TAXATION
Taxation of Infrastructure Funds under Japanese Law
This subsection is a summary of Japanese tax implications relating to infrastructure funds and to an
investment made in an infrastructure fund by a “non-Japanese investor”. A “non-Japanese investor” as used inthis summary is a foreign corporation or a non-resident individual with no permanent establishment in Japan towhich the relevant income is attributable. This summary does not include the tax implications of investments in
an infrastructure fund made by Japanese corporations, resident individuals of Japan, foreign corporations or
non-resident individuals with permanent establishments in Japan. The information given below regarding
Japanese tax laws is based on the tax laws in force and their interpretations by the Japanese tax authorities as ofthe date of this offering circular. Tax laws and interpretations may change at any time, possibly with retroactive
effect. We will not update this summary of current taxation with respect to infrastructure funds for any changes
in the tax law or their interpretation that occurs after the date of this offering circular.
This summary is not intended to be exhaustive of all possible tax considerations that may apply to particularinvestors. You should seek your own tax advice regarding the acquisition, ownership and disposition of units. In
particular, you should seek advice regarding the tax consequences under the laws of the jurisdiction of which
you are a resident, and any tax treaty between Japan and your country of residence.
Taxation of Non-Japanese Investors
Taxation of Dividends. Dividends, which in this section mean distributions from retained earnings of an
infrastructure fund, are generally treated as dividend income of the investors in the same way as dividends paidby an ordinary Japanese corporation. If units of an infrastructure fund are listed and traded on a stock exchange, a
15% withholding tax is generally imposed on the dividends paid by infrastructure funds to non-Japanese
investors under Japanese domestic tax laws. However, a 20% withholding tax is imposed on dividends paid to
non-Japanese individual investors that own 3% or more of the total units of an infrastructure fund as of the record
date with respect to the dividends. Additionally, under the Special Reconstruction Income Tax Act, a surtax is
imposed on income tax (including withholding tax) on Japanese source income. The surtax rate is fixed at 2.1%of the amount of income tax payable, and is applicable for the period from January 1, 2013 to December 31,
2037. Consequently, the effective withholding tax on dividends paid to non-Japanese investors is 15.315%
instead of 15% until December 31, 2037. Similarly, the withholding tax is 20.42% instead of 20% in case of
non-Japanese individual investors that own 3% or more of the total units as of the record date with respect todividends until December 31, 2037. The rate of withholding tax may be reduced or exempted by the applicationof the relevant income tax treaty. The surtax does not increase the reduced rates or exemption under theapplicable tax treaties. Non-Japanese investors are not required to file a Japanese tax return and their Japanese
tax liabilities are finalized by the withholding tax. The application form for the treatment under the tax treaty
must be submitted to the relevant tax authorities through the infrastructure fund prior to the payment of theapplicable distribution. The non-Japanese investor claiming a reduction of or an exemption from Japanese
withholding tax may be requested to furnish further information to enable the Japanese tax authorities to decide
whether relief under the tax treaty should be granted. In the case where a non-Japanese investor seeks to obtain a
tax reduction or exemption with respect to any distributions under a tax treaty, it may be necessary to obtain acertificate of residency from the competent authority in the jurisdiction of residence before submitting theapplication form to the Japanese tax authority. Even if the correct amount of tax was not withheld because
relevant documentation or application form itself was not submitted in a timely manner, Japanese tax authority
may allow a non-Japanese investor to claim a refund of any excess amount withheld if the non-Japanese investor
files a refund application together with completed application form with the Japanese tax authority. In case where
the non-Japanese investor is an investment vehicle, such as a trust fund and a partnership, the investment vehicle
itself may not be treated as a resident of a country that has concluded a tax treaty with Japan under certain tax
treaties, and may therefore not enjoy the benefits accorded to the resident described above. Some tax treaties
have also a limitation of benefit clause. As such, the application of any tax treaty will depend upon the
non-Japanese investors’ circumstances. Accordingly, the non-Japanese investors should consult their own tax
advisors with respect to taxation of dividends.
Taxation of Distributions in Excess of Retained Earnings that are accounted as Allowance for Temporary
Difference Adjustment. The 2015 Tax Reform Act enables any surplus cash distributions in excess of retained
earnings that are accounted as allowance for temporary difference adjustment under the Calculation Rules for
Investment Corporations to be treated as profits distributions and deductible for tax purposes. As a result of these
Japanese tax law changes, an infrastructure fund does not expect to incur corporate taxes due to any temporary
differences between the treatment of certain transactions under Japanese GAAP and Japanese tax laws. A
distribution of allowance for temporary difference adjustment is subject to the same tax treatment for investors as167

described under “— Taxation of Dividends” above. Non-Japanese investors are not required to file a Japanese tax
return and their Japanese tax liabilities are finalized by the withholding tax.
