Investment
Invincible Corporation

Audited Financial Statements
for the 24th Fiscal Period(from January 1, 2015 to June 30, 2015)

INDEX TO FINANCIAL STATEMENTS
Page

Greetings ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 1

Independent Auditor’s Report ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 4

Balance Sheet as of June 30, 2015 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 5

Statement of Income and Retained Earnings for the six months ended June 30, 2015 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 7

Statement of Changes in Net Assets for the six months ended June 30, 2015 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 8

Statement of Cash Flows for the six months ended June 30, 2015 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 9

Notes to Financial Statements as of and for the six months ended June 30, 2015 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 10

Greetings from Naoki Fukuda, Executive Director of Invincible Investment Corporation
and President & CEO of Consonant Investment Management Co., Ltd.
It is my pleasure to take this opportunity to express my sincere gratitude to all investors in Invincible
Investment Corporation (“INV”) for your ongoing support.

We hereby provide you with a report on INV’s asset management and financial results for the 24th
period (covering the period from January 1, 2015 to June 30, 2015, the “reporting period”).

With respect to the external growth of INV’s properties in the reporting period, we acquired 3 hotels(total acquisition price: JPY 13,261 million) on February 6, 2015 by utilizing excess cash-on-handand new loans, and resolved on June 25, 2015 to acquire 11 hotels and 3 residential properties (totalacquisition price: JPY 35,258 million) on July 16, 2015 with the funds raised via a global public
offering of new investment units (the “Capital Increase”) and new loans.

With respect to the financial operations, we decided to refinance all existing loans on July 16, 2015
concurrently with the Capital Increase and the acquisition of the above properties in order torefinance all secured bank loans to an unsecured bank facility, lengthen and diversify the debt
maturity duration, and further reduce interest rates.

For the reporting period, due to the acquisition of 3 new hotels and the acceleration of internal
growth from the existing hotel portfolio backed by the significant increase in the number of inboundvisitors to Japan; hotel rents increased by JPY 313 million (15.1%) from the previous period to JPY
2,382 million, and INV’s total operating revenues increased by JPY 364 million (7.9%) to JPY 4,974
million.

As a result, net income increased by JPY 337 million (17.2%) to JPY 2,295 million, andDPU (distribution per unit) increased by JPY 127 (17.3%) to JPY 860.

After the reporting period, in addition to the Capital Increase, the acquisition of the above-mentioned
14 properties and the de-collateralization of loans, INV acquired 3 hotels (total acquisition price:
JPY 7,369 million) on August 28, 2015 by utilizing the funds raised through new loans as well aspart of the excess cash-on-hand obtained from the Capital Increase. As a result, INV’s total assets
under management as of the end of August 2015 increased to JPY 173,815 million, a JPY 55,888
million (47.4%) increase compared to JPY 117,927 million as of the end of the fiscal period ended
December 31, 2014 (previous period; the 23rd period).
increase to JPY 1,924, a 47.3% increase year-on-year.

The annual DPU for 2015 is expected to

INV’s market capitalization as of August 25,

2015 was JPY 201,840 million, rising it to the 18th-largest market capitalization among the 53 listed
J-REITs in Japan (market capitalization at the end of December 2013: JPY 30,566 million, which12

(Note)

The forward-looking statements, forecasts and goals mentioned above are based on available information,
assumptions and estimates as of August 26, 2015. These assumptions and estimates are unavoidably
uncertain, and could be affected by various risks and factors beyond INV’s control. Thus, no guarantee
can be made regarding the realization of such future forecasts and targets, and actual results may varysignificantly.

3

4

INVINCIBLE INVESTMENT CORPORATIONBALANCE SHEETAs of June 30, 2015
As of
June30,2015

December31,
2014

June 30,
2015(in thousands of
U.S. dollars)(in thousands of yen)

ASSETS
Current assets:
Cash and bank deposits (Notes 4, 7 and 14) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥9,153,872

Cash and bank deposits in trust (Notes 4, 7 and 14) ∙∙∙∙∙

4,011,521¥

2,691,921
4,822,622$

21,983

Accounts receivable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

82

190

1

Rental receivables ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

644,552

637,813

5,208

Prepaid expenses ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

233,324

260,394

2,126

Consumption taxes receivable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

1,319,253

316,413

2,584

Other ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

0

0

0

Allowance for doubtful accounts ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(1,968)(2,436)(19)

Total current assets ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

15,360,637

8,726,919

71,269Buildings, at cost ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

85,91485,914701

Buildings and accompanying facilities, at cost ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

38,862

38,862317

Structures, at cost ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

2,779

2,779

22

Land ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

711,834

711,834

5,813

Buildings in trust, at cost ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Buildings and accompanying
facilities in trust, at cost ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

45,227,883

49,657,804

405,535

10,400,867

12,748,349

104,110Structures in trust, at cost ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

321,799

323,594

2,642

Tools, furniture and fixtures in trust, at cost ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

268,476

302,397

2,469

Land in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

63,258,940

69,963,823

571,366

Subtotal ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Less: Accumulated depreciation ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

120,317,357(5,573,763)

133,835,359(6,560,529)

1,092,979(53,577)

Total property and equipment, net ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

114,743,593

127,274,829

1,039,402

Other ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

76

45

0

Total intangible assets ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

76

45

0

39,384

Non‐current assets:
Property and equipment (Notes 5, 6 and 7):

Intangible assets:

Investments and other assets:
Guarantee deposits ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

10,00010,035

81

Long‐term prepaid expenses ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

328,159

251,697

2,055

Other ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

34,76536,218295

Total investments and other assets ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

372,924

297,951

2,433

Total non‐current assets ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

115,116,594

TOTAL ASSETS ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥130,477,232

127,572,826¥

136,299,746

1,041,836$

1,113,1055As ofJune30,2015

December31,
2014

June 30,
2015(in thousands of
U.S. dollars)(in thousands of yen)

LIABILITIESCurrent liabilities:
Accounts payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Current portion of long‐term loans payable(Notes 7, 8 and 14) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Current portion of long‐term loans payable in trust(Notes 7, 8 and 14) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

141,428¥

168,742$

1,378

1,200,000

62,341,000

509,113
81,33918,1679,960,000

Accounts payable‐other ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

22,87243,752357

Accrued expenses ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

127,170

174,711

1,426

Income taxes payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

578

542

4

Advances received ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

371,084

420,660

3,435

Deposits received ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

23,896

10,10882

Total current liabilities ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

1,905,197

73,119,517

597,137

56,100,000‐‐

9,941,832‐‐
11,596

Non‐current liabilities:
Long‐term loans payable (Notes 7, 8 and 14) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Long‐term loans payable
in trust (Notes 7, 8 and 14) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Tenant leasehold and security deposits in trust(Note 14) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

1,109,146

1,420,014

Tenant leasehold and security deposits (Note 14) ∙∙∙∙∙

28,663

28,663234

Total non‐current liabilities ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

67,179,642

1,448,677

11,830TOTAL LIABILITIES ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

69,084,839

74,568,195

608,968

Unitholders’ capital ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

53,096,413

53,096,413

433,617

Capital surplus ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

6,264,432

6,264,432

51,159Retained earnings ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

2,031,546

2,370,704

19,360Total unitholders’ equity ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

61,392,392

61,731,550

504,136

NET ASSETS (Note 9)Unitholders’ equity:

TOTAL NET ASSETS ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙TOTAL LIABILITIES AND NET ASSETS ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

61,392,392¥

130,477,232

61,731,550,¥

136,299,746

504,136$

1,113,105

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

6

INVINCIBLE INVESTMENT CORPORATIONSTATEMENT OF INCOME AND RETAINED EARNINGSFor the six months ended June 30, 2015
For the six months ended
December31,
2014

June30,2015

June30,2015(in thousands of U.S.
dollars)(in thousands of yen)

Operating revenue
Rental revenue－real estate (Note 11) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥4,610,717

Total operating revenue ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

4,610,717¥

4,974,760

4,974,760$

40,626

40,626

1,586,854

1,834,039

14,977

Operating expenses
Property related expenses (Note 11) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Directors’ compensation ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

4,800

4,800

39

Asset management fees ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

125,000

180,000

1,469

Asset custody fees ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

3,976

6,342

51

Administrative service fees ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

26,672

22,055

180

Provision of allowance for doubtful accounts ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

1,527

467

3

Other ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

91,966116,123

948

Total operating expenses ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

1,840,796

2,163,828

17,671

Operating income ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

2,769,920

2,810,931

22,955

Non‐operating income
Interest income ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

537

1,242

10

Interest on tax refund∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

‐

3,098

25

Other ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

483

307

2

Total non‐operating income ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

1,021

4,648

37

Non‐operating expenses
Interest expenses ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

365,480

379,341

3,097

Loan‐related costs ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

294,738

140,328

1,146

Investment unit issuance costs ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

152,101‐‐

Other ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

14

‐

‐

Total non‐operating expenses ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

812,334

519,670

4,243

Ordinary income ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

1,958,607

2,295,909

18,749

Income before income taxes ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

1,958,607

2,295,909

18,749

4

Income taxes (Note 12):Current ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

