Disclaimers
This document has been prepared solely for the purpose of providing U.K. and Dutch
investors with certain information under Article 23 of the European Alternative Investment
Fund Managers Directive (European Directive 2011/61/EU) (the “AIFMD”) as
implemented in their respective jurisdictions. Accordingly, you should not use thisdocument for any other purpose.
Prohibition of Sales to EEA Retail Investors
In addition to the restrictions under the AIFMD, the units of Ichigo Hotel REIT Investment
Corporation (“IHR” or the “AIF”) are not intended to be offered, sold or otherwise madeavailable to and should not be offered, sold or otherwise made available to any retail investor
in the European Economic Area (the “EEA”). For these purposes, a retail investor means aperson who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of
Directive 2014/65/EU, as amended (the “MiFID II”), including any client, beneficiary,principal, or similar of any person acting as a trustee, agent, nominee, or similar; or (ii) a
customer within the meaning of Directive (EU) 2016/97, where that customer would not
qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II; or (iii)
not a qualified investor as defined in Regulation (EU) 2017/1129, as amended (the“Prospectus Regulation”). Consequently no key information document has been preparedrequired by Regulation (EU) No 1286/2014 (the “PRIIPs Regulation”) for offering or sellingthe units of IHR or otherwise making them available to retail investors in the EEA.
Therefore offering or selling the units of IHR, or otherwise making them available, to any
retail investor in the EEA may be unlawful under the PRIIPs Regulation.
Prohibition of Sales to UK Retail Investors
In addition to the restrictions under the AIFMD, as retained by the United Kingdom in its
domestic laws, the units of IHR are not intended to be offered, sold or otherwise madeavailable to and should not be offered, sold or otherwise made available to any retail investor
in the United Kingdom. For these purposes of this provision, a “retail investor” means aperson who is one (or more) of: (i) a retail client, as defined in point (8) of Article 2 of theProspectus Regulation as it forms part of domestic law by virtue of the European Union(Withdrawal) Act 2018 (“EUWA”); (ii) a customer within the meaning of the provisions of
the Financial Services and Markets Act 2000 (the “FSMA”) and any rules or regulations
made under the FSMA to implement Directive (EU) 2016/97, where that customer would
not qualify as a professional client, as defined in point (8) of Article 2(1) of Regulation (EU)1

No 600/2014 as it forms part of domestic law by virtue of the EUWA; or (iii) not a qualified
investor as defined in Article 2 of Regulation (EU) 2017/1129, as it forms part of domestic
law by virtue of the EUWA; and the expression “offer” includes the communication in any
form and by any means of sufficient information on the terms of the offer and the units tobe offered so as to enable an investor to decide to purchase or subscribe the international
units. Consequently no key information document required by Regulation (EU) No
1286/2014, as it forms part of domestic law by virtue of the EUWA (the “UK PRIIPs
Regulation”), for offering or selling the units or otherwise making them available to retailinvestors in the United Kingdom has been prepared and therefore offering or selling theunits or otherwise making them available to any retail investor in the United Kingdom may
be unlawful under the UK PRIIPs Regulation.
United Kingdom
The units of IHR are being marketed in the United Kingdom pursuant to Article 59 of theUnited Kingdom Alternative Investment Fund Managers Regulations 2013. In accordancewith this provision, Ichigo Investment Advisors Co., Ltd. (the “AIFM” or the “AssetManager”) has notified the Financial Conduct Authority (the “FCA”) of its intention to offer
these units in the United Kingdom. For the purposes of the FSMA, IHR is an unregulated
collective investment scheme which has not been authorized by the FCA. Accordingly, any
communications of an invitation or inducement to invest in IHR may be made only to: (i)investment professionals falling within Article 19(5) of the Financial Services and Markets
Act 2000 (Financial Promotion) Order 2005, as amended, or “the Order”; (ii) high net worth
companies, unincorporated associations or other entities falling within Articles 49(2)(a) to(d) of the Order; or (iii) other persons to whom it may lawfully be communicated (all such
persons together being referred to as “Relevant Persons”). In the United Kingdom, thisdocument and its contents are directed only at Relevant Persons and must not be acted onor relied on by persons who are not Relevant Persons. The transmission of this document
and its contents in the United Kingdom to any person other than a Relevant Person isunauthorized and may contravene the FSMA and other United Kingdom securities laws andregulations.
European Economic Area and United Kingdom Investors
The AIFMD was adopted on June 8, 2011 and was required to be implemented by each
Member State of the EEA into its national legislation by July 22, 2013. The units of IHR
may not be marketed (within the meaning given to the term “marketing” under the AIFMD),
and the Communication may not be conducted, to prospective investors domiciled or with2

a registered office in any Member State of the EEA or the United Kingdom unless: (i) theunits of IHR may be marketed under any national private placement regime (including underthe AIFMD) or other exemption in that Member State or the United Kingdom (asapplicable); or (ii) the units of IHR can otherwise be lawfully marketed or sold in that
Member State or the United Kingdom (as applicable) in circumstances in which the AIFMD
does not apply, provided that any such offer or sale is not made to a retail investor as
described above. We have made a notification to each of the Netherlands Authority for the
Financial Markets (Authoriteit Financiële Markten, the “AFM”) and the United Kingdom
Financial Conduct Authority pursuant to Article 42 of the AIFMD in order to market theunits of IHR in the Netherlands and the United Kingdom, respectively.
Netherlands
The units of IHR are being marketed in the Netherlands under Section 1:13b of theNetherlands Financial Supervision Act (Wet op het financieel toezicht, or the “Wft”). In
accordance with this provision, the AIFM has notified the AFM of its intention to offer theseunits in the Netherlands. The units of IHR will not, directly or indirectly, be offered, sold,transferred or delivered in the Netherlands, except to or by individuals or entities that are
qualified investors (gekwalificeerde beleggers) within the meaning of Article 1:1 of the Wft.
As a consequence, neither the AIFM nor IHR is subject to the license requirement forinvestment institutions (beleggingsinstellingen) or their managers pursuant to the Wft.
Consequently, the AIFM and IHR are only subject to the supervision of the Dutch Central
Bank (De Nederlandsche Bank) or the AFM for the compliance with the ongoing regulatory
requirements as referred to in the Dutch law implementation of Article 42 of the AIFMD.
According to Article 23 of the AIFMD the prospectus is not subject to approval by the AFM.
No approved prospectus is required to be published in the Netherlands pursuant to Article 3of the Prospectus Regulation as applicable in the Netherlands.

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

IHR is an investment corporation (toshi hojin) that invests in hotel

AIF

properties in Japan, aiming to secure stable earnings in mid- to long-term.
IHR seeks to establish a portfolio of properties that generates stablerevenues as well as potential income growth through increased demands
by hotel users.

Investment

IHR primarily invests in hotel properties in Japan with a focus on what westrategy

call “lodging-focused hotel properties”, hotel properties that are located athigh customer traffic areas such as areas around terminal train stations,business centers and shopping centers, and serve simply as convenient
places for customers to stay at attractive rates with minimal services andfacilities. Once the performance of the portfolio stabilizes, IHR also plans
to invest in full-service hotels and resort hotels with high growthpotentials. Leveraging know-hows and sourcing capabilities as well as
value-add capabilities of Ichigo Inc., IHR’s sponsor and the parent of the
AIFM, IHR aims to actively manage and grow IHR’s portfolio both
externally and organically. IHR’s decision-making process when investingin a hotel asset is based on its valuation of the expected total cash flowfrom hotel operations, estimates of future hotel rates, and holistic analysisof the profitability of the investment opportunity.

Types of assets theReal estate, leasehold rights, and surface rights (chijō-ken) to real estate,

AIF may invest inincluding trust beneficiary interests therein, real estate-backed securities,
equity interests in corporations holding overseas real estate, specified
assets and other assets.

