Investment
Invincible Corporation

Audited Financial Statements
for the 27th Fiscal Period(from July 1, 2016 to December 31, 2016)

INDEX TO FINANCIAL STATEMENTS
Page

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

Independent Auditor’s Report ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 3

Balance Sheet as of December 31, 2016 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 4

Statement of Income and Retained Earnings for the six months ended December 31, 2016∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 6

Statement of Changes in Net Assets for the six months ended December 31, 2016 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 7

Statement of Cash Flows for the six months ended December 31, 2016 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 9

Notes to Financial Statements as of and for the six months ended December 31, 2016 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 10

Greetings from Naoki Fukuda, Executive Director of Invincible Investment Corporation andPresident & CEO of Consonant Investment Management Co., Ltd.
I would like to take this opportunity to express my sincere gratitude to all unitholders of Invincible
Investment Corporation (“INV”) for your continued support.
We hereby provide you with a report on INV’s asset management and financial results for the 27th fiscal
period (covering the period from July 1, 2016 to December 31, 2016; the “Reporting Period”).
INV positions hotels and residential properties as its core assets and proactively conducts management
activities to maximize growth and stability of the portfolio.
In the hotel sector, the number of inbound visitors reached a record high of 24.03 million in 2016, an increaseof 22% from the previous year and 79% higher than two years ago. The significant increase in inboundnumbers can be attributed to improvements in airports/travel infrastructure, the launch and expansion of
low-cost carriers (LCCs), the Japanese government’s further promotion of tourism-oriented initiatives such as
the relaxation of visa requirements as well as a sharp increase in the number of cross-border travelers due tothe rise of the middle-income class in Asia.
During the Reporting Period, INV’s hotel portfolio showed a slight decrease in revenues per available room
(RevPAR) of 0.8% year-on-year. This was mainly due to unfavorable impact from the day configuration of theSilver Week holidays in September, poor weather including more typhoon landings, the increase in new hotel
supply and a rapid increase of the number of hotel rooms listed by online travel agents. However, RevPAR for
full year of 2016 increased by 3.3% over the previous year and gross operating profit (GOP) for full year of2016 also increased by 3.8% over the previous year (1).
The residential properties continue to benefit from ongoing efforts to increase rents upon new/renewal lease
contracts and from selective reductions of leasing cost expenditures. As a result, net operating income (NOI)
for existing assets increased by 3.8% year-on-year for the Reporting Period and increased by 4.4% for the fullyear of 2016 over the previous year (2).
As a result, operating revenues reached JPY 9,511 million, ordinary income JPY 5,431 million and net income
JPY 5,431 million, with a distribution per unit (DPU) of JPY 1,477, an increase of 24.4% year-on-year.(3) With
this, the annual DPU came to JPY 2,663, a significant increase of 30.1% above the previous year.
Further, INV conducted a public offering in March 2017 to acquire two high quality residential assets,
including Royal Parks Tower Minami-Senju, which will serve as the flagship residential asset.
INV renewed the Memorandum of Understanding (MOU) with affiliates of its sponsor, Fortress Group, on
December 22, 2016 concerning preferential negotiation rights for property acquisitions. The MOU provides arobust pipeline of assets that INV can potentially acquire, consisting of 22 hotels with 6,616 rooms (INV
currently owns 48 hotels with 7,027 rooms) and nine residential properties with 743 units (INV currently
owns 70 residential properties with 4,778 units). Going forward, INV plans to expand its portfolio via
acquisitions from the abundant pipeline.
Moreover, with respect to INV’s internal growth, we will implement various measures to maximize hotelrevenue through close collaboration with each of the hotel operators. As for the residential portfolio, we
reduced the number of master lessees and property managers from 19 companies to 10 companies (inDecember 2016 and January 2017) in an effort to improve NOI, favoring companies with stronger
performance in achieving rent increases.
Concerning financial operations, INV obtained an initial credit rating of ‘A’ with a ‘Positive’ outlook fromJapan Credit Rating Agency, Ltd. (JCR) on September 27, 2016. INV aims to further strengthen its lender

1

2

3

INVINCIBLE INVESTMENT CORPORATIONBALANCE SHEETAs of December 31, 2016
As ofDecember 31,
2016

June 30,
2016

December 31,
2016(in thousands of
U.S. dollars)(in thousands of yen)
ASSETS
Current assets:
Cash and bank deposits (Notes 6 and 15) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥Cash and bank deposits in trust (Notes 6 and 15) ∙∙∙∙∙∙
Accounts receivable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Rental receivables ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Prepaid expenses ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Consumption taxes receivable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Other ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Allowance for doubtful accounts ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total current assets ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Non‐current assets:
Property and equipment (Notes 7 and 8):
Buildings, at cost ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Buildings and accompanying facilities, at cost ∙∙∙∙∙∙∙∙∙∙∙∙
Structures, at cost ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Land ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Buildings in trust, at cost ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Buildings and accompanying
facilities in trust, at cost ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Structures in trust, at cost ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Tools, furniture and fixtures in trust, at cost ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Land in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Construction in progress in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Subtotal ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Less: Accumulated depreciation ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total property and equipment, net ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Intangible assets:
Leasehold rights in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total intangible assets ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Investments and other assets:
Guarantee deposits ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Long‐term prepaid expenses ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Derivatives assets (Note 16) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Other ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total investments and other assets ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total non‐current assets ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙TOTAL ASSETS ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

11,322,762
5,441,316
201
1,375,846
394,524
2,672,787
35(2,764)
21,204,709¥

8,714,907
5,499,826
19
1,398,433
387,328‐
32(1,334)
15,999,214$

74,812
47,2120
12,004
3,324
‐
0
(11)
137,344

85,91438,862
2,779
711,834
101,837,752

85,91438,862
2,779
711,834
102,029,376

737
333
23
6,110
875,863

23,193,164

23,379,828

200,702336,691
500,608
135,384,518
46,368262,138,495(9,492,518)
252,645,976

340,005
651,007135,384,518‐
262,624,127(11,526,460)
251,097,667

2,918
5,588
1,162,198‐
2,254,477(98,948)
2,155,529

8,871,542
8,871,542

8,840,627
8,840,627

75,89175,891

613,914729,351‐
40,6401,383,905
262,901,424
284,106,133

613,914616,340
151,259
42,851
1,424,366
261,362,660
277,361,874

5,270
5,290
1,298
367
12,2272,243,648
2,380,993¥$

4

As ofDecember 31,
2016

June 30,
2016

December 31,
2016(in thousands of
U.S. dollars)(in thousands of yen)
LIABILITIESCurrent liabilities:
Accounts payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥
Short‐term loans payable (Notes 9 and 15) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Accounts payable‐other ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Accrued expenses ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Income taxes payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Consumption taxes payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Advances received ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Deposits received ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total current liabilities ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Non‐current liabilities:
Long‐term loans payable (Notes 9 and 15) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Tenant leasehold and security deposits in trust(Note 15) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Tenant leasehold and security deposits (Note 15) ∙Derivatives liabilities(Note 16) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Asset retirement obligations(Note 17) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total non‐current liabilities ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙TOTAL LIABILITIES ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙NET ASSETS (Note 10)
Unitholders’ equity:
Unitholders’ capital ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Surplus:Capital surplus ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Allowance for temporary differences
adjustment(Note 5) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Other deduction of capital surplus ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Capital surplus (net)∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Voluntary reserve
Reserve for temporary differences
adjustment(Note 4)∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Voluntary reserve ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Retained earnings ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total surplus ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total unitholders’ equity ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Valuation and translation adjustments:
Deferred gains or losses on hedges ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total valuation and translation adjustments ∙∙∙∙∙∙∙TOTAL NET ASSETS ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙TOTAL LIABILITIES AND NET ASSETS ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

188,3623,498,000
8,957,286
186,571605‐
507,135
21,072
13,359,034¥

182,601‐
51,825
166,066605
460,521522,072
13,583
1,397,276

$

1,567
‐
444
1,425
5
3,953
4,481
116
11,994

138,419,000

142,419,000

1,222,585

2,035,843

2,030,396

17,42928,663
227,532
31,050140,742,089
154,101,123

28,663‐31,260144,509,319
145,906,596

246
‐
268
1,240,529
1,252,524

120,367,271

120,367,271

1,033,284

6,264,432

6,264,432

53,776‐(224,225)(1,924)(763,290)
5,501,141(763,290)
5,276,915(6,552)45,299

708

‐

‐

708
4,363,420
9,865,270
130,232,542‐
5,659,831
10,936,747
131,304,019‐
48,586
93,885
1,127,169(227,532)(227,532)
130,005,009
284,106,133

