Disclaimer
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.
Netherlands
The units of Advance Residence Investment Corporation (“ADR” or the “AIF”) 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 accordance with this provision, AD
Investment Management Co., Ltd. (the “AIFM”) has submitted a notification with theDutch Authority for the Financial Markets. The units of ADR 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 ADR is
subject to the license requirement pursuant to the Wft. Consequently, neither the AIFM
nor ADR is subject to supervision of the Dutch Central Bank (De Nederlandsche Bank,“DNB”) or the Netherlands Authority for Financial Markets (Autoriteit Financiële
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 European Directive 2003/71/EC (the EU Prospectus Directive) as
amended and implemented in Netherlands law. The AIFM is solely subject to limited
ongoing regulatory requirements as referred to in Article 42 of the AIFMD.

United Kingdom
Units of the ADR are being marketed in the United Kingdom pursuant to Article 59 of theUnited Kingdom Alternative Investment Fund Managers Regulations 2013. In accordancewith this provision, the AIFM has submitted a notification with the Financial Conduct
Authority (the “FCA”).
For the purposes of the United Kingdom Financial Services and Markets Act 2000(“FSMA”) the ADR is an unregulated collective investment scheme which has not beenauthorized by the FCA.

sf-3476691

Accordingly, any communication of an invitation or inducement to invest in the ADR may
be made to persons in the United Kingdom only if the communication falls within one ormore of the categories of exempt financial promotions under the Financial Services andMarkets Act (Financial Promotion) Order 2005 (the “Order”), such as financial
promotions communicated to:(1)(2)

persons who are investment professionals, as defined in article 19 of the Order;
persons who are high net worth companies, unincorporated associations, or otherentities listed in article 49 of the Order,

or if the communication is made to persons to whom such an invitation or inducement
may otherwise lawfully be communicated. The distribution of this document to any personin the United Kingdom in circumstances not falling within one of the above categories is
not permitted and may contravene FSMA. No person falling outside those categories
should treat this document as constituting a promotion to him, or act on it for any purposes
whatever.
European Economic Area
In relation to each Member State of the European Economic Area (the “EEA”) which has
implemented the Prospectus Directive (each, a Relevant Member State), with effect fromand including the date on which the Prospectus Directive is implemented in that Relevant
Member State (the Relevant Implementation Date) no offer of units of the ADR may bemade to the public in that Relevant Member State except in circumstances falling within
Article 3(2) of the Prospectus Directive, provided that no such offer of units shall require
the publication of a prospectus pursuant to Article 3 of the Prospectus Directive, or a
supplement to a prospectus pursuant to Article 16 of the Prospectus Directive.
For the purposes of this provision, the expression “an offer of units to the public” inrelation to any units in any Relevant Member State means the communication in any formand by any means of sufficient information on the terms of the offer and the units to beoffered so as to enable an investor to decide to purchase or subscribe the units, as the same
may be varied in that Member State by any measure implementing the Prospectus
Directive in that Member State, the expression “Prospectus Directive” means Directive
2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to theextent implemented in the Relevant Member State), and includes any relevant2
sf-3476691

implementing measure in the Relevant Member State and the expression “2010 PD
Amending Directive” means Directive 2010/73/EU.
The units of ADR are not intended, from 1 January 2018, to be offered, sold or otherwise
made available to and, with effect from such date, should not be offered, sold or otherwise
made available to any retail investor in 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, “MiFID II”); (ii) a customer within themeaning of Directive 2002/92/EC (as amended, “IMD”), where that customer would not
qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II; or (iii)
not a qualified investor as defined in the Prospectus Directive. Consequently no key
information document required by Regulation (EU) No 1286/2014 (the “PRIIPs
Regulation”) for offering or selling the units of ADR or otherwise making them available
to retail investors in the EEA has been prepared and therefore offering or selling the unitsof ADR or otherwise making them available to any retail investor in the EEA may beunlawful under the PRIIPs Regulation.

3
sf-3476691

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

Advance Residence Investment Corporation seeks to maximize unitholder value, aiming tosecure stable profits and achieve asset growth over the medium and long term byinvesting in Japanese domestic real estate primarily used for residential purposes with afocus on diversifying its investments among regions.