605

605

Deferred ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

‐

‐

‐

Total income taxes ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

605

605

4

Net income ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

1,958,002

2,295,304

18,744Retained earnings brought forward ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙Unappropriated retained earnings (Note 10) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

73,543¥2,031,546

75,399¥2,370,704

615$

19,360

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

7

INVINCIBLE INVESTMENT CORPORATIONSTATEMENT OF CHANGES IN NET ASSETSFor the six months ended June 30, 2015
Unitholdersʹ equity
SurplusRetainedearnings

Capitalsurplus

Unitholdersʹ
capitalTotal
unitholdersʹ
equityTotal
surplus

Total net assets(in thousands of yen)

Balance as of June 30, 2014¥

29,134,389¥

6,264,432¥

974,975¥

7,239,407¥

36,373,796¥

36,373,796

Changes during the period
Issuance of new investment units ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

23,962,024

‐

‐

‐

23,962,024

Dividends from surplus ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙‐‐(901,431)(901,431)(901,431)(901,431)

Net income ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙‐‐

1,958,002

1,958,002

1,958,002

1,958,002

Total changes during the period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

23,962,024

Balance as of December 31, 2014 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

53,096,413‐¥

6,264,432

1,056,571¥

2,031,546

1,056,571¥

8,295,97823,962,024

25,018,595¥

61,392,392

25,018,595¥

61,392,392

Changes during the period
Issuance of new investment units ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

‐

‐

‐

‐

‐

‐

Dividends from surplus ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙‐‐(1,956,146)(1,956,146)(1,956,146)(1,956,146)
2,295,304

Net income ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙‐‐

2,295,304

2,295,304

2,295,304

Total changes during the period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙‐‐

339,157

339,157

339,157

Balance as of June 30, 2015 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

53,096,413¥

6,264,432¥

2,370,704¥

8,635,136¥

61,731,550

339,157¥

61,731,550

Unitholdersʹ equity
Unitholdersʹ
capitalSurplusRetainedearnings

CapitalsurplusTotal
unitholdersʹ
equityTotal
surplus

Total net assets(in thousands of U.S. dollars)

Balance as of December 31, 2014 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙$

433,617$

51,159$16,590$67,749$501,367$

501,367

Changes during the period
Issuance of new investment units ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙‐‐

Dividends from surplus ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙‐‐‐(15,975)‐(15,975)‐(15,975)‐(15,975)
18,744

Net income ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙‐‐

18,744

18,744

18,744

Total changes during the period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

‐

‐

2,769

2,769

2,769

Balance as of June 30, 2015∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙$

433,617$

51,159$19,360$70,519$504,136

2,769$

504,136

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

8

INVINCIBLE INVESTMENT CORPORATIONSTATEMENT OF CASH FLOWSFor the six months ended June 30, 2015
For the six months ended
December 31,
2014

June 30,
2015

June 30,
2015(in thousands of
U.S. dollars)(in thousands of yen)

Cash flows from operating activities:
Income before income taxes ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥
Depreciation and amortization ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Investment unit issuance costs ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Loan‐related costs ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Amortization of tenant leasehold and security deposits in trust ∙∙∙Interest income ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Interest expenses ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Changes in assets and liabilities
Increase (decrease) in allowance for doubtful accounts ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Decrease (increase) in rental receivables ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Decrease (increase) in consumption taxes receivable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Increase (decrease) in consumption taxes payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Increase (decrease) in accounts payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Increase (decrease) in accounts payable‐other ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Increase (decrease) in accrued expenses ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Increase (decrease) in advances received ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Increase (decrease) in deposits received ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Other, net ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Subtotal ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Interest income received ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Interest expenses paid ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Income taxes paid ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

577(573,359)(1,319,253)(143,637)(673)(10,409)
2,933
13,561(9,776)
5,533
1,572,798
537(363,177)
(547)

467
6,739
1,002,839‐
21,53917,86549,39649,576(13,787)(9,953)
4,925,816
1,242(381,197)
(640)

3
55
8,189
‐
175
145
403
404
(112)
(81)
40,227
10(3,113)(5)

1,958,607
837,289
152,101
294,738(378)(537)
365,480¥

2,295,909
986,795‐
140,328‐(1,242)
379,341$

18,749
8,058
‐
1,146
‐
(10)
3,097

Net cash provided by operating activities ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

1,209,610

4,545,220

37,118Cash flows from investing activities:
Purchases of property and equipment in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Repayments of tenant leasehold and security deposits in trust ∙∙∙∙∙
Proceeds from tenant leasehold and security deposits in trust ∙∙∙∙∙∙
Other, net ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(40,203,087)(47,787)
131,585(694)(13,512,228)(95,186)
406,054(1,487)(110,348)
(777)
3,316
(12)

Net cash used in investing activities ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(40,119,985)(13,202,847)(107,822)

Cash flows from financing activities:
Repayments of short‐term loans payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Proceeds from long‐term loans payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Repayments of long‐term loans payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Payments for loan‐related costs ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Distribution payments ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Proceeds from issuance of investment units ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Payment of Investment unit issuance costs∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(13,488,750)
57,300,000(17,552,100)(618,099)(900,512)
23,962,024(151,356)‐
6,241,000(1,200,000)(81,398)(1,952,824)‐‐‐
50,967(9,799)(664)(15,947)‐‐

Net cash used in financing activities ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

48,551,206

3,006,776

24,555

Net increase (decrease) in cash and cash equivalents ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙Cash and cash equivalents at beginning of period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

9,640,831
3,524,562(5,650,850)
13,165,393(46,148)
107,516

Cash and cash equivalents at end of period (Note 4) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

13,165,393¥

7,514,543$

61,368The accompanying notes are an integral part of these financial statements.

9

INVINCIBLE INVESTMENT CORPORATIONNOTES TO FINANCIAL STATEMENTS
As of and for the six months ended June 30, 2015

1. Organization
Invincible Investment Corporation (the“Company”), a real estate investment corporation, was incorporated on January 18, 2002, underthe Act on Investment Trusts and Investment Corporations of Japan (the“Investment Trust Act”) with initial capital of ¥200 million.
The Company is externally managed by a registered asset management company, Consonant Investment Management Co., Ltd. (the“Asset Manager”). The Asset Manager is currently owned 100% by Calliope Godo Kaisha (Calliope). The Company was formed toinvest primarily in properties in Japan.
On May 17, 2004, the Company raised ¥3,377,250 thousand through an initial public offering of 9,000 investment units. As a“comprehensive investment REIT focusing on the Tokyo metropolitan area and on residential properties,” The Company was listed on
the Osaka Securities Exchange in May 2004.
On February 7, 2005, the Company completed its second public offering of 10,650 investment units at a price of ¥369,734 per unit inconnection with a public offering in Japan.
On July 31, 2006, the Company completed its third public offering of 25,000 investment units at a price of ¥332,045 per unit in connection
with a public offering in Japan. The Company was listed on the J‐REIT market of the Tokyo Stock Exchange in August 2006 (in order tofocus trading on one securities exchange and reduce administrative tasks and costs accompanying a duplicate listing, The Company
delisted from the Osaka Securities Exchange on October 6, 2007).
Effective on February 1, 2010, the Company executed a five‐to‐one unit split and 215,596 investment units were issued in connection
with the unit split. Effective on the same day, the Company also merged with LCP Investment Corporation (LCP) and allocated 367,200
investment units at a ratio of 4 units (post‐unit split) of the Company per one investment unit of LCP. As a result, investment units
issued and outstanding were 636,695 units as of February 1, 2010.
On July 29, 2011, the Company completed a third party allotment of 711,597 investment units at a price of ¥9,837 per unit.
On December 20, 2013, the Company completed a third party allotment of 224,887 investment units at a price of ¥13,340 per unit.
On July 16, 2014, the Company completed its fourth public offering totaling 1,040,000 new investment units at a price of ¥21,873 per unit.
527,322 of such units were issued in connection with a Domestic Public Offering, and the remaining 512,678 units were issued inconnection with an International Offering pursuant to Rule 144A and Regulation S under the U.S. Securities Act of 1933. On August 13,
2014, the Company issued an additional 55,507 investment units domestically in connection with the exercise of an over‐allotment
option. Net proceeds of approximately ¥23.9 billion were used to repay the Company’s outstanding short term borrowings incurred inconnection with the acquisition of 18 properties during this fiscal period.