151,259
151,259
131,455,278
277,361,874

1,298
1,298
1,128,468
2,380,993¥$

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

5

INVINCIBLE INVESTMENT CORPORATIONSTATEMENT OF INCOME AND RETAINED EARNINGSFor the six months ended December 31, 2016
For the six months ended
December 31,
2016

June 30,2016(in thousands of yen)
Operating revenue
Rental revenue－real estate (Note 12) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥Total operating revenue ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Operating expenses
Property related expenses (Note 12) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Asset management fees ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Directors’ compensation ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Asset custody fees ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Administrative service fees ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Provision of allowance for doubtful accounts ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Other ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total operating expenses ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Operating income ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Non‐operating income
Interest income ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Interest on tax refund ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Refund of consumption taxes∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Other ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total non‐operating income ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Non‐operating expenses
Interest expenses ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Loan‐related costs ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Investment unit issuance costs ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total non‐operating expenses ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Ordinary income ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Income before income taxes ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Income taxes (Note 13):
Current ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Deferred ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total income taxes ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙Net income ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Retained earnings brought forward ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙Unappropriated retained earnings (Note 10)∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

8,158,220
8,158,220¥

9,511,466
9,511,466

December 31,
2016(in thousands of U.S.
dollars)$

81,65081,6502,697,986
250,000
4,800
9,128
24,010269
98,1203,084,315
5,073,905

3,162,067
250,000
4,800
14,02627,8901,123
117,347
3,577,255
5,934,211

27,144
2,146
41
120
239
9
1,007
30,70850,941

1,316
1,372
‐
213
2,902

129
6,722
35,949385
43,186

1
57
308
3
370

295,185
280,326
137,270
712,782
4,364,025
4,364,025

359,540
186,249‐545,789
5,431,608
5,431,608

3,086
1,598
‐
4,685
46,627
46,627605‐
605
4,363,420‐
4,363,420

605
‐
605
5,431,003
228,827
5,659,831

5‐
546,622
1,964
48,586¥$

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

6

INVINCIBLE INVESTMENT CORPORATIONSTATEMENT OF CHANGES IN NET ASSETSFor the six months ended December 31, 2016

Unitholdersʹ equity
SurplusCapital surplus

Voluntary reserve

Deduction of capital surplus

Unitholdersʹ
capitalCapital surplus

Allowance fortemporarydifferences
adjustment

Other
deduction ofcapital surplus

¥

¥

¥

Deduction ofcapital surplus

Capital surplus(net)

Reserve fortemporarydifferences
adjustment

Voluntary
reserve¥¥¥(in thousands of yen)
Balance as of January 1, 2016 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥82,465,438

6,264,432

‐

‐

¥

‐

6,264,432‐‐

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

37,901,832

Other distributions in excess of(763,290)

retained earnings ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(763,290)(763,290)

Reserve for temporary differences708

adjustment ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

708

Distributions from surplus ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙Net income ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Changes other than unitholders’equity(net) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total changes during the period ∙∙∙∙∙∙∙∙∙∙∙∙

37,901,832

Balance as of July 1, 2016 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥120,367,271‐¥‐

6,264,432¥(763,290)‐¥(763,290)(763,290)¥(763,290)(763,290)¥

5,501,141

708
¥

708

708

¥

708

Changes during the period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Reversal of reserve for temporary(708)

differences adjustment ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(708)

Distributions from surplus ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Distributions in excess of retained(224,225)

earnings from allowance for(224,225)(224,225)

temporary differences adjustment ∙∙∙∙∙∙∙Net income ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Changes other than unitholders’equity(net) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total changes during the period ∙∙∙∙∙∙∙∙∙∙∙∙
Balance as of December 31, 2016 ∙∙∙∙∙∙∙∙∙∙∙∙ ¥‐‐120,367,271¥(224,225)

6,264,432¥‐(224,225)¥(224,225)(763,290)¥(987,516)

Unitholdersʹ equity

5,276,915

(708)
¥

(708)

‐

¥

‐

Valuation and translation adjustments

SurplusRetained earnings(224,225)¥

Total unitholdersʹ
equityTotal surplus

Deferred gains orlosses on hedges

Total valuationand translation
adjustments

Total net assets(in thousands of yen)
Balance as of January 1, 2016∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

3,028,323¥

9,292,755¥

91,758,194

¥

‐

¥

‐

¥

91,758,197

Changes during the period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Issuance of new investment units ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Other distributions in excess of retained earnings ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

37,901,832

37,901,832(763,290)(763,290)(763,290)

Reserve for temporary differences adjustment ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

(708)

‐

‐

‐

Distributions from surplus ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(3,027,614)(3,027,614)(3,027,614)(3,027,614)

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

4,363,420

4,363,420

4,363,420

Changes other than unitholders’equity(net) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

‐

‐

‐

Total changes during the period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Balance as of July 1, 2016 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

1,335,097¥

4,363,420

572,515¥

9,865,270

4,363,420(227,532)

38,474,348¥

130,232,542(227,532)(227,532)¥(227,532)(227,532)(227,532)¥(227,532)

38,246,815¥

130,005,009

Changes during the period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Reversal of reserve for temporary differences
adjustment ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Distributions from surplus ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

708

‐

‐

‐

(4,135,302)(4,135,302)(4,135,302)(4,135,302)(224,225)(224,225)(224,225)

5,431,003

5,431,003

Distributions in excess of retained earnings fromallowance for temporary differences adjustment ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙Net income ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

5,431,003

5,431,003

Changes other than unitholders’equity(net) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total changes during the period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Balance as of December 31, 2016 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

1,296,410¥

5,659,831

1,071,476¥

10,936,747

1,071,476¥

131,304,019¥

378,792

378,792

378,792

378,792

378,792

1,450,268

151,259¥

151,259¥

131,455,278

7

Unitholdersʹ equity
SurplusCapital surplus
Unitholdersʹ
capitalVoluntary reserve

Deduction of capital surplus
Capital surplus

Allowance fortemporarydifferences
adjustment

Other
deduction ofcapital surplus$$

Deduction ofcapital surplus

Capital surplus(net)

Reserve fortemporarydifferences
adjustment$$

Voluntary
reserve(in thousands of U.S dollars)
Balance as of July 1, 2016 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙$

1,033,284$

53,776‐(6,552)$(6,552)47,224

6$

6

Changes during the period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Reversal of reserve for temporary(6)differences adjustment ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(6)

Distributions from surplus ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Distributions in excess of retained(1,924)

earnings from allowance for(1,924)(1,924)

temporary differences adjustment ∙∙∙∙∙∙∙Net income ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Changes other than unitholders’equity(net) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total changes during the period ∙∙∙∙∙∙∙∙∙∙∙∙
Balance as of December 31, 2016 ∙∙∙∙∙∙∙∙∙∙∙∙‐$‐

1,033,284$(1,924)53,776$‐(1,924)$(1,924)(6,552)$(8,477)

Unitholdersʹ equity

45,299

(6)
$

(6)

‐

$

‐

Valuation and translation adjustments

SurplusRetained earnings(1,924)$

Total unitholdersʹ
equityTotal surplus

Total valuationand translation
adjustments

Deferred gains orlosses on hedges

Total net assets(in thousands of U.S dollars)
Balance as of July 1, 2016 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙$

37,457$

84,687$

1,117,971$(1,953)$(1,953)$

1,116,018

Changes during the period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Reversal of reserve for temporary differences
adjustment ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Distributions from surplus ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

6

‐

‐

‐

(35,499)(35,499)(35,499)(35,499)(1,924)(1,924)(1,924)

46,622

46,622Distributions in excess of retained earnings fromallowance for temporary differences adjustment ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙Net income ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

46,622

46,622

Changes other than unitholders’equity(net) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total changes during the period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Balance as of December 31, 2016 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

11,128$48,586

9,198$

93,885

9,198$

1,127,169

$

3,251

3,251

3,251

3,251

3,251

12,449

1,298

$

1,298

$

1,128,468

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

8

INVINCIBLE INVESTMENT CORPORATIONSTATEMENT OF CASH FLOWSFor the six months ended December 31, 2016
For the six months ended
December 31,
2016

June 30,2016(in thousands of yen)
Cash flows from operating activities:
Income before income taxes ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥
Depreciation and amortization ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Investment unit issuance costs ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

