This is an English language summary of the original Japanese Asset Management Report available on our
Website. However, no assurance or warranties are given with respect to the accuracy or completeness of
this English language summary. The Japanese original shall prevail in the case of any discrepancies
between this summary and the Japanese original.

Invincible Investment Corporation
Asset Management Report
Fiscal Period ended December 31, 2016 (July 1, 2016 to December 31, 2016)
Contents
Greetings from Naoki Fukuda, Executive Director of Invincible Investment Corporation
and President & CEO of Consonant Investment Management Co., Ltd.
Summary of Financial Results
Portfolio and Assets under Management (AUM)
Residential Portfolio
Hotel Portfolio
Sponsor Pipeline
Newly Acquired Properties in March 2017
I.
II.
III.
IV.
V.
VI.
VII.
VIII.

Asset Management Report
Balance Sheet
Statement of Income
Statement of Unitholders’ Equity
Notes
Statement of Cash Distribution
Audited ReportStatement of Cash Flows (Reference Information)

Portfolio Map
Portfolio Overview
Financial Conditions

Overview of Unitholders/Investment Units
Information for Unitholders

Greetings from Naoki Fukuda, Executive Director of Invincible Investment Corporation andPresident & CEO of Consonant Investment Management Co., Ltd.
I would like to take this opportunity to express my sincere gratitude to all unitholders of Invincible
Investment Corporation (“INV”) for your continued support.
We hereby provide you with a report on INV’s asset management and financial results for the 27th fiscal
period (covering the period from July 1, 2016 to December 31, 2016; the “Reporting Period”).
INV positions hotels and residential properties as its core assets and proactively conducts management
activities to maximize growth and stability of the portfolio.
In the hotel sector, the number of inbound visitors reached a record high of 24.03 million in 2016, an increaseof 22% from the previous year and 79% higher than two years ago. The significant increase in inboundnumbers can be attributed to improvements in airports/travel infrastructure, the launch and expansion of
low-cost carriers (LCCs), the Japanese government’s further promotion of tourism-oriented initiatives such as
the relaxation of visa requirements as well as a sharp increase in the number of cross-border travelers due tothe rise of the middle-income class in Asia.
During the Reporting Period, INV’s hotel portfolio showed a slight decrease in revenues per available room
(RevPAR) of 0.8% year-on-year. This was mainly due to unfavorable impact from the day configuration of theSilver Week holidays in September, poor weather including more typhoon landings, the increase in new hotel
supply and a rapid increase of the number of hotel rooms listed by online travel agents. However, RevPAR for
full year of 2016 increased by 3.3% over the previous year and gross operating profit (GOP) for full year of2016 also increased by 3.8% over the previous year (1).
The residential properties continue to benefit from ongoing efforts to increase rents upon new/renewal lease
contracts and from selective reductions of leasing cost expenditures. As a result, net operating income (NOI)
for existing assets increased by 3.8% year-on-year for the Reporting Period and increased by 4.4% for the fullyear of 2016 over the previous year (2).
As a result, operating revenues reached JPY 9,511 million, ordinary income JPY 5,431 million and net income
JPY 5,431 million, with a distribution per unit (DPU) of JPY 1,477, an increase of 24.4% year-on-year.(3) With
this, the annual DPU came to JPY 2,663, a significant increase of 30.1% above the previous year.
Further, INV conducted a public offering in March 2017 to acquire two high quality residential assets,
including Royal Parks Tower Minami-Senju, which will serve as the flagship residential asset.
INV renewed the Memorandum of Understanding (MOU) with affiliates of its sponsor, Fortress Group, on
December 22, 2016 concerning preferential negotiation rights for property acquisitions. The MOU provides arobust pipeline of assets that INV can potentially acquire, consisting of 22 hotels with 6,616 rooms (INV
currently owns 48 hotels with 7,027 rooms) and nine residential properties with 743 units (INV currently
owns 70 residential properties with 4,778 units). Going forward, INV plans to expand its portfolio via
acquisitions from the abundant pipeline.
Moreover, with respect to INV’s internal growth, we will implement various measures to maximize hotelrevenue through close collaboration with each of the hotel operators. As for the residential portfolio, we
reduced the number of master lessees and property managers from 19 companies to 10 companies (inDecember 2016 and January 2017) in an effort to improve NOI, favoring companies with stronger
performance in achieving rent increases.
Concerning financial operations, INV obtained an initial credit rating of ‘A’ with a ‘Positive’ outlook fromJapan Credit Rating Agency, Ltd. (JCR) on September 27, 2016. INV aims to further strengthen its lender12Summary of Financial Results
Period fromJanuary 1, 2015 toJune 30, 2015

Period from
July 1, 2015 to
December 31, 2015

Period fromJanuary 1, 2016 toJune 30, 2016

Period from
July 1, 2016 to
December 31, 2016

Operating Revenues(JPY million)

4,974

6,863

8,158

9,511

Ordinary Income(JPY million)

2,295

2,953

4,364

5,431

Net Income(JPY million)

2,295

2,952

4,363

5,431

Net Assets(JPY million)

61,73191,758130,005

131,455

Total Assets(JPY million)

136,299

185,918

284,106

277,361

Net Assets per Unit
(JPY)

23,132

28,73135,36835,762

Net Assets/Total Assets
(%)

45.3

49.4

45.8

47.4

Distribution per Unit
(JPY)

860

1,187

1,186

1,477

Number of Units Issued(Unit)

2,668,686

3,193,686

3,675,824

3,675,824(Note) Figures are rounded down to the indicated unit and percentages are rounded to one decimal place.
However, “Net Assets per Unit” are rounded to the nearest yen

3Portfolio and Assets under Management (AUM)

Positioning hotels and residential properties as core assets, INV aims for steady growth ofinvestment assets and securing stable revenues
Composition of the portfolio (1)No. of properties

Residences

HotelsOthers(2)

126

70

48

8

(Note 1) Composition as of the date of this document isshown(Note 2) “Others” includes offices, commercial
facilities and parking lots
(Note 3) Based on acquisition price(Note 4) Defined as follows: Greater Tokyo is Tokyo,
Kanagawa, Chiba and Saitama. Greater
Tokyo (ex, Tokyo 23 wards) is Tokyo (ex.
Tokyo 23 Wards), Kanagawa, Chiba andSaitama. Kansai area is Osaka, Hyogo,
Kyoto, Shiga, Wakayama and Nara. Chubu
area is Aichi, Gifu, Mie, Shizuoka, Nagano,
Yamanashi, Niigata, Toyama, Ishikawa and
Fukui

4

Growth of AUM(Note 1)

“AUM” is total acquisition amount of the properties owned as of the end of December of the relevant year (orMarch 14, 2017), and “New Acquisition” shows total acquisition amount for the properties acquired in therelevant year (up to March 14 for 2017)

Residential Portfolio
Composition ratio of residential portfolio

Royal Parks Shinden

96.1% of the residential
portfolio is concentrated inTokyo 23 wards and othermajor cities(Note 1)
(Note 2)
(Note 3)(Note 4)

81.2% of the residential units
are smaller than 60m2

81.0% of the residential units
are less than JPY 150k per
month

Based on acquisition priceINV defines “Small” as a rentable unit with an area of less than 30m2, “Medium” as a leasable unit with an area of
30m2 to 60m2 and “Large” as a leasable unit with an area of 60m2 or more
Based on the number of units excluding shops, offices and nursing homes as of December 31, 2016
The amount of rent is based on monthly rent plus common-area charge for each unit as of December 31, 20165

Performance of Residential Portfolio
With continued proactive asset management, the residential portfolio in 2016 saw increases in average rent
per tsubo per month by 1.5% and residential NOI by 4.4% from the previous year

(Note 1) Based on the 63 residential properties owned as of the end of December, 2014
(Note 2) Excludes one-off insurance-related revenues and expenses(Note 3) Average Rent per Tsubo per Month is calculated by dividing the total residential rental revenue including common
area charges for each month by the sum of total residential leasable area at the end of each month, indicating the
average rent per Tsubo weighted by leased area
(Note 4) Occupancy is calculated by dividing the sum of total residential leased area by the sum of total residential leasablearea at the end of each month of each year

Residential Rent Increase Program
INV launched an initiative for raising rents in 2014, and in 2016 rent increased for 43.9% of all combined
new and renewal leases with an average contract rent increase of 1.2%

(Note 1)

(Note 2)

Based on the residential properties owned in relevant year excluding the performance for the properties during the
pre-acquisition period. The number of properties at the end of each year is as follows: 63 properties for 2013, 63
properties for 2014, 66 properties for 2015, and 68 properties for 2016
Increase or decrease (%) in the sum of monthly rents on new or renewal contracts, or the total of both, comparedwith the sum of previous rents for properties owned at the end of each month during relevant year

6

Hotel Portfolio
Hotel MyStays Haneda

Composition ratio of hotel portfolio
87.7% of the hotel portfolio
are limited-service hotels

94.5% of the hotel portfolio
are variable rent hotels

57.2% of the hotel portfolio
are located in the Greater
Tokyo area and 9.2% in the
Kansai area

(Note 1) Ratios are based on acquisition price(Note 2) For types, please refer to notes on page 10

Hotel Property Performance Indicators
The annual performance of the hotel portfolio for 2016 showed a slight decrease in occupancy (down 0.3
percentage points from the previous year). However, ADR, RevPAR and GOP rose by 3.7%, 3.3% and3.8% respectively over the previous year.

7

(Note 1)(Note 2)
(Note 3)

Based on 36 hotel properties; of the 48 hotel properties in our portfolio as of December 31, 2016, 9 hotels with
fixed rent lease agreements as well as 3 hotels (Hotel MyStays Shinsaibashi, Hotel MyStays Gotanda Station andHotel MyStays Kanda), which were renovated during the period from January 2015 to December 2016, areexcludedIn calculating the GOP, the rent received by INV for APA Hotel Yokohama-Kannai is regarded as GOP of thehotel since GOP is not disclosed by the operator
For the definitions of the terms, please refer to notes on pages 19 and 20

8

MyStays Hotel Management
MyStays Hotel Management (MHM), the primary operator of hotels owned by INV, hassignificantly improved its website and social media capabilities to increase its customer
base and direct booking ratio■ MHM Overview▪ MHM manages 77 hotels in Japan (12,072 rooms) (as of February 1, 2017) (1)▪ MHM was founded in 1999 and acquired in 2012 by Fortress Group▪ MHM has 2,095 employees (as of December 31, 2016)(1)■ Improved Website and Services

MHM online booking website● Updated website with easier booking navigation and star ratings from TrustYou (2)● In the process of streamlining website architecture and organizing and renovating information in orderto have better user experience and SEO (3)● Increased live-chat languages to four languages and expanded operating hours to 9 a.m. – 11 p.m., 7days per week
● Increased multi-lingual capabilities at front desks● Launched 5%off campaign to increase direct bookings to save commissions and encourage repeat
customers■Key Initiatives
1. Enhance customer services by utilizing analysis
of word-of-mouth reviews provided by
TrustYou
2. Plan to convert over 600 rooms from smoking
to non-smoking which has higher RevPAR due
to updated customer preferences (4)3. Strategically increased overbooking ratios toachieve higher RevPAR and to offset lastminute cancelations(Note 1)
(Note 2)
(Note 3)(Note 4)(Note 5)

- MHM has many highly evaluated hotels 23 hotels out of the 35 hotels in INV’s portfolio managed by MHM
achieved more than 3.8 grade (5) on a scale of 1.0 to 5.0, which apply to“Good”, “Very Good” or “Excellent” (as of January 16, 2017)

Customer reviews (5) are postedon the website of MHM

Includes hotels managed by MHM subsidiary Naqua Hotels and Resorts Management Co., Ltd.
TrustYou analyzes hundreds of millions of travel reviews and considers itself the world’s largest guest feedback
platform
SEO (search engine optimization) is a methodology of strategies, techniques and tactics used to increase theamount of visitors to a website by obtaining a high-ranking placement in the search results page of a searchengine
The initiative has started in December 2016. As of the end of January 2017, 68 rooms have been converted tonon-smoking room, and another 574 rooms will be changed to non-smoking room by the end of December 2017
Average value of customer reviews of guests who stayed at each hotel, which are based on analysis by TrustYou

9

Sponsor Pipeline▪ INV acquired two assets from the sponsor pipeline in March 2017
▪ Robust pipeline of 31 assets provides opportunity for growth and stability, even after theacquisition
Properties Covered by the MOU2

No. of Hotel Guest Rooms
6,116
No. of Apartment Units
743(Note 1) MOU providing preferential negotiation rights(Note 2) We do not intend to acquire any of the properties listed above as of the date of this material and there is no assurance
that we will acquire any of these properties in the future(Note 3) Each “Asset Type” above is as follows:“Limited” refers to a limited service hotel focusing on revenues from room stay and offer limited services regarding
food and beverage, banquet, spa or gymnasium facilities“Full” refers to a full service hotel having sections of stay, food and beverage, and banquet“Resort” refers to a resort hotel located at tourist destinations or recreational lots, having sections of stay, food andbeverage, and incidental facilities

10

Major Sponsor Pipeline Properties(Note) We do not intend to acquire any of the properties listed above as of the date of this material and there is no assurance
that we will acquire any of these properties in the future11Newly Acquired Properties in March 2017
▪ INV acquired the following two residential assets on March 14, 2017 via funds procured
through the public offering and borrowings resolved on February 22, 2017

Address
AccessCompletion Date
No. of Units
Leasable Area
Land Area

Minami-Senju 4-chome, Arakawa-ku, Tokyo
5-minute walk from Minami-Senju Station (Tokyo Metro Hibiya Line, JR
Joban Line, Tsukuba Express Line)May 2008
557 (Apartments 555, Nursing home 1, Shop 1)(1)
39,113.46m2
8,738.44m2(Note 1) The nursing home and the shop are counted as one unit, respectively, for the counting of the number of units

12Address
AccessCompletion Date
No. of Units
Leasable Area
Land Area

Minami-Senju 3-chome, Arakawa-ku, Tokyo
10-minute walk from Minami-Senju Station (Tokyo Metro Hibiya Line, JR
Joban Line, Tsukuba Express Line)
August 2006
113
6,496.86 m2
3,570.00 m2

13

I.

Asset Management Report

Overview of Asset Management
1

Trends in Investment Corporation’s Operating Results
23rd

24th

25th

26th

27th

fiscal period

fiscal period

fiscal period

fiscal period

fiscal period

Jul. 1, 2014 toJan. 1, 2015 toJul. 1, 2015 toJan. 1, 2016 toJul. 1, 2016 to

Dec. 31, 2014

Jun. 30, 2015

Dec 31, 2015

Jun. 30, 2016

Dec 31, 2016

(Note 1) (JPY thousand)

4,610,717

4,974,760

6,863,775

8,158,220

9,511,466(Rental revenue – real estate)(JPY thousand)

4,610,717

4,974,760

6,863,775

8,158,220

9,511,466

Operating expenses(JPY thousand)

1,840,796

2,163,828

2,494,667

3,084,315

3,577,255(Property related expenses)(JPY thousand)

1,586,854

1,834,039

2,178,165

2,697,986

3,162,067

Operating income(JPY thousand)

2,769,920

2,810,931

4,369,108

5,073,905

5,934,211

Ordinary income(JPY thousand)

1,958,607

2,295,909

2,953,293

4,364,025

5,431,608

Net income(JPY thousand)

1,958,002

2,295,304

2,952,688

4,363,420

5,431,003(a) (JPY thousand)

130,477,232

136,299,746

185,918,871

284,106,133

277,361,874

(%)

64.6

4.5

36.4

52.8

-2.4

(JPY thousand)

67,260,000

72,301,000

91,699,000

141,917,000

142,419,000(b) (JPY thousand)

61,392,392

61,731,550

91,758,194

130,005,009

131,455,278

(%)

68.8

0.6

48.6

41.7

1.1

Unitholders’ capital(JPY thousand)

53,096,413

53,096,413

82,465,438

120,367,271

120,367,271

Total distributions(c) (JPY thousand)

1,956,146

2,295,069

3,790,905

4,359,527

5,429,192(Note 2) (%)

99.9

100.0

102.5

94.8

100.0

(d) (Units)

2,668,686

2,668,686

3,193,686

3,675,824

3,675,824(Note 3)23,005

23,132

28,73135,36835,762

By Period

Reporting period

Operating revenue

Operating Results

Total assets(change from last period)
AssetsInterest-bearing debt
Net assets(change from last period)

Dividend

Dividend payout ratio
Number of investment units

Information per Unit

issued and outstanding
Net assets per unit
Distributions per unit(b) / (d) (JPY)(c) / (d) (JPY)

733

860

1,187

1,186

1,477

(Distributions of earnings per unit)

(JPY)

733

860

948

1,125

1,477

(Distributions in excess of retained

(JPY)

-

-

239

61

-

1.9

1.7

1.8

1.9

1.9

3.7

3.5

3.6

3.7

3.8

4.0

3.7

3.8

3.9

4.2

7.9

7.5

7.6

7.9

8.2

earnings per unit)
Return on assets(change over year)
Financial Measures

Return on equity(change over year)
Capital ratio(change from last period)(Note 4) (%)(Note 4) (%)(b) / (a) (Note 4) (%)

47.1

45.3

49.4

45.8

47.4

(%)

1.2

(1.8)

4.1

(3.6)

1.6

(Note 4) (JPY thousand)

3,861,122

4,127,486

5,961,324

7,136,971

8,414,465

NOI(Net Operating Income)(Note 1) Consumption taxes etc. are not included in the items including operating revenues(Note 2) The “Dividend payout ratio” is calculated in accordance with the following formula:
Dividend payout ratio = Distribution amount (Distributions in excess of retained earnings) ÷ Net income × 100“Dividend payout ratio” is rounded to one decimal place(Note 3) Distributions per unit are rounded to the nearest unit
(Note 4) Financial measures above are calculated as below, and ratios are rounded to one decimal place

14

Return on assets = Ordinary income / (Total assets at start of reporting period + Total assets at end of reporting
period) / 2) x 100
Return on equity = Net income this period / (Net assets at start of reporting period + Net assets at end of reporting
period) / 2) x 100
Capital ratio = Net assets at end of reporting period / Total assets at end of reporting period x 100
Rental NOI = Rental revenue – Leasing costs + Depreciation for fiscal period ended December 31, 201615

2

Operating Conditions(1)

Main trends of INV

INV was established in January 2002 in accordance with the Investment Trust and Investment Corporation
Act (Act No. 198 of 1951, as amended; the “Investment Trust Act”). In May 2004, INV was listed on the
Osaka Securities Exchange (application for delisting was made in August 2007), and in August 2006 waslisted on the Real Estate Investment and Trust Securities Section of the Tokyo Stock Exchange (Ticker
Code: 8963).
After the merger with LCP Investment Corporation (“LCP”) was implemented on February 1, 2010, INV
issued new investment units through a third-party allotment on July 29, 2011 and refinanced its debt.
Calliope Godo Kaisha (“Calliope”), an affiliate of the Fortress Investment Group LLC (“FIG” and together
with Calliope and other affiliates of FIG, collectively the “Fortress Group”) was the main allottee, and thesponsor changed to the Fortress Group.
Ever since the commencement of sponsorship from the Fortress Group, INV has been focusing its efforts
on improving the profitability of its portfolio and establishing a revenue base in order to implement stable
distributions, and has strengthened the lender formation through new borrowings and the refinancing ofexisting bank borrowings, thereby creating a financial base for external growth. With this platform as abase, in June 2014, Consonant Investment Management Co., Ltd., the asset manager to which INV entrusts
the management of its assets (the “Asset Manager”) revised the Investment Guidelines for INV, andpositioned hotels as a core asset class alongside residential properties with a view towards expanding
investments in the hotel sector in which demand is forecasted to rise going forward. As a result of theexternal growth efforts, INV's portfolio at the end of the previous period ended June 2016 composed of 124
properties (48 hotels, 68 residential properties and eight others) with a total acquisition value of JPY
266,619 million, and market capitalization at such date of JPY 238,193 million. When compared to theperiod as of May 22, 2014, which is the time immediately prior to INV’s initial investment in hotels, thetotal acquisition value and market capitalization increased significantly by 3.7x and 8.0x, respectively.
In the Reporting Period, INV obtained an initial credit rating of ‘A’ from Japan Credit Rating with a‘Positive’ outlook on September 27, 2016.
INV expanded the pipeline for future growth by adding two residential properties to the properties subject
to a Memorandum of Understanding (the “MOU") with affiliates of Fortress Group with respect topreferential negotiating rights regarding the acquisitions of hotels and residential properties on December
22, 2016. As of the end of the Reporting Period, there are 22 hotels (6,116 rooms) and 11 residential
properties (1,413 units) in the MOU, which will continue to provide INV with considerable opportunities
for external growth.

16

(2)

Operational Environment and Performance

For the December 2016 period, NOI increased by 41.2% or JPY 2,453 million compared to the same period
in the previous year (the December 2015 period), of which 35.7% came from the hotel portfolio and 5.7%
from the residential portfolio.
As a result, INV maintained a high average occupancy rate (Note 1) of 98.2% across the entire portfolio,
and the NOI of entire portfolio increased by 17.9% from the previous period (the June 2016 period) to JPY
8,414 million. Below is commentary on each of these sectors and their performance in the second half of2016.
In the hotel segment, improvements in travel infrastructure, the penetration of LCC’s into the Japanesemarket, and the Japanese government’s promotion of tourism initiatives at the national and local level,
coupled with macro structural changes such as a sharp increase in the number of cross-border travelers dueto the global rise of the middle-income bracket, have led to a continued increase in the number ofinternational visitors to Japan from China and Southeast Asian countries such as Thailand, Malaysia, thePhilippines, Indonesia and Vietnam. This robust combination helped Japan log a record high of 24.039
million inbound visitors in 2016, (a 21.8% increase compared to 19.737 million in the previous year).
However, for the Reporting Period, the hotel segment was impacted by poor weather such as typhoons, day
formation (reduced number of weekday holidays) of the Silver Week holiday in September 2016, anincrease in hotel supply in Tokyo in the limited-service-hotel segment, an increase in the number of hotel
rooms listed on websites of online travel agents and increased cancellations.
Under the circumstances above, INV is working closely with the operators of the hotels, primarily MyStays
Hotel Management Co., Ltd. (“MHM”), a hotel operator in the sponsor group, to proactively address theissues at hand. Specifically, MHM continues to improve the web experience and the service function suchas its online chat function and strengthen its user content and engagement to drive more direct bookings
through the MHM website as well as increase brand awareness. MHM is increasing the over-bookings ratio
to achieve higher occupancy rates and to offset vacancies caused by cancellations. As the result of theinitiatives, 39 of the hotels owned by INV (Note 2) recorded ADR (Note 3) of JPY 9,935, RevPAR (Note 4)of JPY 9,049, and an occupancy rate (Note 5) of 91.1%. Among the 36 hotels (Note 6) in which acomparison can be made for the same period in the previous year, ADR was JPY 9,877 (+0.0%), RevPAR
was JPY 8,973 (-0.8%), with an occupancy rate of 90.8% (-0.7 points). The ratio of overseas sales (Note 7)
at the 36 hotels (Note 8) increased to 27.9% (+2.0 points compared to the same period in the previousyear).
With respect to the residential portfolio, market rent trends for small-type city-center properties maintainmoderate increases. Under the positive circumstances in the macro environment, INV implemented a rent
increase program for new leases and renewals as well as an initiative to reduce residential leasing costs
based on a market analysis of each unit and property. As a result, in the Reporting Period, INV realized arent increase for 54.2% of the new residential lease contracts for an average rent increase of 1.5%
compared to the previous rent across all new leases, and a rent increase for 33.6% of contract renewals foran average rent increase of 1.0% compared to the previous rent across all renewal leases, while maintaininga high contract renewal rate of 83.7%. The average occupancy rate achieved a stable 95.6% and the averageoccupancy rate for 63 properties that can be compared to the same period in the previous year (Note 9) was
94.4% (a decrease of 0.9 points). The NOI (Note 10) for the 63 properties (Note 9) in which previous year
comparisons can be made increased 3.8% compared to the same period in the previous year. Furthermore,
INV decided on November 21, 2016 to change the master lessee (“ML”) and the property manager (“PM”)
for 16 properties effective December 1, 2016 and for one property effective January 1, 2017 (Note 11)
respectively in order to further improve its operational efficiency as well as property performance by17consolidating the number of ML/PM from 19 to 10 for its residential portfolio.
Due to the internal growth for the Reporting Period, and trends in the real estate investment and rental
market, the total appraisal value at the end of the Reporting Period was JPY 328,192 million, an increase of
JPY 4,901 million (+1.5%) over the previous period. The portfolio has an unrealized gain of JPY 68,253
million (Note 12) and an unrealized gain ratio of 26.3% (Note 12).
Key Performance Indicators of 36 Hotel Properties (Note 6)

June fiscal period
Occupancy Rate
ADR (JPY)
RevPAR (JPY)GOP (Note 13) (JPY million)

89.6%
9,008
8,068
4,516

Y2016
December fiscal
period
90.8%
9,877
8,973
5,373

Full-Year
90.2%
9,448
8,523
9,889

Year-on-Year Changes

June fiscal period
Occupancy Rate
ADR (JPY)
RevPAR (JPY)GOP (Note 13) (JPY million)+0.1pt+8.4%+8.5%+12.3%

Y2016
December fiscal
period
-0.7pt
-0.0%
-0.8%
-2.3%

Full-Year-0.3pt
+3.7%
+3.3%
+3.8%

Key Performance Indicators of 63 Residential Properties (Note 9)

June fiscal period
Occupancy Rate
(Note 1)
Average Rent per Tsubo(JPY) (Note 14)
NOI (JPY million)

Y2016
December fiscal
periodFull-Year

95.5%

94.4%

95.0%

10,04010,123

10,082

1,540

1,553

3,093

Year-on-Year Changes

June fiscal period
Occupancy Rate
(Note 1)
Average Rent per Tsubo(JPY) (Note 14)
NOI (JPY million)

Y2016
December fiscal
periodFull-Year

+1.8pt-0.9pt+0.5pt

+1.3%

+1.7%

+1.5%

+5.1%

+3.8%

+4.4%

18

(Note 1)“Occupancy Rate” for the entire portfolio and for the residential properties is calculated by dividing the sumof total leased area by the sum of total leasable area at the end of each month during the relevant period(Note 2)Of the 48 acquired hotels, the following nine hotels with fixed-rent lease agreements are excluded: Super Hotel
Shinbashi-Karasumoriguchi, Comfort Hotel Toyama, Super Hotel Tokyo JR Tachikawa Kitaguchi, Super Hotel
JR Ueno-Iriyaguchi, Comfort Hotel Kurosaki, Comfort Hotel Maebashi, Comfort Hotel Tsubame-Sanjo,
Comfort Hotel Kitami and Takamatsu Tokyu REI Hotel(Note 3)“ADR” means average daily rate, and is calculated by dividing total room sales (excluding service fees) for acertain period by the total number of days per room for which each room was occupied during the same period.
Hereinafter the same shall apply(Note 4)

“RevPAR” means revenue per available room per day, and is calculated by dividing total room sales for a certain
period by total number of rooms available (number of rooms x number of days) during the same period, and is
the same as the figure obtained by multiplying ADR by occupancy rates. Hereinafter the same shall apply(Note 5)

“Occupancy rate” for the hotel properties is calculated in accordance with the following formula:
Occupancy rate = total number of occupied rooms during a certain period ÷ total number of rooms available
during the same period (number of rooms x number of days)
Hereinafter the same shall apply(Note 6)Of the 48 acquired hotels, two hotels which were not operating for a certain period due to renovation in 2015,
Hotel MyStays Shinsaibashi (renovation period: from January 25, 2015 through March 31, 2015) and Hotel
MyStays Gotanda Station (renovation period: from March 1, 2015 through November 24, 2015) and one hotel
which was not fully operating for a certain period due to renovation in 2016, Hotel MyStays Kanda(renovation period: from May 20, 2016 through August 22, 2016) are excluded, in addition to the nine hotels
with fixed-rent lease agreements excluded per Note 2(Note 7)

“Overseas sales ratio” is the ratio of sales amount through overseas web agents to revenues(Note 8)Of the 48 acquired hotels, 12 hotels, APA Hotel Yokohama-Kannai, Super Hotel Shinbashi-Karasumoriguchi,
Comfort Hotel Toyama, Super Hotel Tokyo JR Tachikawa Kitaguchi, Super Hotel JR Ueno-Iriyaguchi, Comfort
Hotel Kurosaki, Comfort Hotel Maebashi, Comfort Hotel Tsubame-Sanjo, Comfort Hotel Kitami and
Takamatsu Tokyu REI Hotel, the tenants of which do not disclose the ratio of overseas sales; Hotel MyStays
Gotanda Station, which was not operating for a certain period due to renovation in 2015 (renovation period:
from March 1, 2015 through November 24, 2015); and Hotel MyStays Kanda, which was not fully operating
for a certain period due to renovation in 2016 (renovation period: from May 20, 2016 through August 22,2016), are excluded(Note 9)Of the 68 acquired residential properties, five properties, City Court Kitaichijo, Lieto Court Mukojima, Lieto
Court Nishi-Ojima, Royal Parks Momozaka and Royal Parks Shinden, which were not held by INV in the same
period in the beginning of the previous year, are excluded(Note 10) For the comparison of NOI of the 63 properties, insurance income and related repair expenses, which aretemporary items, are excluded(Note 11) 16 properties for which ML/PM were changed on December 1, 2016 are Royal Park Omachi, Lexington
Square Haginomachi, Lexington Square Daitabashi, Lexington Square Honjo Azumabashi, Invoice Shin-Kobe
Residence, Cosmo Court Motomachi, Salvo Sala, Luna Court Edobori, Winntage Kobe Motomachi, Corp
Higashinotoin, Prime Life Sannomiya Isogami Koen, HERMITAGE NANBA WEST, West Avenue, Prime
Life Mikage, Lieto Court Mukojima and Lieto Court Nishi-Ojima. One property for which ML/PM werechanged on January 1, 2017 is Acseeds Tower Kawaguchi-Namiki

19

(Note 12) The unrealized gain is calculated using the following formula:
the appraisal value as of the end of the Reporting Period - book value as of the end of the Reporting Period.
The unrealized gain ratio is calculated using the following formula:
the unrealized gain ÷ book value as of the end of the Reporting Period(Note 13) “GOP,” means the gross operating profit, and is the amount remaining after deducting costs of hotel operations(the personnel, material, water, electricity and heating and advertising expenses and other expenses) and the
management services fee to operators (if any) from the hotel’s revenues. Hereinafter the same shall apply(Note 14) “Average Rent per Tsubo” is calculated by dividing the total rental revenue including common area charges
for each month by the sum of total leasable area at the end of each month during the relevant period(3)

Overview of Fund Raising

During the Reported Period, INV obtained a credit rating of ‘A’ with a ‘Positive’ outlook from the Japan
Credit Rating Agency and also increased its banking group from 13 financial institutions to 19 including
Japan Post Bank Co., Ltd.
Below are details of the initial credit rating, which was obtained on
September 27, 2016:
Credit Rating Agency

Rating Object

RatingOutlookJapan Credit Rating Agency, Ltd.

