distribution).
g.

Disclosure Policy(a)With respect to asset management, the Asset Manager will make efforts to disclose information promptly, accurately andfairly from the viewpoint of investors.
(b) The Asset Manager will disclose information accurately pursuant to details and forms required by the Investment Trust
Act, the FIEA, the Tokyo Stock Exchange and the Investment Trusts Association, Japan, etc. Moreover, other than financial
information and information regarding management situation, the Asset Manager will voluntarily disclose information which isconsidered to be useful upon investment determination to the INV.
(c)
In order to ensure transparency of transactions with interested party, the Asset Manager will voluntarily disclose by press
release regarding transactions between the Asset Manager and interested party.

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[Distribution Policy]
INV conforms to the policies set out below with regards to cash distributions to unitholders or registered pledgees ofinvestment units listed or recorded in the registry of unitholders at the end of each fiscal period.
aDistribution of Profits
Distributable amounts generated from management of INV's assets (hereinafter "distributable amounts") refers to theamount of profits calculated in conformity with the provisions of the Act Concerning Investment Trusts and Investment
Corporations (hereinafter the"Act") or generally accepted accounting principles in Japan (net assets in the balance sheet as of
the closing date of each fiscal period less unitholders' capital, retained earnings, and evaluation, currency translation, etc.)(Article 17, Item 1 of the Articles of Incorporation of INV).
INV determines the amount of distribution, which must be an amount that exceeds 90% of the amount of INV's
distributable income as stipulated in Article 67, Item 15 (the Special Provisions of Taxation for Investment Corporations) of
the Act on Special Measures Concerning Taxation in principle (hereinafter "distributable income") (or the relevant amountafter modification if there is any modification to the calculation of the said amount due to revisions to the law, etc.)(However, the amount may not exceed the distributable amounts.). If, however, a deficiency account for tax purposes arises
or income for tax purposes does not arise due to the carried-over deduction of a deficiency account, INV shall determine theamount of distribution on a rational basis. In addition, INV can accumulate reserves and allowances from the distributable
income amount that are deemed to be necessary for maintaining its investment assets and improving or increasing the valueof assets such as long-term reserve for maintenance, payment reserve, reserve for distribution, and other similar reserves, etc.
(Article 17, Item 2 of the Articles of Incorporation of INV).
Any retained earnings not allocated for dividends will be managed based on INV's investment asset targets and policies(Article 17, Item 3 of the Articles of Incorporation of INV).

bCash Distribution Exceeding Profits
In cases when the distributable amounts is less than 90% of distributable income, or when INV considers it appropriate

depending on the economic circumstances and the trends in the real estate market, the leasing market, etc., INV may, in
accordance with the provisions under the Act, determine an additional amount to be distributed to the unitholders in cash as arefund of the investment over and above the distributable amount, with the upper limit of the additional amount beingprescribed in rules of the Investment Trusts Association, Japan, based on the approved cash distribution statement inaccordance with the Act . In this case, if such cash distributions do not satisfy the requirements for Special Provisions of
Taxation for Investment Corporations, INV may distribute monies in an amount determined by INV for the purpose ofsatisfying those conditions (Article 17, Item 4 of the Articles of Incorporation of INV).
(a)Basic Policy
In addition to distribution of profits, INV may make distribution in excess of profits (hereinafter the “Excess Profit
Distribution”) to be determined each fiscal period, in accordance with the following basic policy.
(i)
INV will consider making the Excess Profit Distribution in the event of a. or b. below, and, will, in principle, notmake the Excess Profit Distribution in other circumstances.
a. To satisfy the requirements under the Special Taxation Measures Act applicable to INV, in case the distributableamount is less than 90% of distributable income.
b. To stabilize distributions in cases where significant expenses are to be recorded in connection with, among otherthings, the acquisition of assets or the raising of capital, and the distribution amount is expected to decreasesignificantly.
(ii) The Excess Profit Distribution amount will be no more than 60%(Note) of the depreciation expenses recognizedon the last day of the fiscal period immediately preceding the fiscal period in which such distribution will be made.

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(Note) Per the applicable standards set by the Investment Trusts Association of Japan, closed-end investment
corporation may make the Excess Profit Distribution in the amount up to 60% of the depreciations expenses recognizedon the last day of the relevant fiscal period.
(iii) With respect to implementation of the Excess Profit Distribution and determination of the Excess Profit
Distribution amount, INV is to carefully consider the following: (i) securing funds necessary to maintain the value, etc.
of INV’s investment assets; (ii) the LTV level (Note) is to not exceed 60% following the Excess Profit Distribution; and(iii) securing liquidity following the Excess Profit Distribution.
(Note) LTV level (%) = a / b x 100%
a = total outstanding balance of interest-bearing debt at fiscal end
b = total assets at fiscal end - expected distribution amount(b)

Approval Process for Excess Profit Distribution
In the event INV decides to make the Excess Profit Distribution, the Asset Manager is to present its executive officers withdrafts of financial statements, asset management report and financial documents relating to cash distributions as well as any
accompanying statement, in each case for the fiscal period immediately preceding the fiscal period in which such
distribution is to be made. In presenting such drafts, the General Manager of the Finance Department of the Asset Manager,in accordance with “(1) Basic Policy” above, is to prepare a proposal taking into account matters affecting cash flow suchas medium to long term capital requirements, etc. (e.g., long-term repair plans) and other necessary matters, and will seek
the approval of the President and CEO of the Asset Manager.

c

Methods of Distribution
Distributions shall be paid in cash and based on the number of investment units held to unitholders who are listed orrecorded in the registry of unitholders on the closing date of each fiscal period, or to registered pledgees of investment units(Article 17, Item 5 of the Articles of Incorporation of INV).

dStatutory Limitation for Dividends
INV will be exempted from its obligation to pay distributions to unitholders or registered pledgees of investment units

after a lapse of three years from the commencement date of payment. No interest will accrue with respect to unpaid
distributions (Article 17, Item 6 of the Articles of Incorporation of INV).
In addition to 1. through 4. above, INV shall comply with the rules of The Investment Trusts Association, Japan, etc. in
cash distributions.

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