4,364,025
1,676,751
137,270¥

5,431,608
2,065,066‐$

December 31,
2016(in thousands of
U.S. dollars)
46,627
17,727‐

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

280,326

186,2491,598Interest income ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Interest expenses ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Changes in assets and liabilities
Increase (decrease) in allowance for doubtful accounts ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Decrease (increase) in rental receivables ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(1,316)295,185(129)359,540

(1)
3,086

269
(306,493)(1,430)(22,587)

(12)
(193)

Decrease (increase) in consumption taxes receivable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(1,744,762)

2,672,787

22,944

Increase (decrease) in accounts payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

7,056(66,883)(574)

Increase (decrease) in consumption taxes payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙‐

460,521

3,953

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 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

884,265
38,57733,971(14,615)(34,907)5,615,604
1,316(297,081)(564)(881,047)(5,946)
14,936(23,418)(12,451)
10,176,817
129(358,219)(605)(7,563)
(51)
128
(201)
(106)
87,362
1(3,075)(5)Net cash provided by operating activities ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

5,319,276

9,818,122

84,282

Cash flows from investing activities:
Purchases of property and equipment in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Purchases of leasehold rights in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Repayments of tenant leasehold and security deposits in trust ∙∙∙∙∙∙
Proceeds from tenant leasehold and security deposits in trust ∙∙∙∙∙∙∙
Payments of tenant leasehold and security deposits ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Other, net ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(82,786,898)(3,055,031)(56,280)
474,368(574,396)(2,211)(8,449,701)‐(53,815)
48,371‐(2,211)(72,535)
‐
(461)
415
‐
(18)

Net cash used in investing activities ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(86,000,448)(8,457,356)(72,601)

3,498,000(1,080,000)
47,800,000(594,356)(3,014,523)‐(3,498,000)
4,000,000(53,775)(4,118,229)‐(30,028)
34,337(461)(35,352)‐(224,225)(1,924)(763,290)
37,780,441‐‐‐(15,879)

‐
‐
(136)

Net cash provided by (used in) financing activities ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

83,626,270(3,910,109)(33,566)

Net increase (decrease) in cash and cash equivalents ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙Cash and cash equivalents at beginning of period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙Cash and cash equivalents at end of period (Note 6) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

2,945,097
13,818,981
16,764,078(2,549,344)
16,764,078
14,214,734(21,884)
143,910122,025

Cash flows from financing activities:
Proceeds from short‐term loans payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Repayments of short‐term loans payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Proceeds from long‐term loans payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Payments for loan‐related costs ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Payments of distributions of earnings ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Payments of distributions in excess of retained earnings fromallowance for temporary differences adjustment ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Payments of other distributions in excess of retained earnings∙∙∙∙∙∙∙
Proceeds from issuance of investment units ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Other, net ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥$

The 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 December 31, 2016

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 and inconnection with the acquisition of 18 properties during this fiscal period.
On July 15, 2015, the Company completed its fifth public offering totaling 500,000 new investment units at a price of ¥57,817 per unit.
211,250 of such units were issued in connection with a Domestic Public Offering, and the remaining 288,750 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 12,
2015, the Company issued an additional 25,000 investments units domestically in connection with the exercise of an over‐allotment
option. Net proceeds of approximately ¥29.3 billion were used to repay the Company’s outstanding long term borrowings and inconnection with the acquisition of 14 properties during this fiscal period.
On March 30, 2016, the Company completed its sixth public offering totaling 459,512 new investment units at a price ¥81,217 per unit.
194,144 of such units were issued in connection with a Domestic Public Offering, and the remaining 265,368 units were issued inconnection with an International Offering pursuant Rule 144A and Regulation S under the U.S. Securities Act of 1933. On April 27, 2016,
the Company issued and additional 22,626 investments units domestically in connection with the exercise of an over‐allotment option.
Net proceeds of approximately ¥37.9 billion were used to repay the Company’s outstanding long term borrowing and in connection
with the acquisition of 6 properties during this fiscal period.
On February 22, 2017, the Company completed its seventh public offering totaling 185,000 new investment units at a price ¥46,897 perunit in connection with Japanese Primary Offering.

10

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.

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
December 31, 2016
Buildings ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

77years

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

8‐24

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

7‐18

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

2‐67

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

2‐33

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

3‐55

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

2‐19(d) Intangible Assets
Intangible assets are amortized on a straight‐line basis. Amortization of a term leasehold interest for business use is calculated by thestraight‐line method over the lease term.
(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 on a valuation of any receivables fromcompanies and individuals with financial difficulties.
(h) Impairment of Fixed Assets

11

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.
(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.
No taxes on property and equipment were capitalized for the six months ended December 31, 2016.

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 ¥116.49 = US$1,
the effective rate of exchange prevailing at December 31, 2016. The inclusion of such U.S. dollar amounts associated with the fiscal six
months ended December 31, 2016 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. Reserve for temporary differences adjustment
JPY 708 thousand reserve for temporary differences adjustment is distributed in current fiscal period.

5. Allowance for temporary differences adjustment
For the six months ended June 30, 2016
Not Applicable.
For the six months ended December 31, 2016
On the Balance Sheet, there are the increase and decrease of allowance for temporary differences adjustment.

12

1. Reason, related assets and amounts(in thousands of yen)
Allowance
Related assets,

Reasonetc.

Deferred
gains or losses
on hedges

InitialBeginning

set asideamountbalanceduringperiodReversalEndingduringperiodReason for reversal

balance

Loss on interest rate
swaps recognized at
the end of the fiscal
periodTotal¥ (224,225)‐¥ (224,225)‐¥ 224,225)‐¥ (224,225)‐¥ (224,225)‐¥ 224,225)‐(in thousands of U.S dollars)
Allowance
Related assets,

Reasonetc.

Deferred
gains or losses
on hedges

InitialBeginning

set asideamountbalanceduringperiodReversalEndingduringperiodbalance

Reason for reversal

Loss on interest rate
swaps recognized at
the end of the fiscal
periodTotal$ (1,924)‐$ (1,924)‐$ 1,924)‐$ (1,924)‐$ (1,924)‐$ 1,924)‐

2. Method of reversal(1) Deferred gains or losses on hedges
Based on changes in the fair value of derivatives used as hedging instruments, the corresponding amount is scheduled to be reversed.

6. 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,
2016

June 30,
2016

December 31,
2016(in thousands of
U.S. dollars)(in thousands of yen)
Cash and bank deposits ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥Cash and bank deposits in trust ∙∙∙∙∙∙∙∙∙∙∙∙

11,322,762
5,441,316¥

8,714,907
5,499,826$

74,812
47,212

Cash and cash equivalents ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥16,764,078¥

14,214,734$

122,025

13

7. Property and Equipment
The following tables show the summary of movement in property and equipment for the six months ended December 31, 2016.
At costBeginningbalance

Increase

Endingbalance

Decrease

Accumulated
depreciation

Depreciation forthe period

Net property andequipment(in thousands of yen)
Buildings ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

85,914¥

Buildings and accompanying facilities ∙∙∙∙∙

38,862‐‐

38,862

22,150774

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

2,779

‐

‐

2,779

1,467

65

1,311

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

711,834‐‐

711,834‐‐

711,834

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

101,837,752

191,623‐

102,029,376

6,800,686

1,261,513

95,228,689

23,193,164

186,825

162

23,379,828

4,312,055

719,333

19,067,773

336,691

3,314‐

340,005

158,426

10,476

181,579

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

500,608

150,399‐

651,007

221,184

41,445429,823

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

135,384,518‐‐

135,384,518‐‐

135,384,518

Leasehold rights in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

8,891,821‐‐

8,891,821

51,19330,9148,840,627

Construction in progress in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

46,368‐46,368‐‐‐‐

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

271,030,316¥‐

532,163¥‐¥

46,530¥¥85,914

271,515,949¥

10,489¥

11,577,654

¥

¥

541

2,065,066¥

75,424
16,712¥259,938,294

At costBeginningbalance

Increase

Endingbalance

Decrease

Accumulated
depreciation

Depreciation forthe period

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

737$

Buildings and accompanying facilities ∙∙∙∙∙

333

‐

‐

333

190

6

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

23

‐

‐

23

12

0

11

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

6,110

‐

‐

6,110

‐

‐

6,110

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

874,218

1,644‐

875,863

58,38010,829817,483

199,100

1,603

1200,70237,016

6,175

163,685

2,890

28

‐

2,918

1,359

89

1,558

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

4,297

1,291

‐

5,588

1,898

355

3,689

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

1,162,198‐‐

1,162,198‐‐

1,162,198

Leasehold rights in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

76,331‐‐

76,331439

265

75,891

Construction in progress in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

398

‐

398

‐

‐

‐

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

2,326,640

$

‐

4,568

$

$

‐

399

$

$

737

2,330,809

$

$

90

99,387$$

4

17,727

$

647
143

‐
$

2,231,421

Increases in the net book values are mainly due to capitalized expenditures.

