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 June 30, 2018 (January 1, 2018 to June 30, 2018)
Contents
Greetings from Naoki Fukuda, Executive Director of Invincible Investment Corporation
and President & CEO of Consonant Investment Management Co., Ltd.
INV’s Investment in Overseas Real Estate
Properties Newly Acquired in Fiscal Period Ending December 2018 (Overseas)
Overseas Real Estate Market
INV’s Growth Track Properties Newly Acquired in Fiscal Period Ending December 2018 (Domestic)
Properties Acquired in Fiscal Period Ended June 2018
Unitholder Benefit Program
I.
II.
III.
IV.
V.
VI.
VII.

Asset Management Report
Balance Sheet
Statement of Income and Retained Earnings
Statement of Changes in Net Assets
Notes
Statement of Cash Distribution
Statement of Cash Flows (Reference Information

Domestic Portfolio Map
Sponsor Pipeline
Internal Growth
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 30th fiscal
period (covering the period from January 1, 2018 to June 30, 2018; the “Reporting Period”).
INV positions hotels and residential properties as its core assets and conducts management activities tomaximize growth potential and stability of the portfolio.
During the Reporting Period, INV continued with the Asset Recycling Program started in the previous
fiscal period for further enhancement of portfolio revenues. Under the program, INV acquired 6 hotels
which are highly competitive in terms of location and specifications in their respective areas and also
expected to deliver high yields, while disposing a total of 6 properties (3 residential properties and 3 officebuildings).
As to internal growth of existing properties, INV implemented large-scale renovations at 5 hotels toenhance competitiveness which temporarily impacted occupancy rate and revenue due to associated partial
downtime. However, NOI of the existing hotel portfolio (1) excluding the 5 hotels increased 2.6% year on
year, achieving solid growth. Concerning residential properties, the portfolio NOI increased 3.2% year on
year as a result of successful ongoing efforts to increase rents for both new and renewal leases at each unit.
Specifically, at Royal Parks Tower Minami Senju, INV’s flagship residential property, INV achieved strong
results with rent increases for 84.9% (based on the number of contracts) of the new/renewed lease contracts
with an average unit rent increase of 10.1% compared to the previous rent across all new leases (2).
INV issued its first investment corporation bonds in May 2018 which successfully reduced financing costs,
lengthened the average maturity period of its interest-bearing debt and diversified the maturity dates of its
interest-bearing debt and funding sources, and provided partial funds for property acquisition.
As a result of the operations mentioned above, operating revenues reached JPY 13,104 million, operating
income JPY 8,433 million and net income JPY 7,721 million. INV internally reserved JPY 756 million
for stabilization of the distribution level in the future and decided on distribution per unit of JPY 1,430, an
increase of 13.1% year on year (3).
In addition, INV conducted a global public offering of new investment units in August 2018 (after the endof the Reporting Period) for the fifth consecutive year to acquire 4 hotels in Japan also decided to acquire
the TK interest in two overseas hotels as underlying assets, becoming the first J-REIT to do so.
The 2 overseas hotels are highly competitive and profitable and are located in the Cayman Islands whichhave highly stable political and economic systems. The Cayman Islands anticipate an increase in hotel
demand due to higher inbound tourism and an airport expansion currently underway. The hotels thus are
expected to improve and stabilize INV’s revenues through the geographical diversification of investments
as well as to moderate revenue fluctuations caused by seasonal effects since they have different demand
peak seasons compared to hotels in Japan.

The 4 hotels which INV acquired in Japan are prime properties located in Tokyo, Osaka and central
Sapporo, including 2 under the Hotel MyStays “Premier” brand. INV believes these hotels will contributeto stability and growth of quality as well as to revenue of its hotel portfolio. INV believes that theeffectuation of the Private Lodging Business Act (New Private Lodging Business Act) in June 2018 will
significantly decrease the number of “illegal private lodgings” operating without permission or license
centering on central Tokyo where these properties are located and result in an increase in demand forexisting hotels.
Domestic properties acquired by INV in the Reporting Period and after the end of the Reporting Period
were all from the sponsor pipeline properties. In conjunction with the decision on acquisition of new
properties, INV renewed a Memorandum of Understanding (the “MOU”) with affiliates of Fortress Group
with respect to preferential negotiating rights and increased the number of pipeline properties (19 hotels
with 3,882 rooms, 9 residential properties with 743 units) for further growth. Going forward, INV aims to
improve revenue and distribution per unit through external growth.
INV will continue to implement its basic policy to “increase distribution per unit,” and will ensure theimplementation of measures to maximize unitholder value.
Your continued support is highly appreciated.
Naoki Fukuda
Executive Director, Invincible Investment Corporation
President & CEO, Consonant Investment Management Co., Ltd.

(1) Existing hotel portfolio refers to 40 properties among 54 properties owned by INV at the beginning of
the fiscal period ended June 2018 (including Sheraton Grande Tokyo Bay Hotel, the underlying assetof the preferred equity interest of a special purpose company owned by INV), excluding the 9properties with fixed rent and the 5 properties which went under renovation.
(2) The comparison is made between the total of monthly rents based on new or renewed lease contracts
and the total of monthly rents under previous contracts, concerning contracts which were subject to a
new lease contract or contract renewal.
(3) Comparison with the fiscal period ended June 2017. In order to eliminate the seasonal effects ofhotel variable rent, which is one of the major revenues of INV, in the comparison, the comparison ismade with the same period in the previous year and not with the previous fiscal period (ended
December 2017).
Distribution per unit for the 30th fiscal period(the fiscal period ended June 2018)

JPY 1,430(Note) The forward-looking statements, forecasts and goals described in this report are based on available information,
assumptions and estimates as of August 31, 2018. These assumptions and estimates are unavoidably uncertain, andcould be affected by various risks and factors beyond INV’s control. Thus, no guarantee can be made regarding therealization of such future forecasts and targets, and actual results may vary significantly.

INV’s Investment in Overseas Real Estate
Q Why do you invest in overseas real estate?
A

INV seeks enhancement of profitability and stability of its portfolio as a whole.

INV believes that combining a portfolio of core assets consisting of hotels and residential properties inJapan, with overseas hotels will lead to higher stability of portfolio revenues. The overseas hotels are
expected to be highly profitable and will reduce the impact of revenue fluctuations of domestic assets that
may be caused by changes in economic situations in. In addition, INV believes that by acquiring
overseas hotels with different demand peak periods from domestic hotels, the fluctuations in distribution
amounts between the January to June period and the July to December period, which are attributable toseasonal factors in domestic hotels’ revenues, will be moderated and thus the distribution will be levelledoff.

Q

Which overseas areas will be the target of investment?

A

INV will invest in countries/territories with high political and economic
stability.

INV intends to invest only in advanced countries and territories with stable political, economic andfinancial systems; and where the transparency in laws and regulations, accounting, taxation, the realestate market, etc. is ensured, or in countries and territories that are equivalent to such. Specifically,
INV will target the U.S., Canada, the U.K., Cayman Islands (British Overseas Territory), Singapore, etc.

Q

What types of properties will be the investment target?

A

INV will invest only in high quality hotels that can expect stable demand.

INV intends to selectively invest in hotels that are operated by international hotel operators with global
operational experience, strong marketing and sales capabilities or in hotels with operational knowhow,systems and brand name provided by such operators.

Q

Will hotels with no sponsor involvement also be a target?

A In principle, INV will invest only in hotels with sponsor involvement.
In principle, INV will invest only in hotels developed, owned or operated by our sponsor, Fortress Groupsince this allows INV to ensure that it has sufficient information to make sound investment decisions andobtain adequate operational support after acquisition.
Q

Will investment in overseas real estate increase going forward?

A

INV has no plans, for the time being, of investing in overseas hotels following
investments in hotels located in the Cayman Islands.

As mentioned above, INV has set strict criteria for investment target country/territory, hotel operator,
involvement of the sponsor, etc. and is not currently discussing additional acquisitions after theacquisition of “Westin Grand Cayman Seven Mile Beach Resort & Spa” and “Sunshine Suites Resort”
located in the Cayman Islands (which INV decided to invest in July 2018).
Furthermore, INV’s investment policy limits the allocation of overseas real estate related assets to lessthan 15% of its total investment portfolio (on an acquisition price basis), and thus overseas investment
ratio will not exceed the set percentage. (The investment ratio will be 8.4% after the acquisition of theaforementioned two overseas hotels (after considering exchange contracts.)

Properties Newly Acquired in Fiscal
Period Ending December 2018 (Overseas)

Westin Grand Cayman Seven Mile Beach
Resort & Spa (TK Interest)
A 4 star hotel fronting the Seven Mile Beach located in
an extremely popular resort area in Grand Cayman

 An approx. US$42 million full renovation of all guest rooms,
etc. (completed in December 2017)
Ample meeting rooms, a large spa, six food and beverage outlets, etc.

 The hotel is adjacent to the longest private beach on the Seven Mile Beach, stretching for 700 feet (approx. 200m).
Location

30620 Seven Mile Beach Road, Grand Cayman,
Cayman Islands

Interest

Leasehold(Long-term real estate leasehold rights)(Lease period: 99 years, ending in 2115)

Completion

1994

Renovation Period May 2016 – December 2017
No. of Guest
Rooms

343 rooms, including 18 suites

Land Area

Approx. 29,336 m2

Food & Beverage 6 outlets
Meeting Space

Indoor: 861 m2
Outdoor: 6,781 m2
Reception tent: 111 m2

Retail (Leased)

Dive shop, Jewelry shop, clothing / gift shop, carrentalSpa

Hibiscus Spa (13 treatment rooms)

Parking

220 guest spaces

Other Amenities

Westin kids club, fitness studio, watersport
activities, oversized outdoor pool, beach cabanas,
towel concierge

Resort Fee (Note)
US$65(Note) Additional fee charged per guest and per day to be paid
separately from the lodging bill.

Properties Newly Acquired in Fiscal PeriodEnding December 2018 (Overseas)

Sunshine Suites Resort (TK Interest)
Standing next to Westin Grand Cayman Seven Mile
Beach Resort & Spa, it is operated as the sister hotel.
Guests are allowed to use some of the amenities andWestin’s beach facilities.

All rooms areequipped with akitchen with afull-size refrigerator,
 two-burner stove,
microwave, toaster,coffeemaker and a fullset of cookware.
The hotel has various
facilities including a poolwith an open feel and highquality restaurants.

Location

1465 Esterley Tibbetts Highway, Grand
Cayman, Cayman Islands

Land Area

Interest

Leasehold(Long-term real estate leasehold rights)(Lease period: 99 years, ending in 2115)

Meeting Space

Completion

1999

Food & Beverage Sunshine Grill, Sunshine Cafe
84 guest spaces

Other Amenities

Free breakfast, pool, business center, grab ‘ngo, kitchenette in bedroom,

Resort Fee
131 rooms, including 60 suites
2

Conference room: 33 m2

ParkingRenovation Period October 2016
No. of Guest
Rooms

Approx. 25,454 m2(Note 2)

US$35

(Note 1) Approximately 12,500 m of vacant land is included.
(Note 2) Additional fee charged per guest and per day to be paid separately from a lodging bill.

Overseas Real Estate Market

The Cayman Islands, highly recognized as afascinating resort
About the Cayman Islands
 The Cayman Islands have high political and economic stability with a legal system based on the U.K. common
law and an internationally high level of rating of Aa3 assigned by Moody’s.
 In terms of economy, the Cayman Islands are closely tied to the U.S. due to its geographical proximity andreceive a number of tourists and business visitors mainly from the U.S. The number of lodging guests isincreasing year by year as they being one of the most popular resorts in the Caribbean.
 The Cayman Islands are a tax-efficient jurisdiction, with no tax on income or capital gains and no personal
income tax or property tax. Tax revenue of the Cayman Islands is mostly from indirect taxes, taxes onimported goods or by stamp duties.
 The Cayman dollar is fixed against the US dollar and the exchange rate is relatively stable, allowing for
efficient hedging against exchange fluctuations.
 Investment in hotels in the Cayman Islands will not only promote area diversification but also moderate
revenue fluctuations from period to period attributable to seasonality since demand for hotels peaks at adifferent time from Japan (Note 1).
World’s Best Beaches(2018 Travelers' Choice Awards) (Note 2)#

Name

Grace Bay1
(Turks and Caicos Islands)

#

Name

La Concha Beach
6(Spain)(Overview)Country

British Overseas Territory(under the British Crown)

Land Area

264 km2

2

Baia do Sancho(Brazil)

7

Clearwater Beach(U.S.A.)

Population

Approx. 63,000(as of December 31, 2017)

3

Varadero Beach(Cuba)

8

Seven Mile Beach(Jamaica)

Currency

4Eagle Beach(Aruba)9

Bavaro Beach(Dominican Republic)

Cayman Islands Dollar (KY$)(US$1.00 = KY$0.82 Fixed Exchange
Rate System)

Official Language

EnglishCapitalGeorge Town

GDP

US$3.726 billion(US$62,132 per capita)(As of December 31, 2017)

Seven Mile Beach
Playa Norte
510(Mexico)(Cayman Islands)
Source: Prepared by the Asset Manager based on data from
TripAdvisor

Rating
Aa3 (Moody’s Sovereign Credit Rating)Source: Prepared by the Asset Manager based on data from UN
data, ECONOMICS AND STATISTICS
OFFICE(Government of the Cayman Islands)

The Cayman Islands’ Tourism Market
Number of Stay-over Visitors by Air (Note 3) /% of Repeaters (Note 4)

Number of Hotel Rooms (Note 5)

Source: Prepared by the Asset Manager based on data from Government of the Cayman Islands Economics and Statistics Office, Cayman Islands Department of Tourism

(Note 1) As demand for hotel rooms in Japan heightens during summer holiday season and autumn outing season, INV’s revenues increase
accordingly in the July to December period, creating likelihood of revenue fluctuations between the January to June period and the Julyto December period. In the Cayman Islands, however, demand tends to rise in the dry season, which is from December to April.
Therefore, the investment is expected to contribute to moderating revenue fluctuations of the entire portfolio caused by seasonality.
(Note 2) Travelers' Choice Awards are the most prestigious awards by TripAdvisor, granted annually based on millions of reviews and opinionsfrom travelers around the world. The awards single out not just popular choices, but truly exceptional facilities and destinations thatkeep travelers coming back.
(Note 3) The number reflects only the number of visitors arriving in the Cayman Islands by air among other modes of transport, and does notnecessary move in tandem with the number of visitors arriving by cruise or the total number of visitors to the Cayman Islands.
(Note 4) “% of Repeaters” indicates air arrival visitors that answered “One” or “Two or more” for “Previous visits” in an annual survey
conducted by Cayman Islands Immigration Department that was published on October 18, 2017
(Note 5) Figures from 2009 to 2013 are as of the end of September each year and figures from 2014 to 2016 are as of the end of December eachyear.

The Cayman Islands

Head of
Barkers

West BayCARIBBEAN SEA

North West Pt

Roger Wreck Pt
Old Man Bay

West Bay

Little Sound
Welch Point
North SoundGEORGE TOWN

Grand Cayman
East End

Frank Sound

Owen Roberts
International Airport

Bodden Town

East Point

South Sound
South West Point❶Stingray City

Area where a number of wild rays can beseen in the shallow waters of the clear
Caribbean

Great Pedro Point❷Turtle Center

Place where visitors can swim with sea
turtles❹Camana Bay❺Rum Point

Modern city within walking distance ofSeven Mile Beach where visitors canenjoy shopping

Beautiful white sand beach located on the
point of North Side

❸Dolphin Discovery

Place where visitors can swim withdolphins❻Kittiwake

Site in North Side where visitors canenjoy diving and snorkelingINV’s Growth Track
Change in DPU

Portfolio Composition (Note 5, 6)

Properties (to be) acquired: 6 properties

The Westin Grand Cayman
Seven Mile Beach Resort & Spa

Sunshine Suites
ResortHotel MyStays
Premier Akasaka

Hotel MyStays
Premier Sapporo

Art Hotel
Hirosaki City

Hotel MyStays
Oita

Hotel MyStays
GotandaHotel MyStays
Ueno East

Hotel MyStays
MidosujiAcquired properties: 6 properties

Hotel MyStays
Yokohama Kannai

Art Hotel
JoetsuHotel MyStays
TachikawaNo. of properties(properties)

78

91

111

124

126

126

132

Of which, hotels
Of which, residential

0
63

20
63

37
66

48
68

54
67

60
64

66
64

Of which, others

15

8

8

8

5

2

2

Change in Asset Size (Note 1)(Note 1) Figures are calculated based on (planned) acquisition prices. As to preferred equity securities in the TMK which holds Sheraton GrandeTokyo Bay Hotel and the TK interests which hold the two overseas properties, the hotels, which are the underlying assets, are counted in
the number of properties; and (planned) investment amounts in the preferred equity securities and TK interests by INV (for TK interests,
exchange rate of 1US$=JPY110.45 based on exchange contract on July 26, 2018 is used for calculation) are deemed as (planned)
acquisition prices.
(Note 2) “AUM” indicates the total acquisition price of assets owned as of the end of each year; and “Price of new acquisitions” indicates the totalacquisition price of assets newly acquired out of AUM in the respective year. Furthermore, for 2014, 2017 and 2018, since asset
disposition took place in those years, the sum of “AUM” for the previous year and “Price of new acquisitions” for the relevant year does
not necessary match “AUM” for the relevant year.
(Note 3) For “Jun. 30, 2018,” the total acquisition price of assets owned as of June 30, 2018 is indicated as “AUM,” and the total acquisition priceof assets acquired between January 1, 2018 and June 30, 2018 is indicated as “Price of new acquisitions.”(Note 4) For “Sep. 30, 2018,” the sum of AUM and total acquisition price of acquired assets as of June 30, 2018 is indicated as AUM; and the total(planned) acquisition price of assets (to be) acquired in the fiscal period ending December 2018 is indicated as Price of new acquisitions.
(Note 5) Figures are indicated based on (planned) acquisition prices as of September 30, 2018. As to preferred equity securities in the TMK whichholds Sheraton Grande Tokyo Bay Hotel and the TK interests which hold the two overseas properties, investment amounts in the preferred
equity securities and TK interests by INV are used as acquisition prices, and are categorized based on the use and location of eachunderlying asset.
(Note 6) Each area is defined as follows.
Greater Tokyo (excluding Tokyo 23 wards): Tokyo (excluding Tokyo 23 wards), Kanagawa, Chiba and Saitama / Kansai area: Osaka,
Hyogo, Kyoto, Shiga, Wakayama and Nara / Chubu area: Aichi, Gifu, Mie, Shizuoka, Nagano, Yamanashi, Niigata, Toyama, Ishikawa andFukuiProperties Newly Acquired in Fiscal Period Ending December 2018 (Domestic)

Hotel MyStays Premier Akasaka

 Developed by the sponsor; opened in July 2016 after redeveloping a site previously used as a weekly mansion (ashort-term rental apartment), and the first hotel under the MyStays Premier brand A stylish limited service hotel located a 4-minute walk from Akasaka Station on the Tokyo Metro Chiyoda Line, one
of Tokyo’s major stations
 Excellent location for both tourists and business travelers. Comprised of 327 rooms centering on double and twinrooms
 Pepper welcomes guests as a remote concierge
Hotel Type

Limited service hotel

Location

17-54 Akasaka 2-chome, Minato-ku, Tokyo

Access4-minute walk from Akasaka Station(Tokyo Metro Chiyoda Line)
7-minute walk from Tameike-Sanno Station(Tokyo Metro Ginza Line and Namboku Line)

Completion

June 2016

No. of Guest Rooms

327 rooms

Number of Guest
Rooms

8,620.69 m2

Land Area

2,024.64 m2

Hotel MyStays Premier Sapporo Park

 Ideally located in a center of Sapporo City and a 3-minute walk from Nakajima Koen Station on the Sapporo
Subway Namboku Line Renovation completed in April 2018
 A full service hotel with a wide selection of room types, a natural hot spring, etc.
 Excellent access to sightseeing spots that are popular among tourists from within and outside Japan, such as Odori
Park, Sapporo Beer Museum, Susukino entertainment district and Sapporo Clock Tower
Hotel Type

Full service hotel

Location

2-10 Nishi 2-chome, Minami 9-jo, Chuo-ku, Sapporo-shi,
Hokkaido

Access3-minute walk from Nakajima Koen Station(Sapporo Subway Namboku Line)

Completion

March 1998

Renovation Period

November 2017 - April 2018

No. of Guest Rooms

419 rooms

Number of Guest
Rooms

21,670.64 m2

Land Area

3,451.54 m2

Properties Newly Acquired in Fiscal Period Ending December 2018 (Domestic)

Hotel MyStays Ueno East
Hotel Type

Limited service hotel

Location

5-6 Higashi Ueno 5-chome, Taito-ku, Tokyo

Access2-minute walk from Inaricho Station(Tokyo Metro Ginza Line)
9-minute walk from Ueno Station (JR Yamanote Line)

Completion

September 1991

Renovation Period

December 2015 - May 2016

No. of Guest Rooms

150 rooms

Number of Guest
Rooms

4,396.02 m2

Land Area

856.48 m2

Hotel MyStaysMidosuji Honmachi
Hotel Type

Limited service hotel

Location

2-10 Honmachi 3-chome, Chuo-ku, Osaka-shi, Osaka

Access3-minute walk from Hommachi Station(Osaka Metro Midosuji Line)
4-minute walk from Sakaisuji Hommachi Station(Osaka Metro Sakaisuji Line)

Completion

October 2017

No. of Guest Rooms

108 rooms

Number of Guest
Rooms

3,429.43 m2

Land Area

398.37 m2

Properties Acquired in Fiscal Period Ended June 2018

(Acquired in June 2018: 2 hotels)

Hotel MyStays Gotanda
Hotel Type

Limited service hotel

Location

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

Access6-minute walk from Gotanda Station(JR Yamanote Line/Toei Asakusa Line)

Completion

June 1988

Renovation Period

August 2016

No. of Guest Rooms

110 rooms

Number of Guest
Rooms

1,839.77 m2

Land Area

439.74 m2

Hotel MyStays Tachikawa
Hotel Type

Limited service hotel

Location

1-8-14 Nishikicho, Tachikawa-shi, Tokyo

Access8-minute walk from South Exit of Tachikawa Station(JR Chuo Line/Nambu Line/Ome Line)

Completion

May 1991

Renovation Period

April 2016 - June 2016

No. of Guest Rooms

121 rooms

Number of Guest
Rooms

3,844.64 m2

Land Area

1,179.52 m2(Acquired in February 2018: 4 hotels)
Hotel MyStays
Yokohama-Kannai
Hotel Type
Location
No. of Guest
Rooms

Limited service
hotel
Yokohama-shi,
Kanagawa
165 rooms

Art Hotel Joetsu
Hotel Type

Full service
hotel

Location

Joetsu-shi,
NiigataNo. of Guest
Rooms

198 roomsf

Art Hotel Hirosaki City

Hotel MyStays Oita

Hotel Type

Full service
hotel

Hotel Type

Limited service
hotel

Location

Hirosaki-shi,
Aomori

Location

Oita-shi,Oita

No. of Guest
Rooms

134 rooms

No. of Guest
Rooms

145 rooms

Unitholder Benefit Program
INV has introduced the unitholder benefit program to improve the satisfaction of its unitholders and expand
the unitholder base. Eligible unitholders can stay at Sheraton Grande Tokyo Bay Hotel and all MyStays
hotels at special discount rates.
*Detailed information is sent to eligible unitholders along with this report.

Overview of the Unitholder Benefit Program(1)Applicable Hotels

Eligible Unitholders

 Sheraton Grande Tokyo Bay Hotel All MyStays hotels(2)Unitholders who hold 10 or more Invincible units and whose names are on
Invincible’s Unitholders’ Registry as of these record dates:

Record Date

The last day of every fiscal period (June 30 and December 31 of each year)

Program Details

Stay with unitholder special discount rates at the above applicable hotels

Hotel Reservation
Available Period (3)Reservation via designated website posting accommodation plans for theunitholder benefit program
From April 1 to September 30 (eligible unitholders as of December 31)
From October 1 to March 31 (eligible unitholders as of June 30)

Sheraton Grande Tokyo Bay Hotel

Fusaki Resort Village(Note 1)
(Note 2)
(Note 3)

Hotel Epinard Nasu

Hotel MyStays Premier Akasaka

The details of the unitholder benefit program described above are as planned by Invincible as of September 21, 2018, and the program
may be changed or abolished even after it is has been introduced.
Refers to all hotels under MyStays brand managed by MHM, and hotels shown on the MyStays Hotel Group’s official website(https://www.mystays.com/en-us/) will be applicable.
Available Period represents a period during which you can lodge by using the unitholder benefit program. To enjoy the unitholder
benefit program, you actually need to lodge during the availability period.

Asset Management Report
Overview of Asset Management
1

Trends in Investment Corporation’s Operating Results
26th

27th

28th

29th

30th

fiscal period

fiscal period

fiscal period

fiscal period

fiscal period

Jan. 1, 2016 toJul. 1, 2016 toJan. 1, 2017 toJul. 1, 2017 toJan. 1, 2018 toJun. 30, 2016

Dec 31, 2016

Jun. 30, 2017

Dec 31, 2017

Jun. 30, 2018

(Note 1) (JPY thousand)

8,158,220

9,511,466

9,260,917

12,647,270

13,104,841(Rental revenue – real estate)(JPY thousand)

8,158,220

9,511,466

9,260,917

11,403,236

11,122,481

Operating expenses(JPY thousand)

3,084,315

3,577,255

3,916,456

4,423,618

4,671,320(Property related expenses)(JPY thousand)

2,697,986

3,162,067

3,518,684

3,962,183

4,136,619

Operating income(JPY thousand)

5,073,905

5,934,211

5,344,461

8,223,652

8,433,520

Ordinary income(JPY thousand)

4,364,025

5,431,608

4,702,678

7,303,702

7,722,553

Net income(JPY thousand)

4,363,420

5,431,003

4,702,073

7,303,097

7,721,948

Total assets(a) (JPY thousand)(%)

284,106,133
52.8

277,361,874(2.4)

306,421,050
10.5

371,758,254
21.3

374,512,988
0.7(JPY thousand)

141,917,000

142,419,000

163,990,000

186,983,000

189,415,000(b) (JPY thousand)(%)

130,005,009
41.7

131,455,278
1.1

139,062,593
5.8

181,320,466
30.4

181,523,263
0.1

Unitholders’ capital(JPY thousand)

120,367,271

120,367,271

128,984,946

168,798,455

168,798,455

Total distributions(c) (JPY thousand)

4,359,527

5,429,192

4,880,081

7,496,535

6,854,248(Note 2) (%)

94.8

100.0

102.1

100.3

88.8

(d) (Units)

3,675,824

3,675,824

3,860,824

4,793,181

4,793,181(b) / (d) (JPY) (Note 3)

35,36835,76236,01937,82937,871

1,186
1,125
61

1,477
1,477
-

1,264
1,243
21

1,564
1,528
36

1,430
1,430
-

(Note 4) (%)

1.9
3.7

1.9
3.8

1.6
3.2

2.2
4.3

2.1
4.2

(Note 4) (%)

3.9
7.9

4.2
8.2

3.5
7.0

4.6
9.0

4.3
8.6

(%)

45.8
(3.6)

47.4
1.6

45.4
(2.0)

48.8
3.4

48.5
(0.3)

(Note 4) (JPY thousand)

7,136,971

8,414,465

8,023,607

10,008,268

9,758,373

By Period

Reporting period

Operating revenue

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

Dividend
StatusDividend payout ratio
Number of investment units

Information per Unit

issued and outstanding
Net assets per unit
Distributions per unit(c) / (d) (JPY)(Distributions of earnings per unit)(JPY)(Distributions in excess of retained(JPY)

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

Return on equity(change over year)
Capital ratio(change from last period)
NOI(Net Operating Income)(b) / (a) (Note 4) (%)(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 (Excluding 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.
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 for period ended June 30, 2018 / (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 period ended June 30, 2018.

