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 Japan Hotel REIT Investment
Corporation (“JHR” 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 retailinvestor in the European Economic Area, or the EEA. For these purposes, a retail investor
means a person who is one (or more) of: (i) a retail client as defined in point (11) of
Article 4(1) of Directive 2014/65/EU, as amended, or the MiFID II; or (ii) a customer
within the meaning of Directive (EU) 2016/97, where that customer would not qualify as aprofessional client as defined in point (10) of Article 4(1) of MiFID II; or (iii) not aqualified investor as defined in Regulation (EU) 2017/1129, as amended, the Prospectus
Regulation. Consequently no key information document required by Regulation (EU) No
1286/2014, or the PRIIPs Regulation, for offering or selling the units of JHR or otherwise
making them available to retail investors in the EEA has been prepared and therefore
offering or selling the units of JHR, or otherwise making them available, to any retailinvestor in the EEA may be unlawful under the PRIIPs Regulation.
United Kingdom
The units of JHR are being marketed in the United Kingdom pursuant to Article 59 of theUnited Kingdom Alternative Investment Fund Managers Regulations 2013. In accordancewith this provision, Japan Hotel REIT Advisors Co., Ltd. (the “AIFM”) has notified the
Financial Conduct Authority (the “FCA”) of its intention to offer these units in the United
Kingdom. For the purposes of the United Kingdom Financial Services and Markets Act
2000 (“FSMA”) JHR is an unregulated collective investment scheme which has not beenauthorized by the FCA. Accordingly, any communications of an invitation or inducement
to invest in JHR 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 orother 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, this document and its contents are directed
only at Relevant Persons and must not be acted on or relied on by persons who are not
Relevant Persons. Any person who is not a Relevant Person may not act or rely on thisdocument or any of its contents. The transmission of this document and its contents in the
United Kingdom to any person other than a Relevant Person is unauthorized and may
contravene the FSMA and other United Kingdom securities laws and regulations.
European Economic Area 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 JHR
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 with a registered office in any Member State of the EEA unless: (i) the unitsof JHR may be marketed under any national private placement regime (including underthe AIFMD) or other exemption in that Member State; or (ii) the units of JHR canotherwise be lawfully marketed or sold in that Member State in circumstances in which
the AIFMD does not apply, provided that any such offer or sale is not made to a retailinvestor as described above. We have made a notification to each of the Netherlands
Authority for the Financial Markets and the United Kingdom Financial Conduct Authority
pursuant to Article 42 of the AIFMD in order to market the units of JHR in the
Netherlands and the United Kingdom, respectively.
Netherlands
The units of JHR are being marketed in the Netherlands under Section 1:13b of the Dutch
Financial Supervision Act (Wet op het financieel toezicht, or the “Wft”). In accordancewith this provision, the AIFM has notified the Dutch Authority for the Financial Markets
of its intention to offer these units in the Netherlands. The units of JHR will not, directly
or indirectly, be offered, sold, transferred or delivered in the Netherlands, except to or byindividuals or entities that are qualified investors (gekwalificeerde beleggers) within themeaning of Article 1:1 of the Wft, and as a consequence neither the AIFM nor JHR is
subject to the license requirement pursuant to the Wft. Consequently, neither the AIFM
nor JHR is subject to supervision of the Dutch Central Bank (De Nederlandsche Bank,“DNB”) or the Netherlands Authority for Financial Markets (Autoriteit Financiële

2

Markten, the “AFM”) and this Article 23 AIFMD Prospectus is not subject to approval by
the AFM. No approved prospectus is required to be published in the Netherlands pursuant
to Article 3 of the Regulation (EU) 2017/1129 as amended and applicable in the
Netherlands. The AIFM is therefore solely subject to limited ongoing regulatory
requirements as referred to in Article 42 of the AIFMD.

3

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

Focusing on hotels, which are important and profitable components of the social
infrastructure, JHR primarily invests in real estate related assets that are wholly or partiallyused as hotels and that are in themselves real estate or real estate equivalents or that arebacked by such real estate or real estate equivalents.

Investment strategy

JHR’s investment strategy is to ensure steady and stable revenue in the mid to long term.
JHR focuses on investing in hotels with prospects for attracting domestic and overseas
leisure demand, that is, those located in appealing or fashionable areas. Limited-service
hotels, full-service hotels and resort hotels are all investment targets, but JHR only
acquires properties with competitive advantages in terms of buildings and facilities(infrastructure) and the capabilities of the hotel tenant and operator (services). The
investment strategy is defined in the articles of incorporation of JHR and the investment
guidelines determined by the AIFM.

Types of assets the AIF

Real estate, trust beneficiary interests in real estate, real estate securities, specified assets

may invest in

and other assets, including equity interests in corporations holding overseas real estate(provided, however, that such corporations are required to be unlisted and all of its assets
be composed of real estate and monetary claims, etc. pertaining to such real estate andmeet certain other requirements under the Act on Investment Trusts and Investment
Corporations (the “ITA”)), renewable power generating facilities and the rights to operate
public facilities.

Techniques it may

JHR focuses on investing in hotels with prospects for attracting domestic and overseas

employ and all

leisure demand. The principal risks with respect to investment in JHR are as follows:

associated risks



any adverse conditions in the Japanese economy could adversely affect JHR;

The coronavirus pandemic, through its worldwide economic impact, may
adversely affect JHR;

JHR may not be able to acquire properties to execute the growth and investment
strategy in a manner that is accretive to earnings;

illiquidity in the real estate market may limit the ability to grow or adjust theportfolio;the past experience of the AIFM in the Japanese real estate market is not anindicator or guarantee of the future results;

JHR’s reliance on the JHR’s related parties, the AIFM and its related parties could
have a material adverse effect on its business;

This document has been prepared solely for the purpose of providing U.K. and Dutch investors with certain information
under Article 23 of the AIFMD as implemented in their respective jurisdictions. This document is not an offer to sell or asolicitation of any offer to buy the units of Japan Hotel REIT Investment Corporation.

4



JHR’s reliance on third party service providers, particularly on hotel lessees, hotel
operators and operation support companies, may have a material adverse effecton the revenue of the hotels, including as a result of the service providers’prioritizing the interests of their other clients;



The coronavirus pandemic may cause a significant decline in hotel demand andmay result in a material adverse effect on the revenues of the hotels;

continued weakness in the performance of the hotels owned by JHR may cause
JHR to be in breach of the restrictive covenants under debt financing
arrangement;

JHR may change its detailed investment policy without a formal amendment of thearticles of incorporation;

there are potential conflicts of interest between JHR, the AIFM and its relatedparties, including those arising among the AIF and private funds or other investors,
to which the AIFM provides investment management or advisory services;

the AIFM’s provision of investment management or advisory services to otherfunds may expose the AIFM to indemnification and other obligations inconnection with such services;

JHR’s revenues largely comprise leasing revenues and income from management
contract from the portfolio properties, which may be negatively affected byfactors including vacancies, decreases in rent or sales, and late or missed
payments by tenants or the operators to which it outsources operation of certain
properties;

income from management contract is tied to the revenue of the hotels withrespect to which operation is outsourced to operators, and the agreement with anoperator generally does not provide for a fixed rent; as a result, income frommanagement contract may be volatile and could have a material adverse effect on
JHR’s results;



competition for guests with other hotel properties in the same and surrounding
areas, as well as with short-term lodging such as vacation rentals and apartment
rentals including Airbnb, may adversely affect JHR’s ability to maintain occupancy
rates and revenue;

This document has been prepared solely for the purpose of providing U.K. and Dutch investors with certain information
under Article 23 of the AIFMD as implemented in their respective jurisdictions. This document is not an offer to sell or asolicitation of any offer to buy the units of Japan Hotel REIT Investment Corporation.

5

JHR may find difficulty finding suitable tenants or operators to which it outsources
operation of certain properties, because of the requirement that they be able tooperate hotels;

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

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

geographic concentration of the portfolio in major cities in Japan could have amaterial adverse effect on JHR’s business;

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

JHR’s failure to satisfy a complex series of requirements pursuant to Japanese tax
regulations would disqualify JHR from certain taxation benefits and significantly
reduce the cash distributions to the unitholders;

the ownership rights in some of the properties may be declared invalid or limited;and

support from JHR’s related parties, particularly in connection with management ofhotels, may not achieve the anticipated results.