148. 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 June 30, 2016 and December 31, 2016.
Residential
As of / For the six months ended
December 31,
December 31,
2016
2016
(in thousands of(in thousands of yen)
U.S. dollars)

June 30,
2016

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

60,305,706

Net increase (decrease) during period ∙∙∙∙∙∙∙∙∙∙
Balance at the end of period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

7,968,789
68,274,496

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

77,214,000¥

68,274,496$(438,657)
67,835,839¥

77,843,000

586,097(3,765)582,331$668,237

OfficeAs of / For the six months ended
December 31,
December 31,
2016
2016
(in thousands of(in thousands of yen)
U.S. dollars)

June 30,
2016

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

8,487,876

Net increase (decrease) during period ∙∙∙∙∙∙∙∙∙∙
Balance at the end of period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(17,489)8,470,387

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

7,219,000¥

8,470,387$(29,405)8,440,981¥

7,406,000

72,713(252)
72,460$63,576

Retail facilities
As of / For the six months ended
December 31,
December 31,
2016
2016
(in thousands of(in thousands of yen)
U.S. dollars)

June 30,
2016

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

5,134,083

Net increase (decrease) during period ∙∙∙∙∙∙∙∙∙∙
Balance at the end of period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(46,557)
5,087,525

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

5,840,000¥

5,087,525$(38,298)
5,049,226¥

5,890,000

43,673(328)
43,344$50,562

Parking lots
As of / For the six months ended
December 31,
December 31,
2016
2016
(in thousands of(in thousands of yen)
U.S. dollars)

June 30,
2016

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

100,821

Net increase (decrease) during period ∙∙∙∙∙∙∙∙∙∙
Balance at the end of period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(1)
100,820

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

113,000¥

100,820$(1)
100,819¥

113,000

865
0
865

$

970

15

HotelAs of / For the six months ended
December 31,
December 31,
2016
2016
(in thousands of(in thousands of yen)
U.S. dollars)

June 30,
2016

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

95,223,054

Net increase (decrease) during period ∙∙∙∙∙∙∙∙∙∙
Balance at the end of period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

84,314,865
179,537,920

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

232,905,000¥

179,537,920$

1,541,230(1,026,493)
178,511,427¥

236,940,000(8,811)
1,532,418$

2,033,994

Total
As of / For the six months ended
December 31,
December 31,
2016
2016
(in thousands of(in thousands of yen)
U.S. dollars)

June 30,
2016

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

169,251,542

Net increase (decrease) during period ∙∙∙∙∙∙∙∙∙∙
Balance at the end of period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

92,219,607
261,471,150

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

323,291,000¥

261,471,150$

2,244,580(1,532,855)
259,938,294¥

328,192,000(13,158)
2,231,421$

2,817,340

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 June 30, 2016 and December 31, 2016, please refer to “Note 12: Rent Revenues－Real Estate and Expenses Related toProperty Rental Business“

9. Loans Payable
The following table shows the details of loans payable for the six months ended December 31, 2016.

For the six months ended December 31, 2016
Beginningbalance
Classification

Increase

Decrease

Endingbalance

Beginningbalance

Decrease

Endingbalance

Name of lender(in thousands of yen)

Short‐termloans payable

Increase(in thousands of U.S. dollars)

Averageinterest
rate (%)(1)

Maturity
date

Sumitomo
Mitsui Trust
Bank, Limited¥ 498,000¥‐¥ 498,000¥‐$ 4,275$‐$ 4,275$‐

0.237

22‐Jan‐17

Mizuho Bank,
Ltd.

604,000‐

604,000

‐

5,184

‐

5,184

‐

0.237

30‐Mar‐17

The Bank ofTokyo‐Mitsubishi
UFJ, Ltd.

826,000‐

826,000

‐

7,090

‐

7,090

‐

0.237

30‐Mar‐17

Sumitomo
Mitsui Trust
Bank, Limited

688,000‐

688,000

‐

5,906

‐

5,906

‐

0.237

30‐Mar‐17

Citibank Japan
Ltd.

882,000‐

882,000

‐

7,571

‐

7,571

‐

0.237

15‐Jun‐17

Total short‐termloans payable

3,498,000‐

3,498,000‐

30,028‐30,028‐Use ofproceeds

Remarks(2),(3)

Unsecured
andunguaranteed16

Long‐termloans payable

Mizuho Bank,
Ltd.

5,992,000‐‐

5,992,000

51,437‐‐51,4370.375

16‐Jul‐18

The Bank ofTokyo‐Mitsubishi
UFJ, Ltd.

5,992,000‐‐

5,992,000

51,437‐‐51,4370.375

16‐Jul‐18

Sumitomo
Mitsui Banking
Corporation

5,992,000‐‐

5,992,000

51,437‐‐51,4370.375

16‐Jul‐18

Shinsei Bank,
Limited.

3,330,000‐‐

3,330,000

28,586‐‐28,5860.375

16‐Jul‐18

Citibank JapanLtd.

3,000,000‐‐

3,000,000

25,753‐‐25,7530.375

16‐Jul‐18

Sumitomo
Mitsui Trust
Bank, Limited

2,670,000‐‐

2,670,000

22,920‐‐22,9200.375

16‐Jul‐18

Resona Bank,
Limited.

1,335,000‐‐

1,335,000

11,460‐‐11,4600.375

16‐Jul‐18

Mitsubishi UFJ
Trust andBanking
Corporation

668,000‐‐

668,000

5,734

‐

‐

5,734

0.375

16‐Jul‐18

Mizuho Bank,
Ltd.

5,992,000‐‐

5,992,000

51,437‐‐51,4370.480

16‐Jul‐19

The Bank ofTokyo‐Mitsubishi
UFJ, Ltd.

5,992,000‐‐

5,992,000

51,437‐‐51,4370.480

16‐Jul‐19

Sumitomo
Mitsui Banking
Corporation

5,992,000‐‐

5,992,000

51,437‐‐51,4370.480

16‐Jul‐19

Shinsei Bank,
Limited.

3,330,000‐‐

3,330,000

28,586‐‐28,5860.480

16‐Jul‐19

Citibank JapanLtd.

3,000,000‐‐

3,000,000

25,753‐‐25,7530.480

16‐Jul‐19

Sumitomo
Mitsui Trust
Bank, Limited

2,670,000‐‐

2,670,000

22,920‐‐22,9200.480

16‐Jul‐19

Resona Bank,
Limited.

1,335,000‐‐

1,335,000

11,460‐‐11,4600.480

16‐Jul‐19

Mitsubishi UFJ
Trust andBanking
Corporation

668,000‐‐

668,000

5,734

‐

‐

5,734

0.480

16‐Jul‐19

Mizuho Bank,
Ltd.

5,992,000‐‐

5,992,000

51,437‐‐51,4370.590

16‐Jul‐20

The Bank ofTokyo‐Mitsubishi
UFJ, Ltd.

5,992,000‐‐

5,992,000

51,437‐‐51,4370.590

16‐Jul‐20

Sumitomo
Mitsui Banking
Corporation

5,992,000‐‐

5,992,000

51,437‐‐51,4370.590

16‐Jul‐20

Shinsei Bank,
Limited.

3,330,000‐‐

3,330,000

28,586‐‐28,5860.590

16‐Jul‐20

Citibank JapanLtd.

3,000,000‐‐

3,000,000

25,753‐‐25,7530.590

16‐Jul‐20(2)Unsecured
andunguaranteed17

Sumitomo
Mitsui Trust
Bank, Limited

2,670,000‐‐

2,670,000

22,920‐‐22,9200.590

16‐Jul‐20

Resona Bank,
Limited.

1,335,000‐‐

1,335,000

11,460‐‐11,4600.590

16‐Jul‐20

Mitsubishi UFJ
Trust andBanking
Corporation

668,000‐‐

668,000

5,734

‐

‐

5,734

0.590

16‐Jul‐20

Mizuho Bank,
Ltd.