Taxation of Distributions in Excess of Retained Earnings. Any distribution in excess of retained earnings ofan infrastructure fund, except for allowance for temporary difference adjustment as described above, is regarded
as a return of capital for corporate law purposes. In addition, for Japanese tax purposes, part of such distribution
may be deemed to be a dividend and subject to the same tax treatment as described under “— Taxation of
Dividends” above, while the amount of any remainder after deducting the deemed dividend portion (if any) is
treated as proceeds from the sale of the units (or a return of capital for tax purposes) and subject to the same tax
treatment as described under “— Taxation of Capital Gains” below. We notify our investors of the deemed
dividend amount and the capital decrease ratio that is necessary to calculate the cost basis for tax purposes.
Non-Japanese investors should calculate the cost basis for the deemed sale of units by multiplying the book valueof the units immediately prior to the distribution by the capital decrease ratio. If there is a positive difference
between the proceeds and the cost basis for the deemed sale, non-Japanese investors should treat such difference
as capital gains subject to the same tax treatment as is described in “— Taxation of Capital Gains” below. In
addition, an adjustment to each non-Japanese investor’s cost basis in the units for tax purposes would be
required. The adjusted cost basis after giving effect to a distribution in excess of retained earnings is equal to thebook value of the units immediately prior to distribution less the cost basis for the deemed sale of units.
However, non-Japanese passive investors who own the infrastructure fund units as a portfolio investment may be
exempt from Japanese tax on the capital gains. See “— Taxation of Capital Gains” below.
Taxation of Capital Gains. Capital gains arising from the sale of the infrastructure fund units are generally
treated in the same way as capital gain arising from the sale of shares held in ordinary Japanese corporations.
Under Japanese domestic tax laws, an infrastructure fund may be treated as a Japanese Real Estate Holding
Corporation (“JREHC”) if in general at least 50% of its total assets consist of real estate located in Japan. For
context, real estate includes land, rights over the land, buildings, facilities attached thereto, structures and sharesin the JREHC, but generally exclude machinery and equipment. A non-Japanese investor generally will not be
subject to Japanese tax on capital gains arising from the transfer of units of an infrastructure fund. However, a
non-Japanese investor will be subject to Japanese tax on capital gains arising from the transfer of units of an
infrastructure fund, if the non-Japanese investor falls into either of the following two categories:‰ the non-Japanese investor, together with related persons (its affiliates and related parties, etc.) as definedin Japanese tax laws, and partnerships in which the non-Japanese investor is directly or indirectly apartner, owns or owned more than 5% of the outstanding units of a listed JREHC as of December 31 (fora non-Japanese individual) or as of the last day of the tax year (for a non-Japanese corporation)
immediately prior to the calendar year or the tax year (as the case may be) in which a transfer of the
JREHC units takes place; or‰ the non-Japanese investor, together with related persons (its affiliates and related parties, etc.) as definedin Japanese tax laws, and partnerships in which the non-Japanese investor is directly or indirectly apartner, owns or owned at any time 25% or more of the outstanding units of the infrastructure fund at any
time within a period of three years on or before the end of the calendar year or the tax year (as the casemay be) in which a transfer of the infrastructure fund units takes place, and sells 5% or more of the total
units in the calendar year or the tax year (as the case may be).
If the capital gains derived on the sale of the units of an infrastructure fund fall into either of the above
categories, the non-Japanese investor must file a Japanese corporate tax return or a Japanese income tax returnwith the appropriate Japanese tax authorities. In the case of a non-Japanese investor that is a corporation, in
general, the corporate tax rate is 23.4% under Japanese domestic tax law (under the 2016 Tax Reform Act, thisrate is reduced to 23.2% with effect for the fiscal years beginning from April 1, 2018). For the fiscal years
beginning on or after October 1, 2014, a new 4.4% local corporation tax has been imposed on companies on theirbase corporation tax liability, and this tax rate will be increased to 10.3% for the fiscal years beginning on orafter October 1, 2019 under the 2016 Tax Reform Act. Hence, the effective rate of corporation tax should be
24.430% (decreasing to 24.221% for the fiscal years beginning on or after April 1, 2018 to September 30, 2019and increasing to 25.590% for the fiscal years beginning on or after October 1, 2019 under the 2016 Tax ReformAct). In the case of a non-Japanese investor that is an individual, separate taxation from other income at the rateof 15% generally applies to capital gains under Japanese domestic tax law. However, as highlighted under“— Taxation of Dividends” above, a Special Reconstruction Income Tax is imposed on income tax on Japanesesource income for the period from January 1, 2013 to December 31, 2037. Hence, during this period, theeffective separate taxation on capital gains should be at a rate of 15.315%. The capital gains tax of theinfrastructure fund described above may be exempted by the application of the relevant income tax treaty. The
application of any tax treaty will depend upon the non-Japanese investors’ circumstances. Accordingly,
non-Japanese investors should consult their own tax advisors with respect to taxation of the capital gains.