In addition, JHR is subject to the following risks:risks related to operation of hotels;risks related to specialization in investment in hotels;risks related to the small number of tenants per each building;risks related to seasonality of our performance;risks related to maintenance of facilities and infrastructure;risks related to increasing operating costs;

risks related to JHR’s dependence on the efforts of the AIFM’s key personnel;risks related to the restrictive covenants under debt financing arrangement;risks related to covenants with lessees or hotel operators prohibiting JHR fromtransferring its properties as well as other third-party approval requirements;risks related to entering into forward commitment contracts;risks related to third party leasehold interests in the land underlying JHR’s
properties;

This document has been prepared solely for the purpose of providing U.K. and Dutch investors with certain information
under Article 23 of the AIFMD as implemented in their respective jurisdictions. This document is not an offer to sell or asolicitation of any offer to buy the units of Japan Hotel REIT Investment Corporation.

6

risks related to holding the property in the form of compartmentalized ownership(kubun shoyū) interests or co-ownership interests (kyōyū-mochibun);risks related to holding the property through trust beneficiary interests;risks related to properties not in operation (including properties underdevelopment);risks related to defective title, ground, design or construction (including withrespect to piles and beams of buildings, as well as seismic and vibration insulation
oil dampers) or other defects, non-conformity or problems in the properties;risks related to suffering impairment losses relating to the properties;risks related to decreasing tenant leasehold deposits and/or security deposits;risks related to tenants’ default as a result of financial difficulty or insolvency;risks related to the insolvency of master lessor;risks related to relying on expert appraisals and engineering, environmental andseismic reports as well as industry and market data by third party experts andstatistics or projections published by the Japanese government or its related
entities;risks related to the presence of hazardous or toxic substances in the properties, orthe failure to properly remediate such substances;

risks related to the strict environmental liabilities for the properties;risks related to the amendment of the applicable administrative laws and local
ordinances;

risks related to investments in trust beneficiary interest;

risks related to the tight supervision by the regulatory authorities;risk of non-compliance with applicable rules and regulations, including withrespect to insider trading under the ITA or management of personal information
under the Act on the Protection of Personal Information or the Act on the Use of
Numbers to Identify a Specific Individual in the Administrative Procedure;risks related to the tax authority disagreement with the AIF’s understanding ofJapanese 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.

This document has been prepared solely for the purpose of providing U.K. and Dutch investors with certain information
under Article 23 of the AIFMD as implemented in their respective jurisdictions. This document is not an offer to sell or asolicitation of any offer to buy the units of Japan Hotel REIT Investment Corporation.

7

Any applicable

JHR is subject to investment restrictions under Japanese laws and regulations (e.g., the Act

investment restrictions

on Investment Trusts and Investment Corporations (the “ITA”), the Financial Instruments
and Exchange Act (the “FIEA”)) as well as its articles of incorporation.
JHR 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 for securities, real estate, leaseholds of real estate or surface rights.
Furthermore, a listed J-REIT must invest substantially all of its assets in real estate, realestate-related assets and liquid assets as provided by the listing requirements. Real estatein this context includes, but is not limited to, real estate, leaseholds of real estate, surface
rights, and trust beneficiary interests for these assets, and real estate-related assets in thiscontext 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 such activities in certain
circumstances.
Circumstances in

JHR may take out loans or issue long-term or short-term investment corporation bonds forwhich the AIF may use

the purpose of investing in properties, conducting repairs, paying cash distributions,leverage

repaying obligations (including repayment of tenant leasehold or security deposits, andobligations related to loans or long-term or short-term investment corporation bonds) andother activities.

The types and sources

Loans or investment corporation bonds. JHR currently does not have any outstandingof leverage permitted

guarantees, but may be subject to restrictive covenants in connection with any future

and associated risks

indebtedness that may restrict the operations and limit the ability to make cash
distributions to unitholders, to dispose of the properties or to acquire additional
properties. Furthermore, JHR may violate restrictive covenants contained in the loan
agreements JHR executes, such as the maintenance of debt service coverage or loan-tovalue ratios, which may entitle the lenders or bondholders to require JHR to collateralize
the properties or demand that the entire outstanding balance be paid. Further, in theevent of an increase in interest rates, to the extent that JHR has any debt with unhedged
floating rates of interest or JHR incurs new debt, interest payments may increase, which inThis document has been prepared solely for the purpose of providing U.K. and Dutch investors with certain information
under Article 23 of the AIFMD as implemented in their respective jurisdictions. This document is not an offer to sell or asolicitation of any offer to buy the units of Japan Hotel REIT Investment Corporation.

8

turn could reduce the amount of cash available for distributions to unitholders. Higher
interest rates may also limit the capacity for short- and long-term borrowings, which
would in turn limit the ability to acquire properties, and could cause the market price of
the units to decline.
Any restrictions on

The maximum amount of each loan and investment corporation bond issuance will be one

leveragetrillion yen (the maximum amount of short-term investment corporation bond issuance
will be 250 billion yen), and the aggregate amount of all such debt will not exceed one
trillion yen.

Any restrictions on

No applicable arrangements.

collateral and asset
reuse arrangements
Maximum level of

JHR has set an upper limit of 65% as a general rule for its loan-to-value, or LTV, ratio inleverage which theorder to operate with a stable financial condition. JHR may, however, temporarily exceed

AIFM is entitled toany such levels as a result of property acquisitions or other events.

employ on behalf of
the AIF
Article 23(1) (b)Procedure by which

Amendment of the articles of incorporation. Amendment requires a quorum of a majority

the AIF may change itsof the total issued units and at least a two-thirds vote of the voting rights represented atinvestment strategy /the meeting. Unitholders should note, however, that under the ITA and our articles ofinvestment policy

incorporation, unitholders who do not attend and exercise their voting rights at a General
Meeting of Unitholders are deemed to be in agreement with proposals submitted at themeeting, except in cases where contrary proposals are also being submitted.
Additionally, the guidelines of the AIFM, which provide more detailed policies within JHR’s
overall investment strategy and policy, can be modified without such formal amendmentof the articles of incorporation.

Article 23(1) (c)Description of the

JHR has entered into an Agreement with Kyoritsu Maintenance Co., Ltd. for support for

main legal implications

property acquisition, pursuant to which JHR receives information regarding theof the contractual

prospective sales of real estate and trust beneficiary interests for real estate.

relationship enteredinto for the purpose ofinvestment, including

JHR has entered into a Basic Agreement with Sumitomo Mitsui Trust Bank, Limited for
information provision regarding sales or brokerage of income-type properties held ordeveloped by third parties.

This document has been prepared solely for the purpose of providing U.K. and Dutch investors with certain information
under Article 23 of the AIFMD as implemented in their respective jurisdictions. This document is not an offer to sell or asolicitation of any offer to buy the units of Japan Hotel REIT Investment Corporation.

9jurisdiction, applicable

In 2011, JHR succeeded to an Information Service Agreement with Goldman Sachs (Japan)

law, and the existenceCo., Ltd. pursuant to which JHR receives information regarding real estate and trust

or not of any legal

beneficial rights for real estate; this agreement was originally executed with JHR’s

instruments providing

predecessor, Japan Hotel and Resort Investment Corporation and Japan Hotel and Resort,for the recognition andInc.

enforcement of
judgments in the
territory where the AIF

JHR has entered into a Technical Advisory Agreement with Shin Nippon Air Technologies
Co., Ltd (“SNK”) pursuant to which SNK supports JHR in due diligence for acquisition ofassets.

is establishedAll of the above agreements are governed by Japanese law.
JHR is not involved in or threatened by any legal arbitration, administrative or otherproceedings, the results of which might, individually or in the aggregate, be material.

JHR is a corporate-type investment trust in the form of investment corporation (toshi
hojin) provided for under the ITA. Therefore, the relationship between JHR and its
unitholders is governed by JHR’s articles of incorporation (as opposed to individual
agreements), which can be amended from time to time upon resolution of a generalunitholders’ meeting. JHR’s articles of incorporation stipulate rules relating to generalunitholders meetings, including the convocation, setting of record date, exercise of voting
rights, resolutions and election of JHR’s directors.
The relationship between JHR and its unitholders is also governed by, and is subject to theprovisions of, Japanese law, including the ITA.
The courts in Japan would recognize as a valid and final judgment any final and conclusive
civil judgment for monetary claims (which, for this purpose, are limited to those of apurely civil nature and do not include monetary claims of the nature of criminal oradministrative sanction, such as punitive damages, even though they take the form of civil
claims) against JHR obtained in a foreign court provided that (i) the jurisdiction of suchforeign court is admitted under the laws of Japan, (ii) JHR 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 suchforeign court, (iii) neither such judgment nor the relevant proceeding is repugnant topublic policy as applied in Japan, and (iv) there exists reciprocity as to the recognition by
This document has been prepared solely for the purpose of providing U.K. and Dutch investors with certain information
under Article 23 of the AIFMD as implemented in their respective jurisdictions. This document is not an offer to sell or asolicitation of any offer to buy the units of Japan Hotel REIT Investment Corporation.