3,682,000‐‐

3,682,000

31,607‐‐31,607

0.490

28‐Aug‐19

Sumitomo
Mitsui Trust
Bank, Limited

3,400,000‐‐

3,400,000

29,187‐‐

29,1870.343

22‐Jan‐19

Mitsubishi UFJ
Trust andBanking
Corporation

850,000‐‐

850,000

7,296

‐

‐

7,296

0.343

22‐Jan‐19

Sumitomo
Mitsui Trust
Bank, Limited

3,400,000‐‐

3,400,000

29,187‐‐

29,1870.600

22‐Jan‐21

Mitsubishi UFJ
Trust andBanking
Corporation

850,000‐‐

850,000

7,296

‐

‐

7,296

0.600

22‐Jan‐21

Mizuho Bank,
Ltd.

4,465,000‐

4,000,000

465,000

38,329‐34,337

3,991

0.443

30‐Mar‐19

The Bank ofTokyo‐Mitsubishi
UFJ, Ltd.

1,125,000‐‐

1,125,000

9,657

‐

‐

9,657

0.443

30‐Mar‐19

Sumitomo
Mitsui Trust
Bank, Limited

2,181,000‐‐

2,181,000

18,722‐‐

18,7220.443

30‐Mar‐19

Shinsei Bank,
Limited.

570,000‐‐

570,000

4,893

‐

‐

4,893

0.443

30‐Mar‐19

Resona Bank,
Limited.

570,000‐‐

570,000

4,893

‐

‐

4,893

0.443

30‐Mar‐19

Mitsubishi UFJ
Trust andBanking
Corporation

650,000‐‐

650,000

5,579

‐

‐

5,579

0.443

30‐Mar‐19

Japan Post Bank
Co., Ltd.

‐2,000,000‐

2,000,000‐

17,168‐17,1680.443

30‐Mar‐19

Development
Bank of JapanInc.

1,000,000‐‐

1,000,000

8,584

‐

‐

8,584

0.443

30‐Mar‐19

The Bank ofFukuoka, Ltd.

333,000‐‐

333,000

2,858

‐

‐

2,858

0.443

30‐Mar‐19

The Shizuoka
Bank, Ltd.

270,000

1,000,000‐

1,270,000

2,317

8,584

‐

10,9020.443

30‐Mar‐19

The Daishi Bank,
Ltd.

‐

1,000,000‐

1,000,000

‐

8,584

‐

8,584

0.443

30‐Mar‐19

The Nomura
Trust andBanking Co., Ltd.

270,000‐‐

270,000

2,317

‐

‐

2,317

0.443

30‐Mar‐19

Mizuho Bank,
Ltd.

4,465,000‐

3,500,000

965,000

38,329‐30,045

8,283

0.545

30‐Mar‐20

18

The Bank ofTokyo‐Mitsubishi
UFJ, Ltd.

1,125,000‐‐

1,125,000

9,657

‐

‐

9,657

0.545

30‐Mar‐20

Sumitomo
Mitsui Trust
Bank, Limited

2,180,000‐‐

2,180,000

18,714‐‐

18,7140.545

30‐Mar‐20

Shinsei Bank,
Limited.

570,000‐‐

570,000

4,893

‐

‐

4,893

0.545

30‐Mar‐20

Resona Bank,
Limited.

570,000‐‐

570,000

4,893

‐

‐

4,893

0.545

30‐Mar‐20

Mitsubishi UFJ
Trust andBanking
Corporation

650,000‐‐

650,000

5,579

‐

‐

5,579

0.545

30‐Mar‐20

Japan Post Bank
Co., Ltd.

‐2,000,000‐

2,000,000‐

17,168‐17,1680.545

30‐Mar‐20

The Bank ofFukuoka, Ltd.

333,000‐‐

333,000

2,858

‐

‐

2,858

0.545

30‐Mar‐20

The Shizuoka
Bank, Ltd.

270,000‐‐

270,000

2,317

‐

‐

2,317

0.545

30‐Mar‐20

The Kagawa
Bank, Ltd.

‐

500,000‐

500,000

‐

4,292

‐

4,292

0.545

30‐Mar‐20

The Hyakugo
Bank, Ltd.

‐

1,000,000‐

1,000,000

‐

8,584

‐

8,584

0.545

30‐Mar‐20

The Nomura
Trust andBanking Co., Ltd.

270,000‐‐

270,000

2,317

‐

‐

2,317

0.545

30‐Mar‐20

Mizuho Bank,
Ltd.

4,465,000‐

2,500,000

1,965,000

38,329‐21,461

16,8680.648

30‐Mar‐21

The Bank ofTokyo‐Mitsubishi
UFJ, Ltd.

1,125,000‐‐

1,125,000

9,657

‐

‐

9,657

0.648

30‐Mar‐21

Sumitomo
Mitsui Trust
Bank, Limited

2,180,000‐‐

2,180,000

18,714‐‐

18,7140.648

30‐Mar‐21

Shinsei Bank,
Limited.

570,000‐‐

570,000

4,893

‐

‐

4,893

0.648

30‐Mar‐21

Resona Bank,
Limited.

570,000‐‐

570,000

4,893

‐

‐

4,893

0.648

30‐Mar‐21

Mitsubishi UFJ
Trust andBanking
Corporation

650,000‐‐

650,000

5,579

‐

‐

5,579

0.648

30‐Mar‐21

The Bank ofFukuoka, Ltd.

333,000

1,000,000‐

1,333,000

2,858

8,584

‐

11,4430.648

30‐Mar‐21

The Shizuoka
Bank, Ltd.

270,000‐‐

270,000

2,317

‐

‐

2,317

0.648

30‐Mar‐21

The Kagawa
Bank, Ltd.

‐

500,000‐

500,000

‐

4,292

‐

4,292

0.648

30‐Mar‐21

The Hiroshima
Bank, Ltd.

‐

1,000,000‐

1,000,000

‐

8,584

‐

8,584

0.648

30‐Mar‐21

19

The Nomura
Trust andBanking Co., Ltd.

270,000‐‐

270,000

2,317

‐

‐

2,317

0.648

30‐Mar‐21

Citibank JapanLtd.

1,000,000‐‐

1,000,000

8,584

‐

‐

8,584

0.443

15‐Jun‐19

Citibank JapanLtd.

1,000,000‐‐

1,000,000

8,584

‐

‐

8,584

0.545

15‐Jun‐20

Citibank JapanLtd.

1,000,000‐‐

1,000,000

8,584

‐

‐

8,584

0.648

15‐Jun‐21

Development
Bank of JapanInc.

1,000,000‐‐

1,000,000

8,584

‐

‐

8,584

0.443

30‐Jun‐19

AEON Bank,
Ltd.

3,000,000‐‐

3,000,000

25,753‐‐25,7530.648

30‐Jun‐21

The Tokyo Star
Bank, Limited‐

700,000‐

700,000

‐

6,009

‐

6,009

0.443

20‐Jul‐19

The Tokyo Star
Bank, Limited‐

1,600,000‐

1,600,000‐

13,735‐

13,7350.545

20‐Jul‐20

The Tokyo Star
Bank, Limited‐

1,700,000‐

1,700,000‐

14,593‐

14,5930.648

20‐Jul‐21

Total long‐termloans payable

138,419,000

14,000,000

10,000,000

142,419,000

1,188,247

120,181

85,844

1,222,585¥ 141,917,000¥ 14,000,000¥ 13,498,000¥ 142,419,000$ 1,218,276$ 120,181$ 115,872$ 1,222,585

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 and for repayment of loans payable.

(3)

The principal was repaid using the refund of consumption taxes on November 30, 2016.

(4)

Repayment schedule of long‐term loans payable (except for the current portion) for the next five years after each balance sheet date are as follows:

As of
December 31,
2016(in thousands of yen)

December 31,
2016(in thousands of
U.S. dollars)

1‐2 years∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥28,979,000 $

248,768

2‐3 years∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

51,045,000

438,192

3‐4 years∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

42,012,000

360,648

4‐5 years∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

20,383,000

174,97620

10. 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$ 429 thousand) as required by Article 67‐4 of the Investment Trust Act.
The number of investment units authorized was 10,000,000 units as of June 30, 2016 and December 31, 2016.
The number of investment units issued and outstanding were 3,675,824 as of June 30, 2016 and December 31, 2016.