2

Overview of Asset Management for the Fiscal Period Ended June 2018(a) 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 was listed on the Real Estate Investment andTrust Securities Section of the Tokyo Stock Exchange (Ticker Code: 8963).
After the absorption-type merger with LCP Investment Corporation (“LCP”) was implemented on February 1, 2010, as
specified in Article 147 of the Investment Trust Act, with LCP as the absorbed corporation, 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 the sponsor changed to the Fortress Group. FIG became a subsidiaryof Softbank Group Corp. (“SoftBank Group”), effective December 27, 2017 (Note 1). Calliope, an affiliate of FIG, who
owned 100% of issued shares of the Asset Manager, transferred 80.0% of issued shares of the Asset Manager to Fortress
CIM Holdings L.P., a subsidiary of SoftBank Group, and 20.0% to SoftBank Group on March 29, 2018, pursuant to thebasic agreement which was entered into as of September 7, 2017. Although FIG is no longer an indirect parent
company of the Asset Manager, FIG continues to support INV as the sponsor.
Ever since the commencement of sponsorship from the Fortress Group (Note 2), INV has been focusing its efforts on
improving the profitability of its portfolio and establishing a revenue base in order to secure stable distributions, and has
strengthened the lender formation through new borrowings and the refinancing of existing bank borrowings, thereby
creating a financial base for external growth. With this platform as a base, in June 2014, the Asset Manager revised theInvestment Guidelines for INV, and positioned 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
the external growth efforts and portfolio rebalance to be described below, INV's portfolio at the end of the previous
period ended December 2017 comprised of 126 properties (54 hotels (Note 3), 67 residential properties and five others)with a total acquisition price of JPY 353,695 million. The acquisition price of the portfolio has increased a significant
4.5x, compared to May 22, 2014, which is the date immediately prior to INV’s initial investment in hotels.
In the Fiscal Period ended June 30, 2018 (“Reporting Period”), INV continued to pursue its portfolio rebalancing
strategy with its Asset Recycling Program which began in the fiscal period ended December 2017, selling properties at
low cap rates and utilizing the funds raised to buy properties at more accretive or higher cap rates. INV sold threeresidential properties and three office properties for the total sale price of JPY 10,624 million which is equivalent toa weighted average 4.4% NOI yield (Note 4), and used the proceeds to acquire four hotel properties in February 2018
and two hotel properties in June 2018 for the total acquisition price of JPY 19,750 million which is equivalent to aweighted average 5.7% appraisal NOI yield (Note 5). As a result, INV's portfolio at the end of Reporting Period
comprised of 126 properties (60 hotels (Note 3), 64 residential properties and two others) with a total acquisition priceof JPY 363,831 million. The acquisition price of the portfolio has increased a significant 5.0x, compared to May 22,
2014.
INV revised the Investment Guidelines as of July 17, 2018, establishing a newly updated investment policy to include
overseas real estate related assets and changed its domestic investment policy. Please refer to “(1) Management
Policy “and “c Significant Subsequent Events (Reference Information) (b) Change in the Investment Guidelines” formore details.
INV revised the Memorandum of Understanding (the “MOU") on July 17, 2018 with affiliates of Fortress Group withrespect to preferential negotiating rights regarding the acquisition of hotels and residential properties, which will continue
to provide INV with considerable opportunities for external growth. As of the date of this document, there are 19 hotels
and nine residential properties in the MOU.

In addition to acquiring a long-term issuer credit rating (Note 6) of A (positive outlook) from Japan Credit Rating Agency,
Ltd. (“JCR”), INV issued its first corporate bond for the purpose of raising a part of the funds for property acquisition, as
these bonds helped to diversify the financing sources for INV, while at the same time lowering its financing costs andlengthening the average maturity period of its debt. The two Investment Corporation Bonds have five and 10 year
maturities and coupon rates of 40 and 80 basis points respectively, and have an “A” credit rating from JCR.
(Note 1)US Eastern Standard Time

(Note 2)As of July 2011, Calliope owned 97.35% of issued shares of the Asset Manager and the investment ratio
reached 100% in October 2013. Calliope transferred 80.0% of issued shares to Fortress CIM Holdings L.P., asubsidiary of SoftBank Group and 20.0% to SoftBank Group on March 29, 2018. As of the date of thisdocument, SoftBank Group owns 100% of issued shares of the Asset Manager directly and indirectly.

(Note 3)The preferred equity interest is counted as a hotel property, based on the use of Sheraton Grande Tokyo Bay
Hotel, the underlying asset of the preferred equity interest. Such preferred equity interest issued by special
purpose company refers to 178,458 units of preferred equity interest issued by Kingdom Special Purpose
Company (equivalent to 49.0% of preferred equity interest), which owns the trust beneficiary interest of theSheraton Grande Tokyo Bay Hotel as an underlying asset. Moreover, INV’s investment amount of thepreferred equity interest is counted as the acquisition price of the preferred equity interest. Hereinafter thesame, unless otherwise noted. The underlying asset is the real estate or the real estate related assets to beacquired or owned by a TK operator of TK interest to INV or a TMK relating to the preferred equity interest
which INV owns, thus the real estate which will be the revenue source of INV. Hereafter the same.

(Note 4)

Calculated by dividing the aggregated actual NOI for January 1, 2017 – December 31, 2017 of the soldproperties by the total sale price and rounded to one decimal place.

(Note 5)

Appraisal NOI yield is calculated by dividing the total NOI derived from the direct capitalization method
stated in the appraisal reports by The Tanizawa Sōgō Appraisal Co., Ltd. or Daiwa Real Estate Appraisal Co.,
Ltd. on the valuation date of January 1, 2018 or April 1, 2018 by the total of acquisition price and rounded
to one decimal place.

(Note 6)

The above rating is the issuer rating granted to INV, and not a rating granted to its investment units.
Furthermore, INV’s investment units have no credit rating that have been or will be granted or submitted forinspection by any rating agency at the request of INV.

(b)

Operational Environment and Performance

For the June 2018 period, the portfolio NOI increased by 21.6% or JPY 1,734 million to JPY 9,758 million comparedto the same period in the previous year (the June 2017 period). Of the 21.6% increase in NOI, the hotel portfolio
accounted for an increase of 21.2% or JPY 1,701 million, the residential portfolio accounted for an increase of 2.3%
or JPY 186 million, and other portfolio assets accounted for a decrease of 1.9% or JPY 153 million due to sale ofassets. In addition, the portfolio maintained a high average occupancy rate (Note 1) of 98.5%.
Commentary on hotel and residential performance in the Reporting Period is described below.
The NOI of the 45 hotels owned by INV (Note 2) decreased by 0.8% for the period compared to the same period in
the previous year partially due to the renovation and associated temporary downtime of five hotels. If these five
hotels were not included, NOI would have increased by 2.6%. The 45 hotels recorded an occupancy rate (Note 3) of
88.4% (-0.2 points YoY), ADR (Note 4) of JPY 10,279 (-0.7% YoY), and RevPAR (Note 5) of JPY 9,087 (-0.9%
YoY). As described above, five hotels (Hotel MyStays Kyoto-Shijo, Hotel MyStays Shin-Urayasu ConferenceCenter, Hotel MyStays Maihama, Hotel MyStays Premier Dojima (Note 6) and Hotel MyStays Hakodate Goryokaku(Note 7)) were renovated during the Reporting Period at a total cost of approximately JPY 1.1 billion. Based on theportfolio of 40 hotels excluding such five hotels under renovation, the NOI, occupancy rate, ADR and RevPAR were
+2.6% YoY, +0.9 points YoY, +0.4% YoY, and +1.4% YoY, respectively. Of the total hotel revenue from the 59
hotels INV owns (Note 8), fixed rents accounted for 48.6% (JPY 3,587 million) and variable rents accounted for
51.4% (JPY 3,790 million) at the 59 hotels.
Inbound visitors reached a record high of 28.6 million (+19.3% YoY) in 2017 while government targets are 40 million
in 2020 and 60 million in 2030. For year to date through July 2018, inbound visitors to Japan reached 18.7 million,or 13.9% higher than the same period of the previous year. Under such circumstances, MyStays Hotel Management
Co., Ltd (“MHM”), a hotel operator in the sponsor group which operates 87 hotels nationwide, including 52 hotels in
INV’s portfolio as of the date of this document, is continually enhancing its operations and recently launched its new
website and booking engine to increase direct bookings and reduce commissions. MHM has also recently launched
a new revenue management system based on machine learning to improve the overbooking algorithms to help offset
cancelations and improve revenue at the hotels overall. MHM is continuing to court the increasing foreign tourism
business which accounted for 33.7% (Note 9) of hotel revenue at INV owned MyStays Hotel (Note 10) in theReporting Period. In addition to having multi-lingual chat and staff, MHM has sought to increase its Chinese guest
count by being the first Japanese hotel company to list its rooms on Fliggy, Alibaba’s online marketplace in China,
selling hotels, tours and other travel-related services from online travel agencies and direct travel service providers,commencing from September 2017. MHM was the top international chain by revenue on Fliggy and won an award
for Single’s Day in China. Aside from the topline, MHM has also been focused on expense management and cut thebuilding management costs on 38 of INV`s hotels by 13.9% and cut the elevator maintenance costs on 34 of INV`shotels by 50.4%.
The NOI (Note 11) of the 64 residential properties (Note 12) for the Reporting Period increased 3.2% compared to thesame period in the previous year, and the average occupancy rate achieved a stable 95.6%, an increase of 0.5 points
compared to the same period in the previous year.
Trends for rent at city-center residential properties with small-type rooms maintained a moderate increase. Due tothe positive circumstances in the macro environment, INV continues to focus on its rent increase program for new
leases and renewals as well as initiatives to reduce residential leasing costs based on a detailed market analysis of each
property and unit. In the Reporting Period, INV realized a rent increase for 50.1% (based on the number ofcontracts) of the new residential lease contracts for an average rent increase of 2.6% compared to the previous rent
across all new leases (Note 13). Specifically, at Royal Parks Tower Minami-Senju, INV’s flagship residential
property, INV achieved strong results with rent increases for 84.9% (based on the number of contracts) of the newlease contracts with an average rent increase of 10.1% compared to the previous rent across all new leases (Note 13).
INV achieved a rent increase for 54.4% (based on the number of contracts) of contract renewals for an average rent
increase of 2.3% compared to the previous rent across all renewal leases (Note 14), while maintaining a high contract
renewal rate of 84.9% (Note 13). Combined, new leases and renewal leases were signed at 2.4% higher than theprevious leases.
The total appraisal value of 125 properties (Note 8) at the end of the Reporting Period was JPY 411,542 million. The
portfolio has an unrealized gain of JPY 74,607 million (Note 15) and an unrealized gain ratio of 22.1% (Note 15).
The total appraisal value of 119 properties which were owned throughout the Reporting Period, increased by 0.2%
from JPY 390,955 million at the end of December 2017 period to JPY 391,542 million at the end of the Reporting
Period.
Key Performance Indicators of 45 Hotel Properties (Note 2)
Occupancy Rate (Note 3)
ADR (JPY) (Note 4)
RevPAR (JPY) (Note 5)

June 2018 fiscal period
88.4%
10,279
9,087

Year-on-year change-0.2pt-0.7%-0.9%

GOP (JPY million) (Note 16)

7,417

-1.0%

June 2018 fiscal period
95.6%

Year-on-year change+0.5pt

9,737

+2.6%

2,534

+3.2%

Key Performance Indicators of 64 Residential Properties (Note 12)
Occupancy Rate (Note 1)
Average Rent per Tsubo per Month(JPY) (Note 17)
NOI (JPY million) (Note 11)(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 54 acquired hotels held as of the beginning of the June 2018 Fiscal Period (including the Sheraton
Grande Tokyo Bay Hotel, the underlying asset of the preferred equity interest of TMK owned by INV), thefollowing 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. The figures assume that all properties acquired
after January 2017 by INV had been owned since January 1, 2017. The actual results before acquisition by
INV are based on the data provided by the sellers. Hereinafter, the same shall apply.

(Note 3) “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 4)“ADR” means average daily rate, and is calculated by dividing total room sales (excluding service fees) fora certain 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 5)

“RevPAR” means revenues per available room per day, and is calculated by dividing total room sales for acertain 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 thesame shall apply.

(Note 6)

The property name was changed from “Hotel MyStays Dojima” as of March 10, 2018.
same shall apply.

(Note 7)

Due to an operator change, the property name was changed from “Hotel Nets Hakodate” as of May 1, 2018.
Hereinafter the same shall apply.

(Note 8)

Excluding Sheraton Grande Tokyo Bay Hotel (preferred equity interest) which does not have appraisal
value.

(Note 9)The ratio of sales amount through overseas web agents to revenues.

Hereinafter the(Note 10) The ratio of the amount of revenues from bookings through the overseas travel agencies to total revenues for
47 hotels in INV’s portfolio that MHM operates as of the end of June 2018 Fiscal Period, excluding Hotel
Epinard Nasu operated by a subsidiary of MHM. The figures assume that all hotels acquired in and afterJanuary 2018 by INV had been owned since January 1, 2018. The actual results before acquisition by INV
are based on the data provided by the sellers.
(Note 11) For the comparison of NOI, insurance income and related repair expenses, which are temporary items, areexcluded.
(Note 12) Based on the 64 residential properties; of the 67 properties owned as of the beginning of June 2018 Fiscal
Period, three properties (Harmonie Ochanomizu, Growth Maison Ikebukuro and Capital Heights
Kagurazaka) sold on January 31, 2018 are excluded. Hereinafter the same shall apply. In addition, thefigures for the properties acquired after January 2017 are calculated on the assumption INV had acquired
those properties on January 1, 2017, using the actual figures provided by the sellers of such properties forthe period before the acquisition, for the purpose of comparison with previous year.
(Note 13) 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.
(Note 14) Renewal rate is calculated by the number of renewed contracts during the relevant period divided by the
number of contracts due up for renewal during the relevant period(Note 15) The unrealized gain is calculated using the following formula: the appraisal value as of the end of theReporting 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 ofthe end of the Reporting Period.
(Note 16) “GOP,” means the gross operating profit, and is the amount remaining after deducting costs of hotel
operations (the personnel, utility 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. Moreover, GOP for
the Sheraton Grande Tokyo Bay Hotel has been multiplied by 49%, or INV’s ownership ratio of thepreferred equity interest.
(Note 17) “Average Rent per Tsubo per Month” is calculated by dividing the total rental revenue including common
area charges for each month by the sum of total leased area at the end of each month during the relevant
period.

(c)

Overview of Fund Raising
As a result of the measures described below, INV’s interest-bearing debt outstanding balance was JPY 189,415
million and the Interest-Bearing Debt ratio (Note 1) and LTV (Note 2) were 50.6% and 44.1% respectively, asof the end of the Reporting Period, with an average interest rate (Note 3) of 0.52%.
(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(*) Since appraisal value for Sheraton Grande Tokyo Bay Hotel (preferred equity interest) is notavailable, the acquisition price of the preferred equity interest (JPY 17,845 million) has been
added as appraisal value of Sheraton Grande Tokyo Bay Hotel (preferred equity interest).

(Note 3)

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

(i) Issuance of Investment Corporation Bonds
INV issued its first investment corporation bonds issuance for the purpose of raising part of funds for property

acquisition, as these bonds helped to diversify the financing sources for INV, while at the same time lowering its
financing costs and lengthening the average maturity period of its debt.

Bond Series

Issue Date

Issue AmountInterest Rate

Redemption

Security/(JPY million)(annual rate)

Date

Guaranty

First Series Unsecured Investment

Unsecured /Corporation Bonds (with pari passu

May 25,conditions among specified

2018

1,000

0.400%

May 25,

Unguaranteed2023

Rating: A(JCR)

corporate bonds)
Second Series Unsecured Investment

Unsecured /Corporation Bonds (with pari passu

May 25,conditions among specified

2018

1,000

0.800%

May 25,

Unguaranteed2028

Rating: A(JCR)

corporate bonds)
Total Investment Corporation Bonds/ Average Interest Rate

2,000

0.600%(ii) Debt Financing
INV decided on new borrowings (Term Loan (H)) on June 25, 2018 and borrowed the funds on June 27, 2018 inorder to procure a portion of the acquisition price and related expenses of two hotel properties as described in“(d) Overview of Acquisition of Assets (ii) Acquisition of two hotels”.

Overview of Term Loan (H)LenderBorrowing
Date

MUFG Bank, Ltd.

June 27,

Shinsei Bank, Limited

2018(Note 1)

Outstanding
Amount(JPY million)
1,500Interest Rate

Maturity

Borrowing(annual rate)

Date

Method0.74950%

June 27,

Unsecured/(Note 1)2023

non guarantee

This borrowing has a floating interest rate, but the interest rate is fixed through an interest rate
swap agreement as of June 25, 2018. Therefore, the interest rate stated is fixed in considerationof the swap.

(iii) Prepayment of Loan
INV’s short-term consumption tax loan (Note 1) in the New Syndicate Loan (H) (in the amount of JPY 1,068
million) was prepaid on May 31, 2018 from the consumption tax refund concerning asset acquisitions on
October 13, 2017 and cash on hand.
(Note 1)

Short-term consumption tax loan is a loan which is to be repaid before the maturity date from a
refund of consumption taxes and regional consumption taxes on an acquisition of a property.

(d)Overview of Acquisition of Assets(i) Acquisition of four hotels
The Asset Manager decided to acquire four hotel properties on February 5, 2018 and the acquisition wascompleted on February 7, 2018. The overview of four hotels acquired is as follows:

Use

Acquisition
Appraisal
Price
Value
(JPY million) (JPY million)(Note 1)
(Note 2)

Property
Number

Property Name

Location

D54

Hotel MyStays
Yokohama-Kannai

Yokohama,
Kanagawa

5,326

5,380

Ginga Tokutei
Mokuteki Kaisha

D55

Art Hotel Joetsu

Joetsu,Niigata

2,772

2,800

HL Investments
Tokutei Mokuteki
KaishaD56

Art Hotel Hirosaki
City

Hirosaki,
Aomori

2,723

2,750

Monza Tokutei
Mokuteki Kaisha

D57

Hotel MyStays Oita

Oita, Oita

1,604

1,620

Suisei Tokutei
Mokuteki Kaisha

12,425

12,550

Hotel

Total
(Note 1)
(Note 2)

SellerCategory ofSpecified
Assets

Trust
Beneficial
Interest

Acquisition Prices do not include adjustments for property taxes, city planning taxes, or national or local
consumption taxes; the same shall apply hereinafter.
Appraisal Value is based on appraisal value stated in the appraisal report by The Tanizawa Sōgō Appraisal
Co., Ltd. on the valuation date of January 1, 2018.

(ii) Acquisition of two hotels
The Asset Manager decided to acquire two hotel properties on June 25, 2018 and the acquisition was completed
on June 27, 2018. The overview of two hotels acquired is as follows:

Use

Property
NumberD58

Property Name

Location

Acquisition
Appraisal Value
Price(JPY million)(JPY(Note 1)
million)Hotel MyStays
GotandaShinagawaku, Tokyo

4,068

Hotel MyStays
Tachikawa

Tachikawa,
Tokyo

3,257

3,290

7,325

7,400

Total
(Note 1)(e)Category ofSpecified
AssetsCalvis Tokutei
Mokuteki Kaisha

Trust
Beneficial
Interest

4,110

Hotel
D59

SellerAppraisal Value is based on appraisal value stated in the appraisal report by The Tanizawa Sōgō Appraisal
Co., Ltd. or Daiwa Real Estate Appraisal Co., Ltd. on the valuation date of April 1, 2018.

Overview of Sale of Assets

INV sold its assets as follows for the purpose of improving the profitability of its portfolio by rebalancing of assets

and stabilizing the distribution by recognizing a gain on sales.

(i) Sale of three residential properties and two office buildings
The Asset Manager decided to sell three residential properties and two office buildings on December 21, 2017 andDecember 26, 2017 respectively. Sales of the five assets closed on January 31, 2018. The overview of assets soldis described below. The proceeds from the sale were used to fund the acquisition and a portion of the related
expenses described in “(d) Overview of Acquisition of Assets (i) Acquisition of four hotels.”

Use

Property
NumberResidential

A31

Property
Name

Harmonie
Ochanomizu

Book
Sales
Acquisition
Value
Price
Price
(JPY
(JPY
(JPY
million) million)
million)(Note 1) (Note 2)

1,428

1,346

1,603

Difference
between Sales
Price and Book
Value
(JPY million)(Note 1)

Transferee

256
Trust

GrowthA36

Maison

825

743

1,057

314

IkebukuroUndisclosed

Beneficiary(Note 3)

Interest(Note 4)

CapitalA42

Categoryof Specified
AssetsHeights

604

623

732

108

Office Building

Kagurazaka

B15

B16

Cross Square
NAKANOOhki
Building

Total

Aoba

Taisei-Yuraku
1,060

1,125

1,350

224

Real Estate Co.,
Ltd

Trust
BeneficiaryInterest

816

709

721

11

4,734

4,549

5,464

915

Kubota Honten(Note 1) The difference between sales price and book value is used as an estimate for reference purposes and is
calculated using the book values as of the date of sale. INV recognized a gain on sales of JPY 816 million
after deducting related expenses in the fiscal period ended June 2018.
(Note 2) Sales prices do not include adjustments for fixed asset taxes or city planning taxes, or national or local
consumption taxes. Hereafter the same.
(Note 3) The name of the transferee (a domestic TMK) is not disclosed, as the transferee’s consent has not beenobtained for disclosure.
(Note 4) Each of the trust beneficiary interest of Harmonie Ochanomizu, Growth Maison Ikebukuro and Capital
Heights Kagurazaka was integrated in a single trust account with other trust accounts when INV procured
funds through debt financing backed by trust assets in July 2011. In transferring the sole trust beneficiaryinterest of the above mentioned three properties by itself, INV incurred some expenses to detach from theintegrated trust account, effective as of December 22, 2017.

(ii) Sale of one office building
The Asset Manager decided to sell the following asset on February 13, 2018, and the sale of the asset closed on March
9, 2018. The overview of asset sold described below. The proceeds from the sale were used to the fund theacquisition and a portion of the related expenses described in “(d) Overview of Acquisition of Assets (ii) Acquisitionof two hotels.”

Property
NumberOfficeBuilding

Use

B14

Property
Name

Lexington Plaza
Nishi-Gotanda

Acquisition
Price
(JPY
million)

4,880

Book
Value
(JPY
million)(Note 1)

4,632

Sale
Price
(JPY
million)

5,160

Difference
between Sale
Price andBook Value(JPY million)(Note 1)
527

Transferee

Undisclosed(Note 2)Categoryof Specified
Asset

Trust
BeneficiaryInterest(Note 1) The difference between sales price and book value is used as an estimate for reference purposes and is
calculated using the book values as of the date of sale. INV recognized a gain on sales of JPY 432 million
after deducting related expenses in the fiscal period ended June 2018.
(Note 2) The name of the transferee is not disclosed, as the transferee’s consent has not been obtained for disclosure.

(f)Overview of Results of Operations and Distributions

As a result of the operations mentioned above, operating revenues for the Reporting Period increased by JPY 457
million from the previous period (+3.6%) to JPY 13,104 million, and net income increased by JPY 418 million(+5.7%) to JPY 7,721 million.
INV believes that maintaining the stability of cash distributions over the medium term is one of the most importantfactors in determining the amount of distribution for a given fiscal period. In the Reporting Period, INV recorded again on sale of properties (JPY 1,249 million) and decided to retain a portion of the gains, to the extent allowed by
the conduit requirement, in order to stabilize the distribution per unit (“DPU”) in the future. Therefore, INV will
make a distribution of profit of JPY 6,854 million, or JPY 1,430 per unit, which is equivalent to 90% of its
distributable income of JPY 7,610 million (which is a total of net income and JPY 111 million of retained deficits
carried forward). INV will not make an excess profit distribution in the Reporting Period.
The majority of INV’s owned hotels use a variable rent scheme linked to performance of the relevant hotel. Hoteldemand is affected by seasonal factors and the fiscal period ending December (from July to December) which include
summer holiday and autumn outing seasons tend to record higher revenue than the fiscal period ending June (fromJanuary to June). Accordingly, INV’s rental revenues tend to be higher in the fiscal period ending December than in
the fiscal period ending June.

3

Changes in Total Number of Investment Units Issued and Outstanding

Changes in the number of investment units issued and outstanding and unitholders’ capital for the past 10
years up to the end of the Reporting Period are as follows.
Total number of investment units
issued and outstanding (units)

Unitholders’ capital (JPY)

DateType of issue

February 1, 2010

Unit split

215,596

269,495-

19,134,417,100 (Note 1)

February 1, 2010

Merger367,200

636,695-

19,134,417,100 (Note 2)

711,597

1,348,292

6,999,979,689

26,134,396,789 (Note 3)

224,887

1,573,179

2,999,992,580

29,134,389,369 (Note 4)

July 29, 2011
December 20, 2013

Third-party
allotment
Third-party
allotment

Increase

Total

Increase

Total

Reference

July 16, 2014

Public offering

1,040,000

2,613,179

22,747,920,000

51,882,309,369 (Note 5)

August 13, 2014

Third-party
allotment

55,5072,668,686

1,214,104,611

53,096,413,980 (Note 6)

July 15, 2015

Public offering

500,000

3,168,686

27,970,500,000

81,066,913,980 (Note 7)

August 12, 2015

Third-party
allotment

25,0003,193,686

1,398,525,000

82,465,438,980 (Note 8)

March 30, 2016

Public offering

459,5123,653,198

36,123,157,344

118,588,596,324 (Note 9)

22,626

3,675,824

1,778,675,112

120,367,271,436 (Note 10)-

3,675,824

224,225,264

120,591,496,700 (Note 11)

April 27, 2016

February 22, 2017

Third-party
allotment
Reversal of
allowance fortemporarydifferences
adjustment

March 13, 2017

Public offering

185,000

3,860,824

8,393,450,000

128,984,946,700 (Note 12)

October 12, 2017

Public offering

887,959

4,748,783

37,917,625,218

166,902,571,918 (Note 13)

44,3984,793,181
1,895,883,396
allotment
An investment unit split of five units per one unit was conducted.

168,798,455,314 (Note 14)

November 1, 2017
(Note 1)

Third-party(Note 2)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 3)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 4)

New investment units were issued in a third-party allotment at a price of JPY 13,340 per unit to makerepayment of existing loan, etc.

(Note 5)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 6)

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 7)

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 8)

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 9)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 10) 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.
(Note 11) INV has decided on Board of Directors' Meeting held on February 22, 2017, the reversal of allowance fortemporary difference adjustments for incorporation into unitholders' capital.
(Note 12) New investment units were issued in a public offering at a price of JPY 46,897 per unit (JPY 45,370 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 public offering at a price of JPY 44,118 per unit (JPY 42,702 after
deducting the underwriters’ discount) to raise a part of the funds for the acquisition of new properties.
(Note 14) New investment units were issued in a third party allotment at a price of JPY 42,702 per unit for the purposeof allocation to cash reserves to be used as part of the funds for future acquisition of specified assets.