10

such foreign court of a final judgment obtained in a Japanese court and (v) there is noconflicting judgement on the subject matter by any Japanese court.

Article 23(1) (d)The identity of the AIFM (Asset Manager): Japan Hotel REIT Advisors Co., Ltd.

AIFM, AIF's depository,

The AIFM provides services related to asset management, financing of the AIF,

auditor and any otherreporting to the AIF, asset management planning for the AIF, and other mattersservice providers and adelegated by the AIF.

description of their Auditor: KPMG AZSA LLC

duties and the

The Auditor audits financial statements, prepares audit reports, and reports to theinvestors' rights

supervisory directors if it finds any misconduct or any material fact that is in violation oftheretolaws and regulations or the articles of incorporation with regard to execution of theduties of the executive director.
 General Administrator (for administration), Custodian, Transfer Agent and Special
Accounts Administrator: Sumitomo Mitsui Trust Bank, Limited
The General Administrator (for administration) provides administrative services related
to administration of accounting matters, preparation of accounting books, tax-related
services (other than those entrusted to PwC Tax Japan) and management and recordingof board of directors meetings. The Custodian provides administrative services related
to custody of our assets. The Transfer Agent provides administrative services related topreparation and maintenance of the unitholder registry, payments of cash distributions
to unitholders, acceptance of requests for the exercise of voting rights by unitholders
or any other applications from unitholders, and distribution of meeting convocation
notices and other unitholder notifications and information. The Special Accounts
Administrator provides administrative services, including the preparation, management
and custody of the transfer account book in relation to special accounts.
 General Administrator (for investment corporation bonds): Sumitomo Mitsui Trust
Bank, Limited, Mizuho Bank, Ltd., Resona Bank Limited. and MUFG Bank, Ltd.
The General Administrators provides administrative services in connection with the
AIF’s investment corporation bonds.
 General Administrator (for tax payment): PwC Tax JapanThe General Administrator provides tax-related administrative services.

This document has been prepared solely for the purpose of providing U.K. and Dutch investors with certain information
under Article 23 of the AIFMD as implemented in their respective jurisdictions. This document is not an offer to sell or asolicitation of any offer to buy the units of Japan Hotel REIT Investment Corporation.

11

Service providers owe contractual obligations under their respective agreements with theAIF, as the case may be. In addition, the FIEA provides that the Asset Manager owes the
AIF a fiduciary duty and must 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 relatedparties of the Asset Manager that are contrary to or violate the AIF’s interests.
Pursuant to the ITA, the unitholders have the right to approve the execution or
termination of the asset management agreement at a General Meeting of Unitholders.
Article 23(1) (e)Description of how the

Not applicable.

AIFM complies withthe requirements 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 Custodian, which is responsible for safekeeping
activities.

management or risk
management and of
any safekeeping
function delegated by
the depositary, theidentification of thedelegate and any
conflicts of interest
that may arise fromsuch delegations
Article 23(1) (g)This document has been prepared solely for the purpose of providing U.K. and Dutch investors with certain information
under Article 23 of the AIFMD as implemented in their respective jurisdictions. This document is not an offer to sell or asolicitation of any offer to buy the units of Japan Hotel REIT Investment Corporation.

12

Description of the AIF’s JHR makes investment decisions based on the valuation of properties, upon consideration
valuation procedureand pricing
methodology,
including the methods
used in valuing hardto-value assetsof the property appraisal value.
JHR shall evaluate assets in accordance with its articles of incorporation. The methods andstandards that JHR uses for the evaluation of assets shall be based on the Regulations
Concerning the Calculations of Investment Corporations, as well as the Regulations
Concerning Real Estate Investment Trusts and Real Estate Investment Corporations andother regulations stipulated by the Investment Trusts Association, Japan, in addition to
Japanese GAAP.
The rules of the Investment Trusts Association, Japan, emphasize market price valuation.

Article 23(1) (h)Description of the AIF’s The AIFM stipulates basic provisions of risk management in its risk management rules.
liquidity risk
management,
including redemption
rights in normal andexceptional

Additionally, the AIF uses various financing methods, including investment corporation
bonds and long-term loans, to finance acquisitions and repayment obligations. JHR
controls related risk by maintaining the ratio of interest-bearing debt to total assets undera certain percentage, diversifying repayment deadlines, and retaining a certain amount ofhighly liquid cash and deposits.

circumstances andexisting redemption
arrangements withinvestors

For floating rate borrowings exposed to the risk of interest rate fluctuations, JHR closely
monitors the movement of interest rates.
As JHR is a closed-end investment corporation, unitholders are not entitled to request theredemption of their investment.

Article 23(1) (i)Description of all fees,

Compensation: The articles of incorporation provide that JHR may pay its executive andcharges and expenses

supervisory officers up to 800,000 and up to 500,000 yen per month. The board of officers

and a maximum

is responsible for determining a reasonable compensation amount for the executive andamount which issupervisory officers.

directly / indirectly
borne by the investors

Asset Manager: Asset Management Fee: JHR will pay the Asset Manager an asset management fee asfollows:
1. Management Fee 1

This document has been prepared solely for the purpose of providing U.K. and Dutch investors with certain information
under Article 23 of the AIFMD as implemented in their respective jurisdictions. This document is not an offer to sell or asolicitation of any offer to buy the units of Japan Hotel REIT Investment Corporation.

13

The amount calculated by (i) multiplying the balance of total assets(*) held by JHR
as of the end of March, June, September and December, (the “Calculation Recorddate”) by an annual rate of no more than 0.35% to be separately agreed upon
between the JHR and the AIFM and (ii) then prorated on a per day basis (whereamounts less than one yen are rounded down), based on a year of three hundred
sixty five days, for the period from the previous Calculation Record Date (notincluding such date) until the relevant Calculation Record Date (including such date).
(*) The total assets are the total of the cash reserves balance, the securities balance,
tangible fixed assets and intangible fixed asset.
Management Fee 1 is payable within three month from the each Calculation Record
date.
2. Management Fee 2
The amount calculated by multiplying Net Operating Income(*) of JHR for each fiscal
period by a rate of no more than 1.0% to be separately agreed upon between JHR
and the AIFM.
Provisional Management Fee 2(**) shall be paid within three months after the endof March, June and September each year, and the balance after deducting theaggregate amount of Provisional Management Fee 2 paid from accrued
Management Fee 2 shall be paid within three months after the end of December. In
the event that the aggregate amount of Provisional Management Fee 2 paid exceeds
the amount of accrued Management Fee 2, the excess will be refunded within threemonths after the end of December each year.
(*) Net Operating Income is the amount calculated by subtracting real estate
operating costs (not including Depreciation) from real estate operating revenue.
(**)Provisional Management Fee 2 is the amount calculated by multiplying Net
Operating Income of JHR for each of three-month periods ending at the end of
March, June and September each year, by a rate of no more than 1.0% to be
separately agreed upon between JHR and the AIFM
3. Management Fee 3
The amount calculated by (i) dividing the total available dividend amount before
deducting Management Fee 3(*) for each fiscal period of JHR by the total investment
This document has been prepared solely for the purpose of providing U.K. and Dutch investors with certain information
under Article 23 of the AIFMD as implemented in their respective jurisdictions. This document is not an offer to sell or asolicitation of any offer to buy the units of Japan Hotel REIT Investment Corporation.

14

units issued at the end of December each year (where amounts less than one yen
are rounded down.) and (ii) then multiplying the coefficient of no more than 43,000
which separately agreed upon between JHR and the AIFM. (In the event that theinvestment unit is split, 43,000 shall be multiplied by split ratio(**). When theinvestment unit is split multiple times, the same calculation shall be repeated.)(*) Total available dividend before deducting the Management Fee 3 is the dividend
amount for each fiscal period of JHR stipulated by Article 34, Clause 1 of the articles
of incorporation (before deducting corporate tax, inhabitant tax and business tax,
adjustment amount of the corporate tax, Management Fee 3 and its nondeductible
consumption tax, etc.).
(**) Split ratio is the ratio calculated by (i) dividing the total investment units issued
after split by the total investment units issued before split.
The Provisional Management Fee 3(*) shall be paid within three months after theend of March, June and September each year, and the balance after deducting theaggregate amount of Provisional Management Fee 3 paid from accrued
Management Fee 3 shall be paid within three months after the end of December. In
the event that the aggregate amount of Provisional Management Fee 3 paid exceeds
the amount of accrued Management Fee 3, the excess will be refunded within threemonths after the end of December each year.
(*) Provisional Management Fee 3 is the amount calculated by (i) dividing themidterm net profit before tax for the period of three months ending at the end of
March, June and September each year (before deducting Provisional Management
Fee 3 and its nondeductible consumption tax) by the total investment units issued
as of the end respectively of March, June and September above (where amounts
less than one yen are rounded down), and (ii) then multiplying the coefficient of no
more than 43,000 to be separately agreed upon between JHR and the AIFM (In theevent that the investment unit is split, 43,000 shall be multiplied by the split
ratio(**). When the investment unit is split multiple times, the same calculation
shall be repeated.)