Long-term Issuer Rating

A

Positive

As a result of the measures described below, INV’s interest-bearing debt outstanding balance was JPY
142,419 million and the Interest-Bearing Debt ratio (Note 1) and LTV (Note 2) were 51.3% and 43.4%
respectively, as of the end of the Reporting Period, with an average interest rate (Note 3) of 0.50%.
INV implemented the borrowing of Term Loan (E) (amount borrowed: JPY 4,000 million; interest rate:variable interest rate of 1-month JPY TIBOR (Note 4) plus 0.4%, 0.5% and 0.6% for durations of three,four and five years) from The Tokyo Star Bank, Limited on July 20, 2016 for use as a portion of the funds
and related expenses for the two hotels acquired on June 15, 2016.
On November 30, 2016, INV repaid the portion of Term Loan (B), New Syndicate Loan (F), and Term
Loan (C) in the amount of JPY 3,498 million in total that corresponds to the borrowings equivalent to the
expected consumption tax refund (Note 5), using the consumption tax refunds from the five hotels acquiredon January 22, 2016, the four hotels acquired on March 31, 2016, and the two hotels acquired on June 15,
2016.
In addition, a portion of INV’s existing loans from Mizuho Bank, Ltd. was transferred to Japan Post Bank
Co., Ltd. in the amount of JPY 4,000 million on July 15, 2016, The Kagawa Bank, Ltd., The Shizuoka
Bank, Ltd., The Hyakugo Bank, Ltd., and The Bank of Fukuoka, Ltd. in the amount of JPY 1,000 million
each on July 29, 2016, The Daishi Bank, Ltd. and The Hiroshima Bank, Ltd. in the amount of JPY 1,000
each on December 20, 2016.
(Note 1)

Interest-Bearing Debt ratio uses the calculation formula below:
Interest-Bearing Debt ratio = total outstanding interest-bearing debt/total assets x 100(Note 2)

LTV uses the calculation formula below:
LTV = total outstanding interest-bearing debt/total appraisal value x 100(Note 3)

The average borrowing interest rate (annual rate) is calculated by the weighted average based on the outstandingbalance of borrowings and rounded to two decimal places(Note 4)

With respect to only the first interest calculation period, the 2-month JPY TIBOR

20

(Note 5)(4)

Borrowings corresponding to the expected consumption tax refund mean the borrowings which will be prepaid
in the amount equivalent to the refund of consumption tax and local tax, which were paid in relation to theacquisition of the trust beneficiary interests acquired by the borrowings executed at the same time, in the casewhere the above-mentioned consumption tax refunds are received. The same shall apply hereinafter

Overview of Results of Operations and Distributions

As a result of the operations mentioned above, operating revenues for the Reporting Period increased by
JPY 1,353 million from the previous period (+16.6%) to JPY 9,511 million, and net income increased by
JPY 1,067 million from the previous period (+24.5%) to JPY 5,431 million. DPU for the Reporting Period
was JPY 1,477, an increase of JPY 291 (+24.5%) compared to the previous period.
INV aims to include maximum profit distributions (excluding excess profit distribution) in deductible
expenses in accordance with Section 1 of Article 67-15 of the Act on Special Taxation Measures Law (ActNo. 15 of 1957; as amended), and decided to distribute all of the amount by deducting reversal of
allowance for temporary differences adjustment from profit as defined in Article 136, Paragraph 1 of theInvestment Trust Act, except for fractional distribution per unit less than JPY 1. As a result, the distribution
per unit (excluding excess profit distribution) for the Reporting Period is JPY 1,477. On the other hand,excess profit distribution will not be made.

21

3Changes in Total Number of Investment Units Issued and Outstanding

Changes in the number of investment units issued and outstanding and unitholders’ equity from the date ofestablishment to the end of the Reporting Period are as follows.

Date

Type of issue

Total number of investment
units issued and outstanding

Unitholders’ capital (JPY)

Increase

Increase

Total

Total

Reference

January 18, 2002

Private placement
for incorporation

400

400

200,000,000

200,000,000(Note 1)

December 26, 2003

Private placement

2,700

3,100

1,012,500,000

1,212,500,000(Note 2)January 9, 2004

Private Placement

1,350

4,450

506,250,000

1,718,750,000(Note 2)January 21, 2004

Private placement

1,333

5,783

499,875,000

2,218,625,000(Note 2)January 27, 2004

Private placement

267

6,050

100,125,000

2,318,750,000(Note 2)January 28, 2004

Private placement

800

6,850

300,000,000

2,618,750,000(Note 2)January 31, 2004

Private placement

266

7,116

99,750,000

2,718,500,000(Note 2)February 5, 2004

Private placement

800

7,916

300,000,000

3,018,500,000(Note 2)February 7, 2004

Private placement

1,333

9,249

499,875,000

3,518,375,000(Note 2)

May 17, 2004

Public offering

9,000

18,2493,377,250,000

6,895,625,000(Note 3)February 7, 2005

Public offering

10,65028,8993,937,667,100

10,833,292,100(Note 4)

July 31, 2006

Public offering

25,00053,8998,301,125,000

19,134,417,100(Note 5)February 1, 2010

Unit split

215,596

269,495-

19,134,417,100(Note 6)

February 1, 2010

Merger367,200

636,695-

19,134,417,100(Note 7)

711,597

1,348,292

6,999,979,689

26,134,396,789(Note 8)224,887

1,573,179

2,999,992,580

29,134,389,369(Note 9)July 29, 2011
December 20, 2013

Third-party
allotment
Third-party
allotment

July 16, 2014

Public offering

1,040,000

2,613,179

22,747,920,000

51,882,309,369(Note 10)

August 13, 2014

Third-party
allotment

55,5072,668,686

1,214,104,611

53,096,413,980(Note 11)

July 15, 2015

Public offering

500,000

3,168,686

27,970,500,000

81,066,913,980(Note 12)

August 12, 2015

Third-party
allotment

25,0003,193,686

1,398,525,000

82,465,438,980(Note 13)

March 30, 2016

Public offering

459,5123,653,198

36,123,157,344

118,588,596,324(Note 14)

April 27, 2016

Third-party
allotment

22,626

3,675,824

1,778,675,112

120,367,271,436(Note 15)

(Note 1)

INV was incorporated through a private placement at a price of JPY 500,000 per unit

(Note 2)

New investment units were issued in a private placement at a price of JPY 375,000 per unit to raise funds for theacquisition of new properties

22

(Note 3)

New investment units were issued in a public offering at a price of JPY 395,000 per unit (JPY 375,250 after
deducting the underwriters’ discount) to raise funds for the acquisition of new properties(Note 4)

New investment units were issued in a public offering at a price of JPY 385,140 per unit (JPY 369,734 after
deducting the underwriters’ discount) to raise funds for the acquisition of new properties(Note 5)New investment units were issued in a public offering at a price of JPY 348,740 per unit (JPY 332,045 after
deducting the underwriters’ discount) to raise funds for the acquisition of new properties(Note 6)

An investment unit split of five units per one unit was conducted(Note 7)A merger by absorption pursuant to Article 147 of the Act on Investment Trusts and Investment Corporations
was conducted with LCP, with INV as the surviving entity. As a result of the merger by absorption, four
investment units of INV (after the investment unit split) were allotted for each LCP investment unit. The
number of LCP investment units issued as of the time of the merger by absorption was 91,800 units(Note 8)New investment units were issued in a third party allotment at a price of JPY 9,837 per unit to make repaymentof existing loan, etc.

(Note 9)New investment units were issued in a third party allotment at a price of JPY 13,340 per unit to make repaymentof existing loan, etc.

(Note 10) New investment units were issued in a public offering at a price of JPY 22,688 per unit (JPY 21,873 after
deducting the underwriters’ discount) to raise funds for the acquisition of new properties(Note 11) New investment units were issued in a third party allotment at a price of JPY 21,873 per unit for the purpose of
cash reserve to appropriate to repayment in future borrowings(Note 12) New investment units were issued in a public offering at a price of JPY 57,817 per unit (JPY 55,941 after
deducting the underwriters’ discount) to raise a part of the funds for the acquisition of new properties(Note 13) New investment units were issued in a third party allotment at a price of JPY 55,941 per unit for the purpose of
allocation to cash reserves to be used as part of the funds for future acquisition of properties(Note 14) New investment units were issued in a public offering at a price of JPY 81,217 per unit (JPY 78,612 after
deducting the underwriters’ discount) to raise a part of the funds for the acquisition of new properties(Note 15) New investment units were issued in a third party allotment at a price of JPY 78,612 per unit for the purpose of
allocation to cash reserves to be used as a part of the funds for future acquisition of properties

Trends in Trading Prices of Investment Securities
The highest and lowest prices (trading prices) in the Real Estate Investment and Trust Securities Section of
the Tokyo Securities Exchange on which the investment securities of INV are listed are as follow.
Real Estate Investment and Trust Securities Section, Tokyo Securities Exchange
PeriodClosingmonth
HighestLowest23rd fiscal
periodDecember
2014
50,90023,02024th fiscal
periodJune
201566,40044,50025th fiscal
periodDecember
2015
76,40057,90023

26th fiscal
periodJune
201688,40061,100(Unit: JPY)
27th fiscal
periodDecember
2016
70,30049,6004Distribution PerformanceWith respect to profit distributions (not including distributions in excess of retained earnings) for the
December 2016 period, INV decided to distribute almost all of its earnings as defined in Article 136,
Paragraph 1 of the Investment Trusts Act other than fractional amount per unit less than JPY 1, after
deducing the refunded amount of the allowance for temporary difference adjustments, aiming to include themaximum amount of earnings distributions in deductible expenses in accordance with Article 67-15,
Paragraph 1 of the Act on Special Taxation Measures (Act No. 26, 1957). As a result, the distribution of
earnings per unit (not including distributions in excess of retained earnings per unit) is JPY 1,477. Further,
INV has decided not to make distributions in excess of retained earnings.
PeriodCalculated Period
Unappropriatedretained earnings(JPY thousand)Reserved profit(JPY thousand)Total cash distribution(JPY thousand)(Distribution per unit)(JPY)
Total profit
distribution(JPY thousand)(Profit distribution per
unit)
(JPY)
Total refund ofinvestment(JPY thousand)(Refund of investment
per unit )(JPY)
Total distribution fromthe allowance fortemporary differences
adjustment out of total
refund of investment(JPY thousand)(Distribution from theallowance fortemporary differences
adjustment per unit outof refund ofinvestment per unit)(JPY)

23rd fiscal
periodJul. 1, 2014
to Dec. 31,
2014

24th fiscal
periodJan. 1, 2015
to Jun. 30,
2015

25th fiscal
periodJul. 1, 2015
to Dec. 31,
2015

26th fiscal
periodJan. 1, 2016
to Jun. 30,
2016

27th fiscal
periodJul. 1, 2016
to Dec. 31,
2016

2,031,546

2,370,704

3,028,323

4,363,420

5,659,831

75,39975,634-

228,827

6,414

1,956,146

2,295,069

3,790,905

4,359,527

5,429,192

733

860

1,187

1,186

1,477

1,956,146

2,295,069

3,027,614

4,135,302

5,429,192

733

860

948

1,125

1,477

-

-

763,290

224,225

-

-

-

239

61

-

-

-

-

224,225

-

-

-

-

61

-

24

Total distribution fromunitholders’ equity
under the tax laws outof the total refund ofinvestment(JPY thousand)Distribution fromunitholders’ equity
under the tax laws outof refund ofinvestment per unit
(JPY)
5

-

-

763,290

-

-

-

-

239

-

-

Future Operational Policy and Issues to be Addressed

Outlook for the Fiscal Periods Ending June 30, 2017 and December 31, 2017
The DPU (including distribution in excess of retained earnings) for the June 2017 period is forecast to be
JPY 1,240 (+4.6% YoY) and the DPU (including distribution in excess of retained earnings) for the
December 2017 period is forecast to be JPY 1,481 (+0.3% YoY); the full year DPU (including distribution
in excess of retained earnings) for calendar year 2017 is forecast to be a modest growth of JPY 2,721(+2.2% YoY).
(I) Future operational policy and issues to be addressed
Since July 2011, INV has enhanced unitholder value by significantly increasing DPU with the FortressGroup as its sponsor. Going forward, INV will implement various strategies to maintain further growth,
including the following measures.
• Continuous acquisition of properties from sponsor and third parties• Further internal growth at hotel and residential properties• Diversification of financing measures including the issuance of invest corporation bonds andextension and diversification of maturities
Details of the future growth strategy are as follows.
(i)

External growth strategy

New Property Acquisitions
As its basic strategy, INV will move forward with the acquisition of new properties focusing on hotels,
where continued growth in portfolio revenues is anticipated, and residential properties especially whererental growth can be achieved. Rent revenue from residential assets and other assets as well as the fixed
rent portion from hotels will also contribute to more stable revenue, which was 67.4% of total revenue for2016. This acquisition strategy will enable INV to build a portfolio with a good balance between growthand stability.
In regards to hotels, INV will take into consideration the trends in foreign travelers visiting Japan, businessand leisure customer demand, the competitive hotel environment, and leasing contract types when making
investment decisions, with the aim of acquiring properties where growth and stability of GOP and rental25

revenue are forecasted to increase.
In regards to residential properties, INV will analyze occupancy rates, rental market trends, the presence ofcompeting properties among other factors, and consider acquiring mainly small-type properties in large
cities with strong competitiveness in which it believes it can achieve increases in rent. On February 22,
2017, INV decided to acquire two high quality family-type properties in Tokyo, taking into consideration of
the rent growth potential for Royal Parks Tower Minami-Senju and the stability from the fixed-term leasefor Royal Parks Seasir Minami-Senju, which will be beneficial to the diversification of the residential
portfolio.
These two residential properties are to be acquired from the pipeline of the sponsor, the Fortress Group,
which has helped INV to achieve steady external growth as follows.

Properties acquired from affiliates of the Fortress Group (as of February 22, 2017)
Date

Properties acquired

Total acquisition price

September 2012
May 2014
July 2014
February 2015

24 residential properties
Two hotels
18 hotels
Two hotels
11 hotels andthree residential properties
One hotel
Five hotels andone residential property
Four hotels andone residential property
Two hotels
74 properties(of which 45 are hotels and 29 areresidential properties)

JPY 14,043 million
JPY 5,435 million
JPY 39,938 million
JPY 4,911 million

July 2015
August 2015
January 2016
March 2016
June 2016
Total

26

JPY 35,258 million
JPY 5,069 million
JPY 10,207 million
JPY 66,697 million
JPY 15,900 million
JPY 197,458 million(of which hotels: JPY 170,382 million;
residential: JPY 27,076 million)

The Fortress Group manages four dedicated Japanese real estate funds, including the Fortress Japan
Opportunity Funds I, II, and III. The Fortress Group’s committed equity is over JPY 300 billion and thenumber of properties that the Fortress Group is invested in exceeds 1,400. In order to ensure future growth
options for the portfolio, INV entered into an updated MOU with affiliates of the Fortress Group thatprovides preferential negotiation rights with respect to the acquisition of 22 hotels and nine residential
properties (excluding two residential properties anticipated to be acquired) (see the table below) (Note 1).
In addition, by utilizing the property transaction information available through the Fortress Group and
INV’s own network, INV will continuously consider and implement the acquisitions of properties fromthird parties that will contribute to stability and growth in revenue and cash flow and an increase in DPU.
Asset Type (Note 2)

Location

No. of Rooms

1

Hotel MyStays Premier Akasaka

Asset Name

Limited Service Hotel

Minato-ku, Tokyo

327

2

Hotel MyStays Yokohama Kannai

Limited Service Hotel

Yokohama-shi, Kanagawa

166

3

RIHGA Royal Hotel Kyoto

Full Service Hotel

Kyoto-shi, Kyoto

489

4

Narita Excel Hotel Tokyu

Full Service Hotel

Narita-shi, Chiba

706

5

Hotel MyStays Premier Sapporo Park

Full Service Hotel

Sapporo-shi, Hokkaido

418

6

Hotel MyStays Sapporo Station

Limited Service Hotel

Sapporo-shi, Hokkaido

242

7

Hotel MyStays Oita

Limited Service Hotel

Oita-shi, Oita

145

8

Art Hotel Hirosaki City

Full Service Hotel

Hirosaki-shi, Aomori

134

9

Beppu Kamenoi Hotel

Resort Hotel

Beppu-shi, Oita

322

10

Fusaki Resort Village

Resort Hotel

Ishigaki-shi, Okinawa

195

11

Sheraton Grande Tokyo Bay Hotel

Full Service Hotel

Urayasu-shi, Chiba

1,016

12

Hotel MyStays Shin Osaka ConferenceCenterLimited Service Hotel

Osaka-shi, Osaka

397

13

Art Hotel Asahikawa

Full Service Hotel

Asahikawa-shi, Hokkaido

265

14

Hotel MyStays Kanazawa Castle

Limited Service Hotel

Kanazawa-shi, Ishikawa

206

15

Hotel JAL City Matsuyama

Full Service Hotel

Matsuyama-shi, Ehime

161

16

Hotel MyStays Ueno East

Limited Service Hotel

Taito-ku, Tokyo

150

17

(tentative) Hotel MyStays Honmachi
3-chome (Note 3)

Limited Service Hotel

Osaka-shi, Osaka

120

18

Hotel MyStays Sapporo Nakajima Park

Limited Service Hotel

Sapporo-shi, Hokkaido

86

19

Flexstay Inn Sakuragicho

Limited Service Hotel

Yokohama-shi, Kanagawa

70

20

MyCUBE by MYSTAYS Asakusa
Kuramae

Limited Service Hotel

Taito-ku, Tokyo

161

21

Hotel MyStays Premier Hamamatsucho

Limited Service Hotel

Minato-ku, Tokyo

120

22

Hotel MyStays Premier Omori

Limited Service Hotel

Shinagawa-ku, Tokyo

220

No.

Hotel Subtotal

6,116

23

Gran Charm Hiroo

Residential/Small TypeShibuya-ku, Tokyo

121

24

Plestay Win Kinshicho

Residential/Small Type

Sumida-ku, Tokyo

92

25

Gran Charm Kichijoji

Residential/Small TypeMusashino-shi, Tokyo

28

26

Green Patio Noda

Residential/Small Type

Noda-shi, Chiba

240

27

Dainichi F-45

Residential/Small Type

Urayasu-shi, Chiba

54

28

Gran Charm Urayasu

Residential/Small Type

Urayasu-shi, Chiba

54

29

Gran Charm Urayasu 5

Residential/Small Type

Urayasu-shi, Chiba

54

27

Asset Name

No.

Asset Type (Note 2)

Location

No. of Rooms

30

Gran Charm Minami Gyotoku I

Residential/Small Type

Ichikawa-shi, Chiba

52

31

Gran Charm Minami Gyotoku II

Residential/Small Type

Ichikawa-shi, Chiba

48

Residential Property Subtotal

743(Note 1)

The term of validity of the MOU is from December 22, 2016, the date of execution of the updated MOU, to
December 21, 2017. The above 31 properties do not include two residential properties anticipated to beacquired upon the exercise of preferential negotiation rights under the MOU as of February 22, 2017.
Regarding the 31 properties listed above, there is no guarantee that INV will be granted an opportunity forconsidering acquisition of the properties or be able to acquire the properties(Note 2)Each “Asset Type” above is as follows:“Limited Service Hotel” refers to a hotel focusing on revenues from room stay and offer limited services
regarding food and beverage, banquet, spa or gymnasium facilities.
“Full Service Hotel” refers to a hotel having segments of stay, foods and beverages, and banquet“Resort Hotel” refers to a hotel located in tourist destinations or recreational lots, having segments of stay, foodand beverage, and other facilities“Small Type” refers to a residential property in which the majority of dwelling units are less than 30m2

(Note 3)(Tentative) Hotel MyStays Honmachi 3-chome is scheduled to be completed in November 2017 and open in
December 2017

Property Sales
While INV places priority on increasing unitholders’ value through external growth by taking into accountthe increased level of activity in the real estate trading market, it also plans to consider the possibility ofproperty sale and replacement upon consideration of the portfolio sector composition, geographic
distribution and competitiveness of each property, as appropriate.
(ii) Strategy for internal growth(Hotels)
Of the 48 hotels owned by INV as at the end of the Reporting Period, 39 hotels use a variable rent scheme.
In the variable rent scheme, in principle, INV receives all of gross operating profit (GOP) after deducting
management fees for the hotel operator as rents, and INV can directly enjoy the hotel revenue upside. In thecase where GOP enters into a downward trend, INV could take advantage from the fixed rent portion or
downside floor to protect itself from further loss. For 33 hotels, MHM has implemented strict revenue
management seeking to maximize revenue. INV will continue to accurately ascertain and analyze operating
conditions of its hotels, the conditions of nearby hotels, market trends and other factors through operation
meetings and other contact with hotel operators and will focus on operations that maximize rent income.
(Residential properties and others)
INV will continue to strengthen its collaborative ties with Property Management (PM) companies andbrokers to further boost occupancy rates and earning capabilities of its properties. With respect to INV’s
residential properties, while keeping in mind the high-season in the residential rental market that occurs
during the fiscal period ending June 2017, INV will focus on increasing the occupancy rate and rent for28both new lease contracts and lease renewals for each of its properties as well as formulating net leasing cost
reduction policies in order to continue maximizing profits.
Further, the implementation of appropriate maintenance and repair plans is of the utmost importance inmaintaining and enhancing the competitiveness and market value of the properties as well as ensuring
stable operations and high tenant satisfaction. Therefore, INV will continue to monitor current strategicplans with flexible implementation as it sees fit. Especially for hotels, INV will carefully execute the plans
for renovations and replacement of fixtures and fittings in order to maintain and increase revenues.
(iii) Financial strategy
INV has obtained its initial credit rating, strengthened its relationship with existing lenders and enhanced its
lender formation via adding six new lenders including Japan Post Bank Co., Ltd. in order to further
stabilize its financial base. Going forward, INV will work on diversifying financing measures including
issuing investment corporation bonds. Also, INV seeks to maximize unitholders’ value by way of extension
and diversification of its borrowing terms, further reduction of borrowing costs, solicitation of new
financial institutions and further strengthening of its lender formation.
(iv) Compliance risk management
While the executive officer of INV concurrently serves as the representative director at the Asset Manager,
two supervisory directors (an attorney and a certified public account) oversee the execution of the executive
officer’s duties via the Board of Directors of INV. In addition, the compliance officer of the Asset Manager
attends each meeting of the Board of Directors in the capacity of an observer.
The Asset Manager has a compliance officer who is responsible for compliance with laws, regulations andother relevant matters as well as overall management of transactions with sponsor related parties. Moreover,it has in place a compliance committee which, chaired by such compliance officer, is in charge ofdeliberating on compliance with laws, regulations and other relevant matters as well as transactions withsponsor related parties. Compliance committee meetings are attended by an outside expert (an attorney)
who, sitting in as a compliance committee member, conducts rigorous deliberations on the existence of
conflicts of interest in transactions with sponsor related parties as well as strict examinations with respect to
INV’s compliance with laws and regulations.
INV intends to continually take steps to strengthen its compliance structure.

29

6

Significant subsequent events(I) Issuance of new investment units
INV resolved on February 22, 2017 at its Board of Directors Meeting to the issuance of new investment units(“Public Offering”) and secondary offering of investment units as per the below.

(i)Issuance of new investment units through Public Offering
Number of investment units to be offered: 185,000 investment units

Use of proceeds: INV will use the proceeds from the Public
Offering for the acquisitions of “Royal Parks
Tower Minami-Senju” and “Royal Parks Seasir
Minami-Senju” as described in “(c) Property
Acquisition” below.

(ii) Secondary offering of investment units (overallotment secondary offering)Number of investment units to be offered in the secondary offering:

9,250 investment units(iii) Issuance of new investment units through third-party allotment (Note)
Number of investment units to be offered (maximum):

9,250 investment units

Allottee: Mizuho Securities Co., Ltd.