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
HighestLowest26th fiscal
periodJune
201688,40061,10027th fiscal
periodDecember
2016
70,30049,60028th fiscal
periodJune
201754,80041,50029th fiscal
periodDecember
2017
50,20044,450(Unit: JPY)
30th fiscal
periodJune
201853,00046,6504Distribution Performance

Pursuant to the cash distribution policy set forth in Article 17, Item 4 of the Articles of Incorporation, INV
has determined that the amount of distribution shall be up to the amount of profits and shall exceed 90% of
the amount of “distributable income” as stipulated in Article 67, Item 15 of the Act on Special Measures
Concerning Taxation.
For the Reporting Period, while distributing JPY 6,854 million, which is equivalent to 90% of distributable
income (JPY 7,610 million), as distribution of profit, INV reserved JPY 756 million as internal reserve anddeclared distribution per unit (excluding excess profit distribution) of JPY 1,430. INV shall not makeexcess profit distribution for the Reporting Period.
PeriodCalculated Period
Unappropriated retained
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 for temporary
differences adjustment
per unit out of refund ofinvestment per unit)(JPY)
Total distribution fromunitholders’ equity under
the tax laws out of thetotal refund of investment(JPY thousand)26th fiscal
periodJan. 1, 2016
to Jun. 30,
2016

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

28th fiscal
periodJan. 1, 2017
to Jun. 30,
201729th fiscal
periodJul. 1, 2017
to Dec. 31,
2017

30th fiscal
periodJan. 1, 2018
to Jun. 30,
20184,363,420

5,659,831

4,708,487

7,212,580

7,610,548

228,8276,414-90,516-111,399

756,300

4,359,527

5,429,192

4,880,081

7,496,535

6,854,248(1,186)(1,477)(1,264)(1,564)(1,430)4,135,302

5,429,192

4,799,004

7,323,980

6,854,248(1,125)(1,477)(1,243)(1,528)(1,430)224,225-

81,077

172,554

-

(61)

(-)

(21)

(36)

(-)

224,225-

46,329

-

-

(61)

(-)

(12)

(-)

(-)

-

-

34,747

172,554-

Period
Calculated Period
Distribution fromunitholders’ equity under
the tax laws out of refundof investment per unit
(JPY)
5

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

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

28th fiscal
periodJan. 1, 2017
to Jun. 30,
201729th fiscal
periodJul. 1, 2017
to Dec. 31,
2017

30th fiscal
periodJan. 1, 2018
to Jun. 30,
2018

(-)

(-)

(9)

(36)

(-)

Future operational policy and issues to be addressed
Outlook for the Fiscal Period Ending December 31, 2018
The DPU for the December 2018 period is forecast to be JPY 1,683 (+7.6% YoY). Combined with the DPU for
the June 2018 fiscal period, the full year DPU for calendar year 2018 is forecast to be JPY 3,113 (+10.1% YoY),
providing steady growth.
aFuture operational policy and issues to be addressed
Since July 2011, INV has enhanced unitholder value by significantly increasing DPU and financial stability with theFortress Group as its sponsor. Since Fortress Group joined under the umbrella of SoftBank Group in December
2017 and SoftBank Group owns 100% of issued shares of the Asset Manager directly and indirectly as of March 29,
2018, in addition to continued access to Fortress’s global real estate expertise, INV will seek to leverage theresources that are expected to become available through SoftBank Group. SoftBank Group has market-leading
expertise in technology fields such as digital marketing for both mobile and desktop, online payment systems, searchengine optimization, AI and robotics. INV believes that deployment of technology into INV’s real estate assets,
especially its hotels, will enhance the ongoing initiatives to improve its digital marketing, minimize labor costs andincrease customer engagement. For example, INV plans to pursue opportunities to better manage the increased
number of foreign visitors and their related online research, bookings and payments, improve the process in setting
hotel rates and manage overbooking through the use of sophisticated AI algorithms, and reduce labor costs while
enhancing customer service through the use of robotics.
In addition to pursuing synergy with SoftBank Group, going forward, INV will continue to implement various
strategies to maintain further growth and financial stability, including the following measures.
Further external growth utilizing sponsor supportProperty acquisition from third parties with the aim of expanding the AUM

Asset recycling and property acquisitions using the proceeds from sales



Further internal growth at hotel and residential properties

Diversification of funding sources and loan duration maturities and lengthening the average maturity
period of its debt and diversifying the maturity date of its debt by the issuance of investment corporationbonds

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, wherecontinued growth in portfolio revenues is anticipated, and residential properties especially where rental growth
can be achieved. Rent revenue from residential assets and other assets as well as the fixed rent portion fromhotels will also contribute to more stable revenue, which was 65.9% of total revenue (Note 1). This acquisition

strategy will enable INV to build a portfolio with a good balance between growth and stability.
In regards to hotels, INV will take into consideration the trends in foreign travelers visiting Japan, demands ofbusiness and leisure customers in nearby areas, and leasing contract types when making investment decisions,with the aim of acquiring properties where growth and stability of GOP and rental revenue are forecasted toincrease.
After the Reporting Period, on August 2, 2018, INV acquired four hotels as mentioned in below “cSignificant Subsequent Events (c) Acquisition of assets.” For the further achievement of the profitability andstability, INV also will acquire the TK Interest which holds two overseas hotels in Grand Cayman.
In regards to residential properties, INV will analyze occupancy rates, rental market trends, the presence ofcompeting properties among other factors, and consider acquiring properties that have mainly small-type rooms
with strong competitiveness in large cities, in which it believes it can achieve increases in rent.
INV has achieved steady external growth via the sponsor pipeline from the Fortress Group, as follows.

Properties Acquired from affiliates of the Fortress Group (as of the date of this document)
Date

Properties acquired

Total acquisition price

September 2012
May 2014

24 residential properties
Two hotels

JPY 14,043 million
JPY 5,435 million

July 2014
February 201518 hotels
Two hotels

JPY 39,938 million
JPY 4,911 million

July 2015

11 hotels andthree residential properties

JPY 35,258 million

August 2015
January 2016

One hotel
Five hotels andone residential property

JPY 5,069 million
JPY 10,207 million

March 2016

Four hotels andone residential property

JPY 66,697 million

June 2016
March 2017

Two hotels
Two residential properties

JPY 15,900 million
JPY 24,562 million

May 2017
October 2017

One hotel
Five hotels (Note 2)

JPY 8,000 million
JPY 57,444 million (Note 2)

February 2018
June 2018

Four hotels
Two hotels

JPY 12,425 million
JPY 7,325 million

August 2018

Four hotels
92 properties(of which 61 are hotels and 31 areresidential properties)

JPY 47,747 million
JPY 354,961 million(of which hotels: JPY 303,323 million;
residential: JPY 51,638 million)

Total

The Fortress Group manages five dedicated Japanese real estate funds, including the Fortress Japan Opportunity
Funds I, II, III and IV. The Fortress Group’s committed equity is over JPY 300 billion and the number ofproperties that the Fortress Group is invested in exceeds 3,500. In order to ensure future growth options for the
portfolio, INV entered into an updated MOU with affiliates of the Fortress Group that provides preferential
negotiation rights with respect to the acquisition of 19 hotels and nine residential properties (see the table below)(Note 3). 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 from third
parties that will contribute to stability and growth in revenue and cash flow and an increase in DPU.

No.

Asset name

Asset type (Note 4)

Location

No. of rooms

1

Rihga Royal Hotel Kyoto

Full Service Hotel

Kyoto-shi, Kyoto

489

2

Hotel MyStays Premier Narita

Full Service Hotel

Narita, Chiba

711

3

Fusaki Resort Village

Resort Service Hotel

Ishigaki, Okinawa

188

4

Art Hotel Asahikawa

Full Service Hotel

Asahikawa, Hokkaido

265

5

Hotel MyStays Kanazawa Castle

Limited Service Hotel

Kanazawa, Ishikawa

206

6

Hotel MyStays Matsuyama

Full Service Hotel

Matsuyama, Ehime

162

7

Hotel Mystays Sapporo Nakajima
Park

Limited Service Hotel

Sapporo, Hokkaido

868

Flexstay Inn Sakuragicho

Limited Service Hotel

Yokohama, Kanagawa

70

9

MyCUBE by MYSTAYS Asakusa
Kuramae

Limited Service Hotel

Taito-ku, Tokyo

161

Resort HotelFujiyoshida, Yamanashi

159

11 Hotel Nord Otaru

Limited Service Hotel

Otaru, Hokkaido

98

12 Hotel Sonia Otaru

Limited Service Hotel

Otaru, Hokkaido

94

13 Art Hotel Niigata Station

Full Service Hotel

Niigata, Niigata

304

14 Art Hotel Ishigakijima

Resort Hotel

Ishigaki, Okinawa

245

15 Hotel MyStays Shinsaibashi East

Limited Service Hotel

Osaka, Osaka85

16 Hotel MyStays Sapporo Aspen

Limited Service Hotel

Sapporo, Hokkaido

305

Limited Service Hotel

Sapporo, Hokkaido

80

18 Hotel MyStays Sapporo Susukino

Limited Service Hotel

Sapporo, Hokkaido

104

19 Hotel MyStays Nayoro

Limited Service Hotel

Nayoro, Hokkaido

70

10 Hotel MyStays Fuji Onsen Resort

17

Hotel MyStays Sapporo Nakajima
Park Annex

Hotel subtotal

3,882

20 Gran Charm Hiroo

Residential/Small TypeShibuya-ku, Tokyo

121

21 Plestay Win Kinshicho

Residential/Small Type

Sumida-ku, Tokyo92

22 Gran Charm Kichijoji

Residential/Small TypeMusashino, Tokyo28

23 Green Patio Noda

Residential/Small Type

Noda, Chiba

240

24 Dainichi F 45

Residential/Small Type

Urayasu, Chiba

54

25 Gran Charm Urayasu

Residential/Small Type

Urayasu, Chiba

54

26 Gran Charm Urayasu 5

Residential/Small Type

Urayasu, Chiba

54

27 Gran Charm Minami Gyotoku I

Residential/Small Type

Ichikawa, Chiba

52

28 Gran Charm Minami Gyotoku II

Residential/Small Type

Ichikawa, Chiba

48

Residential property subtotal

743

Total

4,625

(Note 1)The percentage indicates composition of rent revenue based on the actual results for the fiscal period ended
June 2018. Sheraton Grande Tokyo Bay Hotel (preferred equity interest) is excluded.

(Note 2)

Sheraton Grande Tokyo Bay Hotel acquired by a special purpose company, of which INV owns thepreferred equity interest, is counted as one property and the INV’s investment amount to the preferred
equity interest is counted as the acquisition price of the preferred equity interest.

(Note 3)

The term of validity of the MOU is from July 17, 2018, the date of execution of the updated MOU, to July

16, 2019. Regarding the 28 properties listed above, there is no guarantee that INV will be granted an
opportunity for considering acquisition of the properties or be able to acquire the properties.
(Note 4)Each “Asset Type” above is as follows:“Limited Service Hotel” refers to a hotel focusing on revenues from room stay and offer limited service
regarding foods and beverages, 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 at tourist destinations or recreational lots, having segments of stay,foods and beverages, and incidental facilities.
“Small Type” refers to a residential property in which the majority of dwelling units are less than 30 m2.

Property Sales
While INV places priority on increasing unitholders’ value through external growth by taking into account theincreased level of activity in the real estate trading market, it also considers the possibility of portfolio optimization
upon consideration of the portfolio sector composition, geographic distribution and competitiveness of each property,
as appropriate and previously detailed in the Asset Recycling Program.
(ii) Strategy for internal growth(Hotels)
Of the 59 hotels (Note 1) owned by INV as of the end of the Reporting Period, 50 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 as a result INV can directly enjoy the hotelrevenue upside. In the case 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 48 hotels, MHM and subsidiaries of MHM
have implemented sophisticated revenue management initiatives seeking to maximize revenue. INV willcontinue 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.
For hotels, renovation of rooms and replacement of fixtures and fittings are indispensable to maintain andincrease revenues and operate stably in a planned manner.
(Residential properties and others)
INV will continue to strengthen its collaborative ties with PM and brokers to further boost occupancy rates andearning capabilities of its properties. With respect to INV’s residential properties, while keeping in mind thelow-season in the residential rental market that occurs during the December 2018 period, INV will focus on
increasing the occupancy rates and rents for both new lease contracts and lease renewals for all 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 hightenant satisfaction.
Therefore, INV will continue to monitor current strategic plans with flexible
implementation as it sees fit.
(Note 1)

Excluding Sheraton Grande Tokyo Bay Hotel (the preferred equity interest).

(iii) Financial strategy
In the Reporting Period, INV issued its first investment corporation bonds and lowered its financing costs while atthe same time lengthened the average maturity period of its debt and diversified the maturity date of its debt andfunding sources. Going forward, INV seeks to maximize unitholders’ value by way of further reduction ofborrowing costs, diversification of loan maturity dates and financing measures, and improvement of its credit
rating.

(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 eachmeeting 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 and otherrelevant matters as well as overall management of transactions with sponsor related parties. Moreover, it has in placea compliance committee which, chaired by such compliance officer, is in charge of deliberating on compliance withlaws, regulations and other relevant matters as well as transactions with sponsor related parties. Compliancecommittee 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 relatedparties 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.

c

Significant Subsequent Events(a) Issuance of New Investment Units
On July 17, 2018, INV launched its fifth Global Share Offering, and sixth share offering in total since Fortress became
its Sponsor. The offering size and funds raised are described below. The funds used from the issuance of new units
were used to procure a portion of acquisition price for four domestic hotels and TK Interest with two overseas hotels as
underlying assets defined in “(c) Acquisition of assets”. Payment for the issuance of new investment units and for thethird-party allotment in connection with overallotment secondary offering were completed on August 1, 2018 andAugust 21, 2018 respectively. As a result, total equity for INV is JPY 211,092 million, total number of issued
investment units is 5,748,181 units.
(i) Issuance of new investment units through Public Offering
Number of investment
units to be offered:

Issue price(offer price)
Total issue price(total offer price)Amount to be paid
(issue value)
Total amount to be paid
(total issue value)
Payment date:909,524 investment units
Domestic public offering: 432,024 investment units
Overseas offering: 477,500 investment units
JPY 45,776 per unit
JPY 41,634,370,624:

JPY 44,287 per unit:

JPY 40,280,089,388:

August 1, 2018

(ii) Secondary offering of investment units (overallotment secondary offering)Number of Investment
Units to be offered in thesecondary offering
Offer priceTotal offer price
Delivery date:

45,476 investment units:::

JPY 45,776 per unit
JPY 2,081,709,376
August 2, 2018(iii) Issuance of new investment units through third-party allotment
Number of investment
units to be offered
Amount to be paid
(issue value)
Total amount to be paid
(total issue value)
Payment date
Allottee:

45,476investment units:

JPY 44,287per unit:

JPY2,013,995,612::

August 21, 2018
Mizuho Securities Co., Ltd.

(b) Debt Financing
Along with equity finance defined in “(a) Issuance of New Investment Units”, INV has decided to execute newborrowings (New Syndicate Loan (J)) on July 17, 2018 in order to fund a portion of the acquisition price of four
domestic hotel properties and TK Interest with two overseas hotels as underlying assets later described in “(c)Acquisition of assets”.
New Syndicate Loan (J)LenderMizuho Bank, Ltd.
Sumitomo Mitsui Banking
Corporation
MUFG Bank, Ltd.
Shinsei Bank, Limited
Citibank, N.A., Tokyo Branch
Development Bank of Japan, Inc.
The Nomura Trust and Banking
Co., Ltd.
AEON Bank, Ltd.
Mizuho Bank, Ltd.
Sumitomo Mitsui Banking
Corporation
MUFG Bank, Ltd.
Shinsei Bank, Limited
Citibank, N.A., Tokyo Branch
The Nomura Trust and Banking
Co., Ltd.
AEON Bank, Ltd.
Mizuho Bank, Ltd.
Sumitomo Mitsui Banking
MUFG Bank, Ltd.
Total Debt

Borrowing
Date

Outstanding
Balance(JPY million)
13,119September
12,
2018(Note 1)

13,12010,761

Interest Rate(annual rate)

Maturity
Date

Variableinterest rate
(Note 2)
Variableinterest rate
(Note 3)September 12,
2023(Note 1)
September 12,
2022(Note 1)

Variableinterest rate
(Note 4)September 12,
2021(Note 1)

Borrowing
MethodUnsecured/nonguarantee
2,359

Variableinterest rate
(Note 4)

August 2,
2021

1,099

Variableinterest rate
(Note 5)

August 2,
2019

August 2,
2018

40,458

(Note 1) Borrowing Date and Maturity Date is scheduled as of the date of this document, and it may be changed in
the future.
(Note 2) 1-month JPY TIBOR (Base Rate) + spread (0.50%)(Only in first calculation period, 2-month JPY TIBOR (Base Rate) + spread (0.50%))(Note 3) 1-month JPY TIBOR (Base Rate) + spread (0.40%)(Only in first calculation period, 2-month JPY TIBOR (Base Rate) + spread (0.40%))(Note 4) 1-month JPY TIBOR (Base Rate) + spread (0.30%)(Only in first calculation period, 2-month JPY TIBOR (Base Rate) + spread (0.30%))(Note 5) 1-month JPY TIBOR (Base Rate) + spread (0.20%)(Only in first calculation period, 2-month JPY TIBOR (Base Rate) + spread (0.20%))(c)Acquisition of assets(i) Acquisition of four domestic hotel properties
The Asset Manager decided to acquire hotels as follows on July 17, 2018, and acquisition of assets has beenclosed on August 2, 2018.

Use

Property
Number

Property Name

Acquisition Appraisal Value
Price(million yen)(million yen)
(Note 1)

Seller

D60

Hotel MyStays Premier Minato-ku,
AkasakaTokyo

20,691

20,900

Aki Tokutei
Mokuteki Kaisha

D61

Hotel MyStays Premier Sapporo,
Sapporo Park
Hokkaido

16,731

16,900Raetia Tokutei
Mokuteki Kaisha

D62

Hotel MyStays Ueno
East

Taito-ku,
Tokyo

5,286

5,340

Hotel MyStays
Midosuji Honmachi

Osaka, Osaka

5,039

5,090

Dogo Tokutei
Mokuteki Kaisha

47,747

48,230

-

Hotel

D63

Total
(Note 1)

Location

Category ofSpecified
AssetsTrust
HL Investments 2 Beneficial
Tokutei Mokuteki Interest
Kaisha-Appraisal Value is based on appraisal value stated in the appraisal report by the Japan Real Estate Institute or The
Tanizawa Sōgō Appraisal Co., Ltd. on the valuation date of June 1, 2018.

(ii) Acquisition of TK Interest with two Overseas Real Estate as Underlying Assets
The Asset Manager decided to acquire TK Interest as follows on July 17, 2018 and executed the TK Agreement on
the same date.
(1) Asset to be acquired

TK interest in a Cayman Islands special purpose company that plans to acquire
99-year Leasehold Interests (Note 1) (with a lease payment of USD 1 or KYD 1 peryear) in overseas real estate as underlying assets (the “Cayman Hotel TK Interest”)(2) Anticipated acquisition price
USD 339,836,000 (JPY 37,534 million) (Note 2) for 100.0% of the Cayman Hotel TK
Interest (Note 3)(3) Name of underlying asset
Westin Grand Cayman Seven Mile Beach Resort & Spa and Sunshine Suites Resort(each an “Underlying Asset”, and collectively the “Underlying Assets”, or the “TwoOverseas Hotel Assets”)(4) Anticipated acquisition date
One business day prior to the acquisition date of the underlying assets, which is
expected to close by October 31, 2018 or the date separately agreed (Note 4)(5) TK operator
Seven Mile Resort Holdings Ltd (the “Cayman SPC”).
(Note 1)
Rights equivalent to long-term real estate leasehold rights in Japan (hereinafter referred to collectively as
the “Leasehold”). The TK operator will also acquire some movables including FF&E pertaining to hotel
operations. “FF&E” is an abbreviation for furniture, fixtures and equipment, which are the assets
necessary for hotel operation, such as furniture, fixtures, equipment and kitchen equipment (hereinafter thesame).
(Note 2)
The anticipated investment amount is fixed by the foreign exchange forward contract executed on July 26,
2018 in Japanese Yen denomination which were calculated using an exchange rate of 1 USD=110.45.
Hereinafter the same.
(Note 3)
The anticipated acquisition price is INV’s anticipated investment amount for the Cayman Hotel TK Interest.
The amount does not include any taxes payable including consumption tax and is rounded down.
(Note 4)The “anticipated acquisition date” (hereinafter the same) will be one business day prior to the date when the
Cayman SPC (TK operator) will acquire the underlying assets, which will be (a) as soon as possible, using
commercially reasonable efforts, after all conditions to closing have been satisfied or waived, and in any
event by October 31, 2018, or (b) such other date as may be agreed upon with the sellers. Conditions
precedent to closing under the purchase and sale agreement include, among others, obtaining (i)governmental approvals relating to the transfer of the Leasehold and (ii) permits under the laws of the
Cayman Islands required for the operation of the two Overseas Hotel Assets (including operation by theSpecial Purpose Company to which the Cayman SPC entrusts the hotel operation).

(Reference Information)(a) Debt Financing
INV has decided to execute new borrowings (New Syndicate Loan (I)) on July 12, 2018 in order to repay a portion of
New Syndicate Loan (E) in the amount of JPY 28,979 million which was due on July 17, 2018.
New Syndicate Loan (I)LenderMizuho Bank, Ltd.
MUFG Bank, Ltd.
Sumitomo Mitsui Banking
Corporation
Sumitomo Mitsui Trust Bank,
LimitedShinsei Bank, Limited
Citibank, N.A., Tokyo Branch

Borrowing
Date

July 17,2018

Outstanding
Balance(JPY million)

Interest Rate(annual rate)

Maturity
Date

9,659

Variableinterest rate
(Note 1)

July 14,
2023

9,660

9,660

Variableinterest rate
(Note 2)
Variableinterest rate
(Note 3)

July 17,
2022
July 17,
2021

Borrowing
MethodUnsecured/nonguarantee

Total Debt

28,979(Note 1) 1-month JPY TIBOR (Base Rate) + spread (0.50%)(Only in first calculation period, 2-month JPY TIBOR (Base Rate) + spread (0.50%))(Note 2) 1-month JPY TIBOR (Base Rate) + spread (0.40%)(Only in first calculation period, 2-month JPY TIBOR (Base Rate) + spread (0.40%))(Note 3) 1-month JPY TIBOR (Base Rate) + spread (0.30%)(Only in first calculation period, 2-month JPY TIBOR (Base Rate) + spread (0.30%))(b) Change in the Investment Guidelines
The Asset Manager decided to revise the Investment Guidelines as of July 17, 2018, prior to the anticipated acquisitionof overseas assets. Such revision is intended to establish an investment policy and asset management structure
regarding investments in overseas assets, and also to change the investment policy regarding domestic hotels to focus
on (i) Limited service hotels, which feature relatively higher profit margins and potential for revenue growth backed byincreasing demand for accommodations, and (ii) Full-service and Resort hotels, which have a variety of revenue
sources, including rooms, food and beverage and banquet facilities, that are expected to achieve stable growth in overall
hotel revenues. Please refer to the press release entitled “Notice concerning Partial Change in Investment Policy due
to Revision of Internal Rules (the “Investment Guidelines”) of the Asset Manager” dated July 17, 2018.

Overview of the Investment Corporation
1

Overview of Investment
By Period
Results Dates

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

26th fiscal
periodAs of Jun. 30,
2016

27th fiscal
periodAs of Dec. 31,
2016

28th fiscal
periodAs of Jun. 30,
201729th fiscal
periodAs of Dec. 31,
2017

30th fiscal
periodAs of Jun. 30,
2018

10,000,000

10,000,000

10,000,000

10,000,000

10,000,000

3,675,824

3,675,824

3,860,824

4,793,181

4,793,181

120,367

120,367

128,984

168,798

168,798

12,135

15,634

17,493

26,761

27,960Notes regarding Unitholders

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

Number of units held

The Master Trust Bank of Japan, Ltd.
(trust account)
Japan Trustee Services Bank, Ltd.
(trust account)
Trust & Custody Services Bank, Ltd.
(securities investment trust account)
The Nomura Trust and Banking Co.,
Ltd. (investment trust account)
Mizuho Trust & Banking Co., Ltd.
Calliope Godo Kaisha
THE BANK OF NEW YORKMELLON SA/NV 10
JP MORGAN CHASE BANK 385628
STATE STREET BANK AND TRUSTCOMPANYSTATE STREET BANK WEST
CLIENT-TREATY 505234
Total(Note) Percentages are rounded down to two decimal places.

% of total number of investment
units issued and outstanding

697,842

14.55

581,36812.12

214,5114.47

165,938

3.46

131,076

2.73

98,9182.06

96,213

2.00

74,626

1.55

74,185

1.54

66,0651.37

2,200,742

45.91

3

Notes regarding Directors

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

Name

Executive Director

Naoki Fukuda
Takashi Takahashi

Supervisory Director

Auditor

Hiroyuki Fujimoto

Primary responsibilities
President and CEO,
Consonant Investment
Management Co., Ltd.
Attorney,
Ocean General Law Office
Tax accountant,
CPA Fujimoto OfficeOutside Auditor,
BRYCEN Co., Ltd.
(current position)

Ernst & Young
ShinNihon LLC (Note 1)-

Directors’ remunerationfor operating period(JPY thousand)
2,400

2,400

15,900(Note 1) The Japanese name of Ernst & Young ShinNihon LLC was changed on July 1, 2018. (The English name remains
unchanged.) Hereinafter the same shall apply.
(Note 2) Executive 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 INV.

Determination 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.

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.)
Special account management company
General administrative agent (Fiscal agent pertaining toinvestment corporation bonds)

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)
Mizuho Bank, Ltd. / Sumitomo Mitsui Banking
Corporation(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.

Status of Investment Corporation’s Assets under Management
1

Composition of INV’s Assets
Fiscal period ended December 31, 2017(as of December 31, 2017)
Purpose

Geographic area
(Note 1)

Percentage of
total assets(%)

Amount held
(JPY million)(Note 2)Type ofasset

Greater Tokyo
Area (Note 3)
Major regional
HotelscitiesSubtotal
Total real estate
Greater Tokyo
area
Major regional
Residences
citiesSubtotal
Greater Tokyo
area
Real
Offices/Commercial Major regional
estate in
Facilities
citiestrust
Subtotal
Greater Tokyo
area
Major regional
HotelscitiesSubtotal

Fiscal period ended June 30, 2018(as of June 30, 2018)
Percentage of
total assets(%)

Amount held
(JPY million)(Note 2)

2

0.0

2

0.0

-

-

-

-

2
2

0.0
0.0

2
2

0.0
0.0

74,091

19.9

70,87718.9

15,858

4.3

15,691

4.2

89,94924.2

86,569

23.1

5,765

1.6

-

-

5,666

1.5

4,912

1.3

11,432

3.1

4,912

1.3

121,22532.6

133,640

35.7

105,09928.3

111,80929.9

226,32560.9

245,450

65.5

Total real estate in trust

327,706

88.2

336,932

90.0

Preferred equity interest (Note 4)

17,8544.8

17,856

4.8

Deposits and other assets

26,1937.0

19,721

5.3

371,758

100.0

374,512100.0(327,709)(88.2)(336,934)(90.0)

Total assets (Note 5)(Note 1)“Greater Tokyo area” refers to Tokyo, Kanagawa, Chiba and Saitama.

(Note 2)

“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).

(Note 3)

Part of Hotel MyStays Haneda falls under this category.

(Note 4)Preferred equity interest issued by Kingdom Special Purpose Company, with the Sheraton Grande Tokyo Bay
Hotel as an underlying asset (asset in trust of trust beneficiary interest acquired by Kingdom Special Purpose
Company, which is the real estate that serves as the main source of revenue for Kingdom Special Purpose
Company).

(Note 5)

The figures indicated in parenthesis under “Total assets” show the amounts related to owned real estate(excluding the amount of preferred equity securities owned).