This document has been prepared solely for the purpose of providing U.K. and Dutch investors with certain information
under Article 23 of the AIFMD as implemented in their respective jurisdictions. This document is not an offer to sell or asolicitation of any offer to buy the units of Japan Hotel REIT Investment Corporation.

15

(**) The split ratio is the ratio calculated by (i) dividing the total investment units
issued after the split by the total investment units issued before the split.
4. Acquisition Fee
For each acquisition of a real estate-related property, the AIFM receives an
Acquisition Fee. The amount of the Acquisition Fee is calculated by multiplying theacquisition price (not including consumption tax pertaining to the building etc.
(stipulated by Article 39 of the articles of incorporation, the same applies
hereinafter) and other acquisition costs) by a rate of no more than 0.75% to be
separately agreed upon between JHR and the AIFM (where amounts less than one
yen are rounded down). In the event that JHR acquires a real estate-related
property from a sponsor-related party(*), such rate shall be lowered by 0.25%(stipulated in Article 36 of the articles of incorporation).
The Acquisition Fee shall be paid by the end of the month following the month of
acquisition.
5. Disposition Fee
For each disposition of a real estate-related property, the AIFM receives a
Disposition Fee. The amount of the Disposition Fee is calculated by multiplying thetransfer price (not including consumption tax pertaining to the building etc. and thesales cost etc.) by a rate of no more than 0.5% to be separately agreed upon
between JHR and the AIFM (where amounts less than one yen are rounded down).
In the event that JHR sells the real estate-related property to a sponsor-related
party(*), such rate shall be lowered by 0.25% (stipulated in Article 36 of the articles
of incorporation).
The Disposition Fee shall be paid by the end of the month following the month of
the transfer.
(*) The term “sponsor-related party” is stipulated in the AIFM’s rules fortransactions with sponsor-related parties, and includes (a) interested parties, etc.,(b) the AIFM’s shareholders, (c) companies, etc. that take a 50% or more stake in ashareholder that holds 50% or more of the shares in the AIFM, (d) companies inwhich a shareholder of the AIFM has a 50% or more stake, (e) entities or persons
This document has been prepared solely for the purpose of providing U.K. and Dutch investors with certain information
under Article 23 of the AIFMD as implemented in their respective jurisdictions. This document is not an offer to sell or asolicitation of any offer to buy the units of Japan Hotel REIT Investment Corporation.

16

who ceased to fall under (a) through (d) within the last 3 months, and (f) entities or
persons who are deemed appropriate by the compliance officer to be treated assponsor-related parties in light of the AIFM’s rules for transactions with sponsorrelated parties and the purpose of these rules.
6. Merger Fee
In the event that JHR succeeds to the assets of another party pursuant to a merger,
following the due diligence, valuation and other merger-related tasks conducted by
the AIFM of such assets held by such party, the AIFM receives a Merger Fee
according to the Asset Management Agreement between JHR and the AIFM. The
amount of Merger Fee is calculated by (i) multiplying the appraisal value, as of themerger date, of the real estate-related assets JHR succeeds to, by a rate of no morethan 0.25% to be separately agreed upon JHR and the AIFM (where amounts lessthan one yen are rounded down) and (ii) adding to (i) the consumption tax
pertaining to the amount calculated in (i). The Merger Fee shall be paid within threemonths from the effective date of the merger.

Custodian/ General Administrator:Custodian Fee, General Administrator Fee:
1. JHR will pay the Custodian in connection with custody.
2. JHR will pay the General Administrator, in connection with accounting,government of the Investment Corporation, preparation of tax return, fiscal
agent of investment corporation bond and other tasks agreed upon between
JHR and the General Administrator.

Transfer Agent: Transfer Agent Fee (Standard Fee):
Standard transfer agent fees are for services such as preparation, maintenance andstorage of JHR’s unitholder register; preparation and reporting of the end-of-fiscal
period unitholders register and unitholder statistical data.
The monthly standard fees will be the total of the amount calculated using thefollowing table divided by 6, with a minimum monthly fee of 200,000 yen.
This document has been prepared solely for the purpose of providing U.K. and Dutch investors with certain information
under Article 23 of the AIFMD as implemented in their respective jurisdictions. This document is not an offer to sell or asolicitation of any offer to buy the units of Japan Hotel REIT Investment Corporation.

17

Number of Unitholders

Fees per Unitholder

first 5,000 unitholders

480 yenover 5,000 to 10,000

420 yenover 10,000 to 30,000

360 yenover 30,000 to 50,000

300 yenover 50,000 to 100,000

260 yenover 100,000

225 yen Other fees:
JHR pays the transfer agent other fees for various other services, including inconnection with the payment of dividends.
Special Accounts Administrator
 Special Accounts Administrator Fee:
Special accounts administrator fees are for the administration of special accounts,
including preparation and maintenance of a ledger related to such accounts andhandling of inquiries from Japan Securities Depository Center (JASDEC). The
standard fees will be the total of the amount calculated using the following table,with a minimum monthly fee of 20,000 yen.
Number of Subscribers

Fees per Subscribers

first 5,000 subscribers

150 yenover 5,000 to 10,000

130 yenover 10,000 subscribers

110 yen Other fees:
JHR pays the special accounts administrator other fees for various other services,
including in connection with receipt and confirmation of requests for transfers andfor processing transfers to a recipient account.
Auditor: Auditor Fee:

This document has been prepared solely for the purpose of providing U.K. and Dutch investors with certain information
under Article 23 of the AIFMD as implemented in their respective jurisdictions. This document is not an offer to sell or asolicitation of any offer to buy the units of Japan Hotel REIT Investment Corporation.

18

JHR shall pay the independent auditor up to 30 million yen per fiscal period within
three months after the date of the invoice from the independent auditor. The board
of officers is responsible for determining the actual compensation amount.
The AIF may also incur other miscellaneous fees in connection with property
management, issuance of units, investment corporation bonds and the operation,acquisition or disposition of properties.
Article 23(1) (j)Description of theUnder Article 77 paragraph 4 of the Act on Investment Trusts and Investment

AIFM's procedure to

Corporations of Japan, which applies the requirements of Article 109 paragraph 1 of theensure fair treatment

Companies Act to investment corporations, investment corporations are required to treatof investors and details

unitholders equally depending on the number and content of units held. In addition, uponof any preferential

liquidation, the allotment of residual assets to unitholders is required to be made equallytreatment received bydepending on the number units held under Article 77 paragraph 2 item 2 and Article 158

investors, includingof the ITA.

detailing the type ofinvestors and theirlegal or economic links
with the AIF or AIFM
Article 23(1) (k)The latest annual

Additional information may be found in our most recent annual report prepared inreport referred to inaccordance with Article 22 of the AIFMD, which is available at the Asset Manager’s office

Article 22(1)located at Ebisu Neonato, 4-1-18, Ebisu, Shibuya-ku, Tokyo 150-0013 Japan.

Article 23(1) (l)The procedure andJHR is authorized under the articles of incorporation to issue up to 20,000,000 units. Its

conditions for theunits have been listed on the Tokyo Stock Exchange since June 14, 2006. (*)

issue and sale of the(*) On April 1, 2012, the former Japan Hotel and Resort, Inc. merged with and into theunitsformer Nippon Hotel Fund Investment Corporation, which, as the surviving entity, changed
its name to Japan Hotel REIT Investment Corporation.
Secondary market sales and transfers of units will be conducted in accordance with therules of the Tokyo Stock Exchange. Unit prices on the Tokyo Stock Exchange aredetermined on a real-time basis by the equilibrium between bids and offers. The Tokyo
Stock Exchange sets daily price limits, which limit the maximum range of fluctuation within

This document has been prepared solely for the purpose of providing U.K. and Dutch investors with certain information
under Article 23 of the AIFMD as implemented in their respective jurisdictions. This document is not an offer to sell or asolicitation of any offer to buy the units of Japan Hotel REIT Investment Corporation.