Investment strategy

ADR’s investment strategy is to maximize unitholders’ value by utilizing ITOCHU Group’s
and other supporting companies’ networks, knowledge and human resources in areas
concerning leasing, property sourcing and facility management.

Types of assets the AIF

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

may invest in

and other assets.

Techniques it may

ADR focuses on investing in residential properties which ADR anticipates will provide

employ and all

steady rental revenue especially in Tokyo and other urban areas where there will be

associated risks

continued population growth even though the population as a whole is expected to
decline.
The principal risks with respect to investment in ADR are as follows:•

any adverse conditions in the Japanese economy could adversely affect ADR;•

ADR 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 asset manager (the “AIFM”) in the Japanese real estatemarket is not an indicator or guarantee of the future results;•

ADR’s reliance on ITOCHU Group, the AIFM and other third party service providers
could have a material adverse effect on business;•

the AIFM operating a real estate private investment fund•there are potential conflicts of interest between ADR and ITOCHU Group as well as
the AIFM;•

ADR’s revenues largely comprise leasing revenues from the portfolio properties,
which may be negatively affected by vacancies, decreases in rent, and late or
missed payments by tenants;•

ADR faces significant competition in seeking tenants and it may be difficult to findreplacement tenants;•

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

ADR may suffer large losses if any of the properties incurs damage from a natural
or man-made disaster;4
sf-3476691

•most of the properties in the portfolio are concentrated in Tokyo metropolitan
area;

•

any inability to obtain financing for future acquisitions could adversely affect thegrowth of the portfolio;•

ADR’s failure to satisfy a complex series of requirements pursuant to Japanese tax
regulations would disqualify ADR from certain taxation benefits and significantly
reduce the cash distributions to the unitholders; and•the ownership rights in some of the properties may be declared invalid or limited.

In addition, we are subject to the following risks:•

risks related to increasing operating costs;•

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

risks related to third party leasehold interests in the land underlying ADR’sproperties;•risks related to holding the property in the form of stratified ownership (kubunshoyū) 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 the defective title, design, construction or other defects 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;•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 insider trading regulations;•risks related to the amendment of the applicable administrative laws and local
ordinances;•risks related to infringing third party’s intellectual property right;•

risks related to holding interests in properties through preferred shares of special
purpose companies (tokutei mokuteki kaisha);5
sf-3476691

•risks related to holding Japanese anonymous association (tokumei kumiai)interests;•

risks related to investments in trust beneficiary interest;•

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

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

Any applicable

ADR is subject to investment restrictions under Japanese laws and regulations (e.g., theinvestment restrictions

Act on Investment Trusts and Investment Corporations (the “ITA”), the Financial
Instruments and Exchange Act (the “FIEA”)) as well as its articles of incorporation.
ADR 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 or real estate, leaseholds of real estate or surface
rights.
A listed J-REIT must invest substantially all of its assets in real estate, real estate-related
assets and liquid assets as provided by the listing requirements. Real estate in this context
includes, but is not limited to, real estate, leaseholds of real estate, surface rights, andtrust beneficiary interests for these assets, and real estate-related assets in this context
include, but are not limited to, anonymous association (tokumei kumiai) interests forinvestment 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.
Investment restrictions ADR places in its articles of incorporation are as follows:(1) Restrictions relating to securities and monetary claims
ADR will place importance on stability and convertibility of investments into securities
and monetary claims, and it will not make investments aimed only at gaining positive
management profits.
(2) Restrictions relating to derivatives transactions
ADR will place importance on stability and convertibility of investments into securities
and monetary claims when managing surplus funds, and in other instances, shall take6
sf-3476691

into consideration the relationship with real estate and real estate backed
securities.(3) ADR will restrict its real estate investment targets to real estate locatedin Japan.
(4) ADR will not invest in assets denominated in a foreign currency.
Circumstances in which ADR may take out loans or issue long-term or short-term corporate bonds for the purpose
the AIF may useof investing in properties, conducting repairs and related work, paying cash distributions,leverage

repaying obligations (including repayment of tenant leasehold or security deposits, andobligations related to loans or long-term or short-term corporate bonds) and otheractivities.