2. Summary of Significant Accounting Policies(a) Basis of Presentation
The Company maintains its accounts and records in conformity with accounting principles and practices generally accepted in Japan(“Japanese GAAP”), including provisions set forth in the Investment Trust Act, the Companies Act of Japan, the Financial Instruments
and Exchange Act of Japan, and other related regulations, which are different in certain respects from the application and disclosure
requirements of International Financial Reporting Standards or accounting principles generally accepted in the United States of America.
The financial statements are prepared based on the Japanese audited financial statements of the Company, which were prepared inaccordance with Japanese GAAP and filed with the Kanto Local Finance Bureau as required by the Financial Instruments and Exchange
Act of Japan. In preparing the accompanying financial statements, certain information in the notes has been added and certain
reclassifications have been made from the financial statements issued domestically for the convenience of the readers outside Japan.
The financial statements are not intended to present the financial position and the results of operations in accordance with accounting
principles and practices generally accepted in countries and jurisdictions other than Japan.
The Company’s fiscal period is a six‐month period, which ends at the end of June and December of each year.
10Amounts less than ¥1 thousand and US$ 1 thousand have been rounded down. As a result, the totals shown in the financial statements
and notes thereto do not necessarily agree with the sum of the individual amounts.
The Company does not prepare consolidated financial statements as it has no subsidiaries.
(b) Cash and Cash Equivalents
Cash and cash equivalents consist of cash, demand deposits, and short‐term investments which are highly liquid and readily convertible
to cash, have a low risk of price fluctuation, and mature within three months from the date of acquisition.
(c) Property and Equipment
Property and equipment are recorded at cost. Depreciation of property and equipment, except for land, is calculated on a straight‐line
basis over the estimated useful lives of the assets as stated below:
For the six months ended
June 30, 2015

Buildings ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

77 years

Buildings and accompanying facilities ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

8‐24

Structures ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

7‐18

Buildings in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

2‐67

Buildings and accompanying facilities in trust ∙∙∙∙∙∙∙∙∙∙

2‐32

Structures in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

4‐55

Tools, furniture and fixtures in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

2‐15(d) Intangible Assets
Intangible assets are amortized on a straight‐line basis.
(e) Long‐term Prepaid Expenses
Long‐term prepaid expenses are amortized on a straight‐line basis.
(f)

Investment Unit Issuance Costs

Investment unit issuance costs are recorded as expenses when incurred.
(g) Allowance for Doubtful Accounts
Allowance for doubtful accounts is provided based on past experience for normal receivables and a valuation of any receivables fromcompanies and individuals with financial difficulties.
(h) Impairment of Fixed Assets
An assessment for impairment is carried out on an asset or group of assets, such as fixed assets, intangible assets and investments,
whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the asset or group of assets isdeemed to be impaired, an impairment loss is recognized for the difference between the carrying amount and the recoverable value ofthe asset or group of assets using the discounted cash flow model.
(i)

Accounting Treatment of Trust Beneficiary Interests in Real Estate Trusts

For trust beneficiary interests in real estate trusts, which are commonly utilized to obtain ownership in investment properties in Japanand through which the Company holds all of its real estate, all assets and liabilities with respect to assets in trust, as well as all income
generated and expenses incurred with respect to assets in trust, are recorded in the relevant accounts of the balance sheet and statementof income and retained earnings of the Company in proportion to the percentage that such trust beneficiary interest represents. Certain
material accounts with respect to assets and liabilities in trust are presented separately from other accounts in the balance sheets of theCompany.
(j)

Income Taxes

Deferred tax assets and liabilities are computed based on the temporary differences between the financial statement and income tax
basis of assets and liabilities using the applicable statutory tax rate.

11

(k) Consumption Taxes
Consumption taxes withheld and consumption taxes paid are not included in the statement of income and retained earnings.
Consumption taxes paid are generally offset against the balance of consumption taxes withheld. As such, the excess of payments overamounts withheld are included in current assets and the excess of amounts withheld over payments are included in current liabilities as
the case may be.
(l)Taxes on Property and Equipment

Property and equipment are subject to various taxes, such as property taxes and urban planning taxes on an annual basis. An owner of aproperty is registered in the record maintained by the local government in each jurisdiction, and such taxes are imposed on the ownerregistered in the record as of January 1 of each year based on the assessment made by the local government.
Under the above tax rules, a seller of a property at the time of disposal is liable for these taxes on the property from the date of disposal tothe end of the calendar year in which the property is disposed. The seller, however, is reimbursed by the purchaser for these accrued tax
liabilities and the amount of settlement reflects this adjustment. For the purchaser, a portion of such taxes calculated from the acquisition
date to the end of the calendar year is capitalized as a cost of the property in accordance with Japanese GAAP. In subsequent calendar
years, half of such taxes on property and equipment for each calendar year are charged as operating expenses in each fiscal period.
Taxes on property and equipment capitalized as part of the acquisition cost of properties amounted to ¥42,497 (US$347) thousand for thesix months ended June 30, 2015.

3. U.S. Dollar Amounts
The Company maintains its accounting records in Japanese yen. The U.S. dollar amounts included in the accompanying financial
statements and notes thereto represent the arithmetical result of translating Japanese yen into U.S. dollars at the rate of ¥122.45 = US$1,
the effective rate of exchange prevailing at June 30, 2015. The inclusion of such U.S. dollar amounts associated with the fiscal six months
ended June 30, 2015 is solely for the convenience of readers outside Japan. Such translations should not be construed as representations
that the Japanese yen amounts represent, or have been, or could be converted into, U.S. dollars at that or any other rate.

4. Cash and Cash Equivalents
Cash and cash equivalents shown in the statements of cash flows consist of the following balance sheet items.
As ofDecember 31,
2014

June 30, 2015

June 30, 2015
(in thousands of
U.S. dollars)(in thousands of yen)

Cash and bank deposits ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥9,153,872

Cash and bank deposits in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

4,011,521

Cash and cash equivalents ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥13,165,393¥

2,691,921$

21,983$61,3684,822,622¥

7,514,543

39,384

5. Property and Equipment
The following tables show the summary of movement in property and equipment for the six months ended June 30, 2015.
At costBeginning balance

Increase

Endingbalance

Decrease

Accumulated
depreciation

Depreciation forthe period

Net property andequipment(in thousands of yen)

Buildings ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

85,914

Buildings and accompanying facilities ∙∙∙∙∙

38,862‐‐

Structures ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

2,779

‐

Land ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

711,834‐

Buildings in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Buildings and accompanying facilities
in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

45,227,883

4,429,921

10,400,867

2,347,482

¥

‐

¥

‐

¥

85,914

¥

8,866

¥

541

¥

77,04838,862

19,744

1,196

‐

2,779

1,270

65

1,509

‐

711,834‐‐

711,834‐

49,657,804

3,726,114

589,21045,931,690

12,748,349

2,551,810

365,747

10,196,539‐

19,117Structures in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

321,799

1,795‐

323,594

128,347

9,602

195,246

Tools, furniture and fixtures in trust ∙∙∙∙∙∙∙∙∙∙

268,476

33,920‐302,397

124,376

20,401

178,020

Land in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

63,258,940

Total ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

120,317,357

6,704,883¥

13,518,001

69,963,823

‐
¥

‐

¥

133,835,359‐¥

6,560,529‐¥

986,765

69,963,823¥

127,274,829

12

At cost
Beginningbalance

Increase

Endingbalance

Decrease

Accumulated
depreciation

Depreciation forthe period

Net property andequipment(in thousands of U.S. dollars)

Buildings ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙$

701

$

‐

$

‐

Buildings and accompanying facilities ∙∙∙∙∙∙∙∙∙∙∙∙∙

317

‐

‐

317

161

9

Structures ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

22

‐

‐

22

10

0

12

Land ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

5813

‐

‐

5,813

‐

‐

5,813

Buildings in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Buildings and accompanying facilities
in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

369,357

36,177‐405,535

30,4294,811

375,105

84,93919,170‐104,110

20,8392,986

83,271

Structures in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

2,628

14

‐

2,642

1,048

78

1,594

Tools, furniture and fixtures in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

2,192

277

‐

2,469

1,015

166

1,453

Land in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

516,610

Total ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙$

982,583

54,756$110,396

$

‐
$

‐

701

$

72

571,366$

1,092,979$‐$

53,577

4

$

156

‐
$

8,058

629

571,366$

1,039,402

Increases in the net book values are mainly due to the acquisition of 3 properties (¥13,261,000 thousand) as shown below and capitalized construction costs.

D21

Apa Hotel Yokohama Kannnai

8,350,000

Acquisition cost(in thousands of U.S. dollars)
68,191

D22

Hotel Nets Hakodate

2,792,000

22,801

D23

Flexstay Inn Shirogane

2,119,000

17,305

Property No.