2

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

D43

Hotel MyStays Gotanda Station

A105 Royal Parks Tower Minami-Senju

Book value

Leasable area

Leased area

(JPY million)22

Occupancy rate

Ratio of(%)

rental revenue

Main use

(m )

(m )

26,464

10,137.88

10,137.88

100.0

4.3

Hotel

22,388

39,113.46

36,405.23

93.1

6.9

Residence(Note 1) (Note 2) (%) (Note 2)

D44

Hotel Epinard Nasu

20,21837,702.33

37,702.33

100.0

5.2

Hotel

D47

Hotel MyStays Premier Kanazawa

13,33913,250.03

13,250.03

100.0

2.8

Hotel

13,03913,026.99

13,026.99

100.0

3.5

Hotel

D50

Hotel MyStays Shin Osaka ConferenceCenterD51

Hotel MyStays Premier Omori

9,746

11,849.61

11,849.61

100.0

2.5

Hotel

D52

Beppu Kamenoi Hotel

8,689

19,422.08

19,422.08

100.0

3.1

Hotel

D49

Hotel MyStays Premier Hamamatsucho

7,980

6,151.93

6,151.93

100.0

2.0

Hotel

D45

Hotel MyStays Fukuoka Tenjin

7,911

5,083.06

5,083.06

100.0

2.0

Hotel

D21

APA Hotel Yokohama-Kannai

7,897

6,568.51

6,568.51

100.0

2.1

Hotel

137,676

162,305.88

159,597.65

98.3

34.3

-

Total

(Note 1) “Occupancy rate” is computed by dividing the leased area by leasable area.
(Note 2) “Occupancy rate” and “Ratio of rental revenue” are rounded to one decimal place.

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 of June 30, Book value
2018
(JPY
(JPY million)
million)(Note 2)

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

Trust
beneficiaryinterest(Note 3)

1,771.13

1,210

1,112

2,681.94

1,330

1,076

A26

Nisshin Palacestage
Daitabashi

A27

Nisshin Palacestage HigashiNagasaki

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

Trust
beneficiaryinterest(Note 3)Growth Maison Gotanda

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

Trust
beneficiaryinterest(Note 3)

1,051.50

1,040

848

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

Trust
beneficiaryinterest(Note 3)

1,367.96

1,140

968

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

Trust
beneficiaryinterest(Note 3)

2,152.31

1,430

1,353

3,029.16

1,090

1,073

A28

A29

A30

Growth Maison Kameido

Emerald House

A32

Suncrest Shakujii-Koen

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

Trust
beneficiaryinterest(Note 3)A33

Growth Maison
Shin-Yokohama

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

Trustbeneficiaryinterest(Note 3)

1,858.44

1,180

952

A34

Belle Face
Ueno-Okachimachi

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

Trust
beneficiaryinterest(Note 3)

1,351.11

1,090

940

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

Trust
beneficiaryinterest(Note 3)

1,562.26

1,010

813

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

Trust
beneficiaryinterest(Note 3)

1,015.34

747

739

A35

A37

Grand Rire Kameido

Growth Maison Yoga

Name of property

A38

A39

Route Tachikawa

Shibuya-Honmachi Mansion

Location(Note 1)

Legal form of Leasable area
asset
(m2)

Appraisal value
as of June 30, Book value
2018
(JPY
(JPY million)
million)(Note 2)

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

Trust
beneficiaryinterest(Note 3)

1,368.57

669

637

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

Trust
beneficiaryinterest(Note 3)

1,167.50638

664

1,235.93

499

654

A40

City Heights Kinuta

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

Trust
beneficiaryinterest(Note 3)

A41

Acseeds Tower
Kawaguchi- Namiki

2-5-13 Namiki, Kawaguchi-shi,
SaitamaTrustbeneficiaryinterest(Note 3)

1,210.74746

532

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

Trust
beneficiaryinterest(Note 3)

1,047.75

535

557

Belair Meguro

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

Trust
beneficiaryinterest(Note 3)557.05621

556

Wacore Tsunashima I

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

Trustbeneficiaryinterest(Note 3)907.46515

523

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

Trust
beneficiaryinterest(Note 3)815.77573

515

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

Trustbeneficiaryinterest(Note 3)2,040.27

486

513

871.35

554

450

A43

A44

A45

A46

A47

College Square Machida

Foros Nakamurabashi

Growth Maison Kaijin

A48

College Square Machiya

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

Trust
beneficiaryinterest(Note 3)

A51

City House Tokyo Shinbashi

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

Trust
beneficiaryinterest

3,364.00

3,270

2,305

A52

Winbell Kagurazaka

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

Trust
beneficiaryinterest

4,032.70

4,150

3,027

A53

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

Trust
beneficiaryinterest

4,310.77

2,590

1,878

Location(Note 1)Name of property

Legal form of Leasable area
asset
(m2)

Appraisal value
as of June 30, Book value
2018
(JPY
(JPY million)
million)(Note 2)Trust
beneficiaryinterest

1,987.88

1,910

1,313

Trust
beneficiaryinterest

1,627.13

1,110

817

Trust
beneficiaryinterest

1,220.24

722

551

Trust
beneficiaryinterest

3,426.36

1,370

1,012

Trust
beneficiaryinterest

1,929.59

574

386

Trust
beneficiaryinterest

1,528.58

453

280

Trust
beneficiaryinterest

705.75

281

230

Trust
beneficiaryinterest

1,430.64

1,240

845

Trust
beneficiaryinterest

784.74

640

432

Trust
beneficiaryinterest

4,460.56

1,290

949

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

Trust
beneficiaryinterest

7,794.91

8,110

6,463

Neo Prominence

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

Trust
beneficiaryinterest

3,574.70

2,050

1,610

A77

Invoice Shin-Kobe
Residence

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

Trustbeneficiaryinterest

2,773.71

1,400

1,164

A78

Cosmo Court Motomachi

Trustbeneficiaryinterest

2,310.49

1,100

890

A79

Revest Honjin

Trustbeneficiaryinterest

1,933.80

816

613

A80

Revest Matsubara

Trustbeneficiaryinterest

1,955.40

800

603

A54

Lexington Square
Akebonobashi

A59

Towa City Coop ShinotsukaII

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

A61

Bichsel Musashiseki

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

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 Higashi-Komagata, Sumida-ku,

A73

AMS TOWER Minami 6-Jo

A75

Spacia Ebisu

A76

3-8 Yochomachi, Shinjuku-ku, Tokyo

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

Location(Note 1)Name of property

A82

Alba Noritake Shinmachi

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

3-6-8 Noritake Shinmachi, Nishi-ku,
Nagoya-shi, Aichi
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,Osaka128-1 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

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,

Legal form of Leasable area
asset
(m2)

Appraisal value
as of June 30, Book value
2018
(JPY
(JPY million)
million)(Note 2)Trust
beneficiaryinterest

1,731.68

743

554

Trust
beneficiaryinterest

1,634.60

734

544

Trust
beneficiaryinterest

1,554.03

709

543

Trust
beneficiaryinterest

2,670.66

717

522

Trust
beneficiaryinterest

1,428.12

637

499

Trust
beneficiaryinterest

701.92

635

510

Trust
beneficiaryinterest

1,185.50

573

482

Trust
beneficiaryinterest

1,433.35

615

465

Trust
beneficiaryinterest

765.18

619

430

Trust
beneficiaryinterest

1,029.05

530

415

Trust
beneficiaryinterest

530.60

530

391

Trust
beneficiaryinterest

1,020.86

438

350

Trust
beneficiaryinterest

789.12

447

345

Trust
beneficiaryinterest

992.76

439

329

Trust
beneficiaryinterest

1,477.62

436

321

Trust
beneficiaryinterest

794.80320

312Location(Note 1)Name of property

Legal form of Leasable area
asset
(m2)

Appraisal value
as of June 30, Book value
2018
(JPY
(JPY million)
million)(Note 2)Trust
beneficiaryinterest

974.81

389

289

Trust
beneficiaryinterest

761.18

327

273

Trust
beneficiaryinterest

5,230.18

1,990

1,770

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

Trust
beneficiaryinterest

2,940.20

1,760

1,693

Lieto Court Nishi-Ojima

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

Trust
beneficiaryinterest

2,048.28

1,770

1,637

A103

Royal Parks Momozaka

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

Trust
beneficiaryinterest

8,776.26

3,080

2,865

A104

Royal Parks Shinden

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

Trust
beneficiaryinterest

15,797.29

5,510

5,015

A105

Royal Parks Tower
Minami-Senju

4-7-3 Minami-Senju, Arakawa-ku,
Tokyo

Trust
beneficiaryinterest

39,113.46

22,70022,388

A106Royal Parks Seasir
Minami-Senju

3-41-7 Minami-Senju, Arakawa-ku,
Tokyo

Trust
beneficiaryinterest

6,496.86

2,760

2,756

182,093.86

100,387

86,569

A98

Little River Honmachibashi

A99

Prime Life Mikage

A100

City Court Kitaichijo

A101

Lieto Court Mukojima

A102

1-34 Honmachibashi, Chuo-ku,
Osaka-shi, Osaka
2-25-11 Mikage Tsukamachi,
Higashinada-ku, Kobe-shi, Hyogo
1-6-3 Kita 1-jo Higashi, Chuo-ku,
Sapporo-shi, Hokkaido

Subtotal
B17

Lexington Plaza Hachiman

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

Trustbeneficiaryinterest

8,419.15

3,720

3,056

B18

AEON TOWN Sukagawa

105 Furukawa, Sukagawa-shi,
Fukushima

Trust
beneficiaryinterest

18,440.58

2,450

1,855

26,859.73

6,170

4,912

Subtotal
D01

Hotel MyStays Kanda

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

Trust
beneficiaryinterest

2,585.72

4,920

3,003

D02

Hotel MyStays Asakusa

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

Trust
beneficiaryinterest

3,327.38

4,670

2,553

D03

Hotel MyStays Kyoto-Shijo

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

Trustbeneficiaryinterest

7,241.51

15,1005,821

D04

MyStays Shin-Urayasu
Conference Center

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

Trustbeneficiaryinterest

6,232.30

7,140

4,730

Name of property

Location(Note 1)

Legal form of Leasable area
asset
(m2)

Appraisal value
as of June 30, Book value
2018
(JPY
(JPY million)
million)(Note 2)

D05

Hotel MyStays Maihama

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

Trustbeneficiaryinterest

2,456.36

6,580

4,848

D06

Hotel MyStays Premier
Dojima2-4-1 Sonezakishinchi, Kita-ku, Osaka

Trust
beneficiaryinterest

9,445.32

7,340

3,810

D07

Hotel MyStays
Nagoya-Sakae

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

Trust
beneficiaryinterest

9,064.71

6,290

2,717

D08

Hotel MyStays
Sakaisuji-Honmachi

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

Trust
beneficiaryinterest

4,188.83

7,240

2,414

D09

Hotel MyStays Yokohama

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

Trustbeneficiaryinterest

7,379.43

3,500

1,999

D10

Hotel MyStays Nippori

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

Trust
beneficiaryinterest

1,719.29

2,960

1,821

D11

Hotel MyStays
Fukuoka-Tenjin-Minami

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

Trustbeneficiaryinterest

3,412.71

5,460

1,507

D12

Flexstay Inn Iidabashi

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

Trust
beneficiaryinterest

2,953.38

1,980

1,366

D13

Hotel MyStays Ueno
Inaricho

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

Trust
beneficiaryinterest

1,150.76

2,240

1,262

D14

Flexstay Inn Shinagawa

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

Trust
beneficiaryinterest

1,134.52

1,950

1,212

D15

Flexstay Inn Tokiwadai

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

Trust
beneficiaryinterest

2,539.75

2,090

1,217

D16

Flexstay Inn Sugamo

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

Trust
beneficiaryinterest

2,089.86

2,050

1,137

D17

Hotel MyStays Otemae

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

Trust
beneficiaryinterest

4,956.66

4,530

1,153

D18

Flexstay Inn Kiyosumi
Shirakawa

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

Trust
beneficiaryinterest

2,673.64

1,270

729

D19

Flexstay Inn Nakanobu P1

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

Trust
beneficiaryinterest

770.56

763

573

D20

Flexstay Inn Nakanobu P2

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

Trust
beneficiaryinterest

391.49367

290

Name of property

Location(Note 1)

Legal form of Leasable area
asset
(m2)

Appraisal value
as of June 30, Book value
2018
(JPY
(JPY million)
million)(Note 2)D21

APA Hotel
Yokohama-Kannai

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

Trustbeneficiaryinterest

6,568.51

9,650

7,897

D22

Hotel MyStays
Hakodate-Goryokaku

26-17 Honcho, Hakodate-shi,
Hokkaido

Trustbeneficiaryinterest

7,961.26

3,640

2,848

D23

Flexstay Inn Shirogane

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

Trust
beneficiaryinterest

1,754.06

2,220

2,101

D24

Hotel MyStays Haneda

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

Trust
beneficiaryinterest

5,400.16

8,160

7,470

D25

Hotel MyStays Kameido P1

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

Trust
beneficiaryinterest

4,349.67

7,020

5,454

D26

Hotel MyStays Ueno
Iriyaguchi

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

Trust
beneficiaryinterest

2,247.92

3,900

3,728

D27

Hotel MyStays Kameido P2

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

Trust
beneficiaryinterest

2,793.99

4,670

3,649

D28

Hotel Vista Shimizu

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

Trustbeneficiaryinterest

3,559.81

2,430

2,082

D29

Super Hotel Shinbashi/
Karasumoriguchi

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

Trust
beneficiaryinterest

1,403.89

1,790

1,604

D30

Flexstay Inn Higashi-Jujo

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

Trust
beneficiaryinterest

1,714.53

1,340

1,268

D31

Hotel MyStays Utsunomiya

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

Trustbeneficiaryinterest

11,733.23

1,540

1,230

D32

Flexstay Inn
Kawasaki-Kaizuka

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

Trustbeneficiaryinterest

1,190.57

1,150

936

D33

Comfort Hotel Toyama

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

3,305.64

1,090

941

D34

Flexstay Inn
Kawasaki-Ogawacho

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

Trustbeneficiaryinterest

725.60

1,030

884

D35

Flexstay Inn Ekoda

8-6 Sakaecho, Nerima-ku, Tokyo

Trust
beneficiaryinterest

3,932.93

4,800

4,939

D36

Super Hotel Tokyo-JR
Tachikawa Kitaguchi

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

Trust
beneficiaryinterest

1,832.97

1,230

1,131

Name of property

Location(Note 1)

Legal form of Leasable area
asset
(m2)

Appraisal value
as of June 30, Book value
2018
(JPY
(JPY million)
million)(Note 2)

D37

Super Hotel JR
Ueno-iriyaguchi

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

Trust
beneficiaryinterest

1,279.16

1,220

1,102

D38

Hotel MyStays Shinsaibashi

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

Trust
beneficiaryinterest

1,942.01

3,220

3,095

D39

Comfort Hotel Kurosaki

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

Trustbeneficiaryinterest

3,207.60

1,220

1,096

D40

Comfort Hotel Maebashi

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

Trust
beneficiaryinterest

3,660.96

1,160

1,084

D41

Comfort Hotel
Tsubame-Sanjo

2-115 Sugoro, Sanjo-shi, Niigata

Trustbeneficiaryinterest

3,099.90

1,070

975

D42

Comfort Hotel Kitami

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

Trustbeneficiaryinterest

3,009.50

905

812

D43

Hotel MyStays Gotanda
Station (Note 4)

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

Trust
beneficiaryinterest

10,137.88

27,50026,464

D44

Hotel Epinard Nasu

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

Trustbeneficiaryinterest

37,702.33

23,10020,218D45

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

5,083.06

8,740

7,911

D46

Hotel MyStays
Hamamatsucho

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

Trust
beneficiaryinterest

1,951.90

7,480

7,865

D47

Hotel MyStays PremierKanazawa

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

Trustbeneficiaryinterest

13,250.03

14,50013,339

D48

Takamatsu Tokyu REI Hotel

9-9 Hyogomachi, Takamatsu-shi,
KagawaTrustbeneficiaryinterest

7,148.17

2,220

2,106

D49

Hotel MyStays Premier
Hamamatsucho

1-8-5 Hamamatsucho, Minato-ku,
Tokyo

Trust
beneficiaryinterest

6,151.93

8,270

7,980

D50

Hotel MyStays Shin Osaka
Conference Center

6-2-4 Nishinakashima, Yodogawa-ku,
Osaka-shi, Osaka and two other lots

Trust
beneficiaryinterest

13,026.99

13,20013,039

D51

Hotel MyStays PremierOmori

6-11-2 Minami Oi, Shinagawa-ku,
Tokyo and 13 other lots

Trust
beneficiaryinterest

11,849.61

9,930

9,746

D52

Beppu Kamenoi Hotel

2160-1 Chuocho, Beppu-shi, Oita and12 other lots

Trust
beneficiaryinterest

19,422.08

9,010

8,689

Legal form of Leasable area
asset
(m2)

Appraisal value
as of June 30, Book value
2018
(JPY
(JPY million)
million)(Note 2)Name of property

Location(Note 1)

D53

Hotel MyStays Sapporo
Station4-15 Kita Hachijyo Nishi, Sapporo-shi,
Hokkaido

Trustbeneficiaryinterest

7,267.88

8,140

7,811

D54

Hotel MyStays Yokohama
Kannai

5-65, Onoe-cho, Naka-ku,
Yokohama-shi, Kanagawa and 3 other
lots

Trust
beneficiaryinterest

4,501.18

5,380

5,324

D55

Art Hotel Joetsu

5-1-11, Hon-cho Joetsu-shi, Niigata

Trustbeneficiaryinterest

7,563.60

2,810

2,769

D56

Art Hotel Hirosaki City

1-1-2, 1-6, 1-7, 2-1, Omachi,
Hirosaki-shi, Aomori

Trustbeneficiaryinterest

14,826.30

2,760

2,730

D57

Hotel MyStays Oita

1-32, Niagemachi Oita-shi, Oita

Trust
beneficiaryinterest

3,254.69

1,640

1,600

D58

Hotel MyStays Gotanda

2-5-4, Higashigotanda Shinagawa-ku,
Tokyo

Trust
beneficiaryinterest

1,839.77

4,120

4,077

D59

Hotel MyStays Tachikawa

1-8-14, Nishiki-cho Tachikawa-shi,
Tokyo

Trust
beneficiaryinterest

3,844.64

3,290

3,268

Subtotal

321,210.09

304,985

245,453

Total

530,163.68

411,542336,934(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, JLL Morii Valuation & Advisory K.K., The Tanizawa Sogo Appraisal
Co., Ltd. or Daiwa Real Estate Appraisal Co., Ltd.
(Note 3) Individual trust beneficiary interests were integrated into three groups with other trust beneficiary interests when INV
procured funds through debt financing backed by trust assets in July 2011. The grouping of trust beneficiary interests
at the end of the fiscal period ended June 30, 2018 is as follows:
Group 1
Nisshin Palacestage Daitabashi, Nisshin Palacestage Higashi-Nagasaki, Growth Maison Shin-Yokohama,
Belle Face Ueno-Okachimachi, Growth Maison Yoga, Shibuya-Honmachi Mansion, City Heights Kinuta, and Foros
Nakamurabashi.
Group 2Growth Maison Gotanda, Growth Maison Kameido, Emerald House, Route Tachikawa, College Square Machida,
Belair Meguro, and Wacore Tsunashima I.
Group 3
Suncrest Shakujii-Koen, Grand Rire Kameido, Acseeds Tower Kawaguchi-Namiki, Growth Maison Kaijin, andCollege Square Machiya.
(Note 4) Appraisal value at the end of the period indicates appraisal value calculated deeming the Owned Portion and the
Floor Expansion Portion as one.

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

Name of property

29th fiscal period(July 1, 2017 to December 31, 2017)
Occupancy
RentalNumber ofrate
revenue
Ratio oftenants(at end of(during
rental(at end of
period)period)revenueperiod)
(%)
(JPY
(%)
(unit)(Note 1)
thousand)(Note 3)(Note 3)(Note 2)30th fiscal period(January 1, 2018 to June 30, 2018)
Occupancy
RentalNumber ofrate
revenue
Ratio oftenants(at end of(during
rental(at end of
period)period)revenueperiod)
(%)
(JPY
(%)
(unit)(Note 1)
thousand)(Note 3)(Note 3)(Note 2)

A26

Nisshin Palacestage
Daitabashi

1

92.9

37,935

0.3

1

95.1

38,8800.3

A27

Nisshin Palacestage
Higashi- Nagasaki

1

97.2

44,936

0.4

1

100.0

47,0870.4

A28

Growth Maison Gotanda

1

100.0

27,429

0.2

1

100.0

27,4850.2

A29

Growth Maison Kameido

1

94.0

34,006

0.3

1

95.4

35,011

0.3

A30

Emerald House

1

96.8

42,569

0.4

1

100.0

49,2180.4

A31

Harmonie Ochanomizu(Note 5)

1

97.4

40,327

0.4

-

-

6,624

0.1

A32

Suncrest Shakujii-Koen

1

100.0

36,146

0.3

1

97.1

37,6340.3

A33

Growth Maison
Shin-Yokohama

1

95.5

33,518

0.3

1

98.5

36,661

0.3

A34

Belle Face
Ueno-Okachimachi

1

87.5

29,347

0.3

1

96.9

33,4990.3

A35Grand Rire Kameido

1

100.0

26,619

0.2

1

100.0

26,6190.2

A36

Growth Maison Ikebukuro(Note 5)

1

97.6

25,913

0.2

-

-

4,168

0.0

A37

Growth Maison Yoga

1

97.4

22,004

0.2

1

97.4

22,616

0.2

A38

Route Tachikawa

1

100.0

20,357

0.2

1

100.0

21,5400.2

A39

Shibuya-Honmachi Mansion

1

91.3

19,610

0.2

1

92.2

19,4720.2

A40City Heights Kinuta

1

94.6

16,499

0.1

1

100.0

18,1020.2

A41

Acseeds Tower KawaguchiNamiki

1

96.5

24,680

0.2

1

98.2

24,7540.2

A42

Capital Heights Kagurazaka(Note 5)

1

97.2

19,656

0.2

-

-

3,226

0.0

A43

College Square Machida

1

100.0

17,484

0.2

1

100.0

17,4840.2

A44

Belair Meguro

1

92.1

15,462

0.1

1

96.1

16,1430.1

A45

Wacore Tsunashima I

1

94.1

17,879

0.2

1

96.0

18,1270.2

A46

Foros Nakamurabashi

1

97.5

18,730

0.2

1

95.1

18,7160.2

A47

Growth Maison Kaijin

1

96.7

23,510

0.2

1

93.5

22,2000.2

A48

College Square Machiya

1

100.0

14,706

0.1

1

100.0

14,7060.1

A51City House Tokyo Shinbashi

1

96.5

91,869

0.8

1

98.0

92,9850.8

Name of property

29th fiscal period(July 1, 2017 to December 31, 2017)
Occupancy
RentalNumber ofrate
revenue
Ratio oftenants(at end of(during
rental(at end of
period)period)revenueperiod)
(%)
(JPY
(%)
(unit)(Note 1)
thousand)(Note 3)(Note 3)(Note 2)30th fiscal period(January 1, 2018 to June 30, 2018)
Occupancy
RentalNumber ofrate
revenue
Ratio oftenants(at end of(during
rental(at end of
period)period)revenueperiod)
(%)
(JPY
(%)
(unit)(Note 1)
thousand)(Note 3)(Note 3)(Note 2)

A52

Winbell Kagurazaka

1

97.9

106,463

0.9

1

98.2

109,221

1.0

A53

Nishiwaseda Cresent
Mansion1

98.8

73,034

0.6

1

98.4

74,348

0.7

A54

Lexington Square
Akebonobashi

1

96.5

50,044

0.4

1

99.0

51,097

0.5

A56

Casa Eremitaggio (Note 5)--

32,725

0.3

-

-

-

-

A59

Towa City Coop Shinotsuka II

1

98.8

35,011

0.3

1

96.1

35,9170.3

A61

Bichsel Musashiseki

1

94.4

23,557

0.2

1

98.5

24,7620.2

A62

Lexel Mansion Ueno
Matsugaya (Note 5)--

33,795

0.3

-

-

-

-

A63

Towa City Coop Sengencho

1

84.2

54,095

0.5

1

93.1

54,977

0.5

A64Royal Park Omachi

1

94.5

26,790

0.2

1

96.4

27,001

0.2

A65

Lexington Square
Haginomachi

1

94.8

16,671

0.1

1

97.4

18,1450.2

A66

Visconti Kakuozan

1

83.8

10,327

0.1

1

100.0

11,157

0.1

A71

Lexington Square Daitabashi

1

100.0

31,873

0.3

1

97.9

33,0790.3

A72

Lexington Square Honjo
Azumabashi

1

97.0

18,108

0.2

1

100.0

18,426

0.2

A73

AMS TOWER Minami 6-Jo

1

81.2

42,888

0.4

1

82.9

42,761

0.4

A75

Spacia Ebisu

1

91.2

208,979

1.8

1

95.6

208,597

1.9

A76

Neo Prominence

1

100.0

64,935

0.6

1

98.3

67,322

0.6

A77

Invoice Shin-Kobe Residence

1

100.0

49,889

0.4

1

99.1

50,8280.5

A78

Cosmo Court Motomachi

1

98.7

37,732

0.3

1

98.7

38,2680.3

A79

Revest Honjin

1

91.2

29,712

0.3

1

93.7

31,286

0.3

A80

Revest Matsubara

1

94.4

28,388

0.2

1

98.1

30,4390.3

A81

Sun Terrace Minami
Ikebukuro (Note 5)--

22,533

0.2

-

-

-

-

A82

Alba Noritake Shinmachi

1

93.7

25,132

0.2

1

95.1

28,107

0.3

A83

Revest Meieki Minami

1

90.9

24,979

0.2

1

90.5

25,5840.2

A84

Revest Heian

1

95.2

23,656

0.2

1

96.8

23,8650.2

A85

Vendir Hamaotsu Ekimae

1

97.7

33,279

0.3

1

91.2

33,886

0.3

A86

Salvo Sala

1

100.0

25,620

0.2

1

92.6

25,2100.2

Name of property

29th fiscal period(July 1, 2017 to December 31, 2017)
Occupancy
RentalNumber ofrate
revenue
Ratio oftenants(at end of(during
rental(at end of
period)period)revenueperiod)
(%)
(JPY
(%)
(unit)(Note 1)
thousand)(Note 3)(Note 3)(Note 2)30th fiscal period(January 1, 2018 to June 30, 2018)
Occupancy
RentalNumber ofrate
revenue
Ratio oftenants(at end of(during
rental(at end of
period)period)revenueperiod)
(%)
(JPY
(%)
(unit)(Note 1)
thousand)(Note 3)(Note 3)(Note 2)

A87

Excellente Kagurazaka

1

94.1

17,974

0.2

1

94.1

19,9690.2

A88

Luna Court Edobori

1

94.0

20,768

0.2

1

96.0

21,3200.2

A89

Winntage Kobe Motomachi

1

94.8

20,880

0.2

1

98.3

22,7780.2

A90

Queen's Court Fukuzumi

1

89.7

17,200

0.2

1

100.0

18,525

0.2

A91

Corp Higashinotoin

1

97.7

19,847

0.2

1

100.0

19,1540.2

A92

Belair Oimachi

1

92.9

14,697

0.1

1

100.0

15,4900.1

A93

Siete Minami-Tsukaguchi

1

90.1

16,625

0.1

1

100.0

17,4370.2

A94

Prime Life Sannomiya
Isogami Koen

1

100.0

15,321

0.1

1

100.0

15,4880.1

A95

HERMITAGE NANBA
WEST

1

100.0

15,767

0.1

1

100.0

16,0830.1

A96

Century Park Shinkawa
1-bankan

1

95.4

17,018

0.1

1

88.6

20,9550.2

A97West Avenue

1

87.5

10,715

0.1

1

97.5

12,1850.1

A98

Little River Honmachibashi

1

90.7

12,838

0.1

1

100.0

14,0050.1

A99

Prime Life Mikage

1

96.7

12,209

0.1

1

100.0

12,6720.1

A100 City Court Kitaichijo

1

96.1

66,200

0.6

1

98.4

66,770

0.6

A101 Lieto Court Mukojima

1

99.0

54,091

0.5

1

99.0

55,654

0.5

A102 Lieto Court Nishi-Ojima

1

99.0

48,298

0.4

1

99.0

48,9680.4

A103 Royal Parks Momozaka

4

93.6

148,512

1.3

4

90.0

155,151

1.4

A104 Royal Parks Shinden

4

100.0

215,752

1.9

4

100.0

217,076

2.0

A105Royal Parks Tower
Minami-Senju

1

94.1

744,215

6.5

1

93.1

763,803

6.9

A106Royal Parks Seasir
Minami-Senju

1

95.7

96,186

0.8

1

96.9

113,119

1.0

Subtotal

73

95.3

3,416,550

30.0

70

95.8

3,363,873

30.2

B08

Kindai Kagaku Sha Building(Note 5)