Use of proceeds: INV will keep the proceeds as cash-on-handand use for future asset acquisition. The
procured funds will be deposited at banks until
disbursement.

(Note) There may be cases where there will be no subscription for whole or part of the investment units to be issued
through the third-party allotment, resulting in a commensurate shortfall in the ultimate number of investment
units to be issued through the third-party allotment, due to forfeiture, or there may be cases where such issuanceitself will not take place at all30

(II) Borrowing of funds
INV has decided today to obtain new loans in order to acquire properties described in “(c) Property
Acquisition” below and related expenses. The details of loans are as follows:(i)

New Syndicate Loan (G)LenderMizuho Bank, Ltd.
Development Bank of Japan, Inc.
Resona Bank, Limited
The Bank of Fukuoka, Ltd.
The Shizuoka Bank, Ltd.
The Nomura Trust and Banking Co.,Ltd.
AEON Bank, Ltd.
The Dai-ichi Life Insurance Company,
LimitedThe Gunma Bank, Ltd.
The Towa Bank, Ltd.

Borrowing
Date

BorrowingAmount(JPY million)

Interest Rate(per annum)

Principal
Maturity
Date

Borrowing
MethodMarch 14,
2017

3,250

Variable interest rate
(Note 1)March 14,2020

Unsecured /with noguarantee

March 14,
2017

3,250

Variable interest rate
(Note 2)

March 14,2021

Unsecured /with noguarantee

March 14,
2017

4,750

Variable interest rate
(Note 3)

March 14,2022

Unsecured /with noguarantee

Total

11,250(Note 1)1-month JPY TIBOR (Base Rate) + spread (0.40%)(Note 2)1-month JPY TIBOR (Base Rate) + spread (0.50%)(Note 3)1-month JPY TIBOR (Base Rate) + spread (0.60%)(ii) Term Loan (F)LenderSumitomo Mitsui Banking
Corporation.

Borrowing
Date

BorrowingAmount(JPY million)

Interest Rate(per annum)

Principal
Maturity
Date

Borrowing
MethodMarch 14,
2017

3,000

Variable interest rate
(Note)

September 14,
2020

Unsecured /with noguarantee

Total

3,000

(Note)1-month JPY TIBOR (Base Rate) + spread (0.45%)

31

(III)

Property acquisition
The Asset Manager has decided on February 22, 2017 to acquire the two residential properties as follows:

Use

Acquisition
price(JPY million)(Note 1)

Appraisal value(JPY million)(Note 2)

Property
number

Property nameLocation

A105

Royal Parks
Tower
Minami-Senju

Arakawa-ku,
Tokyo

21,879

Royal Parks
SeasirMinami-Senju

Arakawa-ku,
Tokyo

2,683

2,710

24,562

24,81022,100Residential
A106

Total

SellerLegal formof asset

SakuraTokutei
Mokuteki
KaishaMomo
Tokutei
Mokuteki
KaishaTrustbeneficiaryinterest(Note 1) Acquisition price does not include property taxes, city planning taxes, national or local consumption taxes;
hereinafter the same
(Note 2) The appraisal value is as of December 1, 2016 based on the appraisal reports by Japan Real Estate Institute(Note 3) Figures are rounded down to the nearest million yen

32

Overview of the Investment Corporation
1

Overview of Investment
By Period
Results Dates

23rd fiscal
periodAs of Dec. 31,
2014

24th fiscal
periodAs of Jun. 30,
2015

25th fiscal
periodAs of Dec. 31,
2015

26th fiscal
periodAs of Jun. 30,
2016

27th fiscal
periodAs of Dec. 31,
2016

10,000,000

10,000,000

10,000,000

10,000,000

10,000,000

2,668,686

2,668,686

3,193,686

3,675,824

3,675,824

53,09653,09682,465

120,367

120,367

12,148

10,731

10,587

12,135

15,634

Number of issuable
investment units(Unit)
Number ofinvestment units
issued andoutstanding(Unit)
Unitholders’ capital(JPY million)
Number of total
unitholders
2

Notes regarding Unitholders

Major unitholders at the end of the reporting period are as below.
Name

Number of units held

% of total number of investment
units issued and outstanding

Calliope Godo Kaisha
Japan Trustee Services Bank, Ltd.
(trust account)
Trust & Custody Services Bank, Ltd.
(securities investment trust account)
The Master Trust Bank of Japan, Ltd.
(trust account)
Rayo Godo Kaisha
The Nomura Trust and Banking Co.,
Ltd. (investment trust account)
THE BANK OF NEW YORK 133970
THE BANK OF NEW YORKMELLON SA/NV 10
NORTHERN TRUST CO. (AVFC)
RE IEDU UCITS CLIENTS NONLENDING
15 PCT TREATY ACCOUNT
JP MORGAN CHASE BANK 385628

609,942

16.59

472,40212.85

395,03410.74

349,8209.51

149,9254.07

141,012

3.83

87,0872.36

75,6742.05

52,8491.43

47,626

1.29

Total

2,381,371

64.78(Note) Percentages are rounded down to two decimal places33

3

Notes regarding Directors

Directors at the end of the reporting period are as below.

Position

Name

Executive Director

Naoki Fukuda

Primary responsibilities

Takashi Takahashi
Supervisory Director
Hiroyuki Fujimoto
Auditor(Note)

Directors’ remunerationfor operating period(JPY thousand)President and CEO,
Consonant Investment
Management Co., Ltd.
Attorney, Ocean General
Law Office
Tax accountant, CPA
Fujimoto Office

Ernst & Young
ShinNihon LLC

-

2,400
2,400
11,700Executive and supervisory directors do not hold INV’s units either in their names or in the names of third parties.
In addition, while they may be directors of organizations not listed above, those organizations as well as thoselisted above have no conflicts of interest with INVDetermination policy for dismissal or non-reappointment of Auditor
The auditing agreement with the auditor is renewed every accounting period. Dismissals are made inaccordance with the Investment Trust Act, and in addition, non-reappointments are considered by the boardof directors of INV by comprehensively taking into account the auditing quality, auditor remuneration, andother various circumstances.
Matters related to parties that have received a business suspension order within the past two years
The Auditor of INV received business suspension order from the Financial Services Agency on December
22, 2015 to suspend accepting new engagements for 3 months (from January 1, 2016, to March 31, 2016).
4

Asset Management Company, Asset Custody Companies, and General Administrative AgentsThe asset management company, asset custody companies, and general administrative agents at the end of
the Reporting Period are as below.
Delegation category
Asset management company
Asset custody company
General administrative agent (institutional operations(Note 1) administration of unitholders’ registry, etc.)
General administrative agent (institutional operations(Note 2))
General administrative agent (accounting operations,
etc.)

Name
Consonant Investment Management Co., Ltd.
Sumitomo Mitsui Trust Bank, Limited
Sumitomo Mitsui Trust Bank, Limited
Consonant Investment Management Co., Ltd.
EP Consulting Services Corporation
Mitsubishi UFJ Trust and Banking Corporation
Limited (Note 3) / Sumitomo Mitsui Trust
Bank, Limited (Note 4)

Special account management company

34

(Note 1) Of the administrative tasks for the INV’s institutional operations, tasks related to the mailing of general unitholders’meetings and the receipt and counting of voting forms are delegated(Note 2) (i) Tasks related to the running of general unitholders’ meetings for INV (excluding tasks related to the mailing ofgeneral unitholders’ meetings and the receipt and counting of voting forms), (ii) Tasks related to the running of themeetings of the Board of Directors of INV, and (iii) the aforementioned in (i) or tasks incidental or related to (ii)are delegated(Note 3) Conducts administrative tasks related to the creation, maintenance, and disposition of transfer savings accountregisters for special accounts of unitholders of the INV before the merger (former Tokyo Growth REIT Investment
Inc.) as well as tasks related to other transfer savings account registers(Note 4) Conducts administrative tasks related to the creation, maintenance, and disposition of transfer savings accountregisters for special accounts of unitholders of the former LCP as well as tasks related to other transfer savings
account registers

35

Status of Investment Corporation’s Assets under Management
1

Composition of INV’s Assets
Fiscal period ended June 30, 2016(as of June 30, 2016)

Type of

Purpose

Geographic area

asset

(Note 1)

Percentage of total
assets(%)

Amount held
(JPY million)(Note 2)

Greater Tokyo
area
Major regional
Residences
citiesSubtotal
Greater Tokyo
area
Offices/Commercial Major regional
Facilities
citiesSubtotalRealestateGreater Tokyo
area
Major regional
Parking lots, etc.
citiesSubtotal
Greater Tokyo
area
Major regional
HotelscitiesSubtotal
Total real estate
Greater Tokyo
area
Major regional
Residences
citiesSubtotal
Greater Tokyo
area
Offices/Commercial Major regional
Facilities
citiesReal
Subtotalestate inGreater Tokyo
trust
area
Major regional
Parking lots, etc.
citiesSubtotal
Greater Tokyo
area
Major regional
HotelscitiesSubtotal

Fiscal period ended December 31, 2016(as of December 31, 2016)
Percentage of
total assets(%)

Amount held
(JPY million)(Note 2)

-

-

-

-

-

-

-

-

-

-

-

-

705

0.2

704

0.3

-

-

-

-

705

0.2

704

0.3

100

0.0

100

0.0

-

-

-

-

100

0.0

100

0.0

-

-

-

-

-

-

-

-

806

0.3

805

0.3

51,86018.3

51,61018.6

16,413

5.8

16,225

5.8

68,27424.0

67,835

24.5

7,023

2.5

7,002

2.5

5,828

2.1

5,782

2.1

12,852

4.5

12,785

4.6

-

-

-

-

-

-

-

-

-

-

-

-

102,44536.1

102,297

36.8

77,092

27.1

76,214

27.5

179,537

63.2

178,511

64.4

Total real estate in trust

260,664

91.7

259,133

93.4

Deposits and other assets

22,6348.0

17,423

6.3

Total assets (Note 3)

284,106

100.0

277,361100.0(261,471)(92.0)(259,938)(93.7)

36

(Note 1)(Note 2)
(Note 3)

2

“Greater Tokyo area” refers to Tokyo, Kanagawa, Chiba and Saitama“Amount held” is from the balance sheet as of the end of the reporting period and is calculated by deducting
accumulated depreciation from the acquisition price (including acquisition related costs)
The figures indicated in parenthesis under “Total assets” show the amounts related to owned real estate

Major Properties

The overview of the Investment Corporation’s major properties (top 10 properties by book value) at the endof the Reporting Period is as below.

Name of property

Book value(JPY
million)Leasablearea (m )Leased area(m )Occupancy
rate (%)(Note 2)

Ratio of rental
revenue (%)

22Main use

D43

Hotel MyStays Gotanda Station

24,6528,752.42

8,752.42

100.0

4.2

Hotel

D44

Hotel Epinard Nasu

20,62037,702.33

37,702.33

100.0

10.9

Hotel

D47

Hotel MyStays Premier Kanazawa (Note 1)

13,667

13,250.03

13,250.03

100.0

3.6

Hotel

D21

APA Hotel Yokohama-Kannai

8,117

6,568.51

6,568.51

100.0

2.5

Hotel

D45

Hotel MyStays Fukuoka Tenjin

8,022

5,083.06

5,083.06

100.0

2.0

Hotel

D46

Hotel MyStays Hamamatsucho

7,935

1,951.90

1,951.90

100.0

1.2

Hotel

D24

Hotel MyStays Haneda

7,641

5,400.16

5,400.16

100.0

1.9

Hotel

A75

Spacia Ebisu

6,550

7,794.91

7,328.56

94.0

2.2

Residence

D03

Hotel MyStays Kyoto-shijo

5,818

7,241.51

7,241.51

100.0

3.9

Hotel

D25

Hotel MyStays Kameido P1

5,514

4,349.67

4,349.67

100.0

2.0

Hotel

108,540

98,094.50

97,628.15

99.5

34.3

-

Total

(Note 1) The name of the property has been changed from Hotel MyStays Kanazawa on October 1, 2016. The same shall apply
hereinafter(Note 2) “Occupancy rate” is computed by dividing the leased area by leasable area, and rounded to one decimal place37

3

Asset Portfolio of Real Estate, etc.

The portfolio of the properties (real estate and trust beneficiary interest in real estate) held by theInvestment Corporation at the end of the Reporting Period is as below.

Name of property

Location(Note 1)

Legal form of Leasable area
asset
(m2)

Appraisal value
as ofBook value
December 31,
(JPY
2016
million)(JPY million)(Note 2)

A26

Nisshin Palacestage
Daitabashi

1-31-2 Izumi, Suginami-ku, Tokyo

Trust
beneficiaryinterest

1,771.13

1,150

1,123

A27

Nisshin Palacestage HigashiNagasaki

5-4-1 Nagasaki, Toshima-ku, Tokyo

Trust
beneficiaryinterest

2,681.94

1,270

1,092

A28

Growth Maison Gotanda

2-26-6 Nishi-Gotanda, Shinagawa-ku,
Tokyo

Trust
beneficiaryinterest

1,051.50

994

827

A29

Growth Maison Kameido

6-58-16 Kameido, Koto-ku, Tokyo

Trust
beneficiaryinterest

1,367.96

1,110

984

A30

Emerald House

3-27-18 Itabashi, Itabashi-ku, Tokyo

Trust
beneficiaryinterest

2,152.31

1,380

1,374

A31

Harmonie Ochanomizu

2-5-5 Yushima, Bunkyo-ku, Tokyo

Trust
beneficiaryinterest

1,748.24

1,330

1,355

A32

Suncrest Shakujii-Koen

3-15-35 Takanodai, Nerima-ku, Tokyo

Trust
beneficiaryinterest

3,029.16

1,070

1,090

A33

Growth Maison
Shin-Yokohama

3-16-2 Shin-Yokohama, Kohoku-ku,
Yokohama-shi, Kanagawa

Trustbeneficiaryinterest

1,858.44

1,180

966

A34

Belle Face
Ueno-Okachimachi

1-27-5 Higashi-Ueno, Taito-ku, Tokyo

Trust
beneficiaryinterest

1,351.11

1,040

956

A35

Grand Rire Kameido

3-39-12 Kameido, Koto-ku, Tokyo

Trust
beneficiaryinterest

1,562.26

979

829

A36

Growth Maison Ikebukuro3-31-14 Nishi-Ikebukuro, Toshima-ku,
Tokyo

Trust
beneficiaryinterest

952.89

882

752

A37

Growth Maison Yoga

1-15-15 Okamoto, Setagaya-ku, Tokyo

Trust
beneficiaryinterest

1,015.34

703

750

A38

Route Tachikawa

3-7-6 Nishikicho, Tachikawa-shi,
Tokyo

Trust
beneficiaryinterest

1,368.57

641

641

A39

Shibuya-Honmachi Mansion

2-35-2 Honmachi, Shibuya-ku, Tokyo

Trust
beneficiaryinterest

1,167.50

624

655

38

Name of property

Location(Note 1)

A40

City Heights Kinuta

4-13-15 Kinuta, Setagaya-ku, Tokyo

Trust
beneficiaryinterest

1,235.93

492

650

A41

Acseeds Tower
Kawaguchi- Namiki

2-5-13 Namiki, Kawaguchi-shi,
SaitamaTrustbeneficiaryinterest

1,210.74

716

546

A42

Capital Heights Kagurazaka

71-1 Enokicho, Shinjuku-ku, Tokyo

Trust
beneficiaryinterest

1,126.65

567

621

A43

College Square Machida

3-4-4 Nakamachi, Machida-shi, Tokyo

Trust
beneficiaryinterest

1,047.75

534

562

A44

Belair Meguro

1-2-15 Meguro, Meguro-ku, Tokyo

Trust
beneficiaryinterest

557.05

601

561

A45

Wacore Tsunashima I

2-7-47 Tarumachi, Kohoku-ku,
Yokohama-shi, Kanagawa

Trustbeneficiaryinterest

907.46

515

531

A46

Foros Nakamurabashi

1-6-6 Kouyama, Nerima-ku, Tokyo

Trust
beneficiaryinterest

815.77

566

524

A47

Growth Maison Kaijin

5-29-51 Kaijin, Funabashi-shi,
Chiba

Trust
beneficiaryinterest

2,040.27

449

523

A48

College Square Machiya

7-3-1 Arakawa, Arakawa-ku, Tokyo

Trust
beneficiaryinterest

871.35

536

460

A51

City House Tokyo Shinbashi

6-19-1 Shinbashi, Minato-ku, Tokyo

Trust
beneficiaryinterest

3,364.00

3,160

2,342

A52

Winbell Kagurazaka

6-15 Shin-Ogawacho, Shinjuku-ku, Tokyo

Trust
beneficiaryinterest

4,032.70

3,850

3,063

A53

Nishiwaseda Cresent
Mansion3-18-9 Nishi-Waseda, Shinjuku-ku, Tokyo

Trust
beneficiaryinterest

4,310.77

2,400

1,883

A54

Lexington Square
Akebonobashi

3-8 Yochomachi, Shinjuku-ku, Tokyo

Trust
beneficiaryinterest

1,987.88

1,780

1,338

A56

Casa Eremitaggio

1-14-15 Nakane, Meguro-ku, Tokyo

Trust
beneficiaryinterest

1,197.19

1,090

961

A59

Towa City Coop ShinotsukaII

5-49-7 Higashi-Ikebukuro, Toshima-ku,

Trustbeneficiaryinterest

1,627.13

1,070

824

A61

Bichsel Musashiseki

1-22-7 Sekimachi-Kita, Nerima-ku, Tokyo

Trust
beneficiaryinterest

1,220.24

705

556

Tokyo

39

Legal form of Leasable area
asset
(m2)

Appraisal value
as ofBook value
December 31,
(JPY
2016
million)(JPY million)(Note 2)

Location(Note 1)Name of property

Legal form of Leasable area
asset
(m2)

Appraisal value
as ofBook value
December 31,
(JPY
2016
million)(JPY million)(Note 2)Trust
beneficiaryinterest

1,969.45

1,180

864

Trust
beneficiaryinterest

3,426.36

1,350

1,022

Trust
beneficiaryinterest

1,929.59

556

398

Trust
beneficiaryinterest

1,528.58

446

289

Trust
beneficiaryinterest

705.75

266

232

Trust
beneficiaryinterest

1,430.64

1,150

867

Trust
beneficiaryinterest

784.74

594

446

Trust
beneficiaryinterest

4,460.56

1,230

987

3-6-22 Higashi, Shibuya-ku, Tokyo

Trust
beneficiaryinterest

7,794.91

7,900

6,550

Neo Prominence

3-21-5 Shimo, Kita-ku, Tokyo

Trust
beneficiaryinterest

3,574.70

1,920

1,622

A77

Invoice Shin-Kobe
Residence

3-3-8 Ikutacho, Chuo-ku, Kobe-shi,

Trustbeneficiaryinterest

2,773.71

1,420

1,194

A78

Cosmo Court Motomachi

Trustbeneficiaryinterest

2,310.49

1,080

918

A79

Revest Honjin

Trustbeneficiaryinterest

1,933.80

790

635

A80

Revest Matsubara

Trustbeneficiaryinterest

1,955.40

787

622

A81

Sun Terrace Minami
Ikebukuro

Trustbeneficiaryinterest

898.70

724

600

A82

Alba Noritake Shinmachi

Trustbeneficiaryinterest

1,731.68

721

573

A62

Lexel Mansion Ueno
Matsugaya

A63

Towa City Coop Sengencho

A64

Royal Park Omachi

A65

Lexington Square
Haginomachi

A66

Visconti Kakuozan

A71

Lexington Square Daitabashi

1-33-18 Izumi, Suginami-ku, Tokyo

A72

Lexington Square Honjo
Azumabashi

4-20-6 Higashikomagata, Sumida-ku,

A73

AMS TOWER Minami 6-Jo

A75

Spacia Ebisu

A76

3-10-2 Matsugaya, Taito-ku, Tokyo

4-338-2 Sengencho, Nishi-ku,
Yokohama-shi, Kanagawa
2-11-10 Omachi, Aoba-ku, Sendai-shi,
Miyagi1-15-16 Haginomachi, Miyagino-ku,
Sendai-shi, Miyagi
2-44 Otanacho, Chikusa-ku, Nagoya-shi,
Aichi

Tokyo
2-5-15 Minami 6-Jo Nishi, Chuo-ku,
Sapporo-shi, Hokkaido

Hyogo
3-12-20 Motomachidori, Chuo-ku,
Kobe-shi, Hyogo
2-13 Toriidori, Nakamura-ku, Nagoya-shi,
Aichi
3-13-12 Matsubara, Naka-ku, Nagoya-shi,
Aichi
2-22-6 Minami-Ikebukuro, Toshima-ku,
Tokyo
3-6-8 Noritake Shinmachi, Nishi-ku,
Nagoya-shi, Aichi

40

Location(Note 1)Name of property

A83

Revest Meieki Minami

A84

Revest Heian

A85

Vendir Hamaotsu Ekimae

A86

Salvo Sala

A87

Excellente Kagurazaka

A88

Luna Court Edobori

A89

Winntage Kobe Motomachi

A90

Queen's Court Fukuzumi

A91

Corp Higashinotoin

2-13-33 Meieki-Minami, Nakamura-ku,
Nagoya-shi, Aichi
2-13-17 Heian, Kita-ku, Nagoya-shi,
Aichi

1-2-15 Hamaotsu, Otsu-shi, Shiga

2-6-21 Shimanouchi, Chuo-ku,
Osaka-shi,Osaka
128-1 Yamabukicho, Shinjuku-ku, Tokyo,
and other one parcel
3-4-11 Edobori, Nishi-ku, Osaka-shi,Osaka
7-2-2 Motomachidori, Chuo-ku,
Kobe-shi, Hyogo

1-3-10 Fukuzumi, Koto-ku, Tokyo
380-1 Kawaranomachi, Higashinotoindori
Nijo Kudaru, Nakagyo-ku, Kyoto-shi,
Kyoto, and other two parcels

5-14-17 Higashi-Oi, Shinagawa-ku,
Tokyo

A92

Belair Oimachi

A93

Siete Minami-Tsukaguchi

A94

Prime Life Sannomiya
Isogami Koen

A95

HERMITAGE NANBA
WEST

A96

Century Park Shinkawa
1-bankan

Nagoya-shi, Aichi

A97

West Avenue

1-5-17 Nishi, Kunitachi-shi, Tokyo

A98

Little River Honmachibashi

3-18 Minami-Tsukaguchimachi,
Amagasaki-shi, Hyogo
4-3-23 Isogamidori, Chuo-ku, Kobe-shi,Hyogo
4-10-3 Sakuragawa, Naniwa-ku,
Osaka-shi, Osaka
4-1-2 Shinkawacho, Minato-ku,

1-34 Honmachibashi, Chuo-ku,
Osaka-shi, Osaka

41

Legal form of Leasable area
asset
(m2)

Appraisal value
as ofBook value
December 31,
(JPY
2016
million)(JPY million)(Note 2)Trust
beneficiaryinterest

1,634.60

728

564

Trust
beneficiaryinterest

1,554.03

678

561

Trust
beneficiaryinterest

2,670.66

713

542

Trust
beneficiaryinterest

1,428.12

625

515

Trust
beneficiaryinterest

701.92

615

521

Trust
beneficiaryinterest

1,185.50

570

496

Trust
beneficiaryinterest

1,433.35

606

481

Trust
beneficiaryinterest

765.18

584

439

Trust
beneficiaryinterest

1,029.05

513

425

Trust
beneficiaryinterest

530.60

491

398

Trust
beneficiaryinterest

1,020.86

433

357

Trust
beneficiaryinterest

789.12

434

354

Trust
beneficiaryinterest

992.76

421

339

Trust
beneficiaryinterest

1,477.62

424

323

Trust
beneficiaryinterest

794.80

322

316

Trust
beneficiaryinterest

974.81

391

298

Location(Note 1)Name of property

Legal form of Leasable area
asset
(m2)

Appraisal value
as ofBook value
December 31,
(JPY
2016
million)(JPY million)(Note 2)Trust
beneficiaryinterest

761.18

337

281

Trust
beneficiaryinterest

5,230.18

1,920

1,835

5-45-10 Mukojima, Sumida-ku, Tokyo

Trust
beneficiaryinterest

2,940.20

1,720

1,731

Lieto Court Nishi-Ojima

2-41-14 Ojima, Koto-ku, Tokyo

Trust
beneficiaryinterest

2,048.28

1,710

1,673

A103

Royal Parks Momozaka

5-38 Fudegasakicho, Tennouji-ku,
Osaka-shi, Osaka

Trust
beneficiaryinterest

8,776.26

3,000

2,995

A104

Royal Parks Shinden

3-35-20 Shinden, Adachi-ku, Tokyo

Trust
beneficiaryinterest

15,797.29

5,110

5,203

144,376.66

77,84367,835

A99

Prime Life Mikage

A100

City Court Kitaichijo

A101

Lieto Court Mukojima

A102

2-25-11 Mikage Tsukamachi,
Higashinada-ku, Kobe-shi, Hyogo
1-6-3 Kita 1-jo Higashi, Chuo-ku,
Sapporo-shi, Hokkaido

Subtotal

B08

Kindai Kagakusha Building

2-7-15 Ichigaya-Tamachi, Shinjuku-ku,
Tokyo

Trust
beneficiaryinterest

1,451.54

1,040

1,207

B09

Shinjuku Island

6-5-1 Nishi-Shinjuku, Shinjuku-ku,
TokyoReal estate526.43

541

704

B14

Lexington Plaza
Nishigotanda

5-2-4 Nishi-Gotanda, Shinagawa-ku,
Tokyo

Trust
beneficiaryinterest

6,033.58

4,100

4,684

B15

Cross Square NAKANO

5-24-18 Nakano, Nakano-ku, Tokyo

Trust
beneficiaryinterest

2,145.00

1,050

1,111

B16

Ohki Aoba Building

9-7 Futsukamachi, Aoba-ku,
Sendai-shi, Miyagi

Trustbeneficiaryinterest

2,178.37

675

733

B17

Lexington Plaza Hachiman

3-1-50 Hachiman, Aoba-ku,
Sendai-shi, Miyagi

Trustbeneficiaryinterest

8,419.15

3,550

3,105

B18

AEON TOWN Sukagawa

105 Furukawa, Sukagawa-shi,
Fukushima

Trust
beneficiaryinterest

18,440.58

2,340

1,943

39,194.65

13,296

13,490

81.04

113

100

81.04

113

100

Subtotal
C01

Times Kanda-Sudacho 4th

1-22-7, 1-22-15 Kanda sudacho,
Chiyoda-ku, Tokyo
Subtotal

42

Real estateName of property

Location(Note 1)