Acquisition cost(in thousands of yen)

Property name

6. Fair Value of Investment and Rental Properties
The following tables show the net book value and the fair value of the investment and rental properties in the aggregate for the six
months ended December 31, 2014 and June 30, 2015.
Residential
As of / For the six months ended
December 31, 2014

June 30, 2015

June 30, 2015
(in thousands of
U.S. dollars)(in thousands of yen)

Net book value
Balance at the beginning of period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

55,874,464 ¥

55,569,758$

453,815

Net increase (decrease) during period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙(304,706)(300,354)(2,452)

Balance at the end of period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

55,569,758

55,269,403

451,363

60,775,000 ¥

62,209,000

Fair value ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥$

508,035

OfficeAs of / For the six months ended
December 31, 2014

June 30, 2015

June 30, 2015
(in thousands of
U.S. dollars)(in thousands of yen)

Net book value
Balance at the beginning of period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

8,579,951

Net increase (decrease) during period ∙∙∙∙∙∙∙(28,342)¥(36,906)(301)

Balance at the end of period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

8,551,609

8,514,702

69,536

Fair value ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

7,227,000¥

8,551,609

7,181,000$

69,837$58,644Retail facilities
As of / For the six months ended
December 31, 2014

June 30, 2015

June 30, 2015
(in thousands of
U.S. dollars)(in thousands of yen)

Net book value
Balance at the beginning of period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

5,275,638

Net increase (decrease) during period ∙∙∙∙∙∙∙∙(50,243)¥(47,106)(384)

Balance at the end of period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

5,225,394

5,178,288

42,288Fair value ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

5,690,000¥

5,225,394

5,820,000$$

42,67347,52913

Parking lots
As of / For the six months ended
December 31, 2014

June 30, 2015

June 30, 2015
(in thousands of
U.S. dollars)(in thousands of yen)

Net book value
Balance at the beginning of period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

100,825

Net increase (decrease) during period ∙∙∙∙∙∙∙∙(1)¥

100,823(1)(0)

Balance at the end of period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

100,823

100,822823

Fair value ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

107,000¥$

109,000

823

$

890

Hotel
As of / For the six months ended
December 31, 2014

June 30, 2015

June 30, 2015
(in thousands of
U.S. dollars)(in thousands of yen)

Net book value
Balance at the beginning of period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

5,532,341

Net increase (decrease) during period ∙∙∙∙∙∙∙∙

39,763,665¥

12,915,605

Balance at the end of period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

45,296,007

58,211,612

Fair value ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

52,759,000¥

45,296,007$

369,914
105,476475,390

71,555,000$

584,360

Notes:
Fair value has been determined based on the appraisals or research provided by independent real estate appraisers.
For rental revenues and expenses for the six months ended December 31, 2014 and June 30, 2015, please refer to “Note 11: Rent Revenues－Real Estate and Expenses Related toProperty Rental Business“

7. Collateral
The following table shows the assets pledged as collateral to secure long‐term loans payable and long‐term loans payable in trust.
As ofDecember 31, 2014

June 30, 2015

June 30, 2015
(in thousands of
U.S. dollars)(in thousands of yen)

Cash and bank deposits ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

4,262,187

Cash and bank deposits in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

4,011,521

312,245¥$

4,822,622

2,549
39,384

Buildings ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

77,58977,048629

Buildings and accompanying facilities ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

20,314

19,117156

Structures ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

1,574

1,509

12

Land ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

711,834

711,834

5,813

Buildings in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

42,090,979

45,931,690

375,105

Buildings and accompanying facilities in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

8,214,804

10,196,539

83,271

Structures in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

203,054

195,246

1,594

Tools, furniture and fixtures in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

164,502

178,020

1,453

Land in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

63,258,940

69,963,823

571,366

Total ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

123,017,302

132,409,697¥$

1,081,336

The following table shows the loans payable secured by collateral.
As ofDecember 31, 2014

June 30, 2015

June 30, 2015
(in thousands of
U.S. dollars)(in thousands of yen)

Current portion of long‐term loans payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

1,200,000

62,341,000

509,113

Current portion of long‐term loans payable in trust∙∙∙∙∙∙∙∙∙∙∙

18,1679,960,000

81,339Long‐term loans payable∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙‐‐

Long‐term loans payable in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

56,100,000
9,941,832‐‐

Total ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

67,260,000¥

72,301,000$

590,453

14

8. Loans Payable
The following table shows the details of loans payable for the six months ended June 30, 2015.
For the six months ended June 30, 2015
Beginning
Increase
Classification

EndingBeginningbalancebalance

Decreasebalance

Increase

EndingAveragebalanceinterest

Maturity

Use ofrate (%)

date

proceeds

Decrease
Remarks

Name of lender(in thousands of yen)(in thousands of U.S. dollars)(1)

Sumitomo Mitsui
Banking

12,400,000－

400,000

12,000,000

101,265－

July 14,
3,266

97,9990.930
2017

Corporation (3)The Bank ofTokyo‐Mitsubishi

12,400,000－

400,000

12,000,000

101,265－

July 14,
3,266

97,9990.930
2017UFJ, Ltd. (3)Mizuho Bank, Ltd. (3)12,400,000－

400,000

12,000,000

101,265－

July 14,
3,266

97,999Secured

0.930
2017

and
(2)

Shinsei Bank, Limited
6,500,000－－

6,500,000

53,082－－53,082

Citibank Japan Ltd. (3)6,500,000－－

6,500,000

53,082－－

July 14,unguarant

2017

eed

0.930

(3)

July 14,53,0820.930
2017

Sumitomo Mitsui
5,000,000

loans
payable (6)－5,000,000

40,832－－

July 14,40,8320.930

Trust Bank, Limited(3)2017Resona Bank,

July 14,2,100,000
Long‐term－－－

2,100,000

17,149－－17,1490.930

Limited.(3)2017

Sumitomo Mitsui
Banking－

1,357,000－

1,357,000－

11,082－February
11,0820.930
6, 2018

Corporation (4)The Bank ofTokyo‐Mitsubishi－

1,357,000－

1,357,000－

11,082－February
11,0820.930
6, 2018

UFJ, Ltd. (4)Mizuho Bank, Ltd. (4)－1,357,000－

1,357,000－

11,082－February
11,082

0.930

Secured6, 2018
andShinsei Bank, Limited－

650,000－

650,000

－

5,308

－

February
5,308

(2)

0.930

unguarant(4)

6, 2018

Citibank Japan Ltd. (4)Februaryeed－

650,000－

650,000

－

5,308

－

5,308

0.930
6, 2018

Sumitomo Mitsui
Trust Bank, Limited.

February－

470,000－

470,000

－

3,838

－

3,838

0.930

－

400,000－

400,000

－

3,266

－

3,266

0.930

6, 2018(4)
Resona Bank , Limited.

February(4)

6, 2018

Total long‐term loans
57,300,000

6,241,000

1,200,000

62,341,000

467,946

50,967

9,799

509,113

－

－

－

－

payableMitsubishi UFJ Trustand Banking

March 31,2,700,000－－

2,700,000

22,049－－22,049

1.900

2018

Corporation (5)Long‐term

SecuredMitsubishi UFJ Trust

March 31,loans
and Banking

2,860,000－－

2,860,000

23,356－－

and
23,356

1.900

2019

payable in(2)
unguarant

Corporation (5)trust (7)eedMarch 31,

Mitsubishi UFJ Trustand Banking

1,830,000－－

1,830,000

14,944－－

14,944

1.900

2020

Corporation (5)15Ending

Beginning
Increase

Increasebalancebalance
Classification

EndingBeginning

Decrease

Average

Decreasebalancebalanceinterest

Maturity

Use ofrate (%)

date

proceeds

Remarks

Name of lender(in thousands of yen)(in thousands of U.S. dollars)(1)

Sumitomo Mitsui
Banking－

12,400,000

400,000

12,000,000

101,265－

July 14,
3,266

97,9990.930
2017

Corporation (3)The Bank ofTokyo‐Mitsubishi－

12,400,000

400,000

12,000,000

101,265－

July 14,
3,266

97,9990.930
2017UFJ, Ltd. (3)Mizuho Bank, Ltd. (3)－12,400,000

400,000

12,000,000

101,265－

July 14,
3,266

97,999Secured

0.930
2017

and
(2)

Shinsei Bank, Limited－

6,500,000－

6,500,000

53,082－－53,082

Citibank Japan Ltd. (3)－6,500,000－

6,500,000

53,082－－

July 14,unguarant

2017

eed

0.930

(3)

July 14,53,0820.930
2017

Sumitomo Mitsui－

5,000,000－

5,000,000

40,832－－

July 14,40,8320.930

Trust Bank, Limited(3)2017Resona Bank,－

2,100,000
Long‐term－

2,100,000

17,149－－July 14,
17,1490.930
2017

Limited.(3)Sumitomo Mitsuiloans
payable (6)Banking－

1,357,000－

1,357,000－

11,082－February
11,0820.930
6, 2018

Corporation (4)The Bank ofTokyo‐Mitsubishi－

1,357,000－

1,357,000－

11,082－February
11,0820.930
6, 2018

UFJ, Ltd. (4)Mizuho Bank, Ltd. (4)－1,357,000－

1,357,000－

11,082－February
11,082

0.930

Secured6, 2018
andShinsei Bank, Limited－

650,000－

650,000

－

5,308

－

February
5,308

(2)

0.930

unguarant(4)

6, 2018

Citibank Japan Ltd. (4)Februaryeed－

650,000－

650,000

－

5,308

－

5,308

0.930
6, 2018

Sumitomo Mitsui
Trust Bank, Limited.

February－

470,000－

470,000

－

3,838

－

3,838

0.930

－

400,000－

400,000

－

3,266

－

3,266

0.930

6, 2018(4)
Resona Bank , Limited.

February(4)

6, 2018

Mitsubishi UFJ Trustand Banking

March 31,2,570,000－－

2,570,000

20,988－－20,988

1.900

2019

9,960,000－－

9,960,000

81,339－－81,339－－－－67,260,000

6,241,000

1,200,000

72,301,000

549,285

50,967

9,799

590,453

－

－

－

－

Corporation (5)Total long‐term loans
payable in trust
Total loans payable

Notes:(1)

The average interest rate indicates a weighted average interest rate for each six‐month period, rounded to three decimal places.

(2)

The funds are mainly used to acquire real estate properties or properties in trust.