11. 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 June 30, 2016 and December 31, 2016.
For the six months ended
December 31,
2016

June 30,
2016

December 31,
2016(in thousands of
U.S. dollars)(in thousands of yen)
Unappropriated retained earnings ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥4,363,420

Reversal of reserve for temporary differences adjustment ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

(708)

¥

5,659,831‐$

48,586‐

Reversal of allowance for temporary differences adjustment∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙‐(224,225)(1,924)

Distributions in excess of retained earnings ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Allowance for temporary differences adjustment ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(224,225)‐‐

Deduction from capital surplus ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

‐

‐

‐

Distributions ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(4,359,527)(5,429,192)(46,606)

Of which, distributions of earnings∙∙ ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(4,135,302)(5,429,192)(46,606)

Of which, allowance for adjustment of temporary differences ∙∙∙∙∙∙∙∙∙∙∙∙∙∙(224,225)‐‐

Of which, distributions in excess of net earnings ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

‐

‐

‐

‐

‐

‐

‐

Voluntary reserve ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Reserve for temporary differences adjustment ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙‐

Retained earnings carried forward ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥228,827

¥

6,414

$

55

The distributions in respect of the six months ended December 31, 2016 of ¥1,477 (US$12.6) per investment unit, amounting to a total
dividend of ¥5,659,831 thousand (US$48,586 thousand), including distributions in excess of retained earnings (return of capital), wasproposed and approved at the Board of Directors meeting on February 22, 2017. These financial statements do not reflect this dividend
payable.
Cash distributions per investment unit were ¥1,186 and ¥1,477 (US$12.6) for the six months ended June 30, 2016, and December 31, 2016,
respectively.

2112. 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 June 30, 2016 and December 31,
2016 consist of the following:
For the six months ended
December 31,
2016

June 30,
2016

December 31,
2016(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 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥7,889,877
268,342
8,158,220¥

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∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥554,149
281,065
12,6691,676,736
173,364
2,697,986
5,460,234

¥

¥

¥
¥

9,237,784
273,682
9,511,466$

580,896356,372
11,8072,065,066
147,924
3,162,067
6,349,399

$

$

$
$

79,301
2,349
81,650

4,986
3,059
101
17,727
1,269
27,14454,505

13. 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
June 30,
2016

December 31,
2016(Rate)

Statutory tax rates ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Deductible cash distributions ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Increase (decrease) in valuation allowance ∙∙∙∙∙∙∙∙∙∙∙
Other ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

32.31 %
(32.31)(2.72)
2.63

31.74 %
(31.71)(0.09)
0.08

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

0.01 %

0.01 %(b) Deferred tax assets and liabilities consist of the following:
As ofJune 30,
2016

December 31,
2016

December 31,
2016(in thousands of
U.S. dollars)(in thousands of yen)
Deferred tax assets:
Current:
Enterprise tax payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥
Rental receivables (merger) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

481
183

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

877

¥

661
‐
423

$

5
‐
3

22

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

1,542

1,084

9

Buildings and other (merger) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Land (merger) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Deferred gains or losses on hedges ∙∙∙∙∙∙∙∙Net loss carried forward ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Asset retirement obligations ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Fixed‐term leasehold ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

711,143
2,092,087
72,2187,200,289
9,855‐

700,210
2,092,087‐
7,200,289
9,921
16,2486,010
17,959‐61,81085
13910,018,757

86,005

Non‐current:

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

10,085,594

Deferred tax liabilities:
Non‐current
Asset retirement obligations ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

9,797

9,797

84

Deferred gains or losses on hedges ∙∙∙∙∙∙∙∙‐

48,009412

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

9,797

57,807496

Valuation allowance ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(10,077,339)(9,960,950)(85,509)

Total ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙‐Net deferred tax assets ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

‐

‐
¥

‐

‐

$

‐

14. Leases(a) Lease rental revenues
The future minimum rental revenues pursuant to existing rental contracts as of December 30, 2016 and December 31, 2016 scheduled tobe received are summarized as follows:
As ofJune 30,
2016

December 31,
2016

December 31,
2016(in thousands of
U.S. dollars)(in thousands of yen)
Due within one year ∙∙∙∙∙∙∙∙∙∙∙∙¥
Due over one year ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

5,988,176
50,718,568¥

5,988,176
47,412,300$

51,405407,007

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

56,706,745¥

53,400,477$

458,412(b) Lease rental expenses
The future minimum rental expenses pursuant to existing rental contracts as of June 30, 2016 and December 31, 2016 scheduled to be
paid are summarized as follows:
As ofJune 30,
2016

December 31,
2016

December 31,
2016(in thousands of
U.S. dollars)(in thousands of yen)
Due within one year ∙∙∙∙∙∙∙∙∙∙∙∙¥
Due over one year ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

244,619
7,490,299¥

244,619
7,367,989$

2,099
63,249Total ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

7,734,918¥

7,612,609$

65,34915. Financial Instruments(a) Qualitative information for financial instruments(i) 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.
(ii) Nature and extent of risks arising from financial instruments and risk management

23

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 notavailable, fair value is estimated using valuation techniques which contain various assumptions. If other valuation models orassumptions 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 June 30, 2016 and December 31, 2016.
As ofJune 30,
2016
Carrying
amounts

December 31,
2016

Fair value

Carrying
amounts

Difference

December 31,
2016

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 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥11,322,762(2) Cash and bank deposits in trust. ∙∙∙∙∙

5,441,316

Total assets ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥¥11,322,762¥‐

5,441,316

16,764,078

¥

¥

¥

8,714,907‐

16,764,078¥

3,498,000¥¥

5,499,826

‐

¥

‐

¥

8,714,907¥

5,499,826

14,214,734

¥

‐

¥

‐

$

‐

14,214,734

¥

‐

¥

74,812$

47,212‐$‐$74,812$

47,212122,025

$

‐

$

‐
‐

122,025

$

‐

‐

$

‐

Liabilities:(3) Short‐term loans payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥3,498,000(4) Account payable ‐ other ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

8,957,286

8,957,286

‐

‐

‐

‐

‐

‐

‐

(5) Long‐term loans payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

138,419,000

138,419,000‐

142,419,000

142,419,000‐

1,222,585

1,222,585‐

Total liabilities ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥150,874,286¥

150,874,286

¥

‐

¥

142,419,000¥

142,419,000

¥

‐

$

1,222,585$

1,222,585

$

‐

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 (3) Short‐term loans payable (4) Account payable ‐ otherBecause of their short maturities, the carrying amounts approximate their fair value.
(5) Long‐term loans payable in trust
Long‐term loans payable with floating interest rates reflecting changes in market 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,
2016

June 30,
2016

December 31,
2016(in thousands of
U.S. dollars)(in thousands of yen)
Tenant leasehold and security deposits ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

28,663¥

28,663$

246

Tenant leasehold and security deposits in trust ∙∙∙∙∙∙∙∙∙∙∙∙¥

2,035,843¥

2,030,396$

17,429Tenant 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.

24

(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 June 30, 2016:
Cash and bank deposits ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥Cash and bank deposits in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

11,322,762
5,441,316

¥

‐
‐

¥

‐
‐

¥

‐
‐

¥

‐
‐

¥

‐
‐

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

16,764,078

¥

‐

¥

‐

¥

‐

¥

‐

¥

‐

As of December 31, 2016:
Cash and bank deposits ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥Cash and bank deposits in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

8,714,907
5,499,826

¥

‐
‐

¥

‐
‐

¥

‐
‐

¥

‐
‐

¥

‐
‐

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

14,214,734

¥

‐

¥

‐

¥

‐

¥

‐

¥

‐

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 December 31, 2016:
Cash and bank deposits ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙$Cash and bank deposits in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

74,812
47,212

$

‐
‐

$

‐
‐

$

‐
‐

$

‐
‐

$

‐
‐

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

122,025

$

‐

$

‐

$

‐

$

‐

$

‐

(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 June 30, 2016:
Short‐term loans payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥
Long‐term loans payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

3,498,000
‐

¥

‐
‐

¥

‐
46,663,000¥‐
44,094,000¥‐
47,662,000¥‐‐

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

3,498,000¥‐¥

46,663,000¥

44,094,000¥

47,662,000¥‐

As of December 31, 2016:
Short‐term loans payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

‐

¥

‐

¥

‐

¥

‐

¥

‐

¥

‐

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

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

‐

¥

‐

28,979,000¥

Within 1 year

28,979,000

51,045,000¥

1‐2 years

51,045,000

42,012,000¥

2‐3 years

42,012,000

20,383,000¥

3‐4 years

20,383,000‐

4‐5 years

Over 5 years(in thousands of U.S. dollars)
As of December 31, 2016:
Short‐term loans payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙$‐

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

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

‐

$

‐

$

248,768$

248,768‐$

438,192$

438,192‐$

360,648$360,648‐$

174,976$

174,976

‐
‐

$

‐

25

16. Derivatives
Information on derivative transactions undertaken by the Company as of June 30, 2016 and December 31, 2016 is as follows. Derivative
instruments are used for hedging purposes only and are subject to hedge accounting.
As of June 30, 2016:
Contract amount(*1)
Method ofhedge
accounting

Type ofderivativetransactionMainhedgeditem

Over 1
year

Total

Fair
Value(*2)(in thousands of yen)

Principle
accounting
methodInterest rate
swap
transaction
floating ratereceivable andFixed rate
payableLong‐term
borrowings¥

99,119,000¥

99,119,000¥(227,532)

Total ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥99,119,000¥

99,119,000¥(227,532)(*1) The contract amount is based on the notional principal amount.
(*2) The fair value is provided by the financial institution.