The types and sources

Loans or corporate bonds. ADR currently does not have any outstanding guarantees andof leverage permitted

may be subject to restrictive covenants in connection with any future indebtedness thatand associated risks

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, ADR may
violate restrictive covenants contained in the loan agreements ADR executes, such as themaintenance of debt service coverage or loan-to-value ratios, which may entitle thelenders to require ADR to collateralize the properties or demand that the entire
outstanding balance be paid. Further, in the event of an increase in interest rates, to theextent that ADR has any debt with unhedged floating rates of interest or ADR incurs new
debt, interest payments may increase, which in 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 corporate bond issuance will be one trillion yen,leverageand 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

ADR has set an upper limit of 60% as a general rule for its loan-to-value, or LTV, ratio inleverage which theorder to operate with a stable financial condition. ADR may, however, temporarily exceed

AIFM is entitled tosuch 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 general7
sf-3476691

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
ADR’s overall investment strategy and policy, can be modified without such formal
amendment of the articles of incorporation
Article 23(1) (c)Description of the

ADR has entered into a sponsor support agreement with ITOCHU Corporation and ITOCHU

main legal implications

Property Development Co., Ltd governed by Japanese law.

of the contractual
relationship enteredinto for the purpose of

ADR 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.

investment, including
jurisdiction, applicablelaw, and the existenceor not of any legal
instruments providing
for the recognition andenforcement of
judgments in the
territory where the AIF
is established
Article 23(1) (d)The identity of the• AIFM (Asset Manager): AD Investment Management Co., Ltd.

AIFM, AIF's depository,• Auditor: Deloitte Touche Tohmatsu LLC

auditor and any other• Custodian and Transfer Agent: Mizuho Trust and Banking Co., Ltd.

service providers and a• General Administrators: Sumitomo Mitsui Trust Bank, Limited

description of theirService providers owe contractual obligations under their respective agreements with theduties and the

AIF or AIFM, as the case may be. In addition, the FIEA provides that the Asset Manager

investors' rights

owes the AIF a fiduciary duty and must conduct its activities as the asset manager in good

theretofaith.
The FIEA also prohibits the Asset Manager from engaging in certain specified conduct,
including entering into transactions outside the ordinary course of business or withrelated parties 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)8sf-3476691

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
management or risk

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 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)Description of the AIF’s

ADR makes investment decisions based on the valuation of properties, upon consideration

valuation procedureof the property appraisal value.

and pricing
methodology,
including the methods
used in valuing hardto-value assets

ADR shall evaluate assets in accordance with its Article of Incorporation. The methods andstandards that ADR 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 ITA, in addition to Japanese GAAP.
J-REITs may only use the valuation methods prescribed in the rules of the Investment
Trusts Association, Japan, which emphasize market price valuation.
Please refer to ADR’s “Article of Incorporation of Investment Corporation, Attachment 2”(https://www.adr-reit.com/src/2013/12/Articles_of_Incorporation201510231.pdf).
Article 23(1) (h)Description of the AIF’s

ADR seeks to manage its capital resources and liquidity sources to provide adequate funds

liquidity risk

for current and future financial obligations and other cash needs and acquisitions.

9
sf-3476691

management,

ADR manages liquidity risk by preparing monthly cash management plans and by acquiring

including redemption

committed lines of credit from its major lenders.

rights in normal andexceptional
circumstances and

As ADR is a closed-end investment corporation, unitholders are not entitled to request theredemption of their investment.

