Investment
Invincible Corporation

Audited Financial Statements
for the 29th Fiscal Period(from July 1, 2017 to December 31, 2017)

INDEX TO FINANCIAL STATEMENTS
Page

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

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

Balance Sheet as of December 31, 2017 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 4

Statement of Income and Retained Earnings for the six months ended December 31, 2017 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 6

Statement of Changes in Net Assets for the six months ended December 31, 2017 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 7

Statement of Cash Flows for the six months ended December 31, 2017 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 9

Notes to Financial Statements as of and for the six months ended December 31, 2017∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 10

Greetings from Naoki Fukuda, Executive Director of Invincible Investment Corporation andPresident & CEO of Consonant Investment Management Co., Ltd.
I would like to take this opportunity to express my sincere gratitude to all unitholders of Invincible
Investment Corporation (“INV”) for your continued support.
We hereby provide you with a report on INV’s asset management and financial results for the 29th fiscal
period (covering the period from July 1, 2017 to December 31, 2017; the “Reporting Period”).
INV positions hotels and residential properties as its core assets and conducts management activities tomaximize growth potential and stability of the portfolio.
During the Reporting Period, INV conducted a global public offering of new investment units to acquire
four hotels located in Tokyo, Osaka, Sapporo and Oita and the additional floors of an existing hotel, alongwith a preferred equity interest in a special purpose company (the “TMK”) in October 2017 with funds
raised in the global offering. The TMK holds Sheraton Grande Tokyo Bay Hotel (the “Sheraton”), a fullservice and Tokyo Disney Resort official hotel with 1,016 rooms. The Sheraton was acquired through a
joint venture investment with an affiliate of Government of Singapore Investment Corporation (“GIC”).
The acquisition of a flagship hotel such as the Sheraton as well as hotels that are well situated to capture an
increase in demand from foreign visitors is expected to contribute to the growth, improvement in stabilityof income, and overall quality of the portfolio.
INV commenced an Asset Recycling Program in July 2017 to sell assets that INV believes generate low
yield, using those proceeds in an accretive manner to acquire assets that INV believes generate higher yield,
aiming to improve the overall NOI yield of the portfolio. INV disposed six residential properties, five officebuildings and one parking lot between July 2017 and March 2018, and used the proceeds to acquire four
hotels in February 2018. The four newly acquired hotels are highly competitive in terms of location andspecifications and are expected to deliver higher yields than the disposed assets. Through these measures,
INV intends to further strengthen the portfolio, while providing an increase in property operating revenues
and distribution per unit.
INV has signed a Memorandum of Understanding (the “MOU”) with affiliates of Fortress Group withrespect to preferential negotiating rights regarding the acquisition of hotels and residential properties,
which will continue to provide INV with considerable opportunities for external growth. As of March 9,
2018, there are 17 hotels with 3,995 rooms and nine residential properties with 743 units that are coveredby the MOU. Going forward, INV aims to improve revenue and distribution per unit through further
property acquisitions utilizing the remaining proceeds from past property dispositions as well as proceedsfrom property dispositions currently under consideration.
As a continued focus on proactive asset management, INV changed the master lessee and property manager
for four residential properties to reduce property management fees, and improved the economics of two
properties by changing the lease agreement structure. In addition, INV changed the operator of one hotel to
MyStays Hotel Management Co., Ltd. with the goal of improving hotel revenue through enhanced web
marketing and sales to inbound tourists.
As a result of the operations mentioned above, operating revenues reached JPY12,647 million, operating
income of JPY 8,223 million and net income of JPY 7,303 million, with a distribution per unit of JPY 1,564,
an increase of 5.9% year-on-year(1). Annual distribution per unit for 2017, which combines distributions
for the 28th and 29th fiscal periods, came to JPY 2,828, an increase of 6.2% over the previous year.
INV will continue to implement its basic policy to “increase distribution per unit,” and will ensure theimplementation of measures to maximize unitholder value.

Your continued support is highly appreciated.
Naoki Fukuda
Executive Director, Invincible Investment Corporation
President & CEO, Consonant Investment Management Co., Ltd.

(1) Comparison with the fiscal period ended December 2016. In order to eliminate seasonal factors of
hotel variable rents, which is one of the major revenues of INV, in the comparison, the comparison ismade with the same period in the previous year and not with the previous fiscal period (ended June2017).
Distribution per unit for the 29th fiscal period(the fiscal period ended December 2017)(Note)

JPY 1,564

The forward-looking statements, forecasts and goals described in this report are based on available information,
assumptions and estimates as of December 31, 2017. These assumptions and estimates are unavoidably uncertain, andcould be affected by various risks and factors beyond INV’s control. Thus, no guarantee can be made regarding therealization of such future forecasts and targets, and actual results may vary significantly.

INVINCIBLE INVESTMENT CORPORATIONBALANCE SHEETAs of December 31, 2017
As ofDecember 31,
2017

June 30,
2017

December 31,
2017(in thousands of
U.S. dollars)(in thousands of yen)
ASSETS
Current assets:
Cash and bank deposits (Notes 5 and 16) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥Cash and bank deposits in trust (Notes 5 and 16) ∙∙∙∙∙∙
Accounts receivable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Rental receivables ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Prepaid expenses ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Consumption taxes receivable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Other ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Allowance for doubtful accounts ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total current assets ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Non‐current assets:
Property and equipment (Notes 6 and 7):
Buildings, at cost ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Buildings and accompanying facilities, at cost ∙∙∙∙∙∙∙∙∙∙∙∙
Structures, at cost ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Tools, furniture and fixtures, at cost ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Land ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Buildings in trust, at cost ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Buildings and accompanying
facilities in trust, at cost ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Structures in trust, at cost ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Tools, furniture and fixtures in trust, at cost ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Land in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Subtotal ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Less: Accumulated depreciation ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total property and equipment, net ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Intangible assets:
Leasehold rights in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total intangible assets ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Investments and other assets:
Investment securities(Note 17)∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Guarantee deposits ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Long‐term prepaid expenses ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Derivatives assets (Note 18) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Other ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total investments and other assets ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total non‐current assets ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙TOTAL ASSETS ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

3,532,405
6,065,755
8,204
1,420,192
445,116
20,8230(33)
11,492,465¥

14,367,140
6,326,653
8
1,984,728
489,098
613,566
0(89)
23,781,107$

127,142
55,9880
17,563
4,328
5,429
0
0
210,452

85,91438,8622,779
2,395
711,834
118,192,822

‐
‐
‐
3,192
‐
128,867,905

‐
‐
‐
28
‐
1,140,423

26,991,646

28,454,395

251,808

345,467
898,892
142,046,411
289,317,026(13,726,024)
275,591,001

262,372
1,065,760
167,845,958
326,499,585(15,618,522)
310,881,062

2,321
9,431
1,485,362
2,889,376(138,217)
2,751,159

16,946,974
16,946,974

16,828,843
16,828,843

148,927
148,927‐
1,651,565
601,737
92,24345,0622,390,608
294,928,585
306,421,050

17,854,460
1,651,565
587,753
113,592
59,86920,267,241
347,977,146
371,758,254

158,004
14,615
5,201
1,005
529
179,356
3,079,443
3,289,896¥$4

As ofDecember 31,
2017

June 30,
2017

December 31,
2017(in thousands of
U.S. dollars)(in thousands of yen)
LIABILITIESCurrent liabilities:
Accounts payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥
Short‐term loans payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Current portion of long‐term loans payable∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Accounts payable‐other ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Accrued expenses ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Income taxes payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Advances received ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Deposits received ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total current liabilities ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Non‐current liabilities:
Long‐term loans payable (Notes 8 and 16) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Tenant leasehold and security deposits in trust(Note 16) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Tenant leasehold and security deposits (Note 16) ∙Asset retirement obligations(Note 19) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total non‐current liabilities ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙TOTAL LIABILITIES ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙NET ASSETS (Note 9)Unitholders’ equity:
Unitholders’ capital ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Surplus:Capital surplus ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Allowance for temporary differences
adjustment(Note 4) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Other deduction of capital surplus ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total deduction of capital surplus ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Capital surplus (net)∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Voluntary reserve
Retained earnings ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total surplus ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total unitholders’ equity ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Valuation and translation adjustments:
Deferred gains or losses on hedges ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total valuation and translation adjustments ∙∙∙∙∙∙∙TOTAL NET ASSETS ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙TOTAL LIABILITIES AND NET ASSETS ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

170,911‐‐
175,062
164,764
605
540,675
15,932
1,067,951¥

254,936
3,068,000
28,979,000
51,836
270,486605
600,752
29,19033,254,807

$

2,256
27,150256,451
458
2,393
5
5,316
258
294,290

163,990,000

154,936,000

1,371,115

2,240,373

2,215,299

19,604

28,663
31,468166,290,505
167,358,457‐
31,680157,182,980
190,437,787‐
280
1,390,999
1,685,290

128,984,946

168,798,455

1,493,791

6,264,432

6,264,432

55,437‐(46,329)(409)(987,516)(987,516)
5,276,915(1,022,263)(1,068,593)
5,195,838(9,046)(9,456)45,9804,708,487
9,985,403
138,970,350

7,212,580
12,408,419
181,206,874

63,828109,8091,603,600

92,24392,243139,062,593
306,421,050

113,592
113,592
181,320,466
371,758,254

1,005
1,005
1,604,605
3,289,896¥$

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

5

INVINCIBLE INVESTMENT CORPORATIONSTATEMENT OF INCOME AND RETAINED EARNINGSFor the six months ended December 31, 2017
For the six months ended
December 31,
2017

June 30,2017(in thousands of yen)
Operating revenue
Rental revenue－real estate (Note 11) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥Gain on sales of properties (Note 12)∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total operating revenue ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Operating expenses
Property related expenses (Note 11) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Impairment loss (Note 13) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Asset management fees ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Directors’ compensation ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Asset custody fees ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Administrative service fees ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Provision of allowance for doubtful accounts ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Other ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total operating expenses ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Operating income ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Non‐operating income
Interest income ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Interest on tax refund ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Other ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total non‐operating income ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Non‐operating expenses
Interest expenses ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Loan‐related costs ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Investment unit issuance costs ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total non‐operating expenses ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Ordinary income ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Income before income taxes ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Income taxes (Note 14):
Current ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total income taxes ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙Net income ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Retained earnings / losses brought forward ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙Unappropriated retained earnings / losses (Note 10)∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

9,260,917‐
9,260,917¥

11,403,236
1,244,033
12,647,270

December 31,
2017(in thousands of U.S.
dollars)$

100,913
11,009111,9223,518,684‐
250,000
4,800
13,59429,98333
99,3603,916,456
5,344,461

3,962,183
15,677250,000
4,800
15,23037,34789
138,288
4,423,618
8,223,652

35,063
138
2,212
42
134
330
0
1,223
39,147
72,775

70
150
1,077
1,297

54
234
507
796

0
2
4
7

377,451
223,228
42,401
643,080
4,702,678
4,702,678

445,855
304,073
170,817920,746
7,303,702
7,303,072

3,945
2,690
1,511
8,148
64,63464,634605
605
4,702,073
6,414
4,708,487

605
605
7,303,097(90,516)
7,212,580

5
564,629(801)
63,828¥$The accompanying notes are an integral part of these financial statements.