As of December 31, 2016:
Contract amount(*1)
Method ofhedge
accounting

Type ofderivativetransaction

Principle
accounting
methodInterest rate
swap
transaction
floating ratereceivable andFixed rate
payableMainhedgeditem

Contract amount(*1)

Over 1
year

Total

Fair
Value(*2)(in thousands of yen)

Long‐term
borrowings

Over 1
year

Total

Fair
Value(*2)(in thousands of U.S. dollars)¥

99,119,000¥

99,119,000¥

151,259$

850,879$

850,879$

1,298

Total ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥99,119,000¥

99,119,000¥

151,259$

850,879$

850,879$

1,298(*1) The contract amount is based on the notional principal amount.
(*2) The fair value is provided by the financial institution.

17. Asset Retirement Obligations
The Company has an obligation under a fixed‐term leasehold agreement to restore its leased land, which represents the land where
COMFORT HOTEL MAEBASHI, owned by the Company, is located upon the termination of agreement. The estimated period of useof property is estimated at 43 years based on the lease period per the agreement. The assets retirement obligation for the restoration isrecognized as a liability using discount rate at 1.342%.
Movements of asset retirement obligations for the six month ended June 30, 2016 and December 31, 2016 are as follows.
For the six month ended
December 31,
2016

June 30,
2016

December,
2016(in thousands of
U.S. dollars)(in thousands of yen)
Balance at the beginning of the period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥‐¥31,050$266

Liabilities incurred due to the acquisition of properties ∙∙∙∙∙∙∙

30,868‐‐

Accretion expense ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

182

209

1

Balance at the end of the period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥31,050¥31,260$268

2618. Segment Information
Segment information for the six months ended June 30, 2016 and December 31, 2016 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 June 30, 2016 and December 31, 2016 were as follows:

For the six months ended June 30, 2016

Name of client

Mystays Hotel Management Co.,Ltd.

Operating Revenues(in thousands of yen)
¥3,389,166

Related segment

Real estate investing business

For the six months ended December 31, 2016

Name of client

Mystays Hotel Management Co.,Ltd.
Naqua Hotel & Resorts Management
Co.,Ltd.

Operating Revenues

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

Related segment¥4,043,845＄34,714

Real estate investing business¥1,040,790＄8,934

Real estate investing business27

19. Related‐Party Transactions(a) Parent Company and Major Corporate Unitholders
For the six months ended June 30, 2016
Share capital
Type ofrelated‐party

Interested
party of the
Asset
Manager(in millions ofyen)

Votinginterest intheCompany

Investment
managementbusiness

¥

0.1

‐

Minato‐ku
Tokyo

Investment
managementbusiness

¥

0.1

‐

Momo
TMK(3)

Minato‐ku
Tokyo

Investment
managementbusiness

¥

0.1

‐

Tsuki TMK(3)Minato‐ku
Tokyo

Investment
managementbusiness

¥

0.1

‐

Septentrio
TMK(3)

Minato‐ku
Tokyo

Investment
managementbusiness

¥

0.1

‐

Septentrio２
TMK(3)

Minato‐ku
Tokyo

Investment
managementbusiness

¥

0.1

‐

Septentrio３
TMK(3)

Minato‐ku
Tokyo

Investment
managementbusiness

¥

0.1

‐

Ginga
TMK(3)

Minato‐ku
Tokyo

Investment
managementbusiness

¥

0.1

‐

Wakusei
TMK(3)

Minato‐ku
Tokyo

Investment
managementbusiness

¥

0.1

‐

Naqua Hotel& Resorts
Management
Co., Ltd.(3)Minato‐ku,
Tokyo

Hotel
managementbusiness¥

10‐

Mystays HotelManagement,.
Co.Ltd(3)Minato‐ku,
Tokyo

Hotel
managementbusiness

¥

100

‐

Company
nameLocation

Aki TMK(3)Minato‐ku
Tokyo

NavaroTMK(3)

Business

Transactions for the period
Relationshipwith theCompany
Seller of realestate trust
beneficiaryrightsSeller of realestate trust
beneficiaryrightsSeller of realestate trust
beneficiaryrightsSeller of realestate trust
beneficiaryrightsSeller of realestate trust
beneficiaryrightsSeller of realestate trust
beneficiaryrightsSeller of realestate trust
beneficiaryrightsSeller of realestate trust
beneficiaryrightsSeller of realestate trust
beneficiaryrightsBalance at the end of period

Amounts (1)Type of transactions(in thousands ofyen)

Amounts(1)Balancesheet
account(in thousands ofyen)

Acquisition of real estate
trust beneficiaryrights(2)(5)¥ 3,160,000‐‐

Acquisition of real estate
trust beneficiaryrights(2)(5)¥ 20,155,000‐‐

Acquisition of real estate
trust beneficiaryrights(2)(5)¥ 7,934,000‐‐

Acquisition of real estate
trust beneficiaryrights(2)(5)¥ 24,674,000‐‐

Acquisition of real estate
trust beneficiaryrights(2)(5)¥ 12,588,600‐‐

Acquisition of real estate
trust beneficiaryrights(2)(5)¥ 4,196,199‐‐

Acquisition of real estate
trust beneficiaryrights(2)(5)¥ 4,196,199‐‐

Acquisition of real estate
trust beneficiaryrights(2)(5)¥ 13,761,000

Accounts
payable‐otherAcquisition of real estate
trust beneficiaryrights(2)(5)¥ 2,139,000‐

Lease holder
and operator of
hotel

Rental Revenues¥ 627,563

Rentalreceivables¥ 220,811

Lease holder
and operator of
hotel

Rental Revenues¥ 3,389,166

Rentalreceivables¥ 990,543¥ 8,800,548‐

Notes:(1)

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

(2)

Terms and conditions are decided pursuant to the Asset Manager’s Regulations on Transactions with Sponsor‐related Persons and the Management Manual regarding(3)

The seller, Aki TMK, Navaro TMK, Momo TMK, Tsuki TMK, Septentrio TMK , Septentrio ２ TMK, Septentrio ３ TMK, Ginga TMK, Wakusei TMK, Naqua Hotel &Transactions with Sponsor‐related Persons.

Resorts Management Co., Ltd and Mystays Hotel Management., Co. Ltd has no relationship to be stated, but they receive investment through funds that are managed by FIG,
an affiliate of Calliope. Accordingly, we treat Aki TMK, Navaro TMK, Momo TMK, Tsuki TMK, Septentrio TMK , Septentrio ２ TMK, Septentrio ３ TMK, Ginga TMK,
Wakusei TMK, Naqua Hotel & Resorts Management Co., Ltd and Mystays Hotel Management., Co. Ltd as a related party.
(4)(5)

Calliope holds 609,942 units (holding ratio: 16.6%) of the issued investment units of the Company.
The transaction amount 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
SellerAcquisition cost(in thousands of yen)

Property No.