(3)

The part of principal (¥1,200 million) was repaid on April 30, 2015.
The remaining balance as of June 30, 2015 was repaid on July 16, 2015.

(4)

The principal was repaid in full on July 16, 2015.

(5)

Mitsubishi UFJ Trust and Banking Corporation (“Mitsubishi UFJ Trust”), the trustee of real estate held in trust for which the Company is the beneficiary, borrows money fromPrudential Mortgage Asset Holdings 1 Japan Investment Business Limited Partnership, a part of the Prudential Financial, Inc. as of September 28, 2012. The Company received
the borrowed funds (after deducting reserves and other proceeds) from Mitsubishi UFJ Trust as payment of the trust principal for the real estate in trust on the same day.

16

(6)

Long‐term loans payable includes current portion.

(7)

Long‐term loans payable in trust includes current portion.

9. Net Assets
The Company issues only non‐par value units in accordance with the Investment Trust Act, and the entire amount of the issue price of
new investment units is allocated to unitholders’ capital within net assets. The Company is required to maintain net assets of at least¥50,000 thousand (US$ 408 thousand) as required by Article 67‐4 of the Investment Trust Act.
The number of investment units authorized were 10,000,000 units as of December 31, 2014 and June 30, 2015.
The number of investment units issued and outstanding were 2,668,686 units as of December 31, 2014 and June 30, 2015 respectively.

10. Appropriation of Retained Earnings
In accordance with the distribution policy in Article 17, Paragraph 1, of the Company’s articles of incorporation which stipulates making
distributions in excess of 90% of distributable profit as defined in Article 67‐15, Paragraph 1 of the Special Taxation Measures Act of Japanfor the fiscal period.
The following table shows the appropriation of retained earnings for the six months ended December 31, 2014 and June 30, 2015.
For the six months ended
December 31, 2014

June 30, 2015

June 30, 2015

(in thousands of yen)(in thousands of
U.S. dollars)

Unappropriated retained earnings ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥2,031,546$

Cash distribution declared ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(1,956,146)

Retained earnings carried forward. ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥75,399¥2,370,704(2,295,069)¥

75,634

19,360(18,742)$617

A dividend in respect of the six months ended June 30, 2015 of ¥860 (US$7.0) per investment unit, amounting to a total dividend of¥2,295,069 thousand (US$18,742 thousand) was proposed and approved at the Board of Directors meeting on August 26, 2015. These
financial statements do not reflect this dividend payable.
Cash distributions per investment unit were ¥733 and ¥860 (US$7.0) for the six months ended December 31, 2014, and June 30, 2015,
respectively.

11. Rent Revenues － Real Estate and Expenses Related to Property Rental Business
Rent revenue – real estate and expenses related to property rental business for the six months ended December 31, 2014 and June 30,
2015 consist of the following:
For the six months ended
December 31, 2014

June 30, 2015

June 30, 2015
(in thousands of
U.S. dollars)(in thousands of yen)

Rental revenue – real estate:
Rental revenue and common area charges ¥Other ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total rental revenue – real estate∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥Expenses related to property rental business:
Facility management fees ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥Property related taxes ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Insurance expense ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Depreciation ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Other ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total expenses related to property
rental business. ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥Operating income from property
leasing activities ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥4,408,874
201,843
4,610,717¥

4,738,713
236,047
4,974,760$

460,196
163,789
6,084
837,259
119,524¥

468,393
201,860
7,061
986,765
169,957

$

3,825
1,648
57
8,058
1,387

1,586,854¥

1,834,039$

14,9773,023,863¥

3,140,721$

25,649¥$38,6991,927
40,62617

12. Income Taxes
The Company is subject to corporate income taxes in Japan. The Company may deduct from its taxable income the amounts distributed
to its unitholders, provided the requirements are met under the Special Taxation Measures Act of Japan. Under this act, the Company
must meet a number of tax requirements, including a requirement to distribute in excess of 90% of distributable profit for the fiscal
period in order to be able to deduct such amounts. If the Company does not satisfy all of the requirements, the entire taxable income of
the Company will be subject to regular corporate income taxes in Japan.
The Company has a policy of making distributions in excess of 90% of its distributable profit for the fiscal period to qualify for conditions
set forth in the Special Taxation Measures Act of Japan to achieve a deduction of distributions for income tax purpose and it distributes
approximately 100% of distributable profit. Hence, the Company has treated the distributions as a tax allowable deduction as defined in
the Special Taxation Measures Act of Japan.
(a) Reconciliations of the Company’s effective tax rates and statutory tax rates are as follows:
For the six months ended
December 31, 2014

June 30, 2015

(Rate)

Statutory tax rates ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

34.16 %

34.15 %

Deductible cash distributions ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(33.54)(33.80)

Increase (decrease) in valuation allowance ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(0.46)

0.63

Other ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(0.13)(0.95)

Effective tax rates ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

0.03 %

0.03 %(b) Deferred tax assets consist of the following:
As of
December 31, 2014

June 30, 2015

June 30, 2015
(in thousands of
U.S. dollars)(in thousands of yen)

Deferred tax assets:
Current:
Enterprise tax payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥‐

Rental receivables (merger) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

197

¥

489
186

$

3

Allowance for doubtful accounts ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

672

787

6

Total ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

870

1,463

11

1

Non‐current:
Buildings and other (merger) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

801,025

746,394

6,095

Land (merger) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

2,251,597

2,129,657

17,392Net loss carried forward ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

7,749,271

7,329,595

59,857

Subtotal ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

10,801,895

10,205,647

83,345

Valuation allowance ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(10,802,765)(10,207,110)(83,357)

Total ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙－Net deferred tax assets ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

－

－
¥

－

－
$

－

(c) Revision of the amount of deferred tax assets and liabilities by the change of income tax rate
With the “Act for Partial Revision of the Income Tax Act, Etc “(Act No. 9 of 2015) promulgated on March 31, 2015, the effective tax rateused to calculate deferred tax assets and deferred tax liabilities concerning temporary differences, etc. expected to be resolved inaccounting periods beginning on or after July 1, 2015 was changed to 32.31%.
As a result of this change, there is no effect on net deferred tax assets and income taxes.

1813. Leases(a) Lease rental revenues
The future minimum rental revenues pursuant to existing rental contracts as of December 31, 2014 and June 30, 2015 scheduled to bereceived are summarized as follows:
As of
December 31, 2014

June 30, 2015

June 30, 2015

(in thousands of yen)(in thousands of
U.S. dollars)

Due within one year ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

1,843,409$

Due over one year ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

15,485,197

Total ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

17,328,607¥

2,413,667

19,711

21,199,677¥

23,613,345

173,129$

192,840(b) Lease rental expenses
The future minimum rental expenses pursuant to existing rental contracts as of December 31, 2014 and June 30, 2015 scheduled to be
paid are summarized as follows:
As of
December 31, 2014

June 30, 2015

Due within one year ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

112,249

Due over one year ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

2,224,164

Total ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

2,336,413¥

June 30, 2015
(in thousands of
U.S. dollars)(in thousands of yen)

112,249$

2,168,039¥

2,280,288

916
17,705$

18,622

14. Financial Instruments(a) Qualitative information for financial instrumentsi.

Policy for financial instrument transactions

The Company raises funds through loans payable and the issuance of investment units to acquire real estate properties, pay
property maintenance expenses and/or repay existing loans payable. Surplus funds are managed carefully through investments
in financial instruments taking into account liquidity and safety in light of the current financial market conditions. Derivative
instruments are used only for hedging purposes and not for speculation. The Company did not enter into any derivativetransactions for the six months ended December 31, 2014 and June 30, 2015.
ii.

Nature and extent of risks arising from financial instruments and risk management

The funds raised through loans payable are mainly used to acquire real estate properties or properties in trust and for the
repayment of existing loans payable. Liquidity risks relating to loans payable are managed by the finance department of theAsset Manager by preparing monthly plans for funds, and monitoring the covenants defined in loan agreements.
iii.

Supplemental information for financial instruments

The fair value of financial instruments is based on quoted market prices if available. When quoted market prices are not available, fairvalue is estimated using valuation techniques which contain various assumptions. If other valuation models or assumptions were used,the estimated value may differ.
(b) Quantitative information for financial instruments
The following table shows the carrying amounts, fair values and valuation differences of financial instruments for which fairvalue is available as of December 31, 2014 and June 30, 2015.

19

As ofDecember 31, 2014
Carrying
amounts

June 30, 2015

Fair value

Carrying
amounts

Difference

June 30, 2015

Fair value

Carrying
amounts

Difference(in thousands of yen)

Fair value

Difference(in thousands of U.S. dollars)

Assets:Current:(1) Cash and bank deposits ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

9,153,872(2) Cash and bank deposits in trust. ∙∙∙∙∙

4,011,521

Total assets ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

13,165,393

Liabilities:(3)Current portion of long‐termloans payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

9,153,872

－

¥

¥

¥

2,691,921－

4,011,521
13,165,393

－

¥

¥

2,691,921

4,822,622¥¥

7,514,543¥

7,514,543－$－

4,822,622¥－

21,983$39,384$61,36821,983

$

－

$

－

－

39,384$61,3681,200,000

1,200,000－

62,341,000

62,341,000－

509,113509,113－(4) Long‐term loans payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(5) Current portion of long‐term loans
payable in trust. ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

56,100,000

56,100,000

－

－

－

－

－

－

－

18,167

18,25184

9,960,000

9,960,000－

81,33981,339－(6) Long‐term loans payable in trust. ∙∙∙9,941,832

10,156,234

214,401

－

－

－

－

－

Total liabilities ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

67,260,000¥

67,474,486¥

214,486¥

72,301,000¥

72,301,000

¥

－

$

590,453$

590,453

－
－

$

Notes
i.