-

-

6,827

0.1

-

-

-

-

B09

Shinjuku Island(Note 5)--(Note 4)(Note 4)

-

-

-

-

B14

Lexington Plaza Nishigotanda(Note 5)

7

100.0

152,362

1.3--

59,8930.5

B15

Cross Square NAKANO(Note 5)

1

95.2

46,566

0.4

-

-

7,963

0.1

29th fiscal period(July 1, 2017 to December 31, 2017)
Occupancy
RentalNumber ofrate
revenue
Ratio oftenants(at end of(during
rental(at end of
period)period)revenueperiod)
(%)
(JPY
(%)
(unit)(Note 1)
thousand)(Note 3)(Note 3)(Note 2)Name of property

30th fiscal period(January 1, 2018 to June 30, 2018)
Occupancy
RentalNumber ofrate
revenue
Ratio oftenants(at end of(during
rental(at end of
period)period)revenueperiod)
(%)
(JPY
(%)
(unit)(Note 1)
thousand)(Note 3)(Note 3)(Note 2)

B16

Ohki Aoba Building(Note 5)1

88.7

35,318

0.3

-

-

6,862

0.1

B17

Lexington Plaza Hachiman

1

100.0

165,805

1.5

1

100.0

164,195

1.5

B18

AEON TOWN Sukagawa

1

100.0

141,886

1.2

1

100.0

141,593

1.3

11

99.1

567,259

5.0

2

100.0

380,507

3.4

-

-

435

0.0

-

-

-

-

Subtotal

-

-

435

0.0

-

-

-

-

D01

Hotel MyStays Kanda

1

100.0

111,117

1.0

1

100.0

111,338

1.0

D02

Hotel MyStays Asakusa

1

100.0

106,946

0.9

1

100.0

106,530

1.0

D03

Hotel MyStays Kyoto-Shijo

1

100.0

315,937

2.8

1

100.0

190,995

1.7

D04

MyStays Shin-Urayasu
Conference Center

1

100.0

187,712

1.6

1

100.0

170,174

1.5

D05

Hotel MyStays Maihama

1

100.0

160,018

1.4

1

100.0

110,898

1.0

D06

Hotel MyStays Premier
Dojima1

100.0

231,470

2.0

1

100.0

180,563

1.6

D07

Hotel MyStays
Nagoya-Sakae

1

100.0

220,601

1.9

1

100.0

189,920

1.7

D08

Hotel MyStays
Sakaisuji-Honmachi

1

100.0

176,288

1.5

1

100.0

134,391

1.2

D09

Hotel MyStays Yokohama

1

100.0

127,889

1.1

1

100.0

118,488

1.1

D10

Hotel MyStays Nippori

1

100.0

61,152

0.5

1

100.0

61,9620.6

D11

Hotel MyStays
Fukuoka-Tenjin-Minami

1

100.0

167,915

1.5

1

100.0

145,371

1.3

D12

Flexstay Inn Iidabashi

1

100.0

52,682

0.5

1

100.0

53,4160.5

D13Hotel MyStays
Ueno Inaricho

1

100.0

50,462

0.4

1

100.0

49,251

0.4

D14

Flexstay Inn Shinagawa

1

100.0

42,955

0.4

1

100.0

43,7700.4

D15

Flexstay Inn Tokiwadai

1

100.0

53,861

0.5

1

100.0

55,2150.5

D16

Flexstay Inn Sugamo

1

100.0

49,654

0.4

1

100.0

55,2320.5

D17Hotel MyStays Otemae

1

100.0

127,898

1.1

1

100.0

94,1220.8

D18

Flexstay Inn Kiyosumi
Shirakawa

1

100.0

36,933

0.3

1

100.0

36,7920.3

D19

Flexstay Inn Nakanobu P1

1

100.0

17,374

0.2

1

100.0

22,9840.2

Subtotal
C01

thTimes Kanda-Sudacho 4(Note 5)Name of property

29th fiscal period(July 1, 2017 to December 31, 2017)
Occupancy
RentalNumber ofrate
revenue
Ratio oftenants(at end of(during
rental(at end of
period)period)revenueperiod)
(%)
(JPY
(%)
(unit)(Note 1)
thousand)(Note 3)(Note 3)(Note 2)30th fiscal period(January 1, 2018 to June 30, 2018)
Occupancy
RentalNumber ofrate
revenue
Ratio oftenants(at end of(during
rental(at end of
period)period)revenueperiod)
(%)
(JPY
(%)
(unit)(Note 1)
thousand)(Note 3)(Note 3)(Note 2)

D20

Flexstay Inn Nakanobu P2

1

100.0

10,199

0.1

1

100.0

11,8730.1

D21

APA Hotel
Yokohama-Kannai

1

100.0

229,958

2.0

1

100.0

229,000

2.1

D22

Hotel MyStays
Hakodate-Goryokaku

1

100.0

148,450

1.3

1

100.0

76,8500.7

D23

Flexstay Inn Shirogane

1

100.0

50,788

0.4

1

100.0

55,1630.5

D24

Hotel MyStays Haneda

1

100.0

187,483

1.6

1

100.0

183,749

1.7

D25

Hotel MyStays Kameido P1

1

100.0

180,675

1.6

1

100.0

183,133

1.6

D26

Hotel MyStays Ueno
Iriyaguchi

1

100.0

92,202

0.8

1

100.0

95,0110.9

D27

Hotel MyStays Kameido P2

1

100.0

123,808

1.1

1

100.0

120,229

1.1

D28

Hotel Vista Shimizu

1

100.0

82,140

0.7

1

100.0

61,6520.6

D29Super Hotel
Shinbashi/Karasumoriguchi

1

100.0

39,426

0.3

1

100.0

39,4260.4

D30

Flexstay Inn Higashi-Jujo

1

100.0

37,747

0.3

1

100.0

38,3490.3

D31

Hotel MyStays Utsunomiya

1

100.0

95,975

0.8

1

100.0

99,5990.9

D32

Flexstay Inn
Kawasaki-Kaizuka

1

100.0

32,833

0.3

1

100.0

32,101

0.3

D33

Comfort Hotel Toyama

1

100.0

35,928

0.3

1

100.0

35,9280.3

D34

Flexstay Inn
Kawasaki-Ogawacho

1

100.0

29,409

0.3

1

100.0

25,4630.2

D35

Flexstay Inn Ekoda

1

100.0

104,046

0.9

1

100.0

115,864

1.0

D36Super Hotel Tokyo-JR
Tachikawa Kitaguchi

1

100.0

31,787

0.3

1

100.0

31,7870.3

D37Super Hotel JR
Ueno-iriyaguchi

1

100.0

27,275

0.2

1

100.0

27,2750.2

D38

Hotel MyStays Shinsaibashi

1

100.0

88,880

0.8

1

100.0

67,682

0.6

D39

Comfort Hotel Kurosaki

1

100.0

37,894

0.3

1

100.0

37,894

0.3

D40

Comfort Hotel Maebashi

2

100.0

43,811

0.4

2

100.0

43,811

0.4

D41

Comfort Hotel
Tsubame-Sanjo

2

100.0

34,949

0.3

2

100.0

34,9490.3

D42

Comfort Hotel Kitami

1

100.0

30,300

0.3

1

100.0

30,3000.3

D43

Hotel MyStays Gotanda
Station1

100.0

427,047

3.7

1

100.0

482,750

4.3

D44

Hotel Epinard Nasu

1

100.0

1,103,226

9.7

1

100.0

576,941

5.2

Name of property

29th fiscal period(July 1, 2017 to December 31, 2017)
Occupancy
RentalNumber ofrate
revenue
Ratio oftenants(at end of(during
rental(at end of
period)period)revenueperiod)
(%)
(JPY
(%)
(unit)(Note 1)
thousand)(Note 3)(Note 3)(Note 2)30th fiscal period(January 1, 2018 to June 30, 2018)
Occupancy
RentalNumber ofrate
revenue
Ratio oftenants(at end of(during
rental(at end of
period)period)revenueperiod)
(%)
(JPY
(%)
(unit)(Note 1)
thousand)(Note 3)(Note 3)(Note 2)

D45

Hotel MyStays Fukuoka
Tenjin1

100.0

237,370

2.1

1

100.0

218,700

2.0

D46

Hotel MyStays
Hamamatsucho

1

100.0

114,084

1.0

1

100.0

112,104

1.0

D47

Hotel MyStays Kanazawa

1

100.0

368,625

3.2

1

100.0

306,064

2.8

D48

Takamatsu Tokyu REI Hotel

3

100.0

106,156

0.9

3

100.0

105,549

0.9

D49

Hotel MyStays Premier
Hamamatsucho

1

100.0

228,976

2.0

1

100.0

223,983

2.0

D50

Hotel MyStays Shin Osaka
Conference Center

1

100.0

267,910

2.3

1

100.0

393,186

3.5

D51

Hotel MyStays Premier
Omori

1

100.0

160,256

1.4

1

100.0

273,325

2.5

D52

Beppu Kamenoi Hotel

1

100.0

221,531

1.9

1

100.0

347,901

3.1

D53

Hotel MyStays Sapporo
Station1

100.0

108,954

1.0

1

100.0

221,703

2.0

D54

Hotel MyStays Yokohama
Kannai

-

-

-

-

1

100.0

133,413

1.2

D55

Art Hotel Joetsu

-

-

-

-

1

100.0

145,193

1.3

D56

Art Hotel Hirosaki City

-

-

-

-

1

100.0

152,005

1.4

D57

Hotel MyStays Oita

-

-

-

-

1

100.0

69,4440.6

D58

Hotel MyStays Gotanda

-

-

-

-

1

100.0

3,843

0.0

D59

Hotel MyStays Tachikawa

-

-

-

-

1

100.0

3,472

0.0

Subtotal

57

100.0

7,418,990

65.1

63

100.0

7,378,100

66.3

Total

141

98.2

11,403,236

100.0

135

98.6

11,122,481

100.0(Note 1) “Occupancy rate” is calculated by dividing the leased area by leasable area.
(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) “Occupancy rate” and “Ratio of rental revenue” are rounded off to one decimal place.
(Note 4) Not disclosed because the consent of the tenant was not obtained.
(Note 5) Kindai Kagaku Sha Building and Times Kanda Sudacho 4th were sold on July 31, 2017; Shinjuku Island was soldon December 26, 2017; Casa Eremitaggio, Lexel Mansion Ueno Matsugaya and Sun Terrace Minami Ikebukuro
were sold on December 28, 2017; Harmonie Ochanomizu, Growth Maison Ikebukuro, Capital Heights Kagurazaka,
Cross Square NAKANO and Ohki Aoba Building were sold on January 31, 2018; and Lexington Plaza
Nishi-Gotanda was sold on March 9, 2018.

4

Asset Portfolio of Facilities Generating Renewable Energy, etc.

Not applicable
5

Asset Portfolio Including Rights to Operate Public Facilities, etc.

Not applicable
6 Asset Portfolio of Securities
The portfolio of the securities held by the Investment Corporation at the end of the Reporting Period is as
below.

Name

Type

Preferred equity
securities in
Kingdom Special
Purpose Company

Quantity Book value (JPY million)(units)Unit priceAmountFair value (JPY million) Valuation gainor loss
Unit priceAmount (JPY million)

Notes

Preferred equity 178,458
securities-

17,856-

17,8561)- (Note(Note 2)

178,458-

17,856-

17,856-

Total(Note 1) Fair value of the preferred equity securities indicates the acquisition cost.
(Note 2) INV owns 178,458 units of preferred equity securities issued by Kingdom Special Purpose Company (equivalent
to 49.0% of preferred equity securities issued and outstanding after the issuance of the said preferred equity
securities), with the Sheraton Grande Tokyo Bay Hotel as an underlying asset.

7

Status of Contract Amount and Fair Value of Specified Transaction

As of June 30, 2018, the contract amount and fair value of the outstanding transaction under the specified
transaction account of INV are as follows.
(Unit: JPY thousand)Category

Transaction type, etc.

Non-market
transaction

Interest rate swap
Receive floating rate/pay fixed rate

Contract amount(Note 1)
Amounts due after
one year
100,619,000

Fair value(Note 2)

67,390,000

90,975(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

8

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 assetsthat are significant investment targets for INV outside of 3 above.
9

Asset Owned Outside of Japan or the Region

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

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

2

Location

PurposeScheduled time of
implementation

Total

Payment for
the fiscal
Advanceperiod ended payments
June 30, 2018

D44 Hotel Epinard Nasu

Nasu-gun,Tochigi

Renovation work

From July 2018
To December 2018

390,000--

Hotel MyStays
D51 Premier Omori

Shinagawa-ku,
Renovation work
Tokyo

From July 2018
To December 2018

90,000--Hotel MyStays
D49 Premier
Hamamatsucho

Minato-ku,TokyoRenovation work

From July 2018
To December 2018

40,000--

D48

Takamatsu Tokyu
REI Hotel

Takamatsu-shi,
Renovation work
KagawaFrom July 2018
To December 2018

22,500--

A39

Shibuya-Honmachi
MansionShibuya-ku,
Tokyo

From July 2018
To December 2018

19,570--Outer wall repair
work

Capital Expenditures for the Fiscal Period Ended June 30, 2018

The principal construction work constituting capital expenditures for the real estate assets for the fiscal
period ended June 30, 2018 is as follows. Capital expenditures for the fiscal period totaled JPY 1,315,508
thousand, and together with JPY 24,050 thousand in repair costs included in this fiscal period’s expenses,
construction work totaling JPY 1,339,558 thousand was implemented.
Name of property

Location

PurposeTime of implementation

Payment(JPY thousand)

D22

Hotel MyStays
Hakodate-Goryokaku

Hakodate-shi,
Hokkaido

Renovation work

From January 2018
To June 2018

225,642

D05

Hotel MyStays
Maihama

Urayasu-shi,
Chiba

Renovation work

From January 2018
To June 2018219,683

D06

Hotel MyStays
Premier Dojima

Osaka-shi,
Osaka

Renovation work

From January 2018
To June 2018

183,241

D03

Hotel MyStays
Kyoto-Shijo

Kyoto-shi,
Kyoto

Renovation work

From January 2018
To June 2018

102,308

D04

MyStays Shin-Urayasu Urayasu-shi,
Chiba
Conference Center

Renovation work

From January 2018
To June 2018

69,592515,039

Other construction
Total

1,315,508

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)
26th
27th
28th
29th
30th
fiscal period
fiscal period
fiscal period
fiscal period
fiscal period
From January 1, From July 1, 2016 From January 1, From July 1, 2017 From January 1,
2016 to June 30, to December 31, 2017 to June 30, to December 31, 2018 to June 30,
2016
2016
2017
2017
2018
982,750

1,303,685

1,397,286

1,397,243

1,566,108

543,275

446,066

468,145

697,444468,448

222,339

352,464

468,189

528,579

422,728

1,303,685

1,397,286

1,397,243

1,566,108

1,611,828(Note) The amount reserved for the relevant fiscal period includes the reserves for acquired properties, and the amountreversed includes the reserves for disposed properties.

Overview of Expenses and Liabilities
1

Statement of Operating Expenses(JPY thousand)30th fiscal period
January 1, 2018 to June 30, 2018

29th fiscal period
July 1, 2017 to December 31, 2017

Item(a) Asset management fees

250,000

275,000(b) Asset custody fees

15,23018,162(c) Administrative services fees

37,347

39,697(d) Directors’ compensation

4,800

4,800

154,055

197,041

461,434

534,701(e) Other
Total

2

Borrowing Conditions

Borrowing conditions by financial institution at the end of the Reporting Period are as below.
Type
LenderMizuho Bank, Ltd.
Sumitomo Mitsui Trust Bank,
Short-term
Limitedloans
Sumitomo Mitsui Banking
Corporation
Subtotal
Sumitomo Mitsui Banking
Corporation
MUFG Bank, Ltd. (Note 5)
Mizuho Bank, Ltd.
Shinsei Bank, Limited
Citibank, N.A., Tokyo Branch
Sumitomo Mitsui Trust Bank,
Long-term
Limitedloans
Resona Bank, Limited(Note 4)
MUFG Bank, Ltd. (Note 6)
Sumitomo Mitsui Banking
Corporation
MUFG Bank, Ltd. (Note 5)
Mizuho Bank, Ltd.
Shinsei Bank, Limited
Citibank, N.A., Tokyo Branch
Sumitomo Mitsui Trust Bank,
LimitedLong-term Resona Bank, Limitedloans
MUFG Bank, Ltd. (Note 6)(Note 4) Sumitomo Mitsui Banking
Corporation
MUFG Bank, Ltd. (Note 5)

Balance atBalance at
AverageBorrowing beginning of
end ofinterestdate
Reporting
Reportingrate
PeriodPeriod(%)(JPY thousand) (JPY thousand) (Note 1)
1,023,000
667,000
Oct. 13,
2017

Jul. 16,
2015

Jul. 16,
2015

Jul. 16,
2015
Jul. 16,2015

1,022,000

666,000

1,023,000

667,000

3,068,000

2,000,000

5,992,000

5,992,000

5,992,000
5,992,000
3,330,000
3,000,000

5,992,000
5,992,000
3,330,000
3,000,000

2,670,000

2,670,000

1,335,000
668,000

1,335,000
668,000

5,992,000

5,992,000

5,992,000
5,992,000
3,330,000
3,000,000

5,992,000
5,992,000
3,330,000
3,000,000

2,670,000

2,670,000

1,335,000
668,000

1,335,000
668,000

5,992,000

5,992,000

5,992,000

5,992,000

Repayment Repayment Purpose
date
method

Notes

0.253

Oct. 13,2018(Note 3) (Note 2)

Unsecured /with noguarantee

0.375Jul. 16,2018(Note 3) (Note 2)

Unsecured /with noguarantee

0.480

Jul. 16,2019(Note 3) (Note 2)

Unsecured /with noguarantee

0.480

Jul. 16,2019(Note 3) (Note 2)

Unsecured /with noguarantee

0.590Jul. 16,
2020(Note 3) (Note 2)

Unsecured /with noguarantee

Balance atBalance at
AverageBorrowing beginning of
end ofinterestdate
Reporting
Reportingrate
LenderPeriodPeriod(%)(JPY thousand) (JPY thousand) (Note 1)
Mizuho Bank, Ltd.
5,992,000
5,992,000
Shinsei Bank, Limited
3,330,000
3,330,000
Citibank, N.A., Tokyo Branch
3,000,000
3,000,000
Sumitomo Mitsui Trust Bank,
Jul. 16,
2,670,000
2,670,000
0.590
2015
LimitedResona Bank, Limited
1,335,000
1,335,000
MUFG Bank, Ltd. (Note 6)
668,000
668,000Type

Mizuho Bank, Ltd
Sumitomo Mitsui Trust Bank,
Limited
MUFG Bank, Ltd. (Note 6)
Sumitomo Mitsui Trust Bank,
Limited
MUFG Bank, Ltd. (Note 6)
Mizuho Bank, Ltd
MUFG Bank, Ltd. (Note 5)
Sumitomo Mitsui Trust Bank,
LimitedShinsei Bank, Limited
Resona Bank, Limited
MUFG Bank, Ltd. (Note 6)
Japan Post Bank Co., Ltd.
Development Bank of Japan,
Long-term Inc.
The Bank of Fukuoka, Ltd.
loans
(Note 4) The Shizuoka Bank, Ltd.
The Daishi Bank, Ltd.
The Nomura Trust andBanking Co., Limited
Mizuho Bank, Ltd
MUFG Bank, Ltd. (Note 5)
Sumitomo Mitsui Trust Bank,
LimitedShinsei Bank, Limited
Resona Bank, Limited
MUFG Bank, Ltd. (Note 6)
Japan Post Bank Co., Ltd.
The Bank of Fukuoka, Ltd.
The Shizuoka Bank, Ltd.
The Kagawa Bank, Ltd.
The Hyakugo Bank, Ltd.
The Nomura Trust andBanking Co., Limited
Mizuho Bank, Ltd.
MUFG Bank, Ltd. (Note 5)
Sumitomo Mitsui Trust Bank,
LimitedShinsei Bank, Limited.
Resona Bank, Limited
MUFG Bank, Ltd. (Note 6)

Aug. 28,2015

3,682,000

3,682,000

Jan. 22,2016

3,400,000

3,400,000

850,000

850,000

Jan. 22,2016

3,400,000

3,400,000

850,000
465,000
1,125,000

850,000
465,000
1,125,000

2,181,000

2,181,000

570,000
570,000
650,000
2,000,000

570,000
570,000
650,000
2,000,000

1,000,000

1,000,000

333,000
1,270,000
1,000,000

333,000
1,270,000
1,000,000

Mar. 31,2016

Mar. 31,2016

Mar. 31,2016

Mar. 31,2016

270,000

270,000

965,000
1,125,000

965,000
1,125,000

2,180,000

2,180,000

570,000
570,000
650,000
2,000,000
333,000
270,000
500,000
1,000,000

570,000
570,000
650,000
2,000,000
333,000
270,000
500,000
1,000,000

270,000

270,000

1,965,000
1,125,000

1,965,000
1,125,000

2,180,000

2,180,000

570,000
570,000
650,000

570,000
570,000
650,000

Repayment Repayment Purpose
date
methodJul. 16,
2020(Note 3) Note 2)

Notes

Unsecured /with noguarantee

Unsecured /with noguarantee
Unsecured /(Note 3) (Note 2) with noguarantee
Unsecured /(Note 3) (Note 2) with noguarantee

0.480

Aug. 28,
2019

0.343

Jan. 22,
2019

0.600

Jan. 22,
2021

0.453

Mar. 30,
2019(Note 3) (Note 2)

Unsecured /with noguarantee

0.453

Mar. 30,
2019(Note 3) (Note 2)

Unsecured /with noguarantee

0.553

Mar. 30,
2020(Note 3) (Note 2)

Unsecured /with noguarantee

0.653

Mar. 30,2021(Note 3) (Note 2)

Unsecured /with noguarantee(Note 3) (Note 2)

Type
LenderThe Bank of Fukuoka, Ltd.
The Shizuoka Bank, Ltd.
The Kagawa Bank, Ltd.
The Hiroshima Bank, Ltd.
The Nomura Trust andBanking Co., Limited

Balance atBalance at
AverageBorrowing beginning of
end ofinterestdate
Reporting
Reportingrate
PeriodPeriod(%)(JPY thousand) (JPY thousand) (Note 1)
1,333,000
1,333,000
270,000
270,000
500,000
500,000
Mar. 31,1,000,000
1,000,000
0.653
2016
270,000
270,000

Repayment Repayment Purpose
date
methodMar. 30,2021(Note 3) (Note 2)(Note 3) (Note 2)

Citibank, N.A., Tokyo Branch

Jun. 15,2016

1,000,000

1,000,000

0.453

Jun. 15,
2019

Citibank, N.A., Tokyo Branch

Jun. 15,2016

1,000,000

1,000,000

0.553

Jun. 15,
2020

Citibank, N.A., Tokyo Branch

Jun. 15,2016

1,000,000

1,000,000

0.653

Jun. 15,2021

Development Bank of Japan,
Inc.

Jun. 30,2016

1,000,000

1,000,000

0.453

Jun. 30,
2019

AEON Bank, Ltd.

Jun. 30,2016

3,000,000

3,000,000

0.653

Jun. 30,
2021

Tokyo Star Bank, Limited

Jul. 20,2016

700,000

700,000

0.453

Jul. 20,
2019Tokyo Star Bank, Limited

Jul. 20,2016

1,600,000

1,600,000

0.553

Jul. 20,
2020

Jul. 20,2016

1,700,000

1,700,000

0.653

Jul. 20,2021

634,000

634,000

1,000,000

1,000,000

333,000
333,000

333,000
333,000

0.453

333,000

333,000

Mar. 14,2020

252,000
200,000
165,000
1,633,000
333,000
333,000

252,000
200,000
165,000
1,633,000
333,000
333,000

333,000

333,000

253,000
200,000
165,000
1,733,000
333,000
333,000

253,000
200,000
165,000
1,733,000
333,000
333,000

333,000

333,000

Long-termloans(Note 4) Tokyo Star Bank, Limited
Mizuho Bank, Ltd.
Development Bank of Japan,
Inc.
Resona Bank, Limited
The Bank of Fukuoka, Ltd.
The Nomura Trust andBanking Co., Limited
The Towa Bank, Ltd.
The Shizuoka Bank, Ltd.
The Gunma Bank, Ltd.
Mizuho Bank, Ltd.
Resona Bank, Limited
The Bank of Fukuoka, Ltd.
The Nomura Trust andBanking Co., Limited
The Towa Bank, Ltd.
The Shizuoka Bank, Ltd.
The Gunma Bank, Ltd.
Mizuho Bank, Ltd.
Resona Bank, Limited
The Bank of Fukuoka, Ltd.
The Nomura Trust andBanking Co., Limited

Mar. 14,2017

Mar. 14,2017

Mar. 14,
2017

0.553

Mar. 14,
2021

Notes

Unsecured /with noguarantee

Unsecured /with noguarantee
Unsecured /(Note 3) (Note 2) with noguarantee
Unsecured /(Note 3) (Note 2) with noguarantee
Unsecured /(Note 3) (Note 2) with noguarantee
Unsecured /(Note 3) (Note 2) with noguarantee
Unsecured /(Note 3) (Note 2) with noguarantee
Unsecured /(Note 3) (Note 2) with noguarantee
Unsecured /(Note 3) (Note 2) with noguarantee(Note 3) (Note 2)(Note 3) (Note 2)

Unsecured /with noguarantee

Unsecured /with noguarantee
Unsecured /with noguarantee

0.653

Mar. 14,2022(Note 3) (Note 2)

Unsecured /with noguarantee

Type
Lender
AEON Bank, Ltd.
The Towa Bank, Ltd.
The Shizuoka Bank, Ltd.
The Daiichi Life InsuranceCo., Ltd.
The Gunma Bank, Ltd.
Sumitomo Mitsui Banking
Corporation
Mizuho Bank, Ltd.
The Daiichi Life InsuranceCo., Ltd.
Shinsei Bank, Limited
Citibank, N.A., Tokyo Branch
Resona Bank, Limited
The Bank of Fukuoka, Ltd.
AEON Bank, Ltd.
The Nomura Trust andBanking Co., Limited
The Hiroshima Bank, Ltd.
Shinsei Bank, Limited
Citibank, N.A., Tokyo Branch
Resona Bank, Limited
The Bank of Fukuoka, Ltd.
AEON Bank, Ltd.
The Nomura Trust andLong-term
Banking Co., Limitedloans
The Hiroshima Bank, Ltd.
(Note 4)
Mizuho Bank, Ltd.
Sumitomo Mitsui Trust Bank,
LimitedSumitomo Mitsui Banking
Corporation
Shinsei Bank, Limited
Citibank, N.A., Tokyo Branch
Resona Bank, Limited
Development Bank of Japan,
Inc.
The Bank of Fukuoka, Ltd.
AEON Bank, Ltd.
The Nomura Trust andBanking Co., Limited
The Hiroshima Bank, Ltd.
The Daiichi Life InsuranceCo., Ltd.
Mizuho Bank, Ltd.
Sumitomo Mitsui Trust Bank,
LimitedSumitomo Mitsui Banking
Corporation
Mizuho Bank, Ltd.