D01

Hotel MyStays Kanda

1-2-2 Iwamotocho, Chiyoda-ku, Tokyo

Trust
beneficiaryinterest

2,585.72

5,260

3,066

D02

Hotel MyStays Asakusa

1-21-11 Honjo, Sumida-ku, Tokyo

Trust
beneficiaryinterest

3,327.38

5,530

2,561

D03

Hotel MyStays Kyoto-Shijo

52 Kasabokocho, Higashiiru,
Aburanokoji, Shijyodori,Shimogyo-ku, Kyoto-shi, Kyoto

Trustbeneficiaryinterest

7,241.51

15,6005,818

D04

MyStays Shin-Urayasu
Conference Center

2-1-4 Akemi, Urayasu-shi, Chiba

Trustbeneficiaryinterest

6,232.30

7,140

4,760

D05

Hotel MyStays Maihama

3-5-1 Tekkodori, Urayasu-shi, Chiba

Trustbeneficiaryinterest

2,456.36

6,690

4,722

D06

Hotel Vista Premio Dojima

2-4-1 Sonezakishinchi, Kita-ku, Osaka

Trust
beneficiaryinterest

9,445.32

7,370

3,706

D07

Hotel MyStays
Nagoya-Sakae

2-23-22 Higashi-Sakura, Naka-ku,
Nagoya-shi, Aichi

Trust
beneficiaryinterest

9,064.71

5,850

2,792

D08

Hotel MyStays
Sakaisuji-Honmachi

1-4-8 Awaji-machi, Chuo-ku,
Osaka-shi, Osaka

Trust
beneficiaryinterest

4,188.83

8,580

2,441

D09

Hotel MyStays Yokohama

4-81 Sueyoshicho, Naka-ku,
Yokohama-shi, Kanagawa

Trustbeneficiaryinterest

7,379.43

3,500

2,039

D10

Hotel MyStays Nippori

5-43-7 Higashi-Nippori, Arakawa-ku,
Tokyo

Trust
beneficiaryinterest

1,719.29

3,630

1,838

D11

Hotel MyStays
Fukuoka-Tenjin-Minami

3-14-20 Haruyoshi, Chuo-ku,
Fukuoka-shi, Fukuoka

Trustbeneficiaryinterest

3,412.71

4,390

1,526

D12

Flexstay Inn Iidabashi

3-26 Shin-Ogawamachi, Shinjuku-ku,
Tokyo

Trust
beneficiaryinterest

2,953.38

2,180

1,366

D13

Hotel MyStays Ueno
Inaricho

1-5-7 Matsugaya, Taito-ku, Tokyo

Trust
beneficiaryinterest

1,150.76

2,580

1,280

D14

Flexstay Inn Shinagawa

1-22-19 Kita-Shinagawa,Shinagawa-ku, Tokyo

Trust
beneficiaryinterest

1,134.52

2,130

1,221

D15

Flexstay Inn Tokiwadai

1-52-5 Tokiwadai, Itabashi-ku, Tokyo

Trust
beneficiaryinterest

2,539.75

2,300

1,230

D16

Flexstay Inn Sugamo

3-6-16 Sugamo, Toshima-ku, Tokyo

Trust
beneficiaryinterest

2,089.86

2,170

1,157

43

Legal form of Leasable area
asset
(m2)

Appraisal value
as ofBook value
December 31,
(JPY
2016
million)(JPY million)(Note 2)Name of property

Location(Note 1)

D17

Hotel MyStays Otemae

1-3-2 Tokuicho, Chuo-ku, Osaka-shi,
Osaka

Trust
beneficiaryinterest

4,956.66

4,720

1,169

D18

Flexstay Inn Kiyosumi
Shirakawa

1-12-16 Tokiwa, Koto-ku, Tokyo

Trust
beneficiaryinterest

2,673.64

1,320

737

D19

Flexstay Inn Nakanobu P1

4-27-12 Futaba, Shinagawa-ku, Tokyo

Trust
beneficiaryinterest

770.56

837

578

D20

Flexstay Inn Nakanobu P2

4-27-8 Futaba, Shinagawa-ku, Tokyo

Trust
beneficiaryinterest

391.49

403

284

D21

APA Hotel
Yokohama-Kannai

3-37-2 Sumiyoshicho, Naka-ku,
Yokohama-shi, Kanagawa

Trustbeneficiaryinterest

6,568.51

9,660

8,117

D22

Hotel Nets Hakodate

26-17 Honcho, Hakodate-shi,
Hokkaido

Trustbeneficiaryinterest

7,961.26

3,580

2,707

D23

Flexstay Inn Shirogane

5-10-15 Shirokane, Minato-ku, Tokyo

Trust
beneficiaryinterest

1,754.06

2,310

2,108

D24

Hotel MyStays Haneda

5-1-13 Haneda, Ota-ku, Tokyo

Trust
beneficiaryinterest

5,400.16

8,490

7,641

D25

Hotel MyStays Kameido P1

6-32-1 Kameido, Koto-ku, Tokyo

Trust
beneficiaryinterest

4,349.67

7,150

5,514

D26

Hotel MyStays Ueno
Iriyaguchi

5-5-13 Higashi-Ueno, Taito-ku, Tokyo

Trust
beneficiaryinterest

2,247.92

4,520

3,770

D27

Hotel MyStays Kameido P2

6-7-8 Kameido, Koto-ku, Tokyo

Trust
beneficiaryinterest

2,793.99

4,840

3,681

D28

Hotel Vista Shimizu

1-23 Masagocho, Shimizu-ku,
Shizuoka-shi, Shizuoka

Trustbeneficiaryinterest

3,559.81

2,400

2,144

D29

Super Hotel Shinbashi/
Karasumoriguchi

5-16-4 Shinbashi, Minato-ku, Tokyo

Trust
beneficiaryinterest

1,403.89

1,800

1,618

D30

Flexstay Inn Higashi-Jujo

2-10-2 Nakajujo, Kita-ku, Tokyo

Trust
beneficiaryinterest

1,714.53

1,430

1,271

D31

Hotel MyStays Utsunomiya

2-4-1 Higashi-Shukugo,
Utsunomiya-shi, Tochigi

Trustbeneficiaryinterest

11,733.23

1,280

1,238

D32

Flexstay Inn
Kawasaki-Kaizuka

1-13-2 Kaizuka, Kawasaki-ku,
Kawasaki-shi, Kanagawa

Trustbeneficiaryinterest

1,190.57

1,180

962

44

Legal form of Leasable area
asset
(m2)

Appraisal value
as ofBook value
December 31,
(JPY
2016
million)(JPY million)(Note 2)Name of property

Location(Note 1)

Legal form of Leasable area
asset
(m2)

Appraisal value
as ofBook value
December 31,
(JPY
2016
million)(JPY million)(Note 2)

D33

Comfort Hotel Toyama

1-3-2 Takara-machi, Toyama-shi,ToyamaTrustbeneficiaryinterest

3,305.64

1,090

963

D34

Flexstay Inn
Kawasaki-Ogawacho

15-9 Ogawacho, Kawasaki-ku,
Kawasaki-shi, Kanagawa

Trustbeneficiaryinterest

725.60

1,060

896

D35

Flexstay Inn Ekoda

8-6 Sakaecho, Nerima-ku, Tokyo

Trust
beneficiaryinterest

3,932.93

5,040

5,001

D36

Super Hotel Tokyo-JR
Tachikawa Kitaguchi

2-21-9 Akebonocho, Tachikawa-shi,
Tokyo

Trust
beneficiaryinterest

1,832.97

1,230

1,156

D37

Super Hotel JR
Ueno-iriyaguchi

7-9-14 Ueno, Taito-ku, Tokyo

Trust
beneficiaryinterest

1,279.16

1,220

1,121

D38

Hotel MyStays Shinsaibashi

1-9-30 Nishi-Shinsaibashi, Chuo-ku,
Osaka-shi, Osaka

Trust
beneficiaryinterest

1,942.01

3,410

3,137

D39

Comfort Hotel Kurosaki

3-13-13 Kurosaki, Yahatanishi-ku,
Kitakyusyu-shi, Fukuoka

Trustbeneficiaryinterest

3,207.60

1,200

1,134

D40

Comfort Hotel Maebashi

2-18-14 Omotecho, Maebashi-shi,
Gunma

Trust
beneficiaryinterest

3,660.96

1,160

1,136

D41

Comfort Hotel
Tsubame-Sanjo

2-115 Sugoro, Sanjo-shi, Niigata

Trustbeneficiaryinterest

3,099.90

1,060

1,006

D42

Comfort Hotel Kitami

3-4 Ohdori-Nishi, Kitami-shi,
Hokkaido

Trustbeneficiaryinterest

3,009.50

890

843

D43

Hotel MyStays Gotanda
Station

2-6-8 Nishi-Gotanda, Shinagawa-ku,
Tokyo

Trust
beneficiaryinterest

8,752.42

24,80024,652

D44

Hotel Epinard Nasu

1-10 Kaidoue (and 59 other landparcels), Oaza-Takakuhei,
Nasu-machi, Nasu-gun, Tochigi

Trustbeneficiaryinterest

37,702.33

21,60020,620D45

Hotel MyStays Fukuoka
Tenjin3-5-7 Tenjin, Chuo-ku, Fukuoka-shi,
FukuokaTrustbeneficiaryinterest

5,083.06

8,280

8,022

D46

Hotel MyStays
Hamamatsucho

1-18-14 Hamamatsucho, Minato-ku,
Tokyo

Trust
beneficiaryinterest

1,951.90

8,010

7,935

D47

Hotel MyStays PremierKanazawa

2-13-1 Hirooka, Kanazawa-shi,Ishikawa

Trustbeneficiaryinterest

13,250.03

13,90013,667

D48

Takamatsu Tokyu REI Hotel

9-9 Hyogomachi, Takamatsu-shi,
KagawaTrustbeneficiaryinterest

7,148.17

2,170

2,135

45

Location(Note 1)Name of property

Legal form of Leasable area
asset
(m2)

Appraisal value
as ofBook value
December 31,
(JPY
2016
million)(JPY million)(Note 2)

Subtotal

226,275.96

236,940

178,511

Total

409,928.31

328,192

259,938(Note 1) “Location” is, in principle, based on the indicated address (jyukyohyoji), except that if the jyukyohyoji system has notbeen implemented for such property, the location is based on the land number (chiban)(Note 2) “Appraisal value” is the value appraised or researched as of the end of the fiscal period in accordance with the Articles
of Incorporation of INV and the regulations of The Investment Trusts Association, Japan by Asset Research andDevelopment Inc., Japan Real Estate Institute, Morii Appraisal & Investment Consulting Inc., The Tanizawa Sogo
Appraisal Co., Ltd. or Daiwa Real Estate Appraisal Co., Ltd.

46

Trends for the leasing operations of the properties owned by INV are as below.

Name of property

26th fiscal period(January 1, 2016 to June 30, 2016)
RentalOccupancy
Number ofrevenue
rate
Ratio oftenants(during(at end of
rental(at end of
period)period)revenueperiod)
(JPY
(%)
(%)
(unit)
thousand)(Note 1)
(Note 2)27th fiscal period(July 1, 2016 to December 31, 2016)
RentalOccupancy
Number ofrevenue
rate
Ratio oftenants(during(at end of
rental(at end of
period)period)revenueperiod)
(JPY
(%)
(%)
(unit)
thousand)(Note 1)
(Note 2)

A26

Nisshin Palacestage
Daitabashi

1

97.0

39,605

0.5

1

98.0

39,4940.4

A27

Nisshin Palacestage
Higashi- Nagasaki

1

93.2

45,952

0.6

1

96.5

43,8570.5

A28

Growth Maison Gotanda

1

100.0

27,349

0.3

1

100.0

27,3450.3

A29

Growth Maison Kameido

1

95.5

34,404

0.4

1

92.4

33,416

0.4

A30

Emerald House

1

100.0

50,753

0.6

1

96.9

43,2880.5

A31

Harmonie Ochanomizu

1

100.0

40,389

0.5

1

100.0

41,7030.4

A32

Suncrest Shakujii-Koen

1

84.3

34,709

0.4

1

94.0

34,5860.4

A33

Growth Maison
Shin-Yokohama

1

89.7

34,823

0.4

1

94.2

34,3470.4

A34

Belle Face
Ueno-Okachimachi

1

98.3

33,342

0.4

1

95.2

30,471

0.3

A35Grand Rire Kameido

1

100.0

26,619

0.3

1

100.0

26,6190.3

A36Growth Maison Ikebukuro

1

97.6

26,408

0.3

1

100.0

26,7330.3

A37Growth Maison Yoga

1

97.5

21,839

0.3

1

94.8

22,092

0.2

A38

Route Tachikawa

1

93.2

20,700

0.3

1

100.0

20,282

0.2

A39

Shibuya-Honmachi Mansion

1

95.9

20,473

0.3

1

91.9

19,621

0.2

A40City Heights Kinuta

1

100.0

17,446

0.2

1

94.6

16,1580.2

A41

Acseeds Tower KawaguchiNamiki

1

94.8

24,262

0.3

1

89.4

24,5560.3

A42Capital Heights Kagurazaka

1

97.2

18,752

0.2

1

97.2

18,5650.2

A43

College Square Machida

1

100.0

17,484

0.2

1

100.0

17,4840.2

A44

Belair Meguro

1

96.1

16,436

0.2

1

92.1

16,2590.2

A45

Wacore Tsunashima I

1

98.0

18,466

0.2

1

89.9

18,6900.2

A46

Foros Nakamurabashi

1

96.2

18,546

0.2

1

91.2

17,5970.2

A47

Growth Maison Kaijin

1

97.7

21,918

0.3

1

97.4

22,1450.2

A48

College Square Machiya

1

100.0

14,706

0.2

1

100.0

14,7060.2

A51City House Tokyo Shinbashi

1

96.1

90,692

1.1

1

93.3

92,2851.0

47

Name of property

26th fiscal period(January 1, 2016 to June 30, 2016)
RentalOccupancy
Number ofrevenue
rate
Ratio oftenants(during(at end of
rental(at end of
period)period)revenueperiod)
(JPY
(%)
(%)
(unit)
thousand)(Note 1)
(Note 2)27th fiscal period(July 1, 2016 to December 31, 2016)
RentalOccupancy
Number ofrevenue
rate
Ratio oftenants(during(at end of
rental(at end of
period)period)revenueperiod)
(JPY
(%)
(%)
(unit)
thousand)(Note 1)
(Note 2)

A52

Winbell Kagurazaka

1

98.6

107,429

1.3

1

95.5

101,878

1.1

A53

Nishiwaseda Cresent
Mansion1

100.0

72,347

0.9

1

95.8

73,724

0.8

A54

Lexington Square
Akebonobashi

1

95.4

51,132

0.6

1

96.7

49,4050.5

A56

Casa Eremitaggio

1

100.0

31,694

0.4

1

96.7

34,594

0.4

A59

Towa City Coop Shinotsuka II

1

97.6

35,168

0.4

1

96.3

35,1500.4

A61

Bichsel Musashiseki

1

95.7

24,923

0.3

1

91.5

22,9180.2

A62

Lexel Mansion Ueno
Matsugaya

1

100.0

46,988

0.6

1

96.4

34,7400.4

A63

Towa City Coop Sengencho

1

91.1

59,002

0.7

1

89.7

56,386

0.6

A64Royal Park Omachi

1

96.7

26,051

0.3

1

92.8

25,432

0.3

A65

Lexington Square
Haginomachi

1

100.0

17,646

0.2

1

92.1

17,5900.2

A66

Visconti Kakuozan

1

100.0

10,533

0.1

1

83.8

11,857

0.1

A71

Lexington Square Daitabashi

1

97.2

29,731

0.4

1

92.9

32,254

0.3

A72

Lexington Square Honjo
Azumabashi

1

94.1

17,760

0.2

1

96.9

19,0350.2

A73

AMS TOWER Minami 6-Jo

1

87.6

47,964

0.6

1

86.1

45,6860.5

A75

Spacia Ebisu

1

91.7

199,105

2.4

1

94.0

205,456

2.2

A76

Neo Prominence

1

96.2

65,593

0.8

1

95.0

64,271

0.7

A77

Invoice Shin-Kobe Residence

1

98.2

49,993

0.6

1

81.5

46,7820.5

A78

Cosmo Court Motomachi

1

96.3

37,778

0.5

1

86.5

35,5280.4

A79

Revest Honjin

1

97.5

31,265

0.4

1

95.0

31,6990.3

A80

Revest Matsubara

1

88.7

28,956

0.4

1

91.8

28,164

0.3

A81

Sun Terrace Minami
Ikebukuro

1

100.0

23,817

0.3

1

97.4

23,8300.3

A82

Alba Noritake Shinmachi

1

97.2

26,647

0.3

1

91.0

25,917

0.3

A83

Revest Meieki Minami

1

96.6

26,539

0.3

1

93.6

25,956

0.3

A84

Revest Heian

1

100.0

24,076

0.3

1

88.7

23,0230.2

A85

Vendir Hamaotsu Ekimae

1

95.3

33,371

0.4

1

93.4

32,6400.3

A86

Salvo Sala

1

100.0

25,795

0.3

1

96.7

24,6570.3

48Name of property

26th fiscal period(January 1, 2016 to June 30, 2016)
RentalOccupancy
Number ofrevenue
rate
Ratio oftenants(during(at end of
rental(at end of
period)period)revenueperiod)
(JPY
(%)
(%)
(unit)
thousand)(Note 1)
(Note 2)27th fiscal period(July 1, 2016 to December 31, 2016)
RentalOccupancy
Number ofrevenue
rate
Ratio oftenants(during(at end of
rental(at end of
period)period)revenueperiod)
(JPY
(%)
(%)
(unit)
thousand)(Note 1)
(Note 2)

A87

Excellente Kagurazaka

1

97.1

17,871

0.2

1

88.3

18,2520.2

A88

Luna Court Edobori

1

96.0

21,499

0.3

1

98.0

21,4510.2

A89

Winntage Kobe Motomachi

1

86.0

21,396

0.3

1

80.7

19,6730.2

A90

Queen's Court Fukuzumi

1

93.1

17,240

0.2

1

96.6

16,843

0.2

A91

Corp Higashinotoin

1

90.8

17,464

0.2

1

95.2

17,2030.2

A92

Belair Oimachi

1

100.0

15,582

0.2

1

92.9

14,4480.2

A93

Siete Minami-Tsukaguchi

1

97.5

16,684

0.2

1

97.5

16,6050.2

A94

Prime Life Sannomiya
Isogami Koen

1

93.8

15,129

0.2

1

87.5

13,7690.1

A95

HERMITAGE NANBA
WEST

1

100.0

14,372

0.2

1

88.0

15,516

0.2

A96

Century Park Shinkawa
1-bankan1

95.4

17,500

0.2

1

90.9

17,4090.2

A97West Avenue

1

85.0

11,037

0.1

1

87.5

12,2540.1

A98

Little River Honmachibashi

1

100.0

13,951

0.2

1

96.9

13,7950.1

A99

Prime Life Mikage

1

96.7

12,143

0.1

1

86.8

11,566

0.1

A100 City Court Kitaichijo

1

95.7

66,535

0.8

1

94.8

65,467

0.7

A101 Lieto Court Mukojima

1

96.8

53,918

0.7

1

95.3

53,665

0.6

A102 Lieto Court Nishi-Ojima

1

98.0

48,584

0.6

1

96.8

48,105

0.5

A103 Royal Parks Momozaka

4

100.0

124,216

1.5

4

100.0

139,988

1.5

A104 Royal Parks Shinden

4

100.0

108,933

1.3

4

100.0

215,643

2.3

74

96.4

2,481,468

30.4

74

94.7

2,562,556

26.9

Subtotal
B8

Kindai Kagakusha Building

1

100.0

37,069

0.5

1

100.0

38,162

0.4

B9

Shinjuku Island

1

100.0

(Note 3)(Note 3)1100.0(Note 3)(Note 3)

B14

Lexington Plaza Nishigotanda

7

100.0

149,977

1.8

7

91.8

140,640

1.5

B15

Cross Square NAKANO

1

84.1

39,416

0.5

1

89.1

44,6230.5

B16

Ohki Aoba Building

1

83.6

39,081

0.5

1

83.6

34,5220.4

B17

Lexington Plaza Hachiman

1

98.8

163,598

2.0

1

100.0

163,789

1.7

B18

AEON TOWN Sukagawa

1

100.0

142,027

1.7

1

100.0

142,027

1.5

49

Name of property

Subtotal

26th fiscal period(January 1, 2016 to June 30, 2016)
RentalOccupancy
Number ofrevenue
rate
Ratio oftenants(during(at end of
rental(at end of
period)period)revenueperiod)
(JPY
(%)
(%)
(unit)
thousand)(Note 1)
(Note 2)27th fiscal period(July 1, 2016 to December 31, 2016)
RentalOccupancy
Number ofrevenue
rate
Ratio oftenants(during(at end of
rental(at end of
period)period)revenueperiod)
(JPY
(%)
(%)
(unit)
thousand)(Note 1)
(Note 2)

13

98.0

588,368

7.2

13

97.2

580,963

6.1

1

100.0

2,700

0.0

1

100.0

2,700

0.0

Subtotal

1

100.0

2,700

0.0

1

100.0

2,700

0.0

D1

Hotel MyStays Kanda

1

100.0

88,987

1.1

1

100.0

95,2221.0

D2

Hotel MyStays Asakusa

1

100.0

128,239

1.6

1

100.0

115,200

1.2

D3

Hotel MyStays Kyoto-Shijo

1

100.0

358,013

4.4

1

100.0

367,441

3.9

D4

MyStays Shin-Urayasu
Conference Center

1

100.0

179,110

2.2

1

100.0

212,187

2.2

D5

Hotel MyStays Maihama

1

100.0

148,450

1.8

1

100.0

183,694

1.9

D6

Hotel Vista Premio Dojima

1

100.0

206,141

2.5

1

100.0

215,896

2.3

D7

Hotel MyStays
Nagoya-Sakae

1

100.0

180,607

2.2

1

100.0

197,906

2.1

D8

Hotel MyStays
Sakaisuji-Honmachi

1

100.0

194,326

2.4

1

100.0

201,529

2.1

D9

Hotel MyStays Yokohama

1

100.0

111,541

1.4

1

100.0

118,878

1.2

D10

Hotel MyStays Nippori

1

100.0

72,466

0.9

1

100.0

65,6150.7

D11Hotel MyStays
Fukuoka-Tenjin-Minami

1

100.0

110,274

1.4

1

100.0

137,361

1.4

D12

Flexstay Inn Iidabashi

1

100.0

52,789

0.6

1

100.0

52,0290.5

D13Hotel MyStays
Ueno Inaricho

1

100.0

53,901

0.7

1

100.0

51,8180.5

D14Flexstay Inn Shinagawa

1

100.0

48,453

0.6

1

100.0

50,6000.5

D15

Flexstay Inn Tokiwadai

1

100.0

64,932

0.8

1

100.0

60,3680.6

D16Flexstay Inn Sugamo

1

100.0

55,657

0.7

1

100.0

54,8520.6

D17Hotel MyStays Otemae

1

100.0

137,938

1.7

1

100.0

144,286

1.5

D18

Flexstay Inn Kiyosumi
Shirakawa

1

100.0

40,024

0.5

1

100.0

39,6690.4

D19

Flexstay Inn Nakanobu P1

1

100.0

22,914

0.3

1

100.0

21,6530.2

D20

Flexstay Inn Nakanobu P2

1

100.0

12,159

0.1

1

100.0

11,3710.1

D21

APA Hotel
Yokohama-Kannai

1

100.0

231,479

2.8

1

100.0

234,973

2.5

D22

Hotel Nets Hakodate

1

100.0

110,080

1.3

1

100.0

160,872

1.7

C1Times Kanda-Sudacho 4th50

Name of property

26th fiscal period(January 1, 2016 to June 30, 2016)
RentalOccupancy
Number ofrevenue
rate
Ratio oftenants(during(at end of
rental(at end of
period)period)revenueperiod)
(JPY
(%)
(%)
(unit)
thousand)(Note 1)
(Note 2)27th fiscal period(July 1, 2016 to December 31, 2016)
RentalOccupancy
Number ofrevenue
rate
Ratio oftenants(during(at end of
rental(at end of
period)period)revenueperiod)
(JPY
(%)
(%)
(unit)
thousand)(Note 1)
(Note 2)

D23

Flexstay Inn Shirogane

1

100.0

58,122

0.7

1

100.0

54,4440.6

D24

Hotel MyStays Haneda

1

100.0

177,466

2.2

1

100.0

178,271

1.9

D25

Hotel MyStays Kameido P1

1

100.0

176,496

2.2

1

100.0

186,026

2.0

D26

Hotel MyStays Ueno
Iriyaguchi

1

100.0

106,248

1.3

1

100.0

98,7621.0

D27

Hotel MyStays Kameido P2

1

100.0

123,608

1.5

1

100.0

130,259

1.4

D28

Hotel Vista Shimizu

1

100.0

67,741

0.8

1

100.0

83,3190.9

D29Super Hotel
Shinbashi/Karasumoriguchi

1

100.0

39,426

0.5

1

100.0

39,4260.4

D30

Flexstay Inn Higashi-Jujo

1

100.0

40,114

0.5

1

100.0

40,1260.4

D31

Hotel MyStays Utsunomiya

1

100.0

77,939

1.0

1

100.0

64,7420.7

D32

Flexstay Inn
Kawasaki-Kaizuka

1

100.0

31,955

0.4

1

100.0

32,535

0.3

D33

Comfort Hotel Toyama

1

100.0

35,928

0.4

1

100.0

35,9280.4

D34

Flexstay Inn
Kawasaki-Ogawacho

1

100.0

29,136

0.4

1

100.0

28,421

0.3

D35

Flexstay Inn Ekoda

1

100.0

113,216

1.4

1

100.0

110,022

1.2

D36Super Hotel Tokyo-JR
Tachikawa Kitaguchi

1

100.0

31,787

0.4

1

100.0

31,7870.3

D37Super Hotel JR
Ueno-iriyaguchi

1

100.0

27,275

0.3

1

100.0

27,2750.3

D38

Hotel MyStays Shinsaibashi

1

100.0

84,282

1.0

1

100.0

90,8191.0

D39

Comfort Hotel Kurosaki

1

100.0

33,616

0.4

1

100.0

37,894

0.4

D40

Comfort Hotel Maebashi

2

100.0

38,901

0.5

2

100.0

43,811

0.5

D41

Comfort Hotel
Tsubame-Sanjo

2

100.0

31,003

0.4

2

100.0

34,9490.4

D42

Comfort Hotel Kitami

1

100.0

26,879

0.3

1

100.0

30,3000.3

D43

Hotel MyStays Gotanda
Station1

100.0

254,397

3.1

1

100.0

396,6124.2

D44

Hotel Epinard Nasu

1

100.0

627,563

7.7

1

100.0

1,040,790

10.9

D45

Hotel MyStays Fukuoka
Tenjin1

100.0

109,967

1.3

1

100.0

190,416

2.0

D46

Hotel MyStays
Hamamatsucho

1

100.0

77,364

0.9

1

100.0

115,208

1.2

D47

Hotel MyStays Kanazawa

1

100.0

49,162

0.6

1

100.0

343,391

3.6

51

26th fiscal period(January 1, 2016 to June 30, 2016)
RentalOccupancy
Number ofrevenue
rate
Ratio oftenants(during(at end of
rental(at end of
period)period)revenueperiod)
(JPY
(%)
(%)
(unit)
thousand)(Note 1)
(Note 2)Name of property

D48

Takamatsu Tokyu REI Hotel27th fiscal period(July 1, 2016 to December 31, 2016)
RentalOccupancy
Number ofrevenue
rate
Ratio oftenants(during(at end of
rental(at end of
period)period)revenueperiod)
(JPY
(%)
(%)
(unit)
thousand)(Note 1)
(Note 2)

3

100.0

7,591

0.1

3

100.0

106,269

1.1

Subtotal

52

100.0

5,085,683

62.3

52

100.0

6,365,246

66.9

Total

140

98.5

8,158,220

100.0

140

97.9

9,511,466

100.0(Note 1) “Occupancy rate” is computed by dividing the leased area by leasable area, and is rounded to one decimal place(Note 2) “Rental revenue (during period)” indicates each property’s leasing operation revenues during the fiscal period, andhas been rounded down to the nearest thousand yen(Note 3) Not disclosed because the consent of the tenant was not obtained

4

Asset Portfolio of Facilities Generating Renewable Energy, etc.

Not applicable
5

Asset Portfolio Including Rights to Operate Public Facilities, etc.