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

Compensation: The articles of incorporation provide that ADR may pay its executive

charges and expenses

officer up to one million yen per month and each of its supervisory officers up to 500

and a maximum

thousand yen per month. The board of officers is responsible for determining a reasonableamount which iscompensation amount for the executive officer and each of the supervisory officers.

directly / indirectly
borne by the investors

Asset Manager:• Asset Management Fee: ADR will pay the Asset Manager an asset management fee asfollows:oAsset Management Fee 1

ADR will, within 2 months after the end of each fiscal period, pay an amount up to a
maximum of the amount (calculated pro rata based on the actual number of days in
the relevant fiscal period, taking one year as being 365 days; the same applies tocalculations of the base fee below) calculated by multiplying by 0.20% p.a. the total
asset value set out in ADR’s balance sheet (approved under Article 131, Paragraph 2of the Investment Trusts Act) dated as of the closing of the latest fiscal period.
oAsset Management Fee 2

ADR will pay, within 3 months after the closing of fiscal period, an amount notexceeding the amount calculated by multiplying the total of real estate rental
business income (if invested assets include equity interests in silent partnerships orreal estate-backed securities involving real estate, including the dividends relating tothese invested assets or other forms of income) after subtracting the total of thereal estate rental business expenses (excluding depreciation expenses and losses on
the sale or retirement of non-current assets) for the relevant fiscal period by 3.0%.
oAsset Management Fee 3

10
sf-3476691

An amount not exceeding the amount calculated by the following method shall be
paid within 3 months after the closing of fiscal period.
Calculation formula:(Total of Asset Management Fee 1 and Asset Management Fee 2 for the relevant fiscal
period) x adjusted EPU x 0.008% (Note)
Where the adjusted EPU is to be calculated A ÷ B
A: Net profit for the relevant fiscal period before deduction of the amount for AssetManagement Fee 3
B: Number of units issued as of the closing date of the fiscal period(Note) From the first day of the fiscal period during which the application of Asset Management Fee 3
commences, the following are to apply: (i) if ADR implements a 1-for-X unit split, the amountcalculated based on the formula above for Asset Management Fee 3 shall be multiplied by X for
fiscal periods following the relevant fiscal period; and (ii) if ADR implements a Y-for-1 consolidationof the units, the amount calculated based on the formula above for Asset Management Fee 3 shallbe divided by Y for fiscal periods following the relevant fiscal period.

• Acquisition Fee
When real estate or real-estate-backed securities are newly acquired, ADR will pay
the Asset Manager, by the end of the month following the month of acquisition, anamount not exceeding the amount calculated by multiplying the purchase price of
the asset acquired by 1.0%. The “purchase price” is the amount set out in thepurchase agreement and excludes expenses associated with the purchase andconsumption tax and local consumption tax.

• Disposal Fee
When real estate or real-estate-backed securities are disposed of, ADR will pay the
Asset Manager, by the end of the month following the month of disposal, anamount not exceeding the amount calculated by multiplying the sales price of theasset so disposed of by 0.50%. The “sales price” is the amount set out in thepurchase agreement and excludes expenses associated with the sales andconsumption tax and local consumption tax.

• Merger Fee
If the AIFM conducts a survey or valuation of the assets held by a possible merger
partner for ADR and ADR inherits these assets held by the merger partner through amerger, an amount multiplied by a rate not exceeding 0.5% of assets including realestate, real estate-backed securities, specified bonds, and real estate-related loans

11
sf-3476691

on the merger effective date shall be paid to the Asset Manager within 3 months
from the end of month in which the merger effective date falls.
Custodian:• Custodian Fee: ADR will pay the Custodian a monthly fee calculated as follows:
The amount of total assets as indicated on the prior month-end trail balance x
0.03% ÷12
General Administrators:• General Administrators Fee: ADR will pay the General Administrators a monthly fee
calculated as follows:
The amount of total assets as indicated on the prior month-end trial balance x
0.09% ÷12
Transfer Agent:• Transfer Agent Fee (Standard Fee):
Standard transfer agent fees are for services such as preparation, maintenance andstorage of ADR’s unitholder register; preparation and reporting of the end-of-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.
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 yenAuditor:• Auditor Fee:ADR may pay the independent auditor up to 20 million yen per fiscal period. The
board of officers is responsible for determining the actual compensation amount.