Techniques it may

IHR primarily invests in real estate assets used for hotels and aims toemploy and all

establish a portfolio for which stable cash flow and future growth byassociated risks

increased demands for hotel usage is expected. The principal risks withrespect to investment in IHR are as follows:•

any adverse conditions in the Japanese economy and hotelindustry could adversely affect IHR;•

IHR may not be able to close acquisitions or disposition ofproperties;•

IHR may not be able to acquire properties to execute the growthand investment strategy in a manner that is accretive to earnings;•

illiquidity in the real estate market may limit the ability to grow or
adjust the portfolio;•

IHR’s reliance on IHR’s related parties, the AIFM and its relatedparties could have a material adverse effect on its business;4•

IHR’s reliance on its directors and the AIFM’s personnel could
have a material adverse effect on IHR’s business;•

IHR’s reliance on tenants (hotel operators) and other third parties
could have a material adverse effect on its business;•

IHR’s policy to utilize CAPEX for increasing the value of hotel
properties may not be successful, and costs for maintenance andrenewal of FF&E could have a material adverse impact on IHR’soperations;•

IHR may change its detailed investment policy without a formal
amendment of the Articles of Incorporation;•

there are potential conflicts of interest between IHR, the AIFM
and its related parties, including those arising among the AIF andprivate funds or other investors, to which the AIFM provides
investment management or advisory services;•

IHR’s revenues largely consist of leasing revenues from theportfolio properties, which may be negatively affected by factors
such as vacancies, decreases in rent or sales (including decrease ofvariable rent due to decline of tenants’ sales), and late or missed
payments by tenants;•

a number of IHR’s hotel properties are generally expected to caterto a single tenant and are typically designed for a specific use,which may make it difficult to find substitute tenants;•

IHR may find difficulty finding suitable tenants because of thespecific know-hows and management capabilities to be able tooperate hotels and ancillary facilities;•

increases in interest rates may increase the interest expense andmay result in a decline in dividends and market price of the units;•

IHR may suffer large losses if any of the properties incurs damage
from a natural or man-made disaster;•

any inability to obtain financing or refinancing from issuance ofinvestments units, loan and issuance of investment corporation
bonds for future acquisitions could adversely affect the growth ofthe portfolio;•

IHR’s failure to satisfy a complex series of requirements pursuant
to Japanese tax regulations would disqualify IHR from certain
taxation benefits and significantly reduce the cash distributions to
its unitholders;5•the ownership rights in some of the properties may be declaredinvalid or limited; and•support from IHR’s related parties may not achieve the anticipatedresults.

In addition, IHR is subject to the following risks:•

risks related to operation of hotels and ancillary facilities;•risks related to specialization in investment in hotels and ancillaryfacilities;•risks related to seasonality of its performance;•risks related to maintenance of facilities and infrastructure;•risks related to increasing operating costs;•

risks related to franchise arrangements and brand licensing
agreements;•

risks related to IHR’s dependence on the efforts of the AIFM’s
key personnel;•risks related to the restrictive covenants under debt financing
arrangement;•risks related to entering into forward commitment contracts;•

risks related to third party leasehold interests in the land
underlying IHR’s properties;•risks related to holding the property in the form ofcompartmentalized ownership (kubun shoyū) interests or coownership interests (kyōyū-mochibun);•risks related to holding the properties through trust beneficiaryinterests;•

risks related to properties not in operation (including properties
under development);•risks related to the defective title, ground, design, construction orother defects, problems or nonconformity to contracts with respect
to the properties;•risks related to suffering impairment losses relating to theproperties;•risks related to decreasing tenant leasehold deposits and/or
security deposits;•risks related to lease termination, decreased lease renewals, anddefaults of tenants as a result of financial difficulty or insolvency;•

risks related to relying on expert appraisals and engineering,
environmental and seismic reports;6•risks related to COVID-19 pandemic;•risks related to the presence of hazardous or toxic substances in
the properties, or the failure to properly eliminate such substances;•risks related to the strict environmental liabilities for theproperties;•risks related to the amendment of the applicable administrative
laws and local ordinances;•risks related to investments in anonymous associations (tokumei
kumiai) interests;•

risks related to the tight supervision by the regulatory authorities;•risks related to the tax authority’s disagreement with the AIF’s
understanding of Japanese tax laws and regulations;•risks related to being unable to benefit from reductions in certain
real estate taxes enjoyed by qualified J-REITs;•

risks related to changes in Japanese tax laws; and•the risk of dilution as a result of further issuances of units.

Any applicable

IHR is subject to investment restrictions under Japanese laws andinvestment

regulations (e.g., the Act on Investment Trusts and Investment

restrictions

Corporations (the “ITA”), the Financial Instruments and Exchange Act(the “FIEA”)) as well as its Articles of Incorporation.
IHR must invest primarily in specified assets as defined in the ITA.
Specified assets include, but are not limited to, securities, real estate,leaseholds of real estate, surface rights (chijō-ken) (i.e., right to use land
for the purpose of having a structure on it) or trust beneficiary interests forsecurities, real estate, leaseholds of real estate or surface rights.
Furthermore, a listed J-REIT must invest substantially all of its assets inreal estate, real estate-related assets and liquid assets as provided by thelisting requirements. Real estate in this context includes, but is not limited
to, real estate, leaseholds of real estate, surface rights, and trust beneficiaryinterests for these assets, and real estate-related assets in this context
include, but are not limited to, anonymous association (tokumei kumiai)interests for investment in real estate.
Pursuant to the ITA, investment corporations may not independently
develop land for housing or to construct buildings, but may outsource suchactivities in certain circumstances.

7

Circumstances in

IHR may borrow funds or issue long-term or short-term investment

which the AIF

corporation bonds for the purpose of investing in properties, paying

may use leveragevarious costs, including for repair, or cash distributions, obtaining
operating funds, repaying obligations (including repayment of tenantleasehold or security deposits, and obligations related to loans or long-termor short-term investment corporation bonds) and other activities.

The types and

IHR currently has outstanding loans and investment corporation bonds.

sources of

IHR currently does not have any outstanding guarantees, but may beleverage permitted

subject to restrictive covenants in connection with any future indebtedness

and associatedthat may restrict the operations and limit the ability to make cash

risks

distributions to unitholders, to dispose of the properties or to acquire
additional properties.
Furthermore, IHR may violate restrictive covenants contained in the loan
agreements IHR executes, for example with regard to the maintenance ofdebt service coverage or loan-to-value ratios, which may entitle the lenders
or bondholders to require IHR to collateralize the properties or demandthat the entire outstanding balance be paid ahead of scheduled payments.
Further, in the event of an increase in interest rates, to the extent that IHR
has any debt with unhedged floating interest rates or IHR incurs new debt,
interest payments may increase, which in turn could reduce the amount ofcash available for distributions to unitholders. Higher interest rates may
also limit the capacity for short- and long-term borrowings, which wouldin turn limit the ability to acquire properties, and could cause the market
price of the units to decline.

Any restrictions

The maximum permitted amount of each loan and investment corporationon leveragebond issuance is one trillion yen, and the aggregate amount of all suchdebt may not exceed one trillion yen.

Any restrictions

No applicable arrangements.

on collateral andasset reusearrangements
Maximum level of

IHR has set an upper limit of 60% as a general rule for its loan-to-value, orleverage which the

LTV, ratio in order to operate with a stable financial condition. IHR may,

AIFM is entitledhowever, temporarily exceed such levels as a result of property

to employ on

acquisitions or other events.

behalf of the AIF

8

Article 23(1) (b)Procedure by

Changes to IHR’s basic investment policy require an amendment to thewhich the AIF

Articles of Incorporation. Such amendment requires a quorum of a

may change its

majority of the total issued units and at least a two-thirds vote of the voting

investmentrights represented at a general meeting of unitholders. Unitholders should

strategy /note, however, that under the ITA and the Articles of Incorporation,

investment policy

unitholders who do not attend and exercise their voting rights at a general
meeting of unitholders are deemed to have agreed with the proposals
submitted at the meeting and be counted towards affirmative votes, except
in cases:(a) where proposals that are in conflict with the proposals are also being
submitted; or(b) where with respect to proposals on (i) appointment or dismissal of an
executive director or supervisory director, (ii) execution or
termination of the asset management agreement with the AssetManager, (iii) dissolution of IHR, (iv) reverse unit split, (v)exemption of liability for an executive director, supervisory director
or accounting auditor and/or (vi) consent to an agreement for merger,
a. unitholder(s) who have continued to hold 1/100 or more of
the total investment units of IHR for more than six months
notifies IHR (or both of IHR and the convener of the meetingof the general meeting of unitholders if the convener is not
an executive director or supervisory director of IHR) of its
opposition to the proposals within two weeks from the day
IHR announces such proposal(s) on its website or the datethe convener of the general meeting of unitholders
announced of such proposal(s) in an equivalent manner; orb. IHR expresses its opposition to the proposal(s) on the noticeof general meeting of unitholders or through the website.
Additionally, the investment guidelines of the AIFM, which provide moredetailed policies based on IHR’s basic investment strategy and policy, canbe modified without such formal amendment of the Articles ofIncorporation or the unitholders’ approval.