Not applicable
6

Status of Contract Amount and Fair Value of Specified Transaction

As of December 31, 2016, the contract amount and fair value of the outstanding transaction under the
specified transaction account of INV are as follows.
(Unit: JPY thousand)Contract amount(Note 1)
Amounts due after
one year

Category

Transaction type, etc.

Non-market
transaction

Interest rate swap
Receive floating rate/pay fixed rate

99,119,000

99,119,000

Fair value(Note 2)

151,259(Note 1) The contract amount is stated based on a notional principal(Note 2) The fair value is estimated based on the price, etc. presented by the correspondent financial institutions

7

Status of Other Assets

Real estate and trust beneficiary interests in real estate are listed together in “3 Asset Portfolio of Real
Estate, etc.” above. As of the end of this Reporting Period, there are no investments in specified assets thatare significant investment targets for INV outside of 3 above.

52

8

Asset Owned Outside of Japan or the Region

There are no relevant items outside of Japan or the region.

53

Capital expenditures for properties held by INV

1Schedule for capital expenditures

The schedule for the principal capital expenditures for property maintenance construction, etc., as of theend of the Reporting Period for the real estate assets owned by INV is as follows.
Estimated cost (JPY thousand)Name of property

D44 Hotel Epinard Nasu

Nasu-gun,Tochigi

Cross Square
NAKANO

Nakano-ku,
Tokyo

A52 Winbell Kagurazaka

Shinjuku-ku,
Tokyo

B15

2

Location

PurposeRenovation work

Scheduled time of
implementation

From January 2017
to June 2017

Parking lots
From January 2017
equipment repair
to June 2017
work
Repair work ofdeteriorated rooftop
From January 2017
waterproof/Partial
to June 2017
repair and paint workof outer wall

Total

Payment for
the fiscal
Advanceperiod ended
payments
December31, 2016

450,000--

17,000--15,330--Capital expenditures for the fiscal period ended December 31, 2016

The principal construction work constituting capital expenditures for the real estate assets for the fiscal
period ended December 31, 2016 is as follows. Capital expenditures for the fiscal period totaled JPY
532,163 thousand, and together with JPY 24,069 thousand in repair costs included in this fiscal period’s
expenses, construction work totaling JPY 556,232 thousand was implemented.
PurposeTime ofimplementation

Payment(JPY thousand)Name of property

Location

Hotel MyStays
D01 Kanda

Chiyoda-ku,
TokyoRenovation work

From July 2016
To December 2016

154,601

D44 Hotel Epinard Nasu

Nasu-gun,Tochigi

Hotel interior renovation work

From July 2016
To December 2016

14,325

B17

Lexington Plaza
HachimanSendai-shi,
MiyagiRooftop parking lot repair work

From July 2016
To December 2016

10,564

D06

Hotel Vista Premio
DojimaOsaka-shi,
Osaka

Repair work of multi-story car
parking equipment

From July 2016
To December 2016

8,410

D06

Hotel Vista Premio
DojimaOsaka-shi,
Osaka

Replacement work of thyristor
based battery chargers

From July 2016
To December 2016

7,500
360,831

Other construction

556,232

Total

54

3

Reserved funds for long-term maintenance plan (repair reserves)

INV has reserved funds from the cash flow of the fiscal period, as shown below, towards large-scale
maintenance repairs in the medium to long-term in accordance with the long-term maintenance plan foreach property.

Fiscal period

Reserved funds at beginningof period
Amount reserved(Note)
Amount reversed(Note)
Amount carried over for
next fiscal period(Unit: JPY thousand)23rd fiscal
24th fiscal
25th fiscal
26th fiscal
27th fiscal
periodperiodperiodperiodperiodFrom July 1, 2014 From January 1, From July 1, 2015 From January 1, From July 1, 2016
to December 31, 2015 to June 30, to December 31, 2016 to June 30, to December 31,
2014
2015
2015
2016
2016
579,682

738,365

852,699

982,750

1,303,685

268,495

283,147

352,490543,275

446,066

109,812

168,813

222,439

222,339

352,464

738,365

852,699

982,750

1,303,685

1,397,286(Note) The amount reserved for the relevant fiscal period includes the reserves for acquired properties, and the amountreversed includes the reserves for disposed properties

55

Overview of Expenses and Liabilities

1

Statement of Operating Expenses
26th fiscal period
January 1, 2016 to June 30, 2016

Item(a) Asset management fees

(JPY thousand)27th fiscal period
July 1, 2016 to December 31, 2016

250,000

250,000(b) Asset custody fees

9,128

14,026(c) Administrative services fees

24,01027,890(d) Directors’ compensation

4,800

4,800

(e) Other

98,390118,471386,329

415,187

Total

2

Borrowing Conditions

Borrowing conditions by financial institution at the end of the Reporting Period are as below.
Type

LenderSumitomo Mitsui Trust Bank,
LimitedBalance at Balance at end Average
Borrowing beginning of of Reportinginterestdate
Reporting
Periodrate
Period(JPY thousand)(%)(JPY thousand)(Note 1)
Jan. 22,2016

498,000-

604,000-

826,000-

688,000-

882,000-

Subtotal

3,498,000-

Sumitomo Mitsui Banking
Corporation

5,992,000

5,992,000

The Bank of Tokyo-Mitsubishi
UFJ, Ltd.

5,992,000

5,992,000

Mizuho Bank, Ltd.

5,992,000

5,992,000

3,330,000

3,330,000

3,000,000

3,000,000

Sumitomo Mitsui Trust Bank,
Limited

2,670,000

2,670,000

Resona Bank, Limited

1,335,000

1,335,000

Mitsubishi UFJ Trust andBanking Corporation

668,000

668,000

Mizuho Bank, Ltd.
Short-term The Bank of Tokyo-Mitsubishi
UFJ, Ltd.
loans
Sumitomo Mitsui Trust Bank,
Limited
Citibank Japan Ltd.

Long-term Shinsei Bank, Limited
loans
Citibank Japan Ltd.

Mar. 31,2016

Jun. 15,
2016

Jul. 16,
2015

56

Repayment Payment Purpose
date
method

Notes

0.237

Jan. 22,2017(Note 3) (Note 2)

Unsecured /with noguarantee

0.237

Mar. 30,
2017(Note 3) (Note 2)

Unsecured /with noguarantee

0.237

Jun. 15,2017(Note 3) (Note 2)

Unsecured /with noguarantee

0.375Jul. 16,2018(Note 4) (Note 2)

Unsecured /with noguarantee

Type

LenderBalance at Balance at end Average
Borrowing beginning of of Reportinginterestdate
Reporting
Periodrate
Period(JPY thousand)(%)(JPY thousand)(Note 1)

Sumitomo Mitsui Banking
Corporation

5,992,000

5,992,000

The Bank of Tokyo-Mitsubishi
UFJ, Ltd.

5,992,000

5,992,000

Mizuho Bank, Ltd.

5,992,000

5,992,000

3,330,000

3,330,000

Shinsei Bank, Limited

Jul. 16,
2015

Citibank Japan Ltd.

3,000,000

3,000,000

Sumitomo Mitsui Trust Bank,
Limited

2,670,000

2,670,000

Resona Bank, Limited

1,335,000

1,335,000

Mitsubishi UFJ Trust andBanking Corporation

668,000

668,000

Sumitomo Mitsui Banking
Corporation

5,992,000

5,992,000

The Bank of Tokyo-Mitsubishi
UFJ, Ltd.

5,992,000

5,992,000

5,992,000

5,992,000

3,330,000

3,330,000

Long-term Mizuho Bank, Ltd.
loans
Shinsei Bank, Limited

Jul. 16,
2015

Citibank Japan Ltd.

3,000,000

3,000,000

Sumitomo Mitsui Trust Bank,
Limited

2,670,000

2,670,000

Resona Bank, Limited

1,335,000

1,335,000

Mitsubishi UFJ Trust andBanking Corporation

668,000

668,000

3,682,000

3,682,000

3,400,000

3,400,000

Mizuho Bank, Ltd

Sumitomo Mitsui Trust Bank,
LimitedAug. 28,
2015

Jan. 22,2016

Mitsubishi UFJ Trust andBanking Corporation
Sumitomo Mitsui Trust Bank,
LimitedMitsubishi UFJ Trust andBanking Corporation

850,000

850,000

3,400,000

3,400,000

Jan. 22,2016
850,000

57

850,000

Repayment Payment Purpose
date
method

Notes

0.480

Jul. 16,2019(Note 4) (Note 2)

Unsecured /with noguarantee

0.590Jul. 16,
2020(Note 4) (Note 2)

Unsecured /with noguarantee

0.490

Aug. 28,2019(Note 4) (Note 2)

Unsecured /with noguarantee

0.343

Jan. 22,2019(Note 4) (Note 2)

Unsecured /with noguarantee

0.600

Jan. 22,2021(Note 4) (Note 2)

Unsecured /with noguarantee

Type

LenderBalance at Balance at end Average
Borrowing beginning of of Reportinginterestdate
Reporting
Periodrate
Period(JPY thousand)(%)(JPY thousand)(Note 1)

Mizuho Bank, Ltd

4,465,000

465,000

The Bank of Tokyo-Mitsubishi
UFJ, Ltd.

1,125,000

1,125,000

Sumitomo Mitsui Trust Bank,
Limited2,181,000

2,181,000

Shinsei Bank, Limited

570,000

570,000

Resona Bank, Limited

570,000

570,000

650,000

650,000

Mitsubishi UFJ Trust andBanking Corporation

Mar. 31,2016-

2,000,000

Development Bank of Japan,
Inc.

1,000,000

1,000,000

The Bank of Fukuoka, Ltd.

333,000

333,000

The Shizuoka Bank, Ltd.

270,000

1,270,000

The Daishi Bank, Ltd.

-

1,000,000

Long-term The Nomura Trust andloans
Banking Co., Limited

270,000

270,000

Mizuho Bank, Ltd

4,465,000

965,000

The Bank of Tokyo-Mitsubishi
UFJ, Ltd.

1,125,000

1,125,000

Sumitomo Mitsui Trust Bank,
Limited

2,180,000

2,180,000

Shinsei Bank, Limited

570,000

570,000

Resona Bank, Limited

570,000

570,000

Mitsubishi UFJ Trust andBanking Corporation

650,000

650,000-

2,000,000

The Bank of Fukuoka, Ltd.

333,000

333,000

The Shizuoka Bank, Ltd.

270,000

270,000

The Kagawa Bank, Ltd.

-

500,000

The Hyakugo Bank, Ltd.

-

1,000,000

270,000

270,000

Japan Post Bank Co., Ltd.

Japan Post Bank Co., Ltd.

The Nomura Trust andBanking Co., Limited

Mar. 31,
2016

58

Repayment Payment Purpose
date
method

Notes

0.443

Mar. 30,
2019(Note 4) (Note 2)

Unsecured /with noguarantee

0.545

Mar. 30,
2020(Note 4) (Note 2)

Unsecured /with noguarantee

Type

LenderMizuho Bank, Ltd

4,465,000

1,965,000

The Bank of Tokyo-Mitsubishi
UFJ, Ltd.

1,125,000

1,125,000

Sumitomo Mitsui Trust Bank,
Limited

2,180,000

2,180,000

Shinsei Bank, Limited.

570,000

570,000

Resona Bank, Limited

570,000

570,000

650,000

650,000

The Bank of Fukuoka, Ltd.

333,000

1,333,000

The Shizuoka Bank, Ltd.

270,000

270,000

The Kagawa Bank, Ltd.

-

500,000

The Hiroshima Bank, Ltd.

-

1,000,000

270,000

270,000

Mitsubishi UFJ Trust andBanking Corporation

Long-term
loans

Balance at Balance at end Average
Borrowing beginning of of Reportinginterestdate
Reporting
Periodrate
Period(JPY thousand)(%)(JPY thousand)(Note 1)Mar. 31,2016

The Nomura Trust andBanking Co., Limited

Repayment Payment Purpose
date
method0.648

Mar. 30,2021(Note 4) (Note 2)(Note 4) (Note 2)

Citibank Japan Ltd.

Jun. 15,2016

1,000,000

1,000,000

0.443

Jun. 15,
2019

Citibank Japan Ltd.

Jun. 15,2016

1,000,000

1,000,000

0.545

Jun. 15,
2020

Citibank Japan Ltd.

Jun. 15,2016

1,000,000

1,000,000

0.648

Jun. 15,2021

Development Bank of Japan,
Inc.

Jun. 30,2016

1,000,000

1,000,000

0.443

Jun. 30,
2019

AEON Bank, Ltd.

Jun. 30,2016

3,000,000

3,000,000

0.648

Jun. 30,
2021

Tokyo Star Bank, Limited

Jul. 20,2016-

700,000

0.443

Jul. 20,
2019Tokyo Star Bank, Limited

Jul. 20,2016-

1,600,000

0.545

Jul. 20,
2020

Tokyo Star Bank, Limited

Jul. 20,2016-

1,700,000

0.648

Jul. 20,
2021

Subtotal

138,419,000

142,419,000

Total

141,917,000

142,419,000

59

Notes

Unsecured /with noguarantee

Unsecured /with noguarantee
Unsecured /(Note 4) (Note 2) with noguarantee
Unsecured /(Note 4) (Note 2) with noguarantee
Unsecured /(Note 4) (Note 2) with noguarantee
Unsecured /(Note 4) (Note 2) with noguarantee
Unsecured /(Note 4) (Note 2) with noguarantee
Unsecured /(Note 4) (Note 2) with noguarantee
Unsecured /(Note 4) (Note 2) with noguarantee

(Note 1) Average interest rate is the daily weighted average number of the period according to the number of days, and isrounded to three decimal places. In regards to borrowings which interest rate swap transactions are entered into forthe purpose of avoiding risk from interest rate fluctuation, interest rates reflecting the interest rate swap are shown(Note 2) The funds raised through borrowings are mainly used to acquire trust beneficiary interests in real estate and toprepay the borrowings(Note 3) INV repaid the principal accompanied with the receipt of consumption tax refund on November 30, 2016
(Note 4) The balance at the end of the period will be repaid in full on the repayment date3

Investment Corporation Bonds

Not applicable
4

Short-Term Investment Corporation Bonds

Not applicable
5

Investment Unit Options

Not applicable60

Acquisitions and Sales for the Fiscal Period Ended December 31, 2016

1

Acquisitions and Sales of Real Estate, Asset-Backed Securities, Infrastructure Assets andInfrastructure Related-Assets

Not applicable2

Acquisitions and Sales of Other Assets

Assets other than those described above were mostly bank deposits or bank deposits in trust.
3

Transaction Price Verifications

Not applicable
4

Transactions with Interested Parties(1) Transactions
Not applicable(2) Commissions Paid
Not applicable
5

Transactions between the Asset Manager and Its Other Businesses

As the Asset Manager (Consonant Investment Management Co., Ltd.) does not engage in any otherbusiness, such as the type I financial instruments business and the type II financial instruments business,the building lots and buildings transaction business, or the real estate specified joint enterprise, there are no
applicable transactions.

61

Financial Condition
1

Assets, Liabilities, Principal, and Profit and Loss

Please refer to Audited Financial Statements for the Fiscal Period ended December 31, 2016 (July 1, 2016
to December 31, 2016).
2

Changes in the Calculation Method of Depreciation

Not applicable
3

Changes in the Evaluation Method of Real Estate and Infrastructure Assets, etc.

Not applicable4

Beneficiary Certificates of Investment Trusts, etc. Set Up by the Company

Not applicable
Other
1

Notice(1) General Meeting of Unitholders
INV’s General Meeting of Unitholders was held on September 26, 2016.
The summary of the matters approved at the General Meeting of Unitholders are as follows.
AgendaSummary
1.

2.
Proposal No. 1

Partial Amendment to Articles ofIncorporation

With the consent of the asset management company, the asset
management fees for the period from January 2013 to
December 2016 have been reduced. INV has further obtained
the consent of the asset management company to reduce theamount of asset management fees for the period from January
2017 to December 2017 to the amount which is lower than theamount applicable if such reduction were not made, and whichis equal to the amount applied for the period from January
2016 to December 2016. Accordingly, INV amended thestandards concerning the amount and payment for the asset
management fees effective January 1, 2017.
In response to the amendment to the taxation (including therelevant laws and regulations) in respect of the tax bearing
issue in relation to the discrepancy between tax andaccounting treatment of investment corporations, INV madenecessary amendment to the relevant article. Furthermore, so
as to establish the provisions concerning the entrustment ofgeneral administrative services on allotment without
contribution of new investment unit options and acquisition of
its own investment units, both of which are prescribed in the
Act on Investment Trusts and Investment Corporations, and,in addition, so as to clarify that the Investment Corporation
shall bear the expenses associated with the acquisition of its
own investment units, the allotment without contribution of
new investment unit options and the issuance of investment
corporation bonds, INV has amended the relevant articles. In

62

addition, necessary additions or deletions of provisions,revision and clarification of expressions, and other changes in
the wording of INV's Articles of Incorporation are made.
Proposal No. 2
Proposal No. 3
Proposal No. 4

Appointment of One (1)Executive Director
Appointment of One (1)Substitute Executive Director
Appointment of Two (2)Supervisory Directors

Naoki Fukuda was appointed.
Christopher Reed was appointed.
Takashi Takahashi and Hiroyuki Fujimoto were appointed.

(2) Board of Directors of Investment Corporation
There are no matters regarding execution and amendment of the principal agreement approved by INV’s Boardof Directors in the Reporting Period.

2

Disclosure of companies owning real estate overseas

Not applicable
3

Disclosure of real estate owned by companies owning real estate overseas

Not applicable63

4

Risk Factors

An investment in our units involves significant risks. The principal risks with respect to investment in
Invincible Investment Corporation are as follows.
Property and Business Risks

Any adverse conditions in the Japanese economy could adversely affect our properties.



We may not be able to acquire properties to execute our growth and investment strategy in amanner that is accretive to earnings.



Our reliance on Fortress Group could have a material adverse effect on our business.

Because of our repositioning of our portfolio in 2014 to include hotels, which include lease terms
that contain a variable rent structure, our results of operations will be inherently more volatile andnot comparable to previous fiscal periods, and we may not be able to effectively manage our hotel
portfolio due to our limited operating history in the hotel business, especially with respect to fullservice hotels, resort hotels and other non-limited service hotels that we may decide to acquire in
greater numbers in the future.



Increases in prevailing market interest rates, particularly following the Bank of Japan’s
announcement of a major new policy for monetary easing, would increase our interest expenseand may result in a decline in the market price of our units.

The high geographic concentration of our real estate portfolio in the greater Tokyo area and othermajor cities could have a material adverse effect on our business.

Competition for tenants and hotel guests may adversely affect our ability to retain our current
tenants and find new tenants, and to maintain occupancy rates and revenue.



Our hotels are subject to the operating risks common to the hospitality industry, which have a
direct effect on the variable rent component of our portfolio’s revenue.

The cyclical and seasonal nature of the hospitality industry may cause fluctuations in ouroperating performance, which could have a material adverse effect on us and our variable rent
revenues.

We may incur unexpected expenses, expenditure or other losses for repair or maintenance of ourproperties, and our hotels require periodic capital reinvestment for renovation.



The majority of our hotels are leased to MyStays Hotel Management, which is owned by FortressGroup-managed funds, and subject to the risk of default under its hotel lease agreements.



Our focus on residential properties could have a material adverse effect on our business.



We may lose rental revenues in the event of defaults by end-tenants under their lease agreementsfor properties other than hotels.



Master leases may give rise to certain risks.



We may suffer large losses if any of our properties incur damage from a natural or man-madedisaster or acts of violence.



We may be strictly liable for an unforeseen loss, damage or injury suffered by a third party at our
properties.



Because most of our operating expenses are largely fixed, we may suffer adverse consequences if
our rental revenues decline.

64

We may not be able to promptly acquire suitable properties or sell those in our portfolio on
acceptable terms in response to changing economic, financial or investment conditions.



Defects relating to our properties may adversely affect our financial condition and results ofoperations.



We rely on expert appraisals and engineering, environmental and seismic reports, which are
subject to significant uncertainties.



The environmental assessments of our properties made prior to our ownership may not haveuncovered all environmental liabilities, and Japanese laws subject property owners to strict
environmental liabilities.



Decreases in tenant leasehold and/or security deposits would increase our funding costs.



Any inability to obtain financing for future acquisitions, or any restrictions on our activities under
our financing arrangements, could adversely affect us.

A high LTV ratio may increase our exposure to changes in interest rates and have a material
adverse effect on our results of operations.



We may suffer impairment losses relating to our properties and may also suffer adverse tax effects
upon recognizing impairments.



The performance of Fortress Group is not an indicator or guarantee of our future results.



Our financial statements are prepared in accordance with Japanese GAAP, which differs in certain
material respects from IFRS, U.S. GAAP and generally accepted accounting principles andfinancial reporting standards in other jurisdictions.



We rely on industry and market data that are subject to significant uncertainties.

Management and Governance Risks


Our success depends on the performances of service providers to which we are required to assign
various key functions.



There are potential conflicts of interest between us and certain Fortress Group affiliates or
Fortress Group-related companies including the Asset Manager, MyStays Hotel Management andNaqua Hotels & Resorts Management



We depend on the efforts of our executive director and key personnel of the Asset Manager.

Unitholders have limited control over our policies.



The Japanese regulatory authorities have tightened regulatory supervision of J-REITs and theirasset managers and their corporate governance.



If unitholders do not exercise their voting rights, we may count their votes in favor of proposals at
a general meeting of unitholders.

Taxation Risks


Our failure to satisfy a complex series of requirements pursuant to Japanese tax regulations would
disqualify us from certain taxation benefits and significantly reduce our distributions to ourunitholders.



If the Japanese tax authorities disagree with the interpretations we used for prior periods, we may
be forced to pay additional taxes for those periods.

65

We may not be able to benefit from reductions in certain real estate taxes enjoyed by qualified
J-REITs.



Changes in Japanese tax laws may significantly increase our tax burden.

We expect to be treated as a “passive foreign investment company” for U.S. federal income tax
purposes.



Unitholders may be subject to U.S. Foreign Account Tax Compliance Act (FATCA) withholding
tax after 2018.

Legal and Regulatory Risks

5

Our ownership rights in some of our properties may be declared invalid or limited.



We may lose our rights in a property we own if the purchase of the property is recharacterized asa secured financing.



Acquisition of properties for which third parties hold leasehold interests in the land and own thebuildings may subject us to various risks.



Our leasehold interests may be terminated or may not be asserted against a third party in somecases, or our leases with our tenants could be modified.



We currently hold several properties in the form of compartmentalized ownership interests (kubun
shoyu-ken) and our rights relating to such properties may be affected by the intentions of otherowners

We may acquire properties in the form of co-ownership (kyoyu) and our rights relating to suchproperties may be affected by the intentions of other owners.

Tax increases or adverse changes in applicable laws may affect our potential liabilities relating toour properties and operations.

Compliance with energy conservation regulations in Japan may adversely affect our financial
results.



Our costs of complying with regulations applicable to our properties could adversely affect our
results of operations.



We own a substantial portion of our properties through trust beneficiary interests and may suffer
losses as a trust beneficiary.



The Alternative Investment Fund Managers Directive may negatively affect our ability to market
our units in the EEA and increase our compliance costs associated with the marketing of our units
in the EEA.



Our units may be deemed to constitute “plan assets” for ERISA purposes, which may lead to therescission of certain transactions, tax or fiduciary liability and our being held in violation of
ERISA requirements.

Other

Unless there are specific statements to the contrary, monetary figures are rounded down to the nearest yen
and percentages are rounded off for unspecified values.

66II. Balance Sheet
Fiscal period ended
June 30, 2016 (Reference)(as of June 30, 2016)
AssetsCurrent assets:
Cash and bank deposits
Cash and bank deposits in trust
Accounts receivable
Rental receivables
Prepaid expenses
Consumption taxes receivable
Other
Allowance for doubtful accounts
Total current assets
Non-current assets:
Property and equipment
Buildings, at cost
Accumulated depreciation
Buildings, net
Buildings and accompanying facilities, at cost
Accumulated depreciation
Buildings and accompanying facilities, net
Structures, at cost
Accumulated depreciation
Structures, net
Land
Buildings in trust, at cost
Accumulated depreciation
Buildings in trust, net
Buildings and accompanying facilities in trust,at costAccumulated depreciation
Buildings and accompanying facilities intrust, net
Structures in trust, at cost
Accumulated depreciation
Structures in trust, net
Tools, furniture and fixtures in trust, at cost
Accumulated depreciation
Tools, furniture and fixtures in trust, net
Land in trust
Construction in progress in trust
Total property and equipment, net
Intangible assets
Leasehold rights in trust
Total intangible assets
Investment and other assets
Guarantee deposits
Long-term prepaid expenses
Derivatives assets
OthersTotal investments and other assets
Total non-current assets
Total assets

67(Unit: JPY thousand)Fiscal period ended
December 31, 2016(as of December 31, 2016)

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

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

85,914(9,948)75,96538,862(21,375)
17,4872,779(1,401)
1,377
711,834
101,837,752(5,539,382)
96,298,370

85,914(10,489)
75,42438,862(22,150)
16,712
2,779(1,467)
1,311
711,834
102,029,376(6,800,686)
95,228,689

23,193,164

23,379,828(3,592,722)(4,312,055)

19,600,442

19,067,773

336,691(147,949)
188,742
500,608(179,738)
320,869
135,384,518
46,368
252,645,976

340,005(158,426)
181,579
651,007(221,184)
429,823
135,384,518
251,097,667

8,871,542
8,871,542

8,840,627
8,840,627

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

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

Fiscal period ended
June 30, 2016 (Reference)(as of June 30, 2016)(Unit: JPY thousand)Fiscal period ended
December 31, 2016(as of December 31, 2016)

Liabilities
Current liabilities:
Accounts payable
Short-term loans payable
Accounts payable-otherAccrued expenses
Income taxes payable
Accrued consumption taxes
Advances received
Deposits received

188,3623,498,000
8,957,286
186,571605
507,135
21,072

182,601
51,825
166,066605
460,521522,072
13,583

Total current liabilities

13,359,034

1,397,276

138,419,000
2,035,843
28,663
227,532
31,050142,419,000
2,030,396
28,66331,260140,742,089

144,509,319

154,101,123

145,906,596

120,367,271

120,367,271

6,264,432

6,264,432*3 (763,290)(763,290)
5,501,141*3 (224,225)*1 708*1 －Non-current liabilities:
Long-term loans payable
Tenant leasehold and security deposits in trust
Tenant leasehold and security deposits
Derivatives liabilities
Asset retirement obligations
Total non-current liabilities
Total liabilities
Net assets
Unitholders’ equity:
Unitholders’ capital
Surplus:Capital surplus
Deduction of unitholders' capital surplus
Allowance for temporary differences adjustment
Other deduction of capital surplus
Total deduction of unitholders' capital surplus
Capital surplus (net)
Voluntary reserve
Reserve for temporary differences adjustment(763,290)(987,516)
5,276,915

Voluntary reserve

708－

Retained earnings

4,363,420

5,659,831

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

68

9,865,270

10,936,747

130,232,542

131,304,019(227,532)

151,259(227,532)

151,259*2 130,005,009*2 131,455,278

284,106,133

277,361,874

III.