12
sf-3476691

The AIF may also incur other miscellaneous fees in connection with the issuance of units,
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 Corporations

AIFM's procedure toof Japan, which applies the requirements of Article 109 paragraph 1 of the Companies Act

ensure fair treatment

to investment corporations, investment corporations are required to treat unitholders

of investors and details

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

the allotment of residual assets to unitholders is required to be made equally depending

treatment received byon the number units held under Article 77 paragraph 2 item 2 and Article 158 of the ITA.

investors, including
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 semi-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 17th Floor, Jinbocho Mitsui Building, 1-105 Kanda-Jinbocho, Chiyoda-ku, Tokyo.

Article 23(1) (l)The procedure and

ADR is authorized under the articles of incorporation to issue up to 6,000,000 units. Its

conditions for the issue

units have been listed on the Tokyo Stock Exchange since March 2, 2010.

and sale of the units

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
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 valueof the AIF or latest
market price of theunit or share of the AIF

ADR’s unit’s latest market price is publicly available at the Tokyo Stock Exchange or fromfinancialinformation

venders(including

Reuters,

which

can

be

http://www.reuters.com/finance/stocks/overview?symbol=3269.T).

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

The units of ADR were listed on the Tokyo Stock Exchange on May 2, 2010.

performance of the

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

AIF, where available

13
sf-3476691

viewedat

Fiscal period

Total Assets

Total Net Assets(JPY million)(JPY million)

Total unitholders’equity per unit
(base value) (JPY)

13th Fiscal Period(August 1, 2016 to450,967

220,834

163,580

450,479

220,754

163,521448,421220,574

163,388452,846

220,524

163,351

452,487

220,069

163,014January 31, 2017)
14th Fiscal Period(February 1, 2017 to July
31, 2017)
15th Fiscal Period(August 1, 2017 toJanuary 31, 2018)
16th Fiscal Period(February 1, 2018 to July
31, 2018)
17th Fiscal Period(August 1, 2018 toJanuary 31, 2018)
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)14
sf-3476691

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) and 23(5)Article 23(2)The AIFM shall inform

Not applicable.

the investors before
they invest in the AIF
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

15
sf-3476691

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.

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 whenever they
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 (ie.
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

16
sf-3476691

Terms of redemption and

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

entitled to request the redemption of their investment.

discretion applies, where relevant
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 appropriateness and effectiveness of the risk management structure

the risk management systems

are regularly evaluated and enhanced by the AIFM.

employed by the AIFM to manage
those risks

Deposits are exposed to risks of failure of the financial institution holding
the deposit and other credit risks, but such risks are controlled by striving todiversify the financial institutions holding the deposits.
Funds from debts and investment corporation bonds are mainly used for
asset acquisition or debt repayment, etc. These are exposed to liquidity risk
at the time of repayment, but the liquidity risk is controlled through suchmeasures as striving to maintain and strengthen the capacity to procure
funds from the capital market via capital raising, along with securing several
fund procurement sources and diversifying repayment deadlines, executing
commitment lines of credit which provide credit facilities with major
financial lenders, and also preparing monthly cash management plans.
Debt with a floating interest rate is exposed to interest rate fluctuation
risks, but the impact that interest rate rises have on the operations islimited by keeping the appraisal LTV at low levels, maintaining the
proportion of debt that is long-term fixed-rate debt at high levels, andsetting a procurement limit depending on the economic and financial
environment, terms of lease agreements with tenants, asset holding period
and other factors.
Furthermore, derivative transactions (interest rate swap transactions) areutilized as hedging instruments to mitigate the risks of rises in floatinginterest rates.

17
sf-3476691

Tenant leasehold and security deposits are deposits from tenants and are
exposed to liquidity risks arising from tenants moving out of properties, but
the liquidity risk is controlled through such measures as preparing monthly
cash management plans.
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 amountAny new arrangements or change in applicable arrangements will beof leverage which the AIFM may

disclosed at an appropriate time.

employ on behalf of the AIF,
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)18
sf-3476691

Information on the total amount of

The aggregate amount of debt with interest is JPY 225,918 million as ofleverage employed by the AIF

March 31, 2019.

calculated in accordance with thegross and commitment methods

19
sf-3476691