The methods and assumptions used to estimate fair value are as follows:(1) Cash and bank deposits and (2) Cash and bank deposits in trust
Because of their short maturities, the carrying amounts approximate their fair value.
(3) Current portion of long‐term loans payable, (4) Long‐term loans payable, (5) Current portion of long‐term loans payable in trust and (6) Long‐term loans payable
in trust
The fair values of long‐term loans payable 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 loans payable under the same conditions and terms. Long‐term loans payable with floating interest rates reflecting changes inmarket rates within a short term period are stated at their carrying amounts as their carrying amounts approximate their fair values.

ii.

Financial instruments for which fair value is difficult to determine are as follows:
As of
December 31, 2014

June 30, 2015

June 30, 2015
(in thousands of
U.S. dollars)(in thousands of yen)

Tenant leasehold and security deposits ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

28,663Tenant leasehold and security deposits in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙

1,109,146¥

28,663$

1,420,014

234
11,596

Tenant leasehold and security deposits are not publicly traded, and it is difficult to determine their fair value based on estimated future cash flows because the repayment datesof those deposits are not certain. Therefore, these financial instruments are not included in the above quantitative information.
iii.

Cash flow schedule of financial assets after the balance sheet dateWithin 1 year

1‐2 years

2‐3 years

3‐4 years

4‐5 years

Over 5 years(in thousands of yen)

As of December 31, 2014:
Cash and bank deposits ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

9,153,872

Cash and bank deposits in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

4,011,521

¥

‐

¥

‐

Total ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

13,165,393

¥

‐

¥

‐

¥

‐

¥

¥

‐

¥

‐

¥

‐

¥

‐

¥

‐

‐

¥

‐

‐

¥

‐

‐

¥

‐

‐

¥

‐

¥

‐

‐

‐

As of June 30, 2015:
Cash and bank deposits ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

2,691,921

Cash and bank deposits in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

4,822,622

Total ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

7,514,543‐¥

Within 1 year‐‐¥

1‐2 years‐‐¥

2‐3 years‐‐¥

3‐4 years‐‐

4‐5 years

Over 5 years(in thousands of U.S. dollars)
As of June 30, 2015:
Cash and bank deposits ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙$

21,983

Cash and bank deposits in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

39,384

Total ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙$

61,368

$

‐

$

‐
$

‐

‐

$

‐
$

‐

‐

$

‐
$

‐

‐

$

‐
$

‐

‐
‐

$

‐

20

iv.

Cash flow schedule of financial liabilities after the balance sheet dateWithin 1 year

1‐2 years

2‐3 years

3‐4 years

4‐5 years

Over 5 years(in thousands of yen)
As of December 31, 2014:
Current portion of long‐term loans payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

1,200,000

Long‐term loans payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

‐

¥

‐

¥

Current portion of long‐term loans payable in trust ∙∙∙∙

18,167

‐

‐

‐

‐

‐

Long‐term loans payable in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙‐

73,807104,256

2,894,530

5,143,274

1,725,963

Total ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

1,218,167¥

73,807¥56,204,256¥

2,894,530

¥

¥

‐

¥

‐

¥

‐

¥

‐

‐

¥

‐

56,100,000

¥

‐

‐

¥

‐

‐

‐

5,143,274¥

1,725,963‐¥‐

As of June 30, 2015:
Current portion of long‐term loans payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

62,341,000

Long‐term loans payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

‐

‐

‐

‐

‐

‐

Current portion of long‐term loans payable in trust ∙∙∙∙

9,960,000

‐

‐

‐

‐

‐

Long‐term loans payable in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

‐

‐

‐

‐

‐

‐

Total ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

72,301,000¥

Within 1 year‐¥

1‐2 years‐¥

2‐3 years‐¥

3‐4 years‐¥

4‐5 years‐

Over 5 years(in thousands of U.S. dollars)
As of June 30, 2015:
Current portion of long‐term loans payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙$

509,113Long‐term loans payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

‐

‐

‐

‐

‐

‐

Current portion of long‐term loans payable in trust ∙∙∙∙

81,339

‐

‐

‐

‐

‐

Long‐term loans payable in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙‐

Total ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙$

590,453

$

‐

$

‐
$

‐

‐

$

‐
$

‐

‐

$

‐
$

‐

‐

$

‐
$

‐

‐

‐
$

‐

15. Segment Information
Effective from the six months ended June 30, 2011, the Company adopted “Accounting Standard for Disclosures about Segments of anEnterprise and Related Information” (ASBJ Statement No. 17, revised on March 27, 2009), and “Guidance on Accounting Standard forDisclosures about Segments of an Enterprise and Related Information” (ASBJ Guidance No. 20, issued on March 21, 2008).
Segment information for the six months ended December 31, 2014 and June 30, 2015 is as follows:(a) Operating Segment Information
Disclosure is omitted as the Company is comprised of a single reportable segment engaged in the property rental business.
(b) Enterprise‐wide Disclosures(i) Information about Products and Services
Disclosure is not required as revenues from external customers for the single segment are in excess of 90% of total revenues.
(ii) Information about Geographic Areas(1) Revenues from Overseas Customers:
Disclosure is not required as revenues from external customers located in Japan are in excess of 90% of total revenues.
(2)Tangible Fixed Assets:
Disclosure is not required as tangible fixed assets located in Japan are in excess of 90% of total tangible fixed assets.
(c) Information about Major Customers
Information about major clients for the six‐month periods ended December 31, 2014 and June 30, 2015 were as follows:21

For the six months ended December 31, 2014
Operating Revenues
Name of client

Related segment(in thousands of yen)

Mystays Hotel Management Co.,Ltd.

¥1,722,789

Real estate investing business

For the six months ended June 30, 2015
Operating Revenues

Operating Revenues(in thousands of yen)(in thousands of U.S. dollars)Name of client

Related segment

Mystays Hotel Management Co.,Ltd.

＄14,381¥1,760,999

Real estate investing business16. Related‐Party Transactions(a) Parent Company and Major Corporate Unitholders
For the six months ended December 31, 2014

Type of

Voting(in millions of yen)interest

Business

Balance at the end of period

Transactions for the period

Amounts (1)Relationship with

Company
Location

related‐party

Share capital

Amounts(1)in thethe Company

nameType of transactions

Compa(in thousands of yen)

Balance sheet account

yen)

ny
Zephyrus

Minato‐ku

Investment

TMK(3)

Tokyo

manageme

Nishi TMK(3)Minato‐ku,

Investment

Tokyo

¥

0.1

―

nt businessestate trust beneficiaryrights,(2)(5)Acquisition of real

managemetrust beneficiary

estate trust beneficiarynt businessrightsrights,(2)(5)Seller of real estate

beneficiary

trust beneficiaryrights,(2)(5)Minato‐ku,

Investment

holding TMK(3)Tokyo

manageme

Interested party

DanubeMinato‐ku,

Investmentof theAsset

TMK(3)

Tokyo

¥

0.1

279

―

―

nt business

Acquisition of real

managemetrust beneficiary

estate trust beneficiarynt businessrightsrights,(2)(5)Seller of real estate

Acquisition of realtrust beneficiary

estate trust beneficiary

Minato‐ku,

Investment

holding TMK(3)Tokyo

manageme

Aki TMK(3)Minato‐ku,

Investment

Tokyo

¥

¥

0.1

82

―

―

nt businessrightsrights,(2)(5)Seller of real estate

Acquisition of real

managemetrust beneficiary

estate trust beneficiarynt businessrightsrights,(2)(5)

Lease holder andRental Revenues.

Mystays Hotel

Minato‐ku,

HotelManagement,.

Tokyo

manageme¥ 14,878,412――¥ 4,473,000――¥ 7,594,980――¥ 3,845,400――¥ 2,514,820――¥ 6,631,968――¥ 1,722,789

Rental receivables

rightsSeller of real estate

Nagahoribashi

Co.Ltd(3)Acquisition of realtrust beneficiaryrightsShijodoriManagerSeller of real estate

Seller of real estate¥(in thousands of

¥

¥

0.1

100

―

―

540,064

operator of hotel

nt businessNotes:(1)(2)

Consumption taxes are not included in the transaction amount, but are included in the balance at the end of period.
Terms and conditions are decided pursuant to the Asset Manager’s Regulations on Transactions with Sponsor‐related Persons and the Management Manual regarding
Transactions with Sponsor‐related Persons.