6

INVINCIBLE INVESTMENT CORPORATIONSTATEMENT OF CHANGES IN NET ASSETSFor the six months ended December 31, 2017
Unitholdersʹ equity
SurplusCapital surplus
Deduction of capital surplus

Unitholdersʹ
capitalCapital surplus

Allowance fortemporarydifferences
adjustment¥¥

Other deduction ofcapital surplus

Capital surplus (net)

Deduction ofcapital surplus(in thousands of yen)
Balance as of January 1, 2017 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥120,367,271

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

5,276,915

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

8,393,450

Reversal of allowance for temporary differences

224,225

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

224,225(224,225)‐‐

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

8,617,675

Balance as of June 30, 2017 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥128,984,946‐¥

6,264,432

224,225¥(224,225)‐¥(987,516)‐¥(987,516)‐¥

5,276,915

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

39,813,508

Distributions from surplus ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Distributions in excess of retained earnings from(46,329)

allowance for temporary differences adjustment∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Other distributions in excess of retained earnings ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(34,747)(46,329)(46,329)(34,747)(34,747)

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

39,813,508

Balance as of December 31, 2017 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥168,798,455‐¥

6,264,432(46,329)¥(34,747)(46,329)¥(1,022,263)

Unitholdersʹ equity
SurplusRetained earnings

Total surplus(81,077)¥(1,068,593)(81,077)¥

5,195,838

Valuation and translation adjustments
Total unitholdersʹ
equityDeferred gains orlosses on hedges

Total valuationand translation
adjustments

Total net assets(in thousands of yen)
Balance as of January 1, 2017 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

5,659,831¥

10,936,747¥

131,304,019¥

151,259¥

151,259¥

131,455,278

Changes during the period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Issuance of new investment units ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Reversal of allowance for temporary differences

8,393,450

8,393,450(224,225)(224,225)‐‐

Distributions from surplus ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(5,429,192)(5,429,192)(5,429,192)(5,429,192)

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

4,702,073

4,702,073

4,702,073

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

4,702,073

Changes other than unitholders’equity(net) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total changes during the period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Balance as of June 30, 2017 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(951,344)¥

4,708,487(951,344)¥

9,985,403

7,666,331¥

138,970,350(59,016)(59,016)(59,016)(59,016)(59,016)

7,607,315¥

92,243¥92,243¥139,062,593

Changes during the period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Issuance of new investment units ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Distributions from surplus ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(4,799,004)

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

39,813,508

39,813,508(4,799,004)(4,799,004)(4,799,004)(46,329)(46,329)(46,329)(34,747)(34,747)(34,747)

7,303,097

7,303,097

7,303,097

7,303,097

2,504,093

2,423,015

42,236,524

Changes other than unitholders’equity(net) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total changes during the period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Balance as of December 31, 2017 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

7,212,580¥

12,408,419¥

181,206,874¥

21,34821,34821,34821,34821,34842,257,873

113,592¥

113,592¥

181,320,466

Unitholdersʹ equity
SurplusCapital surplus

Unitholdersʹ capital
Capital surplus

Deduction of capital surplus

Capital surplus (net)7temporary
differences
adjustment

capital surplus

capital surplus(in thousands of U.S dollars)
Balance as of June 30, 2017 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙$

1,141,459$

55,437$‐$(8,739)$(8,739)$46,698Changes during the period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Issuance of new investment units ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

352,331

Distributions from surplus ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Distributions in excess of retained earnings from(409)

allowance for temporary differences adjustment ∙∙∙∙∙∙∙∙∙∙∙∙∙
Other distributions in excess of retained earnings ∙∙∙∙∙∙∙∙∙∙

(307)

(409)

(409)

(307)

(307)

Net income ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Changes other than unitholders’equity(net) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total changes during the period∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Balance as of December 31, 2017 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

352,331$‐

1,493,791

$

(409)

55,437

$

(307)

(409)

$

(9,046)Unitholdersʹ equity
SurplusRetained earnings

Total surplus

(717)
$

(717)

(9,456)$45,980

Valuation and translation adjustments
Total unitholdersʹ
equityTotal valuationand translation
adjustments

Deferred gains orlosses on hedges

Total net assets(in thousands of U.S dollars)
Balance as of June 30, 2017 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙$

41,668$88,366$

1,229,826

$

816

$

816

$

1,230,642

Changes during the period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Issuance of new investment units ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Distributions from surplus ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(42,469)

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

352,331(42,469)(42,469)

(409)

(409)

(409)

(307)

(307)

(307)

64,62964,62964,62964,62922,16021,442

373,774

Other distributions in excess of retained earnings ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙Net income ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

352,331(42,469)

Changes other than unitholders’equity(net) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total changes during the period∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Balance as of December 31, 2017 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙$

63,828$109,809$1,603,600

$

188

188

188

188

188

373,963

1,005

$

1,005

$

1,604,605

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

8

INVINCIBLE INVESTMENT CORPORATIONSTATEMENT OF CASH FLOWSFor the six months ended December 31, 2017
For the six months ended
June 30,
2017

December 31,
2017

December 31,
2017(in thousands of
U.S. dollars)(in thousands of yen)
Cash flows from operating activities:
Income before income taxes ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥
Depreciation and amortization ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Impairment∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Investment unit issuance costs∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

4,702,678
2,281,374‐
42,401

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

223,228

304,0732,690Interest income ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Interest expenses ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Changes in assets and liabilities
Increase (decrease) in allowance for doubtful accounts ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Decrease (increase) in rental receivables ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(70)
377,451(54)
445,855

0
3,945(1,301)(21,759)55(564,535)

0(4,995)Decrease (increase) in consumption taxes receivable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(20,823)(640,464)(5,667)

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

81,748(7,867)(69)

Increase (decrease) in consumption taxes payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(460,521)

47,721

422

Increase (decrease) in accounts payable‐other ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Increase (decrease) in accrued expenses ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Increase (decrease) in advances received ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Increase (decrease) in deposits received ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Decrease in property and equipment, due to sale ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Decrease in property and equipment, due to sale in trust∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Other, net ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Subtotal ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Interest income received ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Interest expenses paid ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Income taxes paid ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

25,473444
18,602(21,461)‐‐(17,577)
7,209,888
70(379,198)(605)(67,922)
98,06560,077(7,567)802,750
3,590,653(1,274)
14,116,980
54(439,861)
(605)

(601)
867
531
(66)
7,103
31,775(11)
124,9290(3,892)(5)¥7,303,702
2,567,215
15,677
170,817$64,63422,718138
1,511

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

6,830,155

13,676,568

121,031

Cash flows from investing activities:
Purchases of property and equipment∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Purchases of property and equipment in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Purchases of leasehold rights in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Purchases of investment securities∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Repayments of tenant leasehold and security deposits∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Repayments of tenant leasehold and security deposits in trust ∙∙∙∙∙∙∙∙∙∙
Proceeds from tenant leasehold and security deposits in trust ∙∙∙∙∙∙∙∙∙∙∙
Payments of tenant leasehold and security deposits ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Other, net ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(2,395)(26,684,589)(8,187,950)‐‐(79,334)
290,004(1,037,651)(2,211)(797)(42,111,738)‐(17,854,460)(28,663)(139,629)
115,173‐(14,807)(7)(372,670)‐(158,004)(253)(1,235)
1,019
‐
(131)

Net cash used in investing activities ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(35,704,126)(60,034,922)(531,282)‐
21,571,000(257,922)(5,406,728)

3,068,000
19,925,000(325,727)(4,776,561)

27,150176,327(2,882)(42,270)‐(46,329)(409)‐
8,351,048(34,747)
39,644,352(307)
350,834

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

24,257,397

57,453,986

508,442

Net increase (decrease) in cash and cash equivalents ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙Cash and cash equivalents at beginning of period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙Cash and cash equivalents at end of period (Note 5) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥(4,616,573)
14,214,734
9,598,161

11,095,633
9,598,161
20,693,794

98,191
84,939183,130

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

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

9

INVINCIBLE INVESTMENT CORPORATIONNOTES TO FINANCIAL STATEMENTS
As of and for the six months ended December 31, 2017

1. Organization
Invincible Investment Corporation (the“Company”), a real estate investment corporation, was incorporated on January 18, 2002, underthe Act on Investment Trusts and Investment Corporations of Japan (the“Investment Trust Act”) with initial capital of ¥200 million.
The Company is externally managed by a registered asset management company, Consonant Investment Management Co., Ltd. (the“Asset Manager”). The Asset Manager is currently owned 100% by Calliope Godo Kaisha (Calliope). The Company was formed toinvest primarily in properties in Japan.
On May 17, 2004, the Company raised ¥3,377,250 thousand through an initial public offering of 9,000 investment units. As a“comprehensive investment REIT focusing on the Tokyo metropolitan area and on residential properties,” the Company was listed on
the Osaka Securities Exchange in May 2004.
On February 7, 2005, the Company completed its second public offering of 10,650 investment units at a price of ¥369,734 per unit inconnection with a public offering in Japan.
On July 31, 2006, the Company completed its third public offering of 25,000 investment units at a price of ¥332,045 per unit in connection
with a public offering in Japan. The Company was listed on the J‐REIT market of the Tokyo Stock Exchange in August 2006 (in order tofocus trading on one securities exchange and reduce administrative tasks and costs accompanying a duplicate listing, the Company
delisted from the Osaka Securities Exchange on October 6, 2007).
Effective on February 1, 2010, the Company executed a five‐to‐one unit split and 215,596 investment units were issued in connection
with the unit split. Effective on the same day, the Company also merged with LCP Investment Corporation (LCP) and allocated 367,200
investment units at a ratio of 4 units (post‐unit split) of the Company per one investment unit of LCP. As a result, investment units issued
and outstanding were 636,695 units as of February 1, 2010.
On July 29, 2011, the Company completed a third party allotment of 711,597 investment units at a price of ¥9,837 per unit.
On December 20, 2013, the Company completed a third party allotment of 224,887 investment units at a price of ¥13,340 per unit.
On July 16, 2014, the Company completed its fourth public offering totaling 1,040,000 new investment units at a price of ¥21,873 per unit.
527,322 of such units were issued in connection with a Domestic Public Offering, and the remaining 512,678 units were issued inconnection with an International Offering pursuant to Rule 144A and Regulation S under the U.S. Securities Act of 1933. On August 13,
2014, the Company issued 55,507 investment units domestically in connection with the exercise of an over‐allotment option. Net
proceeds of approximately ¥23.9 billion were used to repay the Company’s outstanding short term borrowings and in connection withthe acquisition of 18 properties during this fiscal period.
On July 15, 2015, the Company completed its fifth public offering totaling 500,000 new investment units at a price of ¥57,817 per unit.
211,250 of such units were issued in connection with a Domestic Public Offering, and the remaining 288,750 units were issued inconnection with an International Offering pursuant to Rule 144A and Regulation S under the U.S. Securities Act of 1933. On August 12,
2015, the Company issued 25,000 investment units domestically in connection with the exercise of an over‐allotment option. Net
proceeds of approximately ¥29.3 billion were used to repay the Company’s outstanding long term borrowings and in connection withthe acquisition of 14 properties during this fiscal period.
On March 30, 2016, the Company completed its sixth public offering totaling 459,512 new investment units at a price ¥81,217 per unit.
194,144 of such units were issued in connection with a Domestic Public Offering, and the remaining 265,368 units were issued inconnection with an International Offering pursuant Rule 144A and Regulation S under the U.S. Securities Act of 1933. On April 27, 2016,
the Company issued 22,626 investment units domestically in connection with the exercise of an over‐allotment option. Net proceeds ofapproximately ¥37.9 billion were used to repay the Company’s outstanding long term borrowing and in connection with the acquisitionof 6 properties during this fiscal period.
On March 13, 2017, the Company completed its seventh public offering totaling 185,000 new investment units at a price ¥46,897 per unit
in connection with Japanese Primary Offering.