Balance atBalance at
AverageBorrowing beginning of
end ofinterestdate
Reporting
Reportingrate
PeriodPeriod(%)(JPY thousand) (JPY thousand) (Note 1)
900,000
900,000
253,000
253,000
200,000
200,000
Mar. 14,2017
Mar. 14,2017
May 29,2017

Oct. 13,2017

Oct. 13,2017

Oct. 13,2017

Oct. 13,2017
Oct. 13,500,000

500,000

165,000

165,000

3,000,000

3,000,000

4,321,000

4,321,000

3,000,000

3,000,000

355,000
355,000
334,000
300,000
190,000

355,000
355,000
334,000
300,000
190,000

167,000

167,000

167,000
355,000
355,000
333,000
300,000
190,000

167,000
355,000
355,000
333,000
300,000
190,000

167,000

167,000

167,000
500,000

167,000
500,000

500,000

500,000

500,000

500,000

355,000
355,000
333,000

355,000
355,000
333,000

1,500,000

1,500,000

300,000
190,000

300,000
190,000

166,000

166,000

166,000

166,000

500,000

500,000

1,250,000

1,250,000

1,065,000

1,065,000

1,250,000

1,250,000

1,250,000

1,250,000

Repayment Repayment Purpose
date
methodNotes

Unsecured /with noguarantee
Unsecured /(Note 3) (Note 2) with noguarantee
Unsecured /(Note 3) (Note 2) with noguarantee

0.653

Mar. 14,
2022

0.503

Sept. 14,
2020

0.603

Nov. 29,
2021

0.353

Oct. 132020(Note 3) (Note 2)

Unsecured /with noguarantee

0.453

Oct. 132021(Note 3) (Note 2)

Unsecured /with noguarantee

0.653

Oct. 132022(Note 3) (Note 2)

Unsecured /with noguarantee

0.753

Oct. 132023(Note 3) (Note 2)

Unsecured /with noguarantee

0.853

Oct. 11(Note 3) (Note 2) Unsecured /(Note 3) (Note 2)

Type
LenderSumitomo Mitsui Trust Bank,
LimitedBalance atBalance at
AverageBorrowing beginning of
end ofinterestdate
Reporting
Reportingrate
PeriodPeriod(%)(JPY thousand) (JPY thousand) (Note 1)
2017
1,060,000
1,060,000

Sumitomo Mitsui Banking
Corporation
Mizuho Bank, Ltd.
Sumitomo Mitsui Banking
Long-term
Corporation
loans
Shinsei Bank, Limited(Note 4)
MUFG Bank, Ltd.
Subtotal
Total

Oct. 13,2017
Jun. 27,2017

1,250,000

1,250,000

1,850,000

1,850,000

1,850,000

1,850,000-

1,000,000-

500,000

183,915,000
186,983,000

185,415,000
187,415,000

Repayment Repayment Purpose
date
method

2024

0.303

Oct. 13
2019

0.750

Jun. 27
2023

Notes

with noguarantee

Unsecured /with noguarantee
Unsecured /(Note 3) (Note 2) with noguarantee(Note 3) (Note 2)(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
for the purpose of avoiding risk from interest rate fluctuation, interest rates reflecting the interest rate swap areshown.
(Note 2) The funds raised through borrowings are mainly used to acquire trust beneficiary interests in real estate and toprepay the borrowings.
(Note 3) The balance at the end of the period will be repaid in full on the repayment date.
(Note 4) Long-term loans includes current portion of long term loans payable.
(Note 5) The Bank of Tokyo-Mitsubishi UFJ, Ltd. changed its name to MUFG Bank, Ltd. on April 1, 2018.
(Note 6) In line with the transfer of corporate lending service, etc. from Mitsubishi UFJ Trust and Banking Corporation to
MUFG Bank, Ltd. on April 16, 2018, MUFG Bank, Ltd. succeeded the status as a lender from Mitsubishi UFJ
Trust and Banking Corporation.

3

Investment Corporation Bonds
Status of investment corporation bonds as of the end of the Reporting Period is as follows.
Bond Series

Issue DateFirst Series Unsecured
Investment Corporation
Bonds (Note 1)
Second Series
Unsecured Investment
Corporation Bonds(Note 1)

May 25, 2018

Balance at theBalance at the Interest Rate
beginning of theend of the period(%)
period(JPY thousand)(JPY thousand)－

1,000,000

0.400

Redemption Date

May 25, 2023

Redemption Use offunds
method(Note 2)

Security/
Guaranty(Note 3)
Unsecured /Unguaranteed

May 25, 2018

Total

－

1,000,000

0.800

－

2,000,000－

May 25, 2028

(Note 2)

(Note 3)－－－(Note 1) This is with pari passu conditions among specified corporate bonds.
(Note 2) The Investment Corporation Bonds may be purchased and cancelled at any time after the payment date, except for the case where the laws
and regulations or the Depository otherwise stipulates.
(Note 3) The funds will be used to acquire trust beneficiary interest in real estate.

4

Short-Term Investment Corporation Bonds

Not applicable
5

Investment Unit Options

Not applicable－Acquisitions and Sales for the Fiscal Period Ended June 30, 20181

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

Sale

Acquisition date

Acquisition
price(JPY million)(Note 1)

Sales priceGain/loss on
Book value(JPY million)
sales(JPY million)(JPY million)(Note 2)

Sales date

D54

Hotel MyStays Yokohama
Kannai (Note 3)

February 7, 2018

5,326

-

-

-

-

D55

Art Hotel Joetsu (Note 3)

February 7, 2018

2,772

-

-

-

-

February 7, 2018

2,723

-

-

-

-

February 7, 2018

1,604

-

-

-

-

June 27, 2018

4,068

-

-

-

-

June 27, 2018

3,257

-

-

-

-

D56
D57
D58
D59

Art Hotel Hirosaki City
(Note 3)
Hotel MyStays Oita
(Note 3)
Hotel MyStays Gotanda(Note 3)
Hotel MyStays Tachikawa(Note 3)

A31

Harmonie Ochanomizu--

January 31, 2018

1,603

1,346

221

A36

Growth Maison Ikebukuro--

January 31, 2018

1,057

743

289

A42

Capital Heights Kagurazaka--

January 31, 2018

732

623

90

B14

Lexington Plaza
Nishi-Gotanda--

March 9, 2018

5,160

4,632

432

B15

Cross Square NAKANO--January 31, 2018

1,350

1,125

208

B16

Ohki Aoba Building--

January 31, 2018

721

709

7

10,624

9,181

1,249

Total

19,750-(Note 1) Acquisition price does not include various costs (brokerage commissions, taxes and other public dues) required for
acquisition of the property and is the purchase price indicated in the trust beneficiary interest purchase agreement.
(Note 2) Sales price does not include various costs (brokerage commissions, taxes and other public dues) required for sale ofthe property, and is the sales price indicated in the trust beneficiary interest purchase agreement.
(Note 3) Acquired as trust beneficiary interest in real estate with the real estate as trust asset.

2

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 of Specified Assets(1) Real Estate Transactions
Acquisitionor saleName of property

Acquisition orCategory of Transaction
sales price Appraisal value
date(JPY million)(JPY million)
specified asset(Note 1)

A31 Harmonie Ochanomizu
January 31,
2018

A36 Growth Maison Ikebukuro
A42

Capital Heights
Kagurazaka

B14

Lexington Plaza
Nishi-Gotanda

Sale

March 9,2018

B15 Cross Square NAKANO
B16 Ohki Aoba Building
D54

Hotel MyStays Yokohama
KannaiReal estate
Trustbeneficiaryinterest

D55 Art Hotel Joetsu
D56 Art Hotel Hirosaki City

January 31,
2018

February 7,
2018

D58 Hotel MyStays Gotanda
D59 Hotel MyStays Tachikawa

June 7,2018

Appraisal date

1,603

1,420

Asset Research andDevelopment Inc.

December 1,
2017

1,057

915

Asset Research andDevelopment Inc.

December 1,
2017

732

587

Asset Research andDevelopment Inc.

December 1,
2017

5,160

4,250

Japan Real Estate
Institute

December 31,
2017

1,350

1,170

Japan Real Estate
Institute

December 1,
2017

721

710

The Tanizawa Sogo
Appraisal Co., Ltd

December 1,
2017

5,326

5,380

The Tanizawa Sogo
Appraisal Co., Ltd

January 1,
2018

2,772

2,800

The Tanizawa Sogo
Appraisal Co., Ltd

January 1,
2018

2,723

2,750

The Tanizawa Sogo
Appraisal Co., Ltd

January 1,
2018

1,604

1,620

The Tanizawa Sogo
Appraisal Co., Ltd

January 1,
2018

4,068

4,110

The Tanizawa Sogo
Appraisal Co., Ltd

April 1, 2018

3,257

3,290

Daiwa Real EstateAppraisal Co., Ltd.

April 1, 2018

Acquisition
D57 Hotel MyStays Oita

Appraiser(Note 1) Acquisition price does not include various costs (brokerage commissions, taxes and other public dues) required for
acquisition of the property and is the purchase price indicated in the trust beneficiary interest purchase agreement.
(Note 2) The real estate appraisal described above is conducted by applying “Section 3: appraisals concerning prices of realestate subject to securitization” of “Real Estate Appraisal Standard.”

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.

Financial Condition
1

Assets, Liabilities, Principal, and Profit and Loss

Please refer to “Audited Financial Statements for the Fiscal Period ended June 30, 2018 (January 1, 2018 toJune 30, 2018).”
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

NoticeBoard of Directors of Investment Corporation
Of the execution and amendment of the principal agreement approved by INV’s Board of Directors in theReporting Period, principal summary is as follows.
Approval date

April 26, 2018

2

Item

Summary

Comprehensive resolution on
issuanceofinvestment
corporation bonds

Board of Directors passed a comprehensive resolution on issuance ofinvestment corporation bonds with a maximum total issue amount of
JPY 2.0 billion and an issuance period from April 30, 2018 to May
31, 2018; and entrustment of administrative duties concerning
offering of investment corporation bonds and general administrative
duties as an issuing agent, fiscal agent, paying agent, etc. to aprescribed general administrative agent.

Disclosure of Companies Owning Real Estate Overseas

Not applicable
3

Disclosure of Real Estate Owned by Companies Owning Real Estate Overseas

Not applicable
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.
As a large portion of our hotels are subject to a variable rent structure, our results of operations are
inherently more volatile than the results of properties with fixed-lease arrangements, and we may
not be able to effectively manage our hotel portfolio due to our relatively limited operating history
in owning full service hotels, resort hotels and other non-limited service hotels that we may decideto 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 expense andmay 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 our operating
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.
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.
We may be exposed to risks relating to investments in the operators or master lessees of ourproperties.

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 FortressGroup-related companies including the Asset Manager, MyStays Hotel 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.
• The shareholder benefit plan that we intend to introduce may be cancelled, changed or abolished.
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.
• 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• 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 as asecured 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 may hold interests in some properties through preferred equities of a TMK (tokutei mokuteki
kaisha), and illiquidity in the market for such equities may limit our ability to sell our interests, andwe may be exposed to risks unique to this investments structure.
• 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 such

•
•
•
•
•
•

5

properties 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.

II.

Balance Sheet

AssetsCurrent assets:
Cash and bank deposits
Cash and bank deposits in trust
Accounts receivable
Income taxes receivable
Rental receivables
Prepaid expenses
Consumption taxes receivable
Other
Allowance for doubtful accounts
Total current assets
Non-current assets:
Property and equipment
Tools, furniture and fixtures, at cost
Accumulated depreciation
Tools, furniture and fixtures, net
Buildings in trust, at cost
Accumulated depreciation
Buildings in trust, net

Buildings’ accompanying facilities in trust, at cost

Accumulated depreciation

Buildings’ accompanying facilities in trust, 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
Total property and equipment, net
Intangible assets
Leasehold rights in trust
Total intangible assets
Investment and other assets
Investment securities
Guarantee deposits
Long-term prepaid expenses
Derivatives assets
OthersTotal investments and other assets
Total non-current assets
Deferred assets
Investment corporation bond issuance costs
Total deferred assets
Total assets

Fiscal period ended
December 31, 2017 (Reference)(as of December 31, 2017)(Unit: JPY thousand)Fiscal period ended
June 30, 2018(as of June 30, 2018)

14,367,140
6,326,653
1,984,728
489,0988
613,566
0(89)
23,781,107

8,505,792
6,566,761
6,483
1,826,596
428,536
149,632
0(89)
17,483,714

3,192
(218)
2,973
128,867,905(9,412,123)
119,455,782
28,454,395(5,758,755)
22,695,639
262,372(112,316)
150,055
1,065,760(335,109)
730,651
167,845,958
310,881,062

3,192
(444)
2,748
133,579,099(10,479,742)
123,099,357
28,918,145(6,237,852)
22,680,292
225,353(86,498)
138,854
1,395,339(392,369)
1,002,969
173,298,062
320,222,285

16,828,843
16,828,843

16,712,637
16,712,637

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

17,856,387
1,681,565
426,222
92,561
12,667
20,069,404
357,004,327

371,758,254

24,94524,945374,512,988

Fiscal period ended
December 31, 2017 (Reference)(as of December 31, 2017)(Unit: JPY thousand)Fiscal period ended
June 30, 2018(as of June 30, 2018)

Liabilities
Current liabilities:
254,936

598,870

Short-term loans payable

Accounts payable

3,068,000

2,000,000

Current portion of long term loans payable

28,979,000

46,663,000

Accounts payable-other51,836

131,783

Accrued expenses

270,486

195,481

Income taxes payable
Consumption taxes payable
Advances received
Deposits received
Total current liabilities

605

605

-

14,902600,752

551,506

29,19021,69733,254,807

50,177,846-

2,000,000

154,936,000

138,752,000

2,215,299

2,026,400

-

1,586

Non-current liabilities:
Investment corporation bonds
Long-term loans payable
Tenant leasehold and security deposits in trust
Derivatives liabilities
Asset retirement obligations

31,68031,891

Total non-current liabilities

157,182,980

142,811,878

190,437,787

192,989,724

168,798,455

168,798,455

6,264,432

6,264,432

Total liabilities
Net assets
Unitholders’ equity:
Unitholders’ capital
Surplus:Capital surplus
Deduction of unitholders' capital surplus
Allowance for temporary differences adjustment*2 (46,329)*2 (46,329)

Other deduction of capital surplus(1,022,263)(1,194,818)

Total deduction of unitholders' capital surplus(1,068,593)(1,241,148)

Capital surplus (net)

5,195,838

5,023,283

Retained earnings

7,212,580

7,610,548

Total surplus

12,408,419

12,633,832

181,206,874

181,432,288

Deferred gains or losses on hedges

113,592

90,975

Total valuation and translation adjustments

113,592

90,975*1 181,320,466*1 181,523,263

371,758,254

374,512,988

Total unitholders’ equity
Valuation and translation adjustments:

Total net assets
Total liabilities and net assets

III.

Statement of Income and Retained Earnings

Fiscal period ended
December 31, 2017 (Reference)(from July 1, 2017 to
December 31, 2017)(Unit: JPY thousand)Fiscal period ended
June 30, 2018(from January 1, 2018 toJune 30, 2018)*1 11,403,236*1 11,122,481*2 1,244,033*2 1,249,645

Operating revenue
Rental revenue – real estate
Gain on sales of properties
Dividend income-

732,714

Total operating revenue

12,647,270

13,104,841

Operating expenses
Property related expenses*1 3,962,183*1 4,136,619

Impairment loss
Asset management fees

*3 15,677*3 -

250,000

275,000

Directors’ compensation
Asset custody fees

4,800
15,2304,800
18,162Administrative service fees
Provision of allowance for doubtful accounts

37,347
89

39,697
2

Other
Total operating expenses
Operating income
Non-operating income
Interest income

138,288

197,039

4,423,618

4,671,320

8,223,652

8,433,520

54

78

Interest on tax refund
Other

234
507

3,086
1,181

Total non-operating income

796

4,347

445,855

479,456

-

1,216

-

379

304,073
170,817234,197--64

Non-operating expenses
Interest expenses
Interest expenses on investment corporation bonds
Amortization of investment corporation bond issuancecosts
Loan-related costs
Investment unit issuance costs
Other

920,746

715,314

Ordinary income

Total non-operating expenses

7,303,702

7,722,553

Income before income taxes

7,303,702

7,722,553

605

605

Income taxes
Total income taxes
Net income
Retained earnings brought forward
Unappropriated retained earnings

605

605

7,303,097

7,721,948(90,516)

7,610,548

7,212,580(111,399)

IV.

Statement of Changes in Net Assets
Fiscal period ended December 31, 2017 (Reference) (from July 1, 2017 to December 31, 2017)

Unitholders’capitalBalance at the beginningof the period
Changes during theperiodIssuance of new
investment units
Distributions fromsurplusDistributions in excess
of retained earnings fromallowance for temporary
differences adjustment
Other distribution inexcess of retained
earnings
Net income
Changes other thanunitholders’ equity (net)Total changes during theperiodBalance at the end of theperiodCapital surplus

128,984,946

6,264,432－

Capital surplus(net)(987,516)

5,276,915(46,329)(46,329)(34,747)(34,747)(34,747)(34,747)(81,077)(81,077)(987,516)

39,813,508(46,329)

39,813,508－

168,798,455

6,264,432(46,329)(46,329)

Unitholders’ equity
SurplusRetainedearnings
Balance at the beginningof the period
Changes during theperiodIssuance of new
investment units
Distributions fromsurplusDistributions in excess ofretained earnings fromallowance for temporary
differences adjustment
Other distribution inexcess of retained
earnings
Net income
Changes other thanunitholders’ equity (net)Total changes during theperiodBalance at the end of theperiod(Unit: JPY thousand)Unitholders’ equity
SurplusCapital surplus
Deduction of capital surplus
Allowance for
Total
Other
temporary
deduction of
deduction ofdifferences
capital surplus
capital surplus
adjustment

4,708,487(4,799,004)

7,303,097

Total
unitholders’
Total surplus
equity9,985,403

138,970,350(1,022,263)

Valuation and translation
adjustments
DeferredTotal
gains orvaluation andlosses ontranslation
hedgesadjustments
92,24392,243(1,068,593)

Total net
assets139,062,593

39,813,508

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

7,303,097

7,303,097

7,303,097
21,34821,34821,3482,504,093

2,423,015

42,236,524

21,34821,34842,257,873

7,212,580

12,408,419

181,206,874

113,592

113,592

181,320,466

5,195,838

Fiscal period ended June 30, 2018 (from January 1, 2018 to June 30, 2018)

Unitholders’capitalBalance at the beginningof the period
Changes during theperiodDistributions fromsurplus
Other distribution inexcess of retained
earnings
Net income
Changes other thanunitholders’ equity (net)Total changes during theperiodBalance at the end of theperiodCapital surplus

168,798,455

6,264,432(46,329)

Capital surplus(net)(1,022,263)(1,068,593)

5,195,838(172,554)(172,554)(172,554)－－－(172,554)(172,554)(172,554)

168,798,455

6,264,432(46,329)(1,194,818)(1,241,148)

5,023,283

Unitholders’ equity
SurplusRetainedearnings
Balance at the beginningof the period
Changes during theperiodDistributions fromsurplus
Other distribution inexcess of retained
earnings
Net income
Changes other thanunitholders’ equity (net)Total changes during theperiodBalance at the end of theperiod(Unit: JPY thousand)Unitholders’ equity
SurplusCapital surplus
Deduction of capital surplus
Allowance for
Total
Other
temporary
deduction of
deduction ofdifferences
capital surplus
capital surplus
adjustment

Total
unitholders’
Total surplus
equity7,212,580

12,408,419

181,206,874(7,323,980)(7,323,980)(7,323,980)(172,554)(172,554)

7,721,948

7,721,948

7,721,948

Valuation and translation
adjustments
DeferredTotal
gains orvaluation andlosses ontranslation
hedgesadjustments
113,592

113,592

Total net
assets181,320,466(7,323,980)(172,554)

7,721,948(22,616)(22,616)(22,616)

397,968

225,413

225,413(22,616)(22,616)

202,796

7,610,548

12,633,832

181,432,288

90,97590,975

181,523,263

V.

Notes

[Notes Concerning Significant Accounting Policies]
By Period
Item

Fiscal period ended
December 31, 2017 (Reference)(from July 1, 2017 to
December 31, 2017)

Fiscal period ended
June 30, 2018(from January 1, 2018 toJune 30, 2018)

1. Evaluation standards and Other securities
evaluation method ofThose with no fair value
assetsCost method through moving-average method
is used.

Other securitiesThose with no fair value
Cost method through moving-average method
is used.

2. Method of depreciationof non-current assets(a) Property and equipment
The straight-line method is used.
The useful lives of major property, plantand equipment are as follows.
Tools, furniture and fixtures
4-8 years
Buildings in trust
5-67 years
Buildings and accompanying facilities intrust
2-33 years
Structures in trust
3-55 years
Tools, furniture and fixtures in trust
2-19 years(a) Property and equipment
The straight-line method is used.
The useful lives of major property, plantand equipment are as follows.
Buildings
77 years
Buildings and accompanying facilities
8-24 years
Structures
18 years
Tools, furniture and fixtures
4-8 years
Buildings in trust
5-67 years
Buildings and accompanying facilities intrust
2-33 years
Structures in trust
3-55 years
Tools, furniture and fixtures in trust
2-19 years(b) Intangible assets
The straight-line method is used. For
leasehold interests (fixed-term land leasefor business purposes), the straight-line
method based on the lease period is used.
(c) Long-term prepaid expenses
The straight-line method is used.
3. Accounting treatment of (a) Investment unit issuance costs
deferred assets
The full amount is recorded as expense at
the time of expenditure.

4. Method of calculatingallowances

Allowance for doubtful accounts
To reserve for losses on doubtful accounts,
allowances are provided for normal
receivables using a rate determined based on
past bad debt experiences, and specificallowances are provided for accounts with apossibility of default based on the estimatedamounts considered to be uncollectible byconsidering the collectability of accounts on
an individual basis.

(b) Intangible assets
The straight-line method is used. For
leasehold interests (fixed-term land leasefor business purposes), the straight-line
method based on the lease period is used.
(c) Long-term prepaid expenses
The straight-line method is used.
(a) Investment unit issuance costs
The full amount is recorded as expense at
the time of expenditure.
(b) Investment corporation bond issuance costs
Investment corporation bond issuance costs
are amortized using the straight-line
method over a period up to redemption of
the investment corporation bonds.
Allowance for doubtful accounts
To reserve for losses on doubtful accounts,
allowances are provided for normal
receivables using a rate determined based on
past bad debt experiences, and specificallowances are provided for accounts with apossibility of default based on the estimatedamounts considered to be uncollectible byconsidering the collectability of accounts on
an individual basis.

5. Revenue and expense
recognition

6. Method of hedge
accounting

Accounting treatment of property taxes andother taxes
With respect to property taxes, city planningtaxes and depreciable asset taxes, of the tax
amount assessed and determined, the amountcorresponding to the relevant fiscal period is
accounted for as property related expenses.
Of the amounts paid to the seller for
acquisitions of real estate, the amountequivalent to property taxes is capitalized aspart of the acquisition cost of the real estate ortrust beneficiary interests in real estate insteadof being charged as expense. The amountequivalent to property taxes that was included
as part of the acquisition of real estate during
the fiscal period ended December 31, 2017 is
JPY 24,256 thousand.
(a) Method of hedge accounting
Deferred hedge accounting is used.

Accounting treatment of property taxes andother taxes
With respect to property taxes, city planningtaxes and depreciable asset taxes, of the tax
amount assessed and determined, the amountcorresponding to the relevant fiscal period is
accounted for as property related expenses.
Of the amounts paid to the seller for
acquisitions of real estate, the amountequivalent to property taxes is capitalized aspart of the acquisition cost of the real estate ortrust beneficiary interests in real estate insteadof being charged as expense. The amountequivalent to property taxes that was included
as part of the acquisition of real estate during
the fiscal period ended June 30, 2018 is JPY
77,833 thousand.
(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 effectiveness(d) Method of evaluating hedge effectivenessHedge effectiveness is evaluated byHedge effectiveness is evaluated bycomparing the cumulative amount ofcomparing the cumulative amount ofchanges in cash flows of the hedging
changes in cash flows of the hedging
instrument and the cumulative amount of
instrument and the cumulative amount ofchanges in cash flows of the hedged itemchanges in cash flows of the hedged item
and verifying the difference in the amounts
and verifying the difference in the amountsof change of both the hedged item and theof change of both the hedged item and thehedging instrument.
hedging instrument.
7. Other significant(1) Accounting treatment policy of trust (1) Accounting treatment policy of trust
matters which constitutebeneficiary interests in real estate
beneficiary interests in real estate
the basis for preparation
As to trust beneficiary interests in real
As to trust beneficiary interests in realof financial statements
estate, all accounts of assets and liabilities
estate, all accounts of assets and liabilities
within assets in trust, as well as all income
within assets in trust, as well as all income
generated and expenses incurred fromgenerated and expenses incurred fromassets in trust, are recorded in the relevant
assets in trust, are recorded in the relevantbalance sheets and income statementbalance sheets and income statement
accounts. Of such items, the following
accounts. Of such items, the following
significant trust assets and liabilities are
significant trust assets and liabilities areshown separately on the balance sheet.
shown separately on the balance sheet.
(a) Cash and bank deposits in trust(a) Cash and bank deposits in trust(b) Buildings in trust(b) Buildings in trust
Buildings and accompanying facilities
Buildings and accompanying facilities
in trust
in trust
Structures in trust
Structures in trust
Tools, furniture and fixtures in trust
Tools, furniture and fixtures in trust
Land in trust
Land in trust(c) Leasehold rights in trust(c) Leasehold rights in trust(d) Tenant leasehold and security deposits
in trust(d) Tenant leasehold and security deposits
in trust(2) Accounting treatment of consumption taxes
Transactions subject to consumption taxes
are recorded at amounts exclusive ofconsumption taxes.

(2) Accounting treatment of consumption taxes
Transactions subject to consumption taxes
are recorded at amounts exclusive ofconsumption taxes.

[Notes to changes in indication method]
Fiscal period ended
December 31, 2017(from July 1, 2017 to
December 31, 2017)

Not applicable.

Fiscal period ended
June 30, 2018(from January 1, 2018 toJune 30, 2018)“Income taxes receivable” was included in “Accounts receivable”
under “Current assets” in the balance sheet for the previous fiscal
period. However, due to an increase in its monetary significance, it
is recorded as a separate item from the Reporting Period. As aresult, JPY 8,000 which was recorded under “Accounts
receivable” under “Current assets” in the balance sheet for theprevious fiscal period is now restated as JPY 8,000 for Income
taxes receivable.

[Notes to the Balance Sheet]
Fiscal period ended December 31, 2017 (Reference)(as of December 31, 2017)

Fiscal period ended June 30, 2018(as of June 30, 2018)*1. Minimum net assets as required by Article 67, Paragraph
4 of the Act on Investment Trusts and Investment
Corporations
JPY 50,000 thousand*2. Allowance for temporary differences adjustment*1. Minimum net assets as required by Article 67, Paragraph
4 of the Act on Investment Trusts and Investment
Corporations
JPY 50,000 thousand

Fiscal period ended December 31, 2017 (from July 1, 2017 to December 31, 2017) (Reference)
1. Reasons, related assets and amounts

Relatedassets, etc.

ReasonLeaseholdrights in trust

Amortization ofleasehold rights

Total

InitialamountBalance atthe end of
previous
period-(46,329)(46,329)-(46,329)(Unit: JPY thousand)
Balance atReversalthe end of
duringcurrent
periodperiodAllowance
set aside
duringperiod

2. Method of reversal(1) Leasehold rights in trust
The corresponding amount is scheduled to be reversed upon sale, etc.

(46,329)-(46,329)(46,329)

Fiscal period ended June 30, 2018 (from January 1, 2018 to June 30, 2018)
1. Reasons, related assets and amounts

Relatedassets, etc.