Article 23(1) (c)Description of the

IHR has entered into an asset management agreement with the Assetmain legal

Manager. Also, IHR has entered into a sponsor support agreement with

implications of the

Ichigo Inc., pursuant to which Ichigo Inc. provides IHR with various kinds

contractualof support, including introduction of IHR to its network of financial

9relationshipinstitutions which may provide debt financing to IHR, and potential

entered into forinvestors, provision of advice and information regarding potential property

the purpose of

acquisition / disposition opportunities, and other consulting services.

investment,

These contracts are governed by Japanese law.

includingjurisdiction,
applicable law,and the existenceor not of any legal
instruments
providing for therecognition andenforcement of
judgments in the
territory where the
AIF is established

IHR is not involved in or threatened by any lawsuits, arbitrations,administrative or other proceedings, the results of which would,
individually or in the aggregate, be material.
IHR is a corporate-type investment trust in the form of investment
corporation (toshi hojin) provided for under the ITA. Therefore, therelationship between IHR and its unitholders is governed by the Articles ofIncorporation (as opposed to individual agreements), which can beamended from time to time upon resolution of a general meeting ofunitholders. The Articles of Incorporation stipulate rules relating to
general meetings of unitholders, including the convocation, setting ofrecord date, exercise of voting rights, resolutions and election of IHR’s
directors.
The relationship between IHR and its unitholders is also governed by, andis subject to the provisions of, Japanese law, including the ITA.
The courts in Japan would recognize as a valid and final judgment any
final and conclusive civil judgment for monetary claims (which, for thispurpose, are limited to those of a purely civil nature and do not include
monetary claims of the nature of criminal or administrative sanction, suchas punitive damages, even though they take the form of civil claims)
against IHR obtained in a foreign court provided that (i) the jurisdiction ofsuch foreign court is admitted under the laws of Japan, (ii) IHR has
received service of process for the commencement of the relevant
proceedings, otherwise than by a public notice or any method comparable
thereto, or has appeared without any reservation before such foreign court,(iii) neither such judgment nor the relevant proceeding is repugnant topublic policy as applied in Japan, (iv) there exists reciprocity as to therecognition by such foreign court of a final judgment obtained in a
Japanese court and (v) there is no conflicting judgement on the subject
matter by any Japanese court.

Article 23(1) (d)The identity of the• AIFM (Asset Manager): Ichigo Investment Advisors Co., Ltd.

AIFM, AIF’s

The AIFM provides services related to asset management, financing ofdepository, auditor

the AIF, reporting to the AIF, and other matters delegated by the AIF.

10

and any otherservice providers• Auditor: Grant Thornton Taiyo LLC

and a description

The Auditor audits financial statements, prepares audit reports, andof their duties andreports to the supervisory directors if it finds any misconduct or any

the investors’material fact that is in violation of laws and regulations or the Articles

rights thereto

of Incorporation with regard to execution of the duties of the executive
director.
• Asset Custodian, Administrative Agent for Unitholders’ Register andGeneral Administrative Agent: Mizuho Trust & Banking Co., Ltd.
The Asset Custodian provides administrative services related to custodyof IHR’s assets.
The Administrative Agent for Unitholders’ Register provides
administrative services related to preparation and maintenance of theunitholders’ register, issuance of the investment units, payments of cash
distributions or refunds to unitholders, and unitholders’ exercise ofrights or any other requests from unitholders.
The General Administrative Agent provides administrative services
related to administration of board of directors’ meetings and general
meetings of unitholders, accounting matters, preparation of accounting
books and tax-related services.
• General Administrator (for investment corporation bonds): Sumitomo
Mitsui Banking Corporation
The General Administrator (for investment corporation bonds) provides
administrative services in connection with the AIF’s investment
corporation bonds.
Service providers owe contractual obligations to the AIF under theirrespective agreements with the AIF, as the case may be. In addition, the
FIEA provides that the Asset Manager owes the AIF a fiduciary duty andmust conduct its activities as the asset manager in good faith.
The FIEA also prohibits the Asset Manager from engaging in certain
specified conduct, including entering into transactions outside the ordinary
course of business or with related parties of the Asset Manager that arecontrary to or violate the AIF’s interests.

11

Pursuant to the ITA, the unitholders have the right to approve theexecution or termination of the asset management agreement at a general
meeting of unitholders.
Article 23(1) (e)Description of

Not applicable.

how the AIFM
complies with therequirements tocover professional
liability risks (ownfunds /
professional
indemnity
insurance)
Article 23(1) (f)Description of any
delegatedmanagement
function such as
portfolio

Not applicable.
There is no delegation of such functions beyond the AIFM, which is
responsible for portfolio and risk management, and the Asset Custodian,which is responsible for safekeeping activities.

management orrisk management
and of any
safekeeping
function delegatedby the depositary,
the identificationof the delegate andany conflicts ofinterest that may
arise from suchdelegations
Article 23(1) (g)Description of the

IHR makes investment decisions in accordance with its Articles of

AIF’s valuation

Incorporation and based on its investment strategies and the results of due

procedure anddiligence, which includes the valuation of properties and consideration ofpricing

the property appraisal value.

methodology,

12including the

IHR valuates assets in accordance with its Articles of Incorporation. The

methods used inmethods and standards that IHR uses for the valuation of assets are based

valuing hard-to-on the Ordinance on Accountings of Investment Corporations, as well as

value assets

the Regulations Concerning Real Estate Investment Trusts and Real Estate
Investment Corporations and other regulations stipulated by theInvestment Trusts Association, Japan, in addition to the ITA and Japanese
GAAP.
The rules of the Investment Trusts Association, Japan, emphasize theimportance of market price valuation.

Article 23(1) (h)Description of the

IHR takes the financial strategy that aims to secure stable revenues for a

AIF’s liquidity

mid- to long term as well as steady growth in portfolio size and stablerisk management,

asset management. IHR manages liquidity risk by implementing debt

includingfinancing, seeking optimal combination of short and long-term borrowing

redemption rights

and fixed and floating interest rate borrowing, and diversifying lenders andin normal andfinancing methods.

exceptional
circumstances andexisting

As IHR is a closed-end investment corporation, unitholders are not entitled
to request the redemption of their investment.

redemption
arrangements withinvestors
Article 23(1) (i)Description of all

Director:fees, charges and• Director Compensation:

expenses and a

The Articles of Incorporation provide that IHR may pay each of its

maximum amountexecutive directors and supervisory directors up to 800,000 yen perwhich is directly /month and up to 500,000 yen per month, respectively. The board ofindirectly borne bydirectors is responsible for determining a reasonable compensation

the investors

amount for the executive and supervisory directors.
Asset Manager:• Asset Management Fees:
IHR pays the Asset Manager asset management fees as follows:
A. NOI & Dividend Performance Fee
IHR pays to the Asset Manager a NOI & Dividend PerformanceFee for each fiscal period. The NOI & Dividend Performance Fee13

is calculated by multiplying the Dividend Performance per Unit
(DPU)1 by Net Operating Income (NOI)2 , multiplied by
0.0036%.
1

DPU is calculated by dividing IHR’s distributable earnings in therelevant fiscal period by the total number of outstanding units at theend of the same period. For this purpose, distributable earnings
mean the amount of total distributions calculated pursuant to theprovisions of the Articles of Incorporation and declared by the boardof directors of IHR for the relevant fiscal period (before thededuction of the NOI & Dividend Performance Fee, corporate taxes
and non-deductible consumption taxes, etc.), minus the amount of
any return of capital (excluding deemed dividends), subject tocertain adjustments.

2

NOI is calculated by subtracting the total rent-related expenses(excluding depreciation and losses on retirement of fixed assets) of
the relevant fiscal period from the total rental income of the same
fiscal period.

The payment date of the NOI & Dividend Performance Fee shallbe within 3 months from the end of the relevant fiscal period.
B. Disposition Fee
For each real estate related asset that IHR disposes of, the AssetManager receives a disposition fee in the amount calculated bymultiplying the gains from the sale (before deduction of the
Disposition Fee) by 15%; provided, however that if the
cumulative sum of gains on sales of real estate assets minus thesum of cumulative losses from such sales in the relevant fiscal
period is negative, the Asset Manager would receive no suchfee.
The payment date of the Disposition Fee shall be within 3months from the end of the relevant fiscal period.
C. Merger Performance Fee
If IHR merges with another investment corporation in response
to a proposal from such investment corporation (including eithercase where IHR is a surviving entity or a dissolved entity), theAsset Manager receives the Merger Performance Fee in theamount, calculated by multiplying the Unrealized Gains Realized14

Through the Merger per unit1 by the number of units outstandingat the time of the resolution of the general meeting of unitholders
approving the merger agreement, multiplied by 15%; provided,
however, if the amount of the Unrealized Gains Realized
Through the Merger is negative, there would be no Merger
Performance Fee to be paid to the Asset Manager.
1

The Unrealized Gains Realized Through the Merger per unit iscalculated by subtracting the Net Asset Value per unit2 at the timeof the merger from the value of IHR unit, which is equal to theclosing price of the unit of the other investment corporation (i.e., thecounterparty of the merger) immediately before the date of IHRunitholders’ approval for the merger multiplied by the merger ratio
stipulated in the merger agreement.

2

Net Asset Value per unit at the time of the merger refers to net assets(based on the book value) of IHR as of the date to which the closing
price of the units set out in 1. above relates.