10

On October 12, 2017, the Company completed its eighth public offering totaling 887,959 new investment units at a price ¥44,118 per unit.
515,017 of such units were issued in connection with a Domestic Public Offering, and the remaining 372,942 units were issued inconnection with an International Offering pursuant Rule 144A and Regulation S under the U.S. Securities Act of 1933. On November 1,
2017, the Company issued 44,398 investment units domestically in connection with the exercise of an over‐allotment option. Net
proceeds of approximately ¥39.8 billion were used to repay the Company’s outstanding long term borrowing and in connection with theacquisition of 4 properties and 1 preferred security during this fiscal period.

2. Summary of Significant Accounting Policies(a) Basis of Presentation
The Company maintains its accounts and records in conformity with accounting principles and practices generally accepted in Japan(“Japanese GAAP”), including provisions set forth in the Investment Trust Act, the Companies Act of Japan, the Financial Instruments
and Exchange Act of Japan, and other related regulations, which are different in certain respects from the application and disclosure
requirements of International Financial Reporting Standards or accounting principles generally accepted in the United States of America.
The financial statements are prepared based on the Japanese audited financial statements of the Company, which were prepared inaccordance with Japanese GAAP and filed with the Kanto Local Finance Bureau as required by the Financial Instruments and Exchange
Act of Japan. In preparing the accompanying financial statements, certain information in the notes has been added and certain
reclassifications have been made from the financial statements issued domestically for the convenience of the readers outside Japan.
The financial statements are not intended to present the financial position and the results of operations in accordance with accounting
principles and practices generally accepted in countries and jurisdictions other than Japan.
The Company’s fiscal period is a six‐month period, which ends at the end of June and December of each year.

Amounts less than ¥1 thousand and US$ 1 thousand have been rounded down. As a result, the totals shown in the financial statements
and notes thereto do not necessarily agree with the sum of the individual amounts.
The Company does not prepare consolidated financial statements as it has no subsidiaries.
(b) Cash and Cash Equivalents
Cash and cash equivalents consist of cash, demand deposits, and short‐term investments which are highly liquid and readily convertible
to cash, have a low risk of price fluctuation, and mature within three months from the date of acquisition.
(c) Valuation standard and method for securities
Other securities without fair market value are recorded at cost being determined by the moving average method.
(d) Property and Equipment
Property and equipment are recorded at cost. Depreciation of property and equipment, except for land, is calculated on a straight‐line
basis over the estimated useful lives of the assets as stated below:
For the six months ended
December 31, 2017
Buildings ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

77years

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

8‐24

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

18

Tools, furniture and fixtures∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

4‐8

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

5‐67

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

2‐33

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

3‐55

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

2‐19(e) Intangible Assets
Intangible assets are amortized on a straight‐line basis. Amortization of a term leasehold interest for business use is calculated by thestraight‐line method over the lease term.

11

(f)

Long‐term Prepaid Expenses

Long‐term prepaid expenses are amortized on a straight‐line basis.
(g) Investment Unit Issuance Costs
Investment unit issuance costs are recorded as expenses when incurred.
(h) Allowance for Doubtful Accounts
Allowance for doubtful accounts is provided based on past experience for normal receivables and on a valuation of any receivables fromcompanies and individuals with financial difficulties.
(i)

Impairment of Fixed Assets

An assessment for impairment is carried out on an asset or group of assets, such as fixed assets, intangible assets and investments,
whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the asset or group of assets isdeemed to be impaired, an impairment loss is recognized for the difference between the carrying amount and the recoverable value ofthe asset or group of assets using the discounted cash flow model.
(j)Accounting Treatment of Trust Beneficiary Interests in Real Estate Trusts

For trust beneficiary interests in real estate trusts, which are commonly utilized to obtain ownership in investment properties in Japanand through which the Company holds all of its real estate, all assets and liabilities with respect to assets in trust, as well as all income
generated and expenses incurred with respect to assets in trust, are recorded in the relevant accounts of the balance sheet and statementof income and retained earnings of the Company in proportion to the percentage that such trust beneficiary interest represents. Certain
material accounts with respect to assets and liabilities in trust are presented separately from other accounts in the balance sheets of theCompany.
(k) Income Taxes
Deferred tax assets and liabilities are computed based on the temporary differences between the financial statement and income tax
basis of assets and liabilities using the applicable statutory tax rate.
(l)

Consumption Taxes

Consumption taxes withheld and consumption taxes paid are not included in the statement of income and retained earnings.
Consumption taxes paid are generally offset against the balance of consumption taxes withheld. As such, the excess of payments overamounts withheld are included in current assets and the excess of amounts withheld over payments are included in current liabilities as
the case may be.
(m) Taxes on Property and Equipment
Property and equipment are subject to various taxes, such as property taxes and urban planning taxes on an annual basis. An owner of aproperty is registered in the record maintained by the local government in each jurisdiction, and such taxes are imposed on the ownerregistered in the record as of January 1 of each year based on the assessment made by the local government.
Under the above tax rules, a seller of a property at the time of disposal is liable for these taxes on the property from the date of disposal tothe end of the calendar year in which the property is disposed. The seller, however, is reimbursed by the purchaser for these accrued tax
liabilities and the amount of settlement reflects this adjustment. For the purchaser, a portion of such taxes calculated from the acquisition
date to the end of the calendar year is capitalized as a cost of the property in accordance with Japanese GAAP. In subsequent calendar
years, half of such taxes on property and equipment for each calendar year are charged as operating expenses in each fiscal period.
Tax on property and equipment capitalized as part of the acquisition cost of properties amounted to ¥24,256 (US$214) thousand for thesix months ended December 31, 2017.

3. U.S. Dollar Amounts
The Company maintains its accounting records in Japanese yen. The U.S. dollar amounts included in the accompanying financial
statements and notes thereto represent the arithmetical result of translating Japanese yen into U.S. dollars at the rate of ¥113.00 = US$1,
the effective rate of exchange prevailing at December 31, 2017. The inclusion of such U.S. dollar amounts associated with the fiscal six
months ended December 31, 2017 is solely for the convenience of readers outside Japan. Such translations should not be construed as
representations that the Japanese yen amounts represent, or have been, or could be converted into, U.S. dollars at that or any other rate.

124. Allowance for temporary differences adjustment
For the six months ended June 30, 2017
On the Balance Sheet, there are the increase and decrease of allowance for temporary differences adjustment.
1. Reason, related assets and amounts(in thousands of yen)
Allowance
Related assets,etc.

set aside

ReversalReason for
occurrence

InitialamountBeginningbalanceEndingbalance‐¥ (224,225)¥ (224,225)‐¥ 224,225‐¥ (224,225)¥ (224,225)‐¥ 224,225‐

duringperiodduringperiodReason for reversal

Deferred
gains or losses
on hedges
Total

Changes in the fair value ofderivatives

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

For the six months ended December 31, 2017
On the Balance Sheet, there are the increase and decrease of allowance for temporary differences adjustment.
1. Reason, related assets and amounts(in thousands of yen)
Allowance
Related assets,

Reason for

InitialBeginning

set asideetc.

occurrence

amountbalanceduringperiodLeaseholdrights in trust

ReversalEndingduringperiodbalance

Reason for reversal

Amortization ofleasehold rights in
trust

Total

¥ (46,329)‐¥ (46,329)‐¥ (46,329)¥ (46,329)‐¥ (46,329)‐¥ (46,329)‐(in thousands of U.S dollars)
Allowance
Related assets,
etc.

Leaseholdrights in trust

Reason for
occurrence

InitialamountBeginningbalanceset aside
duringperiodReversalEndingbalanceduringperiodReason for reversal

Amortization ofleasehold rights intrust$ (409)‐$ (409)‐$ (409)‐13

Total‐$ (409)‐$ (409)$ (409)2. Method of reversal(1) Leasehold rights in trust
Upon the sale of the relevant properties, the corresponding amount is scheduled to be reversed.

5. Cash and Cash Equivalents
Cash and cash equivalents shown in the statements of cash flows consist of the following balance sheet items.
As ofDecember 31,
2017

June 30,
2017

December 31,
2017(in thousands of
U.S. dollars)(in thousands of yen)
Cash and bank deposits ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥Cash and bank deposits in trust ∙∙∙∙∙∙∙∙∙∙∙∙

3,532,405
6,065,755¥

14,367,140
6,326,653$

127,142
55,988Cash and cash equivalents ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥9,598,161¥

20,693,794$

183,130

6. Property and Equipment
The following tables show the summary of movement in property and equipment for the six months ended December 31, 2017.
At costBeginningbalance

Increase

Endingbalance

Decrease

Accumulated
depreciation

Net property andequipment

Depreciation forthe period(in thousands of yen)
Buildings ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

85,914

Buildings and accompanying facilities ∙∙∙∙∙

38,862

Structures ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Tools, furniture and fixtures ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

¥

‐

¥

85,914

¥

‐

¥

‐

‐

¥

‐

451

¥

‐

‐

38,862

645

‐

2,779

‐

2,779

‐

‐

53

‐

2,395

797

‐

3,192

218

150

2,973

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

711,834‐

711,834

‐

‐

‐

‐

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

118,192,822

12,140,912

1,465,830

128,867,905

9,412,123

1,505,614

119,455,782

26,991,646

1,830,880

368,131

28,454,395

5,758,755

864,616

22,695,639

345,467

13,14896,243

262,372

112,316

9,984

150,055

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

898,892

182,139

15,2701,065,760

335,10967,567

730,651

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

142,046,411

27,980,136

2,180,589

167,845,958‐‐

167,845,958

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

17,079,771

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

306,396,797‐¥

42,148,014‐¥

4,965,455

17,079,771¥

343,579,356

250,928¥

15,869,450

118,131¥2,567,215

16,828,843¥

327,709,905

At costBeginningbalance

Increase

Endingbalance

Decrease

Accumulated
depreciation

Net property andequipment

Depreciation forthe period(in thousands of U.S dollars)
Buildings ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙$

760

Buildings and accompanying facilities ∙∙∙∙∙

343

‐

343

‐

‐

5

‐

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

24

‐

24

‐

‐

0

‐

Tools, furniture and fixtures ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

21

7

‐

28

1

1

26

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

6,299

‐

6,299

‐

‐

‐

‐

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

1,045,954

107,441

12,9711,140,423

83,293

13,324

1,057,130

238,864

16,202

3,257

251,808

50,962

7,651

200,846

3,057

116

851

2,321

993

88

1,327

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

7,954

1,611

135

9,431

2,965

597

6,465

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

1,257,047

247,611

19,297

1,485,362‐‐

1,485,362

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

151,148

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

2,711,476

$

‐

$

‐
$

372,991

760

$

‐
$

43,942‐$

151,148$3,040,525

‐

$

2,220
$

140,437

3

$

1,045
$

22,718‐148,927$2,900,087

14

Increases in the net book values are mainly due to the acquisition of 5 properties(￥41,448,010thousand) as shown below and capitalized expenditures.
Acquisition cost(in thousands of yen)

Property No.