ReasonLeaseholdrights in trust

Amortization ofleasehold rights

Total

Initialamount(46,329)(46,329)

Balance atthe end of
previous
period(46,329)(46,329)(Unit: JPY thousand)
Balance atReversalthe end of
duringcurrent
periodperiodAllowance
set aside
duringperiod

2. Method of reversal(1) Leasehold rights in trust
The corresponding amount is scheduled to be reversed upon sale, etc.

-

-

-

-

(46,329)(46,329)

[Notes to Statement of Income and Retained Earnings]
Fiscal period ended December 31, 2017 (Reference)(from July 1, 2017 to December 31, 2017)

Fiscal period ended June 30, 2018(from January 1, 2018 to June 30, 2018)*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)(Other revenues)
Total

Rental revenue – real estate
11,060,128
343,107
11,403,236(Rent/common area charges)(Other revenues)
Total

B. Real estate rental expenses

B. Real estate rental expenses

Property related expenses

Property related expenses

10,769,777
352,704
11,122,481(Maintenance costs)

707,458(Maintenance costs)

665,093(Taxes and public dues)

470,600(Taxes and public dues)

470,692(Insurance expenses)

11,499(Insurance expenses)

12,845(Depreciation expenses)

2,567,215(Depreciation expenses)

2,772,510(Other expenses)
Total

205,408
3,962,183

C. Real estate rental income(A-B)(Note) Of which, revenue from variable
hotel rents*2 Gain on sales of properties
Kindai Kagaku Sha Building
Proceeds from sales of properties
Cost of sales of properties
Other expenses on sales of properties
Gain on sales of properties
Times Kanda-Sudacho 4th
Proceeds from sales of properties
Cost of sales of properties
Other expenses on sales of properties
Gain on sales of properties
Shinjuku Island
Proceeds from sales of properties
Cost of sales of properties
Other expenses on sales of properties
Gain on sales of properties(Other expenses)
Total

215,476
4,136,619

C. Real estate rental income
7,441,052
3,741,186(Unit: JPY
thousand)(A-B)

6,985,862(Note) Of which, revenue from variable
hotel rents

3,789,484*2 Gain on sales of properties(Unit: JPY
thousand)

1,364,791
1,197,764
51,333
115,693

Harmonie Ochanomizu
Proceeds from sales of properties
Cost of sales of properties
Other expenses on sales of properties
Gain on sales of properties

130,217
100,818
3,658
25,740Growth Maison Ikebukuro
Proceeds from sales of properties
Cost of sales of properties
Other expenses on sales of properties
Gain on sales of properties

1,059,850
743,659
26,625289,565

705,102
701,931
10,228(7,057)

Capital Heights Kagurazaka
Proceeds from sales of properties
Cost of sales of properties
Other expenses on sales of properties
Gain on sales of properties

734,817623,867
20,817
90,132

1,606,646
1,346,372
38,843
221,430

Fiscal period ended December 31, 2017 (Reference)(from July 1, 2017 to December 31, 2017)

Fiscal period ended June 30, 2018(from January 1, 2018 to June 30, 2018)

Casa Eremitaggio
Proceeds from sales of properties
Cost of sales of properties
Other expenses on sales of properties
Gain on sales of properties

1,312,035
948,287
28,743335,004

Cross Square NAKANO
Proceeds from sales of properties
Cost of sales of properties
Other expenses on sales of properties
Gain on sales of properties

1,357,090
1,125,668
23,268208,153

Lexel Mansion Ueno Matsugaya
Proceeds from sales of properties
Cost of sales of properties
Other expenses on sales of properties
Gain on sales of properties

1,329,240
853,265
26,547449,428

Ohki Aoba Building
Proceeds from sales of properties
Cost of sales of properties
Other expenses on sales of properties
Gain on sales of properties

728,446
709,604
11,439
7,402

Sun Terrace Minami Ikebukuro
Proceeds from sales of properties
Cost of sales of properties
Other expenses on sales of properties
Gain on sales of properties

934,980
591,335
18,419325,224

Lexington Plaza Nishigotanda
Proceeds from sales of properties
Cost of sales of properties
Other expenses on sales of properties
Gain on sales of properties

5,180,003
4,632,693
114,348432,961*3. Impairment loss
Name of property
Use
LocationType
Impairment loss

: Ohki Aoba Building: Retail facility: Sendai-shi, Miyagi: Land in trust: JPY 15,677 thousand

Upon calculating impairment loss, book value of the asset sold
was reduced to recoverable value and the amount reduced wasposted in operating expenses as impairment loss for the land intrust. The net sales price which is obtained by subtracting
expected sales expenses from actual selling price is deemed as
recoverable value.

[Notes to Statement of Changes in Net Assets]
Fiscal period ended December 31, 2017 (Reference)(from July 1, 2017 to December 31, 2017)

Fiscal period ended June 30, 2018(from January 1, 2018 to June 30, 2018)

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

4,793,181 units

Number of investment units issued andoutstanding

4,793,181 units

[Notes Related to Tax Accounting]
Fiscal period ended December 31, 2017 (Reference)(as of December 31, 2017)

Fiscal period ended June 30, 2018(as of June 30, 2018)

1. Significant components of deferred tax assets and liabilities 1. Significant components of deferred tax assets and liabilities(Unit: JPY thousand)(Unit: JPY thousand)(Deferred tax assets - current assets)(Deferred tax assets - current assets)
Enterprise tax payable
1,331 Enterprise tax payable
1,325
Impairment loss
Allowance for doubtful accounts

2,367
28

Allowance for doubtful accounts

28

Subtotal

1,354

Subtotal

3,726

Valuation allowance

1,354

Valuation allowance

3,726

Total

-

(Deferred tax assets - current)

-

Total

-

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

730,990

Land (merger)

1,918,655

Loss carried forward

7,200,289

Asset retirement obligations

10,055

Amortization of leasehold right

79,644

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

9,939,635

9,797
36,05445,851
9,893,783(Deferred tax assets - non-current assets)
Buildings and other (merger)

561,751

Land (merger)

1,374,216

Loss carried forward

7,200,289

Asset retirement obligations

10,122

Amortization of leasehold right

116,528

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

9,262,907

9,797
28,87538,6739,224,234

Total

-

(Deferred tax assets - non-current)
2. Significant difference between statutory tax rate and theeffective tax rate
Statutory tax rate
31.74%(Deferred tax assets - non-current)-

Deductible cash distributions(30.49)%Deductible cash distributions(22.95)%

Changes in valuation allowance(1.25)%

Changes in valuation allowance(8.79)%

Others0.01%

Others0.01%

Effective tax rate

0.01%

Effective tax rate

0.01%

Total

-

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

[Notes Related to Financial Instruments]
Fiscal period ended December 31, 2017 (Reference)(from July 1, 2017 to December 31, 2017)

Fiscal period ended June 30, 2018(from January 1, 2018 to June 30, 2018)

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 and issuinginvestment corporation bonds are mainly used to acquire
real estate properties or trust beneficiary interest in realestate (including related acquisition costs) and for therefinancing of existing loans. Liquidity risks relating toloan 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 December 31, 2017 are as follows.
(Unit: JPY thousand)2. Estimated fair value of financial instruments.
Book value, fair value and the difference between value asof June 30, 2018 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

14,367,140

14,367,140-

6,326,653

6,326,653-

20,693,794

20,693,794-(1) Cash and bankdeposits(2) Cash and bankdeposits in trust
Total assets(3,068,000)(3,068,000)-(3) Short-term loans(4) Current portion oflong term loans
payable(5) Long-term loans(28,979,000)(28,979,000)-(154,936,000)(154,936,000)

Total liabilities(186,983,000)(186,983,000)

113,592

113,592-(6) Derivatives(4) Current portion oflong term loans
payable(5) Investment
corporation bonds(6) Long-term loans

Book Value

Fair Value

Difference

8,505,792

8,505,792-

6,566,761

6,566,761-

15,072,553

15,072,553-(2,000,000)(2,000,000)-(46,663,000)(46,663,000)-(2,000,000)(1,998,500)

1,500(138,752,000)(138,752,000)-

Fiscal period ended December 31, 2017 (Reference)(from July 1, 2017 to December 31, 2017)

Fiscal period ended June 30, 2018(from January 1, 2018 to June 30, 2018)
Total liabilities(189,415,000)(189,413,500)

1,500

90,97590,975-(7) Derivatives(*1) Items recorded in the Liabilities Section are shown inparenthesis.

(*1) Items recorded in the Liabilities Section are shown inparenthesis.

(*2) Receivables and payables arising from derivativetransactions are recorded in net amounts, and if thetotal net amount is a negative amount, such amount isshown in parenthesis.

(*2) Receivables and payables arising from derivativetransactions are recorded in net amounts, and if thetotal net amount is a negative amount, such amount isshown 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 trust (1) Cash and bank deposits (2) Cash and bank deposits in trust(3) Short-term loans(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, and is 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.
(4) Current portion of long term loans payable (5) Long-termloansLong-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) Current portion of long term loans payable (6) Long-termloansLong-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.
(5) Investment corporation bonds
Fair value is calculated using a method based on market price.

(6) 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.

(7) 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 transaction hedged
accounting type, etc.
item
Interest
rate swap
Principle
Receiveaccounting
floating
methodrate/pay
fixed rate

Longterm
loans

Contract amount, etc.
(Note 1)

Fair value(Note 2)

Amount due
after
one year

99,119,000

70,140,000

113,592(*1) The contract amount, etc. is stated based on a notional
principal.
(*2) The fair value is estimated based on the price, etc.
presented by the correspondent financial institutions.

(Note 2) Financial instruments for which fair value isextremely difficult to value.

(Unit: JPY thousand)
Method of Derivative Primary
hedge transaction hedged
accounting type, etc.
item
Interest
rate swap
Principle
Receiveaccounting
floating
methodrate/pay
fixed rate

Longterm
loans

Contract amount, etc.
(Note 1)

Fair value(Note 2)

Amount due
after
one year

100,619,000 67,390,000

90,975(*1) The contract amount, etc. is stated based on a notional
principal.
(*2) The fair value is estimated based on the price, etc.
presented by the correspondent financial institutions.

(Note 2) Financial instruments for which fair value isextremely difficult to value.

Fiscal period ended December 31, 2017 (Reference)(from July 1, 2017 to December 31, 2017)

Fiscal period ended June 30, 2018(from January 1, 2018 to June 30, 2018)(Unit: JPY thousand)Book value

Category
Tenant leasehold andsecurity deposits in trust

2,215,299
17,854,460

Investment securities(Unit: JPY thousand)Book value

Category
Tenant leasehold andsecurity deposits in trust

2,026,400
17,856,387

Investment securities

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.

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.

Since quoted market prices are not available for investment
securities (preferred equity interest), fair value is deemed
extremely difficult to value. Thus, prices are not subject tothe disclosure of fair value.

Since quoted market prices are not available for investment
securities (preferred equity interest), fair value is deemed
extremely difficult to value. Thus, prices are not subject
to the disclosure of fair value.

(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 December 31, 2017

As of June 30, 2018

(Unit: JPY thousand)Due within
one year

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

Cash and bank deposits

14,367,140--

Cash and bank deposits in
trust

6,326,653

-

Total

20,693,794-(Unit: JPY thousand)Due within
one year

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

Cash and bank deposits

8,505,792---

Cash and bank deposits intrust

6,566,761

-

-

-

Total

15,072,553--

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

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

Cash and bank deposits

-

-

-

Cash and bank deposits

-

-

-

Cash and bank deposits in
trust

-

-

-

Cash and bank deposits in
trust

-

-

-

Total

-

-

-

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 December 31, 2017

As of June 30, 2018

Due within
one year
Short-term loans
Current portion of
longterm loans payable

3,068,000(Unit: JPY thousand)Due after one Due after two
to two years to three years--

28,979,000--

Long-term loans-

54,745,000

50,130,000

Total

32,047,000

54,745,000

50,130,000

Due within
one year(Unit: JPY thousand)Due after one Due after two
to two years to three years

2,000,000--

46,663,000

-

-

-

-

-

Long-term loans-

51,744,000

57,380,000

Total

48,663,000

51,744,000

57,380,000

Short-term loans
Current portion of
longterm loans payable
Investment corporationbonds

Fiscal period ended December 31, 2017 (Reference)(from July 1, 2017 to December 31, 2017)

Fiscal period ended June 30, 2018(from January 1, 2018 to June 30, 2018)

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

Short-term loans
Current portion of
longterm loans payable-

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

-

Short-term loans
Current portion of
longterm loans payable
Investment corporation
bonds

-

-

-

Long-term loans

32,821,000

10,115,000

7,125,000

Total

32,821,000

10,115,000

7,125,000

-

-

-

-

-

-

-

1,000,000

1,000,000

Long-term loans

15,638,000

6,865,000

7,125,000

Total

15,638,000

7,865,000

8,125,000[Notes Related to Asset Retirement Obligations]Fiscal period ended December 31, 2017 (Reference)(from July 1, 2017 to December 31, 2017)

Fiscal period ended June 30, 2018(from January 1, 2018 to June 30, 2018)

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

1. Summary of the asset retirement obligations for the period
INV has recorded asset retirement obligations in regard to
its obligation to restore the land to its original condition
related to the fixed-term land lease agreement of Comfort
Hotel Maebashi held by INV.
2. Calculation method for asset retirement obligations for theperiodThe amount of the asset retirement obligations has been
calculated by fixing the estimated period of use at 43 years,
based on the period until the expiration of the fixed-term
land lease agreement, and by using a discount rate of
1.342%.
3. Increase/decrease in the total amount of asset retirement
obligations for the current fiscal period(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

31,468212
31,680

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

31,680210
31,891

[Notes Related to Rental Properties]
Fiscal period ended December 31, 2017 (Reference)(from July 1, 2017 to December 31, 2017)

Fiscal period ended June 30, 2018(from January 1, 2018 to June 30, 2018)

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)

INV owns residential properties and hotels as core assets
principally in the Tokyo area and major regional cities withan aim to establish a portfolio focusing on both stability andgrowth potential. The book value changed during theperiod and balance at the end of the period are as follows.
(Unit: JPY thousand)Book value

Use

Fair value atBalance at theBalance at the the end of the
Change during
periodbeginning of
end of thethe period
the period
periodResidences

93,113,195(3,163,531)

89,949,664

102,353,000

Offices

8,424,734(1,949,803)

6,474,931

Book value

Use

Fair value atBalance at theBalance at the the end of the
Change during
periodbeginning of
end of thethe period
the period
periodResidences

89,949,664(3,380,554)

86,569,109

100,387,000

6,130,000

Offices

6,474,931(6,474,931)--

Commercial
facilities

4,957,292(44,824)

4,912,468

6,170,000

Commercial
facilities

5,001,269(43,977)

4,957,292

6,100,000

Parking lot

100,818(100,818)--

Hotels226,328,017

19,125,328

245,453,345

304,985,000

Hotels185,897,957

40,430,059

226,328,017

285,424,000

Total

327,709,905

9,225,018

336,934,923

411,542,000

Total

292,537,976

35,171,929

327,709,905

400,007,000(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 December 31, 2017 were new acquisition of
hotels and capital expenditure-related construction
work.
(Note 3) The major factors of the decrease were sale ofresidential properties, office properties and parking;and recording of depreciation and impairment loss.
(Note 4) The fair value as of the end of the reporting period isdetermined based on the appraisal value or survey
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, 2017,
please refer 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 June 30, 2018 were new acquisition of hotels
and capital expenditure-related construction work.
(Note 3) The major factors of the decrease were sale ofresidential properties and office properties; andrecording of depreciation.
(Note 4) The fair value as of the end of the reporting period isdetermined based on the appraisal value or survey
value provided by Asset Research and Development
Inc., Japan Real Estate Institute, JLL Morii Valuation& Advisory K.K., 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, 2018, pleaserefer to “Notes to Statement of Income and Retained
Earnings.”[Notes Related to Restriction on Asset Management]
Fiscal period ended December 31, 2017 (Reference)(from July 1, 2017 to December 31, 2017)
Not applicable.

Fiscal period ended June 30, 2018(from January 1, 2018 to June 30, 2018)
Not applicable.

[Notes Related to Transactions with Related Parties]
Fiscal period ended December 31, 2017 (from July 1, 2017 to December 31, 2017) (Reference)
1

Interested parties of the Asset Manager
Classification

Name

Business or
occupation

Percentage ofvoting rights
owned
(%)

Type of transaction

Transaction
amount(JPY thousand)Account

HL Investments
Tokutei Mokuteki
KaishaInvestment
managementbusiness-

Purchase oftrust beneficiary interests
in real estate

13,068,000--

9,781,000--

8,870,000--

Septentrio3 Tokutei
Mokuteki Kaisha
Interested party of
the Asset Manager

Monza Tokutei
Mokuteki Kaisha
Suisei Tokutei
Mokuteki Kaisha
Naqua Hotel &Resorts Management
Co., Ltd.
MyStays HotelManagement
Co., Ltd.

Investment
managementbusiness
Investment
managementbusiness
Investment
managementbusiness-

Purchase oftrust beneficiary interests
in real estate
Purchase oftrust beneficiary interests
in real estate
Purchase oftrust beneficiary interests
in real estate

Balance at theend of the period(JPY thousand)

7,880,000

Hotelbusiness-

Rental revenues

1,103,226

Accounts
receivable

130,953

Hotelbusiness-

Rental revenues

4,794,080

Accounts
receivable

1,551,920(Note 1) Consumption taxes, etc., are not included in transaction amounts, but are included in the balance at the end of the period.
(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) HL Investments Tokutei Mokuteki Kaisha, Septentrio3 Tokutei Mokuteki Kaisha, Monza Tokutei Mokuteki Kaisha,
Suisei Tokutei Mokuteki Kaisha and Naqua Hotel & Resorts Management Co., Ltd. and MyStays HotelManagement Co., Ltd. have no capital relationship to be disclosed with the Asset Manager. However, these
Tokutei Mokuteki Kaisha or the tenant and operator have received an anonymous partnership investment orinvestment through funds that are managed by affiliates of Fortress Investment Group LLC (“FIG”), an affiliate ofCalliope. Accordingly, INV treats HL Investments Tokutei Mokuteki Kaisha, Septentrio3 Tokutei Mokuteki
Kaisha, Monza Tokutei Mokuteki Kaisha, Suisei Tokutei Mokuteki Kaisha and Naqua Hotel & Resorts
Management Co., Ltd. and MyStays Hotel Management Co., Ltd. as the equivalent to interested parties.
(Note 4) Calliope holds 609,942 units (holding percentage: 12.7%) of the issued investment units of INV.
(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 number

Name of property

Counterparty

Purchase price(JPY thousand)

D50

Hotel MyStays Shin Osaka Conference HL Investments Tokutei Mokuteki
CenterKaishaD51

Hotel MyStays Premier Omori

Septentrio3 Tokutei Mokuteki Kaisha

9,781,000

D52

Beppu Kamenoi Hotel

Monza Tokutei Mokuteki Kaisha

8,870,000

D53

Hotel MyStays Sapporo Station

Suisei Tokutei Mokuteki Kaisha

7,880,000

Total

13,068,000

39,599,000

2Asset Custody Company
Classification

Asset CustodyCompany

Name

Sumitomo Mitsui
Trust Bank,
LimitedBusiness or
occupation

Percentage ofvoting rights
owned
(%)

Banking andtrust business-Type of transaction

Transaction
amount(JPY thousand)Borrowing for
short-term loan
Borrowing forlong-term loan

1,022,000
2,625,000

Account
Short-termloans payable
Long-termloans payable

Balance at theend of the period(JPY thousand)
1,022,000
23,976,000

Prepaid expenses

53,375Long-term
prepaid expenses

77,317

61,771 Accrued expenses

1,139

Finance related fees

38,303

Interest expenses(Note 1) Consumption taxes, etc., are not included in transaction amounts, 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.

Fiscal period ended June 30, 2018 (from January 1, 2018 to June 30, 2018)
1

Interested parties of the Asset Manager
Classification

Name

Business or
occupation

Ginga Tokutei
Mokuteki Kaisha

Investment
managementbusiness

HL Investments
Tokutei Mokuteki
KaishaInvestment
managementbusiness

Monza Tokutei
Mokuteki Kaisha
Interested party of
the Asset Manager

Suisei Tokutei
Mokuteki Kaish
Calvis Tokutei.
Mokuteki Kaisha
Naqua Hotel &Resorts Management
Co., Ltd.
MyStays HotelManagement
Co., Ltd.

Percentage ofvoting rights
owned
(%)

Type of transaction

Transaction
amount(JPY thousand)Account

Balance at theend of the period(JPY thousand)-Purchase oftrust beneficiary interests
in real estate

5,326,000---

Purchase oftrust beneficiary interests
in real estate

2,772,000--

Investment
managementbusiness
Investment
managementbusiness
Investment
managementbusiness

2,723,000--

Purchase oftrust beneficiary interests
in real estate
Purchase oftrust beneficiary interests
in real estate
Purchase oftrust beneficiary interests
in real estate

1,604,000-

7,325,000-

Hotelbusiness-

Rental revenues

576,941

Accounts
receivable

221,582

Hotelbusiness-

Rental revenues

5,324,738

Accounts
receivable

1,387,974-(Note 1) Consumption taxes, etc., are not included in transaction amounts, but are included in the balance at the end of the period.
(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) Ginga Tokutei Mokuteki Kaisha, HL Investments Tokutei Mokuteki Kaisha, Monza Tokutei Mokuteki Kaisha,
Suisei Tokutei Mokuteki Kaisha, Calvis 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.
However, (i) Ginga Tokutei Mokuteki Kaisha, HL Investments Tokutei Mokuteki Kaisha, Monza Tokutei Mokuteki
Kaisha, Suisei Tokutei Mokuteki Kaisha have received an anonymous partnership investment or investment throughfunds that are managed by affiliates of FIG (an affiliate of Calliope, which is a parent company of the Asset Manager
directly owning 100% of its issued shares) upon transactions with the Tokutei Mokuteki Kaisha, (ii) Calvis Tokutei
Mokuteki Kaisha has received an anonymous partnership investment or investment through funds that are managed
by affiliates of FIG (a subsidiary of SoftBank Group Corp., which is a parent company of the Asset Manager
directly/indirectly owning 100% of its issued shares) upon transactions with the Tokutei Mokuteki Kaisha, and (iii)
Naqua Hotel & Resorts Management Co., Ltd., and MyStays Hotel Management Co., Ltd. have received ananonymous partnership investment or investment through funds that are managed by affiliates of FIG (an affiliate ofCalliope, which is a parent company of the Asset Manager directly owning 100% of its issued shares until March 29,
2018; a subsidiary of SoftBank Group Corp., which is a parent company of the Asset Manager directly/indirectly
owning 100% of its issued shares on and after March 29, 2018). Accordingly, INV treats Ginga Tokutei Mokuteki
Kaisha, HL Investments Tokutei Mokuteki Kaisha, Monza Tokutei Mokuteki Kaisha, Suisei Tokutei Mokuteki
Kaisha, Calvis Tokutei Mokuteki Kaisha, Naqua Hotel & Resorts Management Co., Ltd., and MyStays HotelManagement Co., Ltd. as the equivalent to interested parties.
(Note 4) 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 number
D54

Name of property

Purchase price(JPY thousand)Counterparty

Hotel MyStays Yokohama Kannai

Ginga Tokutei Mokuteki Kaisha

5,326,000

D55

Art Hotel Joetsu

HL Investments Tokutei Mokuteki
Kaisha2,772,000

D56

Art Hotel Hirosaki City

Monza Tokutei Mokuteki Kaisha

2,723,000

D57

Hotel MyStays Oita

Suisei Tokutei Mokuteki Kaisha

1,604,000

D58

Hotel MyStays Gotanda

Calvis Tokutei. Mokuteki Kaisha

4,068,000

D59

Hotel MyStays Tachikawa

Calvis Tokutei. Mokuteki Kaisha

3,257,000

Total

2

19,750,000

Asset Custody Company
Classification

Asset CustodyCompany

Name

Sumitomo Mitsui
Trust Bank,
LimitedBusiness or
occupation

Banking andtrust business

Percentage ofvoting rights
owned
(%)

-

Type of transaction
Borrowing for
short-term loan
Borrowing forlong-term loan

Transaction
amount(JPY thousand)
356,000-

Short-termloans payable
Long-termloans payable

Balance at theend of the period(JPY thousand)
666,000
23,976,000

Prepaid expenses

44,600Long-term
prepaid expenses

57,99370,227 Accrued expenses

768

Finance related fees
Interest expenses

Account-(Note 1) Consumption taxes, etc., are not included in transaction amounts, 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.

[Notes Related to Per Unit Information]
Fiscal period ended December 31, 2017 (Reference)(from July 1, 2017 to December 31, 2017)

Fiscal period ended June 30, 2018(from January 1, 2018 to June 30, 2018)

Net assets per unit

JPY 37,829

Net JPY
assets35,762
per unit

JPY 35,368

JPY 28,731
JPY 37,871

Net income per unit

JPY 1,712

Net income
JPY 1,477
per unit

JPY 1,270

JPY 937
JPY 1,611

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 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 December 31, 2017 (Reference)(from July 1, 2017 to December 31, 2017)
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 June 30, 2018(from January 1, 2018 to June 30, 2018)

7,303,097
7,303,097
4,266,437

4,702,073
Net income5,431,003
for the fiscal 4,363,420
period (JPY 2,952,688
thousand)Amounts not attributable to common unitholders(JPY thousand)Net income attributable to common units
4,702,073 5,431,003
4,363,420 2,952,688(JPY thousand)Average number of investment units during the
3,788,254 3,675,824
3,436,572 3,149,936
period (units)

7,721,948
7,721,948
4,793,181

[Notes Related to Significant Subsequent Events]
Fiscal period ended December 31, 2017 (Reference)(from July 1, 2017 to December 31, 2017)

Fiscal period ended June 30, 2018(from January 1, 2018 to June 30, 2018)

1. Sale of Assets
INV completed sale of the following five properties on
January 31, 2018.

1. Issuance of new investment units
INV resolved at its meetings of the Board of Directors
held on July 17, 2018 and July 25, 2018 respectively to
conduct the issuance of new investment units andsecondary distribution of investment units. Payment for
the new investment units issued through the public
offering was completed on August1, 2018, in accordancewith the following terms and conditions. In addition,with respect to the issuance of new investment units
through the third-party allotment in connection with theoverallotment secondary offering, the payment wascompleted on August 21, 2018. As a result, theunitholders’ capital of INV is JPY 211,092 million andthe number of investment units issued and outstanding of
INV increased to 5,748,181.

Property Number: A31
Property Name: Harmonie Ochanomizu
Sale dateJuly 31, 2018

Location

Bunkyo-ku, Tokyo

Book value (Note 1)

JPY 1,346 million

Sales price (Note 2)

JPY 1,603 million

Expected gain on sales(Note 3)

JPY 220 million

Transferee

Not disclosed (Note 4)

Legal form of asset

Trust beneficiary interest

Property Number: A36
Property Name: Growth Maison Ikebukuro
Sale dateJuly 31, 2018

Location

Toshima-ku, Tokyo

Book value (Note 1)

JPY 743 million

Sales price (Note 2)

JPY 1,057 million

Expected gain on sales(Note 3)

JPY 288 million

Transferee

Not disclosed (Note 4)

Legal form of asset

Trust beneficiary interest

Property Number: A42
Property Name: Capital Heights Kagurazaka
Sale dateJuly 31, 2018

Location

Shinjuku-ku, Tokyo

Book value (Note 1)

JPY 623 million

Sales price (Note 2)

JPY 732 million

Expected gain on sales(Note 3)

JPY 87 million

Transferee

Not disclosed (Note 4)

Legal form of asset

Trust beneficiary interest(1) Issuance of new investment units through public
offering
Number of investment units
offeredOf whichdomestic public offering
overseas offering
Issue price(offer price)
Total issue price(offer price)
Paid amount (issue value)
Total paid amount(total issue value)
Payment date:909,524 investment units:::

432,024 investment units
477,500 investment units
JPY 45,776 per unit
JPY 41,634,370,624::

JPY 44,287 per unit
JPY 40,280,089,388:

August 1, 2018(2) Secondary offering of investment units(overallotment secondary offering)Number of Investment Units
offered in the secondaryoffering
Offer priceTotal offer price
Delivery date:

45,476 investment units:::

JPY 45,776 per unit
JPY 2,081,709,376
August 2, 2018(3) Issuance of new investment units throughthird-party allotment
Number of investment units
offeredAmount to be paid
(issue value)
Total paid amount(total issue value)
Payment date
Allottee:

45,476investment units:

JPY 44,287per unit:

JPY 2,013,995,612::

August 21, 2018
Mizuho Securities Co.,Ltd.