19

a single trading day. Daily price limits are set according to the previous day’s closing priceor special quote.
Article 23(1) (m)Latest net asset value

JHR’s unit’s latest market price is publicly available at the Tokyo Stock Exchange or fromof the AIF or latest

financial information venders (including Reuters, which can be viewed atmarket price of theunit or share of the AIF

http://www.reuters.com/finance/stocks/overview?symbol=8985.T).

Article 23(1) (n)Details of the historical

The units of JHR were listed on the Tokyo Stock Exchange on June 14, 2006.

performance of the

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

AIF, where available
Fiscal period

Total Assets

Net Assets(JPY million)(JPY million)

Net Assets
per unit(JPY)

22th Fiscal Period(January 1, 2021 to394,323

221,542

49,595400,296

221,201

49,570415,722

236,52253,004

350,556

203,372

50,705352,183

201,963

50,354

December 31, 2022)
21th Fiscal Period(January 1, 2020 to
December 31, 2020)
20th Fiscal Period(January 1, 2019 to
December 31, 2019)19th Fiscal Period(January 1, 2018 to
December 31, 2018)18th Fiscal Period(January 1, 2017 to
December 31, 2017)

This document has been prepared solely for the purpose of providing U.K. and Dutch investors with certain information
under Article 23 of the AIFMD as implemented in their respective jurisdictions. This document is not an offer to sell or asolicitation of any offer to buy the units of Japan Hotel REIT Investment Corporation.

20

Article 23(1) (o)Identity of the prime

No applicable prime broker.

broker, any material
arrangements of the
AIF with its prime
brokers, how conflictsof interest aremanaged with theprime broker and theprovision in thecontract with thedepositary on thepossibility of transfer
and reuse of AIF
assets, andinformation about any
transfer of liability tothe prime broker that
may exist
Article 23(1) (p)Description of how and The AIFM will disclose the matters described in Articles 23(4) and 23(5) periodicallywhen periodic

through the AIF Internet website and other public disclosures.

disclosures will bemade in relation toleverage, liquidity andrisk profile of theassets, pursuant to
Articles 23(4) and23(5)Article 23(2)The AIFM shall inform

Not applicable.

the investors before
they invest in the AIF
This document has been prepared solely for the purpose of providing U.K. and Dutch investors with certain information
under Article 23 of the AIFMD as implemented in their respective jurisdictions. This document is not an offer to sell or asolicitation of any offer to buy the units of Japan Hotel REIT Investment Corporation.

21

of any arrangement
made by thedepository tocontractually discharge
itself of liability inaccordance with
Article 21(13)The AIFM shall also

Not applicable.

inform investors of any
changes with respect
to depositary liability
without delay
Article 23(4)(a)Percentage of the AIF's assets which

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

their illiquid nature.

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

There are no such special arrangements.

arrangements, including whether
they relate to side pockets, gates orother arrangements
Valuation methodology applied to

There are no such special arrangements.

assets which are subject to sucharrangements
How management and performance

There are no such special arrangements.

fees apply to such assets
Article 23(4)(b)Any new arrangements for managing

Any new arrangements or change in applicable arrangements will be

the liquidity of the AIF

disclosed at an appropriate time.

This document has been prepared solely for the purpose of providing U.K. and Dutch investors with certain information
under Article 23 of the AIFMD as implemented in their respective jurisdictions. This document is not an offer to sell or asolicitation of any offer to buy the units of Japan Hotel REIT Investment Corporation.

22

For each AIF that the AIFM manages

Any new arrangements or change in applicable arrangements will bethat is not an unleveraged closed-end

disclosed at an appropriate time.

AIF, notify to investors wheneverthey make changes to its liquidity
management systems (which enable
an AIFM to monitor the liquidity riskof the AIF and to ensure the liquidity
profile of the investments of the AIF
complies with its underlying
obligations) that are material inaccordance with Article 106(1) ofRegulation (EU) No 231/2013 (i.e.,there is a substantial likelihood that areasonable investor, becoming awareof such information, would
reconsider its investment in the AIF,
including because such information
could impact an investor’s ability to
exercise its rights in relation to its
investment, or otherwise prejudice
the interests of one or more investors
in the AIF).
Immediately notify investors where

Any new arrangements or change in applicable arrangements will bethey activate gates, side pockets ordisclosed at an appropriate time.

similar special arrangements or
where they decide to suspend
redemptions
Overview of changes to liquidity

Any new arrangements or change in applicable arrangements will bearrangements, even if not special

disclosed at an appropriate time.

arrangements
Terms of redemption and

JHR is a closed-end investment corporation, and unitholders are notcircumstances where management

entitled to request the redemption of their investment.

discretion applies, where relevantThis document has been prepared solely for the purpose of providing U.K. and Dutch investors with certain information
under Article 23 of the AIFMD as implemented in their respective jurisdictions. This document is not an offer to sell or asolicitation of any offer to buy the units of Japan Hotel REIT Investment Corporation.

23

Also any voting or other restrictions

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

exercisable, the length of any lock-up
or any provision concerning ‘first inline’ or ‘pro-rating’ on gates andsuspensions shall be included
Article 23(4)(c)
The current risk profile of the AIF and

The AIFM stipulates basic provisions of risk management in their risk

the risk management systems

management rules.

employed by the AIFM to manage
those risks

Investment corporation bonds and long-term loans are used to financerehabilitation obligations, acquisition of real estate and repayment of loans.
These financial instruments are exposed to liquidity risk. JHR controls suchrisks by maintaining the ratio of interest-bearing debt to total assets undera certain percentage and diversifying repayment deadlines.
For floating rate borrowings exposed to the risk of interest rate
fluctuations, JHR, in order to reduce the impact caused by rising interest
rates, closely monitors the movement of interest rates, and intends toincrease the ratio of fixed rate loans compared to floating rate loans.

Measures to assess the sensitivity of

No such measures have been implemented.

the AIF’s portfolio to the most
relevant risks to which the AIF is or
could be exposed
If risk limits set by the AIFM have

No such situation has occurred.

been or are likely to be exceeded andwhere these risk limits have been
exceeded a description of thecircumstances and the remedial
measures taken
Article 23(5)(a)Any changes to the maximum

Any new arrangements or change in applicable arrangements will beamount of leverage which the AIFM

disclosed at an appropriate time.

may employ on behalf of the AIF,
This document has been prepared solely for the purpose of providing U.K. and Dutch investors with certain information
under Article 23 of the AIFMD as implemented in their respective jurisdictions. This document is not an offer to sell or asolicitation of any offer to buy the units of Japan Hotel REIT Investment Corporation.

24

calculated in accordance with thegross and commitment methods. This
shall include the original and revised
maximum level of leverage calculated
in accordance with Articles 7 and 8 ofRegulation (EU) No 231/2013,
whereby the level of leverage shall becalculated as the relevant exposure
divided by the net asset value of the
AIF.
Any right of the reuse of collateral or

No such right or guarantee exists.

any guarantee granted under theleveraging agreement, including thenature of the rights granted for thereuse of collateral and the nature of
the guarantees granted
Details of any change in service

Any new arrangements or change in applicable arrangements will be

providers relating to the above.

disclosed at an appropriate time.

Article 23(5)(b)Information on the total amount of

The aggregate amount of debt with interest is JPY 164,754 million as ofleverage employed by the AIF

June 30, 2022.

calculated in accordance with thegross and commitment methods

This document has been prepared solely for the purpose of providing U.K. and Dutch investors with certain information
under Article 23 of the AIFMD as implemented in their respective jurisdictions. This document is not an offer to sell or asolicitation of any offer to buy the units of Japan Hotel REIT Investment Corporation.