Property name

D43

Hotel MyStays Gotanda Station (Additional Acquisition Portion)

Acquisition cost(in thousands of U.S. dollars)

1,849,010

16,362

D50

Hotel MyStaysShin Osaka Conference Center

13,068,000

115,646

D51

Hotel MyStays Premier Omori

9,781,000

86,557

D52

Beppu Kamenoi Hotel

8,870,000

78,495

D53

Hotel MyStays Sapporo Station

7,880,000

69,734

41,448,010

366,796

Total

7. Fair Value of Investment and Rental Properties
The following tables show the net book value and the fair value of the investment and rental properties in the aggregate for the six
months ended June 30, 2017 and December 31, 2017.
Residential
As of / For the six months ended
December 31,
December 31,
2017
2017
(in thousands of(in thousands of yen)
U.S. dollars)

June 30,
2017

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

67,835,839

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

25,277,356
93,113,195

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

104,752,000¥

93,113,195$(3,163,531)
89,949,664¥

102,353,000

824,010(27,995)
796,014$905,778

OfficeAs of / For the six months ended
December 31,
December 31,
2017
2017
(in thousands of(in thousands of yen)
U.S. dollars)

June 30,
2017

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

8,440,981

Net increase (decrease) during period ∙∙∙∙∙∙∙∙∙∙
Balance at the end of period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(16,247)
8,424,734

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

7,636,000¥

8,424,734$(1,949,803)
6,474,931¥

6,130,000

74,555(17,254)
57,300$54,247Retail facilities
As of / For the six months ended
December 31,
December 31,
2017
2017
(in thousands of(in thousands of yen)
U.S. dollars)

June 30,
2017

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

5,049,226

Net increase (decrease) during period ∙∙∙∙∙∙∙∙∙∙
Balance at the end of period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(47,956)
5,001,269

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

5,980,000¥

5,001,269$(43,977)
4,957,292¥

6,100,000

44,259(389)
43,869$53,982

Parking lots
As of / For the six months ended
December 31,
December 31,
2017
2017
(in thousands of(in thousands of yen)
U.S. dollars)

June 30,
2017

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

100,819

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

100,818(100,818)

$

892
(892)

15

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

100,818

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

113,000

‐
¥

‐

‐

$

‐

Hotel
As of / For the six months ended
December 31,
December 31,
2017
2017
(in thousands of(in thousands of yen)
U.S. dollars)

June 30,
2017

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

178,511,427

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

7,386,530
185,897,957

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

245,021,000¥

185,897,957$

1,645,114

40,430,059
226,328,017¥

357,788
2,002,902

285,424,000$

2,525,876

Total
As of / For the six months ended
December 31,
December 31,
2017
2017
(in thousands of(in thousands of yen)
U.S. dollars)

June 30,
2017

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

259,938,294

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

32,599,681
292,537,976

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

363,502,000¥

292,537,976$

2,588,831

35,171,929
327,709,905¥

311,256
2,900,087

400,007,000$

3,539,884

Notes:
1.Fair value has been determined based on the appraisals or research provided by independent real estate appraisers.
2.For rental revenues and expenses for the six months ended June 30, 2017 and December 31, 2017, please refer to “Note 11: Rent Revenues－Real Estate and Expenses Related toProperty Rental Business“

8. Loans Payable
The following table shows the details of loans payable for the six months ended December 31, 2017.
For the six months ended December 31, 2017Classific
ation

Name oflender

Beginningbalance

Increase

Endingbalance

Decrease

Beginningbalance

Increase(in thousands of yen)

Short‐term loans
payableLong‐term loans
payableEndingbalance

Decrease(in thousands of U.S. dollars)

Averageinterest
rate (%)(1)

Maturitydate

MizuhoBank, Ltd.

‐

1,023,000‐

1,023,000

‐

9,053

‐

9,053

0.244

13‐Oct‐18

Sumitomo
MitsuiTrust Bank,
Limited

‐1,022,000‐

1,022,000

‐

9,044

‐

9,044

0.244

13‐Oct‐18

Sumitomo
Mitsui
Banking
Corporation‐

1,023,000‐

1,023,000

‐

9,053

‐

9,053

0.244

13‐Oct‐18

Total
Short‐termloanspayable‐3,068,000‐

3,068,000‐

27,150‐27,150MizuhoBank, Ltd.

5,992,000‐‐

5,992,000

53,026‐‐53,0260.375

16‐Jul‐18

The Bank ofTokyo‐Mits
ubishi UFJ,Ltd.

5,992,000‐‐

5,992,000

53,026‐‐53,0260.375

16‐Jul‐18

Sumitomo
Mitsui
Banking
Corporation

5,992,000‐‐

5,992,000

53,026‐‐53,0260.375

16‐Jul‐18

Use ofproceeds

Remarks(2)

Unsecured andunguaranteed(2)

Unsecured andunguaranteed

16

Classification

Name oflender

Beginningbalance

Increase

Endingbalance

Decrease

Beginningbalance(in thousands of yen)

Long‐term loans
payableIncrease

Endingbalance

Decrease(in thousands of U.S. dollars)

Averageinterest
rate (%)(1)

Maturitydate

ShinseiBank,
Limited.

3,330,000‐‐

3,330,000

29,469‐‐29,4690.375

16‐Jul‐18

Citibank,
N.A., Japan
Branches.

3,000,000‐‐

3,000,000

26,548‐‐26,5480.375

16‐Jul‐18

Sumitomo
MitsuiTrust Bank,
Limited

2,670,000‐‐

2,670,000

23,628‐‐23,6280.375

16‐Jul‐18

ResonaBank,
Limited.

1,335,000‐‐

1,335,000

11,814‐‐

11, 8140.375

16‐Jul‐18

Mitsubishi
UFJ TrustandBanking
Corporation

668,000‐‐

668,000

5,911

‐

‐

5,911

0.375

16‐Jul‐18

MizuhoBank, Ltd.

5,992,000‐‐

5,992,000

53,026‐‐53,0260.480

16‐Jul‐19

The Bank ofTokyo‐Mits
ubishi UFJ,Ltd.

5,992,000‐‐

5,992,000

53,026‐‐53,0260.480

16‐Jul‐19

Sumitomo
Mitsui
Banking
Corporation

5,992,000‐‐

5,992,000

53,026‐‐53,0260.480

16‐Jul‐19

ShinseiBank,
Limited.

3,330,000‐‐

3,330,000

29,469‐‐29,4690.480

16‐Jul‐19

Citibank,
N.A., Japan
Branches.

3,000,000‐‐

3,000,000

26,548‐‐26,5480.480

16‐Jul‐19

Sumitomo
MitsuiTrust Bank,
Limited

2,670,000‐‐

2,670,000

23,628‐‐23,6280.480

16‐Jul‐19

ResonaBank,
Limited.

1,335,000‐‐

1,335,000

11,814‐‐

11,8140.480

16‐Jul‐19

Mitsubishi
UFJ TrustandBanking
Corporation

668,000‐‐

668,000

5,911

‐

‐

5,911

0.480

16‐Jul‐19

MizuhoBank, Ltd.

5,992,000‐‐

5,992,000

53,026‐‐53,0260.590

16‐Jul‐20

The Bank ofTokyo‐Mits
ubishi UFJ,Ltd.

5,992,000‐‐

5,992,000

53,026‐‐53,0260.590

16‐Jul‐20

Sumitomo
Mitsui
Banking
Corporation

5,992,000‐‐

5,992,000

53,026‐‐53,0260.590

16‐Jul‐20

ShinseiBank,
Limited.

3,330,000‐‐

3,330,000

29,469‐‐29,4690.590

16‐Jul‐20

Citibank,
N.A., Japan
Branches.

3,000,000‐‐

3,000,000

26,548‐‐26,5480.590

16‐Jul‐20

Sumitomo
MitsuiTrust Bank,
Limited

2,670,000‐‐

2,670,000

23,628‐‐23,6280.590

16‐Jul‐20

ResonaBank,
Limited.

1,335,000‐‐

1,335,000

11,814‐‐

11,8140.590

16‐Jul‐20

Use ofproceeds

Remarks(2)

Unsecured andunguaranteed

17

Classification

Name oflender

Beginningbalance

Increase

Endingbalance

Decrease

Beginningbalance(in thousands of yen)

Long‐term loans
payableIncrease

Endingbalance

Decrease(in thousands of U.S. dollars)

Averageinterest
rate (%)(1)

Maturity
date

Mitsubishi
UFJ TrustandBanking
Corporation

668,000‐‐

668,000

5,911

‐

‐

5,911

0.590

16‐Jul‐20

MizuhoBank, Ltd.

3,682,000‐‐

3,682,000

32,584‐‐32,5840.480

28‐Aug‐19

Sumitomo
MitsuiTrust Bank,
Limited

3,400,000‐‐

3,400,000

30,088‐‐30,0880.343

22‐Jan‐19

Mitsubishi
UFJ TrustandBanking
Corporation

850,000‐‐

850,000

7,522

‐

‐

7,522

0.343

22‐Jan‐19

Sumitomo
MitsuiTrust Bank,
Limited

3,400,000‐‐

3,400,000

30,088‐‐30,0880.600

22‐Jan‐21

Mitsubishi
UFJ TrustandBanking
Corporation

850,000‐‐

850,000

7,522

‐

‐

7,522

0.600

22‐Jan‐21

MizuhoBank, Ltd.

465,000‐‐

465,000

4,115

‐

‐

4,115

0.436

30‐Mar‐19

The Bank ofTokyo‐Mits
ubishi UFJ,Ltd.

1,125,000‐‐

1,125,000

9,955

‐

‐

9,955

0.436

30‐Mar‐19

Sumitomo
MitsuiTrust Bank,
Limited2,181,000‐‐

2,181,000

19,300‐‐19,3000.436

30‐Mar‐19

ShinseiBank,
Limited.

570,000‐‐

570,000

5,044

‐

‐

5,044

0.436

30‐Mar‐19

ResonaBank,
Limited.

570,000‐‐

570,000

5,044

‐

‐

5,044

0.436

30‐Mar‐19

Mitsubishi
UFJ TrustandBanking
Corporation

650,000‐‐

650,000

5,752

‐

‐

5,752

0.436

30‐Mar‐19

Japan Post
Bank Co.,Ltd.

2,000,000‐‐

2,000,000

17,699‐‐17,6990.436

30‐Mar‐19

Developme
nt Bank ofJapan Inc.

1,000,000‐‐

1,000,000

8,849

‐

‐

8,849

0.436

30‐Mar‐19

The Bank ofFukuoka,Ltd.

333,000‐‐

333,000

2,946

‐

‐

2,946

0.436

30‐Mar‐19

The
Shizuoka
Bank, Ltd.

1,270,000‐‐

1,270,000

11,238‐‐

11,2380.436

30‐Mar‐19

The Daishi
Bank, Ltd.

1,000,000‐‐

1,000,000

8,849

‐

‐

8,849

0.436

30‐Mar‐19

The
NomuraTrust andBankingCo., Ltd.

270,000‐‐

270,000

2,389

‐

‐

2,389

0.436

30‐Mar‐19

MizuhoBank, Ltd.

965,000‐‐

965,000

8,539

‐

‐

8,539

0.536

30‐Mar‐20

The Bank ofTokyo‐Mits
ubishi UFJ,Ltd.

1,125,000‐‐

1,125,000

9,955

‐

‐

9,955

0.536

30‐Mar‐20

Use ofproceeds

Remarks(2)

Unsecured andunguaranteed

18

Classification

Name oflender

Beginningbalance

Increase

Endingbalance

Decrease

Beginningbalance(in thousands of yen)

Long‐term loans
payableIncrease

Endingbalance

Decrease(in thousands of U.S. dollars)

Averageinterest
rate (%)(1)

Maturity
date

Sumitomo
MitsuiTrust Bank,
Limited

2,180,000‐‐

2,180,000

19,292‐‐

19,2920.536

30‐Mar‐20

ShinseiBank,
Limited.