The Merger Performance Fee is incurred on the date the merger isapproved at the general meeting of unitholders, and the payment
date shall be within one month of the merger date.
D. REIT TOB Sale Performance Fee
If IHR is acquired by a third party through a TOB, the AssetManager receives the REIT TOB Sale Performance Fee in theamount, calculated by multiplying the Unrealized Gains Realized
Through the TOB per unit1 by the number of units purchased by
the third-party via the TOB, multiplied by 15%; provided,
however, if the amount of the Unrealized Gains Realized
Through the TOB is negative, there would be no Merger
Performance Fee to be paid to the Asset Manager.
1 The Unrealized Gains Realized Through the TOB per unit iscalculated by subtracting the Net Asset Value per unit2 at the timeof the TOB from the offer price of the TOB.
2 Net Asset Value per unit at the time of the TOB refers to net assets(based on the book value) at the end of the tender offer period
divided by the number of units outstanding at that time.

The REIT TOB Sale Performance Fee is incurred on the last dateof the tender offer period, and the payment date shall be within
one month of such date.

15

Asset Custodian:• Asset Custodian Fee:IHR shall pay to the Asset Custodian an asset custodian fee for eachfiscal period in the amount agreed by the parties, up to the amount as
described in the following table, calculated based on IHR’s total
assets as stated in its balance sheet at the end of the immediately
preceding fiscal period. If IHR’s assets include fee properties,
additional fee of up to 100,000 yen per property shall be added to theasset custodian fee for each month. The fee is paid by the end of themonth immediately following the end of the relevant fiscal period.
Total Assets:

Fee Percentage(for six months)

First 100 billion yen or less

0.010%

Portion over 100 billion yen and 200

0.008%

billion yen or lessPortion over 200 billion yen and

0.006%

300 billion yen or lessPortion over 300 billion yen

0.005%

General Administrative Agent:• General Administration Fee:IHR shall pay to the Asset Custodian an asset custodian fee for eachfiscal period in the amount agreed by the parties, up to the amount as
described in the following table, calculated based on IHR’s total
assets as stated in its balance sheet at the end of the immediately
preceding fiscal period. Also, if IHR’s assets include fee properties,
additional fee of up to 100,000 yen per property shall be added to thegeneral administrative fee for each month. The fee is paid by the endof the month immediately following the end of the relevant fiscal
period.
Total Assets:

Fee Percentage(for six months)

First 100 billion yen or less

0.030%

Portion over 100 billion yen and0.024%

200 billion yen or lessPortion over 200 billion yen and

0.018%

300 billion yen or lessPortion over 300 billion yen

160.015%

Administrative Agent for Unitholders’ Register:• Administration for Unitholders’ Register Fees (Standard Fee):IHR pays to the Administrative Agent for Unitholders’ Register a fee
for administrative services related to the management of unitholders’list. The monthly management fee is one-sixth of the sum of the fees
calculated per unitholder set out below based on the total number ofunitholders as of the latest notification to all the unitholders,provided that the minimum monthly amount is 200,000 yen.
Number of Unitholders:Fees perUnitholder

Not more than 5,000 unitholders

480 yen5,001 to 10,000

420 yen

10,001 to 30,000

360 yen30,001 to 50,000

300 yen50,001 to 100,000

260 yenmore than 100,000

225 yen• Administration of Distributions Fees:
IHR pays fees for (i) administrative services such as the
preparation of the distributions register, distributions receipts,
specified bank account deposit slips, deposit notices; bookkeeping, which includes keeping record of distribution amounts
paid, determining outstanding distribution amounts, keeping
payment records; paying stamp taxes; as well as (ii) payment of
distributions and management of the distributions register after thebank handling period. The fees paid are determined by calculating
the total number of unitholders receiving distributions falling undereach of the sections as shown below, provided that the minimum
amount is set at ¥350,000.
Number of Unitholders:Fees perUnitholder

Not more than 5,000 unitholders

120 yen5,001 to 10,000

110 yen

10,001 to 30,000

100 yen30,001 to 50,000

80 yen50,001 to 100,000

60 yenmore than 100,000

50 yen17

With respect to distributions made to a specified bank account,
IHR pays an additional charge of 130 yen per distribution made.
IHR also pays an additional fee for overdue payments tounitholders in the amount of 450 yen per payment for unpaid
distributions as of each payment date.
• Other fees:
IHR pays the transfer agent other fees for various other services,
including in connection with the general meeting of unitholders.
Auditor:• Auditor Fee:IHR may pay the independent auditor up to 15 million yen per fiscal
period . The board of directors is responsible for determining theactual compensation amount.
IHR may also incur other miscellaneous fees in connection with property
management, issuance of units, investment corporation bonds and theoperation, acquisition or disposition of properties.
Article 23(1) (j)Description of theUnder Article 77 paragraph 4 of the ITA, which applies the requirements

AIFM's procedureof Article 109 paragraph 1 of the Companies Act of Japan to investment

to ensure faircorporations, investment corporations are required to treat unitholders

treatment ofequally depending on the number and content of units held. In addition,

investors andupon liquidation, the allotment of residual assets to unitholders is required

details of any

to be made equally depending on the number of units held under Article 77

preferential

paragraph 2 item 2 and Article 158 of the ITA.

treatment received
by investors,
including detailingthe type ofinvestors and theirlegal or economic
links with the AIF
or AIFM
Article 23(1) (k)The latest annual

Not applicable.

report referred toin Article 22(1)18Article 23(1) (l)The procedure and

IHR is authorized under the Articles of Incorporation to issue up to

conditions for the

10,000,000 units. Its units have been listed on the Tokyo Stock Exchange

issue and sale ofsince November 30, 2015.

the units

Secondary market sales and transfers of units will be conducted inaccordance with the rules of the Tokyo Stock Exchange. Unit prices on theTokyo Stock Exchange are determined on a real-time basis by theequilibrium between bids and offers. The Tokyo Stock Exchange sets daily
price limits, which limit the maximum range of fluctuation within a single
trading day. Daily price limits are set according to the previous day’s
closing price or special quote.

Article 23(1) (m)Latest net asset
value of the AIF
or latest market
price of the unit orshare of the AIF

IHR’s unit’s latest market price is publicly available at the Tokyo Stock
Exchange or from financial information venders (including Reuters, which
can be viewed athttps://www.reuters.com/markets/companies/3463.T).

Article 23(1) (n)Details of the

The units of IHR were listed on the Tokyo Stock Exchange on November

historical30, 2015.

performance of theAIF, where

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

available

Net Assets

Fiscal period (sixTotal Assets

Net Assets

months ended)(JPY million)(JPY million)

January 31, 2023

59,79232,186126,236

July 31, 2022

59,356

31,959125,342January 31, 2022

59,393

31,940125,270

July 31, 2021

58,92931,866

124,979

January 31, 2021

58,80231,807

124,74819

per unit(JPY)Article 23(1) (o)Identity of theNo applicable prime broker.

prime broker, anymaterial
arrangements of
the AIF with its
prime brokers,
how conflicts ofinterest aremanaged with theprime broker andthe provision in
the contract withthe depositary on
the possibility oftransfer and reuseof AIF assets, andinformation about
any transfer of
liability to theprime broker that
may exist
Article 23(1) (p)Description of

The AIFM will disclose the matters described in Articles 23(4) and 23(5)how and when

periodically through the AIF Internet website and other public disclosures.

periodic
disclosures will bemade in relation toleverage, liquidity
and risk profile of
the assets,pursuant to
Articles 23(4) and23(5)Article 23(2)The AIFM shallNot applicable.

inform theinvestors before

20they invest in the
AIF of any
arrangement madeby the depository
to contractuallydischarge itself ofliability inaccordance with
Article 21(13)The AIFM shallNot applicable.

also inform
investors of any
changes withrespect todepositary liability
without delay
Article 23(4)(a)Percentage of the

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

AIF's assets which

their illiquid nature.

are subject tospecialarrangements
arising from their
illiquid nature.
The percentage
shall be calculated
as the net value of
those assets
subject to special
arrangements
divided by the net
asset value of the
AIF concerned21Overview of any

There are no such special arrangements.

specialarrangements,
including whether
they relate to side
pockets, gates orotherarrangements
Valuation

There are no such special arrangements.

methodology
applied to assets
which are subject
to sucharrangements
How management

There are no such special arrangements.

and performancefees apply to such
assets
Article 23(4)(b)Any new

Any new arrangements or change in applicable arrangements will bearrangements fordisclosed at an appropriate time.

managing theliquidity of the
AIF
For each AIF thatAny new arrangements or change in applicable arrangements will be

the AIFM

disclosed at an appropriate time.

manages that is
not anunleveraged
closed-end AIF,
notify to investors
whenever they
make changes to
its liquidity
management
systems (whichenable an AIFM tomonitor the22liquidity risk of
the AIF and toensure theliquidity profile ofthe investments of
the AIF complies
with its underlying
obligations) thatare material inaccordance with
Article 106(1) ofRegulation (EU)No 231/2013 (i.e.,there is a
substantial
likelihood that areasonable
investor,
becoming awareof suchinformation,
would reconsider
its investment in
the AIF, including
because suchinformation could
impact an
investor’s ability
to exercise its
rights in relation
to its investment,or otherwise
prejudice theinterests of one ormore investors in
the AIF).