Statement of Income and Retained Earnings(Unit: JPY thousand)Fiscal period ended
December 31, 2016
(from July 1, 2016 to
December 31, 2016)

Fiscal period ended
June 30, 2016 (Reference)(from January 1, 2016 toJune 30, 2016)
Operating revenue
Rental revenue – real estate*1 8,158,220*1 9,511,466

Total operating revenue

8,158,220

9,511,466*1 2,697,986*1 3,162,067

250,000
4,800
9,128
24,010269
98,120250,000
4,800
14,02627,8901,123
117,347

Total operating expenses
Operating income
Non-operating income
Interest income
Interest on tax refund
Refund of consumption taxes
Other3,084,315
5,073,905

3,577,255
5,934,211

1,316
1,372
213

129
6,722
35,949385

Total non-operating income

2,902

43,186

Non-operating expenses
Interest expenses
Loan-related costs
Investment unit issuance costs

295,185
280,326
137,270359,540
186,249-

Operating expenses
Property related expenses
Asset management fees
Directors’ compensation
Asset custody fees
Administrative service fees
Provision of allowance for doubtful accounts
Other712,782545,789

Ordinary income

Total non-operating expenses

4,364,025

5,431,608

Income before income taxes

4,364,025

5,431,608

605
-

605
-

605

605

Income taxes
Current
Deferred
Total income taxes
Net income

4,363,420

5,431,003

Retained earnings brought forward-

228,827

Unappropriated retained earnings

4,363,420

5,659,831

69

IV. Statement of Changes in Net Assets
Fiscal period ended June 30, 2016 (from January 1, 2016 to June 30, 2016)(Unit: JPY thousand)Unitholders’ equity
SurplusCapital surplus
Unitholders’capitalBalance at the beginningof the period
Changes during theperiodIssuance of new
investment units
Other distributions inexcess of retained
earnings
Reserve for temporary
differences adjustment
Distributions fromsurplus

Voluntary reserve

Deduction of capital surplus
Other
Allowance
CapitalDeduction of
for temporary deduction of
surplus (net)capitalcapitaldifferences
surplussurplusadjustment

Capitalsurplus82,465,438

6,264,432---

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

Reserve fortemporarydifferences
adjustment

Voluntary
reserve

-

-

708

708

37,901,832

Net income
Changes other thanunitholders’ equity(net)
Total changes during theperiodBalance at the end of theperiod37,901,832--(763,290)(763,290)(763,290)

708

708

120,367,271

6,264,432-(763,290)(763,290)

5,501,141

708

708

Valuation and translation
adjustments
Total
Deferredvaluation andgains ortranslation
losses on
adjustments
hedgesTotal net
assetsUnitholders’ equity
SurplusRetainedearnings
Balance at the beginningof the period
Changes during theperiodIssuance of new
investment units
Other distributions inexcess of retained
earnings
Reserve for temporary
differences adjustment
Distributions fromsurplus
Net income
Changes other thanunitholders’ equity(net)
Total changes during theperiodBalance at the end of theperiod

3,028,323

Total
unitholders’
Total surplus
equity9,292,755

91,758,194--

91,758,194

37,901,832

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

(708)

-

-

-

(3,027,614)(3,027,614)(3,027,614)(3,027,614)

4,363,420

4,363,420

4,363,420

4,363,420(227,532)(227,532)(227,532)

1,335,097

572,515

38,474,348(227,532)(227,532)

38,246,815

4,363,420

9,865,270

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

130,005,009

70

Fiscal period ended December 31, 2016 (from July 1, 2016 to December 31, 2016)(Unit: JPY thousand)Unitholders’capitalBalance at the beginningof the period
Changes during theperiodReversal of reserve fortemporary differences
adjustment
Distributions
fromsurplusDistributions in excess
of retained earnings
from allowance fortemporary differences
adjustment

Unitholders’ equity
SurplusCapital surplus
Deduction of capital surplus
Other
Allowance
CapitalDeduction of
for temporary deduction of
surplus (net)capitalcapitaldifferences
surplussurplusadjustment

Capitalsurplus120,367,271

6,264,432-(763,290)(224,225)(763,290)

5,501,141(224,225)(224,225)

Voluntary reserve
Reserve fortemporarydifferences
adjustment

Voluntary
reserve

708

708

(708)

(708)

Net income
Changes other thanunitholders’equity(net)
Total changes during theperiodBalance at the end of theperiod--(224,225)-(224,225)(224,225)

(708)

(708)

120,367,271

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

5,276,915--

Valuation and translation
adjustments

Unitholders’ equity
SurplusRetainedearnings
Balance at the beginningof the period
ChangesduringtheperiodReversal of reserve fortemporary differences
adjustment
Distributions
fromsurplusDistributions in excess
of retained earnings
from allowance fortemporary differences
adjustment
Net income
Changes other thanunitholders’equity(net)
Total changes during theperiodBalance at the end of theperiodTotalunitholders’
Total surplus
equityDeferred
gains orlosses onhedgesTotalvaluation andtranslation
adjustments

Total net
assets(227,532)(227,532)

130,005,009

4,363,420

9,865,270

130,232,542

708

-

-

-

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

5,431,003

5,431,003

5,431,003

5,431,003

378,792

378,792

378,792

1,296,410

1,071,476

1,071,476

378,792

378,792

1,450,268

5,659,831

10,936,747

131,304,019

151,259

151,259

131,455,278

71

V.

Notes

[Notes Concerning Significant Accounting Policies]

By Period
Item
1. Method of depreciationof non-current assets

2. Method of calculatingallowances

3. Revenue and expense
recognition

Fiscal period ended
Fiscal period ended
June 30, 2016 (Reference)
December 31, 2016
(from January 1, 2016 to(from July 1, 2016 toJune 30, 2016)
December 31, 2016)(a) Property and equipment(a) Property and equipment
The straight-line method is used.
The straight-line method is used.
The useful lives of major property, plant
The useful lives of major property andand equipment are as follows.
equipment are as follows.
Buildings
77 years
Buildings
77 years
Buildings and accompanying facilities
Buildings and accompanying facilities
8-24 years
8-24 years
Structures
7-18 years
Structures
7-18 years
Buildings in trust
2-67 years
Buildings in trust
2-67 years
Buildings and accompanying facilities in
Buildings and accompanying facilities intrust
2-33 years
trust
2-33 years
Structures in trust
3-55 years
Structures in trust
3-55 years
Tools, furniture and fixtures in trust
Tools, furniture and fixtures in trust
2-19 years
2-19 years(b) Intangible assets(b) Intangible assets
The straight-line method is used. For
The straight-line method is used. For
leasehold interests (fixed-term land lease
leasehold interests (fixed-term land lease forfor business purposes), the straight-line
business purposes), the straight-line method
method based on the lease period is used.
based on the lease period is used.
(c) Long-term prepaid expenses(c) Long-term prepaid expenses
The straight-line method is used.
The straight-line method is used.
Allowance for doubtful accounts
Allowance for doubtful accounts
To reserve for losses on doubtful accounts, To reserve for losses on doubtful accounts,
allowances are provided for normal allowances are provided for normal
receivables using a rate determined based on receivables using a rate determined based on
past bad debt experiences, and specific past bad debt experiences, and specificallowances are provided for accounts with a allowances are provided for accounts with apossibility of default based on the estimated possibility of default based on the estimatedamounts considered to be uncollectible by amounts considered to be uncollectible byconsidering the collectability of accounts on considering the collectability of accounts on
an individual basis.
an individual basis.
Accounting treatment of property taxes and Accounting treatment of property taxes andother taxes
other taxes
With respect to property taxes, city planning With respect to property taxes, city planningtaxes and depreciable asset taxes, of the tax taxes and depreciable asset taxes, of the tax
amount assessed and determined, the amount amount assessed and determined, the amountcorresponding to the relevant fiscal period is corresponding to the relevant fiscal period is
accounted for as property related expenses.
accounted for as property related expenses.
Of the amounts paid to the seller for Of the amounts paid to the seller for
acquisitions of real estate, the amount acquisitions of real estate, the amountequivalent to property taxes is capitalized as equivalent to property taxes is capitalized aspart of the acquisition cost of the real estate or part of the acquisition cost of the real estate ortrust beneficiary interests in real estate instead trust beneficiary interests in real estate insteadof being charged as expense. The amount of being charged as expense. There is noequivalent to property taxes that was included amount equivalent to property taxes included
as part of the acquisition of real estate during as part of the acquisition of real estate during
the fiscal period ended June 30, 2016 is JPY the fiscal period ended December 31, 2016.
176,385 thousand.

72

Fiscal period ended
June 30, 2016 (Reference)(from January 1, 2016 toJune 30, 2016)(a) Method of hedge accounting
Deferred hedge accounting is used.

Fiscal period ended
December 31, 2016
(from July 1, 2016 to
December 31, 2016)(a) Method of hedge accounting
Deferred hedge accounting is used.

(b) Hedging instrument and hedged item
Hedging instrument: interest rate swap
Hedged item: interest on borrowings(b) Hedging instrument and hedged item
Hedging instrument: interest rate swap
Hedged item: interest on borrowings(c) Hedge policy
INV enters into derivatives transactions forthe purpose of hedging against the risks set
forth in INV’s Articles of Incorporation inaccordance with its risk management
policy.

(c) Hedge policy
INV enters into derivatives transactions forthe purpose of hedging against the risks set
forth in INV’s Articles of Incorporation inaccordance with its risk management
policy.

(d) Method of evaluating hedge effectivenessHedge effectiveness is evaluated bycomparing the cumulative amount ofchanges in cash flows of the hedging
instrument and the cumulative amount ofchanges in cash flows of the hedged item
and verifying the difference in theamounts of change of both the hedged
item and the hedging instrument.
5. Other significant(1) Accounting treatment policy of trust
matters which constitutebeneficiary interests in real estate
the basis for preparation
As to trust beneficiary interests in realof financial statements
estate, all accounts of assets and liabilities
within assets in trust, as well as all income
generated and expenses incurred fromassets in trust, are recorded in the relevantbalance sheets and income statement
accounts. Of such items, the following
significant trust assets and liabilities areshown separately on the balance sheet.
(a) Cash and bank deposits in trust(b) Buildings in trust
Buildings and accompanying facilities
in trust
Structures in trust
Tools, furniture and fixtures in trust
Land in trust
Construction in progress in trust(c) Leasehold rights in trust(d) Tenant leasehold and security deposits
in trust(d) Method of evaluating hedge effectivenessHedge effectiveness is evaluated bycomparing the cumulative amount ofchanges in cash flows of the hedging
instrument and the cumulative amount ofchanges in cash flows of the hedged item
and verifying the difference in the amountsof change of both the hedged item and thehedging instrument.
(1) Accounting treatment policy of trust
beneficiary interests in real estate
As to trust beneficiary interests in realestate, all accounts of assets and liabilities
within assets in trust, as well as all income
generated and expenses incurred fromassets in trust, are recorded in the relevantbalance sheets and income statement
accounts. Of such items, the following
significant trust assets and liabilities areshown separately on the balance sheet.
(a) Cash and bank deposits in trust(b) Buildings in trust
Buildings and accompanying facilities
in trust
Structures in trust
Tools, furniture and fixtures in trust
Land in trust(c) Leasehold rights in trust(d) Tenant leasehold and security deposits
in trust

By Period
Item
4. Method of hedge
accounting(2) Accounting treatment of deferred assets
Investment unit issuance costs
The full amount is recorded as expense at
the time of expenditure.
(3) Accounting treatment of consumption taxes
Transactions subject to consumption taxes
are recorded at amounts exclusive ofconsumption taxes.

73(2) Accounting treatment of deferred assets
Investment unit issuance costs
The full amount is recorded as expense at
the time of expenditure.
(3) Accounting treatment of consumption taxes
Transactions subject to consumption taxes
are recorded at amounts exclusive ofconsumption taxes.

[Notes to the Balance Sheet]
Fiscal period ended June 30, 2016 (Reference)(as of June 30, 2016)

Fiscal period ended December 31, 2016(as of December 31, 2016)*1. Matters concerning treatment of reversal of reserve for*1. Matters concerning treatment of reversal of reserve fortemporary differences adjustment.
temporary differences adjustment.
INV reversed all of the reserve for temporary differences
INV plans to reverse all of the reserve for temporary
adjustment in the amount of JPY 708 thousand, and use
differences adjustment in the amount of JPY 708 thousand,the funds as part of the profit distributions.
and use the funds as part of the profit distributions to bemade in the next fiscal period.
*2. Minimum net assets as required by Article 67,*2. Minimum net assets as required by Article 67,
Paragraph 4 of the Act on Investment Trusts andParagraph 4 of the Act on Investment Trusts andInvestment Corporations
Investment Corporations
JPY 50,000 thousand
JPY 50,000 thousand*3. Allowance for temporary differences adjustment
Fiscal period ended June 30, 2016 (from January 1, 2016 to June 30, 2016) (Reference)
Not Applicable
Fiscal period ended December 31, 2016 (from July 1, 2016 to December 31, 2016)
1. Reasons, related assets and amounts

Related assets,
etc.

ReasonDeferred gains
or losses onhedgesLoss oninterest-rate
swaps
recognized

Total(Unit: JPY thousand)
Balance at theBalance at the
Allowance set
Reason for
Reversalend ofend of current
aside during
Initial amountreversalduring periodprevious
periodperiodperiod(224,225)-(224,225)-(224,225)-(224,225)-(224,225)-(224,225)-

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 bereversed.

74

[Notes to Statement of Income and Retained Earnings]

Fiscal period ended June 30, 2016 (Reference)(from January 1, 2016 to June 30, 2016)

Fiscal period ended December 31, 2016
(from July 1, 2016 to December 31, 2016)*1. Real estate rental revenues and expenses(Unit: JPY thousand)
A. Real estate rental revenues*1. Real estate rental revenues and expenses(Unit: JPY thousand)
A. Real estate rental revenues

Rental revenue – real estate(Rent/common area charges)

Rental revenue – real estate
7,889,877(Other revenues)
Total

268,342
8,158,220(Rent/common area charges)

9,237,784(Other revenues)
Total

273,682
9,511,466

B. Real estate rental expenses

B. Real estate rental expenses

Property related expenses

Property related expenses(Maintenance costs)

554,149(Maintenance costs)

580,896(Taxes and public dues)

281,065(Taxes and public dues)

356,372(Insurance expenses)

12,669(Insurance expenses)

11,807(Depreciation expenses)

1,676,736(Depreciation expenses)

2,065,066(Other expenses)
Total

173,364
2,697,986

147,924
3,162,067

Total
C. Real estate rental income

C. Real estate rental income(A-B)(Other expenses)

5,460,234(A-B)

6,349,399[Notes to Statement of Changes in Net Assets]
Fiscal period ended June 30, 2016 (Reference)(from January 1, 2016 to June 30, 2016)

Fiscal period ended December 31, 2016
(from July 1, 2016 to December 31, 2016)

Number of issuable investment units and number of investment Number of issuable investment units and number of investment
units issued and outstanding
units issued and outstanding
Number of investment units authorized
Number of investment units issued andoutstanding

10,000,000 units

Number of investment units authorized

10,000,000 units

3,675,824 units

Number of investment units issued andoutstanding

3,675,824 units

75

[Notes Related to Tax Accounting]
Fiscal period ended June 30, 2016 (Reference)

Fiscal period ended December 31, 2016

1. Significant components of deferred tax assets and liabilities 1. Significant components of deferred tax assets and liabilities(Deferred tax assets - current assets)(Deferred tax assets - current assets)(Unit: JPY thousand)(Unit: JPY thousand)Enterprise tax payable
481 Enterprise tax payable661
Accounts receivable (merger)
Allowance for doubtful accounts

183

Accounts receivable (merger)-

877

Allowance for doubtful accounts

423

Subtotal

1,542

Subtotal

1,084

Valuation allowance

1,542

Valuation allowance

1,084

Total

-

Total

-

(Deferred tax assets - current)(Deferred tax assets - non-current assets)
Buildings and other (merger)-(Deferred tax assets - current)(Deferred tax assets - non-current assets)
Buildings and other (merger)-

Land (merger)
Deferred gains/losses on hedges
Loss carried forward
Asset retirement obligations

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

Subtotal(Deferred tax liabilities –non-current liabilities)
Removal expenses included in asset
retirement obligations
Subtotal

10,085,594

Valuation allowance

10,075,797

Total(Deferred tax assets - non-current)

Land (merger)

700,210
2,092,087

Deferred gains/losses on hedges-

Loss carried forward

7,200,289

Asset retirement obligations

9,921

Amortization of leasehold right

16,24810,018,757-

Subtotal(Deferred tax liabilities –non-current liabilities)
Deferred gains or losses on hedges
Removal expenses included in asset
retirement obligations
Subtotal-

Valuation allowance

9,960,950

9,797
9,797

9,797
48,00957,807

Total-(Deferred tax assets - non-current)-

2. Significant difference between statutory tax rate and theeffective tax rate
Statutory tax rate
32.31%

2. Significant difference between statutory tax rate and theeffective tax rate
Statutory tax rate
31.74%

Deductible cash distributions(32.21)%

Deductible cash distributions(31.71)%

Changes in valuation alloawnce(2.72)%

Changes in valuation alloawnce(0.09)%

Others

2.63%

Others0.08%

Effective tax rate
0.01% Effective tax rate
3. Modifications to the corporation tax rate, etc. after the fiscal
period.
Due to the enactment of the “Act to Partially Revise theIncome Tax Act and Others” (Act No. 15 of 2016) and the“Act to Partially Revise the Local Tax Act and Others”(Act No. 13 of 2016) on March 29, 2016, the corporation
tax rate, etc. was reduced from the fiscal period
commencing after April 1, 2016.
Accordingly, thestatutory effective tax rate used for calculating deferred tax
assets and deferred tax liabilities will be changed from theexisting rate of 32.31% to 31.74% for the temporary
difference expected to be reversed during fiscal periods
commencing after July 1, 2016. There is little impact fromthis change.

76

0.01%
-

[Notes Related to Financial Instruments]

Fiscal period ended June 30, 2016 (Reference)(from January 1, 2016 to June 30, 2016)

Fiscal period ended December 31, 2016
(from July 1, 2016 to December 31, 2016)

1. Status of financial instruments

1. Status of financial instruments(1)Policy for financial instruments(1)Policy for financial instruments

INV principally conducts its operations throughinvestments in real estate and other specified assets to seek
to ensure stable income in the medium to long term.
The policy for raising funds is principally through issuing
new investment units or borrowing loans.
Derivative transactions are to be entered into for the
purpose of hedging against the risk of future interest rateincreases, etc. and not for speculation.
Surplus funds are managed after carefully taking into
account safety, liquidity, the interest rate environment andfinancing.

INV principally conducts its operations throughinvestments in real estate and other specified assets to seek
to ensure stable income in the medium to long term.
The policy for raising funds is principally through issuing
new investment units or borrowing loans.
Derivative transactions are to be entered into for the
purpose of hedging against the risk of future interest rateincreases, etc. and not for speculation.
Surplus funds are managed after carefully taking into
account safety, liquidity, the interest rate environment andfinancing.

(2)Nature and extent of risks arising from financial
instruments and risk management(2)Nature and extent of risks arising from financial
instruments and risk management

The funds raised through borrowings are mainly used toacquire real estate properties or trust beneficiary interest inreal estate (including related acquisition costs) and for therefinancing of existing loan. Liquidity risks relating to loan
are managed by the finance department of the AssetManager by preparing and updating plans for funds, andmonitoring the covenants set forth in loan agreements.

The funds raised through borrowings are mainly used toacquire real estate properties or trust beneficiary interest inreal estate (including related acquisition costs) and for therefinancing of existing loan. Liquidity risks relating to loan
are managed by the finance department of the AssetManager by preparing and updating plans for funds, andmonitoring the covenants set forth in loan agreements.

(3)Supplemental information regarding market value, etc. forfinancial instruments(3)Supplemental information regarding market value, etc. forfinancial instruments

The fair value of financial instruments is based on quoted
market prices if available. When quoted market prices are
not available, fair value is determined through a reasonableestimate. Since certain assumptions, etc. are used inestimating the fair value, different assumptions, etc. may
result in the variance of such value.

The fair value of financial instruments is based on quoted
market prices if available. When quoted market prices are
not available, fair value is determined through a reasonableestimate. Since certain assumptions, etc. are used inestimating the fair value, different assumptions, etc. may
result in the variance of such value.

2. Estimated fair value of financial instruments
Book value, fair value and the difference between value asof June 30, 2016 are as follows.
(Unit: JPY thousand)2. Estimated fair value of financial instruments
Book value, fair value and the difference between value asof December 31, 2016 are as follows.
(Unit: JPY thousand)Book Value(1) Cash and bankdeposits(2) Cash and bankdeposits in trust
Total assets(3) Short-term loans

Fair Value

Difference

11,322,762

11,322,762-

5,441,316

5,441,316-

16,764,078

16,764,078(3,498,000)(3,498,000)(4) Accounts payable(8,957,286)(8,957,286)-(5) Long-term loans(138,419,000)(138,419,000)-

Total liabilities(150,874,286)(150,874,286)-(227,532)(227,532)-(6) Derivatives

Book Value(1) Cash and bankdeposits(2) Cash and bankdeposits in trust
Total assets(3) Short-term loans

Fair Value

Difference

8,714,907

8,714,907-

5,499,826

5,499,826-

14,214,734

14,214,734--(4) Long-term loans(142,419,000)(142,419,000)

Total liabilities(142,419,000)(142,419,000)-

151,259

151,259-(5) Derivatives(Note 1) Items recorded in the Liabilities Section are shown in(Note 1) Items recorded in the Liabilities Section are shown inparenthesis
parenthesis(Note 2) Receivables and payables arising from derivative(Note 2) Receivables and payables arising from derivativetransactions are recorded in net amounts, and if the77

Fiscal period ended June 30, 2016 (Reference)(from January 1, 2016 to June 30, 2016)

Fiscal period ended December 31, 2016
(from July 1, 2016 to December 31, 2016)transactions are recorded in net amounts, and if thetotal net amount is a negative amount, such amountis shown in parenthesis

total net amount is a negative amount, such amountis shown in parenthesis(Note 1) Methods to calculate fair value of financial (Note 1) Methods to calculate fair value of financial
instruments
instruments(1) Cash and bank deposits(2) Cash and bank deposits in (1) Cash and bank deposits(2) Cash and bank deposits intrust(3) Short-term loans(4) Accounts payabletrust(3) Short-term loans
Due to the short maturities, the book value of these instruments Due to the short maturities, the book value of these instruments
is deemed a reasonable approximation of the fair value, andis deemed a reasonable approximation of the fair value, andtherefore, the book value is used as the fair value.
therefore, the book value is used as the fair value.
(5) Long-term loans
Long-term loans with floating interest rates reflecting changes
in market rates within a short-term period is stated at theirbook value as their book value approximate their fair value.

(4) Long-term loans
Long-term loans with floating interest rates reflecting changes
in market rates within a short-term period is stated at theirbook value as their book value approximate their fair value.

(6) Derivatives(a) Derivatives transactions to which hedge accounting
was is applied
Not applicalbe(b) Derivatives transactions to which hedge accounting isappliedThe contract amount as of the closing date undereach hedge-accounting method and the amountequivalent to the notional principal prescribed in thecontracts are as shown below.

(5) Derivatives(a) Derivatives transactions to which hedge accounting is
not applied
Not applicable(b) Derivatives transactions to which hedge accounting isappliedThe contract amount as of the closing date undereach hedge-accounting method and the amountequivalent to the notional principal prescribed in thecontracts are as shown below.

(Unit: JPY thousand)
Method of Derivative Primary
hedge

Contract amount, etc.

Fair value(Note 1)

(Note 2)transaction hedged

accounting type, etc.

Method of Derivative Primary
hedge

Amount due

item(Unit: JPY thousand)Fair value(Note 1)

(Note 2)transaction hedged

accounting type, etc.

after

Contract amount, etc.
Amount due

item

after

one yearPrinciple
accounting
methodone yearInterest

Interest

rate swap

rate swap

Receivefloating
rate/pay

Longterm

Principle
99,119,000

99,119,000 (227,532)

loans

accounting
methodfixed rate

Receivefloating
rate/pay

Longterm

99,119,000

99,119,000

151,259

loans

fixed rate

(Note 1) The contract amount, etc. is stated based on a
notional principal(Note 2) The fair value is estimated based on the price, etc.
presented by the correspondent financial
institutions(Note 1) The contract amount, etc. is stated based on a
notional principal(Note 2) The fair value is estimated based on the price, etc.
presented by the correspondent financial
institutions78

Fiscal period ended June 30, 2016 (Reference)(from January 1, 2016 to June 30, 2016)

Fiscal period ended December 31, 2016
(from July 1, 2016 to December 31, 2016)(Note 2) Financial instruments for which fair value isextremely difficult to value(Unit: JPY thousand)(Note 2) Financial instruments for which fair value isextremely difficult to value(Unit: JPY thousand)Category

Book value

Category

Tenant leasehold and28,663security deposits
Tenant leasehold and2,035,843
security deposits in trust
Tenant leasehold and security deposits and tenantleasehold and security deposits in trust have no observable
market price, and it is impracticable to estimate reasonably
their future cash flows because the repayment dates of
those deposits and the timing of the lessee’s exit from theproperty are not certain. Thus, their fair value is notdisclosed.

Book value

Tenant leasehold and28,663security deposits
Tenant leasehold and2,030,396
security deposits in trust
Tenant leasehold and security deposits and tenantleasehold and security deposits in trust have no observable
market price, and it is impracticable to estimate reasonably
their future cash flows because the repayment dates of
those deposits and the timing of the lessee’s exit from theproperty are not certain. Thus, their fair value is notdisclosed.