(3)

The seller, Zephyrus TMK,Nishi TMK,Shijodori holding TMK,Danube TMK,Nagahoribashi holding TMK,Aki TMK and Mystays Hotel Management.,Co.Ltd has no
relationship to be stated, but they receives investment through funds that are managed by FIG, an affiliate of Calliope. Accordingly, we treat Zephyrus TMK ,Nishi
TMK,Shijodori holding TMK,Danube TMK,Nagahoribashi holding TMK,Aki TMK and Mystays Hotel Management.,Co.Ltd as a related party.

22

Calliope holds 609,942 units (holding ratio: 22.85%) of the issued investment units of the Company.

(4)

Sale price and acquisition price exclude adjusted amount of real property tax and city planning tax, as well as consumption tax and local consumption tax.

(5)

Acquisition of real estate trust beneficiary rights are relating to below
Acquisition cost(in thousands of yen)

Property nameSellerD3

Hotel MyStays Kyoto‐Shijo

Shijodori holding TMK

6,024,460

D4

MyStays Shin‐Urayasu Conference Center

Zephyrus TMK

4,930,200

D5Hotel MyStays Maihama

Zephyrus TMK

4,870,312

D6

Hotel Vista Premio Dojima

Danube TMK

3,845,400

D7

Hotel MyStays Nagoya‐Sakae

Zephyrus TMK

2,958,000

Hotel MyStays Sakaisuji‐Honmachi

Nagahoribashi holding
TMK

2,514,820

Hotel MyStays Yokohama

Zephyrus TMK

2,119,900

Property No.

D8
D9
D10

Hotel MyStays Nippori

Nishi TMK

1,898,540

D11

Hotel MyStays Fukuoka‐Tenjin‐Minami

Shijodori holding TMK

1,570,520

D12

Flexstay Inn Iidabashi

Aki TMK

1,381,660

D13

Hotel MyStays Ueno Inaricho

Nishi TMK

1,331,960

D14

Flexstay Inn Shinagawa

Nishi TMK

1,242,500

D15

Flexstay Inn Tokiwadai

Aki TMK

1,242,500

D16

Flexstay Inn Sugamo

Aki TMK

1,192,800

D17

Hotel MyStays Otemae

Aki TMK

1,192,800

D18

Flexstay Inn Kiyosumi Shirakawa

Aki TMK

749,476

D19

Flexstay Inn Nakanobu P1

Aki TMK

589,442

D20

Flexstay Inn Nakanobu P2

Aki TMK

283,290

Total

39,938,580

For the six months ended June 30, 2015

Type ofCompany

related‐party

nameLocation

Business

Balance at the end of period

Transactions for the period

Share capital
Voting(in(inmillions

thousanof yen)ds of U.S.

Amounts(1)Amounts (1)interest
Relationship within thethe Company

Type of transactions

Compa

dollars)(in thousands(inof yen)thousands of U.S.

ny

Balancesheet(in thousands(inof yen)thousandaccounts of U.S.
dollars)

dollars)
Zephyrus

Minato‐ku

Investment

TMK(3)

Tokyo

management

Nishi TMK(3)Minato‐ku,

Investment

Tokyo

¥

0.1

$

0

―

the Asset
Managertrust beneficiary

beneficiaryrightsrights,(2)(5)Acquisition of real estate

management

trust beneficiary

trust beneficiarybusinessrightsrights,(2)(5)

Lease holder andRental Revenues.

Mystays Hotel

Minato‐ku,

HotelManagement,.

Tokyo

manageme

Co.Ltd(3)Acquisition of real estate

trust

Seller of real estatebusiness
Interested party ofSeller of real estate

¥

¥

0.1

100

$

$

0

0

―

―

¥ 2,792,000$ 22,801―――¥ 2,119,000$ 17,305―――¥ 1,760,999$ 14,381

Rental

501,272

4,093

operator of hotel

receivabl

nt businesses

Notes:(1)(2)

Consumption taxes are not included in the transaction amount, but are included in the balance at the end of period.
Terms and conditions are decided pursuant to the Asset Manager’s Regulations on Transactions with Sponsor‐related Persons and the Management Manual regarding
Transactions with Sponsor‐related Persons.

(3)

The seller, Zephyrus TMK, Nishi TMK, and Mystays Hotel Management., Co. Ltd has no relationship to be stated, but they receives investment through funds that are(4)

Calliope holds 609,942 units (holding ratio: 22.85%) of the issued investment units of the Company.

managed by FIG, an affiliate of Calliope. Accordingly, we treat Zephyrus TMK, Nishi TMK, and Mystays Hotel Management., Co. Ltd as a related party.

(5)

Sale price and acquisition price exclude adjusted amount of real property tax and city planning tax, as well as consumption tax and local consumption tax.
Acquisition of real estate trust beneficiary rights are relating to below
Property nameSellerD22

Hotel Nets Hakodate

Zephyrus TMK

2,792,000

Acquisition cost(in thousands of U.S. dollars)
22,801

D23

Flexstayinn Shirogane

Nishi TMK

2,119,000

17,305

4,911,000

40,106

Property No.

Total

Acquisition cost(in thousands of yen)23

(b) Board of Directors and Major Individual Unitholders
For the six months ended December 31, 2014
Transactions for the period

VotingType ofinterest in
Name

Balance at the end of period
Amounts (3)BalanceAmounts (3)Business / Occupation

related‐party

theType of transactions

sheet(in thousands of yen)Company
Directors andNaoki

Executive officer of the Company

close relatives

Fukudaand management director of―

Payment of the assets management¥

128,993

fee to Consonant Investment

Consonant Investment

Management Co., Ltd.(1)Management Co., Ltd.

Payment of institution management(in thousands of yen)account
Accrued¥67,500¥864

expenses¥

1,100

fee to Consonant Investment

Accruedexpenses

Management Co., Ltd.(2)Notes:(1)

Naoki Fukuda serves as a representative of the Asset Manager and the asset management fee is established in the Articles of Incorporation of the Company.

(2)

Naoki Fukuda serves as a representative of Asset Manager and the fee is established in the “Administrative Agency Agreement for Organizational Management” which wasagreed between the Asset Manager and the Company.

(3)

Consumption taxes are not included in the transaction amount, but are included in the balance at the end of period.

For the six months ended June 30, 2015
Transactions for the period
Amounts (3)VotingType of

Balance at the end of period
Amounts (3)interest in
Name

BalanceBusiness / Occupation

related‐party

theType of transactions(in thousands(in thousandsof U.S.

Company

accountof yen)

(in
(in

sheet

thousands
thousandsof U.S.

dollars)of yen)dollars)

Directors andNaoki

Executive officer of the Company―

Payment of the assets management

close relatives

Fukudaand management director offee to Consonant Investment

Consonant Investment

Management Co., Ltd.(1)Management Co., Ltd.

Payment of institution management¥

180,000$

1, 469Accrued¥97,200

$

793

¥

864

$

7

expenses¥600

fee to Consonant Investment$

4

Accruedexpenses

Management Co., Ltd.(2)Notes:(1)

Naoki Fukuda serves as a representative of the Asset Manager and the asset management fee is established in the Articles of Incorporation of the Company.

(2)

Naoki Fukuda serves as a representative of Asset Manager and the fee is established in the “Administrative Agency Agreement for Organizational Management” which was(3)Consumption taxes are not included in the transaction amount, but are included in the balance at the end of period.

agreed between the Asset Manager and the Company.

17. Per Unit Information
The following table shows net asset value per unit as of December 31, 2014 and June 30, 2015, and net income per unit for the six months
then ended. Net income per unit is calculated by dividing the net income attributable to unitholders by the weighted average number ofunits outstanding during the six‐month period. The Company has no potentially dilutive units.
As of / For the six months ended
December 31,
June 30,
June 30,
2014
2015
2015
(Yen)
¥

(U.S. dollars)

Net asset value per unit ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

23,005

Net income per unit ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

762

23,132
860

$

188
7

Weighted average number of units ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

2,570,932

2,668,686－

24

18．Subsequent Events(a) Issuance of New Investment Units
The Company resolved at its meeting of the board of directors held on June 25, 2015 and July 8, 2015 respectively to conduct theissuance of new investment units and secondary distribution of investment units. Payment for the new investment units issued
via public offering was completed on July 15, 2015. In addition, with respect to the issuance of new investment units through thethird‐party allotment in connection with the overallotment for the public offering, the payment was completed on August 12,
2015. As a result, Unitholdersʹ capital has become JPY 82,465 million and the number of investment units issued and outstanding
has become 3,193,686 units.

(i) Issuance of new investment units through public offering:(a) Number of investment units

500,000 units
Domestic public offering : 211,250 units
International offering(b) Issue price (offer price):

JPY 57,817 per unit(c) Total issue price (total offer price):

JPY 28,908,500,000(d) Amount paid in (issue value):

JPY 55,941 per unit(e) Total amount paid in (total issue value):

JPY 27,970,500,000(f) Payment date:July 15, 2015

: 288,750 units(ii) Secondary offering of investment units (overallotment secondary offering)(a) Number of investment units:

25,000 units(b) Offer price:

JPY 57,817 per unit(c) Total offer value:

JPY 1,445,425,000(d) Delivery date:July 16, 2015(iii) Issuance of new investment units through third‐party allotment(a) Number of new investment units:

25,000 units(b) Amount paid in:

JPY 55,941 per unit:

JPY 1,398,525,000(d) Payment date:August 12, 2015(e) Allotee:

Mizuho Securities Co., Ltd.