23

Immediately

Any new arrangements or change in applicable arrangements will be

notify investors

disclosed at an appropriate time.

where they
activate gates, side
pockets or similar
specialarrangements or
where they decideto suspend
redemptions
Overview of

Any new arrangements or change in applicable arrangements will bechanges todisclosed at an appropriate time.

liquidity
arrangements,
even if not special
arrangements
Terms ofIHR is a closed-end investment corporation, and unitholders are notredemption andentitled to request the redemption of their investment.

circumstanceswheremanagement
discretion applies,
where relevant
Also any voting or

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

other restrictions
exercisable, thelength of any lockup or any
provisionconcerning ‘firstin line’ or ‘prorating’ on gatesand suspensions
shall be included
Article 23(4)(c)
The current risk

IHR uses funds from loans and investment corporation bonds to acquire

profile of the AIF

assets and to repay debt. On the repayment/maturity dates of suchand the risk

financing methods, IHR is exposed to liquidity risk. It manages and limits

24management

liquidity risk by diversifying fund procurement sources andsystems employed

repayment/maturity dates.

by the AIFM to
manage thoserisks

In addition, IHR is exposed to the risk of being impacted by interest rate
hikes at the time of the borrowing or issuance of bonds and throughout thelife of its floating rate loans. IHR limits the potential damage from risinginterest rates by closely monitoring and controlling the LTV ratio and theratio of long-term and fixed-rate loans to total assets.

Measures to assess No such measures have been implemented.
the sensitivity of
the AIF’s portfolio
to the most
relevant risks towhich the AIF isor could be
exposedIf risk limits set by No such situation has occurred.
the AIFM havebeen or are likely
to be exceeded
and where theserisk limits havebeen exceeded a
description of thecircumstances andthe remedial
measures taken
Article 23(5)(a)Any changes to

Any new arrangements or change in applicable arrangements will be

the maximum

disclosed at an appropriate time.

amount ofleverage which the
AIFM may
employ on behalfof the AIF,
calculated inaccordance withthe gross andcommitment

25

methods. This
shall include theoriginal andrevised maximum
level of leveragecalculated inaccordance with
Articles 7 and 8 ofRegulation (EU)No 231/2013,
whereby the levelof leverage shallbe calculated as
the relevant
exposure divided
by the net asset
value of the AIF.
Any right of the

No such right or guarantee exists.

reuse of collateralor any guarantee
granted under theleveraging
agreement,
including thenature of the rights
granted for thereuse of collateraland the nature of
the guarantees
granted
Details of any

Any new arrangements or change in applicable arrangements will bechange in service

disclosed at an appropriate time.

providers relating
to the above.
Article 23(5)(b)Information on the

The aggregate amount of debt with interest is JPY 26,340 million as of

total amount ofJanuary 31, 2023 .

leverage employed26

by the AIF
calculated inaccordance withthe gross andcommitment
methods

27

PROMOTION OF ENVIRONMENTAL AND/OR SOCIAL CHARACTERISTICS – SFDR PRECONTRACTUAL DISCLOSURE
Product Name: Ichigo Hotel REIT Investment Corporation
Ichigo Hotel REIT Investment Corporation (“Ichigo Hotel”) promotes environmental and social characteristics,
but does not have as its objective a sustainable investment within the meaning of Article 9(1) of Regulation (EU)2019/2088 (“SFDR”). Ichigo Hotel has no employees in accordance with the prohibition on having employees
under the Act on Investment Trusts and Investment Corporations of Japan and relies on Ichigo Investment
Advisors Co., Ltd. (the “Asset Management Company”) to manage and operate the properties in its portfolio.
Ichigo Hotel and the Asset Management Company are hereinafter referred to collectively as “we,” “us” or“our,” unless noted otherwise. References to “fiscal year” or “FY” herein are to the 12 months began or
beginning on March 1 of the year specified, in line with the fiscal year of the Asset Management Company,
unless noted otherwise.
Does this financial product have a sustainable investment objective?
☐ Yes
☒ No
☐ It will make a minimum of sustainable ☐ It
promotes
Environmental/Social(E/S)
investments with an environmental
characteristics and while it does not have as its
objective: __%objective a sustainable investment, it will have aminimum proportion of __% of sustainable
investments☐ in economic activities that
qualify as environmentally☐ with an environmental objective in economic
sustainable under the EU
Taxonomy
activities that qualify as environmentally
sustainable under the EU Taxonomy☐ in economic activities that do not☐ with an environmental objective inqualify as environmentally
sustainable under the EU
economic activities that do not qualify as
Taxonomyenvironmentally sustainable under the EU
Taxonomy☐ with a social objective☐ It will make a minimum of sustainable
investments with a social objective:__%☒ It promotes E/S characteristics, but will not make any
sustainable investments

What environmental and/or social characteristics are promoted by Ichigo Hotel?
Ichigo Hotel is a Japanese real estate investment trust, commonly known as J-REIT, which specializes
in investing in hotel properties in Japan, and seeks to increase value to unitholders by acquiring assets that offer
both stable revenues and the potential for income growth. The Asset Management Company closely monitors
the impact of Ichigo Hotel’s portfolio and its management and operations on environmental factors such aspreservation and renovation of existing real estate, energy conservation and efficiency, CO2 emissions reduction,
recycling, renewable energy usage, presence of harmful substances including asbestos and PCB, and soil
contamination as well as social factors such as employee mental health surveys, workplace harassment
prevention rules and trainings, flexible work hours and leaves, extended retirement age. Such factors are
considered for every investment and operational decision, along with the profitability of the property.

Ichigo Inc. (the “Sponsor” or “Ichigo”), the sponsor of Ichigo Hotel and also the parent company of theAsset Management Company, is a sustainable infrastructure company in Japan, dedicated to contributing to asustainable society. The Sponsor operates three core businesses: sustainable real estate business (focusing adding
value to existing real estate assets by improving them as highly functional real estate assets and extending theiruseful lives without destructive demolition and resource-intensive redevelopment), clean energy business(developing and operating renewable power plants such as solar and wind power plants) and asset managementbusiness (providing value-add capabilities to assets under management by drawing upon Ichigo group’s expertiseand offering stability and growth potential to investors from a long-term perspective by not only responding tomarket needs but also pursuing to promote environmentally sound initiatives). With its corporate mission to“Make the World More Sustainable”, the Sponsor believes that companies exist to serve society and is committed
to contributing to a sustainable society while growing long-term value for its stakeholders. The Sponsor has
made sustainability a key business priority across all of its businesses and has established the Ichigo
Sustainability Policy to further reduce Ichigo’s environmental impact and support sustainable growth. As
members of Ichigo group, we have adopted the Ichigo Sustainability Policy:•

Harmony with the environment. We actively monitor and minimize the environmental impact of Ichigo
Hotel’s properties and real estate operations.

•

Energy conservation, CO2 emissions reduction and recycling. We seek to contribute to a low-carbon,
low-waste society by lowering energy consumption at Ichigo Hotel’s properties, extending the usefullife of Ichigo Hotel’s properties, actively transitioning to electricity sourced from renewable sources at
Ichigo Hotel’s properties and promoting recycling.

•

Regulatory and environmental compliance. We comply with environmental laws and regulations. We
also carefully monitor and comply with all applicable changes in such laws and regulations.

•

Training and awareness. We promote understanding of the Ichigo Sustainability Policy and work toincrease sustainability awareness among all of the Asset Management Company’s employees. We also
promote sustainability awareness in coordination with our stakeholders, seeking understanding andcooperation on sustainability from our partner companies and tenants.

•

Sustainability performance communication and disclosure. We disclose the Ichigo Sustainability Policy
and our sustainability initiatives to the public on Ichigo Hotel’s website at https://www.ichigohotel.co.jp/en/esg/. We also obtain certifications for our sustainability activities on an ongoing basis asapplicable.

 What sustainability indicators are used to measure the attainment of the environmental or social
characteristics promoted by Ichigo Hotel?
We implement and use the following initiatives and indicators to measure the attainment of theenvironmental or social characteristics Ichigo Hotel promotes:•

Preservation and renovation of existing real estate. Ichigo’s sustainable real estate business has aproven track record of preserving and renovating existing real estate as highly functional real estate,
instead of demolishing and redeveloping real estate, a common practice in Japan’s real estateindustry. Ichigo, along with the Asset Management Company and Ichigo Hotel, firmly believes that,instead of this wasteful cycle of demolition and redevelopment, improving and renovating existingbuildings can extend useful lives of the buildings and add value while minimizing resources andcontributing to building a more sustainable society. The renovations include, but are not limited to,improvement of aesthetics and tenant comfort, seismic reinforcements, regulatory compliance andincrease in energy efficiency. In principle, Ichigo Hotel exclusively invests in renovated hotel
properties, either by Ichigo or other third-party developers, instead of newly developed orredeveloped hotel properties. As of January 31, 2023, all 25 properties in Ichigo Hotel’s portfolio
were such renovated hotel properties, of which 18 properties were renovated by Ichigo.
•

Environmental certification of individual buildings. To track the environmental performance of
Ichigo Hotel’s properties, we rely on building-level certifications issued by third-party
organizations such as Building Energy-efficiency Labeling System (“BELS”) certification andother equivalent certifications. As of January 31, 2023, one property, The OneFive Tokyo Shibuya,
has acquired four stars out of the five-star ranking system of BELS certification.