25

PROMOTION OF ENVIRONMENTAL AND/OR SOCIAL CHARACTERISTICS – SFDR PRECONTRACTUAL DISCLOSURE
Product Name/Legal Identifier: Japan Hotel REIT Investment Corporation
Japan Hotel REIT Investment Corporation (hereafter referred to as “we”, “us” or “our”) promotes
environmental or social characteristics, but does not have as its objective a sustainable investment within themeaning of article 9(1) of Regulation (EU) 2019/2088 (“SFDR”). We have no reference benchmark designatedfor the purposes of attaining the environmental or social characteristics promoted by our investment units.
Does this financial product have a sustainable investment objective?
☐ Yes
☒ No
☐ It will make a minimum of sustainable ☐ It
promotes
Environmental/Social(E/S)
characteristics and while it does not have as its
investments with an environmental
objective: __%objective a sustainable investment, it will have aminimum proportion of __% of sustainable investments☐ in economic activities that qualify☐ with an environmental objective in economic
as environmentally 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 inqualifyasenvironmentally
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 (“E/S”) characteristics are promoted by Japan Hotel REIT Investment
Corporation?
We, together with Japan Hotel REIT Advisors (the “Asset Manager”), are making efforts to enhance thesustainability of our business through consideration of ESG (Environment, Social & Governance) issues, on the
belief that sound management, which enables us to co-exist in harmony with society and our environment, will
improve unitholder value over the medium to long term. We established a Sustainability Policy in December 2017and are pursuing a series of ESG measures, including reduction of our environmental impact in consideration of
all of our stakeholders. In December 2021, in order to further enhance our ESG initiatives, we identified the ESG
issues that we consider to be most material to us and are promoting measures to address those issues.
We have implemented various environmental initiatives including the following.
•

Reducing CO2 emissions. We aim to reduce CO2 emissions annually by an average of 1% or more
for our portfolio as a whole as well as each of our individual properties over the five-year period thatstarted in fiscal year 2018.

•

Reducing Energy Consumption. We aim to reduce energy use intensity annually by an average of
1% or more for our portfolio as well as individual properties over the five-year period that started infiscal year 2018. As of December 31, 2021, we had installed LED lighting at 41 of our properties
including Oriental Hotel Hiroshima and Oriental Hotel Okinawa Resort & Spa, inverter control
devices on air conditioning units at 39 of our properties and water-saving devices at 13 of ourproperties. Ten of our hotels have reduced clean water consumption by using well water. Seven of
our hotels in Okinawa have reduced clean water consumption by reusing gray water as recycledwater.

•

Preserving the Local Environment. Hotel Nikko Alivila participates in beach clean-up activities
every year in Yomitan, hosted by Yomitan Village in Okinawa. Nirai Beach is located in front ofHotel Nikko Alivila, which is famous for having one of the most beautiful ocean waterfronts on
Okinawa’s main island. The hotel staff cleans the beach every morning and conducts beachpreservation activities, and as a result, visitors are able to observe sea turtles laying eggs and eggs
hatching on the beach. Hotel Nikko Alivila is a member of the Sea Turtle Association of Japan.

We have implemented various social initiatives at our properties including the following.
•

Initiatives to Cope with COVID-19. As of December 31, 2021, we provided seven of our hotels as
facilities for accommodation and care of COVID-19 patients. As COVID-19 measures, we haveinstalled check-in machines, acrylic boards in lobbies and automated thermometers at some of ourproperties. We also provide two of our hotels’ banquet rooms as vaccination sites.

•

Supporting Cultural Activities and Child-rearing in Local Communities. Based on the policy ofmaking itself “friendly to the Earth, local community and family,” Oriental Hotel tokyo bay
proactively engages in local community events, such as local festivals and events to promote disaster
preparedness. Oriental Hotel tokyo bay also supports local art and cultural activities by hosting anannual chapel concert and providing our space for galleries. Oriental Hotel tokyo bay is also
dedicated to supporting child care such as through cooperation with an after-childbirth support
project sponsored by Urayasu City to provide physical and mental health care to mothers and theirbabies. In 2010, the hotel received the Kids Design Award, co-sponsored by the Kids Design
Association, a non-profit organization that aims to enhance safety for children and create a societythat enables their healthy growth, and the Ministry of Economy, Trade and Industry of Japan, thefirst for a hotel in Japan.

•

Safety Measures for Local Communities. Okinawa Marriott Resort & Spa donates to MESH support,
a non-profit organization that operates helicopter emergency medical services in the northern areaof Okinawa, which is a medically depopulated area. Okinawa Marriott Resort & Spa also supports
its local community by opening its pool for life-saving training offered to primary school students.

•

Initiatives for HR Development. To help development of its real estate management professionals,
the Asset Manager supports them in acquiring professional certifications such as ARES (Association
for Real Estate Securitization) Certified Master, an educational program that teaches practical,
specialized knowledge in the real estate and finance fields, for all officers and employees. We cover
the full cost of participation in training relating to practical knowledge, industry trends andcompliance. As of June 30, 2021, 15 employees had been certified as real estate brokers, twoemployees had been certified as real estate appraisers, one employee had been certified as a building
administrator registered with the Japanese Building Management Institute as a specialist in building
administration, two employees had been certified as official real estate consulting masters registeredwith Real Estate Transaction Promotion Center with knowledge and expertise for real estate
consulting and ten employees had been certified as ARES Certified Masters.

•

Initiatives for Employee Health and Well-being. The Asset Manager has established a HealthCommittee to improve standards of health for employees and promote wellness. The committee,
which meets once a month, reviews employee health-related matters, including the status of work
performed by all employees and the well-being and safety of the work environment. After eachcommittee meeting, advice from an occupational health physician, who is a member of the HealthCommittee, is distributed to all employees. The Asset Manager subsidizes the costs of annual
physical exams and flu shots. The Asset Manager also allows our employees to consult with an
occupational health physician about mental health issues as needed.

•

Respect for Human Rights, Diversity and Equality of Opportunities. Internal rules of the AssetManager explicitly prohibit discrimination based on ethnicity, religion, gender, age, origin or
nationality. Through compliance training, we promote respect for diversity of perspectives andvalues and raise awareness to eliminate discrimination and harassment.

•

Whistleblowing. The Asset Manager has established whistleblower rules and a whistleblowing
hotline that allows its officers and employees (including contract and temporary employees) to reportor consult about potential harassment, fraud or other inappropriate acts. In accordance with theWhistleblower Protection Act of Japan, the rules protect whistleblowers by prohibiting mistreatment
upon whistleblowing, allowing anonymous reports and keeping whistleblowers’ reports confidential,
and stipulate procedures to find and correct reported acts, including investigation methods anddisciplinary actions for those who are found to have engaged in inappropriate behavior. In addition
to an in-house contact, a whistleblower may consult an outside attorney who has no business
relationship with the Asset Manager.
•

Communication with Employees. The Asset Manager conducts a biannual employee satisfaction
survey to consider and implement improvement measures. The Asset Manager also organizes
workshops that both senior level and junior level employees attend to discuss our branding strategy
and share values with each other, with the aim of becoming a better company through two-way
communication between management and employees. The Asset Manager also takes into
consideration proposals for workplace improvement that we learn from employees during thoseworkshops.

•

Contribution to an Inclusive Society. The Asset Manager has introduced a re-employment systemfor employees aged 60 and over who wish to continue working. The Asset Manager has establisheda labor environment where senior personnel may remain active after the official retirement age byleveraging their work experience and expertise.

What sustainability indicators are used to measure the attainment of the E/S characteristics promoted by Japan
Hotel REIT Investment Corporation?
We use the following indicators to measure the attainment of the E/S characteristics we promote.
•Environmental Certification. In order to ensure the credibility of our initiatives aimed at reducing ourenvironmental impact, we have obtained green building certifications from third-party experts such as theComprehensive Assessment System for Built Environment Efficiency (“CASBEE”) for Buildings andBuilding-Housing Energy-efficiency Labeling System (“BELS”) Evaluation. As of December 31, 2021, we
had acquired “B+: Good” from CASBEE for two of our properties as well as two stars out of BELS’ fivestar ranking system for one of our properties and its highest rating, five stars, for one of our properties (“Green
Certified Assets”).

•

GRESB Real Estate Assessment. The GRESB, established in 2009, validates ESG performance data andprovide benchmarks for measuring real estate companies’ and institutional investors’ commitment tosustainability. Leading European, U.S., and Asian institutional investors use these benchmarks in selecting
investment targets. We have participated in the GRESB Real Estate Assessment since 2018 and have acquired“Green Star,” which is given based on evaluation of the management component, which evaluates policies
and organizational structure for ESG promotion, and the performance component, which assesses
environmental performance and tenant engagement of properties owned, for four consecutive years. We werealso selected as “Sector Leader” in the Asian Hotel Sector for two consecutive years since 2020.

•

SMBC Environmental Assessment Loan. The SMBC Environmental Assessment Loan is a loan provided by
Sumitomo Mitsui Banking Corporation based on environmental assessment conducted by the Japan ResearchInstitute, Limited, which reviews the borrower’s environmental management comprehensively based on four
criteria: (i) awareness of environmental load; (ii) extent of environmental conservation measures and results;(iii) its environmental management system; and (iv) initiatives for environmental communication andenvironmental business. We received an “A” grade under the SMBC Environmental Assessment in March
2018.