(Note 3) Remaining schedule of monetary claims after theclosing date of the fiscal period(Note 3) Remaining schedule of monetary claims after theclosing date of the fiscal period

As of June 30, 2016

As of December 31, 2016
(Unit: JPY thousand)(Unit: JPY thousand)Cash and bank deposits

Due within
one year

Due after one Due after two
to two years to three years

11,322,762-

Cash and bank deposits intrust

5,441,316

Total

16,764,078-

Cash and bank deposits in
trust

-

Total

-

Due after one Due after two
to two years to three years-

Cash and bank deposits

8,714,907

-

-

-

-

Cash and bank deposits intrust

5,499,826

-

-

-

-

Total

14,214,734--

Due after three Due after four Due after five
to four years to five years
years
Cash and bank deposits

Due within
one year

Due after three Due after four Due after five
to four years to five years
years

-

Cash and bank deposits

-

-

-

-

-

Cash and bank deposits in
trust

-

-

-

-

-

Total

-

-

-

-

(Note 4) Repayment schedule of long-term loans and otherinterest-bearing debts after the closing date of the
fiscal period(Note 4) Repayment schedule of long-term loans and otherinterest-bearing debts after the closing date of the
fiscal period

As of June 30, 2016

As of December 31, 2016
(Unit: JPY thousand)(Unit: JPY thousand)Due within
one year

Due after one Due after two
to two years to three years

Due within
one year

Short-term loans

3,498,000--

Short-term loans

-

-

-

Long-term loans--

46,663,000

Long-term loans-

28,979,000

51,045,000

Total

3,498,000-

46,663,000

Total

-

28,979,000

51,045,000

Due after three Due after four Due after five
to four years to five years
years

Due after one Due after two
to two years to three years

Due after three Due after four Due after five
to four years to five years
years

Short-term loans

-

-

-

Short-term loans

-

-

-

Long-term loans

44,094,000

47,662,000-

Long-term loans

42,012,000

20,383,000

-

Total

44,094,000

47,662,000

-

Total

42,012,000

20,383,000-79[Notes Related to Asset Retirement Obligations]Fiscal period endedJune 30, 2016 (Reference)(from January 1, 2016 toJune 30, 2016)

Fiscal period endedDecember 31, 2016
(from July 1, 2016 toDecember 31, 2016)

1. Summary of the asset retirement obligations for the period
1. Summary of the asset retirement obligations for the period
INV has recorded asset retirement obligations in regard to
INV has recorded asset retirement obligations in regard to
its obligation to restore the land to its original condition
its obligation to restore the land to its original condition
related to the fixed-term land lease agreement of Comfort
related to the fixed-term land lease agreement of Comfort
Hotel Maebashi held by INV.
Hotel Maebashi held by INV.
2. Calculation method for asset retirement obligations for the
2. Calculation method for asset retirement obligations for theperiodperiodThe amount of the asset retirement obligations has been
The amount of the asset retirement obligations has been
calculated by fixing the estimated period of use at 43 years,
calculated by fixing the estimated period of use at 43 years,
based on the period until the expiration of the fixed-termbased on the period until the expiration of the fixed-term
land lease agreement, and by using a discount rate ofland lease agreement, and by using a discount rate of
1.342%.
1.342%.
3. Increase/decrease in the total amount of asset retirement
3. Increase/decrease in the total amount of asset retirement
obligations for the current fiscal period
obligations for the current fiscal period(Unit: JPY thousand)(Unit: JPY thousand)
Balance at the beginning of the period
Increase due to the acquisition of properties
Accretion expense
Balance at the end of the period

30,868182
31,05080

Balance at the beginning of the period
Increase due to the acquisition of properties
Accretion expense
Balance at the end of the period

31,050209
31,260[Notes Related to Rental Properties]
Fiscal period ended
June 30, 2016 (Reference)(from January 1, 2016 toJune 30, 2016)
INV owns residential properties and hotels as core assets aswell as other various properties including offices andcommercial facilities principally in the Tokyo area andmajor regional cities in order to establish a portfolio which
focuses on both stability and growth potential. The bookchanged during the period and balance at the end of theperiod are as follows.
(Unit: JPY thousand)Book value
Fair value atBalance at theBalance at the the end of the
Change during
periodbeginning of
end of thethe period
the period
periodUse

Residences60,305,706

7,968,789

68,274,496

77,214,000

Offices

8,487,876(17,489)8,470,387

Fiscal period ended
December 31, 2016
(from July 1, 2016 to
December 31, 2016)
INV owns residential properties and hotels as core assets aswell as other various properties including offices andcommercial facilities principally in the Tokyo area andmajor regional cities in order to establish a portfolio which
focuses on both stability and growth potential. The bookvalue changed during the period and balance at the end of
the period are as follows.
(Unit: JPY thousand)Book value
Fair value atBalance at theBalance at the the end of the
Change during
periodbeginning of
end of thethe period
the period
periodUse

Residences

68,274,496(438,657)

67,835,839

77,843,000

7,219,000

Offices

8,470,387(29,405)8,440,981

7,406,000

5,087,525(38,298)

5,049,226

5,890,000

100,820(1)

100,819

113,000

Commercial
facilities

5,134,083(46,557)

5,087,525

5,840,000

Commercial
facilities

Parking lot

100,821(1)

100,820

113,000

Parking lot

Hotels95,223,054

84,314,865

179,537,920

232,905,000

Hotels179,537,920(1,026,493)

178,511,427

236,940,000

Total

169,251,542

92,219,607

261,471,150

323,291,000

Total

261,471,150(1,532,855)

259,938,294

328,192,000(Note 1) Book value is the figure calculated by subtracting
amount of accumulated depreciation from acquisition
price (including acquisition-related costs)(Note 2) The major factors for the increase for the fiscal period
ended June 30, 2016 were acquisition of residential
properties and hotels, capital expenditures related toconstruction work
(Note 3) The major factor for the decrease was depreciation(Note 4) The fair value as of the end of the reporting period isdetermined based on the appraisal value provided by
Asset Research and Development Inc., Japan Real
Estate Institute, Morii Appraisal & Investment
Consulting Inc., The Tanizawa Sogo Appraisal Co.,
Ltd., and Daiwa Real Estate Appraisal Co., Ltd.
For information related to profits and losses from rental
properties in the fiscal period ended June 30, 2016, pleaserefer to “Notes to Statement of Income and Retained
Earnings.”(Note 1) Book value is the figure calculated by subtracting
amount of accumulated depreciation from acquisition
price (including acquisition-related costs)(Note 2) The major factors for the increase for the fiscal period
ended December 31, 2016 was capital expenditures
related to construction work
(Note 3) The major factor for the decrease was depreciation(Note 4) The fair value as of the end of the reporting period isdetermined based on the appraisal value provided by
Asset Research and Development Inc., Japan Real
Estate Institute, Morii Appraisal & Investment
Consulting Inc., The Tanizawa Sogo Appraisal Co.,
Ltd., and Daiwa Real Estate Appraisal Co., Ltd.
For information related to profits and losses from rental
properties in the fiscal period ended December 31, 2016,
please refer to “Notes to Statement of Income and Retained
Earnings.”[Notes Related to Restriction on Asset Management]
Fiscal period ended June 30, 2016 (Reference)(from January 1, 2016 to June 30, 2016)

Fiscal period ended December 31, 2016
(from July 1, 2016 to December 31, 2016)

Not applicable.

Not applicable.

81

[Notes Related to Transactions with Related Parties]
Fiscal period ended June 30, 2016 (from January 1, 2016 to June 30, 2016)
1

Interested parties of the Asset Manager

Classification

Interested party of
the asset manager

Name

Business or
occupation

Percentage
of votingrightsowned(%)

Type of transaction

Aki Tokutei
Mokuteki Kaisha

Investment
managementbusiness-

Purchase of trust beneficiaryinterests in real estate(Note 2) (Note 5)

3,160,000--

Navaro Tokutei
Mokuteki Kaisha

Investment
managementbusiness-

Purchase of trust beneficiaryinterests in real estate(Note 2) (Note 5)

20,155,000--

Momo Tokutei
Mokuteki Kaisha

Investment
managementbusiness-

Purchase of trust beneficiaryinterests in real estate(Note 2) (Note 5)

7,934,000--

Tsuki Tokutei
Mokuteki Kaisha

Investment
managementbusiness-

Purchase of trust beneficiaryinterests in real estate(Note 2) (Note 5)

24,674,000--

Septentrio Tokutei
Mokuteki Kaisha

Investment
managementbusiness-

Purchase of trust beneficiaryinterests in real estate(Note 2) (Note 5)

12,588,600--

Septentrio 2 Tokutei
Mokuteki Kaisha

Investment
managementbusiness-

Purchase of trust beneficiaryinterests in real estate(Note 2) (Note 5)

4,196,199--

Septentrio 3 Tokutei
Mokuteki Kaisha

Investment
managementbusiness-

Purchase of trust beneficiaryinterests in real estate(Note 2) (Note 5)

4,196,199--

Ginga Tokutei
Mokuteki Kaisha

Investment
managementbusiness-

Purchase of trust beneficiaryinterests in real estate(Note 2) (Note 5)

13,761,000 Accounts payable

Wakusei Tokutei
Mokuteki Kaisha

Investment
managementbusiness-

Purchase of trust beneficiaryinterests in real estate(Note 2) (Note 5)

2,139,000-

Naqua Hotel &Resorts Management Hotel businessCo., Ltd.

-

Rental revenues

627,563

Accounts
receivable

220,811-

Rental revenues

3,389,166

Accounts
receivable

990,543

MyStays HotelManagement
Co., Ltd.

Hotel businessTransaction
amount(JPY thousand)Account

Balance at the endof the period(JPY thousand)

8,800,548-(Note 1) Consumption taxes, etc., are not included in transaction amount, but are included in the balance at the end of theperiod(Note 2) The terms and conditions have been determined based on the Asset Manager’s internal rules and manual regardingtransactions with the sponsor company(Note 3) Aki Tokutei Mokuteki Kaisha, Navaro Tokutei Mokuteki Kaisha, Momo Tokutei Mokuteki Kaisha, Tsuki Tokutei
Mokuteki Kaisha, Septentrio Tokutei Mokuteki Kaisha, Septentrio 2 Tokutei Mokuteki Kaisha, Septentrio 3 Tokutei
Mokuteki Kaisha, Ginga Tokutei Mokuteki Kaisha, Wakusei Tokutei Mokuteki Kaisha, Naqua Hotel & Resorts
Management Co., Ltd., and MyStays Hotel Management Co., Ltd. have no capital relationship to be disclosed with
the Asset Manager. The Tokutei Mokuteki Kaisha or the lessee and operator have received an anonymous partnershipinvestment or investment through funds that are managed by affiliates of Fortress Investment Group LLC (“FIG”), an
affiliate of Calliope. Accordingly, INV treats Aki Tokutei Mokuteki Kaisha, Navaro Tokutei Mokuteki Kaisha,Momo Tokutei Mokuteki Kaisha, Tsuki Tokutei Mokuteki Kaisha, Septentrio Tokutei Mokuteki Kaisha, Septentrio 2
Tokutei Mokuteki Kaisha, Septentrio 3 Tokutei Mokuteki Kaisha, Ginga Tokutei Mokuteki Kaisha, Wakusei Tokutei
Mokuteki Kaisha, Naqua Hotel & Resorts Management Co., Ltd., and MyStays Hotel Management Co., Ltd. as theequivalent to interested parties(Note 4) Calliope holds 609,942 units (holding percentage: 16.6%) of the issued investment units of INV

82

(Note 5) The purchase of trust beneficiary interests pertains to the following properties. The transaction amount is thepurchase price stated in the trust beneficiary purchase agreement, to which other expenses for acquisition, property
taxes, city planning taxes and consumption taxes are not included
Property
NumberName of Property

Counterparty

A103

Royal Parks Momozaka

Momo Tokutei Mokuteki Kaisha

2,910,000

A104Royal Parks Shinden

Momo Tokutei Mokuteki Kaisha

5,024,000

D38

Hotel MyStays Shinsaibashi

Aki Tokutei Mokuteki Kaisha

3,160,000

D39

Comfort Hotel Kurosaki

Navaro Tokutei Mokuteki Kaisha

1,148,000

D40

Comfort Hotel Maebashi

Navaro Tokutei Mokuteki Kaisha

1,128,000

D41

Comfort Hotel Tsubame-Sanjo

Navaro Tokutei Mokuteki Kaisha

1,010,000

D42

Comfort Hotel Kitami

Navaro Tokutei Mokuteki Kaisha

851,000

D43

Hotel MyStays Gotanda Station

Tsuki Tokutei Mokuteki Kaisha

24,674,000

D44Hotel Epinard Nasu

Sepentrio Tokutei Mokuteki Kaisha
Sepentrio 2 Tokutei Mokuteki Kaisha
Sepentrio 3 Tokutei Mokuteki Kaisha

20,981,000

D45

Hotel MyStays Fukuoka Tenjin

Navaro Tokutei Mokuteki Kaisha

8,059,000

D46

Hotel MyStays Hamamatsucho

Navaro Tokutei Mokuteki Kaisha

7,959,000

D47

Hotel MyStays Premier Kanazawa

Ginga Tokutei Mokuteki Kaisha

13,761,000

D48

Takamatsu Tokyo REI Hotel

Wakusei Tokutei Mokuteki Kaisha

2,139,000

Purchase Price (JPY thousand)

Total

2

92,804,000

Asset Custody Company
Classification

Asset CustodyCompany

NameBusiness or
occupation

Sumitomo Mitsui
Banking andTrust Bank, Limited trust business

Percentage
of votingrights owned(%)-

Type of transaction

Transaction
amount(JPY thousand)Account

Borrowing forlong-term loan

13,341,000

Long-termloans payable

21,351,000

Prepaid expenses

50,170Finance related fees

120,832
Long-term
Prepaid expenses

126,21250,413 Accrued expenses

320Interest expenses

Balance at theend of the period(JPY thousand)(Note 1) Consumption taxes are not included in transaction amount, but are included in the balance at the end of the period(Note 2) The terms and conditions have been determined based on actual market conditions

83

Fiscal period ended December 31, 2016 (from July 1, 2016 to December 31, 2016)
1

Interested parties of the Asset Manager

Name

Business or
occupation

Percentage ofvoting rights
owned
(%)

Type of transaction

Ginga Tokutei
Mokuteki Kaisha

Investment
managementbusiness-

Payments for accounts
payableNaqua Hotel &Interested party ofResorts Management Hotel businessthe Asset Manager
Co., Ltd.

-

Rental revenues

1,040,790

Accounts
receivable

92,474-

Rental revenues

4,043,845

Accounts
receivable

1,146,414

Classification

MyStays HotelManagement
Co., Ltd.

Hotel businessTransaction
amount(JPY thousand)Account

Balance at the endof the period(JPY thousand)

8,800,548 Accounts payable-(Note 1) Consumption taxes, etc., are not included in transaction amount, but are included in the balance at the end of the period(Note 2) Ginga Tokutei Mokuteki Kaisha, Naqua Hotel & Resorts Management Co., Ltd., and MyStays Hotel Management
Co., Ltd. have no capital relationship to be disclosed with the Asset Manager. The tenant and operator have received
an anonymous partnership investment or investment through funds that are managed by affiliates of Fortress
Investment Group LLC (“FIG”), an affiliate of Calliope. Accordingly, INV treats Ginga Tokutei Mokuteki Kaisha,
Naqua Hotel & Resorts Management and MyStays Hotel Management Co., Ltd. as the equivalent to interested parties(Note 3) Calliope holds 609,942 units (holding percentage: 16.6%) of the issued investment units of INV

2

Asset Custody Company

Classification

Name

Business or
occupation

Percentage ofvoting rights
owned
(%)

Type of transaction
Borrowing forlong-term loan
Repayment of short-termloan

Asset CustodyCompany

Sumitomo Mitsui
Banking andTrust Bank, Limited trust businessTransaction
amount(JPY thousand)
1,186,000

Long-termloans payable
Short-termloans payable

Balance at the endof the period(JPY thousand)
21,351,000-

Prepaid expenses

48,328Long-term
Prepaid expenses

92,85658,014 Accrued expenses

620

Finance related fees

Interest expenses

Account-(Note 1) Consumption taxes are not included in transaction amount, but are included in the balance at the end of the period(Note 2) The terms and conditions have been determined based on actual market conditions

84

[Notes Related to Per Unit Information]
Fiscal period ended June 30, 2016 (Reference)(from January 1, 2016 to June 30, 2016)

Fiscal period ended December 31, 2016
(from July 1, 2016 to December 31, 2016)

Net assets per unit

JPY 35,368

Net income per unit

JPY 1,270

Net income per unit is calculated by dividing net income forthe period by the daily weighted average number ofinvestment units issued and outstanding. Diluted net income
per unit is not stated, as there are no diluted units.

Net assets
JPY 28,731
per unit

JPY 35,762

Net income
JPY per
937unitJPY 1,477

Net income per unit is calculated by dividing net income forthe period by the daily weighted average number ofinvestment units issued and outstanding. Diluted net income
per unit is not stated, as there are no diluted units.

(Note) The basis for calculating net income per unit is as follows.
Fiscal period ended June 30, 2016 (Reference)(from January 1, 2016 to June 30, 2016)
Net income for the fiscal period (JPY thousand)Amounts not attributable to common unitholders(JPY thousand)Net income attributable to common units(JPY thousand)Average number of investment units during theperiod (units)

Fiscal period ended December 31, 2016
(from July 1, 2016 to December 31, 2016)

4,363,420
4,363,420
3,436,572

85

2,952,688
Net income for the fiscal period (JPY thousand)Amounts not attributable to common unitholders(JPY thousand)Net income attributable to common units
2,952,688(JPY thousand)Average number of investment units during the
3,149,936
period (units)

5,431,003
5,431,003
3,675,824

[Notes Related to Significant Subsequent Events]
Fiscal period ended June 30, 2016 (Reference)(from January 1, 2016 to June 30, 2016)
1. Borrowing of funds
In order to raise a part of the funds to be used for theacquisition of trust beneficiary interests for the two hotel
properties acquired on June 15, 2016, INV implemented
the following borrowing on July 20, 2016.

Term Loan (E)LenderBorrowing amountInterest rate, etc.

Interest payment datePrincipal repayment
methodBorrowing method
Borrowing date
Maturity date

The Tokyo Star Bank,
LimitedJPY 4,000 million
Base Rate (1-month JPY
TIBOR) + 0.40%, 0.50%,
0.60%(i) The last Japanesebusiness day of each month
before the principal maturity
date, beginning with July29, 2016, and (ii) the
principal maturity dateFiscal period ended December 31, 2016
(from July 1, 2016 to December 31, 2016)
1. Issuance of new investment units
INV decided on the issuance of new investment units andsecondary offering of investment units at its board of
directors’ meeting on February 22, 2017. Issue price perunit and other details are scheduled to be determined atfuture board of directors’ meeting.
(1) Issuance of new investment units through Public
Offering
Number of Investment Units to be offered: 185,000
investment units(2) Secondary offering of investment units(by way of overallotment)
Number of investment units to be offered: 9,250
investment units
2. Borrowing of funds
In order to raise a part of the funds to be used for theacquisition of trust beneficiary interests for the two
residential properties to be acquired on March 14, 2017(see “3. Acquisition of Assets” below), INV decided on
the implementation of the following borrowings at its
board of directors’ meeting held on February 22, 2017.

Lump-sum repayment
Unsecured / with noguarantee
July 20, 2016
July 20, 2019, July 20, 2020,
July 20, 2021

New Syndicate Loan (G)Syndicate formed by
LenderMizuho Bank, Ltd.
JPY11,250 million
Borrowing amountBase Rate (1-month JPY
Interest rate, etc.
TIBOR) + 0.40%, 0.50%,
0.60%(1) The last JapaneseInterest payment datebusiness day of each month
before the principal
maturity date, beginningwith March 31, 2017, and(2) the principal maturity
date
Principal repayment
Lump-sum repayment
methodUnsecured / with no
Borrowing method
guarantee
March 14, 2017
Borrowing date
March 14, 2020, March 14,
Maturity date
2021 and March 14, 2022

86

Fiscal period ended June 30, 2016 (Reference)(from January 1, 2016 to June 30, 2016)

Fiscal period ended December 31, 2016
(from July 1, 2016 to December 31, 2016)
Term Loan (F)LenderBorrowing amountInterest rate, etc.
Interest payment datePrincipal repayment
methodBorrowing method
Borrowing date
Maturity date

Sumitomo Mitsui Banking
Corporation.
JPY3,000 million
Base Rate (1-month JPY
TIBOR) + 0.45%(1) The last Japanesebusiness day of each month
before the principal
maturity date, beginningwith March 31, 2017, and(2) the principal maturity
date
Lump-sum repayment
Unsecured / with noguarantee
March 14, 2017
September 14, 2020

3. Acquisition of assets
INV decided to acquire the following two properties (totalacquisition price of JPY 24,562 million) on February 22,
2017.
Property number: A105
Property name: Royal Parks Tower Minami-Senju
Acquisition date
Acquisition price(Note)
Location
Completion date
Legal form of asset
SellerTotal floor area
Leasable area

87

March 14, 2017
JPY 21,879 million
Minami-Senju 4-chome,
Arakawa-ku,Tokyo
May 2008
Trust beneficiary interest
Sakura Tokutei Mokuteki
Kaisha47,424.89m2
39,133.46 m2

Fiscal period ended June 30, 2016 (Reference)(from January 1, 2016 to June 30, 2016)

Fiscal period ended December 31, 2016
(from July 1, 2016 to December 31, 2016)
Property number: A106
Property name: Royal Parks Seasir Minami-Senju
Acquisition date
Acquisition price(Note)
Location
Completion date
Legal form of asset
SellerTotal floor area
Leasable area

March 14, 2017
JPY 2,683 million
Minami-Senju 3-chome,
Arakawa-ku,Tokyo
August 2006
Trust beneficiary interest
Momo Tokutei Mokuteki
Kaisha7,248.10m2
6,496.86m2(Note) Acquisition price is based on the purchase priceindicated in the relevant purchase agreement anddoes not include acquisition costs, property taxes,
city planning taxes and consumption taxes

88

[Notes related to Provision and Reversal of Allowance for Temporary Differences Adjustment]

Fiscal period ended June 30, 2016 (Reference)(from January 1, 2016 to June 30, 2016)

Fiscal period ended December 31, 2016
(from July 1, 2016 to December 31, 2016)

In the Statement of Cash Distribution, INV recorded JPY
708 thousand of reserve for temporary differences
adjustment regarding the gain on negative goodwill forthe purpose of appropriating for cash distribution.

In the Statement of Cash Distribution, INV reversed JPY
224,225 thousand of allowance for temporary differences
adjustment corresponding to the change in the fair valueof interest-rate swaps.

In the Statement of Cash Distribution, INV recorded JPY
224,225 thousand of allowance for temporary differences
adjustment regarding deferred losses on hedges ofinterest rate swaps.
The amount of such allowance corresponding to theamounts of change of fair value is scheduled to bereversed.

89VI. Statement of Cash Distribution

Fiscal period ended June 30,
2016 (Reference)(from January 1, 2016 toJune 30, 2016)
I.

Unappropriated retained
earnings
II. Reversal of voluntary
reserve
Reversal of reserve fortemporary differences
adjustment
III. Incorporation into
unitholders' equity
Of which, reversal of
allowance for temporary
differences adjustment
IV. Distribution in excess ofretained earnings
Allowance for temporary
differences adjustment
V. Distributions(Distribution per unit)
Of which, distribution of
earnings(Distribution of earnings
per unit)
Of which, allowance fortemporary differences
adjustment(Distribution in excess
of retained earnings perunit (Allowance fortemporary differences
adjustment))
VI. Retained earnings carriedforwardCalculation method of
distribution amountFiscal period ended
December 31, 2016
(from July 1, 2016 to
December 31, 2016)

JPY 4,363,420,951

JPY5,659,831,868

JPY 708,942--

JPY 224,225,264

JPY 224,225,264-

JPY 4,359,527,264(JPY 1,186)

JPY 5,429,192,048(JPY 1,477)

JPY 4,135,302,000

JPY 5,429,192,048(JPY 1,125)(JPY 1,477)

JPY 224,225,264-(JPY 61)-

JPY 228,827,893

JPY 6,414,556

As
shown
above,
thedistribution per unit for theperiod is JPY 1,186.
With
respect
toprofitdistributions (not including
distributions in excess of
profit), INV decided to
distribute almost all of its profit
as defined in Article 136,

As
shown
above,
thedistribution per unit for theperiod is JPY 1,477.
With
respect
toprofitdistributions (not including
Excess Profit Distribution),
INV decided to distributealmost all of its profit as
defined in Article 136,

90

Paragraph 1 of the Investment
Trust Act, other than fractionalamount per unit less than JPY
1, aiming to include themaximum amount of profit
distributions in deductible
expenses in accordance with
Article 67-15, Paragraph 1 of
the Act on Special Taxation
Measures (Act No. 26, 1957).
As a result, the distribution of
earnings per unit (not including
distributions in excess of profit
per unit) is JPY 1,125.
In addition, in accordance withthe distribution policy as set
forth in the Articles ofIncorporation, INV makes
distributions in excess ofearnings of the amount that it
determines as the amountequivalent to items deductedfrom net assets (as set forth in
Article 2, Paragraph 2, Item 30(b) of the Ordinance on
Accountings of Investment
Corporations), taking into
consideration the effect of theitems deducted from net assets
on the distributions (the“Excess Profit Distribution”).
For the Reporting Period, INV
makes Distribution in excess ofearnings of JPY 227 million,
corresponding to deferredlosses on hedges, of which, thedistribution of allowance fortemporarydifferences
adjustment is JPY 224 million,
and the distribution per unit of
the allowance for temporary
differences adjustment is JPY
61.

91

Paragraph 1 of the Investment
Trust Act, remaining after
deducting the reversal of
allowance
for
temporarydifferences adjustments, otherthan fractional amount per unit
less than JPY 1, aiming toinclude the maximum amountof profit distributions indeductible
expensesinaccordance with Article 67-15,
Paragraph 1 of the Act on
Special Taxation Measures (ActNo. 26, 1957). As a result, thedistribution of earnings per unit
(not including Excess Profit
Distribution per unit) is JPY
1,477.
Furthermore, INV has decided
not to make Distribution inexcess of profit.

Note
Accompanying English financial information, comprising Balance Sheet, Statement of Income andRetained Earnings, Statement of Changes in Net Assets, Notes to financial statements and Statement of
Cash Distribution, have been translated from the Japanese financial statements of the Investment
Corporation prepared in accordance with the Act on Investment Trusts and Investment Corporations ofJapan.
Under Article 130 of the Act on Investment Trusts and Investment Corporations of Japan, the Japanesefinancial statements for the six months ended December 31, 2016 have been audited by Ernst & Young
ShinNihon LLC, in accordance with auditing standards generally accepted in Japan. However, English
translation of the Japanese language report of independent auditors is not attached herein since theaccompanying English translation of Balance Sheet, Statement of Income and Retained Earnings,
Statements of Changes in Net Assets, Notes to financial statements and Statement of Cash Distribution are
unaudited.
Regarding the English audited financial statements, please refer to the “Audited Financial Statements” on
the website of Invincible Investment Corporation: http://www.invincible-inv.co.jp/eng/cms/doc.html

92VII. Statement of Cash Flows (Reference Information)(Unit: JPY thousand)Fiscal period ended
December 31, 2016
(from July 1, 2016 to
December 31, 2016)

Fiscal period ended
June 30, 2016 (Reference)(from January 1, 2016 toJune 30, 2016)
Cash flows from operating activities
Net income before taxes
Depreciation and amortization
Investment unit issuance costs
Loan-related costs
Interest income
Interest expenses
Increase (decrease) in allowance for doubtful
accounts
Decrease (increase) in rental receivable
Decrease (increase) in consumption taxes receivable
Increase (decrease) in accounts payable
Increase (decrease) in consumption taxes payable
Increase (decrease) in accounts payable-other
Increase (decrease) in accrued expenses
Increase (decrease) in advances received
Increase (decrease) in deposits received
Others, net

4,364,025
1,676,751
137,270
280,326(1,316)295,185

5,431,608
2,065,066
186,249(129)
359,540

269(1,430)(306,493)(1,744,762)
7,056
884,265
38,57733,971(14,615)(34,907)5,615,604(22,587)
2,672,787(66,883)
460,521(881,047)(5,946)
14,936(23,418)(12,451)
10,176,817

Interest income received
Interest expenses paid
Income taxes paid

1,316
(297,081)
(564)

129
(358,219)(605)

Net cash provided by operating activities

5,319,276

9,818,122

Purchases of property and equipment in trust
Purchases of leasehold rights in trust
Proceeds from tenant leasehold and security
deposits in trust
Repayments of tenant leasehold and security
deposits in trust
Payments of tenant leasehold and security deposits
Other, net(82,786,898)(3,055,031)(8,449,701)-(56,280)(53,815)474,368

48,371(574,396)(2,211)(2,211)

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

3,498,000(1,080,000)
47,800,000(594,356)(3,014,523)(3,498,000)
4,000,000(53,775)(4,118,229)-(224,225)

Subtotal

Cash flows from investing activities

Cash flows from financing activities
Proceeds from short-term loans payable
Repayment of short-term loans payable
Proceeds from long-term loans payable
Payments for loan-related costs
Payment of distributions of earnings
Payment of distributions in excess of retained
earnings from allowance for temporary differences
adjustment

93

Fiscal period ended
June 30, 2016 (Reference)(from January 1, 2016 toJune 30, 2016)(Unit: JPY thousand)Fiscal period ended
December 31, 2016
(from July 1, 2016 to
December 31, 2016)

Payment of other distribution in excess of retained
earnings
Proceeds from issuance of investment units
Other(763,290)-

37,780,441-(15,879)

Net cash provided by (used in) financing activities

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

Net increase (decrease) in cash and cash equivalents

2,945,097(2,549,344)

Cash and cash equivalents at beginning of period

13,818,981

16,764,078

Cash and cash equivalents at end of period *1

16,764,078

14,214,734[Notes Concerning Significant Accounting Policies (Reference Information)]
By Period
Item
Cash and cash equivalents as statedin Statement of Cash Flows

Fiscal period ended
June 30, 2016 (Reference)(from January 1, 2016 toJune 30, 2016)
Cash and cash equivalents as statedin the Statement of Cash Flows
consist of cash on hand and cash intrust, floating deposits, deposits intrust and short-term investments thatare very liquid and realizable with amaturity of three months or lesswhen purchased and that are subject
to insignificant risks of changes invalue.