•

External sustainability evaluation. GRESB is an annual benchmarking assessment to measureenvironmental, social and governance (“ESG”) integration of real estate companies and funds, aswell as the name of organization which runs the assessment. It was founded by a group of major
European pension funds who played leading roles in launching Principles for Responsible
Investment (PRI). It is used by major institutional investors in Japan and overseas when selecting
targets for investment. In the 2022 GRESB Real Estate Assessment, Ichigo Hotel received for thesecond consecutive year two out of five stars in GRESB Rating, which is based on GRESB Overall
Score and its quintile position relative to global participants. Ichigo Hotel also won the “Green Star”
designation for the second consecutive year by achieving high performance both in the management
component, which evaluates policies and organizational structure for ESG promotion, and in theperformance component, which assesses environmental performance and tenant engagement. In
2022, Ichigo Hotel also received the second highest “B Level” for GRESB Public Disclosure, whichassesses the breadth of ESG disclosure, for the second consecutive year.

•

RE100 and transition to renewable energy. In February 2021, Ichigo joined RE100, a global
initiative bringing together businesses committed to 100% transition to electricity from renewablesources, including solar, wind, hydro and biomass energy. Ichigo has set a target to source 100% ofelectricity from renewable sources across all of its operations and businesses, including Ichigo
Hotel’s properties, by the end of 2025. In line with this target, we proactively pursue 100%transition to electricity from renewable sources at Ichigo Hotel’s properties. As of January 31, 2023,
nine out of 25 properties in Ichigo Hotel’s portfolio have completed transition to 100% of electricity
from renewable sources. During the fiscal period ending July 31, 2023, we plan to revert transition
to electricity from renewable sources at certain properties but maintain our target to complete
transition to 100% of electricity from renewable sources for all of the properties in Ichigo Hotel’s
portfolio by the end of 2024, ahead of Ichigo’s target of 2025.

•

Tracking of ESG data and setting of reduction targets. We track and monitor energy consumption,
greenhouse gas (“GHG”) emissions and water usage of Ichigo Hotel’s properties.
oEnergy consumption. Energy consumption data tracked and monitored includes electricity
and gas consumption at Ichigo Hotel’s properties and is measured in MWh. The totalenergy consumption amount of Ichigo Hotel’s properties (including properties acquired or
disposed during the fiscal year indicated) was 28,433.56 MWh in FY2021 (a total of 23
properties), 25,224.34 MWh in FY2020 (a total of 23 properties) and 44,174.54 MWh in
FY2019 (a total of 22 properties).

o

GHG emissions. We track and monitor GHG emissions, calculated from electricity and gas
consumption at Ichigo Hotel’s properties. We calculate GHG emissions from electricity
and gas consumption by converting electricity and gas consumption amounts to CO2emissions based on the national average conversion factors for the relevant period
published by the Ministry of the Environment of Japan. The total aggregate amount of
GHG emissions of Ichigo Hotel’s properties (including properties acquired or disposed
during the fiscal year indicated) was 12,174.21 t-CO2 (with Scope 1 and Scope 2 GHG
emissions being 8,434.19 t-CO2) in FY2021, 11,267.12 t-CO2 (with Scope 1 and Scope 2

GHG emissions being 7,733.69 t-CO2) in FY2020 and 16,270.26 t-CO2 (with Scope 1 andScope 2 GHG emissions being 12,200.66 t-CO2) in FY2019. We aim to reduce Scope 1
and Scope 2 GHG emissions by 50% from the level in FY2019 by FY2030 and Scope 3
GHG emissions by 30% from the level in FY2019 to FY2023, and to achieve net zero GHG
emissions by FY2050.
oWater usage. The total water usage amount of Ichigo Hotel’s properties (including
properties acquired or disposed during the fiscal year indicated) was 270,436.00 m3 in
FY2021 (a total of 23 properties), 213,526.30 m3 in FY2020 (a total of 23 properties) and
349,430.24 m3 in FY2019 (a total of 22 properties).

•

Energy and resource efficiency improvements. As part of our initiatives to reduce energy andresource consumption and improve efficiency of Ichigo Hotel’s properties, we have been installing
LED lighting and water-saving equipment at Ichigo Hotel’s properties. As of January 31, 2023, wehave fully completed installation of LED lighting and water-saving equipment at three and nine,respectively, out of 25 properties in Ichigo Hotel’s portfolio, and have started the installation of
LED lighting and water-saving equipment at 17 and 11, respectively, out of 25 properties in Ichigo
Hotel’s portfolio. In addition, as of January 31, 2023, we have engaged third party organizations to
independently assess energy efficiency and potential measures to improve energy efficiency at two
properties in Ichigo Hotel’s portfolio. We plan to install LED lighting and water-saving equipment
in all 25 properties in Ichigo Hotel’s portfolio by the end of 2024.

•

Employee mental health surveys. Ichigo group offers annual mental health lecture hosted byexternal experts for all of its employees, including the employees of the Asset Management
Company, and conducts annual mental health survey. The Asset Management Company works tocreate a pleasant and stress-free working environment and provides internal and external resourcesand opportunities for its employees to consult with counselors and/or doctors based on the survey
results.

•

Workplace harassment prevention rules and trainings. Ichigo has established harassment
prevention guidelines, including grievance reporting and escalation procedures, which have been
adopted by the Asset Management Company. In line with the guidelines, the Asset Management
Company strictly prohibits any and all kinds of workplace harassment, and proactively works to
identify and resolve any incident of harassment while taking utmost care to protect the rights ofreporting or grieved employees. Confidentiality is strictly observed so that employees are notdeterred from raising or reporting any incident of harassment. In addition, the Ichigo group offers
annual training on prevention of workplace harassment for all of its employees, including theemployees of the Asset Management Company, and conducts annual harassment survey.

•

Flexible work hours and leaves. The Asset Management Company provides its employees withflexible work hours where employees have control over when they start and finish work each day,in order to provide employees with a better work-life balance and to accommodate their individual
needs and schedules. To further accommodate employees’ individual needs and schedules, andincrease their engagement and satisfaction, the Asset Management Company’s employees areallowed to use five consecutive additional paid leave days per year. For FY2022, all of the AssetManagement Company’s employees have used all of the five consecutive additional paid leave days.

•

Extended retirement age. The retirement age in Japan is generally considered to be the age of 65
years when the eligibility for Japan’s national pension benefits starts. In order to provide employeeswith more flexibility in retirement planning and to support older employees in light of the aging
population in Japan, Ichigo group, including the Asset Management Company, allows its employees
to work full time beyond the traditional retirement age of 65 years until the age of 70 years if theychoose to do so.

 What are the objectives of the sustainable investments that Ichigo Hotel partially intends to make andhow does the sustainable investment contribute to such objectives?
Not applicable.
 How do the sustainable investments that Ichigo Hotel partially intends to make, not cause significant
harm to any environmental or social sustainable investment objective?
Not applicable.
Principle adverse impacts
Does Ichigo Hotel consider principal adverse impacts on sustainability factors?
Yes, we collect on an ongoing basis select information on our existing portfolio regarding the principal
adverse impact indicators, including exposure to fossil fuels through investment assets, exposure to energyinefficient investment assets, GHG emissions and energy consumption intensity. We aim to manage the risk
connected to principal adverse impacts from our investment decisions in several ways, including generalscreening criteria and due diligence.
•

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

•

Exposure to energy-inefficient investment assets. We consider properties which do not haveenvironmental certifications to be energy-inefficient. As of January 31, 2023, 93.3% of Ichigo Hotel’s
properties based on acquisition price did not have any environmental certification. As described in moredetail above, Ichigo Hotel in principle exclusively invests in renovated properties, of which renovations
include measures to improve energy efficiency, and implement as appropriate measures to reduce theenvironmental impact of these properties, including by obtaining environmental certifications.

•

GHG emissions. We track and monitor GHG emissions, calculated from electricity and gas consumptionof tenants at Ichigo Hotel’s properties. We calculate our tenants’ GHG emissions from electricity andgas consumption by converting electricity and gas consumption amounts to CO2 emissions based on thenational average conversion factors for the relevant period published by the Ministry of the Environmentof Japan. The total aggregate amount of GHG emissions was 12,174.21 t-CO2 (with Scope 1 and Scope
2 GHG emissions being 8,434.19 t-CO2) in FY2021, 11,267.12 t-CO2 (with Scope 1 and Scope 2 GHG
emissions being 7,733.69 t-CO2) in FY2020 and 16,270.26 t-CO2 (with Scope 1 and Scope 2 GHG
emissions being 12,200.66 t-CO2) in FY2019.