•

Task Force on Climate-related Financial Disclosures (“TCFD”): The TCFD was established by the Financial
Stability Board (FSB) to develop recommendations for more effective climate-related disclosures. In
November 2021, the Asset Manager expressed support for the TCFD recommendations, which are designed
to help companies provide better information to support informed capital allocation, and joined the TCFD
Consortium, an organization comprised of Japanese companies that support the recommendations and discuss
initiatives aimed at effective information disclosure by companies and linking of disclosed information toappropriate investment decisions by financial institutions.

Principal Adverse Impacts
How are indicators for adverse impacts on sustainability factors taken into account?
We consider, both at the entity-level (i.e., the Asset Manager) and at the fund-level (i.e., Japan Hotel
REIT Investment Corporation), principal adverse impacts of our investment decisions on sustainability factors.
Under the Investment Trust Act of Japan, Japan Hotel REIT Investment Corporation is prohibited from having
any employees and is required to outsource asset management to a third party. Accordingly, as discussed in detailelsewhere, any consideration at the fund-level of principal adverse impacts of our investment decisions onsustainability is principally conducted by the Asset Manager, subject to approval of our Board of Directors. In
addition to the Asset Manager’s contractual obligations to Japan Hotel REIT Investment Corporation under theasset management agreement, the Financial Instruments and Exchange Act of Japan provides that the AssetManager owes Japan Hotel REIT Investment Corporation a fiduciary duty in conducting its activities, including
making investment decisions informed by sustainability considerations.
Does Japan Hotel REIT Investment Corporation take into account principal adverse impacts on sustainability
factors?
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 and GHG emission intensity. We aim to manage the risk connected to principal
adverse impacts from our investment decisions in several ways, including general screening 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 other than the properties thathave received any of the green building certifications to be energy-inefficient. As described in moredetail above, we implement as appropriate measures to reduce the environmental impact of theseproperties and believe such engagement leads the acquisition of environmental certifications.

•

GHG emission intensity. Total GHG emissions generated by properties leased to HMJ Group hotels(60.5% of our portfolio based on gross floor area) were 47,633 t-CO2 (in 2018), 51,547 t-CO2 (in2019) and 36,185 t-CO2 (in 2020). We aim to reduce GHG emission annually by an average of 1% ormore for our portfolio as well as individual properties over a five-year period starting in fiscal year
2018.

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.
Investment Strategy
What investment strategy does Japan Hotel REIT Investment Corporation follow?
We are a J-REIT that specializes in investment in hotels. Our basic investment thesis is to achieve steady
growth and stable revenue over the medium to long term. We aim to maximize unitholder value by acquiring
highly competitive hotels in areas with strong demand from both domestic and inbound leisure customers.
We issue green bonds that take into consideration ESG factors as follows.
•

Green Bond Framework. We may issue green bonds in accordance with the Green Bond Principles (2018)
established by the International Capital Markets Association, which are intended to support issuers infinancing environmentally sound and sustainable projects that foster a net-zero emissions economy andprotect the environment, as well as the Green Bond Guidelines (2017) established by the Ministry of theEnvironment of Japan aiming at maintaining credibility in the environmental effects of green bonds. We

issued our twelfth unsecured investment corporation bonds in July 2019 under this framework (“2019 Green
Bond Framework 2019”). We and the Asset Manager believe that continued issuances of green bonds will
not only lead to strengthen our financing base, but also will contribute to the expansion of ESG investment
opportunities.
•

Eligibility Criteria. We established the eligibility criteria with respect to use of proceeds (as described below)
under our 2019 Green Bond Framework, which obtained Green 1, the highest green bond rating, from Japan
Credit Rating Agency (“JCR”).

•

Use of Proceeds.
(i) Refinancing renovation cost of Oriental Hotel Fukuoka Hakata Station (formerly Hotel Centraza Hakata)meeting the following criteria:oinvestment in and construction of equipment which can reduce CO2 emissions such as air
conditioning units and use of electricity, oroinvestment in and construction of equipment which can otherwise contribute to the environment,such as through reduction of water usage(ii) Renovation of hotels other than Oriental Hotel Fukuoka Hakata Station meeting the following criterion:orenewal of air conditioning units and other equipment which can reduce CO2 emissions by at least
10%What are the binding elements of the investment strategy used to select the investments to attain each of the
E/S characteristics promoted by Japan Hotel REIT Investment Corporation?
When the Investment and Operation Committee and the Compliance Committee of the Asset Manager
make a decision to invest in a property (subject to the approval of the Board of Directors of the Asset Manager),
findings about the property on the sustainability considerations are incorporated into the overall investment
proposal. To the extent possible, the Committees generally exclude investment proposals with the following ESG
issues: (i) the level of asbestos in the property, after removal or treatment, exceeds the maximum level permitted
under applicable environmental law; (ii) the usage and disposal of PCB-containing machines in the property are
not properly handled in accordance with relevant law; (iii) soil contamination, after treatment, exceeds the
maximum level permitted under applicable environmental law. In addition, when we select assets for investment
in connection with our green bonds, the properties must meet the eligibility criteria. The eligible assets areevaluated and selected by the Asset Manager’s finance department after discussion with internal engineers, inaccordance with the targets set by Asset Manager’s ESG Promotion Committee (“Green Projects”). The Green
Projects must be approved by the Asset Manager’s Investment and Operation Committee and Board of Directors,
and then reported to our Board of Directors.
How is the strategy implemented in the investment process on a continuous basis?
In order to implement initiatives continuously and systematically based on our Sustainability Policy, theAsset Manager has established the ESG Promotion Committee, which generally meets at least once every quarter,to establish targets and measures to be undertaken, assess the progress and conduct sustainability training for
officers and employees. The Sustainability Policy will be reviewed and revised by the ESG Promotion Committee
as necessary. Any revision to the Sustainability Policy will be reported to our Board of Directors.
The ESG Promotion Committee consists of the Asset Manager’s management and officers andemployees chosen from various groups involved in promoting ESG, with the President & CEO acting as the chair
and the Director & Head of Finance and Planning acting as the operating officer.
What is the committed minimum rate to reduce the scope of the investments considered prior to the applicationof that investment strategy?
Prior to our investment in a property, the Asset Manager conducts due diligence review of the property,
including the assessment of compliance with applicable environmental laws and ordinances, environmental

performance and environmental and disaster risks, as well as investigation into hazardous substances and soil
contamination. We do not consider investing in properties that do not meet the standards for soil contaminationand other environmental contamination in accordance with the Air Pollution Control Act and the Soil
Contamination Countermeasures Act of Japan and other environmental laws and ordinances. However, from time
to time we acquire properties not meeting the standards as long as they are deemed fixable promptly after
acquisition.
What is the policy to assess good governance practices of the investee companies and Japan Hotel REIT
Investment Corporation?
We invest 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 to us.
We, along with the Asset Manager, have introduced the following measures to assess and enhance ourgovernance systems:•

Initiatives to Prevent Conflicts of Interest. The Asset Manager has formulated a decision-making processthat is stricter than what is required by law. In particular, in addition to interested parties stipulated byapplicable law, the Asset Manager specifies “sponsor-related parties”, including the Asset Manager’s
shareholders and their subsidiaries, which are subject to detailed standards and procedures. Certaintransactions with sponsor-related parties require a resolution of the Board of Directors of the Asset Manager
and a resolution of our Board of Directors in addition to deliberation and approval by the Investment andOperation Committee and the Compliance Committee of the Asset Manager.

•

Risk Management. The Asset Manager has established a risk management system for the purpose of ensuringsound management and performing appropriate risk management as a financial instruments business operator.
In addition, the Asset Manager’s Board of Directors has established a risk management policy and strategic
objectives and supervises the development of an appropriate risk management system.

•

Internal Audit. The Asset Manager conducts annual internal audits at least once a year, in order to evaluate
its risk management. Once the internal audit is completed, the compliance officer, who serves as the chief
controller of internal audit, reports the audit results to the President of the Asset Manager, Compliance
Committee and the audited departments. The chief controller of internal audit also reports to the Board of
Directors as necessary. The chief controller of internal audit quarterly reviews the progress made on mattersfor improvement indicated by internal audits and reports the results to the President and Compliance
Committee.

We also make the following ongoing disclosures related to our Green Bond Framework. We disclose theallocation status of the funds raised through Green Bonds and environmental KPI once a year on our website until
the redemption date of the Green Bonds.
•

Impact Reporting. We annually disclose the following quantitative environmental performance indicators asof March 31 on our website for our properties leased to HMJ Group (60.5% of our portfolio based on grossfloor area).
oElectricity consumptionoCO₂ emissionsoWater consumptionoWaste generation

Where can I find further details on the investment strategy?
For more details on our investment strategy, see https://www.jhrth.co.jp/en/esg/greenbond.html.