Property name

A103

Royal Parks Momozaka

Momo TMK

2,910,000

A104Royal Parks Shinden

Momo TMK

5,024,000

D38

Hotel Mystays Shinsaibashi

Aki TMK

3,160,000

D39

Comfort Hotel Kurosaki

Navaro TMK

1,148,000

D40

Comfort Hotel Maebashi

Navaro TMK

1,128,000

D41

Comfort Hotel Tsubame‐Sanjo

Navaro TMK

1,010,000

D42

Comfort Hotel Kitami

Navaro TMK

851,000

D43

Hotel Mystays Gotanda Station

Tsuki TMK

24,674,000

D44Hotel Epinard Nasu

Septentrio TMK
Septentrio２ TMK
Septentrio３ TMK

20,981,000

D45

Hotel MyStays Fukuoka Tenjin

Navaro TMK

8,059,000

D46

Hotel MyStays Hamamatsucho

Navaro TMK

7,959,000

28

Property name

Property No.

Acquisition cost(in thousands of yen)SellerD47

Hotel MyStays Kanazawa

Ginga TMK

D48

Takamatsu Tokyu REI Hotel

Wakusei TMK

13,761,000
2,139,000
Total

92,804,000

For the six months ended December 31, 2016
Share capital
Type ofrelated‐party

Interested
party of the
Asset
Manager

Transactions for the period
Votinginterest intheCompany

Relationshipwith theCompany

Type oftransactions

0‐

Seller of real estate
trust beneficiaryrights

$

0

‐

$

0

‐

(in
thousandsof U.S.
dollars)

Company
nameLocation

Business

Ginga
TMK(2)

Minato‐ku,
Tokyo

Investment
managementbusiness

¥

0.1

$

Naqua Hotel& Resorts
Management
Co., Ltd.(2)Minato‐ku,
Tokyo

Hotel
managementbusiness¥

10

Mystays
HotelManagement
Co., Ltd(2)Minato‐ku,
Tokyo

Hotel
managementbusiness

¥ 100

(in
millionsof yen)Balance at the end of period

Amounts (1)Amounts(1)Balancesheet
account(inthousandsof yen)(in thousandsof U.S.
dollars)

Accounts
payable‐other‐‐$ 8,934

Rentalreceivables¥ 92,474$ 793$ 34,714

Rentalreceivables¥ 1,146,414$ 9,841(inthousandsof yen)(inthousands of
U.S. dollars)

Paymentof
accounts
payable¥ 8,800,548$ 75,547

Lease holder andoperator of hotel

RentalRevenues¥ 1,040,790

Lease holder andoperator of hotel

RentalRevenues¥ 4,043,845

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

(1)

Ginga TMK, Naqua Hotel & Resorts Management Co., Ltd and Mystays Hotel Management., Co. Ltd has no relationship to be stated, but they receive investment through(2)

funds that are managed by FIG, an affiliate of Calliope. Accordingly, we treat Ginga TMK, Naqua Hotel & Resorts Management Co., Ltd and Mystays Hotel Management.,
Co. Ltd as a related party.
Calliope holds 609,942 units (holding ratio: 16.6%) of the issued investment units of the Company.

(3)(b) Board of Directors and Major Individual Unitholders
For the six months ended June 30, 2016

Type ofrelated‐party

Directors
and close
relatives

Name

Naoki
FukudaVotinginterest intheCompany

Business / Occupation

Executive officer of theCompany andmanagement director ofConsonant Investment
Management Co., Ltd.

‐

Transactions for the period

Balance at the end of period

Amounts (3)Type of transactions(in thousands of yen)
Payment of the assets management
fee to Consonant Investment
Management Co., Ltd.(1)Payment of institution
management fee to Consonant
Investment Management Co.,
Ltd.(2)¥

Amounts (3)Balance sheet
account(in thousands ofyen)

259,280

Accruedexpenses¥ 135,000

600

Accruedexpenses

¥

¥

324

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.

For the six months ended December 31, 2016
Transactions for the period
Type ofrelated‐party

Directors
and close
relatives

Name

Naoki
FukudaBusiness / Occupation

Executive officer of theCompany andmanagement director ofConsonant Investment
Management Co., Ltd.

Votinginterest intheCompany‐

Balance at the end of period

Amounts (3)Type of transactions
Payment of the assets
management fee toConsonantInvestment
Management Co.,
Ltd.(1)
Payment of institution
management fee toConsonantInvestment
Management Co.,
Ltd.(2)

Balancesheet
account

Amounts (3)(in thousandsof U.S.
dollars)(inthousands ofyen)(in thousandsof U.S. dollars)¥

250,000$

2,146

Accruedexpenses¥ 135,000

$

1,158

¥

600

$

5

Accruedexpenses

¥

$

2

(in
thousandsof yen)324

Notes:

29

(1)
(2)

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.
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.

30

20. Per Unit Information
The following table shows net asset value per unit as of June 30, 2016 and December 31, 2016, 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,
2016

June 30,
2016

(Yen)

December 31,
2016(U.S. dollars)

Net asset value per unit ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥35,368¥35,762$306

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

1,270

¥

1,477

$

12

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

3,436,572

3,675,824‐

21．Subsequent events(a) Issuance of New Investment Units
The board of directors held on February 22, 2017 and March 6, 2017 approved the issuance of new investment units and secondary
distribution of investment units. Payment for the new investment units issued via public offering was completed on March 13, 2017. In
addition, with the respect to the issuance of new investment units through the third‐party allotment in connection with theoverallotment for the public offering, the payment date is April 12, 2017. In the case that the application and payment are completed for
all allocated investment units through the third‐party allotment, holders’ capital becomes JPY129,180 million and the number ofinvestment units issued and outstanding become 3,870,074 units.
(i) Issuance of new investment units through public offering(a) Number of investment units

Domestic public offering : 146,150 units
International: 38,850 units

Total:185,000 units(b) Issue price (offer price): JPY 46,897 per unit(c) Total issue price (total offer price): JPY 8,675,945,000(d) Amount paid in (issue value): JPY 45,370 per unit(e) Total amount paid in (total issue value) : JPY 8,393,450,000(f) Payment date

: March 13, 2017(ii) Secondary offering of investment units (overallotment secondary offering)(a) Number of investment units: 9,250 units(b) Offer price: JPY 46,879 per unit(c) Total offer value: JPY 433,797,250(d) Delivery date

: March 14, 2017(iii) Issuance of new investment units through third‐party allotment(a) Number of investment units: 9,250 units(b) Amount paid in (issue value): JPY 45,370 per unit(c) Total amount paid in (total issue value) : JPY 419,672,500(d) Payment date

: April 12, 2017(e) Allotee: Mizuho Securities Co, Ltd.

31

(b) New borrowings
The Company borrowed a portion of the consideration on March 14, 2017 for the acquisition of 2 residential properties.

Syndicate Loan (G)(a)Lender: The Syndicate group organized by Mizuho Bank, Ltd.

(b)Borrowing amount: JPY 11,250 million(c)Interest rate

: One‐month JPY TIBOR + spread (0.40%, 050%, 0.60%)(d)Interest payment date

: Last business day of each month from borrowing date thorough principal maturity date, with thefirst interest payment date set on March 31, 2017(e)Method of principal repayment: To be repaid in full on the principal maturity date(f)Borrowing method: No secured / with no guarantee(g)Borrowing date

: March 14, 2017(h)Principal maturity date

: March 14, 2020, March 14, 2021, March 14, 2022

Term Loan (F)(a)Lender: Sumitomo Mitsui Banking Corporation(b)Borrowing amount: JPY 3,000 million(c)Interest rate

: One‐month JPY TIBOR + spread (0.45%)(d)Interest payment date

: Last business day of each month from borrowing date thorough principal maturity date, with thefirst interest payment date set on March 31, 2017(e)Method of principal repayment: To be repaid in full on the principal maturity date(f)Borrowing method: No secured / with no guarantee(g)Borrowing date

: March 14, 2017(h)Principal maturity date

: September 14, 2020(c) Acquisition of Assets
The Company decided to acquire 2 properties as shown in the following table, of which the total acquisition price is JPY 24,562 million,
on February 22, 2017 and acquired the 2 properties on March 14, 2017.
Acquisition
Use

Property
NumberPrice
Property Name

Total
rentable

Location(JPY million)

Sellerarea

Category of Specified
Assets(Note 1)

A105

Royal Parks Tower

Arakawa‐ku,

Minami‐Senju

TokyoRoyal Parks Seasir

Arakawa‐ku,

Minami‐Senju

Tokyo

21,87939,113.46 m2

Sakura TMK

Trust Beneficial Interest

2,683

6,496.86 m2

Momo TMK

Trust Beneficial Interest

Residential
A106

32

Total

24,56245,610.32 m2(Note 1) The transaction amount exclude adjusted amount of real property taxes and city planning taxes, as well as consumption taxes and local
consumption taxes.

33