•

Energy consumption intensity. Energy consumption intensity at Ichigo Hotel’s real estate assets was
0.480 MWh/m2 in FY 2021, 0.536 MWh/m2 in FY 2020 and 0.569 MWh/m2 in FY 2019.

We believe that investment decisions that negatively affect climate or other environment-relatedresources, or have negative implications for society, can have a significant impact to risk and value creation for
our unitholders. To this end, we consider the principal adverse impacts of our investment decisions on the above
sustainability factors throughout all major steps of the investment decision and management process throughout
the lifecycle of the properties in our portfolio.
We consider, both at the entity-level (i.e., the Asset Management Company) and at the fund-level (i.e.,
Ichigo Hotel), principal adverse impacts of our investment decisions on sustainability factors. Under the Act on
Investment Trusts and Investment Corporations of Japan, Ichigo Hotel is prohibited from having any employees
and is required to outsource the asset management function to a third party. Accordingly, as discussed in detailelsewhere, any consideration at the fund-level of principal adverse impacts of our investment decisions onsustainability is principally conducted by the Asset Management Company, subject to approval of Ichigo Hotel’sBoard of Directors. In addition to the Asset Management Company’s contractual obligations to Ichigo Hotelunder the asset management agreement, the Financial Instruments and Exchange Act of Japan provides that theAsset Management Company owes Ichigo Hotel a fiduciary duty in conducting its activities, including making
investment decisions based on sustainability considerations.
More information related to principal adverse impacts on sustainability factors can be found on thewebsite: https://www.ichigo-hotel.co.jp/en/esg/
Investment Strategy
What investment strategy does Ichigo Hotel follow?
Ichigo Hotel invests directly or indirectly through trust beneficiary interests in real estate. Therefore,
the investment strategy (including due diligence) in relation to investee companies is not applicable.
•

Basic strategy. We primarily invest in hotel properties in Japan with a focus on what we call “lodgingfocused hotel properties”, hotel properties that are located at high customer traffic areas such train
stations, business centers and shopping centers, and serve primarily as places to stay at very attractive
rates without extraneous services and facilities. Leveraging Ichigo’s know-hows and sourcing
capabilities as well as value-add capabilities, we aim to actively manage and grow Ichigo Hotel’s
portfolio both externally and internally.

•

Initial investment target research. Our initial investment research includes understanding how
preserving and renovating our target real estate has extended useful lives and increased tenantsatisfaction without the wasteful cycle of demolition and redevelopment. The renovations include
improvement of aesthetics and tenant comfort, seismic reinforcements, regulatory compliance andincrease in energy efficiency. Our investment research analyzes various factors such as how we canreduce our environmental load through post-acquisition improvements, coexist with local communities
where Ichigo Hotel invests and operates the properties, contribute to solving social issues and achieve
healthy growth for all stakeholders.

•

Due diligence. Prior to Ichigo Hotel’s investment in a property, the Asset Management Company
conducts due diligence on the property, including ESG due diligence, building review and regulatoryenvironmental due diligence. Our ESG due diligence on a property considers, among others, thefollowing ESG factors: (i) susceptibility to earthquakes (including the probable maximum loss (“PML”)
analysis); (ii) generation and discharge of untreated wastewater into the environment, and air pollutant
emissions; (iii) use of hazardous or toxic chemicals such as asbestos and PCB; (iv) generation andstorage of hazardous waste; and (vi) litigation or media coverage related to land, labor, public interest,
worker compensation, regulatory agencies or protest against the property. For our regulatoryenvironmental due diligence, we engage experts to conduct a soil and environmental contamination
survey and review soil and environmental reports in accordance with the Soil Contamination
Countermeasure Act of Japan. The due diligence findings related to risks and opportunities (including
ESG-related risks and opportunities) are reported and reviewed by the Risk & Compliance Committee
prior to their submission to the Investment Committee. During the review, the Risk & Compliance
Committee considers risks and opportunities for the target property and creates action plans to reducerisks and/or capitalize on opportunities presented. In particular, we consider the following ESG-relatedrisks and opportunities:oEnvironmental certification of buildings. As a part of our due diligence review, we consider current
ESG-related certifications of the building and the potential for ESG enhancements to the building.
To such ends, when engaging in new construction, renovation, or repairs, we consider andimplement options that will decrease the environmental load such as in energy consumption,
renewable energy usages, CO2 emissions, water consumption, and waste reduction.
o•

ESG-related measures by existing tenants. The tenants of Ichigo Hotel’s properties are hotel
operators. As a part of our due diligence review, we consider ESG-related measures and initiatives
already in place at the target property by the existing hotel operator and the potential for ESG
enhancements to the hotel operation in the future after acquisition by Ichigo Hotel.

Post-acquisition improvements and Ichigo’s Regeneration Group. We consider ESG factors throughout
a property’s lifecycle even after acquisition or investment decision by Ichigo Hotel by analyzing how
to prioritize, act, track and monitor the sustainability performance of the property and collaborate withthe tenant and local communities. Once a property is acquired, we proactively communicate with thetenant, a hotel operator, to assess, discuss and implement various measures to improve sustainability
performance such as energy efficiency while concurrently increasing tenant satisfaction and improvethe value of the property
In addition, Ichigo has established a dedicated working group named “Regeneration Group”, toimplement ESG-related initiatives and monitor progress thereof across its group companies, including
the Asset Management Company. The Asset Management Company and the Regeneration Group meetsat least once every quarter to discuss the implementation and progress of ESG-related initiatives andimprovements for the properties in Ichigo Hotel’s portfolio.

 What are the binding elements of the investment strategy used to select the investments to attain eachof the environmental or social characteristics promoted by Ichigo Hotel?
When the Investment Committee of the Asset Management Company submits its final proposal to invest
in a property to Ichigo Hotel’s Board of Directors, the Risk & Compliance Committee’s reports andaction plans based on due diligence findings for the property are incorporated into the overall investment
proposal. To the extent possible, the Investment Committee excludes investment proposals with thefollowing issues discovered during the due diligence process: (i) presence of asbestos and PCB onsite;(ii) significant level of soil contamination in accordance with the Soil Contamination Countermeasure
Act of Japan; and (iii) lack of feasible remedies and/or preventive measures for (i) and (ii) above.
 What is the committed minimum rate to reduce the scope of the investments considered prior to theapplication of that investment strategy?
The Asset Management Company’s investment decision-making process involves assessment ofmaterial ESG related risks and opportunities to ensure that Ichigo Hotel’s sustainable investment
strategy is implemented on a continuous basis. We carefully consider the status of compliance withvarious related laws and regulations, and investigate the presence of hazardous substances, the historyof past land usages and the soil contamination when investing in properties. We also maintain PML at
20% or less for each property Ichigo Hotel acquires and at 10% or less for Ichigo Hotel’s portfolio, andconsider purchasing earthquake insurance on any property with a PML of more than 20%. As of January
31, 2022, none of the properties in Ichigo Hotel’s portfolio exceeds a PML of 20%.
 What is the policy to assess good governance practices of the investee companies and Ichigo Hotel?
Ichigo Hotel invests directly or indirectly through trust beneficiary interests in real estate. Therefore,due diligence (including the assessment of good governance practices) in relation to investee companies
is not applicable.
Ichigo Hotel, along with the Asset Management Company, has introduced the following measures
to assess and enhance our governance systems:

•

Adoption of 100% performance-linked asset management fees. In February 2019, Ichigo Hotelbecame the first listed J-REIT to adopt 100% performance-linked asset management fees without
fixed asset management fees, aligning the interests of Ichigo Hotel’s unitholders with those of theAsset Management Company and the Sponsor, and supporting value creation for Ichigo Hotel’sunitholders. The asset management fees that Ichigo Hotel pays to the Asset Management Company
are fully linked to distributions per unit and net operating income for the relevant fiscal period.

•

Independent directors at both Ichigo Hotel and the Asset Management Company. All of Ichigo
Hotel’s Directors, including the Executive Director, and a majority of the Asset Management
Company’s Directors, three out of five Directors, are independent directors. As of January 31, 2023,
Ichigo Hotel is one of the only three J-REITs of which its executive director does not concurrently
serve as the president of the asset management company and the asset management company’sboard of directors has a majority of independent directors. Ichigo Hotel stipulates in its Rules of theBoard of Directors that meetings of its Board of Directors are to be held at least once every threemonths. Ichigo Hotel’s Board of Directors meetings are attended by the Executive Director and two
Supervisory Directors, currently one lawyer and one certified accountant, each of whom uses theirexperience and expertise to provide multifaceted supervision of the Executive Director’s job
execution, as well as asset management performance of the Asset Management Company. The
Executive Director of Ichigo Hotel actively leads the Boards of Directors meetings and reports thebusiness execution status of the Asset Management Company, thereby ensuring that active dialogue
and internal controls are implemented through the Board of Directors meetings.