Asset Allocation
What is the asset allocation planned for Japan Hotel REIT Investment Corporation?
We use BELS and CASBEE for the environmental certification of the properties in our portfolio. We
call our property that receives any such certifications as “Green Certified Asset”. As of December 31, 2021, 17.2%of the properties in our portfolio were Green Certified Assets, and 82.8% were noncertified assets based on grossfloor area. The percentage of Green Certified Assets in our portfolio is not high mainly due to a limited numberof green certification organization in Japan that review and issue green certifications to hotel properties. We trackand monitor the property-level environmental performance indicators of our properties leased to HMJ Group(60.5% of our portfolio based on gross floor area) including the Green Certified Assets, to assess theenvironmental performance of our portfolio. Our climate change-related targets are as follows: reduce energy
consumption intensity annually by an average of 1% or more for our portfolio as well as individual property, overa five-year period starting in fiscal year 2018; and reduce CO2 emission intensity annually by an average of 1%
or more for our portfolio as well as individual property over a five-year period starting in fiscal year 2018.

17.2% is #1 Aligned with E/S#1B Other E/S characteristics

Investments of JHR
82.8% qualifies as #2 Other

How does the use of derivatives attain the environmental or social characteristics promoted by Japan Hotel
REIT Investment Corporation?
Not applicable.
To what minimum extent are sustainable investments with an environmental objective aligned with the EU
Taxonomy?
Not applicable.
What investments are included under “#2 Other,” what is their purpose and are there any minimum
environmental or social safeguards?
As discussed in detail above, we invest in properties that have been subjected to ESG-related due
diligence review and risk assessment. We do not consider investing in properties that do not meet the standards
for environmental contamination in accordance with the applicable environmental laws and ordinances, unlessdeemed fixable promptly after acquisition.
How will sustainable investments contribute to a sustainable objective and not significantly harm any othersustainable investment objectives?
There are no assets specifically earmarked as having a sustainable objective and as such, no calculationis required to be made as to whether any individual asset does significant harm to any sustainable investment
objective as referred to in the SFDR. Nevertheless, our sustainable investment objective is consistently integrated
and monitored in the management of the assets.
We have instituted a number of initiatives, at both the portfolio level and the property level, to promote
E/S characteristics. Such initiatives include the following.
•

Climate Change Initiatives. We monitor environmental performance, such as energy consumption, CO2
emissions and water consumption, and strive to improve continuously improve our performance. Our climatechange-related targets are as follows: reduce energy consumption intensity annually by an average of 1% ormore for our portfolio as well as individual property, over a five-year period starting in fiscal year 2018; andreduce CO2 emission intensity annually by an average of 1% or more for our portfolio as well as individual
property over a five-year period starting in fiscal year 2018.
•

Energy Saving Initiative. We actively promote the efficient use of energy by making capital investments in
our properties and implementing measures to conserve energy. As of December 31, 2021, we had installed
LED lighting at 41 of our properties including Oriental Hotel Hiroshima and Oriental Hotel Okinawa Resort& Spa., and had installed inverter control devices on air conditioning units at 39 of our properties and watersaving devices at 13 of our properties. Ten of our hotels have reduced clean water consumption by using well
water. Seven of our hotels in Okinawa have reduced clean water consumption by reusing gray water asrecycled water. We have included in our leases with HMJ Group hotels Green Lease provisions that require
our tenants to collect energy consumption data and provide them to us (16 properties, equal to 60.5% of ourportfolio based on gross floor area, as of December 31, 2021). We analyze the data provided by our tenants
and consider renovation options to improve environmental performance and optimize facilities management.

Index as Reference Benchmark
Is a specific index designated as a reference benchmark to determine whether Japan Hotel REIT Investment
Corporation is aligned with the environmental or social characteristics that it promotes?
Our investment units have been included in the Nikkei ESG-REIT index (“Nikkei Index”), which was
newly established in 2020, since its establishment. The Nikkei Index is composed of Tokyo Stock Exchange-listed
J-REITs weighted by market capitalization adjusted for ESG considerations, including GRESB ratings. The index
is reviewed annually for inclusion or exclusion every November. We use the Nikkei Index only as a reference
benchmark for performance comparison and market context purposes.
How is the reference benchmark continuously aligned with each of the environmental or social characteristics
promoted by Japan Hotel REIT Investment Corporation and with the investment strategy?
Not applicable.
How is the alignment of the investment strategy with the methodology of the index ensured on a continuous
basis?
Not applicable.
How does the designated index differ from a relevant broad market index?
See above.
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.jhrth.co.jp/en/esg/index.html.
Note Regarding the EU Taxonomy Regulation
As set out above, we promotes certain environmental characteristics.
The Asset Manager is required, under Regulation (EU) 2020/852 (the “EU Taxonomy Regulation”), todisclose whether its assets are aligned with the environmental objectives formulated in the EU Taxonomy
regulation. The EU Taxonomy Regulation is to be complemented by technical standards and screening criteria
which are currently developed. The technical screening criteria for the first two environmental objectives (climatechange mitigation and climate change adaptation) were adopted in December 2021. They apply as of January 1,
2022.
We invest in economic activities that are eligible under the EU Taxonomy Regulation in respect ofclimate change mitigation and/or climate change adaptation. This means that screening criteria for theseinvestments have been or will be developed. The Asset Manager expressly states that in view 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 our investments with these environmental objectives and climate related goals in line withEU Taxonomy Regulation are not sufficiently available, the Asset Manager is not currently in a position todisclose on an accurate and reliable basis to what extent our investments technically qualify as Taxonomy-aligned
or “environmentally sustainable” within the specific meaning of the EU Taxonomy Regulation. Our investments
may have a positive contribution to these environmental objectives and may therefore eventually be considered
Taxonomy-aligned, but at this stage, the Asset Manager is required to state that there is no minimum proportionof our investments that qualify as such.
The Asset Manager further states that the “do no significant harm” principle applies only to thoseinvestments 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 not take
into account the EU criteria for environmentally sustainable economic activities.
Integration of Sustainability Risks in the Investment Decisions, and the Impact of Such Risks on the
Returns of Japan Hotel REIT Investment Corporation (SFDR Article 6 Disclosure)
We have established the ESG Promotion Committee, which generally meets at least once every quarter,to establish targets and measures to be undertaken, assess the progress and conduct sustainability training for
officers and employees. The ESG Promotion Committee consists of the Asset Manager’s management and officers
and employees chosen from various groups involved in promoting ESG, with the President & CEO acting as thechair and the Board Director & Head of Finance and Planning acting as the operating officer.
Under this organizational structure, we have instituted a number of initiatives to promote E/Scharacteristics. Such initiatives include climate change initiatives, initiatives for saving/reducing energy
consumption, local community initiatives, and initiatives for employees’/tenant’s initiatives.
In order to conduct sustainable asset management while maximizing the value of our properties, we havetaken into consideration ESG factors in our investment and asset management processes. In addition, we haveestablished a Green Bond Framework in relation to fund procurement. Our Sustainability Policy clearly states that
we consider the environment and stakeholders such as members of local communities surrounding our properties,
and we request our hotel tenants to cooperate with our sustainability initiatives. We consider environmental andsocial factors when procuring products and services.
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 one of the top priorities 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 is commensuratewith the pursuit of superior risk-adjusted returns. In other words, we believe that if we fail to consider ESG factors
enough in the investment decision-making process, it may cause the increase of capital cost and even reduceinvestors’ returns. If our ESG initiatives are not sufficient, our investment units may be excluded from ESG stock
indices or may be excluded from investment by investors who use the status of ESG initiatives as one of theirinvestment criteria. As a result, the investment unit price may be adversely affected. We are exposed to thefollowing risks in particular.
Physical risks
We are exposed to earthquake, flood and storm risks because some of our properties are located in areasthat are sensitive to their impact. If a significant earthquake, flood or storm hits any of our properties, it will likely
have a negative effect on its value. This may include physical damage to the properties and tenants’ premises. Weview these risks as medium-level risks, which the Asset Manager addresses by avoiding concentration of ourproperties in any particular geographic area.
Social and governance risks
We are exposed to the risk that any of our hotels will become subject to a serious public criticism
regarding any social or governance aspect of the hotel that makes our holding of the hotel inconsistent with our
ESG policy. We view this risk as a low-level risk because we test each of our hotels against our ESG policy on

an ongoing basis and, in case of non-compliance with our ESG policy, promptly take measures to rectify the noncompliance upon consultation with independent experts as necessary.