570,000‐‐

570,000

5,044

‐

‐

5,044

0.536

30‐Mar‐20

ResonaBank,
Limited.

570,000‐‐

570,000

5,044

‐

‐

5,044

0.536

30‐Mar‐20

Mitsubishi
UFJ TrustandBanking
Corporation

650,000‐‐

650,000

5,752

‐

‐

5,752

0.536

30‐Mar‐20

Japan Post
Bank Co.,Ltd.

2,000,000‐‐

2,000,000

17,699‐‐17,6990.536

30‐Mar‐20

The Bank ofFukuoka,Ltd.

333,000‐‐

333,000

2,946

‐

‐

2,946

0.536

30‐Mar‐20

The
Shizuoka
Bank, Ltd.

270,000‐‐

270,000

2,389

‐

‐

2,389

0.536

30‐Mar‐20

The
KagawaBank, Ltd.

500,000‐‐

500,000

4,424

‐

‐

4,424

0.536

30‐Mar‐20

The
Hyakugo
Bank, Ltd.

1,000,000‐‐

1,000,000

8,849

‐

‐

8,849

0.536

30‐Mar‐20

The
NomuraTrust andBankingCo., Ltd.

270,000‐‐

270,000

2,389

‐

‐

2,389

0.536

30‐Mar‐20

MizuhoBank, Ltd.

1,965,000‐‐

1,965,000

17,389‐‐17,3890.636

30‐Mar‐21

The Bank ofTokyo‐Mits
ubishi UFJ,Ltd.

1,125,000‐‐

1,125,000

9,955

‐

‐

9,955

0.636

30‐Mar‐21

Sumitomo
MitsuiTrust Bank,
Limited

2,180,000‐‐

2,180,000

19,292‐‐

19,2920.636

30‐Mar‐21

ShinseiBank,
Limited.

570,000‐‐

570,000

5,044

‐

‐

5,044

0.636

30‐Mar‐21

ResonaBank,
Limited.

570,000‐‐

570,000

5,044

‐

‐

5,044

0.636

30‐Mar‐21

Mitsubishi
UFJ TrustandBanking
Corporation

650,000‐‐

650,000

5,752

‐

‐

5,752

0.636

30‐Mar‐21

The Bank ofFukuoka,Ltd.

1,333,000‐‐

1,333,000

11,796‐‐

11,7960.636

30‐Mar‐21

The
Shizuoka
Bank, Ltd.

270,000‐‐

270,000

2,389

‐

‐

2,389

0.636

30‐Mar‐21

The
KagawaBank, Ltd.

500,000‐‐

500,000

4,424

‐

‐

4,424

0.636

30‐Mar‐21

The
Hiroshima
Bank, Ltd.

1,000,000‐‐

1,000,000

8,849

‐

‐

8,849

0.636

30‐Mar‐21

Use ofproceeds

Remarks(2)

Unsecured andunguaranteed

19Classification

Name oflender

Beginningbalance

Increase

Endingbalance

Decrease

Beginningbalance(in thousands of yen)

Long‐term loans
payableIncrease

Endingbalance

Decrease(in thousands of U.S. dollars)

Averageinterest
rate (%)(1)

Maturity
date

The
NomuraTrust andBankingCo., Ltd.

270,000‐‐

270,000

2,389

‐

‐

2,389

0.636

30‐Mar‐21

Citibank,
N.A., Japan
Branches.

1,000,000‐‐

1,000,000

8,849

‐

‐

8,849

0.436

15‐Jun‐19

Citibank,
N.A., Japan
Branches.

1,000,000‐‐

1,000,000

8,849

‐

‐

8,849

0.536

15‐Jun‐20

Citibank,
N.A., Japan
Branches.

1,000,000‐‐

1,000,000

8,849

‐

‐

8,849

0.636

15‐Jun‐21

Developme
nt Bank ofJapan Inc.

1,000,000‐‐

1,000,000

8,849

‐

‐

8,849

0.436

30‐Jun‐19

AEON
Bank, Ltd.

3,000,000‐‐

3,000,000

26,548‐‐26,5480.636

30‐Jun‐21

The Tokyo
Star Bank,
Limited

700,000‐‐

700,000

6,194

‐

‐

6,194

0.436

20‐Jul‐19

The Tokyo
Star Bank,
Limited

1,600,000‐‐

1,600,000

14,159‐‐14,1590.536

20‐Jul‐20

The Tokyo
Star Bank,
Limited

1,700,000‐‐

1,700,000

15,044‐‐

15,0440.636

20‐Jul‐21

MizuhoBank, Ltd.

634,000‐‐

634,000

5,610

‐

‐

5,610

0.436

14‐Mar‐20

Developme
nt Bank ofJapan Inc.

1,000,000‐‐

1,000,000

8,849

‐

‐

8,849

0.436

14‐Mar‐20

ResonaBank,
Limited.

333,000‐‐

333,000

2,946

‐

‐

2,946

0.436

14‐Mar‐20

The Bank ofFukuoka,Ltd.

333,000‐‐

333,000

2,946

‐

‐

2,946

0.436

14‐Mar‐20

The
NomuraTrust andBankingCo., Ltd.

333,000‐‐

333,000

2,946

‐

‐

2,946

0.436

14‐Mar‐20

The Towa
Bank, Ltd.

252,000‐‐

252,000

2,230

‐

‐

2,230

0.436

14‐Mar‐20

The
Shizuoka
Bank, Ltd.

200,000‐‐

200,000

1,769

‐

‐

1,769

0.436

14‐Mar‐20

The
Gunma
Bank, Ltd.

165,000‐‐

165,000

1,460

‐

‐

1,460

0.436

14‐Mar‐20

MizuhoBank, Ltd.

1,633,000‐‐

1,633,000

14,451‐‐

14,4510.536

14‐Mar‐21

ResonaBank,
Limited.

333,000‐‐

333,000

2,946

‐

‐

2,946

0.536

14‐Mar‐21

The Bank ofFukuoka,Ltd.

333,000‐‐

333,000

2,946

‐

‐

2,946

0.536

14‐Mar‐21

Use ofproceeds

Remarks(2)

Unsecured andunguaranteed

20

Classification

Name oflender

Beginningbalance

Increase

Endingbalance

Decrease

Beginningbalance

Increase(in thousands of yen)

Long‐term loans
payableEndingbalance

Decrease(in thousands of U.S. dollars)

Averageinterest
rate (%)(1)

Maturity
date

The
NomuraTrust andBankingCo., Ltd.

333,000‐‐

333,000

2,946

‐

‐

2,946

0.536

14‐Mar‐21

The Towa
Bank, Ltd.

253,000‐‐

253,000

2,238

‐

‐

2,238

0.536

14‐Mar‐21

The
Shizuoka
Bank, Ltd.

200,000‐‐

200,000

1,769

‐

‐

1,769

0.536

14‐Mar‐21

The
Gunma
Bank, Ltd.

165,000‐‐

165,000

1,460

‐

‐

1,460

0.536

14‐Mar‐21

MizuhoBank, Ltd.

1,733,000‐‐

1,733,000

15,336‐‐

15,3360.636

14‐Mar‐22

ResonaBank,
Limited.

333,000‐‐

333,000

2,946

‐

‐

2,946

0.636

14‐Mar‐22

The Bank ofFukuoka,Ltd.

333,000‐‐

333,000

2,946

‐

‐

2,946

0.636

14‐Mar‐22

The
NomuraTrust andBankingCo., Ltd.

333,000‐‐

333,000

2,946

‐

‐

2,946

0.636

14‐Mar‐22

AEON
Bank, Ltd.

900,000‐‐

900,000

7,964

‐

‐

7,964

0.636

14‐Mar‐22

The Towa
Bank, Ltd.

253,000‐‐

253,000

2,238

‐

‐

2,238

0.636

14‐Mar‐22

The
Shizuoka
Bank, Ltd.

200,000‐‐

200,000

1,769

‐

‐

1,769

0.636

14‐Mar‐22The
Dai‐ichi Life
Insurancecompany,
Limited

500,000‐‐

500,000

4,424

‐

‐

4,424

0.636

14‐Mar‐22

The
Gunma
Bank, Ltd.

165,000‐‐

165,000

1,460

‐

‐

1,460

0.636

14‐Mar‐22

Sumitomo
Mitsui
Banking
Corporation

3,000,000‐‐

3,000,000

26,548‐‐26,5480.486

14‐Sep‐20

MizuhoBank, Ltd.

7,321,000‐

3,000,000

4,321,000

64,787‐

26,54838,2380.586

29‐Nov‐21

The
Dai‐ichi Life
Insurancecompany,
Limited‐3,000,000‐

3,000,000‐

26,548‐26,5480.586

29‐Nov‐21

ShinseiBank,
Limited.

‐

3,141

0.344

Citibank,
N.A., Japan
Branches

‐

3,141

0.344

ResonaBank,
Limited.

‐

2,955

0.344

The Bank ofFukuoka,
Ltd.

‐

2,654

0.344

355,000

355,000

334,000

300,000

‐

‐

‐

‐

355,000

355,000

334,000

300,000

‐

‐

‐

‐

3,141

3,141

2,955

2,654

‐

‐

‐

‐

Use ofproceeds

Remarks(2)

Unsecured andunguaranteed

13‐Oct‐20

13‐Oct‐20

13‐Oct‐20

13‐Oct‐20

21

Classification

Name oflender

Beginningbalance

Increase

Endingbalance

Decrease

Beginningbalance

Increase(in thousands of yen)

Long‐term loans
payableAEON
Bank, Ltd.

‐

The
NomuraTrust andBankingCo., Ltd.

‐The
Hiroshima
Bank, Ltd.

‐

ShinseiBank,
Limited.

‐

Citibank,
N.A., Japan
Branches‐

ResonaBank,
Limited.

‐The Bank ofFukuoka,
Ltd.

‐

AEON
Bank, Ltd.

‐

The
NomuraTrust andBankingCo., Ltd.

‐The
Hiroshima
Bank, Ltd.

‐

MizuhoBank, Ltd.

‐

Sumitomo
MitsuiTrust Bank,
Limited‐Sumitomo
Mitsui
Banking
Corporation‐

ShinseiBank,
Limited.

‐

Citibank,
N.A., Japan
Branches‐

ResonaBank,
Limited.

‐Developme
nt Bank ofJapan Inc.

‐

The Bank ofFukuoka,
Ltd.

‐

AEON
Bank, Ltd.

‐

The
NomuraTrust andBankingCo., Ltd.