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General Taxation
An infrastructure fund is a corporation incorporated under the ITA and, in principle, is subject to corporate
taxes at normal corporate tax rates. Generally, dividends paid by a corporation are not deductible in thecalculation of the taxable income of a corporation. However, a dividend made by an infrastructure fund to its
unitholders will be deductible from the taxable income of the infrastructure fund for Japanese corporate tax
purposes if the requirements set forth below are satisfied. Moreover, the 2015 Tax Reform Act enables any
surplus cash distributions in excess of retained earnings that are accounted as allowance for temporary difference
adjustment to be treated as profits distributions and deductible for tax purposes. As a result of these Japanese tax
law changes, we do not expect to incur corporate taxes due to any temporary differences between the treatment ofcertain transactions under Japanese GAAP and Japanese tax laws. This treatment of temporary differences underthe 2015 Tax Reform Act applies for fiscal periods beginning on or after April 1, 2015.
A distribution made by an infrastructure fund, including distributions of allowance for temporary difference
adjustment, will be deductible from the taxable income for Japanese corporate tax purposes if the infrastructure
fund satisfies the requirements relating to infrastructure funds as well as the requirements relating to the year of
taxation, as described below.
The requirements relating to the infrastructure fund:‰ the infrastructure fund is registered under Article 187 of the ITA;
‰ any of the following requirements is met: (i) there is a public offering of units of the infrastructure fundwith the total issue price of ¥100 million or more at the time the infrastructure fund is established;(ii) there are 50 or more unitholders of the infrastructure fund at the end of the tax year; or(iii) institutional investors, as defined in the FIEA and the Special Taxation Measures Act own 100% of
the infrastructure fund units at the end of the tax year;‰ the offer for investment of the units in the infrastructure fund is made mainly in Japan (i.e., the articles ofincorporation of the infrastructure fund state that more than 50%, on a cumulative basis, of the total issue
price of the units is offered in Japan); and‰ the infrastructure fund has a tax year of one year or less.
The requirements relating to the infrastructure fund’s tax year:‰ the infrastructure fund does not engage in any business other than asset management, has not opened any
place of business other than its head office, and has not hired any employees;‰ the asset management function has been entrusted to an asset manager as defined in Article 198 of the
ITA;‰ the custody function for the assets owned by the infrastructure fund has been entrusted to a custodian as
defined in Article 208 of the ITA;
‰ the largest unitholder of the infrastructure fund and its affiliates do not collectively hold more than 50%of the outstanding units or the voting rights of the infrastructure fund at the end of the tax year;‰ the infrastructure fund distributes to its unitholders in excess of 90% of its distributable profits as definedin the Special Taxation Measures Act;‰ the infrastructure fund does not own 50% or more of the total equity of another corporation, except for
specified foreign subsidiary corporations as defined under the ITA;
‰ the infrastructure fund invests in specified assets as defined in the ITA, except for renewable energy
power generation facilities and concessions to operate public facilities, in excess of 50% of its total assets
at the end of the relevant fiscal period. However, in cases where the articles of incorporation of the listed
infrastructure fund state that the infrastructure fund operates all of its renewable energy power generation
facilities by leasing them to third parties, and such infrastructure fund makes an initial acquisition of arenewable energy power generation facility prior to March 31, 2020, the book value of the renewableenergy power generation facility is included in the calculation at the end of the relevant fiscal period for
20 years after commencement of leasing the renewable energy power generation facility; and‰ the infrastructure fund does not receive loans from parties other than institutional investors, as defined in
the FIEA and the Special Taxation Measures Act.

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Any taxable income that is retained by an infrastructure fund and not paid as a dividend will be subject toregular corporate taxes in Japan. If the infrastructure fund meets all the conditions listed above and distributes allof its income for the taxable period in a timely manner to the unitholders, corporate tax on the infrastructure fundis likely to be small, provided that the difference between the profit for Japanese tax purposes and the profit forJapanese accounting purposes is small, because corporate tax is payable only on the difference. However, if theinfrastructure fund does not satisfy any one of the above conditions, the entire taxable income of theinfrastructure fund, before the payment of any distribution, will be subject to regular Japanese corporate taxes.

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