(issue value)(c) Total amount paid in(total issue value)(b) New borrowings
The Company borrowed money on July 16, 2015 to fund a portion of the acquisition of 11 hotel properties and 3 residential
properties and to obtain a new syndicate loan (New Syndicate Loan (E)) to refinance the New Syndicate Loan (C)(D), together
with the Prudential LPS Loan B.
New Syndicate Loan (E)(a) Lender:

Sumitomo Mitsui Banking Corporation
The Bank of Tokyo‐Mitsubishi UFJ, Ltd.
Mizuho Bank, Ltd.
Shinsei Bank, Limited
Citibank Japan Ltd.
Sumitomo Mitsui Trust Bank, Limited
Resona Bank, Limited
Mitsubishi UFJ Trust and Banking Corporation(b) Borrowing amount:JPY 88,338 million(c) Interest rate:

One‐month JPY TIBOR + spread (0.20, 0.40, 0.50, 0.60%)(d) Interest payment date:

Last business day of each month from borrowing date through principal maturity date,with the first interest payment date set on July 31, 2015.

(e) Method of principal repayment:

To be repaid in full on each principal maturity date(f) Borrowing method:

No secured / with no guarantee

25

(g) Borrowingdate:

July 16, 2015(h) Principal maturity date:

May 16, 2016,July16,2018,July16,2019,July16,2020

Furthermore, the Company borrowed money on August 28, 2015 to fund a portion of the acquisition of 3 hotels.
Term Loan (A)(a) Lender:

Mizuho Bank, Ltd.

(b) Borrowing amount:JPY 3,682million(c) Interest rate:

One‐month JPY TIBOR + spread (0.50%)(Note)(d) Interest payment date:

Last business day of each month from borrowing date through principal maturity date,(e) Method of principal repayment:

with the first interest payment date set on September 30, 2015.
To be repaid in full on the principal maturity date(f) Borrowing method:

No secured / with no guarantee(g) Borrowingdate:

August 28, 2015(h) Principal maturity date:August 28, 2019

(Note) The interest rate applicable for the first interest calculation period only will be two‐month JPY TIBOR (Base Rate) + spread (0.5%).

(c) Prepayment of Existing Borrowings
The Company carried out prepayment of existing borrowings in order to reduce borrowing costs and acquisition of the 11 hotel
properties and 3 residential properties.
The overview of prepayment is as follows:
New Syndicate Loan (C)(a) Lender:

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
Resona Bank, Limited(b) Outstanding borrowing amount before prepayment:

JPY 56,100 million(c) Interest rate:

One‐month JPY TIBOR + spread (0.80%)(d) Borrowing method:

Secured / with no guarantee(e) Borrowingdate:

July 17, 2014(f) Principal maturity date:July 14, 2017(g) Prepaymentdate:

July 16, 2015(h) Prepayment amount:

JPY 56,100 million(i) Outstanding borrowing amount after prepayment

:

JPY 0

:

Sumitomo Mitsui Banking Corporation

New Syndicate Loan (D)(a) Lender

The Bank of Tokyo‐Mitsubishi UFJ, Ltd.
Mizuho Bank, Ltd.
Citibank Japan Ltd.
Shinsei Bank, Limited
Sumitomo Mitsui Trust Bank, Limited
Resona Bank, Limited(b) Outstanding borrowing amount before prepayment:

JPY 6,241 million(c) Interest rate:

One‐month JPY TIBOR + spread (0.80%)(d) Borrowing method:

Secured / with no guarantee(e) Borrowingdate:

February 6, 2015(f) Principal maturity date:February 6, 2018(g) Prepaymentdate:

July 16, 201526

(h) Prepayment amount:JPY 6,241 million(i) Outstanding borrowing amount after prepayment

:

JPY 0

:

Prudential Mortgage Asset Holdings 1 Japan Investment Limited Partnership

Prudential LPS Loan B(a) Lender(b) Outstanding borrowing amount before prepayment:

JPY 9,960 million(c) Interest rate:

1.90% Fixed interest rate(d) Borrowing method:

Secured / with no guarantee(e) Borrowingdate:

September 28, 2012(f) Principal maturity date:

March 31, 2018,March 31, 2019,March 31, 2020(g) Prepaymentdate:

July 16, 2015(h) Prepayment amount:

JPY 9,960 million(i) Outstanding borrowing amount after prepayment

:

JPY 0

(d) Acquisition of Assets
The Company acquired the 14 properties on July 16, 2015.
The overview of 14 properties is as follows,

Use

Location

Acquisition
Price(JPY million)(Note 1)

Total rentable
area

Hotel Mystays Haneda

Ota‐ku, Tokyo

7,801

5,400.16 ㎡

Hotel Mystays Kameido P1

Koto‐ku, Tokyo

5,594

4,349.67 ㎡

Taito‐ku, Tokyo

3,821

2,247.92 ㎡

Koto‐ku, Tokyo

3,742

2,793.99 ㎡

2,198

3,559.81 ㎡

Minato‐ku, Tokyo

1,624

1,403.89 ㎡

Kita‐ku, Tokyo

1,277

1,714.53 ㎡

1,237

11,733.23 ㎡

980

1,190.57 ㎡

979

3,305.64 ㎡

Property
Number

Property Name

D24

D25

D26

Hotel Mystays Ueno
Iriyaguchi

D27

Hotel Mystays Kameido P2

D28

Hotel Vista Shimizu

Shizuoka‐shi,Shizuoka

SellerCategory ofSpecified Assets

Skye TokuteiMokuteki

Trust Beneficial

KaishaInterest

Nishi TokuteiMokuteki

Trust Beneficial

KaishaInterest

Rannoch TokuteiMokuteki

Trust Beneficial

KaishaInterest

Nishi TokuteiMokuteki

Trust Beneficial

KaishaInterest

Wakusei TokuteiMokuteki

Trust Beneficial

KaishaInterest

Suisei TokuteiMokuteki

Trust Beneficial

KaishaInterest

Aki TokuteiMokuteki

Trust Beneficial

KaishaInterest

Hotel
D29

Super Hotel Shinbashi/
Karasumoriguchi

D30

Flexstay Inn Higashi‐Jujo

D31

Hotel MyStays Utsunomiya

D32

D33

Utsunomiya‐shi,Tochigi

Flexstay Inn

Kawasaki‐shi,

Kawasaki‐Kaizuka

Kanagawa

Comfort Hotel Toyama

Toyama‐shi,EkimaeToyamaZephyrus

Trust Beneficial

TokuteiMokuteki Kaisha

Interest

Rannoch TokuteiMokuteki

Trust Beneficial

KaishaInterest

Suisei TokuteiMokuteki

Trust Beneficial

KaishaInterest

27

Property
NumberUse

D34

Property Name

Location

Flexstay Inn Kawasaki‐

Kawasaki‐shi,

Ogawacho

Kanagawa

Subtotal

Residential

Sapporo‐shi,

Acquisition
Price(JPY million)(Note 1)

Total rentable
area

906

725.6 ㎡

30,15938,425.01 ㎡

1,782

5,230.18 ㎡

Godo Kaisha Baretta

SellerCategory ofSpecified Assets

Rannoch TokuteiMokuteki

Trust Beneficial

KaishaInterest

A100

City Court Kitaichijo

A101

Lieto Court Mukojima

Sumida‐ku, Tokyo

1,683

2,940.20 ㎡

Godo Kaisha Baretta

A102

Lieto Court Nishi‐Ojima

Koto‐ku, Tokyo

1,634

2,048.28 ㎡

Godo Kaisha Baretta

Subtotal

5,099

10,218.66 ㎡

Total

35,25848,643.67 ㎡(Note 1)

Hokkaido

Trust Beneficial
Interest

Trust Beneficial
Interest

Trust Beneficial
Interest

Acquisition prices do not include adjustments for property taxes or city planning taxes, or national or local consumption taxes; hereinafter the same.

Furthermore, the Company acquired the 3 properties on August 28, 2015.
The overview of 3 properties is as follows,

Use

Property
Number

Property Name

Location

Acquisition Price(JPY million)(Note 1)

Total rentable area

D35

Flexstay Inn Ekoda

Nerima‐ku, Tokyo

5,069

3,932.93 ㎡

SellerNishi Tokutei
Mokuteki
KaishaCategory ofSpecified Assets

Trust

Beneficial

Interest

Super Hotel
Hotel

D36

Tokyo‐JRTachikawa‐shi,Tachikawa

Tokyo

1,170

1,832.97 ㎡

1,130

1,279.16 ㎡

7,369

7,045.06 ㎡

Tsukiji One

Trust

Godo Kaisha

Interest

Beneficial

Kitaguchi

D37

Super Hotel JR
Ueno‐Iriyaguchi

Total(Note 1)

Taito‐ku, Tokyo

Tsukiji One

Trust

Godo Kaisha

Interest

Beneficial

Acquisition prices do not include adjustments for property taxes or city planning taxes, or national or local consumption taxes; hereinafter the same.

28