‐

190,000

167,000

167,000

355,000

355,000

333,000

300,000

190,000

167,000

167,000

500,000

500,000

500,000

355,000

355,000

333,000

1,500,000

300,000

190,000

166,000

Endingbalance

Decrease(in thousands of U.S. dollars)

‐

‐

‐

‐

‐

‐

‐

‐

‐

‐

‐

‐

‐

‐

‐

‐

‐

‐

‐

‐

190,000

167,000

167,000

355,000

355,000

333,000

300,000

190,000

167,000

167,000

500,000

500,000

500,000

355,000

355,000

333,000

1,500,000

300,000

190,000

166,000

‐

‐

‐

‐

‐

‐

‐

‐

‐

‐

‐

‐

‐

‐

‐

‐

‐

‐

‐

‐

1,681

1,477

1,477

3,141

3,141

2,946

2,654

1,681

1,477

1,477

4,424

4,424

4,424

3,141

3,141

2,946

13,274

2,654

1,681

1,469

‐

‐

‐

‐

‐

‐

‐

‐

‐

‐

‐

‐

‐

‐

‐

‐

‐

‐

‐

‐

Averageinterest
rate (%)
(1)

1,681

0.344

1,477

0.344

1,477

0.344

3,141

0.444

3,141

0.444

2,946

0.444

2,654

0.444

1,681

0.444

1,477

0.444

1,477

0.444

4,424

0.644

4,424

0.644

4,424

0.644

3,141

0.644

3,141

0.644

2,946

0.644

13,274

0.644

2,654

0.644

1,681

0.644

1,469

0.644

Maturitydate

Use ofproceeds

Remarks(2)

Unsecured andunguaranteed

13‐Oct‐20

13‐Oct‐20

13‐Oct‐20

13‐Oct‐21

13‐Oct‐21

13‐Oct‐21

13‐Oct‐21

13‐Oct‐21

13‐Oct‐21

13‐Oct‐21

13‐Oct‐22

13‐Oct‐22

13‐Oct‐22

13‐Oct‐22

13‐Oct‐22

13‐Oct‐22

13‐Oct‐22

13‐Oct‐22

13‐Oct‐22

13‐Oct‐22

22Classification

Name oflender

Beginningbalance

Increase

Endingbalance

Decrease

Beginningbalance

Increase(in thousands of yen)

Long‐term loans
payableThe
Hiroshima
Bank, Ltd.

‐The
Dai‐ichi Life
Insurancecompany,
Limited‐MizuhoBank, Ltd.

‐

Sumitomo
MitsuiTrust Bank,
Limited‐Sumitomo
Mitsui
Banking
Corporation‐(in thousands of U.S. dollars)‐

166,000‐

500,000‐

1,250,000‐

1,065,000‐

1,250,000‐

166,000‐

500,000

Sumitomo
MitsuiTrust Bank,
Limited‐Sumitomo
Mitsui
Banking
Corporation‐

MizuhoBank, Ltd.

‐

Sumitomo
Mitsui
Banking
Corporation

‐

Total
Long‐term
loans
payable163,990,000

22,925,000

3,000,000

183,915,000

1,451,238

202,876

163,990,000

25,993,000

3,000,000

186,983,000

1,451,238

230,026

Total loans payable‐

1,060,000‐

1,250,000‐

1,850,000‐

1,850,000‐

1,250,000‐

1,850,000‐

1,850,000

4,424

0.644

11,061

0.744

9,424

0.744

11,061

0.744

Use ofproceeds

Remarks(2)

Unsecured andunguara
nteed

‐

‐

13‐Oct‐22

13‐Oct‐22

13‐Oct‐23

13‐Oct‐23

13‐Oct‐23

11‐Oct‐24

0.844

11,0610.844

16,371

0.294

16,3710.294

26,548

1,627,566‐‐

26,5481,654,716‐‐‐

16,371

0.644

9,380

‐

16,371

1,469

Maturity
date

0.844

‐

11,061

Averageinterest
rate (%)(1)

11,061

‐

9,380

‐

1,250,000‐

11,061‐

1,060,000‐

11,061

‐

‐

‐

9,424

‐

1,250,000‐

11,061‐

1,065,000

‐

4,424

‐

1,250,000

‐

1,469

MizuhoBank, Ltd.

1,250,000

Endingbalance

Decrease

11‐Oct‐24

11‐Oct‐24

13‐Oct‐19

13‐Oct‐19

Notes:(1)

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

(2)

The funds are mainly used to acquire properties in trust and for repayment of loans payable.

(3)

Long‐term loans payable include current portion.

(4)

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

As of
December 31,
2017

December 31,
2017(in thousands of
U.S. dollars)(in thousands of yen)
1‐2 years∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

54,745,000$

484,469

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

50,130,000

443,628

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

32,821,000

290,451

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

10,115,000

89,513

9. Net Assets
The Company issues only non‐par value units in accordance with the Investment Trust Act, and the entire amount of the issue price of
new investment units is allocated to unitholders’ capital within net assets. The Company is required to maintain net assets of at least¥50,000 thousand (US$ 442 thousand) as required by Article 67‐4 of the Investment Trust Act.
The number of investment units authorized was 10,000,000 units as of June 30, 2017 and December 31, 2017.

23

The number of investment units issued and outstanding were 3,860,824 as of June 30, 2017 and 4,793,181 December 31, 2017 respectively.

10. Appropriation of Retained Earnings
In accordance with the distribution policy in Article 17, Paragraph 1, of the Company’s articles of incorporation which stipulates making
distributions in excess of 90% of distributable profit as defined in Article 67‐15, Paragraph 1 of the Special Taxation Measures Act of Japanfor the fiscal period.
The following table shows the appropriation of retained earnings for the six months ended June 30, 2017 and December 31, 2017.
For the six months ended
December 31,
2017

June 30,
2017

December 31,
2017(in thousands of
U.S. dollars)(in thousands of yen)
Unappropriated retained earnings ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥4,708,487¥

7,212,580$

63,828Distributions in excess of retained earnings ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Allowance for temporary differences adjustment ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(46,329)‐‐

Deduction from unitholders capital surplus ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(34,747)(172,554)(1,527)

Distributions ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(4,880,081)(7,496,535)(66,341)

Of which, distributions of earnings∙∙ ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(4,799,004)(7,323,980)(64,813)

Of which, allowance for adjustment of temporary differences ∙∙∙∙∙∙∙∙∙∙∙∙∙∙(46,329)‐‐

Of which, deduction from unitholders capital surplus ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(34,747)(172,554)(1,527)Retained earnings carried forward ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥(90,516)¥(111,399)

$

(985)

The distributions in respect of the six months ended December 31, 2017 of ¥1,564 (US$13.8) per investment unit, amounting to a total
distributions of ¥7,496,535 thousand (US$66,341 thousand), including distributions in excess of retained earnings, were proposed andapproved at the Board of Directors meeting on February 20, 2018. These financial statements do not reflect these distributions payable.
Cash distributions per investment unit were ¥1,264 and ¥1,564 (US$13.8) for the six months ended June 30, 2017, and December 31, 2017,
respectively.
Notes related to provision and reversal of allowance for temporary differences adjustment is below.
For the six months ended June 30, 2017
In this table, the Company recorded allowance for temporary differences adjustment below.
(a) Reasons, related assets and allowance(in thousands of yen)
Related assets, etc.

Leasehold rights in trust

Allowance for temporary difference adjustments

Reason for occurrenceOccurrence of amortization of leasehold rights in trust

46,329(b) Method of reversal

Related assets, etc.

Leasehold rights in trust

Method of reversal

Upon sale, the corresponding amount is scheduled to be reversed.

For the six months ended December 31, 2017
Not Applicable.

11. Rent Revenues － Real Estate and Expenses Related to Property Rental Business

24

Rent revenue – real estate and expenses related to property rental business for the six months ended June 30, 2017 and December 31,
2017 consist of the following:
For the six months ended
December 31,
2017

June 30,
2017

December 31,
2017(in thousands of
U.S. dollars)(in thousands of yen)
Rental revenue – real estate:
Rental revenue and common area charges (*) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥Other ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total rental revenue – real estate ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥8,927,781
333,135
9,260,917¥

Expenses related to property rental business:
Facility management fees ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥Property related taxes ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Insurance expense ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Depreciation ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Other ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total expenses related to property rental business ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥Operating income from property leasing activities∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥646,226
390,797
10,1952,281,374
190,0903,518,684
5,742,232¥(*)Variable rental revenue of hotels ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥2,932,843

11,060,128
343,107
11,403,236

$

$

¥
¥

707,458
470,600
11,4992,567,215
205,408
3,962,183
7,441,052

$
$

6,260
4,164
101
22,7181,817
35,06365,850¥3,741,186$

33,107¥$

97,877
3,036
100,913

12. Breakdown of Gain on sales of Properties
For the six months ended June 30, 2017
Not Applicable.

For the six months ended December 31, 2017
Kindai Kagaku
Sha Building
Revenue from sales of properties ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥Cost of properties sold ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Other sale‐related costs ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Gain or loss on sales of properties ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥1,364,791
1,197,764
51,333
115,693

Casa Eremitaggio

Revenue from sales of properties ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥Cost of properties sold ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Other sale‐related costs ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Gain or loss on sales of properties ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥1,312,035
948,287
28,743335,004

Kindai Kagaku
Sha Building
Revenue from sales of properties ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ $Cost of properties sold ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Other sale‐related costs ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

12,077
10,599454

Times Kanda‐
Sudacho 4th(in thousands of yen)¥
130,217
100,818
3,658¥
25,740
Lexel Mansion Ueno
Matsugaya(in thousands of yen)¥
1,329,240
853,265
26,547¥449,428

Times Kanda‐
Sudacho 4th(in thousands of yen)
$
1,152
892
32

Shinjuku Island¥¥

705,102
701,931
10,228(7,057)
Sun Terrace
Minami‐Ikebukuro¥¥

934,980
591,335
18,419325,224

Shinjuku Island

$

6,239
6,211
90

25

Gain or loss on sales of properties ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ $1,023

Casa Eremitaggio

Revenue from sales of properties ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ $Cost of properties sold ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Other sale‐related costs ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Gain or loss on sales of properties ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ $11,610
8,391
254
2,964

$

227

Lexel Mansion Ueno
Matsugaya(in thousands of yen)$
11,763
7,551
234
$
3,977

$

(62)
Sun Terrace
Minami‐Ikebukuro

$

$

8,274
5,233
163
2,878

13. Impairment Loss
Property name

Ohki Aoba
Building

Use

Commercial
Facility

LocationType

Sendai, Miyagi

Impairment(in thousands of yen)

Land in trust

Impairment(in thousands of U.S dollars)

15,677138

For the purpose of calculating impairment loss, the properties’ book value were reduced to the recoverable amount and the difference
was recorded as impairment loss of land in trust under operating expenses. The recoverable amount was measured by the net realizablevalue, calculated by subtracting the expected disposal cost from the actual sales prices.