•

Compliance-focused management of the Asset Management Company. The Asset Management
Company, as a member of the Ichigo group, considers compliance to be a key priority, and sharesthe Ichigo’s robust Codes of Corporate Ethics and Code of Conduct. As a decision-making bodyfor policies and related matters regarding the promotion of compliance, the Risk & Compliance
Committee reports directly to the Representative Director of the Asset Management Company, whotakes responsibility in monitoring and reviewing any critical compliance matters and proper
execution asset management. For each fiscal year, a compliance program is formulated by the headof the Risk & Compliance Committee, serving as the Compliance Officer, and the progress thereofis reported to the Board of Directors every quarter. The Asset Management Company also ensures
objectivity in assessing compliance matters by including third-party independent lawyers andaccountants in the Risk & Compliance Committee. Internal audits are generally conducted on all
departments at least once a year, of which results are reported directly to the Representative
Director, and special internal audits may be conducted when the Representative Director, theCorporate Auditor or the Board of Directors of the Asset Management Company deems it necessary.

•

Prevention of conflicts of interests and internal rules for related party transactions. In order toprevent conflicts of interests when transacting with related parties, the Asset Management Company
adopts Ichigo group’s Policy for Managing Conflicts of Interest and Internal Rules for Related
Party, in compliance with the Financial Instruments and Exchange Act of Japan and the Act on
Investment Trusts and Investment Corporations of Japan. Transactions that involve acquisitions
from (and sales to) related parties are required to be made below (in case of sales, above) appraisal
value as determined by an independent, third-party appraiser. Furthermore, acquisitions require that
the Compliance Officer independently assess the transaction price by obtaining a second opinion
appraisal and that the transaction be deliberated at the Risk & Compliance Committee, which inturn need to be approved by Ichigo Hotel’s Board of Directors. In addition, to further prevent
conflicts among business divisions, the Asset Management Company’s internal rules require that
asset acquisition information obtained by any business division in the Asset Management Company
be mechanically distributed to other business divisions based on an objective, pre-determined rules
to ensure fairness and avoid any element of discretion.

Asset Allocation
What is the asset allocation planned for Ichigo Hotel?
As of January 31, 2023, 6.7% of Ichigo Hotel’s portfolio based on acquisition price had theenvironmental certifications described above. We plan to increase the percentage of the properties withenvironmental certifications in Ichigo Hotel’s portfolio.

Investments of Ichigo
Hotel

6.7% is #1 Alignedwith E/S#1B Other E/Scharacteristics

93.3% qualifies as #2
Other#1 Aligned with E/S characteristics includes the investments of the financial product used to attainthe environmental or social characteristics promoted by the financial product.
The sub-category #1B Other E/S characteristics covers investments aligned with the environmental
or social characteristics that do not qualify as sustainable investments.
#2 Other includes the remaining investments of the financial product which are neither aligned withthe environmental or social characteristics, nor are qualified as sustainable investments.
 How does the use of derivatives attain the environmental or social characteristics promoted by Ichigo
Hotel?
Not applicable.
To what minimum extent are sustainable investments with an environmental objective aligned with the EU
Taxonomy?
Not applicable.
 Does Ichigo Hotel invest in fossil gas and/or nuclear energy related activities that comply with the
EU Taxonomy?
Not applicable. Ichigo Hotel does not invest in real estate assets involved in fossil gas and/or nuclear
energy-related activities.
 What is the minimum share of investments in transitional and enabling activities?
Not applicable.
What is the minimum share of sustainable investments with an environmental objective that are not alignedwith the EU Taxonomy?

Not applicable.
What is the minimum share of socially sustainable investments?
Not applicable
What investments are included under “#2 Other”, what is their purpose and are there any minimum
environmental or social safeguards?
As of January 31, 2023, 93.3% of Ichigo Hotel’s portfolio based on acquisition price did not have any
environmental certification. While we have invested in such properties in accordance with our investment
guidelines, there were circumstances that prevented us from obtaining environmental certifications prior to ouracquisitions, and we will do our best to obtain appropriate environmental certifications in due course. As
described above, we retain third party experts to investigate the status of compliance with various related laws
and regulations, including the presence of hazardous chemicals and substances such as asbestos and PCB, thehistory of past land usages and the soil contamination when investing in properties. We also maintain PML at
20% or less for each property Ichigo Hotel acquires and at 10% or less for Ichigo Hotel’s portfolio, and consider
purchasing earthquake insurance on any property with a PML of more than 20%. As of January 31, 2022, noneof the properties in Ichigo Hotel’s portfolio exceeds a PML of 20%.
Index as Reference Benchmark
Is a specific index designated as a reference benchmark to determine whether Ichigo Hotel is aligned withthe environmental or social characteristics that it promotes?
Not applicable. No specific index has been designated as reference benchmark to determine whether
Ichigo Hotel is aligned with the environmental and/or social characteristics that it promotes.
 How is the reference benchmark continuously aligned with each of the environmental or social
characteristics promoted by Ichigo Hotel?
Not applicable.
 How is the alignment of the investment strategy with the methodology of the index ensured on acontinuous basis?
Not applicable.
 How does the designated index differ from a relevant broad market index?
Not applicable.
 Where can the methodology used for the calculation of the designated index be found?
Not applicable.
More Product-specific Information
Where can I find more product-specific information online?
More product-specific information can be found on the website: https://www.ichigo-hotel.co.jp/en/esg/.
The information on the website is not incorporated by reference into this offering circular.

Note Regarding the EU Taxonomy Regulation
As set out above, Ichigo Hotel promotes certain environmental characteristics.
The Asset Management Company is required, under Regulation (EU) 2020/852 (the “EU Taxonomy
Regulation”), to disclose whether its assets are aligned with the environmental objectives formulated in the EU
Taxonomy regulation. The EU Taxonomy Regulation is to be complemented by technical standards andscreening criteria which are currently developed. The technical screening criteria for the first two environmental
objectives (climate change mitigation and climate change adaptation) were adopted in December 2021. They
apply as of January 1, 2022.
Ichigo Hotel invests in economic activities that are eligible under the EU Taxonomy Regulation in
respect of climate change mitigation and/or climate change adaptation. This means that screening criteria forthese investments have been or will be developed. The Asset Management Company expressly states that inview of the fact that the regulations are still under development or have only recently been adopted and the fact
that, as a result thereof, data on alignment of Ichigo Hotel’s investments with these environmental objectives
and climate related goals in line with EU Taxonomy Regulation are not sufficiently available, the AssetManagement Company is not currently in a position to disclose on an accurate and reliable basis to what extent
Ichigo Hotel’s investments technically qualify as Taxonomy-aligned or “environmentally sustainable” within
the specific meaning of the EU Taxonomy Regulation. Ichigo Hotel’s investments may have a positive
contribution to these environmental objectives and may therefore eventually be considered Taxonomy-aligned,
but at this stage, the Asset Management Company is required to state that there is no minimum proportion of
Ichigo Hotel’s investments that qualify as such.
The Asset Management Company further states that the “do no significant harm” principle applies only
to those investments underlying the financial product that takes into account the EU criteria for environmentally
sustainable economic activities. The investments underlying the other portion of this financial product do nottake into account the EU criteria for environmentally sustainable economic activities.

INTEGRATION OF SUSTAINABILITY RISKS IN THE INVESTMENT DECISIONS, AND THE
IMPACT OF SUCH RISKS ON THE RETURNS OF Ichigo Hotel (SFDR ARTICLE 6 DISCLOSURE)
Ichigo has established a dedicated working group named “Regeneration Group”, to implement ESGrelated initiatives and monitor progress thereof across its group companies, including the Asset Management
Company. The Asset Management Company and the Regeneration Group meets at least once every quarter todiscuss the implementation and progress of ESG-related initiatives and improvements for the properties in Ichigo
Hotel’s portfolio.
In addition, the Asset Management Company has established the Risk & Compliance Committee, whichmeets periodically in order to discuss various risks and compliance-related issues including prevention of
conflicts of interests and compliance with laws and internal rules for related party transactions.
In order to realize sustainability in our asset management while maximizing our portfolio value, we
consider ESG factors in our investment and asset management processes, including post-acquisition
improvements.
As stated above, we have instituted a number of initiatives, at both the portfolio level and the property
level, to promote environmental and/or social characteristics. Such initiatives include energy-saving initiatives
and transition to renewable energy.
While sustainability issues will severely impact our business activities, we believe that such issues may
also become potential business opportunities to create new value for sustainable growth. Accordingly, we
position our commitment to sustainability as a top priority in our management strategies. We also believe that
integrating sustainability factors alongside traditional financial and operational metrics in our investment
decision process helps us make a more holistic assessment of a property’s risks and opportunities and iscommensurate with the pursuit of superior risk-adjusted returns.