Fiscal period ended
December 31, 2016
(from July 1, 2016 to
December 31, 2016)
Cash and cash equivalents as statedin the Statement of Cash Flows
consist of cash on hand and cash intrust, floating deposits, deposits intrust and short-term investments thatare very liquid and realizable with amaturity of three months or lesswhen purchased and that are subject
to insignificant risks of changes invalue.

[Notes to Changes in Indication Method (Reference Information)]
Fiscal period ended June 30, 2016 (Reference)(from January 1, 2016 to June 30, 2016)
In the fiscal period ended December 31, 2015, “Payment
for leasehold and security deposits” was included in“Other” under “Cash flows from investing activities”.
However, due to an increase in the relevant amount, it
has become significant enough to be recorded as aseparate item in the fiscal period ended June 30, 2016.
As a result, the entry for (JPY 2,211,000), which wasrecorded under “Cash flows from investing activities –Others” for the previous period is now indicated under“Payments of tenant leasehold and security deposits”.

Fiscal period ended December 31, 2016
(from July 1, 2016 to December 31, 2016)-94

[Notes to Statement of Cash Flows (Reference Information)]
By Period
Item*1. Relationship between cash andcash equivalents in Statement of
Cash Flows and amounts inaccompanying balance sheet

Fiscal period ended
June 30, 2016 (Reference)(from January 1, 2016 toJune 30, 2016)(As of June 30, 2016)(Unit: JPY thousand)Cash and bank
11,322,762
deposits
Cash and bank5,441,316
deposits in trust
Cash and cash
16,764,078
equivalents

95

Fiscal period ended
December 31, 2016
(from July 1, 2016 to
December 31, 2016)(As of December 31, 2016)(Unit: JPY thousand)Cash and bank8,714,907
deposits
Cash and bank5,499,826
deposits in trust
Cash and cash
14,214,734
equivalents

“My Number” informed by municipalities is necessary for taxation procedure on investment units.
Thus, it is necessary for unitholders to notify your “My Number” to your brokerage, etc.
Usage of “My Number” in investment units related affairs“My Number” is recorded on the payment record and the payment record is filed with the relevant
tax authority pursuant to laws and ordinances.
Major payment record*Payment record regarding cash distribution

Usage of “My Number” includes taxation related procedures on investment units. It is necessary for
unitholders to notify your “My Number” to your brokerage, etc.
Inquiries regarding notifying “My Number”Unitholders whose investment units are managed in brokerage accounts
Each brokerage
Unitholders who have no brokerage accountTransfer Agent Department, Sumitomo Mitsui Trust Bank, Limited
Toll-free Telephone Number 0120-782-031

96

Portfolio Map

No. of Properties

No. of Hotels

No. ofHotel Rooms

No. ofApartment Units

126

48

7,027

4,778

(Note 1) as of March 14, 2017
(Note 2) For properties corresponding to the number and overview, please refer to pages 96-99

97

98

Portfolio Overview(as of March 14, 2017)
Use

Property
NumberName of Property(Note 1)

Residential

A26
A27

Location

Nisshin Palacestage
Suginami-ku, Tokyo
Daitabashi
Nisshin Palacestage HigashiToshima-ku, Tokyo
Nagasaki

Acquisition
Price(JPY mn)

Investment
Ratio
(%)

Occupancy
Rate(%)(Note 2)

(Note 3)(Note 4)

Leasable Area(m2)

RentableUnits

1,771.13

98

1,251

0.4

98.0

2,681.94

60

1,229

0.4

96.5

A28

Growth Maison Gotanda

Shinagawa-ku, Tokyo

1,051.50

48

888

0.3

100.0

A29

Growth Maison Kameido

Koto-ku, Tokyo

1,367.96

66

1,070

0.4

92.4

A30

Emerald House

Itabashi-ku, Tokyo

2,152.31

96

1,505

0.5

96.9

A31

Harmonie Ochanomizu

Bunkyo-ku, Tokyo

1,748.24

65

1,428

0.5

100.0

Suncrest Shakujii-Koen

Nerima-ku, Tokyo

3,029.16

29

1,088

0.4

94.0

A32
A33
A34

Growth Maison ShinYokohama
Belle Face UenoOkachimachi

Yokohama-shi, Kanagawa

1,858.44

68

1,059

0.4

94.2

Taito-ku, Tokyo

1,351.11

64

1,023

0.4

95.2

A35

Grand Rire Kameido

Koto-ku, Tokyo

1,562.26

72

906

0.3

100.0

A36

Growth Maison Ikebukuro

Toshima-ku, Tokyo

952.89

42

825

0.3

100.0

A37

Growth Maison Yoga

Setagaya-ku, Tokyo

1,015.34

39

795

0.3

94.8

A38

Route Tachikawa

Tachikawa-shi, Tokyo

1,368.57

24

676

0.2

100.0

A39

Shibuya-Honmachi Mansion Shibuya-ku, Tokyo

1,167.50

25

651

0.2

91.9

A40

City Heights Kinuta

1,235.93

19

646

0.2

94.6

A41

Acseeds Tower KawaguchiKawaguchi-shi, Saitama
Namiki

1,210.74

57

620

0.2

89.4

A42

Capital Heights Kagurazaka Shinjuku-ku, Tokyo

1,126.65

26

604

0.2

97.2

A43

College Square Machida

Machida-shi, Tokyo

1,047.75

62

589

0.2

100.0

A44

Belair Meguro

Meguro-ku, Tokyo

557.05

25

589

0.2

92.1

A45

Wacore Tsunashima I

Yokohama-shi, Kanagawa

907.46

50

572

0.2

89.9

A46

Foros Nakamurabashi

Nerima-ku, Tokyo

815.77

37

566

0.2

91.2

A47

Growth Maison Kaijin

Funabashi-shi, Chiba

2,040.27

34

557

0.2

97.4

A48

College Square Machiya

Arakawa-ku, Tokyo

871.35

43

510

0.2

100.0

A51

City House Tokyo Shinbashi Minato-ku, Tokyo

3,364.00

86

2,520

0.9

93.3

A52

Winbell Kagurazaka

Shinjuku-ku, Tokyo

4,032.70

118

3,260

1.1

95.5

A53
A54

Nishiwaseda Cresent
MansionLexington Square
Akebonobashi

Setagaya-ku, Tokyo

Shinjuku-ku, Tokyo

4,310.77

69

1,880

0.6

95.8

Shinjuku-ku, Tokyo

1,987.88

88

1,450

0.5

96.7

Meguro-ku, Tokyo

1,197.19

17

1,070

0.4

96.7

A56

Casa Eremitaggio

A59

Towa City Coop Shinotsuka
Toshima-ku, TokyoII

1,627.13

58

866

0.3

96.3

A61

Bichsel Musashiseki

Nerima-ku, Tokyo

1,220.24

70

577

0.2

91.5

A62

Lexel Mansion Ueno
Matsugaya

Taito-ku, Tokyo

1,969.45

29

970

0.3

96.4

A63

Towa City Coop Sengencho Yokohama-shi, Kanagawa

3,426.36

154

1,110

0.4

89.7

A64

Royal Park Omachi

Sendai-shi, Miyagi

1,929.59

51

415

0.1

92.8

A65

Lexington Square
Haginomachi

Sendai-shi, Miyagi

1,528.58

39

330

0.1

92.1

A66

Visconti Kakuozan

Nagoya-shi, Aichi

A71

Lexington Square Daitabashi Suginami-ku, Tokyo

A72

Lexington Square Honjo
Azumabashi

784.74

A73

AMS TOWER Minami 6-Jo Sapporo-shi, Hokkaido

4,460.56

A75

Spacia Ebisu

Shibuya-ku, Tokyo

7,794.91

A76

Neo Prominence

Kita-ku, Tokyo

A77

Invoice Shin-Kobe Residence Kobe-shi, Hyogo

A78

Cosmo Court Motomachi

A79

Revest Honjin

705.75

8

255

0.1

83.8

1,430.64

43

977

0.3

92.9

33

511

0.2

96.9

120

1,180

0.4

86.1

109

7,010

2.4

94.0

3,574.70

52

1,660

0.6

95.0

2,773.71

81

1,260

0.4

81.5

Kobe-shi, Hyogo

2,310.49

82

973

0.3

86.5

Nagoya-shi, Aichi

1,933.80

80

674

0.2

95.0

Sumida-ku, Tokyo

99

Occupancy
Rate
(%)

(Note 2)

(Note 3)(Note 4)

Residential

Investment
Ratio
(%)

PurposeAcquisition
Price(JPY mn)

Property
Number

A80

Revest Matsubara

Nagoya-shi, Aichi

1,955.40

70

657

0.2

91.8

A81

Sun Terrace Minami
Ikebukuro

Toshima-ku, Tokyo

898.70

38

625

0.2

97.4

A82

Alba Noritake Shinmachi

Nagoya-shi, Aichi

1,731.68

64

608

0.2

91.0

A83

Revest Meieki Minami

Nagoya-shi, Aichi

1,634.60

61

597

0.2

93.6

A84

Revest Heian

Nagoya-shi, Aichi

1,554.03

40

595

0.2

88.7

A85

Vendir Hamaotsu Ekimae

Otsu-shi, Shiga

2,670.66

81

581

0.2

93.4

A86

Salvo Sala

Osaka-shi, Osaka

1,428.12

54

544

0.2

96.7

A87

Excellente Kagurazaka

Shinjuku-ku,Tokyo

701.92

33

543

0.2

88.3

A88

Luna Court Edobori

Osaka-shi, Osaka

1,185.50

50

525

0.2

98.0

A89

Winntage Kobe Motomachi

Kobe-shi, Hyogo

1,433.35

57

512

0.2

80.7

A90

Queen's Court Fukuzumi

Koto-ku, Tokyo

765.18

25

456

0.2

96.6

A91

Corp Higashinotoin

Kyoto-shi, Kyoto

1,029.05

42

446

0.2

95.2

A92

Belair Oimachi

Shinagawa-ku, Tokyo

530.60

26

412

0.1

92.9

A93

Siete Minami-Tsukaguchi

Amagasaki-shi, Hyogo

1,020.86

40

374

0.1

97.5

A94

Prime Life Sannomiya
Isogami Koen

Kobe-shi, Hyogo

789.12

32

373

0.1

87.5

A95

HERMITAGE NANBA WEST

Osaka-shi, Osaka

992.76

21

355

0.1

88.0

A96

Century Park Shinkawa
1-bankan

Nagoya-shi, Aichi

1,477.62

44

335

0.1

90.9

A97

West Avenue

Kunitachi-shi, Tokyo

794.80

40

331

0.1

87.5

A98

Little River Honmachibashi

Osaka-shi, Osaka

974.81

31

310

0.1

96.9

A99

Prime Life Mikage

Kobe-shi, Hyogo

761.18

28

297

0.1

86.8

Name of Property

Location

Leasable Area(m2)

Rentable
Units(Note 1)

A100 City Court Kitaichijo

Sapporo-shi, Hokkaido

5,230.18

127

1,782

0.6

94.8

A101 Lieto Court Mukojima

Sumida-ku, Tokyo

2,940.20

82

1,683

0.6

95.3

A102 Lieto Court Nishi-Ojima

Koto-ku, Tokyo

2,048.28

91

1,634

0.6

96.8

A103 Royal Parks Momozaka

Osaka-shi, Osaka

8,776.26

147

2,910

1.0

100.0

A104 Royal Parks Shinden

Adachi-ku, Tokyo

15,797.29

248

5,024

1.7

100.0

Arakawa-ku, Tokyo

39,113.46

557

21,8797.5

92.8

Arakawa-ku, Tokyo

6,496.86

113

2,683

0.9

100.0

189,986.98

4,778

95,678

32.9

94.5

Royal Park Tower Minami-Senju
A105(Note 5)
Royal Parks Seasir Minami-Senju
A106(Note 5)
Subtotal
Office Buildings / Commercial Facilities

B08

Kindai Kagakusha Building

Shinjuku-ku, Tokyo

1,451.54

13

1,301

0.4

100.0

B09

Shinjuku Island

Shinjuku-ku, Tokyo

526.43

1

715

0.2

100.0

B14

Lexington Plaza Nishigotanda

Shinagawa-ku, Tokyo

6,033.58

11

4,880

1.7

91.8

B15

Cross Square NAKANO

Nakano-ku, Tokyo

2,145.00

45

1,060

0.4

89.1

B16

Ohki Aoba Building

Sendai-shi, Miyagi

2,178.37

13

816

0.3

83.6

B17

Lexington Plaza Hachiman

Sendai-shi, Miyagi

8,419.15

18

3,280

1.1

100.0

B18

AEON TOWN Sukagawa

Sukagawa-shi,
Fukushima

18,440.58

1

2,320

0.8

100.0

39,194.65

102

14,372

4.9

97.2

81.04

1

97

0.0

100.0

81.04

1

97

0.0

100.0

Subtotal
Parking
Lots

C01

Times Kanda-Sudacho 4th
Subtotal

Chiyoda-ku Tokyo

100

Purpose

Property
NumberHotelsD01

Acquisition
Price(JPY mn)

Investment
Ratio
(%)

Occupancy
Rate(%)(Note 2)

(Note 3)(Note 4)

Location

Leasable Area(m2)

Rentable
Units

Hotel MyStays Kanda

Chiyoda-ku, Tokyo

2,585.72

126

2,851

1.0

100.0

D02

Hotel MyStays Asakusa

Sumida-ku, Tokyo

3,327.38

161

2,584

0.9

100.0

D03

Hotel MyStays Kyoto-Shijo

Kyoto-shi, Kyoto

7,241.51

225

6,024

2.1

100.0

D04

MyStays Shin-Urayasu
Conference Center

Urayasu-shi, Chiba

6,232.30

175

4,930

1.7

100.0

D05

Hotel MyStays Maihama

Urayasu-shi, Chiba

2,456.36

90

4,870

1.7

100.0

D06

Hotel Vista Premio Dojima

Osaka-shi, Osaka

9,445.32

153

3,845

1.3

100.0

D07

Hotel MyStays Nagoya-Sakae

Nagoya-shi, Aichi

9,064.71

279

2,958

1.0

100.0

D08

Hotel MyStays
Sakaisuji-Honmachi

Osaka-shi, Osaka

4,188.83

191

2,514

0.9

100.0

D09

Hotel MyStays Yokohama

Yokohama-shi,
Kanagawa

7,379.43

190

2,119

0.7

100.0

D10

Hotel MyStays Nippori

Arakawa-ku , Tokyo

1,719.29

93

1,898

0.7

100.0

D11

Hotel MyStays
Fukuoka-Tenjin-Minami

Fukuoka-shi, Fukuoka

3,412.71

177

1,570

0.5

100.0

D12

Flexstay Inn Iidabashi

Shinjuku-ku, Tokyo

2,953.38

62

1,381

0.5

100.0

D13

Hotel MyStays Ueno Inaricho

Taito-ku, Tokyo

1,150.76

72

1,331

0.5

100.0

D14

Flexstay Inn Shinagawa

Shinagawa-ku, Tokyo

1,134.52

55

1,242

0.4

100.0

D15

Flexstay Inn Tokiwadai

Itabashi-ku, Tokyo

2,539.75

130

1,242

0.4

100.0

D16

Flexstay Inn Sugamo

Toshima-ku, Tokyo

2,089.86

105

1,192

0.4

100.0

D17

Hotel MyStays Otemae

Osaka-shi, Osaka

4,956.66

111

1,192

0.4

100.0

D18

Flexstay Inn Kiyosumi
Shirakawa

Koto-ku, Tokyo

2,673.64

56

749

0.3

100.0

D19

Flexstay Inn Nakanobu P1

Shinagawa-ku, Tokyo

770.56

39

589

0.2

100.0

D20

Flexstay Inn Nakanobu P2

Shinagawa-ku, Tokyo

391.49

22

283

0.1

100.0

D21

APA Hotel Yokohama-Kannai

Yokohama-shi,
Kanagawa

6,568.51

452

8,350

2.9

100.0

D22

Hotel Nets Hakodate

Hakodate-shi, Hokkaido

7,961.26

205

2,792

1.0

100.0

D23

Flexstay Inn Shirogane

Minato-ku, Tokyo

1,754.06

84

2,119

0.7

100.0

D24

Hotel MyStays Haneda

Ota-ku, Tokyo

5,400.16

174

7,801

2.7

100.0

D25

Hotel MyStays Kameido P1

Koto-ku, Tokyo

4,349.67

266

5,594

1.9

100.0

D26

Hotel MyStays Ueno Iriyaguchi Taito-ku, Tokyo

2,247.92

97

3,821

1.3

100.0

D27

Hotel MyStays Kameido P2

Koto-ku, Tokyo

2,793.99

177

3,742

1.3

100.0

D28

Hotel Vista Shimizu

Shizuoka-shi, Shizuoka

3,559.81

152

2,198

0.8

100.0

D29

Super Hotel Shinbashi/
Karasumoriguchi

Minato-ku, Tokyo

1,403.89

74

1,624

0.6

100.0

D30

Flexstay Inn Higashi-Jujo

Kita-ku, Tokyo

1,714.53

89

1,277

0.4

100.0

D31

Hotel MyStays Utsunomiya

Utsunomiya-shi, Tochigi

11,733.23

126

1,237

0.4

100.0

D32

Flexstay Inn Kawasaki-Kaizuka Kawasaki-shi, Kanagawa

1,190.57

64

980

0.3

100.0

D33

Comfort Hotel Toyama

Toyama-shi, Toyama

3,305.64

150

979

0.3

100.0

D34

Flexstay Inn
Kawasaki-Ogawacho

Kawasaki-shi, Kanagawa

725.60

62

906

0.3

100.0

D35

Flexstay Inn Ekoda

Nerima-ku, Tokyo

3,932.93

210

5,069

1.7

100.0

D36

Super Hotel Tokyo-JR
Tachikawa Kitaguchi

Tachikawa-shi, Tokyo

1,832.97

96

1,170

0.4

100.0

D37

Super Hotel JR Ueno-iriyaguchi Taito-ku, Tokyo

1,279.16

69

1,130

0.4

100.0

D38

Hotel MyStays Shinsaibashi

Osaka-shi, Osaka

1,942.01

57

3,160

1.1

100.0

D39

Comfort Hotel Kurosaki

Kitakyushu-shi, Fukuoka

3,207.60

151

1,148

0.4

100.0

D40

Comfort Hotel Maebashi

Maebashi-shi, Gunma

3,660.96

154

1,128

0.4

100.0

D41

Comfort Hotel
Tsubame-Sanjo

Sanjo-shi, Niigata

3,099.90

133

1,010

0.3

100.0

D42

Comfort Hotel Kitami

Kitami-shi, Hokkaido

3,009.50

127

851

0.3

100.0

Name of Property(Note 1)

101

Purpose

Property
NumberHotelsD43

Acquisition
Price(JPY mn)

Investment
Ratio
(%)

Occupancy
Rate(%)(Note 2)

(Note 3)(Note 4)

Leasable Area(m2)

Rentable
Units

Hotel MyStays Gotanda Station Shinagawa-ku, Tokyo

8,752.42

335

24,674

D44

Hotel Epinard Nasu

Nasu-gun, Tochigi

37,702.33

310

20,981

7.2

100.0

D45

Hotel MyStays Fukuoka Tenjin

Fukuoka-shi, Fukuoka

5,083.06

217

8,059

2.8

100.0

D46

Hotel MyStays Hamamatsucho

Minato-ku, Tokyo

1,951.90

105

7,959

2.7

100.0

D47

Hotel MyStays PremierKanazawa (Note 6)

Kanazawa-shi, Ishikawa

13,250.03

261

13,761

4.7

100.0

D48

Takamatsu Tokyu REI Hotel

Takamatsu-shi, Kagawa

7,148.17

193

2,139

0.7

100.0

Name of Property

Location(Note 1)

8.5

100.0

Subtotal

226,275.96

7,102

181,032

62.2

100.0

Total

455,538.63

11,983

221,181

100.0

97.5

(Note 1)

"Property number" refers to the asset owned by INV, classifying the residential asset as A, the office / commercial
facility as B, the parking lot as C, the hotel as D according to the use of each property. The numbers with A, B, C, andD indicate the order of acquisition dates and properties with the same acquisition date are arranged in the order ofacquisition price(Note 2)“Acquisition price” is the purchase price indicated in the real estate or trust beneficiary purchase agreement. Such
price excludes consumption tax and other taxes, and has been rounded down to the nearest million yen(Note 3)

“Investment ratio” is the ratio of the acquisition price to the aggregate acquisition price of INV’s portfolio, and has
been rounded to the first decimal place(Note 4)

“Leasable Area” and “Occupancy Rate” are as of end of December 2017

(Note 5)Acquired as of March 14, 2017

(Note 6)

Name changed from Hotel MyStays Kanazawa to Hotel MyStays Premier Kanazawa on October 1, 2016102

Financial Conditions■ The bank formation is further reinforced by the addition of three new lenders via new
borrowing on March 14, 2017 (No. of lenders increased to 22)■ INV obtained its credit rating of ‘A’ with a ‘Positive’ outlook from Japan Credit Rating Agency(JCR) on September 27, 2016

Rating (obtained as of September 27, 2016)
Rating Agency

Rating Object

RatingOutlookJapan Credit Rating
Agency, Ltd.

Long-term Issuer
RatingA

Positive

Lender Formation (as of March 14, 2016)
Mizuho Bank
BTMU
SMTB
SMBC
Citibank Japan
Shinsei Bank
Resona Bank
MUTBTokyo Star BankJapan Post Bank
Aeon Bank
DBJ
Fukuoka Bank
Shizuoka Bank
Nomura TB
Kagawa Bank
Daishi Bank
Hyakugo Bank
Hiroshima Bank
Towa Bank
Dai‐ichi Life Insurance
Gunma Bank

18.5%
13.6%
13.6%
13.4%
7.7%
7.5%
4.3%
3.6%
2.6%
2.6%
2.5%
1.9%
1.9%
1.5%
1.2%
0.6%
0.6%
0.6%
0.6%
0.5%
0.3%
0.3%

(Note 1)

LTV (Appraisal Value Base) is calculated by the following formula: (Interest-bearing debts at the end of therelevant fiscal period) / (Total appraisal value as of the end of the same period)
LTV (Appraisal Value Base) as of March 14, 2017 calculated by the following formula:(Interest-bearing debts at the end of December 2016 + Total amount of new borrowings) / (Total appraisal value asof the end of December 2016 + Total appraisal value for the properties acquired on March 14, 2017 as ofDecember 1, 2016)(Note 2)

The average interest rate is calculated by the following formula: (Total loan amount outstanding at the end of eachfiscal period or as of March 14, 2017 multiplied by applicable interest rate at the end of each fiscal period for eachloans or as of March 14, 2017 / The loan amount outstanding at the end of each fiscal period or as of March 14,
2017

103

(Note 3)

DSCR is calculated by dividing operating income, as adjusted for depreciation expenses from property rental
business and any loss (gain) on sales of property by scheduled prepayments of loans payable and interest expense
for the relevant period(Note 4)DSCR (excluding hotel variable rent) is in the same manner as DSCR, except for excluding hotel variable rent
from operating income

104Overview of Unitholders/Investment Units■ Historical Unit Price(Note) Unit prices indicate the closing price on the TSE market. TSE REIT Index has been indexed, assuming the closing
price of TSE REIT Index as of January 4, 2013 was the same as the closing price of INV unit on the same day.
.

■ Distribution of Unitholders

Annual Schedule105

Information for Unitholders
For Unitholders
Investors’ Registry
Administrator
Special Account Management
Institution

Correspondence(Telephone Assistance)

Sumitomo Mitsui Trust Bank, Limited
1-4-1, Marunouchi, Chiyoda-ku, Tokyo<Unitholders of the former Tokyo Growth REIT Investment Inc.>
Mitsubishi UFJ Trust and Banking Corporation
1-4-5, Marunouchi, Chiyoda-ku, Tokyo<Unitholders of the former LCP Investment Corporation>
Sumitomo Mitsui Trust Bank, Limited
1-4-1, Marunouchi, Chiyoda-ku, Tokyo
Transfer Agent Department, Sumitomo Mitsui Trust Bank,
Limited
2-8-4, Izumi, Suginami-ku, Tokyo, 168-0063
Toll-free Telephone Number 0120-782-031
Administrative services are available at the main and branch
offices throughout Japan of Sumitomo Mitsui Trust Bank,
LimitedNotification Process for Address Changes
Please notify your brokerage (financial instruments business operator) regarding changes to addresses,
names, registered seals, and the like. Unitholders who have special accounts instead of brokerage
accounts should contact the transfer account management institution (financial instruments business
operator) below.
Unitholders of the pre-merger Investment Corporation (former Tokyo Growth REIT Investment Inc.)
Mitsubishi UFJ Trust and Banking Corporation Toll-free Number: 0120-255-100
Unitholders of the former LCP Investment Corporation
Sumitomo Mitsui Trust Bank, Limited Toll-free Number: 0120-782-031
Dividends
Unitholders may collect “dividends” by submitting the “Dividends Receipt” at your local Japan Post Bankor at the deposit teller of a post office. In the case that the collection period is past, please specify thecollection method on the back of the “Dividends Receipt,” and either mail the receipt to the Transfer Agent
Department of the Sumitomo Mitsui Trust Bank, Limited or collect from a branch teller.

(Bank Transfers)
Should you desire to specify bank transfers for future dividends, please notify your brokerage(financial instruments business operator).
(Note)

Please collect dividends within 3 years of distribution. Please note that payments cannot be made after 3 years
due to the rules and regulations of the Articles of Incorporation of the Investment Corporation

106

Notification(Notice of Dividend Payment)
The 2008 amendment of the Special Taxation Measures Law (Act No. 23 of April 30, 2008) mandated thesending to unitholders a “Notice of Dividend Payment” stating the dividend amount, amount of taxes
withheld, and the like. If you collect dividends via a “Dividends Receipt,” please view the “Notice ofDividend Payment” sent alongside it. If you have specified a wire transfer, the “Dividend Statement”
delivered with the dividend payment is the “Notice of Dividend Payment.” Both documents may be usedas supporting documents when filing income tax returns.
(Characters for Addresses and Names of Unitholders)With the digitization of investment securities, if there are Chinese characters in your address or names that
the Japan Securities Depository Center (JASDEC) has not included in the transfer system, please list in theInvestors’ Registry by converting part or all of the characters to those that JASDEC has included in thetransfer system or to katakana. Please be aware that correspondence may be addressed using charactersthat JASDEC has included in the transfer system. Please inquire with your brokerage regarding charactersregistered for your address and name.
Inquiries
For inquiries regarding INV: Consonant Investment Management Co., Ltd.
TEL: 03-5411-2731 (Main)
Weekdays 9:30-17:30

107