14. Income Taxes
The Company is subject to corporate income taxes in Japan. The Company may deduct from its taxable income the amounts distributed
to its unitholders, provided the requirements are met under the Special Taxation Measures Act of Japan. Under this act, the Company
must meet a number of tax requirements, including a requirement to distribute in excess of 90% of distributable profit for the fiscal
period in order to be able to deduct such amounts. If the Company does not satisfy all of the requirements, the entire taxable income of
the Company will be subject to regular corporate income taxes in Japan.
The Company has a policy of making distributions in excess of 90% of its distributable profit for the fiscal period to qualify for conditions
set forth in the Special Taxation Measures Act of Japan to achieve a deduction of distributions for income tax purpose and it distributes
approximately 100% of distributable profit. Hence, the Company has treated the distributions as a tax allowable deduction as defined in
the Special Taxation Measures Act of Japan.
(a) Reconciliations of the Company’s effective tax rates and statutory tax rates are as follows:
For the six months ended
June 30,
2017

December 31,
2017(Rate)

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

31.74 %
(32.06)0.32
0.02

31.74 %
(30.49)(1.25)
0.01

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

0.01 %

0.01 %(b) Deferred tax assets and liabilities consist of the following:
As ofJune 30,
2017

December 31,
2017(in thousands of yen)

December 31,
2017(in thousands of26

U.S. dollars)
Deferred tax assets:
Current:
Enterprise tax payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥
Impairment ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

996

¥

1,331

$

11
20

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

‐
10

2,367
28

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

1,006

3,726

32

Buildings and other (merger) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Land (merger) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙Net loss carried forward ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Asset retirement obligations ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Fixed‐term leasehold ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

689,159
2,092,087
7,200,289
9,987
42,149730,990
1,918,655
7,200,289
10,05579,644

6,468
16,97963,71988704

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

10,033,674

9,939,635

87,961

Deferred tax liabilities:
Non‐current
Asset retirement obligations ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Deferred gains or losses on hedges ∙∙∙∙∙∙∙∙

9,797
29,2789,797
36,05486319

0

Non‐current:

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

39,07545,851

405

Valuation allowance ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(9,994,598)(9,893,783)(87,555)

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

‐

‐
¥

‐

‐
$

‐

15. Leases(a) Lease rental revenues
The future minimum rental revenues pursuant to existing rental contracts as of June 30, 2017 and December 31, 2017 scheduled to bereceived are summarized as follows:
As ofJune 30,
2017

December 31,
2017

December 31,
2017(in thousands of
U.S. dollars)(in thousands of yen)
Due within one year ∙∙∙∙∙∙∙∙∙∙∙∙¥
Due over one year ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

6,579,788
47,397,583¥

7,970,088
56,088,357$

70,531
496,357

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

53,977,372¥

64,058,446$

566,888(b) Lease rental expenses
The future minimum rental expenses pursuant to existing rental contracts as of June 30, 2017 and December 31, 2017 scheduled to be
paid are summarized as follows:
As ofJune 30,
2017

December 31,
2017

December 31,
2017(in thousands of
U.S. dollars)(in thousands of yen)
Due within one year ∙∙∙∙∙∙∙∙∙∙∙∙¥
Due over one year ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

312,959
10,403,515¥

312,959
10,247,035

$

2,769
90,681

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

10,716,474¥

10,559,994$

93,451

16. Financial Instruments(a) Qualitative information for financial instruments(i) Policy for financial instrument transactions

27

The Company raises funds through loans payable and the issuance of investment units to acquire real estate properties, pay
property maintenance expenses and/or repay existing loans payable. Surplus funds are managed carefully through investments
in financial instruments taking into account liquidity and safety in light of the current financial market conditions. Derivative
instruments are used only for hedging purposes and not for speculation.
(ii) Nature and extent of risks arising from financial instruments and risk management
The funds raised through loans payable are mainly used to acquire real estate properties or properties in trust and for the
repayment of existing loans payable. Liquidity risks relating to loans payable are managed by the finance department of theAsset Manager by preparing monthly plans for funds, and monitoring the covenants defined in loan agreements.
(iii) Supplemental information for financial instruments
The fair value of financial instruments is based on quoted market prices if available. When quoted market prices are notavailable, fair value is estimated using valuation techniques which contain various assumptions. If other valuation models orassumptions were used, the estimated value may differ.
(b) Quantitative information for financial instruments
The following table shows the carrying amounts, fair values and valuation differences of financial instruments for which fairvalue is available as of June 30, 2017 and December 31, 2017.
As ofJune 30,
2017
Carrying
amounts

December 31,
2017

Fair value

Carrying
amounts

Difference

December 31,
2017

Fair value

Carrying
amounts

Difference(in thousands of yen)

Fair value

Difference(in thousands of U.S. dollars)

Assets:Current:(1) Cash and bank deposits ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥3,532,405(2) Cash and bank deposits in trust. ∙∙∙∙∙

6,065,755

Total assets ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥9,598,161¥

3,532,405¥‐

6,065,755¥

9,598,161¥

14,367,140‐¥¥

6,326,653‐¥

20,693,794

14,367,140¥

6,326,653¥

20,693,794‐$

127,142‐¥$

55,988‐$183,130

127,142$‐

55,988$183,130‐$‐

Liabilities:(3)Short‐term loans payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

‐

‐

‐

(4) Current portion of long‐term loans
payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

‐

‐

‐

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

163,990,000

163,990,000‐

Total liabilities ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥163,990,000¥

163,990,000¥

3,068,000‐¥

3,068,000‐

28,979,000

28,979,000‐

154,936,000

154,936,000‐

186,983,000¥

186,983,000¥

27,150‐$27,150‐256,451

256,451‐

1,371,115

1,371,115

1,654,716$

1,654,716

‐
$

‐

Notes

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

(ii) Financial instruments for which fair value is difficult to determine are as follows:
As of
December 31,
2017

June 30,
2017

December 31,
2017(in thousands of
U.S. dollars)(in thousands of yen)
Tenant leasehold and security deposits ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

28,663¥‐$‐Tenant leasehold and security deposits in trust ∙∙∙∙∙∙∙∙∙∙∙∙¥

2,240,373¥

2,215,299$

19,604

Investment securities ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥‐¥

17,854,460$

158,004

Tenant leasehold and security deposits are not publicly traded, and it is difficult to determine their fair value based on estimated future cash flows because the repayment datesof those deposits are not certain. Therefore, these financial instruments are not included in the above quantitative information.
Fair values of preferred securities are not subject to disclosure of fair value as they have no market value and their fair values are extremely difficult to recognize.

(iii) Cash flow schedule of financial assets after the balance sheet date28

Within 1 year

1‐2 years

2‐3 years

3‐4 years

4‐5 years

Over 5 years(in thousands of yen)
As of June 30, 2017:
Cash and bank deposits ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥Cash and bank deposits in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

3,532,405
6,065,755

¥

‐
‐

¥

‐
‐

¥

‐
‐

¥

‐
‐

¥

‐
‐

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

9,598,161

¥

‐

¥

‐

¥

‐

¥

‐

¥

‐

As of December 31, 2017:
Cash and bank deposits ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥Cash and bank deposits in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

14,367,140
6,326,653

¥

‐
‐

¥

‐
‐

¥

‐
‐

¥

‐
‐

¥

‐
‐

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

20,693,794

¥

‐

¥

‐

¥

‐

¥

‐

¥

‐

Within 1 year

1‐2 years

2‐3 years

3‐4 years

4‐5 years

Over 5 years(in thousands of U.S. dollars)
As of December 31, 2017:
Cash and bank deposits ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙$Cash and bank deposits in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

127,142
55,988

$

‐
‐

$

‐
‐

$

‐
‐

$

‐
‐

$

‐
‐

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

183,130

$

‐

$

‐

$

‐

$

‐

$

‐

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

1‐2 years

2‐3 years

3‐4 years

4‐5 years

Over 5 years(in thousands of yen)
As of June 30, 2017:
Long‐term loans payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙‐

Total ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥‐

46,663,000¥

46,663,000

48,044,000¥

48,044,000

55,512,000¥

55,512,000

13,771,000¥

13,771,000‐¥‐

As of December 31, 2017:
Short‐term loans payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

3,068,000

‐

‐

‐

‐

‐

Current portion of long‐term loans payable ∙∙∙28,979,000

‐

‐

‐

‐

‐

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

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

32,047,000

54,745,000¥

Within 1 year

54,745,000

50,130,000¥

1‐2 years

50,130,000

10,115,000

32,821,000¥

2‐3 years

32,821,000¥

3‐4 years

10,115,000

7,125,000¥

4‐5 years

7,125,000

Over 5 years(in thousands of U.S. dollars)
As of December 31, 2017:
Short‐term loans payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

27,150

‐

‐

‐

‐

‐

Current portion of long‐term loans payable ∙∙∙256,451

‐

‐

‐

‐

‐

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

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

283,601

484,469$

484,469

443,628$

443,628

290,451$

290,451

89,513$89,51363,053$63,05329

17. Investment securities
For the six months ended June 30, 2017
Not Applicable.

For the six months ended December 31, 2017
Fair values of preferred securities recorded on the Balance Sheet at ¥17,854,460 thousand (US$158,004 thousand) are not subject todisclosure of fair value as they have no market value and their fair values are extremely difficult to recognize.

18. Derivatives
Information on derivative transactions undertaken by the Company as of June 30, 2017 and December 31, 2017 is as follows. Derivative
instruments are used for hedging purposes only and are subject to hedge accounting.
As of June 30, 2017:
Contract amount(*1)
Method ofhedge
accounting

Type ofderivativetransaction

Principle
accounting
methodInterest rate
swap
transaction
floating ratereceivable andFixed rate
payableMainhedgeditem

Over 1
year

Total

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

Long‐term
borrowings¥

99,119,000¥

99,119,000¥

92,243

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

99,119,000¥

92,243(*1) The contract amount is based on the notional principal amount.
(*2) The fair value is provided by the financial institution.

As of December 31, 2017:
Contract amount(*1)
Method ofhedge
accounting

Type ofderivativetransaction

Principle
accounting
methodInterest rate
swap
transaction
floating ratereceivable andFixed rate
payableMainhedgeditem

Contract amount(*1)
Fair
Value(*2)

Over 1year

Total(in thousands of yen)

Long‐term
borrowings

Fair
Value(*2)

Over 1year

Total(in thousands of U.S. dollars)¥

99,119,000¥

70,140,000¥

113,592$

877,159$

620,707$

1,005

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

70,140,000¥

113,592$

877,159$

620,707$

1,005(*1) The contract amount is based on the notional principal amount.
(*2) The fair value is provided by the financial institution.

19. Asset Retirement Obligations
The Company has an obligation under a fixed‐term leasehold agreement to restore its leased land, which represents the land where
COMFORT HOTEL MAEBASHI, owned by the Company, is located upon the termination of agreement. The estimated period of useof property is estimated at 43 years based on the lease period per the agreement. The assets retirement obligation for the restoration isrecognized as a liability using discount rate at 1.342%.
Movements of asset retirement obligations for the six month ended June 30, 2017 and December 31, 2017 are as follows.

30

For the six month ended
December 31,
2017

June 30,
2017

December 31,
2017(in thousands of
U.S. dollars)(in thousands of yen)
Balance at the beginning of the period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥31,260¥31,468$278

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

‐

‐

‐

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

208

212

1

Balance at the end of the period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥31,468¥31,680$280

20. Segment Information
Segment information for the six months ended June 30, 2017 and December 31, 2017 is as follows:(a) Operating Segment Information
Disclosure is omitted as the Company is comprised of a single reportable segment engaged in the property rental business.
(b) Enterprise‐wide Disclosures(i) Information about Products and Services
Disclosure is not required as revenues from external customers for the single segment are in excess of 90% of total revenues.
(ii) Information about Geographic Areas(1) Revenues from Overseas Customers:
Disclosure is not required as revenues from external customers located in Japan are in excess of 90% of total revenues.
(2)Tangible Fixed Assets:
Disclosure is not required as tangible fixed assets located in Japan are in excess of 90% of total tangible fixed assets.
(c) Information about Major Customers
Information about major clients for the six‐month periods ended June 30, 2017 and December 31, 2017 were as follows:

For the six months ended June 30, 2017

Name of client

Mystays Hotel Management Co.,Ltd.

Operating Revenues(in thousands of yen)
¥3,852,826

Related segment

Real estate investing business

For the six months ended December 31, 2017

Name of client

Mystays Hotel Management Co.,Ltd.