Fiscal period ended December 31, 2017 (Reference)(from July 1, 2017 to December 31, 2017)
Property Number: B15
Property Name: Cross Square NAKANOSale date

January 31, 2018

Location

Nakano-ku, Tokyo

Book value (Note 1)

JPY 1,125 million

Sales price (Note 2)

JPY 1,350 million

Expected gain on sales(Note 3)

JPY 199 million

Transferee

Taisei-Yuraku Real Estate Co.,Ltd.

Legal form of asset

Trust beneficiary interest

Fiscal period ended June 30, 2018(from January 1, 2018 to June 30, 2018)
2. Debt Financing
In order to fund a portion of acquisition price of four
domestic hotel properties (domestic trust beneficiaryinterests) acquired on August 2, 2018 and TK Interest
with overseas real estate as underlying assets to beacquired on October 31, 2018 or on a date to be
separately agreed, INV resolved the following debt
financing at its meetings of the Board of Directors heldon July 17, 2018 and entered into a loan agreement on
July 31, 2018.
New Syndicate Loan (J)Lender:Outstanding balance
Interest rate, etc.

::

Interest payment
date:

Principal repayment
methodBorrowing method
Borrowing date:

Maturity date:

Property Number: B16
Property Name: Ohki Aoba Building
Sale date

January 31, 2018

Location

Sendai-shi, Miyagi

Book value (Note 1)

JPY 709 million

Sales price (Note 2)

JPY 721 million

Expected gain on sales(Note 3)-

Transferee

Kubota Honten

Legal form of asset

Trust beneficiary interest

In addition, INV decided on February 13, 2018 to sell thefollowing one property and completed its sale on March 9,
2018.
Property Number: B14
Property Name: Lexington Plaza Nishigotanda
Sale date

March 9, 2018

Location

Shinagawa-ku, Tokyo

Book value (Note 1)

JPY 4,639 million

Sales price (Note 2)

JPY 5,160 million

Expected gain on sales(Note 3)

JPY 431 million

Transferee

Not disclosed (Note 4)

Legal form of asset

Trust beneficiary interest(Note 1)
(Note 2)The book value is as of December 31, 2017.
Sales price does not include sales-related
expenses, adjustments for property taxes or city
planning taxes, or national or local(Note 1)::

Syndicate of lenders
arranged by Mizuho Bank,Ltd.
JPY 40,458 million
Base Rate (1-month JPY
TIBOR; however, 2-month
JPY TIBOR for the first
calculation period) +0.50%, 0.40%, 0.30%,
0.30%, 0.20%
The last Japanese business
day of each month before
the principal maturity datewith September 28, 2018as the first payment date,
and the principal maturity
date
The last Japanese business
day of each month before
the principal maturity datewith October 31, 2018
(Note 1) as the firstpayment date, and theprincipal maturity dateLump-sum repayment
Unsecured / Unguaranteed
August 2, 2018,
September 12, 2018
(Note 1)
August 2, 2019, August 2,
2021, September 12, 2021
(Note 1), September 12,2022 (Note 1), September
12, 2023 (Note 1)

Borrowing date, interest payment date andmaturity date are those expected as of the dateof this document and are subject to change.

3. Acquisition of assets (properties)
INV resolved acquisition of the following four hotel
properties (total acquisition price: JPY 47,747 million) on
July 17, 2018 and completed the acquisition on August 2,
2018.

Fiscal period ended December 31, 2017 (Reference)(from July 1, 2017 to December 31, 2017)

Fiscal period ended June 30, 2018(from January 1, 2018 to June 30, 2018)consumption taxes.
(Note 3)(Note 4)(Note 5)The amount of difference between sales priceand book value, and after deducting expectedsales-related expenses is indicated.
The name of the transferee is not disclosed, as
the transferee’s consent has not been obtainedfor disclosure.
For details of the sales assets, please refer to “I.
Asset Management Report; Status ofInvestment Corporations’ Assets underManagement; 3 Asset Portfolio of Real Estate,etc.” earlier in this document.

2. Acquisition of Assets
On February 5, 2018, INV decided to acquire thefollowing four hotel properties and concluded a purchaseand sale agreement on the same day. INV completed theacquisition on February 7, 2018, using the proceeds fromthe sales outlined in “1. Sale of Assets” to fund part of theacquisition.
Property Number: D54
Property Name: Hotel MyStays Yokohama Kannai
Acquisition dateFebruary 7, 2018

Acquisition price (Note)

JPY 5,326 million

Location

Yokohama-shi, Kanagawa

Completion dateAugust 2016

Legal form of asset

Trust beneficiary interest

SellerGinga Tokutei Mokuteki
KaishaTotal floor area

4,567.24m2

Total leasable area

2

4,567.24m

Property Number: D55
Property Name: Art Hotel Joetsu
Acquisition dateFebruary 7, 2018

Acquisition price (Note)

JPY 2,772 million

Location

Joetsu, Niigata

Completion dateNovember 1993

Legal form of asset

Trust beneficiary interest

Seller

HL Investments Tokutei
Mokuteki Kaisha

Total floor area

7,551.78m2

Property Number: D60
Property Name: Hotel MyStays Premier Akasaka
Acquisition dateAugust 2, 2018

Acquisition price (Note 1)

JPY 20,691 million

Location

Minato-ku, Tokyo

Completion dateJune 2016

Legal form of asset

Trust beneficiary interest

Seller

Aki Tokutei Mokuteki
KaishaTotal floor area

8,620.69m2

Total leasable area

8,620.69m2

Property Number: D61
Property Name: Hotel MyStays Premier Sapporo Park
Acquisition dateAugust 2, 2018

Acquisition price (Note 1)

JPY 16,731 million

Location

Sapporo-shi, Hokkaido

Completion date

March 1998

Legal form of asset

Trust beneficiary interest

SellerRaetia Tokutei Mokuteki
KaishaTotal floor area

21,670.64m2

Total leasable area

21,670.64m2

Property Number: D62
Property Name: Hotel MyStays Ueno East
Acquisition dateAugust 2, 2018

Acquisition price (Note 1)

JPY 5,286 million

Location

Taito-ku, Tokyo

Completion date

September 1991

Legal form of asset

Trust beneficiary interest

Seller

HL Investments 2 Tokutei
Mokuteki Kaisha

Total floor area

4,396.02m2

Total leasable area

4,396.02m2

Fiscal period ended December 31, 2017 (Reference)(from July 1, 2017 to December 31, 2017)
Total leasable area

Fiscal period ended June 30, 2018(from January 1, 2018 to June 30, 2018)

7,551.78m2

Property Number: D56
Property Name: Art Hotel Hirosaki City

Property Number: D63
Property Name: Hotel MyStays Midosuji Honmachi
Acquisition dateAugust 2, 2018

Acquisition dateFebruary 7, 2018

Acquisition price (Note 1)

JPY 5,039 million

Acquisition price (Note)

JPY 2,723 million

Location

Osaka-shi, Osaka

Location

Hirosaki-shi, Aomori

Completion date

October 2017

Completion dateAugust 1989

Legal form of asset

Trust beneficiary interest

Legal form of asset

Trust beneficiary interest

SellerMonza Tokutei Mokuteki
KaishaSeller

Dogo Tokutei Mokuteki
KaishaTotal floor area

3,429.43m2

Total floor area

18,889.26m2

Total leasable area

3,429.43m2

Total leasable area

18,889.26m2(Note 1)

Property Number: D57
Property Name: Hotel MyStays Oita
Acquisition dateFebruary 7, 2018

Acquisition price (Note)

JPY 1,604 million

Location

Oita-shi, Oita

Completion dateJuly 2007

Legal form of asset

Trust beneficiary interest

SellerSuisei Tokutei Mokuteki
KaishaTotal floor area

3,766.72m2

Total leasable area

3,766.72m2(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.

Acquisition price is based on the purchaseprice indicated in the relevant purchase andsale agreement and does not include
acquisition-related expenses, property taxes,
city planning taxes or consumption taxes.

4. Acquisition of assets (TK interest with overseas realestate as underlying assets)
INV resolved acquisition of the following TK interest on
July 17, 2018 and concluded a TK agreement on the same
date.
Overview of acquisition

Asset to be acquired

Anticipated acquisition
price

Name of underlying asset

Anticipated acquisition date

TK operator

TK interest in a Cayman
Islands special purpose
company that plans toacquire Leasehold Interestsin overseas real estate as
underlying assets
USD 339,836,000 (JPY
37,534 million) (Note 1) for
100.0% of the Cayman
Hotel TK Interest
Westin Grand Cayman
Seven Mile Beach Resort &Spa and Sunshine Suites
ResortOne business day prior to
the acquisition date of theunderlying assets, which is
expected to close by
October 31, 2018 or thedate separately agreed
Seven Mile Resort
Holdings Ltd.

Fiscal period ended December 31, 2017 (Reference)(from July 1, 2017 to December 31, 2017)

Fiscal period ended June 30, 2018(from January 1, 2018 to June 30, 2018)

Overview of underlying assets
Name of asset
Anticipated acquisition
price (Note 1) (Note 2)
Location

Westin Grand Cayman
Seven Mile Beach Resort& Spa
USD 255,300,000(JPY 28,197 million)
Seven Mile Beach Road,
Grand Cayman, Cayman
Islands

Completion date

1994

Total floor area

231,728 ft2(approx. 21,528m2)

Name of asset

Sunshine Suites Resort

Anticipated acquisition
price (Note 1) (Note 2)

USD 49,700,000(JPY 5,489 million)
Esterley Tibbetts Highway,
Grand Cayman, Cayman
Islands

Location
Completion date1999

Total floor area

72,367 ft2(approx. 6,723m2)(Note 1)

The anticipated investment amount is fixed by
the foreign exchange forward contract
executed on July 26, 2018 in Japanese Yen
denomination which were calculated using an
exchange rate of 1 USD=110.45.

(Note 2)This price is not the anticipated acquisition
price of the Cayman Hotel TK Interest
acquired by INV but the anticipatedacquisition price of the Leasehold, etc. of theUnderlying Asset acquired by the Cayman
SPC.

[Notes Related to Provision and Reversal of Allowance for Temporary Differences Adjustment]
Fiscal period ended December 31, 2017 (Reference)(from July 1, 2017 to December 31, 2017)

Not applicable

Fiscal period ended June 30, 2018(from January 1, 2018 to June 30, 2018)

Not applicableVI. Statement of Cash Distribution

I.

Unappropriated retained
earnings
II. Distribution in excess ofretained earnings
Allowance for temporary
differences adjustment
Other deduction ofcapital surplus
III. Distributions(Distribution per unit)
Of which,
distribution of earnings(Distribution of earnings
per unit)
Of which,other distribution in excess
of retained earnings(Distribution in excess ofretained earnings per unit
(Other distribution in excess
of retained earnings))
IV. Retained earnings (deficit)
carried forward

Fiscal period ended
December 31, 2017 (Reference)(from July 1, 2017 to
December 31, 2017)

Fiscal period ended
June 30, 2018(from January 1, 2018 toJune 30, 2018)

JPY 7,212,580,928

JPY 7,610,548,999--

JPY 172,554,516-

JPY 7,496,535,084(JPY 1,564)

JPY 6,854,248,830(JPY 1,430)

JPY 7,323,980,568

JPY 6,854,248,830(JPY 1,528)(JPY 1,430)

JPY 172,554,516-(JPY 36)(-)(JPY 111,399,640)

JPY 756,300,169

Calculation method of
distribution amountAs shown above, the distribution
per unit for the Reporting Period
is JPY 1,564.
With respect to profit distributions(not including Excess Profit
Distribution), INV decided to
distribute almost all of its profit as
defined in Article 136, Paragraph
1 of the Investment Trust Act,
other than fractional amount perunit less than JPY 1, aiming toinclude the maximum 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 perunit (not including Excess Profit
Distribution per unit) is JPY
1,528.
In addition, in accordance withthe distribution policy as set forthin the Articles of Incorporation,
INV makes distributions inexcess of earnings of the amountthat it determines (the “Excess
Profit Distribution”). For theReporting Period, INV decided
also to make Excess Profit
Distribution of JPY 172 million
as refund of investment in orderto level distributions, making
other Excess Profit Distributionof JPY 36 per unit.
For the Reporting Period, there
arose deferred gain on hedges of
JPY 113 million, which isregarded as profit as stipulated in
Article 136, Paragraph 1 of theInvestment Trust Act, and INV
decided to distribute almost theentire amount of profit stipulated
in Article 136, Paragraph 1 of theInvestment Trust Act.
As a
result, INV recorded retained
deficit carried forward）of JPY 111
million for the next fiscal period.

Inaccordancewith
thedistribution policy set forth in
Article 17, Paragraph 1 of the
Articles of Incorporation of INV,
the distribution amount shall be
the amount which does not exceed
the amount of profits but exceeds
90% of the distributable income as
defined in Article 67-15 of theSpecial Taxation Measures Act.
However, in the event that any tax
losses arise, or if no profits havebeen recorded for tax purposesdue to tax losses carried forward,
the distribution amount may be as
reasonably determined by INV.
Pursuant to this policy, INV
determinedthedistribution
amount to be JPY 6,854,248,830
out of net income of JPY
7,721,948,639. Moreover, INV
does not make Excess Profit
Distribution set forth in Article 17,
Paragraph 4 of the Articles ofIncorporation.

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 June 30, 2018 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 is
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

VII. Statement of Cash Flows (Reference Information)

Cash flows from operating activities
Net income before taxes
Depreciation and amortization
Impairment loss
Investment unit issuance costs
Amortization of investment corporation bondissuance costs
Loan-related costs
Interest income
Interest expenses
Increase (decrease) in allowance for doubtful accounts
Decrease (increase) in rental receivable
Decrease (increase) in refundable income taxes
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
Decrease from sales of property, plant andequipment
Decrease from sales of property, plant andequipment in trust
Others, net
SubtotalInterest income received
Interest expenses paid
Income taxes paid
Net cash provided by operating activities
Cash flows from investing activities
Purchases of property and equipment
Purchases of property and equipment in trust
Purchase of investment securities
Repayments of tenant leasehold and security
deposits
Repayments of tenant leasehold and security
deposits in trust
Proceeds from tenant leasehold and security
deposits in trust
Payments of tenant leasehold and security deposits
Other, net
Net cash used in investing activities
Cash flows from financing activities
Proceeds from short-term loans payable
Repayments of short-term loans payable
Proceeds from long-term loans payable
Proceeds from issuance of investment corporation
bonds
Payment for loan-related expenses
Payment of distributions of earnings
Payment of distributions in excess of earnings from

Fiscal period ended
December 31, 2017 (Reference)(from July 1, 2017 to
December 31, 2017)(Unit: JPY thousand)Fiscal period ended
June 30, 2018(from January 1, 2018 toJune 30, 2018)

7,303,702
2,567,215
15,677
170,817

7,722,553
2,772,510
-

-

379

304,073(54)445,85555(564,535)
2(640,464)(7,867)47,721(67,922)
98,06560,077(7,567)234,197(78)
480,6720
158,132(149,624)
661,287
39,752(32,819)
49,627(75,177)(49,246)(47,348)

802,750-

3,590,653

9,181,866(1,277)
14,116,980
54(439,861)(605)
13,676,568

20,177
20,966,865
78(483,261)(605)
20,483,077(797)(42,111,738)(17,854,460)(20,847,991)(1,927)(28,663)-(139,629)(320,542)

115,173

132,593(14,807)(60,034,922)(30,000)
47,201(21,020,665)

3,068,000
19,925,000(1,068,000)
1,500,000-

1,977,436(325,727)(4,776,561)(46,329)(40,494)(7,280,040)-

allowance for temporary differences adjustment
Payment of other distributions in excess of earnings
Proceeds from issuance of investment units
Net cash provided by (used in) financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period

Fiscal period ended
December 31, 2017 (Reference)(from July 1, 2017 to
December 31, 2017)(Unit: JPY thousand)Fiscal period ended
June 30, 2018(from January 1, 2018 toJune 30, 2018)(34,747)
39,644,352
57,453,986
11,095,633
9,598,161
20,693,794(172,554)(5,083,652)(5,621,240)
20,693,794
15,072,553[Notes Concerning Significant Accounting Policies (Reference Information)]
By Period
Item
Cash and cash equivalents as statedin Statement of Cash Flows

Fiscal period ended
December 31, 2017 (Reference)(from July 1, 2017 to
December 31, 2017)
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
June 30, 2018(from January 1, 2018 toJune 30, 2018)
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
December 31, 2017(from July 1, 2017 to
December 31, 2017)

Not applicable.

Fiscal period ended
June 30, 2018(from January 1, 2018 toJune 30, 2018)“Decrease (increase) in retainable income taxes” wasincluded in “Others, net” under “Cash flows from operating
activities” in the Statement of Cash Flows for the previous
fiscal period. However, due to an increase in its monetarysignificance, it is recorded as a separate item from theReporting Period. As a result, JPY 1,274,000 which wasrecorded under “Others, net” under “Cash flows fromoperating activities” in the Statement of Cash Flows for theprevious fiscal period is now restated as JPY 2,000 for
Decrease (increase) in retainable income taxes and (JPY
1,277,000) for Others, net.

[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
December 31, 2017 (Reference)(from July 1, 2017 to
December 31, 2017)(As of December 31, 2017)(Unit: JPY thousand)Cash and bank
14,367,140
deposits
Cash and bank6,326,653
deposits in trust
Cash and cash
20,693,794
equivalents

Fiscal period ended
June 30, 2018(from January 1, 2018 toJune 30, 2018)(As of June 30, 2018)(Unit: JPY thousand)Cash and bank8,505,792
deposits
Cash and bank
6,566,761
deposits in trust
Cash and cash
15,072,553
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 regulations.
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

Domestic Portfolio Map (As of August 2, 2018)

No. of Properties

No. ofHotelsNo. ofResidential
Properties

Others

130

64

64

2

(Note) For properties corresponding to the number and overview, please refer to pages 32-34.

Sponsor Pipeline
Strong pipeline of 28 assets continues to secure stable growth opportunity.
 Properties Covered by the MOU (1)HotelsNo.

Property name

Type (2)Location# of Rooms

Status1

Rihga Royal Hotel Kyoto

Kyoto, Kyoto

Full

489

In operation

2

Hotel MyStays Premier Narita

Narita, Chiba

Full

711

In operation

3

Fusaki Resort Village

Ishigaki, Okinawa

Resort188

In operation

4

Art Hotel Asahikawa

Asahikawa, Hokkaido

Full

265

In operation

5

Hotel MyStays Kanazawa Castle

Kanazawa, Ishikawa

Limited206

In operation

6

Hotel MyStays Matsuyama

Matsuyama, Ehime

Full

162

In operation

7

Hotel Mystays Sapporo Nakajima Park

Sapporo, Hokkaido

Limited86

In operation

8

Flexstay Inn Sakuragicho

Yokohama, Kanagawa

Limited70

In operation

9

MyCUBEby MYSTAYS Asakusa Kuramae

Taito-ku, Tokyo

Limited161

In operation

10 Hotel MyStays Fuji Onsen Resort

Fujiyoshida, Yamanashi

Resort159

In operation

11 Hotel Nord Otaru

Otaru, Hokkaido

Limited98

In operation

12 Hotel Sonia Otaru

Otaru, Hokkaido

Limited

94

In operation

13 Art Hotel Niigata Station

Niigata, Niigata

Full

304

In operation

14 Art Hotel Ishigakijima

Ishigaki, Okinawa

Resort245

In operation

15 Hotel MyStays Shinsaibashi East

Osaka, Osaka

Limited85

In operation

16 Hotel MyStays Sapporo Aspen

Sapporo, Hokkaido

Limited305

In operation

17 HotelMyStays Sapporo Nakajima Park Annex

Sapporo, Hokkaido

Limited80

In operation

18 Hotel MyStays Sapporo Susukino

Sapporo, Hokkaido

Limited104

In operation

19 Hotel MyStays Nayoro

Nayoro, Hokkaido

Limited70

In operation

Residential properties
No.

Property nameLocation# of Rooms

20 Gran Charm Hiroo

Shibuya-ku, Tokyo

121

21 Plestay Win Kinshicho

Shibuya-ku, Tokyo92

22 Gran Charm Kichijoji

Musashino, Tokyo28

23 Green Patio Noda

Noda, Chiba

240

24 Dainichi F-45

Urayasu, Chiba

54

25 Gran Charm Urayasu

Urayasu, Chiba

54

26 Gran Charm Urayasu 5

Urayasu, Chiba

54

27 Gran Charm Minami Gyotoku I

Ichikawa, Chiba

52

28 Gran Charm Minami Gyotoku II

Ichikawa, Chiba

48

No. of Hotel Rooms

3,882(Note 1)

(Note 2)

No. of Apartment Units

743

The above is a list of properties for which INV shallbe granted an opportunity to consider theacquisition in priority to a third party when affiliatesof Fortress Group intend to sell any of theproperties. Regarding the properties in the list, thesaid affiliates do not intend to sell any of theproperties and INV does not intend to acquire anyof the properties as of September 21, 2018.
Therefore, there is no assurance that INV will be
granted an opportunity for considering acquisitionof the properties or be able to acquire the properties.
INV does not hold preferential negotiation rights toacquire any overseas properties.
Each “Type” above is as follows: “Limited Service”
refers to a hotel focusing on revenues from room
stay and offer limited service regarding foods andbeverages, banquet, spa or gymnasium facilities.
“Full Service” refers to a hotel having segments ofstay, foods and beverages, and banquet. “Resort”
refers to a hotel located at tourist destinations orrecreational lots, having segments of stay, foods andbeverages, and incidental facilities.

Rihga Royal Hotel Kyoto

Hotel MyStays Fuji Onsen Resort

Fusaki Resort Village

Hotel MyStays Sapporo Aspen

Hotel Nord Otaru

Hotel MyStays Premier Narita

Internal GrowthHotels + Residential properties

 A well diversifiend portfolio consisting of core assets of hotel and residential properties located throughout
highly visible tourist destinations and dense urban centers, help to recude the impact from revenue fluctuationsof and one property.

NOI (Hotels) (Note 1, 2)

Portfolio NOI (Hotels + Residential properties +Others (Note 4))

NOI (Residential properties) (Note 3)

Residential properties

 A countinuous effort to increase rent for both new leases and at lease renewals has reulted in a noticable
improvement in average rent.

Change in Rent for All Contracts (NewContracts and Renewal Contracts) (Note 7)

Average Rent Increase / Decrease (Note 8)(Note 1) Based on 45 hotel properties; of the 54 hotel properties in our portfolio at the beginning of June 2018 fiscal period, 9 hotels with fixed-rentlease agreements are excluded.
(Note 2) Includes the dividends from preferred equity interest of TMK that owns Sheraton Grande Tokyo Bay Hotel, assuming INV owned thepreferred equity interest of TMK from the beginning of 2017.
(Note 3) Based on the 64 residential properties owned as of the date of this document. Excludes one-off insurance-related revenues and expenses.
(Note 4) Based on two commercial properties owned by INV as of the date of this document.

Hotels Although the June 2018 period was impacted from large-scale renovations, INV expects full year 2018 results
to achieve a year-on-year increase in occupancy rate, ADR, RevPAR, and GOP by 0.3pt, 0.9%, 1.2%, and1.3% respectively over the previous year.

ADR (Note 1)

RevPAR (Note 1)

Occupancy Rate (Note 1)

GOP (Note 1, 6)Case Example of Internal Growth Among the domestic hotel portfolio, INV renovated five properties (Hotel MyStays Kyoto-Shijo, MyStays
Shinurayasu Conference Center, Hotel MyStays Maihama, Hotel MyStays Premier Dojima and Hotel
MyStays Hakodate-Goryokaku) in 2018 to raise the asset value and to improve profitability.
Guest room at Hotel MyStays Hakodate-Goryokaku
Before renovation

After renovation(Note 5) Concerning all properties mentioned in (Note 1) through (Note 4), the actual results before acquisition by INV are calculated based on thedata provided by the sellers.
(Note 6) In calculating the GOP, added the 49% of GOP for Sheraton Grande Tokyo Bay Hotel, which means INV’s pro rata portion of the amountof JV TMK’s preferred equity owned by INV. The rent paid for APA Hotel Yokohama-Kannai, is regarded as GOP of the hotel.
(Note 7) Data are prepared based on actual figures of residential properties owned by INV for the relevant period (only after INV’s acquisition
regarding properties acquired during the relevant period).
(Note 8) “Average Rent Increase / Decrease” indicates the increase/decrease rate of the total of monthly rents compared with the total of rents in theprevious contracts, for new contracts or renewal contracts, or the total of both.

Financial Conditions
Issued INV’s first Investment Corporation Bonds to diversify financing sources while loweringborrowing costs and extending the maturity of its debt
 Investment Corporation Bonds (issued on May 25, 2018)
Total issue
Bond SeriesTermamount(JPY million)
First Series Unsecured Investment
5 years
1,000
Corporation Bonds
Second Series Unsecured Investment
10 years
1,000
Corporation Bonds
Total/Average

7.5 years

2,000Interest rate
(per annum)

Rating

0.40%

A (JCR)

0.80%

A (JCR)

0.60%

 Lender Formation (as of September 30, 2018 (planned))(Note 1) LTV (Appraisal Value Base) is calculated by the following formula: (Interest-bearing debt at the end of the relevant fiscal period, excluding
short-term consumption tax loan) / (Total appraisal value as of the end of the same period). For Sep. 30, 2018 (Forecast), it is calculated by
the following formula: (Expected interest-bearing debt on September 30, 2018, excluding short-term consumption tax loan of 1,099 million
yen) / (Appraisal value of INV’s portfolio as of the end of the fiscal period (June 30, 2018) + Total appraisal value of properties (to be)acquired in August 2018 or after). As to preferred equity securities in the TMK which holds Sheraton Grande Tokyo Bay Hotel as anunderlying asset and the TK interests which hold overseas properties, since no appraisal value is available, LTV after the acquisition is
calculated using INV’s (planned) acquisition prices of the preferred equity securities and TK interests as appraisal values.

 LTV (based on appraisal value)(1) and Weighted Average Interest Rate(2) DSCR Rating

Rating Agency

Rating Object

RatingOutlookJapan Credit Rating
Agency, Ltd.

Long-term
Issuer Rating

A

Positive(Note 2)

(Note 3)(Note 4)

Average interest rate is calculated by the following formula: [Sum total of (Each loan’s loan amount outstanding at the end of the fiscal
period multiplied by applicable interest rate at the end of the fiscal period)] / (Total loan amount outstanding at the end of the fiscal
period). For “Sep. 30, 2018 (E)”, calculated by following formula: (Total anticipated loan amount outstanding as of September 30, 2018
multiplied by applicable interest rate assuming 1 month TIBOR as of July 27, 2018 was applied as base rate) / (The loan amountoutstanding at September 30, 2018).
DSCR is calculated by dividing (i) by (ii) for the relevant period; (i) operating income, as adjusted for depreciation expenses fromproperty rental business and any gain (loss) on sales of property (ii) scheduled repayments of loans payable, interest expense, the amountof redemption of bond and bond interest.
DSCR (excluding hotel variable rent) is in the same manner as DSCR, except for excluding hotel variable rent from operating income.

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 priceof INV unit on the same day.
.

Distribution of Unitholders(Note) Percentage figures are rounded to one decimal place.

Annual Schedule

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.

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 for dividends payable in and after January 2009. If you collect dividends via a“Dividends Receipt,” please view the “Notice of Dividend Payment” sent alongside it. If you havespecified a wire transfer, the “Dividend Statement” delivered with the dividend payment is the “Notice ofDividend Payment.” Both documents may be used as 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