Operating Revenues

Operating Revenues(in thousands of yen)(in thousands of U.S. dollars)¥4,794,080＄42,425

Related segment

Real estate investing business31

21. Related‐Party Transactions(a) Parent Company and Major Corporate Unitholders
For the six months ended June 30, 2017
Share capital
Type ofrelated‐party

Interested
party of the
Asset
Manager

Transactions for the period(in millions ofyen)

Votinginterest intheCompany

Relationshipwith theCompany

Investment
managementbusiness

¥

0.1

‐

Seller of real estate
trust beneficiaryrightsAcquisition of real estate trust
beneficiary rights(2)(5)Minato‐ku,
Tokyo

Investment
managementbusiness

¥

0.1

‐

Seller of real estate
trust beneficiaryrights

Septentrio2
TMK(3)

Minato‐ku,
Tokyo

Investment
managementbusiness

¥

0.1

‐

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

Hotel
managementbusiness¥

10

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

Hotel
managementbusiness¥ 100

Company
nameLocation

Sakura TMK(3)Minato‐ku,
TokyoMomo TMK(3)Business

Balance at the end of period

Amounts (1)Amounts(1)Balancesheet
account(in thousands ofyen)¥ 21,879,000‐‐

Acquisition of real estate trust
beneficiary rights(2)(5)¥ 2,683,000‐‐

Seller of real estate
trust beneficiaryrightsAcquisition of real estate trust
beneficiary rights(2)(5)¥ 8,000,000

‐

‐

‐

Lease holder andoperator of hotel

Rental Revenues¥ 549,169

Rentalreceivables¥ 198,247‐

Lease holder andoperator of hotel

Rental Revenues¥ 3,852,826

Rentalreceivables¥ 1,043,190

Type of transactions(in thousands ofyen)

Notes:(1)

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

(2)

Terms and conditions are decided pursuant to the Asset Managerʹs Regulations on Transactions with Sponsor‐related Persons and the Management Manual regarding
Transactions with Sponsor‐related Persons.

(3)

The seller, Sakura TMK, Momo TMK, Septentrio2 TMK, Naqua Hotel & Resorts Management Co., Ltd and Mystays Hotel Management, Co. Ltd has no relationship to bestated, but they receive investment through funds that are managed by FIG, ans affiliate of Calliope. Accordingly, we treat Sakura TMK, Momo TMK, Septentrio2 TMK,
Naqua Hotel & Resorts Management Co,. Ltd and Mystays Hotel Management, Co. Ltd as a related party.

(4)

Calliope holds 609,942 units(holding ratio: 15.8%) of the issued investment units of the Company.

(5)

The transaction amount exclude adjusted amount of real property tax and city planning tax, as well as consumption tax and local consumption tax.

For the six months ended December 31, 2017
Share capital
Type ofrelated‐party

Interested
party of the
Asset
Manager

Transactions for the period(inthousandsof U.S.
dollars)

Votinginterest intheCompany

Relationshipwith theCompany

Company
nameLocation

Business

HL
Investments
TMK(3)

Minato‐ku,
Tokyo

Investment
managementbusiness

¥

0.1

$

0

‐

Seller of real estate
trust beneficiaryrights

Septentrio3
TMK(3)

Minato‐ku,
Tokyo

Investment
managementbusiness

¥

0.1

$

0

‐

Seller of real estate
trust beneficiaryrightsMonza
TMK(3)

Minato‐ku,
Tokyo

Investment
managementbusiness

¥

0.1

$

0

‐

Seller of real estate
trust beneficiaryrightsSuisei
TMK(3)

Minato‐ku,
Tokyo

Investment
managementbusiness

¥

0.1

$

0

‐

Seller of real estate
trust beneficiaryrightsNaqua Hotel& Resorts
Management
Co., Ltd.(3)Minato‐ku,
Tokyo

Hotel
managementbusiness

¥

10

$

88

‐

Lease holder andoperator of hotel

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

Hotel
managementbusiness

¥ 100

$

884

‐

Lease holder andoperator of hotel(inmillionsof yen)Balance at the end of period

Amounts (1)Amounts(1)(inthousandsof yen)(inthousandsof U.S.
dollars)

Balancesheet
account¥ 13,068,000$ 115,646‐¥ 9,781,000$ 86,557‐‐‐¥ 8,870,000$ 78,495‐‐‐¥ 7,880,000$ 69,734‐‐‐

RentalRevenues¥ 1,103,226$ 9,763

Rentalreceivables¥ 130,953$ 1,158

RentalRevenues¥ 4,794,080$ 42,425

Rentalreceivables¥ 1,551,920$ 13,733

Type oftransactions

Acquisition ofreal estate
trust
beneficiaryrights(2)(5)Acquisition ofreal estate
trust
beneficiaryrights(2)(5)Acquisition ofreal estate
trust
beneficiaryrights(2)(5)Acquisition ofreal estate
trust
beneficiaryrights(2)(5)(inthousandsof yen)(in thousandsof U.S.
dollars)‐‐

Notes:(1)

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

(2)

Terms and conditions are decided pursuant to the Asset Managerʹs Regulations on Transactions with Sponsor‐related Persons and the Management Manual regarding
Transactions with Sponsor‐related Persons.

32The seller, HL Investments TMK, Septentrio3 TMK, Monza TMK, Suisei TMK, Naqua Hotel & Management Resorts Management Co., Ltd and Mystays Hotel Management,(3)

Co. Ltd has no relationship to be stated, but they receive investment through funds that are managed by FIG, ans affiliate of Calliope. Accordingly, we treat HL Investments
TMK, Septentrio3 TMK, Monza TMK, Suisei TMK, Naqua Hotel & Management Resorts Management Co., Ltd and Mystays Hotel Management, Co. Ltd as a related party.
(4)

Calliope holds 609,942 units(holding ratio: 12.7%) of the issued investment units of the Company.

(5)

The transaction amount exclude adjusted amount of real property tax and city planning tax, as well as consumption tax and local consumption tax.
Acquisition of real estate trust beneficiary rights are relating to below
Acquisition cost(in thousands of yen)

Acquisition cost(in thousands of US dollars)

Property No.

Property nameSellerD50

Hotel MyStays Shin Osaka ConferenceCenter

HL Investments TMK

D51

Hotel MyStays Premier Omori

Septentrio3 TMK

9,781,000

86,557

D52

Beppu Kamenoi Hotel

Monza TMK

8,870,000

78,495

D53

Hotel MyStays Sapporo Station

Suisei TMK

13,068,000

Total

115,646

7,880,000

69,734

39,599,000

350,433(b) Board of Directors and Major Individual Unitholders
For the six months ended June 30, 2017

Type ofrelated‐party

Directors
and close
relatives

Name

Naoki
FukudaVotinginterest intheCompany

Business / Occupation

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

‐

Transactions for the period

Balance at the end of period

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

Amounts (3)Balance sheet
account

Type of transactions(in thousands ofyen)

253,256

Accruedexpenses¥ 135,000

600

Accruedexpenses

¥

¥

324

Notes:(1)

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

(2)

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

(3)

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

For the six months ended December 31, 2017
Transactions for the period
Type ofrelated‐party

Directors
and close
relatives

Name

Naoki
FukudaBusiness /Occupation

Executive officer of
the Company andmanagement
director ofConsonantInvestment
Management Co.,Ltd.

Votinginterest intheCompany‐

Balance at the end of period

Amounts (3)Type of transactions

Payment of the assets
management fee to Consonant
Investment Management Co.,
Ltd.(1)
Payment of institution
management fee to Consonant
Investment Management Co.,
Ltd.(2)

Amounts (3)(inthousandsof yen)(inthousandsof U.S.
dollars)¥

276,823

$

2,449

¥

1,100

$

9

(in
thousandsof yen)(inthousandsof U.S.
dollars)

Accruedexpenses¥ 159,138

$

1,408

Accruedexpenses¥$

7

Balance sheet
account

864

Notes:(1)

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

(2)

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

(3)

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

33

22. Per Unit Information
The following table shows net asset value per unit as of June 30, 2017 and December 31, 2017 and net income per unit for the six months
then ended. Net income per unit is calculated by dividing the net income attributable to unitholders by the weighted average number ofunits outstanding during the six‐month period. The Company has no potentially dilutive units.
As of / For the six months ended
December 31,
2017

June 30,
2017

(Yen)

December 31,
2017(U.S. dollars)

Net asset value per unit ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥36,019¥37,829$334

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

1,241

¥

1,712

$

15

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

3,788,254

4,266,437‐

23．Subsequent Events(a) Sales of assets
The Company completed sales of 5 properties as shown in the following table on January 31, 2018.

Use

Property
numberResidential

A31

Residential

A36

Residential

A42

OfficeBuilding

Commercial
Facility

B15

B16

Property nameHarmonie
Ochanomizu
Growth Maison
Ikebukuro
Capital Heights
Kagurazaka
Cross Square
NAKANOOhki Aoba
Building

Book value

Sales price

Anticipated(JPY million)(JPY million)(JPY million)(Note 1)

(Note 2)

(Note 3)

1,346

1,603

220

743

1,057

288

623

732

87

1,125

1,350

199

709

721

‐

gain on sales

Transferee

Category of specified
asset

Undisclosed

Trust beneficial(Note 4)interest

Undisclosed

Trust beneficial(Note 4)interest

Undisclosed

Trust beneficial(Note 4)interest

Taisei‐Yuraku Real

Trust beneficial

Estate Co.,Ltd.

interest

Kubota Honten &Trust beneficial

Co.,Ltd.

interest

The Company decided to sell 1 property as shown in the following table on February 13, 2018 and the sale has been closed on March 9,
2018.

Use

OfficeBuilding

Property
number

B14

Property name

Lexington Plaza
Nishi-Gotanda

Book value

Sales price

Anticipated(JPY million)(JPY million)(JPY million)(Note 1)

(Note 2)

(Note 3)

4,639

5,160

431

gain on sales

Transferee

Category of specified
asset

Undisclosed

Trust beneficial(Note 4)interest(Note 1) The book values are amount as of December 31, 201734

(Note 2) Sales prices do not include sales-related expenses, adjustments for fixed asset taxes or city planning taxes, or national and local consumption

taxes.
(Note 3) Anticipated gain on sales are the differences between sales price and the total of book value and anticipated sales-related expenses.
(Note 4) The name of the transferee is not disclosed, as the transferee’s consent has not been obtained for disclosure.

(b)Acquisition of assets (properties)
The Company decided to acquire 4 hotel properties as shown in the following table on February 5, 2018, entered into the purchase and saleagreement on the same date, and the acquisitions have been closed on February 7, 2018, using a part of funds from “(a) Sales of assets” for theseacquisitions.
Acquisition price
Use

Property
number

Property nameLocation

Total(JPY million)

rentable area

SellerCategory of
specified asset(Note 5)

Hotel

D54

Hotel

D55

Hotel MyStays

Yokohama,

Yokohama-Kannai

Kanagawa

Art Hotel Joetsu

Joetsu, Niiigata

5,326

4,567.24 m2

2,772

7,551.78 m2

Ginga Tokutei

Trust beneficial

Mokuteki Kaishainterest

HL Investments
Tokutei Mokuteki
Kaisha

Hotel

D56

Hotel

D57

Art Hotel

Hirosaki,

Hirosaki City

AomoriHotel MyStays Oita

Oita, Oita

2,723

18,889.26 m2

1,604

3,766.72 m2

Trust beneficial
interest

Monza Tokuteki

Trust beneficial

Mokuteki Kaishainterest

Suisei Tokutei

Trust beneficial

Mokuteki Kaishainterest(Note 5)Acquisition prices show purchase prices set forth in the purchase and sale agreements. Acquisition prices do not include adjustments for property
taxes or city planning taxes, or national and local consumption taxes.

35